Human Resource Management: An Experiantial Approach,6th John H. Bernardin solutions manual and test bank
CHAPTER 2
THE ROLE OF GLOBALIZATION
IN HR POLICY AND PRACTICE
CHAPTER OBJECTIVES
After reading this chapter, you should be able to:
1. Describe the different ways companies may engage in international commerce.
2. Explain the different international business strategies
3. Explain how international human resources management (IHRM) differs from traditional domestic HRM
4. Understand the different IHRM strategies
5. Describe the trends relating to international job assignments.
6. Understand the issues and trends relating to the development of globally competent business leaders.
Chapter 2 - Summary
I. Overview
A. Increasing globalization of the world economy and competition
B. Growth of foreign direct investment (FDI) is control through ownership by a foreign company or foreign individuals
C. Creation of offshore professional and operations centers
D. Why expand globally?
1. Access to additional resources (including skilled workers)
2. Lower costs
3. Economies of scale
4. Favorable regulations and tax systems
5. Direct access to new and growing markets
6. Ability to customize products to local tastes and styles
7. Rise of regional trade alliances (e.g., NAFTA, the European Union)
E. Majority of Fortune 500 companies are now multinational; deriving more than half of their revenues from overseas business
II. How Do Companies Engage In International Commerce?
A. Export Work
1. To increase sales and revenues
2. To spread research and development costs over a larger sales volume
3. To relieve excess capacity
4. For diversification due to maturing domestic markets
5. Lack necessary knowledge to directly do business effectively on foreign shores
B. Directly sell their products in a foreign market
C. Use intermediaries who are third parties that specialize in importing and exporting.
D. Advantages of exporting include:
1. Relatively low investment
2. Ease of withdrawing from a market
E. Disadvantages of exporting include:
1. Tariffs and quotas
2. High transportation costs
3. Difficulty finding good distributors
F. License is when the licensor leases the right to use its intellectual property to the licensee for a fee.
Intellectual property includes patents, formulas, patterns, copyrights, trademarks, brand names, and methods and procedures.
G. Franchise agreement allows franchisee to operate a business under the name of franchiser for a fee
H. Contract manufacturing is when outsourcing of the creation of products occurs
I. Management contracts occur when a company sells its management and/or technical expertise to another
J. Foreign direct investment occurs when an organization owns part of or an entire business in a foreign market
K. Partner alliance allows gradual investment and sharing risk with another
L. Joint ventures create a new, separate company owned jointly by partners
M. Strategic alliance - agreement to partner with one another, not as a separate entity
N. Sole ownership – high risk; single owner in foreign market ensures they have full decision-making authority and operational control
III. What Influences the Decision to Invest in a Particular International Market?
A. General Environment
1. A particular country’s economic, legal, political, and socio-cultural systems, plus diversity in language and religious beliefs
B. Task Environment
1. Those forces that are directly related to the industry within which a firm operates
2. Cost pressures, the intensity of competitive rivalry, the ease with which organization may enter or leave the industry, and the degree of power over the company maintained by suppliers and customers
3. Porter’s two types of international industries:
a. Multilocal industry – competition in each country or region is essentially independent of the competition in other regions
b. Global industry – a firm’s competitive position in one country is significantly affected by its position in other countries
C. Internal Strengths or Weaknesses
1. Relevant internal factors include an organizational culture, the expertise of its management staff, the sophistication of its information systems, and the ability to detect and respond to consumer trends
2. These are critical assets that add value within the firms
IV. Domestic versus International HR
A. HR activities all relate to the procurement, allocation and utilization of people. The particular activities themselves may not be all that different regardless of where they are performed or who they cover.
B. Factors that differentiate domestic HR from international HR
1. Different national governments
2. Different legal systems
3. Different economic conditions
4. People of diverse cultures and values
5. Suppliers and customers over vast geographical distances
C. Factors that affect the level of difficulty involved in operating HR on an international basis
1. Legal complexity
2. Degree of cultural difference (Geert Hofstede)
a. Individualism/collectivism
b. Power distance
c. Uncertainty avoidance
d. Masculinity/femininity
e. Long term vs. short term orientations
3. Organization’s degree of foreign investment in relation to its domestic investment
4. Attitude of senior management toward international operations
a. Failure to recognize differences between domestic and international operations frequently creates problems in foreign business units
V. International HR strategies
A. Four general international HR management strategies
1. Ethnocentric approach - foreign subsidiaries have little autonomy, operations are typically centralized, and major decisions are made at the corporate headquarters
a. Key positions in management held by parent company nationals (Parent Company Nationals (PCNs))
2. Polycentric philosophy - tend to treat each subsidiary as a distinct entity with some level of decision-making authority
a. PCNs fill key upper level management for a time
b. Host country nationals (HCNs) fill middle- and lower-level positions, but eventually move up to take over for PCNs
3. Geocentric managerial approach - strives to integrate headquarters and foreign subsidiaries through a global workforce
a. Third country nationals are residents of a country different than either the parent country or the host county
b. Find best person to fill the position, whether or not they are a PCN, HCN, or third-country national (TCN)
4. Regiocentric managerial approach - may be thought of as a scaled-down version of the geocentric model in that it tends to appoint people to positions within global regions
B. What Influences the choice of IHRM strategy?
1. General environment
2. The industry environment
3. Firm’s internal strengths and weaknesses
4. Firm’s strategy
VI. International Business Assignments
A. International businesses need international expertise
B. Expatriates: employees who are placed in an assignment outside their home country
Impatriates: individuals from a host country or a third county who are assigned to work in the headquarters office
C. Goals of International Business Assignments
1. Key element in developing management teams that are globally focused & globally competent
2. Expatriate assignments encourage high levels of coordination and control among business units
3. Requires high levels of international communication, both information sharing and information exchange, because of geographical distances, cultural diversity, complex supply & demand conditions, and other similar pressures
D. Challenges of International Business Assignments
1. Assignment failure
2. International compensation: understand cost of living differences impact on setting competitive wages
a. Balance sheet approach
b. Going rate approach
c. Cafeteria-style benefit package
d. Regional system
e. Trailing spouse benefits
3. Cross-cultural training for expatriate and family
a) Factual information
b) Cultural orientation and assimilation
c) Language training
d) Sensitivity training
e) Field experience
4. Repatriation
a. Difficulty retaining expatriates/ high turnover
b. Reverse culture shock
c. Frustration with perceived career opportunities; failure to be able to leverage their international experience, and knowledge
E. Recent Trends in Overseas Assignments
1. Four types of expatriate assignments
a. Short-term assignments
b. Developmental assignments
c. Strategic assignments
d. Long-term assignment
2. More international assignments for women
3. Push for reducing expenses leads to reliance on shorter term assignments and localization
VII. Global Leadership Challenges
A. Organizations are increasingly committed to developing management teams that are globally focused. HR goal to develop solid global teams
B. What is a globally competent leader?
1. Integrators who see beyond obvious country and cultural differences
2. Diplomats who can resolve conflicts and influence locals to accept world standards or commonalities
3. They can recognize the best from various places and adapt it for utilization elsewhere
4. They have an in-depth understanding of world markets: their potential and their problems
5. Masters of global supply chains and distribution channels
6. They skillfully embrace cultural diversity
C. Competency Model for global leadership: competencies have been identified, however, there is often an overlap of competencies and they often focus on traits rather than learned behaviors. In addition, not enough research to show that the competencies are predictive of actual performance domestically or internationally.
D. Global mindset is a general description of the need for all organizational decision-makers to think well beyond domestic issues
1. General components of a global mindset
a. Global data bank
b. Market knowledge
c. Understanding the global superstructure
d. Global economic systems
e. Cross-cultural skills
f. Cultural roots
g. Spirit of generosity, magnanimity
VIII. Summary
A. Business and commerce are increasingly crossing national, regional, and continental borders.
B. Even if you never work for a multinational corporation, chances are the global economy will affect you and your business.
C. There are many approaches to participating outside of an organization’s native borders. These approaches vary in risk and investment.
D. After choosing how to focus outside national borders, an organization must determine a basic management strategy. These range from multidomestic to a more global focus.
E. Choosing the right international human resource strategy (IRHM) can aid the organization in meeting its objectives and global goals.
F. Traditionally US companies have used key management talent and international job rotation as a means for developing and deploying strategic capability during efforts to internationalize.
G. Development of effective global leadership continues to be a major challenge
CHAPTER 2 - IMPORTANT TERMS
Acquisitions - involve the purchase of an existing business
Balance sheet approach - international compensation approach that ensures the expatriate maintains the same standard of living in the host country as he/she had in the home country by providing a variety of financial, social, and family benefits
Business Partnership- allows gradual investment and sharing risk with another
Cafeteria-style benefit package – international compensation approach where expatriates can choose from a variety of benefits, at costs that meet a specified total
Competency- KASOC’s that enable an individual to perform effectively in a job
Contract manufacturing - when outsourcing of the creation of products occurs
Culture - has been defined, as “a system of values and norms that are shared among a group of people and that when taken together constitute a design for living"
Developmental assignments – an expatriate assignment that is increasingly considered to be a necessity for a high potential fast tracker in many large international companies
Ethnocentric approach - foreign subsidiaries have little autonomy, operations are typically centralized, and major decisions are made at the corporate headquarters
Expatriates- Employees who are placed in an assignment outside their home country
Export - when a company sells it goods or services to a foreign market
Export strategy - views world as single marketplace and standardize goods or services
Foreign direct investment - an investment abroad; usually where the company being invested in is controlled by the foreign corporation or foreign individual.
Franchise agreement - allows franchisee to operate a business under the name of franchisor for a fee
General environment - a country’s economic, legal, political, and socio-cultural systems, plus diversity in language and religious beliefs that influences an organization’s decision to invest in a particular international market
Geocentric - managerial approach strives to integrate headquarters and foreign subsidiaries
Global approach - combines export orientation and multilocal management
Global industry – one of Porter’s two types of international industries. This type of company’s competitive position in one country is significantly affected by its position in other countries. This type of company requires integration among units in order to leverage the firm’s competitive advantage. Important to have a balance between global competitiveness and local respoinsiveness.
Global mindset - a general description of the need for all organizational decision-makers to think well beyond domestic issues
Global workforce – a workforce that can be deployed in a variety of ways throughout the world. Individual differences in nationality are not as important as individual differences in talent
Globally competent managers and leaders—knowledgeable, effective, well-rounded individuals who could be sent anywhere on the globe to run an operation
Host country nationals (HCNS)- individuals who are residents of countries in which a foreign subsidiary is located
Impatriates- individuals from a host county or a third county who are assigned to work in the headquarters office, when it is located in a different county
Individualism vs. Collectivism – refers to the degree to which individuals looks after themselves or operate in groups
Intermediaries - third parties that specialize in importing and exporting
Joint ventures - create a new, separate company owned jointly by partners
KASOCS- Necessary knowledge, abilities, skills and other characteristics
Licensing is when the licensor leases the right to use its intellectual property to the licensee for a fee
Localization – international compensation approach that converts expatriates to local standard; the “going-rate approach”
Long-term assignment – an expatriate assignment that is similar to the traditional expatriate role; involves start-ups or ongoing managerial presence to resolve major problems and would typically be taken by a ‘career expatriate”
Long-term vs. Short-term orientation – refers to the extent to which members of a society accept delayed gratification of their material, social or emotional needs
Management contracts - occur when a company sells its management and/or technical expertise to another
Masculinity/femininity – refers to different expectation about gender roles in society
Multilocal industries – competition in each country, or region, is essentially independent of the competition in other regions
Offshore professional and operations center – either as a form of sole ownership or a strategic alliance, these centers involve the exporting of the work itself to places around the globe in order to obtain competitive advantage by leveraging combination of such factors as workforce skills, cultural similarities, costs, time, and government policies, regardless of where the work product is ultimately marketed
Parent-country nationals (PCNS)- individuals who are residents of the organization’s home country who are sent offshore on assignment
Polycentric philosophy - treats each subsidiary as a distinct entity with some level of decision-making authority
Power distance – the extent to which less powerful members of society accept and expect that power is distributed unequally
Regiocentric managerial approach - may be thought of as a scaled-down version of the geocentric model in that it tends to appoint people to positions within global regions
Regional System- international compensation approach that sets wages for all expatriates assigned to a particular region according to the system that exists in that region
Repatriation – when the expatriates return to the home country
Reverse culture shock – occurs when expatriates who live and work in foreign country become immersed in their new cultures and return home surprised to find that everything has changed, from their companies to their communities
Short-term assignments – an expatriate assignment described as “something longer than a business trip”
Sole ownership - has full decision-making authority and operational control
Strategic alliance - agreement to partner with one another, not as a separate entity
Strategic assignments – an expatriate assignment that involves persons with special skills who are moved to become a country manager in an unfamiliar area
Task environment – the forces that are directly related to the industry within which a firm operates that influences the decision to invest in a particular international market
Third country nationals (TCNS) - are residents of a different country than the parent country or the host country
Trailing spouse- the spouse of an individual assigned to an expatriate assignment that leaves a job and travels with their spouse on the international assignment
Uncertainty avoidance – refers to whether members of society feel comfortable in structured situations
Chapter 2 - Discussion Questions
1. Why do you think businesses internationalize? Which forces are most influential and which are secondary forces?
Major reasons include access to additional resources, lower costs, economies of scale, favorable regulations and tax systems, direct access to new and growing markets, ability to customize products to local tastes and styles, and the rise of regional trade alliances. The identification of the most influential forces depends on the business. Businesses such as electronic manufacturing would identify its major forces as the lower costs of raw materials (as in ferrite cores) and labor. For example, McDonald’s or Starbucks would consider access to new and growing markets as the international force of major influence. Software developers would probably cite access to additional qualified talent as a major reason. Produce wholesalers (of oranges, bananas, etc.) would argue that tax advantages in the form of no duties or tariffs would be one justification to internationalize. The argument here is whether the access to new or growing markets is the primary influence and the tariff advantage as the secondary, or the favorable tax opened the new markets. The secondary forces are likely to be the ability to customize products to local tastes and styles and trade alliances.
2. Think of three or four organizations with which you are familiar. How have they been affected by the globalization of business? Make sure you consider both direct and indirect influences. If they have not been particularly affected, what are some of the reasons for their insulation from the trend?
Answers will vary. Direct effects will either be increases to the bottom line or decreases to the bottom line. Increases to the bottom line are generally derived from one or more of the internationalization influences: access to additional resources, lower costs, economies of scale, favorable regulations and tax systems, direct access to new and growing markets, ability to customize products to local tastes and styles, and the rise of regional trade alliances. Decreases to the bottom line include loss of market share due to competitor’s globalization that resulted in decreased costs and subsequent gain in market share for competition. Additionally, any of the aforementioned influences that represent competitive advantage could affect the bottom line of its direct competitors.
Indirect influences will likely be from one of the following:
better and more sources available by searching the Internet to find best prices;
purchasing products used in business activities imported by multinational companies.
If the student indicates that the business has not been affected by globalization, the reasoning will probably be due to the local nature of the business. A local farmers’ market is a good example of this. The marketer buys only local produce to sell to local patrons. Some of those local patrons could be employees of a multinational and without the globalization of that company that employee may not have been in the local market to buy the local produce. Virtually every business is affected by globalization.
3. Think about two businesses: (1) a manufacturer of athletic gear and (2) a property and casualty insurance company. How might the internationalization of each of these companies differ from one another? What factors might account for these differences? Choose one company and pretend that you’re the HR director. How would you figure out the “right” way to manage this international expansion?
Similar factors for both companies in developing an international strategy are the economic, legal, political, and socio-cultural systems, language, and predominant religion in the chosen country. Both would also have to look at the industry specific issues and the internal strengths within their respective organizations.
The athletic gear manufacturer will probably choose the country that has more advantages for lower labor and material costs. The country chosen would depend on whether it is rich with skilled or unskilled labor, depending on how difficult each step of the manufacturing process is. The company will be concerned about regulations and tariffs as well as any part of the process it may transfer to other facilities. The way in which the business globalizes will probably take the form of licensing, franchising, contract manufacturing, joint ventures with some sort of offshore facility. Depending on what their market is, the firm may be either multilocal or globally focused.
The property and casualty insurance firm would place great emphasis on the pool of skilled workers available since labor accounts for most of cost of sales, especially in the service industries. This firm will probably consider language a stronger force than would the manufacturing concern. This firm will probably choose to take advantage of one of these types of globalizing, franchising, management contracts, and strategic alliances.
Each firm will have its unique problems in the process of internationalizing. In both cases, however, the HR issues to look at and answer (the whom, what, when, where, and why) constitute the staffing, decision making, communication, compensation, career planning, performance management, and training of those employees affected. In addition, good measurement systems to determine the effectiveness of any programs instituted for the afore-mentioned activities is essential for any HR director.
4. How do differences in international HR management (IHRM) strategies affect the relative importance of each of the HR domains?
Domestic HR and international HR management strategies perform the same activities, yet international HR management must be aware and involved with the different cultures and the different employment and business laws and regulations within the countries the organization operates. In addition to cultural differences, the degree of the investment that a firm has in its foreign market versus its domestic market is an important consideration for HR. Laws or policies, conflicts of cultures, cultural, standards, training, and compensation differences are those challenges that IHRM need to pay attention to as they affect each of the HR domains.
5. What are the advantages and disadvantages of using home-country, host-country, and third-country nationals? Under what specific circumstances might an organization choose to utilize third-country nationals?
Companies that use home-country nationals believe that their management and human resource practices are a critical core competence that gives them a competitive advantage. These companies usually centralize their operations and the control is focused on the parent company and country. Firms of this strategy would typically have a large domestic market in the home country and cater to that market. Home-country nationals are typically management and key employees, while host country nationals are typically lower management and workers. Some organizations start with home-country nationals and as the host country nationals are identified and trained, turn the operations over to the host country nationals. Major disadvantages to using home-country nationals are the high cost, the poor success rate of expatriates, and the culture shock. Advantages are that the home country national possesses the knowledge about the parent company and can communicate the expectations and standards to the local workforce.
Host country nationals are used when a firm sees that the different legal, social, and cultural conditions would make it difficult to impose the parent company’s HR practices that may be more ethnocentric and therefore opt to adopt a polycentric approach. This is generally true of firms that, although they would like tighter controls, have extreme price pressures and have to rely on the lowest cost possible. Host country nationals are typically less costly than home country nationals, especially if the home country has a high per capita GDP, as is the United States or many of the European countries. Communication can be difficult due to language and cultural differences.
Companies that have key positions that require extensive international experience often turn to third country nationals. Usually this is looked upon as part of the training program for those key individuals. Advantages include creating more diverse management and obtaining global skills for leadership that can become a competitive advantage. Disadvantages are costs, culture shock and expatriate success rate.
Chapter 2 The Role of Globalization in HR Policy and Practice
True/False Questions
[QUESTION]
1. Third parties that specialize in facilitating importing and exporting are called intermediaries.
Answer: True
Page: 36
Level: Easy
[QUESTION]
2. Licensing is one means of entering a foreign market.
Answer: True
Page: 37
Level: Medium
[QUESTION]
3. A licensee leases the right to use intellectual property of another firm.
Answer: True
Page: 37
Level: Medium
[QUESTION]
4. Management contract is a special form of licensing.
Answer: False
Page: 37
Level: Medium
[QUESTION]
5. Some firms prefer to enter international markets through actual ownership of business.
Answer: True
Page: 38
Level: Medium
[QUESTION]
6. Technological innovations, lower costs associated with skilled labor, and direct access to growing markets are all putting pressure on companies to decrease global expansion.
Answer: False
Page: 34
Level: Medium
[QUESTION]
7. A major disadvantage to joint ventures is the potential for conflict between the partners.
Answer: True
Page: 38
Level: Easy
[QUESTION]
8. While multinational corporations sell their brand of product in multiple global locations, they typically use raw materials sourced from a local source.
Answer: False
Page: 34
Level: Hard
[QUESTION]
9. Strategic alliances permit organizations to share risk and expenses, and also enable each partner to tap into and benefit from the strengths of the other.
Answer: True
Page: 38
Level: Medium
[QUESTION]
10. Factors associated with a company’s task environment influence a company’s decision to invest in the international market.
Answer: True
Page: 41
Level: Medium
[QUESTION]
11. It is difficult to operate in a decentralized fashion in a multilocal industry because of the high need for coordination.
Answer: False
Page: 41
Level: Medium
[QUESTION]
12. In global industries, business policies and practices can be as centralized or as decentralized, as management prefers.
Answer: False
Page: 41
Level: Medium
[QUESTION]
13. The degree of cultural differences is one of the factors that affect the level of difficulty involved in operating HR on an international basis.
Answer: True
Page: 44
Level: Easy
[QUESTION]
14. People from highly individualistic societies attach more importance to freedom and challenges in jobs.
Answer: True
Page: 42
Level: Easy
[QUESTION]
15. HR within a global company is complex because of the different cultures, politics and laws that exist between locations.
Answer: True
Page: 41
Level: Medium
[QUESTION]
16. Individuals from societies with high levels of uncertainty avoidance tend to have a strong task orientation, prefer flexible work hours, and feel a strong loyalty to their employer.
Answer: True
Page: 43
Level: Easy
[QUESTION]
17. Large corporations such as Walmart, are generally successful when they decide to embark on ventures within foreign markets, and because of their size, do not need to be concerned about the complexities associated with international HR issues within smaller companies.
Answer: False
Page: 44
Level: Hard
[QUESTION]
18. Individuals from societies with a short-term orientation expect quick results, personal steadiness and stability, and place less emphasis on status.
Answer: True
Page: 43
Level: Easy
[QUESTION]
19. An organization’s degree of foreign investment in relation to its domestic investment does not play a role in increasing the complexity of managing HR internationally.
Answer: False
Page: 44
Level: Medium
[QUESTION]
20. The UNCTAD index is based on a composite of two ratios: foreign assets to total assets and foreign sales to total sales.
Answer: False
Page: 45
Level: Medium
Multiple Choice Questions
[QUESTION]
21. The level of decentralization and empowerment within a culture can be understood by a reference to the ______ within that culture.
A) Individualism
B) Power distance
C) Dichotomy
D) Short-term orientation
E) Collectivism
Answer: B
Page: 43
Level: Hard
[QUESTION]
22. The successful placement of employees within international assignments is important to the success of a transnational organization. Studies have shown that difficulty adjusting to a different ______ is the number one reason for the failure of international assignments.
A) level of collectivism
B) level of compensation
C) set of laws
D) currency
E) culture
Answer: E
Page: 42
Level: Hard
[QUESTION]
23. An agreement that allows an independent organization or individual to run a business using the name of an established business for a fee is known as.
A) franchising
B) exporting
C) licensing
D) contract manufacturing
E) management contract
Answer: A
Page: 37
Level: Medium
[QUESTION]
24. The organization gives up a major amount of control over processes when using contract manufacturers. A concern with this approach is:
A) variation in advertising content
B) lack of ability to relieve excess capacity
C) irresponsible use of brand names and trademarks
D) product quality concerns
E) the difficulty of finding reliable distributors
Answer: D
Page: 37
Level: Medium
[QUESTION]
25. When an organization directly owns part of or an entire business in a foreign market, it is called __________.
A) franchising
B) exporting
C) licensing
D) contract manufacturing
E) foreign direct investment
Answer: E
Page: 38
Level: Medium
[QUESTION]
26. A(n) __________ allows an organization to make direct investment very gradually while sharing its risk with a knowledgeable, experienced other party while maintaining independence.
A) Joint venture
B) Alliance/partnership
C) Management contract
D) Contract manufacturing
E) Foreign direct investment
Answer: B
Page: 38
Level: Medium
[QUESTION]
27. A(n) __________ involves the purchase of an up-and-running business that has established suppliers and customers.
A) Start-up operation Acquisition
B) Alliance
C) Strategic alliance
D) Sole ownership
E) Acquisition
Answer: E
Page: 38
Level: Medium
[QUESTION]
28. In __________ industries, a firm’s competitive position in one country is significantly affected by its position in other countries.
A) Local
B) Decentralized
C) Centralized
D) Global
E) Multilocal
Answer: D
Page: 41
Level: Easy
[QUESTION]
29. __________ refers to the extent to which members of a society accept delayed gratification of their material, social, or emotional needs.
A) Individualism
B) Power distance
C) Dichotomy
D) Long-term versus short-term orientation
E) Uncertainty avoidance
Answer: D
Page: 42
Level: Easy
[QUESTION]
30. The UNCTAD index is based on a composite of ratios including:
A) Foreign assets, sales, and debt.
B) Domestic sales, employment and profit.
C) Foreign assets, employment, and profit.
D) Foreign assets, sales, and employment.
E) Domestic assets, employment and sales.
Answer: D
Page: 45
Level: Medium
[QUESTION]
31. A(n) __________ leases the right to use its intellectual property to another firm.
A) Licensor
B) Licensee
C) Franchisee
D) Contractor
E) Expatriate
Answer: A
Page: 37
Level: Easy
[QUESTION]
32. A company that exports, as a means to sell its products in foreign markets will
A) Have a direct investment in a foreign market.
B) Increase sales volume allowing for better management of the costs associated with research and development
C) Avoid the high cost of transportation fees and tariffs and maintain a competitive advantage.
D) Enable individuals to take advantage of existing advertising and training to ensure success.
E) Maintain exclusivity with one other company to distribute product and control their brand in the foreign country.
Answer: B
Page: 36
Level: Hard
[QUESTION]
33. In the __________ approach, foreign subsidiaries have little autonomy, operations are centralized, and major decisions are made at corporate headquarters.
A) Geocentric
B) Ethnocentric
C) Polycentric
D) Regiocentric
E) Sociocentric
Answer: B
Page: 46
Level: Easy
[QUESTION]
34. Hofstede’s work on culture and its impact on managing HR within an international environment was conducted in the 1960’s and ‘70’s. It is interesting that
A) the results of his work have been replicated, confirming the validity of his findings, and recent studies have expanded on his original theory.
B) while his work is often cited, it was impossible to replicate his findings in subsequent studies.
C) the results of his study can only be applied within the electronics industry and have no relevance outside of that industry.
D) the definition of culture when used in reference to a society is in many ways very different from the definition when used to describe the environment within a company.
E) the study found vast differences between the culture of the society and the culture of the local companies that operated in that society.
Answer: A
Page: 43
Level: Hard
[QUESTION]
35. Pepsi provides Heineken with its formula or agrees to supply the cola syrup and Heineken adds carbonated water, packages it in appropriate containers, and sells it in the Netherlands. Pepsi cannot enter into a similar agreement with another firm to sell Pepsi in the Netherlands, and Heineken cannot alter the product, nor can it begin duplicating other Pepsi products (such as Lays Potato Chips) without a separate agreement. This is an example of:
A) Franchising.
B) Exporting.
C) Licensing.
D) Contract manufacturing.
E) Management contracts.
Answer: C
Page: 37
Level: Medium
[QUESTION]
36. A(n) __________ is formed when companies agree to partner with one another, but do not set up a separate entity.
A) Joint venture
B) Merger
C) Strategic alliance
D) Sole ownership
E) Task force
Answer: C
Page: 38
Level: Easy
[QUESTION]
37. UNCTAD is an abbreviation for __________.
A) United Nations Conference on Tariff and Development
B) United Nations Conference on Trade and Development
C) United National Conference on Trade and Development
D) United National Conference on Tariff and Development
E) Unified Nations Conference on Trade and Development
Answer: B
Page: 44
Level: Easy
[QUESTION]
38. Individuals who are residents of the organization’s home country who are sent offshore on assignment are called __________.
A) third-country nationals
B) host country nationals
C) parent country nationals
D) parent host nationals
E) third-host nationals
Answer: C
Page: 46
Level: Easy
[QUESTION]
39. Which of the following statement best describes host-country nationals?
A) Individuals who have proven themselves in the local marketplace.
B) Individuals who are residents of the organization’s home country who are sent offshore on assignment
C) Individuals contributing important information, perspective, and decision-making factors.
D) Individuals attaching more importance to freedom and challenges in job.
E) Individuals who are residents of countries in which a foreign subsidiary is located.
Answer: E
Page: 46
Level: Difficult
[QUESTION]
40. When determining how to compensate expatriates, an advantage of the “going-rate approach” is that
A) the expatriate is kept whole during the assignment because his pay is similar to the pay that would have been received for working the same job in their home county
B) locals perceive the pay as fair because the expatriate is paid at a rate that is similar to the pay received by local employees of that company who have similar position, performance and experience.
C) it is an effective means to reduce costs because you are offering the expatriate the ability to choose from a variety of benefit options that are appropriate to the location of the expatriate assignment.
D) although it is a high cost approach, the ability of the expatriate to save on housing and social expenses while on assignment makes expatriate assignments in countries with low pay levels more attractive.
E) with the increase in dual income families, this options provides an incentive for both the employee of the company and their spouse to accept an expatriate assignment
Answer: B
Page: 50
Level: Hard
Essay Questions
[QUESTION]
41. Explain the differences between licensing and franchising, licensor and franchiser, and licensee and franchisee. Use examples to illustrate.
Answer: Licensing is when a firm (licensor) leases the right to use its intellectual property (includes patents, formulas, patterns, copyrights, trademarks, brand names, methods, and procedures) or proprietary property to another firm (licensee) for a fee. Pepsi is an example of a licensor. Heineken is a licensee to Pepsi when it buys the right to bottle Pepsi in the Netherlands. Pepsi supplies the syrup, Heineken adds the water. But Heineken cannot alter the Pepsi syrup for the local taste.
In franchising, the franchiser sells the right to another firm, called the franchisee, to operate the business under the name of the franchiser for a fee. The difference between a license and a franchise is the control over the operation. McDonald's is a good example of a franchiser. Examples are fast-food chains such as McDonald’s, Dairy Queen, Domino’s Pizza, and KFC, which have franchised restaurants worldwide.
Page: 37
Level: Medium
[QUESTION]
42. What factors influence the decision to invest in a particular international market?
Answer: First a company should find out about the general environmental trends. These include economic, legal, political, socio-cultural, dialects and accents in the language, and religious beliefs. Second is the company’s task environment. These include cost pressures, the intensity of competitive rivalry, the ease with which organizations may enter or leave the industry, and the degree of power over the company maintained by suppliers and customers. And finally, the company should assess its internal strengths or weaknesses which include its culture, management team, customers, and knowledge and use of technology.
Page: 40-41
Level: Medium
[QUESTION]
43. Your company has decided to open a branch in another country. As the human resource manager, it is your job to determine how the foreign subsidiary will interact with the parent corporation. Define the four international human resource management strategies you may choose from. Be sure to describe the role both locals and expatriates would play in the subsidiary's development.
Answer: Ethnocentric - Foreign subsidiaries have little autonomy and operations and decisions are centralized at corporate headquarters. Generally calls for sending personnel from country of origin to fill key positions in management at the subsidiary. These people are known as parent company nationals (PCNs).
Polycentric - Company treats each subsidiary as a distinct entity with some decision-making authority. Usually fills middle-management positions with local talent known as host country nationals (HCNs). These individuals are eventually moved into upper-level management but rarely move beyond managing within their own country.
Geocentric - Management approaches work under the philosophy that relationships between headquarters and foreign subsidiaries should be extremely collaborative. Positions are filled with the most qualified individual, regardless of nationality (Host, Parent, or Third-country nationals).
Regiocentric - A scaled-down version of the geocentric model, but restricted to appointment of people within specific global regions (Europe, North America, Southeast Asia, etc).
Page: 46-47
Level: Hard
[QUESTION]
44. List a few reasons for organizations to expand their business interests beyond their national boundaries?
Answer: Major reasons include access to additional resources (including skilled workers), lower costs, economies of scale, favorable regulations and tax systems, direct access to new and growing markets, and the ability to customize products to local tastes and styles. In addition, the rise of regional trade alliances (such as NAFTA and the European Union) is another important reason organizations have increasingly internationalized.
Page: 34
Level: Medium
[QUESTION]
45. List the five Asian economies expected to share the world's largest economies with the U.S. by 2020.
Answer: The five Asian economies expected to share the world's largest economies with the U.S. are China, Japan, India, Indonesia and a united Korea.
Page: 35
Level: Medium
[QUESTION]
46. List few reasons why a company would choose exports as an option for international commerce.
Answer: Most companies export in order to increase sales and revenues. Companies with high research and development costs resort to exporting to spread costs over large sales volume. Companies may also export in order to relieve excess capacity. Some companies export as a form of diversification to sustain their maturing domestic markets. Finally, some companies export as they lack the necessary knowledge to directly do business effectively on foreign shores.
Page: 36
Level: Medium
[QUESTION]
47. Explain the merits and demerits of licensing and franchising to the licensors, licensees, franchisors, and franchisees.
Answer: The merits include: (a) licensees and franchisees receive access to a business that has an established product and operating system and a good reputation. (b) Licensors and franchisors get the opportunity to expand internationally with very limited knowledge about local markets. (c) Over time, each party to the agreement learns valuable information from the other: franchisees learn how to operate a successful business; franchisors learn quickly about the marketplace.
Demerits include: (a) Both parties typically share the revenues, while neither party has full decision-making authority. (b) Disputes about the terms and conditions of the agreement can become a problem. (c) Company could find its intellectual property duplicated and sold everywhere if patents and copyrights are not protected. (d) Licensors and franchisors must make certain that the required technical skills are available to support the quality of the product or service.
Page: 37
Level: Hard
[QUESTION]
48. Which are the common areas of conflict in a joint venture?
Answer: The common areas of conflict in a joint venture include future investments and the sharing of future profits.
Page: 38
Level: Medium
[QUESTION]
49. What is the objective of businesses creating offshore professional and operations centers.
Answer: Either as a form of sole ownership or as a strategic alliance, these centers involve the exporting of the work itself to places around the globe in order to obtain competitive advantage by leveraging combinations of factors such as workforce skills, cultural similarities, costs, time, and government policies, regardless of where the work product is ultimately marketed.
Page: 39
Level: Hard
[QUESTION]
50. What differentiates domestic HR from international HR?
Answer: The domestic and international HR differ in the complexity involved in operating in different countries with different cultures, politics, and laws and regulations.
Page: 41
Level: Medium
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