Table of Contents
Background to the research.. 3
The research problem.. 3
Research objectives. 4
Main objective. 4
Specific Objectives. 4
Significance of the research.. 4
Definition of terms. 5
Limitations of the study. 5
Review of literature. 6
What are multinationals and how do they manage subsidiaries?. 6
Factors affecting the operation of multinational companies. 6
The dilemma in the management of subsidiaries using expatriates. 7
Can international human resource management take charge in expatriate management? 8
Research Methodology. 9
Research design.. 9
Sampling techniques. 9
Data collection tools and methods. 9
Data analysis discussion and recommendations. 9
References List 10
The problem of expatriate management in Multinationals – adaptation to foreign culture
Background to the research
According to Chew, 2004, Treven, 2006, Globalization has opened opportunities for business firms across the world. Because of the opportunities that accrue to globalizations, firms have realized that it is beneficial to enter new markets. Therefore many firms are entering and setting their businesses in different countries as part of diversification and fulfillment of business growth strategies. From the last decade of the 20th century up to date, many firms have been making efforts of entering new countries of operation. As firms expand into new countries or areas of operation, the need for adaptive mechanisms of managing staffs is needed. Therefore, international human resource management has been coded to help in the management of staffs in multinational companies (Du Plessis and Beaver, 2008). As firms establish themselves in new destinations, they take different approaches of organizing their staffs. Most firms prefer to use expatriates at different levels. Expatriated are foreign works that are deployed in different countries to help in the management of these subsidiary firms of a company. These workers are usually sent from the mother companies (Longatan, 2009, Grainger and Nankervis, 2001).
Research reveals that there are many advantages as well as demerits of using expatriates by multinational corporations. Many people continue to explore the subject of expatriates and their roles in the global business. Though globalization has simplified business operations for multinational companies across the world, many challenges are still being faced by multinational firms (Grainger and Nankervis, 2001). Many companies have found it hard to adapt to the new environment due to the problem f expatriate management. Differences in human resource policies exist between the foreign countries and the countries from where the multinational firms are situated (Stone, 2008). Cultural differences are one of the main factors from which the problem of expatriate management resonates. The difference in business culture – human resource practices between the countries where subsidiaries are located and the mother countries of operation are eminent. Different companies have different human resource policies which may be favorable in some countries and unfavorable in others. While most of the expatriate managers would prefer to go by the human resource policies of the mother firms, this may not fit in the foreign countries (Short and Callahan, 2005).
The research problem
The multinationals hold up the world economy. They control more than 50 percent of the revenues in the world economy. They also use both local staffs and international staffs. Due to the existence of differences in business and cultural differences between the host countries and the parent countries, the management of and by expatriates becomes quite hard. The growth and expansion of multinational companies has been applauded as a major contributor to economic growth. Multinational companies are the main drivers of trade at the global level. Most of the multinationals have huge assets and control an enormous amount of revenues across the countries where they operate. The relevance of multinationals in national economies has also been emphasized by many researchers. Therefore, the management of these firms has to be taken seriously because of the importance of these firms in economic development.
The multinationals find the use of expatriate firms in their subsidiaries to e relevant. Expatriates are deployed at different levels. Some firms only use the expatriates at top management levels in the organization. Expatriates are also used in a long-term or short-term basis. The use of expatriate workers in subsidiaries has its benefits and its shortfalls as well. One of the major problems that have been reported in expatriate management concerns the issue of adaptability to the business culture of the foreign countries. The difference in business and social culture between different countries affects human resource practices in multinationals. The development of better human resource management practices in multinationals using expatriate staffs has been hardened by the differences in business cultures. The problem of expatriates in multinational firms derails their performance. This research therefore looks into the problem of expatriate management in multinational firms. It centers on business culture and how it affects expatriate management in subsidiary firms of multinational companies.
The main objective of this research is to establish the problem of expatriate management in multinational companies.
The first objective is to find reasons why multinational firms use expatriate staffs and managers in their subsidiary firms.
The second objective is to identify circumstances and different levels at which multinational companies use expatriates.
The other objective is to find out the real benefits of using expatriates in multinational corporations.
Also, the research seeks to identify the cultural issues related to human resource management and general business practices and culture affecting expatriate management.
The research seeks to find out how multinationals adopt to the business environment in multinational firms.
The paper also seeks to identify how firms are dealing with the problem of expatriate management.
Basing on literature, the research will try to come up with recommendations on how multinationals can deal with the problem of adapting to the foreign culture and practices.
Significance of the research
This research is meant to establish the common practices that affect human resource practices in expatriate management by multinationals. Basing on the nature of the problem as will be revealed in literature, the research will come with recommendations. These recommendations will respond to specific problems hence acting as probable solutions to the problem under study. In this era, business growth is a denominator of economic growth. The growth of economies lies in the operations of big companies. Therefore this research will open into a problem affecting multinational companies which could be a basis for finding solutions to the problem and the growth of business. The recommendations made in this research will add to the investigative literature available thence contribute to solution.
Definition of terms
There are several terms which will be used throughout this research which must come into the attention of people who will be referring to this research.
Expatriates – As used in this research, this term means foreign workers who are working for subsidiary firms of multinational corporations.
Expatriate management – as it applies to this research, this phrase means using foreign workers; from mother firms to manage the subsidiary firms. The phrase will also mean employing foreign staffs in multinational subsidiaries – not basically those acquired from the mother company.
Multinationals – Multinationals is used in research to mean firms that are controlling production activities in more than a single country. The term will also refer to business companies that are operating globally.
Subsidiaries – subsidiaries are firms that are located in foreign countries – outside the countries where their mother firms are operated. Subsidiaries refer to sub-companies of major companies located outside the company where the mother plants are located in different countries in the world.
Culture – culture is used as an elaborate term in this research. It will refer to the business practices and policies in a given country. Culture will also to some extend mean the social factors affecting the interaction between workers in an organizational setup.
Mother firm – Mother firm as used in this research means the major company that is controlling the subsidiary companies. Mother firms are the pioneer companies for the subsidiary firms. Parent company will also be used to refer to mother firm in this research.
Host country – As used in this research, host country means the country where the subsidiary firms for a given multinational company is located.
Parent country – This phrase as used in this study refers to the country were the main firm of a company is located.
Limitations of the study
This research will use both primary and secondary data hence it will be exposed to all weaknesses of secondary and primary research. Secondary data will be used in this research therefore it may not cater for the current issues concerning the problem under study. Time will also be a limitation in this research. The limit in time may affect the intensity and range of data collected and the details and the outcomes of the analysis. The research will also be limited to a specific country with specific multinationals operating in that country. Cultural factors in the business environment differ from one country to the other. The findings and recommendations may not thus apply to all countries in the world. Also different multinationals are governed by different cultures which affect how they manage subsidiaries using expatriates.
This research will take place within two months. The collection of data or literature will take place within the first three weeks of the research. The review of the data collected will be done within two weeks. This will be to ensure that only important data is availed for analysis and for making deduction. This will be followed by analysis of the data collected. Data analysis will take place within two weeks. The last one week will be used for checking on the inferences or recommendations to ensure that they match the analysis done.
Review of literature
What are multinationals and how do they manage subsidiaries?
Multinational corporations are business entities which are controlling production activities in more than one country in the world. In different industries in the world today, there are many business companies which have expanded to the global business arena. Some of the multinationals have a large capital base to the extent that they control production in almost every continent in the world. Other multinationals are restricted to only certain regions of the world (Mayerhofer, Hartmann, Michelitsch-Riedl and Kollinger, 2004). Multinationals bring with them a lot of benefits to economies. On of their major contribution to economies is that they offer employment opportunities in countries where they operate. Besides this, multinationals contribute directly to national economies by submitting huge monies inform of taxes to national governments. As multinationals expand into new areas they are forced to adapt to new and norms in the new environment. Most multinationals prefer using the staffs from their mother firms as they understand the company better and can hold up to the norm of the company. Multinationals dispatch their staffs to the subsidiary firms. This is common more so at the top level of the company. The management of staff in the international context has become quite important for business firms today. International human resource management pays emphasis on the management of staffs in multinational firms. It seeks to seal all the human resource management gaps which are prevailing in multinationals. One of the gaps is the cultural barrier in expatriate management in multinationals (David and John, 2006).
Factors affecting the operation of multinational companies
Research shows that there are a number of factors which affect how expatriate activities are conducted and the level of success which can be attained in expatriate management. When the multinational firms are choosing expatriate staffs, they consider technical ability, cultural empathy, managerial skills, diplomacy, language ability and adaptability. Others are attitude, maturity and adaptability of the family member of the expatriates. Managing human resources in foreign locations or countries poses a great challenge to human resource managers. The management of employees who originate from the same country proves to be easy than managing employees in a foreign environment (Kumar, 2011).
Research has revealed that multinationals have been facing many challenges of operating using expatriate staffs. The problems range from the cost of sustaining the expatriates to problems of adaptability to the culture and the general business climate in foreign countries. Cultural adaptation has been a major concern of firms that exercise expatriate management. Many western firms have been reporting an increase in expatriate failure where they are forced to recall their expatriate staffs. Expatriate failure is caused by many factors among them being the difficulties in adjusting to the new business environment in the countries where they are assigned to work (Mayerhofer, Hartmann, Michelitsch-Riedl and Kollinger, 2004).
The selection of staff for international assignments has been a concern for human resource in many multinationals. Some of the factors that surround the selection of these staffs are the understanding and ability to function in foreign countries, tolerance to new changes and flexibility of behaviors. International human resource management policies have been trying to standardize the policies governing performance appraisal. However, the differences in culture between the host countries and the parent countries make it hard for the standardization to work (Warner, 2004).
The dilemma in the management of subsidiaries using expatriates
The management of expatriates is one of the factors that determine the survival of multinational firms. The staffing decisions made by have to be pegged on the cultural differences as well as similarities between the host country and the parent country. Also, such decisions have to consider the orientation at the top management of firms and the strategic considerations such as the relationship between localization and standardization (Mayerhofer, Hartmann, Michelitsch-Riedl and Kollinger, 2004).
As it is now, the problem of human resource in international firms does not call for adjustment to new environment. It is demanding for a total understanding of the economic culture as well as the social culture of the country in which the company is operating. This further calls for historical understanding and even experience in the economic culture and practices. With competition in global business, firms are rushing to capture new markets. As they rush to do so, they seen to draw away important policy points like the sustaining of staffs in the new markets. Multinationals do not take to reflect on best international human resource management practices to be used in their new firms in new locations. Such practices could focus training on adaptation to all forms of culture as well as considering the benefits of using local staffs in managing the expatriate firms (Mayerhofer, Hartmann, Michelitsch-Riedl and Kollinger, 2004).
Expatriate assignments can pose great challenges not only to the employees but also to their families. In such scenarios, companies design compensation programs for their expatriate workers. High compensation packages are awarded to the expatriate staffs in order to sustain them in the host country. Foreign tasks include a substantive increase in responsibility. Managing a firm outside its home country is calls for more responsibility because of the limited access to corporate support and the cultural shift. International human resource management experts have emphasized on cultural training to the expatriate staffs for multinational which highly embrace expatriate management. Cross cultural training helps the expatriates to prepare for what they will encounter in the foreign countries. The development of international compensation policies for multinationals requires these companies to align the policies to those of the host countries. This proves to be difficult for expatriate managers especially so that such policies touch on many issues some of which touch on the tax policies of the country (Vance and Paik, 2011).
It has been recognized that the management of human resources at the global level is more complex because of the nature of practices in the in the international business environment. International human resource management practices are going a step in solving the problems that are inherent in the management of multinational organizations. This is because international human resource practices has been forcing on training staffs on aspects of adaptability to different business environments. This resonates from the recognition that business is no longer centered by focused on creation and utilization of chances at local and international level (Vance and Paik, 2011).
Can international human resource management take charge in expatriate management?
Mila, Lazarova and Jean-Luc Cerdin, 2007, have observed that expatriate failure has become a worry to many multinationals and thus the reason why international human resource management was codded. The main aim of international human resource management is to develop policies that can be used to better the management of staffs in multinationals. To avoid the problem of expatriate management, a number of measures have been suggested. The first measure or approach of embracing expatriate management is the element of planning. Most firms take expatriate management as a simple exercise. They thus employ the aspect of planning to a very low degree which ends up affecting the whole exercise of expatriate management. Prior planning helps in broadening the look in the whole exercise of expatriate management. All possible hindrances are factored in the plans and strategies of mitigating or addressing them for instance training enforced. Planning is a key preparedness factor which will ensure that these firms assess the host countries culture before picking on modalities of expatriate management (Vance and Paik, 2011).
High costs of operation have been reported in multinationals due to the costs that are associated with expatriate management. While most multinationals continue to incur a lot of costs associated with catering for their staffs, they still record high rates or returnees. Multinationals tend to ignore cross-cultural communication training which could be resourceful in cutting down the sums of money spend on expatriates. Research shows that staffs who are trained on cultural issues of the host country adopt better to the host countries. They make insightful contribution to the subsidiaries. This is contrary to expatriates who are not trained on cross cultural communications as these groups of expatriates record a high rate of failure (Du Plessis, Venter and Prabhudev, 2007).
This research will take the form of a case study. This case study design will be favorable for this research as it will be looking at a specific problem in multinationals. It will focus on ten multinationals operating in a single host country.
The final sample will be composed of ten companies that will be selected from amongst the multinationals operating in one country. The sample will be composed of five multinationals operating in the services sector and five others which are operating in the manufacturing sector. Both of these groups of subsidiaries will be sampled from amongst a group of companies lying in each of these sectors. Stratified sampling will be used to group the companies into the two main sectors under which they lie. After this, random sampling technique will be used to select samples in each of the two groups.
Data collection tools and methods
Data will be collected using different tools. Questionnaires and interview guides will be the major tools that will be used in collecting information from the employees of the sampled subsidiaries. Questionnaires will be used in collecting information from the staffs of the subsidiaries while the interview guides will help in getting information from the topmost management of these firms. Focused group discussions will be used in administering the question guides to the managers. Interview guides generates more comprehensive data than the questionnaires. Secondary data will be collected from secondary authentic literature materials published not more than ten years ago. Journals will be the most preferred sources from which secondary data will extracted. The questionnaires and the interview guides will be administered within the same time frame. The questionnaire will be self administered.
Data analysis discussion and recommendations
The data collected from each company will be sorted analyzed individually. The analyses made from the individual subsidiaries will be brought together and analyzed collectively. After the collection of the primary data it will be codded according to the response categories in the questionnaires and the interview guides. After codding the data, analysis will follow. Data will be analyzed using statistical method. Statistical tools of analysis like graphs, charts and percentages will be employed in the presentation and analysis of the primary data. Data points which are easily interpretable will be formed. The data points will then be compared withy the secondary data so as to come up with comprehensive deductions. This will be expected to give a more wide view of the problem being studied. A conclusion will be made by observing all the outcomes from the research. Recommendations will then be made by critically observing the outcomes of the research. The recommendations will form part of reference for scholars who are interested in studying areas related to this research.
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