Changes in the global business environment (the external factors) that organizations need to address
It can be extremely crucial for organizational leaders to understand the environment before they commence business. External factors cannot be controlled by an organization. They include political conditions, government regulations, accounting agencies, social environment and technological environment. These external factors have an impact on an organization’s operations (Patrick Dowling, 2008, p. 78). Knowledge and clear understanding of the environment can be crucial for any organization that aims at being successful.
Firstly, changes in market conditions create changes internally as organizations try to adjust. For example, in the past few years, the airline industry in the US underwent serious changes. After the terrorist attack in September 11, demand for air travel dropped. The use of internet for comparing airline charges made transactions easier for clients, and encouraged airlines to compete. By mid- 2008, most airlines were reducing amenities that had been taken for granted in the past, due to the increase in fuel costs that began in 2004. Some airlines decided to merge for the sake of remaining in business (Boyacigiller, 1998, p. 369).
Accordingly, workplace demographic is another change that has occurred in the global business environment. For example, workplace monitoring agencies have reported that the average age of the United States workforce is expected to increase as the baby boom generation approaches retirement and younger workers are not enough to fill the gaps. Organizations should realize that as their workforce ages, the benefits they prefer change. Arrangements such as job sharing and flexible work hours might become more common because even after retirement, these employees stay in the workforce (Patrick Dowling, 2008, p. 81). Unsatisfied employees may also resort to retirement, leading to loss of crucial expertise and knowledge in the organization (Kenneth Fukuda, 2002, p. 287). In this case, organizations will have to come up with strategies of retaining employees and plan their retirement. Of great importance will be finding ways of solving age related stereotypes that hinder retention of such employees (Boyacigiller, 1998, p. 380).
Categorically, technology is another major factor for consideration since it motivates change. The complexity of computers has increased with time. This implies that organizations can be expected to change their technology much faster to keep up with the pace. In some instances, technology has produced a remarkable development, giving companies a hard time adapting. For example, music CDs were more appealing compared to LP vinyl records (Patrick Dowling, 2008, p. 95). For a long time, record companies benefited from their status quo. Though, when peer to peer file sharing threatened their existence, the music industry found itself unprepared for such technological changes. They first responded by suing such users and tried to look for a technology that would not make it possible to copy a DVD or CD. This was until Apple's iTunes came up with the idea of selling music online (Derrick Collings, 2007, p. 206).
On this front, political factors should also be taken into consideration. National, international and local politics can influence an organization’s operation. It can be vital for an organization to have a thorough understanding of the current political situation where it operates to enable it make proper arrangements for unexpected changes that may result from changes in current laws or outcome from elections (Kenneth Fukuda, 2002, p. 289). Additionally, it can be crucial to consider legal matters, changes in regulatory guidelines and laws can have a crucial impact on an organization. Laws concerning business taxes, employment practice and minimum can have a direct effect on an organization (Patrick Dowling, 2008, p. 109).
As such, the manner in which businesses get affected by international competitors is another factor for consideration. In the modern globalized world, organizations are increasingly affected by the operations of their international competitors (Derrick Collings, 2007, p. 200). For example, a company like Cadburys has production units in different parts of the world enabling it access the global market. Fast internet connections enable shrinking of communication, bringing together sellers and buyers from different parts of the globe within a short time. Such global advertising and marketing has facilitated the emergence of global brands. Such globalization has resulted to multinational corporations increasingly targeting substantial parts globally. A business that fails to respond to such a change stands to lose out to international competitors who enjoy economies of scale.
Particularly, such organizations can respond by increasing their global presence, whereby they can operate in more overseas markets. This is applicable by setting up overseas plants or developing joint ventures with partners overseas. They can also develop a global brand. An organization can focus on brands which it has the biggest advantage, enabling it sell a narrower range of its leading brands (Derrick Collings, 2007, p. 202).Referring to Perlmuter's staffing strategies predict how businesses will resource overseas operations in the future.
According to Perlmuter, multinational corporations (MNC) following an ethnocentric staffing policy would mostly appoint parent country nationals (PCN) to the top positions at their subsidiaries. Following polycentric staffing policy, these corporations would choose host country nationals (HCN). Firms with geocentric staffing policy would select the best person irrespective of their nationality, and this can include third country nationals (TCN), nationals of a country other than the corporation’s home country, and the country of the subsidiary. Later, Heenan and Perlmutter defined a fourth approach, which they referred to as region centric, where managers get transferred on a regional basis, and it tends to form a midway between pure ethnocentric/polycentric and a geocentric approach.
With regard to the characteristics of the parent country characteristics, MNCs from countries with a culture of avoiding risks will have a higher tendency of employing PCNs, managing directors for their subsidiaries (Derrick Collings, 2007, p. 210). There has often been suspicion towards foreigners as managers and a view that initiative from subordinates should be kept under control. Therefore, trusted PCN is usually the preferred alternative for senior positions in subsidiaries. Direct control of subsidiary operations will be more crucial if the level of cultural distance between host and home country is high.
MNC longer presence in the host country may eventually lead to the development of trust relationships with HCNs thus reduced need to deploy PCNs. Head quarter (HQ) managers will prefer to have at least some home country managers in crucial positions to facilitate the flow of information (Kenneth Fukuda, 2002, p. 290). Larger MNC have more PCNs as managing directors since they have more managerial resources and have a formal management development program in operation that involves the transfer of managers around the world. MNCs with research intensive products, more likely will feel the need to transfer at least some of this knowledge to their subsidiaries to enable training of local managers (Caligiuri, 2000, p. 76).
Whereas MNCs with a global strategy are more likely to staff their subsidiaries with much focus on PCNs or HCNs/TCNs that have been socialized at the HQ, MNCs with a multi domestic strategy will concentrate on HCNs who have been socialized at the host-country subsidiary (Boyacigiller, 1998, p. 377). MNCs with a multi domestic strategy will more likely staff their culturally dissimilar subsidiaries with HCNs that have been socialized at the HQ. Similarly, MNCs having a global strategy and a polycentric managerial orientation will likely staff their subsidiaries with HCNs that have been socialized at the HQ.
With regard to host-country features, MNCs are likely to employ PCNs when the education level in the host country is low since in that case qualified local personnel will be scarce. In addition, a high political risk in a host country is likely to make direct control through expatriates more significant because the risks of loss of assets might be substantial. In the future, organizations would prefer local managers because in most cases, they have adjusted better to the high living costs in their countries and would not require additional compensation, compared to expatriates who expect to get additional compensation to maintain their previous lifestyle (Derrick Collings, 2007, p. 209).A process by which to select these workers, ensure that you describe the competencies required and personal traits.
Selecting an individual for international assignments requires exemplary performance. Such candidates should, therefore, face a number of tough challenges before being selected. A number of characteristics should determine the expected level of an expatriates’ success: relationship skills, language skills, family situation, and motivational state can be some of the most crucial characteristics to be taken into consideration in selecting an expatriate (Boyacigiller, 1998, p. 374).
As such, I would recommend that technical competency be used as the basis of selection for expatriates. The selection process should be made vigorous by organizations to ensure that only qualified individuals get selected. Though the technical skills for an expatriate should be put at the forefront, other skills should also be given consideration since they are equally important. The organization should ensure a strong relationship between its headquarters and the host country to make the expatriate more productive (Caligiuri, 2000, p. 62).
When selecting expatriates, the organization should ensure they have a strong belief in their specific assignment, and have the belief the assignment shall be productive for their careers. Training the expatriates and their families is crucial for proper selection (Kenneth Fukuda, 2002, p. 292). Firms should give priority to expatriates with effective relationship skills to avoid premature termination. In addition, the firms should conduct thorough interviews, which should mainly focus on behavioral flexibility, nonjudgmental disposition and strong interpersonal skills (Caligiuri, 2000, p. 67).
Since expatriates take their families to foreign countries with them. Family transition should, therefore, be taken seriously. The expatriate should be comfortable, this calls for the organization to train the expatriate spouse to have the willingness of living abroad to ensure they are supportive to the expatriates. Additionally, pre-departure training can be crucial for the expatriate, it can depend on a number of factors like novelty of the foreign country and prior overseas experience (Boyacigiller, 1998, p. 378). This training should inform the expatriate concerning their new territory and be able to immerse the expatriate into the new culture.
Overall, these expatriates should portray the following competences.
- Technical competence on the job.
This can be one of the determinants of success. It is crucial if individuals get assigned abroad since the individual get located a distance away from the HQ, which in most cases tends to be the hub for technical expertise, this makes it impossible for them to consult readily with their superiors and peers on job related matters.
- Ability to cope with environmental variables.
Coping with environmental constraints like competitors, customers, unions and governments can be crucial for effective performance. This is crucial since macro- environment may vary in the host country, calling for the expatriate to be understanding, and operate within these systems.
- Family situation.
This is the ability of expatriates to adjust to living in foreign territory. This can be mostly crucial if the expatriate spouses have had to leave their careers to accompany their partners abroad.
Personal traits or relational abilities
This refers to individual’s ability to deal with their peers, supervisors and subordinates. For expatriates, this variable immensely affects the chances of successful performance. This should not be confined to mere knowledge of another culture (Kenneth Fukuda, 2002, p. 290). The vital element should be the ability to live and work with individuals whose customs, beliefs, and manners differ from the expatriate’s. Such individuals in my opinion should be Young and single, they should be motivated to relocate abroad due to their interest in internationalism, and should overall also consider their relocation as a more permanent move (Caligiuri, 2000, p. 75).Recommend actions that can be taken by organizations to ensure that the workers are as productive and effective in the quickest time
In expatriate selection, interpersonal skills and personality characteristics are very crucial, though most firms still rely on knowledge of the companies systems and technical competence. In order for organizations to ensure that workers become productive in the shortest time, diverse cross-cultural training programs should be developed. These programs should focus on
- The expatriate’s cultural background.
- Culture-specific characteristics of the host-country environment.
- The expatriate’s degree of contact with the host environment.
- The assignment length
- The individual’s family situation
- The individual’s language skills.
When all these factors are given consideration in the training, and the expatriates get proper training, workers can become productive and effective in the shortest time.
In addition, analysis of assignment success can be of crucial value for organizations having a high number of international personnel. Investigating factors that influence assignment success should be of major focus for a firm considering international transfers to ensure expatriates have an intention or motivation to remain on the job (Derrick Collings, 2007, p. 199). Such expatriates can be able to adapt to the environment in the foreign country more easily, and appreciate the diverse culture. This enables workers become productive and effective in a short time.
Boyacigiller, N. (1998). The role of expatriates in the management of interdependence complexity and risk in multinational corporations. Journal of International Business studies, 357-381.
Caligiuri, P. (2000). Selecting expatriates for personality characteristics: A moderating effect of personality on the relationship between host national contact and cross-cultural adjustment. Management International Review, 61-80.
Derrick Collings, H. S. (2007). Changing patterns of global staffing in the multinational enterprise: Challenges to the conventional expatriate assignment and emerging alternatives. Journal of World Business, 198-213.
Kenneth Fukuda, Y. K. (2002). Boundary spanning behaviors of expatriates. Journal of World Business, 285-297.
Patrick Dowling, M. F. (2008). International human resource management: Managing people in a multinational context. London: Cengage Learning.