Successful Domestic Company Goes Global – MGT 510 Assignment Instructions
Imagine that you are the CEO of a successful domestic company. In the last 6 months, many potential clients in foreign countries have expressed a desire to conduct business with you. You know that in order for your company to grow, you will have to expand overseas. You have recently attended a local three (3)-day international trade exposition and have gathered many brochures on the foreign companies interested in doing business with your company.
After meeting with the Executive Committee of your successful domestic company, you decide that you will need to identify a minimum of two (2) countries for expansion and two (2) expatriates whom you will send into the chosen countries. The selected expatriates will learn about the countries’ cultures and business activities there. You must prepare a report for the potential employees who may want to take an overseas assignment, the Executive Committee, and the Board of Directors.
Use the Internet and Strayer Library to research possible countries for expansion. Next, conduct research on leveraging expatriates over country nationals for business overseas. Finally, research books that could help expatriates in their transition to working overseas.
Write an eight to ten (8-10) page paper in which you:
- Create a guide to leveraging expatriates. The guide should include four to six (4-6) sources that address benefits and challenges of sending expatriates to other countries.
- Examine the major benefits that this report can provide for the organization, and suggest two (2) uses for the information contained therein. Justify your response.
- Analyze the major factors (e.g., distance, cultural background, knowledge of the related countries, languages spoken, relatives who may live in another country, etc.) that would influence your choice of countries into which your company would expand. Recommend two (2) countries for expansion. Provide a rationale for your response.
- Determine three (3) criteria that you would consider when deciding which employees to send abroad. Justify your response.
- Propose the major methods and / or incentives you would use in order to encourage the selected employees to become expatriates. Provide a rationale for your response.
- Recommend one (1) strategy to ensure that both the Executive Committee and the Board of Directors are committed to the expansions. Justify your response.
- Recommend two (2) books that the selected expatriates should take with them when they go overseas. Provide a rationale for your response.
- Outline a guide for expatriates who will reside within another country for one to two (1-2) years. The related guide should cover the following topics: selecting items to pack, accommodating a vehicle (i.e., leave behind or send overseas), shipping or selling furniture, moving pets, and arranging accommodations for children and / or family residing in another country for the discussed length of time.
- Develop a framework for your presentation. The framework should include the following:
- Relevant visuals
- Statistics that support the decision to expand into the identified countries
- A feasibility study of your company’s proposed expansion to the countries in question
- Information related to renting or buying land or a building
- Any other information relevant to the case for expansion
- Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other similar websites do not qualify as academic resources.
Successful Domestic Company Goes Global – MGT 510 Assignment Sample Answer
Introduction
The world business is ever increasing and Multi-National Corporations (MNCs) have been forced to expand into foreign countries in order to tap into greater market potential and beat the growing global business competitions. Most of the MNCs establish subsidiaries, joint ventures or joint alliances that are owned by the parent companies. Most of these subsidiaries require expatriates to run them (Oltra, Bonache, & Brewster, 2012). Therefore, it is important that any company that goes global, they must take into considerations the challenges faced by their expatriates in such countries if they are to realize success of their business ventures.
The Major Benefits That This Report Can Provide For the Organization
In order to prepare the expatriates for managerial roles in the host countries, there is need to offer cross-cultural training. The development of a good understanding and appreciation of the cultural diversity of the host country is important for successful foreign investments. In addition, it is important that the objectives of foreign investments to be integrated with the choice of appropriate host manager. The benefits of using expatriates over host manager are critical to the success of the MNCs in developing successful market penetration in foreign destinations (Vilet, 2012).
The report shall provide important information regarding the choice between the host manager and use of expatriates. The rationale behind the choice of expatriates as highlighted in the report shall provide a clear framework and information that shall make it easy for the management to make decisions on expatriation. Furthermore, the report highlights major challenges that expatriates go through as well as the expatriates’ selection and compensation criteria. This information is important and provides a good basis for the selection of competent expatriates, who shall ensure the success of the MNCs foreign operations.
A Guide to Leveraging Expatriates
Numerous business opportunities exist in foreign countries that make international countries to expand. While expansion can be an easy venture, considering the financial capability of these companies, there are numerous challenges that can affect effective operations of the expatriates. According to (Chew, 2004), MNCs are often faced with the challenge of using expatriates in order to complete strategically critical tasks in foreign countries. These companies, in addition to using expatriates to facilitate corporate control and for their expertise, they often initiate international management competencies and facilitate entry into the new markets.
According to (Williams, 2011), the MNCs face a number of challenges in the foreign countries related to social, economic, political and cultural environments. This creates a challenge in the choice of a manager for a foreign business. Often the decision faced by such companies is either to appoint a foreign national or send an expatriate. Most MNCs prefer to appoint a manager from their parent company for a number of reasons. The ability to execute the orders of the parent company and maintain close relationship between subsidiary and the parent company as well as maintaining internal company consistency, makes expatriates the obvious choice for many corporations. Similarly, the expatriate managers stand a better chance to share production secrets and have communication ease with the parent company, since they have a better understanding of its values and cultures.
Furthermore, the selection of an expatriate makes it possible for the parent company to ensure its orders are executed. Most of the parent companies are skeptical about ability of the host managers to carry out orders of the parent company, while maintaining close relationships. In addition, at its initial stage of establishment, there are no established links that can be used to choose a host manager, leaving use of an expatriate as the only choice. The selection of an expatriate manager to head a subsidiary follows the ethnocentric staffing policy.
However, (Chew, 2004) further asserts that the failure of the MNCs to offer comprehensive communication and facilitate their entry, often plunges them into crisis and possible failure. Most of the expatriates often return before their assignments are complete (Vilet, 2012). The failure of successful expatriation can be attributed to organizational and individual inability to meet foreign challenges. Most expatriates face a culture shock when they manage in foreign countries.
According to (Galarza, 2005), culture shock is caused by anxiety of losing the familiar ways of doing things. In the managerial perspectives, most of the expatriates face dilemmas in the host country related to management of employees. For instance, when to order people, shaking hands, when to give tips, how to reject invitations, how to make purchases and facial expressions. Furthermore, culture shock can be evident in the local cultural beliefs, food, customs and norms. The difference between the host country and the parent country’s culture form one of the greatest challenges that expatriate face in their endeavors.
Analysis of the Major Factors in Foreign Countries
According to (Mcmanus, White, & Botten, 2008), organizations going global can only achieve effective competitive advantage if they develop effective human resources as well as good management of their uniqueness. Therefore, it is important for any company that is going global to develop a good understanding of the host country. The major factors that need to be addressed include distance, culture and languages spoken as these may substantially affect the success or failure of the human resources.
Although many people do not regard language as a major factor, it can greatly affect the communication outcomes. (Hsu, 2012) pointed that language determines how one expresses him/herself. Although languages may be the same, there are differences on how one expresses some words and this can determine success of communication in workplace as well as business processes. Therefore, it is important that the country in which business expansion should be carried out must bare much resemblance in terms of language, with the company parent company.
The other factor that is of great consideration when going global is the cultural diversity. According to (Hofstede, Hofstede and Minkov, 2010), culture determines power and negotiations. Most developed nations differ in power distances from the undeveloped nations. Culture also influences the choice of food, timing, modes of dressing, and associations. It is important that firms analyze and determine whether there is a close resemblance in culture in the host countries as this would facilitate integration of expatriates.
In addition, the distance determines geographical time zone, which can influence communication between the host and parent country. The countries in the Far East have huge time difference with that of America and that would present many communication challenges. The choice of the host country shall take into consideration to the distance. The choice of England and Australia were made since it provides less culture shock and the major language used is English, which is widely spoken in US. The choice of these countries shall make it easy for business to be conducted in addition to facilitating the settlement of the expatriates.
Criteria to Consider When Deciding Which Employees to Send Abroad
It is important that repatriation be done in a manner that facilitates successful business in the host country. Therefore, it is important that the expatriate selection follow a number of criteria that would ensure that competent expatriates are selected. In order to select competitive employees to send abroad, the chosen individual must be able to take an interview with his/her spouse. According to (Haslberger & Stroh, 1992), the expatriate selection must be done in rigorous interviews in order to determine if they can withstand any cultural changes that they shall encounter in the host country. The interviews help in assessment of the past and current behaviors of the candidates as well as their intelligence, interpersonal and communication skills.
The other criterion that shall be used in the selection of the expatriates is through recommendation from other senior managers who have prior international experience in human resource management. A line manager who recommends a candidate may be having knowledge about the candidate that the interviewing manager may not in a position to know. The final criterion shall involve the use of formal assessment tests. Formal assessment tests are concerned with the evaluation of individual traits that are necessary in order for the candidate to adapt to the new culture. The most commonly assessed traits include good interpersonal experiences, adventure, flexibility and adaptability. This criterion provides a better measure of the ability of the candidate to manage diversity and adapt to new environment.
The Major Methods And / Or Incentives to Use In Order To Encourage the Selected Employees to Become Expatriates
It is important that expatriates have the necessary support in order to give them a motivation to leave their home country and take responsibilities in the foreign countries. One of the major methods that would determine the motivation of the expatriates to work is the remuneration package. According to (Harrison, 2012) there is need to ensure that remuneration of expatriates is competitive enough in order to allow them to help the company meet their objectives while keeping the costs down. He suggests the need for benchmarking in order to provide competitive salary package. In addition, the expatriates would feel more encouraged if their salary packages included benefits such as relocation package and medical cover. A number of methods can be used to determine a competitive package that can encourage expatriates to relocate. According to (Society for Human Resource Management, 2012) competitive package can be determined through balance sheet method, lump sum, and negotiation and Cafeteria techniques.
The use of competitive salary package may not be the only technique to encourage expatriates to relocate to foreign destinations. (Distance Learning Center, 2013) provide a number of incentives that can ensure the expatriates take the opportunity to move abroad and take foreign jobs. It asserts that the transfer of employees can be disruptive and creates disengagement with their families. Therefore, it is necessary that the expatriates be assisted in finding a house, guarantee-against-loss programs and home purchase plans. All these would make it easy for the expatriates to settle and thus encourage them to move abroad.
Strategy That Would Ensure That both the Executive Committee and the Board of Directors Are Committed To the Expansions
Although the expansions can be an inevitable business strategy for MNCs that would wish to expand to foreign destinations, it is important that good strategic expansion initiatives be drafted in a way that can convince company management to adopt them. (Fernandes, 2014) pointed out that for companies to be successful in their global expansion strategies; there is need for management to adopt logical, meticulous and strategic approaches. This report shall propose use of joint ventures as a means of gaining global expansion. The (Manzella, 1998), define joint ventures as a form of business corporation between two or more companies.
Most of the directors and executive committee will always adopt strategies that protect the interests of the company. The use of joint ventures allows the company to retain its exclusive business rights. The strategy is good for a company in establishing new businesses in foreign destinations since it requires little investments; it facilitates business ownership issues since the host companies have good knowledge on business registration processes. In addition, joint ventures shall provide a way in which the company can mitigate the risks of investment in foreign destinations.
Books That the Selected Expatriates Should Take With Them When They Go Overseas
Arriving in a completely new environment can be a challenging task especially for the individuals who have no prior experience. Therefore, the report recommends that the expatriates shall carry with them two books that shall help them to integrate to their new destinations. The first book is a book that covers the culture about the two countries, each specific to the country of destination. Such a book will be very useful in facilitating the communication since it shall provide comprehensive information regarding the language, modes of communication and other cultural aspects. The other book that would be very useful is a book that geographical information about the country, detailing the potential areas where one can find good accommodation and necessary help in case of any difficulty while in the foreign country.
A Guide for Expatriates Who Will Reside Within another Country for One To Two (1-2) Years
In order to ensure a smooth transition and settlement in a foreign country, it is necessary that expatriates carry essential items. The first important item is the visa, which shall be used to obtain the work permit. In addition, there could be a compelling desire to move with pets and one’s family. Relocating with children can be a taunting task, and taking pets may require one to have prior knowledge of quarantine restrictions in the host country. Therefore, the report advices against any children and pets being moved into the host country. However, if the destination country provides opportunities for one’s spouse, one can relocate with them. Doing business requires a lot of traveling and this entails the use of vehicles. Although the public transport in the UK and Australia are well developed, it is advisable that the expatriates hire cars until they obtain the necessary license. In addition, there is a need to take the necessary debit cards in order to use in facilitating transactions. Finally, one must remember to take the necessary telephone contacts for communication with the family members.
Framework for the Expansion
The table above shows the growth in the per capita income and the GDP of Australia over the last 20 years. This highlights that the country’s economy is ever growing and the increasing per capita shows that the country provides a good opportunity for investments. However, the presence of foreigners in the country has led to rise in the cost of housing which may pose problems to the investors who seek for housing services. However, private investments decreased in 2013/2014 financial year and this means that the sector offers good market for new investor interest as shown in the diagram below (Australian Bureau of Statistics, 2014).
Furthermore, according to (The Australian Foreign Investment Review Board, 2013) the Australian government has progressively increased the aggregate assets threshold that can be owned by any foreign investor from 90s and in December 2006 from $50 million to $100 million. This provides further room for foreign expansion meaning the company has enough capacity to acquire assets. According to the (UK Trade & Investment, 2013), UK has been ranked as the best destination for foreign direct investment. Given that the Australia and UK offer resemblance to US in terms of culture, the cost of doing business in these countries are cheaper due to lesser cultural shock that expatriates are likely to face. Majority of the US foreign investors prefer UK owing to its relatively stable political and economic environments.
Conclusion
Foreign investments provide an opportunity where a company can tap into emerging markets or increase its businesses. When firms go global, they are often required to send their employees to the host countries and these may pose many challenges to the expatriates. The major source of problem is the cultural difference between host and parent country. However, the close resemblance between UK and US as well as the Australian culture, makes these two countries ideal destinations for American firms to invest.
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