{"id":146,"date":"2017-05-01T14:09:12","date_gmt":"2017-05-01T18:09:12","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/hrm1stcanadianedition\/?post_type=chapter&p=146"},"modified":"2017-05-05T18:51:10","modified_gmt":"2017-05-05T22:51:10","slug":"15-1-offshoring-outsourcing","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/hrm1stcanadianedition\/chapter\/15-1-offshoring-outsourcing\/","title":{"raw":"15.1\u00a0Offshoring, Outsourcing","rendered":"15.1\u00a0Offshoring, Outsourcing"},"content":{"raw":"
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Learning Objectives<\/h3>\r\nBy the end of this section, you will be able to:\r\n
    \r\n \t
  1. Be able to explain the terminology related to international HRM.<\/li>\r\n \t
  2. Define global HRM strategies.<\/li>\r\n \t
  3. Explain the impact of culture on HRM practices.<\/li>\r\n<\/ol>\r\n<\/div>\r\nAs you already know, this chapter is all about strategic human resource management (HRM) in a global environment.\r\n\r\nBefore we begin to discuss HRM in a global environment, it is important to define a few terms, some of which you may already know. First,\u00a0offshoring\u00a0is when a business relocates or moves some or part of its operations to another country.\u00a0Outsourcing involves contracting with another company (onshore or offshore) to perform some business-related task. For example, a company may decide to outsource its accounting operations to a company that specializes in accounting, rather than have an in-house department perform this function. Thus a company can outsource the accounting department, and if the function operates in another country, this would also be offshoring. The focus of this chapter will be on the HRM function when work is offshored.\r\n
    Outsourcing<\/strong> <\/em>involves contracting with another company (onshore or offshore) to perform some business-related task.<\/div>\r\n
    Offshoring<\/strong> <\/em>is when a business relocates or moves some or part of its operations to another country<\/div>\r\n

    The Global Environment<\/h2>\r\nAlthough the terms\u00a0international,\u00a0global multinational, and\u00a0transnational\u00a0tend to be used interchangeably, there are distinct differences. First, a\u00a0domestic\u00a0market is one in which a product or service is sold only within the borders of that country. An international\u00a0market is one in which a company may find that it has saturated the domestic market for the product, so it seeks out international markets in which to sell its product. Since international markets use their existing resources to expand, they do not respond to local markets as well as a global organization. A\u00a0global\u00a0organization is one in which a product is being sold globally, and the organization looks at the world as its market. The local responsiveness is high with a global organization. A multinational\u00a0is a company that produces and sells products in other markets, unlike an international market in which products are produced domestically and then sold overseas. A\u00a0transnational\u00a0company is a complex organization with a corporate office, but the difference is that much of the decision making, research and development, and marketing are left up to the individual foreign market. The advantage to a transnational is the ability to respond locally to market demands and needs. The challenge in this type of organization is the ability to integrate the international offices. Coca-Cola, for example, engaged first in the domestic market, sold products in an international market, and then became multinational. The organization then realized they could obtain certain production and market efficiencies in transitioning to a transnational company, taking advantage of the local market knowledge.\r\n
    \r\n\r\nA domestic market<\/strong><\/em> is one in which a product or service is sold only within the borders of that country.An international market<\/strong><\/em> is one in which a company may find that it has saturated the domestic market for the product, so it seeks out international markets in which to sell its product.\r\n\r\nA global organization<\/strong><\/em> is one in which a product is being sold globally, and the organization looks at the world as its market\r\n\r\nA transnational company<\/strong><\/em> is a complex organization with a corporate office, but the difference is that much of the decision making, research and development, and marketing are left up to the individual foreign market.\r\n\r\n<\/div>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
    Global<\/td>\r\nTransnational<\/td>\r\n<\/tr>\r\n
    Centrally controlled operations<\/td>\r\nForeign offices have control over production, markets<\/td>\r\n<\/tr>\r\n
    No need for home office integration, since home office makes all decisions<\/td>\r\nIntegration with home office<\/td>\r\n<\/tr>\r\n
    Views the world as its market<\/td>\r\nHigh local responsiveness<\/td>\r\n<\/tr>\r\n
    Low market responsiveness, since it is centrally controlled<\/td>\r\n<\/tr>\r\n
    International<\/td>\r\nMultinational<\/td>\r\n<\/tr>\r\n
    Centrally controlled<\/td>\r\nForeign offices are viewed as subsidiaries<\/td>\r\n<\/tr>\r\n
    No need for home office integration, as home office makes all decisions<\/td>\r\nHome office still has much control<\/td>\r\n<\/tr>\r\n
    Uses existing production to sell products overseas<\/td>\r\nHigh local responsiveness<\/td>\r\n<\/tr>\r\n
    Low market responsiveness<\/td>\r\n<\/tr>\r\n
    Table 15.1<\/strong>\u00a0Differences between International, Global, Multinational, and Transnational Companies<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nGlobalization has had far-reaching effects in business but also in strategic HRM planning. The signing of trade agreements, growth of new markets such as China, education, economics, and legal implications all impact international business.\r\n\r\nTrade agreements have made trade easier for companies. A\u00a0trade\u00a0agreement\u00a0is an agreement between two or more countries to reduce barriers to trade. For example, the European Union consists of twenty-seven countries (currently, with five additional countries as applicants) with the goal of eliminating trade barriers. The North American Trade Agreement (NAFTA) lifts barriers to trade between Canada, the United States, and Mexico. The result of these trade agreements and many others is that doing business overseas is a necessity for organizations. It can result in less expensive production and more potential customers. Because of this, along with the strategic planning aspects of a global operation, human resources needs to be strategic as well. Part of this strategic process can include staffing differences, compensation differences, differences in employment law, and necessary training to prepare the workforce for a global perspective. Through the use of trade agreements and growth of new markets, such as the Chinese market, there are more places available to sell products, which means companies must be strategically positioned to sell the right product in the right market. High performance in these markets requires human capital that is able to make these types of decisions.\r\n\r\nThe level of education in the countries in which business operates is very important to the HR manager. Before a business decides to expand into a particular country, knowledge of the education, skills, and abilities of workers in that country can mean a successful venture or an unsuccessful one if the human capital needs are not met. Much of a country\u2019s human capital depends on the importance of education to that particular country. In Denmark, for example, college educations are free and therefore result in a high percentage of well-educated people. In Somalia, with a GDP of $600 per person per year, the focus is not on education but on basic needs and survival.\r\n\r\nEconomics heavily influences HRM. Because there is economic incentive to work harder in capitalist societies, individuals may be more motivated than in communist societies. The motivation comes from workers knowing that if they work hard for something, it cannot be taken away by the government, through direct seizure or through higher taxes. Since costs of labour are one of the most important strategic considerations, understanding of compensation systems (often based on economics of the country) is an important topic. This is discussed in more detail in\u00a0Section 15.3.3 \"Compensation and Rewards\".\r\n\r\nThe legal system practiced in a country has a great effect on the types of compensation; union issues; how people are hired, fired, and laid off; and safety issues. Rules on discrimination, for example, are set by the country. In China, for example, it is acceptable to ask someone their age, marital status, and other questions that would be considered illegal in Canada. In another legal example, in Costa Rica, \u201caguinaldos\u201d also known as a thirteenth month salary, is required in December.\u00a0[2]This is a legal requirement for all companies operating in Costa Rica. We discuss more specifics about international laws in\u00a0Section 15.3.5 \"The International Labour Environment\".\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
    Rank<\/strong><\/td>\r\nCompany<\/strong><\/td>\r\nRevenues <\/strong>\r\n\r\n($ millions)<\/strong><\/td>\r\nProfits <\/strong>\r\n\r\n($ millions)<\/strong><\/td>\r\n<\/tr>\r\n
    1<\/td>\r\nWalmart Stores<\/td>\r\n408,214<\/td>\r\n14,335<\/td>\r\n<\/tr>\r\n
    2<\/td>\r\nRoyal Dutch Shell<\/td>\r\n285,129<\/td>\r\n12,518<\/td>\r\n<\/tr>\r\n
    3<\/td>\r\nExxon Mobil<\/td>\r\n284,650<\/td>\r\n19,280<\/td>\r\n<\/tr>\r\n
    4<\/td>\r\nBP<\/td>\r\n246,138<\/td>\r\n16,578<\/td>\r\n<\/tr>\r\n
    5<\/td>\r\nToyota Motor<\/td>\r\n204,106<\/td>\r\n2,256<\/td>\r\n<\/tr>\r\n
    6<\/td>\r\nJapan Post Holdings<\/td>\r\n202,196<\/td>\r\n4,849<\/td>\r\n<\/tr>\r\n
    7<\/td>\r\nSinopec<\/td>\r\n187,518<\/td>\r\n5,756<\/td>\r\n<\/tr>\r\n
    8<\/td>\r\nState Grid<\/td>\r\n184,496<\/td>\r\n\u2212343<\/td>\r\n<\/tr>\r\n
    9<\/td>\r\nAXA<\/td>\r\n175,257<\/td>\r\n5,012<\/td>\r\n<\/tr>\r\n
    10<\/td>\r\nChina National Petroleum<\/td>\r\n165,496<\/td>\r\n10,272<\/td>\r\n<\/tr>\r\n
    11<\/td>\r\nChevron<\/td>\r\n163,527<\/td>\r\n10,483<\/td>\r\n<\/tr>\r\n
    12<\/td>\r\nING Group<\/td>\r\n163,204<\/td>\r\n\u22121,300<\/td>\r\n<\/tr>\r\n
    13<\/td>\r\nGeneral Electric<\/td>\r\n156,779<\/td>\r\n11,025<\/td>\r\n<\/tr>\r\n
    14<\/td>\r\nTotal<\/td>\r\n155,887<\/td>\r\n11,741<\/td>\r\n<\/tr>\r\n
    15<\/td>\r\nBank of America Corp.<\/td>\r\n150,450<\/td>\r\n6,276<\/td>\r\n<\/tr>\r\n
    16<\/td>\r\nVolkswagen<\/td>\r\n146,205<\/td>\r\n1,334<\/td>\r\n<\/tr>\r\n
    17<\/td>\r\nConocoPhillips<\/td>\r\n139,515<\/td>\r\n4,858<\/td>\r\n<\/tr>\r\n
    18<\/td>\r\nBNP Paribas<\/td>\r\n130,708<\/td>\r\n8,106<\/td>\r\n<\/tr>\r\n
    19<\/td>\r\nAssicurazioni Generali<\/td>\r\n126,012<\/td>\r\n1,820<\/td>\r\n<\/tr>\r\n
    20<\/td>\r\nAllianz<\/td>\r\n125,999<\/td>\r\n5,973<\/td>\r\n<\/tr>\r\n
    21<\/td>\r\nAT&T<\/td>\r\n123,018<\/td>\r\n12,535<\/td>\r\n<\/tr>\r\n
    22<\/td>\r\nCarrefour<\/td>\r\n121,452<\/td>\r\n454<\/td>\r\n<\/tr>\r\n
    23<\/td>\r\nFord Motor<\/td>\r\n118,308<\/td>\r\n2,717<\/td>\r\n<\/tr>\r\n
    24<\/td>\r\nENI<\/td>\r\n117,235<\/td>\r\n6,070<\/td>\r\n<\/tr>\r\n
    25<\/td>\r\nJ.P. Morgan Chase & Co.<\/td>\r\n115,632<\/td>\r\n11,728<\/td>\r\n<\/tr>\r\n
    26<\/td>\r\nHewlett-Packard<\/td>\r\n114,552<\/td>\r\n7,660<\/td>\r\n<\/tr>\r\n
    27<\/td>\r\nE.ON<\/td>\r\n113,849<\/td>\r\n11,670<\/td>\r\n<\/tr>\r\n
    28<\/td>\r\nBerkshire Hathaway<\/td>\r\n112,493<\/td>\r\n8,055<\/td>\r\n<\/tr>\r\n
    29<\/td>\r\nGDF Suez<\/td>\r\n111,069<\/td>\r\n6,223<\/td>\r\n<\/tr>\r\n
    30<\/td>\r\nDaimler<\/td>\r\n109,700<\/td>\r\n\u22123,670<\/td>\r\n<\/tr>\r\n
    31<\/td>\r\nNippon Telegraph & Telephone<\/td>\r\n109,656<\/td>\r\n5,302<\/td>\r\n<\/tr>\r\n
    32<\/td>\r\nSamsung Electronics<\/td>\r\n108,927<\/td>\r\n7,562<\/td>\r\n<\/tr>\r\n
    33<\/td>\r\nCitigroup<\/td>\r\n108,785<\/td>\r\n\u22121,606<\/td>\r\n<\/tr>\r\n
    34<\/td>\r\nMcKesson<\/td>\r\n108,702<\/td>\r\n1,263<\/td>\r\n<\/tr>\r\n
    35<\/td>\r\nVerizon Communications<\/td>\r\n107,808<\/td>\r\n3,651<\/td>\r\n<\/tr>\r\n
    36<\/td>\r\nCr\u00e9dit Agricole<\/td>\r\n106,538<\/td>\r\n1,564<\/td>\r\n<\/tr>\r\n
    37<\/td>\r\nBanco Santander<\/td>\r\n106,345<\/td>\r\n12,430<\/td>\r\n<\/tr>\r\n
    38<\/td>\r\nGeneral Motors<\/td>\r\n104,589<\/td>\r\n\u2014<\/td>\r\n<\/tr>\r\n
    39<\/td>\r\nHSBC Holdings<\/td>\r\n103,736<\/td>\r\n5,834<\/td>\r\n<\/tr>\r\n
    40<\/td>\r\nSiemens<\/td>\r\n103,605<\/td>\r\n3,097<\/td>\r\n<\/tr>\r\n
    41<\/td>\r\nAmerican International Group<\/td>\r\n103,189<\/td>\r\n\u221210,949<\/td>\r\n<\/tr>\r\n
    42<\/td>\r\nLloyds Banking Group<\/td>\r\n102,967<\/td>\r\n4,409<\/td>\r\n<\/tr>\r\n
    43<\/td>\r\nCardinal Health<\/td>\r\n99,613<\/td>\r\n1,152<\/td>\r\n<\/tr>\r\n
    44<\/td>\r\nNestl\u00e9<\/td>\r\n99,114<\/td>\r\n9,604<\/td>\r\n<\/tr>\r\n
    45<\/td>\r\nCVS Caremark<\/td>\r\n98,729<\/td>\r\n3,696<\/td>\r\n<\/tr>\r\n
    46<\/td>\r\nWells Fargo<\/td>\r\n98,636<\/td>\r\n12,275<\/td>\r\n<\/tr>\r\n
    47<\/td>\r\nHitachi<\/td>\r\n96,593<\/td>\r\n\u22121,152<\/td>\r\n<\/tr>\r\n
    48<\/td>\r\nInternational Business Machines<\/td>\r\n95,758<\/td>\r\n13,425<\/td>\r\n<\/tr>\r\n
    49<\/td>\r\nDexia Group<\/td>\r\n95,144<\/td>\r\n1,404<\/td>\r\n<\/tr>\r\n
    50<\/td>\r\nGazprom<\/td>\r\n94,472<\/td>\r\n24,556<\/td>\r\n<\/tr>\r\n
    51<\/td>\r\nHonda Motor<\/td>\r\n92,400<\/td>\r\n2,891<\/td>\r\n<\/tr>\r\n
    52<\/td>\r\n\u00c9lectricit\u00e9 de France<\/td>\r\n92,204<\/td>\r\n5,428<\/td>\r\n<\/tr>\r\n
    53<\/td>\r\nAviva<\/td>\r\n92,140<\/td>\r\n1,692<\/td>\r\n<\/tr>\r\n
    54<\/td>\r\nPetrobras<\/td>\r\n91,869<\/td>\r\n15,504<\/td>\r\n<\/tr>\r\n
    55<\/td>\r\nRoyal Bank of Scotland<\/td>\r\n91,767<\/td>\r\n\u22124,167<\/td>\r\n<\/tr>\r\n
    56<\/td>\r\nPDVSA<\/td>\r\n91,182<\/td>\r\n1,608<\/td>\r\n<\/tr>\r\n
    57<\/td>\r\nMetro<\/td>\r\n91,152<\/td>\r\n532<\/td>\r\n<\/tr>\r\n
    58<\/td>\r\nTesco<\/td>\r\n90,234<\/td>\r\n3,690<\/td>\r\n<\/tr>\r\n
    59<\/td>\r\nDeutsche Telekom<\/td>\r\n89,794<\/td>\r\n491<\/td>\r\n<\/tr>\r\n
    60<\/td>\r\nEnel<\/td>\r\n89,329<\/td>\r\n7,499<\/td>\r\n<\/tr>\r\n
    61<\/td>\r\nUnitedHealth Group<\/td>\r\n87,138<\/td>\r\n3,822<\/td>\r\n<\/tr>\r\n
    62<\/td>\r\nSoci\u00e9t\u00e9 G\u00e9n\u00e9rale<\/td>\r\n84,157<\/td>\r\n942<\/td>\r\n<\/tr>\r\n
    63<\/td>\r\nNissan Motor<\/td>\r\n80,963<\/td>\r\n456<\/td>\r\n<\/tr>\r\n
    64<\/td>\r\nPemex<\/td>\r\n80,722<\/td>\r\n\u22127,011<\/td>\r\n<\/tr>\r\n
    65<\/td>\r\nPanasonic<\/td>\r\n79,893<\/td>\r\n\u22121,114<\/td>\r\n<\/tr>\r\n
    66<\/td>\r\nProcter & Gamble<\/td>\r\n79,697<\/td>\r\n13,436<\/td>\r\n<\/tr>\r\n
    67<\/td>\r\nLG<\/td>\r\n78,892<\/td>\r\n1,206<\/td>\r\n<\/tr>\r\n
    68<\/td>\r\nTelef\u00f3nica<\/td>\r\n78,853<\/td>\r\n10,808<\/td>\r\n<\/tr>\r\n
    69<\/td>\r\nSony<\/td>\r\n77,696<\/td>\r\n\u2212439<\/td>\r\n<\/tr>\r\n
    70<\/td>\r\nKroger<\/td>\r\n76,733<\/td>\r\n70<\/td>\r\n<\/tr>\r\n
    71<\/td>\r\nGroupe BPCE<\/td>\r\n76,464<\/td>\r\n746<\/td>\r\n<\/tr>\r\n
    72<\/td>\r\nPrudential<\/td>\r\n75,010<\/td>\r\n1,054<\/td>\r\n<\/tr>\r\n
    73<\/td>\r\nMunich Re Group<\/td>\r\n74,764<\/td>\r\n3,504<\/td>\r\n<\/tr>\r\n
    74<\/td>\r\nStatoil<\/td>\r\n74,000<\/td>\r\n2,912<\/td>\r\n<\/tr>\r\n
    75<\/td>\r\nNippon Life Insurance<\/td>\r\n72,051<\/td>\r\n2,624<\/td>\r\n<\/tr>\r\n
    76<\/td>\r\nAmerisourceBergen<\/td>\r\n71,789<\/td>\r\n503<\/td>\r\n<\/tr>\r\n
    77<\/td>\r\nChina Mobile Communications<\/td>\r\n71,749<\/td>\r\n11,656<\/td>\r\n<\/tr>\r\n
    78<\/td>\r\nHyundai Motor<\/td>\r\n71,678<\/td>\r\n2,330<\/td>\r\n<\/tr>\r\n
    79<\/td>\r\nCostco Wholesale<\/td>\r\n71,422<\/td>\r\n1,086<\/td>\r\n<\/tr>\r\n
    80<\/td>\r\nVodafone<\/td>\r\n70,899<\/td>\r\n13,782<\/td>\r\n<\/tr>\r\n
    81<\/td>\r\nBASF<\/td>\r\n70,461<\/td>\r\n1,960<\/td>\r\n<\/tr>\r\n
    82<\/td>\r\nBMW<\/td>\r\n70,444<\/td>\r\n284<\/td>\r\n<\/tr>\r\n
    83<\/td>\r\nZurich Financial Services<\/td>\r\n70,272<\/td>\r\n3,215<\/td>\r\n<\/tr>\r\n
    84<\/td>\r\nValero Energy<\/td>\r\n70,035<\/td>\r\n\u22121,982<\/td>\r\n<\/tr>\r\n
    85<\/td>\r\nFiat<\/td>\r\n69,639<\/td>\r\n\u22121,165<\/td>\r\n<\/tr>\r\n
    86<\/td>\r\nDeutsche Post<\/td>\r\n69,427<\/td>\r\n895<\/td>\r\n<\/tr>\r\n
    87<\/td>\r\nIndustrial & Commercial Bank of China<\/td>\r\n69,295<\/td>\r\n18,832<\/td>\r\n<\/tr>\r\n
    88<\/td>\r\nArcher Daniels Midland<\/td>\r\n69,207<\/td>\r\n1,707<\/td>\r\n<\/tr>\r\n
    89<\/td>\r\nToshiba<\/td>\r\n68,731<\/td>\r\n\u2212213<\/td>\r\n<\/tr>\r\n
    90<\/td>\r\nLegal & General Group<\/td>\r\n68,290<\/td>\r\n1,346<\/td>\r\n<\/tr>\r\n
    91<\/td>\r\nBoeing<\/td>\r\n68,281<\/td>\r\n1,312<\/td>\r\n<\/tr>\r\n
    92<\/td>\r\nUS Postal Service<\/td>\r\n68,090<\/td>\r\n\u22123,794<\/td>\r\n<\/tr>\r\n
    93<\/td>\r\nLukoil<\/td>\r\n68,025<\/td>\r\n7,011<\/td>\r\n<\/tr>\r\n
    94<\/td>\r\nPeugeot<\/td>\r\n67,297<\/td>\r\n\u22121,614<\/td>\r\n<\/tr>\r\n
    95<\/td>\r\nCNP Assurances<\/td>\r\n66,556<\/td>\r\n1,396<\/td>\r\n<\/tr>\r\n
    96<\/td>\r\nBarclays<\/td>\r\n66,533<\/td>\r\n14,648<\/td>\r\n<\/tr>\r\n
    97<\/td>\r\nHome Depot<\/td>\r\n66,176<\/td>\r\n2,661<\/td>\r\n<\/tr>\r\n
    98<\/td>\r\nTarget<\/td>\r\n65,357<\/td>\r\n2,488<\/td>\r\n<\/tr>\r\n
    99<\/td>\r\nArcelorMittal<\/td>\r\n65,110<\/td>\r\n118<\/td>\r\n<\/tr>\r\n
    100<\/td>\r\nWellPoint<\/td>\r\n65,028<\/td>\r\n4,746<\/td>\r\n<\/tr>\r\n
    Source: Adapted from FORTUNE 500 List 2010,http:\/\/money.cnn.com\/magazines\/fortune\/global500\/2010\/full_list\/ (accessed August 11, 2011).<\/td>\r\n<\/tr>\r\n
    Table 15.2<\/strong>\u00a0Top Global 100 Companies<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n

    HRM Global Strategies<\/h2>\r\nWhen discussing HRM from the global perspective, there are many considerations. Culture, language, management styles, and laws would all be considerations before implementing HRM strategies. Beechler et al.\u00a0[3]\u00a0argued that for multinational companies, identifying the best HRM processes for the entire organization isn\u2019t the goal, but rather finding the best fit between the firm\u2019s external environment (i.e., the law) and the company\u2019s overall strategy, HRM policies, and implementation of those policies. To this end, Adler and Bartholomew developed a set of transnational competencies that are required for business to thrive in a global business environment.[4]\u00a0A\u00a0transnational\u00a0scope\u00a0means that HRM decisions can be made based on an international scope; that is, HRM strategic decisions can be made from the global perspective rather than a domestic one. With this HRM strategy, decisions take into consideration the needs of all employees in all countries in which the company operates. The concern is the ability to establish standards that are fair for all employees, regardless of which country they operate in. A transnational\u00a0representation\u00a0means that the composition of the firm\u2019s managers and executives should be a multinational one. A\u00a0transnational\u00a0process, then, refers to the extent to which ideas that contribute to the organization come from a variety of perspectives and ideas from all countries in which the organization operates. Ideally, all company processes will be based on the transnational approach. This approach means that multicultural understanding is taken into consideration, and rather than trying to get international employees to fit within the scope of the domestic market, a more holistic approach to HRM is used. Using a transnational approach means that HRM policies and practices are a crucial part of a successful business, because they can act as mechanisms for coordination and control for the international operations.\u00a0[5]\u00a0In other words, HRM can be the glue that sticks many independent operations together.\r\n
    \r\n\r\nHofstede\u2019s Five Cultural Dimensions:<\/strong>\r\n
      \r\n \t
    1. Individualism-collectivism<\/li>\r\n \t
    2. Power Distance<\/li>\r\n \t
    3. Uncertainty avoidance<\/li>\r\n \t
    4. Masculinity and femininity<\/li>\r\n \t
    5. Long-term or short-term orientation<\/li>\r\n<\/ol>\r\n<\/div>\r\nBefore we look at HRM strategy on the global level, let\u2019s discuss some of the considerations before implementing HRM systems.\r\n

      Culture as a Major Aspect of HRM Overseas<\/h2>\r\nCulture is a key component to managing HRM on a global scale. Understanding culture but also appreciating cultural differences can help the HRM strategy be successful in any country. Geert Hofstede, a researcher in the area of culture, developed a list of five cultural dimensions that can help define how cultures are different.\u00a0[6]\r\n\r\nThe first dimension of culture is\u00a0individualism-collectivism<\/strong>. In this dimension, Hofstede describes the degree to which individuals are integrated into groups. For example the United States is an individualist society, and so is Canada; that is, each person looks after him- or herself and immediate family. There is more focus on individual accomplishments as opposed to group accomplishments. In a collective society, societies are based on cohesive groups, whether it be family groups or work groups. As a result, the focus is on the good of the group, rather than the individual.\r\n\r\nPower\u00a0distance<\/strong>, Hofstede\u2019s second dimension, refers to the extent to which the less powerful members of organizations accept that power is not distributed equally. For example, some societies may seek to eliminate differences in power and wealth, while others prefer a higher power distance. From an HRM perspective, these differences may become clear when employees are asked to work in cross-functional teams. A Danish manager may have no problem taking advice from employees because of the low power distance of his culture, but a Saudi Arabian manager may have issues with an informal relationship with employees, because of the high power distance.\r\n\r\nUncertainty\u00a0avoidance<\/strong>\u00a0refers to how a society tolerates uncertainty. Countries that focus more on avoidance tend to minimize the uncertainty and therefore have stricter laws, rules, and other safety measures. Countries that are more tolerant of uncertainty tend to be more easygoing and relaxed. Consider the situation in which a company in the United States decides to apply the same HRM strategy to its operations in Peru. The United States has an uncertainty avoidance score of 46, which means the society is more comfortable with uncertainty. Peru has a high uncertainty avoidance, with a score of 87, indicating the society\u2019s low level of tolerance for uncertainty. Let\u2019s suppose a major part of the pay structure is bonuses. Would it make sense to implement this same compensation plan in international operations? Probably not.\r\n\r\nMasculinity\u00a0and\u00a0femininity<\/strong>\u00a0refers to the distribution of emotional roles between genders, and which gender norms are accepted by society. For example, in countries that are focused on femininity, traditional \u201cfemale\u201d values such as caring are more important than, say, showing off. The implications to HRM are huge. For example, Sweden has a more feminine culture, which is demonstrated in its management practices. A major component in managers\u2019 performance appraisals is to provide mentoring to employees. A manager coming from a more masculine culture may not be able to perform this aspect of the job as well, or he or she may take more practice to be able to do it.\r\n\r\nThe last dimension is\u00a0long-term\u2013short-term\u00a0orientation<\/strong>, which refers to the society\u2019s time horizons. A long-term orientation would focus on future rewards for work now, persistence, and ordering of relationships by status. A short-term orientation may focus on values related to the past and present such as national pride or fulfillment of current obligations. We can see HRM dimensions with this orientation in succession planning, for example. In China the person getting promoted might be the person who has been with the company the longest, whereas in short-term orientation countries like Canada and the United States, promotion is usually based on merit. A Canadian working for a Chinese company may get upset to see someone promoted who doesn\u2019t do as good of a job, just because they have been there longer, and vice versa.\r\n\r\nBased on Hofstede\u2019s dimensions, you can see the importance of culture to development of an international HRM strategy. To utilize a transnational strategy, all these components should be factored into all decisions such as hiring, compensation, and training. Since culture is a key component in HRM, it is important now to define some other elements of culture.\r\n\r\nCulture\u00a0refers to the socially accepted ways of life within a society. Some of these components might include language,\u00a0norms,\u00a0values,\u00a0rituals, and material\u00a0culture\u00a0such as art, music, and tools used in that culture. Language is perhaps one of the most obvious parts of culture. Often language can define a culture and of course is necessary to be able to do business. HRM considerations for language might include something as simple as what language (the home country or host country) will documents be sent in? Is there a standard language the company should use within its communications?\r\n\r\n[caption id=\"attachment_619\" align=\"aligncenter\" width=\"600\"]\"\"<\/a> Table 14.3<\/strong> Examples of Countries and Hofstede's Dimensions[\/caption]\r\n\r\n \r\n
      \r\n

      Fortune\u00a0500 Focus<\/h3>\r\nFor anyone who has traveled, seeing a McDonald\u2019s overseas is common, owing to the need to expand markets. McDonald\u2019s is perhaps one of the best examples of using cultural sensitivity in setting up its operations despite criticism for aggressive globalization. Since food is usually a large part of culture, McDonald\u2019s knew that when globalizing, it had to take culture into consideration to be successful. For example, when McDonald\u2019s decided to enter the Indian market in 2009, it knew it needed a vegetarian product. After several hundred versions, local McDonald\u2019s executives finally decided on the McSpicy Paneer as the main menu item. The spicy Paneer is made from curd cheese and reflects the values and norms of the culture.[7]\r\n\r\nIn Japan, McDonald\u2019s developed the Teriyaki Burger and started selling green tea ice cream. When McDonald\u2019s first started competing in Japan, there really was no competition at all, but not for the reason you might think. Japanese people looked at McDonald\u2019s as a snack rather than a meal because of their cultural values. Japanese people believe that meals should be shared, which can be difficult with McDonald\u2019s food. Second, the meal did not consist of rice, and a real Japanese meal includes rice\u2014a part of the national identity\u00a0[8]\u00a0and values. Most recently, McDonald\u2019s introduced the McBaguette in France to align with French cultural values.\u00a0[9]\u00a0The McBaguettes will be produced in France and come with a variety of jams, a traditional French breakfast. Just like in product development, HRM must understand the differences between cultures to create the best HRM systems that work for the individual culture.\r\n\r\nNorms are shared expectations about what is considered correct and normal behavior. Norms allow a society to predict the expected behavior and be able to act in this manner. For many companies operating in Canada, a norm might be to dress down for work, no suit required. But if doing business overseas, that country\u2019s norm might be to wear a suit. Not understanding the norms of a culture can offend potential clients, customers, and colleagues.\r\n\r\nValues, another part of culture, classify things as good or bad within a society. Values can evoke strong emotional feelings from a person or a society. For example, burning of the flag results in strong emotions because values (love of country and the symbols that represent it) are a key component of how people view themselves, and how a culture views society. In April 2011, a pastor in Florida burned a holy book, the Koran, which sparked outrage from the Muslim community all over the world. This is an example of a strongly held value that when challenged can result in community rage.\u00a0[10]\r\n\r\nRituals are scripted ways of interacting that usually result in a specific series of events. Consider a wedding in North America, for example. The basic wedding rituals (first dance, cutting of cake, speech from best man and bridesmaid) are practiced throughout society. Besides the more formalized rituals within a society, such as weddings or funerals, daily rituals, such as asking someone \u201cHow are you?\u201d (when you really don\u2019t want to know the answer) are part of culture, too. Even bonding rituals such as how business cards are exchanged and the amount of eye contact given in a social situation can all be rituals as well.\r\n\r\nThe material items a culture holds important, such as artwork, technology, and architecture, can be considered material culture. Material culture can range from symbolic items, such as a crucifix, or everyday items, such as a Crockpot or juicer. Understanding the material importance of certain items to a country can result in a better understanding of culture overall.\r\n\r\n<\/div>\r\n
      \r\n

      Human Resource Recall<\/h3>\r\nWhich component of culture do you think is the most important in HRM? Why?\r\n\r\n<\/div>\r\n
      \r\n

      Key Takeaways<\/h3>\r\n