Business Environment Essay
In a highly competitive and ultra-dynamic business environment in order for Morden business to remain competitive and thrive, it is no longer good enough to compete and serve at a local scale, more and more business have seen the need and benefit of expanding their business on a global scale. Expanding the business internationally will allow a broader market which in turn will help the organisation stay competitive even gain a competitive edge, it will also result in increased profit margins and stakeholders larger return on investments. When expanding internationally there are several key issues that will need to be addressed such as the organisational context, the staffing context, recruitment and selection, international compensation and performance management and continued management and re-entry.
The organisational context
Whinch-it board of directors though lacking the necessary skills to expand globally have expressed interest in expanding to the Asian region to tape into the markets need for boats and boating equipment. When planning an overseas expansion they are several issues that should be considered, these include the change of size and structure of the organisation, the flow and volume of information, control mechanisms, and the host countries demands-Dowling et.al 2008. As the business expands it gets bigger in terms of size and therefore structure of the organisation has to change in order to accommodate the change in size. According to Lihua (2009) two key structural features of the organisation will change which are the hierarchal levels and the number of subunits. Due to more employees being needed they will need to be managers to manage the subunits therefore an increase in the levels of hierarchy in the organisation. Departments such as the export department structure will also be the initial stages to be affected and also attended to by manufacturing companies such as Winch-it.
Whinch-it will require a foreign agent or a distributor who will have knowledge of the local market, in addition to a foreign agent an export manager is also needed to control the domestic based home office, this new positions will affect the structure and size of Winch-it. With an increasing size of the organisation and a longer hierarchical system the volume of information and control mechanism becomes harder to monitor. According to Arace et.al 1974 communication plays a vital role in the organisation’s control and coordination process and the organisational hierarchy plays a part in the work related communication flows, the more levels of hierarchy means the longer and delay the information might get to certain subunits and the relevancy and urgency of that information might have diminished by the time it gets to its final destination, Arace et.al 1974 also states the need of networking in the organisation as that will strengthen the communication links between individuals in the organisation.
There are various organisational structures that Winch-it can adopt for its international expansion, the most effective one I recommend is the matrix structure. By adopting this structure Whinch-it is basically integrating its operations across more than one dimension Dowling et.al (2008). The advantages to this structural form are no issue is neglected as conflicts of interest are brought out in the open and priority is placed upon any problem that may arise in the organisation.
Due to Whinch-it having multiple objectives in their plan to internationalize their business such as not just selling their products in the Asian regions but also moving some of the production overseas the matrix structure is an excellent choice as it fits the strategy of simultaneous pursuits and multiple business dimensions which in will also be given equal priority Dowling et.al (2008). According to Qiu et.al (2012) a number of multinational companies use the matrix system to implement high levels of dual strategies such as foreign product diversification and area diversification; this shows the matrix system fits the situation. This matrix structure is highly effective but is also expensive and will require careful implementation and management from the top management.
The staffing context
Whinch-it can pursue one of several approaches to international staffing, with each having its advantages and disadvantages. These staffing methods include ethnocentric staffing method which the strategic decisions are made at the headquarters and the foreign subsidiaries have limited autonomy. If Whinch-it feels there are no qualified personals in the host country then ethnocentric approach will prove to be the best one. Having a parent company national will also maintain the communication, coordination and control links to corporate headquarters. Disadvantages of this staffing model include reduced productivity and high turnover as a result of limited promotional opportunities to the host country nationals. Another staffing method that can be used is polycentric, this models allows each subsidiary to be managed by a host country national with some decision making autonomy, this will eliminate some of the problems that ethnocentric have while also eliminating adjustment periods, language barriers and it gives continuity of management of foreign subsidiaries Dowling et.al 2008.
Polycentric however has its disadvantages such as language barriers with parent company national and the loyalty to the PCN might be lower that the loyalty to the HCN’s nationality. Geocentric method of staffing takes no account of the nationality of the individuals but their ability to perform the task at hand, the advantages of this according to Dowling et.al (2008) is that it enables a development of an international team that will be ready for deployment throughout the global organisation, one of its disadvantages is the host government wanting a bigger percentage of the employees from the host country and it is very expansive due to increased training and relocation cost.
Choosing the correct staffing model for Whinch-it, various factors such as the uncertainty of the foreign market and the rules and laws differing greatly from rules and regulation from the PCN and also the technology advancement being different according to Isidor et.al (2011) technology intensity will increase the likelihood of an ethnocentric staffing method, although this will be beneficial I recommend Winch-it to employ the Geocentric staffing model. This model although expensive will allow the organisation to have the best people for the job who are trained by the organisation and will allow for an easier communication and control throughout all the subsidiaries and the PCN headquarters. According to Gowan (2004) recruitment success results from the organisation understanding of relationship among person-job fit, person-organization fit and cultural differences and recruits accordingly. This will help the organisation in employing high potential employees.
Recruitment and selection
The goal of organisations is to employ people at the positions that there will be able to do their jobs effectively and efficiently, this aspect is extremely important to the organisation as the employees recruited and selected by the organisation will be vital the success of the organisation. Issues that will arise in the international selection and recruiting are the fact that the national government would want the locals to be hired as opposed to foreigners. The fact that they will be cultural difference in the host country the selection of employees will need to be able to adapt to the host country culture and develop the appropriate behaviours as according to host country.
Winch-it should consider the factors the inability of expatriate to adjust to foreign culture as this is the main reason for expatriate fail, this may have resulted because of family concerns as the employee will be separated from family or the family will having difficulties adjusting to the foreign land which can put a lot of emotional strain on the expatriate and therefore may also affect their job. The length of the assignment will also prove to be a problem as the expatriate may require longer time to adjust before being effective but due to the lack of time they may be needed to be effective as soon as possible with no sufficient adjustment time. According to Dowling et.al 2008 the companies can offer the expatriate family friendly policies that will assist the families too in the adjustment and adapting to the foreign land.
International compensation and performance management
Pay is the most important factor as it as the biggest motivator when it comes to employees performing their task effectively and efficiently. A study taken by Chen et.al 2012 showed that groups that where offered a pay increase worked more cohesive and effective that the group that where offered just the base pay. When going international the parent company nationals will need to be compensated for the perceived risk they will be going by going to a foreign land therefor the expatriates should receive benefits that will offer them the incentive to go to their appointed positions and perform at a high level and avoid expatriate failure.
Lihua, W 2009, ‘Ownership, size, and the formal structure of organizations: evidence from US public and private firms, 1992-2002’, Industrial & Corporate Change, 18, 4, pp. 595-636, Business Source Complete, EBSCOhost, viewed 30 April 2013
arace, R, & Pacanowsky, M 1974, ‘Organizational Communication Role, Hierarchical Level, and Relative Status’, Academy Of Management Proceedings (00650668), p. 62, Business Source Complete, EBSCOhost, viewed 30 April 2013.
Qiu, J, & Donaldson, L 2012, ‘Stopford and Wells were Right! MNC Matrix Structures do fit a ‘High-High’ Strategy’, Management International Review (MIR), 52, 5, pp. 671-689, Business Source Complete, EBSCOhost, viewed 30 April 2013 Isidor, R, Schwens, C, & Kabst, R 2011, ‘Human resource management and early internationalization: is there a leap-frogging in international staffing?’, International Journal Of Human Resource Management, 22, 10, pp. 2167-2184, Business Source Complete, EBSCOhost, viewed 30 April 2013 Gowan, MA 2004, ‘Development of the Recruitment Value Proposition for Geocentric Staffing’, Thunderbird International Business Review, 46, 6, pp. 687-708, Business Source Complete, EBSCOhost, viewed 30 April 2013. Sparrow, PR 2007, ‘Globalization of HR at function level: four UK-based case studies of the international recruitment and selection process’, International Journal Of Human Resource Management, 18, 5, pp. 845-867, Business Source Complete, EBSCOhost, viewed 30 April 2013. Chen, C, Williamson, M, & Zhou, F 2012, ‘Reward System Design and Group Creativity: An Experimental Investigation’, Accounting Review, 87, 6, pp. 1885-1911, Business Source Complete, EBSCOhost, viewed 30 April 2013 Dowling, J Marion & Festing, D 2008 “International human resource management”
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 3 June 2017
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