Impacts of International Field Experience on Business Management - Essay Example

Impacts of international field experience on business management. Overview (To be written at the end) 2.0 Literature review In a fast changing globalbusiness world, multinational firms form subsidiaries in different parts of the world by thorough joint ventures and strategic partnerships etc to compete global establishments and business setups. Such ventures also permit the multinationals to have a global presence and avail economies of scale. as Harvey & Fung (2000, 151-159) explains, such business expansion creates job opportunities for individuals to be placed in the countries that the MNC is expanding in. Thus these expatriates need to have the necessary skill sets so that they can be easily placed in the new working environment. Such a job is complicated poses several challenges for the employee when dealing with the difference in the countries like cultural differences, language, legal, political and economic scenarios that he needs to be accustomed to. MNCs of all sizes today counter the issues of facilitating the right type of training to their employees, selection of the employees for expatriate jobs and ensuring that these managers are integrated well in the new environment. Hill (2007) adds that even with such problems entailing such managers, businesses today are still venturing in international field experiences because such business setups across the global enables the firms to grow multi-dimensionally and form an important resource for the firm. Profits boom and the firm is not dependent on one market only. Especially in the case of economic downturns in the west, industries are now seeking businesses in China and India, which they are doing so by incorporating international field experiences for the employees in these markets. These employees give the firms valuable insight into the new markets and help the businesses decide whether they are prospective markets for future investments or not. Even though there may be demand for the product the firms may decide not to enter the market due to cultural barriers, legal issues and political scenarios, which may only be known, when employees are sent on international projects to test out the market prospects. 2.1 International field experience International field experience is not a novel concept. It is when an employee of a firm is sent to work in another country to the firm’s subsidiary. Rowold (2007, 21-36) adds that these employees are expected to control and administer the business simultaneously syncing its operation with the centre of operations, which may be in his hometown. Such learning offers rare developmental chances for the individual by giving him more flexibility both at personal and professional platform. Treven (2003, 550-557) By getting hands-on experience in another country the individual is more aware of the cultural diversity, globally problems and scenarios and becomes more skilful at adapting himself to new cultural environments. It is argued by Guest & Conway (2002, 22-38) that though whether such international field experiences have on the actual development of the individual and in turn the business that sends the employee for the field experience. Previous research by Harvey & Fung (2000, 151-159) suggests that international field experience doesn’t always benefit the employee upon his return to the current job. However, xxx argues that the employees that return from the international field experience have developed skills and knowledge base (Harvey & Fung, 2000, 151-159). Many recently returning employees suggest that their career excels because of the international field experience but often not in the same firm. Research by Hill (2007)suggests that some firms do not even guarantee a promising post once they return from their international field experience, which may be the cause of a high turnover rate of the firm. Research by Rowold (2007, 21-36), also suggests that career development and enhancements can occur with international field experiences however, the firms should use these enhanced skills of the employees once they return after their assignment. 2.2 Hofstede cultural model for employee selection Today there is a growing tendency for the MNC’s to train their employees for international field experience as they realise its growing needs and requirements. The MNC’s often select the employees from the home country only. However, Guest & Conway (2002, 22-38) argues that as firms expand their horizons globally, firms realise how importance and essential it is to train employee expatriates. With the growing competition, firms are increasing their level of training for these employees so that they may ultimately benefit the firm. However, it is essential for the firm to choose the right candidates for the training and field experience. These should not be selected just based on the skill sets but also based on how well they know the foreign culture and how quickly they can adapt to it. This will enable him to be most efficient and thus benefit the firm more. Ho (2005, 113-128) explains that one method of choosing the right employees for the job is by implementing the Hofstede’s cultural dimension theory. The framework enables employers to assess the cross-cultural psychology of the employees and how well they can adjust to the new international culture. The model having five dimensions looks into the individualism-collectivism- how much of dependence or independence there is in the society, which converts into the work environment. 2.2.1 Uncertainty avoidance-how well a society can withstand uncertainties and how well the expatriate will be able to adjust to such a society. Moreover how he is to alter his nature and behaviour in such a situation can be determined with this assessment. 2.2.2 Power distance-how well the power is distributed in a work environment and how much of authority there is at every level of the organization. This, Jun and Yong (2001,369-377) adds, when measured against the expatriate will enable the firm to gauge how much of decision-making power he will be having in the new scenario. 2.2.3 Masculinity-feminity. Such an assessment of the society will enable employers to understand the society better. according to Morgan, Jie & Young (2004, 1247-1261), when the society if masculine it means that it is material, there is competition and aggressiveness in the society. If it is feminine it means that the society values the quality of life and the relationships more. Thus such assessments of the society will help the expatriate to adjust better to the new place. 2.2.4 Long-term versus short-term orientation. This is when the society is futuristic. In short term orientation the society focuses more on the past, traditional values and social obligations (Ho, 2005, 113-128). With the knowledge of these variables, the firm can compare the abilities of the employee with that of the country he will be placed in and then make an assessment whether he will be able to adjust to the new environment or not and whether investing in his training will be beneficial for the firm in the future or not. Jun and Yong (2001,369-377) adds that the employee not only benefits from the hands-on training he receives from the job experience but is also consistently learning from his environment. Such learning from the international field experience when brought back to the home country once the assignment is over will benefit the firm because of the employee bringing in new experiences and a new perspective (Morgan, Jie & Young, 2004, 1247-1261). 2.3 Dunnings Electic theory According to this theory, as Hutchings (2005, 553-566) explains, a firm’s ability to turn its inputs into outputs depends on many factors within the firm. It depends upon the firm whether it wants to execute this process within the home country or abroad-whichever option maximises the productivity of the firm. The theory has three basic aspects. 2.3.1 Resource endowments are assets of the firm that enable the production of more income in the future. These resources may be available within the country or in other countries. Ownership specific endowments are resources that a firm owns and can use within the home country or across the globe. In the case of expatriates going for international field visits, the firm’s resources are used for enhancing further production across the globe when these resources may be difficult to replicate (Hutchings, 2005, 553-566). 2.3.2 Internalization, as explained by Lazarova & Cerdin (2007, 172-187), is when a firm uses its internal resources and finds it more effecting rather than seeking external resources. According to Dunnin’s theory, firms utilise expatriates because it is more profitable for them to use their liaison (the expatriate) in markets where there is imperfect competition. When some markets have lower costs when firms use hierarchical coordination in terms of foreign direct investment rather than using market price dexterity then the use of expatriates becomes essential for the firm. Using international field experiences for the employee in terms of expatriates going on projects in other countries, the firms are able to expand their businesses simultaneously being cost effective. According to Hutchings (2005, 553-566), it is argued that investing in an expatriate and his international field experiences adds to the cost, however, for firms that visualise such a cost as long-term investment indulge in such strategies. In addition, technological innovations involving the internet and making communication easier thorough cellular phones, emails, free international calling, conference calling etc. firms are opting more often for such employee investments. 2.4 Approaches for field experience remuneration Firms may implement various methods for hiring these employees. 2.4.1 Ethrocentric approach is where the firm finds it difficult to find trained and educated personnel in the host country, the parent country resorts to expatriates or international field experiences so that knowledge may be transferred and the subsidiary may be managed. The advantages of such hiring could be that knowledge and skills may be transferred from one country to another. However, Hutchings (2005, 553-566) argues that the salary package of the expatriate is bigger than the local employees in the host country, which is demotivating for the host country employees. Moreover, there may be limited growth opportunities for the latter as now the gap has been filled by an expatriate. 2.4.2 Polycentric approach is when the home country nationals are hired in the parent country. according to Larsen (2004, 860-869), this lessen the language issues and the firm finds it cheaper to hire them. However, the drawback of this type of hiring is that the home country nationals have limited growth prospects. 2.4.3 Geocentric approach is where the firm hires managers irrespective of their nationalities and sends them to whichever country they deem fit. With such hiring, the employees benefit but there may be issues pertaining to labour laws of other countries where they would prefer locals to be hired in the position (Larsen (2004, 860-869). 2.4.4.Regiocentric Approach is when the firm divides its business in regions and hiring can only take place regionally. With such a method the firms are able to minimize the language barriers and the locals are much more acceptable to the employee in question as their horizon is expanded to the region and not just their country. 2.5 employee perspectives The firm should not only look into the benefits that it will derive from the location of the employee into an international field experience. according to Lazarova & Caligiuri, (2001, 389-401), it should also look into the benefits the employee will be deriving from the placement. The package should be good for the employee. He should also be compensated for the inconvenience that is caused by the field experience. He should be compensated with both the intrinsic and extrinsic rewards so that he is satisfied with what he gets and works with more efficiency. Many approaches for the salary structure may be adopted by the firm including parent-country salaries, international patterns of salaries or the regional salaries structure. Intrinsic compensations include scope for future development, personal enhancement with better exposure and career advancements. 2.5.1 Extrinsic and intrinsic costs International field experiences entail costs that the firms have to bear. However these costs may not be easily calculated due to the fragmentation of the costs involved. This is because the costs are calculated by the locals and intricate cost cannot be known. Moreover, Lazarova & Caligiuri, (2001, 389-401) add that if the competitors for instance have domestic employees instead of an expatriate, then the firm is running a cost disadvantage. The firm has to analyse whether such field experience is beneficial for the firm’s future or not. Many benefits are availed from such experiences both for the employee and the firm. The firm can look into establishing new businesses globally by sending expatriates and employees for international field experiences. The employee can introduce the corporate culture to the host country and establish coordination between the subsidiary and the head office by communication of the company vision and objectives. according to Lazarova & Tarique (2005, 361-373), establishing new businesses becomes easier with such field experiences as the firm becomes well aware of the local culture and environment. The firm incurs cost advantage when the employee transfers his skills and technological expertise to the locals where the new establishment is. This not only gives the firm a cost advantage but also enables it to run smother operations, as it doesn’t have to spend a lot of their training. Moreover, Huselid (1999, 635-672) argues that with such field experiences the firm is able to fill the skill gap that is present in the new location. Lastly, the with such a field experience, the individual employee develops holistically within the new environment and new experiences that he faces which will in turn enable him to get a more promising future ahead. There is a lot of competition between employees for such field assignments where, realising the long-term benefits of these assignments, they are even willing to compensate on the extrinsic and intrinsic benefits. Lazarova & Caligiuri, (2001, 389-401) further add that the career benefits of such experiences enable them to attain a competitive edge in the industry and strengthen their job portfolio. This is because other firms are more willing to hire them as they have experience of handling work in different cultural scenarios where the work environment and employees are different. Language barriers, negotiation techniques and decision-making styles may differ in different environments. Coupled with legal and political limitations that may make the employee much more aware and flexible to adjustment in new scenarios. It also gives the employee precious insight into business organizations and new setups which adds to the overall knowledge and skill of the employee thereby increasing his worth. 3.0 Discussion The methodology used to analyse the topic is secondary data collection. Understanding the research philosophy is essential in order to select the most viable methodology for data analysis given the scenario of the research, the topic, budget and timeframe, which are among the factors to be considered. Once the research comprehends the research philosophy, he can be inventive and visualise the research method that he should select for the research and he will have a stronger hold on conducting the research and its results. Though there are various methodologies that can be adopted, like primary and secondary research. In primary research there can again be several methods like qualitative and quantitative methods and their analysis could be through deductive or inductive approaches. However, in this research, the researcher has opted for secondary data collection via journals and books. Reliability is to assess the instrument that has been used for conducting the research. In this case since the methodology used is secondary data collection, the research results depends upon the researches conducted by other researchers and therefore they may be questionable as the results may differ if the research is conducted all over again. Validity is when how close the researcher has been in evaluating the limitations of the research. The limitations of this research are firstly the topic is limited to international field experience. Thus the local field experience is not considered and the results may not be implemented there. Secondly, the results may vary from one firm to another and such generalised results may not be true for all firms. 3.1 International field experience According to the literature studied in the previous section international field experience is when a firm intends to set up a business subsidiary in another region. The employee is sent to another country where he works among the locals of that country to set up the business. Such business expansion has become essential for firms in today’s unpredictable environment where it cannot depend on just one market for survival. Thus businesses enter new countries for further expansion and business growth. However, the firms enter new markets where the market is unknown and so is the language, culture and work environment in most cases. A firm cannot set up a business in a totally new environment thus it send employees on field experiences so that they may be able to tap the new market and study it in terms of culture, customers and prospective business growth. Without such international field assignments, the firm could incur heavy losses f it ventured into a market without market visits by these employees. However, the firm cannot just send any random employee, it has to select the right employee and invest in the employee’s training so that he may be able to make valuable contributions for the firm and not just add to the cost. In today’s competitive environment, many employees want to venture into such international assignments because it is beneficial for them. However, the firm has to be careful as to who they are sending and how loyal he will remain to the firm as the firm makes heavy investments on him. 3.2 Effects of international field experiences on the business According to the literature reviewed, business can have both a positive and a negative impact because of these field experiences. This is because when a firm sends an employee for field experience, it has to invest heavily on him. However, is he going to be proportionately productive for the firm is a risk that the firm takes when it is sending the employee in a foreign land. How well he is able to transfer the firm’s vision and objectives to the local employees and how well he adjusts in the new environment is something that can only be decided once the employee is actually there. 3.2.1 Selection of the employee The employee should be selected after he is thoroughly evaluated in terms of his expertise and his cultural attributes. His personality also plays an important role in determining how well he will be able to adjust within the new environment. If the firm chooses the wrong person, the investment can go to waste and it will have a cost disadvantage. The literature suggests using the Hofstede model to select the employee by comparing his nature with that of the market that he will be sent to. In this way the best possible employee may be selected and the firm will save a lot. Moreover, this employee may prove to be productive as he will be able to adjust to the environment better and thus in turn give positive results for the firm. It is argued whether the firm should invest in an expatriate or hire a local employee. There are different opinions where some suggest that hiring an expatriate is better while others contend that he should be a local. It actually depends on the scenario and firm. The right training and employee will benefit the firm while if a firm invests heavily on the training of the wrong individual then that is added cost. However, an expatriate will better be able to translate the firm’s objective and vision into the new subsidiary while a local may not be able to do so. Many times using an expatriate is essential rather than being a choice is because there is often a lack of the skill set in the other country and training the personnel would be a lot more expensive. However, it remains a critical decision for the firm whether it intends to hire a local or send an employee for an international field experience. Sending an employee for the field experience is a good option for the firm because it enables it to expand in another market. However, the employee has to be very well trained so that the experiences that the firm incurs on him are more then compensated for. If this turns out to be a bad investment, then the firm loses out in the industry as the comparison attains a cost advantage. 3.2.3 Compensating the employee The firm should also be able to compensate the firm well. The firm can choose from different types of remuneration forms which include polycentric approach, geocentric and regiocentric approaches, which the firm can decide after assessing how it can be most cost effective. This is essential because only when the project is cost effective will it be beneficial for the firm. More importantly, once the firm has chosen the right employee, it also has to choose the right compensation package that includes the intrinsic and extrinsic rewards for him so that he also becomes loyal to the firm and considers the assignment beneficial for himself. Deploying an employee into another country can be cost efficient for the firm because instead of risking setting up a whole new business it can test the market with such assignments and then later build upon it. 3.3 Impact on employees The employees’ benefit from such field assignments. This is because the firm is investing in them and they get additional training. They also get added exposure in new markets, which open their horizon to new forms of opportunities and learning. However, it is a difficult job for them because they have to adjust in a new environment with new cultures and people. It depends on his training and personality whether he is able to adjust well or not. If he is able to do that then he will be successful but if he not able to achieve his goals, then the investments the firm makes on him become in vain. Irrespective of the training he receives, the job will be challenging because of the scenarios that he has to face. The employees should be paid well for the sacrifices that he makes in terms of leaving his family etc. his salary and perks should be higher than what he currently earns or else the placements may not be worth it. Moreover, he should also be paid more or at least the same as those he works wit in the new environment so that he remains motivated enough. In addition, all the training that he receives and his experiences that he gains from such a deployment will enable him to excel in his career, as it will give him a competitive edge over others. However, the important thing remains in how well his newly acquired expertise are utilised by the firm once he is back from his assignment. Often, firms are not able to give a competitive position to the employee, which is disheartening for him. However, his expertises are better valued by other firms, which gives him reason to switch to new firms. Conclusion In a competitive global environment, businesses are expanding globally and for that they have to enter joint ventures and franchises etc in other countries. However, for such investments, they need to rely on trained personnel whom they can trust. Thus these firms train their employees and invest heavily in them so that they are able to go on such international field experiences and assess the future growth prospects for the firm. Such employees benefit the firms in the long run as they play a pivotal role in achieving the firm’s long-term objectives. Thus though such employees are expensive to deploy and maintain, they bring in substantial growth and profits for the firm. However, the firm should ensure that it has selected the right employee for the job. This may be done by employing the Hofstede model to assess his personal nature along with his capabilities and measure it against the culture of the new place that he will be travelling to. This will enable the firm to assess how well he will be able to transfer his skills and achieve the firm’s objectives. However, to do this, the firm also has to take care of the employee and give him extrinsic and intrinsic rewards so that he is motivated enough to go for the assignment. Such rewards should be carefully selected and thus should match the employee’s expectations. It is equally important that the employee realises how much of benefit he is achieving from such an experience and how well it will add to his career portfolio. The training and added investment may give him a competitive edge in the industry and his worth may be truly improved. Moreover, his future growth is also secured. International field experience is then beneficial for both the firm as well as the employees. Some argue that it is very expensive to maintain expatriates in the firm however, the firm may think otherwise keeping in view the benefits it is deriving from such a placement. The employee may also help transfer skills that are short in the new country thereby paying the way for the firm to have an early competitive edge in the new country. Moreover, the employee can lower the barriers between subsidiary and head office by maintaining a balance in the communication and management. However, one important aspect is that once the employee is back from the assignment he is now a more experienced and trained employee which the firm must realise and reward accordingly. If this is not done, chances are that the firm will lose the employee to another firm that values him more. References Harvey, M. & Fung, H. (2000). Inpatriate managers: The need for realistic relocation reviews. International Journal of Management, 17, 151-159. Hill, Charles W. (2007). International business, 6th ed. New York: McGraw-Hill, 2007. Jun, Sunkyu, Gentry, James W. & Hyun, Yong J. (Second Quarter 2001). Cultural adaptation of business expatriates in the host marketplace. 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