Chapter 18 Outline

The Strategic Role of International HRM

In Chapter 12, we examined four strategies pursued by international businesses--the multidomestic, the international, the global, and the transnational. Multidomestic firms try to create value by emphasizing local responsiveness; international firms, by transferring core competencies overseas; global firms, by realizing experience curve and location economies; and transnational firms, by doing all these things simultaneously. In Chapter 13, we discussed the organizational requirements for implementing each of these strategies. Table 18.1, identical to Table 13.2, summarizes the relationships between international strategies, structures, and controls.

Structures or controls summarized in Table 18.1 don't mean much if the human resources that support them are not appropriate. Without the right kind of people in place, organizational structure is just a hollow shell. In Chapter 13, we explained that formal and informal structure and controls must be congruent with a firm's strategy for the firm to succeed. Success also requires HRM policies to be congruent with the firm's strategy and with its formal and informal structure and controls. For example, a transnational strategy imposes very different requirements for staffing, management development, and compensation practices than a multidomestic strategy does.

The opening case alluded to the relationship between strategy, structure, and HRM. Like many other consumer products firms, Coca-Cola is trying to become a transnational organization (in some ways, "think globally, act locally" is a good definition of a transnational strategy). As indicated in Table 18.1, firms pursuing a transnational strategy need to build a strong corporate culture and an informal management network for transmitting information within the organization. Through its employee selection, management development, performance appraisal, and compensation policies, the HRM function can help develop these things. For example, Coca-Cola's global service program, by creating a cadre of international managers with experience in various nations, should help to establish an informal management network. In addition, management development programs can build a corporate culture that supports strategic goals. In short, HRM has a critical role to play in implementing strategy. In each section that follows, we will review the strategic role of HRM in some detail.