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There are four primary approaches that multinational companies use in staffing decisions, including geocentric, ethnocentric, polycentric, and regiocentric approaches. The geocentric staffing approach does not focus on one nationality over the other. Instead, upper level management positions are held by the most qualified employees selected form a global pool of candidates. These managers are considered third country nationals, or TCNs. The most qualified candidates are selected, but no single nationality is stressed. The Geocentric Approach is one of the methods of international recruitment where the Multi National Companies recruit the most suitable employee for the job irrespective of their Nationality. When a company adopts the strategy of recruiting the most suitable persons for the positions available in it, irrespective of their nationalities, it is called a geocentric approach. Companies that are truly global in nature adopt this approach since it utilizes a globally integrated business strategy. Since the HR operations are constrained by several factors like political and ethnical factors and government laws, it is difficult to adopt this approach. However, large international companies generally adopt the geocentric strategy with considerable success. The ethnocentric staffing approach heavily focuses on the norms and practices of the parent company where upper management positions are typically held by corporate personnel from the home country. These managers are considered parent company nationals, or PCNs. Japanese and Korean firms follow this approach quite often. Countries with branches in foreign countries have to decide how to select management level employees. Ethnocentric staffing means to hire management that is of same nationality of parent company. When a company follows the strategy of choosing only from the citizens of the parent country to work in host nations, it is called anethnocentric approach. Normally, higher-level foreign positions are filled with expatriate employees from the parent country. The general rationale behind the ethnocentric approach is that the staff from the parent country would represent the interests of the headquarters effectively and link well with the parent country. The recruitment process in this method involves four stages: self-selection, creating a candidate pool, technical skills assessment, and making a mutual decision. Self-selection involves the decision by the employee about his future course of action in the international arena. In the next stage, the employee database is prepared according to the manpower requirement of the company for international operations. Then the database is analysed for choosing the best and most suitable persons for global assignments and this process is called technical skills assessment. Finally, the best candidate is identified for foreign assignment and sent abroad with his consent. The polycentric staffing approach heavily focuses on the norms and practices of the host company where upper management positions are typically held by corporate personnel from the local country. These managers are considered host country nationals, or HCNs. European firms often follow this approach. When a company adopts the strategy of limiting recruitment to the nationals of the host country (local people), it is called a polycentric approach. The purpose of adopting this approach is to reduce the cost of foreign operations gradually. Even those organizations which initially adopt the ethnocentric approach may eventually switch over lo the polycentric approach. The primary purpose of handing over the management to the local people is to ensure that the company understands the local market conditions, political scenario, cultural and legal requirements better. The companies that adopt this method normally have a localized HR department, which manages the human resources of the company in that country. Many international companies operating their branches in advanced countries like Britain and Japan predominantly adopt this approach for recruiting executives lo manage the branches.” The regiocentric staffing approach, a more recently identified approach, is where upper level management positions are held by employees from a particular region (North American region, European Region, Asian region, etc.). This approach is similar to the polycentric approach, but it reflects a specific region rather than a specific country. For instance, a U.S. company in Mexico may consider hiring an employee from Canada to fill a management role. The regiocentric approach uses managers from various countries within the geographic regions of business. Although the managers operate relatively independently in the region, they are not normally moved to the company headquarters. One shortcoming of the regiocentric approach is that managers from the region may not understand the view of the managers at headquarters. Also, corporate headquarters may not employ enough managers with international experience. 1.The country where the headquarters of a multinational company is located is known as(a)host country(b)home country(c)third country(d)None of the above
A firm that has operations in more than one country is known as a multinational corporation (MNC).The largest MNCs are major players within the international arena. Walmart’s annual worldwide sales, for example, are larger than the dollar value of the entire economies of Austria, Norway, and Saudi Arabia. Although Walmart tends to be viewed as an American retailer, the firm earns more than one-quarter of its revenues outside the United States. Walmart owns significant numbers of stores, as of mid-2014, in Mexico (2,207), Brazil (556), Japan (437), the United Kingdom (577), Canada (390), Chile (386), Argentina (105), and China (400). Walmart also participates in joint ventures in China (328 stores) and India (5). Even more modestly sized MNCs are still very powerful. If Kia were a country, its current sales level of approximately $42 billion (in 2012) would place it in the top 75 among the more than 180 nations in the world (Wal-Mart Stores Inc., 2014). Multinationals such as Kia and Walmart have chosen an international strategy to guide their efforts across various countries. There are three main international strategies available: (1) multidomestic, (2) global, and (3) transnational (Figure 7.23 “International Strategy”). Each strategy involves a different approach to trying to build efficiency across nations while remaining responsive to variations in customer preferences and market conditions. Multidomestic StrategyA firm using a sacrifices efficiency in favor of emphasizing responsiveness to local requirements within each of its markets. Rather than trying to force all of its American-made shows on viewers around the globe, MTV customizes the programming that is shown on its channels within dozens of countries, including New Zealand, Portugal, Pakistan, and India.  Similarly, food company H. J. Heinz adapts its products to match local preferences. Because some Indians will not eat garlic and onion, for example, Heinz offers them a version of its signature ketchup that does not include these two ingredients. Global StrategyA firm using a sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing efficiency. This strategy is the complete opposite of a multidomestic strategy. Some minor modifications to products and services may be made in various markets, but a global strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market. Microsoft, for example, offers the same software programs around the world but adjusts the programs to match local languages. Similarly, consumer goods maker Procter & Gamble attempts to gain efficiency by creating global brands whenever possible. Global strategies also can be very effective for firms whose product or service is largely hidden from the customer’s view, such as silicon chip maker Intel. For such firms, variance in local preferences is not very important. Transnational StrategyA firm using a seeks a middle ground between a multidomestic strategy and a global strategy. Such a firm tries to balance the desire for efficiency with the need to adjust to local preferences within various countries. For example, large fast-food chains such as McDonald’s and KFC rely on the same brand names and the same core menu items around the world. These firms make some concessions to local tastes too. In France, for example, wine can be purchased at McDonald’s. This approach makes sense for McDonald’s because wine is a central element of French diets.
ReferencesStandard & Poor’s Ratings Services. (2014). Stock report on Walmart. Retrieved from http://www.standardandpoors.com/ratings/en/us?rpqSearch=NO&pageNav=No&searchText=Walmart%20stores%20Inc.&searchField=Entity Wal-Mart Stores Inc. (2014). Our Locations. Retrieved from http://corporate.walmart.com/our-story/our-business/locations/ Image descriptionFigure 7.23 International Strategy “What’ for dinner?” is a question Of interest to folks Of nations. The answer depends, in some part, on the international strategy of the corporations that provide foods, drinks, and condiments worldwide. Firms choose between the potential trade-offs between efficiency in production/distribution and responsiveness to local market preferences. Below we provide examples of how a firm’s decision may provide some answers to how you might fill your belly.
Return to Figure 7.23 Media AttributionsA firm that has operations in more than one country. To sacrifice efficiency in favor of responsiveness to varying preferences across countries. To sacrifice responsiveness to local preferences in favor of efficiency. Involves balancing the desire for efficiency with the need to varying preferences across countries. |
When an international firm follows a strategy of choosing only from the nationals of the parent company it is called?
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