Globalization of MNCs

free essayThere is the tendency for companies all over the globe to transform into worldwide organizations nowadays. Few following factors have led to the transformation of not only enterprises but also a change in the requirements for human resources management. They include such as globalization and internationalization of the world economy, the trend to form alliances and networks, a need for greater flexibility in the labor force, sophisticated knowledge management objectives, and intellectual capital on a global basis. Human resources are a crucial factor in achieving competitiveness on a global scale. The rapidly growing internationalization of companies that must be controlled worldwide more and more has required the creation of a new strategic approach to human resources management.

The international human resource management is defined as a process of hiring and training of staff members that work not only in the country of origin but also in other states. It means that it is necessary to cross national borders to formulate and implement the strategies, policies, and practical measures to ensure the resources, professional development, career management, and the salary applicable to the transnational labor force. The main features of the international human resource management should include the significant influence of environmental factors, diversity of control functions, and a differentiated approach to training the management personnel. In international companies, the functions of HR are extremely complicated by the need to adapt to the policies and procedures towards employees, as well as some differences among states.

Thus, the research paper is aimed at discussing the definition of expatriation and repatriation adopted by multinational companies, as well as their consideration at strategic, environmental, political, socio-cultural and operational levels. Additionally, the research paper will include the discussion of required investments that multinational entities need to consider when deciding to involve employees working in global operations.

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Expatriation and Repatriation: Definition and Meaning at Different Levels of Operation

Expatriation is a temporary or permanent removal of an individual from the country, in particular, the own geographical or cultural homeland. This meaning is usually a result of deprivation of citizenship. From the public international law, expatriation is the termination of nationality upon someone’s request. Repatriation is the return of an employee to the homeland, a gradual entry into the original culture, and the operative use in the organization after being hired for several years in another country (Andresen et al. 2014).

From the operational and strategic points of view, moving workers in the international organizations is a core component in the research and practice of international human resource management. The movement of personnel involves their reassignment, often including their families, due to various places of work. It is often a long-term process related to the change of residence and the need to adapt to local conditions. The movement is very important. It allows maximizing the identification of the regular staff with the corporation, as well as contributing to the accumulation of knowledge of the global organization. Moreover, it should consider the specifics associated with the locations of all of the enterprise’s subsidiaries (Baruch, Altman & Tung 2016).

The expatriation process includes the provision of training and development aimed to help them work more efficiently abroad. Education means course aimed at the development of specific performance skills and abilities. For example, training programs can be designed to help expatriates to learn a foreign language, be able to use the new equipment, as well as introduce them to the new production processes. Additionally, this flow involves the adoption of an exclusive training to improve the adaptation to a new culture.

As for the political level of expatriation and repatriation processes, it is related to taxation issues of expatriates and repatriates, as well as the burden that multinational companies have to carry out regarding this. Each country has local laws related to the taxation of income of its citizens, operating income on its territory applicable to the national currency of other states, as well as the profit of people working in other countries. As a result, accounting departments should consider the tax equalization process of expatriates and repatriates (Andresen et al. 2014).

The local legislation of a hosting company is one of political factors related to the process of expatriation and repatriation. Especially, it is related to the wage policy. For example, employers, according to the law, are required to pay for maternity leave, 15 days from the salary as a Christmas bonus, as well as provide dismissed employees with a minimum of three months of severance pay in Mexico (Flores 2005).

From an environmental and socio-cultural standpoint of expatriation and repatriation processes, it is relevant to consider the following features. These ones are technical and human skills, communication, talent management, emotional stability, an ability to adapt to the new environment and industrial capacity to carry out accepted responsibilities. Additionally, it is an opportunity to integrate with the personnel of another culture, understand the development level of the host state, and solve problems with different networks and perspectives.

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The processes of expatriation and repatriation also take into account the person’s independence and self-reliance. They are related to the need for assistance and installations, the experience of the independent performance, project management, an activity in the company, and social efforts. Physical and emotional conditions refer to the ratio of health and working circumstances, a psychological opportunity to adapt to a different culture, an ability to cope with the culture shock, and balancing between age and experience. This aspect also involves the belief in the chance of working abroad, search for adventures and fun activities overseas, as well as career possibilities. The environmental factor that is typical for discussed processes includes the following attributes. The first one is the pleasure of family life, the ability of the relatives to reduce the level of stress and adapt to a new culture, and the leader’s qualities. Moreover, this factor includes the opportunities to continue leadership in a foreign operation, specific features required for the successful performance in the hosting country, as well as the salary factor (Baruch, Altman & Tung 2016).

Investments in Personnel Working in Global Operations

To carry out a meaningful program of study or development companies have to evaluate the needs for training and development. This assessment includes the determination of the gap between what managers and workers intended to be expatriated can do and the fact that they should do, according to the organization’s objects. For example, the company operating in Latin America strives to have its employees fluent in Spanish. If the majority of its wage-workers are such ones, the need for learning the language will be minimal. However, if there are only few people being fluent in Spanish, the company may require the extensive training.

The enterprise that is just penetrating the international market will have different needs in the training and development in comparison with what established global companies strive for. The recent enterprise that has just appeared on the world arena will most likely experience a partial or even complete lack of experienced international managers. In this regard, the cost of training and development will be essential. On the contrary, a global firm is more likely to have the staff of trained and experienced managers with the abroad work experience that possess the appropriate skills and abilities. However, the same companies will also require some costs on training to implement additional organizational shifts.

Thus, for example, when the enterprise Jaguar acquired the factory in England previously manufacturing vehicles such as Ford Escort, managers faced with demoralized labor force. The latter one did not want to take any responsibility for decisions. As a result, the personnel were sent to special seminars aimed at the improvement of their technical skills and self-motivation of key decisions (Menipaz & Menipaz 2011, p. 508).

According to Bonache (2006), the allocation of funds for expatriated managers is another investment that multinational companies need to take into account. It is a serious issue. The reason is related to the determination of the amount of compensation for expatriate leads. Most of international organizations consider it necessary to provide such managers with differentiated salaries. Therefore, the sharp differences in the value of currencies, the standards of living, customs, etc. should be considered. When managers are sent to short-term trips abroad, their salary usually remains unchanged. However, companies try to compensate such short-term expenses like accommodation, food, and transportation. In the case of long-term trips overseas, the amount of payment is generally adjusted to provide an expatriated lead with an appropriate level of life in the host country. This adjustment is particularly important when a lead is moved from low-cost states to such one with high living standards or vice versa.

Sometimes companies have to pay extra bonuses to expatriates. Therefore, they could accept to go on a business trip in relatively unattractive places. For example, it is not difficult to attract people to move for the work in England or Japan. However, it is much harder to convince a person to relocate to such countries as Colombia or Afghanistan. The supplement associated with such trips is called premium. It is related to a difficulty or a prize for a job abroad. In fact, it is an additional incentive for the individual to accept the appointment. For example, when the bloody civil war ended in Angola, the French oil company TotalFinaElf wanted to expatriate its managers to that country. However, to do it, it needed to offer large sums of money to them. Even so, the agreed expatriates insisted on the duration of their trip for less than a year (Olowu 2010, p. 76).

Many international companies also have to introduce a system of tax equalization. It ensures the accordance of the net income of an expatriated manager in the host company with the lead’s net profit at home. As a result, accounting departments determine the level of taxes expatriates pay in the country of origin and the host state. They make the necessary adjustments equating taxes to others.

International firms are required to provide their expatriates with not only some adjustment of wages but also an identified form of benefits additionally to those ones they receive at home. Such ones are such bonuses as health insurance and paid vacation. Assigned benefits also include the costs for housing, education, medical care, and a trip to a native country, as well as the membership in various clubs.

One of the most common special bonuses that global entities have to face with related to investments is paying for housing. Like other components of the cost of living, the housing question varies depending on the region. Its provision at an appropriate level being equal to the property expatriates have within their home countries can cost a lot of money. Therefore, the payment for housing is often treated as a separate benefit. If a manager is sent abroad for a permanent residence or a long trip enterprises can buy the house at a fair market price for such individual. Moreover, companies can help expatriates to purchase the property in the host country in case the value of a building or interest rates on loans are different from those ones at home.

If an expatriated lead has a family, international entities may have to help his spouse in search of a new job position and pay the costs of education for children. The reason is that kids may require going to private school. This cost will be paid by the company. For example, a schooling problem is particularly important for expatriated managers in Japan. Their children cannot pass the entrance exams to enter the prestigious Japanese universities if they forget partially the native language during the long-term stay abroad. It is a reason many Japanese firms pay for the education at private schools for the children of their expatriates. They are being assisted during a process of learning the material needed for exams (Ko 2015, p. 360).

Medical benefits can also require some adjustments. For example, some people believe that the Malaysian health care facilities do not meet modern standards. In order for expatriates to move to this country the medical care in Singapore from their employers is required.

Most international companies pay the cost of expatriates for the trips to their homelands due to family issues. For example, it can be related to meeting family members or on holidays. An additional benefit is to travel home once or twice a year at the company’s expense. Meanwhile firms may allow a large number of trips to the home country in case of a short-term travelling abroad (Bonache 2006, p. 163-165).

Human resource managers must also evaluate the needs in training and development for workers from host countries. It should be done in order to help expatiates to operatively carry out their duties in the host state (Isiaka et al. 2016). The needs of local labor groups in training and development depend on several factors. One of the most important forces is the location of a foreign sub-division. In industrial markets, it is easy to find skilled workers who are out of training. They may only require a small introduction to the operations of the enterprise. In relatively undeveloped regions, the needs in training can be much higher. For example, when Hilton began to open its hotels in Eastern Europe after the fall of communism, the following fact was revealed. Waiters, clerks, and other service employees do not possess the basic skills required to provide high-quality services. Such people were so used to working in a planned economy that they did not care about the satisfaction of guests. It was as well hard to understand for them why they needed to change their attitude to work. As a result, Hilton had to invest much more money than it had been expected to train new employees.

Education has also become a critical element if a firm wants to gain maximum benefits from relocating of the production abroad. In recent years, there has been a strong trend towards multinational companies being expressed in the relocation of enterprises to certain regions. Such ones include Honduras, Malaysia, and Indonesia where the labor force is cheap (Ho 2013). However, the performance of these workers is often low and remains low until enterprises invest in training of the personnel. For example, only the third of the population has more than six years of education in Malaysia. It is a reason for high costs of training in this region. Thus, an owner of Quality Coils and a manufacturer of solenoid coils closed the plant in Connecticut, in the USA, and moved the production to Ciudad Juarez, Mexico. The reason was that the hourly rate was three times lower there. However, it soon became clear that the labor productivity was three times lower than in the USA as well. Along with the tendency to absenteeism and personal expenses of workers of doing business in Mexico, the owner of the firm had to go back to Connecticut, the USA.


Sometimes training costs arise due to unforeseen reasons for companies. For example, when Merrill Lynch acquired the fourth largest securities Japanese firm Yamaichi Securities, it expected to get the talented staff and experienced brokers being familiar with their domestic market along with it. However, it turned out some time later that Yamaichi brokers were able to conduct the transaction with securities. However, they did not know about such concepts as a customer service and the study of their investment needs before providing some stock recommendations. Merrill Lynch had to invest heavily to introduce new brokers the basics of the customer service (Paprzycki & Fukao 2008, p. 153).

The practice of compensation and evaluation of work results in non-executives also varies significantly among countries, depending on local laws, customs, and cultures. In such individualistic cultures like in the USA, the main focus is made on the evaluation of results of an individual followed by an appropriate payment of labor. In such cultures like in Japan, with a more pronounced orientation, the training and development of the entire group should be considered more. Meanwhile the individual assessment and wages are being paid less attention to. In addition to salaries, compensation packages include incentive payments and benefits programs. Studies show that the specific combination of wages, incentive payments, and benefits is a function of the national culture. For example, salaries were 85% of the total remuneration in 41 industrial sectors of four Asian countries. However, the wages made 56% in 41 industrial sectors of five Latino-European countries.

Problems and Barriers with the Expatriation and Repatriation Processes that MNCs Are Faced with

The assessment of training needs is an extremely important element of international human resource management. Companies that underestimate these requirements may face serious difficulties in this area. The reason is that it is the lack of knowledge of foreign markets. Therefore, buyers are a major barrier to the successful penetration of these areas.

Going on long-term trips abroad, the representatives of the parent country are facing enormous difficulties in adapting to the new culture. Working in foreign conditions and a constant contact with it can cause the cultural shock. It is a psychological phenomenon that causes some feelings of fear and helplessness, irritability and disorientation. As a result of the work in a new and unfamiliar cultural environment, new expatriates can feel the feeling of losing the familiar cultural environment, as well as confusion, failure, self-doubt, and low self-esteem (Bonache 2006, p. 159).

The cultural shock reduces the effectiveness of the expatriates’ performance. It is a reason why international companies develop and implement the variety of strategies that help to mitigate these effects. One simple solution is to provide expatriates with learning tools aimed to help a better understanding and anticipation of the coming cultural change. It is expressed in the provision of educational programs that help to learn the foreign language and culture. In addition to this formal way of training, enterprises can send people to short-term trips, as well as ensure that expatriates understand the role of the trip abroad in their career.

If the expatriation of managers and their families is successful, they can get used to living and working in the foreign culture. Returning home can be almost as dramatic as moving overseas for them. One of the difficulties related to repatriation is that people assume that nothing has changed at home. Such persons expect to return to old friends, familiar surroundings, and their daily routine. However, their acquaintances could move away or made social connections while colleagues could get appointed to new job positions in other firms. For example, some of returning expatriates are being denied the credit because they have not had any internal credit history over the past few years in the USA.

Repatriate managers also have to put up with the shifts and uncertainty in their working places. The company may not guarantee what will happen to the workplaces during expatriates being absent while they are on a trip abroad. Additionally, an expatriate can have considerable power authorized and influence operational decisions during the performance overseas. On the other hand, expatriates have less authority and are being on the same page with other subordinates. Moreover, they are a subject to a greater number of executives that even before. It is also possible that the host country of expatriated managers and their families has enjoyed a higher social status that they used to have at home before. The issues of re-adaptation can be quite serious and require attention from expatriates themselves and from their firms.

The problem of repatriation can result in considerable sums of money for international companies. According to the estimates, the quarter of repatriated workers leaves their employers in a year after returning home. For example, an average expatriate working overseas from three to four years costs hundred thousands of dollars annually for the US employer. Thus, each repatriated manager who decides to quit the position in the enterprise is evaluated in the loss of expensive investments (Bonache 2006, p. 160).

Recommendations for Improvement that Can Be Adopted by MNCs

It is relevant to note that the problems of expatriation and repatriation can be reduced if international companies systematically provide expatriates with organizational career development programs. The probability of the successful implementation of managers’ assignment working overseas will increase in case the leads get an access to the following benefits. First, they will be able to choose whether they can accept a trip overseas or not. Second, they should be able to get a realistic idea of the new workplace and its mission in advance. Third, expatriates will get a perspective of how they will be repatriated. Fourth, whether they will be allowed hiring an assistant to defend the interests and provide the corporate and social protection while expatriates work abroad. Finally, expatriates must clearly realize a link between a business trip abroad and long-term career opportunities within the same company. This factor is the most crucial one in determining the success of expatriates.

Another important element of international human resource management that requires some improvement is related to the preservation and turnover of workers. Staff retention is referred to the extent to which firms manage to keep their value of personnel. Staff turnover is an exact opposite concept, which means the rate at which employees leave enterprises. There can be some reasons for workers to leave firms. For example, it can be dissatisfaction with the current level of wages and opportunities to improve or obtain more favorable offers from other business entities. The staff turnover also occurs due to a change of workplace related to the expatriation or repatriation processes (Ren 2013). If an employee does not like a geographical perspective of changing a place of work, he or she can consider changing an employer. In the international business, the problem related to the staff turnover is particularly acute. The reason is that the process of the managers’ development with international business skills is expensive. High qualified leads are in great demand these days. Some firms even use the services of headhunters to look for perspective workers that are currently working in other organizations. For the same reason, multinational firms are recommended to get a core priority of getting qualified managers due to the lack of shortage of highly skilled and experienced executives.

The recommendation for one of the ways to control the flow of personnel management is the development of strategies. Such policies are aimed at reducing the percentage of failed expatriation and repatriation. They can include the career consulting, intellectual education to moderate the cultural shock, and others. Additionally, it is recommended to offer special incentives to the most valuable international managers. They may be related to increased wages and the right to choose their trips abroad independently. Moreover, multinational companies can provide such leads with stringent guarantees regarding the timing of such missions. For example, an enterprise may wish to hire the particularly experienced representative from the third country to manage its operations in another state. Such lead can accept an opportunity to get a trip for the long-term duration. This decision will be related to the costs and other associated with the relocation inconveniences.

Another important element of the management of staff turnover is an interview when one wants to quit a job. Such job talk is conducted with the employees leaving the country. The purpose for such interview is to learn more about why people decide to quit. Taking into account the existing distance of international business companies can ignore these interviews to find out about the reasons for leaving a job position. However, job talks can give managers the potentially valuable data. Enterprises can reduce the outflow of future workers using interviews. Thus, companies are recommended to think seriously how to use job talks as a part of strategies aimed at reducing the staff turnover (Ramaswami, Carter & Dreher 2016).

The practice of compensation also reflects local laws, culture, and the economic situation within the state. Prevailing wage levels are different in various countries. This issue encourages many labor-intensive industries to migrate to such states as Malaysia, Indonesia, and Guatemala. To attract workers, human resource managers should ensure that the salary complies with local regulations in their enterprises.

Finally, a human resource manager of each foreign subdivision of the firm needs to develop and implement the system of performance appraisals and reporting. It is the most appropriate scheme related to the location of the sub-division. It considers the nature of work and the cultural context as well (Ramaswami, Carter & Dreher 2016). For example, the US workers positively perceive a feedback as an assessment system, which allows them to improve their results. Meanwhile German employees are often opposed it considering that the response forces them to admit mistakes and shortcomings. Adjusting the structure of the compensation package to the compliance with local regulations, human resource managers must ensure the following fact. Their employees have received the maximum benefit from each paid dollar.

Conclusion

Human resource management is a set of actions aimed at the attraction, development, and maintenance of effective workforce needed to achieve the company’s goals. the function of human resource management plays a central role in the firm’s success. Therefore, top leads should approach its implementation strategically. The requirements for international human resource management are partly dictated by the degree of internationalization of an enterprise. The relative level of centralization or decentralization of control also plays an important part in this case. The form must develop and adhere to the basic philosophy of the personnel.

The important elements of the international human resource management include the recruitment and selection of employees. Some companies prefer to send experienced managers in foreign trips while others employ inexperienced administrators. Each of these recruitment concepts has its personal methods. Business and international skills are usually considered important factors to decide about the leads to travel abroad. In their turn, managers and firms must solve the issues related to the expatriation of their workers overseas and their repatriation to the homeland.

Two other important aspects of international human resource management are training and staff development. This activity includes two major components. They include the assessment of training needs and the choice of main methods, as well as training procedures.

Firms should evaluate the results of their international management and determine the amount of their compensation package. The latter benefit for expatriated managers typically includes the bonus related to the difference in living minimum required standards and the variety of special benefits.

Given the high cost of training and development of expatriates, enterprises should pay the special attention to the management of retention and turnover. All components of the international human resource management are as well applicable to non-executives.