Employment Relations Aspects of Managing Global Business
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This refers to the way in which a business divides its activities among separate units and coordinates activities between those units
Centralisation vs. Decentralisation
- Centralised is the extent to which decision making is centralized at a high level in one part of the business
- It helps coordinate the operations of international subsidiaries, which is particularly important where the business is operating in many markets. Purchasing is often centralized (bulk buying) for discounts
- Decentralised is the degree to which decisions are made by individual subsidiaries.
- This results in products better suited to local needs as subsidiary has better understanding of local culture, politics, laws and competitors.
- Local manager is in a better position to react to changes in the environment and trends than a centralised structure would allow
Types of organisational structures
International division structure
- It separates domestic and international operations with their own managers. International division is then subdivided into units. Each unit has own manager – they carry out their own marketing, finance and production.
- Managers become specialists in a wide range of related activities, therefore allowing the business to reduce costs, increase efficiency and prevent international activities interrupting domestic services
- Useful for businesses that are new to international business or where international activities account for a small % of total business
International area structure
- Here the businesses global operations are organised into countries or geographic regions. Commonly in regions such as Asia-Pacific or otherwise according to countries
- Each division operates as a self-contained unit, with most of the decision-making decentralized
- It’s suited to businesses that treat each area as unique. Useful where there are large cultural, political or economic differences between markets
Global product structure
- This divides worldwide operations according to the businesses product areas. Its then subdivided into domestic and international units
- Each function such as marketing, finance and operating are duplicated in the separate units
- Suitable for businesses offering diverse set of products because it overcomes some of the coordination probs of international division structure
Global matrix structure
- Splits the chain of command between product and area divisions. Each managers reports to the head of the product division and the head of the geographic area
- Main goal is to unite geographic and product area managers for joint decision-making
- Common for businesses trying to increase local responsiveness, reduce costs and coordinate worldwide operation
- Staffing issues involve the recruitment, training and retaining of managerial and executive staff and office and production staff.
- Size of issue depends on the level of businesses international activities
- Using home country managers makes communications and coordination with corporate headquarters easier as the language barrier does not exist
- Issue of costs also influences the choices between home country transfers or the local employees
Shortage of skilled labour
- One of the factors that influence the use of non-parent or local skilled labour is its availability
- There may be shortages of appropriate staff in the host country which can be a critical issue in the performance of the subsidiary
- Skill and knowledge of workers tends to be low where the labour cost is low. Others may lack experience in the industry and in a customer focused environment
- Lack of managers qualified to run a global operation can create difficulties for the business
- Can be costly and time consuming as the business will have to train the workers or not set up in that particular country
Labour Law Variations
- Important for a global business to comply with the local labour laws, therefore managers need to be aware of the difference in the laws compared to their own home country.
- Issues are:
- Wages and conditions
- Affirmative action
- Religious holiday observances
- Summary dismissal
- The right to below to a union or trade association
Minimum Standards of Labour
Fundamental ILO (international labour organisation) conventions
- Seven conventions have been identified by the ILO as being fundamental to the rights of human beings at work, irrespective of levels of development of individual member states
- Ratifications are the formal commitments by govts to follow international agreements
- These conventions include “right to organise and collective bargaining”, “minimum age convention” and “abolition of forced labour convention”
- Is a serious problem. It is the most important source of child exploitation and child abuse in the world
- Many children are working at an early age in hazardous working environment which takes advantage of their vulnerability
- Involves the use of using the parent company employees in senior management positions, “locals” in middle management and “local” in the low-level skill positions.
- Advatages are that the expatriate (employee from another country usually the company headquarters) will be most effective in transposing the corporate culture
- Also used when qualified workers are not available locally
- Disadvantages are the expense of relocating managers from the home – their wages, their families/ pressure of cultural differences can leave manager in culture shock (disoriented, frustrated)/ it can also become a barrier as the manager may be conservative in changes/ lack of knowledge of host country laws, culture, social structure etc
- Here the host country nationals are employed. Can be used for top or middle management, as well as for non-managerial staff.
- Large companies run extensive training programs for host managers to expose them to the corporate culture and business practices
- Adv is the saving on high cost of the expatriate. Local managers have the advantage because they know the local market well in terms of culture and accepted business practices
- Disad is the potential to lose control of the operation. By employing a local manager, the business risks becoming a collection of national businesses rather than a global operator
- Focuses on employing the best available person, regardless of nationality
- This helps a business develop global managers who can adjust to many business and cultural environments.
- Disadvantage is that it is expensive. Global managers are highly sought after, and the combo of high demand and less supply can lead to higher salaries and associated packages
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