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Summary Content International HRM
Class content International HRM + notes + (chatgpt) explanation + overviews + summary of all cases KUL Campus Brussels - 23-34
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INTERNATIONAL HRMProf. dr. Ralf Caers – AY24-25
TABLE OF CONTENTS
Chapter 1 - Setting The Scene ........................................................................................................................... 3
What to expect ............................................................................................................................................. 3
Maybe reality is too complex ....................................................................................................................... 3
Our first model: strong and weak ................................................................................................................. 3
Strong institutions and weak firms ................................................................................................................. 3
Weak institutions and strong firms ................................................................................................................. 9
Strong institutions and strong firms ............................................................................................................. 10
Weak institutions and weak firms ................................................................................................................. 12
Our first model: strong and weak ............................................................................................................... 12
Chapter 5 – HR in the US and in US MNEs....................................................................................................... 18
The US in numbers ..................................................................................................................................... 18
HRM is US MNEs ......................................................................................................................................... 19
The US business system .............................................................................................................................. 19
Chapter 6 – HR in Africa ................................................................................................................................. 37
Africa in numbers ....................................................................................................................................... 37
Africa .......................................................................................................................................................... 38
HR in Africa................................................................................................................................................. 43
China in Africa ............................................................................................................................................ 49
Chapter 7 - HR in the UK ................................................................................................................................. 52
The UK in numbers ..................................................................................................................................... 52
Between 1800 and 1979 ............................................................................................................................. 52
Between 1979 and 1997 ............................................................................................................................. 54
After 1997 .................................................................................................................................................. 57
The UK in the new millennium ................................................................................................................... 57
HR in the UK ............................................................................................................................................... 58
Chapter 8 – Expats.......................................................................................................................................... 66
Definitions .................................................................................................................................................. 66
4 approaches to international staffing [Exam] ............................................................................................ 66
Ethnocentric staffing ..................................................................................................................................... 67
Polycentric staffing........................................................................................................................................ 67
Regiocentric staffing ..................................................................................................................................... 68
Geocentric staffing ........................................................................................................................................ 69
Taking it from the workers’ perspective ..................................................................................................... 69
The parent company nationals ..................................................................................................................... 70
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, The host country nationals ........................................................................................................................... 72
Third country nationals ................................................................................................................................. 73
The assignment ............................................................................................................................................. 73
The expatriate cycle ................................................................................................................................... 75
The expatriate cycle: selection ...................................................................................................................... 75
The expatriate cycle: Selecting the expat ..................................................................................................... 78
The expatriate cycle: Preparation ................................................................................................................. 80
The expatriate cycle: Training ....................................................................................................................... 80
The expatriate cycle: Support-in-post ........................................................................................................... 81
The expatriate cycle: Repatriation ................................................................................................................ 82
Chapter X: Country-of-origin effect or host country effect? ........................................................................... 89
The country-of-origin effect & The host country effect ............................................................................... 89
The country-of-origin effect in US MNEs ...................................................................................................... 89
2
,CHAPTER 1 - SETTING THE SCENE
WHAT TO EXPECT
• Bit of a history class
o Next year: Contemporary History of International HRM
• Business cases
o What’s going on in the world
• Sometimes comparative, not the main aim
• Understanding stereotypes, even if the (entire) economy no longer looks that way
• HR in a country and HR in MNEs
• Focus on US, UK, Europe, Africa, Japan and on expats
• Adding China too if we make it there
MAYBE REALITY IS TOO COMPLEX
• The West versus not The West
o Japan is the West?
o How West is Hungary?
• Liberal versus not so liberal
o EU versus US
• Free versus not so free
o Unionism and repression
• Maybe theoretical models help us to understand the foundations of countries and MNEs
o Understanding gravity versus understanding tap water
OUR FIRST MODEL: STRONG AND WEAK
• Strong institutions and weak firms
• Weak institutions and strong firms
• Strong institutions and strong firms
• Weak institutions and weak firms
→ Institutions reflect governments and bodies of governments
STRONG INSTITUTIONS AND WEAK FIRMS
• Governments enact policies and impose them on firms (which need to accept)
Government have power they can use over organizations, and they need to adapt themselves to the laws and regulations
• Societal perspective on HRM
o Profit maximization under restrictions
o Affects operational scope of companies
o Societal view is the belief that organizations are not isolated, they get affected by their environment
• 38 hour work week, minimum wages
The government sets the rules of the game, boundaries, restrictions (eg workers can work max 38h)
• France: right to disconnect (2016): not being on standby, can’t call them
→ positive: disconnect and recharge / negative: less competitive
• Does not rule out capitalism or liberalism
• See case DPD: minimum wages in this sector otherwise they would be paid way less “the race to the bottom” the one who does it
cheapest will get the job
(dangerous situations like sleeping less and driving more)
3
,Average annual work hours per year per person in employment
• 365 days * 24 hours = 8,760 hours/year
• That is the physical reality for everyone
• The rest is a social construct or a personal choice
→max for everybody
• 365 days * 24 hours = 8,760 hours/year
• 365 days * 8 hours = 2,920 hours/year
• 365 days * 5/7 * 8 hours = 2,085 hours/year
• 365 days * 5/7 * 8 hours – 20*8 vacation = 1,925 hours/year
→decision (social norm)
(For some companies, you got to work first to be allowed to take vacation days.)
• Average number of working days/year in Belgium around 220 days
• Average number of working hours/day in Belgium around 7,6 hours
• Average for Belgium 1,672 hours/year
• 1,672/8,760*100 = 19% of time devoted to work
→Belgium
(eg: Payed vacation – they stay longer, come back more motivated)
• (See slide 8)
How to read this table:
o Work hours vary between 1,380 (Denmark) and 2,137 (Mexico)
▪ 15,75% of time (Denmark) and 24,4% (Mexico)
o Work hours have dropped in many countries between 2009 and 2019
o Convergence and divergence
▪ Many higher work hour countries drop (Chile, Korea, Costa Rica) (C)
▪ Some higher work hour countries increase (Mexico, New Zealand) (C&D)
▪ Many lower work hour countries drop too (Germany, Switzerland) (D)
o Work hours not dropping in all developed nations
▪ Belgium, Netherlands, UK, US
o C = The increase in quality of life (or easier to reach a good quality of life) and growth economy allowed for
a drop in working hours. Nowadays, it is easier to get more money in less hours than it was in the
industrial revolution.
o C&D = The increase in working hours has a lot to do with wanting to fast develop economy of the country.
• What the table tells you (and does not) :
o Tells you how many hours people on average work in a country
o But FDI most often is focused on a sector
▪ Hours worked in one sector may differ from the average
o You have no data about the productivity in one hour
o You have no data about the cost of the work hour
▪ Wage costs but also other costs (telework, pension)
o How is working time calculated?
▪ Including or excluding commute?
Should companies pay workers for commuting? They are going somewhere to work, not because they
want
▪ Including or excluding work breaks?
Pay for employees break or not
4
, • The cost of a working hour + Paid leave and public holidays (see slide 11-13)
(The more holidays, the more money we are spending without productivity in return)
o 100 = cost of working hour remained constant
o Below 100 = cost of working hour dropped
o Above 100 = cost of working hour increased
Vacation might be important for business
• Varying public holidays slow down communication in MNEs
o Not able to reach the daughter company
o Issues we have with holidays – they may slow us down
(in an international company, it may be holiday in Belgium but not in the USA, so Belgium is slowing down
productivity USA)
• Varying public holidays may lower holiday-feeling of workers
o Working because the international headquarters works too
Some people defend every employee should follow the culture of the mother company.
If there is a strong culture: you work in a MNE and e.g. where Christmas does not exist – they expect you to work,
you don’t get a holiday feeling while the MNE doesn’t realize this
These people feel like they are in the culture of the mother country, not their own
• Example of the stock market
o Wall street closes 12 times due to public holidays in 2024
o Euronext only 6 times
o Trade in Europe is much lower than normal in Europe when USA is on public holiday.
→Some countries have/had very strong control over the economy
• Germany before the reunion
o Communist approach
o Produce only what is necessary for people, no excess. Regardless of the job, everybody gets the same (equality).
Biggest problem: people not doing anything (free riding), but getting same benefits
o The idea of equality : “the garbage man is just as important as the professor” but the garbage man didn’t get paid as
much ; “we all have the same egg holder”
Communism: not a bad idea but the system has flaws
• China before the reform
o Even today often viewed as very controlling
o Case: After school tutoring (2021)
o Case: PICC (2019)
o Case: China Musk Tweet
• Framing China (see slides 16-20)
o Xi Jinping
o Standing committee
o Politburo
(We always see this one guy in power pulling all strings, however in reality there are multiple people)
o Even Reuters helps
(Also happens in other countries but were more critical about this)
o And Bloomberg helps too
(Disappears but later on he pops back up and he’s more positive about China (as if he’s been brainwashed) → This is
the image we’ve been given)
o China often gets framed, use of stereotypes – be critical of info we’re shown
o A group of people decide what happens in China, not only one. However, we always see the president of China.
The president selects trustworthy people to help him out.
Western media tend to criticise that and say China is a dictatorship but when that happens in USA, it is fine.
5
,• Case: After school tutoring
o 2021
o Booming business
o Millions of workers, often teachers with day jobs
o Tal Education, New Oriental Education & Technology, Gaotu Techedu
o Primary and secondary school teachers banned from paid tutoring after school
Good or bad?
→Partially good because Chinese government limits works and allow people to refresh and focus on day job.
Bad because government is controlling a booming business.
→In the end, the decision was good because there was a limited amount of people in
o Banning online classes, summer schools
o Questioning the drivers of motivation
o Strong effect on market and businesses
• Case: PICC
o People’s Insurance Company of China
o Damages insurer
o Popular stock amongst retailers
o Times 4 in 5 months after IPO
o Citic securities issues sell rating (50% downside) → -10% after the news
o Claimed to be driven by Chinese government to turn ’crazy’ bull market into slow bull market
• A counterfactual approach: AMC
o See slide 23
o Price targets of less than 2$ are communicated regularly by independent analyst agencies
before and after the short squeeze
o June 2021: short squeeze (not everybody can do it. Kind of control market)
▪ Big investment funds are short in AMC
▪ Selling loaned stock now, buying it back when stock drops
▪ Retailers join forces to buy stock, forcing funds to close short positions and buy AMC
too
▪ Massive amount of buy orders skyrockets the stock
o Hearing in congress
o Robinhood sued for market manipulation (Similar to GameStop case)
▪ Barred purchase of meme stock, but allowed selling
o Regulating markets to avoid excesses is not limited to China
• Case: China Musk Tweet
o Another example of strong institutions
o July 2020
o Tesla CEO Elon Musk tweets that ‘China rocks’ while US is full of ‘complacency and
entitlement’
o Sells 20% of its vehicles in China in 2023 (26% in 2021)
o Chinese market equals 2/3th of EV sales worldwide
o Would not benefit from Chinese protection in competition with Chinese producers BYD and
NIO
o Staying on ‘good terms’
o While China relations are bad under Trump and Biden (troubling under Obama before too)
o January 2023: Musk says Chinese competitors work hardest and smartest
o Second most powerful person at Tesla: Tom Zhu
o When talking about HR, Elon musk is an interesting topic: case: musk taking over twitter
6
,• Another way to get control
• Government appoints workers, no control by HR
• HR could not be located at firm level
o Case: Political appointments
o Case: Erdogan’s control over central bank
o Case: European fruit banned by Russia
o Case: Russian Government takes control over VK
• Limiting labour market access
o Case: Doctor quota
• US Political Appointments
o See slide 27: People who got a special political position given by president.
• How to look at political appointments
o Politicians deciding who to appoint in the judicial system
▪ Trump nomination of Amy Coney Barrett as the Associate Justice of the supreme
court (right before he lost presidency)
o Job specification may be extended
▪ Political colour matters when it is not strictly job-related
▪ → characteristics people need to have for the job + political ideology.
Being politically active sometimes makes it easier to get the job.
o Potential impact on society
▪ Case of abortion right in the US
• Supreme Court of the US
o See slide 29-30
By putting people with a certain political view in impactful position can strongly shifts the laws of a country. Abortion
example.
• How to look at political appointments
o Also broader than the government, judicial sector or diplomacy
o Many governments still own shares in semi-private companies
• Case: Erdogan
o Recep Tayyip Erdogan
o Prime Minister of Turkey between 2003—2014
o President of Turkey since 2014
• 2018: Erdogan made son-in-law head of Turkey’s ministry of finance
→ controversial because he is not qualified for the position. Erdogan wants to control finances
department.
o 2021: 3 central bank governors got fired in less than 2 years, many central bankers (from the
committee) too
o Defying interest rate-inflation logic
→ when there is inflation, Central Bank increases interests, people save more money and inflation slows down.
Erdogan doesn’t believe in this, so even lowered interest rates more, leading to hyperinflation.
o Hyperinflation hitting businesses hard
o 65% in December 2023
o First prime minister of turkey from 03 till 14 and president since then
They weren’t loyalists so they had to be replaced by loyalists
• Turkish inflation over the years
o See slide 33
7
,• Turkish lira over the years
o See slide 34
• Turkish GDP over the years
o See slide 35
o It looked like Erdogan was doing a great job because GDP was increasing. However, it was due to hyperinflation,
which is terrible.
• Erdogan survives political quake
o Feb 5, 2023
o Earthquake in Turkey (Gaziantep) and Syria
o 48,448 people killed
▪ Most deadly quake since 1939
▪ Turkey, like Japan, one of the most earthquake sensitive countries in the world
o Building sector has been driving force behind Erdogan’s economic expansion (5,4% of GDP in
2020)
o Rush from rural areas to cities as of the 90s and 00s needs to be supported by housing
o Critique on quality of construction, leaders of construction firms arrested
o Erdogan accused of handing top-jobs in city planning and real estate development to close
friends
▪ Owners of 4 of the 5 biggest construction firms originate from the same Turkish
province as Erdogan
o Turkish elections (May 14, 2023) keep Erdogan in power
o But policy changes
▪ 6 increases in interest rates in 6 months
▪ To 40% in November 2023
o The bigger Erdogan became, the bigger these constructions became (friend politics, same area as the where Erdogan
came from) so, many poor people yet these companies so big
But there was an election coming, and this controversy was right before → however he STILL got reelected
• Case: European fruit banned in Russia
o 2014: Russia bans European fruit, vegetables, fish and milk products
o Counter measures because of EU restrictions after Krim-invasion
o 60% of Belgian pears exported to Russia
(companies loses many sales because of something out of their control, the government was the one making the
decisions)
o Severe impact of government decisions
o Ban still valid in 2024
o Smuggling Italian & French cheese is big business
• Case: Belgian Pork in China
o 2019: China bans import of Belgian pork meat
o Because of a disease (African pork plague)
o Meat is certified safe in 2020, but import ban remains
o 2024: Import again allowed
o Shows importance of trade missions supported by politicians
o Facilitate export through Memorandum of Understanding
8
, • Case: ASML machines to China
o 2023
o US concerned that China would use advanced chip technology for military purposes
o China imports 14% more machinery in 2023 (almost 40 billion dollars)
▪ While total Chinese import (all sectors) drops
o Calls for an export ban to China
▪ Hindering development of Chinese high-tech sector
o Most advanced machines produced by ASML in the Netherlands
▪ Net sales of 27.6 billion euro in 2023
o US influence leads Dutch government to restrict export to China
o ASML announces immediately that it will comply
o China warns about destabilizing effect on trade relations with the Netherlands
• Case: Nationalization in Russia
o July 2023
o Russia announces nationalization of Russian daughter companies of Danone and Carlsberg
o Considered to belong to unfriendly nations
o Putin ally Yakub Zakriev appointed head of Danone Russia
▪ Vice-president of Chechnya
▪ Produced 6% of worldwide turnover for Danone
o Putin ally Taimoeraz Bolloev appointed head of Carlsberg Russia (Baltika)
▪ Produced 2% of worldwide turnover for Carlsberg
• Case: Doctor quota
o Belgium applies doctor quota
o Limiting amount of students that can graduate and specialize
o Avoiding overconsumption and financial strain on the system
(if there are many doctors then people will go more often even if they are not feeling that sick)
o Avoiding poor wages and lack of growth opportunities due to low number of patients per
doctor
▪ Compare to Seychelles
o Affects hospitals in their strategic choices and HR policies
▪ International recruitment
▪ Retention policies
WEAK INSTITUTIONS AND STRONG FIRMS
→ But things can be different too
• Sometimes governments are in a weaker position
because they want to attract foreign investment and institutions get a lot of negotiation power, while governments lose
influence
• MNC’s have leverage over institutions
• Country desperate for FDI
• Reduced labour regulation → autonomy for the firms
• Lack of (professionalized/not corrupt) labour courts
o Gives workers perception that complaining is not an option
o Employers know that workers need to come back for more anyway
• Accepting unsafe workplaces and low wages to foster growth
People need the money so they cannot complain about bad conditions (child labour)
o Levelling in the future when MNEs get locked in
9
, • Example: garment sector in Bangladesh
o Rana Plaza
• Believing this generation suffers so that coming generations will have it better
Making the companies happy is what matters because they contribute a lot for the local economy.
• Weak is relative…
o See slide 44
o Feb 22, 2023
▪ Tesla changes strategies
▪ Had planned to build the world’s biggest battery plant next to its German car plant
▪ Decides to keep the production of batteries in the US
▪ Cites tax advantages in the Inflation Reduction Act (IRA)
• Lobby groups
= is an organization representing a specific industry or interest that employs experts to persuade policymakers to support their
agenda or policies through various means such as providing information and lobbying.
= experts who inform politicians about a topic and try to convince them to benefit a certain industry because lobbyists get hired
by businesses
o EU parliament discloses lobby groups interactions to favour transparency
o Calls it a ‘legitimate and essential aspect of the decision process” & “enabling access to
specialist information of an economic, social, environmental and scientific nature”
o 2022: lobby scandal in the EU
o 2010-2020: Big oil spends 250 million on European lobbying
o First half of 2022: US pharmacy spends 142 million on lobbying (highest of all industries) + 16
million spent on campaigns of politicians in mid-term elections
• Example case
o EU forbid sales of cars with combustion engine as of 2035
o Zero emissions
o Could have been much faster due to climate change
o German minister for traffic Volker Wissing fights for exceptions
▪ Italy joins in
▪ Lobby groups representing Porsche, Lamborghini and Ferrari
(they don’t want just electric vehicles)
o Negotiate exceptions for the use of e-fuels and synthetic fuels
o Driven by safeguarding employment
o Not unrelated with the late and difficult transition to EVs by European producers
o Lobbies are quite strong in the EU
STRONG INSTITUTIONS AND STRONG FIRMS
Strong institutions and strong firms:
• Both are striving powers
• In liberal markets (US, UK)
→ case of the Western world, both want power and impact decision making
• In strong state economies (Germany)
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