Chapter 3human Resource
Chapter 3human Resource
Chapter 3human Resource
Agenda
Review Discussion Questions Chapter 2 Module Test 1&2 Lecture ~ Chapter 3 Case True & False
Chapter Focus
Role of HRM and the challenges it faces in international mergers and acquisitions Particular attention to small and medium sized businesses
Opening Vignette
Mergers and Acquisitions: The Dynamics of Globalization increased level of internationalization through M & As
M&As
Strong M&A trend in industries such as car manufacturing and natural resources Both sectors in which many Canadian companies have been involved such as the auto industry and mining
Cross-Border Alliances
The Strategic importance of alliances has increased in the course of globalization Cross Boarder Alliances are cooperative agreements between two or more firms from different national backgrounds, which are intended to benefit all partners
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Equity Modes
foreign direct investors purchase of shares of an enterprise in a country other than its own
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Equity as well as non-equity cross-border alliances pose specific challenges to international human resource management
The difference in HRM in equity and non-equity is supposed to lie in the differing extent to which specific HR measures are used
Research deficit with respect to non-equity cross border alliances and beyond scope of chatper
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Acquisition one company buys another company intending to control the activities of the combined operations
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M&As
Merger usually results in the formation of a new company, while an acquisition involves the acquiring firm keeping its legal identity and integrating a new company into its own activities (Figure 3.2)
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HR Challenges in M&As
creating new HR practices and strategies that meet the requirements of the M & A
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the growth aspiration of the acquiring company risk diversification technological advantages a response to government policies in a particular country exchange rate advantages favourable political and economic conditions effort to follow clients
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Trends
Cross-border M&As have seen tremendous growth over the last two decades, largely due to globalization Both the value and number of M&As rose in 2005 to $716 billion, an 88% increase Between 1197 & 2002, Canadian firms acquired 447 foreign companies worth 124 billion, while foreign companies acquired 345 Canadian companies worth 144 billion
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M&As
Despite the high yearly growth rates in the area of M&As there seems to be a gap between the expected added value and the benefits realized from an M&A
There is growing appreciation that the way the M&A is managed during the different phases (especially in the post-merger integration phase) has an impact of its performance, and in turn on the added value created.
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Employee Resistance
Evidence that employee resistance endangers M&A performance It is important that all M&As effectively manage issues where employee resistance is encountered HRM can play a major role in this
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HRM role (task and human integration) visibility and continuity of leadership communication processes integrating mechanisms acquired personnel retained voluntary personnel loss
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especially difficult to manage and takes time both firms are embedded in their own national, institutional and cultural settings
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Low Integration if the M&A is carried out for portfolio reasons both companies remain separate cultures
High Integration crucial for the M&A to meet the HR requirements of the phases
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pre- M & A phase (a screening of alternative partners based on an analysis of their strengths and weaknesses) due diligence phase (analyzing the potential benefits of the merger, product-market combinations, tax regulations, and compatibility with respect to HR and cultural issues) integration planning phase (planning for the new company) implementation phase (action plan)
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Different Countries
Performance related pay more popular in US than Japan or Germany Recruitment in US tends to be rather short term as compared to Germany and UK, while Japan the lifetime orientation is less than before but still a long term focus
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Joint Venture legal entity representing holdings of parent firms located outside the country of operation
Joint ventures can have two or more parent companies however most involve just two
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to gain knowledge and to transfer that knowledge host government insistence increased economies of scale to gain local knowledge to obtain vital raw materials
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manage the relationships at the interfaces of the parent companies to integrate dualities of rules and practices focuses on the compatibility of the respective partners
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IHRM roles partnership change facilitator and strategy implementer innovator collaborator
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Partnership Role
HR managers should take all stakeholders needs into account and demonstrate a thorough understanding of the business and market
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Innovator
HR Manager should be able to identify talent for executing joint venture strategies and adapting to changes through the stages
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Collaborator
The HR Managers strengths should lie in creating winwin situations characterized by sharing rather than competing between the different entities engaged in the joint venture
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different national, institutional, and cultural environments; cultural differences matter in collaboration, decision making and loyalty
top management multicultural team; different cultural expectations, management styles and strategic objectives
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Top Management Team and Role in Joint Ventures Top management has a high impact on the performance of a joint venture Top management is usually composed of individuals from different cultural context due to high competition for these roles
To avoid intercultural conflicts some firms have started to recruit country experts rather than internal staff
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SMEs: Strategic Importance and Barriers to Internationalization No standard definition for SMEs, differs per country Some base on headcount, turnover, annual balance or combo In Canada small businesses are defined as companies with up to 49 employees and annual revenue between $30 000 and 5 million Medium companies between 50 500 employees and annual total revenues between 5 million and $50 million
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FACTS: Page 90
2001: 0.2% of Canadian firms had 500 plus employees, 92% fewer than 20 employees Europe: less than 1% of large firms, rest SMEs Most countries 80% SMEs Strong position of SMEs is not reflected to the same extent in the international business environment. Most have less experience and less power to withstand the demand of host governments, financial resources, reputation, etc.
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shortage of working capital to finance exports identifying foreign business opportunities limited information to locate/analyze markets inability to contact potential overseas customers obtaining reliable foreign representation lack of managerial time to deal with internationalization
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inadequate quantity of and/or untrained personnel for internationalization difficulty in managing competitors prices lack of home government assistance/incentives excessive transportation/insurance costs
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importance of the founder/owner recruitment, selection, and retention human resource development; the challenge of learning expatriate management limited resources of the HR department and outsourcing
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Specific skills of the founder have an impact on the internationalization process of SMEs international work experience or established networks and relationships abroad positive perceptions of the international environment
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SMEs more difficulties than large firms in recruiting adequate international managers perceived to lack legitimacy as employers with a strong international orientation perceived as having disadvantages; career/international work opportunities, pay/benefits, progressiveness of company, training
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IHRM activities for SMEs communicate the company has a strong position in international markets and offers international career opportunities use selection criteria that defines international competencies improve and emphasize benefits; training, career paths, financial
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IHRM activities for SMEs learning processes are critically important improve capacity to perceive relevant environmental developments: strategy and communication training resist the temptation to impose large firm thinking
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SMEs informal
IHRM activities for SMEs cultural integration outsourcing IHRM
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