Management in Multinational Corporations (MNC)

Management in Multinational Corporations (MNC) The internationalization of business activity is getting progressively essential and inevitable. Of considerably significance is thus also the  globalization of human resource management. Nowadays, an  increasing and sufficient flexibility of companies is required as well as  the ability to react to local circumstances and market constraints. Hence, in order to facilitate the process of adaptation to global developments in corporations, and especially in the Human Resource  vicinity, a set of typologies/approaches have been developed for  Multinational Corporations (MNCs). In that case, the approaches can  be used to illustrate the strategic intent and the situation in which the  MNC is in (Hollinshead, 2010, p. 51). Accordingly, there are different  approaches to IHRM developed by several theorists. This paper  examines four approaches, which have been developed by the US  management theorist Howard Perlmutter (1969) and by Adler and  Ghadar, with the purpose of giving an understanding to the association  between the multinational parent in the country of origin and the  subsidiary located elsewhere. The four approaches build up in  succession by describing a trend from immature dependency of  international subsidiaries towards mature autonomy (Hollinshead,  2010, p. 52). These approaches have b een created to be applied to  managing and staffing the subsidiaries and constitute certain policies  and attitudes in managing IHRM activities. Consequently, are there any  similarities and differences between these four approaches? Discussion MNCs have to decide upon one approach to apply to the HR  activities. The best suited one can be chosen among the ethnocentric,  polycentric, regiocentric, and geocentric style. Before starting to  outline parallels and divergences, it is key to get a short overview of  the characteristics of each approach. Firstly, the ethnocentric (also  called domestic) method has its focus on home market and export. Approved management techniques from the country of origin are  transferred to the operating international subsidiaries. The aim here is  to maintain the power in the home country; thus a centralized  managerial authority comes into its own (Hollinshead, 2010, p. 52). Another trait is that cultural factors do not play a role; the foreign  cultural influence is totally ignored. As outlined by Adler and Ghadar  ( 1990:242) it is more a matter of We allow you to buy our products  (Hollinshead, 2010, p. 55). Consequently, routine activities are carried  out by recruited host country nationals (HCNs), while parent country  nationals (PCNs) are in charge for the management of the subsidiary  (Hollinshead, 2010, p.52). In polycentric (international) oriented  companies, the focus lies on local receptiveness and transfer of  learning. The overseas subsidiaries are regarded as self-governing  business units, which are controlled and managed by HCNs, whereas  key decision making (e.g. financial investments, etc.) is still in the  responsibility of PCNs (Hollinshead, 2010, p. 54). The third method is  the regiocentric (multinational) approach, where the focal point is the  global strategy, low cost and price competition. This metho d is a  midway between the culture and the global profile. In this case, the  most effective managers get recruited regardless of their country of  origin, thus a sharing of common organizational culture across distinct  managerial alliances take place (Hollinshead, 2010, p.54-56). The last  approach is a geocentric (global) cultural sensitive one, where it is  concentrated on both local responsiveness and global integration. The  aim is to establish a collaboration between the parent and the  subsidiary and again between subsidiaries (Hollinshead, 2010, p. 54-56). Eventually, these approaches, when comparing, have similarities  and divergences in some aspects. In the polycentric method the  primary orientation is the market and in the geocentric one the  strategy, whereas ethnocentrism concentrates on the product or  service itself and regiocentrism on the price factor. Concerning the  worldwide strategy, the ethnocentric/domestic style permits overseas  clients to purchase the product/service, the polycentric/international  method focuses on augmenting the market internationally and to  transfer the technology abroad, whereas the regiocentric/ multinational  approach is looking forward to supply, market and produce the goods  globally, and the geocentric/global approach wants to gain global  strategic competitive advantage. Regarding the staffing of expatriates,  the international and global approach assigns many expatriates, while  the multinational method only allocates a few expatriates and the  domestic one even none. There are also differences referring to whom  gets send. In the domestic phase it doesnt matter whom to send to  the subsidiaries (regarding the fact that almost no one is sent abroad),  in contrast the international approach assembles OK performers and sales people, whilst multinational and global approaches give attention  to employ only very good performers as well as high potential managers and top executives. The aspect purpose varies again for the four approaches: the domestic one rewards employees when expatriating, the international approach regards expatriates as people who get the job done, in the multinational method a project and career development takes place and in the global approach a career and organizational development occurs. Furthermore, with referenc e to the career impact, in the domestic attitude, there is a negative career impact for expatriates, the international method states a deficient impact for the domestic career, which is in contrast to the multinational and global approach, where it is considered important for the global career and essential for the executive suit. For the matter of a professional re-entry, the domestic and international approaches aggravate this particular process to a great extent, whereas in the multinational and global methods it is less difficult to re-entry even professionally easy. Another facet, is the training and development (language and cross-cultural management) one, where in the domestic method no training is required and in the international approach only a time-span of one week. Quite the opposite is necessary for the  multinational and global ones, where training and development can be carried out throughout the career. Expatriates need also certain necessary skills. The ethnocentr ic approach requires technical and managerial skills, the polycentric one the same as the ethnocentric one plus cultural adaptation, the multinational one plus recognizing cultural differences and the global one plus cross cultural interaction, influence and synergy (Scullion Linehan, 2005, p. 28-29).To conclude, the four approaches can be splitted up to two blocks of approaches, by putting the domestic and international ones together in one block and the multinational and global approaches to the other block, with regard to similarities and differences. Eventually, it gets obvious that the multinational and global approaches are best suited for the globalizing market, because a change in business activities require also a change in HR policies and activities to be most efficient and effective.