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Why Do International Companies Use Expatriate Managers Why Do International Companies Use Expatriate Managers Essay Long before the globalisation, the internet and advanced telecommunications many companies with an international orientation have applied expatriate managers — some even since the early days of international trade.
The theme for this essay is critically to evaluate the reasons why international companies continue to use expatriate managers even though it is a very expensive option.
The term expatriate originates from the Latin words ex patria out of fatherland and refers to an employee from one country that temporarily works and resides in another. Referring to Janssens et al. As well, the necessary leadership, management, entrepreneur and language skills are required for acting as a change agent.
From an HRM point of view, further prerequisites for a successful expatriation are clear defined success criteria, clear reporting lines and a close contact and back-up from parent company, including a plan for repatriation.
Last but not least, a successful adjustment of any family into the foreign country is crucial for a successful expatriation. Although the theme of the essay basically is a postulate, the validity is supported by a recent report from the Economist Intelligence Unit concluding that four out of ten international companies actually plan to increase their expatriate staff over the next five years.
Even stronger support is referred by Knapp with an increase over 2 years of 63 percent in companies using long-term assignments and 67 percent increase in companies using short-term assignments. However, studies also show high expatriate failure rates.
The aforementioned increase in expatriations is remarkably in itself, but also as there are reasons advocating Understanding expatriate assignment in basf decrease in expatriations besides the aforementioned risks of expatriation failure: High levels of heterogeneity in different markets compared to home market, where differences in culture and high complexity in foreign legislative and other institutional conditions, as well as potential political risk, lead to greater utilization of local management rather than expatriates managers.
Subsidiaries also tend to operate on a wide extend of local autonomy in polycentric Perlmutter, multinationals structured with a loose coordination and a disperse configuration Porter, The fact that career opportunities for locals are reduced if expatriate managers are used, that mobility barriers in dual two career families are increasing, that there is an overall unwillingness to go to unattractive locations, coupled with uncertainty about the repatriation and the further career possibilities, may likewise limit expatriations.
However, despite the above mentioned and despite the high direct cost of expatriation and the high indirect cost by failed expatriations, international companies apparently, as aforementioned studies show, continue to use expatriate managers increasingly for reasons the essay seek to evaluate below.
The market servicing strategy of an international company may initially evolve from conducting direct export, to setting up sales subsidiaries abroad, followed by overseas production in form of either licensing, joint ventures, acquisitions and eventually in form of greenfield investments.
Additional globalization factors like deregulation of trade, free flow of capital and improvements in cost and speed of transportation have further supported and accelerated the transformation of many especially upstream markets into global markets with increased homogeneity.
The realization of the above strategic development opportunities are fundamental for creating a future unique and competitive mission of an international company, who often turns to the use of expatriate managers for many reasons.
First, international companies want to optimize their chances of success! It is evaluated that expatriate managers often are the preferred choice because they can be trusted and therefore they are more likely to act in the best interest of the organization, they have the same mindset as HQ and communication is therefore easy, they know the business and they are sought to be competent.
Expatriate managers are therefore, all other things being equal, capable of moving the business into the agreed direction by creating the necessary organizational energy and organizing and completing the necessary projects. To evaluate further why international companies use expatriate managers, a typology of international companies are needed to understand their differences in relation to the reasons for the possible use of expatriate managers.
Although in reality other specific organizational hybrid forms do exist, emerging under the influence of exogenous and endogenous factors Schuler et al. The multinational company form is often reflecting back to the international companies in the first half of the twentieth century.
These were often organised with a kind of mother-daughter structure, but the form also exits today in national markets with regulatory differences e. The multinational company form is polycentric Perlmutter, in outlook with a host country centred culture applying an adaptive Taylor et al.
The national subsidiary, operating with a high degree of autonomy in a bottom up governance structure with decentralised HRM, hereto offers a high degree of local responsiveness, which is one of the generic building blocks Hill and Jones, for a multinational company.
However, referring to the stage model by Adler and Ghadar , the becoming multinational company may use expatriate managers in the organizational transitional lifecycle phase coming from the international phase.
For the international company the global form may be a respond to the globalisation as described in the second paragraph on page 3. The global company has an ethnocentric Perlmutter, outlook with a home country centred culture applying an exportive Taylor et al.
It is characterised by a global integration by means of a concentrated configuration and a tight coordination Porter,e. ABB since with top down governance typically replicating the same business model in markets characterised by worldwide convergence in consumer tastes e. In addition to the reasons and the evaluation mentioned in the second and third paragraph on page 3, it is essential for the global company to secure scale economies, thereby strengthen competitiveness and keeping EBIT margins, as well as securing one global company culture.
It is evaluated that global companies therefore continue to use expatriate managers often in low cost countries with limited knowledge to secure a strict control of overseas operations, to leverage a global company culture, and to assure scale economies in order to achieve superior global efficiency.Understanding Expatriate Assignment in Basf Globalization has led to keen competition not only in global economies, but also Human Resources Management, The increasing importance of global marke International Companies - Multidomestic Strategy.
HR Manager (expatriate assignment): Provided consultation to General Manager & management team regarding all relevant human capital concerns and all HR initiatives. In charge of country-wide roll-out, training and implementation of Performance Management Process & Strategic Manpower Development (Succession Planning).
Paying Expatriates: Understanding Split Pay It seems no matter what you do, people complain. A US expat in Paris paid in US dollars complains bitterly when the US dollar weakens. WWI WWI started in and ended in WWI was known as the Great war before WW2 happened as it was supposed to be the war to end all wars.
Also the assassination of Archduke Ferdinand has been blamed as the catalyst for WWI (Spielvogel Book). The major players in WWI were the Triple Entente- Britain, France, Russia and the Triple Alliance- Germany, Austria-Hungary, Italy. This examination will help to find out what the critical success factors in expatriate assignments are and, thus to answer the research question.
In the last chapter, the research findings will be summarised and subsequently, it will be recommended what companies and expatriates should do in order to be effective and successful abroad. Understanding Expatriate Assignment in Basf Essay Globalization has led to keen competition not only in global economies, but also Human Resources Management, The increasing importance of global market and increasing world mobility lead to increase of expatriates.