Assignment 2: Successful Domestic Company Goes Global!
Due Week 6 and worth 280 points
Imagine that you are the CEO of a successful domestic company. In the last 6 months, many potential clients in foreign countries have expressed a desire to conduct business with you. You know that in order for your company to grow, you will have to expand overseas. You have recently attended a local three (3)-day international trade exposition and have gathered many brochures on the foreign companies interested in doing business with your company.
After meeting with the Executive Committee of your successful domestic company, you decide that you will need to identify a minimum of two (2) countries for expansion and two (2) expatriates whom you will send into the chosen countries. The selected expatriates will learn about the countries’ cultures and business activities there. You must prepare a report for the potential employees who may want to take an overseas assignment, the Executive Committee, and the Board of Directors.
Use the Internet and Strayer Library to research possible countries for expansion. Next, conduct research on leveraging expatriates over country nationals for business overseas. Finally, research books that could help expatriates in their transition to working overseas.
Note: You may create and / or assume all necessary assumptions needed for the completion of this assignment.
Write an eight to ten (8-10) page paper in which you:
Create a guide to leveraging expatriates. The guide should include four to six (4-6) sources that address benefits and challenges of sending expatriates to other countries.
Examine the major benefits that this report can provide for the organization, and suggest two (2) uses for the information contained therein. Justify your response.
Analyze the major factors (e.g., distance, cultural background, knowledge of the related countries, languages spoken, relatives who may live in another country, etc.) that would influence your choice of countries into which your company would expand. Recommend two (2) countries for expansion. Provide a rationale for your response.
Determine three (3) criteria that you would consider when deciding which employees to send abroad. Justify your response.
Propose the major methods and / or incentives you would use in order to encourage the selected employees to become expatriates. Provide a rationale for your response.
Recommend one (1) strategy to ensure that both the Executive Committee and the Board of Directors are committed to the expansions. Justify your response.
Recommend two (2) books that the selected expatriates should take with them when they go overseas. Provide a rationale for your response.
Outline a guide for expatriates who will reside within another country for one to two (1-2) years. The related guide should cover the following topics: selecting items to pack, accommodating a vehicle (i.e., leave behind or send overseas), shipping or selling furniture, moving pets, and arranging accommodations for children and / or family residing in another country for the discussed length of time.
Develop a framework for your presentation. The framework should include the following:
Statistics that support the decision to expand into the identified countries
A feasibility study of your company’s proposed expansion to the countries in question
Information related to renting or buying land or a building
Any other information relevant to the case for expansion
Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other similar websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Evaluate the implementation process related to strategy management.
Use technology and information resources to research issues in global management.
Write clearly and concisely about global management using proper writing mechanics.
Successful Domestic Company Goes Global
As a company that wishes to expand its operations internationally, the use of expatriates would be necessary, mainly because of the need to create linkages with the host-country interest groups and enhance organizational development. However, the use of expatriates may also be challenging due to the high rates of failure and the development of a negative notion of domestic country-centrism among the host-country nationals. Regardless of these challenges, our company should expand its operations to Germany and Japan because of the high rate of technological innovation and existence of IP protection rights in the two countries, ensure that it upholds moral legitimacy to obtain stakeholder buy-in in the expansion and use the criteria of job ability, relational skills and family adaptability in selecting suitable candidates for the expatriate positions, to enhance the chances of success of the expansion.
Benefits of this Report
The primary benefit of this report would be to enlighten stakeholders about the proposed expansion and some of the challenges that the entity is likely to face as it undertakes the activity. Most importantly, the information contained in therein would be used for operational and strategic decision making. As the company expands in other countries, the management may require insights about the new market to make long term and day-to-day decisions. Hence, this report provides information about the new markets that the administration may use to make such decisions.
Benefits of Sending Expatriates
A growing literature suggests that assigning international tasks to expatriates has significant benefits, among them fostering organizational development. As hypothesized by Edstrom and Galbraith, among the rationales for firms to send their employees to other countries include the need to improve the international capabilities of the corporation (cited by York, 2009). Sending two of the company’s employees to other countries would help them gain the knowledge, skills, and values required to work across national boundaries. Consequently, the employees would report back to the parent organization and transfer the competencies that the entity requires to enhance its international capability, which would, in turn, foster organizational development.
Furthermore, sending expatriates would help the company to strengthen its linkages in foreign lands and enhance its competitiveness in the new market. Bell (2008) considers expatriates as an aid to develop lasting ties with domestic lobbyists, host-country governments, and other interest groups. Sending expatriates to other countries would form a basis for first-time interaction between the parent company and the host country’s interest groups such as the local and federal authority and domestic lobbyists. Interacting with these groups would help the firm enhance its competitiveness as it would have substantial insights into the former’s requirements and expectations concerning the corporation’s operations.
Challenges of Sending Expatriates
However, sending expatriates would also have a downside, such as high chances of expatriate failure, which would compromise the firm’s attempt to expand its operations internationally. As noted by Pokharel (2016), the rate of expatriate failure is 70% and 20-40% in developing and developed countries, respectively. Most notably, the root cause of failure of expatriates may include personal dissatisfaction and damaged business relationships (Pokharel, 2016). When deployed employees are unsatisfied with the experience in a foreign country, they may portray low productivity and even yearn an early return before accomplishing their mission. Also, if the expatriates experience damaged overseas business relationships, probably due to varying values and perspectives among the host-country employees, they may fail in their tasks. As such, expatriate failure is a significant anticipated challenge that the management of the domestic firm should tackle appropriately.
Besides the high rate of failure, sending expatriates to other countries would paint a negative image of the entity among the host-countries’ clients, which would be detrimental to the firm’s international success. As the literature suggests, multinational companies need to promote host-country nationals to eliminate the notion of parent country-centrism (Hamamatsu, 2017). Most notably, sending expatriates, rather than assigning tasks to host-country’s employees, may create the perception that the firm mainly supports the use of its parent country employees for international business. This aspect would affect its competitiveness and success, especially among clients that are analytical on such matters. As such, it would be essential for the entity to couple the expatriates with host-country employees to eliminate the notion of parent country-centrism.
Criteria for Expatriate Selection
Keeping in mind that the firm’s primary objective is to expand its operations in the new markets successfully, there are various expatriate selection criteria that should be used to facilitate the achievement of this objective, among them job ability. Prior studies conducted by International Orientation Resources reveals that 90% of companies rely on a candidate’s technical expertise while making international selections (Wang, Bullock & Oswald, 2011). Most notably, the employees should have the necessary knowledge to perform their duties in other countries for them to be selected for the expatriate positions. It is worth noting that while working on the foreign land, the employees may not be close to their colleagues to help them in completing their tasks. Therefore, expatriates must have the job ability to undertake the required duties competently with minimum or zero assistance from colleagues in the parent firm.
Furthermore, relational skills will be an essential criterion when deciding which employees to assign international tasks. As opined by Teagarden and Gordon, relational skills are crucial, particularly in scenarios of anticipated significant contact with host nationals (cited by Wang, Bullock & Oswald, 2011). In this context, the expatriates may be required to interact with host country nationals in efforts to build business linkages, which are essential for the organization’s competitiveness. To be successful in this task, an employee must possess relational skills that will aid effective interaction with other interest groups. As such, relational skills will be a vital criterion for selecting employees that fit the expatriate position.
Apart from job ability and relational skills, family adaptability will also be taken into account in the expatriate selection process. It is worth noting that a significant fraction of the company’s employees is married and that their families act as their social support system. Bhagat argued that non-work variables, such as family adaptability, may have a spillover impact on the deployed employee (cited by Wang, Bullock & Oswald, 2011). For example, if the expatriate’s family does not positively adjust to the new environment, the latter may not offer the social support that the employee requires to perform their job effectively. In worst-case scenarios, the expatriate’s quality of work may even diminish because of improper family adjustability in the new environment. Therefore, family adjustability must be evaluated during the selection process to ensure that the expatriates receive the social support needed to thrive in their international tasks.
Methods/Incentives to Encourage Employees to Become Expatriates
Besides taking the three criteria into account during the selection process, there are various methods and incentives that the company may use to encourage workers to become expatriates, such as making pre-departure training an essential practice. It is typical of employees to anticipate social and cultural shocks that may be tough for their stay on foreign land. However, conducting pre-departure training can help to familiarize employees with the new culture and encourage them to assume international tasks. Most notably, the literature suggests that expatriates can be offered training in three primary areas; language, job-related training, and international training that is based on the culture of the organization and the prevailing culture in the respective country (Pokharel, 2016). Employees who receive this training may feel empowered and competent to become expatriates.
Also, incentives, both financial and non-financial, may be offered to encourage employees to become expatriates. As noted by Nazir, Shah & Zaman (2014), compensation is a critical aspect of workforce motivation for both local staff and expatriates. Most notably, it is more likely for employees to assume expatriate duties if they are motivated through financial and non-financial packages. For example, increasing salaries, providing school allowances for expatriate’s children, health insurance, job placement for one’s spouse, accommodation and relocation benefits may encourage employees to become expatriates as their financial needs would be well-catered for. Therefore, monetary incentives, such as allowances and salary increase and non-financial incentives such as job placement, would highly motivate the firm’s employees to undertake tasks in other countries.
Recommended Books for Expatriates
As the selected employees relocate to overseas, various books are recommended to make their expatriation journey more successful, such as “Thriving Abroad: The definitive guide to professional and personal relocation success” by Louise Wiles. Most notably, the recommended book is loaded with real-life encounters of couples that took international assignments with employers. The book provides advice on steps that expatriates should take, in terms of decision-making, relocation, and settling, for them to thrive in a foreign land. The fact that the content of the book is based on real-life scenarios of expatriates would make it a perfect read and guide for the company’s expatriates as they assume their duties abroad.
Additionally, the expatriates should take with them “the Emotionally resilient expat- Engage, adapt, and thrive across cultures” by Linda Janssen. Most notably, some unexpected events on foreign land may overwhelm the employees as they undertake their duties. As a result of such circumstances, the employees may experience psychological struggles that may affect their job performance. Fortunately, the recommended book offers a methodology for individuals to comprehend and repair their mental struggles. As such, it shall be an excellent read to help the employees to develop psychological resilience as they go overseas.
Besides the books, the expatriates should follow the guide in the appendices to help them navigate through the expatriation process.
Selecting a Country for Expansion
Factors that would influence the Choice of Country for Business Expansion
Although several potential clients have expressed their desire to conduct business with our entity, several factors would need to need to be taken into consideration when selecting the two countries of choice, such as the level of innovation. Bangser (2015) asserts that today’s market is moving fast, and a state must provide the institutions, human capital, infrastructure, and market sophistication to help an enterprise succeed. Besides, our entity mainly deals in the manufacturing and sale of electrical appliances, which implies that technology is a crucial component to the firm’s success. Most notably, the entity must keep pace with progressive innovation to meet consumer demand and stay ahead of the existing competition in the industry. Therefore, the level of innovation and technology would be among the significant factors that would influence the entity’s choice of country in which to expand.
Additionally, the nature of government regulations would be a critical factor to consider when selecting a location in which to expand the business. As observed by Bangser (2015), onerous laws can be a prohibitive burden even for the most trivial operations. Most notably, firms are always willing to expand their activities to locations with favorable government regulations such as Intellectual Property (IP) protection, considerable tax rates, and many others. The fact that our organization deals in production processes imply that our country of choice must have favorable government regulations that protect our IP rights and favorable tax rates to promote the entity’s profitability and revenue growth in the foreign land.
Based on an analysis of the two primary factors, the recommended countries for expansion would be Japan and Germany. Previous literature reveals that Japan’s key strength has been in the area of innovation (“Japan in 2019”, 2019). Most notably, the country’s technology has been advancing rapidly, facilitating innovation in various fields such as automobiles and electronics. Our company, which focuses primarily on the manufacturing and sale of electronics, would benefit significantly from this technological advancement, thus making Japan a suitable location to expand our activities.
Furthermore, Japan’s government offers copyright protection to foreign companies, an aspect that would make the country a suitable location for the entity’s operations. Most notably, the nation offers protection based on a first-to-file basis (“Japan-protecting intellectual property”, 2019). This basis implies that a company must register a specific patent or trademark before its competitor does to receive the necessary protection. Despite the existent of such stringent regulatory requirements, the country would still be a suitable location for business expansion because of the presence of IP protection.
Besides Japan, Germany would also be a suitable location because it satisfies the two factors that would influence our company’s choice of countries for business expansion. Most notably, a report by the World Economic Forum reveals that “Germany came top as the world’s most innovative economy, with a score of 87.5 out of 100 in the innovation capability pillar”, as shown in figure 1. (Whiting, 2018, par.2). The country’s innovative capability would be an opportunity for our company to develop advanced electrical supplies to sell both locally and internationally. As such, Germany’s technology would be a significant attraction to establishing our operations in the country.
Source: World Economic Forum
Furthermore, Germany’s government offers protection for IP rights, which would be conducive to our business operations. For example, previous research shows that there has been extensive use of trademarks in the German market, with approximately 778.000 registered rights in 2009 (Bielig, 2015). These IP rights are suitable for business as they protect original work from imitation. Nonetheless, some conditions may limit the use of a trademark, such as the aging processes of the brand image (Bielig, 2015). For this reason, as the entity seeks IP protection, it should indulge in further research and development to ensure that the production processes are up to date.
Real Estate Utility
Rather than buying land and building new infrastructure for business expansion in the new market, the company should rely on renting real estate space because it is relatively cheaper. For example, a Statista report shows that the average cost of logistic space in Germany ranges between 6.7 and 3.1 euros per square meter per month (Statista Research Department, 2020). This cost is relatively lower compared to building new infrastructure, which would cost thousands of Euros, not to forget the recurrent maintenance fee required.
Strategy to Ensure Board’s Commitment to Expansion
Stakeholder’s buy-in must be achieved for the proposed expansion to succeed. One of the strategies that can be used to ensure that the executive committee and board of directors are fully committed to this expansion is upholding moral legitimacy. As opined by scholars, moral legitimacy is the perception that an organization’s activities benefit society (Mallon, 2016). Arguably, convincing the stakeholders that the planned expansion would be beneficial to the new markets and the company’s profitability would likely enhance their commitment to the plan.
In summary, the use of expatriates for business expansion may be subject to benefits and challenges. Most notably, the use of expatriates may promote organizational development and help enhance linkages in the host country. However, the use of expatriates may also be challenging due to the high rates of failure and the development of negative notions about the business among host-country clients. To enhance the chances of success of the expansion, the organization should use job ability, relational skills, and family adaptability as the primary criteria for selecting expatriates. Financial, non-financial incentives, and pre-departure training should also be offered to encourage the selected employees to become expatriates. Furthermore, the business should expand its operations to Japan and Germany because the two countries have a high rate of technological innovation and favorable IP protection rights that would help the company thrive. However, the firm must also uphold moral legitimacy to ensure that the stakeholders are committed to the expansion.
Bangser, D. (2015, August 12). Top 4 factors for determining a foreign business location. The Business Journals. Retrieved from https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2015/08/factors-for-determining-foreign-business-location.html
Bell, S. (2008). International brand management of Chinese companies: Case studies on the Chinese household appliances and consumer electronics industry entering U.S. and Western European markets. Berlin, Germany: Springer Science and Business Media.
Bielig, A. (2015). Intellectual property and economic development in Germany: Empirical evidence for 1999-2009. European Journal of Law and Economics, 39, 607-622. doi: 10.1007/s10657-012-9324-5
Hamamatsu, S. (2017). Host-country national expatriates. Annals of Business Administrative Science, 16(2017), 29-40. doi: 10.7880/abas.0161223a
Japan in 2019: Innovation-Led growth (2019, February, 28). Forbes. Retrieved from https://www.forbes.com/custom/2019/02/26/japan-in-2019-innovation-led-growth/
Japan- Protecting intellectual property (2019, June 9). Stopfakes.gov. Retrieved from https://www.stopfakes.gov/article?id=Japan-Protecting-Intellectual-Property
Mallon, M.R. (2016). Getting buy-in: Financial stakeholders’ commitment to strategic transformation. Management Research, 15(2), 227-243. doi: 10.1108/MRJIAM-06-2016-0667
Nazir, T., Shah, S.F.H., & Zaman, K. (2014). Review of literature on expatriate compensation and its implication for offshore workforce. Iranian Journal of Management, 7(2), 203-221.
Pokharel, B. (2016). Triumph over failure of expatriate in an international assignment from the international human resource management perspective. International Journal of Business and Management, 11(5), 310-314. doi:10.5539/ijbm.v11n5p310
Statista Research Department (2020, July 14). Monthly cost of average logistic space in Germany as of January 2020, by city (euros per square meter). Statista. Retrieved from https://www.statista.com/statistics/1022505/average-logistic-rent-in-germany-by-city/
Wang, J., Bullock, C., & Oswald, S. (2011). Expatriate selection: The key to international success. International Business and Economics Research Journal, 1(11), 69-78. doi: 10.19030/iber.v1i11.3999
Whiting, K. (2018). Germany is the world’s most innovative economy. World Economic Forum. Retrieved from https://www.weforum.org/agenda/2018/10/germany-is-the-worlds-most-innovative-economy/
York, K.M. (2009). Applied human resource management: Strategic issues and experiential exercises. New York, NY: SAGE Publications
Guide for Expatriates
Selecting Items to Pack
Category One: Practical
These are things the expatriate will require in their everyday life in the other country. The items may include; clothes, medicine (if any), and electronic gadgets such as laptops.
Category Two: Legal
These are items, particularly documents, you may require to enter and settle in the new country legally. The items include; passports, insurance policies, and a letter of employment signed by the management of the company.
Category Three: Sentimental
These are additional items you wish to carry to the new country. They may include the recommended books for expatriates.
Accommodating A Vehicle
Based on the company’s policy, expatriates will be provided with transport allowances. Therefore, employees should leave their vehicles in the domestic country.
Other belongings such as furniture should be left behind as employees will be provided with full accommodation during the period of their assignment. Furthermore, the management will help carter for the monthly rent payment of employees who live in rented houses in the domestic country up to the lapse of their foreign assignments. However, expatriates are allowed to move their pets to the other country, only if they meet the animal health requirements of the country to which they are deployed.
The majority of the expatriates may be required to spend up to two years in another country. Therefore, for purposes of social support, which is mainly obtained from family members, the company will offer free accommodation for the employee’s spouse and children during the duration of the assignment.