Chapter 14

HUMAN RESOURCE
MANAGEMENT STRATEGY
The Coca-Cola Company thinks local
1 Does the Coca-Cola Company have a local perspective regarding the role of human resource
management?

The company certainly does have a local perspective regarding the HRM role. Coca-Cola is interested in recruiting people
from anywhere in the world, training and developing them, and sending them to assignments around the globe. It does not
confine itself to recruiting, training, developing, or promoting people from any one particular region or country. Both
Americans and non-Americans have equal opportunities in the company, further reinforcing this international perspective.

2 On what basis does Coca-Cola choose people for international assignments? Identify and describe two.

One of the bases on which Coca-Cola chooses people is the ability to speak at least two languages fluently. A second is
familiarity with at least two cultures. Both are viewed as critical for success in international assignments.

3 What type of training does Coca-Cola provide to its interns? Of what value is this training?

The company puts interns into groups and assigns projects that require them to investigate or study certain areas of
operations. The interns are then evaluated on the outcome. This training is useful in helping the firm identify those
individuals who offer the most promise for the company.
4 How useful is it for Coca-Cola’s managers to be fluent in more than one language? Why?
Coca-Cola’s managers must be fluent in other languages because the company believes this allows them to operate
effectively in at least two different cultures. This permits the company to transfer managers from one geographic region to
another and to know that the managers will be able to become acculturated within a minimum time period. Moreover,
because there are common languages in many regions of the world, a manager who is fluent, say, in English and Spanish
could be transferred to countries throughout North America, South America, Europe, Africa, and Australia. Thus, bilingualism
provides the company with a cadre of managers who can literally span the globe.

Chapter 17
EUROPEAN UNION
France Telecom
1 Describe the stages by which France Telecom has built up a successful strategic base in the EU. What
barriers to integration had to be overcome in the EU before France Telecom could buy up rival companies?

As a state-owned monopoly, France Telecom originally had a strong presence in its own market but relied heavily on fixed-
line operations and had no significant international presence. Faced with deregulation, France Telecom sought to compete
regionally but understood that to do so it had to have competitive products and access to international markets. Investment
in R&D allowed the company to expand its product line while strategic alliances were sought to protect its market and
expand into others. The Global One alliance with Telekom provided a period of competitive shelter from one of its major EU
competitors. By the time this alliance was dissolved in 1999, France Telecom had the capacity to compete alone against
major EU telecommunication companies and had begun to acquire companies to solidify its product line and enter new EU
markets. For France Telecom to be able to purchase rival firms, deregulation of telecommunications markets of individual
countries in the EU had to occur. In addition, France Telecom acquisitions must overcome antitrust legislation in the EU.

2 To what extent is the triad strategy of France Telecom the same as that of Vodafone (in Chapter 8 )? Are
there any differences?

Both Vodafone and France Telecom have a stronger presence in the European market than in any other triad market.
Acquisitions have been a major part of both their strategies to gain technology and market share in their own triad region
and in other triad markets. One difference is Vodafone’s continued reliance on alliances, such as its joint venture with Bell
Atlantic, whereas France Telecom no longer seeks alliances but equity in competitors. Another difference is that the extent
of Vodafone’s international expansion is much larger than France Telecom’s.

3 In what ways will integration and localization be important issues for conducting mergers in the EU?

Companies successfully operating in different EU countries will seek mergers to achieve some economies of scale in R&D,
design, sourcing, and distribution, among others. Nevertheless, the benefits of economies of scale have to be weighed
against the need to tailor-make products for customers in different markets. Integration will therefore occur only in some
sectors of the merged company.

4 In what ways will both pricing and positioning be important for companies like France Telecom doing
business in the EU?

Companies like France Telecom must be prepared to take full advantage of the economies from EU integration. Costs must
decrease in order to increase market share in the more competitive EU market. At the same time, companies must have
access to the markets of the EU and market their products according to both customer expectation and profit maximization.

Chapter 18
JAPAN
Doing business in Japan
1 What kinds of challenges are foreign managers likely to meet when trying to set up a subsidiary office in
Japan and recruit local employees?

One way to answer this question would be to examine the political, economic, and cultural issues in turn. Political challenges
include the legislation for registering local companies, licensing, taxation, visas for foreign nationals, and employment
regulations. Economic challenges include the costs of premises and business services. But there are other costs, less easy
to estimate, that result from the extra time and effort needed to develop customer relationships and adapt to Japanese
business practices. All of the above challenges would involve a degree of cultural learning, given that they involve interaction
with and an understanding of local people and organizations. Recruiting, managing, and keeping Japanese employees,
however, represents one of the biggest challenges for foreign managers. Failure to adapt human resource management
practices, incentive schemes, the organizational structure and hierarchy, the definition of roles and responsibilities, and
decision-making systems to develop an efficient, motivated local workforce undermines many foreign firms’ market-entry
strategies in Japan.

2 How have keiretsu networks limited foreign firms entering the Japanese market in the past and how is this
now changing?

The degree to which keiretsu networks will affect foreign firms’ success in the Japanese market partly depends on which
industry or business they are in. In the past, foreign entrants have found it very difficult to find willing suppliers or distributors
because many local firms have been tied into long-term relationships with other keiretsu members. Traditionally these long-
term relationships have meant that foreign firms will be disadvantaged when competing against local firms, regardless of the
relative price or benefits of their product or service. Consumers and corporate purchasing departments have tended to show
a strong bias toward local brands and local producers. Since the recession, however, price has become more important as a
selection criterion and keiretsu structures have loosened, providing more opportunities for foreign firms. Imported products,
discount stores (bypassing the complex distribution systems), and direct sales have all become acceptable. Japanese firms
of all sizes are actively seeking links with firms outside their traditional networks and outside Japan as part of their changing
business strategies.

3 As part of the general growth of foreign direct investment into Japan, why are foreign firms increasingly
able and willing to engage in mergers and acquisitions (M&As) with local firms?

Deregulation by the Japanese government has helped to make it easier in recent years for foreign firms to acquire Japanese
firms. Changes in capital markets, some driven by the government, have promoted inflows of foreign capital to reduce the
debt burden. Japanese banks are also much more interested in M&A as a means to rescue (or hand over responsibility for)
failing local companies. More significant factors are, first, the growing optimism among foreign firms regarding the future
prospects of the Japanese market and their confidence in M&A as a means of access. Second, the rise in M&As can be
partly attributed to the changing attitudes of senior Japanese managers who see foreign firms as a means to escape their
current economic problems. M&As can help drive some of the strategic changes desired by Japanese managers, such as
internationalization and diversification. They can also help push through some of the necessary organizational changes,
from delinking from keiretsu relationships to changing internal hierarchies and reward systems.

4 Despite widespread changes in Japan and the restructuring of Japanese corporations, why is it still
important for foreign managers to understand something of the history and the context in which Japanese
businesses have evolved?

Whether competing with Japanese businesses, collaborating with them, or working for them, their current practices and their
distinctive strengths and weaknesses are the result of their historical development in the political, economic, and social
context of Japan. Their past is also the clue to their current restructuring, why it is necessary, and why it is not a quick and
simple process. Managers in firms looking to enter the Japanese market need to know about the broader context of Japan
because this provides insights into the role of government agencies, the business infrastructure, keiretsu networks, business
etiquette, the culturally influenced preferences of customers, and the many other differences and difficulties that require
adaptation. Japanese firms are a product of this unique environment and relatively few have broken away from their
dependence on Japan’s domestic market, and most retain elements of traditional Japanese management practices. Foreign
managers will better understand the strategic options and organizational challenges they face in alliances, joint ventures,
and M&As with Japanese companies if they know something of their home environment.

Chapter 19
NORTH AMERICA
NAFTA
1 How has NAFTA affected Canada?
NAFTA eliminates tariffs and makes it easier for efficient Canadian firms to operate competitively in the United States. At the
same time, it allows efficient US firms to ship their goods into Canada without paying any tariffs and, in the process, helps
drive down prices. So NAFTA helps the Canadian economy by encouraging efficiency, lowering prices, and opening up new
markets in the United States.

2 Has NAFTA increased trade between the United States and Canada? Why is this?

The data show that US–Canada trade has increased as a result of NAFTA. Three reasons can be cited. First, the elimination
of all tariffs under NAFTA encouraged exports. Second, both countries are more likely to produce those goods and services
for which they have a competitive advantage and to buy the others from their neighbor. Third, as the economies of the two
countries grow, so will the amount of trade as each begins to adapt operations to the desires of the other and starts to tap
this market further.

3 How has NAFTA affected Mexico?

Mexico’s progress under NAFTA will create a market for US goods in that, as the middle and upper classes in the country
increase their purchasing power, they will turn more and more to the purchase of US-made goods. From cars to television
sets to home appliances, Mexican consumers will be buying products sold by US MNEs. The sale of these goods will create
greater interest in Mexico by US multinationals, which will mean even greater opportunities for US firms—and Mexican
consumers. The elimination of tariffs under NAFTA ties Mexico into the North American regional triad.

4 How has NAFTA affected the United States?

NAFTA will lead to an increase in trade in the region for three reasons. First, the elimination of all tariffs will encourage
exports. Second, all three countries are more likely to specialize in producing those goods and services for which they have
a competitive advantage and, in turn, buy the others from their neighbors. Third, as the economies of the member countries
grow, so will the amount of trade as each begins to adapt operations to the desires of the other and starts to tap this market.
Furthermore, the United States has more secure access to energy and other vital natural resources from Canada and
Mexico.

5 Does NAFTA include environmental laws?

There are environmental laws in NAFTA, but these are still up for debate. There are issues of sovereignty. Should an
international agreement set the standard for environmental laws or should the individual governments make their own laws
to be responsive to their national needs? Although an environmental chapter was included in NAFTA, there is a growing
concern among NGOs that environmental laws could be used as a non-tariff barrier to trade, keeping out some goods from
the rich US market. Both the US and Canada advocate the use of clean technology in NAFTA and press for higher
environmental standards and processes in Mexico.

Chapter 20
EMERGING ECONOMIES
Acer Taiwan goes international
1 What was the internationalization strategy of Acer and why was it successful?
Rather than aiming to break into the triad markets directly, despite the attractions, Acer focused on building a presence in
smaller local Asian markets first. In some ways it followed a pattern of gradual, stepwise internationalization. Acer built up
from its relatively small home-base diamond in Taiwan and expanded production throughout South-East Asia. It then
undertook a double-diamond strategy for accessing the triad markets of North America and Europe. It formed strategic
alliances with the US and European MNEs and used these as a stepping stone to FDI in these key triad markets. It also kept
its production-based efficiencies of employee involvement in company growth and ongoing R&D to improve the quality of its
products.
2 How are changes in the Asian regional economy, in terms of both growing markets and growing
competitors, affecting Acer and should the firm cope?

Among a range of threats and opportunities China looms large in both respects. Acer has taken a step in the right direction
by moving away from manufacturing, where Chinese firms have natural advantages, and into customer-oriented design,
development, and services. Acer’s advantages also lie in its global distribution and marketing and its brand. These are firm-
specific advantages (FSAs), which Lenovo and other Chinese firms will take some time to develop. The evolving political
relationship between Taiwan and mainland China or the People’s Republic of China is also an important factor, influencing
some of the strategic options open to firms like Acer. But other parts of Asia, including Japan, are changing and the firm
could do well to develop an international strategy that focused more on the regional than the global.

3 Why did Acer form strategic alliances with IBM and Texas Instruments?

Acer was not familiar with the North American market and was a new kid on the computer block. So it formed strategic
alliances, whenever possible, with the dominant US MNEs. In doing so, Acer learned about the US triad market and how to
distribute its products there. It also gained new technological capabilities for both process (manufacturing) innovation and
product design and development. Acer was then able to move ahead of these once-dominant US firms once it combined its
efficiency in production with its new market knowledge of the rich North American customers.

Chapter 21
CHINA
Oxford Instruments in China
1 Why has OI invested in China? In what ways does its strategy fit with current trends in China?

OI’s investment in China was mainly “market-seeking” in that the firm had experienced growing sales through exports to
China in the past and expected to further increase sales by establishing a presence in the market, alongside its customers.
This investment has paid off well, with both exports and locally manufactured product sales growing well. FDI to establish
local customer services and representative sales offices has supported this success. OI is benefiting from cheaper local
assembly costs for some products and has recently developed some R&D partnerships. These count as “resource-seeking”
investments. Its strategy has continued to fit well with current trends in China. The growth in local demand for its products
comes from both Chinese firms and foreign MNEs, including OI’s customers in the United States and Europe, that have
moved operations to China. China may also evolve into an important source of inputs for its worldwide product development
and R&D efforts in the future.

2 Which “mode of entry” did OI select in China and what kinds of operational and practical challenges did it
face?

OI registered as a wholly foreign-owned enterprise (WFOE) and established a manufacturing facility through this route rather
than via a joint venture. Its major challenges, like many foreign firms in China, included the need to: understand and comply
with local regulatory and legal conditions and deal with Chinese central and local authority bureaucracies; develop
relationships with local customers and adapt to their contracting behaviors; recruit and train (and retain) local experts;
develop an effective working relationship between the local offices and the UK-based divisions; and protect its intellectual
property rights.

3 What kinds of threats and opportunities might OI face from new multinational firms from China and what
strategic responses should it be considering?

OI is arguably already in a good competitive position in that its profitability stems mainly from its technological capabilities
and investments in R&D, rather than low costs. Most large Chinese firms are building from an initial low-cost advantage, so
whilst OI might experience some competition in its low-end businesses, it seems secure for now in the more technologically
sophisticated business lines. IPR theft is a continuing threat and may help newcomers catch up rapidly in some key niche
areas. But, while any high-technology start-ups or established instrumentation firms in China might eventually be able to
compete on the basis of new technology developments, they are weak in terms of customer relationships and brand
recognition and therefore have limited access to markets outside China. There may be opportunities for OI to partner with
smaller start-ups to develop new products, or build relationships with larger customers to provide products, technical
services, and support as they internationalize.