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A multinational corporation Essay

Siemens enjoys a leading position in Pakistan in the areas of Information and Communication, Power Transmission and Distribution, Industrial Solutions, Power Generation, Automation and Drives, Medical Solutions, and Transportation systems. In Fiscal Year 2005, (October 1, 2004 – September 30, 2005), Siemens in Pakistan posted total sales of about EUR 373 million. New orders totaled EUR 490 million. With a workforce of more than 1300 employees, Siemens is one of the most important employers in the country.

Furthermore, Siemens Pakistan has been declared No 1 among the top 25 companies by Karachi Stock Exchange. Siemens involvement in the region known as Pakistan today dates back more that 130 years. The company first became known through the construction of Indo European telegraph line from London to Calcutta in 1870. Siemen’s first office in what is now Pakistan opened in 1922. The company thus has roots in the country and a longtime standing that also makes it a good role model for other MNC’s in the country.

A company with a global presence in 190 countries, employing 460,000 people around the globe, should be a prime candidate for the study of Managerial recruitment of Parent country nationals (PCNs), Host country nationals (HCNs) and Third

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country nationals (TCNs). The company is thus a role model among MNC’s in the country, an example of strong managerial strategies, a success story, therefore one that warrants a detailed analysis in light of given managerial theories of international business.

Companies have three sources for staffing the positions in international operations: (1) managers for the home country of the firm, (2) managers from the host country, and (3) managers form a third country (Negandhi, 1987). It is not unusual for large international firms to have top management teams to be composed of managers of many different nationalities. The geocentric attitude is the basis for viewing the organization as a worldwide entity engaged in global decision making, including staffing decisions.

One must look beyond the immediate external environment and recognize the world wide changes brought about primarily by advanced communication technology and by the existence of multinational corporations (Ronen, 1986). According to Weihrich & Koontz (1994), in the early stages of the development, managers were often selected from the home country. Some of the reasons include the managers’ experience at the home office and their familiarity with products, personnel, enterprise goals and policies, etc. This facilitates not only planning but also control.

On the other hand the home country national may be unfamiliar with the language or the environment the foreign country. Moreover it is usually more expensive to send managers and their families abroad. Families would fine it hard to adjust to the environment of a foreign country. Furthermore, host countries may pressure the parent firm to employ host managers. Managers who are host country nationals speak the same language and are familiar with the country’s environment. Employing them is generally less costly, and it may require relocating them and their families.

The problem is that those managers may not be familiar with the firm’s products and operations, and thus control may be more difficult. The other alternative is to have third country nationals, who often are international career managers. Still, the host country may prefer to have its own nationals in the position of power. However (Arvind Phattak, 1992) has voiced caution in selecting managers from countries that had political conflicts in the past, such as India and Pakistan or Greece and Turkey.

According to Coulter & Robbins, (1999) the decisions to send individuals on global assignments are based on employee selection criteria that are influenced by the company’s experience and commitment to global operations. A firm’s resources affect how the firm behaves and performs (Barney, 1991; Lippman and Rumelt, 1982). Penrose, 1959, states that managerial resources play an important role in obtaining, utilizing, and developing a firm’s other productive resources. Tan and Mahoney, 2002, supplement this claim by arguing that therefore firms need to deploy their managerial resources effectively.

According to Tan & Mahoney, 2002, the effectiveness of human resource deployment influences the likelihood of generating and sustaining competitive advantages of a multinational firm and is therefore a fundamental issue for international business studies. A multinational firm can deploy two types of human resources to top managerial positions in its foreign operations – expatriates and local hires. Expatriates are defined as the home country and/or third-country employees sent by the headquarters. Local hires are host country employees (Daniels and Radebaugh, 2001).

Expatriates typically have developed firm-specific knowledge and firm-specific relationships. In contrast, local hires typically have local market knowledge and local business connections. Extensive literature is to be found on the economic benefits and economic costs of expatriation (e. g. , Black and Gregersen, 1999; Edstri?? m and Galbraith, 1977; Kobrin, 1988; Scullion, 1991), and a few empirical studies have also explored the critical factors that lead to the use of expatriates and local hires (e. g. , Boyacigiller, 1990; Harzing, 2001; Richards, 2001).

Here, it is generally suggested that expatriates can improve the multinational firm’s capability to transfer and control information, and that the factors that necessitate information transfer and control will also increase the propensity of a multinational firm to use expatriates. Tan and Mahoney, 2002, find a common premise underlying this research literature, that the values of comparative economic contributions of expatriates and local hires influence the multinational firm’s human resource deployment decision in the foreign operation.

However, Coff, 1997, finds it lacking in terms of having overlooked the impact of one distinct characteristic about human resources on this strategic decision. Specifically, human resources are under only limited control by a firm. For example, employees are in a position to leave the firm, renegotiate employment contract for personal benefits, or withhold critical information. When the firm has serious concerns over whether particular employees are willing to do as they are required, the firm may choose not to place these employees in particular managerial positions even if they may be the most capable employees.

As a result, the concern of a multinational firm about its effective control of employees may affect the firm’s human resource deployment decisions. Tan & Mahoney, 2002, also criticize contemporary research literature for not having systematically considered how the objective of managerial resource control influences the multinational firm’s international staffing decision. Such transfers are used to change or maintain the structure and decisions processes of the parent organization and as a coordination and control strategy.

This is a two-pronged strategy consisting of two elements i. e. socialization of both expatriate and local managers into the corporate culture and creation of a verbal information network that provides links between subsidiaries and head quarters. “The study of Edstrom & Galbraith (1977), which is very often quoted in both articles and textbooks, seems to be the only one which theoretically explains why international transfers of managers occur” (Borg, 1988:41). A further investigation reveals a substantial number of German studies, both conceptual and empirical, on this topic.

The fact that they appeared in German language only seems to have blocked their way to the Anglo- Saxon research community. However, according to Harzing (2001), there is considerable consensus on the principal functions of international transfers well represented by the classification of Edstrom & Galbraith. In many of the German studies, though, the focus is more on a direct type of expatriate control than on the informal type of control or coordination that Edstrom & Galbraith distinguish. However, the ultimate goal is similar in both occasions: making sure that the various organizational units strive towards common organizational goals.

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