Unit $8$: International Management

This unit introduces the production, physical resource, human resources and financing issues of concern to international managers.

Production operations are important to achieving a company$$s strategy. Careful planning of all aspects of production helps companies cut costs $($to become low$-$cost leaders$)$ or design new products and product features necessary for a differentiation strategy.

Among the important strategic issues that managers must consider are planning for production capacity, the location of facilities, production processes to be used, and the layout of facilities.

The process of assessing a company$$s ability to produce enough output to satisfy market demand is called capacity planning. Companies must estimate global demand for their products as accurately as possible. Selecting the location for production facilities is called facilities location planning.

Deciding on the process that a company will use to create its product is called process planning. The particular process to be used is typically determined by a firm$$s business$-$level strategy. Deciding on the spatial arrangement of production processes within production facilities is also important and is called facilities layout planning.

Before an international company begins operations, it must acquire a number of physical resources. For example, managers must answer questions that include: Will the company make or buy the components it needs in the production process? What will be the sources of any required raw materials? Will the company acquire facilities and production equipment or build its own?

Companies strive toward quality improvement to contain costs and increase value for customers. Quality products help keep production costs low because they reduce waste in valuable inputs, reduce the cost of retrieving defective products from buyers, and reduce the disposal costs that result from defective products.

All companies have a limited supply of resources at their disposal to invest in current operations or new endeavors. So where do companies obtain needed funds? Generally speaking, organizations obtain financial resources through one of three sources: borrowing $($debt$),$ issuing equity $($stock ownership$)$ and internal funding.

Human resource management $($HRM$)$ is the process of staffing a company and ensuring that employees are as productive as possible. It requires managers to be effective in recruiting, selecting, training, developing, evaluating, and compensating employees and in forming good relationships with them.

In order to obtain employees, the international firm can use ethnocentric staffing, where individuals from the home country manage operations abroad. In polycentric staffing, individuals from the host country manage operations abroad. Finally with geocentric staffing, the best$-$qualified individuals, regardless of nationality, manage operations.

Living in another culture can be a stressful experience. Many expatriates experience culture shock$$a psychological process affecting people living abroad that is characterized by homesickness, irritability, confusion, aggravation, and depression.

Compensation packages should reflect the host country$$s cost of living, and also take into account local laws and customs.