INTERNATIONAL HUMAN

RESOURCE MANAGEMENT
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IHRM IN CROSS-BOARDER
MERGERS, ACQUISITIONS,
INTERNATIONAL ALLIANCES
& SMES
Kiera Staley
Lecturer, La Trobe Business School
Mai Anh
Lecturer, International School-VNU
anhmd@isvnu.vn
SESSION 4 - INTRODUCTION
OVERVIEW
Today’s seminar covers the following topics:
• Cross-border alliances
• Subcontracting
• Equity-based alliances (Subsidiaries, M&As,
IJVs)
• Globalizing SMEs

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ACRONYMS USED IN TODAY’S SEMINAR

HR – Human Resource
HQs – Headquarters
IJV – International Joint Venture
M&A – Mergers and Acquisitions
MGNT – Management
MNEs – Multinational Enterprises
SMEs – Small & Medium Enterprises

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CROSS-BORDER ALLIANCES
EQUITY AND NON-EQUITY

A non-equity cross-border alliance is an

investment means in which responsiblities and
rrofits are assigned to each company according to
a contract.

Equity modes involve a foreign direct intestor’s

purchase of an enterproise in a country other than
its own.

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INTERNATIONAL VS. DOMESTIC HRM
VARIABLES THAT MODERATE THE DIFFERENCES

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NON-EQUITY MODE
SUBCONTRACTING

o To take advantage of lower costs in the

foreign location
o IHR focus:
o making sure the human rights of the production
workers are guaranteed and the manufacturing
and production activities are done in a
responsible manner.
o management development and training

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SUBCONTRACTING
OUTSOURCING (SOMEONE ELSE DOES THE WORK FOR US)
o Contracting out business processes to other
firms
o Reducing costs, improving quality?, freeing
company resources for greater focus
o More directly linked to the management of
the business
o Very much involving IHR in planning,
managing and execution of international
assignments, business travel, training

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SUBCONTRACTING
OFFSHORING (THE WORK IS DONE OVERSEAS)
o Involving relocation of one or more aspects of a
firm’s business processes to another country
o For the purpose, at least initially, of lowering costs
o Offshore process is still operated by the firm’s
personnel but in an offshore location
o Same HR responsibilities as those in the parent-
firm except under different legal system and
influence of other national culture

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SUBCONTRACTING
OFFSHORING & OUTSOURCING
OFFSHORING
DEFINITION Relocation of one or more
aspects of a firm’s business
processes to a location in another
country.
RISKS & Offshoring is often criticized for
CRITICISM
transferring jobs to other
countries. Other risks include
geopolitical risk, language
differences and poor
communication etc.
BENEFITS Benefits of offshoring are usually
lower costs, better availability of
skilled people, and getting work
done faster through a global
talent pool.
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OUTSOURCING
Outsourcing refers to sub-contracting
work out to an external organization.
Risks of outsourcing include
misaligned interests of clients and
vendors, increased reliance on third
parties, lack of in-house knowledge of
critical (though not necessarily core)
business operations etc.
Usually companies outsource to take
advantage of specialized skills, cost
efficiencies and labour flexibility.
EQUITY MODE
SUBSIDIARY

• Subsidiaries are a common feature of MNEs

who generally organize their businesses into
national and functional subsidiaries
• A subsidiary is a business/organisation that is
completely or partly owned (major shareholder)
by the parent organisation and thus the parent
organisation normally controls the activities and
policies of the subsidiary (therefore, Holden is
the Australian arm of General Motors).

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EQUITY MODE
SUBSIDIARY (WHOLLY OWNED)
o Firms owns 100% of the stock
o Own sale offices in foreign countries where sales are
large
o Own manufacturing factories in foreign countries to
assemble and/or manufacture products
o Managed by a sales manager from parent firm
o The major challenge is to integrate the acquired firm’s
practices with those of the parent
o IHRM role- create new HR policies and practices for new
work force (greenfield) or integrate the acquired firms
practices with those of the parent

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GREENFIELD & BROWNFIELD VENTURES
KEY DEFINITIONS
o Greenfield investment is a form of direct foreign
investment from a parent company into a new
venture in a foreign country, constructing new
businesses from the ground up.
o In contrast, Brownfield investment is associated
with investment into a foreign country where a site
previously used for business purposes, such as a
steel mill or an oil refinery, is expanded/upgraded to
achieve superior return.

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GREENFIELD & BROWNFIELD VENTURES
PROS & CONS
o The main advantage of these two external ventures
is that it gives the firm a greater ability to build the
kind of subsidiary company that it wants
o Both are generally associated with a large tax break
and other government associated benefits
o However, greenfield ventures are slower to establish
o Greenfield ventures are associated with higher risk
than Mergers or Acquisitions

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COOPERATIVE CORPORATE VENTURING
INTERNATIONAL JOINT VENTURES (IJV)
o Two or more firms (from at least two countries)
creating a new business entity with shared
ownership and managerial responsibilities
o Employees will normally be assigned to the new
entity from each of the partners
o HR needs to adopt or develop HR practices for the
multinational workforce.
o HR specifically is responsible for merger and
interaction of two or more national and corporate
cultures

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COOPERATIVE CORPORATE VENTURING
MAIN REASONS FOR IJV
• To gain knowledge & transfer that knowledge (product, technology,
country/local etc.)/to promote shared learning.
• To reduce the cost of technological development or market entry.
• The host government insists
• To reduce the time taken to develop and commercialize new
products/markets
• To obtain vital raw materials
• To share risks (e.g., financial)
• To improve global competitive advantage
• Provide an efficient & cost effective response forced by market
globalization

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COOPERATIVE CORPORATE VENTURING
IJV CHALLENGES INCLUDE
o Managing the risk of loosing control of information / technology to its
partner

o shared ownership can lead to conflicts and battles for control if goals and
objectives differ or change over time

o HR must manage relations at the interfaces between IJV & parent

companies

Different rules can create critical dualities

o HR must develop appropriate HRM practices & strategies for the IJV itself.

HR must recruit, develop, motivate, retain human resources at IJV level

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COOPERATIVE CORPORATE VENTURING
HR’S ROLE IN IJV
Partnership
 HRM’s should take the needs of all stakeholders into account and
demonstrate understanding of the business.

Change facilitator & strategy implementer

 HRM’s should be able to conceptualize and implement new strategies
involving trust-based communication and cooperation.

Innovator
 HRM should be able to identify talent for executing and adapting to IJV
strategies and stages.

Collaborator
 HRM’s strengths lie in creating win-win situations characterised by sharing
rather than competing between the entities.
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QUESTION:

WHAT DO YOU THINK THE

ROLE OF TOP MGNT IS IN
IJV?

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CASE STUDY

COLLABORATION, DECISION-
MAKING AND LOYALTY IN A
GERMAN-CHINESE JOINT
VENTURE: BEIJING LUFTHANSA
CENTER CO. LTD

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EXTERNAL CORPORATE VENTURING
MERGERS AND ACQUISITIONS (M&AS)
o Merger is a legal consolidation of two companies
into one entity.
o An acquisition occurs when one company takes
over another and completely establishes itself as
the new owner (in which case the target company
still exists as an independent legal entity controlled
by the acquirer).

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EXTERNAL CORPORATE VENTURING
MERGERS AND ACQUISITIONS (M&AS)
o The number and value of cross-boarder acquisition
and joint ventures is increasing due to globalization.
o A preferred entry method in both developed and
emerging markets
o To consolidate the scope of business activities and
parent firms’ position in the global market place

o IHR activities are specially important in:

o pre-merger due diligence phase
o post-merger integration

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EXTERNAL CORPORATE VENTURING
MERGERS AND ACQUISITIONS (M&AS)
Mergers and acquisitions of established firms:
o Horizontal – the acquired and and acquiring firms
are based in the same industry
o Vertical – the acquired firm is in an industry that
either supplies or purchases from the industry of
the acquiring firm
o Conglomerate – the acquired and acquiring firms
are based in unrelated industries

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MERGERS & ACQUISITIONS
FIGURE 4.2 THE FORMATION PROCESSES OF
M&AS AND HR CHALLENGES

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EXTERNAL CORPORATE VENTURING
PROS OF MERGERS AND ACQUISITIONS (M&AS)
Both are attractive because:
o they are quick to execute
o they enable firms to preempt their competitors
o the end result should grow the business quicker and
in a more profitable manner than normal organic
growth would allow.

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EXTERNAL CORPORATE VENTURING
CONS OF MERGERS AND ACQUISITIONS (M&AS)
Acquisitions & Mergers can fail when:
o the cultures of the acquiring and acquired firm clash
o attempts to realize synergies run into roadblocks and take much
longer than forecast
o there is inadequate pre-acquisition assessment / screening
o Within the first year of a merger, up to 20% of executives may be
lost. The percentage usually gets worse over more than one year
after a merger
o Personnel issues are often neglected
o A large number of M&As fail or do not produce the intended
results
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WHEN THINGS GO WRONG…

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MERGERS & ACQUISITIONS
EXAMPLES
Mergers Acquisitions
BHP/Billiton Google/YouTube
Disney/Pixar Facebook/WhatsApp
Exxon/Mobil Microsoft/Nokia
Daimler Benz/Chrysler Microsoft/Skype
Sears/Kmart eBay/PayPal
AOL/Time Warner Wesfarmers/Coles

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MERGERS & ACQUISITIONS
FIGURE 4.4 HR ACTIVITIES IN THE PHASES OF CROSS
BOARDER M&A

Key to success = involve HR department in the early stages

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EXTERNAL CORPORATE VENTURING
STRATEGIC HRM IN M&A
There should be a fit between business strategy and HR
strategy. Firms should rely on three conceptual tools:

1. Resources
money, people, brands, relationships/support, information

2. Processes
activities used to convert resources into goods & services
(eg. training and development programs)

3. Values
the way employees think about what they do & why they
do it (shape employee’s priorities and decision making)

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EXTERNAL CORPORATE VENTURING
COMPARING HRM IN M&A
o Performance-related pay is more popular in US than in
Japan or Germany

o Recruitment in US is more short-term than in Germany,

France, & UK

o Japan still has longest-term focus

o US training & career planning is the most extensive

o French still favor French managers (ethnocentric)

o Germans are the most anxious to adopt

international practices for their M&As
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QUESTION:

WHAT DO YOU THINK THE

ROLE OF EXPATS IS IN
M&A?

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INTERNATIONAL SMES
TABLE 4.1 SME DEFINITION

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INTERNATIONAL SMES
SMES ARE VERY IMPORTANT
In European Economic Area (EEA) & Switzerland:
• 99+% of 16 million enterprises in European Economic Area
(EEA) & Switzerland are SMEs
• Two thirds of jobs are in SMEs

In Asia Pacific region:

• SMEs are 90% of all enterprises
• 32-48% employment is by SMEs

In US:
• 80+% employment is by SMEs
with less than 20 employees

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INTERNATIONAL SMES
SMES IN AUSTRALIA
• There are over 1.2 million SMEs representing over 96% of all
business making them Australia’s largest employer.
• Of the 1.2 million SMEs in Australia, more than two thirds
employ between one and four people.
• This means that 93.5 per cent of people employed by SMEs
in Australia are employed by what can be described as
‘micro-SMEs’, namely companies with less than 20
employees
• SMEs are the fastest growing sector of most economies
around the world.
• As a SME, you face many similar risks to larger business.
However the relative impact of each risk has the potential to
devastate your business.
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INTERNATIONAL SMES
BARRIERS TO INTERNATIONAL MARKETS BY SMES
1. Not enough working capital to finance exports
2. Inability to identify foreign business opportunities
TOP
3. Limited information to locate/analyze markets 10
4. Inability to contact potential overseas customers
5. Inability to obtain reliable foreign representation
6. Lack of managerial time to handle internationalization
7. Untrained or not enough personnel to go international
8. Difficulty in managing competitors’ prices
9. Lack of home government assistance & incentives
10. Excessive transportation & insurance costs

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INTERNATIONAL SMES
IHRM FEATURES IN SMES

o The founder or owner has large impact on recruitment,

selection, & retention.
o Learning challenges
o Expatriate management
o Limited resources of the HR department & outsourcing

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