Advantage and disadvantages of

using parent country nationals, host

country nationals and third country
nationals as employees
 Meaning of Parent country
nationals(PCN)

• The employee’s nationality is the same as the

organization’s. For example, a German citizen
working for a German company in India.
 Meaning of Host country
National(HCN)

• The employee’s nationality is the same as the

location of the subsidiary. For example, a
Indian citizen working for a German company
in India.
 Meaning of Third country
nationals(TCN)

• The employee’s nationality is neither that of

the organization nor that of the location of the
subsidiary. For example, an Sri Lankan citizen
working for a German company in India.
 PCN advantages:
• Knowledge of Firms culture and products
• Loyalty
• Influence at headquarters
• Easier to access
• Foreign Image
• Groom executives for top management
• International exposure to promising
managers.
 PCN disadvantages
• Difficulty in adapting to foreign country
• Excessive cost of selecting, training and
maintaining expatriates.
• Promotional opportunities less for HCNs
• Compensation difference for HCNs and PCNs
• Communication problems abroad
• Low productivity in early part of tenure
• Family adjustment problems
 HCN advantages
• Familiar with local environment
• Goodwill
• Less expensive than hiring a PCN
• Knows local business
• Can be productive right away
• Locals motivated due to promotional
opportunities
• No language barrier
 HCN disadvantages
• Loyalty maybe to country not company
• Limited familiarity with firms own operation
and culture
• PCN at headquarters may lack sufficient
understanding of the subsidiary’s needs and
corporate strategy for the subsidiary may
suffer as a result.
• Communication problem with parent
company personnel.
 TCN advantages
• Knowledge of specific cultures and languages
• Greater familiarity with host country culture
than PCN, but loyalty will be to the firm
• Relocation costs lower that the PCNs
• Salary and benefits lower than PCNs
• Truly International managers
 TCN disadvantages
• May have a ulterior motive
• Locals may prefer their own citizens for
managerial positions
• Some cross-cultural preparation may still be
required
• Potentially suffering from a lack of knowledge of
the corporate culture
• Using TCN’s to the exclusion of HCNs may create
the same problem or blocked career
advancement that occurs when PCNs are used in
this manner.
Thank You

By Anand Parameshwaran
MBA – B section