the challenge of international management and of ihrm in
TRANSCRIPT
Dr. József Poór
The Challenge of International Management and
of IHRM in Central/Eastern Europe
January 8, 2015
Ljubljana
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Prepared by
Dr. József Poór
Professor of Management, CMC
Szent István University, Gödöllő Hungary
E-mail: [email protected], phone: +36-20-464-9168
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Introduction (1)
• My name
• My experiences in CEE region
• My expectations
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1. Institutional environment of transitional
(CEE) economies
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Overview on transitional countries Similarities and differences
•Different languages
•Different religions
•Different working and
business ethics
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Overview on transitional countries Similarities and differences
Cultural dimensions of Hofstede
No Countries Dimensions
PDI IDV MAS UAI LTO
1 Austria 11 55 79 70 n.a.
2 Bulgaria 70 30 40 85 n.a.
3 Croatia 73 80 40 33 n.a.
4 Czech Republic 57 58 57 74 13
5 Estonia 40 60 30 60 n.a.
6 Hungary 46 80 88 82 50
7 Lithuania* 42 60 19 65 30
8 Poland 93 39 36 95 n.a.
9 Romania 90 30 42 90 n.a
10 Serbia 86 92 43 25 n.a.
11 Slovakia 104 52 110 51 38
12 Slovenia 71 88 19 27 n.a.
13 Germany 35 60 45 60 28
• Masculinity/feminity)
• Power distance
• Uncertainty/avoidance
• Individualism/collectivism
• Short/Long-term thinking
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Overview on transitional countries Trends of Changes in Transitional Economies
Management systems and structures supporting
Privatisation Firm restructuring Continuous improvement Road to recovery
1990 1994 1998 2011
New Labor Law Unemployment law Two-three tiers pension & Medicare
Social systems
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Overview on transitional countries Impact of crisis
„EE countries were previously capitalism's rising stars are
now seeing demand for exports collapse, along with their
currencies”
Source: Spiegel
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Overview on transitional countriesBudget deficit
PL - Poland
CZ – Czech R.
SK - Slovakia
HU - Hungary
SI - Slovenia
EE - Estonia
LV - Latvia
LT - Lithuania
RO - Romania
BG - Bulgaria
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Overview on transitional countries Model of SME development in CEE region
Start-up situation is now over this
group
Consolidations has also taken place
Creation of different company
functions is now being emphasized
In this situation review and renewal of strategies in SME business,
become particularly important
Company
creation
Develop-ment
After EU
accession
Focus on firm creation
Focus on consolidaton
Find new sources of
business growth
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Overview on transitional countries Changing role of management at public sector organizations
Eastern Europe
Administrator
Collective
bargainer
Organizational
designer
Change agent
and coach
State-owned and local
organisations
Foreign-owned
and local private firms
1945 1979 1997 Today
New Public Management (NPM)
Partnering Public Management (PPM)
Administrative Public Management
(traditional)
Western world
Administrative Public Management
(traditional)
NPM
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From East to West (1)Different Trends of immigration
0,5 mn Poles
Moving back
1 mn Romanians
2 mn Romanians
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Regular cross-border labor mobility (1)Hungary-Slovakia - cooperation across Danube
• easy transport
• billingual workers
• wage differences
• labor market
discrepances
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Regular cross-border labor mobility(2)Finland-Estonia – cooperation across the sea
• langauge similarities
• historical relationships
• decreasing transport costs
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2. FDI in transitional (CEE) economies
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FDI in transitional (CEE) economiesGlobal trends of the FDI (1996-2014) mrd USD
Source: UNCTAD
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FDI in transitional (CEE) economiesCapital inflow in CEE region (1991-2011) in mrd USD
0
50
100
150
0 0 0,7 4,2 6 5,617,2 16,3 17,9 21,2 23,9 25,1 23,2 27,1 27,1
54,7 58,7
99,1
135,9147,1
69,3 70,4
93
Source: UNCTAD
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FDI in transitional (CEE) economiesFDI stock/capita in CEE 2010
Czech R. Hungary Slovakia Slovenia Bulgaria New EU10 Poland Romania
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FDI in transitional (CEE) economiesEmployment at foreign-owned firms
Employees
No Country Year
of survey
Number of people employed
by foreigners
All employees in the private sector
In percentage of total (%)
1. Austria 2004 232,800 3,266,500 7.1%
2. China 2004 24,000 752,000 3.2%
3. Czech Republic 2004 620,000 3,890,000 15.9%
4. Finland 2001 176,000 2,060,000 8.5%
5. Germany 2004 2,280,000 31,405,000 7.3%
6. Hungary 2009 606,000 2,703,000 22.4%
7. Poland 2000 648,000 10,546,000 6.1%
8. Portugal 2002 150,400 3,756,000 4.0%
9. Slovakia 2009 600,000 1,800.000 35%
10. Slovenia 2004 64,000 798,000 8.0%
11. USA 2004 5,116,000 131,367,000 3.9%
Source: UNCTAD (2008): World Investment Report, 2007: Transnational Corporations and Export Competitiveness. United Nations, Geneva, SARIO (Slovak Agency for Development of Investment and Trade) 2010.
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FDI in transitional (CEE) economiesMarket enterance in CEE region
EVOLUTIONARY
• Buying-selling relationship
• Representative office
• JV’s companies
• Wholly owned companies
(e.g. Shell, IBM, Fiat , Levi
Strauss, etc.)
REVOLUTIONARY
Buying-selling relationship
JV’s or wholly owned
companies (e.g.: GE, Volkswagen,
Reemtsma, Heineken, Suzuki)
Evolutionary approach Revolutionary approach Globally born approach
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FDI in transitional (CEE) economiesCapital inflow into TE countries
1988 2001 2004
Labour-intensive industries
Service centres
Knowledge-intensive industries
Cheap
blue-collar
labour
Cheap
skilled
labour
Cheap
resources
Production performance
Higher
flexibility
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FDI in transitional (CEE) economiesLife-cycle of foreign investments
Through:
•Privatisation
•Set up green-field
FDIs
1988-1999
Today and near future
Through:
•Acquisition of privatised
firms
•Market liberalisation
•Support of mega merging
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FDI in transitional (CEE) economiesThe main development phases and
changing role of company management at EE subsidiaries
Stage I:
Early changes
Stage II:
Near past
Stage III:
Steady state
Privatisation - Firm establisment:
Transform HR infrastructure and competencies
Restructuring&Development
Set up new HR capacities and develop new HR roles
Consolidation &Renewal
Support continous renewal and knowledge generation
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3. Roads to transitional (CEE) economies
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Roads to transitional (CEE) economiesCase One: Fedex in Moscow (1)
Chack Nadal as FedEx manager (“Cast Away” movie) was
able to explain Russian employees American interpretation of
effective working time.
In 2006 and for the 9th consecutive year, FedEx was
recognized as one of the "100 Best Companies to Work For"
by Fortune Magazine and the Great Place to Work Institute.
FedEx is present in Russia since beginning 1990s.
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Roads to transitional (CEE) economiesCase One: Fedex in Moscow (2)
„The World on Time”
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Roads to transitional (CEE) economiesCase One: Fedex in Moscow (3)
Culturally correct behaviors Culturally incorrect behaviors
Countries PDI UAI MAS IDV CDI
1 Russia 95 75 40 47 -
2 US 40 46 52 91 29
„The World on Time”
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Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (1)
“Along with very sorry Trabants, Ladas and other relics from the Soviet era, it's enough to make most of us look at cars a new -- and relish the state-of-the-art double upholders and seats that heat themselves. But in the Czech Republic, Skoda is looked at very differently. The company, even though it fell on some very miserable times during the eastern bloc days, is still viewed with something approaching wonderment.” (CNN-Quest)
+
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1918
1938-1945
1993-
1968
1989
Items Czech R Germany US
Population 10,5 82 308
GDP per capita
(USD) 18.288 40.681 45.778
HDI index 0,84 0,885 0,95
Czech RepublicOverview
Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (2)
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Items Czech R Germany US
Population 10,5 82 308
GDP per capita
(USD) 18.288 40.681 45.778
HDI index 0,84 0,885 0,95
1990-
1870-1918
1918-1945
1945-1990
GermanyOverview
Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (3)
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Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (4)
Cultural dimensions of Hofstede
Dimensions No Countries
PDI IDV MAS UAI LTO
1 Czech Republic 57 58 57 74 13
2 Germany 35 60 45 60 28
Cultural comparison -Czech and German people
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Market share
0%
5%
10%
15%
20%
25%
Germany China Global US
Market share
VW - 4.4 million car (No 1 car company of the world)
Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (5)
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1949-1989 (Socialistic car model)
Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (6)
Skoda - Past
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Skoda - Present
2009 (Skoda Yeti) 2006 (Skoda Ramster)
March 28,1991 VW and Skoda)
2005
1 million
car/yr
Are skoda cars sold
in U.S.?
Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (7)
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Conclusions of the caseSimple driving rules were laid down
The flow of information has become easier
The vehicles are manufactured with VW parts
The main aim was to maintain and increase quality
Fostering good relations with decision-makers of Czech government
Škoda brand featured in many major sponsorship
Skoda took over the product - marketing know-how from VW
Roads to transitional (CEE) economiesCase Two - VW (Volkswagen) makes Skoda a Czech success (8)
Conclusions of the case
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Roads to transitional (CEE) economiesCase Three – Tungsram (HU) – GE (General Electric (1)
The harsh business environment in Europe and the globalization of business required more rapid changes in the organization, people and the culture than expected at the acquisition. Even though experiencing many conflicts of interest and hard debates people were open to the changes because they had vision, they were involved and received frequent communication on the business goals and results. In this particular case, the initial years of changes have taken since acquisition until 1994 or more than 5 years. Today the company is eminently successful. It has entered an era of business growth and stability. GE meantime has successfully learned from the Tungsram experience. (Dowling et al., 2008) The right people management strongly contributed to the successful transition of the business into a profitable venture.
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Roads to transitional (CEE) economiesCase Three – Tungsram (HU) – GE (General Electric) (2)
0
5000
10000
15000
20000
1990 1993 2004 2011
Employees
Employees
0
500
1000
1500
2000
2500
3000
3500
4000
1990 1993 2004 2011
Revenue (million USD)
Revenue (million USD)
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Roads to transitional (CEE) economiesCase Three – Tungsram (HU) – GE (General Electric) (3)
This organization has control of the entire value chain
Strategy
Controlling
HRM
IT and office infrstructure
R&D In-bound
logistics
Operation&
out-bound
logistics
Sales&
marketing
C
L
I
E
N
T
S
Value chain - mandates
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Roads to transitional (CEE) economiesCase Three – Tungsram (HU) – GE (General Electric) (4)
Young people in middle management positions
Right mix of expatriates and locals
Entry level programs in finance, engineering,
manufacturing, HR and IS areas
Locals in key managerial positions within
Less expatriates
GE-pan-european structure
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The business environment required rapid changes
in the organization, people and culture
People are open to changes, if there are vision,
communication and involvement
The right people management strongly
contributed to the success of the acquisition
Roads to transitional (CEE) economies
Case Three – Tungsram (HU) – GE (General Electric) (5)
Learning from the case
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Recent development
Jeffrey Immelt would like
to close or transfer
to China the traditional
lighting production
Roads to transitional (CEE) economies
Case Three – Tungsram (HU) – GE (General Electric) (6)
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Roads to transitional (CEE) economiesCase Four – Japanese expats in CEE region (1)
It is, in fact, increasingly accepted that success or failure are
determined less by the company and much more by the
family and domestic problems of the expatriates themselves.
After a brief introduction, this case-study reveals – separately
- the adversities and difficulties with which Japanese
expatriates are confronted in both their professional and
private circumstances. This is based upon interviews with
over 100 Japanese expatriates in five countries (Mexico,
France, Poland, the Czech Republic and Hungary).
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Roads to transitional (CEE) economiesCase Four – Japanese expats in CEE region (2)
109 Japanese expatriates aged between 31 and 39 in five countries (Mexico, France,
Poland, the Czech Republic and Hungary)
Foreign posting duration (annual job rotation system)
Duration (months) Absolute
Frequency
Relative frequency
%
Under 3 44 40.4
4 to 12 37 33.9
13 to 35 22 20.2
Over 36 6 5.5
Total 109 100.0
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Roads to transitional (CEE) economiesCase Four – Japanese expats in CEE region (3)
Expat family Absolute frequency Relative frequency %
None 79 72.5
Wife Only 12 11.0
Whole Family 18 16.5
Total 109 100.0
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Roads to transitional (CEE) economiesCase Four – Japanese expats in CEE region (4)
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What are the typical problems of Japanese expats in foreign
and particularly in transitional environment?
Explain how you would solve these problems as local HR
Managers of a Japanese subsidiary in a transitional
country (for instances: Czech Republic, Hungary, Poland Russia
etc.)?
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Roads to transitional (CEE) economiesCase Five - MNC Consulting Case in EE region (1)
During the 1990’s the focus within Eastern European companies was on
assisting the organization in making the transitions associated with
privatization. During the subsequent years, the focus has increasingly
shifted toward a continuous improvement approach aimed at helping the
organization develop and on assisting individual employees develop
through coaching. Such providers like Hay Group, Mercer or AON-Hewitt
try to gain a reasonable market share from this growing HR market. How
would they do it? How similar or different are their approaches?
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Roads to transitional (CEE) economiesCase Five - MNC Consulting Case in EE region (2)
Company
information
Staffing –
Early stage
Life cycle
at subsidiaries
Changing patterns
of knowledge-transfer
Management –
regionalization
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Roads to transitional (CEE) economiesCase Five - MNC Consulting Case in EE region (3)
It goes back to US in 1940s
Key services:
• HR consultancy, labor market studies,
• outsourcing, change management
Step by step involved to the region since 1980s
Newly established start-up subsidiaries
Hungary: 1990
Czech Rep. : 1992
Slovakia: 1996
Poland: 1998
Almost all countries in EE region: 2005
Firm
Revenue
(US$ mil)
Market
Share
PwC $770 13%
Mercer $767 13%
Accenture $571 9%
Watson Wyatt $495 8%
Deloitte $434 7%
Towers Perrin $200 3%
Hay Group $198 3%
Aon Consulting $148 2%
IBM $141 2%
Ernst & Young $132 2%
Hewitt $126 2%
Buck Consultants $64 1%
Other $1,994 33%
Total Market $6,040 98%
Source: Kenndey Institue
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Expats. consultants
Local inpatriate
Joint teams, intranets
1990 1995 2000 today
HQ
Clients
Expats Consultants Local
inpatriate
Joint teams,
intranet
Roads to transitional (CEE) economiesCase Five - MNC Consulting Case in EE region (4)
Changing patterns of knowledge transfer
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First stage: Locally driven
Second stage: Division driven
Third stage: Pan-EE mgmt. team
Have a flat organization structure
Have a mix management team
Local country managers become
„ambassador”
Roads to transitional (CEE) economiesCase Five - MNC Consulting Case in EE region (5)
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4. Conclusions
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FuturePriorities of key tasks in the future
1. Efficiency improvement
2. Company development
3. Company reorganization
4. Conform to globalization
5. Distribution development
6. EU changes
7. Eastern expansion
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Thank you for your attention!
Întrebări şi răspunsuri
József Poór
Professor of Management
Szent István University, Hungary