Company Background


            EuAuto Technology Limited is a Hong Kong company, having been funded by Innovation and Technology Commission Hong Kong Government, we specialize in design, develop, manufacture and sales of environmentally friendly vehicles for global markets. Its first automobile is mycar, an electric car.


 


European Country Selected


            Germany is famous worldwide for its reputation of having the most advanced and innovative automotive industry. Germany also leads in environmental technologies in renewable energies. German automotive companies are building on this tradition and competence to meet current environmental challenges. Striving for a leading position in all fields of sustainable mobility, the German approach is opening new windows of opportunity in all vehicle segments: powertrain, electrics and electronics, body. Chassis and fuels. Because of the growing automotive industry’s segments, business opportunities abound. The German industry is following an integrated approach to reach significant reduction in air pollutants caused by automotive emission through:



  • Further improving combustion engines and transmissions

  • Moving to partial or complete running on electric energy as with hybrid or fuel cell vehicles

  • Increasing the use of alternative fuels

  • Making further advances in materials, electrics and electronics


 


Hybrid Technology


            Hybrid technology enjoys a good reputation among German consumers. According to a survey, 30 percent of German consumers who intend to purchase a new car consider hybrid cars among their options – this despite the fact that there would be a significant price mark-up. At present, hybrids do not make up a significant segment of the market in terms of unit sold, but demand is growing. As car manufacturers continue to launch hybrid models in the years ahead, sales are expected to rise accordingly.


 


            Plug-in hybrids and full electric vehicles represent a very promising future technology for the replacement of fossil fuels. Prototypes are already under development by German car manufacturers. Energy storage solutions are widely held to be the crucial component in hybrid and full electric cars. Lithium-ion batteries are considered to be the leading technology in terms of range, weight and size. Significant quantities of powerful and durable batteries will be required by German car manufacturers in the near future. Fuel cell technology is widely regarded as being the most promising drive technology in the long term. Germany is home to more than 300 companies specializing in fuel cell technology and over 65 institutes working in the area of fuel cell R&D.


 


Institutional and Cultural Differences


            The international business faces different challenges and obstacles in geographical, financial, legal, political and cultural environments. Culture presents challenges that make human interactions difficult. Cultural differences are found in areas such as language, values, and behaviors. The cultural environment in which an international business operates in has an enormous impact on the organization. Cultural differences according to Graham (2001) are often not obvious and associated problems are neither easily diagnosed nor corrected. Cultural differences have a huge impact on the efficiency of the international enterprise, and particularly on the management of people.


 


            Culture as defined by Briscoe et al (2004) is the characteristic way of behaving and believing that a group of people in a country or region has evolved over time and share (p. 116). A group of people’s culture is a source of their identity. It gives them a sense of belonging. Culture also provides people with the capacity to adapt to circumstances because it defines the acceptable behavior for different circumstances. Culture is transferee form generation to generation. According to Schell and Solomon (1997), culture is learned and absorbed during the earliest stages of childhood, reinforced by literature, history, and religion, embodied by heroes, and expressed in instinctive values and views. Black et al (1992) defines culture as a society’s set of assumptions, values, and rules about social interaction. The culture of the country is made up of values, symbols, beliefs, and languages. These components of culture guide the people’s behavior. The culture in which one is raised programs the mind to react to the environment in certain ways (cited in Sims 2002, p. 365).


 


 


            Every country has a different culture that sets it apart from the rest. Every country has a different history, government and laws. The more countries with which a firm interacts, the more complex and difficult conducting business becomes. According to Briscoe and Schuler (2004) the primary cause of this complexity and high level of difficulty has to do with the importance and critical nature of the differences between various countries’ cultures (p. 114). International businesses are now increasingly interacting with various countries and cultures. The impact of culture, that is, a group of people’s values, beliefs, and behavior patterns are of utmost significance in the achievement of success. Different aspects of the international business such as cross-national negotiations, sales interactions between people from different countries, management of the performance of employees from different countries, and the understanding and treatment of contracts from different countries are, in one way or another, affected by culture. In addition, Human Resources responsibilities, such as staffing, compensation, training, labor relations and performance appraisal are affected by culture (Briscoe and Schuler 2004, p. 114).


 


Layers of Culture: Source of Difficulties


            One of the complexities that makes culture so difficult to deal with is its multiple layers. There are many readily observable aspects of the culture of a country that differ quite obviously from that of other countries. These readily observable things are called artifacts, or manifestations. There are also some aspects of the culture that are not visible. The culture is made up of different layers. Each layer, moving from outside to the inside represent less visible values and assumptions. The less visible layers are considered more important as it has a bigger impact on the attitudes and behaviors. The layers of culture are:



  • Surface Culture (Outside Layer) – things that are readily visible, such as dress, food, architecture, customs, body language, gestures, etiquette, greetings.

  • Hidden Culture (Middle Layer) – values, religions, and philosophies about things like child rearing, views of what is right and wrong.

  • Invisible Culture (Core) – the culture’s universal truths.


 


Cultural Dimensions according to Hofstede


            Geert Hofstede (1984) conducted what is considered as the most influential work on business cultures. Hofstede identified five cultural dimensions that affect international businesses. These dimensions are:


1. Power Distance


            The power distance dimension refers to the extent to which power structures are hierarchical and reflect significant inequalities in power. In countries where there are huge inequalities in power, people see themselves as naturally unequal. In countries where inequalities are huge subordinates are dependent on their superiors. In small power distance countries, individuals are more inclined to regard themselves as equals: rather than expecting to be told what to do, subordinates expect to be consulted and will argue a case with those higher up the organization.


2. Uncertainty Avoidance


            Uncertainty avoidance measured the lack of tolerance for uncertainty and ambiguity. This manifests itself in high levels of anxiety and emotion. This in turn translates into a preference for highly structured formal rules and limited tolerance for groups and individuals demonstrating deviant ideas or behaviors. In countries with low uncertainty business is conducted in a less formal manner.


3. Individualism vs. Collectivism


            The individualist-collectivist dimension measures the degree to which the interests of individuals or of the group take priority. The social framework in an individualistic society is looser than that of a more collectivist society and individuals take responsibility for themselves and their immediate as opposed to extended families. Individualist societies demonstrate a greater regard for individual rights and freedoms and tend to be characterized by assertiveness and competitiveness rather than by teamwork and cooperation. In more collectivist societies, it is the group that looks after the interest of individuals and gives them their sense of identity. In return for this protection, individuals offer the group loyalty and the work towards the attainment of goals determined by and for the good of the group, organization, tribe or society.


 


4. Masculinity – Femininity


            Societies that place a high premium on assertiveness, achievement and the acquisition of material possessions are exhibiting aggressive or masculine goal behavior. Masculine environments also favor conflict and competition in the workplace. Cultures that place high value on social relationships, quality of life and sensitivity demonstrate passive or feminine goal behavior. Cultures and workplaces scoring high on the femininity dimension exhibit high degrees of cooperation, negotiation and compromise (Johnson and Turner 2003).


5. Short-term vs. Long-term Orientation


            In countries with a short-term orientation the emphasis is on the immediate gratification of needs, a focus on the present and the attainment of short-term goals. In cultures with a more long-term orientation the satisfaction of needs is deferred for the sake of long-term benefits and growth.


 


Germany


            The German society is highly individualistic. Germany also has a low power distance that means that there is greater equality between social levels. The Geert Hofstede analysis for Germany shows an emphasis on Individualism, Masculinity and Uncertainty Avoidance. Power Distance and Long-Term Orientation are both ranked considerably lower than the others. Power Distance is the extent to which less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. Long-Term Orientation describes the order of relationships by status and observing this order. This illustrates Germany’s Belief in equality and opportunity for each citizen, as well as its ability to change and adapt rapidly. Germans prize forward thinking. They appreciate planning and knowing details for upcoming events and commitments. They also believe that maintaining clear lines of delineation between people, places and things is the surest way to lead a structured and ordered life.


 


Hong Kong (China)


            The Chinese society has a long-term orientation where in perseverance are given importance. China is also a highly collective society where in social groups are valued and individuals act in accordance with the norms of social groups. The Chinese people are committed to the groups that they are members of. Everyone in a group takes responsibility for other members of the group. Hong Kong has a high power distance. There is a high level of inequality of power and wealth within the society.



           


Organizational Structure and Control Strategies


 


Hierarchy of Authority


            The organizational structure is hierarchical with different functional departments. According to Quinn (1988) organizational structure systematizes the interaction between the people in an organization (cited in Prasad and Thorn 1999). It defines the power relationships and the flow of communications. ARC has a bureaucratic form of organizational structure. The company is an organization with departmental power and expertise.


            The hierarchy pf authority is centralized. . Centralization according to Hendrick (2002) has something to do with where formal decision-making occurs within the organization. In centralized work systems, formal decision-making is concentrated in a relatively few individuals, group, or level, usually high in the organization. The board of directors of the company is responsible for the management of the company. key responsibilities include formulation of the overall strategies of the company and its subsidiaries, the setting of management targets and supervision of management performance.


 


Life Cycle Stage of the Organization


            EuAuto Technology Limited is a company that is in the entrepreneurial stage. In the entrepreneurial stage, executive dominance is established through personal, informal management patterns and structure, flexible communication and coordination procedures both within the organization and with its environment. Personal attention and rewards are given for the mobilization of resources and attainment of legitimacy for the organizational domain from the external environments. The creation of the organization’s ideology, and the paternalistic reward system does not rely only on the level of professionalization of the executive, but rather on his or her entrepreneurial skills.


 


Power and Control


            Power is a process by which a person induces change in another’s behavior or attitudes. Power is considered as the basis of all organized action. As a social structure of human interrelationships, the organization controls the action of individuals; and control over others in power. Control in the organization rests on power. Organizationally, power is described as the ability to make something happen – the essence of the causal relationship. Authority is a manifestation of power characterized by position and relationship within the formal, hierarchical system. Authority connotes the legitimate right of the holder to command, decide or determine the way the organization will go (Fairholm 1993).


            When it comes to control, the corporate governance principles of the company place emphasis on upholding a high standard of ethics and integrity in all aspects of its business, and on ensuring that affairs are conducted in accordance with applicable laws and regulations.  The role of the Chairman is separate form that of the Group Managing Director. The Chairman is separate for overseeing the functioning of the Board while the Group Managing Director is responsible for managing the Group’s business.


 


 


Major Issues


            The major issues in opening a subsidiary in Germany, and elsewhere in the world, revolve in human resource management.


 


Factors that affect HRM practices in the International Arena


1. Country Culture


The culture of a society is a set of assumptions, values, and rules about social interaction. A country’s culture can be defined as the set of values, symbols, beliefs, and languages that guide behavior within that culture. Culture is important to IHRM. The differences in culture from country to country calls for matching HRM practices and policies. The HRM personnel need to develop a set of culture sensitive policies and practices that are both acceptable within the local culture and acceptable to management at the parent company (Sims 2002). 


2. Political Policies and other Regulations


            Industrial relations, and specifically the relationship between the worker, the union, and the employer, differ from one country to another. Some countries give legal rights to employees to have a voice in setting company policies. Many countries allow the interference of the state in the relations between employers and unions (Sims 2002).


3. Economic Factors


Differences in economic systems among countries also translate into inter-country differences in HRM practices. In free enterprise systems, for instance, the need for efficiency tends to favor HRM policies that value productivity, efficient workers, and staff cutting where market forces dictate. In socialists systems, HRM practices tend to shift towards preventing unemployment, even at the expense of sacrificing efficiency. Included in the economic factors is the cost of labor (Sims 2002).


4. Managerial, Educational and Technological Development in the Host Country


            A multinational corporation who seeks to expand in Europe faces different challenges and issues than a multinational corporation that opts to extend its operation to Western Africa. In Europe, the available workforce is likely to be well educated and have considerable technical and management experience (Sims 2002).


5. International Experience of the Organization


Organizations with extensive international experience have had the opportunity to develop more diverse methods of maintaining coordination and control over their foreign operators. Newcomers to the global market place may view the international business environment as more unpredictable, higher in ambiguity and uncertainty, and perhaps more threatening than more experienced global players (Sims 2002).


6. How the Subsidiary is established


The method used to establish operations in foreign locations also may affect HRM policies. In the case of foreign operations that are acquired by merger or acquisition, the presence of existing HRM practices in the acquired/merged operations likely will reduce the wholesale exportation of home country HRM systems into the subsidiary (Sims 2002).


7. International Staffing Policy


The staffing challenges for international assignments are broader in scope than those for domestic staffing. There are different approaches to the management of International human resources. These are as follows:



  • Ethnocentric – the home country attitudes, management style, knowledge, evaluation criteria, and managers are superior to anything the host country might have to offer.

  • Polycentric – there is a conscious belief that only host country managers can ever really understand the culture and behavior of the host country market; therefore, foreign subsidiary should be managed by local people.

  • Geocentric – based on the assumption that the best manager or other employee for any specific position anywhere on the globe may be found in any of the countries in which the organization operates.


These three sets of multinational values translate into three broad international staffing policies or sources for staffing international operations. First, the company can send people from its home country. These employees are often referred as expatriates. Second, it can hire host-country nationals, natives of the host country, to do the managing. Third, it can hire third-country nationals, natives of a country other than the home country or the host country. These sources of overseas workers have different advantages (Sims 2002).



  • Host country nationals – less cost, preferred by host-country governments, intimate knowledge of environment and culture, and language facility

  • Home country nationals – talent available within company, greater control, company experience, mobility, experience provided to corporate executives

  • Third country nationals – broad experience, international outlook, and multilingualism


 


 


References


Black, J S, Gergersen, H B, and Mendenhall, M E 1992. Global assignments: Successfully expatriating and repatriating international managers. San Francisco: Jossey-Bass.


 


Briscoe, D and Schuler, R 2004, International Human Resource Management: Policies and Practices for the Global Enterprise, Routledge, New York.


 


Fairholm, G W 1993, Organizational Power Politics: Tactics in Organizational


            Leadership, Praeger Publishers, Westport CT.


 


Graham, J L 2001, Cultural and Human Resources Management, In A M Rugman and T L Brewer (eds.), The Oxford Handbook of International Business, (pp. 503-533), Oxford University Press, New York.


 


Hendrick, H 2002, An Overview of Macroergonomics, In H. Hendrick and B.


            Kleiner (eds.), Macroergonomics: Theory, Methods, and Applications (pp. 1-24). Lawrence Erlbaum Associates, Mahwah NJ.


 


Hofstede, G. 1980, Culture’s consequences: International Differences in Work-Related Values. Beverly Hills, CA: Sage Publications.


 


Quin, R E and Cameron 1983, ‘Organizational Life Cycles and Shifting Criteria


            of Effectiveness’, Management Science, vol. 9, pp. 33-51.


 


Schell, M S, and Solomon, C M 1997, Capitalizing on the Global Workforce, Irwin, Chicago.


 


Sims, R S 1998, Reinventing Training and Development, Quorum Books,


            Westport CT.


 


Sims, R 2002, Organizational Success through Effective Human Resources Management, Quorum Books, Westport CT.


 


 


 


 


 


 


 


 


 


 


 


 


 



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