Australian National University · FACULTY OF MANAGEMENT

MGMT3025 Chap.1 IHRM and Its Strategic Context

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Chapter 1 of 11 · MGMT3025

IHRM and Its Strategic Context

International HRM starts from the six activities every HR function performs, planning, staffing, performance management, training, pay and employee relations, and asks what happens to each one when the employer works in more than one country.

This chapter sets out the vocabulary the rest of the course relies on: parent-country, host-country and third-country nationals, and the separate labels expatriate and inpatriate for the direction of a move.

It then traces how IHRM involvement rises as a firm moves from exporting to franchising, owned subsidiaries and acquisitions, explains the six factors that make international HR more complex than domestic HR, and closes with strategic IHRM: the tensions between integration and local responsiveness and between convergence and divergence, the five goals multinationals set for IHRM, and Laurent's steps toward learning across cultures.

In this chapter

What this chapter covers

  • 01

    The six HR activities and what changes when they cross borders

  • 02

    Parent-country, host-country and third-country nationals

  • 03

    Expatriate and inpatriate as directions of movement

  • 04

    Internationalisation stages and rising IHRM involvement

  • 05

    Six factors that make IHRM more complex than domestic HR

  • 06

    Integration against local responsiveness and convergence against divergence

  • 07

    Laurent's steps and the five goals multinationals set for IHRM

Worked example · free

How IHRM involvement grows as a mining services firm expands into Chile

Q [6 marks]. A Perth mining services firm first exports equipment to Chile, then opens a small sales office in Santiago, later licenses its technology to a Chilean partner, and finally acquires a Chilean engineering company. Trace how its IHRM involvement changes at each step. The six marks shown are a self-marking guide for revision and are not an official University mark allocation.
Internationalisation stages and IHRM involvementFive stages from exporting to joint ventures and acquisitions, each bar one level higher in IHRM involvement.IHRM involvementVery lowExportingLowSales officeModerateLicensing, franchisingHighOwned subsidiaryVery highJV or acquisition
Each bar is one stage of internationalisation from the Week 1 table, and its height is the IHRM involvement the lecture assigns, so the staircase shows HR responsibility rising as the firm commits more people and capital abroad.
  • +1Exporting is Stage 1, with very low IHRM involvement: staff stay in Perth and the HR task is little more than domestic.
  • +1The Santiago sales office is Stage 2, with low involvement: a few staff now work under Chilean rules and need local contracts.
  • +1Licensing is Stage 3, with moderate involvement: the firm manages a partner relationship and training standards, while the partner employs the workforce.
  • +2The acquisition reaches Stage 5, with very high involvement: two HR systems and two workforces must be combined, the hardest IHRM task in the table.
  • +1Conclude that each move commits more people abroad, so HR responsibility rises step by step with the entry mode.
IHRM involvement climbs from very low when exporting to very high after the acquisition, because each entry mode puts more of the firm's own people and systems under foreign conditions.
Sia tip — Name the entry mode before you discuss HR: the stage decides whether the firm manages its own foreign workforce or only a partner.
Glossary

Key terms

Strategic IHRM
The design of international HR policies that help a multinational deliver its strategy, including how the international HR function itself is run.
Integration
How far headquarters and subsidiaries operate as one unified whole with shared systems and policies.
Divergence
A view that HR practice stays different between countries because local culture and institutions are key to subsidiary success.
Organisational learning
One of the five goals for IHRM: sharing knowledge and practice across the parts of a multinational.
Emergency evacuation
An unplanned exit of staff from a host country for medical, compassionate or similar emergency reasons, one of the added risks HR must plan for.
FAQ

IHRM and Its Strategic Context FAQ

What makes international HRM more complex than domestic HRM?

The Week 1 lecture names six factors: more HR functions and activities, a need for broader expertise, more involvement in employees' personal lives, a wider mix of expatriate and local staff, more risk exposure, and more external influences such as labour law and government regulation. Each factor adds concrete tasks, from visas and relocation to evacuation planning.

Can one employee be both a third-country national and an expatriate?

Yes. Third-country national describes nationality relative to headquarters and the country where someone works, while expatriate describes someone working and living temporarily abroad, usually a PCN sent by head office.

A Polish developer hired by an Indian firm in Kraków is a host-country national there, but if the firm sends her to its Brazilian office for two years she becomes a third-country national and, as a less typical case, an expatriate at the same time.

Why does IHRM involvement rise as a firm internationalises?

Each entry mode puts more of the firm's own people and systems abroad. Exporting needs very little international HR work, a sales office needs some, franchising and licensing require managing partners, an owned subsidiary carries the full host-country HR load, and joint ventures or acquisitions add the task of merging two HR systems and cultures.

What are the five goals multinationals set for IHRM?

The lecture frames them as global competitiveness, efficiency, local responsiveness, flexibility and organisational learning. Each is posed as a question: how IHRM can provide competitive advantage, produce efficient outputs, stay responsive locally while competing globally, adapt to changing conditions, and spread learning across the organisation.

What did Laurent recommend for effective international HRM?

Laurent (1986) describes a sequence. Headquarters recognises that its own HR practice reflects home-culture assumptions, accepts its ways are different rather than better, recognises that subsidiaries may prefer other valid methods, is willing to discuss cultural differences openly, and finally builds a common conviction that learning from other cultures makes people management better.

Study strategy

Exam move

Learn this chapter as vocabulary plus two tensions. Write the three nationality categories and the two movement labels on a card, then test yourself on mixed cases where one person carries two labels. Draw the five internationalisation stages from memory with the involvement level for each, because later chapters on staffing, pay and acquisitions assume you can place a firm on that ladder.

For the strategy material, practise a single paragraph that takes any policy, such as a global bonus or a common appraisal form, and argues it through integration against local responsiveness, closing with fit to business strategy. Use the six complexity factors as a checklist when a case asks why an international problem is harder than its domestic version.

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