Why Do International Companies Use Expatriate Managers? Essay

3943 Words Feb 3rd, 2011 16 Pages
Long before the globalisation, the internet and advanced telecommunications many companies with an international orientation have applied expatriate managers - some even since the early days of international trade. The theme for this essay is critically to evaluate the reasons why international companies continue to use expatriate managers even though it is a very expensive option.

The term expatriate originates from the Latin words ex patria (out of fatherland) and refers to an employee from one country that temporarily works and resides in another. Expatriates may either be send out for assignments from the parent company as parent-country nationals (PCNs), send in as an ‘inpatriate’ to the parent company from the host country
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Introductory, setting the context from a human resource management (HRM) perspective, the need for a sufficient supply of qualified managers who are capable of managing in foreign markets increases as the importance of overseas operations expands within the organization (Stroh & Caligiuri, 1998). This is related to the international company’s degree of internationalisation[2]. The market servicing strategy of an international company may initially evolve from conducting direct export, to setting up sales subsidiaries abroad, followed by overseas production in form of either licensing, joint ventures, acquisitions and eventually in form of greenfield investments. Besides a growing wish for exploiting global opportunities, the domestic sales of home-oriented companies may also be threatened by competitors, thereby confronting the home-oriented companies with a ‘eat or be eaten’ scenario. As a strategic response and as a strategic development path, companies therefore often choose to proactively merge with and/or acquire other businesses, thereby speeding up or increasing a vertical / horizontal integration into exclusive global value chains for serving global markets – and thus the internationalisation degree is increased. Additional globalization factors like deregulation of trade, free flow of capital and improvements in cost and speed of transportation have further supported and accelerated the

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