1- please summarize in details four reasons international activities facilitate
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Question
1- please summarize in details four reasons international activities facilitate attainment of competitive advantage 2- describe and explain the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs1- please summarize in details four reasons international activities facilitate attainment of competitive advantage 2- describe and explain the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs
1- please summarize in details four reasons international activities facilitate attainment of competitive advantage 2- describe and explain the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs
Explanation / Answer
Ans 1 – Factor Conditions. According to standard economic theory, factors of production—labor, land, natural resources, capital, infrastructure—will determine the flow of trade. A nation will export those goods that make most use of the factors with which it is relatively well endowed. This doctrine, whose origins date back to Adam Smith and David Ricardo and that is embedded in classical economics, is at best incomplete and at worst incorrect.
In the sophisticated industries that form the backbone of any advanced economy, a nation does not inherit but instead creates the most important factors of production—such as skilled human resources or a scientific base. Moreover, the stock of factors that a nation enjoys at a particular time is less important than the rate and efficiency with which it creates, upgrades, and deploys them in particular industries.
The most important factors of production are those that involve sustained and heavy investment and are specialized. Basic factors, such as a pool of labor or a local raw-material source, do not constitute an advantage in knowledge-intensive industries. Companies can access them easily through a global strategy or circumvent them through technology. Contrary to conventional wisdom, simply having a general work force that is high school or even college educated represents no competitive advantage in modern international competition. To support competitive advantage, a factor must be highly specialized to an industry’s particular needs—a scientific institute specialized in optics, a pool of venture capital to fund software companies. These factors are more scarce, more difficult for foreign competitors to imitate—and they require sustained investment to create.
Nations succeed in industries where they are particularly good at factor creation. Competitive advantage results from the presence of world-class institutions that first create specialized factors and then continually work to upgrade them.
Demand Conditions. It might seem that the globalization of competition would diminish the importance of home demand. In practice, however, this is simply not the case. In fact, the composition and character of the home market usually has a disproportionate effect on how companies perceive, interpret, and respond to buyer needs. Nations gain competitive advantage in industries where the home demand gives their companies a clearer or earlier picture of emerging buyer needs, and where demanding buyers’ pressure companies to innovate faster and achieve more sophisticated competitive advantages than their foreign rivals. The size of home demand proves far less significant than the character of home demand.
Home-demand conditions help build competitive advantage when a particular industry segment is larger or more visible in the domestic market than in foreign markets. The larger market segments in a nation receive the most attention from the nation’s companies; companies’ accord smaller or less desirable segments a lower priority.
More important than the mix of segments per se is the nature of domestic buyers. A nation’s companies gain competitive advantage if domestic buyers are the world’s most sophisticated and demanding buyers for the product or service. Sophisticated, demanding buyers provide a window into advanced customer needs; they pressure companies to meet high standards; they prod them to improve, to innovate, and to upgrade into more advanced segments. As with factor conditions, demand conditions provide advantages by forcing companies to respond to tough challenges.
Local buyers can help a nation’s companies gain advantage if their needs anticipate or even shape those of other nations—if their needs provide ongoing “early-warning indicators” of global market trends. Sometimes anticipatory needs emerge because a nation’s political values foreshadow needs that will grow elsewhere.
Related and Supporting Industries. The third broad determinant of national advantage is the presence in the nation of related and supporting industries that are internationally competitive. Internationally competitive home-based suppliers create advantages in downstream industries in several ways. First, they deliver the most cost-effective inputs in an efficient, early, rapid, and sometimes preferential way. Italian gold and silver jewelry companies lead the world in that industry in part because other Italian companies supply two-thirds of the world’s jewelry-making and precious-metal recycling machinery.
Far more significant than mere access to components and machinery, however, is the advantage that home-based related and supporting industries provide in innovation and upgrading—an advantage based on close working relationships. Suppliers and end-users located near each other can take advantage of short lines of communication, quick and constant flow of information, and an ongoing exchange of ideas and innovations. Companies have the opportunity to influence their suppliers’ technical efforts and can serve as test sites for R&D work, accelerating the pace of innovation.
The nation’s companies benefit most when the suppliers are, themselves, global competitors. It is ultimately self-defeating for a company or country to create “captive” suppliers who are totally dependent on the domestic industry and prevented from serving foreign competitors. By the same token, a nation need not be competitive in all supplier industries for its companies to gain competitive advantage. Companies can readily source from abroad materials, components, or technologies without a major effect on innovation or performance of the industry’s products. The same is true of other generalized technologies—like electronics or software—where the industry represents a narrow application area.
Firm Strategy, Structure, and Rivalry. National circumstances and context create strong tendencies in how companies are created, organized, and managed, as well as what the nature of domestic rivalry will be. In Italy, for example, successful international competitors are often small or medium-sized companies that are privately owned and operated like extended families; in Germany, in contrast, companies tend to be strictly hierarchical in organization and management practices, and top managers usually have technical backgrounds.
No one managerial system is universally appropriate—notwithstanding the current fascination with Japanese management. Competitiveness in a specific industry results from convergence of the management practices and organizational modes favored in the country and the sources of competitive advantage in the industry. In industries where Italian companies are world leaders—such as lighting, furniture, footwear, woolen fabrics, and packaging machines—a company strategy that emphasizes focus, customized products, niche marketing, rapid change, and breathtaking flexibility fits both the dynamics of the industry and the character of the Italian management system. The German management system, in contrast, works well in technical or engineering-oriented industries—optics, chemicals, complicated machinery—where complex products demand precision manufacturing, a careful development process, after-sale service, and thus a highly disciplined management structure. German success is much rarer in consumer goods and services where image marketing and rapid new-feature and model turnover are important to competition.
Individual motivation to work and expand skills is also important to competitive advantage. Outstanding talent is a scarce resource in any nation. A nation’s success largely depends on the types of education its talented people choose, where they choose to work, and their commitment and effort. The goals a nation’s institutions and values set for individuals and companies, and the prestige it attaches to certain industries, guide the flow of capital and human resources—which, in turn, directly affects the competitive performance of certain industries. Nations tend to be competitive in activities that people admire or depend on—the activities from which the nation’s heroes emerge.
Ans 2 – Compensation is one of many human resource (HR) tools that organizations use to manage their employees. For an organization to receive its money’s worth and motivate and retain skilled employees, it needs to ensure that its compensation system is not an island by itself. Not only is it important for an organization to link compensation to its overall goals and strategies, it is important that its compensation system aligns with its HR strategy. Too many organizations plan and administer their pay systems by default; or worse, fall back on “the squeaky wheel gets the grease” practices. More than any other area in HR, ignoring pay and performance systems can be devastating. It is a very expensive and laborious process to hire new employees, buy back trust of current employees and renew the organization’s energy and motivation level. By ignoring this issue, it does not go away or get better with time. It will take extra money and valuable resources to fix the system. Smart, successful organizations do regular planning and evaluating of their compensation and performance appraisal systems. Because compensation is visible and important to employees, it is critical to consistently communicate a clear message regarding how pay decisions are made. In short, a solid pay-for-performance strategy requires that employee pay matches the organization’s message.
Preliminary Conditions
HCNs, TCNs & Expatriates – Compensation professionals must distinguish between host country nationals, third country nationals and expatriates as compensation recipients with their own unique issues. Host country nationals are the foreign national citizens who work in the home country. Third country nationals are the foreign national citizens who work for home country companies’ branches or units in foreign countries excluding the home & home country of the foreign nationals. Expatriates are the home country nationals who are employed in foreign countries for the same companies.
The term of the international assignment – is central in determining compensation policies. Short-term assignments (i.e., usually less than 1 year in duration) generally do not require substantial modifications to domestic compensation packages; however, extended assignments necessitate features that promote a sense of stability and comfort overseas. These features include housing allowance, educational expenses for children, and adjustments to protect the expatriates from paying double taxes.
Staff Mobility – Companies must also consider whether foreign assignments necessitate employees’ moving from one foreign location to another. Such moves within and across foreign cultures may disrupt the expatriates’ and their families’ lives. Staff mobility comes at a price to companies in the form of monetary incentives and measures to make the employees’ moves as comfortable as possible.
Inflation – is the increase in prices for consumer goods and services. It erodes the purchasing power of currency. Expatriates’ purchasing power remains unaffected when there is no inflation, however, the expatriates’ purchasing power decreases when the inflation is on the rise.
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