Thursday, January 31, 2013

International human resources: Expatriate Adjustment

            The issue of expatriate’s adjustment has been in the HRM literature for a long time. The globalization of the operations of many firms in the world is leading to a scenario where many managers will spend many of their years or careers while working abroad. The issue of the management of expatriates has been a very important one in these organizations. The costs that the firms usually incur in having the expatriates are high for instance in terms of the fringe benefits, the education and health allowances, return air fairs and the huge salaries. There is usually a noted high failure rate that can be faced by the companies that use expatriates due to the fact that the expatriates had difficulty adjusting to the life and work in a different culture. This can happen due to abrupt and little preparation on the part of the employee who is being sent to go and work abroad (Andreason & Kinneer, 2005). The paper will explore how Coca Cola Company expatriate from South Africa can adjust to the working conditions in China.
Company Background
            Coke was founded in 1886 by an Atlanta chemist, John Pemberton. During that period, the company was selling just 9 glasses per day. The company was later sold to Candler who later sold it to Woodruff in 1923. The products of the firm started to be marketed all over the world after the purchase by Woodruff. The firm had reached the mark of selling 1 billion bottles per day in 1997. In 2011, 11.7 billion bottles were sold throughout the world (Coca Cola, 2012). The mission of Coke was to inspire moments of optimism, refresh the world, make a difference and create value for people (Pendergrast, 2004). The firm’s visions include lean and effective production, responsibility to the planet and maximization of shareholders returns. The firm has over 6000 brands which are sold all over the world.
The critical success factors of Coca Cola Company
            The marketing operations of the firm have ensured that the firm remains the world’s most recognized brand. The firm greatly differentiates it products from those of the competitors and thus allowing the firm to have a sustainable competitive advantage from the product quality that result from the differentiation. The other success factor of the firm is the integration of technology and the high level of innovation that is found in the operation of the firm. The firm used vending machines especially in North America, where the customers could be able to buy the products of the firm more easily. The fridge pack innovation that the firm came up with also led to an increase in the growth of the firm (Mobley, Wang & Li, 2009). The low mark up pricing of the products of the firm during the festive seasons has also contributed to the success of the firm. the firm’s other critical success areas lies in the promotional activities that the firm engages in for instance the firm has been a sponsor of major world events such as the Olympic and FIFA world cups.
Environmental analysis of the firm
The environment of the firm can be analyzed through the use of a number of instruments for instance through the use of PESTEL, Porters 5 forces and SWOT analysis
PESTEL analysis
            Political factors that affect the operations of the Coca Cola Company include the different tax regimes that characterize the countries where the firm operates. There are also labor laws that restrict the minimum wages that should be paid out to the workers of the firm. Finally, there are also the political stability and or instability issues that affect the operation of the firm for instance conflicts and other political upheavals that affect the operations of the firm (Daft & Marcic, 2009). There are also economic factors that affect the various operations of the firm. The first includes the volatilities in the foreign exchange market especially due to the fact that the firm operates in over 200 countries. The increasing interest rates are also leading to an increase in the costs to the firm for instance the debt financing of the operations is increasingly becoming difficult. The bleak global economic outlook would also have a negative effect on the purchasing power of the various consumers thus a potential for reduction in revenues (Madura, 2007).
            The socio-cultural factors that affect the operations of the firm include the changing consumer preferences especially due to the realization of the effect of the products of the firm. Coke has been able to respond to this through the addition of diet products. The firm has also been able to add new products such as water and sports drinks due to the social trend of fitness (Singla, 2010). Technology has also affected the operation of the firm; the company has been able to increase the quality of its products through the use of new technologies. The firm has also been able to adopt technologies such as those that allow for recycling bottles so that the effects on the environment can be minimal. According to Boone & Kurtz (2010), the firm has also used technology to makes trendy bottles that have a higher appeal to the youthful consumers.
The legal factors that affect the operations of the firm include those related to the safety of the various products of the firm. The Food and Drug Administration (FDA) produces laws that govern the packaging and labeling of products, and the general safety of the products (Pendergrast, 2004). The firm is also affected by the issues of the environmental protection as water is a major ingredient that the firm uses. Finally, there are environmental issues for instance the sales are dependent on the weather with the products being sold mostly in the summer and hot weather. The sales are very low during the winter and rainy weather.
Porter’s 5 forces analysis
            The porter’s five forces are used to determine the competitiveness and thus the attractiveness of the industry in which the firm operates. The threat of new entrants is low due to a number of reasons. There is a high costs that are involved in the marketing and advertisement of the products and brands of the firm thus block some firms. The firms in the industry have high customer loyalty thus will most likely not switch. The new entrants will also fear retaliation in the form of new product lines and price wars (Pendergrast, 2004). 
The competition within the industry is intense between Pepsi and Coke as they both compete globally in over 200 countries. The market growth has been declining in all sectors by about 1.1 % for all the firms and the market share is majorly captured by Coke and Pepsi. The two major firms also compete in terms of differentiation and advertising rather than on prices. The threats of substitutes are high in the industry for instance tea, juices, coffee, beer and water. This threat is high as there are low switching costs on the part of the consumers. The perceived value or price is low in the industry as the consumer choices are informed by the advertisement. Thus, for the substitutes to establish, they will need to invest in massive advertisement and brand awareness (Pendergrast, 2004).
The bargaining power of the buyers is high to medium depending on the outlet. For the fasts food outlets, the power is high due to the fact that they purchase the products in bulk. However, in the convenience stores, the power is slightly low to high as the customers have to pay superior prices. Finally, the bargaining power of the suppliers is low due to a number of reasons. The switching cost from one supplier to another is low due to the basic nature of the raw materials that they supply. The suppliers are also many and thus when the firm severs link with one they can easily jump onto another (Hill & Jones, 2010).
Challenges faced by expatriates
            The major problem that affects the expatriates is how they can be able to adapt to the organizational and the new national culture. These arise from the personality of the expatriate and the differences in the home and foreign country (Routamaa & Rautiainen, 2002). Expatriate adjustment refers to the degree of the environment coordination of the person and their personal feelings. The adjustment therefore refers to the comfort of the person to the job, socialization and the aspects of psychological comfort with the host culture in terms of the housing, food and transportation. There are three main dimensions that can be learnt from the case. They include work adjustment, general living adjustment and social interaction adjustment (Lan, 2002).
Expatriate adjustment problem
            There were a variety of problems that were noted. The problems that the firm was undergoing through were greater than those that the employees had been told. There was also a low skill of the workforce of the firm and a general lack of professionalism in the running of the firm. There were also problems that were noted in some very optimistic break even analysis and profitability. The board members of the bottling company in china were not sure of how the problems that were being faced could be solved. The Board also had some members who could not be able to carry out their jobs although they were promoted on the basis of their seniority and loyalty to the firm. The collectivism and high power distance in China led to the formation of a special relationship between the members of the firm. The low level employees offered obedience and loyalty to the superiors who in turn offered protection and consideration. This brought about problems in implementing the changes that were proposed.
There was also the issue with the organizational structure of the firm (Matrix structure). There were unclear responsibilities and reporting lines, little duty delegation and centralized decision making in the firm. The expatriate offered a number of changes for instance decentralization of the decision making and many other. The Board Chairman did not back the changes due to the opposition from senior staff. There were disagreements as the expatriate’s actions according to the Chairman were rattling the people who are important to the firm and thus led to the termination.
Reflection of the problems
            The expatriate would have taken more time in building relationships that would help in the selling of the various change proposals that he had. He never backed down as taking the time would lead to his assimilation into the culture. On the  other hand, the expatriate GM misjudged the importance of culture for instance in terms of the power distance and decision making, the long term orientation of the Chinese where activities are to be done for their long term benefits and the collectivist views for instance seniority in the promotions and other benefits. The promotion issues and the membership of the board should have been resolved if the General Manager (GM) understood the intricacies and the working of the Chinese (Hofstede, 1991).
How Coke bottling plant deals with the issues of expatriate adjustment
            The problems that were faced in expatriate adjustment can be understood from the theory of work role transitions; this has been used to explain the varied transitions that expatriates make in adjusting to their new roles in the host countries and how they can adopt the culture. First, there can be personal development and change to accommodate the new roles or changing the way in which the role is done. This latter option failed at the Coca Cola bottling plant in China.
            The focus should be on adjusting to the new role. The strategies include replication, exploration, determination and absorption. Determination involves changing the parameters of the role and not the skills and core values. Exploration involves the change in role and person parameters as the new roles will influence the person (Nicholson, 1984). Absorption involves undertaking a lot of personal change so that the demands of the new job can be accommodated; involves little change to how the job is done. Finally, replication involves making slight changes to adjust to new role; thus continuing to behave as before without consequences (negative) to the settling on the job and performance.
At the firm, the GM was employed to bring about changes to the practices and norms. Later, the Chairman wanted the GM to show conformity to the very norms and practices (Nicholson, 1984). The implied psychological contract of the GM was that he could use determination strategy to bring about the changes that were needed. The changes that were proposed were thwarted as the chairman who had apparently given him the free hand in running the organization. The GM was encouraged to use more of absorption strategy through conforming to the organizational practices and norms. However, this would conflict with the goals of his hiring; improved profitability.
The expatriate, GM, was also faced with novel social and cultural ways as he had never worked in SE Asia before. This could have been bridged through the use of seminars where the expatriates are introduced to the local business scene. They can learn about the culture characteristics such power distance, collectivism, time orientation and uncertainty avoidance etc. Other cross cultural management training can also be able to help for instance acculturation which would lead to the adoption of the exploration strategy where he would change himself to improve his understanding of the local Chinese culture (Nicholson, 1984).
The expatriate adjustment is a very important factor that must be considered by a firm. The problems that are found out in the firm include both the different in organizational and national culture. The effects were massive as the partnership crumbled just after take off. It is important that the terms are clearly indicated in writing to avoid the cases of the Board going back on their word. Also, the expatriates should be able to clearly understand the culture in which they are going to work in before they can embark on the journey. When the two considerations are looked into the adjustment will be easier.

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