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An expatriate is a highly skilled worker with unique expertise who is sent to work in another unit of the same company located in a foreign country, generally on a temporary basis states two categories of expatriates “PCN (Parent country national) whose national origin is same as that of corporate headquarter and TCN (third-country national) Nationals of the country other than MNC‘s (Multinational Corporations) home country and the country of the subsidiary”. The fast growth of internationalization has insisted on globalizing firms to increase the expatriate population. In a survey of 2002, 35% of respondents stated that the expatriates’ population is increasing continuously.
Strategic Role of Expatriates And IHRM
“Successful implementation of global strategies depends on getting the right people with the right skills, at the right time which typically requires the movement of people across national borders” (Selmer, 1999).
IHRM is more strategic now as compared to before because the area of HRM has expanded and more connected with organizational strategic needs. IHRM can perform a crucial role in getting a competitive advantage by reducing cost and by escalating sources of products and services differentiation and attaining competitive advantage through international human resource need that these activities should be managed from a strategic viewpoint.
Coordination and Control
Due to the fast growth of multinational‘s businesses, a greater need for coordination and control is a significant challenge toward the successful accomplishment of the organization‘s integration. Facilitating, well-defined coordination and control of subsidiaries is the primary strategic role of expatriates in order to attain international integration across MNE‘s units. Expatriates play a vital role in controlling subsidiaries where the control of local activities is of high importance to headquarter e.g. heavily invested subsidiaries, research, and development activities, production as compared to sales units and especially subsidiaries where functional dependency is weak on headquarter resources and where local stakeholders are strong.
Knowledge transfer and Expatriates
In today‘s business core competencies are being formulated from a firm‘s learning.
Today expatriates play an extremely strategic important role in knowledge-related functions which include “local staff development and skills transfer from the headquarter, developing top talent and future leaders of the company, improving the trust of a subsidiary, training local employees to improve their individual and team skills, implementing knowledge practice, developing sharing and transferring best practices, developing top talent and future leaders of the company and implementing knowledge practices”.
In current literature “expatriate’s failure” is defined as the inability to adjust to the host country environment, low performance at an overseas assignment, and premature return or coming back to the home country prior to completion of their foreign assignment. While expatriates
are extremely important for the operational and strategic success of organizations, the rate of
expatriate‘s failure on foreign assignments is continuously increasing and it is estimated that 16-70 % of expatriates fail in their assignments depending on the host country (Sims and Schraeder, 2004). The most common and very costly problem facing multinationals in doing business in overseas countries is the high level of expatriate failure.
The increases in international operations by multinational corporations have led to an increase in the number of expatriate employees all over the world. Expatriates are used to implementing the internationalization of their organizations in foreign subsidiaries successfully. Managing expatriates is not an easy task, since it usually means high costs and considerable preparation. This is because expatriate employees end up receiving high salaries and benefits to be relocated to another foreign subsidiary.
Culture And International Business
As organizations go global, they bring in employees not only from their host countries but from other countries in which they operate. Consequently, multinational companies have employees of various nationalities and cultural backgrounds working and managing operations in different countries. This mixture results in professional, cultural, and social challenges. The gaps derived from these differences become great obstacles to individuals and companies achieving the performance expected of them in a different context.
The role and preparation of expatriates being sent to work abroad by companies are becoming a growing and important managerial process that may contribute to the performance of companies overseas.