IHRM+6th+Edition+GlobalHRM_Ch04

Chapter 4: International Mergers and Acquisitions, Joint Ventures, and Alliances

Global HRM Overview

• Focuses on policies and practices for multinational enterprises (MNEs) concerning human resource management (HRM) during international expansions.

• Authored by Ibraiz Tarique, Dennis R. Briscoe, and Randall S. Schuler.

Learning Objectives

• Describe the nature of international mergers, acquisitions, joint ventures, and alliances.

• Explain the major implications of international HRM (IHRM) related to these combinations.

• Define the role of HRM professionals in effectively implementing these international strategies.

Types of International Combinations

• Non-equity Based Combinations:

  • Share profits, responsibilities, and resources via contractual relationships.

• Equity Based Combinations:

  • Involve long-term collaborative relationships requiring ongoing HR management.

  • International Mergers and Acquisitions (IM&A):

    • Companies join operations to create a new entity where they share equality.

  • International Joint Ventures (IJVs):

    • Legally and economically separate entities formed by two or more firms that invest resources for specific goals.

Record of Success or Failure

• A significant number of international combinations fail to achieve their planned objectives, with about a third dissolving within a few years.

• Common reasons include financial or strategic motivations. Successful mergers or acquisitions can lead to:

  • Enhanced industry consolidation.

  • Geographic expansion.

  • Market entry and new technology acquisition.

  • Synergy creation to form a dominant firm.

Due Diligence

• Critical for firms to perform thorough due diligence to assess potential gains.

• High failure rates often stem from cultural incompatibilities and HR misalignment rather than financial miscalculations.

• Extensive HR due diligence is necessary both pre-acquisition and during post-merger integration.

IHRM and International Mergers and Acquisitions Process

• Combination usually occurs in three phases:

  • Phase 1: Pre-combination (e.g., target screening).

  • Phase 2: Combination planning (implementation strategies).

  • Phase 3: Post-combination (HR's role in integration).

IHRM Involvement in IM&A

• Attention to HRM issues is vital to prevent high failure rates:

  • Preparation: Anticipate potential liabilities and cultural incompatibilities.

  • Content: Address general organizational issues, including language and specific international HR matters.

  • Integration Process: Plan for merging operations while focusing on HR aspects.

  • Various strategic approaches may be adopted (refer to figures).

IHRM and International Joint Ventures

• An IJV is a new entity created that represents holdings from multiple parent firms.

• The entities operate under shared control but remain legally independent.

• Central challenges include developing a cohesive culture and operational practices.

Four Stages of the IJV Process

1. Formation: Establishing the partnership.

2. Development: Building the IJV's operational foundations.

3. Implementation: Executing the IJV's operational strategies.

4. Advancement: Moving the IJV forward and beyond initial goals.

Stages One and Two: Formation and Development of the IJV

• Motivations for creating an IJV include:

  • Knowledge acquisition from partners.

  • Access to technology and manufacturing methods.

  • Meeting regulatory requirements.

  • Achieving economies of scale and improving competitive advantage.

• High failure rates emphasize the need for focused HR practices:

  • Issues often stem from poor partner selection and lack of clear objectives.

Stage Three: Implementation of the IJV

• Successful implementations rely on trust-building and cultural integration:

  • Effective job design and staffing policies are essential early on to facilitate collaboration and enhance outcomes.

Stage Four: Advancement of the IJV

• Continuous validation of knowledge transfer between partners enhances long-term success:

  • Critical to ensure newly acquired knowledge is shared within the IJV and with parent firms.

IHRM and International Alliances

• International Alliances:

  • Partnerships that don’t create separate legal entities but provide low-risk ways to enhance capabilities and market access.

  • Major motivations:

    • Growth opportunities.

    • Access to resources and competencies.

    • Market expansion.

Options for Managing International Alliances

• Partnership designs include:

  • Operator Model: One dominant partner leads.

  • Shared Model: Both cultures inform strategies.

  • Autonomous Model: New structures and cultures are formed.

General People Issues in Alliances

• Key management issues include:

  • Organizational structures and culture integration.

  • Cross-cultural skills of executives and effective succession planning.

  • Ensuring language compatibility between partners.

Role of IHRM in International Alliances

• IHR professionals face complex decision-making environments involving multiple stakeholders:

  • Negotiation skills are crucial.

  • Balance between local and international responsibilities is key to success.