Discuss the Challenges to Effective Compensation in Mncs and How Consistency and Equity of Compensation Can Be Achieved.
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Royal Holloway University of London
MSc International Management
Discuss the challenges to effective compensation in MNCs and how consistency and equity of compensation can be achieved.
Introduction
In today’s increasingly competitive environment, businesses are globalizing their firms in order to maximize their profitability and compete effectively. This globalization is exasperated by the availability of cheap labour, raw materials, increased market share and competitive taxation systems. This has led to an increase in Multinational Corporations (MNCs), which are enterprises that deliver services or mange production in more than one country. With the rise of MNCs, managers have to deal with diverse challenges, some of which they are not prepared to handle. They are discovering that there is no single solution for all of these challenges and that each situation presents unique challenges and parameters that require localized solutions. These localized solutions are particularly needed in markets with different cultures and value systems. There are multiple cultural issues that mangers of MNCs need to address. Some are visible and include different dress codes, language, behaviour, art, fashion and food. However it is the non-visible cultural aspects that are posing serious challenges to MNCs. These include customers’ customs, beliefs, histories, personalities, family and national values, religion, national culture, gender, corporate culture and job functions. To illustrate the complexities that MNCs face, take the example of a corporation headquartered within the United Kingdom (U.K.) that wants to expand into Singapore. In the United Kingdom this corporation has been exposed to a business environment that is autonomous, self directed, and includes an individualistic culture (independence). However, upon expansion into Singapore, it will face a new working environment that has a collective culture-identity defined by
Royal Holloway University of London
MSc International Management
Discuss the challenges to effective compensation in MNCs and how consistency and equity of compensation can be achieved.
Introduction
In today’s increasingly competitive environment, businesses are globalizing their firms in order to maximize their profitability and compete effectively. This globalization is exasperated by the availability of cheap labour, raw materials, increased market share and competitive taxation systems. This has led to an increase in Multinational Corporations (MNCs), which are enterprises that deliver services or mange production in more than one country. With the rise of MNCs, managers have to deal with diverse challenges, some of which they are not prepared to handle. They are discovering that there is no single solution for all of these challenges and that each situation presents unique challenges and parameters that require localized solutions. These localized solutions are particularly needed in markets with different cultures and value systems. There are multiple cultural issues that mangers of MNCs need to address. Some are visible and include different dress codes, language, behaviour, art, fashion and food. However it is the non-visible cultural aspects that are posing serious challenges to MNCs. These include customers’ customs, beliefs, histories, personalities, family and national values, religion, national culture, gender, corporate culture and job functions. To illustrate the complexities that MNCs face, take the example of a corporation headquartered within the United Kingdom (U.K.) that wants to expand into Singapore. In the United Kingdom this corporation has been exposed to a business environment that is autonomous, self directed, and includes an individualistic culture (independence). However, upon expansion into Singapore, it will face a new working environment that has a collective culture-identity defined by
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