Ian

Smiley (15351596), Tusshar Batra (17978804),

Luca Cantadori (18162401), Riccardo Stiglich
(18162418)

Latrobe University

Caltex Australia in Singapore

BUS5HRM Group
Report

Table of Contents
General issue (b)
General issue (c)
General issue (d)
General issue (e)
Specific issue 1
Specific issue 4
Specific issue 6
Specific issue 12
References

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12
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20
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Caltex Australia in Singapore

[Subject]
General issue (b): Discuss the impact of globalization on the management of the MNEs
employees?
Globalization is a wide process that is moving people from all different countries of the world
into a single community that is linked thanks to the huge network of communication
technologies. In this environment its easier for managers to find the right employees since they
no more need to rely on a limited market but instead they can now recruit employees from all
around the world.
Because of globalization, managers have now to face several challenges:

- managing diversity of workforce

- managing outsourcing of employees
- downsizing the workforce
According to Torres and Bruxelles (1992) managing diversity means establishing a
heterogeneous workforce to perform to its potential in an equitable work environment where no
member or group of members has an advantage or a disadvantage. Managing diversity means
being able to create and maintain an environment that allows individuals to include a process of
creating and maintaining an environment that naturally allows all individuals to express their
capabilities and knowledge in order to achieve organizational goals (Jenner, 1994; Thomas,
1994). Managing diversity thus means the ability to built specific skills, create policies and
prepare practices that allow the employees to do their best.
According to Cornelius (2001), if managers are good enough at successfully organize workforce
diversity they can create and environment which attracts people from various labour markets;

this means that managers have to recruit the best people for the job no matter their ethnicity, age,
gender or their characteristics and by doing so they can bring new ideas inside the organization.
Another challenge for managers regards managing outsourcing of employees. In fact a growing
trend nowadays is to outsource many activities that before were performed inside the
organization. Outsourcing, as argued by Lacity and Hirschheim (1993), involves the purchase of
goods and services that was previously provided internally.
There are many other motivations for outsourcing, beyond short-term cost savings. For example,
it can enable firms to focus on core activities and by doing so they could lessen the costs and
complexity of their own operations (Prahalad and Hamel, 1990; Hendry, 1995; Arnold, 2000).
Some observe that as suppliers may be significantly more advanced, outsourcing to them allows
organisations to exploit their more advanced technologies (Lamming, 1993; Venkatesan, 1992;
Greaver, 1999). Others suggest that outsourcing improves flexibility to meet changing business
conditions, demand for products, services and technologies (Greaver, 1999), by creating smaller
and more flexible workforces (Patterson and Pinch, 1995).
By doing so managers can achieve a great flexibility since payments are made only for work
completed, tasks undertaken are contract-related and the number of workers can be adapted to
the capacity of the plant. Outsourcing however can create problems for the firm. In fact
according to Blaxill and Hout (1990), core products or technology can be compromised and the
firm may be dependent on a large range of suppliers. Nevertheless outpouring might be
incompatible with high employee commitment; in fact if outsourcing reduces employee
commitment, it will have negative effects the firm performance thus resulting in a lower
productivity, lower quality of the products and also higher labour turnover (Walton, 1999; Porter
et al., 1974, Morris et al., 1993).
The last challenge that managers have to face in this globalized environment is about downsizing
the workforce and essentially it refers to the intended reduction of personnel.
According to Cameron (1994), we can identify three main types of downsizing that managers
can operate. The first type of downsizing is workforce reduction strategy and it focus on shortterm payoffs by eliminating head count or cutting back the number of employees. The second

type of downsizing strategy is called work redesign strategy, lead to moderate-term payoffs and
are designed to cut back on the work itself, for example, by merging units and redesigning jobs
along with or instead of reducing the number of employees. Finally the third kind of downsizing
is called systematic strategy. This kind of downsizing aim a long-term payoff and its focus is
about trying to change not only the culture of the organization but also the values and attitudes of
its employees.
According to McKinley, Sanchez and Schick (1995), even if downsizing is considered
essentially a cost reduction strategy and a way to enhance productivity and profitability, in
reality there is some evidence that it isnt beneficial at all. In fact downsizing, not only doesnt
reduce expenses to the desired level, actually resulting in higher expenses, but also
improvements in productivity and profitability are just temporary and they dont represent a
recovery to pre-layoff levels. Finally downsizing has also negative effects on the commitment
and work effort of those employees that survive downsizing.

General issue (c): Discuss the national culture and corporate culture of the MNE.

This section of the paper will discuss the national culture (Australian) and corporate culture at
Caltex Australia. The Australian culture can be quantified under the lens of 6-dimension model
pioneered by Hofstede. These dimensions are as follows:

1. Power Distance: This dimension outlines the degree to which the power is dispensed
unfairly. Australia scores as low as 36, which characterizes the communication between
managers and employees to be easy-going, direct and participative. This also indicates that the
existence of hierarchy is formless i.e. superiors are approachable for employees and the flow
of information is frequent. (Geert-hofstede.com, 2014)

2. Individualism: It measures the extent of interdependence between members of a society.

Australia scores as high as 90, which makes Australia highly individualistic where publics
self-perception pertains to I rather than WE. They take care of themselves and immediate
family only. (Geert-hofstede.com, 2014)

3. Masculinity: It deals with the motivating force that drives people, either the people want to
become the best (masculine) or they do what they like enjoy/like (feminine). Australia scores
61 and falls under the category of masculine society. (Geert-hofstede.com, 2014)

4. Uncertainty Avoidance: It depicts how the society deals with the expectations of the
unknown future. How threatened they are by the ambiguity of future and how do they plan to
tackle it. Australia transitionally scores 51 on this dimension. (Geert-hofstede.com, 2014)

5. Pragmatism: Low score on this dimension puts the organization in the category of Normative
societies where traditions are followed honorably and societal change is difficult. On the other

end of the continuum, high score makes the organization culturally connected with their past
and handles the situation of present and future according to that. Australia is a Normative
society with a low score of 21. (Geert-hofstede.com, 2014)

6. Indulgence: It is the degree to which individuals restrict their aspiration and urges depending
on their upbringing and culture. One category in this regard can be indulgence with weak
control to restrict and other can be restraint with strong control to restrict. Australia scores
as high as 71 and thereby slumps in the category of indulgence. People in Australia tend to
bring their desires to fruition in order to enjoy life. This also indicates preferentialism towards
leisure and their optimistic attitude. (Geert-hofstede.com, 2014)

Caltex Australias Corporate Culture

Corporate culture is an organized manner in which the superiors, subordinates and groups behave
and coexist with each other. It is a shared set of practices known and adhered by all (Hofstede
and Bond, 1984). This paper will assess the corporate culture of Caltex Australia on the grounds
set by Geert Hofstede. He used the following six dimensions to define corporate culture:

1. Means vs. Goals-oriented: Culture in Caltex Australia is more inclined towards the meansoriented conception where prominence is given to the method of doing things and bypassing
risk (Hofstede, 1984). (Rykrsmith, 2014)
2. Internally vs. Externally driven: Culture at Caltex Australia is more of externally- driven
rather than internal. As it more customer-oriented does provides products that the customer
wants rather than making what they feel is best for the client. For them customer is always
right and their prime agenda is customer satisfaction. (Rykrsmith, 2014)

3. Easygoing vs. Strict work discipline: Culture at Caltex Australia can be attributed as strict
work discipline as their exists fair amount of planning that results in productivity and
efficiency. Punctuality is of prime importance and work is delegated with detailed instructions
(Hofstede, 1984). (Rykrsmith, 2014)

4. Local vs. Professional: At Caltex Australia exists a very professional culture in a sense that
the employees can relate with their profession and substance of their work. Which implies that
the employees arent obligated to relate with their bosses or socialize in a particular way,
which enables the existence of high levels of diversity free from social pressures. (Rykrsmith,
2014)

5. Open vs. Closed system: At Caltex Australia the top management comprehends with the
notion that employee satisfaction is fundamental to achieving the goals set by the company.
Caltex Australia fosters an open culture where the new incumbents are conveniently
welcomed by all existing incumbents by the virtue of their inclusive approach, which enables
anyone to submerge well in the organization. (Rykrsmith, 2014)

6. Employee vs. Work-centered: Caltex Australia upholds a culture where happiness, safety
and satisfaction of employees is considered to be the fundamental reason for success and also
plays a major part in forming a competitive advantage. This belief of the company makes it
more Employee-centered. (Rykrsmith, 2014)

General issue (d): How do various country cultures impact the business and human
resource practice of the MNE?

Caltex according to ( Caltex.com) is present in more than 60 countries and territories in the
Asia-Pacific region and the Middle East, including many emerging , high growth markets .
Every countries has a different culture , that is possible to be described asthe collective
programming of the mind which distinguishes on group or category from another (Geerthofstede.com, 2014).
According to ( Lane , De Stefano , Maznevski , 2000 , p.19) interactions within ones culture
are difficult enough to manage effectively and consequently interactions with people from
different cultures present an even greater potential for distortion or misunderstanding .
Organisations have to pay particular attention to diversity , in fact as written by (Cox and Blake ,
1991 , p.45 ) a well managed, diverse workforce holds potential competitive advantages for
organizations.
How can this impact doing business and managing human resources ?
Cox and Blake state that within flexible work schedules is possible to manage diversity and it has
reduced costs and absenteeism.
Another important element in doing business in order to obtain a competitive advantage driven
by managing cultural differences is to create an environment where all personnel can thrive
(Cox and Blake , 1991 , p.47 ).
Cox and Blake affirmed if work teams "manage" the diversity well, they can make diversity an
asset to performance.
How is possible to do that? The solution is provided by the same authors all members should
have ample opportunity to contribute and potential communications, group cohesiveness, and
interpersonal conflict issues need to be successfully addressed (Cox and Blake, 1991, p.48).

Organisations have to adapt their business and human resources practises to foreign countries
and cultures, indeed practices that may be effective within one cultural context may not be
effective in other cultural contexts Aumann and Ostroff , 2006 , p.13).
As pointed out by Earley and Mosakowski (2000, p.298) cross- cultural management research
must consider the relation between culture and other levels of analysis by developing theories
that describe the mechanisms through which culture influences organizational phenomena.
Culture differences have different effects on HR and business practises , and accordingly the
management and HR department of Caltex should develop some particular features to manage
them.
The dynamics, complexity and diversity, now characteristic of global environment, are diffusing
into the domestic environment, making increasing demands on management and leadership
competencies at all organizational levels (Jokinen, 2005 , p.199) .
In order to acquire global leadership attributes is important according to Black and Gegersen
(1999, p.55) to do some working experiences abroad .
According to Azzariti (2003 , p. 131 ) the term leader has a broader meaning ( then the term
management ) , indeed he has to create and communicate the vision , develop companies and
cultural values and , within communication , to stimulate the participation inside the firm .
To develop the competencies needed to handle cross cultural differences the HRs system should
provide an adequate training to its employees first because To send a manager abroad can
typically cost three times what it would cost to keep him or her at home (Brewster , 1990 ,p.17)
, and second since according to Shaffer and Harrison , (1998 , p.87) the early termination of
just one expatriate costs U.S. firms as much as $1 million , but even worst can be the intangible
consequences , indeed the harm an unsuccessful expatriate may cause in the host country can be
detrimental to an MNCs' future global business (Caligiuri , 2000 , p.62)
According to Johnson , Lenartowicz and Apud (2006 , p.295 ) Many international business
failures have been ascribed to a lack of cross- cultural competence (CC) on the part of business
practitioners.

10

Consequently is crucial for MNE and also for Caltex to provide specific training to expropriate
management, in fact as reported by Black and Mendenhall (1990,p.120) Cross-cultural training
enables the individual to learn both content and skills that will facilitate effective cross-cultural
interaction by reducing misunderstandings and inappropriate behaviours
Indeed the manager that want to be globally competent has , according a work by Adler and
Bartholomew (1992), cited by Johnson, Lenartowicz and Apud (2006, p.527) to study the
cultures where hes going to work and has the skills to manage people from different cultures at
the same time.
Moreover Caltex HR system should provide training to expatriate management about crosscultural competencies.
Cross-cultural competencies are defined by Gertsen (1990 , p.340 ) as the ability to function
effectively in another culture .
A broader definition of cross cultural competencies is given by Johnson, Lenartowicz and Apud
(2006, p. 529 ) Cultural competence is a set of congruent behaviours, attitudes, and policies that
come together in a system, agency, or among professionals and enables that system, agency, or
those professionals to work effectively in cross- cultural situations.
To work effectively in a foreign environment , as written by Black and Gregersen (1990, p.54)
cross-cultural abilities are more important the technical ones.
Caltex following this reasoning should provide a due training to its employees , in order to
succeed in international assignments .
Another important issue that Caltex has to consider is which are the employees that have larger
possibilities to work successfully in a global environment : this is usually described as
international recruitment.
As written by Caligiuri (2000, p.62 ) International human resource experts agree it is imperative
for multinational companies (MNCs) to attract, select, develop, and retain employees who can
live and work effectively outside of their own national borders

11

The process of living and working effectively in the host country is called cross cultural
adjustment .
Caligiuri (2000, p.63 ) defines it as the extent to which individuals are psychologically
comfortable living outside of their home country .
The process of international recruitment has to select individuals with features that can stimulate
the process of adapting to the new country .
Caligiuri (2000, p.67-68 ) reported that two are the characteristic that fosters this process :
openness that will moderate the relationship-between contract with host nationals and cross
cultural adjustment and sociability that will moderate the relationship between contact with
host nationals and cross cultural adjustment .

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General issue (e): What type of business strategy has the MNE pursued in its international
business?
Caltex Australia is using a variant of international strategy in an attempt to gain a sustainable
competitive advantage over their Australian rivals. The international operations of Caltex
Australia take place in Singapore, where its wholly owned subsidiary, Ampol Singapore sources
crude oil and refined products for transport to Caltexs Australian refineries and terminals.
Having an international procurement subsidiary like this allows a firm to combine the advantages
over subsidiary location with the ability to work closely with the people ultimately responsible
for supplying a critical component of the business (Kotabe and Murray, 2004). An outsourcing
operation might have a location advantage but it would not be possible to have such a close
relationship between the parent firm and its outsourced labour. There are a number of advantages
to be exploited by the use of this subsidiary (Porter, 1992). The positioning of the subsidiary in
Singapore takes advantage of the fact that Singapore is the Asia-Pacific regions oil and fuel
trading hub (Carpenter and Ng, 2013, Yun and Jin, 2009); having key staff in a location where
they can meet and negotiate with oil producers and refiners offers the parent company an
advantage over staff based in Australia. This represents the breaking up of Caltex Australias
value chain (specifically procurement and inbound logistics (Porter, 1985)) in order to exploit the
comparative advantage of the subsidiarys location and combine it with the home country
capabilities to gain a competitive advantage over rivals (Mudambi and Venzin, 2010). The
establishment of the subsidiary coincides with the closure of one of Caltexs small Australian
refineries, refined products sourced from Singapore have a lower production cost due to their
large size contributing to economies of scale. An additional advantage of Singapore is the
possibility of manipulating of transactions between Ampol Singapore, Chevron and Caltex
Australia (50% owned by Chevron) in order to pay less tax. Put together, all of these points
contribute to creating value above and beyond what Caltex Australia would be capable of
operating out of Australia alone.
Staffing the subsidiary needs to be congruent with its objective of being an oil purchasing
operation in foreign countries where business is conducted in languages other than English and
cultural norms are different to those of the home country. As such, job advertisements for Ampol

13

Singapore list the ability to speak Mandarin as a beneficial attribute (LinkedIn, 2014). Given
Singapores reputation as an oil hub, sourcing employees locally may give Ampol Singapore
access to specific knowledge or social networks that builds the subsidiarys effectiveness as an
oil purchasing business. Local employees might also be necessary due to changes to Singapores
labor laws (Han Wong, 2013). The use of a greenfields subsidiary as opposed to the acquisition
of a brokering firm suggests Caltex wants a great deal of control over its operations (Harzing,
2002). This may be because the parent firm wants a say in any negotiations, it also may be due to
the internationalized nature of Singapore reducing the advantage of a multi-domestic style
operation. Because the subsidiary has such a narrow focus, knowledge of local Singaporean
traditions and customs, and local responsiveness may be of limited use away from the
negotiation table.

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Specific issue 1: What labour laws are relevant to the global operations of the chosen
MNE?

One of the key roles of the international human resource manager is to navigate the legal
environment of the host country (Schuler, Dowling and De Cieri, 1993). This may mean sending
a team of human resource professionals to the host country to examine the legal environment
first hand and develop a strategy that respects the local laws while maintaining the ability of the
subsidiary to achieve its goals (Sparrow, 2007). By virtue of its operations in Singapore, Caltexs
subsidiary is obliged to abide by its host countrys labour laws in its interactions with its
employees. Singapore generally has less restrictive IR laws than Australia, no minimum wage,
fewer restrictions on firing employees and restrictions placed on trade union activity
(International Labour Office Geneva, 2010, Mom.gov.sg, 2014). However there are restrictions
on employment of non-citizens or permanent residents which may be burdensome for
multinational corporations such as Caltex Australia if they are looking for employees with
specific skills or abilities uncommon in Singapore (Han Wong, 2013, Singapore Ministry of
Manpower, 2013). Employment of foreign workers aside, the relaxed labour laws compared with
Australia may allow the human resource manager to focus less on that aspect of HR function;
indeed laws such as Singapores that enable lower labour costs are a major attraction for
international businesses (Porter, 1992).
Employees in Singapore are covered by the Employment Act (Mom.gov.sg, 2014) and
employers such as Ampol Singapore are obliged to adhere to them regardless of foreign
ownership. However managers and executives are not covered by the Act. Singapore divides its
foreign worker in to three classes, one for people who will earn over $3300 per month, one for
people who earn over $2000 per month and one for people earning less than $2000 per month.
There are restrictions to the number of people holding these passes who can work for an
organisation in order to protect local workers jobs from migrant workers. The critical workforce
of Ampol Singapore are likely to be the highly skilled and educated knowledge workers whose
jobs it is to negotiate oil prices and manage the logistics of shipping the products to Australia.
These employees are likely to fall under the Employment Pass (people who earn more than

15

$3300/month) should they be sourced from Australia or a third country and have fewer
restrictions placed on their hire. However care should be taken by human resource managers
during the hire process to ensure all the legal obligations are met as breaking the laws may mean
a strategically important employee is sent home or prosecuted which may give the subsidiary a
poor reputation that makes further recruitment of highly sought after talent difficult. Minor
aspects of the law are important to adhere to as well. Wages must be paid at least once a month,
and no later than seven days after the end of the monthly pay period (Mom.gov.sg, 2014).
Working more than forty four hours in a week entitles an employee to overtime pay at a rate of
1.5 times the normal hourly rate. Some female employees in Singapore are entitled to paid
maternity leave, the human resource manager will need to have a plan in place for this to ensure
temporary employees are available to fill the vacancy and money is allocated to pay the
employee currently on leave. It is also important that the human resource manager understand
the period of notice required when terminating employees. The period ranges from one day to
four weeks depending on how long the employee has been with the company. The penalty for
breaking the employment act is a fine of up to $5000 and jail time of up to six months so it is
important for the human resource manager to be well acquainted with the legal environment in
Singapore and keep up to date with any developments that may require changes to company
policy and practice. Finally, some third country employment laws may apply to third country
nationals employed by the subsidiary in Singapore (Florkowski and Nath, 1993). Because of the
complexities of the international human resource functions, this role is frequently filled using
host country nationals who will have an inherently better understanding of the situation than
parent or third country nationals (Schuler, Budhwar and Florkowski, 2002).

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Specific issue 4: Based on the mission statement and objectives of the MNE, interpret the
corporate social responsibilities of the MNE. Illustrate with examples

Companys mission statement

Caltex Australia is currently the leading seller of petroleum products and also the topmost
retailer in Australia. The foundational aspiration that drives their business is to become a supplier
that is perceived by all customers as the foremost authority when it comes to safety and
reliability. They wish to proceed with their journey of strengthening the position acquired by
them as the number one supplier of petroleum products by means of further pouring money in
their supply chain management and marketing assets. (Caltex, 2014)

Companys corporate social responsibilities in accordance with the mission statement

With the purpose of fulfillment of their objective of improving their standards of safety and
reliability to pursue the ultimatum of meeting customer needs, the company shall focus on its
corporate social responsibilities. Their corporate social responsibilities stand on five fundamental
pillars, which will be discussed in particular below:

1. Reliability: The Company pays significant attention on performing their activities with care.
Sustaining safety and reliability in their operations is at the heart of their way of doing
business. They have instituted their own operational excellence system of management and a
company-wide management framework for risk which has become the grounds on which the
company identifies risk, prioritizes it highly and manages it in a profound fashion; only to
fulfill the sole purpose of protecting their shareholders, employees, environment and
communities. (Caltex, 2014)

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2. Capability: Following are some areas in which Caltex has shown capability in accordance
with their mission statement:

People and Culture: The Companys ability to pull, retain, train and involve the skilled
people has laid down foundations for their success and has also contributed in a
significant way by acting as a chief competitive advantage in the eyes of customers.
People at Caltex have been able to institute a cultural blueprint containing primarily six
values namely: care, trail blaze, serve, own, move and win. All these values guide them
how to collectively achieve their vision. (Caltex, 2014)

Diversity: The Company created an inspirational diversity strategy to magnify

accountability and diversity skills; embrace an inclusive culture, progress of more women
leaders in the organization. Further, the CEO and MD constituted and leaded a Diversity
Council for evaluating unconscious biases and taking corrective actions. (Caltex, 2014)

Leadership Capability: High quality leadership is inseparable from the culture at

Caltex. The company created a particular leadership model that lays down the guidelines
and expectations from the leaders that coincide with the collective values or vision of the
company. They have partnered with the Melbourne Business School in order to get
assistance on matters like these. (Caltex, 2014)

3. Safety:

In 2011 the company made noticeable reduction in the injury rates by 27%. They have
developed an excellent metrics to monitor their safety risk processes.

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In the same year they launched an Occupational Wellness Policy with an assisting
framework that obligates every functional business within the company needs to perform
a gap analysis to identify gaps and further take initiative to deal with it.

They ran out 1500 drug and alcohol tests in 2011 itself under their drug and alcohol
program.

Minimizing their footprint on the environment by their zeal to eradicate spills and move
the compliance forward.

Implementation of processes relating to operational excellence for the betterment of the

safety standards of distribution and transportation.
(Caltex, 2014)

4. Integrity: The Company strictly adheres to a code of conduct that formulates their way of
doing business that abides by all laws plus at the same time promotes their values. This code
of conduct also maintains their reputation and corporate integrity by acting as decisionmaking framework. (Caltex, 2014)

5. Society:

Wherever the companys refineries, terminals and service stations are situated, they
extensively support the communities, organizations, events etc.

In these communities they run schools, environmental projects, emergency services,

sporting clubs plus provide knowledge by means of newsletters and meetings.

In collaboration with Clonarf Foundation they have enabled full time programs for more
than 3000 aboriginal males for betterment of their self-esteem, life skills, education.

The company pours in heaps of investment into programs like Conservation Volunteers
national wildlife conservation program and by virtue of these programs it connects with
the environment and crucial conservation of wildlife.

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Caltex let their stores be used to sell out merchandise of a charity called Loud Shirt Day
and all of the profits from this sale were donated to First Voice, which is an alliance that
makes a difference by aiding children with hearing problems.
(Caltex, 2014)

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Specific issue 6: What can the chosen MNE do to help ensure its international assignees are
successful in a foreign country of your choice?
According to Romero (2002) an expatriate can be considered a highly skilled worker with unique
expertise who is sent to work in another unit of the same company in a foreign country, generally
on a temporary basis. In a study conducted by Lassarre (2003) it is possible to identify two
different categories of expatriates. The first category includes parent country national, PCN,
whose national origin is the same of the corporate headquarter while the second one includes
third country nationals, TCN, whose national origin is instead other than MNEs home country
and the country of subsidiary.
As stated by Selmer (1999) we can say that the 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.
Thanks to their great understanding of the head quarter rules and commitment to corporate goals,
expatriates are preferred to host country nationals in order to control and coordinate units
collocated overseas (Maurer and Li, 2006).
Since the multinationals business is growing fast, it is now needed a better coordination and
control in order to successfully accomplish the organizations integration (Downes et al., 2002).
According to Torbiorn (1994), expatriates have a strategic role especially when they have to
control subsidiaries where the control of local activities is extremely important to the head
quarter. For this reason expatriates now definitely have a fundamental role in knowledge-related
functions such as local staff development and skills transfer from head quarter, developing top
talent and future leaders of company, improving the trust of 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 (Minbaeva and Michailova, 2004). In order to make
expatriates cross cultural adjustment successful many researchers believe that cross-cultural tools
are the most beneficial and effective tools (Selmer, 2005). Cross cultural training also defined
as a procedure intends to increase individuals ability to cope and work in a foreign
environment (Froster, 2000). Cross-cultural training (CCT) has long been advocated as a

21

means of facilitating effective cross-cultural interactions (Black and Mendenhall, 1990).
According to Porter and Tansky (1999) this kind of training not only develops the learning
orientation of expatriates but also helps them to understand better the culture of the overseas
destination. However many researches demonstrate that often firms dont provide expatriates and
their families the necessary cross cultural training due to time constraints and high costs (Froster,
2000).
Pre-departure training
Pre-departure training is the first stage and researchers recognized that pre-departure CCT is
greatly effective once expatriates have arrived abroad (Mendenhall, 1999). This first stage of
cross cultural training gives expatriates the essential knowledge required after they arrive at the
destination; for example according to Avril and Magnini (2007) expatriates have to know
cultural imperatives, customs, the business etiquettes of the country in which they are going to
operate, the way they have to dress for that particular kind of environment, customs necessary
and optional in order to attend for participants but also they are required to have a good language
training. Again the two authors believe that during this stage of cross cultural training expatriates
may face ambiguous situations and they should consider them as an opportunity to learn and also
in case they face a situation that may result in a non clear success they should not avoid it but
instead be able to develop a strategy for improvement (Avril and Magnini, 2007).
Pre-departure visit
According to Sims and Schraeder (2004), pre-departure visit of the host country helps expatriates
to have a first-hand information about the host country culture and many firms allows them to
visit the host country before they go overseas. During this pre-departure visit expatriates are able
not only to reduce the uncertainties related to the new environment but they can also reduce the
cultural shock (Black and Gregersen, 1991) and for this reason firms must be able to provide
expatriates a practical view about the way of living in the foreign environment in order to reduce
their cultural shock (Sims and Schraeder, 2004).
Post-departure training
Pre-departure training does not adequately address the specific cultural and unique workforce
demands present in a particular assigned country and on-site or pre-departure training is much
more effective and important than pre-departure training (Vance and Paik, 2002).

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According to Suutari and Burch (2001), pre-departure training is very useful but however
training should continue also in the host country because they believe that training done a few
days before the departing isnt enough to prepare expatriates to face the problems during their
assignment and thus it should continue after establishing in the new country. Again Sims and
Schraeder (2004) believe that post-departure training is very helpful since it reduces the impacts
that culture shocks and the difficulties of cross-cultural adjustment may have on the expatriates.
However even if expatriates are considered important for the success of the company, the
percentage of expatriates' failure is increasing. In fact the most common problem that MNEs are
facing in their business overseas is that a great number of managers who are responsible to
overseas assignments return home before the ending of their appointment period just because
they didnt have the proper ability to adjust to the new situation (Maurer and Li, 2006). Thanks
to a recent research by Sims and Schreader (2004) it is said that 16 to 70% of expatriates fail in
their assignment depending on the foreign country and their failure costs to MNEs approximately
$2 billion a year.

23

Specific issue 12: How would you suggest the MNE to evaluate the performance of its
managers of its subsidiaries? Why?

Another issue that Caltex has to consider is how is possible to evaluate managers working in its
subsidiaries .
The MNE s subsidiaries are located in different parts of the world, and consequently , it is going
to evaluate people with different cultures and values.
A definition of international performance management is given by Dowling (1999) : he wrote
that
International performance management is a strategic human resource management process that
enables the MNC to evaluate anf continuosly improve individual , subsidiary unit and corporate
performance against clearly defined , preset objectives that are directly linked to international
strategy .
The problem of working in an international environment is that ,as written by Borkowski (1999,
p.533 ), Cultural, financial, political and operating factors vary by country, and affect both
individual manager and overall subsidiary performance in transnational corporations .
The consequences of the variation of factors in the different countries where Caltex is working
are that Effective performance appraisals are critical in implementing corporate strategy
correctly , but there is no best practice standards that applies to all multinationals ( Shen ,
2005 , p.71 )
In fact , as reported by Borkowski ( 1999 , p.533 ) the performance of a subsidiary manager
should be evaluated using criteria specific to that manager's location, either in a home (domestic)
or in a host (foreign) country subsidiary .
Given to difficulties to find performance appraisal criteria applicable to an international
environment , Caltex should use another type off performance evaluation model , the so called :
360-degrees feedback , represented in the Figure 1.

24

Figure 1 : Leadership and 360 Degrees Feedback

Source : London and Beatty (1993 , p. 355 )

Indeed , as reported by Shen ( 2005 , p.72 ) The so-called 360-degree appraisal by using more
than one rater will avoid bias by providing more than one perspective .
At the center of the framework we have the manager , that as reported by Azzariti (2003 , p.124)
has to be the pivot of the organisation.
The central role of the manager will help Caltex to deal with the complexity of a multicultural
environment , indeed The skilled manager has to be the fulcrum of the organisation
(professional and organisational), able to lead his co-workers through market, organisational and
economical changes. (Azzariti , 2003 , p.124)

25

Moreover London and Beatty (1993 , p.355-356 ) suggest , indeed , that Managerial execution
of strategy involves designing appropriate work structures (including job design), producing
customer value, building appropriate workforce competencies, behaving in a supportive and
effective leadership style, and aligning basic systems, such as financial, material, information,
and especially human resource systems (e.g., appraisal, selection, rewards) to enhance
organizational performance.
The implementation of a 360-degree feedback will help Caltex also on other aspects.
As reported by London and Beatty (1993 , 370) in fact using 360-degree data feedback to
improve work unit results, leadership competency and performance, and customer success in
doing business with the firm can indeed make 360-degree feedback a source of competitive
advantage .

26

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