Case Study: Solving the Labor Dilemma in a Joint
Venture in Japan:
John has found himself with a critical labor shortage, and he doesn't know exactly how to solve his problem. John is the founder, president, and CEO of a small manufacturing firm, Johnsco Electronics. The company has approximately 300 employees in its home state of Tennessee. Recently, it was approached by a major Japanese automobile manufacturing company about a possible joint venture in which Johnsco could retain majority ownership. The opportunity seemed attractive, so John agreed to build and operate a plant outside of Tokyo. The plant is expected to employ around
500 workers to fabricate and assemble computer components for new automobiles. John had recently discovered the extremely high cost of maintaining a significant number of expatriate managers in a city with a cost of living as high as Tokyo. Thus, he had agreed to the joint venture expecting to use mostly his host country nationals for the new facility. Unfortunately, John is having problems staffing many of the essential positions. First, he was not aware that equal employment opportunity laws would apply to his international operation. Since John supplies the federal government with certain military components, his hiring practices are scrutinized to see whether minorities and women are appropriately represented in his workforce. Only recently did John discover that few if any Japanese women ever move into managerial positions in Japan. He's confused about how to balance his obligations under United States law, local customs in Tokyo, and the high cost of using expatriates.
John was led to believe that there would be a large supply of inexpensive labor throughout Asia. He had heard that multinational organizations acquire very inexpensive labor by relying heavily on women to staff labor-intensive production jobs. Culturally, he'd heard, these people defer to authority and are willing to work long, tedious hours. Once again, however, he discovered that Japan has strict policies prohibiting foreign labor. In fact, nearly 15,000 undocumented aliens were arrested in Tokyo each year while attempting to find work.
The Japanese liaison to Johnsco has told John that Japan's workforce is aging even more rapidly than the workforce in the United States. Historically, Japanese companies have been dominated by seniority systems that encourage older workers to remain with a single firm until retirement. There are also fewer young, semiskilled workers, because of the ever-increasing percentages of Japanese children who attend college. For example, over half of the more than 4 million Japanese blue-collar workers in constructionrelate fields are older than 50. John is confused about the implications of these facts for his ability tostaff the Tokyo operation; he wonders about problems with his company-sponsored retirement programs.
And, to add one last problem, John's American plant is almost entirely unionized. The union steward expects two things: (1) any good promotional opportunities created by the international joint venture must give union members the first right of accepting a transfer; and (2) host country nationals who are hired in Japan should be covered by the same union contract as the workers in the United States.
John's enthusiasm over the opportunity to work closely with one of the most powerful automobile makers in the world has diminished. But the agreement is signed, and John now wonders how he can ever get the Tokyo operation off the ground, let alone make a profit, without violating local customs or American laws.
Please answer the given questions:
Question 1. What are the major components of a compensation system in a global organization? Why is it important for global organizations to understand the compensation practices of other global organizations in different countries? Given these compensation practices, how does an organization develop an appropriate strategy?
Question 2. What should a global organization consider when deciding which benefits to offer? What should be the main objectives for a global organization with regards to its compensation and benefits package? Given the considerations and objectives, how would an organization develop an appropriate compensation and benefits package?
Question 3. What metrics should be in place to evaluate expatriate manager performance? How do these metrics differ from those used to evaluate a host country manager? What are the pros and cons associated with these metrics? How would an organization select an appropriate metric?