Executive Summary
The report is conducted for JBS Company based in Melbourne, with headquarters in Brazil. The aim of this report is to explore the possibility of expanding meat products sales and operations into Shanghai, China. With recent activities of bilateral trade agreement signed by the two countries indicating policy changes to tariffs and foreign trade laws creating a positive impact for meat related business in Shanghai and China as a whole, the company is exploring long term strategy of establishing in China in response to the rise of meat consumption and its economic power. The company is therefore considering recruiting the set up CEO from the parent company for the first initial 3 to 4 years, with culturally appropriate leadership style that can have positive impact on the business performance.
In undertaking this research various methods of data collection through OECD, IMF, World Bank, text books, academic journals, articles, research organization and government websites, cultural surveys and trends of meat consumption, as well as literature of Chinese economic profile and business practice are deployed.
Put in perspective, China and Australia greatly differ nearly in everything ranging from political system to business practices. Through the application of Hofstede’s cultural dimensions, the report analyses the similarities and differences between the two countries with regard to economic and political systems, and social values and laws. Important strategy of IHRM focusing on the recruitment and selection, pre-departure training, expatriation and repatriation in addition to developing culturally fit leadership traits, legal binding issues and business ethical policies and practices has been examined.
The results of the analysis suggest that the proposal is a viable business opportunity, provided that the culturally appropriate leadership style and IHRM strategy are developed, implemented, reinforced and maintained. In ensuring success of the initial implementation and international expansion action plan has been developed by analysis and studies required by the company in order to seal a key milestone achievement for the entry stage.
Table of Contents
Executive Summary …………………………………………. 1
Table of contents ………………………………………..... 2
Introduction …………………………………………. 3
Aim and Scope …………………………………………. 3
Methodology …………………………………………. 4
Limitations …………………………………………. 4
Company Assumptions …………………………………………. 4
Macro Environmental Analysis …………………………………………. 4
PEST Country Factory Analysis …………………………………………. 4
Parent and Host nation culture analysis ………………………………………….. 6
Analysis of IHRM issues ………………………………………….. 8
Internal versus external recruitment and selection ………………………… 8
Pre-departure training …………………………………………. 9
Expatriation and repatriation strategy ………………………………………. 10
Type of leadership style .………………………………………… 11
Legal and Ethical policies and practice ..………………………………………… 12
Action Plan .………………………………………..... 13
Milestone achievement ..………………………………………… 15
Conclusion .………………………………………… 16
Bibliography ….………………………………………. 17
Appendix .…………………………………………. 19
1.0 Introduction
An important development of economic growth for years has been a predominant aspect of international multinational corporations, including those of small and medium sized companies to do business in China across a range of manufacturing industries. This report is conducted for JBS – one of the largest meat processing companies in Australia, located across several states. The report is about the initial set up stage of the company planning to enter into the Chinese market, particularly in Shanghai city, known as the capital of the rich. The focal point of the report, therefore, is to recruit and select the set up CEO with two of additional colleagues; general manager and chief financial officer from the parent company in Australia. A comprehensive analysis focusing on cultural trends and PEST using Hofstede’s cultural dimensions is deployed in order to effectively articulate the similarity and difference between the two cultures, Australia and China. As part of HRM strategy to be implemented by the set up CEO, the leadership style and legal and ethical policies and practices commonly facing international businesses doing in China are examined in the report. Furthermore, the measurable action plan which needs to be done before the entry in China is developed, along with critical issues of recruitment and selection, pre-departing training and expatriation and repatriation.
1.1 Aim and Scope
The purpose of this report is to critically analyse the economic outlook, macro environment and cultural issues facing Shanghai city that may have impact on the JBS company business performance. Through the critical analysis, the report will deploy to conduct the contrast between the two countries by using Hofestede’s five cultural dimensions. The report will propose the IHRM strategies concerning internal recruitment and selection, pre-departure training and the expatriation and repatriation. As important as this is, the report will also seek to identify the leadership traits recommended in a country that is paternalistic whether it is directive, cohesive or participative for it has impact on the day to day business performance. In addition, the report is tailored to analyse the important elements of legal and ethical policies and practices required to be complied with by the company.
1.2 Research Methodology
The data relied on and the development of this report was collected by viewing secondary sources such as text books, academic journals, articles and a variety of online organization, government and industry websites.
1.3 Limitations
Limitations exist due to lack of primary data, including an interview with internal reliable personnel from the company. It is important to collect more than one source of secondary data in order to achieve tangible business objectives.
1.4 Company Assumptions
It is assumed that the first 3 to 4 years of the set up phase of the business members from the parent company are of follows;
· Chief Executive Officer (CEO)
· General Manager (GM)
· Chief Financial Officer (CFO)
2.0 Macro Environmental Analysis
2.1 PEST Country Factor Analysis
The intention of this paragraph is to effectively analyse the political, economic, social and technological trends by the following;
Political
The Economist (2015) explains that China is ruled by one-party, the Chinese Communist Party (CCP) for more than half a century and head of state includes the President, Vice-President and Premier also known as Prime Minister. Delegates of the unicameral National People’s Congress (NPC) for National Legislature are selected by provinces, municipalities, autonomous regions and Armed Forces. The politburo (political bureau) of CCP which is one of the top national government bodies is the most powerful body in running the country and decides on all policy and controls political issues. Transparency International (2015) report suggests the country scores 36 and remains in 100 out of 174 whereas the human development is increasing according to UNDP (2014) report.
Economic
Zakkour (2014) stated that the Chinese economy surpassed the American economy as the world’s largest (as measured by purchasing parity power) and firmly consolidated its status as the second largest economy in the world. IMF report (2014) analysed the recent trends of the country economic activity, as it is slow compared with the pace of previous growth in years, with its GDP decelerated to 7.4 percent in 2014, down from 7.8% in 2013. However, the slowdown mainly reflected a sharp reduction in residential investment as rebalancing continues.
The OECD (2015) concerns the slowdown that China is shifting to a slower and more sustainable growth path after three decades of extraordinary economic development. The report recommends that further reforms are needed to ensure that future growth is resilient, inclusive and green, according to the OECD’s latest Economic Survey of China. It also forecasts that China’s GDP will grow by 7% this year and 6.9% in 2016. In terms of meat consumption, Larsen (2013) suggested that Shanghai, as well as China is on the rise due to the rapid explosion of middle class.
Social
Looking at the social aspects of Shanghai, it is apparent that Shanghai and China as a whole places a great emphasis on relationship building. A general business work begins at 8:00 am to 6:00 pm with Saturday opening from 8:00 am to the noon. Banks are open from Monday to Saturday from 8:00 am to 6:00 pm while shops are open every day (Chinabiztips 2015). In a general view, the social and cultural aspect of China plays an important role as is changing demographics. The fluctuation of population growth and age can alter social trends and cultural values. Family size and social behaviors impact how decisions are made. Other social factors are consumer styles, education, religion and interstate emigration. Giving face is a sign of showing respect that can impact on the business.
The AustraliaChina (2015) encourages that wearing appropriate dress is important and understanding the concept of “Guanxi” which means “Connection” for building long term business relationship. Moreover, gifts are expected as a gesture of goodwill for the commencement of a relationship or a business deal. However, it is not wise to give gift without a good reason or witness, as it might be construed as a bribe. The Australianbusiness (2015) describes that a person’s social life revolves around business continuously whether as an employee or business owner. The Chinese enjoys business banquets and personal dinners and lunches.
Technological
The internet is available all over China, but there are some key differences from what is found in most Western countries. Wi-Fi connections are not common even in a good hotel, and access to social media networks is usually limited to Chinese versions. In keeping with the rest of the world, however, China is extending out Wi-Fi access to other, more prestigious locations, as well as the more upmarket travel options, such as the new bullet train services and cruise liner on the Yangtze River (China Highlights 2014). However, internet censorship is strictly being implemented.
The Boston consultant group (2014) predicts that the volume of internet users will increase from the current trend standing at 420 million internet users and the myriad success of Alibaba is such one of the examples that has electrified impact on today e-commerce business. China is risen as a major contributor to science and technology as the country has been into nearly half a century having constantly unprecedented economic growth (Journalist’s Resource 2015).
2.2 Parent and Host Nation Culture Analysis
Hofstede’s Five Cultural Dimensions
The purpose of this paragraph is to critically examine the similarities and differences between Australia and China based on the studies of Hofestede as follows;
Power Distance
China has a high power distance index sitting at 80 on the scores given by Hofstede Centre. This dimension deals with the fact that all individuals in societies are not equal. This power distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally (Luthans & Doh 2015). In a corporate setting, Irwin (2012) argued that this subordinate-superiors relationship tends to be polarized and there is no defense against power abuse by the superiors other than social expectation, grounded in Confucianism. Individuals in this hierarchical society tend to accept formal authority and are less likely to challenge their superiors in the workplace in comparison with cultures where power distance is low such as Australia. The recent rise in grassroots Christianity is however beginning to challenge inertia about inequality.
Individualism
The fundamental issue addressed by this individualism dimension is whether people’s self-image is defined in terms of “I” or “We”. In individualistic societies, people are likely to look after themselves and their direct family. In contrast, people in collectivist societies belong to in-groups that take care of them in exchange for loyalty. China is highly a collectivist culture where people act in the interest of the group and not necessarily of themselves. In-group considerations can affect hiring and promotions in the workplace with closer in-groups getting preferential treatment. In this cultural environment, it is not surprising that nepotism and cronyism are common (Irwin 2012).
Masculinity/ Femininity (MAS)
This is the first dimension where China and Australia rank very closely sitting at 66 and 61, meaning that Chinese are driven by success, competition and achievement. The Chinese will put the work before family or leisure activities. A low score on this dimension is related to femininity, indicating that this is a feminine society in which the dominant values in society are caring for others and quality of life (Stone 2012).
Uncertainty Avoidance (UAI)
China scoring 30 on this dimension is relatively low in comparison with Australia sitting at 51, indicating that Chinese are comfortable with ambiguity. It may seem like China has a lot of rules and regulations in place to avoid ambiguous or uncertain situations, however, they are willing to blend and change the rules as situations require it. In fact, the Chinese language itself is ambiguous and hard for Westerners to understand (Irwin 2012).
Long-term/Short-term Orientation
According to the Hofstede Centre Index, the Chinese rank high at 87 on long term orientation, meaning they focus on persistence and perseverance, and that they will dedicate however much time is required to achieve their goals (Geert Hofstede). Normative societies such as Australia who score low on this dimension prefer to maintain time-honored traditions and norms while viewing societal change with suspicion. Relationships in China are ordered by status and the order is observed. Investment tends to be focused on long term projects as opposed to short term which may bring quick returns (Irwin 2012).
2.0 Analysis of IHRM Issues
3.1 Internal versus external recruitment and selection
The purpose of this paragraph is to deeply look at issues facing the international recruitment and selection with regards to the posting of the set up CEO role for JBS meat processing company within Shanghai and its region in China. Goh and Sullivan (2011) argued that finding and hiring qualified employees is among China’s major HR challenges. Shen and Lang (2009) argue that effective recruitment and selection contributes significantly to expatriate performance. Most MNEs therefore recruit expatriates internally and consider the following selection criteria; job expertise, technical competence, personal traits/interpersonal abilities, cultural openness, ability to adjust to new environments, family issues and previous working experiences. Tungli and Peiperl (2009) argued that these criteria are regarded to be critical to expatriate performance in international assignments and their consideration may depend on reasons for using expatriates. Shen (2005) suggested that there are three general approaches to recruiting and selecting host country nationals (HCNs), namely the home-based, host-based and integrative approaches. Edwards and Shen (2004) argue that the advantages associated with the use of host-country nationals include familiarity with culture, knowledge of language, reduced costs, good public relations and low turnovers of HCN manager. Conversely, the main disadvantages of polycentric approach are the difficulty of bridging the gap between subsidiaries and headquarters and the limited career path for host-country nationals and third-country nationals. Tung & Punnet (1993) and Paauwe & Dewe (1995) nonetheless identified some factors seen as predictors of expatriate success and the expatriate selection criteria should consist of previous oversea work experience, technical skills, managerial skills, cultural empathy, potential interest in oversea work, good ability to communicate, adaptability to a new environment, language ability, positive attitude, relational ability, emotional stability and maturity, leadership skills, ability to commend respect, and adaptability of family. Hays (1974), however, recommends that different selection criteria should be used for different overseas job assignments.
Furthermore, Dickie & Dickie (2006) argued that it is necessarily important to understand the types of candidates and the pros and cons of the candidates when hiring, as there are four major types of Chinese candidates for long term establishment as local Chinese, oversea Chinese, Chinese returnees, and repatriates. Bjorkman and Lu (1999) contended that multinational corporations should learn the Chinese culture that affects Chinese management practices and organizational behaviors and then implement that knowledge into local human resource management practices instead of trying to impose the Western processes from their home country.
3.2 Pre-departure Training
Understanding the culture and etiquette of the host nation can be a great pathway to success in doing business in foreign country. Once the set up CEO has been selected, therefore, pre-departure training becomes the next critical step in attempting to ensure the expatriate’s effectiveness and success abroad (Mendenhall 1987). To assist the set up CEO and family to readapt to work and life in general and to help overcome reverse cultural shock, re-entry training such as counseling workshops and career development consultations prove useful in the adjustment process (Sievers 1998). Mendenhall et al (1987) argued that the training should consist of three types; (1) information giving approaches, which have a relatively low level of rigour (2) effective approaches which address people’s feelings as well as facts, and (3) immersion approaches which are in-depth methods covering a broad range of topics and methods. And the training should be designed to improve rational skills crucial to effective performance of expatriate job assignments.
Regardless of when the pre-departure training should be provided, Selmer (2010) stated that pre-departure cross-cultural programs are traditionally administered a month before departure and it is conducted apart from the actual experience of realities of the host country. So, Forster (2000) supported the argument that the existence of returned expatriate community can play a major role as a support mechanism. With those needs in place, Tung (1982) recommended that cross-cultural training is important in imparting knowledge and understanding of a foreign country and the training should consist of the following factors;
· General information about social lives and living and housing.
· Cultural orientation, providing the information about the cultural institutions and value systems of the host country
· Cultural assimilating program that should include brief episodes describing intercultural encounters
· Language training, sensitivity training to attitudinal flexibility
· Field experience, where candidates can undergo some of the emotional stress of living and working with people different culture
The contents of training will help prepare the set up CEO, general manager and financial officer and their families to face challenges relating to the culture, political, social, economic systems, and the most recent events about the host nation. Getting the family involved in this process is very important and can result in avoiding early return.
3.3. Expatriation and repatriation strategy
The repatriation process may seem to be extremely complicated as it may appear. In fact, with the increasing movement of employees across national boundaries comes a stronger focus on the needs of repatriates of multinational corporations. Making strategy to manage repatriates from the start of hiring expatriates is important in a bid to effectively tackle the potential problem that can arise and challenge the repatriation issues at the end of the assignment. With this concern putting in place, Baruch and Altman (2002) argued that a successful expatriation assignment relies on four elements; choice of candidate, pre-posting preparation for executive and family, support and maintenance of relations with the home organization while on assignment, and the facilitation of a smooth return to the home base upon completion. Yet Tung et al (1981) also argued that the success or failure of the job for expatriates depends on technical competence, personal traits, ability to cope with environmental variables, and family situation. On other hand, Suutari and Brewster (2003) argued that poor repatriation can also result in a loss of high-potential employees, employee under-utilization and subsequent employee reluctance to accept overseas positions. Based on the above-findings, MacDonald and Arthur (2005) recommend that organizations must plan for repatriation, and implement effective repatriation programs and practices to successfully retain people with global insight and experience. In a bid to ensure implementing appropriate strategy for the repatriation, Baruch and Altman et al (2002) recommended the following elements of repatriation strategy which seem to be relevant in this globalised world;
§ recognizing the possible stress repatriation may cause, and need to develop support network by the company during transition period
§ An affirmation of the value of expatriates to the employer, and the importance of their skills upon his/her return
§ A review of the rights of the employee during the repatriation process
§ An outline of the degree to which the employer accepts responsibility for family settlement on return to the home country
4.0 Type of Leadership Style
It is believed that the set up CEO as a leader representing the parent company in the host country will face a mountain of challenges and cultural barriers to be overcome in the set up phase (Elenkov and Manov 2009). Even though China is a paternalistic society in which workers look up to leader’s direction, it is certain that the leadership style embedded in the set up CEO will surely have direct impact on the business performance. Therefore, Kousze and Posner (1987) recommended that modeling the way or behaviors is even more important because they have an added task to overcome —becoming a role model for people from another culture, who may have differing expectations of effective or appropriate leadership behavior. With workers needing a wide support and leading, Suutari (1996) recommended that it is important for the CEO to instate vision in conditions of cultural variations. In fact, the host nation workers need to set up personal example of support for innovation, which is a key feature of a work environment that can unleash creativity, with followers who may have been conditioned by their own national culture to be more risk averse. In essence, the expatriates can promote an organizational culture which encourages to experimentation, risk taking, and freedom from punishment. By doing so, it is recommended that the CEO could provide positive feedback and acknowledgement to celebrate follower’s contributions in a culturally appropriate way (Elenkov and Manov 2009).
5.0 Legal and Ethical Policies and Practices.
Strict compliance towards Chinese legal and ethical policies and practices when doing business in China is critical and understanding the traditional thought and the business culture can lead to a great deal of success, too. Clair and Norris (2012) argue that today’s Chinese business culture is layered centuries-old social norms and traditions which are vastly influenced by Confucian principles of reciprocity and social expectations that can be misconstrued as corruption by the Western counterparts, adding that corporate culture in China is founded in traditional Chinese ideology and its ethical teachings. These principles can be summed up in Guaxi which relies on personal relationship. Fan, Woodbine and Scully (2012) contended that Guanxi orientations maintain a weak linkage with corporate ethics and may lead to unethical business behaviors. Therefore, Webber, Goussak, Ser & Yang (2012) recommends that knowing of an important cultural paradigm is required so that a clear clue of what are the requirements of business practices in China. By executing strict compliance, Benoit (2013) also recommends that compliance mechanisms set up within a corporation must directly address auditing and inspections of factories, factories cheating, auditors taking bribes and other sensitive issues. In addition, Australia China Business Council (2014) highly recommends that the recent signing of free trade agreement between the two countries will help resolve the ethical disputes facing the Australian corporate conducting business in China.
6.0 Action Plan
IHRM Strategies
|
Actions to be taken to achieve IHRM objectives
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By Whom
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By When
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Estimated Cost
|
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To recruit a set up CEO in Shanghai, China in 2016 – 2020.
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To design a selection criteria that consists of 10 to 15 desired leadership behavior traits
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HR manager in consultation with CEO with the parent company
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1st September 2015
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(Not applicable)
|
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To advertise a job vacancy via internet, emai and company website
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HR manager
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20th Sept 2015 – 20th Oct 2015
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$ 300 – 740
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||
To advertise a job vacancy in the host nation, Shanghai, China via the internet and meat industry association magazine and journals
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HR manager
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20th Sept 2015 – 20th Oct 2015
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$ 300 - 600
|
||
To administer the selection criteria to 3 internal parent company candidates plus 3 external host nation candidates
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HR manager
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1st September 2015
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(Not applicable)
|
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Shortlist the candidates, and conduct an interview and leadership scenario evaluation of leadership traits
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HR manager, CEO and general manager
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01st Nov 2015
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Not applicable
|
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Select the best candidate exhibiting a high level of skills and knowledge of the host society plus the excellent interpertionality.
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HR manager, CEO and general manager
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10th Nov 2015
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Not applicable
|
||
Pre-departure Training
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To design the training for the new set up CEO, general manager and financial officer and their family members
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Returned CEO and expatriates in consultation with HR manager
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01st Dec 2015
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$5000 - 8000
|
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The facilitation of the training in the parent company headquarter will be undertaken by returned CEO and expatriates
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Returned CEO and expatriates
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10th Jan 2016 – 16th Jan 2016
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$ 12500 - 17000
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||
The duration of the training for those newly recruits are designed for 5-6 days
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Returned CEO and expatriates
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10th Jan 2016 – 16th Jan 2016
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Not applicable
|
||
Attendees of the training would include the new set up CEO, general manager, chief financial officer and their family members
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Returned CEO and expatriates
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10th Jan 2016 – 16th Jan 2016
|
Not applicable
|
||
To design the content of the course that consists of social, economic, political trends, culture and language, social etiquettes, working condition and the dos and don’ts for foreigners such as the set up CEO, general manager and chief financial officer
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Returned CEO and expatriates in consultation with HR manager
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01st Jan 2016
|
$5000 - 7800
|
||
The facilitation of the training course will be seminar based teaching, role play and individual presentation of how they view the host nation
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Returned CEO and expatriates in consultation with HR manager
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10th Jan 2016 – 16th Jan 2016
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Not applicable
|
||
Expatriation and repatriation strategy
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Pre-posting will be prepared for the set up CEO and family before the actual assignment will be commenced.
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HR manager and CEO
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August, 2016 – September, 2016
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$17,000 - 24000
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Mentoring and coaching for the set up CEO will be conducted by the parent company CEO for the first initial year
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Parent company CEO
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01st Sep 2016 – 01st Sep 2017
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Not applicable
|
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To assess the possible stress repatriation may cause, and the support of the parent company during the time of transition
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HR manager
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01st Oct 2020
|
Not applicable
|
||
To affirm the value of expatriates to the employer, and the importance of their skills upon his/her return
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HR manager
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01st Oct 2020
|
Not applicable
|
||
To outline of the degree to which the employer accepts responsibility for family settlement on return to the home country
|
HR manager and CEO
|
01st Oct 2020
|
Not applicable
|
||
6.1 Milestone Achievement
With the systematic screening displayed in selection and recruitment, the set up CEO and his cohorts such as general manager and chief financial officer who have a high level of cultural knowledge and adaptability skills coupled with excellent inter-personality will be getting a landmark achievement. Although the training provided for pre-departure is short, the set up CEO along with GM and CFO and their family members are believed to have been well equipped with the cultural, social, political and economic knowledge and skills to overcome the culture shock. It is because the contents of training created are down-to-earth and relevant with the teaching of former CEO and expatriates and their family members. Central to the strategic move, a month long pre-posting in Shanghai is critical in enabling the set up CEO and family to have a better knowledge of the locals and social etiquette of Chinese that include how to greet and how to give gifts and could have been mindful of the do’s and don’ts of culture. The set up CEO will therefore have a significant impact of leadership on the host manufacturing adventure, as has been well informed and trained during the pre-departure training. Furthermore, the ongoing support of mentoring and coaching from the parent CEO will be supported for the first initial set up years. Overall, the set up CEO, with a combination of existing skills and qualifications plus the continuous support of parent company CEO will turn the JBS meat processing company into a successful establishment.
Conclusion
In conclusion, much of the macro environmental and cultural analysis conducted indicates that Shanghai has a huge potential market, as its economic is very strong, as well as the increasing rise of consumption. The need to be aware of legal compliance, despite the hurdles, and business ethical policies and practices is vital. Furthermore, when set up a business in China, particularly in Shanghai, it is for the set up CEO essentially important to deliver certain leadership behaviors highly anticipated by the local workers. As mentioned earlier, the leadership traits brought in to the host business practice will have impact on the day to day functioning of business operation. And what needs to be sentient of is that China is the paternalistic society to which Shanghai belongs to this and understanding cultural sensitive things Guanxi can mean a lot. At last, leading the workers in culturally appropriate ways is essential in achieving long term establishment.
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