International Human Resource Management-MJ Version

‘only perks that differentiate executives from other workers are private health
insurance and a car allowance’ (Donkin, 1998: 8). The Managing Director of
Zotefoam sees the internationalizing firm as one with minimal status differ-
ences between levels in the organization hierarchy.
An MNC’s capacity to pay affects both the levels and types of international
compensation. Thus, international compensation strategy must reflect
consideration of cost constraints on the enterprise. The competitive strategy of
the MNC will most likely influence the nature of international compensation
through its IHRM strategy, the aspect of MNC that is aimed at sustaining com-
petitive advantage through human resources. If, for example, as part of the
MNC competitive strategy, the IHRM strategy is to be a market leader in
employee compensation in order to compete for the most competent candi-
dates, then the levels of compensation might well be higher than if the com-
petitive strategy is based on, say, the provision of secure employment.
Attitudes, values and beliefs about the relative value of employee contri-
butions and international compensation elements such as cash compensation,
benefits, perquisites and employee ownership plans across the MNC are inherent
in the organizational culture. The latter also influences the degree to which

International Compensation and Performance Management 311

MNC internal

environment

* Goal orientation

* Capacity to pay

* Competitive strategy

* Organizational culture

* Internal workforce

composition

* Labour relations

* Subsidiary role

MNC external

environment

* Parent nationality

* Labour market

characteristics

* Local culture

* Home & host country

governments’ roles

* Industry type

* Competitors’

strategies

Internal and external

relativities

International

compensation

strategy

Staffing

orientation

FIGURE 12.1

Internal and external variables influencing international compensation strategy