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China Telecom Company is the world's major telecom operator. Having a customer base of more than 300 million customers, its network routes 710 million text messages every day and handles 250 million calls every hour. China Telecom is conceivably the solitary cellular network that provides uninterrupted, consistent coverage through tunnels, on highways, inside sky scrapper elevators as well on top of Mount Everest. One of the unique features of China Telecom servicing excellence is to modify its products, services and tariffs to suit the individual needs of its vast subscriber based.
Analysis about Origin Country
This is the about a Pest analysis of China, drawn on conventional internet sources such as, the CIA World Fact book, Wikipedia and Nation master. China is the most populated country in the world, with 1.34 billion populations. It has the third largest GDP, with $4.84 trillion, after Japan and the U.S. Like India, the currency and conditions make it useful to look at some data using Purchasing Power Parity, which bumps up China's GDP to $7.8 trillion, which would move about it ahead of Japan.
Record run of growth and opportunity that began in 1978 and for the past 25 years it has averaged 10% growth per year. The trace stops this year, sadly. It really is a pity--China's growth has completed more to reduce world poverty than any other program, aid initiative.
China's money being poured into the domestic economy to kept it from going sour, accelerating infrastructure advance. It will help. It is improbable to be enough. Exports have fallen by over a quarter in the last three months. Unemployment is being raised quickly, and China may end up paying poorly skilled workers to dig holes and then fill up them.
Last year, there was about 87,000 'incidents', which in other countries would have been called demonstrations, protests or riots. China is barely keeping the lid on internal disorder, much of it caused by local and regional government corruption, turning people out of their houses or off the farms devoid of compensation.
China is either first or second to emit CO2, and the overall air pollution in China's urban canters is horribly bad. About 16 of the 20 most densely polluted cities in the world are Chinese. Â Their water isn't even better.
There are positives as China has 86% literacy, they lead the world in internet users, they are 4th in the world in copyright applications for residents and 2nd for non-residents also have 4 of the top 100 universities in the world (and 8 of the top 500). (Thomas, 2009)
Analysis about Host Country
Currently Pakistan is being ruled by civil government but history shows about more administrative rule in the past. Uncertain govt. headship has become convention. Strong influence of govt. bodies and parties has become custom.
Under developing country is more likely to be great chance and main economy is based on agriculture. Telecom industry is booming for about last two years. Stable macroeconomic environment is based on prudent fiscal management. Weak fiscal balance has been the main source of macroeconomic difficulties. A new feature of the privatization program has been the offering of shares to the common public throughout the stock market, which was Main dominant religion, is Islam. Also encouraging foreign investment as it is a good source of employment. Educational level has been improved due to private emerging sectors. Well received. (Yes Pakistan, 2009)
Electricity is the major concern in terms of demand and supply inside the country but govt. however to some extent overcome this problem.
Banking sector has been improvised in modern technological advancements. Communication has also been improved. Pakistan Telecom got privatized in past years also become more flexible in term of competition.
Mode of Entry
China Telecom has been first overseas subsidiary, in Pakistan the company has the license to offer and control voice, data and all value added services in the whole country. Pakistan is a key region that is likely to offer growth opportunities as well the possibility to make a distinction in the lives of growing customers that is challenging and understands and appreciates better service and quality standards.
Other hand, it has also been noted, in the situation of China, that nearby prospect can act to support MNCs to apply Western management techniques. Thus, Cooke, in a case study of a foreign-owned toy manufacture, found that, for local managers, 'the discourse of modernity carries much punitive power in China these days, and those who do not speak or act of adopting Western management practices are deemed backward and outdated' (Cooke, 2004, p.44).
In prospective to the condition of the
In Pakistan's market it has been quite prominent fact that the competitors of Pakistan's telecom company who have been dominant in the market are also Multi Nationals and are following the modern practices as been done in western. The reason for the failure of this Pakistani telecom company is lack of innovation and improvisation accordingly. Therefore it is not in the situation to keep same strategy going, as well opening for new gate for another Multi National Company like China Telecom company to enter the competition.
Decision Making for Acquisition and Analysing the Industry Competition
While investigating the competition in the market for the Pakistan's Telecom Industry majority of market has been occupied by the MNC's and Local Company's which are surviving are really few and even not fully dominant. (Babar, 2010)
Whereas if we look over the acquisition and Greenfield. The China Telecom company has the strong background in Telecom industry and working along with its several subsidiaries in USA, Italy and other parts of countries. Structure of the company is also centralized. Therefore acquisition is the only way to take over the company.
By looking at the surroundings like e.g. there are more Telecom companies like Airtel, Tata, Hutch and orange already dominating the Indian as well as Asian market. Therefore Pakistan is key region to plan for establishing its trademark as one of the finest telecom company in the region.
Pakistani officials anticipate that every of new market competitors will spend to a certain extent on the order of US$8-billion on plant, property and equipment over the next five years. One company showing by Business Week will spend US$200-million on a blend of fixed-wireless network and it expects to easily attract 2-million subscribers, mostly on the strength of pent-up order. With all the new competition, 7-million subscribers (fixed and mobile) have been supplementary since mid-year last year alone. Over the next year-and-a-half, according to Government sources cited by Business Week, that number will double. (Asia Pacific, 2005)
Standardization Vs Adaptation
As been acquired from the analysis of the host country, there comes factors which clearly illustrate that Telecom sector is the sector which has been groomed from past two years and there is a lot of scope for more companies to grow into this Telecom market in Pakistan. Also if we keep the Pakistan's Telecom Company into consideration there is no reason for Chinese Telecom Company to adapt the domestic Hr as well as work practices for the company, because the Pakistan's Telecom Company was already been facing constant failures in terms of competitive market.
Before deciding standardization or adaptation lets have the general idea of standardization is actually developing standardized work practices, policies and products marketed worldwide with a uniform marketing mix which is essence of the mass marketing where as adaptation is to go for differentiation of policies and different market requirements. Mixing the standardization and customization which simply giving an idea to think global and act local which most MNC's do. (Samar, 2009)
Therefore suitable for the company to standardize but with customize of local culture in the way minimizing cost and values to create closeness among the local users in the country. Neither worry about this approach as mostly MNC's are following the same approach and have been successful. But that should not only be the reason to do so, only the major reason that is needed to be considered is that China Telecom will have hinders if they won't globalise into the Asian market.
Basically there are four major management orientations such as
i.Ethnocentric: Home country is the superior having control over all subsidiaries leading to standardization approach with centralized management.
ii.Polycentric: Treat each country differently as, is unique from other leading towards adaptable approach and localized management.
iii.Regiocentric: Management goal is to develop regional approach; the firm regulate its practices throughout the region, but not across them.
iv.Geocentric: Go for one general strategy throughout the world market while maintaining the flexibility to adapt strategy to the local market where necessary.
Looking above the strategy so far adopted by the China Telecom Company their management orientation style is Polycentric, where they have adaptable approach.
(Samar & Philip, 2009) Suggested model for the manipulate on HRM in multinational showing that first MNCs mostly are importers either reflect the main ones utilised in their country of origin or accord with what is regarded as 'international best practice', with this practice being commonly connected with the central tenets of Anglo-Saxon human resource management and a claimed junction of approach between MNCs internationally (Sparrow and Hiltrop, 1994).
Transfer of HR Practices
Areas which needed the foremost attention in the terms of HR practices are
Recruitment and selection
Training and development
Consultation and Communication
These are the major areas of concern from Hr prospective that should be analysed from parent and Host Company for transferring the best hr practices.
HR Practices of Parent Company Host Company:
Recruitment and selection: E-recruitment and online job applications are in practice and selection techniques include assessment centres, telephonic interviews, structured interviews.
Where as host company is more inclined towards the traditional methods or recruitment and selection such as print ads and one on one interview.
Performance Management: Performance based salary incentives and recognitions are done. Training is a part of performance management in terms to train employee to achieve the maximum performance that help company to achieve its aims and objectives.
Host Company follows the experience and qualification promotion system. And salary increment is depending upon seniority level.
Reward Management: Intrinsic and Extrinsic rewards both are part of company strategy. Most reward system they follow is appraisals, report, performance benefits, annual bonus, flexible leaves and shift timings etc.
System followed by Host Company is flexible shifts; annual increment based on seniority level and paid leaves etc.
Training and Development: Practices adopted from best practices in HR to benefit the maximum output from the employees with proper guidance and training also leading them to meet the aims and objectives of the company and MNCs spent enough budget to do that as similar the case with China Telecom Company.
However this host company believe in training the staff but only for higher management that is the reason why there is a gap created and transparency breaches as well. (Allan, 2010)
Consultation and communication: Parent company believe on consultation and communication as they are keep to work in high involvement culture which is explaining the decisions to their staff as well as involve them in decision making as suggestion, open forums and meetings.
While Host Company was having quite centralized culture in terms of decision making, however Parent company apparently follows the same structure but that decision is always influenced upon the involvement of opinions and suggestions they include into.
While looking taking in account the Hr practices Parent company should just not impose what they think are right but needed to do proper survey what practices are best working in environment of Pakistan. Following could be the suitable suggestions for the Parent Company to take into consideration.
Devaluate hr department wise, rather than to centralized it so it will serve the need of each department accordingly.
Internal promotions and proper job analysis should be taken into deliberation which will build trust based relationship for an employee and growth factor.
Performance related pay should be suitable with subsidiary wide bonus scheme based upon competency profiles.
Training and development is always encouraged but also overseas training should be eminent for management to transform host according to the international standards.
Two way communication should be done in e.g. meetings, open forums, brain storming sessions, blogs and emails as Telecom company has an edge of Technology therefore to use it in cost effective way will be beneficial.
Subsidiary characteristics and host country effects
The Host Company in Pakistan was low in technological and knowledge; therefore use of expatriates will be quite helpful to cope up with the weaknesses. This includes the proper training and development of the employees.
Must take legal, political and social factors into consideration before taking any decision for the company for example plan strategically when govt. Condition is uncertain as past history Pakistan has faced such issues because any sanctions or policies directly or indirectly approved by the current govt Will be simply overruled by any new govt.
Budget controlling should be done by Parent company in terms to have a full control on fiscal matters of the subsidiary, however it could be extend as in initial process more investment is required. Geographically Pakistan is also quite suitable in the Asian market as it shares the border with India which is the one to the emerging developing economy. China itself therefore easy access towards the subsidiary and in neighbour there is a middle-east country as well.
It has been concluded that Transfer of HR practices in underdeveloped countries are quite significant from the competitive advantage as well as aiming towards the domestic and international markets. However the from cultural prospective Parent company should take national culture into its consideration. Also it is quite notable that MNC's adaptation approach has been quite successful in such markets as they embed their business strategies according to the local market needs while keeping in mind for globalizing also. Another thing which has been viewed is that such companies are like and welcome door for MNCs for acquisition to competitive market where other MNCs are already dominating the market however it is not that easy for the Brownfield Company to penetrate so quickly. Therefore what finally we can conclude is that international business environment should be taken into consideration with respect to its entry, orientation, approach and factors of both countries as well as company.
By analysing the factors following are the suitable recommendations.
Parent company should align the national culture of the host country with their corporate culture in the subsidiary to build trust based relationship, as Pakistan is highly trust based relationship country.
Hr practices should ensure the transparency of planning and development to the local needs.
Decisions should be forecasted keeping in mind political, social and legal factors for the company.
Involvement of locals in decision making should encourage.
Control the subsidiary fiscal policies and have control but also keep in consent the demand of local market.
Thomas, (2009) "Pestle summary: China
"http://www.examiner.com/x-9111-SF-Environmental-Policy Examiner~y2009m4d27-PESTLE-summary-China (Accessed: February 22, 2010).
Yes Pakistan (2009) About Overview of Pakistan Economy. Available at: http://www.yespakistan.com/economy/overview-pak.asp (Accessed: 24 January 2010).
Samar (2010) "Week12: International HRM Transfer Of Practices" International Business Environment [Online]. Available at: http://breo.beds.ac.uk (Accessed: January 19, 2010)
Samar (2010) "Week5: International Business Orientation" International Business Environment [Online]. Available at: http://breo.beds.ac.uk (Accessed: January 18, 2010)
Samar (2010) "Week 11: Ethics and Corporate Social Responsibilities" International Business Environment [Online]. Available at: http://breo.beds.ac.uk (Accessed: January 19, 2010)
Alan Chapman (2010) "People Development and Teamwork". Â Available at: http://www.businessballs.com/dtiresources/TQM_development_people_teams.pdf (Accessed: January 17, 2010).