Business newer-days are recognized to be international and there is a universal belief that this will prolong in the future. This is why organisations now have the need for international managers, as the organisation spread worldwide, so must the employees. Human resource management (HRM) has grown to be one of the most accepted topics in international management. The employee that is send abroad is known as an expatriate. "Expatriates are employees/managers who move from the home country to an overseas location." (Tanner 2009, 360) A successful expatriate usually entail a vast amount of time and money, however, a botched expatriate can be even more expensive for an organisation. "International business is all the business transactions involving private companies or governments of two or more countries." (Daniels 2009, 864) International human resource management is an imperative aspect of MNE's international strategies and the difficulty of managing international operations. The determination of this study is to gain a better understanding of how multinational enterprises (MNE) select their expatriate managers. It is important to note that the selection process is a discrete process and need to function successfully in the organisations.
1. Multinational Enterprise.
1.1.1 Definition of Multinational Enterprise.
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The multinationalÂ enterpriseÂ (MNE) can be measured as the most powerful organisation in the world today. Globalization is theÂ developmentÂ that has a significant impact on how the world operates today and isÂ mostlyÂ driven by the expansion of MNE's. Internationalisation has lined theÂ techniqueÂ for the eradication of boundaries between countries and now multinational enterprises (MNE's) can be distributed across the world inÂ explorationÂ of new markets, opportunities and wherewithal.
"A multinational enterprise (MNE) takes a worldwide view of markets and production." (Daniels 2009, 63) In simple terms, a MultinationalÂ enterpriseÂ (MNE) willÂ produceÂ andÂ marketÂ their products anywhere in the world. Operations can also take place inÂ multipleÂ countries, for example, in the wholesale trade Nestle is anÂ excellentÂ example of an MNE. Nestle has marketing and production facilities in almost every country, in the world; Nestle Switzerland operational plants must be managed to use the same set ofÂ managementÂ styles as their international counterpart Nestle SA.
A multinational enterprise (MNE) is an organisation that holds aÂ heftyÂ equity share; usually fifty percent or more of another organisation, functioning in an overseas country. The multinationalÂ enterpriseÂ (MNE) can be formed when an organisation in one country makes an impartiality investment in an organisation, in another country.Â Foreign direct investment (FDI) is an investment in an overseas organisation where the overseasÂ financierÂ holds at least ten percent of the average shares, accepted with theÂ objectiveÂ of proven a 'lasting interest' overseas, aÂ durableÂ bond andÂ momentousÂ influenceÂ on the management of the organisation. International markets and foreign direct investment (FDI) have amplified penetratingly in the precedent decades. Escalating internationalization has had aÂ remarkableÂ influence on the competitiveÂ spotÂ ofÂ numerousÂ countries.
1.1.2 Role of (MNE) in staffing approaches.
Operating internationally, a Multinational Enterprise (MNE) has manyÂ vitalÂ decisions to make, how to, best structure the organisation in order toÂ manageÂ businessÂ effectively. "According to (Schuler et al.1992,419-459), The most influential factor that determines the success of the organisation, is the way in which the Multinational Enterprise differentiates its operating units internationally and, at the same time, assimilates, control and coordinate its activities." Important factor is toÂ balanceÂ the need for diversity, toÂ coordinateÂ and manage toÂ produceÂ an organisation that is internationally,Â flexibleÂ and competitive. Diversity branch as the need to operate in a rejoinder manner in anÂ arrayÂ of environments occurs internationallyÂ arise. MultinationalÂ enterprise's (MNE's) canÂ supplyÂ resources to host countries that other organisations cannot. The host country canÂ persuadeÂ them toÂ transmitÂ their compensations inÂ suitableÂ forms. The compensation that a host country canÂ acquireÂ from foreign direct investment (FDI) is as follow: 1) Capital, 2) Technology, 3) Skills and Management and 4) Access to markets.
Foreign direct investment (FDI) brings toÂ handÂ financial resources in the form ofÂ capitalÂ for countries who can not afford theÂ requiredÂ capital. The capital inflows received from the FDI areÂ moreÂ constant, and it is much easier toÂ serviceÂ than tradeÂ debtÂ or portfolio investment. InÂ dissimilarityÂ to other suppliers of capital, MNEsÂ mostlyÂ invest inÂ long-standingÂ assignmentsÂ compellingÂ risks and repatriating of profits only when theÂ assignmentÂ yield returns.
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Embryonic countries tend toÂ insulateÂ in the use of technology, even the technology in developed countries can be outdated. The MNEs can bringÂ modernÂ technologies and increase the effectiveness with which technologies can be used. TheyÂ modifyÂ technologies to local environments,Â depictionÂ on theirÂ knowledgeÂ in otherÂ embryonicÂ countries.Â The MNE canÂ improveÂ technologies as modernization materialize and spending patterns change, they can alsoÂ rouseÂ technical competencies inÂ localÂ organisations both suppliers and competitors, by giving support, acting as role models and increasing competition.
18.104.22.168. Skills and Management
The need for training, is regularly not recognised by local organisations, the MNE's isÂ mostlyÂ inÂ possessionÂ of advanced skills and canÂ transferÂ the resources to the host countries. TheyÂ bringÂ toÂ handÂ experts, setup training facilities and have some of the best management techniques thatÂ offerÂ the host country aÂ gargantuanÂ competitive advantage. WhereÂ associationÂ can be integrated into MNE's networks, they canÂ cultivateÂ capabilities toÂ serviceÂ the regional or internationalÂ systemÂ in tasks, products or markets.
22.214.171.124. Market Access.
The MNEs can provide access to export markets, both for existing activities andÂ newÂ activities. In order to attract MNEs, a host country must make sure that its policies and regulations are beneficial, while at the same time protecting theÂ stateÂ from opportunistic entities. The process of internationalization and multinational corporationsÂ influenceÂ theÂ politicalÂ area of a host country, a host country that intends to attract more MNEs and investors need toÂ generateÂ an image ofÂ stabilityÂ and reliability. This can be done by implementing policies and regulations that the international community endorse and that make MNEÂ entryÂ moreÂ advantageousÂ for both parties. The main channel for the transfer of human resource management (HRM) across international boundaries andÂ variousÂ cultures is the MNE. Not only are MNEs mainÂ castÂ lists in international business, but they are also crucial cast lists in theÂ practiceÂ of human resource management (HRM) internationally. TheÂ procedureÂ of human resource management (HRM) in other countries is often culturallyÂ specific, and human resource (HR) professionals need toÂ takeÂ this into consideration.
The main focus of an organisation's human resourcesÂ programmeÂ right through all of itsÂ progressionÂ and actions should be theÂ optimumÂ supportÂ andÂ reinforcementÂ of the organisation's strategy, in attempts and actions involving bothÂ strategyÂ formulation and implementation. The staffing approach has a significant impact on strategic management, includingÂ selectionÂ ofÂ keyÂ MNE managers who have a significantÂ influenceÂ in formulating the MNE's strategy, and theÂ selectionÂ of managers throughout the MNE.
Staffing shouldÂ shapeÂ and strengthen theÂ directionÂ andÂ mainÂ concern of the MNE, such as beingÂ steadyÂ with its ethnocentric, polycentric, region-centric, and geocentric staffing approaches in operatingÂ internationalÂ organisations. An organisation's approach to internationalÂ endowmentÂ (staffing) must support theÂ wayÂ of doing business. Discussion on the orientations toward staffing in MNE can be traced to the work of Howard Perlmutter, and his work represents the seminal theoretical contribution to the field. He introduced aÂ classificationÂ of multinationals which differentiated between firms based on their attitude toward geographic sourcing of their management teams. "According to Perlmutter, 1969. There are threeÂ primaryÂ ways in which international organisations can be staffed; a fourth staffingÂ approachÂ wasÂ added later." The connotations for the staffing functions, mainly forÂ superiorÂ levels of management, held by region-centric, geocentric, ethnocentric and polycentric strategic approaches can be discussed.
2. International Staffing Approaches.
Organisations involved in internationalÂ businessÂ can be divided into four types international strategies, 1) Global, 2) Multi-domestic, 3) Transnational and 4) International strategy. When a MNE has identified their strategy they look to international markets forÂ potentialÂ growth strategies. Management beliefs are a serious matter, because it decides how anÂ organisationÂ views itself in relation to it wants and needs to manage human resources in different countries. Employees whoÂ mixÂ with the organisation's culture and have the ability to engage in the working environment, isÂ extremelyÂ useful, for anÂ internationalÂ human resource manager in the selection process. Nestle, for example, is hiring employees who have the necessary skills required to perform actual tasks and whoseÂ style, beliefs, andÂ valueÂ system needs to be the same as the organisation. Factors such asÂ localÂ values and international trade theories need to be taken into consideration when managersÂ createÂ a strategy for international markets. Ethnocentric, polycentric, geocentric and region-centric is perspectives that managers themselvesÂ presentÂ and characterise into question.
2.1 International strategies.
2.1.1 Global Strategy.
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"This strategy describes the most mature international strategy, with highly coordinated activities dispersed geographically around the world." (Johnson 2008, 306) This strategy offers a standardised product across a number of national markets, with little or noÂ adjustmentÂ to local needs or expectations. An example of a company that make use of this strategy can be Sony, as they compete in every country, in the world, and theyÂ regulateÂ their products for all markets in different countries.
2.1.2 Multi- Domestic Strategy.
"This strategy is similarly loosely coordinated internationally, but involves dispersion overseas of various activities, including manufacturing and sometimes product development." (Johnson 2008, 305) This strategy also aims at adapting a product for use inÂ nationalÂ markets responding to changes in the localÂ marketÂ environment. Local adaption can make theÂ overallÂ organisational portfolio increasingly diversified. This strategy is mostÂ desirableÂ in professional services, where local relationships are extremelyÂ valuable.
2.1.3 Transnational Strategy.
"Transnational companies operate in many countries and delegate many decisions to local managers." (Boddy 2005, 106)This strategy strives to optimise the trade-offs associated withÂ productivity, local adaptation and learning.
2.1.4 International Strategy.
This strategy can be based on the dissemination and adaptation of a company's knowledge and expertise to foreign markets.
2.2 Staffing approaches.
Once the organisation has chosen theirÂ internationalÂ strategy, they can nowÂ chooseÂ andÂ applyÂ one of four staffing approaches in order toÂ manageÂ their staff in an efficient manner in the organisation.
2.2.1 Ethnocentric approach.
"An ethnocentric attitude is the parochialisticÂ belief that the best work approaches and practicesÂ are those of the home country." (Stephen 2007, 92) An organisation with aÂ parentÂ country strategy succeeds with this approach. The headquarter from theÂ parentÂ country makes the key decisions, most employees from theÂ parentÂ countryÂ have significant work, and the contributory support theÂ parentÂ country, resource management procedures.
The organisation procedure and culture values of theÂ parentÂ countryÂ areÂ predominantÂ when MNE follow the ethnocentric approach. A managing and staffing approach can be developed by headquarters and is steadily applied throughout the world.Â Organisations following this approach assume that theÂ parentÂ countryÂ management system is better, and that staff members from other counterparts of the world should follow these styles.
126.96.36.199 Advantages of using Ethnocentric approach.
188.8.131.52.1 Transmitting core competencies.
Employees that can be transferred to engage in anÂ internationalÂ strategyÂ are more likely to be au fait with and protect the organisation's core competencies. Organisations intend to continue with the success of the organisation, when expanding and operating in international markets. TheyÂ perpetuateÂ theÂ successÂ by controlling and regulating the use of the organisation's core competencies.
184.108.40.206.2 Countering cognitive dissonance.
Organisations make use of the ethnocentric staffingÂ approach, to minimise theÂ levelÂ of cognitive dissonance, as there areÂ variousÂ challenges operating in foreign markets; to help them overcome these challenges, the organisation makes use ofÂ reliableÂ andÂ competentÂ employees to engage in proven working methods, in the foreign market,Â .Â An ethnocentric staffingÂ approachÂ is from time almost impossible. The development and employing of local workers can be alerted by the hosting government, the preferences of foreign contributory to hire locals. The MNE is often pushed through immigration laws and workplace set of laws to do so.
220.127.116.11 Disadvantage of using ethnocentric approach.
18.104.22.168.1 De-motivate staff.
The ethnocentric staffing approach can de-motivate local managers and employees. All "smart" andÂ competentÂ employees live near headquarters, this sends out a message, to lower-level employees that the organisation do notÂ appreciateÂ them which lead to less motivated staff.
22.214.171.124.2 Narrow interpretation of foreign operations.
Expatriate managers may struggle toÂ obligeÂ styles which are acceptable in the organisation's headquarters, but which may be considered inappropriate in the host country.
2.2.2 Polycentric approach.
"AÂ polycentric staffing policy uses host-country nationals toÂ manageÂ local subsidiaries." (Daniels 2009, 823) AÂ localÂ employee heads a contributory because headquarters' managers are not measured to have sufficient local knowledge. Contributory continually cultivates human resource management procedures locally. A polycentricÂ staffingÂ approachÂ analyse the effectiveness of the organisations procedures of the host country operations as equivalent to those of the parent country.
126.96.36.199 Advantages of using Polycentric approach.
188.8.131.52.1 Maintain motivation and organisationalÂ image.
Making use of the host country managers, to engage in a multi-domestic strategy, they can assist and encourage local initiative andÂ commitment, and to perk up the organisations localÂ image.
184.108.40.206.2 Continuity ofÂ managementÂ improves.
It abolishes language barriers, elude adjustment problems of expatriate managers and their families, and eliminate the need for costly cultural consciousness training courses. Bestow potential for profit proliferation throughÂ elasticityÂ because local managers can respondÂ immediatelyÂ to market needs in the vicinity of pricing, production, product life cycle, and politicalÂ bustle; deficiency of problems linked with expatriate managers together with cultural short-sightedness.
220.127.116.11 Disadvantages of using Polycentric approach.
18.104.22.168.1 Gap between local andÂ globalÂ operations.
With a polycentricÂ approach, it is moreÂ troubleÂ to bridge the gap (policies, communication, coordination,Â controlÂ and culture etc.) between the hostÂ countryÂ component and the organisation'sÂ parentÂ headquarters.
22.214.171.124.2 Lead to corporate lethargy.
The organisation confines understanding of host nationals to their own country. Organisations headquarters may become isolated fromÂ nationalÂ componentÂ and lead to lack of incorporation, this, in turn, may lead to corporate lethargy.
2.2.3 Geocentric approach.
A geocentric approach can be defined as "A world-oriented view that focuses on usingÂ the best approaches and peopleÂ around the globe." (Stephen 2007, 93) When organisations engage in a geocentricÂ approachÂ they seek the ideal candidate for prime positions throughout the organisation, despite their origin.Â Managers that make use of this staffing approach believe that it is extremelyÂ valuableÂ to have anÂ internationalÂ perspective, both at the organisations headquarters in theÂ parentÂ countryÂ as well as in the foreign host country.
126.96.36.199 Advantages of using Geocentric approach.
188.8.131.52.1 EndorseÂ internationalÂ learning.
A geocentric staffing approach enables firms pursuing a global or transnational strategy to establish the necessary framework of international management, who canÂ supportÂ global learning by moving between countries and cultures without forfeiting their success. This approach also allows the organisation to make best use of its human resources and makes employees feel at ease working in any culture.
184.108.40.206 Disadvantages of using Geocentric approach.
220.127.116.11.1 Hard to develop and costly to maintain.
The issues that make the geocentric staffing approach hard to develop and costly to maintain can be issues such as, economic aspects, decision-making and legal contingencies.
2.2.4 Region-centric approach.
Staffing approaches may also occur in the process under an established region-centric strategic approach, where the organisation's operations orÂ meticulousÂ functions can be controlled byÂ variousÂ countryÂ regions orÂ fundamentalÂ economic regions. This staffing approach can be viewed as the host country has theÂ predominanceÂ at a local contributory, however, with an increased activity ofÂ superiorÂ host country managers toÂ topÂ up operations inÂ variousÂ countries of the fiscal region.
In this case, it can be noted that headquarter employeesÂ signifyÂ atÂ regionalÂ headquarters, which provide opportunities for cross-cultural dealings afar from what can be found in the polycentric staffingÂ approach. The previous host country managers and the international assignments alsoÂ acquireÂ usefulÂ albeit less culturally remote internationalÂ careerÂ experience; however, they are still limited to the regional level with a slight chance of upgrading to the top management strategic workingÂ partyÂ back at their company headquarters.
18.104.22.168 Advantages of using Region-centric approach.
22.214.171.124.1 Build Competencies.
The region-centric staffingÂ approachÂ possibly will play a role, through this prolongedÂ levelÂ of international assignments, to edifice competent international competencies, signifying an obliging conversion to anÂ ultimateÂ global strategy introducing a geocentric approach to staffing.
126.96.36.199.2 Encourage communication.
It permits interaction flanked by managers of an organisation's contributory that transmits to their organisation'sÂ localÂ headquarters, and managers from the organisation's headquarters positioned in the regional headquarters.
188.8.131.52 Disadvantages of using Region-centric approach.
184.108.40.206.1 Career limited.
When anÂ organisationÂ makes use of the region-centric staffingÂ approach, there is a rare occasion that they can be transferred between regions. ThisÂ strategyÂ shift employees within designated regions, rather than transferring internationally.
The multinational enterprise can engage in one of numerous approaches to select international staff. It may even continue on an unplanned core, rather than analytically selecting one of the above four staffing approaches. The jeopardy with these approaches can be that the organisation will choose a staffing approach of making use of parent country nationals in international management positions by firm will choose for a policy of using parent-country nationals in foreign management positions by evasion, that is, simply as an routine expansion of domestic staffing approach, rather than consciously looking for best possible exploitation of management abilities. There are both advantages and disadvantages of making use of local nationals and expatriates in foreign contributories. The majority organisations make use of expatriates only for important positions as senior managers. Expatriates veer to be very costly, it makes little sense to hire expatriates for positions that can be proficiently filled by foreign nationals. Numerous countries compel that a evident percentage of the work force need to be local employees, with omissions frequently made for superior management.
3. Criteria for selecting expatriates.
International humanÂ resourceÂ is aÂ decisiveÂ factor of anÂ organisation'sÂ positionÂ and is widely recognized as an influencing factor for failure and success of international business environments. International humanÂ resourceÂ involves developing human resource capabilities to meet the diverse needs multinationals organisations. Human resources andÂ competitiveÂ internationalÂ economy are cannot beÂ easilyÂ too duplicated, as factors of production and can, therefore,Â provideÂ a competitive advantage for the organisation. When looking at international staffing criteria's, operating and middle management employees can be selected locally. Upper management positions can be filled withÂ parentÂ country nationals (PNC), host country nationals (HCN) and third-country nationals (TCN). The choice of whom to hire is often influenced by the attitudes of top management teams and the overall staffing policies. The organisations strategic positions andÂ visionÂ should take theÂ viewÂ on international human resource management and how it can be integrated into the organisation. "According to Dowling and Schuler, (1990) selectionÂ is theÂ process of gathering information for the purpose ofÂ evaluating and deciding who should be employed in a position." When high-technical capabilities and when new international organisations recognize that adherence to the organisations is in greater concern as to theÂ commitmentÂ to host countries; expatriates areÂ usuallyÂ sending abroad. (Deresky 2003) Technical expertise can be seen as one of the most critical criteria when selecting employees for international assignments. "Black et al, 1999, stated focusing on technical skills can result in an instant selection process, where potential candidates with cross-cultural skills and similar technical skills can be overlooked when decisions makers are trying to find suitable candidates within the organisation."
For the human resource practitioner in charge, it can be challenging to determine what selection criteria to use when selecting employees for international assignments. The factors involved in the expatriation selection is, 1) Technical Ability 2) Cross-Cultural Suitability 3) Family Requirements 4) Organisation-Specific Requirements 5) Language and 6) MNE requirements. These factors are all related so they should not be revisedÂ separately. Technical Ability, Cross-Cultural Suitability and Family Requirements, are the factors related to the individual, and the Organisation-Specific Requirements, Language and MNE requirements areÂ mostlyÂ influenced by the workingÂ situationÂ they need toÂ enter.
3.1.1 Technical Ability.
For the selectedÂ candidateÂ to perform a task, technical and the needed managerial skills isÂ necessary. The assessment of theÂ potentialÂ candidate is usually based on theirÂ previousÂ working experience, where statements andÂ evaluationÂ records from the candidates superiors is available. When the candidate needs to solve a problem in a new international business environment, it must be noted thatÂ experienceÂ is not that serious. Technical abilities are fundamentally the knowledge required to carry out a task; technical abilities is associated to the working of tools. An example of technical abilities can be that financial managers need to make use of business appraisal tools to assess and set up financial statements like the income statement and balance sheet.Â
3.1.2 Cross-culture suitability.
"According to Dowling and Welch, (2004) important Things to consider when assessing the candidates cross-culture suitability, is language skills, culture empathy, the attitude toward new cultures and the level of personnel and emotional stability." In practice, it is not easy to evaluate the cross-culture suitability of a candidate as it isÂ hardÂ preciselyÂ know what factors should be included. The multinational enterprise (MNE) emphasizes the importance of expatriate's abilities toÂ createÂ and maintain aÂ naturalÂ relationship, but means to measure such abilities is not always accurate enough. Efficient relationships for example, an analysis of the hypothesis that culture with evident male dominance is more belligerent and it can be perplexed, because the mock-up of cultures is not autonomous.
3.1.3 Family Requirements.
The success, of the expatriateÂ abroadÂ can be influenced by spouse/family, MNE's sometimes focuses too little on the impact thatÂ familyÂ may have on the expatriate.Â Families find it difficult toÂ adjustÂ as they can suffer from segregation due to the subjection toÂ integrateÂ into new environments. A higher level of organisational assistance in the primitive phases of expatriationÂ usuallyÂ links with a higher level ofÂ adjustmentÂ by the spouse.
3.1.4 Organisation-Specific Requirements.
The human resource practitioner needs to consider the organisations requirements before selecting a candidate, host country governments can stop the transfer of expatriates. The host government, is the ones that issue the working permits and visas to the expatriates, therefore, theÂ parentÂ country need to prove that there is noÂ availableÂ hostÂ nationalÂ country. Legislations and changes of the employee must be addressed; assignments abroad means that the expatriate mustÂ moveÂ to another country withÂ familyÂ toÂ remoteÂ or war-torn environments, where living conditions can beÂ challenging.Â Some host countries do not issue work permits to females, this canÂ makeÂ it difficult, for the spouse toÂ adapt. An organisation-specific requirement is implemented during the formation of an independent relationship flanked by computer resources, which includes the evaluation of the comparative precedence between default recommendation and alternative recommendation; and using the highest precedence recommendations to set up a link among the computer resources.
3.1.5 Language skills.
Language skill is a significant factor, knowledge of the host country'sÂ languageÂ can be consideredÂ essentialÂ for many top level management positions, along with theÂ aptitudeÂ to communicate successfully. Knowledge of the host country's foreign language helps the expatriates and their families/spouse feel more contented in the new environment.Â When adopting a corporate language, which is different from what the, expatriate local, language, is aÂ fundamentalÂ thatÂ languageÂ skills need to be viewed as selection criteria.
3.1.6 Multinational enterprise (MNE) requirements.
The MNE's requirements have anÂ enormousÂ impact on the decisions and which selection criteria to use. Training skills areÂ veryÂ important, so that expatriates canÂ trainÂ locals and emphasize negotiating skills in new international business environments. The period of the assignment is another factor influencing family/spouse. "According to Harris and Brewster, (1999) they suggested that international managers has many similar characteristics as those managers working in less complex environments, but are in need of additional skills regarding toÂ handleÂ the problems that may arise internationally."
Technical abilities is an important factor in the case of selecting international staff, it provides the employee with the basic understanding of what is included in their tasks and what they believe they are capable of doing. The multinational enterprise (MNE) view the experience of expatriate as very important, prolong experience is needed to have the appropriate knowledge to develop a successful organisation.
When considering the roles of expatriates it can be noted that it does not have one single intended role. By evaluating all those who are interested the multi national enterprise (MNE) will select the candidate that is more suitable and has the knowledge and experience needed to successfully engage in the international organisation. When looking at the selection criteria of expatriates, establishing basic criteria for selection can be beneficial to the international business environment.
The purpose of this study was to gain a better understanding and knowledge of the selection criteria when selecting international staff for international assignments. The criteria for selecting expatriates have been discussed, and it was noted that it does not differ much from the regular employee selection process. In order for an international organisation to operate successfully in a foreign country they first need to selected an international strategy to enter the international market/environment. Once the organisation as entered the market they need to know what staffing approach is best suitable to the strategy they are following. If the organisation has determined there strategy and approach, they then have to take in consideration what criteria they are going to make use of to select the best expatriate manager for the international assignment. International organisations have to take in consideration every aspect of selecting the appropriate candidate, as the failure of expatriation can be extremely expensive.