XCO China
A MNC exist as a company with various subsidiaries in foreign countries. These corporations’ offers production or delivery of services with their control coming from a parent company based on the country of initial establishment (Mockler, 2002).
Advantages of substituting use of expatriates by local trained employees.
Use of local Chinese employees will also increase demand and thereby profitability. This is because use of local citizens as employees in a company other than foreigners increases the company’s recognition by the local community. If the local community owns up the company they would buy more of the circuit boards from XCO thus high turnover in for of sales and thus contributing to solutions of the Chinese subsidiary in solving low profitability problems. Similarly, demand is increased if a company is contributing to the economy of a country. Use of local citizens raises the national income of the country as unemployment levels are cut down therefore the government may instill less trade restriction to such a company. In event the profitability of the company is increased (Mockler, 2002).
Its more effective to take Chinese citizens to US to be trained and employ them in XCO rather than use expatriates from US to transmit knowledge. Use of local employees lowers labor cost as compared to expatriates who must be paid for not only their services but also the value of knowledge they transfer. Additionally, use of US expatriates who mean that they should be paid a salary equivalent to what they would get at home (Mockler, 2002). Comparing the two economies (China & USA) this would be a higher cost for the firm in china hence the preference of local employees. Saving in costs would help the general manager of XCO. to increase returns on investment.
Finally, use of expatriates would lead to decline of the Chinese subsidiary profitability because the action adds to the foreignness of the company which leads to increase in government restriction trade restriction. Similarly, most expatriates have adaptability challenges to foreign countries culture thus may not serve their clients effectively based on a good cultural orientation as local citizens would.
Conclusion
To sum up, companies should major on use of local employees more than expatriates to cut down on costs involved in hiring them. Additionally, use of local employees will enable companies increase their client’s base in their countries of operation as they will get local community acceptance as well as the government.
References
Mockler, R. (2002). Multinational strategic management. London, UK: Routledge publishers.