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Module 6 Assignment Responses

Part A:

International activities are very important in designing a competitive advantage as they

offer the organization future access to new markets or different sources of resources and

talent. Companies can seize global opportunities, increase customer diversity, and break the

dependence on a single market through expansion of operations across borders. For example,

Apple and Samsung, both firms, use international markets to secure economies of scale, lower

production costs, and increase profits by large margins. Furthermore, companies can tap into a

nation’s unique resources, such as raw materials and labor, that might be unavailable or

unaffordable domestically (Thomasson, 2024). Access on a global level is a common source of

creativity in the business world as it facilitates gaining the best, definitely the most different,

ideas, cultures, and points of view. Additionally, firms can reinforce their brand recognition and

strengthen customer loyalty through international activities because Customer loyalty is

universally a result of global exposure. Therefore, global expansion becomes a cornerstone of

both strategic growth and differentiation.

Besides, international activities help companies stay competitive as they undertake cost

arbitrage and efficiency gains. Multinational corporations (MNCs) are outsourcing

manufacturing to developing countries where manufacturing costs are low compared to MNCs

using the same location for manufacturing, thus enjoying a pricing advantage over the

competitors (Thomasson, 2024). For example, it is drawing on its Nike manufacturing in several

very low-cost countries; it can afford to spend its resources on marketing and innovation while

still keeping its prices competitive. International expansion is about cost efficiency and risk
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diversification, mainly through multi-regional investments and operations. The strategy

incorporates the idea that economic or political disruption in a single country doesn’t imperil

the company’s performance. In addition, businesses involved in foreign-based activities enjoy

beneficial trade policies and tax incentives in emerging and fast-growing economies. Hence,

encouraging globalization helps firms manage cost efficiencies and gives them the means

necessary to maneuver their operations according to the changing market demand while

establishing a sustainable competitive advantage.

Part B:

In designing an international compensation program, local market conditions deserve

careful attention as the salaries and benefits represent the compensation under the country’s

economic environment and cost of living. For example, a job in a high-salary city in New York

will command a higher salary than performing the same role in Bangkok. To create a

competitive, attractive compensation package, one must understand the local job market,

inflation rates, and employee purchasing powers (Sherrer, 2023). Such companies must also

assess how global standards line up with local pay structures so that they don’t only offer

competitive but also fair remuneration. Some countries might also have exclusive

compensation expectations regarding industry trends or talent availability. Consequently,

aligning salary scales to meet such needs attracts top talents and saves a company the cost of

poor retention resulting from salary discrepancies. Compensation that is competitive in the

market helps to give companies an advantage in locating and retaining employees.

Companies need to account for legal and regulatory requirements in the countries,

besides taking care of the market conditions (Sherrer, 2023). Mandatory benefits, such as
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health insurance, pension plans, and vacation time, vary to some degree from one nation to the

next. If you don’t comply with these local labor laws, you can get in legal trouble, pay fines, or

lose the trust of your employees. Consider Germany, for instance, which has stringent

regulations on what it offers employees as benefits and hours of work. As much as it is about

legal compliance, it is also about compliance with cultural norms and the company's values.

Some cultures may give more importance to job security or long-term incentives rather than

short-term financial Bonuses. In contrast, some cultures may value formal culture in work-life

balance, health benefit categories, etc. A well-designed international compensation program

incorporates legal and cultural elements, fairness, compliance, and employee satisfaction.

Part C:

An international compensation program is intended to overcome issues related to

assigning employees to foreign countries and tie their compensation to the organization's

objectives and the local compensation market. The first and most important of these includes

the base pay, the basic foundation for any compensation structure. Generally, the employees'

base pay is worked out based on the position they hold, their experience, and the cost of living

in the host country. Unlike domestic compensation programs, however, international programs

frequently have additional elements, such as allowances, incentives, and benefits determined

to meet the needs of expatriates (Sherrer, 2023). This may include housing allowances,

transportation costs, education allowances for children, and relocation assistance, which is vital

in supporting an employee's relocation to a new environment.

Also, non-performance-based incentives are another vital part as they will help cut

down on recruiting and retaining employees in those international markets where the
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competition for skilled labor is hard (Sherrer, 2023). The form such incentives could take is

those offered to employees for working in challenging locations, such as hardship allowances or

mobility premiums, to encourage international assignments for employees. Allowances and

bonuses are but one small part of comprehensive benefits packages. Its benefits include health

insurance, retirement plans, and tax assistance to prevent the effects of taxation in the home or

host country. The objective is to guarantee that employees of any international organization

are paid adequately for their global work, enjoy the same standard of living as they would back

home, and are consequently motivated to work hard on the assignments. These various

components combine to create a solid package that caters to a wide range of expatriate needs.

Part D:

Currently, the Balance Sheet approach is the most commonly used method for

compensating US expatriates on international assignments so that they keep the purchasing

power they would have in the United States. It aims to protect expatriates from being

financially disadvantaged in the host country because of the difference between the cost of

living and taxation between the home and host countries (Zier, 2024). Essentially, the company

decides on its own 'baseline,' meaning the amount the person would earn in their home

country for the same job, then adjusts it according to things like the cost of living in the host

country, housing, and tax rates. For example, suppose a US expatriate is assigned to work in a

country like Switzerland or Japan, where the cost of living is much higher; in that case, they will

receive additional allowances to offset the added expenses so that their standard of living

remains the same despite being assigned to another country.

The Balance Sheet approach also covers potential tax discrepancies for US expatriates.

Citizens of the US must report and pay taxes on their income anywhere in the world in which

they live (Zier, 2024). So, to help with this, corporations offer tax equalization so that the

employees' tax burden in the host country doesn’t exceed what they would have owed in the

US. The employer, therefore, assumes any excess tax costs in the host country so that the

expatriate can maintain the same level of tax obligations as would have been in the American

expatriates may receive allowances for housing and education expenses for dependents to

make sure that moving abroad doesn’t mean moving up or down a step or two in the financial

ladder. Financial stability and fairness are essential to US employees' retention and motivation

on international assignments, and the Balance Sheet approach meets those conditions.
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References

Sherrer, K. (2023, August 22). A guide to creating a global compensation strategy.

TechnologyAdvice. https://technologyadvice.com/blog/human-resources/global-

compensation-strategy/

Thomasson, M. D. (2024, July 10). How can a company gain competitive advantage through

internationalisation? Victanis, European strategy advisory

firm. https://www.victanis.com/blog/how-can-a-company-gain-competitive-advantage-

internationalisation

Zier Y. (2024). What Is the Balance Sheet Approach to Expatriate

Compensation? https://fastpay.co.il/the-balance-sheet-approach-in-expatriate-

compensation-packages/#:~:text=The%20balance%20sheet%20approach%20aims,costs

%20and%20complexities%20of%20expatriation