Report

1461902-653153409315-41910Topshop’s venture to Chicago, Illinois.Human Resources Directorate Report, 2011:How to best deal with HR aspects of Topshop’s potential acquisitionArcadia Report:January 14th, 2011 Submitted by: Sally Hawthorne: Graduate Trainee for the Arcadia Group Ltd.Arcadia Group LimitedTo: Chief ExecutiveFrom: Sally Hawthorne, Graduate Trainee for the Arcadia Group LtdDate: 14. 01. 2011Subject: How to best deal with Topshop’s potential acquisitionDear Mr Haybert,I am writing to you as requested with recommendations that suggest how to deal with Topshop’s potential venture to Chicago, Illnois as well as discussing the HR issues which will stem from this. I have used Topshop’s latest acquisition (New York City) as the premise of my analysis because the results will establish how well Topshop are performing in America; which I have thus concluded answering the question, should they venture to another state. My analysis is based solely on Topshop and not the other subsidiary companies which fall under the Arcadia Group Ltd.Kind regards,Sally Hawthorne Contents TOC quot;
1-3quot;
Executive Summary PAGEREF _Toc283016366 4Background Note PAGEREF _Toc283016367 4Topshop’s Strategy PAGEREF _Toc283016368 5Polycentric or Ethnic Approach PAGEREF _Toc283016369 6Factors Influencing the Parent Company. PAGEREF _Toc283016370 6Choosing the Right Expatriate PAGEREF _Toc283016371 7Recruiting and Selection PAGEREF _Toc283016372 8Factors to Consider PAGEREF _Toc283016373 8HR Issues Deemed to be Important by the Expatriate PAGEREF _Toc283016374 9Reward Strategies PAGEREF _Toc283016375 9Career Development PAGEREF _Toc283016376 11Conclusion PAGEREF _Toc283016377 12References PAGEREF _Toc283016378 13Useful Sites PAGEREF _Toc283016379 13 Topshop: The Right Move to Chicago, Illinois? Executive Summary The Human Resources (HR) department has become an important function of Topshop as the company has expanded. For example, by selecting and recruiting, individuals to suit the business. However, with recent plans to open up in Chicago, Illinois, emphasis will be placed on the HR department’s policies and practices as the executive team see them as a critical success factor in the embedding of the acquisition. In recent years the retail industry has witnessed expatriates being the main drivers in developing the organisation’s strategy. However, in the light of using expatriates for foreign acquisitions, practical HR issues have emerged. It has been established that managing expatriates for foreign assignments has created difficulties for the International Human Resource Manager(s) (IHRM) – particularly in terms of adhering to company policies and practices, and setting reward packages that meet with the goals of both the organisation and the expectations of the employee. This report was commissioned to establish if Topshop should venture to Chicago, Illnois. The research draws attention to the fact that Topshop is an international company, and has adopted an ethnocentric approach because the parent company favours their best-practices and standards, in foreign markets. The report finds the prospect of using an expatriate as an advantage to the parent company, the primary reasons being management and organisational development. However, the report has also established using expatriates posses HR issues for both the expatriate and the parent company; the main issues concerning to pay. Further research revealed that in order to ensure effective assimilation from the parent company to the host county the expatriate must be aware of the policies and state laws in Illnois. The report finds the prospect of the company moving to Chicago is weak. The major area of weakness relates to not responding to local foreign markets. Background Note Opening its doors in 1964 inside a Sheffield department store, saw the beginning of the success story for; now one of the UK’s leading clothing retailers. Prior to Sir Philips’ takeover, the premise of Topshop was to provide fashion to teenagers. However, in 1998, Jane Shepherdson, a onetime buyer for Topshop, changed the desired market to a market that would cater for ladies of all ages and sizes. Arcadia Group Ltd is the parent company of Topshop, and is the largest privately owned clothing retailer in the UK. Nonetheless, Topshop is undoubtedly the profit driver for Arcadia. Furthermore, Topshop has expanded not just in the UK, but internationally. Most notably in Jordan, Thailand, Iceland and most recently, in New York City (NYC). Following the success of Topshop NYC talks have been made between Green and the parent company to open up another store in Chicago as Green believes this move will be more successful than his venture to the States. Topshop’s Strategy International, multinational, global and transnational strategies are distinct and have a specific meaning which define the ‘scope and degree of interaction with the parent company’s operations outside of their “home” country’ (Iwan, 2007). As a result of Topshop not responding to local-foreign markets and instead, utilising best-practices and Topshop’s unique competencies in foreign markets, it can be suggested that this in turn resembles an international strategy. Barlett and Ghoshal’s, (1990) paper suggests that a company who wishes to pursue an international strategy would be a company who created competitive advantage through a global diffusion of the company’s distinctive competencies where its local competitors lack these resources and the capability to integrate and effectively rationalise their value-added activities abroad. In addition, an international strategy is associated with low demands for integration and low demands for local responsiveness, and tends to centralise their search in the parent company. Therefore, it could be argued that Topshop has adopted Barlett and Ghoshal’s (1990) idea by using their unique competencies of ‘high British fashion’ and youthful characteristics’ along with their standardisation procedures ‘brand’ and ‘space policies’ to make them successful in the U.S.A. Conversely, it has been suggested that Topshop’s characteristics resemble an international strategy, but, it could be suggested that this may not be a firm position for Topshop and their position could shift in the future. The result of this could be that Topshop’s competencies and standardisation procedures are possibly not responding well in foreign markets. In fact, criticisms have been made towards Topshop NYC which has raised major concerns in relation to their floor policy; dress-sizes and over-priced, low-quality goods. These types of issues have raised concerns that Topshop are not responding well to local foreign markets. For this reason, it could be suggested that before the venture in Chicago, they will have to consider customising their product offering and market strategy to foreign-local markets tastes and preferences. Furthermore, they will have to ensure that they recognise and respond to national boundaries (Brasson and Gold, 1990). In turn, these recommendations are characteristics of a multi-national strategy which thus suggests that this is the direction which Topshop may be forced to take. Polycentric or Ethnic Approach Given what has been discussed above, it could be suggested that Topshop are going to take an ethnocentric approach. The premise of the ethnocentric approach is recruiting from the parent country. Moreover, to adopt an ethnocentric approach top management view ‘techniques and personnel as superior to foreign and as the most effective in overseas markets (Wind, Douglas and Perlmutter, 1973). In addition, LeVine and Campbell (1972) develop further on ‘ethnocentrism’ by suggesting it ‘is seeing one’s own standards of value as universal’. Factors influencing the Parent Company. In light of the approach taken there are still a number of factors which need to be addressed to determine if the right choice has been made. This part of the report will address the positive and negative factors of the ethnocentric approach. Advantages: The advantages of an ethnocentric approach are:- ,[object Object]

Easier to pull out of a business;

The parent company may have an influence on the local culture for the good; and

No major issues with language barriers Whilse there are many advantages to an ethnocentric approach there are also disadvantages which include:- Disadvantages: ,[object Object]

The costs involved: training, wages, accommodation and legislation, and;

Local differentiation in wages and terms.Nevertheless, the issue of pay can create many problems for the parent company as its own separate entity. For example, if a parent company is recruiting locally and offering the expatriate more money than the foreign-local who has the same skills and experience, then conflict will surface. Although companies have policies and practices to ensure wage confidentiality there are still resources accessible to foreign-locals to be able to find out the expatriate’s (average) salary most notably, with the aid of the internet. In order to address the issue of wage terms in foreign markets, Topshop will need to revise their polices for the Illinois state and the ethics which come from that. Management consultancies could be a strong recommendation to addressing some of the disadvantages highlighted above in order to maximise growth in foreign markets. Nevertheless, if Topshop do change their practices to adhere to local-foreign responsiveness and operational boundaries this will not only shift their strategy, but this may also shift their current approach from ethnocentric to a polycentric to allow for success in foreign markets. Moreover, to take a polycentric approach, Topshop’s managers and employees engaged in foreign operations should ideally be from the host country, recruited and selected in the host country. In addition, the advantages of recruiting in the host county would result in saving money associated with recruiting, training, and transferring expatriates from other countries in which the company also has operations (O’Connell, 2010). The disadvantages would be that the employee(s) in the host country would have low knowledge of the company culture and fail to conform to the parent company management. Here, local management takes control and as a result a breakdown in relationships could occur between the parent company and the host country. In summary, the decision for Topshop to follow an ethnocentric approach is the right choice...for now. The reasons for this are because Green believes that no best-practices or standards will better Topshop other than his own. Yet, if he considered the criticisms made about the NYC store, his view could be subject to change. Choosing the Right Expatriate The selection of the most suitable employee for an international assignment has become the key component in the strategic selection process (Guthrie et al., 2003). However, selecting and recruiting the right expatriate for this acquisition has proven to be difficult for the international human resource manager (IHRM) – particularly in terms of adhering to company selection policies and setting compensation packages that meet with the goals of the organisation and the expectations of the employee. This section will address the protocols which need to be enforced to ensure effective assimilation of expatriate staff from the parent company to Topshop in Chicago; and discusses the issues raised by the expatriate and how the parent company aim to deal with them. Recruiting and Selection Recruitment and selection should be an effective, efficient and fair process; one that should exclude discrimination in order to identify the requisite traits of the person needed for any given assignment. Dulebohn and Werling’s (2007) paper develops this by suggesting that the process should effectively enable the organisation to achieve its international business goals by selecting the most suitable candidate. In addition, selection should involve testing and evaluating candidate skills and personal attributes to identify best fit for the international assignment. These strategies are arguably the most important objectives an organisation should undertake to ensure that the employee is capable of delivering the organisation’s international goals, irrespective of gender, age and race (Beardwell et al., 2004). In considering the above, the expatriate will be assigned to the position based on the individual’s experience attained in regards to their current position as well as their personality. However, further consideration should be given to those that have had experience outside their home country. The reason for the latter decision is because they would have had experience adhering to foreign policies, cultural values and attitudes. Factors to Consider Some of the factors in international environments must be continually observed by the organisation’s managers—including its human resource managers to ensure the effective assimilation of expatriate staff from the parent company into the new environment is properly executed (Wheelen and Hunger, 1990). These include:- Socio-cultural— Cultural norms and values; language and attitudes towards foreigners. However, it should be considered that the language barriers would be less important in Illinois, because they speak American-English. In addition, research has established that the majority of the foreign-local communities follow a Christian faith. However, although the majority of Chicago citizens are Christians, consideration has to be given to the small minorities who have other beliefs and values. Therefore, the parent company will need to prepare the expatriate to be versatile to cultural value and norms. Economic—economic development; per capita income; GNP (Gross National Product) trends; monetary and fiscal policies; unemployment levels; currency convertibility; wage levels; and the nature of competition. As of July 2010, Illinois have increased their minimum wage, to $8.25 for 21 year olds, and above. Young people between the ages of 16 and 17 get 85% of the minimum wage, totaling to $7.12(approx (IDES, 2010)). In addition, the Illinois Act (1867) states that the working week is 40 hours, the UK law states that the working week is 37.5 hours. Therefore, in order to comply with the Illinois state laws, Topshop will have to adhere to the minimum wage policy as well as the working Act. However, after converting the minimum wage (U.S dollars) into English pounds, the results have shown that the expatriate will be paid less. Furthermore, on average, the holiday entitlement that an English citizen is entitled to is twenty eight days; but an American citizen is only entitled to fourteen days. So in turn, the expatriate will be working longer, receiving less holiday and monetary income. These are critical issues which will need to be addressed prior to the expatriate assimilation. Technological—regulations on technology transfer, natural resource availability, transportation network; and information-flow infrastructure. While technology is not the premise of Topshop and is not important to the expatriate, it should still be included, because they will be using technical resources to communicate with the expatriate’s assimilation of their move as well as to local-foreign suppliers and, other stakeholders concerned with the business. Political-Legal— government; political and tax laws. It is critically important that the parent company understands the differences between the American and English legal system to ensure that their expatriates are correctly adhering to the host country’s tax system. Prior to the assimilation, the expatriate needs to be consulted and understand that a U.S citizen should be paying 7.2% of any earnings that s(he) makes as medical tax (Ides, 2010). To prevent any misunderstandings or the expatriate paying dual-taxation, the parent company will need to carefully examine this factor. HR Issues Deemed to be Important by the Expatriate While social, cultural, political, and technologies are practical HR issues which need to be addressed, more emphasis should be placed on expatriate issues such as rewards, training and development. This section of the report will focus on potential issues and compile possible solutions to overcome these. Reward Strategies Balancing expatriate expectation with rewards has long been a source of frustration within Topshop. In addition, Topshop’s main competitors Hennes & Mauritz (H&M) are using a balance sheet approach in developing the expatriate reward package. Within this framework, expatriate compensation will typically be adjusted upwards when calculating the cost of living and will incorporate factors such as housing, children’s education, tax implications and health insurance (Sims and Shraeder, 2005). Another factor that often affects expatriate compensation is the issue of dual taxation. Without assistance from the parent organisation, the expatriate may be in a situation of having to pay parent country and host country taxes on their income. However, there are other factors which the parent company will need to consider in relation to the reward strategy; these fall under four headings; including compensations, benefits, development and career and work lifestyle. Table 1: A Reward Strategy which will be implemented by the parent company to the host COMPENSATIONPay*Bonuses* Shareholdings*BENEFITSMedical InsuranceStaff Discount*Travel to work*Education Allowance; or Travel expenses & Uniform allowance An apartmentDEVELOPMENT AND CAREERCareer developmentGuaranteed job, back in the parent company*WORK LIFESTYLEHoliday *Wellness programs (in correlation with medical insurance).Work flexibility* Data Source: The data collected to generate table 1 originated from Topshop’s ‘benefits and rewards’ webpage (Topshop, 2010). The rewards imprinted with an arbitrary sign illustrated in Diagram 1 are standard remunerations that a highly skilled expatriate will receive while working for the parent county. However, as discussed in the report, practical problems will surface when sending the individual on international assignments; and to a county which does not provide medical cover. Therefore, taking this issue into consideration Topshop would be advised to modify the rewards strategy so that the expatriate will receive free medical cover and a wellness program. In addition, the expatriate should have the choice to choose from a free apartment or paid travel. S(he) should receive an education allowance providing that they have children or if they do not, a uniform allowance and a gym membership to total the amount of the education allowance, and to compensate for taking a pay cut that has incurred as a result of the currency difference between the U.K and the U.S. Problems with determining expatriate compensation packages stem from how the organisation keeps the expatriate package whole (Sims and Shraeder, 2005). From the organisation’s perspective, keeping the expatriate whole should entail the expatriate not making excessive gains or losses when all elements of the compensation package are combined (Sims and Shraeder, 2005). Career Development Consequently, it has been recognised within the parent company that labor with greater skills and knowledge can better foster creativity and innovation. Furthermore, research has uncovered that the parent company’s competitors have found that it is not just monetary rewards which motivate their employees; it is in fact career advancement. In addition, the parent company’s primary objective is to continuously invite mechanisms which will not only discover each individual’s learning style, but aid individuals in developing their creativeness and innovative skills in the parent country and the host country. Consequently, the parent company has recognised monetary rewards do not always motivate expatriates and therefore have considered this when deciding the expatriate’s reward strategy. As a result, opportunities will be created which will give the expatriate the potential to become superior levelled management in the foreseeable future. Coaching and mentoring are mechanisms which the parent company advises Topshop to use. They believe that these two mechanisms are an effective way to give employees instruction on hοw thеу саn better υѕе thе skills аnd expertise thеу already hаνе more effectively (Bentley, 1996). In addition, coaching and mentoring reinforces organisational strategy, and a more sustainable dесіѕіοn-mаkіng аnd problem solving mechanism. It could be suggested that continually using mechanisms to focus on the knowledge economy leads to greater flexibility, empowerment, and the potential for competitive advantage in foreign markets. In summary, as attractive as the rewards are to the expatriate on an international assignment, the same cannot be said on return. For example, the expatriate will have been guaranteed that they will have a job on return; but it cannot be certain they will know what is going on in the parent company. Furthermore, the structure of the business may have changed which in turn could impact the nature of the business if Topshop decide to respond to local foreign markets in the foreseeable future. Conclusion While the cost of using expatriates for foreign assignments are quite high, this opportunity should not be ignored. If Topshop’s aim is to sustain competitive advantage in the host country. Subsequently, many HR issues surface from using expatriates, but contary new opportunities develop if Topshop respond to local-foreign demands. This in turn would see a shift the movement of the organisation strategy which in sequence develops greater chances of gaining competitive advantage. However, Topshop have already chosen to apply their best-practice policies and unique competences in the host country and failed to respond to local foreign markets. This has resulted in criticisms being made towards the company. Topshop have the potential to succeed in foreign markets and gain competitor advantage but if they do not cooperate or are not willing to accept change or respond to the needs of their customers in the host country, then they cannot maximise profits. Consequently, the critical factors raised in this report could potentially be detrimental to the business, which suggests that Topshop should not open up in Chicago until they consider how best to respond to local foreign markets. 12 References Axelrod and Hammond, (2003). The Evolution of Ethnocentric Behavior. [Online]. Available at: http://www-personal.umich.edu/~axe/research/AxHamm_Ethno.pdf. [Accessed 2nd December, 2010]. Barlett and Ghoshal, (1990). The Multinational Corporation as an Interorganizational Network. The journal of The Academy of Management. 15, (4) pp. 603-625. Bearof dwell, I. and Holden L. 2004. Human Resource Management: A Contemporary Approach, 4th ed. FT/Prentice Hall Bentley, T, J. (1996). Bridging the Performance Gap. Gower, England. Bratton and Gold, (2007) Human Resources Management Theory and Practice. 4th ed. Palgrave Macmillan. p.p 74-90. Iwan, L. (2007). Difference-between-a-global-transnational-international-and-multinational-company. [Online]. Available at:HYPERLINK quot;
http://leeiwan.wordpress.com/2007/06/18/difference-between-a-global-transnational-international-and-multinational-company/quot;
http://leeiwan.wordpress.com/2007/06/18/difference-between-a-global-transnational-international-and-multinational-company/. [Accessed 2nd December, 2010]. Megginson, D, аnd Clutterbuck, D. (1995). Mentoring іn Action. Kogan page, London. Stueart, R, D, аnd B, B, Moran. (1993). Library аnd Information Center Management. Englewood, Colorado: Libraries Unlimited. Wind, Douglas and Perlmutter (1973). Guidlines for Developing International Marketing Strategies. [Online]. The Journal of Marketing.8, p.p 14-23. Useful Sites Department of Labour State of Illnois: http://www.state.il.us/agency/idol/. Illnois Department of Employment Security: http://www.ides.state.il.us/employer/uitax.asp Topshop Careers: http://www.topshop.com/webapp/wcs/stores/servlet/TopCategoriesDisplay?storeId=12556&catalogId=33057.

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