THE CHINALCO CASE STUDY

The Chinalco Case Study



The Chinalco Case Study

 The future of multinational corporations' competitiveness in the global market is contingent on cot potations ability to change and adapt their resources strategically to the nuances of the broadening global playing field. Business strategies, which organizations adopt to maintain competitiveness, should be developed in conjunction with their human resource departments. The human resource practices need to be congruent with the organizations' strategic plans in order to 'facilitate successful implementation' of their business strategies (Tichy et al. 1982: 47) . Given that it is the people within organizations who sell and market, develop and create products, make decisions and implement programmes, human resources are vital to the success of an organization . To be strategic human resource practices are expected to maximize employee's effectiveness in accordance with their organizations' missions, objectives and goals.

Global management strategies in multinational companies will vary greatly . The processes, practices, systems and structures developed to implement those strategies will likewise vary . Developing global strategies can be difficult, given the conflicting demands the global environment places on MNCs . The conflicting demands often arise as MNCs attempt to maximize their abilities to respond to the needs of the host countries (local responsiveness), while trying to maintain their controlled corporate structure worldwide (global integration) . Oftentimes, the more autonomy foreign subsidiaries have to act independently and respond to local demands, the less integrated the worldwide organization becomes - and vice versa (Prahalad and Doz, 1987 ; Tung and Punnett, 1993).

The Chinese mining company, Chinalco, will be investing $3 billion into the Toromocho mines, a figure the Peruvian government is happy with; however the Chinese have essentially brought two billion tonnes for US$410 a ton. The price of copper has been measured at US$8255 per ton. The investment of $3 billion seems meagre when Chinalco has a chance of making a 2000% profit. For Chinalco to start mining however, it will have to move an entire town across the valley. Morococha is an extremely impoverished area, with the vast majority of its residents living the most basic of lives, but this all comes together to make the offer of resettlement and $2000 hard to resist.

In general, the ethnocentric strategy suggests that companies should maximize their parent company control in order to integrate subsidiaries, at the cost of local responsiveness. The polycentric and regiocentric approaches both allow for more local responsiveness -- with less corporate integration . The geocentric strategy is the 'ideal', as it attempts to balance both global integration and local responsiveness . In a hierarchy, the geocentric strategy would be the best because it incorporates both of the theoretical ideals . Polycentric and regiocentric strategies would be second because they satisfy the local responsiveness ideal (usually at the cost of global integration) . Ethnocentric strategies, focusing on headquarters' control, are neither globally integrated nor locally responsive .

Generally, as foreign subsidiaries mature, they become more resource independent 'with respect to strategic resources, such as technology, capital, manage-ment, access ...