MNCs Hiring Abroad

Wall Street Journal recently reported about American MNCs sifting their hiring momentum to outside of the United States. This is not outsourcing, in the strict sense of the term, but kind of a mix between that and catering to local market needs. I am not aware what kind of reaction the report generated in the States, especially as President Obama continues to play to the domestic galleries with his recent rant about healthcare tourism. Irrespective of public reaction, this trend in MNCs is here to stay. Broadly, there are three reasons why MNCs go outside of their headquarters to hire talent and setup centers (apologies for the poor quality of the graphic. Pls click on the picture for a high resolution version. Opens in the same tab in the browser)

MNCs traditionally chased the top. Lever Brothers came to India not to exploit the talent and not to arbitrage costs – it found the Indian markets attractive for its produce. The state of technology did not allow them to come down the pyramid (they did however extract their top talent and put them for overseas assignments. Something that MNCs today call flow-and-grow). The game has changed significantly since. The MNCs that are here to stay have invested across the span of the pyramid. That investment gives them greater flexibility of running businesses and benefitting from economies of scale

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