Establishing a New Subsidiary in Venezuela

You are the HR manager of an Australian Small-Medium Enterprise (SME) in the oil and gas industry, targeting a new market in Venezuela. According to the Organisation of the Petroleum Exporting Countries (OPEC), Venezuela’s oil revenues account for about 99 per cent of export earnings. Apart from petroleum, the country’s natural resources include natural gas, iron ore, gold, bauxite, diamonds and other minerals. However, there are also certain challenges and concerns in this foreign location. Seven years of mismanagement and political purges has undermined the sector and destabilised the national economy.
Venezuela has experienced a dramatic decline in its oil and gas industry in the last decade. Reversing its fortunes will demand a complete overhaul of its legal and institutional framework for the sector, with attracting international investments the key objective. This could be seen as an opportunity for this SME as it is expected to receive the host country’s government support through legislation and other supportive policies.
Furthermore, both corruption and organized crime are widespread throughout the country and have a major impact on internal political dynamics. The country ranks 173rd out of 180 in Transparency International’s Corruption Perception Index. This can create a serious challenge for the new subsidiary of the SME.
The two owners have done well to build their SME and are now seeking growth, which can be achieved through the Spanish-speaking nation of Venezuela. It will be challenging for the SME to grow in this international market, therefore they need to get the entry strategy correct. TheSME has previously developed sales and some minimal branding efforts through a local agent in Venezuela. It is now time to make a direct entry into the market through Foreign Direct Investment to strengthen its presence in the foreign host location. Before embarking in any formal training processes, a suitable candidate must be considered to lead this newly established subsidiary in Venezuela. At present, your options are as follows:
A. Assign one of the SME founders to the role. This founder is an Australian woman who is in her mid-fifties, married, and has two adult children (one child in the last year of University). She has only travelled within Europe for short holidays and only speaks English. She has extensive senior leadership skills in the Australian context.
B. Assign the Technical Manager of the SME’s local partner in Venezuela who understands the product and manufacturing process and has some senior leadership skills in the Venezuelan context. He is single and a Venezuelan national.
C. Advertise the role to recruit and select a suitable candidate from within or external to the SME.
Using the theories and terms you learned in this unit, answer the following THREE
questions:
1) Compare and critically discuss the four international staffing approaches to justify ONE of the provided options (in the above case study) that would ensure the success of this subsidiary in the Venezuelan context. Provide relevant examples from the case and/or beyond to support your answer. (20 marks)
2) Define and critically discuss the three international business ethics approaches that we studied in this unit and justify which one would best address the corruption issue in this new subsidiary. Provide real-life examples to support your answer. (10 marks)
3) In regards to repatriation issues and potential challenges, identify and critically reflect on at least FOUR factors that can have negative influence on the repatriation adjustment process in this case. Provide relevant examples from the case and/or beyond to support your answer (10 marks)