 In this topic we will be discussing one step of the stages of internationalization model and that step is the sales subsidiary step and we will be looking at how a sales subsidiary operates what type of structure is formed in a sales subsidiary which goes into the international business. In this diagram you can see that there is the corporate executive and under that corporate executive there are departments of the organization there is finance department, logistic department, production department, marketing and sales department and now you can see that the department of exports that is added in the organizational structure in the previous structure of the export department you remember that the sales came under the the foreign sales came under the marketing and sales department now you can see that one department of exports is added in this particular step and then there is the human resources department and human resources department is again having both the function of controlling the human resource of the parent country and controlling the human resource of the sales subsidiary so you can see in this diagram that under the exports department there are two heads number one is direct exports and number two is the sales subsidiary so it is possible that in an organization you are selling your products through directly exporting your product to a foreign country and you have established a sales subsidiary in another foreign country so if you have both those functions operating in your organization then you will have this type of structure if you are not going for direct exports you are establishing sales subsidiaries throughout the foreign operations then direct exports department will not be operating so sales subsidiary will be working under your exports department why do you go for establishing a sales subsidiary in your foreign operations you do not run the work with exports the reason is that when you export in that you can create a lot of problems for foreign agents coordination problems or cultural problems for foreign agents they might be charging very heavy commissions they might not be telling you the exact situation of the market you cannot trust the foreign agents because they are not the part of your organization they are not your employees they are your selling agents so the problems which are faced by the foreign agents force you to establish your international functions in the form of a sales subsidiary then you go for a sales subsidiary because you become more confident that okay your product is selling very well in a foreign market so rather than exporting your product it's better that you establish a sales subsidiary in the foreign market that would enhance your sales and that would enhance your image in that foreign country you also want to have a greater control over your foreign operations so if you establish the foreign country where operations are being done sales are being done with customers networking all these things come into your direct control when you export these things are in your foreign agent control when you establish them in your control so you have more control over all the functions of an organization in that sales subsidiary department and then you may decide to give greater support to the export activity because you find that the export department is or the exports function is much more profitable and therefore you want to make it more highlighted in the functions of your organization so these are the reasons why you go for establishing a sales subsidiary in the international context the HR issues which are related with sales subsidiary management are that number one you have a need for control and coordination now if you have people who are operating in a foreign country you have opened an official subsidiary there obviously you have to hire human resources you have to allocate them to operations so you will need more coordination then you have staffing needs and in staffing needs you can go for two possibilities you can go for an ethnocentric approach in which you hire your parent country nationals PCNs for that export function for that sales subsidiary function and then there is country specific approach in which knowledge of the foreign markets is very much important so obviously PCNs will not have the knowledge of foreign markets you need to hire host country nationals who belong to that country so that is country specific approach now when you are appointed you will appoint HCNs actually i think that most of the organizations try to appoint PCNs as their parent country nationals because they trust them and they know them more and they feel confident in delegating them now when you are appointing parent country nationals in a foreign country you will have to go for the process of expatriate management so expatriate management is a function which will be added when you send your parent country nationals to foreign countries to manage your sales subsidiary