Question

Human resource management responses to global strategy in multinational enterprises by Peter Kidger. In 3-5 pages analyze this article, identifying the key points and explain why they are significant to Human Resources Management

Answer 1

The article "Human Resource Management in Multinational Enterprises" by Peter Kidger describes management of multinationals, development of strategic view of Human Resource Management (HRM) and the important aspect of Human Resource Management (HRM) in a Multinational Enterprise (MNE). As a consequence of the globalization of markets, MNE are tending to adapt a more global perspective in which there is greater cross-national integration of operations, coordination of management practice and the development of internationally oriented management.

The aim and scope of the article is about management of people in multinationals and its principle proposition is that multinational are potentially important contributors to the development of internationally understood norms of best practice in HRM. In the Business world, it is now recognized that almost all the firms are competing in international market as barriers to the movement of of capital and tariff walls have been reduced. The growth of international competition and the opportunities for foreign investment have contributed to the growth in the number and size of multinationals so that it now claimed that they dominate the world economy.

Internationalization is a process in which organizations move from operating exclusively in their domestic market, to operating in number of different national markets. Companies expand in order to utilize more effectively spare capacity. These companies diversify internationally in the search for new profitable markets, as their products reach the maturity phase of the product life cycle. Internationalization moves a transaction from the market of goods and services to that for labour and will occur when transaction cost in the product market are higher than those in the labour market. Porter's diamond links four determinants of national comparative and competitive advantage. The first of these is factor conditions and this embraces Human resources, physical resources, capital resources, and infrastructure. The second determinant is demand conditions and it postulates that the size and quality of domestic demand will significant in shaping cost and quality of products. Third determinant is related and supporting industries and it is important since it may push countries into having to operate to high international stands. Finally, firm strategy, structure and rivalry relates to the way firms may be organized differently in different countries. Porter's theory draws attention to the importance of natural resources bases in international competition and natural resources also includes labour. MNE are able to switch both semi-skilled production and certain kind of professional activities to countries with low labour costs. There are obvious social consequences of this for developed nations where employers bear significant part of social security costs. Variation of lifecycle or stages of internationalization appear in a number of contributions to understanding differences in the strategies, structures and management practices of MNEs. Henry made the point that internationalization means that managers have to recognise the potentially inhibiting influence of domestically orientated mental maps, which may prevent them seeing the potential of foreign markets. He describes three kinds of top management attitude which were labelled as ethnocentric (home country oriented): this orientation is associated with idea that the parent organization knows the best way to manage affairs, polycentric (recognition of importance of country differences): this orientation means that parent company way will not necessarily be successful, and it tends to emerge as subsidiaries develop and foreign sales become significant contributors to coporate success, and geo-centric (orientation to the whole world): a truly international firm is geocentric with a shared world wide approach in both headquarters and subsidiaries. These attitudes can be reflected in decisions on organization design, control and staffing.

Globalization is a phenomenon in which the nation-states are no longer significant actors; in which consumer tastes and cultures are homogenized and satisfied through the provision of standardized global products created by global corporations. For example, Apple Inc sells same Iphones throughout the world. In global companies, the structure is centralized and subsidiaries have less autonomy. The different forms of control used by firms internationalizing at different periods could also be related to the speed and difficulty of international communication at the time; it is easier to develop a centralized structure now than a hundred years ago.

In all growing organizations, managers establish structures that provide a basis for the coordination and control of activities and one of the most important issues for MNEs is the relationship between corporate centre and country based subsidiaries. In a simple model, MNEs choose either a strategy of local responsiveness with a multidomestic structure which gives a great deal of autonomy to local subsidiaries or a strategy of global efficiency with a global structure that provides varying degrees of coordination of policy and operations. Kamoche links this argument to the 'fit flexibility' concept which suggested how the need for both fit and flexibility will vary with stage of internationalization.

Figure 2.1 shows the Framework of Parent-subsidiary relations in MNEs. It is always suggested that the relationship of a subsidiary to the parent organization may be dependent, independent or interdependent. The centralized MNE with dependent subsidiaries is control through a top-down strategic plan, the appointment of parent country nationals in all senior management roles and head office orginated systems. In multidomestic MNE, with independent subsidiaries who develop and carry out a local mandate, and control is though financial mandates. While in more integrated MNE where there is an interdependent relationship between units, control is perhaps through corporate culture and a jointly developed strategic plan.

An issue for MNEs is whether integration and cross unit learning are in practice constrained by the diversity of national cultures and political systems. National differences is things as employment law or attitude to hierarchical authority would be expected to mean that organizations in one country might alike while being different to those based in other countries. Whilst the cross national study of organizations must take account of all aspects of context, most attention in the literature has focused on the impact of national culture. All human behavior is conceived of as culture-affected, and this therefore includes management practice. Culture is a feature of groups and not individual and is an expression of ways of thinking and behaving that are characteristics of a group. It is learned and being passed on from one generation to other and als develops over time. Schein proposed a culture model in three layers: Artificats and behavior, beliefs and values, and basic assumptions. After examining the culture, the next step is to consider how societal cultures differ. Behavior differences between national of different countries can result in cultural faux-pas. Many international organizations try to avoid inter-cultural breakdowns by briefing managers on what to expect if they are working or negotiating with people from another society. The difference in the culture can be reduced to three dimensions: relationship with nature, relationships with people and relationship with time. Difference in our beliefs about these relationships lead to differences in social behavior. There is indeed no aspect of management that is completely culture-free and although the relationship is complex, there is certainly sufficienct evidence that cultural differences are in significant cause of divergence in management practices around the world. There are five elements of culture that are important to organizational management: managing authority, managing relationship, managing oneself, managing uncertainty, and managing time.

Human resources management consists of the policies, processes and practices by which an organization obtains and utlises people to meet its objective. There are two different approaches of HRM have been developed. One, the best practice approach that argues that there is distinctive and potentially universal set of policies and practices that if used together, will achieve high levels of work performance from competent and committed workforce. The other, the best fit approach which uses HRM as a more generic term and based on premise that the important thing to develop a set of internally consistent HR practices that are aligned with strategy and other features of the ogranization. There are differences in the employement conditions and management approaches used by different firms and the proposed two dimensional framework of relative stability of market environment and perceptions of human resources as assets. The resulting four systems were labelled as commitment, compliance, career and contract system. The resource based view of the firm has reinforced the importance of Strategic HRM through the argument that intangible resources such as hum know-how are a potential source of sustainable competitive advantage. Organizational learning is important to the resource-based view since sustainable advantage is most likely to come from organizational knowledge that resides in firm-specific routines. This whole area may provide the Personnel function with a strategically important role in managing the development of human capability and the process of organizational change.

Boxal proposed that human resource advantage is the product of human capital advantage and human process advantage. If MNEs want to promote organizational learning, they need to find effective ways to transfer knowledge across national boundaries. One important source of organizational learning is MNEs is repatriates, but it appears that this has not been seen as potent as it might have been due to the poor management expartriate assignment. In this area, and other such as management development, training and communications, effective human resource policies and practices are needed to ensure that accumulated know-how is utlized to the advantage of the company. The international coordination of aspects of HRM may occur in any multinational, but the impact of globalization is to predict that there will be a greater degree of cross national integration in companies with global rather than a multidomestic strategy. Corporate culture has been seen as a useful integrating mechanism in multinationals and particularly global firms. There are however problems with the use of culture as control mechanism. The theoretical case for a strong corporate culture in a multinational is weakened by the possibility that too much standardization may be a barrier to innovation.

The framework 5.1 is a theoritical framework of HRM in MNEs with Global orientation

• Increasing global competition leads to stress on both global efficiency and local responsivement.
• This infact leads to devolution within a globally integrated structure.
• This devolution will lead to facilitation of world wide learning and development of international management.
• This infact will lead to international sharing of successful HRM practices and development of international HR policies which creates New international roles for Personnel Function