As a result of globalization and technology advancement, most of the companies and their work force are influenced by global pressure and competition. Because of these global influences, firms introduced the need for the proper international strategy and International Human Resource management. International strategies are those methods or approaches taken by a firm to extend their business across borders of their home country (Gillonn 2004).
According to Schuler (2009), the result of internationalization of business resulted in the increase of travel across the border, fast and easy communication across different cultures, fast development and transfer of technologies, improvement in education, free trade between the countries, pressure on cost and migration of people from one country to other countries. Because of this, People and their organization exposed to high pressure and competition. In this scenario, the scope for international human resource management (IHRM) or globalized human resource management comes into existence.
According to Brannen (1999), good strategy and good strategic implementation are the good signs of good management. Based on good management signs and the strategy of go international, IHRM has developed (Lisbeth 2009). IHRM deals with the handling and researching of the issues faced during the management of human resources in enterprises in the global environment like the development of global mind-set in human resource functions by aligning HR processes and procedures for the enhancement of global strategies and competitions.
The some of the key aspects of IHRM are the cultural differences between the firms and the employees of the firms, the compensation methods in different countries, political situation of the countries, etc. IHRM has to deal with the issues of expatriates and foreign locals of the host countries. International human resource management is different from domestic human resource management (Vance 2006).
Aspects of International Strategies and Its Relationship between IHRM
Firms use different strategies for the expansion of their business to different countries. The following are some of the international strategies and their aspects based on the international human resource management.
In Licensing and Subcontracting strategy, a firm makes an agreement with foreign countries firm to manufacture or assemble its products and to export it back to the original firm’s country (Schuler 2009). Here the internationalization happens through export of one product from subcontracted firm to the original firm. In this method, A Firm gives license to other firm to franchise its brand and products. In this strategy, the international HR issues effect in a small way. For the successful implementation of this strategy, the firm needs to guarantee the human rights of production workers and to make sure through training of franchisee to stick to the standards created by the franchisor.
Outsourcing is another kind of strategy for extending business to other countries from a firm’s home country. In this strategy, a firm gives contract to other firm in different country or same country to do their supporting works, so that the original firm’s resource can focus on their core competencies. For example, call centers, accounting, etc. For the success of outsourcing, the international human resource management has to do proper communication with the people from same and different countries, able to assign suitable employees, fix proper compensation and benefits, give good training and development, good employee relationship, etc.
Offshoring , in this strategy a firm relocates one or more aspects of its business process to a different country for its strategic or competitive advantages like low cost and improved quality products. Here the role of international human resource management is to deal with the anxiety of the employees of home country, regarding job security. The other responsibilities of IHRM are relocating services, infrastructure for starting the business, communication skills in both languages, managing political stability, finding suitable skill sets, enforceability of intellectual property rights, etc.
Wholly Owned subsidiary strategy is an approach in which a firm acquires another firm from the country to which the original firm wants to do business. Mergers and Acquisitions come under this strategy. In this case, the firm acquires the whole firm or the infrastructure of the other firm. In this scenario, the success is based on the ability of IHRM to integrate both firms’ culture and HR policies.
International Joint Venture Strategy, is the one in which two or more firms from different countries start a new business in one of the partners country with shared ownership and responsibility. But this new business is entirely independent on their parent companies, except their joint control. International Joint Venture is an equity sharing arrangement between two companies (one local, one foreign) that pool their resources, share risks and operational control to operate an independent business unit on a continuous basis to attain strategic objectives (Geringer & Hebert, 1991). In this new business the challenges for the IHRM are the creation of work force, culture, and practices. The one of the important key for the success of international joint venture is the agreement and the clarification on the agreement between the partners. In case there is lack of clarity in expectation for performance of resulting organization, which may eventually cause the early dissolution of the venture.
Conclusion
The above research and analysis on the importance and role of international human resource management on international strategies show that a global business can be a failure, if the international human resource management is not done properly. For the successful implementation of international strategy, human resources should be managed properly.
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Dowling, Peter J. & Welch, Denise E. (eds.) 2004, International Human Resource Management: Managing People in a Multinational Context Thomson, 4th edn
Brannen, M.Y. 1999, The many faces of cultural data, AIB Newsletter, First Quarter: 6-7
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