Do Multinational Companies Of Different Origin Have Different Approaches To International HRM? - Discuss With Reference To Multinational Companies Of At Least Two Nationalities (USA and Japan).
In the past three decades, the aspect of global strategies by multinationals corporations has grown noticeably. In spite of this vital advancement in international human resource processes, major discontinuities exist between these global structures and the international human resource processes, which are necessary to execute them. The major participants in the global knowledge based economy are multinational companies (MNCs), as their importance in the global business environment cannot be denied. MNCs control and coordinate subsidiaries across national boundaries, hence; they are required to function in diverse national contexts. Mncs sends a package of technology, capital, marketing expertise and managerial talent to carry out production activities in foreign nations.
Mncs have different strategic objectives that they employ in order to attain competitive merit. Bartlett and ghoshal assert that, these strategic goals are very vital for mncs and their degree of importance changes from organization to organization. Mncs struggle to operate efficiently globally, in order to identify and utilize the competitive merit from efficiency in operations. for instance, mncs lower costs and increase revenues to enhance global efficiency. Capital intensity, productivity, labor, learning curve effects, company culture and economies of scale are some of the vital elements that affect efficiency. Bartlett and ghoshal further notes that multinational flexibility is the ability of an organization to manage perils and discover the opportunities arising from volatility and diversity of the worldwide environment. Multinationals promote and facilitate learning across units, as well as encourage new learning through transfer and sharing of new knowledge.
Multinationals employ strategies that help them achieve the above goals. Strategy is the determination of the primary long term objectives of an organization and the embracing of routes of action and the distribution of resources required for executing these goals. Bartlett and ghoshal (2000, p 45) identify several strategic methods that centre on the diverse combinations of competitive advantage; the means, and strategic objectives; the ends. These strategies are: transnational, global, international and multidomestic/ multinational strategy.
A multidomestic strategy proffers principal importance to national differences. It is an assortment of autonomous subsidiaries, with every auxiliary centering on a particular domestic market. The company management has minimal directions from the parent company. The products and services are differentiated to retort to government rules and differences in consumers’ preferences. Multinationals operating on this kind of strategy increase earnings and attain global efficiency. Additionally, such companies achieve flexibility associated with multinationals by responding to national differences. Multidomestic strategy is country-focused, thus; learning remains within the country as the auxiliaries establish the local customer’s needs (local innovation), and use their own resources to meet these needs. These entities operate a decentralized management.
Mncs have different strategic objectives that they employ in order to attain competitive merit. Bartlett and ghoshal assert that, these strategic goals are very vital for mncs and their degree of importance changes from organization to organization. Mncs struggle to operate efficiently globally, in order to identify and utilize the competitive merit from efficiency in operations. for instance, mncs lower costs and increase revenues to enhance global efficiency. Capital intensity, productivity, labor, learning curve effects, company culture and economies of scale are some of the vital elements that affect efficiency. Bartlett and ghoshal further notes that multinational flexibility is the ability of an organization to manage perils and discover the opportunities arising from volatility and diversity of the worldwide environment. Multinationals promote and facilitate learning across units, as well as encourage new learning through transfer and sharing of new knowledge.
Multinationals employ strategies that help them achieve the above goals. Strategy is the determination of the primary long term objectives of an organization and the embracing of routes of action and the distribution of resources required for executing these goals. Bartlett and ghoshal (2000, p 45) identify several strategic methods that centre on the diverse combinations of competitive advantage; the means, and strategic objectives; the ends. These strategies are: transnational, global, international and multidomestic/ multinational strategy.
A multidomestic strategy proffers principal importance to national differences. It is an assortment of autonomous subsidiaries, with every auxiliary centering on a particular domestic market. The company management has minimal directions from the parent company. The products and services are differentiated to retort to government rules and differences in consumers’ preferences. Multinationals operating on this kind of strategy increase earnings and attain global efficiency. Additionally, such companies achieve flexibility associated with multinationals by responding to national differences. Multidomestic strategy is country-focused, thus; learning remains within the country as the auxiliaries establish the local customer’s needs (local innovation), and use their own resources to meet these needs. These entities operate a decentralized management.
Examples of multidomestic companies consist of consumer packaged products like washing soap and retailing business.
International strategy centers on the ends of global learning, as the strategy is properly designated to serve the need for learning through global sharing of innovation. Multinationals using this strategy develop knowledge and competency at the centre and transfer it to the foreign subsidiaries. However, the strategy is effective if a company faces weak pressure for local responsiveness and cost diminution. The strategy does little in attaining global flexibility. McDonald’s (USA) is an example of a mnc that adopts this kind of strategy.
Global strategy entails the use of resources in an integrated manner. Overseas branches are subsidiaries are extremely interdependent in both strategy and operations. Global strategy entails production of a standardized product in a cost effective and efficient manner by integrating productions. This strategy limits flexibility and exposes firms to currency and political risk due to centralization and concentration of production and research and development functions. This strategy limits the ability of a firm to learn from overseas marketplaces. In contrast to multidomestic strategy where a manager in every country responds to competition with no consideration of what is going on in other nations, competitive moves are incorporated across countries. A uniform move is adopted by different nations at the same or differing times. Motorola and Intel (USA) are examples of multinationals adopting a global strategy.
Transnational strategy incorporates both global and multidomestic strategies at the same time. This strategy seeks to attain global coordination while allowing local autonomy at the same time. The strategy gives alternatives to the contending competing forces and entails the creation of an assimilated network of divisions, each with a discrete task. This strategy meets three competitive pressures of flexibility, local responsiveness and global efficiency. Caterpillar company (USA) embraces a transnational strategy.
Multinationals have different structures that enable them to attain strategic objectives that are unique for every multinational. The selection of a competitive is essentially vital, though a triumphant implementation of the strategy depends on the structure of the multinational. The traditional structures for multinationals include the International division, Area division, Product division and global market structures.
International division structure is employed by multinationals when foreign sales and product assortment are low. All the international activities are centered in a single international unit and the domestic organizational arrangement is left intact. It does not require an overhaul of the company.
Area division structure gives preferences the territorial direction and the mncs major division that are founded on location. this kind of structure is suitable for an organization with thin product line ( least level of product range), where the universe is divided into separate areas depending on the market size. Each segment operates in an independent way.
Product division structure is proper for diversified MNCs with wide product diversity. Under product division structure, divisions are made for every group of products, which operate independently. The divisions are in charge of their own value addition tasks such as production, marketing, and research and development.
A global market structure is embraced when the company has a high product range, as well as high overseas sales. Global matrix structure has the merits of area and product structures, global efficiency and local responsiveness, and responsibilities for a specific product are shared by both area and product managers.
Recent approaches have been advanced to include multinational, global, international and transnational organizational models. Multinational organization model was adopted in pre-war period, where political, economic and social factors promoted decentralization. This was for the purpose of allowing overseas operations to react to differences that distinguish national marketplaces. Coordination and control were attained basically through individual association between subsidiary managers and the top corporate management, as overseas units were fairly autonomous from the parent company. This, multinational organizational model is a decentralized structure.
International organizational structure was advanced in the post war era with the primary goal of transferring knowledge and expertise to foreign branches, which were technology handicapped. This model adopts both centralized and decentralized functions. Research and development and knowledge essentially happen in the parent office and then shifted to auxiliaries.
Global organizational model focuses on centralization and control, as well as efficiency. Auxiliaries in this model have autonomy. The transnational model attains the three competitive forces of local responsiveness, flexibility and efficiency. This model is composite configuration of resources and capacities, in which some tasks and assts are centralized, while others are devolved to create an autonomous network of specialized branches. Knowledge and expertise is decentralized throughout the firm and auxiliaries may act as strategic hubs for specific product-market combination. Caterpillar Company uses this model to become a network with diverse hub for various actions, and every hub has a strategic responsibility.
The international human resource management plays a vital role to ensure that mncs operate in an international environment. Different strategies and structures have different implications for international hrm activities like staffing, planning and training and development.
Human resource planning entails a wide range of processes and procedures that seek to manage, discipline, reward and energize workers in the organization. Ihrm connects the comprehension of hr policy to a variety of company values. It asserts that hr policy seeks to manage the association between workers and the employer and the growth of impulsive labor force. Ihrm ensures that human resource policies are highly related to organizational competence and development. The task is to set up a program that energizes workers to devote to the company strategies.
Cultural factors is an essential aspect of ihrm, since it influences the country of origin effect on both the employer and the employees. For instance, the Far East cultural norms and patriarchal system impacts the typical perspective of a Japanese worker of his/her association with the employer. These norms also affect how a worker executes his/ her job tasks. Due to their culture, Japanese workers usually expect permanent employment in return for their loyalty.
Multinationals also handle staffing; recruitment, selection and placement is a different manner. Three distinct approaches to staffing that are widely used comprise of geocentric, polycentric and ethnocentric. Multinationals adopting an ethnocentric staffing mostly employ the parent company nationals in domestic and overseas subsidiaries. Organizations embracing a polycentric method mostly employ citizens from host countries, and organizations opting for geocentric method employ the qualified persons in spite of their nationality. Multinationals that adopts global and international organizational models follow ethnocentric methods. Multidomestic firms adopt a polycentric approach while firms with a transnational model embrace a geocentric staffing approach. International hrm centers on ethnocentric approach as recruitment and selection is carried out at the parent company and auxiliaries have less freedom. The main and essential task of international hrm in global and international models is the selection of expatriates, their preparation, training and appointment for the global responsibility and the power over staffs in different and spread out populations of host nations.
Training and development in international hrm is essential for multinationals as human resources play a pivotal role in growing and sustaining a competitive advantage in the largely competitive global business environment. Training and development helps to learn and transfer knowledge, manage, maintain, coordinate, control and communication between parent company and auxiliaries. In international and global models, training hails from the parent company where company trainers travel to auxiliaries, whilst multidomestic and transnational models carry out training and development locally.
Once employees have been selected, trained and developed, the aspect of compensation sets in. international compensation refers to the provision of financial and non financial rewards, comprising of basic salary, short term and long term incentives and benefits that workers value depending on their input to the mnc performance. Ihrm mainly centers on rewarding of workers in multinationals companies that embrace a global and international structure because; the parent company is responsible for reward system administration. Multidomestic and transnational organizational models have compensation and reward system developed and regulated at the various units by the local HRM. International expatriate compensation system is intricate as the ihrm explores different issues such as hardship, relocation, home leave, education, foreign services premium when compensating an expat.
Performance management also varies from company to company depending on strategies and structures in place. the local hrm has the responsibility of appraising workers in transnational and multidomestic organizations. On the other hand, the ihrm is responsible for appraising workers in multinationals that adopt a global and international model. Different methods of appraisal are employed in ihrm depending on various hypotheses like goal setting and expectancy theories. Performance appraisal in mnc is a tricky exercise since, it occurs across cultural and national borders.
Multinational companies have differing ihrm due to industrial relations that exist across nations. The ihrm in global and international models have to take into consideration the government rules and the role of trade unions in different nations. For instance, ihrm for multinationals operating in Western Europe have to deal with the industry wide collective bargaining, whilst plant level bargaining occurs in North America.
There has been minimal investigation into how the human resource function grows in reaction to structural alterations as an upshot of international growth. Three distinct groups describe the changing role of corporate human resource. These are the centralized human resource companies that have large and proper functioning departments responsible for a wide range of functions. The main role for corporate human resource is to set up and maintain control over global top level management positions like subsidiary or divisional heads, such that staffing is under central control. Companies in this group operate a matrix or product based structures.
Decentralized HR companies involve devolving the hr duties to a small group who restrict their role to the top management at the corporate headquarter. Transferring responsibility is consistent with the decentralized approach of other roles. Organizations with class operate a within a regional or product based structure, but only report using a matrix.
Transition companies have a medium sized corporate hr department, which are staffed by a fairly small group at the corporate headquarters. They operate a decentralized product based structure, though reporting is done using a matrix structure.
The changing roles of the corporate hr within the three categories impact on the way activities like performance management and training are dealt with, as well as the ability of hr corporate HR to plan for staff movements throughout the global operations. Different countries have different approaches and organizational structures. Whereas multinational corporations may develop worldwide capabilities by emphasizing on product diversity, the role of the cultural origin (country of origin) plays a great roe in multinational management. European companies tend to take a different course than that of United States companies. European multinationals tend to move directly from mother-daughter structure to a worldwide structure with global product or area division. They also shift from a matrix company without the transitional stage of an international division. Human resource management practices change to serve the needs of the new global structure. Swedish multinationals tend to adopt a combination of aspects of the mother-daughter structure and some forms of product division at their process of internationalization. Most European firms have a preference for matrix type hr structures, which is best appropriate for the more joint, group oriented work company present in these firms.
United States firms however have attained minimal success on the matrix type of structures. For instance, ford motor company adopted a global matrix dubbed ‘ford 2000’ in its reorganization process, and abandoned its regional structure in 1993. The global matrix organization features a multidisciplinary product team method with networked plants across regions. During the reorganization process, the European regional headquarters was shifted to the United States of America in a bid to enhance decision making globally. However, the global matrix structure was later abandoned for in November 2001, when ford declared a restructuring and plant rationalization, apparently taking the company back to its regional structure. Additional restructuring was done out in 2006 in the North American operations, seeking to put ford back to its competitive standing.
Japanese multinationals evolve along the same spheres like US multinationals. Export divisions are slowly becoming international divisions. The Japanese organizational culture (reporting mechanisms, control decision making systems), systems of management and the role of trading organizations are the likely factors contributing to the slow rate of evolution of the international division. Japanese firms may not adapt their structure as they become more spread. Other Asian multinationals have different structural form and growth patterns different from Japan. For instance, Korean corporations have a higher preference for growth through acquisitions than the building (Greenfield) criterion adopted by Japanese conglomerates.
International strategy centers on the ends of global learning, as the strategy is properly designated to serve the need for learning through global sharing of innovation. Multinationals using this strategy develop knowledge and competency at the centre and transfer it to the foreign subsidiaries. However, the strategy is effective if a company faces weak pressure for local responsiveness and cost diminution. The strategy does little in attaining global flexibility. McDonald’s (USA) is an example of a mnc that adopts this kind of strategy.
Global strategy entails the use of resources in an integrated manner. Overseas branches are subsidiaries are extremely interdependent in both strategy and operations. Global strategy entails production of a standardized product in a cost effective and efficient manner by integrating productions. This strategy limits flexibility and exposes firms to currency and political risk due to centralization and concentration of production and research and development functions. This strategy limits the ability of a firm to learn from overseas marketplaces. In contrast to multidomestic strategy where a manager in every country responds to competition with no consideration of what is going on in other nations, competitive moves are incorporated across countries. A uniform move is adopted by different nations at the same or differing times. Motorola and Intel (USA) are examples of multinationals adopting a global strategy.
Transnational strategy incorporates both global and multidomestic strategies at the same time. This strategy seeks to attain global coordination while allowing local autonomy at the same time. The strategy gives alternatives to the contending competing forces and entails the creation of an assimilated network of divisions, each with a discrete task. This strategy meets three competitive pressures of flexibility, local responsiveness and global efficiency. Caterpillar company (USA) embraces a transnational strategy.
Multinationals have different structures that enable them to attain strategic objectives that are unique for every multinational. The selection of a competitive is essentially vital, though a triumphant implementation of the strategy depends on the structure of the multinational. The traditional structures for multinationals include the International division, Area division, Product division and global market structures.
International division structure is employed by multinationals when foreign sales and product assortment are low. All the international activities are centered in a single international unit and the domestic organizational arrangement is left intact. It does not require an overhaul of the company.
Area division structure gives preferences the territorial direction and the mncs major division that are founded on location. this kind of structure is suitable for an organization with thin product line ( least level of product range), where the universe is divided into separate areas depending on the market size. Each segment operates in an independent way.
Product division structure is proper for diversified MNCs with wide product diversity. Under product division structure, divisions are made for every group of products, which operate independently. The divisions are in charge of their own value addition tasks such as production, marketing, and research and development.
A global market structure is embraced when the company has a high product range, as well as high overseas sales. Global matrix structure has the merits of area and product structures, global efficiency and local responsiveness, and responsibilities for a specific product are shared by both area and product managers.
Recent approaches have been advanced to include multinational, global, international and transnational organizational models. Multinational organization model was adopted in pre-war period, where political, economic and social factors promoted decentralization. This was for the purpose of allowing overseas operations to react to differences that distinguish national marketplaces. Coordination and control were attained basically through individual association between subsidiary managers and the top corporate management, as overseas units were fairly autonomous from the parent company. This, multinational organizational model is a decentralized structure.
International organizational structure was advanced in the post war era with the primary goal of transferring knowledge and expertise to foreign branches, which were technology handicapped. This model adopts both centralized and decentralized functions. Research and development and knowledge essentially happen in the parent office and then shifted to auxiliaries.
Global organizational model focuses on centralization and control, as well as efficiency. Auxiliaries in this model have autonomy. The transnational model attains the three competitive forces of local responsiveness, flexibility and efficiency. This model is composite configuration of resources and capacities, in which some tasks and assts are centralized, while others are devolved to create an autonomous network of specialized branches. Knowledge and expertise is decentralized throughout the firm and auxiliaries may act as strategic hubs for specific product-market combination. Caterpillar Company uses this model to become a network with diverse hub for various actions, and every hub has a strategic responsibility.
The international human resource management plays a vital role to ensure that mncs operate in an international environment. Different strategies and structures have different implications for international hrm activities like staffing, planning and training and development.
Human resource planning entails a wide range of processes and procedures that seek to manage, discipline, reward and energize workers in the organization. Ihrm connects the comprehension of hr policy to a variety of company values. It asserts that hr policy seeks to manage the association between workers and the employer and the growth of impulsive labor force. Ihrm ensures that human resource policies are highly related to organizational competence and development. The task is to set up a program that energizes workers to devote to the company strategies.
Cultural factors is an essential aspect of ihrm, since it influences the country of origin effect on both the employer and the employees. For instance, the Far East cultural norms and patriarchal system impacts the typical perspective of a Japanese worker of his/her association with the employer. These norms also affect how a worker executes his/ her job tasks. Due to their culture, Japanese workers usually expect permanent employment in return for their loyalty.
Multinationals also handle staffing; recruitment, selection and placement is a different manner. Three distinct approaches to staffing that are widely used comprise of geocentric, polycentric and ethnocentric. Multinationals adopting an ethnocentric staffing mostly employ the parent company nationals in domestic and overseas subsidiaries. Organizations embracing a polycentric method mostly employ citizens from host countries, and organizations opting for geocentric method employ the qualified persons in spite of their nationality. Multinationals that adopts global and international organizational models follow ethnocentric methods. Multidomestic firms adopt a polycentric approach while firms with a transnational model embrace a geocentric staffing approach. International hrm centers on ethnocentric approach as recruitment and selection is carried out at the parent company and auxiliaries have less freedom. The main and essential task of international hrm in global and international models is the selection of expatriates, their preparation, training and appointment for the global responsibility and the power over staffs in different and spread out populations of host nations.
Training and development in international hrm is essential for multinationals as human resources play a pivotal role in growing and sustaining a competitive advantage in the largely competitive global business environment. Training and development helps to learn and transfer knowledge, manage, maintain, coordinate, control and communication between parent company and auxiliaries. In international and global models, training hails from the parent company where company trainers travel to auxiliaries, whilst multidomestic and transnational models carry out training and development locally.
Once employees have been selected, trained and developed, the aspect of compensation sets in. international compensation refers to the provision of financial and non financial rewards, comprising of basic salary, short term and long term incentives and benefits that workers value depending on their input to the mnc performance. Ihrm mainly centers on rewarding of workers in multinationals companies that embrace a global and international structure because; the parent company is responsible for reward system administration. Multidomestic and transnational organizational models have compensation and reward system developed and regulated at the various units by the local HRM. International expatriate compensation system is intricate as the ihrm explores different issues such as hardship, relocation, home leave, education, foreign services premium when compensating an expat.
Performance management also varies from company to company depending on strategies and structures in place. the local hrm has the responsibility of appraising workers in transnational and multidomestic organizations. On the other hand, the ihrm is responsible for appraising workers in multinationals that adopt a global and international model. Different methods of appraisal are employed in ihrm depending on various hypotheses like goal setting and expectancy theories. Performance appraisal in mnc is a tricky exercise since, it occurs across cultural and national borders.
Multinational companies have differing ihrm due to industrial relations that exist across nations. The ihrm in global and international models have to take into consideration the government rules and the role of trade unions in different nations. For instance, ihrm for multinationals operating in Western Europe have to deal with the industry wide collective bargaining, whilst plant level bargaining occurs in North America.
There has been minimal investigation into how the human resource function grows in reaction to structural alterations as an upshot of international growth. Three distinct groups describe the changing role of corporate human resource. These are the centralized human resource companies that have large and proper functioning departments responsible for a wide range of functions. The main role for corporate human resource is to set up and maintain control over global top level management positions like subsidiary or divisional heads, such that staffing is under central control. Companies in this group operate a matrix or product based structures.
Decentralized HR companies involve devolving the hr duties to a small group who restrict their role to the top management at the corporate headquarter. Transferring responsibility is consistent with the decentralized approach of other roles. Organizations with class operate a within a regional or product based structure, but only report using a matrix.
Transition companies have a medium sized corporate hr department, which are staffed by a fairly small group at the corporate headquarters. They operate a decentralized product based structure, though reporting is done using a matrix structure.
The changing roles of the corporate hr within the three categories impact on the way activities like performance management and training are dealt with, as well as the ability of hr corporate HR to plan for staff movements throughout the global operations. Different countries have different approaches and organizational structures. Whereas multinational corporations may develop worldwide capabilities by emphasizing on product diversity, the role of the cultural origin (country of origin) plays a great roe in multinational management. European companies tend to take a different course than that of United States companies. European multinationals tend to move directly from mother-daughter structure to a worldwide structure with global product or area division. They also shift from a matrix company without the transitional stage of an international division. Human resource management practices change to serve the needs of the new global structure. Swedish multinationals tend to adopt a combination of aspects of the mother-daughter structure and some forms of product division at their process of internationalization. Most European firms have a preference for matrix type hr structures, which is best appropriate for the more joint, group oriented work company present in these firms.
United States firms however have attained minimal success on the matrix type of structures. For instance, ford motor company adopted a global matrix dubbed ‘ford 2000’ in its reorganization process, and abandoned its regional structure in 1993. The global matrix organization features a multidisciplinary product team method with networked plants across regions. During the reorganization process, the European regional headquarters was shifted to the United States of America in a bid to enhance decision making globally. However, the global matrix structure was later abandoned for in November 2001, when ford declared a restructuring and plant rationalization, apparently taking the company back to its regional structure. Additional restructuring was done out in 2006 in the North American operations, seeking to put ford back to its competitive standing.
Japanese multinationals evolve along the same spheres like US multinationals. Export divisions are slowly becoming international divisions. The Japanese organizational culture (reporting mechanisms, control decision making systems), systems of management and the role of trading organizations are the likely factors contributing to the slow rate of evolution of the international division. Japanese firms may not adapt their structure as they become more spread. Other Asian multinationals have different structural form and growth patterns different from Japan. For instance, Korean corporations have a higher preference for growth through acquisitions than the building (Greenfield) criterion adopted by Japanese conglomerates.
