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Summary International Human Resource Management Chapter 1&2
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This is the summary for the course International HRM chapter 1 and 2.
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International Human Resource Management - Policies and Practices for Multinational EnterprisesChapter Overview 1
Companies have increased global activities; management requires adaption to global environment.
The Drivers of the Internationalization of Business
- Trade agreements (WTO, EU, NAFTA, etc.) decrease trade barriers and open markets, freer trade
= faster growing economies
- Search for new markets and reduced costs : global competition with high quality products and
services coming from everywhere. Pressures firms to search for new markets and revenues and
lower costs, often found in other countries.
- Rapid and extensive global communication: technological revolution (World wide web, internet,
mobile telephones) made global communication easier, quicker, cheaper and more varied. Thus,
enabling the coordination and competitiveness of far-flung operations, subsidiaries and supply
chains. Also, spreading of global basis information about how people live and their standards of
living, what they think and want. Creating global expectations for an ever-increasing quality of
life.
- Rapid development and transfer of new technology: New technologies are developed around
the world and modern transportation; education and communication are made available
everywhere. New technologies made it possible to grow and manufacture high quality products
and price everywhere. With modern education and information technology is it possible that
every country can play a part in this global economy.
- Improving global education and global talent pool: improved education around the world is
enabling firms to produce products and services everywhere. Global communication and travel
combine with this quality global education, so that no country or set of countries has overriding
advantages in the global economy. Result is a global talent pool, resulting that firms can produce
anywhere.
- Increased travel and migration: International travel has become easier, quicker and cheaper.
People traveling experience goods and services (and political business practices) that are
available in other countries. These are taken back home or expectations of what is possibly
changed. Many trades in these products or recognize new opportunities to sell their own
products and services in the country they have visited. Others move to countries to work
(long/short term) or flee because of war or natural disasters.
- Knowledge Sharing: firms operating internationally as they export their management philosophy
and techniques as well as technology, products and services to foreign subsidiaries and spread
knowledge and their company culture elsewhere.
- E-commerce: world wide web, smartphones, global transportation and logistics services made it
possible for companies to conduct business over the internet on a global basis.
- Homogenization of culture and customer demands: the internationalization has led to
homogenous demands, values and cultures for some types of products and services throughout
the world. Nevertheless, companies need to be sensitive for differences in cultures and
countries around the world.
The Growth and Spread of Internationalization
,Integration of markets, nation-states and technologies can be reached faster, father and deeper than
ever before.
- Globalization/ Internationalization refers to every increasing interactions, interconnectedness
and integration of people, companies, culture and countries.
- International Business growth in terms of the numbers and types of enterprises conducting
business across borders, the amount of foreign direct investment (FDI) and the value of trade
between countries.
FDI: Foreign direct investments (FDI) are investments made by one company into
another located in another country.
The key feature of foreign direct investment is that it establishes either effective control
of or at least substantial influence over the decision-making of a foreign business
- Internationalization began from developed counties primarily US, UK, Germany, France and
Japan
- But not only big enterprises conduct international business, also small, developing and/ or
emerging markets are contributing increasingly to global trade.
- World economy is much larger where everyone competing with everyone from everywhere with
everything
- Many studies by Bloomberg Business Week, Financial times, the Fortune Global magazine,
Business week conducted research and surveys about the global change of businesses based on
leadership, profit, assets and market value, revenue, major stock markets, most powerful
women, information technology firms, innovative companies…
here private and family held businesses are excluded because no financial data is published
- Global economy increasingly involves all kinds of products and services from all kinds of
organizations located everywhere
- This change is proceeding fast and creates immense pressure on every enterprise to produce at
lower cost, with greater speed, quality, customer service and innovation
- HR is upon to recruit, select, develop and retain workforce talent that can achieve this global
competitiveness.
Different Settings of International Human Resource Management
Headquarters of Multinationals
- Working as HRM professional in central or headquarter of MNE
- Most common for HR managers
- Focus is from center to subsidiaries developing and overseeing IHRM practices in all foreign
operations and administering the movement of employees between headquarter and foreign
locations
- Increasingly also movement between foreign subsidiaries and headquarter and foreign locales
- HRM likely to find themselves working on international assignments
- In some companies become IHRM major strategic partners in organizations global planning and
talent management of global workforce
- Either headquarter applies its parents’ company HRM practices and policies directly to subsidies
or tries to merge its HRM policies and practices with those that are common in the host country
Home-country Subsidiaries of Foreign Owned Firms
- HR manager works in home country for a foreign MNE (Eiman @AudiBrussels)
, - End receiver from HQ in terms of policies and practices & must integrate this into local culture
and operations
Domestic Firms
- Also confronted with international HR are companies operating domestic
- Hiring employees who come from another country, culture and language
- Competition from foreign firms for customers and suppliers or capital
- Tend to be relatively small
- If these domestic firms are going abroad and become MNE´s themselves, they become
“domestic multinationals”
- Hiring immigrants or first generation since immigration in local domestic firms can lead to many
of the same internationalization concerns
How to merge cultures, languages and general work expectations,
How to respond to different languages, views, attitudes and management practices
(performance and compensation)
- Even in domestic market and international understanding is crucial
- Some domestic companies “go global” to
Tap into talent for its home offices
get entrée into foreign location
Talent needed is short in supply in home country
Government Agencies and Non-Governmental Organizations
- Also, embassies and governmental agencies facing the scope
- Often employed locals and third country people
- Many of them have experience with international operations and have gained knowledge on
how to handle international HRM challenges
- IHRM managers must be internationally savy in order to effectively carry out their
responsibilities
The Development of International Human Resource Management
- The extend of work related to IHRM depending on the degree of development of the global
strategy
- HR managers must contribute expertise to that internationalization
- Some IHRM questions that must be answered within MNE for a global strategy include:
Does the firm have necessary globally experienced executives and employees to
successfully implement a global strategy? What need to be done to train or recruit such
staff?
Which countries make the most sense for locating international operations, at least one
aspect of which is determining where will the firm be most likely able to recruit and hire
the kinds of employees it will need at a competitive wage?
How many employees will need to be relocated to international locations to start up
new operations and how many will be needed to run them (and does the firm have
those people or know-how to find or train them – or will the necessary people be
sourced locally in the host country)?
What will be required to find and recruit the necessary talent to make the new
international operations successful?
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