International Human Resource Management Over

International Human Resource Management

Over the last several years, the issue of multinational corporations (MNCs) and transnational organizations has been increasingly brought to the forefront. Part of the reason for this, is because of shift that is taking place in the way many businesses are addressing the needs of customers around the globe. Simply put, an MNC is when you have a corporation that makes at least 25% of its revenues from outside of its home country. There are several different categories to: include: country focused, globalized and international. The country focused entity will derive its revenues from select countries outside of its own (such as: a British company making over 25% of its profits in Canada). A globalized corporation is when they will have operations in areas that can provide them with specific economic advantages. An example of this would be when an organization establishes manufacturing operations in Mexico and they sell their fished products in the United States. An international corporation is one that will build off the innovations that were developed by various subsidiaries through: the use of research and development. The basic idea is to use the advancements that were made by these divisions to: help build new markets for the company. These different elements are important, because they would provide a variety of organizations with a number of options in: determining how to structure their corporation in line with their business model. (Multinational Corporation 2011)

However, the shifts that have been taking place in the world economy have meant that many of these entities have been slowly evolving towards a new organizational structure (the transnational enterprise). This is when you are taking all of the different approaches and are combining them into one. The key concept is to use these various elements, to take an approach that will address specific cultural factors that are relevant in local markets. Then, augment them with select aspects of the different theories, to help maximize the underlying profit margins. This is significant, because it is showing how the way that corporations are structuring their businesses is evolving. (Horn 1999, pp. 125 -- 129) to fully understand the changes that are occurring requires: looking at the research on MNCs, how global firms are becoming national organizations with international operations, the role of maintaining legitimate businesses and the effectiveness of a voluntary code of ethics. Together, these different elements will provide the greatest insights, as to the how the structure of many corporations is changing.

Much of the international management literature suggests that the traditional MNC has been replaced by the "transnational" enterprise. Using research on international HRM in MNCs, discuss whether you agree or disagree with this view.

When you look at what is taking place, it is clear that the overall nature of the MNCs has been constantly changing. The reason why, is because the competitive pressures of globalization have meant that many organizations must adapt their business models. This is a part of an effort, to maximize their profit margins and to be able to adjust to the changes they are seeing. Since the late 1980's, this has meant that a shift has taken place in how a variety of businesses are structuring themselves. (Horn 1999, pp. 125 -- 129)

Evidence of this can be seen with observations from Horn (1999), who said, "The transnational organization seeks to overcome the weaknesses of more traditional models by moving beyond global integration / local responsiveness tradeoffs implicit in international models. To be globally competitive requires both." This is significant, because it is showing how the overall nature of this business model is changing. As a result, the way: companies are structuring themselves and focusing on achieving these different objectives has given rise to this new kind of thinking. (Horn 1999, pp. 125 -- 129)

To achieve this objective means that businesses must be embracing three different elements to include: there must be excellent coordination / communication, they need to effectively manage the flow of funds and it must link the different ideas / strategies together. This has translated into a number of different entities facing a variety of challenges. As a result, they have begun to use different forms of technology to help achieve these different goals. Where, executives have been forced to make radical adjustments to: their basic strategy and how they can be able to reach out to customers in numerous markets. The below diagram illustrates the shift that has taken place in this basic structure over the last 20 years. (Horn 1999, pp. 125 -- 129)

The Change that has taken place in the way Corporations are structured

Multi-Domestic

International Exporter

Transnational

Global Entities

(Horn 1999, pp. 125 -- 129)

What this is showing is the shifts that have taken place in how these organizations are adjusting to changes from globalization. as, most companies were: following a standard formula for many years. However, once international exports began to increase, is when this would have an impact upon the overall bottom line of an entity. as, they began to see the tremendous profits that they could make in the long-term by: going into markets where labor costs were cheaper and exporting their products into countries with high amounts of domestic consumption. These two factors meant that the basic structure was changed. Where, a variety of corporations began to integrate their operations together to achieve these different objectives. This caused the line between the different types of structures to become a combination of all of these activities. These elements are significant, because they are highlighting the overall changes that have taken place in how a variety of businesses are organized. (Horn 1999, pp. 125 -- 129)

As a result, based on: the literature that was examined and using some logic, it is obvious that this kind of change is taking place. This means that we agree with the fact that the MNC is evolving into various forms of transnational entities. However, it is important to note that select corporations will continue to maintain some kind of structure that is similar to many traditional MNCs. This is because, they could be focused on earning the majority of their profits in: a particular region and have no interest in changing their strategy. In this aspect, one could argue that the role of MNCs has shifted for a variety of businesses. Yet, the overall scope of these changes will depend upon: the kind of industry and what their strategy is for increasing their overall bottom line. These different elements will mean that there will be a certain number of companies that will follow the new transnational structure, while others will embrace the traditional role of MNCs.

Global firms are national firms with international operations' (Hu, 1992, California Management Review, Vol. 34). Discuss with reference to MNCs from specific countries and drawing on the relevant international HRM literature.

Like what was stated previously, depending upon the industry and the business model of the company. The development of transnational corporations will vary from one region of the world to the next. This means that there has been continuous growth in the number of entities that are becoming more transnational in nature. Evidence of this can be seen with the fact that there are 773, 019 companies that are organized in this fashion. This is important, because it shows how the overall nature of the shift, will mean that many business models are changing. (Transnational Entities 2007)

There are a wide variety of corporations around the world that have been embracing this new business model. At the heart of this strategy, is ensuring that there are effective controls in place for the supply chain. The reason why, is because they use this tool, in conjunction with select aspects of technology. This allows managers to understand what is taking place in a particular region. Where, they will utilize a basic formula to: know the precise activities of their different operations around the world and streamline their approach for each market they are located. The below diagram illustrates how most transnational organizations have structured their supply chain to achieve these different objectives.

The Supply Chain of Transnational Organizations

Materials

Supply Network

Integrated Enterprises

Market Distribution

Sourcing, Logistics, Operations

End Consumers

(Sauvant 2008, pp. 34 -- 41)

This diagram is showing how there is increased communication and collaboration that is occurring inside transnational organizations. This means that all of the different departments of an entity will use various forms of technology to: improve communication between the different divisions. This helps to increase the control of the supply chain by: ensuring that the right amount resources and products are sent those markets where demand is the highest. This is significant, because it is illustrating how the overall structure of many corporations has been constantly changing to address these challenges. (Sauvant 2008, pp. 34 -- 41)

An example of how many businesses are embracing the transnational model can be seen with Coca Cola. During the 1980's the company was able to experience tremendous amounts of success surrounding: the introduction of Diet Coke and various artificial sweaters that they were using in place of sugar (i.e. Nutra Sweet). At the same time, they also had a number of failures, like when they company replaced the original formula for their soft drink with a new one. This led to a massive revolt among consumers, who did not want this product. Instead, they demanded something that could bring both of these elements together. At which point, Coke would begin utilizing the original formula, with the understanding that consumer tastes were very fickle. (Lamb 2008, pp. 255 -- 257)

This forced management to slow down on: how they are introducing new products to the market and concentrate on their core business model. During the 1990's this structure became challenging for Coke as: they had bottlers and distributors around the world (with no way to effectively collaborate on a host of different issues). This was problematic, because Pepsi was continuing to introduce products that were in demand. As they would slowly eat away at: the market share that Coke had built over many decades. (Lamb 2008, pp. 255 -- 257)

To prevent the situation from spiraling out of control, Coke began to: use collaboration and they improved supply chain management to address these challenges. This meant that the company rolled out their Coke One program. This was a new initiative where the company would work with the different bottlers to identify products that would be in demand (in a variety of markets around the world). as, they would use technology to: improve communication, collaboration and to more effectively control the supply chain. These different elements meant that bottlers began to share with the company their ideas about: how they can develop a one of a kind product. (Lamb 2008, pp. 255 -- 257)

Over the course of time, this basic strategy was successful. The reason why, is because the increased amounts of communication gave management the ability to speak directly with top executives. While, allowing everyone to: identify waste and those products that were not in demand (in select markets around the world). Once this occurred, it meant that managers and bottlers were able to identify a new soda that addresses the needs of health conscious consumers (Coke Zero). This was the first soft drink that had zero calories and it was an immediate hit with consumers around the globe. (Lamb 2008, pp. 255 -- 257)

What this is highlighting, is how Coke was changing from: being a multi-national corporation to becoming one that is transnational enterprise. as, they have: operations in nearly every single country on Earth and many different brands that are easily recognizable to consumers. During the 1980's and 1990's, the company was having trouble accepting this fact. The reason why, is because management was trying to embrace strategies of the past that had mixed amounts of success for the company. This fooled many executives into thinking that their current business model was sufficient, for addressing the various challenges in the future.

However, once globalization began to have an effect on the industry, is when other competitors began to change their focus (i.e. Pepsi). as, they quickly realized that they need to: adapt their business model to the shifts that are occurring in many markets around the world. This is the point that Pepsi was able to take market share from Coke. The reason why, is because they incorporated all of the different elements from various business models into their structure. Over the course of time, this would force Coke to use a similar kind of approach to keep with the changes that are taking place. This is significant, because it shows how multinational corporations from specific countries (such as: the United States) have been shifting their business model to become transnational entities. (Lamb 2008, pp. 255 -- 257)

What is the role of discourses in maintaining legitimacy for companies in the facilitation of their management of workforces across national and cultural divides?

One of the biggest issues that management of many transnational corporations will face is: how they should address various employment and labor problems in different regions. This can be challenging, as many areas will have their own cultural traditions and customs that they are embracing. At the same time, the underlying amounts of unemployment will vary from one region to the next. This is because, there are different levels of education and skill sets for various countries. As a result, managing the labor force will mean that all transnational organizations must embrace a strategy that can take these views into account. (Leapak 2006, pp. 48 -- 59)

Evidence of this can be seen by looking no further than, the below table which is illustrating how this changing the unemployment rate in different regions.

The Unemployment Rate for Different Areas of the World

Region

Unemployment Rate

Middle East / North Africa

11.9%

Latin America / the Caribbean

8.5%

Europe

8.5%

North America

7.2%

Far East / Asia

6.0%

(Leapak 2006, pp. 48 -- 59)

What this information is showing, is that depending upon the region of the world, the underlying levels of education and skills will vary. Those areas with the lowest average unemployment rate either: have a highly educated workforce or reduced labor costs. These different elements are important, because they are showing the challenges and opportunities that transnational corporations are facing in the future. As they must be able to find some kind of: balance between these different factors.

One possible solution that many corporations have been turning to is finding regions of the world that will allow them access to: both an educated workforce and lower labor costs. Where, they will seek out those areas that can offer them the strategic advantage of operating in select locations. as, they can be able to: produce a particular product / service in these areas and then import it to markets where demand is higher.

A good example of this can be seen in India, where a number of transnational corporations that have been establishing different manufacturing operations. The reason why, is because this area can achieve the two objectives of: lower labor costs and they have a highly educated workface. as, Indians are known for exhibiting a number of positive attributes to include: they are very career focused, most people are fluent in English, workers are open to new ideas, employees are dedicated and there are large numbers of experienced workers. These different factors are important, because they mean that a corporation's costs will decline. While, they are able to locate highly skilled workers, that are more flexible than in other areas of the world. When you put these different elements together, they are forcing variety of businesses to establish operations in the country (in order to achieve their long-term profitability objectives). (Benefits of Doing Business in India 2010)

In this aspect, management is seeking out solutions that will bridge the divide between: their need to increase their overall bottom line and remaining competitive. This means that executives will use improved communication to go to areas where they can lower their expenses as much as possible. What they are looking for are: regions that have a business friendly culture and low enough labor costs to provide significant benefits to an organization. This has caused many different entities to shift from: being strictly an MNC to a transnational organization. as, they will have their operations strategically located in certain areas of the world, that will increase their overall profits as much as possible. In many ways, one could argue that this is what has led directly to the shifts that have been taking place over the last several years. (Benefits of Doing Business in India 2010)

Assess the effectiveness of Voluntary Codes of Conduct vis-a-vis other forms of regulation (national or international) in the sphere of employment relations and labour standards.

One way that a transnational organization can be able to address the challenges that they are facing is through the use of: a voluntary code of ethics. Simply put, this is a set of policies and procedures outlining how everyone is expected to behave. In this case, because it is voluntary, means that employees are not required to follow the various standards that have been outlined. This can be problematic, as many employees will only abide by these policies at certain times. At which point, they can begin engaging in selective ethical actions (when it is convenient for them). For transnational corporations, this can lead to various issues such as: employee theft and waste. Once this begins to occur on a regular basis, it means that it is only a matter of time until the company will lose control of its operations around the world. (Bierman 2008, pp. 32 -- 39)

A good example of this can be seen with Enron. What happened was; the company was rapidly expanding into areas where they could benefit from the increased amounts of deregulation that were occurring. At which point, they began to look for opportunities in many different regions. One of the most notable was Dabhnol, India. During the mid-1990's the company was in the process of constructing a liquefied natural gas power plant in the area. (Bierman 2008, pp. 32 -- 39)

On the surface, everything appeared to be fine, as the company had a voluntary code of ethics and they gave their employees greater amounts of freedom. However, this formula would be a disaster for them. as, the lack of controls meant that: the costs would exceed $6 billion and the plant would lose money from the very beginning. This caused the company to waste billions of dollars in try to support a plant that was not economically viable. At the same time, the lack of ethics inside their India operations; meant that the overall scope of the losses would become far worse than projections. This is because, no one was considering the fact that employees would selectively utilize the code of ethics when it benefits them. as, they would engage in: actions that benefited themselves, their friends or family members. This lead to increased amounts of electricity theft and many the various billing records for certain communities disappeared. Once this began to occur, it meant that the company would not understand the overall scope of the problems they were dealing with until it was too late. At which point, the company would lose $20 billion dollars and they had to create a way to hide these losses from investors. This led directly to the fraud and the off books partnerships to conceal this information from: regulators and the general public. This is important, because it showing how the voluntary code of ethics was ineffective. The reason why, is because management was trying to take different standards that worked: in the United States and was applying them to India. As a result, this was ineffective, because of the differences in employee relations and labor standards. (Bierman 2008, pp. 32 -- 39)

When you step back and analyze this information, it is clear that a voluntary code of ethics is unable to address the challenges facing transnational organizations. This is because; these standards cannot be forced on someone. Once this takes place, it means that this code will be used selectively, to support the individual self-interest of the employee. In this case, the voluntary code of ethics can make the situation more challenging for everyone. Due to the fact that there is no way to ensure that everyone is following the same basic principles.