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Abstract In this paper the impacts of changes in the external environment of MNCs on their HRM practices are explained.

Multinational Corporations (MNCs) are the new dimension in the era of globalization and the major success of these MNCs depends on the strong regulation and management of the HRM. For the sustainable growth and progress of the company HRM has huge responsibilities as it has to focus on the reasonable benefit with gradual profit maximization. But in many cases when MNCs steps in the different countries it faces some common problems like in collaboration, installation and in adjustment. Internationalization process faces problems because of geographical diversity and the difference of the market and product. HRM becomes a key concern for the companies and it is requiring the proper systems and better skilled professionals in the company. Organizations to obtain competitive edge in the long run, it must use its HR practices to develop a unique human resource capital pool in accordance to its corporate structure and culture taking into consideration changes in the external business environment.

Table of Content Contents 1.Introduction 2. Discussion and Analysis 2.1 Economic Trends 2.2 Political and Legal Issues 2.3 Socio-Cultural Trends 2.4 Technological Innovation 2.5 Globalization 3. The Link 4. Conclusion and Recommendation 5. List of Reference and Bibliography Page No. 04 05 06 07 07 08 09 10 11 12-13

List of Figure Figure 1: External Influences on HR practices05

1. Introduction Multinational Corporations (MNCs) are the new dimension in the era of globalization and the major success of these MNCs depends on the strong regulation and management of the HRM. (Huselid et al 2010). For the sustainable growth and progress of the company HRM has huge

responsibilities as it has to focus on the reasonable benefit with gradual profit maximization (Huselid et al 2010). But in many cases when MNCs steps in the different countries it faces some common problems like in collaboration, installation and in adjustment. Internationalization process faces problems because of geographical diversity and the difference of the market and product. HRM becomes a key concern for the companies and it is requiring the proper systems and better skilled professionals in the company (Huselid et al 2010). For the sustainable growth and to keep the chain of progress in the business, HRM is a very vital sector for any company or organization. To face the competitive market and to survive with potential, corporate culture needs to reform and HRM should go with creative idea. In this paper the impacts of changes in the external environment of MNCs on their HRM practices are explained.

2. Discussion and Analysis HRM practice in MNCs gets influenced by the external factor of the international business. The method and practice applied in home country may not suit in the host country. There are variations and difference in the labor forces, investment sectors and business planning and strategies country by country. Because of this difference it leads to ups and downs in terms of result and profit making. There are political, social, economic and environmental factors involved that makes difference. Technological position and advancement also matters regarding the aspects. Globalization always plays a big role in terms of the growth and management of MNCs as it influence the global market and moves with the changing paradigm. In a HRM of any MNC, it requires a preplanned strategy and reflective tactics to tackle this dynamics to make profit in the long stage. The related factors are clarified here with showing the relation of influence and the global trends with current examples (Dowling 2006). Some very useful external factors that influence the market and MNCs both are included in the following paper and a brief discussion also added with a real time insights.

Figure 1: External Influences on HR practices (Source: Adapted by Author)

2.1 Economic Trends 2.1.1 Economic Transition HRM practice of the MNCs directly gets influenced by the financial laws and economic strategies of any country. The role of MNCs varies from country to country and the main reason behind this is the difference of the economic system. For example, the gradual change has taken place in Chinese economy as it was basically a state controlled economy before 1990s and now its fully a market economy. This shift in Chinese economy made significant change in the HRM planning and practice of MNCs. There was only 10% Chinese people were primarily educated and it was too tough for the company like NIKE to hire skilled employee who are expert in both technologically and also professionally. But the situation is totally changed there now days. The managerial system and the incentives mechanism bring vital change in the MNC culture there in China. They are better utilizing the managerial skills and expertise. Motivation, Incentives these are increasing productivity day by day (Held et al 1999). 2.1.2 Global Recession The consequence of the last worldwide economic crisis and the massive recession is very relevant to discuss here and the role of HRM automatically comes under the point. This large downfall in the market created huge problems as there was lack of supply, production, investment and it had a very damaging effect in the HRM practice and planning of the MNCs. People were thrown out from the job in UK, USA and many other developed countries (World Bank 2010). For example, to reduce the cost of $3.7 billion in coming 3 years, The Royal Bank of Scotland eliminated almost 9000 jobs worldwide (Guardian 2010). Many companies like the BT stopped the recruitment and income level was stagnant there. Many corporate facilities like the training, bonus and celebration package was cut off to minimize the cost. In this aspect, the example of Asda and the famous Singapore Marriott Hotel can be an exception as they made some initiatives to regain the moral strength and dedication of their employee. They keep the training program and motivational offers rather than cancelling the expenditure (Business Week 2010).

2.2 Political and Legal Issues Political factors and legal bindings always play a big role in dealing by the HRM of the MNCs in different countries. For Instance, There can be limitation in terms of capability and forcing the plannings and strategies of HR body of the MNCs in different country because of the political and legal bindings. Subsidiary is a very close term where politics directly involved and it creates problems in many cases. If there is a gap in legal terms and conditions, HRM faces problems to implement its policy and strategy. Sometimes it puts barrier for the HRM of any company as it face challenges to grow up and to flourish. For example, in many cases a company can forbid its investment from getting advantageous to its opponent. This activities commonly done by the home employees and they make strong secrecy regarding this factors like the terms of trade and the treaties (Kotabe & Helsen 2009). Another example is that there is a strong minimum payment in food court like KFC and Burger King, McDonalds and the growing retail chain shops in India (Independent 2009).

2.3 Socio-Cultural Trends

2.3.1 Changes in Global Cultural Environment The global change and the new social identities in the whole world playing a major role and it have direct impact over the policies and plannings of the MNCs. HRM of the MNCs facing challenges regarding this change. According to the World Values Survey (WVS), there is a big shift taken place from the perspective of traditional thoughts to the rational beliefs worldwide. Individualistic culture taking place rapidly and the life style is changing towards the luxury rather than working hard. Skilled and Knowledge based society gradually taking place of the traditional labor class society. Democratic practice is taking place of the traditional hierarchy system in the international companies. Country likes Bangladesh where traditional belief is very strong, also receiving this change with systematic approach. Issues like gender balance, safety nets in the job, promotional aspects are taking place in the HRM practice of the MNCs (World Values Survey 2008). For example, Pole Position is a new strategy taken by the BMW Company where it emphasized to empower female employees with more recruitment. It made a great success by giving job to 647 female with proper training and management system in BMW (BMW 2010).

2.3.2 Variations in National Cultures There are diversity and variance in terms of cultural deeds, manners, norms and observations. It comes with the demographic, gender sensitive, motivational aspects in the host country and MNCs has to face these challenges. In fact, cultural dimension is a big concern for the HRM of MNCs in working abroad. European and American MNCs try to follow these trends and maintain these facts in dealing with its HRM body and operating in the countries. For example, SONY Company tries to consider and maintain the regional diversity in terms of its dealings with the country and to expand its market with the aim to maximize its profit. The HRM of SONY provides proper training and good command over the area its employees are dealing but there are differences in terms of training provided by the authority in different regions (Jackson 2009).

2.3.3 Changes in Diversity and Demographics Diversity among the employees in MNCs is a big concern for its HRM at present days. The employees are different in terms of their race, religion, ethnic background, skill and views. Age difference is also a big factor here. Because of this dimensions almost maximum MNCs are planning for diversity management in their HRM activities. It is very recent development in MNC mannerism. Diversity management is known as the systematic and structured program or process to deal with the given activities in MNCs for improving the condition and service provided by its workers towards the consumers. It makes sense to deal with the people from different ethnic, religious, cultural and social backgrounds. For example, Bigger MNCs like the American Express and IBM always respect the diversity and it plans for better training to incorporate with the diversity in the working areas (IBM 2010).

2.4 Technological Innovation Technological advancement has made a big change in international business and the rapid modernization in this sector opened a big opportunity for the MNCs and at the same time it becomes more competitive for the HRM of MNCs. It is helping to promote product through internet, can help to negotiate with the clients and online activities reducing the employees as internet is doing half in many cases. Online payment, online stores, proper information system and storage data are creating a new trend in the activities of MNCs and changing the role of its HRM in many ways (Universumusa 2008). For Example, Cisco Live is now a very popular training program initiated by Cisco for better training to its employees through online and its helping them to maintain a quick and proper communication among its employees. This event promoting the brand in online and building partnership with other companies (www.extratechnology.co.uk). Another Example is that Nokia is one of the most popular

companies in the world at present and its strongly following the rapid technological advancement and incorporating these with the Nokia products. For attaining better profit and comparative advantage in this very competitive business sector, Nokia is focusing on this advancement through its HRM sector. The employees here concentrate more on the external environment, online capabilities, and flexibility for the receivers and mostly skilled manpower building in the office (Addler et al 2002)

2.5 Globalization Because of the globalization and open market system, there is a quick transformation taking place in business world. The rapid globalization and the changing environment in the MNCs making significant change in the activities of HRM practice. There is huge competition growing worldwide and the MNCs are facing lots of challenges to keep up with the current trend. HRM body of MNCs is changing their CSR activities and in many cases its helping The HR activities to get closer to the people (Edwards 2006).

2.5.1 Heightened Global Competition The global competition in business world has set a new dimension in strengthening the international trade and MNCs are facing challenges in both home and abroad to cope up with this competitive market. Because of this competitive culture there are changes taking place in MNCs internal activities and HRM practices both home and abroad. Many MNCs are especially focusing on the development of ICT. Outsourcing activities taking place in international business and market dealings (Edwards 2006). For Example, Aviva Global Service started operating in India with almost 7000 employees through the Norwich Union. It is an outsourcing activity by the company focusing on ICT application and development, service proving in legal and financial sector and call center activities (Aron 2005).

2.5.2 Increased CSR Activities Corporate Social Responsibility is become a new dimension in international business and the MNCs are giving highest importance in this sector. It makes a sense to become more caring and responsible towards the employee and the receiver of the services provided by the MNCs. It is very tough to provide CSR service by the MNCs in comparatively underdeveloped countries with poor working condition. For Example, Ethics Charter and the social rights paper were signed by the Air France with European workers Federation to protect the rights of the workers. It was a big initiative to protect the basic human rights of the employees and to promote a better working condition for all people in the European region. This paper emphasized on the wage standard, income equality and basic human rights in working place (Hyman 2008).

2.5.3 Adoption of Best HR Practices International companies are trying to attract its employees through better management system and effective HRM practices. There are many initiatives taking by the MNCs like introducing a good and well-mannered corporate culture, proper training facility and regular promotion with smart income and incentives (Schuler 2007). For Example, Follow Up and Integration Track (FIT) program is a very reputed program initiated by LOreal Company to motivate its employees in developing their carrier from the recruitment process to the ultimate areas that can reach by an employee (LOreal 2010). For Example, Almost 75% employees in BT are getting benefit from training, better office environment and timely banking that initiated by the HRM of BT (BT 2010). The major task of HRM in MNCs are to best practice the business strategies through facilitate the business knowledge for making a sustainable development mechanism with comparative

advantage (Edwards 2006).

3. The Link External characteristics and incidents directly influence the HRM practices of MNCs. Like the recent financial crisis has a direct linkage with the rapid go down of MNC activities and cutting the salary and forced release from the job worldwide. Sustainability is the key concern here that directly linked with the external environment and HRM just go through this followings. Human resource of a company is always the most important asset for any organization and in many cases MNCs sometimes fail to get this point (Hofstede, 2004) 4. Conclusion and Recommendation HRM is a vital sector for the business companies and the recent change in business world has made the scenario more challenging. Better skill, adequate knowledge and capabilities are interlinked and HRM deals with this three core sections. For better HR practice there are many approach given by the practitioner. Universalist and Configurationally approach is most prominent among these. To foster and to overcome the challenges company should be more flexible regarding the aims and objectives. There should have innovative ideas and cultural diversity should get respect in terms of service providing. Business knowledge, skills of the employees and the mature decision making is always important in HRM sector of any country. There should cultivate a unique culture where the variations will get united through proper HR management. Companies like Google, Microsoft are making these in practice regularly.

5. List of Reference and Bibliography Books & Journals:1. Aron, R. and Singh, J.V. (2005) Getting offshoring right, Harvard Business Review, 63(3): 79-91 2. Adler, N.J. (2002) International Dimensions of Organizational Behaviour (4th edn.), Boston: South Western, Thomson Learning 3. Edwards, T. and Rees, C. (2006) International Human Resource Management: Globalization, National Systems and Multinational Companies, Harlow: Prentice Hall. 4. Held, D., Mc Grew, A., Goldblatt, D. and Perraton, J. (1999) Global Transformations: Politics, Economics, and Culture, Cambridge: Polity Press. 5. Hollinshead, G. (2010), International and Comparative Human Resource Management, McGraw Hill 6. Hofstede, G. (1994) Cultures and Organizations: Software of the Mind, London: HarperCollins 7. Hyman, R. (2008), New Frontiers in European Industrial Relations, Journal of International Relations, 9: 232-258 8. Jackson, T. (2002), International Human Resource Management: A Cross-Cultural Approach, London: Sage. 9. Pfeffer, J. (1995). Producing Sustainable Competitive Advantage through the Effective Management of People. Academy of Management Executive, 9(1), 55 - 69. 10. Scullion, H., Linehan, M., (2005), International human resource management: A Critical Text, Palgrave Macmillan 11. World Values Survey (2008) World Values Association

Websites:-

British Telecom, accessed on 4th August 2012, available at www.btglobal services.com British American Tobacco(2010), accessed at 15th July 2012, available at www.bat.com Air France (2010), HR practices, accessed at 15th July 2012, available at www.airfrance.com BMW (2010), accessed at 16th July 2012, available at www.bmw.com Eurofound (2010), accessed on 4th August 2012, available at www.eurofound.europa.eu IBM Training, (2010), Training, accessed 24th July 2012, available at www.ibm.com The Independent (2010), accessed on 4th August 2012, available at www.independent.co.uk The Business Week (2010), accessed on 4th August 2012, available at http://www.businessweek.com/magazine/content/06_02/b3966060.htm

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