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Question: - Outline the importance of human resource management for

the successful operation of international strategic alliances. Assess the
significance of the major problems encountered by partners in the design
and implementation of effective human resource management practices?

No one is perfect in this world people or organization this explains why

companies partner and why it is important in this global market. Globalization
and liberalization of market increases the competition level in international
market. Cooperative strategy of alliance formation has become gradually more
accepted in global market over the past few decades. Joint venture involving
both big and Small Corporation in all business segments and market around
the world. In near future alliance are only single important method of
international growth and expansion of the companies because there is a no
single company in this world has all expertise and facilities to provide best
services to their customer in international market. It’s concluded that strategic
alliances are the intermediate between full internationalization and the global
or emerging market and it’s also help big multinational organization to get easy
access in emerging market without facing competition (Cauley, M, 1999)

Strategic alliances:-

An agreement between two or more corporations to collaborate in a particular

business sector, so that both companies can be benefited from the strength of
each other and gains some competitive advantages over their existing
competitor. Alliances involve in transferring of knowledge and technical
knowhow between partners as well as sharing natural and human resources,
cost reduction, helps in maintain a good and healthy relationship with
distributors and mainly combined their efforts to developed new products and
technologies. Alliances may involve the corporation between competitors as well
as non competitors (Dussauge, P and Garrette, B, 1999). Although there was

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no particular agreed definition of strategically alliances but according to

Shankar in 1987, “A separate legal body represent the fractional property of
two or more organizational firms, in which the head office of at least one
organization is located in abroad. This separate organizational body are
subjected to shared control of their management activities. Each of the
company is economically and lawfully autonomous to each other” (Reuer, J,
2001)

Importance of Strategic Alliance:-

Using a joint venture as a mode of entry in global business process is an old

methods but the global economic growth in past few decades are continuously
growing which increase the level of competition in international market. Big
corporation are looking for the new option to invest on their operations and
business activities that will emerge new markets and it will increase the use of
international joint ventures (Dussauge,P and Garrette,B,1999) As an Peter,D
view the strategic alliance are likely to grow in a continuous manner, in global
market the fair deal for an IJV, of strategic alliances and cross holding
companies are not the cost reduction, it’s because of Information(technologies,
human resources and most important to get easy access in fresh market). the
economist don’t recognized it, but it’s an old market experience which stated
that, companies cannot maintain their market holding or position in fully
globalized market unless company are in as manufacturer or producer. As an
outsider or exporter you can stand in a market longer, company will out sooner
or later, the reason behind this that all companies to be in market to have
information not for cost reduction(Drucker,P,1989) for example Nissan and
Renault alliance is best way to explain the importance of strategic alliance in
global market . Nissan and Renault is success full shared supply joint venture.
They share technology, expertise and human to develop a new product.

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Types of strategic alliances:-

(a) Partnership between non- competitive firms

1. Growth and expansion
2. IJV’s
3. Vertical partnership
4. Cross – industry agreement
(b) Alliance between Competitors
1. Shared supply alliances
2. Quasi concentration alliances
3. Complementary alliances (Dussauge, P and Garrette, B, 1999).

Human Resource Management:

Human Resource Management is the managerial job that deals with issues
related to Human capital such as compensation, Recruitment, performance
Appraisal, organization policy design and development, provide healthy and
safe working environment, benefits, worker motivation, flow of communication
, administration, and training of employees(Vernon et al ,2007)

Importance of Human Resource in Strategic alliance:-

Human resource management is often considering less important than other

activities in list of alliance manager, yet HRM makes an important contribution
in success and failure of joint venture. So now days HRM are widely recognized
and has a big impact on alliance performance, its life and revenue, the
customers (quality service, low cost products) , distributors and employees
employability, safety and work satisfaction. Previous statistics suggest that the
key important factors superseding in the venture process are those related with
managing work force the take part in the agreement. HRM plays an important
to resolve the issues related with leadership, cross and corporate cultural in
joint venture operations. In strategic alliances human and cultural factor can
decide the life span of joint venture (success or failure) (Child, J., and

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Faulkner, D, 1998) so it’s very to look after human capital by giving them
training to be aware of the possible future problems.

In the perspective of the strategic alliances, HRM are probably even more
important: its impact on number of organization, not just on a single company,
and in several public related activities. Within a strategic alliance there are
many number of issues but the issue related to HRM are bad for the life of joint
venture, failure of human resource system are the of the big reason after
alliance failure(Beech,N and McKenna,E,2008)

HR activities:-

Organizational Design and Development

Human is a most valuable capital for an organization, so it’s very important to

properly manage the human capita. Human resources management team are
responsible for design and development of all HR activities like managing
employee, pensions, social responsibility, HR planning system etc. Human
resource management helps in development of firm practices by designing the
policies like to facilitate learning, motivation , corporate infrastructure ,
culture, offering training , team work and stabilized a acceptable recruitment
procedure to select highly qualified personals with in a organization to boost
the productivity of strategic alliances for example the case Nantong cellulose
fibres company in the beginning they don’t have structural agreement or design
of joint venture but after that in second phase of negotiation with American
partner they rectify the previous error and design the proper agreements(Child,
J., and Faulkner, D,1998)

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Knowledge transfer:-

Human resources management plays an important role or facilitate inter

organizational learning. Transfer of knowledge is a most important process in
strategic alliance. We can also say that it’s also a reason for forming alliances.
Continuous sharing will increase the participation of partner in business
activities; learning increased the life of strategic alliance (Drucker, P, 1999).
Management will facilitate the sharing of natural resources, human resources,
technology and technical knowhow in between both partners and create a
competitive gains for joint venture in global market and enhance the capability
to innovate new products and technology, combine efforts of both partners will
push strategic alliance in the way of success and helps alliance management to
get new skills development in organization , effective knowledge management
will increase the productivity and motivational level of human capital in
organization(child,J,2003)for example Honda and rover is best example to
explain inter organizational learning how Honda learn in the strategic alliance
with Rover and get competitive advantages in international automobile market.

Training and development:-

Training normally refers to enhance their knowledge and skills where as

development are more learning process that gains new capabilities and
knowledge of managing difficult conditions. Training and development process
are continuous process in an organization. Which enhance the working
capabilities as well as develop new personal skills and attributes in employees
which company and increase the future career option for employees.It’s an
important function of human resource management in an organization
(Matthews, C, 1999)

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Performance Management:-

Performance appraisal is a human resource management activity to evaluate

the performance of employees on the basis of their business targets. The
organization of such fix targets are set by the alliance not by the managers. The
method of evaluation of performance are vary to size and culture of an
organization(Sabater, V. (2002) for example- Black & Decker –Eastern
Hemisphere case the management put more emphasis on how to evaluate the
performance and which method they use , standardization or domestic method.

Staff selection:-

This activity is start with job analysis in alliance and identifies the required
number of managers and staff to work in joint venture. The alliance
recruitment process is subjected to negotiation between the partners,
especially when one organization is looking to adjust their surplus employees
in countries like china and India. Recruitment process in alliance is very
crucial, to select the right candidate and place it in right place and provide a
good and healthy working environment to their employees (Ferner et al, 2006)

Stages of Implementation of common human resource management:-

Selection of partner:-

Partner selection is very crucial decision to made in international market ,

partners enter in strategic alliances with some opportunity and objectives, thus
it’s very difficult for management to identify the useful partner selection criteria
like financial conditions, brand name , market experience , resources and most
cultural fit to be enter joint alliances. Poor selection is common reason for
alliance failure (Hamel, G, 1991)

Planning for next step (how to utilize the probable benefits):-

Managing human resource issues in a strategic alliance are very complex. It’s

difficult and time taking to build trust, promote learning, and facilitates proper
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communication flow in strategic alliance. Early Planning in alliance is very

important in order to overcome any problem due to different culture and

corporate management style between both partners. (Hamel, G, 1991).

Especially Human resource planning like labor market conditions, legal and

cultural environment of host country, and also the economic and political

environment in future partner country and strategic alliance itself.

Standardization or localization HR system:-

One of issue that organization has to decide before during formation of

strategic alliances with domestic companies is whether to implement their
international standard HR system or to adapt the domestic conditions. Big
corporation faces two opposing pressure, one to incorporate their activities all
around the world and second to adapt activities which suites domestic market
conditions - local responsiveness (Matthews, C, 1999)
The advantage of international incorporation depends on the possibility of
applying best human resource practices internationally. It’s easy operate and
maintain the quality of services internationally but on the other hand domestic
market condition of host country has significant impact on multinational
corporation for example- In East Asian labor market , it’s cheap as compare to
western labor market , it will not necessarily to implement the standard HRM
system in this condition. It’s really important for both partners to agreed on
common HR system to reduce the possibility of any clashes in strategic
alliances for example- the case Black & Decker eastern hemisphere illustrated
that the performance evaluation is mainly a responsive cultural issue, In global
alliances, where it’s very difficult to made decision to implement new standard
human resource practices or to adapt domestic HR system (Child, J., and
Faulkner, D, 1998)

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Implementing common strategic HRM practices:-

After proper planning and deciding the common HR system it’s time to
implement the common human resource practices in strategic alliance and
evaluate the effectiveness of system
Selection of HR manager:-
Last and main important step to recruit a manager to look after all business
HR activities of strategic alliance and act as a link between two partners.
Manager plays an important role in development of human resource activities
within the alliance so the manager will be aware of everything like cultures and
able to handle all kind of situations (Sabater, V, 2002)

Economical viewpoint related to HRM:-

The economical academic perspective that is illustrate on the basis of financial

economics, management literature, psychology and sociology and mainly
spotted on different aspects of Human resource in strategic alliances.
Human Capital Theory. : - according to this economic theory, human asset
refers to most important productive strength of people (Faulkner, D, 2001).
Human skills, education and previous experience combine have some valve to
corporation because they facilitate it to be more productive and adaptable, thus
human consider has a valuable asset for organization. Theory suggest that it’s
important to understand the value of human asset in organization and try to
create a healthy HRM structure which invest capital to facilitate the
productivity behaviors from labors- including motivation and other related
factors because the investment on human assets gives a good return in future.
The firms can use their HR activities in different way to facilitate their human
assets. For example, company can heir human form labor market or by
providing training to current work force.

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In this theory, related factors such as political environment, market situation,

production strategies and national culture are most important because they
affect the expenses related with another way to use HR to raise the value of
firm human assets and estimated return (productivity).( Hamel, G, 1991)

Resource-Based Theory. : Basically the human resource management in

strategical alliances is more or less follows the resource based theory. The
economic theory stated that the way for organization to develop their strength
and obtain new skills and technologies from a partner. Theory encourage both
of organization to join their strength and resources and competitive advantages
over competitors
The resourced based theory moreover facilitates the learning, sharing of
technology; resources, information, and product design and help each other in
cost reduction. According to the theory HRM plays an important role in whole
process. Human resource very much influences an company employees and
firm resources that are connected with inter organizational learning process in
strategic alliance and gain unseen advantages in strategic relationship and it
create a valuable market competitive advantages in global market (Child, J.,
and Faulkner, D, 1998)

Problem Encountered during Implementation HRM practices:-

During implementation of common HR practices so many problems occurs

because of unfamiliarity with language, culture of the partner country , Its bit
difficult for a new firm to adapt a new culture and language at the beginning of
alliance formation. Problems occurs to implement common HR activities in
alliance are below

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Staffing:

Selection of the staff is a biggest challenge in strategic alliances, the problem

occurred when gap between actual and required is big. In joint venture
agreements there is a question mark, are the both strategic partners satisfied
with present a level of total staff or not, are they agreed about how strategic
alliances can manage with the less staff than required. This kind of situation
has impact on alliance performance and life. According to Drucker, P buying a
human from labour market are one of the important factor in joint ventures
performance, some time cultural beliefs create some clashes between both
partners, so cross cultural understanding is very important during the alliance
formation for example Queensland Minerals case there was a problem in
recruiting persons with in a organization and share in decision making process
due to un trust in between the partners.

Promotion:

for the strategic alliance employees promotion is big concern because often the
promotion are blocked in alliances and it very difficult to get back in parent
company and there is a question mark on promotional possibilities is strategic
alliances are good or poorer than in other organization, also clash between
establishing the common promotional system in alliance to attract high quality
staff to manage their human resources in term of their job aspirations
(Schuler, R, 2001)

Performance Appraisal:

Evaluation management included the past review of employees and according

to that setting the future objectives of alliance management. It should be
regarded as a complicated process for HR manager to give the feedback on
employee’s performance. There is no defined structure of appraisals, there is

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still a question that can we evaluate performance on the basis of company

performance, management performance or by the feedback of superior , if it is
can we get accurate information? , there is a chance of biasness of information
(Tyson, S, 2009) In strategic alliances this process create the complex decision
making and some time clash between the appraisal criteria of both partner so
it’s very important to establish a common appraisal system and explain what
question and how it done in strategic alliances for example – the case study on
Black & Decker on eastern hemisphere they struggling to implement the
common performance appraisal system.

Decision Making:

Is a very important function in strategic alliances, to avoided clashes, manages

clashes and maintain proper communication within the joint venture between
both partners. So it’s necessary to agreed on common frame work and
structure of decision making to maintain smooth flow of information between
alliance and both partners but some time it will create a problem in deciding
the common frame work and number of board of directors. Decision making
process is a kind of agreement on how to manage risks and take decisions with
in a organization and to build a strong communication channel within
organization, which gives a strong base to alliance survival and helps to build
mutual trust and understanding between both partners for example
Queensland minerals alliance case show how lack of proper sharing decision
making frame works leads alliance towards failure (Ferner et al, 2006)

Cultural issues during Implementation of common HRM:

The major problem in communication process is language and cultural

barrier. Language and culture plays an important role in strategic alliance ,
strategic alliance is not only the collaboration of two companies , it’s also a
collaboration of two languages and culture so very important to combine all
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strength and come with new corporate culture and acceptable international
language like English because communication is one of important factor in
alliance success , smooth flow of information within a organization enhance the
productivity of management but the blockage of information flow create trouble
in alliance . It will push alliance towards failure (RAO, P and TEEGEN, H,
2001)

Compensation:

One of the factor related to human resource management ,it concern during
the alliance formation is there any difference in wages of joint venture employee
as compare with parent company employees , if it is ,will create problem
between management and employees which affects the productivity of
employees(York, A, 2000).

Resistance (standardization or localization):

In this case there a big confusion to implement common HR system, which

management system used in strategic alliance, standard international system
or local HR system. Which system is successful in the host country for
example- In East Asia mostly international companies (Western) use local HR
system which is very effective. So for implementing a common HR system both
organizations are agreed on Common system (Child, J., and Faulkner, D, 1998)

Conclusion:-

In conclusion , HRM plays an Important role in alliance success and failure,

proper Human management increase the productivity and work satisfaction of
employees and helps to get competitive gain and increase the life of alliance by
promoting learning and by gaining new skills and capabilities

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At the last the proper HRM system is the key of alliance survival; recent studies
stated that 30% of alliance is fail due HRM issues. So both of the partners are
ready to adapt changes according to market environment and agreed on a
common HR framework and change it according to market environment

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