Running Head: INTERNATIONAL HUMAN RESOURCE MANAGEMENT 1

International Human Resource Management

Name

Institutional Affiliation
 INTERNATIONAL HUMAN RESOURCE MANAGEMENT 2

Introduction

Multinational enterprises (MNE) is a company that has market sales of over 20% in at

least three different continental markets. That way, a company can be referred to as a global

enterprise and has to consider international commerce. The number of MNEs is constantly

growing because every company wants to enter the global stage to increase its market share

trough broader business operations. Furthermore, the constant advancements in technology have

enabled the ease of multinational transactions including communication. The coordination of

company operations is therefore easy and efficient. Despite the promised benefits of

internationalization, a company has to make strategic planning of the numerous management

consequences that may cripple the entire business.

One of the management dilemmas is that of human resource. International Human

Resource Management (IHRM) becomes complex since it destabilizes the status quo. The entire

management of the company becomes complex and needs extensive considerations.

Globalization includes off-shoring which also has its pros and cons. This paper will delve into

the issues involving oversees management and how the IHRM can help to ease the process. The

advantages of drawbacks of off-shoring will be discussed in details. The analysis and evaluation

will involve examples of the globally successful companies to help in the comprehension of

these concepts.

Challenges Facing Overseas Management

Cultural Differences

Any business must understand and accept diversity in the global market in terms of

culture and social life. The Asian market is culturally different from the South American one
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regarding beliefs, values and consumer behaviour. Undoubtedly, any MNE has to consider the

cultural diversity and make an effort to understand the specific market the company wants to

exploit (Stahl, 2017). Subsequently, the company has to tailor its entire operations to suit the

culture of the market. For instance, a fast food company cannot produce any pork products in the

Middle East market. The religious belief of the Islam community prohibits the consumption of

any pork products. A real-context example is when KFC entered the Chinese market. The

Mandarin language translated the globally recognized slogan of the company, ‘Finger-Lickin'

Good,’ to ‘Eat Your Fingers Off.’ Consequently, the company had to change its slogan to a

simple ‘So Good.’ Rebranding, in this case, helped the company to overcome the language

barrier and seamlessly enter that market.

Peterson, Søndergaard, and Kara (2018) state that any management of MNE must think

of the cultural diversity because it affects almost all the aspects of business operations.

Promotional and marketing strategy must address the cultural needs to advertise the brand in a

manner that addresses the needs of the diverse market needs. The business also has to figure out

the market segmentation and brand positioning. It is not the same in the native business

environment because most of the time the company has inadequate information on the social

constructs of the new market. Chicago Style Pizza is a company that was looking to enter the

Czech Republic market in its internationalization strategy. The major challenge of the business

was the cultural differences between the two markets. While the American consumers preferred

eating the pizzas with hands, the Czech eat all meals using fork and knife. Any operation was

therefore aimed at meeting the social demand for the new market in order to attain

competitiveness and achieve business success. The management realized the importance of

cultural diversity and had ever since used that as a lesson for further globalization projects.
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Political Factors

MNEs have to consider legislation differences created with border differences. Every

country has a set of policies and regulations that must be adhered to. MNEs deal in multinational

markets with different laws. The challenge comes in where the company needs to keep up with

the constant changes in legislation within all the nations it is operating in. This is a daunting

challenge to company management since they need consider a range of legislation in any

business operation. The primary consideration is taxation policy. A country’s taxation policy will

affect the operational costs, the human resource flexibility including wages and eventually the

revenue accrued from operating in that particular market. An enterprise cannot transact in a

country were the taxation policy leads to no profit generated. Silvius and Planko (2017) assert

that the primary goal of any business is to generate profits to increase its market share required to

create and maintain a competitive advantage.

The political stability of a country also affects the business operations of any MNE. The

management has determined the political situation of that market in attempts to determine how

secure the assets of the company are. The political condition also affects economic stability.

Penrose (2017) states that economic valuation of a market is a concern for management not only

regarding consumption but also a human resource. According to Maslow’s theory, management

can take advantage of the economic situation of an overseas location to increase its economies of

scale. Global companies like Samsung have taken advantage of low-income countries like

Vietnam for production because they offer cheap labour. That strategy has enabled the company

to increase its productivity and emerge as the best smartphone seller in the world. However,

Safiullah (2015) contradicts Maslow’s theory by arguing that the nature of work has changed and

their underprivileged financial status no longer motivates employees.

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Human Resource Management

Human resource is the driving force of any company. Management of the workforce is an

essential facet of manage because it creates the conducive organizational culture necessary for

achieving the company’s goals. The employees work with a sense of direction and guidelines on

their roles and responsibilities as well as the importance of their contributions to the success of

the organization. Effective human resource management is, therefore, an essential part of any

successful company. However, MNEs face the challenge of having a globally synchronized

workforce. MNEs have a problem of managing the human resource of the highly diverse

workforce. It is a challenge because the entire workforce consists of employees with different

cultural beliefs, economic statuses, an individual’s needs. Several aspects of HRM are affected

by internationalization.

Performance Appraisal

Evaluation of employee performance is necessary to maintain a productive staff.

Company managers use employee performance management to determine promotions and career

development, pay system as well as work responsibility within the organization. Tuytens and

Devos (2012) state that companies that use performance management have increased

productivity and conducive working environment. Employees become motivated because they

believe that the company provides a platform for personal development. This becomes a

challenge when the entire workforce is segregated, and there is no uniform set of organizational

competency standards that can apply to all the employees. Several biases such as the central

tendency bias can affect the integrity of the performance evaluation. The HR manager can use

one of the employee segments, most of the native location of the business, as the benchmark with
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all the other sections. The HRM tend to ignore the fact the employees are different in so many

aspects.

Standardization

The HRM might wish to have a centralized form of management where the policies and

practices of the firm apply to any employee in any region. Lunnan and Elizabeth Mercer Traavik

(2009) states that it is easier to use a similar set of rules to have a standardized method of

operations. This is usually the method used by global companies which use standardization such

as Coca-Cola. The company has been successful in standardizing business operations including

human resource management. However, there are several risks in this type of management. The

Coca-Cola has been unable to set up in particular parts of the world because of staff management

issues (Sinclair & Wilken, 2009). The problem with uniform policies is the different cultural

background as well as legislation. A company’s policies may conflict with the rights of citizens

in a particular nation, which might not be an issue in the parent locality of the firm. Such a

problem further complicates the HRM of the company.

The policies might lead to issues of cultural discriminations. The role of the HR manager

is to make sure that the entire workforce is working efficiently and work towards a specific

direction in meeting the goals of the company. This peace is disrupted when a section of the staff

feel that they are segregated because of their cultural backgrounds. Such issues can affect the

organizational cultures of the company and further dent the productivity of the employees

translating into losses in that specific region of operation.

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Offshoring

Offshoring is an effective business strategy, especially for MNEs. It increases the

efficiency of production. Companies need to minimize operational cost to achieve the economies

of scale. Many companies use offshoring in the manufacturing process, one being Samsung

Electronic Company. Apple is another company that has been able to utilize the strategy. The

company management of the company claimed that China has been ideal for production on the

grounds that the process of recruitment of a productive workforce only 54 seconds as opposed to

three months it would take to find the same staff in the Silicon Valley (Mudambi & Venzin,

2010). The trend is becoming popular in the manufacturing sector. However, there are several

disadvantages associated with offshoring.

Advantages

Low labour cost

Developing firms have helped this process since it has offered the cheap labour that

MNEs can utilize in the global production network. Most of the people in such countries are

desperate to get a source of income. The governments are also desperate to allow for increased

employment opportunities to curb the high rates of unemployment. Hence, the governments are

lenient on labour laws, including minimum wage policies. Eventually, companies end up getting

cheap labour to increase production. This is the opposite in the developed countries where most

of the companies are located. In developed countries, the laws on hiring are strict thus increasing

operational costs. That is why companies like Apple are offshoring production in China.
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New Markets

Offshoring can be a tool for finding new markets of products or services. While the

important aim of the company is to find a cheaper way of production, the new production

location can offer a substantial market. Samsung Electronics Company is one company that has

enjoyed this benefit. The management stated that it established two assembly plants in Vietnam

to increase the volume of production. In the process, the company ended up being the best selling

company in the country. More than three-quarters of the citizens own a Samsung phone, despite

their low economic statuses. This has been enabled by a lack of duty fees incurred while

importing such devices. Eventually, most of the population can afford one. This case is one

advantage of offshoring. It leads to a broader base of operations which consequently lead to

increased sales and revenues.

Easy Staff Management

Offshoring enables the company to have control over the staff. This is opposed to

outsourcing where the company has to find another company to manage its production processes.

Human resource management becomes more comfortable since the employees in the new

location still belong to the parent company. Therefore, the company has control of what is the

business operations and can include it in the overall management plan. Eventually, the company

can make independent decisions that it feels are necessary to achieve its set goals

Disadvantages

Cultural Barriers

Social differences including language is still a persistent challenge for any MNE. Cultural

differences require independent planning for the different overseas countries that a company may
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decide to outsource to. This may be resource extensive and may affect the overall operations of

the firm. Also, it is not possible to address all the differences which might further cause problems

halfway the project. Winkler, Dibbern, and Heinzl (2008) found out that cultural differences

significantly affected German organizations that offshored in India. The primary effect was the

tarnished employer-employees relationship that affected the entire operations of the companies.

Risk to Employees

Most of the offshoring destination countries have lenient rules that protect employees. Such

environments might expose the workers to several exploitations by the profit-hungry

corporations. The welfare of the human resource can, therefore, be the least consideration of the

company. Governments always prevent this from happening, something that might not be the

case in an offshoring destination.

Involvement of IHRM

MNEs can greatly benefit from IHRM because it helps to align the processes of human

resource management, not only on the international scene but also of the different national

contexts. Most people thought that IHRM is involved with the globalization of human resource

management through the creation of global corporate culture. In a real sense, the concept of

IHRM starts by analysis of the organizational, national human resource administration before it

moves to the regional and eventually the international level. IHRM can help to mitigate the ever-

recurrent factor of management of a diversified global workforce. The issue is among the serious

threats that might affect the business operations of any MNE as stated earlier.

IHRM is very flexible in the administration of employees. This is one of the facets of the

concept that has made it a very admirable form of human resource management for MNEs.
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Flexibility in business is defined as the ability to accommodate any changes in the business

environment (Martínez‐Sánchez et al. 2011). Labour flexibility can allow the MNEs to employee

different techniques in the management of the highly diverse workforce. This will ensure that the

individual needs are addressed depending on the social construct of the particular set up. Taking

a theoretical company that has offshored in the tropical regions that do not experience seasons.

Labour flexibility will need to create a different program for those expatriates as those given to

their counterparts who enjoy summer vacation benefits from the firm. That way, the company

will be able to achieve equality within its organizational structure. IHRM enables strategic

planning and decision making that allows for unified incorporation cultural diversity in a

workforce.

The processes of recruitment and performance evaluation may also vary depending on national

and international environments. Human resource managers have to ensure that the company hires

the employees with the Knowledge, Skills, and Abilities (KSAs) that are aligned with the goals

of the organization. Expatriates from different regions may have diverse KSAs that fit the

objectives differently. IHRM concepts will enable the recruitment of a group of employees that

work synergistically to meet the goals of the company using their different but complementary

strengths. Such human resource managers incorporate cross-cultural training and career

development that considers all the employees. This includes the performance appraisal system as

well as promotions and rewards. Evidently, the growing globalization needs to corporate the new

paradigm of IHRM which will help to mitigate the risks of MNE management and offshoring

ventures.
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Conclusion

Undoubtedly, internationalization is growing as aided with the rapid technological

advancements. However, the MNEs still face unsolved problems in management, especially in

human resource management — several factors such as cultural diversity, political factors, and

difficulty in coordinating a workforce cripple the harnessing of the benefits of globalization.

Offshoring is another facet of management that can help MNEs to realize the projected benefit of

low cost of production. However, it also has risks that need to be addressed to reach that

achievement of economies of scale. With all these challenges, IHRM is a management concept

that can help to improve human resource management by mitigating most of the risks associated

with MNEs. Therefore, companies should consider embracing the management concept in

management.
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References

Lunnan, R., & Elizabeth Mercer Traavik, L. (2009). Is the standardization of human resource

practices perceived as fair across national cultures? The cases of China, Lithuania, and

Norway. Baltic Journal of Management, 4(2), 127-148.

Martínez‐Sánchez, A., Vela‐Jiménez, M. J., Pérez‐Pérez, M., & de‐Luis‐Carnicer, P. (2011). The

dynamics of labour flexibility: Relationships between employment type and

innovativeness. Journal of Management Studies, 48(4), 715-736.

Mudambi, R., & Venzin, M. (2010). The strategic nexus of offshoring and outsourcing

decisions. Journal of Management Studies, 47(8), 1510-1533.

Penrose, E. T. (2017). Foreign Investment and the Growth of the Firm 1. In International

Business (pp. 33-48). Routledge.

Peterson, M. F., Søndergaard, M., & Kara, A. (2018). Traversing cultural boundaries in IB: The

complex relationships between explicit country and implicit cultural group boundaries at

multiple levels. Journal of International Business Studies, 49(8), 1081-1099.

Safiullah, A. B. (2015). Employee motivation and its most influential factors: A Study on the

telecommunication industry in Bangladesh. World, 5(1).

Silvius, G., & Planko, J. (2017). Sustainability in Business. In Sustainability in Project

Management (pp. 25-38). Routledge.

Sinclair, J., & Wilken, R. (2009). Strategic regionalization in marketing campaigns: beyond the

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Stahl, G. K., Miska, C., Lee, H. J., & De Luque, M. S. (2017). The upside of cultural differences:

Towards a more balanced treatment of culture in cross-cultural management

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Tuytens, M., & Devos, G. (2012). Importance of system and leadership in performance

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Winkler, J. K., Dibbern, J., & Heinzl, A. (2008). The impact of cultural differences in offshore

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