Meaning of IHRM

It is rather difficult to answer the question: What is international human resource management (IHRM)?
as a number of implications are involved in it. For example:

(i) A domestic company operating within the national boundaries employs some foreign
employees/expatriates in addition to nationals of the country. Can we term this practice by a domestic
company as IHRM?

(ii) A multinational company having a branch office in a host country employs only the nationals of the
host country. Can we call the practice of managing host country national employees by an MNC in its
branch office as IHRM?

(iii) A multinational company employs exclusively its home country nationals in its home country
office/headquarters. Can we term this practice as IHRM

Definition of IHRM: IHRM is defined as, performing HRM and its related activities and arranging for
related and necessary cultural and immigration facilities for prospective and current employees, by
organizations operating in domestic and/or foreign countries.(Subba Rao Pulapa, 2007). Thus, it is clear
that IHRM deals with all functions of HRM in addition to performing other functions exclusively for
expatriates. However, certain additional functions like resolving the disputes between domestic and
foreign employees, cross-cultural management at varying levels and collaborating domestic employees
and foreign employees are also to be performed under IHRM.

P. Morgan defines IHRM as the interplay among human resource activities (viz., procure, allocate and
utilize) types of employees (viz., host-country nationals, parent country nationals and third country
nationals) and countries (viz., host country, home country and others). (See Fig. 1.1) This definition is
silent about certain human resource activities that are peculiar to IHRM like arranging for immigration
facilities. In addition, this definition ignores the expatriates/foreign employees other than host country
nationals, parent country nationals and third country nationals, i.e., foreign employees working in a
domestic company.

DIFFERENCES BETWEEN DOMESTIC BUSINESS AND INTERNATIONAL BUSINESS

Basically, domestic business and international business operate on similar lines. But there are certain
differences between these two businesses. The significant differences between these two emerge from
foreign exchange, quotas, tariff, regulations of a number of governments, wide variations in culture and
the like. Table 1.2 presents the differences between domestic business and international business.

ABLE 1.2: DIFFERENCE BETWEEN DOMESTIC BUSINESS AND INTERNATIONAL BUSINESS

International Human Resource Management: An Overview International HRM differs from domestic
HRM in six major dimensions, viz., (i) wider nationalities of employees, (ii) variety of functions to be
performed, (iii) influence of international environment, (iv) broader and deeper relationships, (v)
different approaches for the domestic functions and (vi) enduring complexity of domestic HRM
activities, as presented in Fig. 1.3.
International Human Resource Management: An Overview International HRM differs from domestic
HRM in six major dimensions, viz., (i) wider nationalities of employees, (ii) variety of functions to be
performed, (iii) influence of international environment, (iv) broader and deeper relationships, (v)
different approaches for the domestic functions and (vi) enduring complexity of domestic HRM
activities.
INTERNATIONAL BUSINESS STRATEGIES:

International business firms can use four basic strategies, viz., international strategy, multidomestic
strategy, global strategy and transnational strategy. International strategy: International business firms
adapt this strategy in order to transfer the valuable skills and products developed in the home country
to the foreign markets where such skills and products are not available. This strategy produces results
when (i) the company has core competencies that the foreign competitors do not possess them, (ii) the
firm faces weak pressure for local responsiveness and cost reductions. For example, Trukai Rice and
steamships (both are Australian companies) transfer the skills and products from Australia to Papua
New Guinea.

Mc Donald, Southern Cross University also adapt international strategy.

Multidomestic strategy: International business firms adapting this strategy customise products and
marketing strategies to the host country requirements and environment. The international business
firms establish their production, marketing, and R & D facilities in various host countries. For example,
Unilever established Hindustan Lever Limited in India. Similar examples include Nestle, Proter and
Gamble and Colgate Pamolive.

Global strategy: International business firms adapting this strategy concentrate on profit earning though
cost minimisation. Therefore, these firms produce standard products, by locating the manufacturing and
other facilities in certain locations where the cost of production/operations is the lowest. They select
other cost reduction strategies in order to achieve low cost leadership in the industry. The firms like
Intel and Texas Instruments adapt this strategy.

Transnational strategy: According to Christopher Bartlett and Sumantra Ghoshal, international business
firms should pursue low cost leadership-cum-local responsive or customisation strategy due to intensive
global competition.
International Human Resource Management achieve this strategy by exploiting experience-based
economies and location based economies. Firms should transfer experience-based core competencies
and also customise their operations/product to the local requirements. They also emphasise that the
transfer of experience based economies and skills should flow not only home firm to foreign subsidiary,
but also from foreign subsidiary to home company and from one foreign subsidiary to another foreign
subsidiary. They referred this learning process as ‘global learning’. This process of simultaneous value
creation is called ‘transnational strategy’. The firms adapting this strategy simultaneously reduce cost
and increase value creation and addition. For example, Caterpillar learned greater cost economies when
it faced the sever competition from Komastu and Hitachi during 1980s.

Strategic Alliance: Strategic alliance is an agreement between two or more competitive international
business firms in order to serve a global market. Strategy alliance normally take place among the
companies carrying-out the similar line of business.

UNDERSTANDING CULTURE

Culture is a system of shared meaning and understanding held by the members of the
organisation/society that distinguishes from others. Culture is mostly determined by the economic level
and conditions and climate of a region or a country. Since economic level and conditions and climate
differ from region to region and country to country, culture also differs from region to region and
country to country.

Certain needs of the people like physiological and sociological, viz., food, water, clothing, housing and
security are common irrespective of the region or country. Therefore economic and social behaviour of
people across the world have some common features though the presentation of the general bahaviour
may vary. These variations are due to the availability of varied inputs for food, clothing, shelter and
social relations together with the variations in climatic conditions. For example, Scandinavian societies
depend on sea food and trade with coastal cities as they are situated along rocky shorelines. People in
desert areas of Asia and Africa travel long distances in search of food and water as they can’t grow crops
due to lack of water and non-suitability of soil to grow crops. People of deserts emphasized on goat
milk, dry grains and dehydrated meat. They avoid some foods like pork. This Culture is institutionalized
and Islamic law prohibits the Muslims from eating pork. Like this, different religions suggest different
types of food to be consumed and/or avoided.

CULTURE: ITS COVERAGE AND DETERMINANTS

Taylor defined culture as "that complex whole which includes knowledge, belief, art, morals, law,
customs and other capabilities and habits acquired by man as a member of society." Pascale defines
culture as "acquired knowledge the people use to interpret experience and generate social behaviour. In
turn this knowledge is used to form beliefs and values, create attitudes and influence behaviour." In
fact, people learn a lot from the environment, viz., social environment, technological environment,
economic environment, political environment, international environment and natural environment.
Thus, culture is:

learnt from the environment and interaction at workplace and social spheres.

shared and exchanged between two people or among several people.

trans-generational, in the sense that it is transferred from one generation to

other generation.

adaptive as individuals adapt the cultures of other persons or societies.

descriptive as it defines boundaries between groups.

Cultural Factors

Knowledge: People gain knowledge from the influence of environmental factors as well as interaction
with the environment. In addition, people gain knowledge from the readings of various books, journals,
magazines and news papers and interaction with the people at work as well as social spheres.

Beliefs: Belief is a cognitive representation of one's relevant environment may be right or wrong, good
or bad and cause and effect relationships.

Value: Value is an "enduring belief that a specific mode of conduct or end state of existence is
personally or socially preferable to an opposite or converse model of conduct or end-state of existence.”

Attitude: Attitude is defined as, "a learned predisposition to respond in a consistently favourable or
unfavourable manner with respect to a given object." Attitudes are evaluative statements – either
favorable or un favorable – concerning objects, people or events.

Behaviour: Knowledge provides inputs to beliefs, values and attitude. In turn, belief influences values
and values influence attitudes. These three factors together form culture and which turn result in
behaviour. People differ in values, belief and attitudes. Therefore, they also differ in culture which in
turn results in cultural diversity of people at the work place as well as in social spheres.

Culture and Behaviour

Culture is made up of assumptions, values, beliefs and attitudes set by the society based on the
changing environment. Individuals set their minds, based on the society's culture in which they are
brought up in addition to their own psychological set up mostly shaped by the genetically
characteristics, to react to and interact with the environment in certain ways. Thus, culture provides a
mental direction and traffic signals to people. Individuals behave based on the mental direction and
traffic signals provided by the culture. One should not forget that the cultural output of one's own being
is the interactive outcome of environmental influences including society and his/her genetically
characteristics. People pursue their goals, behave, and interact with others based on their cultural
configuration. Thus, the culture affects the behaviour.