Copy of IHRM

8/7/2019 Copy of IHRM

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FACTORS FAVOURING GLOBALIZATION:1.SOCIETIES AND ECONOMIES AROUND THE WORLD ARE INTERGRATED.

Reasons:Reduced costs of transportLower trade barriers

Faster communication of ideasRising capital flows and intensifying pressure for migration

2. POVERTY REDUCTION3. PRODUCES WINNERS & LOSERS

4. REDUCED INEQUALITIES WITHIN COUNTRIES5. INVOLVES ISSUES OF POWER CULTURE & ENVIRONMENT6. POLICIES TO COUNTER TERRORISM & CIVIL WAR ARE TO BE DESIGNED


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Globalization refers to process of integratingworld economies. Though government desires

to retain economic identities, the powerfultrend to integrate national economies issweeping across the globe and countries arefalling in line and embracing rapid globalization.Globalization has increased levels of trade,

investment flows and mobility of people acrossthe globe. This is where the need for IHRMemerges .


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Rapidly developing economies have huge markets.

MNCs are locating their subsidiaries in low wage andlow cost countries to reduce their cost ofproduction.Changing demographics (more of younger populationin India)Regional trading blocksDeclining trade and investment barriers

Revolution in technology


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The growth of rapidly growing developingeconomies (RDEs)The Continuing cost and capitaladvantages of RDEsThe development of talent and capabilitiesin RDEsThe migration of customers to RDEsThe emergence of RDE-based globalcompetitors


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IHRM refers to the HR policies andpractices applied by an internationalfirm across all its subsidiaries locatedin different countries.

IHRM is the process of procuring,allocating and effectively utilizinghuman resources in a multinationalOrganization.


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According to the Definition given by P eter J . Dowling and DeniceE. Welch , IHRM contains three dimensions:

1. Three broad human resource activities, viz., procurement,allocation and utilization. These activities include all theactivities of the typical domestic human resource function:human resource planning, employee hiring, performancemanagement, training and development, compensationmanagement and industrial relations.

2. The three national or country categories involved in IHRMactivities:

The host country where the subsidiary may be located.The home country where the head office is located andOther countries that may be suppliers of labour.

3. The three categories of employees of an international firm:Host country nationals (HCNs)

Parent country national (PCNs) andThird country nationals (TCNs)

IHRM is the interplay among these three dimensions-the humanresource activities, types of employees and countries ofoperation


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An expatriate is an employee who is workingand temporarily residing in a foreign country

Some firms call such employees internationalassignees

Inpatriate signifies the transfer of subsidiarystaff to parent country(headquarters)operations


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Globalization of business resulted in a greater mobilization ofhuman resources Effective Management of human resources is recognized as a

major determinant of success or failure in internationalbusiness.

Failure in overseas assignments proves costly, if Human

Resources are not managed professionally. Absence of competent managerial personnel to implementinternational strategies would result in decreased interest insetting up subsidiaries.

The movement away from traditional hierarchicalorganizational structures towards a networked MNCorganization has been facilitated by the development ofpersonal relationships and horizontal communication channelswherein HR plays a significant role.

HRs role in implementation and control of strategies in aninternational business by creating a proactive culture withinthe Organization.


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More HR functions and activities(Internationaltaxation, international relocation andorientation, administrative services forexpatriates, host government relations andlanguage translation services)

Need for broader perspectiveMore involvement in employees personal livesChanges in emphasis as the work force mix of P CNs and HCNs variesRisk exposure &Broader external influences


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THE CULTURAL ENVIRONMENT (EMIC-ETIC DISTINCTION) THE INDUSTRY WITHIN WHICH THE MULTINATIONAL IS

PRIMARILY INVOLVED COMPLEXITY INVOLVED IN OPERATING IN DIFFERENT

COUNTRIES & EMPLOYING DIFFERENT NATIONALCATEGORIES OF EMPLOYEES

ATTITUDES OF SENIOR MANAGEMENT EXTENT OF RELIANCE OF THE MULTINATIONAL ON ITS HOME

COUNTRY OR DOMESTIC MARKET


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Forces for Change:Global Competition

Mergers, Acquisitions and alliancesOrganizational restructuringAdvances in technology and telecommunication

Require MNE to have:FlexibilityLocal responsivenessKnowledge SharingCompetence transfer

Managerial responses:Developing global mindsetInformal control mechanismsHorizontal communication

Cross border and virtual teams

International assignments


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1. ETHNOCENTRIC:Highly centralized HQ control .P CNs dominate .

2 . P OLYCENTRIC: Decentralized . Each subsidiaryhas some degree of decision making autonomy .HCNs manage subsidiaries .

3 . GEOCENTRIC: Ignores nationality in favour of ability . Needs a worldwide integrated business

strategy .


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AdvantagesControl and co-ordination by HQ is maintained.Promising managers get international experience.

PCNs may be the best people for the job.Assurance that the subsidiary will comply with companyobjectives policies etc.

DisadvantagesHCNs promotion opportunities are limited.Adaptation to host country may take a long time.PCNs may impose an inappropriate HQ style.Compensation differences between PCNs and HCNs maycause problems.


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Advantages No problems with language and culture. Reduced hiring costs. No work permits required. Continuity of management improves since HCNs stay

longer in positions. Govt. policy may force hiring of HCNs. Promotional opportunities not limited - so higher morale

among HCNs.Disadvantages HQ may have less control over operations.

HCNs may still have limited career opportunities outside thesubsidiary. Hiring HCNs limits opportunities for PCNs to gain overseas

experience. Hiring HCNs may encourage a federation of disintegrated

national units rather than one integrated global unit.


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Advantages: Salary and compensation may be higher than

for PCNs. May be more familiar with host country than the

PCNs.Disadvantages: Transfers must consider national animosities. Host government may resent TCNs as much as

PCNs. TCNs may not comply with HQ style of

management. TCNs may not want to return after assignment.


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More than two decade of liberalization andcontinuous efforts on part of Government has

opened new avenues for IndianEntrepreneurs. In recent years, Indiancompanies have started taking initiative tomove into global market.


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A. V. Birla Group, operating in 18 countries, recently acquired

two copper mines in Australia for US$ 80 million and a Carbonblack manufacturing unit in China. ONGC Videsh Ltd. (OVL) is investing over US$2 billion in

discovered / producing oil fields in Sudan, Russia and Angola andgas fields in Vietnam. Besides, OVL has acquired explorationassets in Myanmar, Libya, Iran, Iraq and Syria.

Tata Motors paid $118 million to buy Daewoo. Infosys has bought an Australian Software firm for US$ 23 million. Ranbaxy gets 70% of its revenue from its operations outside India

with 40% from USA. Reliance recently paid $ 207 million to acquire Flag Telecom.


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Pitfalls could be primarily divided as under: 1. Commercial 2. Financial 3. Legal

For further understanding we have dividedglobal working of Indian business underfollowing two heads:

I. In case where investment is made outsideIndia;

II. In case it is through contract with ForeignParty.


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Lack of knowledge about the Country; Lack of knowledge about the Company; Lack of knowledge about working culture; Lack of knowledge about laws, relating to

company operations, labour, tax etc.; Lack of knowledge about investment laws,

both in the country of investment and inIndia, notified and amended by Government,time to time.


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Lack of understanding relating to governinglaw;

Lack of understanding relating to mode ofdispute resolution;

Lack of understanding relating to jurisdictionof Court;

Lack of understanding relating toenforcement of Court decision;

Lack of understanding about ethical aspects; Lack of understanding about third party

liabilities; Lack of understanding about force majeure.


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Spend time to understand the Country History & Culture. Involve professionals, with international exposure to assist. Take personal interest in acquiring knowledge of corporate

laws on macro level. Rationalize tax planning with the help of professionals from

these countries. Work closely with professionals on various aspects of

agreement. Undertake due diligence before entering into business

relationship;

Put your concerns about mode of payment, time and quantumclearly on table, before closing the deal; Be careful about third party exposure -take commitment from

foreign party on this aspect; Be careful about governing law, jurisdiction of Court, mode of

dispute resolution.


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