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The IHRM Practices and Internationalization, Essay Example

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Introduction

Globalization has led to many companies stretching its jurisdiction. The Western and Middle Eastern societies have significant cultural differences, Starbucks multi-national cooperation have different institutional foundations regionally, delivering a global proposition that resonates with the brand identity while acting aligned with local requirements attentive to the local exterior. Therefore, increasing the physical and virtual teams in an organization headquarters and subsidiary is a significant approach to internationalization. HRM is a multidimensional construct consisting of three elements, procurement, allocation, and utilization. International HRM is a comparative study of HRM with a broader scope of literature; the primary research focuses on HRM in Multinational Corporation differentiating between home and host countries. The management of ex-pats is a highly complex task with 10 – 20 % of ex-pats managers returning to the host nation within one year of overseas employment, fundamentally, due to the tolerance of ambiguous and culture shock, the model is transparent in a vision of the life cycle of ex-pats illustrated the adjustment process. Moreover, there are several cases correlated to IHRM, such as cultural differences, institutional attributes, globalization, and multicultural teamwork, and cross-cultural training, including recruitment and hiring process that are vital in IHRM.

Abstract

This report seeks to divulge into the underlying theories to explain the interactions of human resource management within different countries using external data exploring cultural differences. Specifically, the first objective is to evaluate relevant literature that briefly and broadly analyses the political, economic, and social statistics of both China and The United States. Literature analysis aims to gather the relevant information required in reporting on the significant findings of theoretical debate on cross-cultural management, institutional techniques, and IHRM. The second objective is preparing a brief report based on the literature review to address a significant issue on international talent management plans and training development management practices across the Starbucks subsidiary in China.  The last objective will be to provide recommendation to mitigate the challenges posed to Starbucks imposed by cultural problems and also to recommend on critical approach to IHRM in correlation to the establishment of an international talent management plan, knowledge transfer, and knowledge sharing across cultural training between Starbucks’ headquarters in United States and Starbucks’ subsidiary in China. Additionally, the report will address different cases interconnected with IHRM among Starbucks headquarters and its subsidiary in China. Some evidence to be discussed will include PEST analysis for the overall international context approach of the IHRM issue, various stages of internalization, IHRM practices and globalization, cultural differences between the United States and China, and cross-cultural training.

Literature Review

Early works on IHRM tended to take a more critical approach to IHRM practices focusing mainly on organizational culture as a necessary power to corporate success and performance. Learning at the national and corporate levels is essential in helping an organization understand intergroup disputes. Over time, it has become vital to look at the other side of leadership on how leaders establish the culture and how culture creates and defines leaders. Some conceptual models dictate how to reason about the functioning and structure of organizational culture, the role that organization leadership plays in the development, and management of literature (Schein 2004). However, organizations must avoid superficial models of perception and develop on the more profound and more complex anthropological models. The research answers cultural differences between an organization HQ and its subsidiary by giving out various categories used in describing culture: habits of thinking, linguistic paradigms, and mental models that comprise cognitive frames that guide languages, thoughts, and perceptions utilized by group members and passed to new members.

Hofstede builds on Schein’s cultural perspectives by including four dimensions associated with culture – uncertainty avoidance, Masculinity as opposed to Femininity, power distance, and individualism as opposed to collectivism. The four sizes reflect express fundamental dilemmas of humanity – describe issues that qualify as having universal psychological relevance, (Hofstede 2001; G.Hofstede & J.Hofstede 2004). Hofstede’s research information can be used in new and future studies in predicting the basis of cross-cultural similarities or diversities on personality and psychopathology. Also, the work is vital in analyzing secondary data for the inference of cultural attributes from cross-cultural manifestations of abnormal or average behaviors. Countries differ considerably in the type of change plans, and their resistance to change that would be preferred –this creates national culture differences which affect organizational change, (Harxing & Hofstede 1996). There is a critical examination of the influence of culture on the strategies that can be differentiated to implement change and the reasons why people resist change. Harzing and Hofstede believe that organizations change when they should not change and fail to turn when they should change. There are critical dimensions of culture which are included in various researches models that are used by management theorists in dealing with organizational culture internationally and nationally. Trompenaars and Hampden-Turner (2011), in their work, highlight relationship with nature and people, particularism and universalism, and collectivism and individualism, which are the critical cultural dimensions exhibited in different organizations depending on the country of origin.  Simillarly, Schein (2004) and Kluckhohn and Strodtbeck (1961) backups Trompenaar’s research and includes human activity and nature, correlation with life and people, time, and truth and reality as culture dimensions that dictates a company culture and values in answering cultural differences among countries. Organizational culture dictates the cross-cultural training that companies in different countries are aligned towards, as shown in Mendenhall and Oddou’s works. In essence, cross-cultural training should follow a piece of information, effective, and immersion approaches in successful cultural practice. All the parts of literature are based on organizational culture and culture in a broader context, such as cultural differences and their effects on corporate operations, the international impact of culture change, and describes several models of dealing with the issue of culture.

Bartlett and Ghoshal’s (2002) works give a deeper understanding of different concepts related to internationalization by describing strategies that MNCs can follow – global, multi-domestic, regional, and transitional procedures. However, the research fails to broadly explain the effects of the following model to achieve internalization based on different perspectives. Egocentric, Polycentric, and ethnocentric are policies proposed by Perlmutter’s research and briefly describe the different policies MNCs can adhere to while trying to achieve internalization. The work powerfully describes the plans, their strengths, and weaknesses, thus building a strong foundation of understanding the internalization from a broader perspective. Interconnection between organization and culture is addressed by (G.Hofstede & J.Hofstede 2004) and their describe common issues that are associated with different dimensions of national culture – relation to authority, the conception of self, and methods of dealing with conflicts.

Moreover, G.Hofstede & J.Hofstede’s research has a strong emphasis on culture and organization correlation through its cultural manifestations at various levels of depth using the ‘onion diagram’ procedure. The study challenges other works on culture by describing a broader context the cultural diversities based on clas, gender, religion, region, and generation. Different key dimensions related on a culture that addresses the issue of civilization are defined by Hall (1966), in his work “the hidden dimension” and describes two main aspects space which can be physical and personal, time which can be polychronic and monochronic, and language comprised of low and high context.

International context

PEST analysis in the USA

The USA has a valid law and a robust democratic setup due to elections that are considered to be transparent and fair (Pestle Analysis 2014). The USA has a stable political environment, advanced technology, and infrastructure, which makes the country an excellent destination for both domestic and international direct investment, including direct foreign investment. The legal requirements for Multinational corporations set up are clearly stated in its legal acts and laws that govern business operations. Therefore, the country’s political system will have a positive impact on Starbucks’ operations. Based on economic factors, the USA has one of the largest economies worldwide in terms of nominal GDP (David 2019). Since the beginning of 2015, unemployment has declined, and income levels improved. However, the rapid change in the global landscape is a significant challenge for the USA. Although the majority of individuals have a liberal mindset, the country experiences racial upheavals. Also, the social mobility has been declining since 1980. Lastly, the United States is the world leader in technology and science. The country has been at the forefront in terms of adopting and deploying new technologies in various fields. Therefore, the rate of technological change and innovation is very rapid in the United States (David 2019).

PEST analysis in China

China has three things that attract business investors – vast market space, low cost of labor, and China’s high growth potential. Legal issues and government regulations are the political factors that affect China (Pestle Analysis 2015). The government has enacted both formal and informal laws which forms must abide, and China lacks a fully complete framework for e-commerce. In economic factors, China has experienced a tremendous growth rate in its GDP. Some factors, such as potential urban growth and abundant skilled labor, impact China’s economy. Population growth and the aging population decline invariably affect the social aspect of China. In China, social behaviors and family size affect decision making. Other social factors include emigration, education, consumer lifestyles, and religion. Lastly, China has dramatically adopted new and advanced technology. According to Farooq (2019), the most significant technological factor helping the Chinese market it is comprehensive internet utilization. About 450 million individuals use the internet, which dictates their purchasing pattern and has a robust physical trend towards shopping.

Stages of internationalization

MNCs may follow domestic-market development, export research and strategizing, initial export sales, international sales, and multinational investment such as investment abroad. As stated by Gubik and Wach (2014), Multinational Corporation may choose between global, multi-domestic, regional, and transitional strategies, (Bartlett and Ghoshal 2002). These plans follow the polycentric, ethnocentric, and geocentric policies proposed by Perlmutter. Ethnocentric is related to home country orientation (the USA for Starbucks case) and holds a belief that management from home country drives more international activities forward compared to non-native employees operating in MNC’s subsidiaries or HQ. Geocentric fails to equate firms’ superiority with nationality and conclude that executive managers try to find the best workforce for solving specific problems regardless of their nationality – is world-oriented. Lastly, polycentric follows a host country-oriented belief. The policy assumes that the host country has diverse cultures, thus making a centralized approach unfeasible (Perlmutter 1969).

Cross-Cultural Analysis

USA and China have different national and corporate cultures. While in China, people enjoy the group or communal culture, in the USA, people follow the individualistic culture – according to Trompenaars and Hampden-Turner (2011), individualism for the USA and communism for China. Companies in China are concerned with hierarchy, and those with higher ranks are shown more respect while in the USA companies follow a more flat structure – employees of all levels have access to the top management. Businesses in the United States concentrate more on efficiency and speed while in China, corporations can be slow in decision making with a preference of fostering relationships and building consensus before acting on any activity – universalism in the USA while particularism in China (Trompenaars & Hampden-Turner 2011).

Moreover, people in China followed particularism due to the culture of carrying on thoughts established in the early hood. They reinforced in organizations while in the USA, individuals rarely follow a particular theory developed in the first hood, thus exercising universalism in organizations (Hofstede 2001). While in the United States, companies enjoy the freedom of access to information and speech, China has massive media and internet censorship, which may be a problem for many businesses (Bryant 2019). Additionally, in the USA, knowledge is relational and situational, while in China, education is task-centered.

Institutional characteristics and arrangements

In terms of institutional attributes, USA follows the Neo-Liberalism, which is dictated by the presence of the Liberal market economy (LMEs), thus providing one of the massive economies in the world. On the other hand, China also follows neo-corporatism, which is dictated by the coordinated market economy (CMEs) and also provides one of the largest global economies, (Hall & Soskice 2001). Moreover, institutional diversities affect the performance, social well-being, and public policies of organizations. China and the USA have different survival rates of organizations that are dictated by their market space, legal issues, and other factors such as technological factors. Therefore, Starbucks ‘ headquarters may survive the pressure for convergence generated by technological change and globalization than its subsidiary in China (Hall & Soskice 2001).

Globalization and IHRM practices

In China, most subsidiary organizations follow the host country HRM and global best practices. USA supports basic HRM recruitments such as recruitment systems – involve extensive interviews and prefers experience – and training and development – provided according to the employee’s needs and specific post requirements. Although the IHRM differs, both the USA and China follow the transfer of the best IHRM skills and practices between headquarters and subsidiary. However, the Chinese IHRM practices, including selection and recruitment practices and policies, are more progressive in adopting current HRM practices – they are divergent from the USA’s best MNCs practices. In the USA, IHRM practices are convergent due to the rapid growth of internationalization firms, which are attracting more practitioners and academic interest (Shen & Edwards 2007). Companies in China that follow more ethnocentric staffing policies and practices experience IHRM problems than companies located in the USA (Kopp 2006).

Role of expatriates

According to, expatriates are sent to various organizational units to provide expertise and guidance where there is a lack or shortage of skilled resources, which signifies the distinctive competency of organizations. The expatriation process in the USA requires that individuals living abroad are subjected to additional tax reporting and various tax residence requirements. The HR functions are interconnected with the role of expatriates since HR coordinates and controls the expatriates in maintaining and achieving the appropriate planned position of the organization. Moreover, expatriates are hired to manage and run top-level offices located in the more essential regions – areas with potential customers (Harris & Holden 2001). Additionally, both countries use local workers and managers when running certain operations, which are not vital.

International talent management

The recruitment process for both the female and male follows the same approach of extensive interviews and preference of experience. The more skilled personnel will be taken to the country with a shortage of resources or the absence of skilled labor. During the recruitment process, the characteristics of each individual based on attitudes, skills, expertise, and level of professionalism are taken into account. In both China and the USA, when recruiting the staff, other hiring and recruitment approaches may be used, such as outsourcing the recruitment process to top company’s known in international talent management. Also, Starbucks can use either a differentiated or inclusive approach of sorting employees (Stahl et al. 2011). Additionally, several principles useful for global talent management include alignment with a plan, internal consistency, management inclusion, cultural embeddedness, and balance of local and global requirements.

Cross-cultural training and multicultural teams

According to Mendenhall and Oddou (1985), cross-cultural training should follow three approaches, which include information, affective, and immersion approaches. Information technique comprises of area briefings, cultural briefings, use of interpreters, relying on media sources such as films and videos, and using survival level language training. The practical technique involves culture assimilation training, critical incidents, stress reduction training, moderate language training, and role-playing. Lastly, the immersion approach incorporates assessment centers, field experiments, simulations, sensitivity training, and extensive language training. Inadequate cultural training may affect management practices, including organizational structure to human and strategy HR, (Schneider & Barsoux 2003). Both the Starbucks headquarters and subsidiary should follow those three cross-cultural training techniques for effective results to enhance and maintain their global competitiveness by choosing the right people (Ko & Yang 2011). The USA adapts to cross-cultural rapidly compared to China. Also, USA’s language and organizational culture are different from the one practiced in China. However, both countries maintain intercultural and diverse teamwork capabilities. Multicultural teams have high creativity and excellent decision-making capabilities.

Conclusion

China exercises communism, which allows companies to adopt particular patterns in national and corporate cultures while the USA practices individualism, thus allowing companies to have a universal corporate and governmental culture. Both countries, the USA and China, have vast market space due to the large growing economy and adoption of advanced technologies. Although the PEST (political, economic, social, and technological) analysis differs from both countries, there are still some similarities that are exhibited by both countries. In cross-cultural training, an organization can follow an intercultural model that constitutes three approaches, namely information, affective, and immersion techniques. The strategies help in training expatriates and employees when moving across borders – training employees to operate in diverse cultures from different countries. The expatriates are needed to provide skills where there is a shortage of expertise or skills that are completely unavailable. There is a correlation between HR functions and the role of expatriates in the sense that HRM coordinates and controls the operations performed by expatriates towards maintaining and achieving the goals of the organization.

Recommendation

IHRM practices and policies in both the Starbucks HQ and its subsidiary should follow the basic approaches of recruitment which comprises of extensive interviews and experience preference. Starbucks IHR practices should focus more on international talent management and training development management since they are associated with many benefits. Some benefits of training and development in an organization enhanced employee performance, improved workers’ morale and satisfaction, increased productivity in both the HQ and the subsidiary, including increased innovation in new techniques and products. Moreover, training and talent development are associated with reduced employee turnover, thus reducing the recruitment cost and enhances blended learning – training involving both online and workplace learning (Poject Management 2020). Starbucks should be concerned that the shortage of international managers is an essential constraint on the successful execution of global plans. Many corporations undermine the complex nature of IHRM issues involved in international operations, which may affect the training and talent development (Shen 2005). For international training and talent development, including management to be effective, Starbucks should follow four strategies; international travel, the establishment of diversified teams, international practice, and international assignments, which are suitable for developing global managers. Starbucks should ensure there are multicultural teams since they are associated with several benefits. Multicultural teams are more creative due to broader access to information and thus can bring in vital information at any time to assist in better decision-making processes (Tobler 2017). Moreover, multicultural teams have a high likelihood of successful outcomes. However, Starbucks should be aware that multicultural groups are associated with two problems: decreased social connection and increased conflicts. Additionally, to train, develop, and lead both international and multicultural teams, Starbucks may minimize language barrier by providing survival language training and giving out interpreters, break down the cultural differences between the group of employees, operate around the cultural customs and traditions, and avoid creating artificial divisions among the multicultural team members, (Business News Daily 2020).

References

Bartlett, C. A. & Ghoshal, S., 2002. Managing across borders: the transnational solution. Boston [MA]: Harvard Business School Press.

Bryant, S., 2019. Identifying cultural differences and similarities: China vs. the US. [Online] Available at: https://countrynavigator.com/blog/global-talent/cultural-differences-us-vs-china/ [Accessed 06 March, 2020].

BusinessNewsDaily, 2020. How to Best Lead a Multicultural or International Team. [Online] Available at: https://www.businessnewsdaily.com/9924-lead-multicultural-international-team.html [Accessed 07 March 2020].

David, J., 2019. PESTEL analysis of the USA. [Online] Available at: https://www.howandwhat.net/pestel-analysis-usa/[Accessed 06 March 2020].

Farooq, U., 2019. PESTLE Analysis of China. [Online] Available at: https://www.marketingtutor.net/pestle-analysis-of-china/ [Accessed 06 March 2020].

Gubik, A. S. & Wach, K., 2014. International Strategies of Businesses: Some Evidence from Internationalised Polish Firms. In: International Entrepreneurship and Corporate Growth in Visegrad Countries, First edition. S .l.: University of Miskolc, pp. 41-46.

Hall, E. T., 1966. The Hidden Dimension. Garden City, New York: Doubleday.

Hall, P. A. & Soskice, D. W., 2001. Varieties of capitalism: the institutional foundations of comparative advantage. Oxford [England]; New York: Oxford University Press.

Harris, H. & Holden, L., 2001. Between Autonomy and Control: Expatriate Managers and Strategic IHRM in SMEs. Thunderbird International Business Review,, pp. 77–100: Vol. 43(1):https://onlinelibrary.wiley.com/doi/pdf/10.1002/1520-6874(200101/02)43:1%3C77::AID-TIE6%3E3.0.CO;2-G.

Harxing, A.-W. & Hofstede, G., 1996. Planned Change in Organizations: The Influence of National Culture. S .l.: JAI Press Inc.

Hofstede, G., 2001. Culture’s consequences: comparing values, behaviors, institutions, and organizations across nations. Thousand Oaks, Calif: Sage Publications.

Hofstede, G. & Hofstede, G. J., 2004. Cultures and Organizations: Software of the Mind. Blacklick: McGraw-Hill Publishing.

Kluckhohn, F. R. & Strodtbeck, F. L., 1961. Variations in value orientations. Evanston: Row, Peterson.

Kopp, R., 2006. International human resource policies and practices in Japanese, European, and United States multinationals. Human Resource Management, pp. 581 – 599;33(4):DOI: 10.1002/hrm.3930330407.

Mendenhall, M. & Oddou, G., 1985. The Dimensions of Expatriate Acculturation. Academy of Management Review. s.l.:s.n.

Perlmutter, H. V., 1969. organisational design & development and culture & internationalisation. s.l.:s.n.

PestleAnalysis, 2015. PEST Analysis of China. [Online] Available at: https://pestleanalysis.com/pest-analysis-of-china/[Accessed 06 March 2020].

PestleAnlsysis, 2014. PEST Analysis of the USA, the Largest Economy of the World. [Online] Available at: https://pestleanalysis.com/pest-analysis-of-usa/[Accessed 06 March 2020].

Project Management, 2020. The Importance of Training and Development in the Workplace. [Online] Available at: https://2020projectmanagement.com/resources/project-management-training-and-qualifications/the-importance-of-training-and-development-in-the-workplace [Accessed 07 March 2020].

Schein, E. H., 2004. Organizational Culture and Leadership Third Edition. San Francisco: Jossey-bass.

Schneider, S. C. & Barsoux, J.-L., 2003. Managing across cultures. Harlow: Financial Times Prentice Hall.

Shen, J., 2005. International training and management development: theory and reality. Journal of Management Development, pp. 656-666; 24(7):http://dx.doi.org/10.1108/02621710510608786.

Shen, J. & Edwards, V., 2007. Recruitment and selection in Chinese MNEs. The International Journal of Human Resource Management, pp. 814-835: https://doi.org/10.1080/0958519042000192960.

Stahl, G. K. et al., 2011. Six Principles of Effective Global Talent Management. [Online] Available at: https://sloanreview.mit.edu/article/six-principles-of-effective-global-talent-management/[Accessed 06 March, 2020].

Tobler, N., 2017. Benefits and Challenges of Working in a Multicultural Team. [Online] Available at: https://mlm.com/working-in-a-multicultural-team/[Accessed 07 March 2020].

Trompenaars, A. & Hampden-Turner, C., 2011. Innovating in a global crisis: riding the whirlwind of recovery. Oxford: Infinite Ideas.

Yang, H.-C. K. &. M.-L., 2011. The Effects of Cross-Cultural Training on Expatriate Assignments. Intercultural Communication Studies XX:, pp. 158- 174;(1).

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