An Introduction to International HRM
Definitions
IHRM is branch of management that investigates the design of and effects of organizational human resource practices in cross-cultural contexts’ (Peltonen, 2006; p523).
IHRM encompasses all issues related to the management of people in an international context including human resource issues in MNCs in different parts of their organizations and comparative analyses of HRM in different countries’ (Stahl and Bj?rkman, 2006; p1).
IHRM is human resource management in an international environment…problems created in an MNC performing business in more than one country, rather than those posed by working for a foreign firm at home or by employing foreign employees in the local firm’ (Briscoe and Schuler, 2004; p1).
Complex relationship between globalisation, national systems and companies which provides us with three distinct “levels of analysis” for interpreting and understanding HRM strategies and practices the globalization effect, the regional and national effect, and the organisation effect’ (Edwards and Rees, 2008; p22).
International HRM is defined as, performing the HRM and related activities and arranging for related and necessary cultural and immigration facilities for prospective and current employees.
International HRM differs from domestic HRM in six major dimensions:
- Wider nationalities of employees
- Variety of functions to be performed
- Influence of international environment
- Broader and deeper relationships
- Different approaches for domestic functions
- Complexity of operations
Coverage
The subject matter of IHRM is covered under three headings:
- Cross-cultural management (unique sets of deep lying values and beliefs of nation)
- Comparative HRM (focuses more specifically on the way that people work and explores the differences between nations in the way that they manage this process, the comparative tradition makes more of the institutional differences than the cultural differences)
- IHRM examines the way organisations manage their human resources across these different national contexts.
Challenges to International HR Managers
- Compliance with laws and regulations of country HR managers are operating in.
- Training and Development programs for expatriates
- Compensation issues
- Recruitment and selection of TCNs/ HCNs
- Retaining the skilled employees
- Cultural diversity and cross-cultural management
- Political and Legal factors
- Language barriers
Types of Companies
Domestic Company
Domestic companies limits its operation, mission and vision to the national political boundaries. The focus is on domestic market opportunities, domestic suppliers and domestic customers.
The domestic company does not have the expansion strategy for the global markets.
International Company
Some of the domestic firms grow beyond their production of domestic markets. It starts internationalizing its operations.
Such organizations which exploit the opportunities outside the domestic market as well are international companies.
These companies remain ethnocentric or domestic country centered only and believe that the practices in and according to domestic business are superior to those of other countries.
It extends its wings in the foreign markets.
Multinational Company
The international companies turn into multinational companies when they start responding to the specific needs of different country markets regrading the product, price and promotion.
These companies formulate different strategies for different markets; thus the orientation shift from ethnocentric approach to polycentric approach.
Under polycentric orientation, the offices, branches or subsidiaries of a multinational company works like a domestic company in each country where they operate with distinct policies and strategies of that country.
Global Company
Global companies either produces in home/ single country and focuses on marketing these products globally or produces the products globally and focuses on marketing domestically.
E.g.. Harley Davidson, Dr. Reddy’s
Transnational Company
Transnational company produces, markets, invests and operates across the world. It is integrated global corporation that links global resources with global market. There is no pure transnational company. But some examples are Coca-cola and Pepsico.
Characteristics:
- Geocentric orientation
- Global scanning or information orientation
- Global vision