Professional Documents
Culture Documents
INTERNATIONAL HRM
Structure
1.1 Introduction to International Human Resource Management
1.2 Definition of Human Resource Management
1.3 Differences between Domestic Human Resource Management and
International Human Resource Management
1.4 Approaches to International Human Resource Management
1.5 Activities under International Human Resource Management
1.6 Understanding Culture
1.7 Culture and its impact on HRM Policies
1.8 Summary
1.9 Self- Assessment Questions
1.10 Further Readings/ References
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International
Human Resource 1.2 DEFINITION OF INTERNATIONAL HUMAN
Management : An
Overview
RESOURCE MANAGEMENT
International Human Resources Management is not a new conception; it is as
aged as the advent of globalization. Due to different cultural diversities, it is
not the same with the management. It is one of the reasons why it is so
significant, widespread, and complex with the ongoing globalization
movement. The fundamental objective of IHRM is to acquire the upper hand
or competitive advantage through recruiting and expanding the employee's
abilities, effectiveness, and efficiency. This is executed through a strategic
approach of sourcing, distributing, relegating, imparting training and
development, performance assessment, and rewards for the ideal utilization
of HR in a global climate. The end goal for any organization is customer
satisfaction and a market leader position while effectively utilizing its
resources. With the help of IHRM, organizations can create the scope for
themselves to attain the status of market leaders.
As per Subba Rao Pulapa (2007), “IHRM can perform HRM and its
connected activities and sort out for related and essential cultural and
migration facilities for future and current employees by the firm working in
domestic and overseas countries.”
In addition to the HRM functions and activities, the IHRM only deals with
expatriate functions. It also includes additional features such as dispute
resolution between domestic and foreign employees, cross-cultural
management at different levels, and cooperation between domestic and
foreign employees.
IHRM carries out HRM and related activities and arranges the necessary
cultural and immigration facilities for organizations operating nationally and
internationally for potential and current employees.
Wider
Nationalites
Different Broader
approaches Relationship
for the and
functions Complexities
International
Human
Resource
Management
Variety of Influence of
International
Functions Environment
Enduring
Complexities
of HRM
activities
International Human Resource Managers perform the same functions, but the
scope of activities is widened from the point of host country nationals, home
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International country nationals, and third-country nationals. They have an additional
Human Resource
Management : An remuneration function that needs to be attended to. Exchange rate
Overview neutralization, international market allowance, and tax adjustment are some
of the HRM activities.
1. Ethnocentric Approach
Domestic companies formulate their strategies, product design, and
operations toward national markets, customers and competitors. In
excessive production, the company can choose to export to foreign
countries. The new foreign market is considered as an extension / new
region. This approach is suitable during the early days of
internationalization and for smaller companies.
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Introduction to
Managing International HRM
Director
Assitant
Manager North
India
Assistant
Manager South
India
Assitant
Manager Exprots
Advantage:
• Better coordination between host and parent country
• Effective control by the head branch over all the subsidies in different
parts of the world.
• Facilitates efficient transfer of technical knowledge
• Parent company can watch over activities of all the subsidiaries
• Avoids the need for having a well-developed labor market at the
international level
• Promotes effective communication between parent and host country
• Easy transfer of parent company culture to the subsidiaries.
Disadvantages:
• Difficult to train or guide employees of the subsidiaries at a different
place from the parent country
• Employees from the parent country might find difficulty in adjusting to
the culture of the host country
• Cultural clashes amongst employees from the parent country and host
country
• Government in host countries can impose strict restrictions on
subsidiaries severely affecting their business
• Opportunities to hire the best talent from the host country are missed
• Expatriates of the parent country are more expensive in comparison to
the employee in the host country
• Rate of failure is high
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International 2. Polycentric Approach
Human Resource
Management : An
Overview Domestic companies exporting to foreign countries know that foreign
markets need an altogether different approach.
Managing
Director
CEO Foreign
Subsidiary
Advantages:
• Difficulty in the adjustment of expatriates from parent country is
eliminated
• Local hiring is comparatively less expensive
• Local staff morale is high
• Better productivity due to better knowledge of the local market
• Career opportunities for nationals of the host country increase
• Better government support
• Chances of success are high
Disadvantages:
• Lack of coordination between host and parent company
• Lack of effective communication between employees of host and parent
country due to the language barrier
• Difficult to exercise control over the subsidiary
• Lack of local market knowledge
• Conflict may arise due to different thinking processes between the
employees of the host and parent company
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3. Regio-Centric Approach Introduction to
International HRM
After operating successfully in the foreign country, the company expands
the exporting operation to the neighboring countries of the host country.
The foreign subsidiary considers the regional environment for
formulating policies and strategies., Still, it exports more or less the same
product design to other countries in this region but with different
marketing strategies.
Managing
Director
CEO Subsidiary
Marketing
Country 1
Marketing
Country 2
Marketing
Country 3
Manager
Manager Manager Manager
Manager R&D Human
Finance Production Marketing
Resources
Advantages:
• Cultural fit employees as they are recruited from the same region as that
of the host country
• Less cost is incurred when hiring the nationals of the host country
• Employees work well in all the neighboring countries within the
geographic region
• The nationals of the host country can better influence the decision of the
managers at headquarters concerning the entire region
Disadvantages:
• Communication gap due to employees not understanding the viewpoint
of the employees of the parent company
• Communication barrier due to language
• Employees from the different regions may lack international experience
• Might create confusion between regional and global objectives
4. Geocentric Approach
The entire world is treated as one single country for the company.
Employees are selected from the whole globe and operate with several
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International subsidiaries. Headquarters coordinate the activities of the subsidiaries.
Human Resource
Management : An Each subsidiary functions as an independent and autonomous company,
Overview formulating its policies, strategies, and product designs. Subsidiaries
must select the entry mode into foreign countries to engage in
international business. Factors such as the size of the company,
environmental factors influence the attractiveness of a foreign market,
potential costs and benefits, and market risk factors.
Human
Operation Finance Marketing
Resources
Country 1
Country 2
Country 3
Human
Operation Finance Marketing Resources
Advantages:
• Help in developing a pool of talents with international experiences and
contact across borders
• Employee expertise can be used for achieving organizational objectives
• Reduction in resentment
• Shared learning as employees learn based on experiences of others
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Disadvantages: Introduction to
International HRM
• Cost of training, compensation, and relocation of employees is too high
• Highly centralized control of staffing is required
• Proper scrutiny by HR during recruitment, making it a time-consuming
process
• Approach is costly since recruitment agencies or consultants are required
to hire for the global search for eligible candidates.
Cultural Factors
Cultural factors influence culture formation leading to the formation of
behavior. The factors responsible are:
1.8 SUMMARY
• The purpose of this unit has been to provide an overview of the field of
international HRM.
• International HRM differs from domestic HRM in many respects.
• The complexity involved in operating in different countries and
employing different national categories of employees is a key variable
differentiating domestic and international HR.
• The differences between IHRM and HRM mainly lay in more HR
activities; the need for a broader perspective; more involvement in
employees' personal lives; changes in emphasis as the workforce mix of
expatriates and locals varies; risk exposure; and broader external
influences.
• Also we discussed the need for an expanded view of the role of HRM in
an international operation.
• The forces which have an impact on IHRM are global competition;
growth in mergers, acquisitions and alliances; organisational
restructuring and advances in technology and telecommunication.
• The multinational management has to deal with the various forces
through flexibility, local responsiveness, knowledge sharing and transfer
of competence.
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