Joint Ventures-Marriages Made In Heaven?
The urge to reduce cost and fierce competition in business have driven companies to find best solutions to increase revenue while keeping costs as low as possible. Expanding into foreign market could be a sweet temptation for companies in order to increase revenues and market share. We call such companies that operate worldwide as while we refer the expansion process as Globalization. Nowadays, globalization is almost a common issue within the business world because of the undeniable benefits and necessity of going abroad.
Currently, I witness there are so many Multinational Companies (MNCs) or Multinational Enterprises (MNEs) have broaden their presences in foreign markets. However, the processes of expanding businesses abroad should not be viewed as simple decision since they demands massive and careful plans in order to survive within the intense competition and other complicated aspects. There are many ways to grow in new market through merger and acquisition or joint ventures.
In any cases, the main objective is to provide complementary capabilities and resources including channels of distributions, strong brands, technology, or marketing in which all of them are backed up by the strong human resources. However, amidst the potential benefits and promises that foreign market expansion offers, a company needs to anticipate the potential failure by managing some issues: incompatibility, lack of planning and weak leadership (The Banker, 2005).
To deal with such issues, therefore, companies require staffs or employees having distinct qualities such as people who can endure the process and help the company to build their new ‘structure’ within foreign markets. For the very least, this team of pioneers must consist of people with interests in international matters, multilingual language capabilities, and knowledge on managing cultural diversity in workplace (Delaney, 2002). In order to obtain benefits of being presenting in foreign market by establishing a winning human resource strategy, this paper will discuss the case of international human resource management for a U.
S. -based company that enters new market in the U. K. and the Europe. 2. Aims and Objectives a) This paper intends to discuss factors that influence international human resources management (IHRM) strategy. b) Using the non-participant observation method, collecting data and analyzing qualitative information from journal, books, magazine and other online materials, this paper is to provide analysis of Puff Daddy Electronics that intends to adopt U. S. styles of employees’ relations in their UK subsidiary.
c) In addition, in order to present comprehensive suggestion on dealing with diversity in international business, this paper will discuss the benefits of implementing the traditional personnel management. 3. International Human Resources Management (IHRM) 3. 1 Issues of IHRM The main challenge for establishing a foreign subsidiary is concerning its human resource strategy. This is because human resources are responsible of translating the designed business plan or strategy into day-to-day activity.
Concerning the issue, there are several questions as following: ? What is the foreign subsidiary business strategy? How does it impact the entire people in the new business? ? What kind of competences (such as technical expertise, interpersonal and managerial skills) will be needed to ensure the successful foreign subsidiary? What characteristics do people who work in the subsidiary must have? ? How will the foreign subsidiary deal with foreign and local management (cultural diversity)?
? What kind of human resources programs does a company have to support the company’s goals? (Kotelnikov, 2001) 3. 2 Factors of International Human Resource Strategy (IHRM) In compliance with the needs to address above challenges, International HRM (IHRM) more and more promotes and develops cross-cultural competences. This issue is very important fro multinational companies since improving employees’ competences that deal with international business are to address two complex concerns as following:
a) Widen geographic locations means that multinational companies should effectively organize operations in appropriate manners b) The presence of multiculturalism implies that multinational companies should foster coordination to be effective. In order to succeed in overseas, according to academic journals and other online resources, the key success of establishing foreign subsidiary is to provide and encourage cross-cultural adjustment to a host country, understanding laws, language, gender issues, and customs & practices.
In line with the suggestions, international managers must possess some technical competencies on cultural issues that in order to effective conduct international business as following: • Able to conduct effective communication and interpersonal skills • Aware of the importance of understanding cross-cultural sensitivity, including how to conduct debate, negotiation, non-verbal communication, humour, awareness of own culture in which the elements are different from one country to another
• Capable of working in multicultural environment • Understanding linguistic richness (Sparrow and Hiltrop, 1994) Above lists of suggestions for international managers from Sparrow and Hiltrop (1994) highlight the notion that cultural issue/cultural diversity is a significant element in the discussion of international human resources management (IHRM) since establishing foreign subsidiary involves the interaction and movement of people across a range of national borders.
In this situation, the appreciation of cultural diversity and understanding on the importance of this diversity is essential. This is due to the new environment, which a foreign subsidiary faces in foreign market, requires many behavioural adjustments in a relatively short period of time. Or else, people will experience a cultural shock when dealing with cultural diversity. 4. Traditional Personnel Management: Dealing With Cultural Diversity
As mentioned in the beginning of this paper, cultural diversity increasingly play important role in determining the success of MNCs. In several literatures, it is found that many companies that conduct business globally for the past decades suddenly fail while there are also enterprises that grow from a zero turns out to exist in international market successfully. There are several practices concerning managing cultural diversity. One of examples is the MNCs that decide to present in a foreign country by placing a general manager from a contributing party.
In order to cope with the cultural diversity issue, it is obvious that MNCs that intend to enter new market in a foreign country should carry out appropriate training sessions highlighting the cultural issues in the target country in regular basis to ensure the effectiveness (Osman-Gani, 2000; Ronen, 1990). To examine how cultural diversity plays roles in an organization, we can refer to the human resources practice at multinational companies. There are some examples of well-known multinational companies that exit from a country due to inability to manage the cultural differences.
However, there are also companies that succeed in any countries they exist. The situation highlights the importance of managing cultural diversity in order to succeed in international business. Concerning these importance, there are some values of cultural differences and a company that can take benefits of these values, they are likely to win the overseas market. The discussion of values of cultural diversity usually falls into three main areas; they are maximizing employee potential; managing across borders and cultures; creating business opportunities and enhancing creativity.
4. 1 Maximizing Employee Potential The first value relate to the harnessing of the human capital possessed by diverse groups. This idea suggests that inability to manage cultural diversity will effectively create low morale and disaffection, which in turn lead to poor individual and organizational performance. Therefore, employers should to find positive values from each employee, who has different culture, to gain advantage for the company while utilizing human capital to fully extent (Cornelius et al. , 2001). 4. 2 Managing Across Borders
The second value relates to the globalization of world markets and the international labour and product markets. As the globalization concept deals with entering diverse markets, therefore, this value highlight the importance of an organization to believe that a diverse workforce can make a positive contribution to organizations. This idea further suggests that the organization should develop strategic approaches to diversity policy to recruit and retain diverse employees (Cornelius et al. , 2001). 4. 3 Creating Business Opportunities
The third value concerns with customer markets point of view. In this value, there is belief that an organization can strengthen market penetration by learning the successful practices of dealing with culture issue in the market. This idea also shows that diversity adds value to the organization (Cornelius et al. , 2001). 5. Approaches to Diversity in Human Resource Management Out of three values describe above, many multinational companies consider the value – creating business opportunities – as underlying value that encourage them to expand into new markets worldwide.
However, there is no single panacea when dealing with international human resource management (IHRM) strategy. It means that IHRM strategy that works at one country may fail in other countries. Therefore, Majlergaard says that it is important for multinational companies (MNCs) to identify quick- wins IHRM strategy and ensure that the MNCS review their HRM policies and practices regularly in order to find out whether they are up to date with market requirement or need changing or adjusting. 6. Managing Human Resource Through many perspectives, employees are the most valuable resources of all.
The understanding of ‘human resource’ has expand to more than just ‘labour’, but instead, creative and social beings that make contributions toward the company, far beyond merely labour works. The understanding inside a further developed term, ‘human capital’ is perhaps more appropriate to describe the extent to which employees and managers influence the workings of a company (‘Human Resources’, 2005). Akio Morita, founder of Sony Corporation, stated that the only secret behind Sony’s success was the way they treat their employees.
He believes that the most important mission of a manager is to develop a healthy relationship with his/her employees, to create a family-like feeling of togetherness among managers and employees (Stoner, 1995). According to Stoner, Freeman and Gilbert (1995), there are 7 steps of managing human resources. They are: 1)planning, 2)recruiting, 3)selection, 4)socialization, 5)training and development, 6)performance evaluation, 7) promotion, transfer, demotions and cut-offs. The seven steps stated above are applied with regard to different conditions of each company.
For example, a well-known and established company might decide to focus on quality enhancement and spend their financial resources to hire and train new employees to achieve the corporate vision, while a young and developing company might rely only on several experienced managers to perform on the job training for new recruits. A company in its first stages of growth might recruit larger number of employees compare to larger companies. Today, many large companies perform se-engineering activities, which involved downsizing of the workforce.
After planning, recruitment and training, the next important step is maintaining the competitive advantage gained. Many companies lost the advantage they gain from recent recruitment scheme because lack of control. For example, many companies fail to deliver a positive working environment that lead to the poor employee morality and then poor employee performance. By providing a service centre for employees for example, a firm could promote positive employee relations instead of creating future disputes.
Another problem is the unnecessary cost of managing paperwork associated with payroll. Managed poorly, payroll system could resulted a large cost derived from administration and paperwork 7. Human Resource Management and Personnel Management People are confused in differing the personnel management and human resource management. In companies worldwide, several years ago, it is a common place to see personnel departments but now, the departments mostly transform into human resource departments.
Similarly, we have witness the transformation from personnel management into human resources management. The different between the two terms is that personnel management concentrates on employee welfare, while human resource management focus on managing people in a way which matches organizational and individual goals and providing employees with intrinsic and extrinsic rewards. Therefore, as de Silva (1998) said that the function of human resource management (HRM) becomes increasingly recognized as a central business concern.
In these circumstances, its performance and delivery are integrated into line management; the aims shift from merely securing compliance to the more ambitious one of winning commitment. 8. Developing Strategic Human Resource Management for Puff Daddy Electronics Nowadays, I witness that the business world becomes more competitive marked by the increasing number of competitors, dynamic due to various customers’ demands, uncertain since there are many factors influence the customers’ buying power and volatile than ever (Kanter, 1991).
Buying the above reasons, therefore, corporations must expand their presence into as many countries to achieve their financial objective. However, selling goods and services in many markets provide the corporations with many challenges since there are different in tastes, habits, and regulations. In these circumstances, Puff Daddy Electronics should be able to manage globally as if the world were one huge market and also should be able to manage locally as if the world were composed of a huge number of separate and loosely connected markets (Bartlett & Ghoshal, 1991).
The above ideas show that corporations as they grow will face great deal of challenge and opportunity in order to enable the corporations to compete effectively and win the market they exist. According to Schuler, Dowling and De Cieri (1993), they say that the situations drive corporations to search for sustainable business models, critical frameworks and winning solutions in the management of MNEs, especially when dealing with human resource management issues. Some scholars find out that there are many reasons why today’s corporations develop strategic human resource management (SHRM), they are falling into these two categories as following:
a) human resource management is an important issue at any level since it determines the corporations’ strategy implementation (Hamel & Prahalad, 1986) b) Puff Daddy Electronics must realize that major strategic components of multinational enterprises (MNEs) have a major influence on international management issues; functions; and policies and practices (Edstrom & Galbraith, 1977) 9. Conclusion The potential benefits that a company may have when conducting international expansion has driven Puff Daddy Electronics to expand into UK market.
In order to obtain benefits of being presenting in foreign market by establishing a winning human resource strategy, this paper has elaborated the case of international human resource management for Puff Daddy Electronics. The driving factors of entering UK market is because they consider creating business opportunities as main driving factors that would create additional value for the company. However, entering new market provides additional challenges as the Puff Daddy Electronics face multiculturalism implies that multinational companies should foster coordination to be effective.
In order to cope with the cultural diversity issue, it is obvious that Puff Daddy Electronics that intend to enter new market in a foreign country should carry out appropriate training sessions highlighting the cultural issues in the target country in regular basis to ensure the effectiveness.
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