Multinational Companies and Global Human Resource Strategies - Coursework Example

Multinational Companies and Global Human Resource Strategies Executive summary The entry of multinationals into business environments presents massive opportunities for growth and expansion into new markets beyond the domestic environment. Such prospects have led to massive internationalization across the world with companies making inroads into different countries as a way of improving their global influence and presence. Companies that have adopted such multinational approach are coke, a company headquartered in the United States and operation in more than 100 countries across the world. Mexican coke is one of the international subsidiaries for coke companies and has made significant success within the Mexican business environment despite issues associated with cultural differences and internationalization politics. The expansion into new business environments across borders presents massive human resource challenges as a business must ensure cultural and managerial opportunity but also consider the needs of the new market. Various international human resource management and staffing policies have been developed to ensure that the internationalization and expansion programs are not affected. Coke Mexico has embraced a number of international staffing policies most of which were adopted from the pioneer years of their entry into the Mexican market. At coke Mexico, a mixture of different international staffing policies has been adopted to ensure smooth operation of the company and continuity of its culture and business practices. Such staffing policies include ethnocentric, polycentric, geocentric and regiocentric staffing approach all of which are governed by different principles. This paper will evaluate some of the staffing strategies that coke Mexico has adopted over the years and also review some of the available policies that it can adopted to ensure continuity and smooth operations. The paper will also provide recommendations on the order of strategic preferences that the company can adopt based on the Mexican situation and business environment. Introduction The world has witnessed rapid internationalization and globalization over the last decade and this has been attributed to the search for new markets and global influence. The expansion of a business entity beyond the domestic boundary while maintaining the commitment to the local market calls for the adoption of complex business structures and strategies (Cooke, 2003). The effective management of human resources is one common determinant of internationalization success and the integration of foreign cultures into the operations of the business. Such an approach is the basis of international staffing, a process that is defined at the application of various human resource practices in the management of people in an international environment. During internationalization, companies have three sources of employees that they can use to ensure that their new entity survives and the organizational culture is maintained. First, a multinational can send employees from its home country to work in the foreign environment, a process referred to as expatriation (Cooke, 2003). Alternatively, a multinational can recruit senior managers from the native host countries or even hire third country nationals who are natives to the new region of operation and assign them different roles in the country. The staffing model adopted by a company influences its successful integration into the new environment and must thus be given consideration. International staffing strategies The choice of human resource management approach adopted by an organization will influence to a larger extent its success in the global market, thus making it highly important a management practice. Companies use different models of human resource management, including the use of expatriates, local managers or a mixture of both. This is influenced by the MNCs approach to managing cross-cultural differences that arises in the international context (Cooke, 2003). Coke Mexico, just like other companies expanding into an unfamiliar territory has faced a number of human resource management challenges which have influenced the staffing strategies adopted. Coca cola views itself as a multi-local enterprise as opposed to a global organization, an approach that has enabled the company to expand in over 200 countries since it was established. Most of the coca cola units operating outside of the United States have been given freedom and space to act based on the needs of the locals, the laws within the countries and the culture of the people (Martin, 2010). Such a loop has also influenced the international staffing policy that the company has adopted in a country like Mexico where nationals have been employed to hold various positions as compared to international employees. According to the company’s human resource division, locals are well placed to address various challenges of the market within their areas of operation as compared to expatriates who will be working in a completely new environment. Despite this attitude, coke Mexico has adopted a myriad of human resource practices to ensure the smooth transition and operation of the business within the new environment (Welch & Steen, 2013). The use of expatriates Just like other companies entering new markets, coke Mexico embraced the use of expatriates in order to enhance the performance of the business and integrate the culture of the company with the local practices. Expatriation is a situation where an organization sends an employee from the home country of the multinational to work in a new business environment in a senior position of management and influence (Cooke, 2003). However, this staffing policy was adopted at the initial years of coca cola expansion into new markets but was later dropped though coke Mexico were some of the countries that had expatriates. The unpopularity of the use of expatriation at coke Mexico can be attributed to the technical challenges that employees and the company face in a new cultural and political environment. In most instances, expatriates are prone to suffer from high attrition rates due to their inability to adjust to the new business environment. Family and social problems have also contributed to the failure of expatriation apart from the fact that it is expensive for a company to send an expatriate to a new business environment (Welch & Steen, 2013). With such challenges, coke Mexico has embraced other international staffing policies with relative success and this decision has not in any way affected its performance in the foreign markets. Apart from organizational culture and behavior, the differences in the cultural practice in the foreign countries will affect the work of the expatriates. Expatriates must be able to adapt to the cultural changes that arise from globalization and the successful implementation of mergers or acquisitions. Ethnocentric approach to international human resource management does not just present cultural challenges to the employees and the expatriates but also to the organizational home office. This approach is characterized by communication of policies, management and framework decision and employee appraisal issues from the central office (Welch & Steen, 2013). Ethnocentric staffing Closely related to expatriation is ethnocentric staffing, an approach that is adopted in order to ensure that the business systems in the domestic and international businesses are common. In ethnocentric staffing, the nationality of senior managers within the multinational are similar to that of the parent company, a similarly uncommon approach that most companies including coke have begun to shed off. In most instances, coke adopts ethnocentric profiling when it is evident that the local labor market cannot push the needs of the company and integrate business practices with those of the parent company (Paik & Ando, 2011). The maintenance of corporate culture is the basis of adopting ethnocentric staffing as a multinational lie coke Mexico desire to establish a corporate practice similar to the parent home country. Though locals can be trained to achieve this goal, a number of multinationals prefer using their nationals who understand the operations of their company to establish similar cultures within the new business environments (Fletcher, Harris & Richey, 2013). However, the slow market integration of coke Mexico was attributed to this staffing strategy, as the advancement of the host country and integration into the operations of the company took long. Cultural myopia followed in most instances and this forced the parent company to embrace other international staffing strategies. Ethnocentric approach to international human resource management does not just present cultural challenges to the employees and the expatriates but also to the organizational home office. This approach is characterized by communication of policies, management and framework decision and employee appraisal issues from the central office Polycentric staffing Polycentric staffing strategy is one of the most used international human resource strategies at coke Mexico and other coke subsidiaries across the world. In this approach, host country nationals are used in the management of various aspects of the business as a way of ensuring faster integration and success of the company (Lawler, Boudreau & University of Southern, 2012). With this approach, little or no flow of personnel occurs from the parent country to the host country, giving the locals an opportunity to make significant cultural growth within the foreign entity. While host country citizens are recruited to manage various positions in the business, parent country nationals are used in the establishment and management of corporate headquarter (Fletcher, Harris & Richey, 2013). By embracing polycentric approach, coke Mexico gave the locals an opportunity to guide the business through the different market hurdles and competitive forces that exist before its entry. The integration of business practices with the country’s social and business culture was also possible due to this staffing policy adopted by coke Mexico (Paik & Ando, 2011). By using the local employees, coke Mexico sent a strong signal to the local market and the consumers about the commitment of the company to improve the social and economic position of the Mexican people. Apart from cultural integration, the use of polycentric staffing approach is also relatively cheaper as compared to other first two strategies (Naidoo & Wu, 2011). Training and workshops can only be organized to improve the local’s understanding the company’s operations and corporate culture which is less costly as compared to the use of expatriates. Alternative staffing strategies Though coke Mexico have embraced the three international staffing strategies, other international human resource management models exist that can be adopted with relative success. Embracing alternative staffing strategies will enable coke Mexico to eliminate some of the challenges that it has faced with the current strategies and face the market with a united and capable force (Reiche, 2007). Coke Mexico should move towards being a geocentric company whose human resource policies are not guided by trends within the parent or even host market, but changes in the global human resource approaches. A geocentric staffing approach look beyond the profiles of people within the parent or host country, but the entire globe (Lawler, Boudreau & University of Southern, 2012). With this approach, business conducts in different other parts of the world are considered in decision making as opposed to the issues inherent in the parent and host country. As a result, coke Mexico can emerge as an international brand name as opposed to being a company whose targets and interests remain confined to the country (Paik & Ando, 2011). In applying egocentricity, coke Mexico will hire professionals from a mix of races and religions with the aim of achieving the best professional and skills blend which can meet the rigors and pressures within the market. Adopting this alternative staffing strategy has a number of benefits and opportunities to coke Mexico and will enhance its operations to other South American countries. Geocentric staffing approach improves the competitiveness of a business and gives it an international appeal which is effective in the current business environment where focus is placed on internationalization (Martin, 2010). With a myriad of employees, communication and cross cultural management skills are developed which improves the focus of the business and enhance its international appeal as compared to other code subsidiaries across the work. Developing a pool of professionals who are aware of the dynamics of the global business environment is a goal of each and every organization that is engaged in internationalization (Makela, Bjorkman & Ehrnrooth, 2009). With the use of geocentric staffing, it is easy to come up with a pool of senior international managers whose business networks can improve the success of the subsidiary. National identification of managers and employees has been attributed to xenophobic tendencies in most countries which have affected the success and performance of multinationals across the world. To eliminate such fears, the use of geocentric employees will eliminate national identification in subsidiaries, thus enhancing cooperation and development of a single unit (Fletcher, Harris & Richey, 2013). Apart from geocentric staffing, coke Mexico can also embrace regiocentric approach which is more culturally friendly as the employees are aware of the challenges and opportunities within the markets. Regiocentric staffing is an emerging approach that involves the transfer of employees between subsidiaries which are located in the same region, in this case the South American or Latino America region. Other managers and employees working in other coke subsidiaries in South America such as Argentina, Columbia and Chile can be swapped and sent to Mexico to work in various management positions. Such an approach will be relatively successful as most of these countries have adopted a Spanish culture and their business practices are uniform compared to other regions within the north of the continent. Adopting this approach allows managers and employees within the Coca-Cola subsidiaries in the region to compete for jobs regionally and improve the employee pool of the company (Martin, 2010). By focusing on the entire region as opposed to Mexico or even a global approach, coca cola will be able to recruit employees who understand the dynamics of the market and challenges that exist. The need for training and orientation of expatriates is also lacking in this staffing approach as the employees recruited by the company understand the local culture, business needs and other issues. Regiocentric staffing approach is also a conduit from graduating from ethnocentric and polycentric staffing strategies which are less likely to succeed in an environment such as Mexico (Makela, Bjorkman & Ehrnrooth, 2009). Regiocentric staffing approach is a localized expatriate arrangement in which experts from a region are picked and assigned roles within the same areas but in different subsidiaries. However, this approach is cheap and attrition failure is less likely to occur as witnessed in the traditional model of expatriation. For example, a Columbian manager transferred to Mexican subsidiary will have less challenges adapting to the environment as compared to an American expatriate who is less likely to speak Spanish (Juul Andersen & Minbaeva, 2013). Order of staffing strategies and recommendations Though all these staffing strategies are associated with major multinationals including coca cola, the preference for any of them should be influenced by a number of factors including the environment, culture and goals of the business. In the case of Mexico, a staffing preference can be adopted based on the cultural issues that affect the success of the available strategies differently. The first options when a need for international staffing arises should be the adoption of regiocentric staffing which will allow the use of regional business leaders who understand the market environment (Martin, 2010). Geocentric and ethnocentric approaches should be adopted in the event that the region does not have the right individual to fill the available position within the company. However, individuals with international managerial exposures should be given preference despite being from the host country to speed up the integration of the business into the new environment. Expatriates should only be used in cases where integration and corporate culture is taking long to be embraced, thus leading to losses and lack of support from the parent office. Table of Contents Multinational Companies and Global Human Resource Strategies 1 Executive summary 1 International staffing strategies 2 The use of expatriates 3 Ethnocentric staffing 4 Polycentric staffing 5 Alternative staffing strategies 6 Order of staffing strategies and recommendations 8 References Cooke, W., 2003. Multinational Companies and Global Human Resource Strategies, Westport, Conn: Greenwood Publishing Group. Fletcher, M, Harris, S, & Richey, J., 2013. 'Internationalization Knowledge: What, Why, Where, and When?’ Journal of International Marketing, 21(3), pp. 47-71. Juul Andersen, T, & Minbaeva, D., 2013. 'The Role of Human Resource Management in Strategy Making', Human Resource Management, 52(5), pp. 809-827. Lawler, E, Boudreau, J, & University of Southern, C., 2012. Effective Human Resource Management: A Global Analysis, Stanford, Calif: Stanford Business Books. Makela, K, Bjorkman, I, & Ehrnrooth, M., 2009. 'MNC subsidiary staffing architecture: building human and social capital within the organisation', International Journal of Human Resource Management, 20(6), pp. 1273-1290. Martin, J., 2010. Key Concepts in Human Resource Management. London: SAGE Publications Ltd. Naidoo, V, & Wu, T., 2011. 'Marketing strategy implementation in higher education: A mixed approach for model development and testing', Journal of Marketing Management, 27(11/12), pp. 1117-1141. Paik, Y, & Ando, N., 2011. 'MNC's competitive strategies, experiences, and staffing policies for foreign affiliates', International Journal Of Human Resource Management, 22(15), pp. 3003-3019 Reiche, B.S., 2007. 'The effect of international staffing practices on subsidiary staff retention in multinational corporations’, International Journal Of Human Resource Management, 18(4), pp. 523-536. Welch, D., & Steen, A., 2013. 'Repositioning Global Staff Transfers: A Learning Perspective', Human Resource Management, 52(5), pp. 793-807. Read More