The Expansion of Multi-National Corporations in the UK - Essay Example

Discuss the expansion of multi-national corporations in the UK. What effect has this had, if any, on British HR practices? Please refer to varieties of capitalism theory in your answer. Contents Introduction 2 Discussion 2 Capitalism theory and its forms 2 Expansion of MNC s in the United Kingdom and their effects on the HRM practices 4 Conclusion 8 References 10 Introduction The rapid emergence of the multinational corporations into the international economic system has created greater urgency and interest for developing an in depth understanding of the way managerial strategies are deployed and diffused in the host countries. The impact of globalization and integration on the national forms of capitalism has been profound in the last 15-20 years. In this context, the role of multinational corporations is perhaps the most critical aspect for evaluation regarding the impacts of the functioning of these corporations in the national systems of the host countries. Though different types of multinational companies choose to enter different economies with distinctive intention like market seeking, efficiency seeking, strategic asset seeking and resource seeking intentions, yet the intensity to which these companies influence the functionalities of the host industries and economies cannot be overlooked. Multinational corporations are recognised as the emerging internationally accepted class of business organizations which have the inherent potential to develop their own organizational field and influence the functioning of industries in the foreign country to a noticeable and recognizable extent. This also includes the major effects of the functioning of the multinational enterprises on the way employment practices and policies are conducted, modified and developed in the host countries in which these enterprises operate. Discussion Capitalism theory and its forms Capitalism refers to an economic system in which the industries, trade systems and the means of production are entirely or largely controlled by the privately owned enterprises functioning in the economy (Dore, 2000). The main features of capitalism may include capital accumulation, private property, wage labour and the development of fully competitive sectors. There are different models and varieties of capitalism based on the role of the government in the country, the intensity of competition in the market, the influence of regulations and interventions on the economy and the scope of private and state ownerships in the country. The various forms of capitalism may include welfare capitalism, free market capitalism or laissez-faire capitalism, state capitalism, “third way” social democracy, crony capitalism and corporatism (Dore, Lazonick and O'Sullivan, 1999). All of these models of capitalism have their unique characteristics based on the employment of different degrees of dependency of the market economy, constraints in the way of free capitalism practices, public ownership structures and consideration of the state sanctioned regulatory and social policies (Amable, 2003). Capitalism is currently the most influential and widespread form of global economic system (Hancke, Rhodes and Thatcher, 2007). The markets of the United Kingdom are dominated by this form of economic system with the mixed capitalism format being widely followed in most of the sectors of the economy. It can be argued that the traditional mixed and advanced level of capitalism followed in the markets of the United Kingdom is being deeply affected by the functioning of the foreign multinational enterprises in the country in both positive and negative ways (Hall and Soskice, 2001). While some of the multinational companies are driving the forces of capitalism to greater heights, most of the multinational corporations originally from democratic nations are enforcing management rules and systems that have challenged and modified the existing landscape of capitalism in the country (Freeman, 2008). Figure 1: Types of multinational activities and their impact on different forms of capitalism\ (Source: Freeman, 2008). Expansion of MNC s in the United Kingdom and their effects on the HRM practices Multinational companies (MNCs) have emerged as central actors in the area of contemporary international economy development. Currently, there are more than 100,000 of MNCs operating across different regions in the world, employing more than 85 million people from diverse nations, having direct or indirect ownership over 90000 foreign affiliates and accounting for one third of the total trade developments and transactions on a global scale (Busch, Hermann, Hinrichs and Schulten, 2013). The multinational corporations can directly and disproportionately impact the directions in which the industries function and also the policies that are formulated by the governments in the host countries. This obviously includes employment and human resource management policies and practices which are integral parts of an industry (Bamble, 2011). The comparison of the traditional domestic human resource management practices and the contemporary human resource management practices clearly suggest that the entry of the foreign multinational companies into the nation have created several disturbances as well as opportunities in the way the people resources are managed in a company (Brown, 2009). Figure 2: Characteristics of liberal market economic conditions in the UK. (Source: Ferner and Hyman, 1998) The market of United Kingdom is characterised by a liberal platform or Anglo-American economic orientation and free market economy which allows multinational corporations to function within the nations without facing many entry barriers and difficulties of integration (Ferner and Hyman, 1998). The Industrial Relations (IR) of the United Kingdom is dominated by the voluntaristic process of industrial relations management. Also, the country offers a system of single channel type of employee representation which means that the problem of integration of the domestic human resource policies and the international human resource management policies have never been a major issue in the market or for the entities functioning in the market. The starting of the era of multinational enterprises’ dominance in the united Kingdom has led to the fast dissolution of the supra firm industrial relations management and has seen the emergence of human resource management systems which are more in line with the democratic policies than with the capitalist policies (Gregg, 2011). The role of multinational corporations have remained profound in the way human resource management and employee relations management systems are employed in different developed and developing countries. The influence of the multinational companies operating in the economy of the United Kingdom seems to have been dominated by the phenomenon of “global and local tension” in the way the management of different multinational and domestic companies develop their people management policies (Hamann and Kelly, 2008). Not only have the multinational corporations operating in the United Kingdom brought about metamorphic changes in the way human resource management is employed across different sectors and industries in the country but also they have also had considerable effect on the government of the country regarding the formulation of employment and human resource management policies and guidelines as enforceable in the country. The researches made on the human resource management strategies and systems of multinational enterprises operating in the United Kingdom suggest that these companies have focused more on the influence of their origin country on their strategic human resource management processes and choices in the foreign countries. This is known as the “country of origin effect” in the context of multinational enterprises operating in the host environment. The country of origin effect has been profound in the human resource management practices in the country, especially driven by the foreign companies that came from starkly different backgrounds as compared to the United Kingdom. The multinational companies from countries with distinct ideologies and market structures like China, Germany, France, Spain and some of the key economies of Asian Pacific region have clearly changed the human resource management and control system of the country from being tightly controlled by the domestic and state authorities to being majorly influenced by the powerful multinationals (Howell, 2003). The multinational enterprises generally employ human resource management principles and strategies that take up a globalised view of the labour markets and try to develop on the available human resources by providing them with higher job security, promoting employee participation and involvement, investing in training and development and focusing on long term and unbiased orientation of employment in the company. This is especially true for the foreign multinational firms operating in the United Kingdom which treat the employee groups as valuable resources and try to cultivate their skills and talents rather than extracting the benefits from them and disposing them later on (Esping-Andersen, 1990). The labour market in the United Kingdom is mature and comparatively free from the control of the government in the area of corporate management. The influence of the multinational firms combined with the existing labour and employee management systems in the country have led to the development of more customer oriented standards and structures which are directly related to major changes in the way human resources are managed in the corporations operating in the United Kingdom. Significant changes have been noticed in the way employee relations are managed, trade unions and other employee representative bodies are formed and in the ways in which agreements and employment terms between employees and employers are decided in the country. Unlike in a traditional capitalist economy, new human resource management approaches that address the benefits of the workers have been instigated by the functioning of the multinational companies in the United Kingdom. These include contemporary human resource management strategies like enhanced involvement of the managers with the lower level of employees, focus on teamwork and collaboration, introduction of reward and appraisal systems, agreements related to flexible working processes, heightened degrees of collaboration and commitment between the employer and employee groups in the country and development of mutually beneficial relationships between the employees and companies (Williams, 2014). These human resource management systems and policies are much different from the existing ways in which people resources were managed in the United Kingdom. Thus, the shift from a capitalist society to a democratic and liberal society has been clearly identified after the entrance and subsequent powerful positioning of the foreign multinationals in the different industries of the United Kingdom. Different other human resource management strategies like performance measurement and evaluation schemes, utilization of systems like open door policy and 360 degree feedback mechanisms, allowance of the rights of association for the employee groups, introduction of performance related pay systems, utilization of forced distribution systems in human resource management, profit sharing and employee ownership schemes, employee empowerment, employee relations management, encouragement of diversity among workforces and increasing focus on the interests and well being of the employee groups of a company have changed the forms of human resource management in the country. The multinational corporations functioning in the market of the United Kingdom have supported the devolvement of unionism in the country, thereby moving away from the stringent capitalist format of managing the employee groups in the country. The intention of the multinational corporations to develop a sustainable, philanthropic and socially responsible image have made them concentrate on developing strategic human resource management practices which would create a win-win situation for both the employers and the employees in the country (Dore, 2000). As such, these multinational companies of foreign origin have triggered the growth of sustainable human resource management practices like involvement of unions in decision making processes, recognition of the trade unions and consultation and inclusion of the employees in the corporate and business decision making processes. Conclusion Though the impact of the multinational companies on the human resource management strategies followed in the United Kingdom seem to have added to the development of the ways in which people assets are managed in different sectors of the country, yet the fact that the massive multinational companies are gaining uncontrollable prominence and can outmanoeuvre the state governments and laws prevailing in the country related to labour laws and employment laws, should not be ignored. It is true that the influence of the multinational companies have by far been positive on the ways in which human resources are managed in the country, but government bodies and international organizations should consider controlling and reviewing the human resource management policies employed by these multinational corporations so that they cannot make any unfair use of their abundant power on the labour groups and employment systems in the country. References Amable, B., 2003. 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