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The Role of IHRM in Managing Cultural Diversity Issues to Achieve Competitive Advantage - Coursework Example

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In the face of increased interactions and movements around the globe, business operations have also gone through tremendous changes where organisations seek opportunities overseas to attain competitive advantage (Marler, 2012). In effect, the contemporary business environment is…
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The Role of IHRM in Managing Cultural Diversity Issues to Achieve Competitive Advantage
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THE ROLE OF IHRM IN MANAGING CULTURAL DIVERSITY ISSUES TO ACHIEVE COMPETITIVE ADVANTAGE By Location 0 Introduction In the face of increased interactions and movements around the globe, business operations have also gone through tremendous changes where organisations seek opportunities overseas to attain competitive advantage (Marler, 2012). In effect, the contemporary business environment is characterised by mergers and acquisitions as the most preferred strategy that organisations use to attain competitive advantage (Deng and Yang, 2015). Though some of the mergers and acquisitions have not been successful owing to some complex issues in the cross-boundary business operations, effective management of such issues has also seen the tremendous success of the business partnerships (Weber and YedidiaTarba, 2012). However, the human resource management functions also change in the cross-boundary contexts and this has always confronted the in charge to consider issues that may affect the operations of these companies at the international level (Weber and YedidiaTarba, 2012). Therefore, the concept of international human resource management came as a result of the transfer of such functions to the global scope. In this regard, IHMR practices must be directed towards managing the contemporary issues in the cross-boundary business operations like cultural diversity (Marler, 2012). Culture is the central issue that influence operations of businesses at the international level since it refers to the diversity in terms of religion, politics, social structures, and language. In effect, academicians and theorists have been seeking to find out how national cultures influence human resource management practices in culturally diverse organisational contexts like mergers and acquisitions (Moran et al., 2011). In this case, there are various studies that explain how International Human Resource Management has been used to manage the problem or issue of cultural diversity since it is the recommended fast hand tool in helping organisations to achieve competitive advantage. Therefore, the focus of this research is to explore how IHRM is critical for the success of mergers and acquisitions by effectively managing cultural elements that influence the operations of such strategic alliances and also explain some contemporary cultural issues that International Human Resource Management faces in cross-border business operations. On the other hand, the focus of this essay is it to describe the contemporary IHRM issues that USA firms seeking to form mergers or alliances with the companies in the UK. 2. 0 Trends and issues in Mergers and Acquisitions between the USA and the UK USA and the UK have always had strong trade ties in history and in the modern era of globalisation, the two countries record a good number of mergers and acquisitions, some have been successful while others failed terribly (Francis, 2013). A perfect example of a US company that has been successful in forming alliance with the UK based firms is the Starbucks (National Statistics, 2014). Though headquartered in the USA, the company has a subsidiary firm in the UK that has been crucial in the forming of other strategic partnerships in the European region. For instance, the partnership with Lindley Catering is a multi-million business opportunity that will bring two companies operating under different national contexts (Centerplate UK., 2015). As such, the company must align its human resource management practices to accommodate the UK‘s culture of managing the workforce or the human resource. Kraft’s acquisition of Cadbury was also a landmark for the UK’s economic sector as it acquired one of the long-serving firms in the UK (Moris, 2014). 3. 0 Cultural elements/issues affecting IHRM functions in mergers and acquisitions On many occasions, human resource management has been assumed to be a universal approach to managing workforce which is not true. The implication is that human resource management policies that are deemed to be universal have not been successful in other countries and this led academicians and theorists to conclude that national cultures have a tremendous influence on the human resource management practices (Milikic, 2009). Therefore a set of human resource policies applied in one country may not be applicable in another country. Milikic (2009) confirm that IHRM is only successful if at all there are efforts to align the strategies with the target country’s national culture, further confirming that there are cultural elements that influence International Human Resource Management. For instance, Kraft’s acquisition of Cadbury was perceived by the UK nationals as eroding the British Cadbury culture thus an indication that national cultures must be integrated in the IHRM practises. However, the success of McDonald’s operations in the UK is greatly attributed to proper cultural diversity management. For instance, the company announced a partnership deal with Hemingway Design in 2011 (McDonald’s, 2015). McDonalds believed that the collaboration was the best long-term strategy for creating sustainable uniforms for the staff. Also in this context, different national cultures were brought together and thus, effective management of cultural diversity was the basis for the success of the partnership (Dickson et al., 2012). One of the cultural elements that may influence the functions of IHRM is individualism, a dimension identified by Hofstede, and he explained it as the extent to which people within a given country prefer acting individually instead being members of groups (Taras et al., 2012). For instance, the Asian culture is less individualistic and also group-oriented whereas the western cultures like the USA have high preference for individualism. In this regard, countries that do not emphasize on individualism prefer more collective action and detest individual competition and such issues must be taken into consideration by the International Human Resource Managers. Masculinity/femininity is another cultural element that Hofstede identified to influence human resource functions at the international level (Taras et al., 2012). In this case, the element refers to the extent to which masculine values prevail over the feminine values. According to Taras et al. (2012), the masculine values include assertiveness, success, performance orientation, and competitiveness while feminine values include close personal relationships, quality of life, and caring. Asian cultures have highest scores in masculinity while the western cultures have almost balanced score on this cultural dimension. To be successful, Providence Equity Partners’ acquisition of the UK-based The Ambassador Theatre Group or ATG has to respect gender equality as a deeply rooted culture in the UK’s human resource management practices Office for (National Statistics, 2014). The implication is that differences in this cultural dimension explain the role that women play in the society. Another vital cultural element that affect the human resource management at the global scope is power distance and as such the leadership style especially strategic decision-making (Milikic, 2009). Some cultures embrace the top-bottom approach where employees views and perceptions are not included in the decision-making process. In such cultures, the human resource management practices tend to exclude the staff and other employees from strategic decisions and workers also form the habit of not complaining and abiding by the decisions made by the executive team (Stone and Stone-Romero, 2012). On the contrary, other national cultures are more conservative and encourage or invite decisions from those below the hierarchy in the organisational structure. In effect, such cultures encourage organisations to develop policies, through the human resource management department, that cater for the employees contribution in relevant decision-making processes (Stone and Stone-Romero, 2012). Countries like the United States, Germany, Netherlands, and other western countries have smaller power distance compared to countries like China, Russia, and France. Therefore, to be successful, CBRE Group’s acquisition of Norland Hods Ltd of the UK must respect the limited power distance offered by the UK national culture (National Statistics, 2014). The implication is that the higher the power distance, the greater the authority difference between the superiors and their subordinates. Power distance affects HR operations and activities because different cultures react differently to management authority. Other countries prefer autocratic approach to management authority while others like the United States adopt participatory management. 4. 0 The role of International Human Resource Management in the success of M&As As mergers and acquisitions continue to characterize the global economy, human resource management department is undoubtedly the organisational function that can steer these partnerships into success (Wilson, 2014). The implication is that management functions change at the global context since employees are drawn from different cultural backgrounds. In this context, IHRM has a major role in socio-cultural integration of the mergers and acquisitions. The implication is that socio-cultural integration is the most difficult stage of the mergers and acquisitions because organisational culture shapes employee identity and failure to address the issue of cultural diversity may demoralise employees (Moran et al., 2011). For instance, the resistance of the Cadbury buy out by Kraft was because the UK citizens believed that the British Cadbury culture was not considered in the acquisition. In this regard, IHRM should make sure that it adopts the right strategy for managing cultural diversity so that each party is satisfied with the approach to managing cultural diversity. However, the success of IHRM in managing cultural diversity will depend on the approach it adopts to appreciating national cultures and as such Perlmutters Mindsets framework that IHRM managers can use to appreciate national cultures (Story and Barbuto, 2011). Perlmutters Mindsets framework Perlmutters Mindsets framework recommended that MNCs go through three stages when establishing relationships with subsidiary firms namely ethnocentric, polycentric, and geocentric (Story and Barbuto, 2011). The ethnocentric approach to national cultures focuses on the values of the home country where the key positions are to be filled by the parent company nationals or the expatriates. However, for a culture that is well-informed like the UK, such an approach to HRM may not be received well as the host country may want equal representation in job allocation and distribution. The implication is that the parent country has a lot of control with this approach to human resource management (Ferner et al., 2012). On the other hand, processes like staff recruitment and staffing are controlled from the centre. Besides, professional development is done within the country of origin with no or limited training on cultural diversity management but such an approach may not be accepted within the UK national culture. Polycentric approach is the opposite of ethnocentric where emphasis is put on the host country where local employees feel key positions implying that parent company has least interest in controlling and homogenising the organisational culture (Story and Barbuto, 2011). Therefore, a US company seeking strategic alliance with companies in the UK should adopt the approach as it emphasises on the recruitment of local staff, training done at the domestic level and focus on language training as well as the development of knowledge about the local culture (Fatehi and Ghadar, 2014). Most of the US acquisitions and mergers driven by Kraft, CBRE Inc., McDonalds, and Providence Equity Partners have been successful because they tend to embrace the polycentric approach of establishing relationships (National Statistics, 2014). Geocentric is actually the best approach to IHRM operations are focused on embracing global values that are not specific to a particular national culture and also transcend the national boundaries (Story and Barbuto, 2011). Functions like selection are carried from a global perspective where the focus is to recruit the best person for the job (Farr and Tippins, 2013). On the other hand, processes like recruitment and selection are based on the integrated approach. Besides, there is great importance attached to training and development where organisations have a high demand for cultural sensitivity and language training (Banutu-Gomez, 2014). McDonalds is a MNC that has not only applied the geocentric approach in the UK but also in other markets around the world. Therefore, if organisations were to go by the principles of International Human Resource Management, geocentric approach would be the best method for managing workforce because most of the management decisions will be globally focused and as such embrace the concept of diversity and eventually result in high levels of competitive advantage (Fatehi and Ghadar, 2014). 5. 0 Theoretical models for indentifying cultural elements affecting mergers and acquisitions The organizational iceberg Schein identified three levels of culture that companies seeking to engage in cross-boundary business operations should adopt. According to the model, culture is described in terms of surface manifestations or the artefacts, values, and basic assumptions (Schneider et al., 2013). According to the Schein, there are various factors that contribute to the multiple nature of the culture model including the education system, values or shared meanings, political or the economic system, religion or philosophy, language and economic prosperity. As for the USA companies seeking to form strategic alliance with companies in the UK, addressing cultural aspect like language barrier will not be a problem because both cultures speak one common language, English (Bloom et al., 2012). However, the IHRM management practices must incorporate the business language used in the UK national culture as different cultures have different terms of reference with the regard to terminologies used in the business negotiations. Besides, UK is a Christian dominated culture, the same as USA implying that religious difference will not bring obstacles in managing the workforce (Bloom et al., 2012). However, the two cultures may differ in terms of values and shared meanings. For instance, small talk at the workplace is a culture familiar with the USA work environment but this is not acceptable with the UK workforce (Bloom et al., 2012). How IHRM can identify cultural elements through Schein’s three levels of culture Scheins three levels of culture can be useful in understanding the national culture of a particular organisational context. According to the model, the first and easy to observe cultural manifestation are the artefacts or the prominent elements within an organisation (Schneider et al., 2013). In this case, artefacts are the things visible even to the outsiders including office layout, dress norms, furniture among others. Though they are easy to observe and note, it actually becomes very difficult to understand these artefacts especially if analysis of the particular culture is based on narrow observation and analysis (Hogan and Coote, 2014). Therefore, if a US company was to consider a strategic alliance with a company from the UK, then the first step made by the International Human Resource Manager of the partnership towards understanding the prevalent national culture is by looking at the artefacts. The next level of culture, as defined by the model, is the espoused values and as such they are the company’s set norms and values (Schneider et al., 2013). In most cases, most of the values are always reinforced through public declaration though such elements are also manifested in the manner in which people repeat phrases and norms (Hogan and Coote, 2014). General terms like low-cost airlines, green energy, and corporate social responsibility can offer fast hand knowledge of the values and norms of a particular culture and as such provide the rationale for adjusting the IHRM practices to take into accounts such elements. On the other hand, basic assumptions are the deeply established organisational cultural norms and values that are only evident within the internal work environment (Schneider et al., 2013). For instance, an organizational culture may instil the firm belief of providing exceptional services to the customers as the only way of building their loyalty to the organisation. In this case, such aspects must be considered because the new HRM policies should not influence the basic assumptions embedded in the organisational culture since they are rooted in the culture of the organisation and thus becomes part of their routine practices (Hogan and Coote, 2014). Other cultural elements rooted in the organisational culture may include masculinity/femininity, power distance, and concept of individualism and all these must be identified by the IHRM so as to leverage the information for effective management of cultural diversity to achieve competitive advantage. 6. 0 Effectiveness of IHRM in managing cultural diversity A strategic perspective or view of International Human Resource Management reveals that the approach is vital for the multinational organisations to manage their human resources in different national contexts. Integrating Sparrow and Hiltrop’s dimension of culture in IRHM practices According to Sparrow and Hiltrop, Multinational Corporations vary with their definition and recognition of national cultural diversity. Some organisations are parochial implying that their general approach ignores the differences in the norms, attitudes, and values of the employees thus they consider that such differences are not significant (Brookes et al., 2011). However, such approach may not apply in the modern organisational context as employees have become more sensitive towards cultural issues that they believe the organisations should respect and uphold. Another approach to national culture diversity is the ethnocentric organisation where the particular company does everything possible to minimize the effects of cultural diversity (van der Smissen et al., 2013). In this regard, such organisations will recruit homogeneous workforce and have strong belief in ones way of doing things. However, such organisations may not thrive in the face of globalisation as diversity at the workplace has been associated with desirable outcomes. Other organisations have synergistic approach to national cultural diversity where they focus on creating an international workforce because they believe that such an approach has positive impacts (Brookes et al., 2011). In this case, the human resource management policies will emphasis on embracing workforce diversity. Therefore, the USA companies seeking to form mergers with the companies in the UK should develop a synergistic approach that recognises the power of workplace diversity in attaining competitive advantage. In fact, even modern customers only prefer to buy from organisations that embrace cultural diversity because they believe that such initiatives show that an organisation is fully committed to embracing social responsibility by encouraging interaction and cohesion of people from different cultural backgrounds (van der Smissen et al., 2013). Managing Cultural Diversity in Alliance When managing cultural diversity in strategic alliances, organisations may decide to design their IHRM policies such that a particular culture dominates the alliance’s operations or they can provide a balance for the contribution of each culture (Vaara et al., 2012). On the other hand, an organisation may be spoilt for choice whether to integrate the culture of the alliance partners or segregate the two cultures for the sake of avoiding conflicts. The options leave multinational corporations with various options for developing their HRM strategies. For instance, they may assume the breakdown approach where one partner seeks dominance thus integration of other cultures may not be acceptable (Stahl et al., 2012). However, in the face of increased awareness of cultural diversity, such an approach may not be applicable in the developed countries that have put strong importance to embracing diversity in the workplace like the UK. 7. 0 Recommendations For a USA company seeking strategic alliances with companies from the UK, a policy that encourages segregation in managing cultural diversity may go well with the host country, UK. The implication is that the approach accepts the balance between the cultural inputs of the business partners without any attempt for integration (Stahl et al., 2012). The little resistance that Kraft-Cadbury acquisition was due to the failure to integrate the British Cadbury culture into the new business operations, and as such would affect the IHRM practices. The approach may be suitable in the early stages of the alliance when one partner may be in a position to provide the expertise while the other can handle issues from the local business environment (Vaara et al., 2012). Another HRM policy that a US firm seeking to form strategic alliance with companies in the UK can adopt is the domination policy that embraces cultural integration on the grounds that the culture of one partner becomes the predominant way of doing things (Stahl et al., 2012). The approach has the advantage of providing for a cultural fit because all partners must accept it and also strive to work within the limits (Vaara et al., 2012). McDonald’s prides itself for allowing the dominance of local cultures in the host countries that the company forms strategic partnerships with, including the UK partners. A US firm seeking an alliance with the companies from the UK can also adopt the synthesis policy in managing cultural diversity where both cultures are integrated (Stahl et al., 2012). The approach is the best for maximizing the bond between the partners and also promotes a high level of learning between them. In most of the mergers and acquisitions like the CBRE, McDonalds, Kraft, and Providence Equity Partners’, most of the partnerships and acquisitions focus on training and development. In this case, a USA firm seeking partnership and alliance in the UK must copy the example of the above successful M&A’s in managing cultural diversity to leverage competencies from both cultures so as to gain competitive advantage. However, the limitation of the approach comes during change initiation and implementation where a partner may resist such suggestion and as such has an adverse effect on productivity though in the short term (Vaara et al., 2012). Nonetheless, the UK culture puts strong emphasis on gender equality as one of the cultural dimensions recommended by Hofstede. In this case, the IHRM policies must be designed in such a way that gender equality is integrated in all HRM functions including, recruiting, staffing, job allocation, and the appraisal systems. It is also imperative to consider the issue of power distance before settling for a merger or acquisition within the UK. Therefore, when a USA company is considering a merger or a strategic alliance with companies from the UK, it will be imperative to consider that the national culture does not support the centralised system or approach to decision making, a practice common to the German cultures (Bloom et al., 2012). The UK culture of HRM is more focused on employee interests and needs and as such strives to include them in important decision-making processes. On the other, the UK national culture has led to the development of human resource management practices that put strong emphasis on employee promotion by developing the necessary policies that can help organisations implement such provisions (Bloom et al., 2012). Perlmutters Mindsets framework recommends a Polycentric approach to establishing cultural relationships where the parent company does not exercise much control on the organisational culture (Story and Barbuto, 2011). Therefore, the approach is recommendable in managing cultural diversity as the IHRM policies will be focused on recruiting local staff and training on cultural sensitivity. However, the geocentric approach is the most preferred in establishing cultural relationships as everything is viewed from a global perspective and jobs allocated based on individual capabilities and competencies. Schein’s three levels of culture is also a firsthand tool in identifying cultural manifestations. The first and observable elements are the artefacts like dress code, office layouts, and other observable elements in the organisation and as such should be the first step by IHRM in identifying the country’s dominant culture. The next level of cultural dimensions is the values and norms or the organisational culture and behaviour. For a US company seeking to form a merger or a strategic alliance with a company in the UK, the IHRM department should take note of terms like green energy, CSR, employee motivation and commitment are some of the values and norms that define the national culture thus they must be incorporated into the International Human Resource Management strategy (Bloom et al., 2012). It is also recommendable to adopt Sparrow and Hiltrop’s synergistic approach to national cultural diversity where they focus on creating an international workforce because they believe that such an approach has positive impacts with strong emphasis on cultural diversity (Brookes et al., 2011). In this case, the IHRM policies will emphasis on embracing workforce diversity. Therefore, the USA companies seeking to form mergers with the companies in the UK should develop a synergistic approach that recognises the power of workplace diversity in attaining competitive advantage 8. 0 Conclusion From the above research, one fact that emerges is that cultural diversity has become a tool for achieving competitive advantage by bringing people from all sorts of walk and leveraging their skills for better organisational performance and productivity. However, International Human Resource managers must also identify strategies for minimising the adverse effects of poor management of cultural diversity. As such, they should value IHRM strategies that encourage the integration of cultures so that all the business partners can accept the partnership as being concerned about the values and norms of each member. The implication is that the research shows that there is a direct link between national cultures and human resource management practices and policy formulation and that for HRM practices to be acceptable in cross-boundary business situations, both the host and parent countries must come to a consensus on how to manage the cultural diversity. In this case, US firms seeking to merge or form alliances with companies in the UK have properly design their human resource management policies so that no conflicts arise and thus a competitive advantage is achieved. 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Strategic Human Resource Management and Competitive Advantage

The paper 'Strategic Human Resource Management and competitive advantage' looks at the heterogeneity concept of RBV, which is very relevant for MNCs since the workforce in an MNC is heterogeneous.... Cheap labor and low cost would not be sufficient for gaining competitive advantage.... It encourages managers to take the risk which is in line with a firm's innovation strategies for attaining competitive advantage.... By integrating a firm's objectives with human resources, strategic HRM plays a key role in gaining competitive advantage (Becker & Hushelid, 2006)....
10 Pages (2500 words) Dissertation
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