The Influential Factors, Key Current Issues and Future Directions for International HRM in China - Essay Example

The reforms in government mechanisms and controls have significantly contributed towards its increasing GDP resulting in exponential economic growth (Fan et al, 2007; Zhu et al, 2005). The move from a traditionally closed-door economy to an ‘open-door economy, has attracted foreign direct investments or FDI which have given a considerable boost to its image as a nation that is ready to embrace the new culture of cooperation.

          The facilitating employment policies, labor law, joining world trade unions, and forging alliances with the international business community have been a few of the major elements of its liberalization. The Government’s recognition of the importance of human resources has been critical to the expanding business opportunities for both within and outside the country. The new labor policies and laws that incorporate the international parameters and conform to the wider international regulations have proved the efficacy of international HRM that Chinese companies and corporate bodies are increasingly adopting within their core business strategies. Scholars assert that new IHRM practices have introduced new formats which are based on investment and stake owner equity (Bell, Khor, and Kochhar, 1993). These are important issues as they cater to the wider welfare of the workforce.

          But according to Child (1994), there is still a strong influence of sociologist ideology of the government towards work, performance, and rewards in local joint ventures partner in a business alliance of MNE in Chinese SOE. The contributory factor could be strong political regulations that favor local people.

In the contemporary environment of competitive business, business practices of the domestic market are inadequate in the global market. 

Expanding business must take cognizance of the changed equation of business practice with reference to the changing socio-cultural background of the country, where one needs to establish the business interests. National cultures are critical elements that determine the negotiator’s assumptions and help to form a business strategy based on behavioral patterns (Cohen, 2004; Rubin & Sander, 1991). Hofstede, (1984) has also emphasized the importance of culture in business paradigms. China being a culturally distinct economy, must be understood for making a successful foray into business partnerships and alliances. The increasing trend in IHRM to understand cross-cultural values, therefore, become a vital part of business in China within and across the business entities that are looking for exploiting business opportunities there.

2. Key current issues in IHRM

          Dowling et al. (1999) say that the complexities of the Chinese socio-political and cultural environment have posed serious challenges to businesses, especially their IHRM practices. The cross-cultural understanding and the wide diversity of national cultures and most importantly the tight control of the government over international business are issues that need careful considerations. Poole (1999) believes that the use of local talent and resources is an important part of joint ventures that promote the local economy. The socio-cultural value systems are vastly different and business practices are very sensitive to behavioral patterns and intrinsically linked to their socio-cultural value system.

          Schuler (2001) says that there is a strong bond of national culture that prefers to deal with local people rather than expatriate managers. This is an important issue with the MNCs as they often incur huge costs on training and cross-culture adjustments.  There is a lot of conflicts if the expatriate manager tries to impose his/her won values on the local people. Chinese culture promoting ‘guanxi’ a shared language and shared culture where Chinese employees prefer to interact with people who are well versed in their language and culture. Thus the onus of responsibility on IHRM is huge when their business has to be conducted with Chinese, within or outside China. The need to understand the Chinese culture becomes an intrinsic part of IHRM when negotiation with their Chinese counterpart is required or becomes necessary.

3. Future directions for IHRM

          China is a goldmine of opportunities for the West and it has especially become highly attractive in the current recessive environment when low investment and high yield becomes critical criteria for competitive advantage. Dunning and Kim (2007)  think that foreign collaboration needs to be focused on identifying the best option for spearheading a business venture in China. The need to have an expatriate to head the venture must be weighed against having a local talent for the post. In both cases, intensive training on cross-cultural understanding and various environmental factors becomes a crucial issue. The high rate of turnover of Chinese Managers is a serious concern as the replacement of expatriate managers with Chinese managers can significantly impact organizational stability. This factor can be considered a vital part of the future direction for IHRM.

          The IHRM must evolve the practice of encouraging an in-house learning environment and whenever possible, the exchange of employees from two diverse countries could be facilitated so that hands-on experience can enhance cross-cultural understanding. It would at the same time, promote mutual respect and result in improved performance. . Various mechanisms like foreign direct investment or FDI, cross-border collaborations, partnership, export, and import of goods and services, facilitate and expedite the process of international business. But the environmental factors like policies and legal paradigms of the government remain key elements that inculcate trust amongst the foreign firms. Indeed, IHRM practices of the business significantly add value to the negotiation and running of businesses in foreign countries like China which offers huge opportunities for people across the globe.