The Advance of Globalization and Business Systems - Essay Example

?A. Why business systems in main industrialized countries continue to diverge despite globalization? It is a fact that though trends towards globalization and internationalization of business continue to intensify, business systems around the world are also diverging. Some scholars claim that Whitley’s analysis of business systems in the Eastern and Western world has remained successful in introducing a worthwhile conceptualization of different business trends. The role of the state in industrialization is discussed by Whitley at length in his research. It is argued by him that all decisions about the route to be followed are not made within an organization rather state plays a potentially important role in deciding the character of any business system in addition to determining how the employers should behave and what strategic choices should they make in response to rising globalization when the need arises to not let their businesses grow in isolation from the global business trends. There is greater state involvement in determining a business’s character and the path it would follow. By developing a framework of analysis to examine business systems, Whitley explained at length “certain components of business systems and their interaction with institutions” (Tempel, 2001, p. 43). Whitley’s concept of national business systems has however been criticized often due to its weaknesses like portraying organizations as “passive pawns” which have little option but to comply (Scott, cited in Tempel, 2001, p. 42). Employment systems– national systems of training: With the help of extensive research and discussion regarding why it is that business systems in many developed nations continue to diverge, many factors are unveiled. While a market driven approach lays the foundation of employment systems in UK, fully developed vocational educational systems in France ensure high skill development and strict on-the-job training. Such pattern of allocating highly skilled workers even for the lowest jobs is not observed in UK. Germany, in contrast, practices the best system of economy wide vocational educational training. The rate of formal consultation is highest in European countries like Germany, Italy, and Sweden where employees are highly valued (Brewster and Larsen, 2000) in contrast to US or UK. As a result, there exists convergence of skills in contrast to polarization of skills as has been reported in UK business leading to “dead-end and low-skilled employment” (Crouch, 1997, p. 372). German business has advantaged hugely from VET system which demands continuous retraining and up-skilling (Crouch, 1997, p. 372). Clear difference exists in employment systems and HRM policies between CMEs (Germany, Italy, France etc.) and LMEs (US, UK etc.) (Boyer, 2005) which explains why business systems continue to diverge despite increase in globalization. Reportedly, there is greater polarization in US business systems “with the bottom 10% of the working population now being absolutely poorer than they were at the end of 1970s” (OECD, cited in Crouch, 1997, p. 370), but they also emphasize more on diversity management (Egan and Bendick, 2003). Japan, however, practices a blend of general education system of a US kind and VET system of a German kind and believes in ensuring diversity of opportunities “but within a more German context” (Crouch, 1997, p. 373). HRM: In contrast to LMEs (Liberal market economies) like US, UK, and Australia, business systems in German, Netherlands, and Swedish market economies show different approach to dealing with HRM. Germany and Scandinavia are CMEs (Coordinated market economies) where legislation value is maximized. CMEs emphasize more on employment regulation in which state plays a greater role than the stock market. All business systems in CME countries have stronger systems of employee voice and there is higher consultation between firms and employees (Farndale, Brewster, and Poutsma, 2008, p. 2008). Now in HRM terms, business systems operating under CMEs are subjected to strict regulation and control as there is greater state involvement in contrast to those operating under LMEs where there may be a greater distinction between domestic and foreign-owned firms (Farndale, Brewster, and Poutsma, 2008, p. 2008). In reference to state involvement, Whitley has introduced the argument that organizations are influenced and penetrated by their institutional environments which are largely determined by the state (Tempel, 2001, p. 42). Such unlimited state involvement however leads the firms to a constraining process where they have limited freedom to lay out the strategic framework themselves. Organizations largely influenced by the state authorities often come across as institutions having little room to argue and which have to comply with the rules designed by the state under any condition. On the basis of Whitley’s research into many East Asian organizations particularly in Japan and South Korea, it is claimed by him that business systems become “institutionalized in different market economies in different ways as a result of variations in dominant institutions” (Whitley, cited in Tempel, 2001, p. 43) which means that East Asian organizations act under varying situations in different ways due to difference in the way they are influenced by dominant institutions or state. The extent of government intervention in HRM issues is greater in Germany, Japan, and Scandinavia than in US or UK. HRM practices like employee voice, financial involvement, and commitment to training differ in CME and LME influenced countries. UK HRM is influenced more by EU and EU policies seek to develop a more employee-centered approach (Richbell, cited in Farndale, Brewster, and Poutsma, 2008, p. 2017) in contrast to US HRM which is less compatible with unionization (Gooderham et al., cited in Brewster, Mayrhofer, and Morley, 2004, p. 20). HR professionals operating in CME contexts may feel more constrained by greater state involvement in contrast to those operating in LME contexts (Farndale, Brewster, and Poutsma, 2008, p. 2019) and they may resist the transfer of a USA approach (Parry, Dickmann, and Morley, 2008, p. 2026) while also at times readjusting the USA HR approaches so that they suit their interests (Almond et al., 2005). Management training and development: Like employment and HRM practices, there exists clear difference in coordinated vs. liberal market management training and development. There are consistent differences in the way business firms develop and train their managers. The style of management development is rooted in the educational infrastructure and labor market institutions which vary from nation to nation. The impact of cultural, societal, and political policies on selection and development decisions in context of managers is huge. The debate over the role played by convergence and divergence in HR practices and management development stress that globalization has led to crashing down of the businesses that grew in isolation from the world economy which is why there is greater need to adopt universally applicable business approaches (Ramirez and Mabey, 2007, p. 294). Businesses continue to drift apart despite globalization because the set of business rules and HR policies practiced varies from country to country. Divergence also has its roots in the institutional differences between countries which have not been studied at length by many institutionalists unlike Whitley who introduced the concept of interpenetration of organizations and institutional structures like how they relate with each other. Whitley has applied his national business systems model to both East Asian and European countries. It is claimed by him that businesses and HRM practices around the world operate in different ways as a result of difference in dominant institutions as already mentioned. It could be deduced from Whitley’s business model however that businesses operating in countries where state authorities have greater than suitable involvement in determining the way they should operate are granted little freedom in context of variability of organizational capabilities across sectors. This is understandable as research has it that variability of organizational capabilities across sectors in both Germany and Japan is limited which are CMEs and have greater state involvement. Reportedly, there is more convergence observed lately than divergence and this argument is reinforced by the fact that there is now noted a growing focus on shareholder value with a decreasing trend in corporatist relationships in Northern and Central European countries (Ramirez and Mabey, 2007, p. 294), while only LMEs like US and UK stressed on maximizing shareholder value in the past. This is because of the greater influence of the US multinational companies on the world economy. However, management training and development practices in most business firms in CMEs are still embedded in their institutional and legal infrastructures which stop them from applying global market-driven policies in their own countries. It is claimed that the training policy of the UK government fails to enhance skill levels in contrast to the German pluralist firms which have exhibited more advanced development of managerial structures and skills (Grugulis, cited in Ramirez, 2004, p. 431). B. Impact of differences in business systems on the types of skills managers develop in different countries: It is an undeniable reality that despite a staggering increase in globalization trend, business systems operating worldwide continue to diverge in important ways. The impact produced on multinational companies by managerial structures development also differs from country to country. Different types of business systems like US/UK general education system, Japanese large-firm model, French system of VET plus on-the-site training, and German apprenticeship system execute conflicting influences on the types of skills managers develop. It is obvious that France and Germany have wisely invested more in skills in contrast to UK leading to great pay-offs like a higher level of trust between employers and workforce and greater commitment of employees with agencies they work for. In contrast, UK firms which lag behind the German and Japanese business firms in the development of managerial skills “still largely fails to adequately raise skill levels” (Grugulis, cited in Ramirez, 2004, p. 431) leading to unrefined training for marginal jobs. Skills developed by managers are more refined and professional and subject to longer-term agreements in countries like Germany and Japan where there exist stronger systems of coordination and commitment to training. This is because companies operating under LMEs like in the case of UK and Australia have little opportunity of coordinating their managerial activities collectively in contrast to CMEs which exhibit a high level of industry coordination (Ramirez, 2004, p. 432). However, management skills in Germany have evolved (Shenton, cited in Lee et al., 1996) which weaken the argument of considering the country an ideal example of CME and it is argued that now German managers are “increasingly adopting a mind-set akin to Anglo-American MNCs” (Lane, 2000). There is reported an expansion and more fierce development of formal off-site management training in countries like Germany, Denmark, and Norway with the result that advanced managerial skills are developed even for marginal jobs. It is a fact that European version of managerial skills development differs significantly from US or UK version even now. The roots of management development are embedded in the socio-economical and political systems in the European countries with a greater focus on legislation and state policies. In the US version however, decisions are made largely within a firm but a clear distinction between managers and subordinates is seen (Ramirez, 2004, p. 442). Globalization has made it more difficult for many CME driven countries to operate in isolation from the global economy and there is noted a greater need to adopt universal managerial skills. References: Almond, P, Edwards, T, Colling, T, Ferner, A, Gunnigle, P, Mu?ller-Camen, M, Quintanilla, J, and Wa?chter, H 2005, Unravelling Home and Host Country Effects: An Investigation of the HR Policies of an American Multinational in Four European Countries, Industrial Relations, vol. 44, no. 2, pp. 276-306. Boyer, R 2005, How and why capitalism differ, Economy and Society, vol. 34, no. 4, pp. 509-557. Brewster, C, and Larsen, HH 2000, Human Resource Management in Northern Europe: Trends, Dilemmas and Strategy, Oxford: Blackwell. Brewster, C, Mayrhofer, W, and Morley, M 2004, European Human Resource Management: Evidence of Convergence?, Oxford: Butterworth-Heinemann. 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