JB HI FI - Host Country Analysis and International HRM Issues - Case Study Example

RМ - Ноst Соuntry Аnаlysis аnd Intеrnаtiоnаl НRМ Issuеs Name Class Unit Introduction JB HI FI was founded in 1974 in Melbourne and has at the moment grown into multiple stores across Australia. The company is among the largest Australian consumer electronics and entertainment equipments’ provider. JB HI-FI has been experiencing rapid expansion all over Australia with a vision to become a leader in the entertainment industry (JB HI-FI, 2014). The company has been utilising state of art technology in their operations. This has helped them to save time and money which they have been utilising in their quest for expansion. As the company assumes to venture into a foreign country to do business, there are challenges to overcome (Albrecht, 2001). The Chinese market has been attracting foreign investors into the country. The economic reforms done in China have made the country the best destination for companies who want to start global operations. China has a well established electronics and entertainment industry, which JB HI-FI can rely on. For JB HI FI, there are opportunities and challenges for expanding to China. This report analyses JB HI-FI expansion into China and look at the HR issues that they are bound to face. The report also gives recommendations on how to face these challenges. China and FDI One of the key attractions to doing business in China is the economic reforms. The country opened its economy and started reforming it which has led to FDI relocating to the country. The country has been developing Special economic zones (SEZ) where FDI can be located. Favourable regulations are in place, making it easier for FDI to invest. The country attractiveness to investors is evident through the current number of FDIs. Electronics and communication is another area that is highly invested in the country (Ahlstrom et al. 2005). China has benefited from technology due to investments by other countries and has a good infrastructure. As firms continue to invest in China, successful management has been a major issue. As JB HI-FI expands to China, they are bound to face some HR issues. The human resource department is faced with several difficulties as they operate in the foreign country. The company should be ready to deal with these issues in order to reap benefits from the investment (Chen & Wilson, 2003). Human resource issues In international management, human resource has been one of the most important issues. There has been the development of the international human resource models to address the issues (Vance & Paik, 2006). During the early years of globalisation, multinationals adopted standardised human resource model. The belief that coming up with a standardised human resource management could lead to more efficiency and effectiveness did not succeed (Jackson, 2002). This led to the development of the international human resource model. The model could help in addressing the differences that exist in different countries such as culture and organisation behaviour. Despite this, multinational organisations stills faces challenges of implementing standardised international human resource management. The human resource department is involved with recruiting and developing the employees with an aim of achieving the company objectives. The human resource department is involved in ensuring that the employees’ welfare is met with an aim of enhancing organisation competitiveness and ensuring it reaches its goals (Maxwell, Blair & McDougall, 2001). One of the main issues that JB HI-FI will face in china is hiring of staff. It has been proved that recruiting and maintaining qualified staff in Chinese market is difficult due to several reasons (Jackson, 2002). Lack of adequate talent In China, shortage of talent is a major issue foreign firms face (Farrell & Grant, 2005). Despite having a large educated young population, there has been an imbalance in the ratio of science and arts students. Most of the students have been involved in arts. There is also less qualified managerial staff in the country due to their skills being inadequate in strategic thinking. JB HI-FI would be more interested in technical and management skills which are in shortage. The Chinese form of education is more theoretical as compared to the western countries which make the graduates less competitive. There are also aspects of lack of vital skills such as teamwork (Farrell & Grant, 2005). Change of environment The existing differences in culture, job market and the employment laws between China and Australia is another challenge. These differences make it hard for multinationals to attract and retain employees in the country. The concept of human resource in China is now being introduced after the economic reforms. The companies were previously owned by the government, which assigned jobs making the human resource department to be more administrative (Ahlstrom et al. 2005). The government offered lifetime employment to managers with no incentives. This led to the managers becoming less motivated and little concern was paid to the employees. The managers lost their skills and were not willing to learn. After the changes, there are still challenges that human resource faces when looking for qualified staff in management (Shen & Edwards, 2006). Compensation and benefits Compensation and benefits is another vital area that is faced by the human resource management in China. Most of the Chinese employees are bound to leave their jobs if they find a better paying one. The country salary rates have been on the rise since the accession to the WTO which led to rapid development. The trend of increases in wage rates is expected to continue increasing as the country continues to develop. For multinational companies, they are bound to base their managerial salaries based on the performance. This may imply that foreign firms are less likely to pay higher salaries to Chinese employees. This may lead to the employees facing job dissatisfaction hence leading to the qualified staff leaving. A study has proved that most of the Chinese employees are less satisfied with their jobs at the moment due to salary (Chen & Wilson, 2003). The domestic companies in China offer better salaries and compensation for their managerial staff. The state owned enterprises are the main competitors for the qualified employees in China (Ahlstrom et al. 2005). They have almost half of the qualified staff in China and offer a better pay with insurance allowances. The employees working at state enterprises have a better job security and more benefits. The human resource will be required to come up with a compensation and reward system that will attract the qualified staff from China. This is a major obstacle that JB HI-FI will have to face in their Chinese operations (Chen & Wilson, 2003). Expatriate failure In most cases, it becomes impossible to find the right candidate for managerial positions in China. This leads to foreign firms using expatriates in their top management position. If JB HIFI fails to find a suitable candidate in the country, they will have to use expatriates. Expatriates are more familiar in managing the business as they are familiar with the company management techniques. Despite their importance, most of the expatriates have been failing in china due to poor performance or have returned before their period of contract is over (Ahlstrom et al. 2005). The unfamiliar culture has been the main reason for expatriates to fail. The company is affected by expatriate failure due to negative results. Due to culture issues, the expatriates may not perform to their full capacity. They are less likely to contribute to the company efforts in localisation of staff. The local staff may not get the required help such as training from the expatriate if he is affected by culture shock. Expatriates are also highly paid than the local talent. The expatriates are thus likely to create a financial pressure to JB HI-FI (Maxwell, Blair & McDougall, 2001). Cultural differences Chinese culture will have an impact on human resource management (Francesco & Gold, 2005). The operation of a business in China is affected by the country culture to a great extent. The attitudes of a population are influenced by their culture. The human resource management have to understand the Chinese business culture in order to manage the human resource appropriately. Understanding the Chinese philosophy will help the company to come up with the right decision making processes. The unique Chinese beliefs and values differ from the Australian way of doing business. The human resource management will be forced to take an approach based on people rather than contracts which is a major change. The unique business values in China are bound to be an issue to the human resource management (Ahlstrom et al. 2005). Foreign companies have been facing a tough legal environment in China. Foreign companies are not allowed to hire employees directly. The companies are forced to undergo the recruitment process through HR agencies (Ahlstrom et al. 2005). Foreign firms are also held more accountable to law than local firms when hiring. The foreign company may be required to have a good government relationship in order to get permits timely. There are also instances of corruption which may affect the company in their hiring process. For a foreign firm such as JB HI-FI, they will have to face legal challenges as they recruit and run the business in China (Shen & Edwards, 2006). The human resource management of JB HI-FI will face challenges when terminating employees and engaging in labour disputes. The contract system in China makes it hard to terminate an employee who is still in contract (Ahlstrom et al. 2005). The employer is supposed to give a thirty day notice before carrying out termination. The foreign firm is also forced to pay severance pay after they terminate an employee. The employees in the Chinese labour market are very litigious, which makes it prudent for foreign firm to act with caution when terminating an employee. This is a major challenge that JB HI-FI will face (Shen & Edwards, 2006). Recommendations For the JB HIFI to succeed in venturing China electronics and entertainment industry, the human resource department has to undertake several measures. Training Chinese employees is very vital to the foreign firm. Training the Chinese employee will help JB HI-FI to improve their turnover and deal with the problems of labour shortage. The employee morale will also be boosted which is very vital for the firm (Ahlstrom et al. 2005). Offering incentives and other motivation factors is also needed in Chinese operations. Low employees’ morale can lead to reduced output for the firm. Most of the companies fail to provide appropriate incentives due to fact that they are faced on the western countries firms. It is vital to note the incentives that work in the Chinese context. JB HI-FI has to ensure that their salary scale is in line with the current wages in China. This will make the company to attract new employees (Fryxell & Butler & Choi, 2004). The management should work in enhancing teamwork. Managing diverse cultures can be made easier through the use of teamwork to bond the Chinese employees with expatriates. There will be needed to adjust the management in order for it to fit the different cultural context. The management have to ensure that they reduce the use of expatriates in their operations in China. The company should focus on utilising the local talent (Chen & Wilson, 2003). Use of expatriates leaves few opportunities for local managers which can affect the ability of a firm to retain local employees. Managing the human resource in an appropriate manner is the key to succeeding in China (Chen & Wilson, 2003). The human resource management at JB HI-FI have to enhance communication with the employees to ensure that there is a good working relationship. The foreign employees should be kept to a minimum and more chances given to the locals. This will make it easier for the human resource management to function and ease the challenges (Ahlstrom et al. 2005). Conclusion For JB HI-FI, expanding to Chinese market offers different challenges to the human resource management. There are differences in culture, legal environment, and management of human resources. Attracting and maintaining qualified staff is one of the toughest challenges the firm will face. The recruitment and selection system is also different from that of home country. The expatriate failure in China is very high due to culture differences. JB HI-FI should pay more attention to attaining qualified staff. There should be training to the Chinese employees to enhance their quality. The company should ensure that they offer competitive salaries due to rising scales. Employee motivations such as use of incentives are required to be relevant to the Chinese business culture. JB HI-FI should reduce the number of expatriates and use more locals to enhance employees’ retention. Lastly, communication is vital when managing cultural diversity. References Ahlstrom, D, Foley, S , Young, M.N. & Chan, E.S. (2005). Human Resource Strategies in Post- WTO China. Thunderbird International Business Review, 47(3), 263–285. Albrecht, M. H. (2001). International HRM: Managing diversity in the workplace. Oxford: Blackwell Business. Chen, S.H. & Wilson, M. (2003). Standardization and Localization of Human Resource Management in Sino-Foreign Joint Ventures, Asia Pacific Journal of Management, 20(242), 397-408. Francesco, A.M. & Gold, B.A. (2005). International Organizational Behaviour. Hamilton: Pearson Prentice Hall. Farrell, D. & Grant, A. (2005). Addressing China’s Looming Talent Shortage, McKinsey& Company, Shanghai, October. Fryxell, G.E. & Butler, J. & Choi, A. (2004). Successful Localization Programs in China: An Important Element in Strategy Implementation. Journal of World Business, 39, 268–282. Jackson, T. (2002). International HRM. SAGE Publications Ltd. JB HI-FI. (2014). Home, retrieved 29 October 2014, https://www.jbhifi.com.au/ Maxwell, G.A., Blair, S., & McDougall, M. (2001). Edging Towards Managing Diversity in Practice, Employee Relations, 23(5), 468 – 482. Shen, J. & Edwards, V. (2006). International HRM in Chinese MNEs, London and New York: Routledge. Vance, C. & Paik, Y. (2006). Managing a global workforce: Challenges and opportunities in international human resource management. Armonk, N.Y: M.E. Sharpe. Read More