Emerging New HR Concepts - Essay Example

Think Global, Act Local: Emerging new HR concepts The new global business scenario has been demanding a flexible strategy for maintain profitabilityand increase reach. Companies are compelled to enter into new territories and market. They have to work out well thought strategies and action plans in production, human resource management, supply chain management, product innovation and corporate governance. There are two sides for the growth story. On the one hand there are immense pressure from investors, share holders and management to increase profitability and productivity. On the other hand open competition and high bargaining power of customers and markets are squeezing margins of the companies. The structure of an industry has a major role in defining a company's competitive advantage in this global scenario. An industry is conceived as a group of companies that market products which substitute each other. The structure of an industry has a direct relation to its profitability. Service industry can be considered as a classic example in this regard. In the post liberalization and globalization era, the concept of outsourcing has gained more attention. Cost is playing a major role deciding the competitive advantage of an organization. Companies are thinking of different options to reduce cost and increase its competitiveness. Outsourcing of production and service has been considered as an effective way to reduce competitiveness. Companies in the western world have been outsourcing jobs and production facilities from their land to low cost areas such as India, Brazil, China and East Asian countries. With the industrialization process of the 20th century, salary levels and capital cost of Western countries had shoot up substantially and this had been eating up a major pie from companies' profit. There was no sign of reduction of cost and salaries. This has compelled corporates to think of other options. During 1980's companies had find East Asian and Latin American countries as a good destination for moving production and services. While companies in Western countries have good technology, better expertise, capital strength and understanding of the market, these countries provide low cost land, human resource and raw materials. Synergising both these strengths has given companies more competitive advantage in their domestic market. Their production cost has come down sharply with this move. It is considered that high skilled labour, highly professional management team, low cost work environment, best management and HR practices, innovation, understanding of the industry and security measures are the major strengths of the organization in the globalised world. Most of these strengths are adopted by companies do to the particular character of the outsourcing industry. In the early 1990's the industrial scenario in developing countries was quite different from that of western countries. Here companies were least bothered of good corporate governance practices, HR management, cost, profitability, security and customer satisfaction. The state protective measures made the industry inefficient. Companies got huge subsidies for every thing and any thing. But with the entry of multi national companies to these markets, situation has changed drastically and a new corporate governance practice has been established. In the labour relation also there has been a paradigm shift in the past one and half decade. Technology has played a major role in changing labour outlook and mindset. Also the process of Globalisation, Liberalisation and Privatisation has played a major role in redefining the perception on labor. Today corporates and industry are keener on optimum use of labor and they are always thinking of new ways to improve efficiency and output. The increasing global competition has demanded new approach to the labor. There has been an increasing demand for skilled labor forces. The skill level of the workforce in developing countries was a major challenge for companies moving from western market to emerging economies such as India, China and Brazil. They had to device new strategies to equip the labour force here with focused training. Another problem was labour laws existed in these economies. Most of these countries were considered as Socialist countries have pro employee labour laws. Technology had played a major role in the evolution of industrial organizations working in both manufacturing and service sectors. With entry of multi national companies labour force has no choice but to undergo drastic changes in their total attitude. These economies have also responded positively to these developments by diluting labor laws in their respective countries. The corporates have also resorted to outsourcing jobs from USA to these low cost emerging economies to improve their competitive advantage. This has caused major reduction in the employment opportunities in the markets such as USA and Europe. So the existing work force in the country is compelled to improve the work knowledge. The importance of technology and management has made a substantial change in the outlook of the industry worldwide. When technology is developing faster than the speed of the light, basic concepts such as labor, capital, skill and production have also shown change of meaning. The structure of today's industrial organisation changed to a large extent. Decentralisation is the mode of organization structure and considered as a potential weapon for competitive advantage. Today workforce of an institution has been totally disintegrated, where one part of the organization might be working in United States and other parts were in other parts of the world such as China and India. It is the word "outsourcing", which conquered industrial hearts in all over the world. Today skill levels of work force have more impact on the economy of a state or a region. At the same time there are remotely controlled management systems to judge the quality of work, which is done in a far away a place. There were arguments that adaptation of newer technology and management practices would help the capitalist forces to alienate labor forces. But actually in the post liberalization, globalization and privatization period, it is seen that labor got more attention than ever. The salary levels of skilled labors have increased substantially and they are very much in the mainstream society. Their voice has been heard seriously by political class. From the beginning of the community living there is division of labour. It starts in families, where husband, wife and children are dividing house hold jobs for more convenient and productive purpose. Now western countries have become brain house of the world and trying to convert third world countries into production houses. In today's trade model companies can earn maximum profit if demand supply gap is huge. But now with free flow of capital and resource from one continent to other, the competition is high. So there is no choice but to expand markets and add more products. Companies are trying to learn from this fact and increasing the competitive advantage by entering into high potential markets like India and China. These markets were considered as a virgin market for Western companies for a long time. Due to socio political situation existed in these countries for a long time, the population in these markets have only limited exposure to western products and services. But with opening of markets world over during the last two decades these coutnries were compelled to open their consumer market. So companies in the developed world (MNCs) have got a double harvest. On the one hand they had been outsourcing production and jobs to these markets to increase competitive advantage in their respective domestic market considering cost factor. They also got the opportunity to sell their products in the developing markets. Both these moves have their own advantages and disadvantages. While moving production and services from domestic market to emerging markets, they had to face high resistance from political parties and employees in the respected countries. This change of attitude was visible when some states in United States introduced legislations restricting flow of jobs from USA. There are a number of non profit organizations active in USA for protecting the rights of labor. The unions in USA have undertaken a number of socio political movements for the betterment of the community as a whole and had some impact on the political structure. Through many forums, they have explored the options to achieve gains for the larger society when job security is under attack and pressure was building on to a lower wages. These movements have been thinking of measures to influencing the decision making process. It is a fact that the process of globalization is instrumental in disintegration of the old industrial model of employment in USA. While there is drastic reduction in employment in manufacturing sector, the service sectors offer more employment potential. Traditional public services re replaced by private corporations and involvement of women in labor market increased substantially. Modern information based systems and technologies have given birth to a new economy, which emphasizes flexibility in the labor market and has hastened the change in employment norms. According to the International Labor Organization (ILO), globally, during the last two decades of the twentieth century there has been "a general increase in the precarious nature of employment and the reduction of workers' protection". This is the context in which unions are trying to bargain greater equity both for and amongst workers. (Judy Fudge, Equity Bargaining in the New Economy, Osgoode Hall Law School, York University, Toronto, Ontario, Canada) In the last one decade there have been a large number of political movements in USA for protecting job. Today the work force of America is more concerned about outsourcing of jobs. It was in this background that there is now increasing awareness among the political class to protect the basic rights to work. The Democratic Party in USA has openly come in support for working class and helped workers to create some grounds for their arguments. This is a clear indication of higher level intervention by labor in the social and political issues of the nation. There are also large number of campaigns by labor unions for protecting the environment, against child labor, for the rights of women and economy at large. More than ever they have now more voice in the political sphere. Global workplace is such a platform which fights for the rights of women, children and environment. It is an online campaign aimed at improving the quality of life of many marginalized class. "War on Want' as it is known has recently launched a new campaign in association with the International Transport Workers' Federation (ITF) for exposing the appalling conditions workers from developing countries are subjected to on some luxury cruise ships. (http://www.waronwant.org/lid=2891) "War on want "is a movement in USA in the back drop of new economic scenario. As the world is shrinking to become a village, inequality and attacks on workers are increasing. Global Workforce is aimed at forming a solidarity movement of workers all over the world. They ague that gloablisation is not process which only rich benefit out of it. They say that the benefit of globalization should reach the working class also. (http://www.globalworkplace.org/lid=68) Companies had to give shape for a concrete action plan to resist these change. But they have no choice but go to low cost economies to reduce cost. So they have introduced a new strategy of preparing a separate model for their consecutive local market with a global strategy. While western companies entered into markets in the emerging economies, they had greater challenges. Though there was a vast sea of opportunities, the hurdles in the form socio, political, economical and infrastructural problems were tremendous. The mind set of people in these markets were not prepared to accept high end products of the western companies. They had some kind of mental inertia in the initial period. Most of the segments viewed multi national companies suspiciously. They thought that this is a part of decolonization move. So companies have devised lot of innovative models to get a local flavour. Acquisition, mergers and tie ups were some of the moves. They have also started strong lobbying in the government and among public. So to an extent they could change public attitude positively. Another negative factor was that these multi national companies don't have much knowledge on the purchasing habits of the population and their product necessity. While domestic companies have good and suited products, they find it difficult to survive in the competition. This was addressed by incorporating local work force to their strategic planning. They poached human resource from leading domestic companies offering huge salaries. Then have come out with global products with local flavor. This has given them upper hand in the market. The globalization has bring in a new scenario, where the production is taking place in a distant area from where it has reach in other continent or in a distant place. It is quite difficult to think of any marketing or manufacturing strategy without considering the logistics support. Logistics involves the integration of information, transportation, inventory, ware housing, material handling and packaging. Realizing the importance of the proper management of logistics, companies have been thinking of new methods for reducing the cost of logistics. The operating responsibility of logistics is the geographical repositioning of raw materials, work in process and finished inventories where required the lowest cost possible. (http://en.wikipedia.org/wiki/Logistics) With opening of markets world over and emergence of multi national companies, the importance of logistics increased substantially. Today in this globalised world order, usually production is happening in one continent and market will be in another continent. Companies are now searching the world over for new production bases for reducing the cost factor and increase the competitive advantage. The meaning of logistics is that reaching right quantity of product or service at the right time for the right price. Its goals are to manage the fruition of project life cycles, supply chains and resultant efficiencies. (http://en.wikipedia.org/wiki/Logistics) The local manufacturing presence had also given MNCs an edge in the open competition. This has been viewed as a proper supply chain management system. In the highly gloabalised world order, the trade has now taken a new trajectory. While companies are compelled to enter into new markets with different products, they have to address socio political issues existed in the operating economies. The business scenario in West might be quite different from that existed in the high potential low cost economies such as India, China and Brazil. The expectation of the population in these areas could be different. They are understanding things from nature and make use of their knowledge in different style. Every community has their own accumulated knowledge. It may be different from one the western companies experienced in other part of the world. Language, culture, international exposure and industry nature of the local communities are some of the major areas to be taken into consideration for companies working globally. These things have direct bearing on doing business. But at the same time they should have global vision to improve reach. Some IT and website companies have understand these issues more and they provide contents after taking into consideration socio political situation existed in those countries. Contents for Republic of China could not be used for India. The idea "Think Global and Act Local" is a market theory on acculturation which mandates that products and services have to customize for regional consumption considering local environment. There are lot of issues for companies working in the overseas market. Regulatory climate is a major area taken into consideration. It may differ from country to country. Companies have to change their management, corporate governance and operational structure to suit to the new market. It is a fact that HR management, which companies practice in western countries won't be suitable for countries like India and China. Here legal challenges would be different. Employee satisfaction and skill levels are not at par with the situation exist in the western market. So HR managers have to taken into consideration these facts. For example in India, where unemployment rates are huge, HR manager have more flexibility. He can resort to innovative management practices. Each company needs to give shape for a specific HR management system considering the local industry environment, mind set of people, legal frame work, language and customer behavior. Reference: 1. Judy Fudge, Equity Bargaining in the New Economy, Osgoode Hall Law School, York University, Toronto, Ontario, Canada 2. Daniel Patrick Welch, Think Global, Act Local: Rinse, Repeat, Die The fun, fraud, farce and fury of local activism, Scoop Independent News, October, 2006 3. Heckman, James. "International in Internet Closes U.S. Lead," Marketing News (February, 2000): 4-7. 4. Russell Smyth China's Business Reforms: Institutional Challenges in a Globalised Economy (Routledgecurzon Contemporary China Series) 5. Chen, Anne. "Going Global Avoid Culture Clashes-Sites Must Reflect Local Customs and Ways of Doing Business to Achieve Success in Foreign Markets," PC Week (3 April 2000): 65. http://www.peoplemanagement.co.uk/pm/articles/Diversity+and+equality.htmname=diversity+and+equality&type=subject http://www.ifla.org/VII/d2/inspel/00-3pean.pdf http://www.oecd.org/documentprint/0,2744,en_2649_35961291_2668590_1_1_1_1,00.html http://www.urban75.com/Action/seattle7.html http://www.jimpinto.com/writings/global1.html Read More