Understanding the driving forces of globalization
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Nowadays, we are live in a highly globalized and international business environment rather than live in a domestic economy. The current business context is more complex and complicated which it had never been in the past. Thus, we need to continuous to changes in the Human Resource Management in how organization employment and managing talent which is require practices and well system to pursue the effectively implementation and high performances to ensure the success in all aspect over the world. Adler and Bartholomew (2002) said that "strategy is internationalizing faster than implementation and much faster than the executives themselves". We will explore the driver force of globalization and the change practices on human resource management as follows.
It is often suggested that the progress of globalization is quickening and will continue to have a growing impact on business organization and management practice. Critically discuss using examples the ways globalization and its driving forces have changed the practices of human resource management?
Yip et al. (1988) identified the driver factors of globalization process; these factors are divided into competitive, economic, market and environmental categories.
For government drivers: trade policies which eliminate all tariff; mutual recognition; subsidies outlawed;
For market drivers: Birth of large "euro mass" segment; Customers and channels increase;
For cost drivers: Economic scale increase; "Favorable logistics"; Sourcing efficiency to improve;
For competitive drivers: Exports and imports within EC to increase; Interdependence of countries to improve; "Pan European" strategy
Below is the detail for the driver force of globalization:
Advancement communication, information technology and transportation
Technology is the principal drivers of globalization. Advanced information technology have transformed our economic life as well as in businesses sector since developed new tools to cope new opportunities, including faster and more informed analyses of economic trends around the world and communication with partners. Thomas Friedman has said that today globalization is "farther, faster, cheaper, and deeper."
Communcation is faster and more convenient due to the Improvement in technology. For example, we can communicate through telephone, e-mail, 3G video conferencing easily, also satellite allows messages send out and receive on the same time.
Advanced communication technology, such as internet allowed customer get information for new goods and services easily. Besides, falling communication costs allow information move quickly and inexpensively, for example: E-bay. This has transformed how we work, communicate, and boost globalization due to the efficiency of communication technology, allowing multi-national corporations to control and monitor their worldwide activities easily.
Improvement in transportation technology in air, sea and rail systems to accelerate the globalization activities. Also, decline in transportation costs and less time needed to travel from one place to another. High-tech transport system has reduced the travelling time and increase efficiency of transferring goods, thus boost globalization. For example, 19th century: use steam engine for transport; 20th century: use commercial jet aircraft, large ocean going vessels and containerization.
Globalizing world in the same aspect of increase in mobility of people and goods over the world. For example, a man who has a morning meeting in Hong Kong can arrive Korea in the evening by air.
Political and social reform of countries especially in the south-east Asia, Latin America, mid European countries and Pacific Rim. Due to the growing economic in these countries, boost globalization sharply. Such economic development and emerging market in one country impacts directly on another country. For example, China becomes the main exporter over the world and this increases the global activities rapidly.
Expansion of Multi-National Corporate(MNC)
Rise of major transnational corporation which has more bigger, well-capitalized corporations expand their business to foreign countries and open up national market. They operate in many countries and have production outside their home country, for examples, Toyota Motor Corporations and Microsoft Corporation.
MNC set up operation around the world to source for new markets and raw materials that can lower the production cost. MNC coordinated by the HQ in the home country. Thus, world economies become more integrated and connected, which boosts globalization because of the relations and mutual benefits exist.
Driving forces from NGO
Government or corporate policies which opened economies domestically and internationally are another driver force of globalization. During the past twenty years, many governments adopted free-market economic systems to increasing productive potential and creating new opportunities for international trade activities. Governments also have reductions in barriers for trade and have established international agreements to promote trade in goods and services. Such as cut-back of trade restrictions (e.g. through GATT), falling trade barriers (e.g. Lower tariff and fewer non-tariff trade impediments), pivatization of state-controlled economic enterprises and liberalization of capital market.
Many corporate agreed and set up legally binding trade agreements. The following are organizations involve in globalization: CIA, World Bank, World Trade Organization and UN, etc
Changes practices of Human Resource Management
Due to the driver forces of globalization, Human Resource Management needs to change practices accord to the complex business environment. We need to understand the human resource management systems and the board context in the organization (technology, strategy, culture and leadership) as well as the external environment (laws, unions, country culture and economic conditions) (Jackson et al. 1995).
Because the internal and external environments are dynamic, the process of managing human resources must also be dynamic. Successful requires meet the present needs also expect future needs. The essential elements of HRM are illustrated as below:
Source: S.E. Jackon and R.S. Schuler, Managing Human Resource through Strategic Partnerships, 2003
Accord to the above framework, below is the detail for the change practices of HRM:
The need to manage diversity. Due to the worldwide workforces become more and more diversity, the need to manage diversity effectively has been arisen. Diversity workforce include different language employee, if employees lack of language understanding or cultural references, the day-today communication will become complicated. The trend in management has been to strategically aim for turning these difficulties into competitive advantages. A company with a diverse workforce has the great potential to reach new market, to attract and retain the best prospective employees, across cultural and national boundaries.
Both new opportunities and difficulties can be arisen from the diverse workforce. Now, employees can sometimes work in and work out at different time zones and the diverse workforce often include of different races, genders, economic backgrounds and religions especially human resource management need to be careful to deal with different culture, woman, race minority workforce. Globalization implies accepting that cultural diversity in management composition and management style contributes to the competitive advantage of the MNC.
Below is the example of organizations done successfully in diversity management:
Ford UK, recognized that effective diversity management was needed within the organization at 2000. Ford also realized that this would require a process of cultural change. Thus, the organization developed and introduced a four-stage change programmed aimed at: mainstream diversity, give ownership of the change process to everyone in the organization, ensure efficient communication of the change plans and evaluate their progress. The approach was very successful and Ford is now one of the organizations looked for best practice diversity management in UK. In addition, Ford extensively sponsors culturally diverse events and have organized a best practice diversity management conference. In this way, they have effectively reinforced their internal strategy with external actions.
Provide equal opportunities. Base on the before need to manage diversity in human resource management, the other change practices to HRM are providing equal opportunities over worldwide employment. Equal opportunity is very important in the modern workplace which involves providing the same opportunities to all the employees and prospective employees regardless of their culture, background, sex, age, disabilities, ethnic origins, sexual orientations etc. Equal opportunities allow the employee to have rights therefore the employer is unable to take advantage, discriminate or manipulate staff. Organization will need to ensure that there is no unlawful or unfair discrimination such as the race relations board because in many countries, unequal employment is illegal. As one of the HRM function is to attract and retain the best people in organization, provide equal opportunities can present this function efficiency.
For example, The Equal Employment Opportunity Commission (EEOC) in US, was created by the Civil Rights Act of 1964, is the federal agency that has the responsibility to "promote equal opportunity in employment through administrative and judicial enforcement of the federal civil rights laws and through education and technical assistance." The EEOC handles complaints about workplace discrimination.
Global competitions demand a more competent and dynamic workforce. Globalization brings the organization in a complex environment and contains different background of workforce. The theory of comparative advantage that, David Ricardo expressed in the early 19th century shows why trade works. Each country has relative strengths and weaknesses, if each country does what it is relatively strengths and import the weakness and the world will produce more and the greater productivity can be exchanged globally, making each country better off. Such as tariffs and other trade restrictions thus prevent possible gains from trade.
We can see that the relationship of globalization and human resources management. If we can achieve the competitive advantage through people that is the dynamic workforce, we can increase the effect of globalization. We can do are analyzing the major activities of human resource management and how we can perform effectively.
Beardwell and Holden (1997) support the assertion "Indeed development is achieved through people" by giving an example of Japan's success despite its lacking natural resources. This is important for us if we have to move forward in terms of economic development.
Besides, Armstrong outlines three most important factors in achieving competitive advantage as Innovative, Quality and Cost Leadership, but all these depend on the quality of an organization's human resources management. The most important is the starting point of human resource management in the context of globalization. Hence, gaining the competitive advantage through management people is one of the success factors of organization.
Different demand in HRM functions. A series of changes are being on the IHRM function: recruitment, global staffing, training and development, employee relations and rewards, by the process of globalization highlighting the difference between globally standardized, optimized or localized HR processes. Due to the higher demand on the global human resource management function to illustrate greater adaptability, provide HR managers more exposure to and rotations in global business that they need to be effective internationally. HRM also functioned to link between corporate headquarters and overseas operations.
Other demand for HRM function is talent management which includes nationalities and experience in HR efforts to diversify talent in other functions and other countries. Increase the life involvement, responsibilities and decision-making of employees. The creation of these core competencies can be achieved through human resource management and dealing effectively with macro concerns such as corporate culture and management development.
Staffing which include recruitment, selection and lay off. The increasing globalization of the marketplace combined with an increasing shortage of skilled staff and advances in technology have resulted in large changes to staffing practices throughout the world. Organizations recruiting employee continue to cope with these massive change in fight to be more competitive and profitable. Many organizations have moved to outsourcing all of their non-core activities strong emphasis on delivering a quality service and in ensuring the technical competence of consultants. For example, HSBC (one of the largest bank in Hong Kong), outsource the call centre function to Shenzhen of credit cards services for Asia sector business since a few years ago.
The other main practice of HRM is sending expatriate which is one of the global staffing strategies based on the management of international managers. The international employee populations and the changing structure and role of international HR functions have raised three important questions. The first concern is the study of globalization processes at functional level (staffing) and whether this can provide useful insights for the IHRM literature. The second concern is the indicators that best evidence globalization of staffing at the functional level and whether these might form the basis of useful future research. The third concern is the patterns or strategies within the global HR recruitment activity of organizations across domestic and overseas labor markets and whether these patterns can be explained by existing theory.
All this concerns is the organization-level developments in international recruitment and selection, drawing upon an analysis of four case studies each conducted in four theoretically derived contexts of centralized or decentralized control and co-ordination, and focus on domestic or overseas markets. It examines the disparities between policy and practice through interview of HR actors at corporate level and in country operations.
Today's world is organized by accelerating globalization, 'which is strengthening the dominance of a world capitalist economic system , supplanting the primacy of the nation state with transnational corporations and organizations, and eroding local cultures and traditions through a global culture' (Kellner, 1989).
Globalization today is being driven by market and corporate expansion, opening national borders to trade, advanced information technology and transportation systems. The way forward is not to stop the expansion of global markets but to find rules for stronger the human resource management under this circumstance and need to come up more changes on practices in this complex business environment.
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