Assessing The Determinants Of Multinational Companies Commerce Essay

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The international HRM transfer practices adopted by US multinational companies (MNCS) have been seen to be subject to a lot of pressures, Evans and Lorange(1989) furthermore US Mncs are believed to be centralized and ethnocentric in delivering their HRM practices. The country of origin is very important because, it affects and influences two very important approaches which are; the culturalist approach which notices that cultures differ and so they would need to employ different HRM cultures in different places and the institutionalist approach that looks at institution and not culture and it is strongly believed that Mncs are influenced by the institution.

The US come from a culture that is low context and many employers have a unitarist perspective and adopts a unitarist approach that believes that all members of an organisation should share the same interests and also believes in a paternalistic approach which demands loyalty from all its employees and see no need for trade unions or collective bargaining, Legge (1995), this goes a long way in understanding why Devos (1981) referred to them as anti-trade unions. The US multinational employers view collective representation of employees with a lot of hostility Wever (1994), this has to do with their cultural dimensions of Power distance, uncertainty avoidance, Individualism and Masculinity as decribed by Hofested (2001).

Source adapted from Hofsede Cultural Dimension (2003)

Power distance (PD) - 40

Uncertainty avoidance (UA) - 46

Individualism (IDV) - 91

Masculinity (MAS) - 62

In view of all the cultural dimensions as illustrated above, the US being high on Masculinity and individualism will desire to transfer, preferring to adopt their own polices and because of their structure of being risk takers and low on uncertainty avoidance, they would want quick returns on investments which means they would apply their HR polices based solely on performance and would want to have total control.

In looking at their financial systems, they are believed to have a very strong banking system in operation that comprises of the local, city bank and top federal reserve and have been viewed to have the most powerful and efficient banking system in the world, they also posses strong financial aid and control and since the corporate governance in the US is not regulated but governed by court decisions and corporate laws, it would be possible based on this for them to transfer HR practices to Nigeria without any financial difficulties, Kniffi (1980).

Host Country effect

In transferring HR practices from US to Nigeria, it is very important to discern if the home country would welcome such a bold step, therefore in considering whether it would be feasible to transfer, PEST (political, economic, social and technological) factors and their cultural practices would need to be assessed to see if it creates a welcoming atmosphere for Kay fabrics international to acquire the home company in Nigeria, taking into considerations that these factors could also hinder the transfer. According to Byars (1991) , PEST analysis would help the company in understanding if they are open to favourable opportunities and how they would need to make contingency plans for threats when preparing to transfer their practices.

Nigeria is one of the developing countries in sub- Saharan Africa whose major resources include; crude oil, iron ore, natural gas etc and in 2001 was estimated to have over 114,092,000 in population and this has attracted a lot of foreign investors, Anakwe (2002). Nigeria has been noted to have a poor and unstable political environment over the years and this has been attributed to its military systems of governance, all these changed in May 1999 with the transition of Nigerian into civilian rule, also again in the same year, the International Financial Corporation (IFC) considered Nigeria among the fifty-four developing countries that were considered as emerging economies Hoskisson et al. (2002). In view of this change to an autonomous rule, its supporting market policies and practices further fostered foreign interest making Nigeria home to over 200 multinational companies from all over the world Geo-jaja and Magnum (2002), making it advantageous to Nigeria, since foreign investments through acquisitions and alliances can expand and improve the economy.

The social and technological factors also affect the transfer as Nigerians are very high social oriented people just like the US. Technological advances both in media and telecommunications can also affect the transfer but since the US are obviously advanced more than the Nigerians in this aspect, it would indeed be feasible to transfer their practices.

In accessing the cultural view and how it would affect the transfer, Hofstede (1997) in his studies of cultures noted that Nigerians are high context culture orientated and are collectivist. Nigerians also have very close connections over a long period of time and their cultural behaviours are not specific because it is believed that everyone knows it. This difference in cultural backgrounds and orientations will pose a very great barrier for the US, who are low context oriented and this may result in a lot of communication difficulties due to their cultural differences as the home country will be explicit as regards managerial duties and functions while the host country will be implicit. Other factors such as employment systems and trade unions play a very important role

Subsidiary Characteristics

There are many reasons why the host country would welcome the transfer of these practices from the US but the most important one is basically for economic growth. Ojukwu (2006) cited that growth = (Advanced benefits + Achieved targets + Achieved performance) - Effects of encountered problems.

The mode of transfer to be adopted by Kay Fabrics international would be through acquisition which is Brownfield investment, which has to do which the purchasing of an already existing production as it would facilitate effective mergers and acquisition, therefore with this mode of entry, a lot of staffs will be laid off, who would refuse to abide to their rules and regulations and also because of their ethnocentric nature, they might encounter some problems with the staff remaining since Nigerians are not ethnocentric.

Industry Characteristics and International experience

Kay Fabrics international been global multinational company would desire to transfer based on the level of competition in the market and because of degree of integration, it would be feasible for the home country to welcome such a move because they would see it as a move by the parent company to avoid racial discrimination.

HR practices in the USA and Managerial operations

According to Hofstede (1980), the US are high on individualism and this has been noted to affect their HR practices and will pose a problem for the Nigerians that are low on individualism and high on collectivism, based on this, the following are the Hr practices that the US company will transfer to its new location.

Recruitment: The most import aspect of their practice, since they are acquiring a new company, they would need more capable employees to fill in various positions. This will be done through high creative recruitment and selection process.

Training and Development: in order for the home country to benefit fully from its managerial duties, it would need to be involved and in doing that, are seen as necessary tools for employee's growth and development.

Appraisals: An effective and efficient appraisal system would need to be put in place to access employee's performance.

Reward: They would need to introduce a reward scheme to facilitate and act as a motivator to increase employee performance.

Communication and consultation: The US being low context culture, will help bridge communications gap and there would be interpersonal connections during a short space of time.

After effectively implementing all these Hr practices, they would need to adopt Perimutter (1969) four approaches in dealing with management practices which are the ethnocentric, polycentric, regiocentric and geocentric. Briscoe et al (2009) discovered that countries with ethnocentric orientation such as the US will adopt a standardized approach, countries with a polycentric orientation will prefer an adaptation approach while regiocentric's aim will be to develop an integrated regional strategy and the geocentric that sees the world as a global market. And so because the US are ethnocentric and believe in superiority, the subsidiary will not have enough liberty in deciding any of their managerial functions, the key decisions will be taken by the parent company, they would introduce the HR practice being used at home, this will finally lead to standardization through convergence and integration of their HR practices. Judging from how they would desire to transfer their HR practice due to their management styles, it will indeed be very feasible if Nigeria accepts it.

Conclusion

The desirability and feasibility in transferring HRM practices from Kay fabrics international will be based on standardization and not adaptation and will be influences by all the determinants that would affect the transfer, bearing in mind that, it would be feasible to transfer their HR practices based on ; Nigeria's political stability, the fact that they can both communicate in the same language, being the English language and the US strong financial systems and reforms. However, it might still not be feasible to transfer based on cultural differences that can create a clash in their cultural beliefs and the strength of the trade unions of the subsidiaries.

Recommendations

As a hr consultant, the following recommendations have been put forward in order to facilitate effective transfer of Kay fabrics international HRM practices to Nigeria:

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