Human Resources for International Joint Ventures: Pakistan and the US

3765 words (15 pages) Essay in Human Resources

08/02/20 Human Resources Reference this

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Contents

Abstract

Introduction

Literature Review

Context of the Problem Statement

Difference in Cultures and Institutions

Mechanisms of Developing the Human Capital

Conclusion

References

 

Abstract

This report looks into the cultural gap and differences between Pakistan and United States in context to an international joint venture between two manufacturing companies belonging to both countries; and their Human Resource Management related implications. The organizational culture in the United States is considered very open and fair in contrast to that of Pakistan, especially in the manufacturing concerns. Since the manufactured product of the international joint venture is a lingerie line, it presents itself in the form of further complication because Pakistani manufacturing concerns are typically male dominated. This report analyzes the significant human resource management problems that are imminent in this joint venture and subsequently presents possible solutions.

Introduction

International Joint Ventures are becoming increasingly popular in the business landscape as a tried and tested method of expanding in the new markets. Though there are a lot of operational intricacies that arise in such ventures, one of the focal problematic area in this context is that of human resource management. It makes sense that if teams for two different parts of the world, having different cultures and values are to work together, then there must be a middle ground where both of the parties can relate. But issues arise when one party comes with the know-how and the other party comes up with the labor. This is especially true of manufacturing joint ventures and firms.

Literature Review

In this day and age of ever expanding business horizon’s and potential for exponential growth, firms and organizations are looking for avenues of growth in different market. It makes sense because of the fact that economies are now more mixed and intertwined due to the movement towards globalization as endorsed by many in the past half century. It is not to deny that the need and hunger for business expansion did not exist before the World War Two. East India Company serves as a concrete example of a business and organization expanded literally to different horizons in that timeframe. Although the intricacies and the mechanics of the expansion did very much differ from the practices that are prevalent today, the East India Company also did Joint Ventures with the local merchants of the Indian Subcontinent. Now that the focus is more towards the employee well-being in the current era, the principal of expansion through joint ventures is the same, but the operational dynamics have become very much different.

The principle function of a Joint Venture is then to tap into the new market, with the help of a local business presence that knows how to navigate the market. Strategically, each party of the joint venture, whether it is local or international, puts forth on the table their roles and liabilities (Zheng and Scase, 2013). In case of International Joint ventures, the local party usually offers the local know-how and a familiar brand name, while the international party offers finances and supervisory roles to ensure up to date business practices (Colak, 2016). Legally, the joint ventures whether they are in a local or an international business landscape can take the form of a partnership or a partial acquisition of ownership. Operationally, that could translate to the creation of a shared previously created or a brand new organization.

There is a lot of risk associated with tapping into a new market about which there is not much familiarity. There is no guarantee whether the products and services pushed in the market with certain price points will resonate with the audience or not. There is no one size fits all strategy, especially when talking about cross cultural international markets. A minor mishap can cost a fortune in costs. Hence companies are adamant on relying on existing business that translate to potential partners in an international joint venture (Connor and Ballentine, 1999).

International joint ventures in this context hence present many advantages in contrast to tapping into the market anew. For instance, the local partner has within his portfolio a solidified base of local customers, who in turn are also familiar with the brand name of the local partner. The credibility of the brand has hence already been established, ensuing trust amongst the target market of the joint venture. If a new solo venture were to be started, extensive marketing campaigns would have to be carried out, if the international partner of the joint venture did not have their name familiar to the masses. The second biggest advantage that the local partner can provide is the already established distribution capabilities. Not a whole lot of companies and organizations have in house distribution, instead they outsource the logistics to other companies. Therefore to find the right kind of support or distribution logistics without a local partner’s help implies to the extensive research into variables such as the investment on the infrastructure in any given country as well as insurance policies etc. The third major advantage a local partner can give is the human capital (Cameron and Kenderdine, 2007). It is to be noted that the local partner’s human capital has already been nurtured enough to be a valuable asset. Since the end goals and the purpose of existence of the international and local partner are similar, the local human capital is hence broadly in tune with the human capital of the international partner. The only difference is that the local human capital has been fine tuned to the local market in their own accord, which may or may not be effective. This is essentially where the international partner can provide their input, and overhaul the operation processes whether they are related to marketing or human resources etc.

Although there are numerous advantages to go through the route of international joint ventures when in the process of expanding, but things do not normally go buttery smooth. The biggest hindrance is the process of collaboration between the international and local human capital. To begin with, numerous cases between companies have been documented where there is difficulty in the management of loyalty (ChoiChangBeom, 2011). Employees are often times accustomed to their own way of doing things, and as the fundamental truth of HR practices, change in the fundamental infrastructure of business practices is always opposed. Thus the loyalty factor is in essence an extension of loyalty to practices things the old way in the joint venture.

Secondly, there is also a staffing gap in most of the international joint ventures. It usually happens that the core workforce is provided by the local partner and the supervisory roles are carried out by the international partner (Choi, 2007). Hence there comes to a formation a multi-tiered system of the employees based upon their country of origin. This gap in staffing tiers is almost necessary as it associates clear functional goals in a setting of already familiar peer workforce (Christiansen, Turkina and Williams, 2013). But with regards to career progression and career trajectory, such tiered gaps are detrimental to the workforce, because swaps in tiers occur very rarely. Since there is an unspoken rule about not going cross functional and climbing up the managerial ladder, not all employees are inclined to give their best.

Diversity in itself is a very big advantage for any multinational corporations due to the benefits of bigger and more robust human capital and mental pool. But diversity in terms of binary groups can be damaging to the company culture. One higher aspect of this argument in terms of international joint ventures is the difference in performance appraisal methods and preferences. The international partner may be more transparent and honest in their process among certain factors and metrics; but it may be that the local partner does not even believe in those metrics as much and considers some other factors much more important for performance appraisal.

Culture is perhaps the biggest factor in these hindrances. Simple factors such as positioning on the openness index of the culture can have a tremendous impact on the types of problems faced within the international joint venture with regards to the human resources (Cyr, 1995). For instance it while openness towards communication in US based companies is considered a strength in any organization. Employees are looking forward to clear cut critical feedback that emphasizes their areas for improvement. The case may not be the same in the Japanese culture as it is very low on the openness index (Prasad and Ghauri, 2004). Therefore if critical feedback is presented to them in the way it is done in the United States, the employees may feel offended and subsequently create a conflict between management and work force.

Context of the Problem Statement

Company A form the United States is a lingerie apparel company with a strong footing in its market. The lingerie is very popular and is marketed as a pompous display of undergarment clothing. Company A has long been interested in expanding its business across emerging economies due to the fact that the level of competition in the emerging economies is very low. Leveraging the human capital and the sheer years of experience managing such a type of a business, Company A is adamant on taking over the emerging economies as well. The country Company A has chosen to tap into first due to virtually no competition is Pakistan. There are not many lingerie manufacturing companies in Pakistan. But due to westernization of the upcoming Pakistani generation, there is a lot of potential in that market. Company A has subsequently found another apparel manufacturing company called Company B and has taken the route of an international joint venture. The rationale behind this decision of forming a new brand in the form of an international joint venture is because since Company A’s own brand is a very pompous lingerie brand, it may not resonate well within the Pakistani audience due to the emphasis of moderation in its cultural values. Hence Company A looks forward to start anew its custom made lingerie for the Pakistani market with the help of a local Company B.

Difference in Cultures and Institutions

Though the United Kingdom had been ruling in the South Asian region for almost a century, there remains a large cultural gap between Pakistan and the United States. Even though Pakistan majority of the Pakistani employed class is familiar with the English language, the comprehension of the culture between both the countries remain divided. It mainly has to do with the mainstream portrayal of the media, where Pakistan is considered very much backward and the United States’ culture is considered overly liberal. This gap is somewhat based on facts in the sense that the organizations in the United States are very much open about their practices and employee inclusions, whereas Pakistan is still figuring out to be inclusive and fair in its employment laws. It mainly has to do with the gender bias where specific roles are reserved for the specific gender. The softer desk jobs tend to be reserved for women (if the workplace considers employing a women at all), whereas on the other end the on field jobs such as those of manufacturing remain dominant with men.

In terms of the human resource landscape within the organization, it means that the employee unions will mostly be compromised of men, with little to no understanding of the workplace rights of women. The supervisory roles then also have to be reserved for men rather than women for the manufacturing department. This is where the controversy strikes; Pakistani men know little to nothing about the lingerie segment of clothing. On the other hand, instructions from women supervisors in manufacturing roles is expected to be taken for granted as there are not many examples of women fitting in that role of a line manager or a supervisor (Kachra and Hébert, 2000). The fundamental relationship of a man or a woman in the business landscape in Pakistani society is void of frankness and is mainly autocratic. The conflict resolution in such cases is not done informally between the employees but handled by committees overseeing and overlooking employee wellbeing (Julian and Trimarchi, n.d.).

Economically, the economic divide in Pakistan is far greater than that of the United States. The ‘colonial complex’ is still very much at large in the sense that the economically advanced class is considered the ruling class and financially deteriorated class is considered the ruled class. Since the concern is of a manufacturing international joint venture, this binary gap in classes could add furthermore complications to the human resource practices. The lack of intermingling between both the classes can present itself in the form of lack of communication and lack of loyalty. Subsequently this can hinder the transfer of human resources and the human capital especially between the experienced manufacturing managers coming from the United States and the working class of the manufacturing department from Pakistan.

As described in the literature review, the binary social classes this joint venture can induce will cause setbacks. One of the negative outcomes in terms of the social aspect is decision making complexity (Luo, 2002). The whole context of male dominant work force along with international supervisory force can make it unclear as to within whom lies the power of making decisions. There is no doubt that the local work force is adamant on working according to the principles and guides that they have been previously following in relation to manufacturing. On the other hand, these operational practices are expected to be outdated and old since Pakistan is an emerging economy. The comfort of doing things the previous way, which may have well been producing good results translates into the local expert knowledge lying within the local work force (Min, 1996). If a turnaround is to be made, it could possibly result in a backlash because there is already an expectation of a communication gap due to the previously defined reasons (Julian and Trimarchi, n.d.).

Another big factor is that since the product of manufactured is women oriented, the manufacture of extravagant lingerie in the local male dominant work force is expected to be considered a taboo. There is nothing wrong with manufacturing of undergarments in Pakistan, but the ones that are marketed as pompous are considered against the modest values of the Pakistani culture. This can create a bit of a dilemma for the workforce whether they are doing right by their time and whether that they should be wholly vested as a moving part in this international joint venture.

Mechanisms of Developing the Human Capital

First and foremost, the staff for the international joint venture should be a reflection of the product that is being made. In essence, it means that there should be a large number of women employed in the workforce as well. Since the product itself is lingerie, the human capital of the international joint venture should have a significant amount of local women working in them.

The prejudice that is prevalent between both the supervisory and working classes in the joint venture as previously described is more focused on the context of a male dominated workforce. If there is a significant amount of female coworkers hired, expectations are that the joint venture work force will break the binary divide of the workforce (Woodside and Pitts, 1996). There shall be then three primary social parties of working class men, working class women and the supervisory or management ‘class’. This will essentially make the whole experience free of prejudgments and prejudice in the sense that this joint venture will introduce new working dynamics never seen as before by the local working class. Hence there are more chances that the practices audited and the newer ones introduced will be accepted with an open mind.

This act of including more local women in the manufacturing workforce will open pathways to an increased ease in transfer of mental capital from the managers to the working class (Vaidya, 2000). The primary reason is that the female working class in Pakistan culture is not accustomed to leadership skills and is willing to follow the directions of the managers. Therefore, the joint venture can have a blank slate in the form of not previously nurtured employees and subsequently write their own new values into the hearts and minds of the employees.

The social stigma previously described about working for a lingerie company can also be overcome with the training and development within cross teams with a high focus on women hiring. Since the social landscape of the Pakistani women is very open within its own cocoon, there is expected to a higher chance of employee engagement and employee loyalty. Even feedback about the product from the employees is then highly probable, granted there are women working on the managerial roles in manufacturing of the lingerie product as well. Men may not feel very comfortable talking about the products or even owning up to the products.

Performance appraisal mechanics are rarely related to the working class in the Pakistani business landscape. Since the society is much more closed than that of the United States, people simply have not had a chance to talk about strengths and weaknesses in a positive manner within an office setting. The key here for the international joint venture is to define and educate the working class employee about what the performance metrics towards the employee appraisal will be and the exact way they can increase their chances of a promotion to the next level. To bridge the gap between the managerial employees and the working line employees, a mix and match of both cultures is recommended, so that the climb up the career trajectory is made believable to the working class employee. The system should be robust in the sense that there is to be a single compensation system to eradicate the feelings of inequity. It should not matter if the employee is working in the manufacturing bay or sitting behind a desk, the compensation and benefit systems for both type of employees should be made uniform (Vaidya, 2000). This shall not only remove the divide but also encourage cross departmental transfers as everyone will be on the same page as to how the system works in the international joint venture.

Conclusion

In a nutshell, the key to success in this international joint venture is coherency. The route to coherency between the local and the international employees of this manufacturing firm has been recommended that of starting anew with a female dominant manufacturing workforce instead of men dominated. Since the women are not that much prevalent in the manufacturing landscape of Pakistani economy, the transfer of knowledge and practices imported from abroad is hence made easier as there is not much knowledge to be replaced to begin with in the first place. The inclusion of a female majority workplace also breaks the ‘us vs them’ mentality as the workforce is demographically not based on two parties, rather there are now three concerned parties. To start with the female workforce in the Pakistani workplace is essentially to start anew with new policies and new human resource management practices. Since this is the goal of the international joint venture to make the transfer of knowledge capital as smooth and effective as possible, starting with a female dominant workforce is therefore the recommended route to be taken. Furthermore, since the product is the manufacturing of female lingerie, the expected communication gap can be narrowed and employee engagement increased by going through the recommended course of action.

References

  • Cameron, F. and Kenderdine, S. (2007). Theorizing digital cultural heritage. Cambridge, Mass.: MIT Press.
  • Choi, C. (2007). Parent Control and Joint Venture Performance. INTERNATIONAL BUSINESS REVIEW, 11(2), p.23.
  • ChoiChangBeom (2011). The Effect of Joint Venture Partners’ Management Control on International Joint Venture Performance. The e-Business Studies, 12(4), pp.159-174.
  • Christiansen, B., Turkina, E. and Williams, N. (2013). Cultural and technological influences on global business. Hershey PA: Business Science Reference.
  • Colak, M. (2016). The impact of environmental uncertainty on international joint venture performance: the mediating role of international joint venture adaptation. J. for Global Business Advancement, 9(3), p.231.
  • Connor, T. and Ballentine, N. (1999). Access to international markets through joint venture. International Journal of Business Performance Management, 1(4), p.368.
  • Hofstede, G. (2001) Culture’s Consequences. Comparing Values, Behaviors, Institutions, and Organizations across Nations 2nd ed. London: Sage.
  • Cyr, D. (1995). Organizational learning in East-West joint ventures. Fontainebleau, France: INSEAD.
  • Julian, C. and Trimarchi, M. (n.d.). A structural model of international joint venture (IJV) marketing performance in a developing country. Maroochydore: Sunshine Coast University College.
  • Kachra, A. and Hébert, L. (2000). Managerial behavior, IJV structure and venture performance. London: Richard Ivey School of Business, University of Western Ontario.
  • Luo, Y. (2002). Multinational enterprises in emerging markets. [Copenhagen]: Copenhagen Business School Press.
  • Min, P. (1996). Caught in the middle. Berkeley: University of California Press.
  • Prasad, S. and Ghauri, P. (2004). Global firms and emerging markets in an age of anxiety. Westport, Conn.: Praeger.
  • Vaidya, S. (2000). Factors affecting learning effectiveness in international joint ventures (IJV).
  • Woodside, A. and Pitts, R. (1996). Creating and managing international joint ventures. Westport, Conn.: Quorum Books.
  • Zheng, P. and Scase, R. (2013). Emerging Business Ventures under Market Socialism. Hoboken: Taylor and Francis.
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