Impact of Globalization on Hrm

Topics: Human resource management, Multinational corporation, Developed country Pages: 22 (4189 words) Published: September 28, 2012
In today’s business environment, there is a continuous growth of world markets, a significant increase in the availability of management and technological know-how, and an increase in economic, political and regional integration. Such factors have led to the globalization of many firms as they seek to gain efficiency advantages, raw materials, cheaper labour, and foreign direct investment.

Constant exposure to international activities can present opportunities beyond marginal significance for multinationals as they seek to operate in different countries. Multinationals as it stands, accounts for over 50% of the world’s manufacturing output and over 30% of the total world trade (Gonzales, 2009). Despite the opportunities presented, multinationals face a number of challenges mainly in terms of how they approach a range of Human Resource Management (HRM) issues. To what extent will a multinational transfer its policies and practices to host countries? How will they staff units overseas? These are just a few of the numerous questions that surface and present challenges for multinationals.

In addition, once they cross national borders, they are susceptible to encounter head on issues like language barriers, culture differences, economic and political systems and varying legal frameworks. As a result of globalization and firms expanding, the cliché statement ‘people are the most important resource in business’ still surfaces and remains of utmost importance. Once multinationals recognise the significance of their most important assets, some of the issues and challenges can be negated. Additionally, they should explore their domestic HRM policies and practices and decide what is best and can be incorporated with their International HRM (IHRM) strategy.


At a first glance, both domestic HRM and IHRM seem to be the same. However, upon closer investigation there are slight variations and differences. When compared to domestic HRM, IHRM includes the following as cited on the article entitled “International human resource management”.

➢ Encompasses more functions.

➢ More diverse functions.

➢ Has constantly changing perspectives.

➢ More involvement in employees’ lives.

➢ Influenced by external factors.

➢ Broader viewpoint on HR activities.

Domestic HRM is simply a range of management activities which seek to achieve organizational objectives through the employees. Torrington (1994:6) as cited on posits that, ‘In many ways IHRM is simply HRM on a larger scale; the strategic considerations are more complex and the operational units more varied, needing co-ordination across more barriers’. In slight contrast, Schuler et al. (1993:720) promulgated that IHRM is ‘human resource management issues, functions and policies and practices that result from the strategic activities of multinational enterprises and that impact on the international concerns and goals of those enterprises’.

Based on the definitions put forward, it is palpable that IHRM deals with problems faced by multinationals in the foreign subsidiaries and the different HR issues associated with the different international business strategies they adopt. This said, the Integrative Response Grid (IR Grid) Fig 2.1 from Prahalad and Doz (1987) surfaces and it argues that the international organisation is faced with pressures to integrate and coordinate their activities on one hand while they have to respond to local or national variations.




LOW Local ResponsivenessHIGH


Source- Wall,S and Rees,B.,2004. International Business.2nd ed. FT Prentice Hall.p.238


Before proceeding to emphasize the mainstream HRM theories, it must be...
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