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Finally, local pay rates may differ. However, it is important to note that in most instances, companies functioning at the domestic level face an environment with very similar political, economic, sociocultural, and technological situations, al- though the variation might be observed across states and geographic areas.

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Finally, local pay rates may differ. However, it is important to note that in most instances, companies functioning at the domestic level face an environment with very similar political,
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International. As more competitors enter the domestic market, companies face the possibility of losing market share; thus they often seek other markets for their products. This usually means entering international markets, initially by exporting products but ultimately by building production facilities in other countries. The international corporation is essentially a domestic firm that builds on its existing capabilities to penetrate overseas markets. Companies such as Procter & Gamble, Honda and General Electric used this approach to gain access to Europe—they es- sentially adapted existing products for overseas markets without changing much else about their normal operations (Snell & Morris, 2019).

The decision to participate in international competition raises a host of HRM issues. All the problems regarding locating facilities are magnified. For example, HRM professionals must consider whether a particular location provides an en- vironment where human resources can be successfully acquired and managed.

Global. The global corporation, on the other hand, can be viewed as a multina- tional frim that maintains control of its operations worldwide from the country in which it is headquartered. Japanese companies, such as NEC and Matsuhita, tend to treat the world market as a unified whole and try to combine their activities in each country to maximize their efficiencies on a global scale. These companies operate much like a domestic firm, except that they view the whole world as their marketplace.

Global organizations compete on state-of-the-art, top-quality products and ser- vices and do so with the lowest cost possible. Whereas MNCs attempt to develop identical products distributed worldwide, global companies increasingly empha- size flexibility and mass customization of products to meet the needs of particular clients. MNCs are usually driven to locate facilities in a country as a means of reaching that country’s market or lowering production costs, and the company must deal with the differences across the countries. Global organizations, on the other hand, choose to locate a facility based on the ability to effectively, efficient- ly, and flexibly produce a product or service and attempt to create synergy through the cultural differences.

This creates the need for HRM systems that encourage flexible production (thus presenting a host of HRM issues). These companies proactively consider the sociocultural, political, economic, and technological systems to determine where production facilities can be located to provide a competitive advantage. Global companies have multiple headquarters spread across the globe, resulting in less hierarchically structured organizations that emphasize decentralized decision making. This results in the need for HRM systems that recruit, develop, retain, and use employees who are competent transnationally.

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Globalization and Human Resource Management • 41

Transnational. Finally, a transnational corporation attempts to achieve the lo- cal responsiveness of a multinational corporation while also achieving the effi- ciencies of a global firm. To balance this “global/local” dilemma, a transnational uses a network structure that coordinates specialized facilities positioned around the world. More specifically, transnational corporations use geo-diversity to great advantage, placing their top executives and core corporate functions in different countries to gain a competitive edge through the availability of talent or capital, low costs, or proximity to their most important customers. Of course, it is all made possible by the Internet, as improved communication facilitates an inte- grated global network of operations.

By using this flexible structure, a transnational provides autonomy to inde- pendent country operations but brings these separate activities together into an integrated whole. For most companies, the transnational form represents an ideal, rather than a reality. McDonald’s is an example of a transnational corporation, especially with culture-specific food items, like India’s vegetarian McAloo Tikki, the McKebab in Israel, or a Hawaiian Deluxe Breakfast complete with span, rice, eggs, and hash browns. With over 31,000 restaurants across 119 countries serving 58 million people each day, it makes sense that McDonald’s overseas revenue makes up nearly 65 percent of their total revenue, and that they cater McDonalds’ core burger-fries-and-shakes menu to local tastes (Johnson, 2011).

The development of transnationals has led to a fundamental rethinking about the nature of a multinational company. Does it have a home country? What does headquarters mean? Is it possible to fragment corporate functions like HRM glob- ally? To be sure, organizational structure directly affects all HRM functions from recruitment through retirement because to be effective, HRM must be integrated into the overall strategy of the organization. Indeed, from the perspective of stra- tegic management, the fundamental problem is to keep the strategy, structure, and HRM dimensions of the organization in direct alignment (See Briscoe & Schuler, 2012) while being respectful of local country laws or regulations.


Entry into international markets creates a host of HRM issues, challenges, prob- lems, and opportunities that must be addressed by HRM professionals and other organizational members if a company is to not only survive but also thrive in a global environment. Once the choice has been made to compete in a global arena, companies must seek to manage employees who are sent to foreign countries as well as local employees. And this results in another issue facing international organizations, the extent to which their HRM practices should either ‘converge’ worldwide to be basically the same in each location, or ‘diverge’ to be differenti- ated in response to local requirements. There is a natural tendency for managerial traditions in the parent company to shape to the nature of key decisions, but there are strong arguments for giving as much local autonomy as possible in order to

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ensure that local requirements are sufficiently taken into account. (This is known as the global/local dilemma) (see Andrews, 2011). Convergence may be increas- ing as a result of the following factors:

• The power of markets • The importance of cost • Quality and productivity pressures • The development of like-minded international cadres • The widespread practice of benchmarking ‘best practices.’

However, before focusing on these challenges it is important for HRM profes- sionals to first understand what is meant by international human resources man- agement (IHRM) and the different levels of participation in international markets. This is especially important because as noted previously a company becomes more involved in international trade, different types of HRM issues, challenges, problems, and opportunities arise.

Broadly defined, global or IHRM is the process of procuring, allocating, and effectively utilizing human resources in an international business. More specifi- cally, global or international human resource management (IHRM) is the process of employing, developing and rewarding people in international or global organi- zations. It involves the world-wide management of people, not just the manage- ment of expatriates. An international organization or firm is one in which opera- tions take place in subsidiaries overseas, which rely on the business expertise or manufacturing capacity of the parent company. Such companies or organizations bring with them their own management attitudes and business styles. HRM pro- fessionals of such organizations cannot afford to ignore the international influ- ences on their work.

IHRM involves a number of issues not present when the activities of the com- pany or organization are confined to one country. For example,

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