Numerous free-trade agreements forged between nations over the past 60 years, like the General Agreement on Tariffs and Trade (GATT) in 1948 and the North American Free Trade Agreement (NAFTA) in 1994, helped quicken the pace of globalization. However, the election of Donald Trump as president of the U.S. in 2016 has created uncertainty for organizations making their location decisions in his efforts to renegotiate, for example, NAFTA which is the world’s largest free trade agreement. In an effort to keep companies from moving produc- tion outside the United States, Trump announced a 35 percent tariff on steel and a 10 percent tariff on aluminum on Canada, Mexico and the EU. President Trump campaigned on renegotiating NAFTA and frequently berated companies seeking
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34 • RONALD R. SIMS
to build plants in Mexico, for example, particularly when it entails closing plants in the United States (see Amadeo, 2018b; Stoll & Colias, 2016).
While factors like Berxit and the election of Trump as the U.S. president are impacting globalization, perhaps none is more important that the rise of Inter- net technologies (Dreyfuss, 2017; Quora, 2017; Sato, 2014). The Internet, as it continues to develop, has certainly changed the ways that people live and work. Indeed, in some industries, such as music and e-commerce, it has completely revolutionized the rules of the game (Cascio, 2019).
The Internet gives everyone in the organization, at any level and in every func- tional areas, the ability to access a mind-boggling array of information-instanta- neously from anywhere. Ideas can be zapped around the globe in the blink of an eye instead of seeping out over month or years. A global marketplace has been created by factors such as the following:
• Global telecommunications enhanced by fiber optics, satellites, and com- puter technology.
• E-commerce that makes organizations global from the moment their Web sites are up and running, as customers from around the world log on.
• Financial markets are now open 24 hours a day around the world (Lioudis, 2018).
• Cost pressures (that prod firms to move where labor and other resources are cheapest), coupled with a search for new markets (as firms and consumers around the world seek foreign goods and services).
• The integration of cultures and values through international travel, as well as the spread of goods such as music, food, and clothing. In combination, these have led to common consumer demands around the world (Tarique, Briscoe, & Schuler, 2016).
• The emergence of global standards and regulations for trade, commerce, finance, products, and services (Gunther, 2005).
The rapid increase in telecommunications and information technology en- ables work to be done more rapidly, efficiently, and effectively all over the world. Friedman (2016 has suggested that an expanding high-tech, information-based economy increasingly defines globalization and shapes the business cycles within it. That is, much of the flow of capital, labor, services, and goods among Asia, America and Europe are technology based. Without chips, screens, and software help from Asia, the U.S. economy would grind to a halt. Clearly, open borders continue to allow new ideas and technology to flow freely around the globe, ac- celerating productivity growth and allowing businesses to be more competitive than they have been in past decades.
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Globalization and Human Resource Management • 35
Globalization and HRM
Due to globalization, companies have to balance a complicated set of issues related to different geographies, including different cultures, employment laws, and business practices, and the safety of employees and facilities abroad. HRM issues underlie each of these and other concerns. They include such things as dealing with employees today and tomorrow who, via the Internet and social me- dia, are better informed about global job opportunities and are willing to pursue them, even if it means working for competing companies or foreign companies. Determining the knowledge and skill base of workers worldwide and figuring out how best to hire and train them (sometimes with materials that must be translated into a number of different languages) is also an issue for companies in the global environment.
There is every indication that the recent social and political changes have con- tributed to globalization and the movement toward international competition. De- spite the reasons an organization may have for expanding operations globally, HRM is critical to the success of any global initiative. If one adopts the basic prin- ciple that HRM strategy must be derived from corporate strategy and that people do determine an organization’s success or failure, then the HRM function needs to be a key strategic partner in any global operations. Still, in some instances HRM is often neglected in the planning and establishment of global endeavors. Despite such neglect, today’s and tomorrow’s HRM professionals must continue to develop their own and other organizational members competencies or skills in the ever-growing international context of the world of work. This means not only understanding the events and factors that continue to increase the global nature of business but also their role in helping to improve their organization’s competitive advantage in global environments.
UNDERSTANDING THE GLOBAL ENVIRONMENT
It is important for HRM professionals to continue to recognize that because politi- cal, economic, social and technological conditions are constantly shifting around the world, how employees are managed in those changing environments will need to shift as well. HRM professionals can better understand the global environment by regularly conducting a political, economic, sociocultural, and technological (PEST) analysis which can act as an audit of a company’s environmental influ- ences to assist in determining the corporate strategy and accompanying HRM response(s) (see, for example, Post, 2017; Snell & Morris, 2019).
By conducting a PEST analysis HRM professionals and other organizational leaders are able to scan different contextual environments to understand the long- term trends and how they might impact a company. A PEST analysis can help HRM professionals to 1) spot business or human resource opportunities, and give them advanced warning of threats, 2) identify trends in the business environment so they can proactively adapt to these changes, 3) help to avoid implementing
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36 • RONALD R. SIMS
HRM practices in a particular country where they may fail, and 4) put an end to old habits and assumptions about how people should be managed to help bring about innovative ideas for the entire organization.
Political Factors
Government regulations and legal issues affect a company’s ability to be profit- able and successful, and this factor looks at how that can happen. Issues that must be considered include tax guidelines, copyright and property law enforcement, political stability, trade regulations, social and environmental policy, employment laws and safety regulations. Companies should also consider their local and fed- eral power structure and discuss how anticipated shifts in power could affect their business.
HRM professionals can assess the political factors by examining a country’s labor laws, property rights, and patents. When Lincoln Electric, the Ohio-based welding company, for example, started operations in Brazil, they could not offer their yearly bonus program based on performance because any bonuses paid for two consecutive years became a legal entitlement (Siegel & Larson, 2009).
Property rights in many countries are poorly protected by governments. Who- ever has the political power or authority can seize others’ property with few or no repercussions. Civil unrest can also lead to the poor enforcement of property rights. Businesses have less incentive to invest in countries or locate factories in countries experiencing strife. Another issue that has implications for global companies relates to the intellectual property rights—rights related to patents, trademarks, and so forth.
Economic Factors
This factor examines the outside economic issues that can play a role in a company’s success. Items for HRM professionals and other organizational mem- bers to consider include economic growth, exchange, inflation and interest rates, economic stability, anticipated shifts in commodity and resource costs, unemploy- ment policies, credit availability, unemployment policies, and the business cycle followed in the country.
By looking at trends around market and trade cycles, specific industry changes, customer preferences, and country economic growth forecasts HRM profession- als and other organizational members can best understand the economic issues that are bound to have an impact on the company. For example, in 1995, the World Trade Organization (WTO) was formalized as a cooperative forum for country leaders to come together and increase free trade across the world. As of Decem- ber 2017, the WTO member countries represented over 164 member-nations and covered 97 percent of all international trade (Amadeo, 2018c). In addition, coun- tries are continually negotiating free trade agreements with each other in hopes of increasing their economic activity.
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Globalization and Human Resource Management • 37
Since China joined the WTO in 2001, its economy has grown dramatically, drastically altering its political and trading relationship with many nations. In a strange twist of fate, Xi Jinping, the leader of the communist world and China’s president, has taken to defending free trade and globalization, whereas U.S. presi- dent Donald Trump, leader of the free world, has taken to attacking them as noted previously (Elliott & Wearden, 2017).
Sociocultural Factors
