You cannot have MNCs without globalisation; by the same token, you cannot have globalisation without MNCs



Introduction

By definition, Globalisation stands for: “Exchange goods and service between people from long distance” (Held, 1999), which is a very long and historical process. The main players in globalisation are multinational corporations. Many firms invest progressively into the technology, innovations and also enter into emerging markets. International Human Resource Management helps these corporations with insights on potential employees or labourers, knowledge management, cultures into new market, traditions in the new region and other important information for easier understanding.

The later part of this essay is about knowledge management and its adoption in multinational corporations. This essay aims to show that multinational companies and globalisation co-exists with each other with implications on human resource management.

Globalisation

According to Toni, 2006 the globalisation has important concepts such as global communications, global market, global production, global money, global finance, global organizations, global social energy and global consciousness. The important change in globalisation and fast processes are technology driven. The other important concepts of globalisation are global trade, global market and globalisation on average.

Global Trade, Global Market and Globalization

Almost all countries in the world take part in the globalisation process. However, there are certain countries that do not participate in this process such as North Korea and other countries with economic limitations. The National Income of countries which are in globalisation process can be found possessing significant figures compared with those non-participating countries. A simple litmus test for evidence of globalisation is to check our local shops; we have fruits and vegetables available all year from all over the world.

International trade has been existent since the development of human history across the world. In intercontinental trade started with the early human civilisations and continued during the times of Babylonians, Mesopotamians and still continuing these recent times with emphasis for progress in better, easier and cheaper way to conduct trade between continents. However, in the past they had some limitations in technology (for example they do not have: e-mail, telephone but only letters or telegram), logistics (for example: they do not have trucks or cars, but they had to depend on horses, sea routes etc) and lacked other important aspects of international business.

First nation which started to improve logistical skills was Greece. They had established trade links with India. This collaboration between Asia and Europe cemented in the sixteenth century. For better understanding of the limitations and benefits in globalisation, “World wide trade” (in short WTO) was created in 1995 and it is working on the following four main principles:

“Non-discrimination;

Reciprocity that tariff reductions in one country should be matched by reduction among its trading partners;

Transparency, that the nature of trade measure should be clear; and

Fairness, so that practices like dumping of goods at below market prices or predatory pricing by exporters were deemed unfair and countries were entitled to institute protection against them” (Herld,1999).

However some economic skeptics think that the world is more regionalised than globalised. And that the companies do not sell everything everywhere, they change their products for each market.

It is observed that the people are not the same and would prefer choice and diversity at all times especially in some regions with large multinational population. One of the important aspects of globalisation is human migration. From historical side it is victorious war, for better life, for better work or asylum. The people every time like to discover new places, similar to tourists or for short term stay in the country. The global labour market’s important aspects are infrastructure and communication. The migration can be elite (only some people are changing the place for leaving) or mass migration (many or mostly they change a place for living); nevertheless they have a cultural power in migration. For example, the evidence in the history shows that the mass migration in the UK from Asian countries creates extremely low labour costs. The most usual place where migration originated is from poorest region towards richest region in the world. Also, many religions added to the development and migration of the communities, such as Christianity, Islam, Confucianism, Hinduism, Judaism and Buddhism.

However not all migrants come to new land officially and countries must have some strict immigration laws. With migration, people bring there religions, tradition, language and other cultural aspects from their home countries.

Multinational Companies

Companies would like to operate as a multinational corporation, because it is more prestigious for its brand and that is why companies use different indexes, nationality of employees, different products for different people aiming to be classified with the status “Multinational corporations” or “Multinational companies”. The size is not important as small or large companies can be multinational companies. For example, small bookshop in the UK can open the online shop and sell books around the world. Nevertheless, most of the multinational corporations are big or medium company. They have better channels to have more qualified workforce in particularly business, newest technology, cheapest production and other very important benefits. Although there is no definition when corporations (company) were starting as multinational, there is no single criterion for it and is defined as, “external and quantifiable measures such as percentage of investment overseas” (Perlmutterr, 1969). It is very important and difficult to start doing business as multinational corporations than gradually becoming multinational. According on Bartlett and Ghoshal’s typology grid, multinational companies are usually formed depending upon how they work; ethnocentric (home made products), polycentric (product from other country) and geocentric (global products), but if they do not have a form then they are just distinguishable.

1. Ethnocentric multinational companies “are home made products”, these companies have a complex organization in home country and they form simple subsidiaries. The typical attribute state for this company is given based on the head of the company. Human resource Management for company must prepare “home people” for new work style in the company. For example, if director is from America then company is “American”. Disadvantages for this type of firms are “seen to out-balance the payoffs, ineffective planning”. For example, an ethnocentric multinational company is U. S. Steel.
2. Polycentric multinational companies choose strategy: The home nationality knows what they need and they need be only in the background. The strategy is to bring in local identity as possible, because in a different country the understanding varies based upon their cultures, traditions and other aspects. The biggest risk for companies can be change in political circumstances in host country where they are operational. For example, they have a factory. Human resource management must prepare people from border in “home tradition”. For example, a polycentric multinational company is Nestle.
3. Geocentric companies can send a top professional employee anywhere in the world. The benefits are, they map all over the world and try to perform the best. In this company the citizenship is not important rather the focus is on how flexible your labour can be. The disadvantages for this style of company are in communication; expensive travelling and lost time for travelling; adaptation; and learning. Human resource management in this company must prepare people for travelling; multinational cultures; language training; and other important factors for better adaptation to labour culture in the new country. For example, a geocentric company is Coca-Cola.

However, in Bartlett and Ghoshal’s research they use only nine biggest companies and not all multinational companies must have exact characteristics, many of them having a mixed characteristic of company. The new companies, multinational or global, changes the way of strategy and adapts itself better in the global market. The new strategy or way of life is metanational company; it means global companies “building an efficient network of production, sales, service subsidiaries capable of penetrating market around the world” (Doz, 1;2001). This new strategy of global market is “learning from the world”. What world needs and what they want? Some of the beginner companies which start to transform from multinational or global company to metanational companies are Procter & Gamble, General Electric and others. But however a true metanational starter is Nokia. The company started by listening to the people’s needs within the region and now the company has grown popular and is fast becoming as leading telecommunication manufacturing companies in the present times.

Innovations

When multinational companies want to make some innovations in the company, normally they use methods based on central or local innovation processes.

1. Central innovation process is directed from headquarters to their worldwide offices or locations. The main advantage from central innovation is that all innovations become well networked in the business of the company. However, there are some disadvantages such as, not all countries will accept this new product or innovation.
2. Local innovation process is changing some products or service only in some branches and not in all networks. Benefits from local innovation process are largely macro such as introducing and selling products, services exclusively for certain region [country, state]; innovation can be made more focussed on the culture and tradition. But there are some of disadvantages such as, it is not very cost-effective and managers end up spending a lot of time for adapting their products. Sometimes when the product is good, it can be adopt the central process and start to sell in the global market. A real world example is the company Nestle trying different products in different countries.

Innovation process is very hard for company (expensive, time-consuming realising it, providing training for employees etc). In the next problem, we will focus on knowledge management because it is very important part of company not only for the innovation but also for the operations of the company.

Knowledge Management

In knowledge management we have three parts: information; models, machines; and management of knowledge. In this essay we are focusing only on the management of knowledge.

The multinational companies have a knowledge department (or knowledge office), for organizational learning and informational management to provide for there employee force. However, in some organisations they think that the important parts of knowledge management are in human resource and in information factors. Many of these companies invest more in “intellectual capital” and maintain very close relationship with “human capital”.

The major problem in knowledge management is in the organisational culture. In any organisation, there are two major aspects or concepts such as developed organisational structure and organisational culture. The organisation structure is formed by the members of the organisation whereas the organisational culture is made of values, assumptions, attitudes and beliefs.

Conclusions

Multinational companies feel globalisation because some of them they change their structure to transnational companies without any specific nation and they are major players in world economy and world business. They reshape themselves because companies aim to be global leaders and provider of services everywhere or anywhere in the world. However, companies face a big problem with knowledge management because the management spends a lot of time to adopting something new in the company, or takes long time for adopting itself in a new country. Almost all multinational companies find itself starting in some region which is not good for its business (for example, Nokia in Finland, Yamaha in Japan and many others). They start to become successful only after they are start to listening to the people what they want? They start to be more successful more in the other part of the world compared to home. Nevertheless there are companies which failed after entering into globalisation. Such companies failed as they were not able to determine what could have gone wrong, or they do not have a good strategy, good human resource and other value added factors which may seem not important when everything is working. Many of its employees might have chosen bad strategy, or were not able to calculate their chances in the new markets. Human resource is the important part in any company with interests in the global market (multinational, global or metanational companies). Without globalisation, the existence of multinational companies become meaningless as these companies would not have new markets. The globalisation can not be without multinational companies because if any company do not want enter in new market then the globalisation exists as “not born”.

References:

1. Bartlett, C.A. and Ghoshal, S. 1998. Managing Across Borders: the Transnational Solution (2nd ed.). London: Random House
2. Beardwell Julie and Claydon Tim. 2007. Human resource management — A Contemporary Approach, 5^th edition. Essex: Pearson
3. Bratton John, and Gold Jeff. 2007. Human resource management Theory and Practice4^th edition. London: Palgrave.
4. Castells, Manuel. 1996. The Rise of the Network Society, The Information Age vol. 1. Oxford: Blackwell
5. Doz, Y. et al..2001. From Global to Metanational: How Companies Win the Knowledge Economy. Boston: Harvard Business School Press
6. Edwards, Tony and Rees, Chris. 2006. International Human Resource Management. London: Prentice Hall
7. Held, David et al. 1999. Global Transformations. Cambridge: Polity Press
8. Hirst P. and Thompson.1999. Globalisation in Question, Cambridge: Polity Press
9. Micklethwait, John and Wooldridge, Adrian.2000. AFuture Perfect: The Challenge and Hidden Promise of
10. Perlmutter, H. 1969. “The tortuous evolution of the multinational corporation,” Columbia Journal of World Business, 4:1, pp. 9–18.
11. Sparrow Paul, Brewster Chris and Harris Hilary. 2004.Globalizing Human Resource Management: Tracking the Business Role of International Human Resources Specialists, London: Routledge
12. Storey John. 2001. Human Resource Management — A Critical Text. London: Thomson Learning