This report is about how the use of immigrant can be a strategic resourcing choice for multinational corporation in the current economic climate. It aims to explore and analyze current practices and developments of strategic personnel and development with full regard to resourcing in the international context. The future of multinational corporations’ competitiveness in the global market is contingent on corporations ability to change and adapt their resources strategically to the nuances of the broadening global playing field. (Caligiuri and Stroh: 1995).
Few writers have examined the role of HRM in formulating and implementing business strategy at an international level. The focus of this work is in the formal design of business strategy, as well as its role as an enhancer of strategy, concentrating specifically on HRM’s role as an enhancer. Bird and Beechler,( 2007). Business strategies, which organizations adopt to maintain competitiveness, should be developed in conjunction with their human resource departments (Lengnick- Hall and Lengnick-Hall, 1988: Schuler and MacMillan. 1984; Tichy, Fombrun and Devanna. 1982). The human resource practices need to be congruent with the organizations’ strategic plans in order to ‘facilitate successful implementation’ of their business strategies (Tichy et al. 1982: 47).
Given that it is the people within organizations who sell and market, develop and create products, make decisions and implement programmes, human resources are vital to the success of an organization. To be strategic. human resource practices are expected to maximize employees effectiveness in accordance with their organizations’ missions, objectives and goals (Lengnick-Hall and Lengnick-Hall, 198R: Schuler and MacMillan, 1981: Tichy et 1982).
In this current economic climate which is the period of recession with the US credit crunch affecting the money markets, consumer spending becomes weak and therefore any service provider, retail outlet or manufacturer that is reliant on consumer spend will find it difficult. Recessions occurs because of a decline in total spending or aggregate demand ( Legge, 1988). They signified by a period of falling domestic product, decline in investment and production, and by rising unemployment. The current recession has driven the unemployment rate to levels not seen since 1993, and it is likely to continue climbing for much of 2009. (Report from Families USA. org 2008). Business confidence has been falling for a while; hence investment rates are likely to decline further due to the lack of confidence and the turmoil in the banking sector. (What is happening to the economy? www. fpb. org).
International human resource managers have a challenging task: they must develop practice: which will maintain congruence with the overall strategic plan of their respective multinational corporations (MNCs), while balancing the economic, social, political and legal constraints of the various host countries. (Milliman, Von Glinow and Nathan, 1991) Multinational Companies The growth of multinational companies is one of the driving forces of the process of internationalization.
(Edwards and Rees , 2006). Multinational companies (MNCs) are key protagonist in the internationalization of economic activity. (Tony Edwards, 1998). They are the primary shapers of the contemporary global economy ( Dickens, 2003:198). MNC is a company engaged in producing and selling goods or services in more than one country. (Shapiro, 2006). Economists define multinational enterprise any company, which owns, controls and manages income generating assets in more than one country. It also engaged in foreign direct investment (FDI), they own or control value-adding activities in more than one country (Dunning, 1992).
MNCs consists of parent company located in the home country and at least five or six foreign subsidiaries. International production, undertaken by multinational enterprises (MNC’s), is the productive core of the globalizing world economy. According to FDi magazine (2009), FDI inflows grew from just $58m in 1982 to nearly $1000bn in 2005 and to more than $1400bn in 2008. The global stock of FDI is in excess of $15,000bn. There are more than 80,000 MNCs globally, with ownership stakes in more than 800,000 foreign affiliates employing more than 82 million people.
MNCs have sales of more than $30,000bn, exports of more than $6000bn and account for about half of the world’s total R&D expenditure and more than two-thirds of the world’s business R;D. The countries where MNCs are growing are the United States , Japan, Western Europe and East Asian countries. These countries are at the core of the world economy. (Shapiro, 2006). MNCs dominate many industrial sectors, such as automotive, electronics and oil, while they are increasingly coming to dominate parts of the service sector as well, especially Finance and telecommunications. (Tony Edwards, 1998: 45).
Some sectors are expected to be resilient or decline due to the global recession and financial crisis. Food and beverages generally fairly resilient during harsher economic times as demand for food is ongoing 5 Professional services and headquarters are growing strongly, with market-seeking investment to exploit the growing markets in developing countries. In terms of the declining sectors, most of these are linked to major declines in global demand for consumer goods and related sub-supply. Communications is typically resilient in times of recession, but given the depth of the downturn, communications companies are expected to cut ack on their global investments.
The major sector affected in the recession is the Financial sector. The global recession is hastening the shift of focus to developing countries as they remain the only source of growth in the world economy. At the same time that these countries have become key destinations for FDI, their companies are rapidly internationalising and becoming multinational enterprises. U. S is prominently been seen as one of the countries that have on of the most admired corporations, in addition to that most of this firms are largely multinational in philosophy and operations.
(Shapiro, 2006). According to Shapiro, (2006) Overseas investment by U. S firms U. S investment by foreign firms are in the hundreds of billions each year. The stock of foreign direct investment by U. S companies reached $2. 07 trillion in 2003 while direct investment by foreign companies in the united states exceeded $1. 55 trillion that year. The influence of MNCs is also present in the UK, this is in part due to the prevalence of Foreign MNCs in Britain where the stock of inward foreign direct investment (FDI) as a proportion of GDP is greater than in
any other large western economy (Dunning, 1993 cited in Edwards, 1998). Employment in foreign owed firms in UK has risen steadily, especially in manufacturing since the 1970’s and in service in the last decade. (Marginson, 1994 cited in Edward’s 1998). 6 Reasons for Investing Abroad, Becoming MNC’s. Barlett and Ghoshal (1989) identify three leverage points that can be gained through different types of internationalization. These are efficiency resulting from performing specific activities at the right scale in the rights place, market access or customer responsiveness that often requires localization of some production
or service dimensions and learning/knowledge leverage. A key element of their argument is that different organization forms are particularly well adapted to one or another of these dimensions of performance, but that addressing all three is extremely difficult. The traditional European multinational, they argue, was extremely good at responding to varying needs, while the Japanese firm of the 1980s did extremely well in terms of efficiency. One motivation for firms to internationalize is the desire to secure a stable source of raw material. (Tony Edwards, 1998: 45).
Most firms want to take direct control over the production of raw materials in order to absorb profit margins. Not just raw materials firms want to have access to,firms want to have access to cheap labour. Hollinshead et al , (1999), recognized Gherman and Allen (1984) and Barrrell and Pain (1997), reasons why companies decide to establish their own manufacturing or extraction units in foreign countries: 1. Local governments prefer to have the MNC’s invest in their counties rather than export to them. Their are benefit in terms of local employment and an outflow of foreign currency can be avoided, resulting in a better trade balance for the host country.
Within MNC’s local managements prefer the parent company to set up a manufacturing plant in the host country because this makes the subsidiary more important within the group and at the same time facilitate relations with the host country. 3. The role played by knowledge-based firm specific assets. This term refers to assets such as managerial or marketing skills or reputation and process or product innovations that are firm specific and may be panted. Dunning (1993), examine different kinds of foreign production MNCs companies undertake.
The resource seekers are prompted to invest abroad to acquire particular and specific resources at a lower real cost than could be obtained in their home country. There are three main types of resource seekers. First are those seeking physical resources. The second group of resource seeking MNCs are those seeking cheap unskilled or semi-skilled labour. The third type of resource seeking is the need of firms to acquire technological capability, management or marketing expertise and organizational skills. 7 Strategies Choices by MNCs Firstly what is strategy ?
Many authors have different interpretations, Johnson and Scholes (1999), define Strategy as the direction and scope of an orgnaisation over the long term : which achieves advantage for the organizations through its configuration of resources within s changing environment, to meet the needs and to fulfill stakeholder expectations. The two authors explain strategies exit at a number of levels in an organization. The corporate strategy which is concerned with the overall purpose and scope of the organization to meet expectations of owners or major stakeholder and add value to different parts of the enterprise.
Corporate strategy aims to establish sustainable competitive advantage that includes superiority regarding cost position and product/service quality and ability regarding meeting customers demand. Tatli A, (2005). Business Unit strategy is about how to compete successfully in a particular market. The third level of of strategy is at the operating end of the organizations, there are operational strategies which are concerned with how the component parts of the organization in terms of resource, processes, people and their skills effectively deliver the corporate and business level strategic direction.
This is important to MNC’s and should be integrated with operational decisions and strategy. The two authors define strategy in perspective of business and management. With the conceptual shift from personnel management to human resource management, the strategic approach has become prominent. Tatli A, (2005). Human resource strategy basically concerns how human resources may be utilized in order to achieve the objectives of a firm. The link between corporate strategy and management of human resource has started to be considered Tatli A, (2005).
Foot and Hook (1996) argue that in contrast to the tactical and rather short-term focus of PM, HRM is strategic and long term. Armstrong (1992: 47) argues that strategic orientation is a vital ingredient in human resource management. It provides the framework within which coherent approach can be developed to the creation and installation of HRM policies, systems and practices. Human resources is one of the strategic dimensions in the portfolio of a firm and needs to be allocated effectively for fostering success and competitive advantage. Tatli A, (2005)