People and Organisations:Principles and Practices in Global contexts(MN7181): Global context for HRM

What is Globalization?

The term globalization comes from English, as base of the word ”globalization” which refers to the emerging of an international network, belonging to an economical and social system.

Roland Robertson was the first person who defined globalization as "the understanding of the world and the increased perception of the world as a whole. Martin Albrow and Elizabeth Kingdefine globalization as "all those processes by which the peoples of the world are incorporated into a single world society.

Anthony Giddens uses the following definition: "the globalization can be defined as the intensification of social relations throughout the world, linking distant localities in such a way that local happenings are formed as a result of events that occur many miles away and vice versa.

Globalization can be linked to the local, the national and the regional. On the one hand, a connection is made between social and economic relationships and networks, organized on a local and / or national, on the other hand, it connects social and economic relationships and networks crystallized on wider scale the regional and global interactions.

Globalization speeds up the competition for efficiency in production market. Under the pressure of competition, one of the main changes is innovation in the workplace and therefore firms were increasingly became commit to seek productive work organization (Chaykowski & Giles, 1998). As firms become more engaged in globalization process, a parent firm will need to innovate to survive. At the end, international workplaces will choose a high performance HR practices designed to encourage workers to commit (Walsworth & Verma, 2007).

To improve a quality of production, for instance, management have to have unique skill to satisfy customers and thus, employers focus on job training, multi-skill and employee’s involvement such as quality circle, autonomous team. Under the functional human resource management, compensation was based primarily on seniority, yet competition has encouraged performance based payment system. Promotion was also tightly linked to individual performance.

On the other hand, at the heart of managerial strategy focusing in high performance work system is individual involvement and trustworthy relationships (Spreizer et al, 1999). Therefore, employers emphasizes on open communication and effective grievance system in the workplace.

Video 1: Globalization and HRM

Key aspects of Globalization

Containerization

The costs of ocean shipping have come down, due to containerization, bulk shipping, and other efficiencies. The lower unit cost of shipping products around the global economy helps to bring prices in the country of manufacture closer to those in export markets, and it makes markets more contestable globally.

Technological change

Rapid and sustained technological change has reduced the cost of transmitting and communicating information – sometimes known as “the death of distance” – a key factor behind trade in knowledge products using web technology.

Economies of scale

Many economists believe that there has been an increase in the minimum efficient scale (MES) associated with some industries. If the MES is rising, a domestic market may be regarded as too small to satisfy the selling needs of these industries. Many emerging countries have their own transnational corporations.

Differences in tax systems

The desire of businesses to benefit from lower unit labor costs and other favorable production factors abroad has encouraged countries to adjust their tax systems to attract foreign direct investment (FDI). Many countries have become engaged in tax competition between each other in a bid to win lucrative foreign investment projects.

Less protectionism

Old forms of non-tariff protection such as import licensing and foreign exchange controls have gradually been dismantled. Borders have opened and average import tariff levels have fallen.

That said, it is worth knowing that, in the last few years, there has been a rise in non-tariff barriers such as import quotas as countries have struggled to achieve real economic growth and as a response to persistent trade and current account deficits.

Growth Strategies of Transnational and Multinational Companies

In their pursuit of revenue and profit growth, increasingly global businesses and brands have invested significantly in expanding internationally. This is particularly the case for businesses owning brands that have proved they have the potential to be successfully globally, particularly in faster-growing economies fueled by growing numbers of middle class consumers.

References

Heung-Jun Jeong (2012) The Effect of Globalization on Human Resource Management, Unions and Flexibility in South Korea , Available at: http://ilera2012.wharton.upenn.edu/RefereedPapers/JeongHeungJun.pdf (Accessed: 26th September 2018).

Jim Riley (2017) Factors That Have Contributed to Globalisation, Available at: https://www.tutor2u.net/business/reference/factors-that-have-contributed-to-globalisation(Accessed: 26th September 2018).

Sandu CUTERELA (2012) Globalization: Definition, Processes and Concepts, Available at: http://www.revistadestatistica.ro/suplimente/2012/4/srrs4_2012a22.pdf (Accessed: 26th September 2018).