Globalization and its Impact on HRM in Corporate Sector

International Journal of Computer Science & Management Studies, Vol. 13, Issue 07, September 2013 Globalization and its Impact on HRM in Corporate Sector Mr. Anirudh 1, Mr. Deepak Jatain 2, Mrs. Neelam 3 1 M.B.A M.D.U Rohtak anirudh.malik1111@gmail.com 2 M.B.A M.D.U Rohtak deepakjatain9@gmail.com 3 M.B.A. M.D.U Rohtak malik.neelam@yahoo.co.in Abstract One of important features of the world economy today is that it is globalizing at a fast pace and the different economies of the world are coming closer to one another in terms of economic relations. The process of global integration is being actively debated particularly among the developing countries in terms of its impact on domestic economic policies and the rate of economic growth. Globalization is now being accepted as an inescapable reality and being built into the process of economic reforms in a number of developing and emerging market economies. A truly global corporation views the entire world as a single market it does not differentiate between domestic market and foreign market. In other words, there is nothing like a home market and foreign market there is only one market, the global market. So it is very important to study about globalization and its effect on corporate sector. Keywords: HRM, Globalization. Introduction Why do companies like Wal Mart, Proctor & Gamble, IBM, Nike, and Nestle want to pursue a global strategy despite failures and losses? The answer is fairly simple. They recognize that business is becoming a unified global arena as trade barriers fall, communication becomes faster and cheaper. Globalization is the process of international integration of products, technologies, human resources, capital, information and cultures. It is characterized by increasing social and economic openness and growing interdependence between the countries of the world. As globalization progresses, economic, social and political systems of different countries more freely interact with one another and adapt to promote further interaction. Globalization therefore is not a purely economic or business concept but also has social, cultural and political dimensions Globalization in its true sense is a way of corporate life necessitated, facilitated and nourished by the transnationalization of the world economy and developed by corporate strategies. Globalization is an attitude of mind it is mindset, which views the entire world as a single market so that the corporate strategy is based on the dynamics of the global environment. In order to grow and prosper, many companies are seeking business opportunities in global markets. Competition and cooperation- with foreign companies has become an important focal point for business. Indeed exporting accounts for a large portion of U.S. economy, totaling more than $956 billion every year. Essential Conditions for Globalization There are, however some essential conditions to be satisfied on the part of domestic economy as well as the firm for successful globalization if the business. They are: Business Freedom: There should not be unnecessary government restrictions which come in the way of globalization, like import restriction, restriction on sourcing finance or other factors from abroad, foreign investments etc. That is why the economic liberalization is regarded as a first step towards facilitating globalization. 302

International Journal of Computer Science & Management Studies, Vol. 13, Issue 07, September 2013 Facilities: The extent to which an enterprise can develop globally from home country base on the facilities available like the infrastructural facilities. Government Support: Although unnecessary government interference is a hindrance to globalization, government support can encourage Globalization. Government support may take the form of policy and procedural reforms, development of common facilities like infrastructural facilities, Rand D support, financial market reforms and so on. Resources: A resource is one of the important factors, which often decides the ability of a firm to globalize. Resourceful companies may find it easier to thrust ahead in the global market. Resources include finance, technology, Rand D capabilities, managerial expertise, company and brand image, human resource etc. It should, however, be noted that many small firms have been very successful in international business because of one or other advantage they possess. Competitiveness: The competitive advantage of the company is a very important determinant of success in global business. A firm may derive competitive advantage from any one or more of the factors such as low costs and price, product quality, product differentiation, technological superiority, after sales service, marketing strength etc. Sometimes small firms may have an edge over others in certain aspects or times of business. Orientation: A global orientation on the part of the business firms and suitable firms and suitable globalization strategies are essential for globalization. Globalization and Its Impact on HRM in Corporate Sector Globalization in the corporate sector encompasses the following areas: Doing or planning to expand the business globally. Giving up the distinction between domestic market and foreign market thereby developing a global outlook of the business. Locating the production and other physical facilities on consideration of global business dynamics irrespective of national consideration. Global sourcing of factors of production that is raw material, technology, labor, and finance. Global orientation of organization structure and management culture. World Development Report (1996) estimated that 23% of the world s GDP of industries that are fully globalized, whereas 15% is under accelerated globalization and another 50% is in the early stages of globalization. At its core, the globalization of business refers to the free movement of capital, goods, services, ideas, information, and people across national boundaries. Markets in every country have become fierce battlegrounds where both domestic and foreign competitors fight for market share. Foreign competitors can be formidable. The Challenges of Human Resource Management In the course of globalization, organization faces a number of critical challenges in the form of competition, technical innovations, market orientation, quality of goods and services, and strategic approach to business performance. The developing countries were in the past against globalization, but now they have opened their doors for globalization, because the American jobs and wages levels are severely affected by the influx of cheap imports and shifting of production to low cost overseas location. For over a decade, the Society for Human Resource Management and the Commerce Clearing House have sponsored an ongoing study of the most important competitive trends and issues facing HR. These key trends extend beyond people issues per se, but they all focus on the need to develop a skilled and flexible work-force in order to compete in the twenty-first century. 303

International Journal of Computer Science & Management Studies, Vol. 13, Issue 07, September 2013 Going global. Embracing new technology. Managing change. Developing human capital. Responding to the market. Containing costs. Challenge 1: Going Global In order to grow and prosper, many companies are seeking business opportunities in global markets. Competition and cooperation with foreign companies have become increasingly important focal points for business since the early 1980 s. Indeed nearly 17 percent of U.S. corporate assets are invested overseas. Challenge 2: Embracing New Technology Advancements in computer technology have enabled organizations to take advantage of the information explosion. With computer networks, unlimited amounts of data can be stored, retrieved, and used in a variety of ways, from simple record keeping to controlling complex equipment. The effect is so dramatic that at broader level, organizations are changing the way they do business. Use of the Internet to transact business has become so pervasive for both large and small companies that e-commerce is rapidly becoming the organizational challenge of the new millennium. Virtual organizations are connected via computer-mediated relationships, and they are giving rise to a new generation of virtual workers who work from home, hotels, their cars, or whenever their work takes them. Challenge 3: Managing Change Technology and globalization are only two of the forces driving change in organizations and HRM. As Jack Welch, CEO of General Electric, put it, You ve got to be on the cutting edge of change. You can t simply maintain the status quo, because somebody s always coming from another country with another product, or consumer tastes change, or cost structure does, or there s a technology breakthrough. If you re not fast and adaptable, you re vulnerable. This is true for every segment of business in every country in the world Challenge 4: Developing Human Capital The idea that organizations complete through people highlights the facts that success increasingly depends on an organization s ability to manage human capital. The term human capital describes the economic value of knowledge, skills, and capabilities. Although the value of these assets may not show up directly on a company s balance sheet, it nevertheless has impact on an organization s performance. According to Lewis Platt, CEO of Hewlett-Packard, Successful companies of the twenty-first century will be those who do the jobs of capturing, storing and leveraging what their employees know. Challenge 5: Responding To The Market Meeting customer expectations is essential for any organization. In addition to focusing on internal management issues, managers must also meet customer requirements of quality, innovation, variety, and responsiveness. These standards often separate the winners from the losers in today s competitive world. How fast can it develop and get a new product to market? How effectively has it responded to special concerns? Better, faster, cheaper These standards require organizations to constantly align their processes with customer needs. Management innovations such as total quality management (TQM) and process reengineering are but two of the comprehensive approaches to responding to customers. Each has direct implications for HR. Challenge 6: Containing Costs There are increasing pressures on companies to lower costs and improve productivity to maximize efficiency. Labor costs are one of the largest expenditures of any organization, particularly in service and knowledge-intensive companies. Organizations have tried a number of approaches to lower costs, particularly labor costs. These include downsizing, outsourcing and employee leasing, and productivity enhancements, each of which has direct impact on HR policies and practices. Adverse Effects of Globalization The adverse effects of globalization on HRM are listed below: Around the world millions of people have lost their jobs due to imports or production shifts abroad. Most of others fear losing their jobs. 304

International Journal of Computer Science & Management Studies, Vol. 13, Issue 07, September 2013 Millions of others fear losing their jobs, especially with those companies operating under competitive pressure. Workers face fear pay cut demands from employers, who often threaten to export jobs. Service and white-collar jobs are becoming vulnerable as they are moving their operations offshore. US employees can lose their competitive advantage when companies build advanced factories in low-wage countries making them as those at home productive. Implications Of Globalisation on HRM Practices Some of the implications of globalization on HRM are listed below: HR practices followed by globalized companies differ from company to company. A survey conducted by Price Water House and Cranfield in 1993 across Europe found that there are significant variations in HRM practices, such as integration of HR and corporate strategy, education and training of HR Manager, recruitment and selection, industrial relations, employee communication, and flexible working practices, etc. Globalization leads to appointment of people from variety of ethnic, racial, and cultural background. Hence the problem for HRM is positively exploit diversity and synergize different skills to achieve more successful outcomes There is a shortage of international managers and need to nurture this cadre is important. HRM needs to ensure that the organization structure and system enhances global effectiveness and enables the organization to achieve both global integration and local responsiveness. Conclusion The management should take every possible step to utilize the opportunities and overcome the hurdles they faced in adapting the global operations. Management should be conscious about the training and development of the employees working on various overseas assignments. Management should develop the human capital in organization. Management should develop a number of approaches to lower the costs and improve productivity. Management should take every possible step to handle the repatriation problems successfully. Management must provide various career development opportunities to the employees working on overseas assignment. Management should pay attention to restructuring of HR practices suit the globalised environment. Recommendations The international standards should be maintained in recruitment and selection practices. Development process should be upgraded by shifting it from traditional skill upgradation to organizational learning. Application of computers should be extensively encouraged to make the training and development programs more effective. Training methods should be reoriented to include web-based training and net-based knowledge dissemination. In order to facilitate the recruitment of scarce skills, new techniques such as flexitime, part-time, and job-sharing may be introduced. Motivating the employees through properly structured compensation schemes. Performance appraisal should be done as an ongoing process at regular intervals rather than annually. HR professionals should need to evolve new methods of career management. Direct communication practices must be encouraged in a globalized environment. 305

International Journal of Computer Science & Management Studies, Vol. 13, Issue 07, September 2013 Leadership should be encouraged to face global challenges. Use of Internet, Intranet, and LAN should be encouraged that allows the manager to send to all the employees a personalized copy of letters, memos, reports and other communications. References [1] Frank Mueller, organization study May (1994),vol -15,no.- 3, page 407-428 [2] Malcolm Warner, the international journal of HRM (2002), vol-13, page 384-398 [3] Jeffery B. Arthur, academy of management,june(1994), vol- 37, page 670-687 [4] http://amj.aom.org/content/38/3/635.short [5] http://onlinelibrary.wiley.com/doi/10.1111 /1467-8543.00273/full [6] http://jir.sagepub.com/content/44/3/335.sh ort [7] http://ideas.repec.org/h/pup/chapts/8508-1.html 306