TOPIC ONE: CONCEPTS OF INTERNATIONAL HUMAN RESOURCE

MANAGEMENT IN AN ORGANIZATION

I. MEANING OF INTERNATIONAL HRM

IHRM can be defined as set of activities aimed at managing organizational human resources at
international level so as to achieve organizational objectives and competitive advantage over
competitors at national and international level.

The simple definition of IHRM ‘Is the management of HR in international settings.

II. WHY ORGANIZATIONS EXPAND INTERNATIONALLY:

i. To capture enhanced market opportunities that foreign countries may present.

ii. To achieve economies of scale in production and administration: This can be achieved by
expanding the scope and volume of operations to international markets.

iii. Keeping up with industry leaders: This may require that an organization enter foreign
markets.

iv. Acquiring ownership of a foreign-based organization or subsidiary.

III. TYPES OF INTERNATIONAL ORGANIZATIONS

1. International Corporations (ICs): Are domestic firms which spread to overseas market
Example; Honda

2. Multinational Corporations (MNCs): Are organizations which have operating units

(subsidiaries) located in foreign countries. Subsidiaries function as autonomous units. Example;
shell

3. Global Corporations (GCs): Are organizations which have operating units (subsidiaries)
located in foreign countries and maintain control over such subsidiaries through a centralized
home office. Example: Matsushita

4. Transnational Corporations (TNCs): Are organizations which have independent country

operations but brings these operations together into an integrated whole through networked
structure. They combine the elements of MNCs and GCs Example; Unilever
IV. THE MAJOR IHRM PRACTICES/FUNCTIONS

International recruitment;

International selection;

International compensations;

International training and development;

International performance appraisal;

Global skills management;

Expatriate management; etc.

V. SOURCE OF EMPLOYEES FOR INTERNATIONAL ORGANIZATIOS

International operations like those of MNCs can be staffed through: -

1. Parent Country Nationals (PCN): The citizens of the country in which the headquarters of
the company is located

2. Host Country Nationals (HCN): The citizens of the country in which the foreign subsidiary
is located

3. Third Country Nationals (TCN): The citizens of a country other than the parent country and
the host country

VI. EVOLUTION OF IHRM

International business has grown rapidly in the last decade. The period has witnessed heavy
inflow of foreign direct investment and a large number of multinationals have been established
almost in every country including Tanzania. Several Tanzanian companies have become
multinationals. A good example can be cited from education, Hotels, Construction, Mining,
telecommunication, health, consultancy etc.

Laurent (1986) stated that "in order to build, maintain and develop the corporate identity,
multinational organizations need to strive for consistency in their ways of managing people on a
worldwide basis. Yet, and in order to be effective locally, they also need to adapt those ways to
the specific cultural requirements of different societies. While the global nature of business may
call for increased consistency, the variety of cultural environments may be calling for
differentiation."

It has therefore become important for human resource managers to ensure that an appropriate
mix of employees in terms of knowledge, skills and cultural adaptability is available to handle
global assignment.

VII. OBJECTIVES OF INTERNATIONAL HRM

i. To create a local appeal without compromising upon the global identity: IHRM intends to
make an international firm successful in managing HR aspects at local level while taking
into account global perspective

ii. To generate awareness of cross-cultural issues in hiring staff across geographical

boundaries: IHRM intends to equip the international firm with the knowledge on
international recruitment and selection practices.

iii. To train upon cultural aspects of the host country: IHRM intends to make people aware
of the cultural aspects of the host country.

iv. To reduce the risk of international human resource: IHRM intends to make the
international firms free from the risk which can result from international HR. For
instance, risk from difference in HRM policies between the host country and parent
country.

v. To avoid cultural risks: IHRM intends to manage cultural differences existing within
subsidiaries of international firms

vi. To avoid regional disparities: IHRM intends to ensure that the HR polices of the host
country are adhered and therefore avoiding differences

vii. To manage diversified human capital: International firms consist of employees from
different states with different background. IHRM provide mechanism through which this
diversity can be managed
viii. Remaining competitive throughout the world: IHRM intends to integrate HR policies and
take care of significance difference in business conditions and culture across a number of
subsidiaries in different countries so that a firm can remain competitive

ix. Locally Responsive: IHRM intends to make an international firm to respond to HRM
aspects of the subsidiaries at local level

x. Flexible and adaptive: IHRM intends to enable a firm to adjust itself to international
business environment

VIII. IMPORTANCE OF INTERNATIONAL HRM

The importance of IHRM in global business environment is as follows: -

It helps international firms to achieve competitive advantages over others in the

atmosphere of increased global competition.

It facilitates international business expansion through strategic alliances and cross border
mergers and acquisitions: IHRM facilitates such arrangements through integrating HR
policies across the states with business operations of a firm

It helps to ensure good performance of expatriates through managing them effectively

It ensures success of international business through effective management of

International HR

It helps in effective implementation of global strategy of international firms

It helps in management of diversified human capital found in international business

operations

It helps to avoid disputes with authorities of host countries which can be cost full to
international firms. Such dispute can arise from failure to adhere to HRM policies of the
host country.