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Host Country Analysis and International HRM Issues Problem Solution Essay

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Updated: Jun 23rd, 2019

Background of the organisation

Brunt Corporation entails a group of hotels incorporated in the United Kingdom (UK), but the management has started investing in foreign countries. The corporation runs a chain of clean and reasonably priced hotels that provide budget accommodation to its clients. The corporation provides hotel services to leisure and business travellers, depending on the clients’ needs.

The management ensures that the hotels are located in the outskirts of the cities to facilitate transportation. The management intends to expand the corporation’s operations to Greece.

For the new hotels, the management will use an ethnocentric approach to manage subsidiaries in the host countries (HCs). The corporation’s policies allow the chief executive officer to send managers from the parent company to manage subsidiaries in the host countries across the world.

Reasons for expanding to Greece

The corporation wanted to increase its revenues through expanding its market to capture clients in Greece. Furthermore, the move would contribute additional income to the corporation; hence, improving the company’s profitability. Additionally, the management of Brunt Corporation wanted to control expenses through venturing into Greece.

The management would achieve low costs of operations through taking advantage of the HC‘s favourable structures of tax. Furthermore, in the future, the corporation would take advantage of the Greece’s low cost of labour by employing HC’s nationals.

The management of Brunt Corporation wanted to diversify the company’s services and products through spreading the risks to Greece. In Greece, Brunt Corporation would counter the challenge of recession periods in the UK and France. Furthermore, widening the corporation’s market would help the management to invent ways to counter the strategies of both existing and potential competitors.

Standardisation and localisation

As MNCs continue to venture into foreign markets, their HR managers experience various challenges in striking a balance between local responsiveness and global integration. For the standardisation, the parent company integrates the universal operations of its subsidiaries in a bid to achieve economies of scale. MNCs move toward standardisation to achieve efficiency across the globe.

As subsidiaries operate in foreign countries, the parent company’s CEO strives to align the management practices of the subsidiaries to the practices of the parent company (Dlabay & Scott, 2006). For localisation, HR managers of subsidiaries implement both operational and strategic decisions to respond to the domestic conditions within the host country.

Furthermore, in the case of localisation, the HR managers adopt management practices as implemented by the companies in the host country (Berry, Poortinga, Breugelmans, Chasiotis, & Sam, 2011).

In the case of Brunt Corporation, the management advocates the standardisation of the HR practices. By hiring employees from the parent company, it is evident that the organisation is reluctant to recognise the practices of the host country.

The failure to strike a balance between the objectives of the parent company and the conditions of the HC in which subsidiaries operate hinders the implementation of HR functions within an organisation.

IHRM Issues (challenges that HR managers of Brunt Corporation will encounter in Greece)

Hofstede’s five cultural dimensions

According to Piepenburg (2011), international businesses connect with different people across the world. Although the interaction among people contributes to cultural diversity, there is a need to comprehend cultural differences (Piepenburg, 2011). In the corporate sector, the differences in the national culture can hinder HR managers from implementing the parent company’s culture.

Culture-Hofstede’s power distance

According to Berry et al. (2011), the flow and acceptability of power within an organisation defines the concept of power distance. According to Hofstede, people view power relations depending on their culture. Furthermore, culture plays a significant role as people decide whether to accept power (Jackson, 2002).

However, power can either be large or small distance depending on the society from which an organisation originates. Power distance defines the form of leadership and style of management adopted by an organisation.

A comprehensive analysis of Brunt Corporation indicates that the firm subscribes to the concept of large power distance. Brunt Corporation has a large chain of command with the CEO heading the company.

The flow of command indicates inequalities among employees. Bartlett and Goshal (2002) state that in large power distance organisations, privileges signify acceptance of power amongst employees. For the Brunt Corporation, this is the case as the managers are entitled to privileges such as unlimited travel allowances.

The style of management among the Greeks entails the concentration of control and power in the management (Myloni, Harzing & Mirza, 2003). However, Greeks prefer the practice of small power distances as businesses are owned and controlled by families and their relatives.

On the contrary, in the United Kingdom, organisations are owned and operated by different investors (Weber, 2008). The Greeks’ concept of strong family bonds in businesses influence the management of organisations operating in the country (Myloni, Harzing & Mirza, 2003).

Employing expatriates makes it easy for the Greeks to alienate a corporation. Furthermore, the majority of firms in Greece are either medium or small-sized (Stavroulakis, 2009), as opposed to Brunt Hotels, which is a foreign corporation. In the formulation of decisions, the owner of the organisation in Greece formulates and implements decisions without consulting other employees.

Furthermore, owners hardly delegate power to their juniors for the fear of losing power (Kriemadis, Pelagidis & Kartakoullis, 2012). The practices by the Greeks rank the country higher in the index of power distance compared to the Brunt Corporation.

Individualism

Hofstede defined individualism as the strength of ties amongst people in society. Countries that have the culture of high individualism lack connections with foreigners.

In such countries, businesses share responsibilities among family members and close friends (Piepenburg, 2011). In Greece, family members and close relatives own and run businesses. Brunt Corporation falls in the category of a society with low individualism.

Masculinity

Masculinity defines the extent to which a society adheres to the traditional aspects of male and female roles. High levels of masculinity occur in countries in which women perform domestic chores, whereas men are the providers of their families (Piepenburg, 2011). In low masculinity countries, different genders are entitled to equality across different profession. In Greece and the United Kingdom, both countries depict low masculinity.

Uncertainty Avoidance Index

The concept of uncertainty entails the level of anxiety that the society experiences during uncertain circumstances (Piepenburg, 2011). In Greece, the society shows a high degree of uncertainty; hence, pushing businesses to make concise decisions prior to undertaking a venture. For the UK, the society depicts a low level of uncertainty.

Long-term Orientation

Societies that show long-term orientation hold on to their culture longer than flexible societies that change their traditions from time to time (Piepenburg, 2011). The UK does not value traditions as much as Greece. In such a situation, the HR manager of Brunt Corporation will experience oppositions as the Greek employees fail to implement innovations that contradict the culture of Greece.

Strategy

In the Greek market, Brunt is deemed to encounter opposing forces due to the opposing culture between the host country and the parent company. Perpetual conflicts arise as the corporation draws a balance between global practices and the local HR practices employed by the parent company (Samovar, Porter, McDaniel & Roy, 2013).

Brunt relies on the concept of localisation to operate its subsidiaries. The company ensures that the subsidiaries follow the HR practices outlined by the parent company. The trend has been successful for the company as it has most of its subsidiaries in the countries with similar culture with the UK. Extending operations to Greece posses various threats to the local practices of HR used by the parent company.

Recruitment-approach between the host and the parent country

In MNCs, HR managers can use a variety of methods of staffing to recruit workforce to work for the subsidiaries in the host countries. For ethnocentric staffing, HR managers recruit expatriates from the parent company in the home country. In such an instance, expatriates are expected to implement the interests of the parent company (Dlabay & Scott, 2006).

For the Brunt Corporation, the CEO prefers using ethnocentric staffing to get workers for the subsidiaries in Greece. Hiring expatriates proves to be expensive; thus, Brunt will not take advantage of the cheap labour in the Greek market. However, there are additional methods of staffing in the international market.

Polycentric staffing entails hiring nationals of the host country for all the operations of the subsidiary. Employees from the host country help to introduce the domestic conditions of the market and culture of the host country into the subsidiary (Dlabay & Scott, 2006).

Although labour will be cheap, nationals of the host country may implement the interests of the domestic market at the expense of the overall objectives of the corporation. For the region-centric staffing, the subsidiaries are equipped with employees from the region in which the subsidiary is located.

Although subsidiaries from a particular region can formulate their HR policies, the parent company controls most of the operations within the regional subsidiaries (Dlabay & Scott, 2006).

Research indicates that organisations in Greece use lower standardised methods of recruitment as compared to the foreign subsidiaries (Stavroulakis, 2009). In Greece, firms advocate the use of internal recruitment, which is characterised by the use of referrals from close friends and relatives.

The practice or recruitment aligns to the Greek culture of family involvement in the operations of firms (Myloni, Harzing & Mirza, 2003). Furthermore, the Greek firms rely on informal qualifications and internal recruitment to hire their employees (Kriemadis, Pelagidis & Kartakoullis, 2012).

In the United Kingdom, organisations use standardised methods of recruitment (Weber, 2008). Brunt Corporation follows the recruitment policies and practices of the United Kingdom. In the UK, firms recruit their employees through rigorous interviews and tests. In Greece, Brunt Corporation shall use ethnocentric method of staffing.

However, HR manager shall lack the taskforce to steer the subsidiaries toward incorporating the culture of the Greeks into the company. Furthermore, the company shall not take advantage of the low cost of labour in Greece due to the expensive labour rendered by the expatriates.

In the recruitment, the management of Brunt should embrace region-centric staffing. The management should group its subsidiaries according to the regions and recruit employees from the region in which a subsidiary is located. In such a way, the management shall eliminate the cost of employing expatriates (Dlabay & Scott, 2006).

Furthermore, HR manager shall have a diversified line of employees to integrate the culture of the region into the parent company. Diversity amongst employees shall eliminate the aspect of implementing the interests of the host country at the expense of the interests of the parent company (Dlabay & Scott, 2006)

Performance management

Greek firms do not provide written reports (Stavroulakis, 2009) as it is the case with Brunt, but they use interviews between employees and supervisors to appraise workforce. However, in Greece, performance management incorporates a subjective criterion in line with the Greek culture. Power distance and ranks within family ties affect the participation of an individual in the exercise of appraisal.

For Brunt, HR managers shall subject employees to formal evaluation that involves a review of individual output and processes used within the subsidiary. Furthermore, Greek firms consider output rather than both output and processes in performance appraisal (Stavroulakis, 2009).

Furthermore, the promotion of employees in Brunt will depend on the performance of an individual. Although performance counts in Greece, promotion also depends on the age and family ties of the persons involved.

Training/ Career Development

Similar to most MNCs, Brunt provides formal training to the employees (Bartlett & Goshal, 2002). However, the practice contradicts that of the HC in various aspects. For the Greek firms, training is informal as most employees rely on the skills acquired during their work tenure (Myloni, Harzing & Mirza, 2003).

The failure by Brunt to employ Greeks at the start of subsidiaries will hamper cross-cultural training in future. The CEO of Brunt should begin by teaching the expatriates Greek as a language. Such a move indicates that the CEO should hire a Greek to train expatriates.

Compensation

Greek companies rely on the government in the determination of the rate of basic salary for employees. The practice is quite different for the Brunt Corporation. The chief executive officer of the corporation determines the salaries of employees. In most cases, salaries are decided through consent between employee and the employer (Dowling, Festing, & Engle, 2013).

Brunt Corporation has a policy that advocates the payment of employees on a monthly basis. Both salaries and allowances are paid at the end of the month. Furthermore, the company uses the UK dollar as the standard unit of payment to counter the outcomes of currency differences across regions.

Recommendations

The management of Brunt Corporation should advocate the creation of a third culture to facilitate standardisation of human resource policies between the PC and subsidiaries in the host country (Dowling, Festing, & Engle, 2013). Moreover, standardisation will ensure the integration of both cultures (host and parent country) into the operations of the subsidiaries in the host country.

Furthermore, prior to venturing into Greece, Brunt should implement flexible policies that can be altered depending on the changes in the HC. Such a move entails localisation of some of the HR practices in the quest to appreciate the culture of the host country. Localising services such as advertising and training of expatriates ensures that HR managers incorporate the culture of the HC in line with the culture of the parent company.

Brunt Corporation should standardise the operations of its subsidiaries in line with the global standards of the international market. Furthermore, Brunt should engage its management in constant research to evaluate the parent company’s practices that suit the culture of the host country (Jackson, 2002).

Conclusion

The aim of this paper was to show how culture and the institutional frameworks of the host country influence HR practices of foreign subsidiaries. The case of Brunt Hotels Corporation highlights some of the challenges that foreign subsidiaries encounter as they operate in host countries.

The case study supports the argument that both localisation and standardisation are significant for the movement of human resource policies between the PC and subsidiaries in the host country.

References

Bartlett, C., & Goshal, S. (2002). Managing across borders: The Transnational Solution. Boston, MA: Harvard Business School Press.

Berry, J., Poortinga, Y., Breugelmans, S., Chasiotis, A., & Sam, D. (2011). Cross-cultural psychology: Research and applications. Cambridge, UK: Cambridge University Press.

Dlabay, R., & Scott, J. (2006). International business. Mason, OH: South-western.

Dowling, J., Festing, M., & Engle, A. (2013). International Human Resource Management. Boston, MA: Cengage Learning

Jackson, T. (2002). The management of people across cultures: valuing people differently. Human Resource Management, 41(4), 110-121.

Kriemadis, T., Pelagidis, T., & Kartakoullis, N. (2012). The role of organisational culture in Greek businesses. EuroMed Journal of Business, 7(2), 129 – 141.

Myloni, B., Harzing, A., & Mirza, H. (2003). Human resource management in Greece Have the colours of culture faded away. International Journal of Cross Cultural Management, 4(1), 59-76.

Piepenburg, K. (2011). Critical analysis of Hofstede’s model of cultural dimensions: To what extent are his findings reliable, valid, and applicable to organisations in the 21st century? Norderstedt, Germany: GRIN Verlag.

Samovar, A., Porter, E., McDaniel, R., & Roy, C. (2013). Communication between cultures. Boston, MA: Wadsworth.

Stavroulakis, D. (2009). Practices in View of Internationalisation: Evidence from Business in Greece. MIBES Transactions, 3(1), 147-156.

Weber, M. (2008). The business case for corporate social responsibility: A company- level measurement approach for CSR. European Management Journal, 26(4), 247-261.

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