Multinational Enterprise Practice
Multinational enterprise practice between Australia and Indonesia using national culture comparison.Today’s business environment is consisting on high level of turmoil that comes from globalisation, news technologies, and great transparency (Reeves & Deimler, 2009); that demand organisation’s responsiveness for levels of dramatic, and often tumultuous, organisational change and development in order to achieve its organisational goals and objectives (Darling & Heller, 2009).
Because of these revolutionary changes in the business environment (Stewart, 1993); the scope of organizations has expanded into a various sizes and types which lead to the important need for cross-cultural awareness and understanding of the daily operations of international businesses (De Cieri, Fenwick, Hutchings, 2005).Therefore, the purpose of this essay is to analyse the international human resource management’s challenges and opportunities when multinational enterprise operates in two different national cultures simultaneously.
This essay uses Australia as the host nation, and Indonesia as the host nation subcontractor as the basis of comparison.
The concept of external environment refers to a specific and general environment outside the organisation that can affect its performance (Robbins, Bergman, Stagg & Coulter, 2008). These changes that create a revolution movement in the business world are mainly globalisation and information technology (Stewart, 1993). Particular changes in the external environment can affect their position in the market, dismantling traditional chain of command in the organisation, and restructuring organisation (Stewart, 1993).
Thus, it is important to know a few factors that increase the practice of IHRM in multinational enterprises. In this essay the external environmental factors that are analysed are technology and globalisation. One of the factors that has a significant influence in the business environment is technology (Stewart, 1993). The advent of new media and innovation in technology gives company choices in how to conduct their recruitment practices, such as online recruitment, which is quick, effective and cost efficient (Searle, 2006). This leads to he changes in the majority of work that have transformed from manual work to a more knowledge-based work, due to the increase in globalisation, competition, and technological development (Borland, Hirschberg & Lye, 2004). Technology is used as a tool that can eliminates physical borders; which then accelerated the pace of globalisation (Mendenhell et al. , 2003). * The second factor that has accelerated changes in business environment is Globalisation. It can be seen from a number of organisations that compete in the global market, that have increased substantially due to the increased development in technology (Mendenhell et al. 2003). Taking advantage of the growing worldwide competition is not limited to technology only; organisations also have to compete in their totality and human resources globally (Harpaz & Meshoulan, 2010). Globalisation has removed the geographical borders that make cultural and distance barriers obsolete when markets fuse together; and has shifted traditional rules, and transforms it to new rules that bring vague, unstable, counterintuitive, and full expectations (Mendenhell et al. , 2003).
Thus, understanding cultural, political, legal and economic differences among countries and its communities can be significant challenges (Dessler, 2008). In addition, globalisation creates feelings of insecurity for employees in relation to the prospects of keeping their job, while the intensification of manual, and also of intellectual work, constituting a fertile ground for the creation of mental disorders, such as stress and depression, especially at a time when mental health is extremely important and vital for society and MNEs’ growth (Antonopoulou & Derivisi, 2009).
That is why the process of developing and implementing SIHRM strategy and practice in two or more countries is more difficult than developing and implementing SHRM strategy in one country. In the past 3 decades the practice of IHRM in organisations have increase because of a vast growth in the international trade, rapid advances in information technology and communication, distribution, and manufacturing technology (Hutchings & Ratnasari, 2006). International human resource management (IHRM) is the study and application of all human esource management activities as they impact the processes of managing human resource enterprises in the global environment (Briscoe, Schuler & Tarique, 2012). The purpose of IHRM is to enable MNE to be competitive throughout the world; efficient; locally responsive; flexible and adaptable within the shortest time periods; and capable of transferring knowledge and learning across their globally dispersed units (Schuler, Budhawar, & Florkowski, 2002).
The practice of international human resource management in an organisation includes staffing and expatriates procurement, compensation, training and development, international labour relations, as well as performance evaluations and contribution (Wong, 2000). However, the best way in performing all the activities in an integrative manner still remains as a challenging task for HR managers (Schuler, Budhawar, & Florkowski, 2002). To fully understand the importance of integrated culture in MNE, we must understand the concept of national culture.
An individual’s values in life are influenced by immediate family, societal and cultural norms, values and beliefs (Hofstede, 2001). Thus, national culture can be defined as ‘the collective programming of the mind that distinguishes the members of one group or category of people from another’ (Hofstede, 2001). Thus, many cross-cultural management research ? ndings stated that national culture will have a signi? cant in? uence an individual’s intrinsic and extrinsic work values (Gahan & Abeysekera, 2009). Hofstede also divided national culture into four dimensions, which are power distance, collectivist vs. ndividualist, femininity vs. masculinity, and uncertain avoidance (Hofstede, 1997). These four dimensions will affect the degree to which the parent company is willing and able to adapt its strategy and practices to suit the conditions in the subsidiary country; the degree to which it maybe necessary to adapt parent company strategy and practices to suit the conditions in the subsidiary country; and the degree to which the parent company strategy will be effective in subsidiary country (Dessler, 2008). That is why, human resource management researchers suggested that Hofstede’s four dimensions in work values need to be re? cted in HRM practice; in relation to understand employee goal-setting, designs job enrichment, and the design and use of performance-based pay of the target workforce (Gahan & Abeysekera, 2009). By using the cultural focus approach, MNE’s HR managers can have a better understanding of differences in social values and customs between its host nation culture and its subsidiaries’ nation (Lertxundi & Landeta, 2009).Furthermore, a comparison of multiple national cultures will provide greater insight for MNE before the organisation starts its operation in another country (Sims, 2006).
It will also increase the awareness on several specific others business culture practice in the manners of etiquette or simple dos or don’t (Pruetipibultham, 2012). Therefore it is imperative for Australian MNEs that operates in Indonesia to understand the cultural characteristics of Indonesia’s society, in order for its operations to succeed. The comparisons between Indonesia and Australia are based on the work values and the concept of social status; and utilises Hofstede’s work on national cultures as a theoretical basis for comparing the countries.
Indonesia’s concept of social status is highly patriarchal and hierarchical, with what appears to be great power distances between levels of the social structure. Showing proper respect, in speech and behaviour, is an essential aspect of the culture (Pruetipibultham, 2012). Indonesia society is highly inclusive; everyone has a place, from the highest to the lowliest and hierarchy ensures that all individuals in society know both their place and their obligations within the social structure (Pruetipibultham, 2012).
In addition to hierarchy, gender and age are important determinants of social status such as the younger person treat the older person with respect, in language and in attitude (Pruetipibultham, 2012). It often happens that when MNE send their young expatriate to work or negotiate in Indonesian company, the Indonesians may immediately feel a little insulted that somebody without proper authority was sent to deal with them (Pruetipibultham, 2012). The concept of life values has become a central in studies of individual level motivations and behaviour, particularly in HRM and organisational behavior (Gahan & Abeysekera, 2009).
Among the various types of life values, work values (or goals) are often viewed as a central determinant of a wide range of an individual’s work-related attitudes and behaviours (Noesjirwan, 1978). In organisational behaviour and human resource management (HRM) research domains, a number of researchers has suggested that these differences in work values need to be re? ected in HRM practice; notably employee goal-setting, job enrichment, the design and use of performance-based pay are dependent on the national culture differences of the target workforce (Gahan ;amp; Abeysekera, 2009).
In Indonesia, most of the common perspective on what corporate priorities should be is respect, understanding and trust when dealing in day-to-day business relationships (Pruetipibultham, 2012). However, the interpretations of how to demonstrate understanding, to show respect, and to develop trust where the Indonesian cultural value systems come into play (Pruetipibultham, 2012). To most Indonesian managers understanding means that business activity should be be combined with the traditions and ingrained attitudes in the Indonesian business culture (Pruetipibultham, 2012).
In addition, some studies found that expatriates in Indonesia can gain respect by listening to and valuing the local manager’s opinions or making an e? ort to explain why they cannot take the manager’s advice and what can be done di? erently in the future, and giving credit to their Indonesian colleagues with measure of experience and merit (Pruetipibultham, 2012). Even though good relations are accomplished by MNE; however, when Indonesian managers encounter di? culties in their projects, it is likely that they will not provide a timely noti? cation and rational explanation of the di? culties.
This show that failure to shame is negatively high in feasibility in Indonesia similar to the rest of East Asia (Begley ;amp; Tan, 2001). Whereas, in the past, the self-identity of Australians have been analysed as being a complex mix of equalitarianism and mateship (Ashkanasy, 2007). In addition, egalitarianism concept consists of sameness and equality (Thompson, 1994). This concept related to mateship that was born when the settlers had to live in the outback and dealt with the difficult environment without much of a family life (Feather, 1986). The sameness falls upon the in-group collectivism but only applied to other who is in the same in-group’ that share similar uniqueness with them (Perkerti ;amp; Sendjaya, 2010). Thus, the concept of sameness can be considered as a based of prejudice and discrimination actions toward Aboriginal tribes (Ashkanasy, 2007). However, the concept that is used by most Australians today is the concept of equalitarianism (Perkerti ;amp; Sendjaya, 2010). Especially, when equal right are protected and enforce by the Australian legislation and government; and if a person fail to abide this means that the person is liable for lawsuit (Campton, Nankervis ;amp; Morrisey, 2009).
In 2008, more than 200 unions leaders developed ‘a new framework for future campaigns’ with six key priorities: a voice for working Australians and their families; improving wages and working conditions; creating a fairer society; growing union membership; organizing workplaces, industries and sectors; and connecting with communities and regions (Brigden, 2008). Thus, because of multicultural factor in Australia and the law also protect people from discrimination, it concept of social status is not as high compare to Indonesia.
Nowadays, most of Australian (especially since generation x), values the concept of work life balance based on the balance between works and outside work commitment (Allan, 2011). Family is a crucial part of the life part in work-life balance concept for workers (Allan, 2011). Thus most Australian companies used the concept of “family friendly” as an attempted to support work-personal life balance and reduce labour turn over (Burke, Oberklaid ;amp; Burgees, 2003).
Especially towards attracting and attaining women in the workforce, thus there is an increasing number of women in the workforce thus moving further away from the concept of traditional role of women (Burke, Oberklaid ;amp; Burgees, 2003). Thus, by using Hofstede’s four dimensions on Indonesia and Australia national cultures, HR researchers found that Indonesians score very high in power distance, very high on collectivism, moderately high in ‘‘femininity’’, and moderately high in ‘‘uncertainty avoidance’’ (Stening ;amp; Ngan, 1997).
Whereas, Australian in the “Anglo” group scored low in power distance, very high in individualism, moderately high in masculinity, moderaly low in uncertainty avoidance, and very low in long term orientation (Ashkanasy, 2007). After understanding the basic concept of subsidiaries nation culture, and compare it to host nation’s culture; MNEs need to assess the impacts of work values on behaviours and interactions in the workplace, particularly where these values might diverge among work team members and between superiors and subordinates (Piers, Stanton ;amp; Ostenfeld, 2006).
Multinational enterprises (MNEs) recognize that human resources play an important role in developing and sustaining a competitive advantage in today’s highly competitive global business environment (Briscoe and Schuler. 2004). Staffing of foreign subsidiaries continues to an important strategic human resource practice that MNEs use to develop and sustain a competitive advantage in the international marketplace (Tarique, Schuler & Gong, 2006).
MNEs can staff their foreign subsidiaries with parent country nationals (PCNs), host country nationals (HCNs) and third country nationals (TCNs) or any combination of the three (Tarique, Schuler & Gong, 2006. ) One of the ways to reduce the labour turn over in international expatriate is by merging organisational cultures and personal interest in order to build a common value and relationship (Harpaz & Meshoulan, 2010).
However, the challenges are the information sharing and integrating business conduct with foreign culture (Tarique, Schuler & Gong, 2006). The reliable information will become harde to interpret when cultural and physical distance increase, information asymmetry becomes more serious, complete and accurate information about subsidiary employee actions and performance becomes more difficult and expensive to obtain, and subsidiary actions become harder to interpret (Tarique, Schuler & Gong, 2006).
These complicate both behavioural and outcome controls (Tarique, Schuler & Gong, 2006). Moreover, information sharing will not be efficient when expatriate is experiencing culture shock that set in when coping with the new environment on a daily basis becomes necessary (Piers, Stanton & Ostenfeld, 2006). Thus, expatriates in culture shock display a variety of ‘‘obvious symptoms’’, including excessive concern about minor issues, preoccupation with cleanliness of drinking water, food nd surroundings, fear of being cheated, robbed or injured, depression, feelings of helplessness, anger over delays and other minor frustrations, reluctance to learn the host language, dependence on long- term residents of their own nationality and lack of awareness about behaving dysfunctional (Piers, Stanton & Ostenfeld, 2006). While there may be some commonly shared ethical attitudes across nations, even those countries that share similar national cultures may find quite conflicting ethical expectations (Sims, 2006). It is unreasonable to assume that one’s own ethical views are always superior (Sims, 2006).
Yet, for cross-cultural businesses to be successful, a reasonable knowledge of the ethical attitudes of the residents of those countries in which we conduct business is a necessity (Sims, 2006) Thus, in order to maintain survival or/and competitive advantage, organisations should ? nd ways to assure that employees do not easily leave their positions to work for the competition; because their skills cannot easily be bought nor imitated (Harpaz & Meshoulan, 2010). This can be achieved with effective training programs before transferring to the subsidiary country and choosing prospective candidate that is the ‘best fit’ for the assignment.
As organizations change and adapt to pressures in the external and internal environment, managers and employees are required to learn new competencies and skills by training programs (Pruetipibultham, 2012). Even though training program is costly, but it will most likely to benefit the company in the long run (Murray, 2011). Technical training and current cross-cultural training programs, together with facilitation of expatriate networks, do not appear to adequately address expatriate failure (Piers, Stanton & Ostenfeld, 2006).
When the destination of the expatriate is a culturally diverse country, training that addresses the ethnic networks and other socializing resources within the host country by retaining links with the home country; this should facilitate expatriate and family adjustment, leading to lower costs from a lower incidence of cultural shock and thus more effective assignments (Piers, Stanton & Ostenfeld, 2006). Organizations wishing to use expatriates in their inter national ventures might, during the planning stage for overseas start-ups, seek advice from Government and other bodies, uch as industry groups, on the presence, characteristics, and contacts of ethnic population groups in overseas locations (Piers, Stanton & Ostenfeld, 2006). Such information needs to be integrated into the expatriate training process (Piers, Stanton & Ostenfeld, 2006). Ethnic group lifestyle is also likely to reflect changes in the home country that have been imported with each new arrival (Piers, Stanton & Ostenfeld, 2006). This means that expatriate arrivals may help reduce the cultural distance of the ethnic minority group to their home country (Piers, Stanton & Ostenfeld, 2006).
Hence, reverse cultural shock, associated with the expatriate’s retur n home on assignment completion, may also be improved upon (Piers, Stanton & Ostenfeld, 2006). Ethical conflicts that may emerge due to basic differences in the ethical attitudes of people who were raised in cultures quite different from our own (Sims, 2006). However, flexibility in adapting to changes can be achieved by merging organisational cultures and personal interest by building share values and gaining trust; and when workers in the organisation have the same share values they will more likely to have stronger commitment with each other (Barbash, J. amp; Barbash, K. , 1989). The transcultural value is de? ned as those values that have been shared among a variety of cultures throughout history or are crucial for daily functioning (Wieland, 2009). The transcultural value system is meant to guide corporations toward a somewhat uniform and universally accepted standard of ethical behavior (Hemphill & Lillevik, 2011). The commitment of individuals on how they behave and team spirit are a key factor to quality work rather than on their acquired technical skills and passive execution of orders receive (Barbash, J. amp; Barbash, K. , 1989). Thus, an improved understanding of corporate culture can be seen as a one step towards more successful negotiation strategies and the development of desirable outcomes (Moore, 1997). In conclusion, there are several difficult challenges to the practice of international human resource management (IHRM) arises from the different encounters in various countries and multinational enterprise (MNE) cultures (Briscoe, Schuler & Tarique, 2012). The adaptation erspective discussed in this article recognises that cultural distances exist and proposes country-specific cultural training incorporating technical competencies, expatriate networks, ethnic group social networks and resources, and ICT to bridge such distances (Piers, Stanton & Ostenfeld, 2006). Thus, the success of integrating cultural aspects in IHRM practice can have significant effects on the overall MNEs overseas operation; that will define the future performance of the organisation and the employees’ quality of life (Darling & Heller, 2009). Reference: Ashkanasy, N. M. 2007). ’The Australian Enigma,’ in culture and leadership across the world: A GLOBE report of in-depth studies of the cultures of 25 countries. Mahwah, NJ: Lawrence Erlbaum Associates Allan, J. (2011). Mining’s relocation culture: The experiences of family members in the context of frequent relocation. International Journal of Sociology and Social Policy, 31 (5/6), 272-286. Barbash, J. & Barbash, K. (1989). Theories and Concepts in Industrial Relations. SC: University of South Carolina Press, 114-116. Bennington, L. & Habir, A. D. (2003). Human resource management in Indonesia.
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