STRATEGY AND INTERNATIONAL HRM
While the majority of international HRM research continues to focus on aspects of expatriation (Kochan et al., 1992), there is a growing literature which seeks to contribute to a better understanding of the relationship between international strategy and HRM (Welch, 1994; De Cieri and Dowling, 1999; Schuler et al., 1993; Dowling et al., 1999; Kobrin, 1994; Hendry, 1994). It has been argued that the fundamental strategic problem for top managers in international firms is balancing the economic need for integration with the pressures for local responsiveness
(Bartlett and Ghoshal, 1989, 1998; Doz and Prahalad, 1986), while recent research suggests that at the international level the firm’s strategic choices impose constraints or limits on the range of international HRM options (De Cieri and Dowling, 1999). The argument is that there should be distinct differences in international HRM policy and practice in multidomestic and transnational or globally integrated firms (Kobrin, 1992). Other researchers link international HRM staffing policy and practice to strategy (Edstrom and Galbraith, 1977; Scullion, 1996) while yet others suggest linkages between the product life cycle stage/international strategy and HRM policy and practice (Adler and Ghadar, 1990; Milliman et al., 1991). Increasingly the central issue for MNCs is not to identify the best IHRM policy per se but rather to find the best fit for the firm’s
strategy, structure and HRM approach. While global strategy is a significant determinant
of IHRM policy and practice, it has been argued that international human resources are a trategic resource, which should affect strategy formulation as well as its implementation Harvey, 1997). In this section we will examine two classic models of strategic international human resource management:
Adler and Ghadar’s phases of internationalization and the De Cieri and Dowling integrative framework of strategic HRM in MNCs. Adler and Ghadar’s phases of internationalization
Adler and Ghadar’s model (1990) is based on Vernon’s life cycle theory (1966). Vernon istinguishes three phases in the international product life cycle. The first phase (‘high tech’) focuses on the product, research and development (R&D) playing an important role as a unctional area. The second phase (‘growth and internationalization’) concentrates on developing and penetrating
markets, not only at home but also abroad. The focus therefore shifts from R&D
to marketing and management control. In the third and final phase (‘maturity’),
intense efforts are made to lower prices by implementing cost control measures.
According to Adler and Ghadar (1990: 239), the average length of the product
life cycle shortly after the Second World War was 15–20 years. Nowadays this
is 3–5 years; for some products it is as short as 5 months. An important implication
is that the various areas of emphasis in Vernon’s life cycle must increasingly
be dealt with simultaneously. Adler and Ghadar saw this as sufficient
reason to suggest a fourth phase (incidentally following in the footsteps of
Prahalad and Doz and Bartlett and Ghoshal as discussed in Chapter 2), in which
the company must achieve differentiation (as a way to develop and penetrate
markets) and integration (as a way to achieve cost control). Having introduced
a fourth phase, the authors then proceed to develop a model in which cultural
aspects and human resource management form the main focus of attention. In
short, they link Vernon’s phases, which concentrate largely on strategic and
structural issues, to culture and human resource management.
The influence of culture
According to Adler and Ghadar (1990), the impact of the cultural background
of a country or region differs from one phase to the next. They identify these
phases as:
• domestic: focus on home market and export;
• international: focus on local responsiveness and transfer of learning;
• multinational: focus on global strategy, low cost and price competition;
• global: focus on both local responsiveness and global integration.
(Please note that Adler and Ghadar use the same terms as Bartlett and Ghoshal, but attach them to different phases, which could be confusing.) The cultural component hardly plays a role in the first phase (domestic).
Management operates from an ethnocentric perspective and can afford to ignore the influence of foreign cultures. The attitude towards foreign buyers – which is a somewhat arrogant one – is he following: ‘We allow you to buy our product’ (Adler and Ghadar, 1990: 242). By contrast, in the second phase (international) the cultural differences of each foreign market are highly important hen entering into external relations. From the polycentric perspective, product design, marketing and production will concentrate on finding a good match between the product and the preferences and style of the relevant foreign market segment. That is why production is often transferred to the relevant country and/or region.