Human Resource Management and Sustainability
Collings, Wood and Szamosi (2018) defines human resource management as the approach which business organisations take to manage their employees to enhance their performances. The human resource management approach consider the employees of business organisations as important aspects of their competitive advantage. This is because the employees of these organisations right from the senior management level to lower level employees play significant role in making strategies and executing them respectively. Brewster, Chung and Sparrow (2016) mention in this respect that HRM plays a very important role in the sustainability of the business organisations in the global because the employees are not only operators of the company but the store house of talents which attribute these organisations with their competitive advantage.
Wood et al.(2014) defines the term sustainability as the method of exploitation of natural, manufacturing good and consuming in a fashion to ensure that both current and future needs of the economies can be fulfilled. Bratton and Gold (2017) link the two concepts of HRM and sustainability. They mention that human resource management plays a very important role in achieving sustainability in different industries like the car industry. The Boston Consultancy Group reports that the though China provides a huge market for the American companies, but the increasing labour costs are forcing these companies to seek alternative markets (bcg.com 2018). The paper would take into account this report by BCG with reference to the concepts of human resource management and sustainability. The industry chosen would be car parts industry of the United States of America. The two countries which would be considered as the alternatives to China are Afghanistan and India.
Global context:
The global context would consider two context which the American car parts manufacturing companies would have to consider while taking decisions on seeking an alternative market to China. They are political context and economic context.
Political context:
The political condition of Afghanistan is unstable due to large scale militant activities in the country. India is far more stable politically compared to Afghanistan. This is evident by the political risk rate published by the Euler Hermes. The rating agency shows that Afghanistan ranks 4th which means that country experiences high rate of political risks or low rate of political safety. The risk rating of India is 1 which means the country is stable politically and experiences high level of political stability (Eulerhermes.com. 2018). New Delhi has strong bilateral connections with Washington and the EU. It can be inferred from the findings that India is politically more stable than Afghanistan which makes it an appropriate alternative market to China for the American car parts manufacturing and marketing companies.
Seeking Alternative Markets to China in the Car Parts Industry
Economic contexts:
Figure 1. GDPI graph of Afghanistan
(Source: tradingeconomics.com 2018)
The graph below shows that GDPI statistics of Afghanistan. It can be inferred from the graph that though the GDPI of the country is showing upward trend, still it is extremely volatile. The GDPI of the country was $ 21 billion with a per capita income of $ 572 in 2017.
Figure 2. Graph showing GDPI of India
(Source: tradingeconomics.com 2018)
The graph shows that the GDPI of India till Jul 2018. If can be inferred from the graph that the country enjoys a high GDPI though its GDPI fell in middle of 2017. The GDPI of India was $ 2.848 trillion in the Q1 of 2018.
The next economic factor which would would determine the success of car parts industry in Afghanistan and India is FDI and their economic risk level (state.gov 2018). As far as Afghanistan is concerned, the economy of the country is highly dollarized and has experienced a growth of 10 percent between 2013 and 2015 due to assistance from international agency. The country is heavily dependent on FDI from other counties with very low rate of economic development of its own.
India in comparison to Afghanistan far stronger both in terms of its own economic power and FDI. As per the GDP rating of the World Bank, India ranked 6th while Afghanistan ranked 111th (databank.worldbank.org 2018). India compared to Afghanistan has its own robust automobile and car parts industry. The country sells automobile parts both domestically and internationally. India is already market to top American automobile companies like Ford. This means the American car parts manufacturing companies can invest in the Indian market through FDI.
Cultural context:
The cultural context which the American car companies would take is the business culture in Afghanistan and India. The business culture in a particular country plays a very significant role in business transactions (Deresky 2017). The business culture is Afghanistan does not allow diect interaction between male and female employees. The business meetings are not well structured and the business decision making power is reserved to senior officials. Meetings are usually held to intimate decisions already taken on the board.
The business culture of India is well structured and free communication between workplace people are accepted between men and female colleagues. The Indian business partners take risks and encourages more innovation (Huhtala et al. 2015). They stress more on relationship building in order to ensure long term business relationship. The dress code in business meets are less conservative both for men and women. Afghanistani business partners in comparison to India restricts this liberty and expects their international business partners to adhere to conservative clothing. Thus, it can be pointed out that India is more favourable in terms of business cultural context.
The Chosen Host Countries: Afghanistan and India
Organisational context:
The organisational context of Afghanistan and India would hold great significance while deciding organisational structure the American car parts companies should adopt to enter these nations. Afghanistan’s business culture is more conservative and does not support prompt decision making. It can also be pointed out that as far as American car parts manufacturing companies are concerned, they often relocate their employees stationed in one market to the another market like Afghanisthan due to business needs. The conservative business culture and lifestyle would create problem.
The Indian business culture is far more conductive and at present the country is the world’s fastest growing economic giant after it overtook China in 2018. The dynamic business culture and steadily growth automobile market would enable the American companies’ to continue their flat structures. Moreover, the country lower labour cost which would enable the car parts manufacturing operate at lower costs (economictimes.indiatimes.com 2018).
The car American car manufacturing companies either enter into the host countries in form of a wholly owned subsidiary or by entering into joint venture with existing car parts manufacturing firm. The following table would compare between the two modes of global operations:
|
Two modes of FDI entrance |
Joint venture |
Wholly owned subsidiary |
|
Identifying the types of cost involved |
1. Legal costs comparatively low. 2. Cost of operations are comparatively low due to access to the resources of joint venture partners 3. Termination of joint venture may put sudden pressure on resaources |
1. Legal and compliance costs are high. 2. Cost of operations are high due to initial establishment and other costs. 3. Greater business development in the long run due to total owner on capital. |
|
Risk factor |
Initial risk is low due to sharing of risks by joint venture |
High |
|
Cost |
Initial cot is high |
Initial establishment cost is very high. |
The above comparison shows that initial cost of establishment of business using the foreign direct investment of mode of global operation is high. The car parts manufacturing companies can either use joint venture method or subsidiary method (Eriksson 2018). Though the initial establishment of subsidiary and the risk factor remains high, it would enable the firm to establish in the firm more firm in the market.
Gallardo-Gallardo and Thunnissen (2016) mentions that multinational companies require to manage their talents efficient in order to attain economies of scale. Since, the employees are the reserves of the knowledge and efficiency, they play very important role in the efficient operations of the car parts manufacturing companies (Karatop, Kubat and Uygun 2015). The chosen market of the chosen host country should be able to provide the car manufacturing company highly talented employees. This means car parts manufacturing companies while entering either Afghanistan or India. As per UNESCO, the rate of education in Afghanistan is 31 percent while India has a literacy rate of 74.04 percent (unesco.org 2018). The comparison between the literacy rate pof Afghanistan and India clearly shows that literacy rate of India is higher than Afghanistan. This means that India can provide the car parts manufacturing firms of the US more highly qualified and trained staff.
Political Context
Özbilgin et al. (2016) mention that industrial relations play a very important role in human resource management in companies. They further mention that the global industries are dependent on positive industrial relations between the employees, employers and the governments to achieve high level of productivity. The global labour relations body, ILO reports that the labour conditions of Afghanistan is undergoing positive changes Decent Work Country Program being signed between the employers, employees and the governments (ilo.org 2018). India has a far more stable and structured industrial relation framework (labour.gov.in 2018). The industrial relationship framework is aligned with global bodies like the ILO. This means in global context, the industrial relation in India is far more conductive of establishing car parts companies.
Van Der Vegt et al.(2015) mention that human resources in every industry is facing challenge due to changing market conditions, rising costs and political conditions. The low rate of education in Afghanistan, lack of political stability and influence of extremist groups are responsible for entry of firms making car parts. This is because hostile situations like this interrupt operations in the car parts manufacturing companies (Boutellis 2015). India on the other hand has strong industrial polices, a booming economy and is comparatively free from terrorist activities. Thus, it can ve inferred from the India is a fit country due to lower HRM risk situation.
There the several challenges which global HRM is facing. The first challenge is rising cost of hiring employees. The second challenge is continuously evolving manufacturing methods in industries like car parts manufacturing. The challenges require the car manufacturing companies to train their employees to stay abreast with the new technology. These human resource management is costing the companies, thus challenging their sustainability.
The above discussion shows that the car manufacturing companies based in the United States of America should enter India. The country is politically stable and economically emerging. It can definitely provide huge market to the car parts making companies to establish their business in the Asian market and reap its profitability.
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