Links between HRM and Business Strategy with Firm Performance: A Cross-cultural Study among US, EU and Japanese MNCs

in South Asian Emerging Economy”

Group H

Sl Name ID

1 Shahriar Mustafa 103-0566-560

2 Minnat-E-Mowla 102-0626-060

3 Abu Usuf Md Rashedul Amin 112-0519-060

4 Md. Mizanur Rahman 111-0197-060

Introduction

Past researches say:Transfer of HRM practices in the MNCs to their foreign subsidiaries may rely on:

Parent country of the MNC (Lau & Ngo, 2001)

Institutional distances between the parent country and the

host country locations (Gaur et al., 2007)

Institutional pressure which prevails in the host country

(Björkman, Fey, & Park, 2007)

Introduction (Cont.)

Business Strategy: states how a firm competes within its industry. It tells about the industry (or industries) the firm competes and how profitable the industry is (Edbarrows, 2009).

HR Strategy: offers a direction for creating value through the workforce of the company (Deloitte, 2007).

Link: A HR strategy attempts to match the philosophy, practices, processes, policies and programs in a way which stimulates and reinforces the employee role behaviors suitable for each competitive strategy (Sayadjavadin & Zadesh, 2001).

South Asia

• Region: India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan, Maldives, and Afghanistan (Dash, 2008)

• Combined GDP: $2.099 trillion (est.)in 2011(IMF, 2012).• Combined Population: 1.7 billion (World Fact Book,

2012).

• Attraction for MNCs: • Cheap labor, • Growing economy,• Large population.

Theoretical Framework

• MNCs has tended to be focused on establishing subsidiaries

• -developed economies • -developing economies

Two Trends:- First, location of globally strategic R&D by the multinational corporations (MNCs) in some developing countries; -second, more recently, some companies from the emerging economies have also started performing R&D to develop products and services for global markets

Theoretical Framework (Contd.)

The extent to which MNCs’ various foreign affiliates (or subsidiaries) act and behave as local firms versus the extent to which their practices resemble those of the parent corporation or some other global standard, is an important issue to investigate (Philip M. Rosenzweig & Nitin Nohria,1993).

The international business is also subject to political decrees made by governments both in "home" and "host" countries (Demirbag & Mehmet, 2009).

Theoretical Framework (Contd.) Since the 1980s, the South Asian economies have

maintained a strong growth which has accelerated slightly over the last ten years

However degrees of control such as legal, political historical, socialization and socio-cultural dimension also influence HRM and Business Strategy with Firm Performance. The socio-cultural environment influences internal work culture and human resource management practices (An international review, 2000).

Theoretical Framework (Contd.) Firm desire to acquire internationalizes strategy (Adaptive)

based on effective human resource management. According to Peter Drucker (1989), within five years there will be two kinds of managers--those who think in terms of a world economy and those who are unemployed.

The rapid rise of multinational Corporations (MNCs) from emerging economies has led to greater interest and urgency in developing a better understanding of the deployment and diffusion of managerial strategies from their perspective for increasing firm performance.

Hypothesis Development

H1: Prospector Business Strategy will be positively associated with firm performance perceived by managers.

H2: Analyzer Business Strategy will be positively associated with firm performance perceived by managers.

H3: Defender Business Strategy will be positively associated with firm performance perceived by managers.

H4: Accumulator HRM Strategy will be positively associated with firm performance perceived by managers.

Hypothesis Development (Contd.)

H5: Utilizer HRM Strategy will be positively associated with firm performance perceived by managers.

H6: Facilitator HRM Strategy will be positively associated with firm performance perceived by managers.

H7: Western MNCs firm performance is better than Eastern MNCs firm performance perceived by managers

Measures

MNC’s Corporate strategy depends on three segments:

• Business strategy• HRM strategy• Firm performance

Business Strategy

Link between corporate strategy, competitive strategy and operational strategy.

Implement own management system.

Develop new markets in their own strategic way.

Solidify and maintain their current position.

HRM Strategy

Create and understand the business value.

Understand the market forces and trends.

HR strategy align with business strategy.

Ultimate power differences within the organizations employee.

Succession planning and employee retention.

Firm Performance

Firm performance depends on:

Invest in people development Supportive and open behavior Shared decision making Cooperative industrial relation Investment in functional development Strong control behavior

DISCUSSION

“SHRM and HR practices are related to different firm outcomes, including financial performance, operational performance, and employee relations climate.”

-Ngo, Lau, & Foley (2008)

So positive association between firm performances with HRM strategy

“Business strategy strongly influence firm performance.”-Roure & Keeley (1989)

So positive association between firm performances with business strategy

IMPLICATION

US, EU and Japanese MNCs in South Asian Emerging Economy

-Top Management for future business strategy -HR Manager for HRM Strategy- Different Cultural framework : India, China & Pakistan

Researcher- New research work in new cultural dimension

-Africa- Other Emerging nation

Limitation

No data to support for arguments-Cannot test hypothesis

Unclear relationship -Influence of other factors

-Strong marketing strategy,-Current business environment-Political and legal environment

FUTURE DIRECTION

More empirical research should be conducted in different cultural dimension.

HR practitioner formulates HRM strategy, think about--Business goal -Firm future performance

MNCs should try to improve the quality of their firm’s HRM in host countries to achieve competitive advantage

Conclusion

Top management thought HR is only the support function of the company, not directly connected with profit generation- Should think HR as a business partner

Business strategies act significantly and positively relate to firm’s performance.

So top management should give importance to both HRM strategy and business strategy- In long term strategy formulation

Bibliography

Bjorkman, I., Fey, C. F., & Park, H. J. (2007). Institutional theory and MNC subsidiary HRM practices: evidence from a three-country study. Journal of international business studies. Academy of international business. 38, 430-446

Dash, K. C. (2008). Regionalism in South Asia: Negotiating Cooperation, Institutional Structures. Kentucky: Routledge.

Deloitte (2007). Taking HR to the next level. A structured approach to developing and executing an effective HR strategy. Retrieved from http://public.deloitte.com/media/0524/us_bnet_takinghrnextlevel_Feb08.pdf

Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., (2009). "Equity-based entry modes of emerging country multinationals," Journal of World Business, Elsevier, vol. 44(4), pages 445-462, October.

Edbarrows (2009). Business Strategy Defined. Retrieved from http://edbarrows.com/Resources/briefs/BusinessStrategyDefined.pdf

Gaur, A. S., Delios, A., & Singh, K. (2007). Institutional environments, staffing strategies, and subsidiary performance. Journal of Management, 33 (4), 611-636.

Bibliography (Contd.)

IMF (2012). Data and Statistics. Retrieved from http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx

Keeley R., & Roure J. (1990) Management, Strategy, and Industry Structure As Influences on the Success of New Firms: A Structural Model, IESE Business School – University of Navarra, WP 158

Ngo H., Lau C. & Foley S. (2008). Strategic Human Resourcemanagement, Firmperformance, And Employeerelations Climate In China Retrieved from crm.sem.tsinghua.edu.cn/UploadFiles/File/5(1).pdf

Seyadjavadin, S. R. & Zadeh, M. H., (2001). HR strategy and its aligning with organizational strategy and human capabilities. Retrieved from http://www.ijms.ir/pg/02/ijms0201.pdf

World Fact Book (2012). Central Intelligence Agency. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/ce.html