One of the central questions in the literature on multinational companies (MNCs) is the extent to which MNC subsidiaries act and behave as local firms versus the extent to which their practices resemble those of the parent company”.
Think of a particular MNE of your choice nd discuss the above statement by using the recommended readings, relevant theory, and academic frameworks. Explain your answer by providing practical
examples from the MNE that you have chosen.
Break down of this assignment
1. To what extent do MNE’s globally standardize their work practices and HRM?
Does a Multinational Enterprise like Walmart adapt global standards?
What are the factors driving Standardization?
2. To what extents are MNE’s locally responsive to work practices?
Does a Multinational Enterprise like Walmart adapt local standards?
Do you think it practices global HRM standards or local adaptations or a combination of both?
What are the factors driving localisation? You are asked to discuss this statement using the example of an MNE of your choice and attempt to incorporate the theoretical concepts that we have covered so far? Linking theory to this assignment?
Applying Hofstede’s theory and other theories covered will help an MNE’s HRM division to understand what to expect in unknown cultures and how to train and prepare its employees.
MNC SUBSIDIARIES ACT AND BEHAVE AS LOCAL FIRMS VERSUS THE EXTENT TO WHICH THEIR PRACTICES RESEMBLE THOSE OF THE PARENT COMPANY”-
Table of Contents
Q1: Extent to which MNE’s globally standardize their work practices and HRM
Q2: Extents to which MNE’s are locally responsive to work practices
In recent days, all the parent companies have control over their branches and subsidiaries. However, it is important for the subsidiary companies to maintain legal independence. As the majority of stockholders in subsidiary, parent company can support a great deal of clout. Director of the subsidiary has power to control over operational activities. This study is focused on literature of MNCs to support its operational activities. Basic contrast of this study on subsidiaries of MNCs lies between two factors, one is behaviour of subsidiaries like local firms and second one is like parent companies. In relation to the example of Walmart, Singapore, this study has analysed global standards and HRM standards. Application of Hofstede’s theory of cultural dimension has described impact of different culture on the employees.
It has been analysed that since last two decades, strategies related to standardization depend on HRM practices. As per the views of Banerjee and Venaik (2018, p.840), consistent diversity in national level can suggest that MNCs are constrained by local companies. On the contrary, multinational companies can balance both standardisation and differentiation regarding the practices.
For example, Walmart can be mentioned to analyse its global standards. In relation to global standards for the multinational companies like Walmart, directed opportunism can be considered as an approach which can maintain flexibility of systematic framework. Walmart practices the process of product standardization based on which it can offer similar products in host country. Walmart has adopted the strategies called “think globally, act locally” (Walmart, 2019). Based on this strategy followed by Walmart, subsidiaries of this organization in Singapore have followed local strategies. Apart from these factors, Walmart, in Singapore is able to offer all household products to office furniture that is selected from efficient suppliers.
It has also been identified that Walmart provides services of differentiation which is able to give a new way of experience to the customers. In order to maintain global standards, subsidiaries of Walmart are able to cross docking method to maintain effective quality of supply chain management. This organization performs to retain position in global market as it has potential to support inventory management and track customers by implementing RFID system and facilities of CRM (Walmart, 2019). In field of retail industry, Walmart can be considered as the largest company which has owned Sam’s Club. This subsidiary of Walmart has announced a commitment of $100,000 for flood relief in Midwest (Walmart, 2019).
Walmart has potential to operate 3500 discount stores, subsidiaries like Sam’s club and other supercenters in US. Through maintaining global standards, Walmart has introduced about 1170 stores in major countries. In Singapore, Walmart has focused on low cost to gain competitive advantages among competitors. It can be reported that based on these global standards, Walmart has recorded sales up to $78 million (Boon, 2016). This organization has focused on monopoly power to the competitors. Based on these global factors, it has been analysed that the organization can change management practices to increase rate of sales by the subsidiaries.
Standardisation environments are able to drive the factors which can help to support developing growth of the MNCs. in case of multinational companies; standardisation can support global strategy as well as structure of business. On the other hand, corporate culture can be influenced by effectiveness of HRM practices by the subsidiaries. As per the views of Chiang et al. (2017, p.250), culture well as environmental condition of host country can be considered as localisation driver to the role of subsidiaries. These factors of localisation drivers can support mode of operation of the subsidiary companies.
In relation to the organizational context of Walmart, drivers of global standardisation have the aim to meet transparency, consistency as well as effectiveness and efficiency. Famiola and Adiwoso (2016, p.29) has argued that drivers of localisation is more potential to support development of subsidiary businesses. The process through which the company can show respect to local tradition and culture can foster success of subsidiary companies. Walmart, in Singapore has supported local tradition and culture to operate the business which has insisted this organization to step forward to success.
Walmart has supported local institutional requirements as well as government policies to establish local business of the subsidiary companies. According to Deresky (2017, p.24), standardisation can be achieved through effective quality of HR practices. For an example, it can be mentioned that Walmart has focused on appraisal system for the employees to attract local employees. On the other hand, both criteria and staffing procedure can be considered as the drivers of standardisation for subsidiary businesses of Walmart.
In case of this organization, it has been observed that staff rotation along with code of conduct based on legal terms of local business environment, this American retail has succeed in Singapore. These factors can support both globalisation standards and localisation standards. Though cultural environment and institutional environment of subsidiary companies of Walmart is able to support localisation standards, corporate culture, strategy as well as structure of the company can support global standardisation.
Due to complexity in the process of implementing effective policies to the business operation, cultural tradition as well as legislations can be influenced. The concept regarding HRM practices which are easy to control, manage will not be supported by the local firms. Based on the views of Mudambi and Navarra (2015, p.25), HRM practices of an MNC can support local response to the work process as it can evaluate quality of performance of the employees.
Walmart supports local standards for both suppliers and the employees. This organization is committed to work with the stakeholders and suppliers which can help to support supply chain management. In case of subsidiary business of Walmart in Singapore, based on local culture, authority of this organization can assess supply chain risk, and monitoring process (Walmart, 2019). A responsible sourcing team of 200 associates has supported retail success by the subsidiary companies (Boon, 2016). Along with these factors, safety and wellbeing of the workers also depend on local standards for this business. Through subsidiary organizations of Walmart are independent in dealing with suppliers and customers, like the parent organization, subsidiaries have implemented both audit policy and disclosure policy.
In relation to Walmart, it has been analysed that this organization supports global supply chain management along with local laws and standards. As per the views of Chiang et. (2017, p.254) , it is important for an MNC to support risk based approach to make audit for the organization. Based on the standards maintained by Walmart, it has been evaluated that though this organisation has focused on local culture of business environment, it has also focused on global supply chain management. These factors have established the fact that Walmart supports a combination of local adaptations and global standards for the subsidiary businesses.
It has been analysed that cultural environment of the locality of subsidiary organization and the institutional environment can drive localisation for the business of MNC. In case of Walmart, mode of operation in Singapore with the subsidiary companies can support development of the organization. As per the views of Deresky (2017, p.23), subsidiaries of an MNC can act as global innovator, implementer and integrated player. Through implementing driver like extrinsic and intrinsic reward system, Walmart has supported motivational approach to the employees. For an example, it can be mentioned that Walmart has announced 77% stake in Flipkart and it is able to spend $16 billion for this stake (Boon, 2016).
Based on the theoretical aspects of Hofstede’s cultural dimension, it can be mentioned that along with six factors of it, an MNC can support HRM practices for local organizations. According to Glava et al. (2018, p.292), based on these aspects, it can be supported that MNC can focus on cross cultural communication with the subsidiaries. Low rate of uncertainty avoidance can be resolved by focusing on equal facilities to the local employees. It is important for the authority of Walmart to focus on language barrier by providing training to the employees. On the other hand,
Figure 1: Hofstede’s cultural dimension
(Source: Based on views of Hofstede Insights, 2019)
It has been analysed that importance of cultural aspects on both local business and multinational organizations can support development of business. In case of multinational companies like Walmart, businesses of subsidiary companies depend on both global standardisation and localisation. Along with the approach of Hofstede’s cultural dimension, this study has analysed importance of American business culture on subsidiary business of Walmart in Singapore. The process of maintaining global codes of conduct and process of managing human resource can support management system. It has also been analysed that the process of hiring employees and legal approvals depend on power of parent companies. This study has established the factor that it is important for the subsidiary organizations to act as local firms. The HRM practices and the business standardisations of subsidiary companies need to be like local companies. Based on the example of Walmart in Singapore, it can be conducted that activities of subsidiary companies can be effective if it supports local culture.
Banerjee, S. and Venaik, S., (2018). The effect of corporate political activity on MNC subsidiary legitimacy: An institutional perspective. Management International Review, 58(5), pp.813-844.
Chiang, F.F., Lemański, M.K. and Birtch, T.A., (2017). The transfer and diffusion of HRM practices within MNCs: lessons learned and future research directions. The International Journal of Human Resource Management, 28(1), pp.234-258.
Famiola, M. and Adiwoso, S.A., (2016). Corporate social responsibility diffusion by multinational subsidiaries in Indonesia: organisational dynamic and institutional effect. Social Responsibility Journal, 12(1), pp.117-129.
Deresky, H., (2017). International management: Managing across borders and cultures. Delhi: Pearson Education India.
Glava, M.L., Smith, T., Holt, L., Peixoto, P., Hu, I. and Mathew, M., (2018). SALES EXPERTISE, HOFSTEDE’S CULTURAL DIMENSIONS & ETHICS IN CHINA AND THE USA. Copyright 2018 by Institute for Global Business Research, Nashville, TN, USA, p.292.
Hofstede Insights (2019). Compare countries. Available at: https://www.hofstede-insights.com/product/compare-countries/ [Accessed 21/03/2019]
Boon, R., (2016). Walmart says yes to anti-theft system by S’pore firm The Strait Times [online] Available at: https://www.straitstimes.com/business/companies-markets/walmart-says-yes-to-anti-theft-system-by-spore-firm [Accessed 25/03/2019]
Mudambi, R. and Navarra, P., (2015). Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs. In The Eclectic Paradigm (pp. 157-191). , London: Palgrave Macmillan
Walmart (2019). Home Page. [Online] Available at: https://www.walmart.com/ip/Singapore/52935176 [Accessed 21/03/2019]
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