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Factors Affecting IHRM

The document discusses key factors that affect international human resource management (IHRM): 1. Legal and political factors vary between countries and firms must understand a host country's employment laws and deal with differences in legal systems. 2. Economic factors like development level and currency fluctuations can impact costs and profits. Cultural forces also represent important differences between groups that must be managed. 3. Education and skill levels determine the types of operations and jobs firms can establish in a country's workforce. Understanding these IHRM factors is crucial for global business success.

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Samish Choudhary
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2K views

Factors Affecting IHRM

The document discusses key factors that affect international human resource management (IHRM): 1. Legal and political factors vary between countries and firms must understand a host country's employment laws and deal with differences in legal systems. 2. Economic factors like development level and currency fluctuations can impact costs and profits. Cultural forces also represent important differences between groups that must be managed. 3. Education and skill levels determine the types of operations and jobs firms can establish in a country's workforce. Understanding these IHRM factors is crucial for global business success.

Uploaded by

Samish Choudhary
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Factors affecting IHRM

Dr. Swapna Joshi

Managing human resources in different cultures, economies, and legal systems presents some
challenges. However, when well done, HR management pays dividends. A seven-year study
in Britain of over 100 foreign companies showed that good HR management, as well as other
factors, accounted for more of the variance in profitability and productivity than did
technology, or research and development. The most common obstacles to effective HR
management are cross-cultural adaptation, different organizational/workforce values,
differences in management style, and management turnover. Doing business globally requires
that adaptations be made to reflect these factors. It is crucial that such concerns be seen as
interrelated by managers and professionals as they do business and establish operations
globally. The major factors impacting IHRM can be seen in the below diagram.

1. Legal and Political Factors The nature and stability of political systems vary from
country to country. U.S. firms are accustomed to a relatively stable political system,
and the same is true in many of the other developed countries in Europe. In some
countries, laws address issues such as employment discrimination and sexual
harassment. In others, because of religious or ethical differences, employment
discrimination may be an accepted practice. An organization that expands
internationally must gain expertise in the host country’s legal requirements and ways of
dealing with its legal system
All of these factors reveal that it is crucial for HR professionals to conduct a
comprehensive review of the political environment and employment-related laws
before beginning operations in a country. The role and nature of labor unions should
be a part of that review.

2. Economic factors affect the other three factors in Figure i.e political, legal and
cultural factors. Different countries have different economic systems. Some even still
operate with a modified version of communism, which has essentially failed. For
example, in China communism is the official economic approach. But as the
government attempts to move to a more mixed model, it is using unemployment and
layoffs to reduce government enterprises bloated with too many workers. Many
lesser-developed nations are receptive to foreign investment in order to create jobs for
their growing populations. Global firms often obtain significantly cheaper labor rates
in these countries than they do in Western Europe, Japan, and the United States.
However, whether firms can realize significant profits in developing nations may be
determined by currency fluctuations and restrictions on transfer of earnings. Also,
political instability can lead to situations in which t he assets of foreign firms are
seized

3. Cultural Factors Cultural forces represent another important concern affecting


international HR management. Culture is composed of the societal forces affecting the
values, beliefs, and actions of a distinct group of people. Cultural differences certainly
exist between nations, but significant cultural differences exist within countries also..
Getting individuals from different ethnic or tribal backgrounds working together may
be difficult in some parts of the world. Culture can lead to ethical differences among
countries.

4. Education and Skill Levels. Companies with foreign operations locate in countries
where they can find suitable employees.. The educations and skill levels of a country’s
labor force affect how and the extent to which companies want to operate there. In
countries with a poorly educated population, companies will limit their activities to
low-skill, low-wage jobs.

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