Managing Global Alliance

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Question: - Outline the importance of human resource management

for the successful operation of international strategic alliances.

Assess the significance of the major problems encountered by

partners in the design and implementation of effective human

resource management practices?

No one is perfect in this world people or organization this explains why

companies partner and why it is important in this global market.

Globalization and liberalization of market increases the competition level in

international market. Cooperative strategy of alliance formation has become

gradually more accepted in global market over the past few decades. Joint

venture involving both big and Small Corporation in all business segments

and market around the world. In near future alliance are only single

important method of international growth and expansion of the companies

because there is a no single company in this world has all expertise and

facilities to provide best services to their customer in international market.

It’s concluded that strategic alliances are the intermediate between full

internationalization and the global or emerging market and it’s also help big

multinational organization to get easy access in emerging market without

facing competition (Cauley, M, 1999)

Strategic alliances:-

An agreement between two or more corporations to collaborate in a

particular business sector, so that both companies can be benefited from the

strength of each other and gains some competitive advantages over their

existing competitor. Alliances involve in transferring of knowledge and

technical knowhow between partners as well as sharing natural and human

resources, cost reduction, helps in maintain a good and healthy relationship

with distributors and mainly combined their efforts to developed new

STUDENT NO-19030441DATE- 4 JUNE 2010


products and technologies. Alliances may involve the corporation between

competitors as well as non competitors (Dussauge, P and Garrette, B, 1999).

Although there was no particular agreed definition of strategically alliances

but according to Shankar in 1987, “A separate legal body represent the

fractional property of two or more organizational firms, in which the head

office of at least one organization is located in abroad. This separate

organizational body are subjected to shared control of their management

activities. Each of the company is economically and lawfully autonomous to

each other” (Reuer, J, 2001)

Importance of Strategic Alliance:-

Using a joint venture as a mode of entry in global business process is an old

methods but the global economic growth in past few decades are

continuously growing which increase the level of competition in international

market. Big corporation are looking for the new option to invest on their

operations and business activities that will emerge new markets and it will

increase the use of international joint ventures (Dussauge,P and

Garrette,B,1999) As an Peter,D view the strategic alliance are likely to grow

in a continuous manner, in global market the fair deal for an IJV, of strategic

alliances and cross holding companies are not the cost reduction, it’s

because of Information(technologies, human resources and most important

to get easy access in fresh market). the economist don’t recognized it, but

it’s an old market experience which stated that, companies cannot maintain

their market holding or position in fully globalized market unless company

are in as manufacturer or producer. As an outsider or exporter you can stand

in a market longer, company will out sooner or later, the reason behind this

that all companies to be in market to have information not for cost

reduction(Drucker,P,1989) for example Nissan and Renault alliance is best

way to explain the importance of strategic alliance in global market . Nissan



and Renault is success full shared supply joint venture. They share

technology, expertise and human to develop a new product.

Types of strategic alliances:-

(a) Partnership between non- competitive firms

1. Growth and expansion

2. IJV’s

3. Vertical partnership

4. Cross – industry agreement

(b) Alliance between Competitors

1. Shared supply alliances

2. Quasi concentration alliances

3. Complementary alliances (Dussauge, P and Garrette, B, 1999).

Human Resource Management:

Human Resource Management is the managerial job that deals with issues related to Human capital such as compensation, Recruitment, performance Appraisal, organization policy design and development, provide healthy and safe working environment, benefits, worker motivation, flow of communication , administration, and training of employees(Vernon et al ,2007)

Importance of Human Resource in Strategic alliance:-

Human resource management is often considering less important than other

activities in list of alliance manager, yet HRM makes an important

contribution in success and failure of joint venture. So now days HRM are

widely recognized and has a big impact on alliance performance, its life and

revenue, the customers (quality service, low cost products) , distributors and

employees employability, safety and work satisfaction. Previous statistics



suggest that the key important factors superseding in the venture process

are those related with managing work force the take part in the agreement.

HRM plays an important to resolve the issues related with leadership, cross

and corporate cultural in joint venture operations. In strategic alliances

human and cultural factor can decide the life span of joint venture (success

or failure) (Child, J., and Faulkner, D, 1998) so it’s very to look after human

capital by giving them training to be aware of the possible future problems.

In the perspective of the strategic alliances, HRM are probably even more

important: its impact on number of organization, not just on a single

company, and in several public related activities. Within a strategic alliance

there are many number of issues but the issue related to HRM are bad for

the life of joint venture, failure of human resource system are the of the big

reason after alliance failure(Beech,N and McKenna,E,2008)

HR activities:-

Organizational Design and Development

Human is a most valuable capital for an organization, so it’s very important

to properly manage the human capita. Human resources management team

are responsible for design and development of all HR activities like managing

employee, pensions, social responsibility, HR planning system etc. Human

resource management helps in development of firm practices by designing

the policies like to facilitate learning, motivation , corporate infrastructure ,

culture, offering training , team work and stabilized a acceptable recruitment

procedure to select highly qualified personals with in a organization to boost

the productivity of strategic alliances for example the case Nantong cellulose

fibres company in the beginning they don’t have structural agreement or

design of joint venture but after that in second phase of negotiation with



American partner they rectify the previous error and design the proper

agreements(Child, J., and Faulkner, D,1998)

Knowledge transfer:-

Human resources management plays an important role or facilitate inter

organizational learning. Transfer of knowledge is a most important process in

strategic alliance. We can also say that it’s also a reason for forming

alliances. Continuous sharing will increase the participation of partner in

business activities; learning increased the life of strategic alliance (Drucker,

P, 1999). Management will facilitate the sharing of natural resources, human

resources, technology and technical knowhow in between both partners and

create a competitive gains for joint venture in global market and enhance

the capability to innovate new products and technology, combine efforts of

both partners will push strategic alliance in the way of success and helps

alliance management to get new skills development in organization ,

effective knowledge management will increase the productivity and

motivational level of human capital in organization(child,J,2003)for example

Honda and rover is best example to explain inter organizational learning

how Honda learn in the strategic alliance with Rover and get competitive

advantages in international automobile market.

Training and development:-

Training normally refers to enhance their knowledge and skills where as

development are more learning process that gains new capabilities and

knowledge of managing difficult conditions. Training and development

process are continuous process in an organization. Which enhance the

working capabilities as well as develop new personal skills and attributes in



employees which company and increase the future career option for

employees.It’s an important function of human resource management in an

organization (Matthews, C, 1999)

Performance Management:-

Performance appraisal is a human resource management activity to evaluate

the performance of employees on the basis of their business targets. The

organization of such fix targets are set by the alliance not by the managers.

The method of evaluation of performance are vary to size and culture of an

organization(Sabater, V. (2002) for example- Black & Decker –Eastern

Hemisphere case the management put more emphasis on how to evaluate

the performance and which method they use , standardization or domestic

method.

Staff selection:-

This activity is start with job analysis in alliance and identifies the required number of managers and staff to work in joint venture. The alliance recruitment process is subjected to negotiation between the partners, especially when one organization is looking to adjust their surplus employees in countries like china and India. Recruitment process in alliance is very crucial, to select the right candidate and place it in right place and provide a good and healthy working environment to their employees (Ferner et al, 2006)

Stages of Implementation of common human resource

management:-

Selection of partner:-



Partner selection is very crucial decision to made in international market , partners enter in strategic alliances with some opportunity and objectives, thus it’s very difficult for management to identify the useful partner selection criteria like financial conditions, brand name , market experience , resources and most cultural fit to be enter joint alliances. Poor selection is common reason for alliance failure (Hamel, G, 1991)

Planning for next step (how to utilize the probable benefits):-

Managing human resource issues in a strategic alliance are very complex.

It’s difficult and time taking to build trust, promote learning, and facilitates

proper communication flow in strategic alliance. Early Planning in alliance is

very important in order to overcome any problem due to different culture

and corporate management style between both partners. (Hamel, G, 1991).

Especially Human resource planning like labor market conditions, legal and

cultural environment of host country, and also the economic and political

environment in future partner country and strategic alliance itself.

Standardization or localization HR system:-

One of issue that organization has to decide before during formation of

strategic alliances with domestic companies is whether to implement their

international standard HR system or to adapt the domestic conditions. Big

corporation faces two opposing pressure, one to incorporate their activities

all around the world and second to adapt activities which suites domestic

market conditions - local responsiveness (Matthews, C, 1999)

The advantage of international incorporation depends on the possibility of

applying best human resource practices internationally. It’s easy operate and

maintain the quality of services internationally but on the other hand



domestic market condition of host country has significant impact on

multinational corporation for example- In East Asian labor market , it’s cheap

as compare to western labor market , it will not necessarily to implement the

standard HRM system in this condition. It’s really important for both

partners to agreed on common HR system to reduce the possibility of any

clashes in strategic alliances for example- the case Black & Decker eastern

hemisphere illustrated that the performance evaluation is mainly a

responsive cultural issue, In global alliances, where it’s very difficult to made

decision to implement new standard human resource practices or to adapt

domestic HR system (Child, J., and Faulkner, D, 1998)

Implementing common strategic HRM practices:-

After proper planning and deciding the common HR system it’s time to

implement the common human resource practices in strategic alliance and

evaluate the effectiveness of system

Selection of HR manager:-

Last and main important step to recruit a manager to look after all business

HR activities of strategic alliance and act as a link between two partners.

Manager plays an important role in development of human resource

activities within the alliance so the manager will be aware of everything like

cultures and able to handle all kind of situations (Sabater, V, 2002)

Economical viewpoint related to HRM:-

The economical academic perspective that is illustrate on the basis of

financial economics, management literature, psychology and sociology and

mainly spotted on different aspects of Human resource in strategic alliances.

Human Capital Theory. : - according to this economic theory, human

asset refers to most important productive strength of people (Faulkner, D,

2001). Human skills, education and previous experience combine have some



valve to corporation because they facilitate it to be more productive and

adaptable, thus human consider has a valuable asset for organization.

Theory suggest that it’s important to understand the value of human asset in

organization and try to create a healthy HRM structure which invest capital

to facilitate the productivity behaviors from labors- including motivation

and other related factors because the investment on human assets gives a

good return in future. The firms can use their HR activities in different way to

facilitate their human assets. For example, company can heir human form

labor market or by providing training to current work force.

In this theory, related factors such as political environment, market situation,

production strategies and national culture are most important because they

affect the expenses related with another way to use HR to raise the value of

firm human assets and estimated return (productivity).( Hamel, G, 1991)

Resource-Based Theory. : Basically the human resource management in

strategical alliances is more or less follows the resource based theory. The

economic theory stated that the way for organization to develop their

strength and obtain new skills and technologies from a partner. Theory

encourage both of organization to join their strength and resources and

competitive advantages over competitors

The resourced based theory moreover facilitates the learning, sharing of

technology; resources, information, and product design and help each other

in cost reduction. According to the theory HRM plays an important role in

whole process. Human resource very much influences an company

employees and firm resources that are connected with inter organizational

learning process in strategic alliance and gain unseen advantages in

strategic relationship and it create a valuable market competitive

advantages in global market (Child, J., and Faulkner, D, 1998)



Problem Encountered during Implementation HRM practices:-

During implementation of common HR practices so many problems occurs

because of unfamiliarity with language, culture of the partner country , Its bit

difficult for a new firm to adapt a new culture and language at the beginning

of alliance formation. Problems occurs to implement common HR activities in

alliance are below

Staffing:

Selection of the staff is a biggest challenge in strategic alliances, the

problem occurred when gap between actual and required is big. In joint

venture agreements there is a question mark, are the both strategic partners

satisfied with present a level of total staff or not, are they agreed about how

strategic alliances can manage with the less staff than required. This kind of

situation has impact on alliance performance and life. According to Drucker,

P buying a human from labour market are one of the important factor in joint

ventures performance, some time cultural beliefs create some clashes

between both partners, so cross cultural understanding is very important

during the alliance formation for example Queensland Minerals case there

was a problem in recruiting persons with in a organization and share in

decision making process due to un trust in between the partners.

Promotion:

for the strategic alliance employees promotion is big concern because often

the promotion are blocked in alliances and it very difficult to get back in

parent company and there is a question mark on promotional possibilities is



strategic alliances are good or poorer than in other organization, also clash

between establishing the common promotional system in alliance to attract

high quality staff to manage their human resources in term of their job

aspirations (Schuler, R, 2001)

Performance Appraisal:

Evaluation management included the past review of employees and

according to that setting the future objectives of alliance management. It

should be regarded as a complicated process for HR manager to give the

feedback on employee’s performance. There is no defined structure of

appraisals, there is still a question that can we evaluate performance on the

basis of company performance, management performance or by the

feedback of superior , if it is can we get accurate information? , there is a

chance of biasness of information (Tyson, S, 2009) In strategic alliances this

process create the complex decision making and some time clash between

the appraisal criteria of both partner so it’s very important to establish a

common appraisal system and explain what question and how it done in

strategic alliances for example – the case study on Black & Decker on

eastern hemisphere they struggling to implement the common performance

appraisal system.

Decision Making:

Is a very important function in strategic alliances, to avoided clashes,

manages clashes and maintain proper communication within the joint

venture between both partners. So it’s necessary to agreed on common

frame work and structure of decision making to maintain smooth flow of

information between alliance and both partners but some time it will create a

problem in deciding the common frame work and number of board of

directors. Decision making process is a kind of agreement on how to manage

risks and take decisions with in a organization and to build a strong



communication channel within organization, which gives a strong base to

alliance survival and helps to build mutual trust and understanding between

both partners for example Queensland minerals alliance case show how lack

of proper sharing decision making frame works leads alliance towards failure

(Ferner et al, 2006)

Cultural issues during Implementation of common HRM:

The major problem in communication process is language and cultural

barrier. Language and culture plays an important role in strategic alliance ,

strategic alliance is not only the collaboration of two companies , it’s also a

collaboration of two languages and culture so very important to combine all

strength and come with new corporate culture and acceptable international

language like English because communication is one of important factor in

alliance success , smooth flow of information within a organization enhance

the productivity of management but the blockage of information flow create

trouble in alliance . It will push alliance towards failure (RAO, P and TEEGEN,

H, 2001)

Compensation:

One of the factor related to human resource management ,it concern during

the alliance formation is there any difference in wages of joint venture

employee as compare with parent company employees , if it is ,will create

problem between management and employees which affects the

productivity of employees(York, A, 2000).

Resistance (standardization or localization):

In this case there a big confusion to implement common HR system, which

management system used in strategic alliance, standard international

system or local HR system. Which system is successful in the host country



for example- In East Asia mostly international companies (Western) use local

HR system which is very effective. So for implementing a common HR

system both organizations are agreed on Common system (Child, J., and

Faulkner, D, 1998)

Conclusion:-

In conclusion , HRM plays an Important role in alliance success and failure,

proper Human management increase the productivity and work satisfaction

of employees and helps to get competitive gain and increase the life of

alliance by promoting learning and by gaining new skills and capabilities

At the last the proper HRM system is the key of alliance survival; recent

studies stated that 30% of alliance is fail due HRM issues. So both of the

partners are ready to adapt changes according to market environment and

agreed on a common HR framework and change it according to market

environment


Managing Global Alliance

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