Globalization and employment relations

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Unit 1

• Globalization and employment relations

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Objectives

• Discuss the concept, definitions of, causes and
  consequences of globalization
• Identify the role of multinational enterprises in
  globalization
• Differentiate between types of multinationals and
  their characteristics
• Analyze divergent industrial relations strategies
• Chart the trends of labour unionization in
  Asia-Pacific
• Discuss union strategies and government policies
  in Asia-Pacific

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Introduction (I)

• International trade and foreign direct investment
  (FDI) have grown rapidly, particularly in
  Asia-Pacific
• Highlight some of key issues associated with
  globalization, particularly managing the
  workforce
• Employers, workers, organizations and government
• The concept of globalization, explaining what it
  means, in relation to multinational enterprises
  and local firms

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Introduction (II)

• Distinguish between MNEs at different stages of
  globalization before focusing on the human
  resource/industrial relations (HR/IR) challenges
• Those challenges posed by globalization for
  workers and unions
• The government policy may change and to ensure
  that labour markets operate efficiently
• Understand the implications of future
  globalization scenario

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Globalization What does it mean? (I)

• The processes that bring people of different
  countries closer together, the final result being
  an absence of barriers to economic or social
  relationships (Waters 19953)
• Occurs through closer international economic
  integration of trade and investment
• Such as Vietnam and India, Hong Kong and
  Singapore, South Korea and Japan

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Globalization What does it mean? (II)

• Globalization is controversial for a number of
  reasons
• More uncertainty
• These change often endanger the security of
  managerial and workers job
• Existing institutional power bases in society
• Take power away from governments
• Shifting it towards international markets and
  large firm
• Loss of sovereignty to the most economically
  powerful countries
• Possibility of stronger economic growth
• Particularly if trade and investment flows are
  internationally regulated to prevent large
  fluctuations in money and share markets

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Causes and evidence (I)

• MNE is the primary engine of change, creating
  complex international networks of product
• Extends far beyond the worlds urban centers
• International trade has grown increasing from 25
  of world GDP in 1970 to 45 in 1990
• Newly industrialized counties tripled their share
  of manufactured goods as a proportion of exports
  from 20 in 1960 to 60 in 1990
• Asia-pacific have benefited particularly from
  trade policies that have emphasized export
  promotion
• The international financial system has made
  capital flows easier

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Causes and evidence (II)

• The government have more difficulty in
  implementing macroeconomic policy
• Less control over capital flows, hence over
  exchange rates and the money supply
• More movement of people in absolute terms
• Immigration flows to and from DCs are, no greater
  relative to population size than in 1970s

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Globalization and production networks (I)

• Implications for employment and labour relations
• 3 main common transnational networks of
  relationships
• Producer-driven chains (PDCs)
• Buyer-driven chains (BDCs)
• Service-provider chains (SPCs)
• Mainly intra-organizational

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Globalization and production networks (II)
Types of global network and their characteristics
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Producer-driven chains

• Close ties with external companies, or
  subsidiaries of the same corporation, to supply
  components or services
• Contractors, subcontractors and subsiderations
  are often located in DCs and NICs according to
  cost and quality consideration
• MNEs often establish strategic alliances
• This type of close but limited collaboration
  between competitors may hasten workforce
  rationalization
• Joint ventures are also a feature of PDCs in
  countries that require, or strongly encourage,
  local partnerships as a condition for FDI

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Buyer-driven chains

• Multinational retailers with strong brand names
• Contract out the manufacture of final goods
  according to strict specifications
• Close ties with the retailers along lines of
  relational contracting
• For example Nike
• NIC-based companies are moving out of low cost,
  labour-intensive production to supply skilled
  services

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Challenges associated with globalization (I)

• For firms, more intense competition associated
  with globalization requires constant change
• Business strategies and organizational structures
  need to be recast continually
• HR and IR polices that explicitly acknowledge the
  cross-cultural context and the diverse
  backgrounds and values of employees

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Challenges associated with globalization (II)

• For workers, structural adjustment creates
  uncertainty over the availability and quality of
  jobs and the terms and conditions of employment
• HR/IR decisions becomes more important for
  workers
• The problems and dilemmas posed by globalization
  are shown as follows

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Challenges associated with globalization (III)
The challenge of globalization
Government Development strategy Economic policy
integration Labour market structuring
Corporations Business strategy, structure, and
culture Redefining the HR/IR role and policies
Workers/Unions Capacity to represent
workers Current and future strategies in the
context of rapid change
Globalization Intensified competition Rationalizat
ion New organizational forms
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Challenges associated with globalization (IV)

• For government, globalization represents a
  challenge in 3 main areas
• Required to preside over structural change
• Industries will be declining while others will
  become more important
• Policies are needed to modernize such enterprises
• Labour standard
• Concerns government policy and involvement in
  regional and global alliances
• Employers and unions have a rightful role to
  play in influencing government thinking

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Issues mainly relevant to corporations

• Identifying and taking advantage of current and
  emerging core corporate strengths
• Being able to combine aspects of local
  comparative advantage and more general
  organizational attributes in novel ways
• Ensuring that economies of scale can be
  harmonized with flexibility and innovation

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Maintaining competitiveness

• Outsourcing of some functions in order to focus
  on core competencies
• Downsizing
• Automation in pursuit of reduced costs and
  productive efficiency
• Low-skilled labour becomes more expensive and the
  local structure of employment evolves towards a
  more skilled pattern

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Corporate social responsibility

• Typically includes a broad commitment to
  employees
• Minimum requirements for independent contractors
  and joint venture partners
• Reflects 4 factors
• Retain a motivated, skilled workforce where
  labour shortage is a persistent problem, or
  global network of production for export markets
• Retain a positive image in host countries
• Productivity is higher than in local firms
• Apply pressure on management to improve wages and
  conditions

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Unions and collective bargaining (I)

• MNE country of origin that reflects a particular
  tradition of management-labour relations
• Largely peaceful and cooperative relationship
  with unions
• Clues are evident from 3 MNE sources
• Behaviour on these issues
• Behaviour with regard to FDI
• Involvement in industrial conflicy

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Unions and collective bargaining (II)

• HR strategies to transcend the constraints are
  related to 4 factors
• MNEs towards the adoption of global strategies,
  structures and cultures
• Organizations becoming internally more
  homogeneous with respect to technology and
  employee requirements
• MNEs as managers seek to adjust production and
  costs
• Less direct regulatory role in the 1990s

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Unions and collective bargaining (III)

• Does the management of these organizations
  prefer to deal with unions through collective
  bargaining?
• The answer is No, the indirect evidence comes
  from governments attempting to attract FDI
• Export processing zones (EPZs)
• Such zones are significant in China and Southern
  Asia

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Unions and collective bargaining (IV)

• Manufacturing triangles
• MNEs and local firms are based on highly
  developed urban centre
• Cheap labour for simple manufacturing in an
  adjoining underdeveloped region
• MNEs prefer to be unconstrained by external
  organizations
• Absence of consistent union density in foreign
  affiliates
• Typically the in-house or enterprise union
  variety

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Unions and collective bargaining (V)

• Why MNEs more prone to industrial conflict?
• More stridently oppose union recognition
• Less co-operative in their approach than local
  companies
• More profitable
• Having a greater capacity to pay
• MNEs generally perfer not to recognize unions or
  to bargain
• Pragmatic and will do so where local labour laws
  strongly encourage or require such behavior

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HR/IR policies and practices in the local
situation (I)

• 4 implications of global integration based on
  international network
• Efficiency in terms of price, quality and
  delivery time
• Tend to disperse resources and power among
  strategic business units and product line
  headquarters
• Product specialization in the context of larger
  markets, inter-affiliate competition for
  investment funds is likely to be increasing
• Internal and external benchmarking and an
  emphasis on organizational learning

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HR/IR policies and practices in the local
situation (II)

• Organizational learning
• Lessons of superior performance can be captured
  and effectively transmitted to management and
  employees
• MNE management face the challenge
• Sustaining continuous improvement
• Knowledge dissemination across business units
• Introducing practices in ways

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HR/IR policies and practices in the local
situation (III)

• The pattern of cooperative dependence includes
  the following attributes
• Employment security for key employees
• Broad and challenging jobs that include an
  emphasis on teamwork, process improvement and
  awareness of obligations to other sections or
  production units
• Facilitative supervision rather than hierarchical
  control
• Continuous employee training
• Systematic individual appraisal
• Performance-related reward
• Workers representation either through a formal
  council and /or via a union in a single
  bargaining unit

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Managing in a changing, complex environment
Joint ventures in China