IHRM: Individual Case Study

By: Muhammad Arham

ID: 18031126

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Table of content

1. Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3)

2. Difference between domestic and international Human resource
management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,4)
3. Factors to consider by MNC before moving across borders . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,5)
4. Factors influencing international Human Resource management . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,6)
5. Taken For Granted HR practices across borders . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)
6. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,7)
7. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8)

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 1. Executive Summary
In this document, my task orientation emphasizes on the role of HR department in a company
and factors responsible for policy making by HR management while expanding operations
globally. Due to globalization and western affect, many countries are approaching towards Neo-
Liberalism causing an increase in inter-connectivity between countries but so did the complexity
with it. Different firms do research and form strategies accordingly so their purpose of
economies of scale and scope can be achieved.

As being an external HR consultant for a Spanish firm, my task is to prepare a report suggesting
key factors to consider before a Spanish MNC establishes subsidiary in Malaysia. I will provide
justification about the roles of IHRM, which can align goals and achievements of a firm through
effective workforce. Different obstacles take place for managing operations globally therefore
my job is to assess internal/external factors and functions that can be managed from Spanish HQ
and from the host country.

2. Domestic and International HR management

Human resource plays a vital role in managing workforce for providing successful outcomes
such as Return-On-Investment (ROI). The study of HRM carries a set of organizational activities
that aims for recruiting, developing and maintaining an effective workforce (Griffin, 2016). This
department is responsible for handling workforce by setting up policies. Some of these are:

 Recruitment and selection

 Job description and orientation
 Wage and salary regulation
 Training and development

There are two types of HRM:

1. Domestic HRM.
2. International HRM.

The management policies are similar between these two types of HRM but when we talk about
IHRM, the amount of complexity increases. Domestic HR functions have to deal with people

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originating within one nation whereas According to (Morgan, 1986) IHRM has to deal with 3
components, which are:

1. Parent country nationals.

2. Host country nationals.
3. Third country nationals.

IHRM is more complicated due to its involvement in employing people from different countries,
cultures and environment. There are many challenges and risks associated with IHRM such as
failure of expatriation or workforce because of uncertain conditions in different countries (Agoi,
2011).

IHRM department is responsible for executing a plan that can support work/life balance of
employees, expatriates and their families.

3. Factors to consider before moving across borders

Spain has to consider 4 major elements before establishing a subsidiary in Malaysia. These are
political, economical, cultural and technological factors that can influence HR polices. (Jackson
and Schuler, 1995)

Political: Government plays a key role for imposing employment laws and regulations that can
affect HR policies. Working conditions vary in different countries therefore Malaysia requires
work time of 8 hours per day with 6 working days a week where as Spain permits 8 hours per
day with 5 working days. Tax policies also determines the amount of profit a firm and employees
can make therefore Spain can gain the advantage of tax system in Malaysia as the country is tax
friendly requiring 28% of income tax where as Spain has 43.5%. Under the 25 year rule of
Barisan National party, Malaysia is politically stable which means the market, institutional and
budget policies are also stable.

Economical: Many firms operate in different countries due to minimal labor and other costs.
Minimum wage rate in Span is higher than Malaysia due to currency value, its exchange rate and
establishment therefore Spain has the advantage of hiring cheap labor. Unemployment rate in
Malaysia is 3.5%, giving Spain the advantage of available human resource. The disadvantage
cost of living in Malaysia, which is 27.8% higher than Spain.

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Cultural: There is a huge cultural difference between Spain and Malaysia that can affect HR
policies for example cross cultural-communication. Apart from their national languages, it is
estimated that almost 60% of Spanish people does not know English where as in Malaysia over
60% can speak English.

Technological: Technology can also play a vital role in advertising and recruiting procedure of a
firm. It is an efficient way of attracting job seekers via internet and email etc. Applicants can also
apply for online jobs which is time efficient. Managers can also communicate with employees
frequently via cell phones. It is estimated that in 2015, Malaysia had 20.6 million internet users.

4. Factors influencing International Human Resource Management

The Concepts of institutional, cultural perspective and manifestation of HRM across borders can
help us in understanding the cross cultural ambiguity and misunderstandings within the
workforce. A cultural frame work introduced by Geert Hofstede (1980) indicating cultural
beliefs, affecting organizational structure and employment practices. For example

 Organizational structure – autocratic/democratic, depending upon the level of power

distance within a country.
 Recruitment – based on talent, merit/ references, nepotism.
 Regulations – level of uncertainty avoidance.
 Compensation – paternity leaves, healthcare, pension, childcare provision.

Power distance (PDI) indicates the acceptance level of hierarchical and inequality structure
society accepts. Spain scores 57 and Malaysia scores 100 in this index, which means power
possession is unequal. Superiority is differentiated with better salaries, benefits and statuses.
(McFarlin, 1992) suggested that high participation is considered as a threat by managers in
Spain. Employees lack in participation due to high PDI. In both countries, employees have to
follow superior orders, therefore struggles in developing skills required for problem solving and
decision making.

Individualist v collectivist societies also shape their HR policies accordingly. In individual

society, group involvement is very less and more achievements through individualistic
approaches are carried out. Recruitment is done on the basis of personal achievements and
experiences. Collectivist societies focus more on relationship building, team work and employers
prefer hiring through references of sub-ordinates or friends (Erez, 2000). Spain scores 51 and
Malaysia scores 26, which means both differ from each other in this index.

Uncertainty avoidance indicates the amount of risk societies tend to take or not. Spain scores 86
and Malaysia scores 36 in this index. High uncertainty avoidance demonstrates cultures requiring

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rules and regulations to avoid threats such as job security where as low uncertainty avoidance
cultures tend to take risks.

Masculine v Feminine cultures demonstrate the amount of such traits a society contains.
Masculine culture possesses a value system driven by values, achievements and competition.
Feminine cultures consist personal relationship, employee well being and satisfaction. Malaysia
score 50 and Spain scores 47 in this index, demonstrating the possession of masculinity by
majority in Malaysia.

5. Taken for granted HR practices

The effective use of human resource depends upon the satisfactory implementation of employers
and employees regarding HR policies. Maslow hierarchy of needs, a model of basic human needs
can be applied for motivating and retaining employees for long term.

There are several cases around the world, where big firms failed to deliver right HR code of
conduct. A report by Gethin Chamberlain in 2011 stated that Apple was accused of exploiting
Chinese labor, leading on to suicide and dissatisfaction of many employees. Employees were
forced to work overtime up till 98 hours in a month. They were forced to work through their
lunch breaks and had to work while standing without any break. Such incidents led to
dissatisfaction of employees through breach of contract, law and job description and many had
no option but to leave.

Conclusion:

The research I have done regarding my course work allowed me to understand various functions
and implications that can affect Policy making strategy of an MNC and its HR department.
Mostly the HR functions of firms are similar but their policies differ according to the external
factors.

It can be seen that centralization of authority has delivered great results for many US and UK
based companies across regions but the culture of individualistic approach can shape
organizational structure into an autocratic form. Spain and Malaysia, both differs on the basis of
individual and collective approach within organizations. Spain has autocratic approach whereas
Malaysian firms consider democratic approach. Spain uses informal strategy for recruitment and
uses internal promotion strategies (Segalla and Turati, 2001). Malaysian policy on the other hand
prefers external recruitment procedure through conducting interviews. (Lopez, 2003) observed
that many Spanish MNC’s don’t consider performance appraisals based on compensation
strategies, such as profit sharing or group based incentives. Malaysian policy gives benefits and
importance to group based activities and training programs due to the collective approach. Apart
from this, the legal implication of labor law also differs in few policies like working hours.

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Before conducting operations in host countries, these factors can give a clear concept of
differences that can shape HR policies accordingly. I can suggest that while knowing the cultural
and institutional differences between Spain and Malaysia, Spain needs to form strategies
according to the labor laws, cultural preferences and organizational environment of Malaysia.
Spain needs to keep the authority of monitoring the on-going activities but should let the
Malaysians take control of forming HR policy making. Recruitment and selection should be done
on the basis of Poly-centric approach because Malaysians understand their people better. There is
also risk involved in failure of expatriation of a Spanish home country national because of the
language barrier, cultural differences and democratic working environment of Malaysians.

Spain needs to understand the barriers that can come in-between the process of establishing a
subsidiary. For me, effective management has a responsibility of developing relationships among
employees. Motivation through career development, appraisals, compensation benefits and salary
and workplace environment can play a major role for establishing long term oriented workforce.
Such motivated workforce can provide efficient and effective results for an organization.

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References

1. http://www.whatishumanresource.com/difference-between-global-or-
ihrm-and-domestic-hrm. [Accessed 22 April 2019]
2. https://www.hofstede-insights.com/country/spain/. [Accessed 22 April
2019].
3. https://www.wolterskluwer.com.my/hr-and-employment/malaysian-
human-resources-guide/
4. https://www.slideshare.net/masumhussain1650/cultural-consequences-
of-ihrm-on-companys-values-behavior-institutions-organizations-across-
nationabstract. [Accessed 22 April 2019].
5. https://www.mylifeelsewhere.com/cost-of-living/spain/malaysia.
[Accessed 22 April 2019].
6. https://www.hofstede-insights.com/country-comparison/malaysia/.
[Accessed 22 April 2019].
7.

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