8. The Global Context for Human Resource Management

 

What is Globalization and what are the advantages and disadvantages of globalization?

Globalization defined as the increasing interdependence between people and countries. It is opening of international borders to allow the flow of goods, People with ideas, and the relevant changes in policies at national and international levels. Globalization has led to growing scale of cross-border trade, an increase of capital, and fast spread of technology. In this article, we will look at the impacts of globalization.

Trade and Economics:     The first and foremost positive of globalization is, its contribution to the increase in trade and economic activities and it has led to a sharp increase in occupation and economic exchanges for almost all the countries. Opened up their economies and implemented free trade policies, which helped to increase economic exchanges. This resulted in strong economy and growth globally. Industries got a boost and production capacities were increased. 

Reduced cost of goods:    A region or country which is able to produce a certain good in large amount    due to availability of raw material in its area has the ability to export that finished good to other parts of the world. This helps in reducing the cost of goods to a large extent. From affordable food to clothing and electronics the end cost is significantly reduced all because of globalization. 

Cultural change            :    Due to increase in economic activities there is an increase in human exchange like migration, transportation and travelling which have resulted in cultural exchanges. Local communities got to know beliefs. Customs and habits of other local communities and started adopting good qualities and ways of living from them. Books, movies and music are important to a culture and recent advancement in the internet has helped to easily spread them to all corners of the world. These are perhaps the biggest contributors to the speed of cultural exchanges. 

Flexible Employee Market:    In the post-globalization era better communication and enhanced technology. A person can work across the world with ease. The employee does not have to come from the company's home country and can be recruited from literally all over the world. A labourer skilled and unskilled can work in one country in the current year and shift to another country the next year 

Unequal wealth Distribution:    Leading to a situation of unequal wealth distribution as a matter of fact it is assumed that around 82% of the world's wealth generated goes to the 1% of the population. 

Environmental Impact        :    Globalization means Industrial development cutting down forests to support ever-increasing population and its needs and increasing transportation of men and materials. This resulted in ever-increasing emission of harmful gases like Carbon Dioxide, Nitrogen oxides and others in the atmosphere. 

Cultural Loss                       :    The growing exchange in culture also had some undesirable effects. Allowing cultural exchange has homogenized world's culture to some extent due to which specific cultural characteristics from many countries are disappearing. From languages to traditions and customs much of the culture is affected almost everywhere and protection of local culture and its uniqueness requires a careful approach. 

Five key economic markers of globalization. 

1. The growth in trade flows between economies around the globe. 

2. The proliferation of ICTs, captured more specifically as technological change 

3. The rapid growth in cross-border capital flows 

4. Intensive tariff liberalization, accompanied by the formation of a number of regional trade blocs 

5. The significant structural changes in domestic economies away from primary production towards service industry output

Structural Shifts in the World Economy

Figure 8.1 shows the evolution of the share of GDP (Gross Domestic Product) by economic activity for industrial and developing countries in different regions of the world economy. The overall data indicate that over the 14 year period 1980-1994, there has been an observable shift in the World GDP, even if disaggregated by economic sector: the contribution from agriculture and mining, utilities, and construction has declined substantially, while manufacturing has experienced a marginal decline. The big benefactor from this trend has been the growth in services and related activities. In terms of global proportions, services contributed 62.3 percent of GDP in 1994 compared to 54.9 percent in 1980. 

Figure 8.1 - Share of GDP by Economic Activity for Different World Regions (1980 & 1994) 

It is noticeable that on the aggregate the share of GDP held by agriculture, mining, utilities, and construction in the developing countries mirrors the trends that we noticed in the industrialized countries for the period 1980 to 1994. The exception is manufacturing which has actually increased from 19.4 percent to 24.2 percent of aggregate developing country GDP. This suggests a second critical trend in the data: that while industrialized countries yielded a declining share of manufacturing in overall GDP, the developing world has increased its share of manufacturing output. In one sense then, there has ostensibly been a redistribution of global manufacturing output – away from the developed toward the developing world. Specifically, between 1980 and 1994, while the share of industrialized country GDP in manufacturing declined by 2.2 percentage points, in the developing world it increased by 4.8 percentage points. Note also that this latter increase was true for all regions within the developing world. 

The above therefore suggests that two key factors characterize this final component of globalization. Firstly, a significant structural change has occurred in the global economy, as all regions within the world economy have increased their output in services, relative to agriculture. Indeed there almost seems to be a direct shift, over this period, out of primary production, into services. Secondly, the manufacturing industry reveals a more interesting trend, marked by a shift in global production from the developed to the developing world – with the shares of manufacturing in GDP reflecting this pattern. 

Relative Wage and Employment Shifts in the Developing World

One of the markers of globalization noted above, was that of structural change in the world economy, with a significant movement in shares of GDP away from agriculture toward the services sector in particular. We replicate these results in Figure 8.2 below, with the addition though of the employment shifts that have occurred within each of the main sectors at the country level over the period 1990 to 1999. It is immediately evident that the decline in value-added in agriculture across this sample of developing countries has had a direct negative impact on employment growth within these sectors. Korea in the 1990s, yields the largest decline in agricultural employment in this sample, with a value-added 21 decline of 44 percent matched by a job attrition rate of about 85 percent. Romania, Malaysia, Egypt, and Honduras similarly show fairly large declines in labour demand within agriculture – within the context of a contraction of output in this sector.

Figure 8.2 - Value-Added and Employment, by Country: 1990-1999

Conversely, the expansion in value-added in services, has resulted in services employment growth in every country except one in the sample. For example, Mexico’s modest increase in value-added in services, resulted in a large growth in employment of over 60 per cent during the 1990s. Similarly in Honduras, the 2 percent growth in services value-added saw a 60 percent growth in employment in the sector. Ultimately though, the data tells a vivid story of the contraction in primary sector output combined with a growth in services output, that has had a clear impact on employment levels in these two main sectors, with labour demand shifting out of agriculture into services in many parts of the developing world. Of course another perhaps more accurate measure of these ‘between sector’ labour demand shifts, is to explore employment changes that occurred within the above sample across the different main sectors during the period 1980 to 1997.

    Globalization of economic in the Hospitality Industry  

With the liberalization, privatization, and globalization of economies the world over, the hospitality industry has undergone transformation through which it has emerged as an industry with a global orientation (Erdly and Kesterson-Townes, 2003). Over the past quarter of a century, there has been an evolution in the hospitality and tourism consumption behavior in terms of increasing levels of importance being attributed to leisure-time pursuits (Williams, 2006). Hospitality consumers have evolved to become qualitatively more discerning, more demanding, and more diverse. Research suggests that the contemporary world traveler is becoming increasingly hedonistic and self-indulgent (Hirschman and Holbrook, 1982; Van Boven An Exploratory Study of Competencies 161 and Gilovich, 2003), seeking a superlative-quality, integrated, multicultural yet consistent hospitality experience. The hospitality industry, the world over, is transforming from a product-focused, physical-asset intensive business to a customer-focused, experience-centric one (Knutson, 2006).

HRM issues and challenges in global markets

The coming of the 21st-century globalization poses distinctive HRM challenges to businesses especially those operating across national boundaries as multinational or global enterprises. 

Global business is characterized by the free flow of human and financial resources especially in the developed economies of the European Union (EU), the North American Free Trade Agreement (NAFTA), other regional groupings such as the Association of southeast Asian Nations (ASEAN), the Economic Community of West African States (ECOWAS), the Southern African Development Community (SADC), etc. These developments are opening up new markets in a way that has never been seen before. This accentuates the need to manage human resources effectively to gain a competitive advantage in the global market place. To achieve this, organizations require an understanding of the factors that can determine the effectiveness of various HR practices and approaches. This is because countries differ along a number of dimensions that influence the attractiveness of Direct Foreign Investments in each country. These differences determine the economic viability of building an operation in a foreign country and they have a particularly strong impact on HRM in that operation. A number of factors that affect HRM in global markets are identified: 

(1) Culture 

(2) Economic System 

(3) Political System – the legal framework and 

(4) Human capital (Noe, 2000). 

Consistent with the scope of the present paper, only one dimension is treated: human capital (the skills, capabilities, or competencies of the workforce). This is in consonance with the believe that competency-based human resource plans provide a source for gaining competitive advantage and for countries profoundly affect a foreign country's desire to locate or enter that country’s market (O’Reilly, 1992). This partly explains why Japan and US locate and enter the local markets in South East Asia and Mexico respectively. In the case of developing countries, globalization poses distinct challenges to governments, the private sector and organized labor. These challenges, which must be addressed through a strategic approach to human resource management, include 

(1) Partnership in economic recovery especially in South East Asia

(2) Dealing with the “big boys”, the fund managers 

(3) Concerns over the possibility of fraud in E-commerce (such as issues of confidence and trust)

(4) Implementing prescriptions for recovery and growth taking into consideration the development agenda and unique circumstances of individual country. 

Reference:

 Bhorat, H & Lundall, P (2004) Employment and labour market effects of globalization: selected issues fr policy management. Employment Strategy Papers, pp6-11 [Online]. Available at https://ilo.org/. Accessed on 24^th May 2021.

 Khan, M. A (2017) Hospitality marketing and consumer behavior (2^nd ed). Apple academic press, [Online]. Available at https://www.taylorfrancis.com/. Accessed on 24^th May 2021.

Muslim, A & Ali Sulaiman (2009) The effect of globalization, labor fexibilization and national industrial relations systems on human resource management. International Business Research, pp 38-39 [Online]. Available at https://www.researchgate.net/. Accessed on 24^th May 2021.