Challenges Faced by Multinational Companies in China

This article discusses the challenges faced by multinational companies in operating in China, including the lack of skilled labor and cultural differences. It also explores effective recruitment and retention strategies for international assignments.

Running head: HUMAN RESOURCE MANAGEMENT
HUMAN RESOURCE MANAGEMENT
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction and about the company..............................................................................2
Literature – challenges or problems facing multinational companies in Chinese
operations...................................................................................................................................2
Reasons related to movement of companies to China...................................................4
Effective recruitment and retention strategy based practices.........................................5
Problem faced in recruitment and retaining skilled labour for international
assignments................................................................................................................................6
Strategies to be implemented by organizations..............................................................9
Conclusion....................................................................................................................10
Recommendations for good practice............................................................................11
References....................................................................................................................12
Appendices...................................................................................................................15
Appendix 1...............................................................................................................15
Appendix 2...............................................................................................................16
Appendix 3...............................................................................................................16
Appendix 4...............................................................................................................17

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Introduction and about the company
The report will be based on the analysis of the growth that has been depicted by the
Chinese economy and the ways by which the multinational organizations are able to operate
in the country. The issues that are faced by different global organizations based on the
unavailability of skilled labour in the country will be analysed in detail. The organization that
has been taken into consideration for this analysis is Apple. Apple has developed its
production based factories in China and the Chinese operations have played a key role in the
success of the organization (Xing and Liu 2016). China is fastest growing economy in the
world and has gained second position with respect to the nominal GDP. The economy of the
country is largest with respect to the purchasing power based parity. The public sector in
China has gained a larger part on the economy in comparison to the private sector. The
availability of cheap labour in China is high due to the high population of the country (Welch
and Björkman 2015).
Apple Inc. is a multinational technology based organization that has its origins in the
United States. The headquarter of Apple is located in Cupertino, California that designs, sells
and develops consumer electronics, online based services and computer software (Apple.com
2019). The hardware based products of Apple include, iPhone smartphone, iPad tablet and
Mac personal computer. Employee retention strategies are highly important for the operations
of Apple in different countries. The company has gained the highest position in the
technology based industry in terms of the staff retention based rates (Apple.com 2019).
Literature – challenges or problems facing multinational companies in Chinese
operations
As discussed by Stone et al. (2015), the view related to the multinational
organizations in China had started changing in a dramatic way since the year 1970 after the

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country had opened the economy for attracting foreign direct investments. The global
companies like, Vollkswagen, 3M and Coca Cola had started entering the Chinese market
and had used the Chinese population. Other major companies that have also entered the
country during this period include, NEC, Phillips and Motorola.
The GDP rates of China had started increasing after the year 2000 and had climbed
above the US. The demands of Chinese consumers from the multinational corporations that
have entered the country had changed. After China joined the World Trade Organization in
2000 the tax rates and policies had gone through various changes. The MNCs have provided
major levels of contribution to the proper development of the economy and GDP of China.
More than 20% of the total industrial output and 19% of the total taxes were provided by the
MNCs in the country (The Diplomat 2019).
According to Stone and Deadrick (2015), the demand for labour has started shifting
towards the emerging as well as the new industries. The search for jobs have increased
among the white collar based employees. The growth related momentum within the
enterprises and industries have increased in the last few years. The demand related to labour
has increased in the industries based on transportation and traffic. The growth in the market
has been driven by the expansion that has taken place in the e-commerce penetration.
New policies have been developed by the government that have led to the
development of many public-private partnerships and investments have been made in the
infrastructure and transportation based projects. The organizations that are a part of
manufacturing industries have suffered from over capacity of the workers. The highest
number of job applications have been received in different sectors of China that include, e-
commerce and internet, real estate, computer software, financial investment and engineering.
The emerging and new industries have faced major difficulties based on the ways by which

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suitable applicants can be selected for fulfilling different positions in the organizations
(Sparrow, Brewster and Chung 2016).
As opined by Redman and Wilkinson (2009), the number of skilled workers in the
country are quite less in the country and this has led to a gap in the workforce. The
competition levels among the white collar based workers in the country have started growing
on a continuous basis. The increased supply of unskilled labour has driven the competition
levels among the white collar based employees. The costs related to skilled labour in the
country have started rising and the traditional manufacturing based industries of China have
been affected due to this factor.
According to Ranjan (2017), the multinational organizations that operate in the
country need to fulfil different expectations of the Chinese consumers. The organizations are
always under the scrutiny of the government of China. The two major issues that can have a
negative influence on the multinational corporations are moral integrity and social prestige.
These factors need to be considered by the global organizations in order to operate
successfully in China. The lack of skilled labour is a major issue in the country. However, the
issues have also been faced with respect to the expectations that people have from the
multinational corporations. For example, Samsung has faced some major labour based issues
in the operations that have been conducted in China. The Foxconn factories of Samsung have
faced major levels of issues based on the ways by which
Reasons related to movement of companies to China
As discussed by Noe et al. (2017), the lower costs of living in China are considered to
be major factors that are able to affect the ways by which the domestic as well as
international organizations can improve the performance levels. Levels of poverty in China
have been effectively reduced by the high levels of economic growth. Growth in different

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sectors has made China as economic leader. The demands related to different services and
products have also increased and the growth of the country is totally based on the purchasing
based power of consumers. The future growth of the economy is predicted to be based on the
increase in dependence levels on the private organizations rather than the public sector based
organizations. The population of China is considered to be a major factor that is able to
attract the multinational organizations towards the country. The levels of unskilled labour that
are available in the country are important for the ways by which different multinational
organizations are able to set up their factories in the country (Lu, Zhu and Bao 2015).
Effective recruitment and retention strategy based practices
According to Ko and Ma (2017), the recruitment and retention of skilled and talented
employees is based on the ways by which the organizations are able to engage them in
different parts of the work process. Employee engagement is considered to be a major
process that can help the organizations in different countries to receive their feedback and
fulfil their demands accordingly. Apple has been quite famous in the technology industry
based on the strategies related to employee retention that have been implemented in its US
based operations. On the other hand, the Chinese operations of company have not been able
to provide effective chance of growth to the employees.
The development of loyalty needs to play a major role in the development of a proper
culture within the organization. The happiness and satisfaction have not been taken into
consideration by Apple in China. The cultural differences that exist between the two
countries are considered to be the most significant reason behind the lack of proper employee
retention in the factories. The training based needs of employees are also highly important for
the organizations that operate in China and the US as well. The training that is provided to the

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skilled or talented employees are highly important for the ways by which they are able to
provide their services to the organizations (Jamali, El Dirani and Harwood 2015).
According to Gutierrez-Gutierrez, Barrales-Molina and Kaynak (2018), the
development of effective recruitment and retention based strategies are considered to be
important for organizations. The recruitment strategies that can be implemented by the
organization include, orientation and on-boarding that is based on the training related to on-
boarding process. The mentorship programs are an important part of the development of
employees who have been recruited. Employee compensation is also an important retention
strategy that can be implemented in order to retain the skilled labour. Rewards and
recognition based systems are also a major retention based strategy that can help
multinational organizations to maintain the labour base effectively. Feedback and
communication that is developed within the organization can play an important role in
understanding the demands and needs of the employees who have been recruited by the
multinational companies (Guest 2017).
Problem faced in recruitment and retaining skilled labour for international assignments
Apple has also developed its factories in the country in order to reduce the levels of
costs based on production. The costs based on the production of the high end products of
Apple Inc. have been reduced with the help of factories that have been set in China. The
company has been able to gain lots of skilled as well as unskilled labour for different
operations and positions within the factories (Edwards and Rees 2006).
As discussed by Dowling (2008), the levels of security that have been maintained by
Apple in the factories are high as well. The supply chain developed by Apple is highly
dependent on the Chinese factories that have been set by the company. The organization
relies on the employees and labour who provide their services in different factories. Apple

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Inc. has developed the factories in China in such a manner so that the production process
based speed place in the high skill based labour market of China has increased the
competition between global organizations in order to acquire skilled employees.
The pressure in factories have increased based on the ways by which skilled labour
can be placed in different positions in the organization. The factories have started facing
immense levels of struggle based on acquiring effective talent for the operations. The
conditions in the factories of global organizations are tough and have affected the levels of
revenues and profitability as well. The difficulty based levels of factories of multinational or
global organizations are based on the ways by which full time workers are hired by Apple
Inc. The lack of proper skilled labour have influenced the production processes of the
organization in a huge manner (Claydon and Beardwell 2007).
The ten major facilities that are operated by an organization named Foxconn have
been analysed by China Labour Watch (CLW) that is a labour rights advocacy based
company and has its headquarters in the New York City. The analysis has also depicted that
the working conditions in the facilities that are responsible for developing products and
Apple along with many other technology-based organizations are quite harsh. The working
conditions are sometimes highly dangerous in nature and have been able to affect the
production process in a huge manner. The income levels of the workers who are a part of
these factories are low (Chowhan, Pries and Mann 2017).
As discussed by Brewster et al. (2016), the work time based calculations and wage
levels in the factories are not effective or adequate for the technology organizations. The
agencies that are responsible for providing labour to the factories have not taken care of their
needs. The high demand for labour has led to the extensive use of their services by the
organizations like Apple Inc. The employment based contracts that are formed by the

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agencies are able to affect the ways by which they are able to provide major levels of services
to organizations in the factories.
The pay that is provided to the employees are considered to be low for the Chinese
workforce. The recruitment of regular workers in the organization have been a major issue
that is faced by Apple Inc. The student interns on the other hand are also being pressurised in
a huge manner by the organizations in the recruitment based process in the organization. The
number of workers who are present in the organizations are less without the student interns.
The working hours and shifts of the employees are also able to affect the ways by which
employees are able to provide their services in an effective manner (Bratton and Gold 2017).
The lack of proper skilled labour in China had led to the implementation of
Ethnocentric approach by Apple. This approach is based on the ways by which the
organization has appointed people from their headquarters in all the managerial positions.
The strategy was mainly implemented by Apple in order to make sure that the employees are
able to manage the ways by which the topmost positions in the organization can be taken by
the employees who were a part of the headquarters. The interests of the company have been
served effectively by the employees who are a part of the headquarter based operations of
Apple (Blogs.wsj.com 2019).
As discussed by Baluch and Ridder (2017), Apple also faced challenges related to
major cultural differences that exist between US and China. The organization has faced major
levels of barriers in the country based on the cultures that are followed. For example, a major
issue had been faced by Apple based on maligning of the warranty based policies that are
followed in China. This had led to a huge outrage among the Chinese population and the
sales of Apple were affected as well. The cultural challenges faced by the organization had
also led to the lack of a positive work environment within the factories.

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Samsung has also faced major issues based on competition of acquiring skilled labour
for the factories that are a part of the Foxconn Group. The company has to compete with
Apple in order to gain the labour required for different posts. This is considered to be an
important factor that has an influence on the operations of Samsung.
Strategies to be implemented by organizations
Apple can implement different strategies in order to fill the gap that has been created
in the skill levels of the employees who are a part of the factories. The strategies that can be
implemented in management of human resources or employees of the factories are as follows,
Rewarding the performance of employees – The development of a strategic reward
system is considered to be important for the ways by which their performance can be
appreciated. The performance of employees is considered to be a major link that has been
developed between the behaviour and employee-activity as well. The behaviours that are able
to influence the operations of the company can be rewarded by the organization (Bailey et al.
2018).
Pay and compensation – Pay or compensation that is provided to the employees is
based on the contribution of employees towards the organization. The base-pay levels that are
provided by Apple to the employees are quite low. This factor needs to be taken into
consideration by the organization in order to increase the productivity levels (Albrecht et al.
2015).
Training and development – Training and development is considered to be the most
important part of the management of employees by the organization. Apple needs to develop
the training and development based programs in such a manner that is able to fulfil the needs
of employees and improve their performance levels that are depicted by them. The skill based

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gap can also be fulfilled with development of proper training and development based
programs (Baluch and Ridder 2017).
Motivation – The performance levels of employees in Apple can be improved with
the help of proper motivation that is provided by the management of the organization. The
motivation levels of the organization can be improved with the help of proper benefits that
are provided to the employees. The benefits that are offered to the employees are considered
to be an important part of the motivational activities that can be performed by Apple
(Dowling 2008).
Performance management – Performance management is considered to be a set of
activities which are able to ensure that the goals which have been set by the organization are
met in an effective manner. The performance management system of Apple needs to
developed in such a manner that can help in fulfilling various goals and objectives that have
been set by the organization (Jamali, El Dirani and Harwood 2015). Management of the
performance of employees is important for an organization like Samsung that operates in the
highly competitive technology industry.
Appraisal for good performance – The process of appraisal of the employees is also
important for the ways by which the best employees are provided appropriate positions.
Apple needs to improve the appraisal based process in order to attract and retain the
employees in the organizational operations. Apple will be able to maintain the operations in
technology industry in an effective manner with the help of proper appraisal based process
(Chowhan, Pries and Mann 2017). Appraisal is considered to be an important factor for the
employees who are a part of the operations of Samsung. Samsung can retain the employees
with the help of effective appraisal and recognition.

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Conclusion
The report can be concluded by stating that the multinational organizations that
operate in China have faced major levels of issues based on the lack of skilled labour for
different positions. The multinational organizations have thereby implemented strategies that
are based on the ways by which the managerial positions can be offered only the employees
who are a part of the headquarters. The cultural issues have also been able to play a major
role in development of organizational revenues. Apple has faced major levels of issues that
are based on the lack of properly trained employees in order to fulfil different positions
within the organization. The conditions that were faced by the employees in different
factories of Apple were also not quite suitable. The organization which is famous for the
employee retention based strategies in different parts of the world has not been able to
maintain the employee base in China in an effective manner.
Recommendations for good practice
The major recommendations that can be provided to Apple in order to improve its
Chinese operations and improve the retention of employees are as follows,
 The implementation of proper training for the skilled as well as unskilled
employees of the organization will be helpful for Apple to retain them and
increase the levels of productivity as well. Training will be able to fulfil
different needs of the employees who are considered to be the most important
part of the successful development of revenues of Apple.
 Apple needs to include more local people in order fulfil the managerial
positions in the organization. This will be able to bring major changes in the
management process of the factories. The proper management of the factories

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will be able to play a major role in improving the productivity levels and the
work process of the employees as well.

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Appendices
Appendix 1

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Appendix 2
Appendix 3

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Appendix 4