Challenges and Advantages of Off-Shoring in Multinational Companies

This report studies the challenges faced by multinational companies in off-shoring operations, including human resource management, effective communication with home country organization members, and other country organization members. The Four P's model is analyzed to understand the operation of multi-national companies, as well as disadvantages and advantages of off-shoring. Advantages of off-shoring include expanding business growth for multi-national companies. Effective human resources are essential in regulating challenges and achieving organizational objectives.

International and
Comparative Human
Resource

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ESSAY.............................................................................................................................................1
Advantages and disadvantages of off-shoring for an MNE...................................................1
Main challenges that face by MNE's in their management of overseas operation.................3
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
International human resource management is practise which is regulated in multinational
companies across national borders where company is established (Levy and Reiche, 2018) Main
work human resource management in multinational companies is to generate culture awareness
and also to respond quickly in different environment. Motive to establish human resource
management in international business is to motivate employee regarding collaboration of work
even if they are not working in same workplace. In this present report, chosen organisation is
Google which is a multinational company doing business across the world. This present report
covers main challenges faced by MNE's in their management of oversees business and
advantage, disadvantage of off-shoring for an MNE's.
ESSAY
Advantages and disadvantages of off-shoring for an MNE
MNE's do off-shoring to get product and services from another country which means to
re-locate company's business in another country. It means that company still producing its goods
and services in home country but now they are also generating goods and services in another
country too. Main reason of doing outsourcing is to get production of goods and services in best
chap rates as possible. Main key reasons of doing offshoring are:
Cost- if company finds that parts which are used in production of goods and service are
available in cheaper rate from another country then company will do off-shoring to get the best
product in cheaper rate as possible (Pla-Barber et al., 2018.)
Tax and Tariffs- if company wants to take some relief from tax and tariffs they will do
off-shoring. Many loopholes are provided in some countries regarding tax and tariffs by which
company will able to save their cost and will import products from countries in a fair price.
Control- company choose to off-shore when they find that production of some goods and
services are so important that if supplier will not able to deliver that in time then company has
faced huge loss therefore, they do off-shoring under which some products and services they
generate from other countries to achieve target market.
These are the points which shows MNC's motive to do off-shoring in company. Advantages of
doing off-shoring.
Reduces cost of operations- MNE companies in its operation do off-shoring just to
reduce cost of operations. But that external agency is separate entity, they are responsible for
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their own operations. External agencies work is get the job done in proper time by hiring external
agency MNE's will able to reduce their cost of operations in an effective manner.
Improves productivity- company by doing outsourcing or off-shoring will able to
improve more their productivity by focusing on company's core functions. This ensures
company's revenue generating program because by doing off-shoring company will able to
maintain their goods and services which helps them to generate higher amount of revenue
(Hummels, Munch and Xiang, 2018.)In this company tie-up with different external departments
and under which they provide them certain time limits in which effective production can be
generated from that external departments.
Increase flexibility- in this company will able to generate higher amount of production in
company. Off-shoring provides goods and production of company in proper time by which
company can able to maintain their flexibility in different time zones. This flexibility in goods
and services makes company to generate higher amount of revenue which improves company's
overall profitability in business market.
Opportunity to acquire specialized skills or equipments- company does not have all
specialized skills or equipments in every region where companies are established. Therefore,
company needs to do off-shoring by which they will able to generate their products and services
from another branch of country which improve their overall revenue and profitability in business
market (Pla-Barber, Linares and Ghauri, 2018). As they are multi-national companies, they have
to supply their products in all branches so that customers will get satisfied and company overall
performance gets fulfilled.
These are the advantages by which company will able to off-shoring to improve their
overall supply of goods and services by which their revenue gets increased.
Disadvantages of doing off-shoring in MNE's:
Cultural and social differences- as MNE's has their business across the nations by this
they need to make adjustments in companies regarding certain cultural and social practises from
which they import their products and services. For example- if company imports some parts of
their goods and services with India then company has to develop understanding of spiritual
beliefs and therefore dates of work schedule may create conflicts (Alam and Butt, 2018).
Communication problems- this was the major problem which every company has to
face. Different regions of the world have different language, and this creates problems to
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international human resource managers in doing communication with other managers of the
country. To handle with this situation international managers have to recruit local employees
which helps them in doing communication by which they will be able to generate effective
decision in the company. For example- companies in north- America have policy of doing
business in straight forward manner and Philippines are more introvert in their policy and they
kept information with themselves which create hurdle in doing communication between
members of the company.
Increase unemployment- this is one of the major problems which local companies are
facing. MNE's companies takes over the local people in their company by which other local
companies which is established in that country are faced major problem in hiring employees
because people tends to compare their pay scale with that multinational company (Pla-Barber,
Linares and Ghauri, 2018).
These are the challenges which faced by MNE's in management of their overseas
operation. Human resource managers of the company has to perform effective role so that they
will be able to generate effective performance between home country and with other companies.
As per the view of Kotabe and Murray (2018) doing off-shoring sometimes create a
problem for the organisation because it leads to increase unemployment for the local companies
of the areas. It's not always said that by doing off-shoring company able to deliver their product
and services in proper time because major problem of doing off-shoring is communication
problem because every region have their own language which sometimes creates a
misunderstanding between organisation. Therefore, doing off-shoring is not always gets
successful for organisation.
Main challenges that face by MNE's in their management of overseas operation
It is a difficult task for the managers of multinational firm's to regulate multiple
operations in business firm's. Challenges which mainly face by MNE's are government
regulations, product standardization, product adaption, barriers to market entry and also human
resource management. Therefore, in Google organisation work of international human resource
managers is to establish proper knowledge about rules and regulations of country's government
in which business is operated. Main work human resource management in multinational
companies is to generate culture awareness and also to respond quickly in different environment.
Motive to establish human resource management in international business is to motivate
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employee regarding collaboration of work even if they are not working in same workplace
(Collings et al., 2018.)
When firm wants to expand their business globally role of international human resource
manager is to consider all the strategies which helps them to expand business successfully in that
particular country. Such factor would be market variables, natural resources of the country,
market type and what business procedure is to follow in that country to regulate successful
business operation. Other barriers which human resource managers has to face are
communication barriers, currency issues, cultural difference and many more.
To overcome with the challenges, marketing researcher of organisation will create
research about obstacles and hurdle which company will face in establishing business operation
in that particular country (Pla-Barber, Linares and Ghauri, 2018). Human resource managers also
apply different marketing theories and models in consumer research to make effective marketing
strategy to run business operation in particular country. Some challenges which are to be faced
by managers are as follows.
Foreign government regulations- it is the major challenge which company has to face
when establishing company in particular country (Ayentimi et al., 2018.) More cost is to be
invest by firm because of different sets of government in the country. According to recent
research it is said that foreign governments are increasing their value added tax in country to
restrict compliance regulations in business market. This means that human resource managers of
the company has to change their policies and has to develop some operational strategies to
deliver goods and services in business market of the country, and for that development company
has to hire local market specialist which help company to establish changes and to deal with
government officials of the country.
Product strategy- if a firm wants to establish its business operation in particular country,
human resource managers has to conduct proper research in determining changes that needs to be
adopted in business operation for the successful regulation of business in that country. In these
policies are to be created by human resource managers if they find any modification in brand
name, logo, and product attributes. These strategies help them to attract local customers of that
country and which also ensures them to generate market success. This is the difficult challenge
for the managers to enter in market which is totally unfamiliar with them. In this type of strategy
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managers needs to convert their slogan in the language of country in which they want to regulate
their business operation.
Operation coordination- another role of human resource managers is to develop effective
coordination of business operations between its home country and to its foreign country (Rees
and Smith, 2017) This is the strategies under which managers has to develop effective
coordination for generating proper coordination of work in business and to achieve successful
business targeted goals of the company. Another decisions in this factor is to decide managers
when to give physical presence in branch and ways to gain support from local organisations. By
getting effective support company will able to establish effective labour unions and suppliers of
the market which helps them to regulate successful business operation. International human
resource managers has to appoint knowledgable local members in broads members of the
company so that they provide the best decision regarding local customers' attraction in the
company.
Human resource- another challenge which international human resource managers face
is to appoint effective local human resource managers in the company. These managers help
organisation regarding payment of salary to workers in local market. Different country has their
different opinion about salary to provide among workers which is a tough challenge for
international human resource managers therefore, they will appoint local managers in company
which helps them to maintain balance between administration cost and to do recruitment for
getting effective performance in company from workers which helps to increase overall
performance of the business in the market.
These are some challenges which Google faced during their establishment of business in some
other country but to overcome with these problems international human resource managers will
create unique marketing strategy in order to gain true market potentiality among customers of the
market (Rees and Smith, 2017). Strategies which are used by international human resource
managers to capture market in different countries are as follows.
Comparative market strategy- this strategy used by human resource managers to
promote their products and services in the country. Under this strategy managers will present
their product as superior from its competitors. Under this strategy managers will do their product
promotion activity through internet, social media, newspapers and will compare their product in
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relation price and quality from their competitor to gain more customers in the company. But this
strategy is not to be created in certain countries if company does not have legal proof of doing
that comparison. This strategy is only used by company when they are providing the best quality
of products and services from its competitors in the market.
Comparative consumer behaviour- under this strategy managers will find what factor
company has to focus to attract customers in organisation (Meyer and Xin, 2018.) Their main
research is on cultural, demographic analysis of country's consumer. Main motive of managers is
to do research on consumer behaviour regarding their values, attitude and behaviour towards
product in the market, by doing this behaviour research human resource managers will able to
develop effective decision regarding production of their good and services in-accordance with
customer needs.
Emerging market perspective- under this strategy managers will identify factors which
attract both consumers and marketers in the company. Under which company will focus on that
customers and marketer which they have not analysed in their consumer research. Therefore, by
doing this they will able to attract more different customers and their behaviour regarding
purchase of local and international brand (Kotabe and Murray, 2018). This perspective helps
intentional firm to start their business in different countries.
Other emerging markets- under this strategy company's human resource managers has
to provide effective policies by which they will able to attract customer's loyalty and their ability
to survive in countries by getting effective customer support, these helps firm to increase their
revenue and profitability by which company's overall performance will get increase in business
market.
These are some theories which is developed by international human er resource managers to
capture international market and to get firm's success in all the branches they establish across the
nations (Meyer and Xin, 2018). By doing these research's managers will able to get view of
regarding factor which helps to provide them success in the company.
To represent work of international human resource management here is the model which study
the role of international human resource management.
5 P's Model concept-
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This model is developed to achieve the best effective work from human resource
management of the company. They have to work with consideration of 5 P's and that is purpose,
principles, processes, people, and performance.
Purpose- this includes that human resource managers has to make purpose to organisation
in which they had to work and that would be organisation's purpose, mission, vision, targets,
aims and strategies (Bournakis, Vecchi and Venturini, 2018.)This decision is to be done by
managers to achieve their overall perspective of the business.
Principles- here principles include that managers have to create business culture with
proper philosophies, assumptions and with proper principles by which proper disciple is
established under organisation for creating work environment.
Processes- this is the particular process under which organisational structure will
represent, their internal structure of work is created, rules and procedures are established to
achieve overall performance of the company.
People- role of human resource managers is to create effective work environment under
which people of organisation works to achieve overall objective of the business. Human resource
managers has to perform that positive environment under which workers so work with full
motivation (Collings, Mellahi and Cascio, 2018).
Performance- under this human resource managers has created policies by which
effective work performance can be achieved from the team members of the organisation with
proper coordination. This is the point where managers will calculate overall performance of the
organisation by which they will able to maintain effective policies which improves performance
and achieve targeted goals of the company.
This is the model which applied by human resource managers to perform their job role in the
organisation so that they will be able to generate effective performance of the company and will
also able to achieve organisational objectives of the company.
Sometimes human resource management process in the company leads to cost effective
by which company overall profitability got reduces (Kotabe and Murray, 2018). Main work of
human resource management is to develop effective employee relationship in which they have to
develop effective leadership quality in getting effective work but being international human
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resource management of multi-national company they will not able to encourage each and every
employee of the organisation under which company's operations are running and by this
employee relationship remains unproductive and also employee did bot sustain for long term in
the organisation.
CONCLUSION
From the above study it can be concluded that human resource management in
multinational companies plays an important role to achieve organisational objectives and to
maintain effective communication with its home country organisation members and with other
country organisation members. In this present report it studied that what are the challenges faced
by multinational companies and advantages and disadvantages of doing off-shoring in
multinational companies. To regulate effective challenges of the organisation an analysis is
compulsory so that effective management operations will get developed in an organisation. Four
P's model are also analysed for the operation of multi-national companies. Disadvantages and
advancement are also explained in this report so that effective off-shoring will take place for the
operation of multi-national companies. Advantages of off-shoring also explained in this report by
which multi-national companies expand their business growth. Lastly, it can be concluded that
effective human resources helps in expanding overall business growth of the organisation.
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REFERENCES
Books and Journals
Alam, F. and Butt, M. U. H. (2018). Motives and Challenges of OFFSHORING.
Ayentimi, D.T., Burgess, J. and Dayaram, K., 2018. Does the historical and institutional re-
construction of Ghana support the transfer of HRM practices?. Journal of Management
History. 24(4). pp.414-434.
Bournakis, I., Vecchi, M. and Venturini, F. (2018). Off‐Shoring, Specialization and
R&D. Review of Income and Wealth. 64(1). pp.26-51.
Collings, Mellahi, and Cascio., (2018). Human resource management: A critical approach.
In Human Resource Management (pp. 1-23). Routledge.
Hummels, D., Munch, J. R. and Xiang, C. (2018). Offshoring and labor markets. Journal of
Economic Literature. 56(3). pp.981-1028.
Kotabe, M. and Murray, J. Y. (2018). Global Sourcing Strategy: An Evolution in Global
Production and Sourcing Rationalization. In Advances in Global Marketing (pp. 365-384).
Springer, Cham.
Meyer, K. E. and Xin, K. R. (2018). Managing talent in emerging economy multinationals:
Integrating strategic management and human resource management. The International
Journal of Human Resource Management. 29(11). pp.1827-1855.
Pla-Barber, J., Linares, E. and Ghauri, P.N., 2018. The choice of offshoring operation mode: A
behavioural perspective. Journal of Business Research.
Rees, G. and Smith, P. eds. (2017). Strategic human resource management: An international
perspective. Sage.
Levy, O. and Reiche, B.S., 2018. The politics of cultural capital: Social hierarchy and
organizational architecture in the multinational corporation. Human Relations. 71(6).
pp.867-894.
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