Operational Management for International Business: Baosteel HRM

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This report provides a comprehensive analysis of Baosteel's international human resource management (HRM) strategy, focusing on its European subsidiary. It begins with an overview of Baosteel and the global steel industry, highlighting key competitors and market dynamics. The report then delves into Baosteel's HRM practices, including employee selection, training, and compensation, emphasizing its international perspective and mentoring strategies. A significant portion of the report is dedicated to identifying and discussing challenges affecting Baosteel's international HRM, such as cultural differences, human resource development issues, and communication barriers. It explores the impact of these challenges on the company's operations and proposes solutions to mitigate them. The analysis includes a case study, providing practical insights into the issues faced by Baosteel. Finally, the report offers recommendations for improvement and concludes with a summary of the key findings, providing valuable insights into Baosteel's HRM practices and the challenges it faces in the global steel industry. This report aims to provide a detailed overview of the company’s operations and management strategies.
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Running head: OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 1
Operational Management for International Business
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 2
Table of Contents
1. Introduction.........................................................................................................................................2
Human Resource Management in the Baosteel’s European Subsidiary.......................................................3
Overview of the Baosteel............................................................................................................................3
2. Global industry analysis......................................................................................................................4
3. Company analysis: international human resource management...........................................................6
4. Case analysis and discussion...............................................................................................................7
4.1 Problems and challenges affecting international human resource......................................................8
4.1.1 Cultural differences....................................................................................................................8
4.1.2 Human resource development.....................................................................................................8
4.1.3 Communication challenge..........................................................................................................8
4.1 Why these challenges are an issue affecting Baosteel........................................................................9
4.3 Solution to the issues affecting Baosteel..........................................................................................10
5. Recommendations and conclusions...................................................................................................11
6. Conclusion.........................................................................................................................................13
7. Reference...........................................................................................................................................14
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 3
1. Introduction
International business operational management is a dynamic environment that has many
different players with many determining factors. There are many factors that play role in the
international business operation and some of these factors include cultural differences, human
resource development, and international management skills (Daniels, Radebaugh & Sullivan,
2014). The global steel industry is a very competitive environment that is influenced by many
customer related issues. Baosteel is a model steel producer that has been striving within this
dynamic global business environment with a good growth strategy. The objectives of this report
are to analyze the Baosteel based on its international human resource management strategy.
International human resource management is an important operational management aspect that
determines both expansion and operation efficiencies.
The report structure gives an analysis of the global steel industry where Baosteel is the
second largest producer of steel. The report under global steel industry analysis the report
explores major competitors within the industry, their age, location and market-related analysis.
Secondly, the report gives the analysis of the Baosteel international human resource management
with a focus on the strategy used by the company to manage its employees, especially on the
Europe subsidiary. Thirdly, the report explores various challenges or problems that affect
international human resources management, the importance of these issues on the suggested
solution for these issues. Lastly, the report recommends the areas that need improvement for the
organization to continue striving in the global steel industry. This report provides the analysis of
the global steel industry with a focus on Baosteel and its international human resource
management topic (Isobel & Lowe, 2008).
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 4
Human Resource Management in the Baosteel’s European
Subsidiary
Overview of the Baosteel
Baosteel is a Chinese steel producer that currently is the largest steel producer in the
country and the second largest steel producer in the world. The company was established in 2016
following the merger of Wuhan Iron and Steel Corporation making the company surpasses major
steel producers in the country. The company is based in Pudong, Shanghai, China with its
subsidiary Europe Baosteel headquartered in Hamburg Germany. Some of the products of the
Baosteel can be divided into categories such as Carbon Steel, Stainless Steel, and Special Steel.
For instance, carbon steel category has a variety of products and these include bar, Heavy plate,
HR steel sheet, CR steel sheet, Wire rod, Pipe tube (Baosteel 2012).
The company has its Europe division that is based in Germany and trade under name of
Baosteel Europe. The company subsidiary is located in Hamburg Germany and employs both
internationals and Germans. This subject the organization to international human resource
management challenges. The company has been expanding over the past years is the first
Chinese company that has to expand and takes a good market position in the international market
(Buckley, 2010).
2. Global industry analysis
The global steel industry is a dynamic industry with many determinants factor and many
key players in the industry. The global steel industry is currently faced with a number of issues
that include slow growth, overcapacity, and digitalization of the steel trade (Marquis & Tilcsik,
2013). Firstly, the dynamic nature of the steel industry is based on its slow demand growth rate
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 5
that has been witnessed over the past few years. Secondly, another issue in the global steel
industry is overcapacity that is projected to persist for years in the near future. Thirdly, digital
development of the steel commerce is characterizing the global steel industry (Steel Orbis,
2016). There is a much different company that takes the share of the international steel business.
Some of the organization that is in the top five steel production list are ArcelorMittal, HBIS
Group, NSSMC Group and POSCO.
Competitors
The global steel industry has many players that are in stiff competition within the market.
Some of the competitors within the market include ArcelorMittal, HBIS Group, NSSMC Group
and POSCO. These companies are the most competitive and form some the top largest producers
of steel in the world.
Firstly, ArcelorMittal is currently the largest producer of steel by volume and this is
evidenced by its total production in the year 2016 that stood at 95.45 tonnages. In addition, the
company was formed in 2006 following the merger between Arcelor by Indian owned Mittal
Steel. The company is located Luxembourgish from where the company has various branches
throughout the world. Being the largest steel producer in the world, the company has many
portfolios that range from mining, steel production and research in the industry. Some of the
products that are produced under the brand name include construction, automotive, domestic
appliances, and energy, transport, packaging and by-product sales. The company currently
employ more than 260,000 employees were in Europe alone. The size of the market share of the
company is currently 10% of the world's steel production (Steel Orbis, 2016).
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 6
Secondly, HBIS Group is another Chinese company that has been the second largest steel
producer before the merger of Baosteel that become the second largest steel producer in the
world. HBIS Group has also emerged to be the third largest producer of steel with 46.18
tonnages having been formed in 2008. The company was formed following the merger of
Tangshan Iron and Steel Group and Handan Iron and Steel Group of Hebei Province. The
company produces a wide variety of products such as cold-rolled sheet, Ultra-strength rebar,
heavy plate, steel pipe and special steel bar. In the global market, the company has three main
areas of focus and these are global steel manufacturing, global marketing service, and global
technology research and development. Within the local market, the company has 8 subsidiaries
taking the right position in the Chinese steel market (Wagner & Hollenbeck, 2010).
Thirdly, the NSSMC Group is another company that also plays an important role in the
global steel industry. The company is currently the fourth largest producer of steel has been the
second largest producer of steel in 2014. The company was formed in 1970 following the merger
of Fuji Iron & Steel and Yawata Iron & Steel. In addition the company based in Chiyoda, Tokyo,
Japan from where the company runs many different branches globally. Some of the products of
the company include steel, flat steel products, long steel products, wire products, plates and
chemicals (Stoddard, 2015).
Fourthly, POSCO is the fifth largest steel producer in the world with total production of
41.56 tonnages. The company was formed in 1968 a currently at its 50th year while doing steel
production. The company produces a number of products that include steel, flat steel products,
wire products, long steel products and plates. The prime location of the company where company
headquarter is located in Pohang, South Korea (Levit, 2017).
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 7
3. Company analysis: international human resource management
The Baosteel has a good international human resource management that considers many
factors as evidenced by the company’s international perspective. The organization has a good
reputation for its international human resource management. Firstly, the selection of employees
is based on a strict procedure to ensure that employees are selected based on competency.
Secondly, the company treasure on the training of newly recruited employees on the corporate
culture before starting work within the company. One of the key criteria for application for the
company human resource is university graduates (Brewerton & Millward, 2010).
Thirdly, promotion is based on the training and those employees that have been trained
has a chance of being promoted to the senior executive position within the company or further
transfer to other countries. This approach that is used by the company aims to train the
employees on specific culture especially on other countries’ culture to facilitate international
human resource development. The human resource management of the company aims to increase
the skills and human resource capability to deliver services under different cultural environment
especially in the global platform (Hill, 2014).
Another important human resource management aspect is compensation that is very
attractive to the company's employees. The company indicates that their compensation is
excellent attracting many applicants. Therefore the company offers good employment
opportunity both for Chinese and internationals. The company compensation is consistent with
the higher quality of living in Shanghai than other cities. This compensation is also coupled with
spouse job offered to employees thereby creating a good human resource condition (Jonathan,
2010).
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 8
Lastly, a more recent approach of the company is based on the mentoring strategy where
employees are assigned mentor upon completion that the company can recommend the employee
for any professional position in another company. This is due to the need to change the human
resource management to strategic nature. Mentoring strategy is enhanced by continuous training
for employees to acquire more skills and profession. The basis of the strategy is to appoint senior
employees to watch over young talented executive employees (Sirkin, Hemerling & Arindam,
2008).
4. Case analysis and discussion
The international human resource is a technical issue that has been affecting the operation
of the Baosteel. There are different challenges that are affecting the human resource management
for the company. There is also need to consider the reasons why these issues are challenging for
the company. A complete analysis of human resource challenges requires finding a solution to
these challenges.
4.1 Problems and challenges affecting international human resource
4.1.1 Cultural differences
The cultural differences are a major challenge that affects the Baosteel especially the
European subsidiary. The human resource management is affected by both national culture and
corporate culture as many employees struggle to emulate the corporate culture of the firm and
had to be trained. Germany is the central base for the European Baosteel subsidiary, Germany
has different national cultures that are totally different the culture of the Chinese people. Cultural
differences have influence in international business operation management and human resource
management (Flamholtz & Randle, 2011).
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 9
4.1.2 Human resource development
Secondly, human resource development is another challenge that is affecting the
company. Being a Chinese company with a different approach to human resource planning and
development, the company has been facing the challenges of recruiting employees and training
them. This has been a challenge particularly with the difference in the culture between the
Germany and China. In addition, the company has been advocating for competency-based
recruitment for employees and subjects them to vigorous training. This has limited framework
that accommodates the Germans during recruitment. Human resource development influences
the development of steel expertise in the international platform (Paauwe & Boon, 2009).
4.1.3 Communication challenge
Communication challenge is another human resources management issue that has
affected the operation of the company at the international level. Communication framework in
terms of language used within the Baosteel European subsidiary is an issue that affects the
transfer of Chinese exports to Germany. It is clear that within Germany the company uses three
different languages that include Chinese, German and English for communication. This coupled
with challenges, especially when dealing with locals that are well conversant with their local
German language. Communication challenges have an influence on the interpersonal
relationships within the Baosteel Europe operations (Zhang, 2009).
4.1 Why these challenges are an issue affecting Baosteel
Firstly, cultural differences are issues that affect the human resources management since
it affects the organizational behavior and organizational communication. According to Johnason
(2009), the cultural difference between China and Germany has an impact on the organizational
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 10
behavior of employees and the communication. Firstly, the Germans have their time frame and
this is not the same as Chinese who can work long and overtime. This highly affects the ability
of senior management to manage employees particularly the German employees. Secondly, the
cultural difference is a challenge since it affects the communication, particularly interpersonal
communications. For instance, national culture affects the language that is used in
communication within the organization (Paauwe & Boon, 2009).
Secondly, the human resource development has been an issue since it affects the ability
of the new employees to effectively carry out task within the organization. Lack of proper
structure of training human resources and criteria for recruitment has been challenging especially
international recruitment. The basis of this challenge is based on the ability of talented German
citizens and other nationals to meet the international challenging leadership and management.
This determines the dynamic international human resource management. Studies show that there
are a few steel expertise and human resource development influences the development of this
expertise that is necessary for the global steel industry (Gazi & Zyphur, 2009).
Thirdly, the communication challenge is an issue since it affects international transfer of
experts from China to Germany. Most of the business transactions between the company with
locals in Germany has been conducted by Sino-Germans due to this language problem (Okolo,
2012). In addition, the difference in language highly affects Chinese without a clear
understanding of German language. When conducting business the communication challenge,
therefore, leaves only experienced employees to transact the business on behalf of the
organization. Communication framework determines the mode of training and the general
operation of the international Baosteel subsidiary (Johnason, 2009).
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4.3 Solution to the issues affecting Baosteel
Firstly, the solution for the cultural differences and cultural conflict has been suggested as
over emphasis of organizational culture as compared to other cultures that affect the
organization. One of the strategies that have been used by the Baosteel to solve the cultural
challenge is instilling the corporate culture among employees. The basis of promoting
organizational culture is through training new employees before allowing them to work within
the organization. Secondly, intercultural competency is another way to reduce the challenge of
cultural conflict. The company can train employees on cultures of other countries especially
those countries where the company can expand its operation to (Conaty & Ram, 2011).
Secondly, solution for the challenges is based on the development of human resource
framework. The international human resource development with a major focus on criteria for
selection, recruitment, and training to ensure that the there is limited cultural conflicts. The
human resource development framework offers the solution that specifically concentrates on
training new employees on the different work environment. Strategic human resource training is
another important aspect of human development that need to be considered (Hale, 2014).
Thirdly, the solution for the communication challenge rests on the development of proper
communication framework. The company communication framework that defines the used of
three languages and these include Chinese, Germans, and English is required within the company
human resource management. When operating the business in Germany the company needs to
come up with a clear strategy that will ensure that the three languages are used within the
organization without conflict between employees (Luthans & Doh, 2015).
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OPERATIONAL MANAGEMENT FOR INTERNATIONAL BUSINESS 12
5. Recommendations and conclusions
In light of the challenges that are affecting Baosteel in the international platform, there is
some recommended improvement that needs by implemented with the company. Firstly, the
company needs to develop the human resource framework that will consider international
environmental factors. A good human resource strategy focuses developing human resource in
all conditions that coincide with international standards. This strategy needs to focus on areas of
training and scope of training that will lead to professionalism. For instance, a good human
resource development strategy with the capability to help employee adapt to cultural differences
and international management is required in the organization (Essays, 2013).
Secondly, the company needs to understand various international cultures and train
employees on such culture. Organization culture also needs to be part of training for new recruits
as this helps them understand the core values of the organization. Intercultural competency
should be the goal of the training as the international human resource management is coupled
with many intercultural windings. This culture needs also to defines a clear organizational
behavior that is in line with organizational culture (Flamholtz & Randle, 2014).
Thirdly, the company needs to develop a clear communication framework that will
consider international perspective. The organization needs to have communication framework
that is developed based on international language as this affect human resource in the
international platform. One of the communication challenges is the language skills that are
required especially on an international level. For instance, working in Germany without knowing
the most preferred language in Germany is a big challenge. Those employees that transferred to
Europe from China need to be subjected to communication training to enable them to understand
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