Evaluating HRM Sustainability: Moving Beyond China in US Auto Parts

This report examines the human resource management (HRM) and sustainability considerations for American car parts manufacturing companies looking to move beyond China due to rising labor costs. It analyzes the political, economic, and cultural contexts of Afghanistan and India as potential alternative markets. The report assesses different modes of global operation, including joint ventures and wholly-owned subsidiaries, and evaluates talent management and industrial relations in each country. Furthermore, it addresses the HRM risks and emerging challenges associated with global expansion, ultimately recommending India as a more politically stable, economically viable, and culturally conducive market for US car parts manufacturers seeking sustainable growth.

Running head: HRM SUSTAINABILITY AND MOVING BEYOND CHINA
HRM Sustainability and Moving Beyond China
Name of the Student
Name of the University
Author note

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HRM SUSTAINABILITY AND MOVING BEYOND CHINA
Table of Contents
Introduction to global HRM and sustainability:..............................................................................1
Global, cultural and organizational context:....................................................................................2
Global context:.............................................................................................................................2
Political context:..........................................................................................................................2
Economic contexts:......................................................................................................................3
Cultural context:..........................................................................................................................5
Organisational context:....................................................................................................................5
Modes of global operation:..............................................................................................................6
Talent management in global organization:....................................................................................7
Industrial relation in a global context:.............................................................................................8
Managing HRM risk situation:........................................................................................................8
Emerging challenges in global HRM:.............................................................................................9
Revision:..........................................................................................................................................9
References:....................................................................................................................................10

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Introduction to global HRM and sustainability:
Collings, Wood and Szamosi (2018) defines human resource management as the
approach which business organisations take to manage their employees to enhance their
performances. The human resource management approach consider the employees of business
organisations as important aspects of their competitive advantage. This is because the employees
of these organisations right from the senior management level to lower level employees play
significant role in making strategies and executing them respectively. Brewster, Chung and
Sparrow (2016) mention in this respect that HRM plays a very important role in the
sustainability of the business organisations in the global because the employees are not only
operators of the company but the store house of talents which attribute these organisations with
their competitive advantage.
Wood et al.(2014) defines the term sustainability as the method of exploitation of natural,
manufacturing good and consuming in a fashion to ensure that both current and future needs of
the economies can be fulfilled. Bratton and Gold (2017) link the two concepts of HRM and
sustainability. They mention that human resource management plays a very important role in
achieving sustainability in different industries like the car industry. The Boston Consultancy
Group reports that the though China provides a huge market for the American companies, but the
increasing labour costs are forcing these companies to seek alternative markets (bcg.com 2018).
The paper would take into account this report by BCG with reference to the concepts of human
resource management and sustainability. The industry chosen would be car parts industry of the
United States of America. The two countries which would be considered as the alternatives to
China are Afghanistan and India.

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Global, cultural and organizational context:
Global context:
The global context would consider two context which the American car parts
manufacturing companies would have to consider while taking decisions on seeking an
alternative market to China. They are political context and economic context.
Political context:
The political condition of Afghanistan is unstable due to large scale militant activities in
the country. India is far more stable politically compared to Afghanistan. This is evident by the
political risk rate published by the Euler Hermes. The rating agency shows that Afghanistan
ranks 4th which means that country experiences high rate of political risks or low rate of political
safety. The risk rating of India is 1 which means the country is stable politically and experiences
high level of political stability (Eulerhermes.com. 2018). New Delhi has strong bilateral
connections with Washington and the EU. It can be inferred from the findings that India is
politically more stable than Afghanistan which makes it an appropriate alternative market to
China for the American car parts manufacturing and marketing companies.
Economic contexts:

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Figure 1. GDPI graph of Afghanistan
(Source: tradingeconomics.com 2018)
The graph below shows that GDPI statistics of Afghanistan. It can be inferred from the
graph that though the GDPI of the country is showing upward trend, still it is extremely volatile.
The GDPI of the country was $ 21 billion with a per capita income of $ 572 in 2017.
Figure 2. Graph showing GDPI of India
(Source: tradingeconomics.com 2018)
The graph shows that the GDPI of India till Jul 2018. If can be inferred from the graph
that the country enjoys a high GDPI though its GDPI fell in middle of 2017. The GDPI of India
was $ 2.848 trillion in the Q1 of 2018.
The next economic factor which would would determine the success of car parts industry
in Afghanistan and India is FDI and their economic risk level (state.gov 2018). As far as
Afghanistan is concerned, the economy of the country is highly dollarized and has experienced a

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growth of 10 percent between 2013 and 2015 due to assistance from international agency. The
country is heavily dependent on FDI from other counties with very low rate of economic
development of its own.
India in comparison to Afghanistan far stronger both in terms of its own economic power
and FDI. As per the GDP rating of the World Bank, India ranked 6th while Afghanistan ranked
111th (databank.worldbank.org 2018). India compared to Afghanistan has its own robust
automobile and car parts industry. The country sells automobile parts both domestically and
internationally. India is already market to top American automobile companies like Ford. This
means the American car parts manufacturing companies can invest in the Indian market through
FDI.
Cultural context:
The cultural context which the American car companies would take is the business
culture in Afghanistan and India. The business culture in a particular country plays a very
significant role in business transactions (Deresky 2017). The business culture is Afghanistan
does not allow diect interaction between male and female employees. The business meetings are
not well structured and the business decision making power is reserved to senior officials.
Meetings are usually held to intimate decisions already taken on the board.
The business culture of India is well structured and free communication between
workplace people are accepted between men and female colleagues. The Indian business partners
take risks and encourages more innovation (Huhtala et al. 2015). They stress more on
relationship building in order to ensure long term business relationship. The dress code in
business meets are less conservative both for men and women. Afghanistani business partners in
comparison to India restricts this liberty and expects their international business partners to

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adhere to conservative clothing. Thus, it can be pointed out that India is more favourable in terms
of business cultural context.
Organisational context:
The organisational context of Afghanistan and India would hold great significance while
deciding organisational structure the American car parts companies should adopt to enter these
nations. Afghanistan’s business culture is more conservative and does not support prompt
decision making. It can also be pointed out that as far as American car parts manufacturing
companies are concerned, they often relocate their employees stationed in one market to the
another market like Afghanisthan due to business needs. The conservative business culture and
lifestyle would create problem.
The Indian business culture is far more conductive and at present the country is the
world’s fastest growing economic giant after it overtook China in 2018. The dynamic business
culture and steadily growth automobile market would enable the American companies’ to
continue their flat structures. Moreover, the country lower labour cost which would enable the
car parts manufacturing operate at lower costs (economictimes.indiatimes.com 2018).
Modes of global operation:
The car American car manufacturing companies either enter into the host countries in
form of a wholly owned subsidiary or by entering into joint venture with existing car parts
manufacturing firm. The following table would compare between the two modes of global
operations:

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Two modes of FDI
entrance
Joint venture Wholly owned subsidiary
Identifying the types
of cost involved
1. Legal costs comparatively low.
2. Cost of operations are
comparatively low due to access to
the resources of joint venture
partners
3. Termination of joint venture
may put sudden pressure on
resaources
1. Legal and compliance costs
are high.
2. Cost of operations are high
due to initial establishment and
other costs.
3. Greater business development
in the long run due to total
owner on capital.
Risk factor Initial risk is low due to sharing of
risks by joint venture
High
Cost Initial cot is high Initial establishment cost is very
high.
The above comparison shows that initial cost of establishment of business using the
foreign direct investment of mode of global operation is high. The car parts manufacturing
companies can either use joint venture method or subsidiary method (Eriksson 2018). Though
the initial establishment of subsidiary and the risk factor remains high, it would enable the firm
to establish in the firm more firm in the market.
Talent management in global organization:
Gallardo-Gallardo and Thunnissen (2016) mentions that multinational companies require
to manage their talents efficient in order to attain economies of scale. Since, the employees are

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the reserves of the knowledge and efficiency, they play very important role in the efficient
operations of the car parts manufacturing companies (Karatop, Kubat and Uygun 2015). The
chosen market of the chosen host country should be able to provide the car manufacturing
company highly talented employees. This means car parts manufacturing companies while
entering either Afghanistan or India. As per UNESCO, the rate of education in Afghanistan is 31
percent while India has a literacy rate of 74.04 percent (unesco.org 2018). The comparison
between the literacy rate pof Afghanistan and India clearly shows that literacy rate of India is
higher than Afghanistan. This means that India can provide the car parts manufacturing firms of
the US more highly qualified and trained staff.
Industrial relation in a global context:
Özbilgin et al. (2016) mention that industrial relations play a very important role in
human resource management in companies. They further mention that the global industries are
dependent on positive industrial relations between the employees, employers and the
governments to achieve high level of productivity. The global labour relations body, ILO reports
that the labour conditions of Afghanistan is undergoing positive changes Decent Work Country
Program being signed between the employers, employees and the governments (ilo.org 2018).
India has a far more stable and structured industrial relation framework (labour.gov.in 2018).
The industrial relationship framework is aligned with global bodies like the ILO. This means in
global context, the industrial relation in India is far more conductive of establishing car parts
companies.
Managing HRM risk situation:
Van Der Vegt et al.(2015) mention that human resources in every industry is facing
challenge due to changing market conditions, rising costs and political conditions. The low rate

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of education in Afghanistan, lack of political stability and influence of extremist groups are
responsible for entry of firms making car parts. This is because hostile situations like this
interrupt operations in the car parts manufacturing companies (Boutellis 2015). India on the other
hand has strong industrial polices, a booming economy and is comparatively free from terrorist
activities. Thus, it can ve inferred from the India is a fit country due to lower HRM risk situation.
Emerging challenges in global HRM:
There the several challenges which global HRM is facing. The first challenge is rising
cost of hiring employees. The second challenge is continuously evolving manufacturing methods
in industries like car parts manufacturing. The challenges require the car manufacturing
companies to train their employees to stay abreast with the new technology. These human
resource management is costing the companies, thus challenging their sustainability.
Revision:
The above discussion shows that the car manufacturing companies based in the United
States of America should enter India. The country is politically stable and economically
emerging. It can definitely provide huge market to the car parts making companies to establish
their business in the Asian market and reap its profitability.

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References:
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https://www.bcg.com/publications/2017/lean-manufacturing-operations-honing-us-
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advantage of wage arbitrage: Bain and Co. Worldwide Managing Partner, Manny Maceda.
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https://economictimes.indiatimes.com/opinion/interviews/average-cost-of-factory-labour-at-less-
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partner-manny-maceda/articleshow/63554253.cms [Accessed 8 Sep. 2018].
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Deresky, H., 2017. International management: Managing across borders and cultures. Pearson
Education India.

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