Significance of Human Resources in International Business Arena

As the success of domestic business depends on its human resources, the success of a multinational company depends on international human resource management. Human resources managers are kind of people managers of any business organization, and are responsible for managing a wide range of employees. The human resource manager in a multi-national company with divisions or subsidiaries in foreign countries has all the normal HR responsibilities plus a brace of additional tasks that are specific to offshore operations of his department. He is literally responsible for international human resource management.

Significance of Human Resources in International Business Arena

International human resource management functions cover many different activities related to a business organization’s employees and contractors. The first and most important is the staffing needs of the company whether staff members are company employees or outside contractors. Other functions include recruiting and training employees, ensuring that they are performing at expected levels or better, handling performance issues and making certain that personnel and management policies conform to laws and regulations. International human resource management is also involved in how the company manages employee compensation and benefits, employee records and personnel policies and practices.

The primary difference between domestic human resource management and international human resource management is the added knowledge and responsibilities required due to foreign operations. These typically include language (in non-English speaking offshore organisations), the local and national regulations and laws governing business operations within a foreign country; currency exchange rates, career outlooks, company benefits and incentives and, perhaps most important. The ethics and etiquette expectations of foreign business contacts. International human resource management people must understand these differences clearly and stand ready to keep other company people informed of them to prevent embarrassing situations and unintentional ‘affronts’ from occurring

Basic human resources are a management activity while human resources development is considered a profession. The latter is targeted more specifically to developing personnel inside organisations through career development, organizational development and training activities. Both functions have undergone very-significant evolutions during the past several decades so that they now play major roles in staffing, managing and training people so that the will perform in an optimum manner for the organisation. Today, international human resource management is the fastest-growing subset of HR due to the growing trend for global business operations.

Significance of Human Resources in International Business

To achieve a competitive advantage in the global market, effective exploitation of human resources is of significant importance. To be in competition and have sustainable advantage it is necessary to manage internal resources in efficient way. For sustainable advantage in competition, creation of value is important, but it should be rare, it must be inimitable, and must be non-sustainable.

For the sustainable competitive advantage, human resources are the most important factor as it is inimitable, non-substitutable as well as valuable and rare.

Human Resources – Valuable

For sustainable competitive advantage, resources must be valuable. The demand for labor is different in different firms and it is more different across the countries than it is within the countries due differences in availability of capital, difference of labor practices and social and cultural norms which are related to the work. The labor supply is also different across countries than within the countries due to difference in hygiene, health care, nourishment, training and educational opportunities. As competition becomes more global, there is an opportunity for creating value through human resources.

Human resources must have control, information, awareness, recognition and rewards to be the source of competitive advantage.

Human Resources – Rare

To be source of sustainable competitive advantage the resource should be rare. Human skills are distributed normally in the population and are rare. Human resources vary in worth, and different jobs require different skills and finding these skills are rare. International firms have and can draw more labor pool; they have great potential for developing the valuable and rare resources than the domestic firms which draw from only labor pool.

Human Resources – Inimitable

It will be more difficult to imitate the resources in the presence of causal ambiguity and social complexity.

  • Causal ambiguity: Exists when their imperfection in understanding of the link between a firm’s resources and competitive advantage. If the firm which is in the competition is not able to identify the human resources which are responsible for competitive advantage, they cannot imitate the advantage. Causal ambiguity is caused mainly due to team production. When the work is done in team, it becomes difficult to identify who had contributed maximum to achieve the goal.
  • Social complexity: It may arise from the transaction-specific relationships. The competitive advantage can be gained due to complex social situation. Even when the relationships are too complex, it is better to consider the value of relationship which may be due to the human transactions. The value can be developed due to the knowledge and trust which had been developed over the time. Human interaction may lead to social complexity.

In the global competition, the social complexity and causal ambiguity act as a barrier to imitation. It becomes difficult for the outsiders to understand the competitive advantage due to differences in customs and norms. The imitation becomes impossible due to religion, culture and political alliances.

Human Resources – Non-substitutable

To stay in the competitive global environment there should be no good substitute available. Finding the good substitute is the difficult task. Human resources are the factor which can be transferred across the technologies, products and markets. Human resources are thus valuable. If the firm has obtained high level of learning capabilities then providing good training ensures that resources do not becomes out of date.

It is possible to substitute all the other resources for the short term and they can’t eliminate the substitution of the human resources for long.

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