Expansion Strategy – Term Paper

The Role of HRM in Supporting the Expansion Strategy

In the context of an organization, performance is not only a wide concept involving effectiveness, efficiency, productivity, as well as competitiveness, but is also a subject in the competitiveness of the organizations. To understand the role of HRM in the expansion strategies in a market-driven economy, it is critical to understand the definition of multinational companies and how they operate. The multinational corporations are those, which the coordination of activities take place across the national borders without market exchange and involving foreign direct investment. These firms exist with the role of avoiding the transaction costs in their operations.  The process of internationalization involves four drivers, which are cost, market, competitive, as well as the government. Apart from what the narrator states in the podcast, there is also the network seeking objectives, which play an important role in the process of internalization. According to the broader definition, the multinational companies are those, which the coordination of production is controlled from a central strategic decision making point that takes them across the national borders. The advantage of utilizing this definition is that it captures the wider impact of the multinational companies on the supply chain. The supply chain involves the steps that firms conduct to transfer goods and services to the consumers Also, he states that this strategy is enhanced by the nature of the international market. The opportunities and inquiries in the foreign markets are the foundations of internalization. Moreover, inadequate sales in their countries in comparison to the costs of research and development motivate these firms to invest in the international market. Also, the multinational corporations enhance people to understand the supply chain throughout the firm facilitated by vertically, and horizontally integrated MNCs, as well as conglomerates.

About the relationship between the human resource management and horizontal and vertical integration and conglomerates, there are numerous ways through which HR is involved in their implementation. In vertical integration involves the merging of business activities across the firms and their subsidiaries by evaluation of the accompanying employee skills, abilities and knowledge needed to complete certain tasks. Also, this strategy allows the companies can instill a corporate culture by having more control over the supply chain. This approach provides a chance for the multinational corporation to minimize their costs and increase returns through better utilization of resources, especially in the supply chain. According to the podcast, vertical integration also enhances better communication between the managers and their employees. Under the forward integration, the multinational companies can liberate their production activities through implementation of policies, which facilitate their expansion. Horizontal integration involves acquisition of additional business activities in production. This strategy has the aim of increasing the market share in circumstances when the business brand is known and has fewer risks in comparison to the vertical.

Human Resource Strategy In Modern World

On the other hand, the conglomerates take diversification of products and firms to increase their market share, as well as competitiveness. A way in which the HRM uses this technique is through the policy expatriation where firms operate independently. On the other hand, vertical integration is used utilized by the human resource management to facilitate effective integration with the foreigners and minimize the language barriers between the local and the foreign employees. The concept of internal fit is applied in the conglomerates under the HR to reinforce coherence of practices, which are mutually reinforcing. Management of the human resources ensures that all the activities in the headquarters are in line with those performed by the employees in various subsidiaries in different countries. These actions are made possible by having the general meetings, which incorporates all the ideas of the firm’s managers regarding recruitment and training of high skilled employees who initiate growth and expansion of the parent company to different parts of the world.

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In the modern world, the human resource strategy has assisted us in establishing a much wide understanding of the techniques used by the administrative systems in the process of expansion across the national borders. Apart from focusing on the technical attributes of specific HR practice, the podcast began by explaining the key drivers, which motivate the multinational corporations undertake their activities in other countries as foreign direct investments. As researchers expand their views on the relationship between the human resource practices and horizontally and, vertically integrated MNCs, as well as conglomerates, one can identify that HRM has a significant role in the three expansion strategies.

Under the vertical integration, the employee abilities, skills, and knowledge are the most renewable and distinctive resources, which can be derived by a business organization (Edvinsson and Malone, 1997). With the change of place of operation, then the premium of strategy formation, learning and innovation are required to be imposed in people-oriented know-how. Based on the information provided in the podcast, vertical integration is regarded as a cultivation technique, composition of workers, as well as cultures, which underlie the competitive potential of the firm. According to Prahalad and Hamel, 1990, in corporation of the organizational technologies and systems, people establish the foundation of the core competencies in a firm. There are three elements to enhance the current paradigm change in human resource management using the vertical integration. These attributes include:-

1) The aspect of agility used to reconcile the simultaneous needs for strategic fit, as well as the firms flexibility

2) The knowledge-based perspective, which complements the behavioral aspects of HR

3) The architectural models offering an elaborate view of HR and employment.

Trends In the Strategic Management

Numerous trends in the strategic management inclusive of shift towards the knowledge based and resource based perspectives of the firm, intellectual capital, the intangible assets and the knowledge management has placed the HR-related concerns at the core of the organization under the expansion strategy. In the past, more focus was on the requisite behaviors needed to implement a specific approach for the organization’s expansion (Guest, 2000). For instance, the Porter’s generic strategies during the 1980s had an implication for the human resource strategy through which firms were needed to minimize the costs to facilitate their growth beyond the national borders (Hill, 2012). However, the previous models did not take into account an HR dimension within their limits like the vertical or the horizontal integration. Considering the vertical integration, a strategic architecture is included to facilitate competence building where human resources are positioned as the key component of competitive advantage through minimization of costs, and the financial risks. Moreover, it engages recruiting the employees with high skills and competencies to across all the departments in the supply chain regardless of the number of subsidiaries (Lussier and Hendon, 2013). One implication of incorporating knowledge based perspectives in human resource management through the vertical integration is the managers or the owners of the firms can track down how the resources are utilized and shared in case of the mergers and acquisitions where businesses adopt the operations of each other.

From the above analysis, corporations converge between the Human resource and the business strategy as they attempt to internationalize or expand beyond their national borders. Also, the human resource management plays a key role in the success of the vertical, horizontal and conglomerate integration in reducing the cost of operation, enhancing effective communication and minimizing the financial risks for them to be competitive in the international market as the MNCs expand.