Today’s business environment is changing at a breaking pace. The rampant pace of global competition, the speeds of technological developments, rapidly changing demographics, and the incredible increase in information technology have resulted in a business environment that changes day to day, hour to hour. To remain competitive in such a dynamic environment, businesses must continually improve their human resource management systems and organizational changes. Managers must continually be looking for ways to improve all aspects of the employment relationships.
International Capital Flows
The extent of international flows of capital and of the information needed to make investment decisions can provide further evidence of international economic interdependence. Today, gross flows of short-term capital in particular are huge by long-term historical standards. In the gold standard era up until World War I, bonds were the dominant means of raising long-term capital. After the collapse of the Bretton Woods system in the early 1970s, syndicated bank lending became the dominant instrument. The position changed again in the 1990s as foreign-direct investment (FDI) grew exceptionally in importance, with equity finance, bonds and bank lending also playing a role. Different financial instruments have been used as indicators of international capital mobility, but financial crises arose in all of the periods mentioned. New and improved financial instruments or systems will be created and look upon as great tools of international flexibility. Although, history has proved nothing lasts forever.
International Flow of Labor
Technological advances have dramatically reduced the costs associated to international travel. The lower transportation cost of today has had an abundance of people traveling around the world far more than they use to. A large portion of all travel today is not only for leisure purposes, but rather international business trips and short-term stays in foreign countries are part of current globalization. The short-term business and holiday travelers, mentioned previously, are faced with light restrictions in many countries. However, public policy in many countries restricts the rights that individuals have to settle and work in a foreign country.
Long-term international migration is not occurring on a huge scale (by historical standards), in spite of the significant migration pressures that exist currently in our global economy where wages for workers with similar skills vary hugely between countries at different stages of development. Even though migration is not occurring on a huge scale, the number of workers from Mexico that have migrated to the US is quite high due to the fact that their wages have increased ten fold. Immigration into the US was much higher at the beginning of the 20th century than recently. During the late 1990s the US accepted approximately one million immigrants annually, including illegal immigrants and refugees. A large number of legal immigrants have also been accepted globally. Western Europe was at its height of accepting legal immigrants in the high growth decades that followed World War II. France and the UK accepted many immigrants from their former colonies. Germany also accepted large numbers of guest workers during this period. During a decade and a half, the portion of the workforce, which consists of foreign workers, doubled. However, this high number of immigrants drastically declined in the mid 1970s.
Public policy plays a crucial role in determining the extent to which countries and their companies participate in globalization. Public policy measures have the potential to reduce the interaction between nations, which would cause the reverse of globalization temporarily. Since World War II, industrialized countries have progressively opened their economies and a number of developing economies also began a process of external liberalization. Nevertheless, a significant group of countries, partly due to policy changes, are not participating in the process of globalization. However, people in very poor countries, such as the ones in the Sub-Saharan Africa, are much better informed about political conditions and standards of living elsewhere in the world due to dramatically improved communication technology.
International Firms Dealing with Globalization
The major benefits that globalization has brought to many have not come without costs. There are major policy challenges that remain to be resolved. These challenges include the leverage that national governments have in a world where competition may lead to a race to the bottom on social, environmental and other policies. International market integration competition and liberal international financial systems have been viewed as tools that could control the power of national governments to set rules and standards according to domestic public preferences and needs. The mobility of capital and regulatory competition between countries can help to discipline governments and increase the efficiency of public institutions. It is argued that the political pressures created by the process off globalization could place national governments in a regulatory downspin where growing corporations will not be able to enter those markets and prosper.
International Distributions of Income
There are three major concerns that are related to trends in international income distribution, the increased volatility that may be associated with increased exposure to international trade and capital flows, and abuses of an essentially open international financial system. International income inequality can occur due to a mixture of income inequality between countries and within countries. It can occur because all are growing, but the rich are growing faster or because the poor are getting poorer. Real incomes among developed countries have been catching up with the rich countries. Although, there has been increases within labour inequality in a number of countries. Extreme poverty still continues to exist in this day and age.
Technological progress, a major driving force internationally, as mentioned previously, may well be increasing the premium available to skilled workers in all countries. This could increase inequality between the skilled and the unskilled workers within countries, including the rich countries. International human resource management may then need to increase the need to rectify or find appropriate domestic policies in order to deal with the problems faced by low skilled workers. We are all very aware of the differences in standards of living between the rich and the poor countries and regions. It is a relevant policy issue. Income inequality globally, is likely to benefit those countries that are able to participate in it, but it does not create adjustment costs for certain segments of the population such as low skilled workers in rich countries. The policy challenge is therefore, to help those that may lose from globalization and to crack down on countries that harvest all the aggregate benefits. By doing this though, human resources may not be as attractive in foreign countries, which would create higher competitiveness.
Abuses of International Financial System
Due to the high degree of openness and by the rapid development of new financing and payment instruments, it has become more and more difficult to control the international financial system against abuses such as money laundering, the financing of criminal terrorist activities, tax evasion and the bypass of rules and standards. The credibility and integrity of the international financial system is threatened every time one of these abuses takes place. The consequences of these abuses affect countries and their companies at every stage of economic development. The existence of abuses encourages illegal and criminal behavior, including bribery and corruption. Moreover, there is a concern that harmful tax practices could trigger reductions in tax revenues and limit the ability of international organisations to provide for public goods at the socially desired levels. A number of institutions aimed at improving standards of financial regulation and at eliminating harmful practices are now in place. As mentioned previously, globalization has brought with it major benefits but these benefits have not come without costs. Since the acts of terrorism in the US, the position of some policy makers has changed significantly.
On an international scale, abuses of the international financial system are also relevant. The international financial system has been used to launder revenues generated by illegal activities, such as drug related crime, and to channel funds to people and organizations involved in illegal activities, such as terrorism. The increasing ease of transferring funds across borders, the extensive networks of all banks and the growing number of countries that have opened their capital accounts have lead to the difficulty in controlling the origin and the destination of funds entering the international financial system. The abuses, misuses and lack of regulation of the international financial system have been made easier because of the slow and difficult co-operation among cross border officials, tax and policy authorities.
Trends of The International Financial System
Globalization has changed many aspects of how people, organisation and businesses operate. It affects societies and countries all over the world in ways that are often difficult to predict. The rules, principles, and decision-making procedures that govern the system differ quite substantially from those that prevailed years ago. The trends that characterized the evolution of the international financial system included:
A more profound integration of international financial markets, where major assets are traded almost continuously by a wide number of investment operators.
Evolution of the role and functions of exchange rate jurisdictions.
An abundance of liberalization of capital markets.
The development of a large pool of savings in the developed world in search of returns and risk diversification.
A change in the level and composition of capital flows to developing and emerging market countries.
The development of a wider arrangement of increasingly complex financial instruments.
The emergence of new international institutions and the development of sets of multilateral and national rules, codes and standards.
The international financial system has been looked upon as something that has functioned well to diversify savings into productive investments, along with encouraging and supporting productivity growth in both developing and developed economies.
International human resource management (IHRM) for firms is likely to be critical to their success, and effective IHRM can make the difference between survival and extinction for many corporations. The purpose of IHRM is to enable the firm to be successful globally. This would entail being competitive throughout the world, efficient, flexible, adaptable, and capable of transferring knowledge and learning across their many establishments. The three major components of IHRM are issues, functions and policies and practices. Issues for IHRM lie within the various decisions needed to be sensitive to unique demands of their environment without detouring the corporation’s pursuit of global strategies. Due to these issues, along with many others, are often facilitated by HRM activities, they represent a critical component in IHRM. IHRM functions represent a corporation’s human resource orientation, the resources allocated to its human resource organization, the location of those resources and HR decision-making. IHRM policies and practices involve the development of general guidelines on how individuals will be managed and specific HR initiatives. IHRM policies and practices relevant to the needs of the corporation include those related to planning, staffing, appraisals, compensation, training and development, and lobour relations. IHRM functions, policies and practices are created and implemented due to the issues that arise. One could say that IHRM issues are the main driver of the other two major components. There are still concerns that remain such as the biasing effects that the culture and norms of headquarters have on socialization processes. These ethnocentric forces can compromise the company’s ability to identify and benefit from cultural synergies in their subunits worldwide. As corporation become more global, their socialization process needs to be less ethnocentric. The cultural differences among nations are too important to be ignored. Firms need to open their recruitment process and enhance the attractiveness of global assignments, which in turn would develop a global workforce and framework of global managers. Although, as firms become more geographically and culturally dispersed, it becomes more difficult for headquarters to identify and track factors bearing on competitiveness.
IHRM within global businesses need to secure and maintain international competitive advantage through continual innovation, which is driven by relaxed positioning allocation systems as well as development, retention systems for staffing, governance and rewards. However, an organizational decline in innovative activity eventually leads to some form of retrenchment in HRM systems. Moreover, companies failing to keep up with state of the art technology, up to date policies and practices, risk weakening their global competitive positioning. Employees will then find themselves with a declining standard of living because productivity gains will not generate enough revenue to advance their general social welfare. IHRM systems need to focus outside of the box to be successful at attacking important issues, which will in turn create positive organisational change.