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Adapting to Host Country’s Environment as a Mandatory Requirements for MNCs

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Adapting to Host Country’s Environment as a Mandatory Requirements for MNCs

Adapting to Host Country’s Environment as a Mandatory Requirements for MNCs: Case of the US MNCs operating in China




Globalization is the ever-increasing need for interaction or interaction between different people in economic activity around the world. Companies that do business at the international level need to understand the role of human resource management. Managing human resources on a global scale needs a robust understanding of the culture and the operation of foreign countries. The need to understand cultural differences always forms the backbone for responding to external dynamics and the environment. International human resource management for multinational companies is vital since it gives the human resource department of the organization an undertaking resource profession chance to handle interviews, hiring, recruitment, and training of employees. Managing human resources also at a multinational level helps the organization to achieve its goals. Managing human resource gives the organization to establish robust procedures which are designed to meet productive work facility and business need.

Managing respective international setting needs employees who are motivated and inspired to ensure collaborative work even they do not reside in the same location. International human resource management helps the organization in team building. Human resource management should work in an international business that usually operates in spheres that ensures teamwork. Teamwork can be built through conducting workshops and promoting the understanding of cultural diversity by motivating employees to work in order to achieve the strategic goals of the organization. Teamwork helps the multinational organization achieve a strong team. Recognizing that some employees play vital roles in other countries, human resource professionals are able to create an element of understanding of how teamwork operates. Teamwork build through human resource management helps the organization to understand how teamwork functions across borders in a bid to maintain the profitability of the company. Companies that are more global help fostering understanding of cultures across different borders.

Human capital has been identified as one of these key determinants. Myloni, Harzing & Mirza (2004) considered that the employees working in the MNCs might come from disparate cultural backgrounds and nationals, the management practices may be different from those of managing employees in a local environment. International human resource management helps to acquire, train, and develop employees in the MNCs. IHRM helps in the management of human resources, ensuring smooth operations in the global subsidiaries.

This paper discusses why the US MNCs operating in China must adapt to the China environment. This paper is important, considering the rising number of companies expanding to foreign markets. The study will provide insight into the impact of adapting to the host country environment. In completing this paper, several models will be used. They include varieties Capitalism (VoC), Liberal Market Economies (LME), and Coordinated Market Economies (CME) and Hofstede’s cultural dimensions. This paper discusses the effect of globalization on employment relations. It compares the national employment systems between the US and China, the cultural difference between China and the US, and limitations of local adaptation.

Globalization and Employment Relations 

Globalization has been identified to have significant implications on the employment relations of nations. However, there are conflicting views on the types and significance of the changes in human resource employment relations resulting from globalization (Schneide and Paunes, 2012)). Generally results in the convergence of labor standards across regions and nations. Pressure linked to globalization is refracted via the national level arrangements leading to continued divergence. Globalization and the convergence of ideas have led to homogeneity in employment systems across regions and countries. Globalization enhanced the mobility of human manpower and understanding cultural differences across nations. As a result, it has prompted the national government to institute common changes in labor standards as a way of curbing the loss of productive investment. Those in support of the divergence perspective argue that employment relations are shaped by a multiplicity of factors, and the globalization alone cannot shape them (Bamber, Ryan & Wailes, 2004).

According to (Lansbury and Wailes, 2010), there is no empirical evidence that shows that employment relations within nations, let alone across regions and nations are converging to a single pattern. There is a huge variation in employment systems within countries, which are good indicators that there exist diverse employment systems. For example, some companies differ significantly by the extent to which they contribute to workers’ development, and they also differ significantly on employment security. The argument by Wailes, Lansbury & Kirsch (2009) contradicts the idea advanced by the theories of capitalist diversity. Particularly the Varieties of Capitalism, which identify that globalization affects employment relations. More specifically, VoC implies that the effect of globalization on employment relations vary in a systematic way across different economies (Hall and Sosckice, 2001). Globalization gives a clear cut illustration of how to advance the ideology of how to market society’s function is determined by the complementariness between institutional arrangements.

According to (Schneide and Paunes, 2012), liberal market economies (LMEs) and coordinated market economies are tow institutional equilibria, which can result in a high economic outcome. The LMEs are where companies rely on the hierarchies and markets in resolving condition issues. These economies are characterized by highly developed capital markets, and there are high use market mechanisms in the coordination of relations with buyer and supplier companies (Wailes, Lansbury & Kirsch, 2009). The United Kingdom, US, and Canada are examples of LMEs. On the other hand, CMEs include nations in which companies utilize, to a greater extent, non-market mechanisms in resolving coordination issues externally and internally (Wailes, Lansbury & Kirsch, 2009). The main difference between LMEs and CMEs is what companies in each economy use in resolving coordination issues. More specifically, while the companies in LMEs utilize hierarchies and markets in resolving coordination problems, CMEs use non-market means to resolve the problems.

According to Hamann and Kelly (2008), based on the VoC approach, globalization effects on the employment relations process, and outcome in LMEs are different from those of CMEs. For example, a rise in international competition is highly likely to prompt companies in the LMEs to embrace market-based employment relations practices such as decentralization. On the other hand, in CMEs, a rise in international competition might reinforce traditional forms of coordination between workers and their employers (Thelen, 2000).

National Employment Systems Difference

There are several differences between the United States and China based on Variety of Capital approach, LMEs, and CMEs in

From the Varieties of Capitalism approach, human resource management from LMEs and CMEs differ in many ways. As identified by Wright et al. (2017), in LMEs, the employers rely on market forms in determining what they pay their employees, and they also depend on the market forms to determine skills development. In the CMEs, the employers organize their activities through a non-market mechanism in determining the HRM practices. However, some countries such as China and India, according to Wright et al. (2017) are hard to categorize them through the VoC approach. This section presents a critical discussion on the differences and similarities between the US and china national employment systems. In comparing the employment systems of the two countries, the paper focused on the dimensions of employment relations such as work organisation, staffing arrangements, skill formation, and enterprise governance. The employment in China and the United States vary based on a Variety of Capitalism, LME, and CME.

The United States and China United Variety of Capitalism

China’s variety of capitalism is an approach that was formulated by Hall and Soskice (200). The present state of China gives five spheres in the economy of the political Model. China, in many aspects, looks like a liberal market economy (LME). Human resources have become difficult to transfer in the industrial space. The United States employment structure gives an opportunity for the spread of the workforce, unlike China. The United States employment usually embraces diversity since it is a capitalist nation giving more room to other sectors of the economy. China, on the other hand, has a different pattern of employment. China’s market of employment gives room for members of the family who take center stage in the management of businesses. The United States has unique human resource management with a more accommodative employment pattern than the Chinese market. The Chinese national employment limits globalization in many divergent ways since they are communist. The United States has built a framework in MNCs that boost education and employment strategies in national employments.

The United States and China Liberal Market Economies

Many capitalists have different ways of developing a capitalist economy. However, the two fundamental way of forming a capitalist economy is through Liberal market economy or through the coordinated market economy.  In the United States, federal laws are made squarely to protect workers in all the sectors of the economy. The federal laws form the framework for the protection of workers. However, in China, labor empowerment is undertaken by the constitution. They are thus making the employment sector in China a more inclined constitution than the employment framework. China’s employment system is labor rigid and pro-work hence making it difficult to expand and accommodate people for progression. Chinese constitution forms the backbone of national employment. The United States is characterized by the firm ability to train employees. Despite many LMEs characterized by short relations, they offer room for economies and innovation. The United States market is not a totally free market since the government always protects the economy. The United States economy is highly embedded in divergent criteria of meeting consumer expectations.

Coordinated market economies

Markets that are coordinated are unique in that the economy of this nature involves non-market players in determining company relations. Multinational companies have to change through some activities. The employment sector has been influenced by transfer in the MNEs. The human resource is easier to transfer, unlike other economies like China. United System economy is a liberal market, thus a good determinant in industries. The interaction between none profit and profit organizations is more inclusive, creating more opportunities in the employment sector.  The Chinese market, on the other hand, is quite unique since it does not allow other players from foreign countries to operate in their economy. The Chinese government is more enclosed since it does not allow other multinational companies to operate in their market without forming joint structures of operations—these kinds of the economy always lower levels of interaction and understanding between different players in the economy. From the above comparison, it evident that China’s employment system is somewhat similar to that of the US, especially in the aspect of skills formation. However, the two systems are, to a greater extent, different. These differences make it vital for a US MNEs must always adapt their HRM to China. From the above discussion, it is clear that although China has made steps towards a market-driven employment system. Companies such as Starbucks and MacDonald’s success in the China market are attributed to the adaptation to the local employment system. This implies that a US MNE must observe the role of the state in human resource practices, such as determining wages. Also, the internal structure in both states is centralized; in China, the management has a stronger prerogative than in the United States. This means that the US management approach may not fit in China.

Cultural difference 

Culture has been identified to influence human resource management. According to Chew & Sharma (2005), to realize the full potential in the human capital, HRM practices must be aligned in accordance with the employee’s cultural background. The argument by Chew & Sharma (2005) promotes the ideology advanced by many scholars such as Edwards et al. (2016) about the need for local adaption by the MNEs. The following paragraphs present the cultural differences between the US and China-based on Hofstede dimensions and explain why the US MNEs must always adapt their HRM to china.

Figure 1: Cultural dimensions for china and US


Figure one above shows that China has a higher rate of power distance than the US (80 and 40, respectively). This dimension indicates the degree to which inequality between those with power and those without is accepted. According to Ahlawat (2016), the countries that have a high score in this dimension, inequality is highly accepted. On the contrary, in low scores in this dimension indicates power is widely dispersed and that people do not welcome situations where there is an unequal distribution of power. According to Obeidat et al. (2016), organizations operating in high power distance society are characterized by centralized structure and large compensation gaps between the managers and the subordinates. This implies that HRM practices by USA MNEs cannot fit in the subsidiaries in China. For example, based on the argument by Obeidat et al. (2016) in the US, inequality between the managers and the subordinates in terms of pay is not acceptable. However, in china, the compensation gap between the managers and the subordinates must be big enough to demonstrate the manager’s power. Moreover, the leaders in US MNEs are used to delegating duties as much as possible. But in China, this is not expected, and it rarely practiced. Hence, for the effective performance of human resources, there is a need for the MNEs to adapt their HRM to china.

Moreover, the image above presents china as restraint society and the US as an indulgence society.  The US has very high scores in the indulgence dimension compared to china (68 and 24, respectively). According to Ahlawat (2016), restrained societies are characterized by strict social norms and suppressing gratification. Also, these societies do not emphasize on leisure time. On the other hand, indulgence societies are more concerned with personal happiness, and they put much emphasis on work-life balance. From this dimension, it is evident that HRM for the US firms should be different from that of China. For example, in the US, individuals are much concerned about leisure time; this is not the case in China. This means that in china work offs may not be welcomed as in the case of the US. Therefore, it is good that a US MNE adopts its HRM in China.

Limitations of Local Adaptation in human resource  management

Local adaptation has more limitations on Human resource management. For instance, it deters the formation of a coherent work framework in reward management policies. Human resource management always faces may challenges while adjusting into a new environment-related to worker’s motivation and staff recruitment. However, it may be true that that local adaptation can deter a company from succeeding in the foreign markets, sometimes companies opt to retain home country elements in their operations. The decision to localize the HRM is influenced by many factors among them the institutional, legal and cultural compatibility between the local and the home country Ayentimi et al. (2017) this implies that when there is little or no difference between the local and home country in these aspects, the company can opt to retain the all/some elements of its operating Model.

According to Chen & Wilson (2003), the extent to which MNEs HRM practices converge or diverge with the local HRM practices depends on industries. Chen & Wilson noted that in the industries where efficiency is a priority, retention of some element of parent company HRM practices is necessary. It is through these elements that skills and know-how can be transferred from the home country to the local country. Therefore, the decision to localize HRM is influenced by many factors among the Industry in which the company operates. Companies operating in the technology-intensive industries may be forced to retain some elements of the home country elements in their operations as a way to ensure a smooth transfer of skills and knowledge from the home country to the local country.


The paper has found a significant difference between the US and China in terms of employment systems and culture. The research established that in the United States, that in the employer has full discretion while in china, although employer discretion has increased over the past years, the state is still dominant. It was also evident that there is a difference in the internal structure between the two countries. Moreover, the study has found that China and the US differ significantly in some cultural dimensions. These differences call for different HRM practices in the two countries, considering that prior studies have shown that culture influences individuals’ behavior. From these findings, the paper concludes that US MNEs that expand to the Chinese market should always adopt their HRM practices to suit the China market. This can help ensure that employees realize their full potential, and it can help the company achieve success. The fact that culture influences how individuals behave, then HRM practices should be devised in a way that they resonate with the individual’s culture.























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