Introduction
The world has seen the globalization of business and it has in recent years it has been more important to comprehend how multinational enterprises (MNEs) can operate efficiently. Human resource management has been one of the pivotal instruments that help the multinationals to meet their goals. Managing human resource activities at the international level requires a competent international human resource management that combines various factors and handles of nations working together. Various nations have different ethnicity, race, culture, and religion. It is good for human resource management at the international level to look carefully at what drives the workers so that it can unlock the company’s potential. Consequently, it is more essential to hire and develop competent workers than on the strategies that are formulated by the company. Proper reviews of the nations, workers, and functions have to be done to ensure that the companies operate effectively and have a competitive edge over other companies. Multinational companies are faced with political, economic, social, and technological factors. Notably, these are PEST analyses that multinational companies review when setting up and operating companies. Generally, these are external forces that affect company operations. Essentially, these external factors vary in various nations, and so a proper scrutiny of the factors should be done on the nations they operate independently. It is a diagnosis that these companies use to effectively discover, evaluate, organize plan, and trail macro-economic factors that can impact the company operations. For these companies to succeed, these factors are vital and should be enhanced so that they can operate efficiently and make profits. Without these factors, the companies can make losses and can even close their subsidiaries in foreign nations which do not have a conducive business environment.
The study will look at the various PESTLE factors and how they affect multinational companies operating in foreign nations our case comparing setting subsidiary companies in China and Portugal. The research will look at the different political, economic, technological, social and cultural composition and whether a company like Lucy group can consider easiness in setting up subsidiary companies. The human resource structure will be a point of concern after reviewing the PESTLE analysis of these nations. Generally, the two nations will require a different workers structure that is in line to the various PESTLE analysis considerations and the factors that emerge.
Over the years, China has come out as one of the most attractive nations in the world. Various factors that have resulted to that are their vast population that makes up the market. Another reason is that it has low cost of labor. It has come to the attention of foreign investors that China has growth potential that is not a match for many nations. It is not easy managing international companies in China. On the other hand, it is easy to operate multinational companies in Portugal. The two nations vary in almost all spheres and their PEST Analysis is hence different from each other.
Portugal has had to grapple with corruption, decline of international markets, unstable political system. Notably, this is much different from China condition. China has a stable political system that ensures that the nations operations are efficiently done to ensure there is no corrupt activities and economic recessions experienced. Political system in China has not been favorable for new entrants in the nation. The People’s Republic of China is a socialist state under the people’s democratic dictatorship headed by Xi Jinping as the president. It has the working class as leaders and it also partners with the peasants. The government has a system of people’s congresses and a multi-party system.
Community Party of China (CPC) leads the multi-party composition under the president. The government under CPC leadership controls the business environment in China at a great extent. China in the recent past had a negative relation with the South Korean government after a company sold their land to the South Korean government so that it could install an anti-missile system. Generally, this did not augur well with the Chinese political leaders. There has been a lot of outcry by these companies that the Chinese government has been pressing them with a motive for the ruling party to have a structure that incorporates them and have a joint venture. Notably, the aim of this is so that the government can have a formal voice when it comes to investments, hiring, and other vital decisions. In essence, the case is much different from the Portuguese political outlook. Portugal has a political system that is democratic. It has two mail parties Socialist and Social Democratic.
Lucy group should look carefully at the political situations in the two nations. The company can operate with little political interference in Portugal compared to China where the government to get hold of a certain percentage of the company ownership. Political environment in Portugal has not facilitated in job creation as compared to the Chin government. In Portugal the nation has seen an increase in wages that deter companies investing. Notably, this is not the case in China, and so it is attractive for the investors. In China, there is regard of human rights as compared to Portugal who follow their European counterparts. There has been unlawful detention, torture and mistreatment and limited freedom of speech. Generally, this can be a deterrent for the investors like Lucy group. Portugal is ranked twelfth internationally as having basic freedoms like freedom of speech. There is no much humiliations, intimidation and arrest of workers, activists and journalists compared to China.
China has performed well economically, which has been an envy of many nations. It has become an incredible financial destination that has brought about foreign direct investment. The Nation has maintained their taxation levels down compared to Portugal. China has high rate of savings, abundant and highly skilled workers. The nation has many businesses that deal with export of products. Generally, these factors have helped a lot in ensuring that the nation grows economically, and this has attracted investors. China has seen a decrease in unemployment as compared to Portugal which is much grappling with unemployment. Lucy group setting up a company in Portugal are going to experience a hurdle from the government if they are in pursue of hiring other nationals as compared to China. This is because Portugal will always consider that their nationals are given first priority so that they can ease the unemployment rate.
In China they would let the workers work because the unemployment rate is lower. The hurdle that Lucy group can go through is the high political interference that would ensure they have a significant control of the companies leaving them with a limited proportion of running the company. China has a more purchasing power of its citizens and has a greater GDP compared to Portugal. The high purchasing of the Chinese people has culminated to high inflationary rates and the prices of the commodities going up. China on the other hand has increased interest rate to curb this. In China, there are more financial sectors, agriculture, mining, construction, leasing, and commercial services as compared to Portugal. Generally, this gives a wider spectrum of areas to conduct business.
Social and cultural aspects in Portugal and China are great tools that determine whether companies like Lucy group can invest given the various demographical changes. Notably, there are changes in age distribution and population growth. In China, they advocate for one child per family as compared to Portugal who do not have such restriction. Generally, this means that China has a more aging population as compared to Portugal. Social behaviors are not similar in these nations and hence, this often impacts how decisions are made. Both nations hold the wellness of their citizens at heart and the ensure that companies from overseas up hold social and environmental concerns that the nationals could be seeking.
Lucy group should ensure skilled workers are hired and trained to ensure that there is little negative externalities realized from their operations. In China there is serious consideration on migrant settlement and biodiversity conservation as compared to Portugal who follow European stand on immigrants which is much lenient. In regions with great development in China, companies have to make mandatory briefing to the government authorities on their operations. Regulation has helped protect the environment and has helped curb negative externalities. Lucy group has to have a proper scrutiny of their operations so that their operations lead to no negative externalities and hence ensuring the nationals are impacted positively.
China and Portugal have had technological factors affecting international companies setting subsidiary companies. China has had more technological composition over the years between the two nations. Subsequently, this has led to new products being developed, new distribution mechanisms getting formulated, new methods of working have come up, new purchasing have come up. Notably, this has led to growth of international companies growing in size. A study has shown that 81% of international companies have grown in stature. Lucy company has to tap the high technology in these countries so that they can easily markets finished products and purchase of raw materials. The company should look at the stable online payment structures that could propel their operations. The technology should be safe and should ensure that there is no room for misappropriation and hacking.
Cultural Differences in Portugal and China and their effect on IHRM
China and Portugal have different language , etiquette, customs, manners and society. China majorly concentrates on society or group composition ans compared to Portugal who are individually celebrated. Essentially, international human resource would operate differently in the two nations. While conducting hiring and retaining of workers, in China the human resource department would call for societal scrutiny. The society should be considered while filling the positions. They are the ones to hold forums and ensure the highly qualified individuals who can be beneficial to them. In Portugal merit is a consideration and it is individually conducted. There is no involvement of families and the society and it is just their merit that is considered. Hierarchy is of great consideration in China. The IHRM should give a higher consideration to those higher up in the structure and mostly are the elders and the government. Without respect, a company like Lucy group cannot fare well. In this case, elders are greatly respected.
In Portugal, family ties are much tighter and nepotism is highly regarded as a good thing. IHRM should strive hard to cast shadow at the practice that runs in the nation where nepotism is rampant. Notably, nepotism has facilitated to rise in corruption that has crippled the economy in a way. The IHRM should work hard to ensure that when it carries hiring and retaining of workers it does not encourage nepotism in their subsidiary companies.