The international joint venture (IJV) remains a popular means of voluntary cooperation between organizations of different locations, sizes, and sectors in satisfying strategic purpose and managing complexity in business settings. IJVs are formed from two businesses combined to meet the shared business objectives. McDonald’s Golden Arches Restaurant Limited (McDonald’s) is a common IJV realized by merging McDonald’s Corporation and two other business partners.
Sony and Ericson also partnered in smartphone and gadget manufacturing, then the former acquired the latter after a year of joint operation. Human resources management (HRM) plays a significant role in the success or failure of IJV (Harzing and Pinnington, 2015). The inconsistency in predicting how IJVs perform can be linked to negligence from human resources (HR). HR services are used to measure how the intended ownership objectives were achieved.
For instance, HR managers have to ensure that the strategies align and support IJV goals. Such measures are achieved by developing a distinct identity and culture for the newly formed organization, aggressively communicating to employees, and establishing diverse career paths. By implementing such roles, the HR manager will be better placed to improve McDonald’s or Sony-Ericson’s performances.
Performance challenges in IJVs have always been associated with the ownership structure, cultural differences, bargaining power, inter-partner learning, inter-partner compatibility, and parent firm characteristics, and external environmental changes that produce inconclusive results. Such results frustrate the HR functions in the joint venture.
However, the HR manager can address them by creating comprehensive compensation, retention, and incentive programs tied to the IJV’s success (Harzing and Pinnington, 2015). Open communications should also be maintained between the IJV HR departments and those of the parents to allow for easy navigation and articulation of issues.
For example, Ericson and Sony’s HR managers had to actively communicate with that of Sony-Ericson for active coordination and support of the common objectives. The IJV agreement is beneficial in increasing the diversity of the product line and entry into new markets. It also helps a company establish new relationships by acquiring new customers, associates, and referrals. The risks and rewards in the joint venture are shared equally between the agreed parties.
National business strategy and corporate culture are the significant challenges faced at IJV formation. For instance, McDonald’s encountered difficulties in incorporating the operations of the two ventures because of differences in the work culture and management styles. The two businesspersons, the British and the American, implemented different management styles from McDonald Corporation. Such inequalities delayed the process of coordination and shared efforts to achieve the business objectives.
Moreover, the lack of a leadership structure from the partners could be evident at the outset of the IJV (Harzing and Pinnington, 2015). The partners also had shared exposure to workload, financial responsibility, and risk, challenging and helpful for McDonald’s growth and expansion.
HRM is dedicated to enabling McDonald’s to obtain and retain a skilled, committed, and motivated workforce. However, to attract the best crew, the joint venture must engage in advertisements to reach a broad range of potential candidates (Harzing and Pinnington, 2015).
The HR manager is responsible for developing a high-performance work system that will ensure the business’s success by engaging potential employees in rigorous recruitment and selection and a competitive remuneration system. Such considerations have synergistic effects and demonstrate the commitments of the company’s management practices. Through HRM, a climate is created to nurture positive and harmonious relationships and hybridization, allowing McDonald’s employees to partner with the management.
Strategic HRM faces various restraints in meeting the shared objectives due to the increasing complexities of business strategies and work cultures in McDonald’s areas. However, challenges in implementing strategic HRM are accelerated by gaps between the organization’s proposed and actual HR practices. The limits leading to the failure of the HRM include reluctance to spend additional resources on the workforce because of cost-related issues. The lack of proper understanding from the management has been cited in HRM (Harzing and Pinnington, 2015).
The inflexibility of the HR professionals in initiating new programs or changing the IJV’s structure, especially when changes are likely to impact the existing rules and regulations, is another hindrance.
The idea of varieties of capitalism impacts IJV since it creates an integrated approach to strategic HRM. In such consideration, the joint ventures will reduce their susceptibility to sudden economic shifts in the world markets, such as the 2008 financial crisis. While liberal market economy (LME) assists in coordinating the business activities through hierarchies and competitive arrangements, coordinated market economy (CME) focuses on non-market relationships to coordinate their activity (Harzing and Pinnington, 2014).
Competitive costs and rapid innovation are the significant benefits of LME, though it is disadvantaged in benefiting from special skills and incremental modernization. On the other hand, CME is helpful in wage moderation, high-level of specific skills, and takes advantage of long-term capital, but limits companies in gaining their market share and competitive edge. Nonetheless, national culture is vital in McDonald’s management since it helps the IJV recognize cultural differences. For instance, McDonald’s will be underappreciated and have poor sales if it sells pork and related products in a Muslim-dominated area.
Reference list
Harzing, A. and Pinnington, A. (2015) International human resource management. London: SAGE.