HRM AND IHRM Practices in IKEA and Walmart

TASK DESCRIPTION Part 2 

(2500 words)

The following learning outcome drives part 2 of this assignment:

Demonstrate a systematic understanding of current issues in HRM and IHRM within a variety of organisations so to enable them to manage effectively the design and implementation of fair, efficient and effective policies and procedures that serve to deliver upon the strategic aims of the organisation.

Essay Question:

To demonstrate your knowledge and understanding of the above, you will need to select two different organisations that operate internationally.  These organisations should operate in different sectors and different geographic locations. In your essay, you will compare and contrast the challenges facing these organisations from an International HRM perspective. Your essay should focus on theory/models/frameworks related to IHRM and their deployment, or choices to be considered, in relation to the differing strategic needs of the organisations you have selected.

Executive Summary

The intent of this paper is to conduct an argumentative investigation on the Human Resource Management (HRM) and International Human Resource Management (IHRM) practices in IKEA and Walmart. These companies are multinationals that operate across different regions. The companies have many employees and large consumer followings. IKEA deals with designing and marketing innovative furniture and house décor products, while Walmart is a retailing chain offering different kinds of products. The paper offers an introduction that addresses how HR practices have been changing with the impact of globalization. The next section offers a theoretical approach that focuses on HRM based on a resource-based view that perceives employees as a key organizational asset that can be used as a competitive advantage. The next section is the methodology, which is a qualitative analysis of the two case studies. The approach facilitates engagement in the situation, as it is in reality to facilitate appropriate recommendations. The paper offers the findings of the case studies that shows the similarities and challenges in HRM and IHRM practices in the two companies. It is followed by a discussion that highlights trends in HRM and IHRM practices. Finally, a conclusion and recommendation to the issues identified in the study are included.

Introduction

Globalization has facilitated the proliferation of businesses across nations. There is consensus among executives and scholars that human capital management and investment is fundamental in a firm’s competitiveness on a global market. The phenomenon is attributed to the fact that different countries present varying influences on Human Resource (HR) practices (Jiang et al. 2012). The forces that shape HR practices include national politics, culture, and the economy of a particular country. The challenges faced emerge from the national factors of a particular host nation (Berggren & Nilsson 2015). There is an accumulating body of research that shows successful multinationals are engaging in a combination of a strong human capital management and attention to critical social capital (Manyika et al. 2016; Ambastha & Momaya 2004). The intent of this paper is to investigate the IHRM approaches employed by IKEA and Walmart, which are mature companies operating that are based on different regions and operating across various countries.

Research Methodology

Developing a systematic understanding of the current issues in HRM and IHRM in different organizations that operate in different geographical locations and industries can be achieved by conducting a case study on IKEA and Walmart. A qualitative approach will facilitate gathering of rich information for the study. Saunders, Lewis and Thornhill, (2012) allude that case studies offer an opportunity to bridge the gaps in research by addressing the issues as they are in reality. Such an approach facilitates the provision of context-specific recommendations and conclusions that firms can employ to improve, as well as the potential to generalize the results in a wider range of organizations (Mack et al. 2011).

The age and size of the firms place them in a category of mature organizations. According to Freeman and Engel (2007), mature companies are those organizations that are well-established in their respective industries. From this perspective, the organizations have widely recognized products and a loyal customer base.

Literature Review

IKEA

IKEA is a Swedish-based multinational firm that deals with retail furniture and décor products. The company is an established brand name, which is known for designing and selling affordable products. The company’s name is sourced from the name of the founder and the farm and village he grew up, Ingvar Kamprad and Elmtaryd and Agunnaryd respectively (Bartlett 2014). IKEA is one of the world’s largest furniture retailers, consuming about 1% of the worldwide wood supply (Binh 2012). The company recognizes that it’s the people who make up the company (IKEA 2016). The firm highlights that it needs employees who are down-to-earth and straightforward to help and fulfill its vision for a better life for all individuals. According to IKEA (2016), the HR department is also responsible for safeguarding and enhancing the organizational culture, which is driven by specific values. These values are critical in enabling all stakeholders to develop and transform the company’s vision into reality.

Walmart

Walmart is an American based multinational that deals with retail products. It is the largest retail chain in the US. It operates more than 4,150 stores across the world, and it is the dominant retail supplier in countries such as Canada, Mexico, and the UK (Caraway 2015). Its size and financial capacity makes it one of the wealthiest and influential organizations in the world. The retailer offers general merchandise, including apparel, health and beauty products, household products, electronic, food, craft, jewelry, and many others. The company was founded in 1962 by Sam Walton. The founder set three key business goals, which are respect for the individual, service to customers, and striving for excellence. These goals guide all the organizational activities of the company, including HRM.

The company employs more than two million people across the globe. Its HR department is known as the People Division to ensure that the success of the organization is attributed to the workforce, since they are the drivers of the tactics and strategies used by the company. Walmart accomplishes its corporate strategy by aligning the HR practices with the business strategies that include operations, organizational culture, prices, and critical products (Brown 2011). The company’s theoretical approach in HRM places priorities on the customer, hence, contributes to the pricing strategies that are designed to ensure consumers are satisfied. The company engages in continuous evaluation and development of the workforce based on the current market needs. Employee development is achieved through training and learning programs (Caraway 2015). Although the staff levels are lean, they are highly efficient and productive. The HR department is mandated with the role of ensuring that the workforce is productive in their functions and responsibilities (Basker 2007).

Findings

A key theme emerging in the HRM and IHRM practices of the two organizations is the acceptance of best practice in managing the workforce. The best practices allude to the employee relations that are increasingly becoming acceptable across industries by academicians as well as practitioners. In this light, the companies appreciate the convergence aspects of HRM that are acceptable across cultures. Notably, IKEA and Walmart value recruitment practices that include engaging potential workers in training and learning programs. Additionally, they have employee development programs to ensure sustainability of the organizations.

Both IKEA and Walmart have a strong orientation in preserving the organizational culture and values that were established when the companies were founded. The firms uphold the organizational culture using rules and regulations, as well as training programs. IKEA’s culture is facilitated by managers who engage the workforce through actions and explanation as the company’s ambassadors (Binh 2012). The managers are offered a one-week seminar at Älmhult to help them adapt to the organizational culture. Subsequently, new stores in new markets are run by a group of well trained and trusted managers, who have the capacity to transmit company values and act in the capacity of problem solvers among the workers. The succession plan is then employed to ensure that the store is handed over to managers who have appropriate qualifications.

The Walmart managers are offered cultural training at the Walton Institute, which is at the University of Arkansas. The imitative is fundamental in maintaining the organizational culture. The HR policies also have a central role in maintaining a corporate culture, even in different countries (Brown 2011). Subsequently, the company’s workforce is comprised of like-minded people that have the capacity to contribute to the organization’s success.

Main Challenges

Operating on the global platform pose various problems for the multinational businesses. The diversity experienced across countries has made it difficult to engage standardized HR practices throughout the organization. One of the key challenges faced by the two companies is the diversity that exists in the workforce. In this context, diversity includes ethnic, ideological, educational, as well as gender differences in the workforce (McGregor and Hamm 2008). Particularly, ethnic diversity is a key issue that has made it difficult to standardize HRM practices. There is no doubt that culture varies between countries and this would present different values, beliefs, and perception among the Chinese workers (Kasriel-Alexander 2012). The challenge posed by national cultures includes different social organizations and organic approach to work

Walmart faces a major risk of lacking the right talented workforce, which can facilitate the growth and expansion of the company in some markets. Although the company has invested in implementing technology to monitor the performance and behavior of employees, its approach to winning the trust and care of its consumers raises challenges because these values are not always accepted by the workforce (Caraway 2015; Basker 2007). 

The differences between countries’ labor regulations and currency value is a challenge for standardized HR practices. The fact that IKEA and Walmart operate in different countries highlights that the remuneration approaches vary significantly. The wage disparities coupled with varying levels of competition and fluctuating currency values raises differences in how labor is compensated, and how new workers are absorbed in the organization. It takes the company’s efforts and a global perspective to manage labor (Bartlett 2014). The cost of labor is high in developed countries such as the US and the UK, while it is low in developing countries. At the same time, the quality of education is rising in developing countries, which is tantamount to an increase in the cost of labor.

Discussion

The challenges analyzed show that businesses must focus on selecting and training managers who are more attuned to different cultures. Fundamentally, the culture of the nation they will be assigned to. In the case of IKEA and Walmart, the companies’ senior managements should identify the economy, political, value systems, and cultural influences of the target foreign markets, and the particular challenges posed by these factors in their expansion. For instance, expansion to China requires the managers to understand that there is a great influence of a culture that promotes group work, but limits talent management practices. The characteristics presented by countries like China and others in Asia are different from those of the US, Sweden and other Western countries where they operate. Subsequently, the success of operations in the foreign countries lies in the ability of company leaders to facilitate business operation, despite the cultural diversity among the workers and the distinct cultural factors that form the external environment, including laws, social norms, and business undertakings.

Taking Hofstede factors into account can be instrumental for managers to determine the differences between their home countries and their host country. Power distance (PD) can be used to determine inequalities in the target market. While the US and Sweden have a low power distance, China has a high one, which suggests that there are inequalities that limit the development of people. In countries with high PD, the organizations have many hierarchies and large compensations differences, and low requirements for qualification in a particular position. Such insights are fundamental for managers to engage effectively in HR practices. The USA and Sweden have individualistic cultures, which makes it a challenge when engaging in collectivist cultures such as China. The close bonds between people limit HR practices that are designed to improve individuals and manage talent. The fact that Walmart and IKEA are based in nations with high levels of masculinity suggests that they are more focused on development and growth. The managers need to understand this to ensure that they foster fast-paced and aggressive growth within the workforce. Walmart and IKEA take risks because they are always innovating and trying out new things. Working in an economy such has China, where the nation has low uncertainty avoidance levels can pose challenges because the workers and consumers are rigid to changes presented by the companies.

The best approach managers can measure success on global ventures is by constantly monitoring. Through effective monitoring activities, the head company can determine expatriate failure or success, cross-cultural competence of their managers, and the appropriate measures that should be employed. IKEA and Walmart need to employ effective measures in the operation and performance of regional managers. Participating in the evaluation can help in improving productivity and supporting HR practices in foreign branches of the company. Also, it is important to determine cultural competencies of foreign managers by assessing personal identity, knowledge on the beliefs and values of the culture host country, communication including the language of the host country, sensitivity to cultural diversity, and the ability to nurture active social relations with the workforce and the legal structure. In this light, mother companies must ensure that foreign managers are capable of adapting the culture of the host country and complies with the requirements and responsibilities of their capacities.

The analysis of IKEA and Walmart show that successful multinationals consider their organizational culture as a source of sustainable competitiveness. Additionally, these firms make deliberate efforts to ensure that the core values and business principles are integrated into the HR practices across all countries. A RBV approach offers a framework that shows how multinationals value their personnel as a fundamental resource that facilitates production, profitability, and sustainability. With the convergence of IHRM practices, the two companies have standardized practices in HRM that include hiring and recruitment programs, employee development activities, performance management, recognition and rewarding employees, training, and other HR practices. Notably, these activities are not only designed to align a particular store with the organizational culture, but they also offer an opportunity to address the challenges that emerge due to diversity experienced across nations.

Investment in China for IKEA and Walmart requires a strategic approach that identifies the differences between the mother nation and the host. Arguably, China is a young market in the international arena and IHRM is yet to be fully developed. The legal structure is increasingly becoming convergent with the international HR standards, but the economic slowdown poses a new threat for multinationals in the country. Changing the national culture is inconceivable for the multinationals, making it more appropriate to conform to the external environment.

Conclusion and Recommendations

The study uses a qualitative approach to investigate the current issues in HRM and IHRM. The case studies on IKEA and Walmart provide compelling evidence for the increasing application of standardized HR practices, which are widely accepted across the corporate and academic spheres. Key challenges facing IHRM emerge from the differences that exist between countries. Based on the reviews, the companies face challenges due to cultural differences among the workers and factors influenced by the national political and economic provisions such labor regulations and currency value. Additionally, changing demographics is presenting new challenges in managing labor.

Based on the findings of this research, IKEA and Walmart have an opportunity to increase their benefits from the workforce. The companies can achieve this by enhancing their global HR practices to ensure that there is a flexible global strategy and policies that provide a framework for how labor should be handled with respect to the host nation cultural, economic, and political aspects. In this context, the specific stores should act independently, but monitored by a regional HR office that ensures the practices are in line with the organizational vision, mission, and values. Fundamentally, there should be increased focus on developing locally specific policies coupled with administrative support and specialist advice from locals. Outsourcing of HR services from local companies in areas of recruitment and training can be instrumental in eliminating the cultural and institutional challenges, while increasing the influence of organizational culture.

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