IHRM Assessment Task 2 - Assignment 2 PDF

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Warning: TT: undefined function: 32Assessment Task 2: Individual ReportStarbucks:Multinational Enterprises and International Human Resource Management27 September 2019BUSM2449 International Human Resources Tutor: Carol Webb Tutorial Time: Friday 12TABLE OF CONTENTS Introduction.........................

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Assessment Task 2: Individual Report

Starbucks:

Multinational Enterprises and International Human Resource Management

27 September 2019

BUSM2449 International Human Resources Tutor: Carol Webb Tutorial Time: Friday 12.30pm

TABLE OF CONTENTS Page 1.

Introduction……….…………………………………………………………

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2.

Starbucks Coffee Company………………………………………………….

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3.

Recruitment and Selection…………………………………………………..

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4.

Employee Engagement and Retention……………………………………….

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5.

Implications for Human Resource Management Functions…………………

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6.

Conclusion and Summary…………………………………………………..

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7.

References…………………………………………………………………...

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1. Introduction That superior Human Resource Management (HRM) can serve as a competitive advantage to an organisation, as argued by Schuler and MacMillan (1984), is a concept that has been acknowledged for some time. However, as also identified by Adler and Bartholomew (1992) the tremendous speed at which organisations have been “internationalizing” and whether organisations HRM management practices are being developed and implemented at the same pace. Therefore, it is understandable that HRM has ‘become an important focus of top management attention, particularly in multinational enterprises’ (Evans et al, 1989, p. xi). Therefore, the objective of this paper is to use Starbucks Coffee Company (Starbucks) as an example of a multinational enterprise (MNE) and its operations in the US and China to demonstrate the effectiveness; efficiency and challenges of international HRM (IHRM) functions operating in an international environment. 2. Starbucks Coffee Company Starbucks was founded in 1971 when it opened its first store in Seattle and by 1992 when it went public it had 140 stores in the US growing stores at 40-60% per annum (Patterson et al, 2009).

In 1996, Starbucks opened its first store outside of the US in Tokyo and global

expansion was rapid claiming in 2008 to be opening seven stores a day worldwide (Patterson et al, 2009). By 2018 across the globe Starbucks was operating in over 29,000 stores in more than 70 countries (Starbucks Corporation, 2018). Starbucks is a truly global multinational enterprise who openly states that its employees or “partners” being the key to helping the business grow and thrive (“Working at Starbucks”, n.d.). Fan et al (2016) state that the success of any MNE is contingent upon the availability and effective utilisation of the strategic resource – people, thus the purpose of this essay is to examine and evaluate several key areas of IHRM. This paper will specifically review Starbucks application of its own HRM practices and strategies from its corporate headquarters in the United States and applied in respect of its major international expansion into China. The report will review the two functional areas of recruitment and selection, and engagement and retention.

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3. Recruitment and Selection Recruitment and selection are recognised as key factors in the success of any MNE. For example, Kock and McGrath (1996) found that careful recruitment and selection are positively related to labour productivity. Further, an organisations global growth can be accelerated by having the right people at the right location globally at the right time (Shen and Edwards, 2004). However, in terms of foreign subsidiaries recruitment and selection represent an ongoing challenge to MNE’s in combining and balancing the knowledge of local culture and conditions with global competencies (Mohomed et al, 2013). Tarique and Schuler (2012) suggest that an MNE should adopt either a convergent or divergent IHRM approach to global talent management across cultures, regions and countries. Convergence means that recruitment and selection policies and practices are similar across countries and cultures whilst divergence means that policies and practices will be different across countries and cultures (Tarique and Schuler, 2012). However, analysing Starbuck’s approach to recruitment and selection suggests that there may be a third approach described by Fan et al (2016) as crossvergence where the recruitment and selection process developed and implemented uses elements of both convergent and divergent strategies. Starbuck’s sets a consistent corporate culture and values globally – its stated mission “to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time” (Starbucks Corporation, n.d.). This then combined with strong messages around its responsibilities to employees, partners, matters of diversity and inclusion, the environmental and ethical sourcing provide a compelling position and reputation that makes Starbucks more attractive to potential employees. However, in its China development and expansion has been characterised by specific locally driven recruitment and selection strategies. Recognising the importance of family in Chinese culture the interview and selection process was adapted to include not only involve the candidates but also their family who are invited to be included and participate actively in interviews (Koehn et al, 2014). Thus, crossvergence at Starbucks is being demonstrated by broad overall talent management strategic direction and motherhood statements set at a global corporate headquarters level however then being enacted and implemented more specifically at a country level giving regard and consideration to the specific prevailing cultural, economic and political factors of the host country (China).

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In the same functional sphere mobilising talent relates to the strategies and practices of how MNE’s move talented employees across regions and locations. The overall objective of talent mobility is to move its talent and resource to ensure that its people can not only fulfil their own goals and aspirations but also contribute to the organisation’s success by aligning talent to the location it would be best utilised. MNE’s, including Starbucks, are in a unique position to leverage the movement of selected and recruited talent across the regions and countries in which they operate. According to Trevan (2001) MNE’s can apply one of three different approaches to managing IHRM. An ethnocentric policy approach is characterised by headquarters from the home country making all key decisions, holding all key jobs, and its practices and policies are followed by subsidiaries. A polycentric approach has each host country being managed on a local basis as home country managers are not considered to have adequate local knowledge. The third and final approach is called geocentric, where the most suitable and qualified people are selected for roles irrespective of their location and nationality. There are both advantages and disadvantages to using either local nationals or expatriates in the foreign subsidiaries of MNE’s. As described by Trevan (2001) the advantages of using local employees to manage international subsidiaries may include lower labour costs, demonstrates trust in the capabilities of local resource, effectively manage local considerations, constraints and laws. However, the disadvantages may include a conflict between local demands and global priorities, reduce the amount of control exercised by the headquarter entity and the difficulty to recruit and attract more qualified and experienced personnel from. In China, Starbucks has used a largely polycentric approach to talent mobility in terms of its IHRM strategies and policies. Starbucks as it does in other international markets worked with local partners (Koehn et al, 2014). It used a senior leadership team that was largely hired locally because it recognised the relative importance of local knowledge and connections in being able to maximise organisational performance in China. Starbucks approach was to allow the locally appointed managers to interpret the core value and cultural statements of the global business and translate these into what is described internally as a “Starbucks Experience” (Starbucks Corporation, n.d.) for its partners that is unique to China. Examples of this included adapting the design of cafes to cater for specific Chinese cultural characteristics of socialising outside of the home and introducing a locally sourced coffee product in order to increase the connection to the local community. 3

4. Employee Engagement and Retention Tarique and Schuler (2010) argue that increasing employee engagement in MNE’s promotes retention of talent, increases knowledge, productivity and as a result improves organisational performance. However, the challenge for MNE’s is how regional and cultural differences may impact the process of designing engagement and commitment strategies and practices. Thus, there is an ongoing strategic tension in terms of to what extent HRM policies and practices respond to specific contingencies within a host country as opposed to simply reflecting a global strategy (Fan et al, 2016). Further, Fan et al (2016) suggests that where the differences between home and host country are substantial then IHRM policies and procedures must adapt to meet the local cultural, legal and institutional expectations. This ongoing tension has been commonly described as MNE’s thinking globally and acting locally or vice versa. In its push into China, Starbucks have used localisation as an important mechanism and key strategy in driving employee engagement and retention. According to Maguire and Hu (2013) Starbucks successfully considered the important local traditional Chinese collectivist values of quanxi – social and community-based networks that entail obligations and social status by providing a workplace that appealed directly to facilitating communal and group gathering – whether it is employees or consumers. Starbucks also recognised the importance of making a commitment to the community by allowing its China workforce to donate over 75,000 hours to voluntary community service which is increasing the loyalty of its workforce (Koehn et al, 2014). Starbucks also invested in assisting local community farmers and producers in sharing its knowledge and expertise in producing high quality coffee. However, Starbucks does not always get this correct, as evidenced by the opening in 2000 of a café in the Forbidden City. As described by Maguire and Hu (2013) despite being sanctioned by local government and authorities it was widely denounced as “trampling” over Chinese culture and was ultimately closed. However, apart from this minor misstep Starbucks seems to have successfully localised its IHRM strategies by aligning them with local values and as a result increased employee engagement and retention as a result. So successful in fact that Starbucks has been awarded “Aon Best Employers – China 2018” for the fourth consecutive time, a firm recognition of its strategy in China to build a warm and welcoming family culture based on the foundations of “Shared Humanity” and with deep respect for China’s unique culture (Starbucks Corporation, 2018).

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5. Implications for Human Resource Management Functions Starbucks entry into the Chia market illustrates that IHRM is an important function to manage in order for an MNE to be successful in a global environment that continues to rapidly change economically, politically and culturally at both the home and each host level the organisation is operating in. Key priority and considerations for Starbucks should include identifying the most talented and highly valuable employees across the organisation and ensuring they are being used in the most mutually optimal way for both the employee and organisation. Starbucks and other MNE’s should continue to focus on finding the best balance between practices that are integrated and similar across regions and then others that are specific to local culture and conditions. Secondly, they should ensure they develop and implement Human Resource strategies which promotes employee engagement and retention in all the regions and cultures in which it operates yet remains aligned with the overall global organisation strategy. Both Starbucks and MNE’s will need to be prepared to be flexible in approach. Whilst the IHRM literature and research sets out clear and discrete theories of IHRM management, for example, globalisation versus localisation, divergence versus convergence and ethnocentric versus polycentric, the reality as evidenced by our analysis of Starbucks in China suggests that the appropriate direction taken by any MNE will probably always need to be a mixture of each and directly relevant to the individual circumstances of each organisation. This is acknowledged by Morley and Collings (2004) who put forward that the single biggest issue facing MNE’s is being unable to maintain a clear and consistent IHRM strategy. Instead, consistent with the experience on Starbucks in the United States and China, they tend to have to face the contradictions and potential confusion of being simultaneously local and global in scope [and] of being both centralised and decentralised (Morley & Collings, 2004).

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6. Conclusion and Summary Starbuck’s has consistently been focused on a suite of core global policies and practices implemented at a host country level with due consideration for local requirements. It has been broadly successful in adopting IHRM policies, practises and strategies that mostly have taken an approach that balances a decentralised system of human resource management but linked by a shared vision, culture and support in managing its global businesses. In 2019 19 years after Starbucks first entered the Chinese market there were over 4,000 stores, with over 55,000 partners and is now Starbucks second largest market behind the United Sates (Starbucks Corporation, 2018). To be able to continue to sustain and maximise the success of its global organisational performance Starbuck’s ongoing IHRM practises and strategies must continue to focus on maintaining the dynamic balance between standardisation and localisation (Morley & Collings, 2004) that it has so far successfully been able to achieve in China with impressive commercial and organisational success in China as a consequence.

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7. References Adler, N., & Bartholomew, S. 1992. ‘Managing Globally Competent People’, The Executive, Vol. 6, No. 3, pp. 52-65. Evans, P., Doz Y., & Laurent, A. 1989. Human Resource Management in International Firms, Macmillan Press, London. Fan, D, Xia, J, Zhang, M, Zhu, C & Li, Z. 2016, ‘The paths of managing international human resources of emerging market multinationals: Reconciling strategic goal and controls means’, Human Resource Management Review, Vol. 26, pp. 298-310. Koch, M.J., and McGrath, R.G. 1996, ‘Improving Labor Productivity: Human Resource Management Policies Do Matter,’ Strategic Management Journal, Vol. 17, No. 5, pp. 335–354. Koehn, N, McNamara, K, Khan, N, & Legris, E. 2014, Starbucks Coffee Company: Transformation and Renewal, Harvard Business School, Harvard Business School Publishing, Boston, USA. Maguire, J, & Hu, D. 2013, ‘Not a simple coffee shop: local, global and glocal dimensions of the consumption of Starbucks in China’, Social Identities, Vol. 19, No. 5, pp. 670-684. Mohamed, A., Singh, S., Irani, Z., & Darwish, T. 2013,’ An analysis of recruitment, training and retention practices in domestic and multinational enterprises in the country of Brunei Darussalam’, The International Journal of Human Resource Management, Vol. 24, No. 10, pp. 2054-2081. Morley, M., & Collings, D. 2004, ‘Contemporary debates and new directions in HRM in MNCs: Introduction’, International Journal of Manpower, Vol. 25, No. 6, pp. 487-499. Patterson, P., Scott, J. & Uncles, M. 2010, ‘How the local competition defeated a global brand: The case of Starbucks’, Australasian Marketing Journal, Vol. 18, No. 1, pp. 4147. Schuler, R., & MacMillan, I. 1984. ‘Gaining competitive advantage through human resource management practices’. Human Resource Management, Vol. 23, No. 3, pp. 241-255. Shen, J., and Edwards, V. 2004, ‘Recruitment and Selection in Chinese MNEs,’ International Journal of Human Resource Management, Vol. 15, No. 4/5, pp. 814–835.

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Starbucks Corporation, 2018, Fiscal 2018 Annual Report, Starbucks Corporation, Washington, USA. Starbucks Corporation, 2018, Starbucks Recognized as Employer of Choice for its Unique Family Culture in China, Starbucks Corporation, 14 September 2018, viewed 23 September 2019 at < www.starbucks.com.cn/en/about/news>. Starbucks Corporation, n.d, Working at Starbucks, Starbucks Corporation, viewed 21 September 2019 at . Tarique, I. and Schuler, R. 2010, ‘Global talent management: Literature review, integrative framework and suggestions for further research’, Journal of World Business, Vol. 45, pp 122-133. Tarique, I. and Schuler, R. 2012, ‘Global Talent Management Literature Review, A Special Report for the SHRM Foundation’, SHRM, October 2012. Trevan, S. 2001,’Human Resource Management in International Organisations’, Management, Vol. 6, pp. 177-189.

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