Beginning Development of Global Strategies

Beginning Development of Global Strategies

Resources are a crucial concern when deriving the global strategy for a multinational company. Whereas some companies may freely move some resources from their home country, some countries’ legal restrictions and protective laws prevent multinational companies from importing these resources from their home country. When companies cannot move resources from their home country, they depend on external parties in the host country to provide these resources. Resources are a concern in global trade because they affect the company’s market power. Based on the resource dependence theory, resources originate from the environment, which constitutes other organizations. That leaves the control of resources an organization needs to external parties, which means that the firm will not control the quality of its products.

Why Resources Are a Concern in the Global Strategy

Institutional complexity (open and dynamic systems) in the global environment makes resources a significant consideration in the global strategy. When firms go international, they depend on external stakeholders to supply core resources. However, some stakeholders issue inconsistent demands and expectations for multinational firms (Larsen et al., 2023). The inconsistent demands posed by stakeholders present the multinational company with trade-offs. A firm that faces inconsistent stakeholder demands may incur costs to mitigate the threat posed by the inconsistency. Alternatively, the firm may ignore the threat and capitalize on short-term profits but lose long-term credibility (Larsen et al., 2023). For instance, the firm in question may use local textile fabrics, which is inconsistent with their company’s brand, but risk losing credibility. However, if the firm is committed to maintaining credibility, it may incur extra costs to access textile fabrics whose quality is consistent with its brand.

Resource Concerns in the Selected Country

Human resources may be another concern for the firm’s operation in China apart from the quality of the materials. China is known for its restrictive human resource regulatory environment. One of the implications of this trend is that CEOs in multinationals lack the freedom to hire and fire employees. For instance, the Chinese Labor Law enacted in 2008 prevents companies from firing employees who have worked for a company for over ten years (Kim, 2008). Besides, the law requires multinationals to consult with labor unions or labor authorities when implementing layoffs (Kim, 2008). Unlike the US where labor regulation is less restrictive and predictable, the Chinese human resource regulatory framework requires HRM to pay attention and proactively manage it.

Impact on the Decision to Move International

China’s regulatory environment concerning job security for temporary employees and other human resource demands and expectations will impact operational costs. For instance, the requirement not to fire employees who have worked for the company for over ten years means the company will incur extra costs to acquire new employees and retain current ones. Also, labor laws in China protecting temporary staff will require the company to maintain a workforce it can sustain. The firm will move to China but pay attention to these human resource requirements.

Impact on Competitive Strategy in the Global Environment

A company moving to China should adopt an employee-oriented human resource management strategy to remain competitive in China. China has some of the most protective laws for employees working in foreign and local companies (Cooke et al., 2020). Therefore, there is a need to adopt employee-friendly policies to attract the best. These strategies may include above-minimum wage payment, a friendly working environment, and job security.

Conclusion

In summary, resource consideration is core to companies intending to move to the international environment. Most firms prefer to maintain uniformity and traditions for brand development, including shipping resources from the home country, but some host countries do not allow it. That leaves the firm to collaborate with local organizations to provide resources. Production materials and labor are some of the core production resources that should be consistent with an organization’s brand and culture. The firm may incur extra costs and adopt competitive strategies to navigate this global complexity and ensure consistency.

References

Cooke, F. L., Xiao, Q., & Xiao, M. (2020). Extending the frontier of research on (strategic) human resource management in China: A review of David Lepak and colleagues’ influence and future research direction. The International Journal of Human Resource Management, 32(1), 183-224.

Kim, S. (2008). Multinational corporations in China: Institutional and strategic perspectives on human resource management and industrial relations.

Larsen, M. M., Birkinshaw, J., Zhou, Y. M., & Benito, G. R. (2023). Complexity and multinationals. Global Strategy Journal, 13(3), 535-551.

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Description
Mike, one of the marketing strategists on your team, stops at your office door wanting to talk. “We use fabrics that are made domestically; however, there are issues with using these same fabrics globally. There are laws and regulations that prevent us from shipping these fabrics to other countries. This is a huge concern. One of our primary selling points is the consistency of quality of our product.”

Beginning Development of Global Strategies

You confirm Mike’s concern, “That’s an excellent point,” you say. “Now you’ve just given yourself and our team more work for the presentation. I’m sure that will come up. One of the board members used to run a textile plant in China.”

Mike nods his head in agreement. “I imagine textiles will not be the only resource concern,” he says.

Consider the following in your response:

Why should resources be a concern in a global strategy?
What resources may be a concern in the country you selected?
How will this impact the decision to move to the country that you selected?
How will this impact your competitive strategy in your global market?
Review the reference materials on global strategy as there is information that may assist with the assignment.