25-05-2012, 12:34 PM
Strategic International Human Resource Management towards achieving Sustained Competitive Advantage
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Introduction
Managers in today’s continuously evolving and very competitive economy
agree that some form of Human Resource Management (HRM) is necessary
as people are both the face of their organisation and the means through
which they can effectively run their business and therefore be successful.
Strategic Human Resource Management (SHRM) takes a step further from
HRM by linking an organisation’s HRM practices to the overall strategy of the
business and assists them in gaining competitive advantage. International
SHRM (SIHRM) is a step further again, recognising that there is a need to
differentiate HRM across countries and cultures, an area that is increasingly
being recognised as a cause of business success or failure (Deresky, 2008).
This literature review aims to justify why SIHRM is necessary in international
business in order to achieve sustained competitive advantage. It begins with
a discussion of Porter’s (1985) industry perspective of competitive advantage
followed by the resource based view of competitive advantage and the
criteria for sustained competitive advantage according to the resource based
view, including why SHRM can be a source of sustained competitive
advantage.
Human Resource Management
HRM is concerned with managing the people who are directly employed in an
organisation towards achieving the organisation’s goals (Wright, McMahan, &
McWilliams, 1994). This is accomplished through attracting and selecting
people that the organisation needs to get the work done, motivating them to
exert the necessary amount of effort to effectively complete tasks by
rewarding them with compensation packages and retaining the employees
that are crucial to the organisation’s success (Macky & Johnson, 2003). HR
also addresses training and development needs to assist both individual and
organisational learning (Delahaye, 2005) and ensures the organisation
complies with legislation, policies and procedures and operates within
limitations that have been set, for example, budget constraints (Macky &
Johnson, 2003).
Competitive Advantage
Industry Perspective
From an industry perspective (Wright, et al., 1994), Porter (1985) states that
there are two ways in which a business can gain competitive advantage over
its competitors; cost reduction or product differentiation. The cost reduction
strategy involves producing a similar quality product or service at a lower
cost than competitors; therefore provided they can command a similar price,
they will have a higher profit margin than competitors. The product
differentiation strategy on the other hand, involves producing a differentiated
product to competitors that is unique in a way that is of high value to
consumers. By being unique, they can command a higher price for the
product; provided this price margin is greater than the increased costs of
producing the differentiated product, they will receive a greater profit. Porter
felt that these two methods were mutually exclusive and that organisations
must chose one strategy in order to potentially gain competitive advantage
because differentiating a product usually involves higher costs. However, the
opposite is also true; in order to be the cost leader, they often need to forego
some differentiation in the product or service (Porter, 1985).
Resource Based View
According to Barney’s (1991) resource based view of competitive advantage,
which has a focus on the organisation itself, rather than the industry. An
organisation will have competitive advantage when they are implementing
strategies that will create value for the organisation but are not being
implemented by any current or potential competitor at the same time.