How can we differentiate International Human Resource Management from Domestic Human Resource Management?

Managing human resource is considered to be the toughest task in managing the enterprise even in domestic business. The success and failure of an organisation depends to a large extent on how the dynamic human resources are selected, trained and motivated to bring out the best result.

Fundamentally, Domestic Human Resource Management and International Human Resource Management have the same processes and objectives. International Human Resource Management differs from Domestic Human Resource Management in terms of its scopes and it's objectives. Some of the factors that differentiate International Human Resource Management from Domestic Human Resource Management are:

1. The scope of human resource activities are larger because the organisation deals with multiple countries and employs from several culture.

2. International workforce requires greater involvement of management at a personal level.

3. The approach is complex because of the potential cultural mix in the workforce.

4. Expatriates are subject to tax at home and the host country. Hence, tax policy has to be decided in a way that they don't penalise the employee for moving to another country.

5. Relocation of staff involves providing immigration and travel services, providing housing, medical and training, international allowance and so on.

6. The laws in the host country vary from those of the parent country. The human resource department must be equipped to deal with all potential issues and ensure that the newly relocated employees and their families are able to function properly in the foreign country.

7. Differences in government policies of foreign countries require the human resource team to ensure that all the expatriates employees adhere to the norms set by the government.

Areas of concern for an international firm are adopting of staffing policies which specify the nationality of the managers for key possession at corporate office and foreign subsidiary, treatment of expatriate managers and maintaining cordial labour relations.

An international firm has wide choices as it can choose prospective candidates from home country, host country or even a third country. Apart from placing premium on the competency of the person, the stuffing policy should fit into the corporate culture of the firm and confirm to the local regulations of the foreign centres.

Product Life Cycle theory of International Trade

Product Life Cycle theory was proposed by Raymond Vernon in the mid 1960s. He didn't agree with the earlier theory and emphasized on information, risk and economies of scale rather than on cost. Raymond Vernon focused on the life cycle of the product and came up with his Product Life Cycle Theory which identified three distinct stages:

1. New Product Stage:

The need for a new product in the domestic market is identified and it is developed, manufactured and marketed in limited numbers. It is not exported in sizable quantities since it is primarily for national market.

2. Maturing Product Stage:

Once the product has become popular in the domestic market, foreign demand increases and manufacturing facility abroad may be setup to meet demand there. After success in the foreign market and towards the end of product maturity stage, the manufacturers try and produce it in the developing countries.

3. Standardized Product Stage:

In Standardized Product Stage of the Life Cycle Theory, the product becomes the commodity, the price becomes optimised and the makers look for countries where it can be made with the least production cost.

Example Product Life Cycle Theory:

Dell manufactures hardware in Asia, which is then transported to US, it's country of origin. Hence, a product which started as export product of a country may end up becoming an import product.

Factor Endowment Theory (Heckscher-Ohlin Theory) of International Trade

Factor Endowment Theory (Heckscher-Ohlin  Theory) improves on the Absolute Cost Advantage Theory and Comparative Cost Advantage Theory. Factor Endowment Theory (Heckscher-Ohlin Theory) tries to explain the crucial question of why country’s trade, good and services with each other. It is based on the hypothesis that, country’s trade with each other as they differ with respect to the availability of the factors of production, i.e., land, labour and capital. For example- United States is a capital rich country. Hence, it’s export bucket will be dominated by capital intensive products like aeroplanes, submarines, tanks, super computers, high end servers, etc. Where as India has labour abundance, so its export bucket is dominated by products with labour contents like gems and jewelleries, textile, handicrafts, sports toys, handloom, electronic and IT services.

Factor Endowment Theory (Heckscher-Ohlin Theory) explains that a country will specialise in the production of goods and services that it is particularly endowed with and are suited for production in that country. Some countries that have enough capital but are scares in labour force. Again, some countries specialise in production of goods and services that in particular require more capital. Factor Endowment Theory (Heckscher-Ohlin Theory) propounds that specialisation in production and trade among countries generate higher economies of scale and scope and ensures higher standard of living for the countries involved.

Basic assumptions of Factor Endowment Theory (Heckscher-Ohlin Theory):

1.    Countries worldwide are endowed with different factors of production, i.e., land, labour and capital may not be in equal proportion in all countries.
2.  Production of goods either requires relatively more capital or land or labour.
3. Factors of production don’t move between two countries.
4. Factor Endowment Theory (Heckscher-Ohlin Theory) assumes no transport cost.
5. The consumers and users in two trading countries may have the same needs.