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Starbucks is a multinational corporation headquartered in Settle, Washington in the United States of America. The company is the world’s largest coffee corporation with its coffee products being consumed in almost all continents. It currently has 16,700 stores in more than 50 countries globally. The company offers premium roasted coffee, espresso-style coffee among other coffee products. It is worth noting that over the years, this corporation has achieved great success both locally and internationally, and this can be attributed to its strategic human resources management regarding internalization. The corporation now has a strong image around the world. The coursework gives a report comparing the internalization of Starbucks with its human resource management orientation.
International Human Resource Management
To compete in the international business environment, many firms have formed corresponding mechanisms for the enhancement of global competition. A central concern of the contemporary literature lies in examining the consequences of intensified global competition. It also lies in the transferability of better HRM policies and practices to countries outside the US and the EU (Ahlstrom & Bruton 2010, pp 13-15). Since organizations continue to seek to leverage HR to compete in the global markets, academics and practitioners have also progressively begun exploring the impacts of the changes on the national patterns of employment relations. They also examine the effects of the changes in the international potential of strategic human resource management.
Starbucks Company decided to enter the global market to be able to explore more available opportunities, especially in the emerging markets. Having over 700 stores in the United States, it was a wise decision by the management to explore more opportunities globally. For this reason, the business has established itself as the leading global coffee corporation. The motivating factors for expansion were the desire to grow and increase its sales. Starbucks wanted to become the market leader in the coffee market, and it could achieve this aim only by working globally where it had the opportunity of increasing its market share. Starbucks could not have reached this goal if it had chosen to operate solely on the United States market. This means that its decision to explore the international market is a strategic one (Deb 2009, pp 37-41). The company wished to increase its sales to be able to report high levels of profitability. The international markets provide a wide customer base that can enable the company to realize more sales, hence the need to penetrate more countries (Briscoe, Tarique, & Schuler 2012, pp 64).
Challenges Facing Expatriates in the Overseas Operation
Managing individuals in different countries that have different cultures is not an easy task for Starbucks. The increasing competition together with globalization has encouraged strategic human resource management to be a critical strategic partner. The technological advancements require new ways of personnel administration. Organizations are seeking to attain strategic objectives of the human resource via managing their people or personnel. While working with the human resource as strategic partners, the organizations are bound to gain a competitive advantage over their rivals. Some of the challenges and difficulties include a decline in competitiveness and reduced foreign direct investment to certain countries.
International human resource management is a fundamental function for any organization (in this case Starbucks) that is intending to expand its operations to the international market or enter foreign market countries. The reason is that international human resource management will involve the interaction of human activities, employees, and star buck operations in the international business environment, which is complex. The complexity of the international business environment requires good strategic choices ensuring that all human resource activities are successful. This will help the corporation to achieve its strategic goals. When Starbucks intends to expand its operation, it ought to choose the correct strategies to overcome the market competition as well as to avoid challenges associated with global operations.
At Starbucks, human resource management has been given the role of creating and facilitating the implementation of the personnel strategies that will ensure it achieves its strategic goals. In today's global world, the human resource has become a vital strategic partner to the organization doing business internationally. The human resource manager, as a strategic partner in those organizations, develops a human resource strategy based on organizational one.
Globalization and Human Resource Management
There have been debates regarding the exact meaning of the term globalization and its impacts on human resource management. Some argue that globalization has weakened and overridden the national systems of human resource management. Globalization has varied impacts on the different levels of HRM system structure (Dowling, Welch & Schuler 1999, pp 14). The barriers to globalized HRM remain, mainly those of a cultural, institutional, and structural nature. The cultural distance affects Starbucks ' expansion to the countries such as China and Japan or any other Asian country. A country's culture, i.e. rules, norms and values, may restrict Starbuck's transfer and operation of certain HRM practices.
Human Resource Strategies for Multinational Companies like Starbucks
There are many HRM strategies that Starbucks can adopt to succeed in the management of its human resources from an international perspective. The company can either decide to follow its local human resource framework or it can integrate its human resources to meet the global HRM standards (Armstrong & Baron 2002 pp 63).
The Globalization Strategy and Practices
In this strategy, Starbucks will be expected to standardize its human resource practices and policies in all its operating countries. The practices should correspond to the international standards, which means that Starbucks will have to establish strong executive structures to ensure uniform HRM practices in all its subsidiaries globally (McDonald & Burton 2002, pp 362). The strategy fails to consider the aspects of the local aspects of the human resource practices and policies. This implies that Starbucks will only consider professionalism when drafting the human resource management policies to be used in a foreign country. The human resource activities in this strategy are harmonized to the global level, and they should be applied in all the company's subsidiaries. The human resource policies and practices that are adopted under this strategy promote equality and fairness in the way they treat employees and executives.
This strategy of HRM is beneficial as it helps the company to develop human resource practices and policies that are standardized. They are, thus, applicable to many regions or countries in the whole world. Using this strategy, Starbucks can centralize its human resource management decisions (Mueller 2000, pp 26). The company might incur high costs while coordinating the human resource practices in all the countries, which is a disadvantage to the firm. It will, thus, be tedious to the management to formulate the policies and practices to be used in all countries. Another disadvantage is that the cultural barriers may affect the universal human resource policies in different countries and market segments. The culture of some countries, such as those of the Middle East, will respond negatively to this strategy because they are different from the western culture which is more loyal in the issues of employees' treatment.
Transnational or Geocentric Strategy
Starbucks mainly uses this strategy to operate in foreign countries. If Starbucks decides to use this strategy, it adopts cross-border integrated human resource practices and policies. The company, thus, applies global, local, and transnational policies meaning that the subsidiaries have the autonomy in dealing with issues about employees and other personnel issues. Each subsidiary sets its practices and policies, which are reflective of both the local and international culture (Mueller 2000, pp 10-11). This strategy enables Starbucks to benefit from the cultural differences since the employees can learn and appreciate other people's cultures and beliefs. The company will also have more flexibility in its human resource management practices. This will ensure that the company has smooth operations in the areas where the culture is different from that of the UK, thus having a competitive edge over the rivals.
Ethnocentric Strategy and Practices
By employing this strategy, a multinational corporation like Starbucks is allowed to employ expatriates in its subsidiaries' key management positions. The strategy enables the company to be in control of all its subsidiaries, which implies that the key decisions are made at the headquarters of the company. The human resource management team is tasked to identify expatriates who will manage the company from abroad. This strategy is useful, especially when the company is planning to expand its business to areas with limited skilled personnel. Therefore, the corporation will employ experts from the main country to manage the company. The other employees may come from the host country to enable cultural integration (Mueller, 2000, pp 13). In this case, the expatriates that the company settles ought to have the adequate skills to allow them to succeed abroad.
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Polycentric Strategy and Practices
Under this strategy, a multinational program from the UK chooses managers from the host country to manage Starbuck's subsidiaries' operations abroad. However, they coordinate closely with the parent company regarding strategic key decisions. The managers are crucial because they provide advice to the main company's managers regarding the cultural behavior of the personnel from their country. They also get guidance concerning the way how to operate the subsidiary and any other related information regarding the products. This strategy enables a multinational company like Starbucks to adapt easily to the foreign business environment of the host country (Simonin & Somer 2009, pp 509- 512). The reason is that the company will not face issues related to cultural and language barriers. However, the above strategy has several limitations. The managers of the company will not be in a position to get the exposure of working in a diverse global environment. This means that the company will not manage to integrate its culture in the subsidiaries (Griffin 2012, pp 27). In addition, the employees from the host state will not have the chance to acquire the knowledge from the parent company.
Differences between Domestic and International HRM
The differences which exist between domestic and international HRM are mainly attributed to the inherent level of complexity and uncertainty regarding the operation in other countries. This is as opposed to the variations in the RM activities (Stolt 2010, pp 54). Other variables that influence the differences between domestic and international HRM are the industry in which the multinational cultural environment is positioned, and where there is the reliance of the multinational to its domestic market and the senior management attitudes. When one compares the two, e general convergence, exists within the basic functions of HRM like procurement, allocation, and utilization (Harris, Brewster & Sparrow 2004, pp 8-9). There are also HRM concepts that are applicable universally. Starbucks management has been able to master this idea; therefore, it has succeeded in the foreign markets.
The complexities of operating in different countries and employing various national categories of workers are a key variable differentiating domestic HRM from international ones. Many firms have underestimated the complexities that are involved in international operations, and this has caused some failures in the foreign markets. Many international failures of the businesses can result from the poor management of their human resources. Some issues of domestic HRM regarding the management of workforce diversity may be beneficial to the international HRM practice (Verbeke 2013, pp 16). The complexity of the international HRM is attributed to the following factors: more HR activities, need for a broader perspective, more involvement of the personal lives of the employees, risk exposure, and more external influences.
To operate in the international market environment, Starbuck's human resources department engages in many activities that are not necessary for the domestic environment. They analyze international taxation as well as international relocation and orientation, administrative services for expatriates, the regulations of the host government, and language translation services. The expatriates are subject to international taxation, and they often have both domestic and host country liabilities in tax. The company has, thus, ensured they design tax equalization policies that ensure that there is no tax incentive or disincentive associated with any international assignment. Managing international HRM at Starbucks assesses the critical components of the effectiveness of HR on a global scale. The company understands that human resource practice is a respective design to deal with any aspects involving employees such as hiring, promotion, firing, work incentives, and other tasks. International HRM is more complex as they encourage the whole Starbucks HR department to deal with the affairs of all global employees. This department is usually charged with the task of ensuring that the global affairs of employees are correspondingly addressed. International human resource ensures that the environment, in which employees work, is attractive. This increases individual productivity while providing global job satisfaction for the company's employees. How Starbucks deals with cultural differences.
When analyzing the differences in business globally, it is vital to understand the culture and its effects on HRM. Before Starbucks starts to trade with any country, their management fists ensure that they understand the social, ethical, and political culture of the given state. They have realized that ignoring cultural differences will automatically lead to many misunderstandings in the business environments they expend. (Ahlstrom & Bruton 2010, pp 10-13) define culture to be connected to knowledge, habits, and beliefs customs that are acquired by the members of society. They argued that it was the acquired knowledge used by the people in different regions of interpreting experiences and action. This knowledge influences people's values, attitudes, and behaviors. Starbucks management knows that the impact of culture on international business will mostly depend on the regions of the countries the company wants to trade. For example, Starbucks firms in the UK will not face any problems trading with the US, Canada, or even Australia, but they will have difficulties trading with China or Far East countries. Cultural differences have affected a wide range of issues. They, therefore, can create a broad variety of misunderstandings and damage the reputation of Starbucks in a foreign country. This means that Starbucks HRM ought to understand each culture of the people it intends to interact with within the international market (McDonnell, Lavelle & Gunnigle 2014, pp 376).
Mergers and Acquisition
To effectively compete in the international business environment, Starbucks has formed joint ventures to act as a mechanism for the enhancement of global competition. Many international companies create venture partnerships to gain access to a foreign market. They also follow this program to acquire new technology and fund capital as well as share the risks.
The international human resource examines how Starbucks as an international organization manages its human resources in the different national contexts. It has been defined that the internal contexts add extra complexity to the movement of people beyond that process found in a purely national setting.
Starbucks manages people in different institutional, legal, and cultural circumstances. Thus, it has to be aware not only of what is allowed and not allowed in different nations and regions of the world but also of what is beneficial for cost-effective management practices. For example, a performance appraisal system, which depends on the UK-style openness between manager and subordinate, may work for the United States and other European states. However, they are unlikely to comply with the greater hierarchical assumptions practiced in Pacific countries such as China. It can be even unlawful in some states. While addressing IHRM, Starbucks has to deal not only with a variety of practices but also with a range of policy as well as strategic issues.