STANDARDIZATION & LOCALIZATION

STANDARDIZATION

vs.

What's the debate?

Localization

LOCALIZATION

Linnea Ek, Ida Modée, Nicole Ayers, Ian Toh & Alex Elia

• Localization is based on culture of the region where the subsidiary company is situated.
• The main reason why localization is implemented in most countries is because it`s cost saving.
• Factors that drives localization of HRM practices includes institutional environment, subsidiary roles, mode of operation and cultural environment.

+

-

Low Transfer of Knowledge & Experience

Limited Control

Responds to local needs

Accelerated business development

Increased income and market share

2

1

Governmental Restrictions

Nature of marketing structure

-

Standardization

Standardization of overseas subsidiary management practices towards HQ practices. These factors includes organizational context, context of host country and also strategic issues.

Other than that, global standardization in HRM allows transparency, consistency and alignment of workforces.

What's the debate?

+

Economies of scale

Transfer of experience

Uniform global image

• What HR-practices do you think RMIT could/should localize if they were operating in Japan?
• What should be standardized for RMIT? What should be the same globally?

Key context and drivers

QUESTIONS

Standardization

Localization

Organization Context

• Strategy & Structure
• Mode of Operation Involved
• Size and Maturity of MNC
• Relative importance of the subsidiary

Corporate Culture

Host Country Context

• Cultural Environment
• Institutional Environment
• country-of -origin effect
• host-country effect

Role of Subsidiary

Mode of Operation Abroad

The major debate?

Wages

Compensation & Rewards

Localization

Standardization

+ Increased wages depending on

countries attracts high quality employees

- May be viewed as unethical

+ Apply minimum wage globally to

minimize labour costs

- Attracts low quality employees

- Possibly decreased company image

Standardization

Localization

1

+ Apply minimum C&R globally

- Attracts low quality employees

+ Increased C&R depending on

countries attracts high quality employees

- Legislation and industrial relations

(affecting a firm’s compensation choices)

- Hofstede’s cultural dimension of

uncertainty avoidance

2

A blend of US HR practices and host-country norms.

Training and development

• Standardization of Training and Education

• Set of pattern for performing tasks

Compensation

• Top wages for top quality
• Benefit packages exceeding the minimum

Recruitment

• Employment standards the same around the world, however....

• Recruit locally to promote internally

The Major debate?

Localization

+ Polycentric approach

+ Increased company image

- Education differs between countries

Recruitment & Selection

• Depends on the specific company, no same specific standardization or localization strategy can effectively apply to both

• A balance of both standardization and localization is optimal, allowing companies to take advantage of the benefits from both strategies, as well as minimize the disadvantages

Standardization

Localization

+ Ethnocentric Approach

+ Uphold company values and procedures

- Expatriate Issues

- Poor company image

3

Training

4

+ Customized to the locals for a more appropriate experience

- Educational levels vary

- More costly and time consuming

- Not easy to exchange employees

Standardization

+ Consistent company image

+ Easy to exchange employees from one

site to another

- Locals dissatisfied with foreign practices

THANK YOU !

IKEA'S HR PRACTICES

• Mandating all of the HR practices from HQ

• More Efficient Ways from Individual Subsidiaries

• Replication of Practices in All Subsidiaries

• Reward System – “Tack!”

• Sustainability Training

References part 1

Baley, A. 2017, Chron, “The Effects of Standardization in the Workplace”, Viewed 11 August 2017, <http://smallbusiness.chron.com/effects-standardization-workplace-36773.html>

Bustamante, S. 2011, IMB Institute of Management Berlin, “Localization vs. Standardization: Global approaches to CSR Management in multinational companies”, Viewed 7 August 2017, <http://www.mba-berlin.de/fileadmin/user_upload/MAIN-dateien/1_IMB/Working_Papers/2011/WP_60_online.pdf>

Business Dictionary, 2017, What is localization? definition and meaning. Viewed 8 August 2017, http://www.businessdictionary.com/definition/localization.html

Chung, C., Sparrow, P. & Bozkurt, Ö, 2014, South Korean MNEs’ international HRM approach: Hybridization of global standards and local practices. Journal of World Business, 49(4), pp. 549-559.

Dowling, P.J, Festing, M, Allen, D & Engle S.R 2013, International Human Resource Management, 6th edn, Cengage Learning, Hampshire, UK.

Ervasti, M. & Suutari, V, 2004, HRM in foreign affiliates: A multiple case study among Estonian affiliates of Finnish companies. Journal of East European Management Studies, 9(4), 345-366.

Ghotbi, D. 2011, University of Twente, “Standardization and localization of HRM in Western MNCs in Iran”, Viewed 11 August 2017, <http://essay.utwente.nl/61130/1/MSc_D_Ghotbi.pdf>.

Harron, A.J. 2017, Journal of Accounting, “Standardized Versus Localized Strategy: The Role of Cultural Patterns in Society on Consumption and Market Research”, Viewed 11 August 2017, <https://www.omicsgroup.org/journals/standardized-versus-localized-strategy-the-role-of-cultural-patterns-in-society-on-consumption-and-market-research

Ikea 2014, ‘People & Planet Positive, IKEA Group Sustainability Strategy for 2020’, Ikea, viewed 11 august 2017 <http://www.ikea.com/ms/en_US/pdf/reports-downloads/sustainability-strategy-people-and-planet-positive.pdf>

References part 2

J Haron, A., 2016, Standardized Versus Localized Strategy: The Role of Cultural Patterns in Society on Consumption and Market Research, Viewed 8 August 2017, https://www.omicsgroup.org/journals/standardized-versus-localized-strategy-the-role-of-cultural-patterns-in-society-on-consumption-and-market-research-2168-9601-1000151.pdf

Katz, H.C. et al, “Labor Relations in a Globalizing World”, pg. 266, Viewed August 7 2017, <https://books.google.com.au/books?id=0TLVBgAAQBAJ&pg=PA266&lpg=PA266&dq=MNC+standardising+wages&source=bl&ots=OhdiNx5XeW&sig=pevgZ46f7ATXvz4rvviB44tuj_A&hl=en&sa=X&ved=0ahUKEwjwxamBzcfVAhUHHpQKHX8VA20Q6AEILDAB#v=onepage&q=MNC%20standardising%20wages&f=false>.

-2168-9601-1000151.pdf>

Marmer-Solamon, C, 1997, McDonald’s serves up HR success … in 91 countries around the world, Management Development Review, 10( 1), pp. 42-43.

McDonald's 2017, Sustainability-People-Providing Opportunity, McDonald's 2017, Viewed 11 August 2017, http://<corporate.mcdonalds.com/mcd/sustainability/people/providing-opportunity.html>

Morris, S, Wright, P, Trevor, J, Stilles, P, Stahl, G, Snell, S, Paauwe, J & Farndale, E 2009, ‘Global Challenges to Replicating HR: The Role of People, Processes, and Systems’, Human Resource Management, 48, pp. 973-995.

UK Essays 2017, HRM And Strategic Decision Making In Mcdonalds, Viewed 11 August 2017, <https://www.ukessays.com/essays/business/hrm-and-strategic-decision-making-in-mcdonalds-business-essay.php?cref=1 >

The Telegraph 2017, ‘Ikea rewards thousands of staff with pension bonus.’, The Telegraph, Viewed 11 august 2017, <http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10528788/Ikea-rewards-thousands-of-staff-with-pension-bonus.html>

Tutorsonnet, 2014, Tutorsonnet, “Advantages and Disadvantages of Localisation”, Viewed 11 August 2017, <http://www.tutorsonnet.com/advantages-disadvantages-of-localisation-homework-help.php>.

Wong, C. 2017, HRmatters21, “Compensation and Rewards Management”, Viewed 11 August 2017, <http://hrmatters21.net/featured-articles/compensation-and-rewards-management/>.