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Factors Affecting Coca-Cola HRM in Global Markets

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Factors Affecting Coca-Cola HRM in Global Markets

Coca-Cola employs about 92,000 people globally, with 87 % of its employees working outside the US. The company also operates in six autonomous regions including the Pacific, Asia, Africa, Europe, Latin America and North America. Coca-Cola’s business runs in more than 200 countries (Aswathappa, & Dash, 2008). Moreover, the company has a global service staff comprising of about 500 people who can be sent to any part of the world to provide expert advice regarding problems related to customer service and operations (Aswathappa, & Dash, 2008). Essentially, the global operations of Coca-Cola pose significant challenges with respect to Human Resource Management. Companies operating in international markets must acknowledge that these markets are similar to their home country markets. This paper explores the issues affecting Coca-Cola HRM in international markets. Certain recommendations are also suggested to help the company tackle the identified issues.

Issues Affecting Global Coca-Cola HRM

International HRM (IHRM) is an important function within Coca-Cola having a responsibility to develop a common framework that links various groups and divisions into the Coca-Cola family (Aswathappa, & Dash, 2008). The IHRM function focuses on promulgating a universal HR philosophy within the company and developing a group of globally minded mid-level managers for management positions in the future. The cross-border management philosophy adopted by Coca-Cola is based on the “think globally, act locally” perspective, wherein national businesses are provided with the discretion to conduct operations in ways that appear to be suitable to the local market conditions (Aswathappa, & Dash, 2008). Nevertheless, IHRM function within Coca-Cola develops the underlying philosophy to guide local businesses in developing their own HRM practices. Coca-Cola employs local personnel, although the company has a group of international managers for two primary reasons including fulfilling the needed skills set that might be lacking in a specific location, and enhancing international exposure of these managers. The global service program consists of about 500 managers, who are paid in accordance with the US compensation packages (Aswathappa, & Dash, 2008). Despite having a well-organied IHRM functions, some challenges have been disclosed.

The first HRM problem that Coca-Cola has faced in global markets relates to the failure of expatriates assignment under the global service program. There is a high prevalence of the abovementioned issue that is characterized by leaving the assignment prematurely, estimated at about 10-20% of international assignments (Joshua-Gojer, 2012). The second issue that has affected Coca-Cola HRM in global markets is the high costs associated with sending expatriates on international assignments. For Coca-Cola, costs is an important issue, since about 200 managers under the Global Service Programme go on international assignments annually (Aswathappa, & Dash, 2008). The estimates show that the managing costs increase threefold, when a manager is sent on an international assignment. Thirdly, although Coca-Cola allows local businesses to develop their own HRM practices, cultural issues cannot be disregarded, since the IHRM function strives to develop an underlying HRM philosophy (Story, Barbuto, Luthans, & Bovaird, 2013). The difference in national cultures hampers this IHRM function. According to Scroggins and Benson (2010), culture is crucial to IHRM because it influences other variables that affect HRM in international markets such as laws. Culture has also an impact on the effectiveness of HRM practices. Therefore, the underlying HRM philosophy being promulgated by Coca-Cola IHRM function may be ineffective in a country having different values and beliefs comparing to the latter of the US.

Currently, Coca-Cola IHRM is partly based on the integrated theory and economic globalization theory. The integrated theory of IHRM assumes that both national institutions and global economic trends are crucial in determining national employment relations patterns. This explains why Coca-Cola allows local businesses to develop their own HRM policies and practices. The economic globalization theory maintains that the operation of international markets follows some universal principles, which in turn lead to the convergence of HRM practices. This explains Coca-Cola’s use of the underlying philosophy as a blueprint for local businesses to develop their HRM approaches.

Literature Review

The challenges of IHRM have been immensely explored in the literature, especially with respect to the failure of international assignments expatriates. Studies exploring reasons of the above described issue have reported a number of factors including dissatisfaction by a partner or a spouse and inability to adapt to host culture and conditions (Joshua-Gojer, 2012); concerns raised by family members (Minter, 2008); and poor selection of the expatriate sent on the international assignment (Scroggins & Benson, 2010). Dissatisfaction among spouses has been associated with the difficulties they face when getting employment (Joshua-Gojer, 2012). The location of the assignment has also been established to play a significant role in contributing to assignment failure (Farndale, Scullion, & Sparrow, 2010). Other challenges that expatriates encounter include immigration, temporary accommodation, and finding housing.

The high cost of international assignments has also been explored in the literature. Various authors agree that the conventional method of remunerating international managers using home-based compensation policies and practices inflates the costs of international assignments (Delbridge, Hauptmeier, & Sengupta, 2011; Story, Barbuto, Luthans, & Bovaird, 2013). A similar approach has been used by Coca-Cola characterized as the US-based compensation package, which implies the US standards rather than the prevailing benchmark in the host country.

Various literature sources define diverse national cultures as a key obstacle to the successful implementation of IHRM. Many authors, both classical and contemporary scholars in management agree on the importance of cross-cultural adaptation in ensuring effective IHRM. Culture comprises of the societal forces that have an impact on actions, beliefs and values associated with a certain group (Delbridge, Hauptmeier, & Sengupta, 2011). A classical work of George Hofstede on cultural differences between nations had significant implications for IHRM. Hofstede (1984) explored the differences in value systems of at least 11,000 IBM employees located in 40 countries. The research emphasized on the effect of the national culture on IBM. From his findings, Hofstede was able to document significant differences in national cultures and their IHRM implications.

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