SHR081-6 International and comparative Human resource management
SHR081-6 International and comparative Human resource management
Introduction
Globalisation has provided the opportunity for companies from different industries to expand their business internationally. Despite the opportunity to expand globally businesses can encounter major issues due to national business systems, and institutional and cultural factors of different countries. In this regard, Marks and Spencer (M&S) has observed issues to operate successfully in China due to those factors. Relating to this context, the current report would be focused on analysing and evaluating the case study of the failure of the organisation in the Chinese market and the reason behind it.
Case study analysis
Context of national business systems
The national business system point-of-view contents that the institutional framework is crucial in directing economic behaviour and it significantly understood the major environmental aspect that would be expected to affect entrepreneur behaviour (Argade et al. 2021). It is posited that constructing the content of developing and developed countries will provide valuable insights into the border prompt of social entrepreneurship, which may differ between the two settings. The potential benefit of social entrepreneurship to policy maker in the national business system helps in insolvable societal and environmental issues along with their context of mutual lessons that can be designed to address the problems that might emerge (Aguilera and Grøgaard, 2019). The national business system is structured as an economic domain in organisation alignment for companies and a working system where trends of national institutional differentiation create varieties of capitalist society. It contains comprehending the introduction between organisations national contestants, a global movement of capital, human labour, future technology, and knowledge. Moreover, it is globally purposed for selecting and trying to coordinate these flows requires in order to focus on national business operations (Hunady et al. 2019).
Similarities and differences between CHINA and UK
The UK and China are located in different geographical locations with different histories and cultures. These differences are influenced by the nation’s different approaches to business operations. In the UK, the staffing process is highly different from that of China, as it has been noted that after Brexit, the UK is beginning to experience a skill shortage among workers making it difficult to find qualified candidates for open positions. The nation has stringent recruiting laws, particularly those relating to discrimination directly and indirectly. At the nation, someone cannot higher an individual based on their sexual orientation, race, ethnicity marital status, or any other aspect. During the recruitment process, one of the top priorities is being made on the lawful authority of an individual to work in that country. Moreover, complying with Real Time Information (RTI) while with the support of all relevant pay role information from Her Majesty’s Revenue Customs (HRCM) hiring process is being done.
In contrast, the hiring process in China is significantly different from that of the UK, as they are job interviews where greeting each other, state names, and questions and interviews are being done. Apart from this, there is a post-interview process where the standing offer, the notice period of the candidate, competition and non-compete agreement along with the job offer issue process are being constructed (Global Partners, 2022). China most probably referred to highly skilled staff in order to be competitive and they use China recruiting agencies along with focusing on recruiting the best staff. Moreover, China has several websites, career events, and job fair that attracts the best talent for organisations. Nevertheless, companies operate according to compliance with the China laws and regulations such as Professional Employer Organisation (PEO) and Foreign Enterprise Service Companies (FESCOs) (Global Partners, 2022).
Referring to the similarities, it has been noted that the ethnocentric approach prominently exists in both nations. The ethnocentric approach refers to employing workers from a home nation to fill those positions all over the world in terms of the recruitment process. An ethnocentric curriculum represents and narrow conviction in the security of a dominant ethnic society and community (Arday et al. 2021). In the UK, because the central curriculum cantered on white that is mainly British culture. Similarly, since the experience has been significantly influenced by Confucian teachings triggers a Sinocentric mindset that places China as the core of everything and considers it superior to certain other regions that are considered to be barbarian (Cheng and Meng, 2021).
Business System
Institutional aspects between the UK and China contributing to the failure of M&S in China
Institutional factor plays a very important role in a country, which significantly referred to the ongoing trends in the country that is significantly different from that of other nations. In this context, referring to M&S’s failure in China few institutional aspects between UK and China would be evaluated so that the actual reason behind the failure of the organisation can be taken into account with an effective note.
Political context
From Figure 1, it can be stated that the UK has political stability, as it scored 0.54 points in the year 2021, whereas, China scored -0.48 in 2021 (The Global Economy, 2022). This refers that both nations have a difference in their political stability, which has become one of the significant institutional factors for M&S to operate in the nation. Moreover, it has been noted that in 2021, the Freedom From Corruption index notified that the UK scored 87 out of 100, which refers that the UK is doing very well in terms of controlling corruption and offering quality governance (Lords Library, 2022). However, in the case of China, they scored 45 out of 100, which refers that the Chinese marketplace and business dealings are not as efficient as the UK (Trading Economics, 2022). It has been noted that it is significantly increasing from the year 2018 to 2021 as reflected in the figure below from 38 points in 2018 to 45 in 2021 (Trading Economics, 2022).
Thus, referring to this due to differences in political aspects in both UK and China, M&S has failed terribly while not understanding the market’s political complexities.
Management aspect
Referring to the HRM system of the UK, the nation utilises levels of software such as Breath, PeopleHR, BambooHR, KiwiHR that significantly refer to better management of human resources and recruitment aspects (Chowdary, 2022). In contrast, China has recently had a paternalistic management model that is established by the “iron rice bowl” under which employees gain raising benefits and salaries based on their performance level and employment rights (Xiao and Cooke, 2020). From this context, it can be stated that both the management aspects of the UK and China is significantly different from that each other with different sort of compensation and benefits schemes.
In this context, referring to the differences between UK and China the context of expatriates comes along with it. Management of international business can be a difficult process for business owners and HR professionals to master, as it requires a high level of capital in order to understand the changing demands of the international business environment (Budhwar and Debrah, 2001). Thus, the amount of preparation that is required to manage an expatriate is highly essential with efficient training and development depending on the nature and length of the overseas project. In this connection, it can be stated that M&S has failed in terms of offering expatriates the appropriate amount of training and development due to which the marketing and human resource perspective in China was not efficient. The case study suggests that the design of the clothes was also not constructed based on the consumer preferences of the Chinese marketplace (Chan, 2018).
M&S was offering straight-fitted clothes whereas; Chinese women were eagerly wanting clothes that have cuts and curves. This reflects that M&S has severely fallen back in terms of sending the expected with the appropriate amount of knowledge about the host country and its operation. Moreover, the organisation used a Eurocentric strategy to operate and handle its Chinese operation (Chan, 2018). This is because M&S management may have assumed that what ends up working in the UK would therefore function properly in the Chinese marketplace, which has significantly triggered and encouraged control issues in China. In this regard, there is a substantial difference between Chinese and British work culture, for example, placing employees in the UK is typically less hierarchical than in China. Moreover, due to poor research and capabilities, M&S did not alter the design of HRM to accommodate the local market.
In this context, theory X and Y can be considered as theory X refer to the negative perspective of human resource management, and theory Y refers to the positive aspect.
Referring to this, theory X refers to encouraging tight control over the supervision, and theory Y refer to managing with an aspect of creating and source of encouragement and work by offering opportunities (Senarathne, 2020). In this context, M&S was required to take the aspect of theory Y at Chinese marketplaces in their business operation so that the employees would be able to possibly decentralize the authority while understanding organisational needs and aspirations. Through this perspective, M&S expats would have been able to accumulate the demands of the consumer and their preferences while designing products efficiently.
Marketing aspect
Marketing plays a significant aspect in an organisation, which refers to their consumer perception of the brand. Considering the case study, it has been identified that M&S has terribly failed in terms of offering products and services to the Chinese consumer. This has resulted due to the poor marketing of M&S and their organisation aspect as reflected in Figure 4, the buzz rating of M&S is declining from 10.2 to 7.9 (Smith, 2022). This refers that the organisation is not being efficient in the international marketplace, which has resulted their business failure. Through the support of other customer experiences tools such as NPS, Churn rate would have supported M&S to understand where the organisation is doing wrong. however, the lack of focus on marketing and poor knowledge of expatriates has triggered this issue terribly.
Consumer preference
It has been observed that the women of China love to emphasise their womanhood while also having cuts and curves in their clothes (Chan, 2018). However, the majority of M&S products were straight-cut, which does not correspond to consumer choices in China. M&S severely neglected the consumer preferences in the nation, which had a direct impact on the business operation and revenues. In this connection, the theory of reasoned action can be referred to as a theoretical perspective, as the organization has failed to understand the core aspect of this theory, which are attitude, subjective norms, and behaviour (Ajzen and Kruglanski, 2019) (Refer to appendix). Thus, M&S was required to understand the demographic variables, attitudes, and personality traits of the signified target market.
Cultural factors between the UK and China that contributed to the failure of M&S in China
Cultural factors are taking a great part in terms of influencing the business operations of multinational companies. Culture can be described as the attitude, ideas, beliefs, social norms, and behaviour of a group of people in a country or society. In addition, culture can also be seen as different values, ideas, beliefs, and attitudes coming together that are influenced by cultural elements such as social structure, language, traditions, and customs (Nemeth et al. 2019). Businesses that are aiming to operate in the international marketplace should always focus on cultural aspects in order to operate business smoothly by properly interacting with consumers as well as employees of different nations. Moreover, cultural adoption in businesses that are emphasising grabbing the international market needs to consider national culture as well as tradition to know their consumers properly, which in turn, helps stem to gain consumers base and increase sales rate (Budhwar and Debrah, 2001).
Cross-cultural aspects
In order to analyse the cross-cultural aspects between UK and China and their influence on the failure of the organisation, Hofstede’s cultural dimensions theory is considered to be utilised. According to this model, there are 6 dimensions that are beneficial to analyse the cultural values of different countries. These cultural dimensions are the “Power distance index”, “Individualism vs. collectivism”, “Uncertainty avoidance”, “Masculinity vs. femininity”, “Long-term orientation vs. short-term orientation”, and “Indulgence vs. restraint” (Tocar, 2019).
The theory indicates that the dimension related to power distance always tackles the fact that individuals in different societies are not equal, which also expresses the attitude of the culture toward inequalities (Tocar, 2019). In terms of this dimension, a huge difference in both cultures is noted, as China scored 80 and the UK scored 35 in this dimension (Hofstede Insights, 2023). This is indicating that China has a culture in which people believe that inequalities among individuals are acceptable.
In the dimension of individualism China scored 20, which indicates a highly collectivist culture. Hence, in this culture, the population always acts in the interest of their group, rather than only focusing on themselves. In the dimension of masculinity China and the UK, both scored 66, which indicate both cultures are success-oriented and driven by competition as well as achievements (Hofstede Insights, 2023). Moreover, China scored only 30 in uncertainty avoidance; in comparison with the UK, it is a low score as the UK scored 35. On the other hand, in long-term orientation, China got an 87 score that indicates the nation has a significantly pragmatic culture, in which individuals believe that truth may depend on context, time, and situations. Additionally, in the dimension of indulgence, China scored only 24, which indicates its tendency to cynicism and pessimism (Hofstede Insights, 2023). Hence, based on the cross-cultural analysis between China and the UK, it is clear that in the culture of both countries, there is a huge difference that has the potential to influence the business operations of multinational companies like M&S.
Organisational and global influence on the failure of M&S
While analysing organisational influence behind the failure of the organisation in China, a major gap in the overall organisational management of M&S is noted. Considering the case study, it is observed that the organisation has manufactured its clothes in a “tax-free zone” in China, to reduce operational costs, which is a wise decision. However, after opening brick-and-mortar stores in China, manufactured products of M&S shipped to the UK and then again came to China to be sold in the brick-and-mortar stores, which made it provide VAT two times (Chan, 2018). This is indicating the overall issue in the organisational operation of M&S, which has failed to take effective decisions related to supply chain management for ensuring business growth in the country.
Regional and national influence on the failure of M&S
Apart from that, national and regional aspects have also influenced the business of M&S and contributed to its failure in China. The cross-cultural analysis between China and UK with the Hofstede cultural dimension has made it clear that in power distance individualism and long term orientation both countries have a huge difference (Hofstede Insights, 2023). Considering this, the culture of both countries influences the choice and preferences of consumers, which has not been positively considered by the company while trying to achieve success in China. For example, the organisation offered the same clothes to Chinese people that it offers in the UK but the preferences of consumers in both countries are different as Chinese people especially women like clothes that are made to reflect their curves. On the other hand, the company offered them straight fit clothes that are preferable in the UK (Chan, 2018). Hence, there is a clear gap in the international performance management of the organisation in the new region. Based on this, the organisation could have considered the ability of global culture to influence the business. This is because, in countries around the globe, cultural differences impact aspects like people management and others of companies (Beugelsdijk et al. 2020).
The global demographic charts indicate that each and every market around the world has an aging population, which influences brands to target people from 45 to 65 years old rather than only focusing on younger ones (Chan, 2018). The case study also indicates that the organisation has taken a Eurocentric approach, by thinking that what has worked in the United Kingdom will automatically be capable of operating the business in China. This is one of the main reasons that the organisation failed to satisfy the consumers and manage people in China, which led it to exit from the country. However, in this regard, the international director of the company, Paul Friston stated that “We have substantially reshaped our international business. This has improved profitability and positioned us for growth” (Zhuoqiong, 2018).
The business system in China
Operating business in China is challenging for global companies as they may face issues related to bureaucracy, people management, lack of intellectual property protections, increasing labour cost, uncertainty of the Chinese market, competition, unfavourable regulations, and corporate culture (MS Advisory, 2022). Domestic businesses in China may get more privileges as well as protections in comparison to international organisations and market access for foreign companies is also limited when it comes to imported products and services (MS Advisory, 2022). This factor has not been considered by the organisation as after producing products in the country the organisation has sent them to the UK and again imported them to China. While operating a business in China foreign companies cannot employ local workers and they are required to go through special human resource management agencies in order to hire local people, which may not be supportive of the needs of organisations (MS Advisory, 2022).
Considering the influence of cross-cultural aspects, organisational, global, and national influence on the failure of Marks & Spencer, it is evident that it could have taken the geocentric approach in its business in China to achieve success. This is because this approach allows companies to assume that there can be similarities as well as differences in different countries that should be understood, recognised, and integrated into the business strategy (Martin, 2021). Hence, the adoption of the geocentric approach could have helped the company to consider different factors in China that may influence its business positively.
Conclusion
Based on the overall discussion, the fast fashion company is focused to expand its business in the Chinese market; however, it witnessed failure in China. In this regard, it is observed that behind the failure of M&S in China, cultural and institutional factors played the most significant role. This is because along with some similarities, there are differences in the cultural and institutional factors of China and the UK that have not been completely considered by the company. Lack of understanding of the organisation regarding the preference of Chinese consumers and people management has also contributed to its failure along with the gap in effective decision-making related to supply chain and operation management. Most importantly, considering the overall issues witnessed by the company it is evident that the company could have taken the geocentric approach to successfully operate the business in China.
Recommendations
Increased focus on divergent thinking
Divergent thinking refers to the thought process that is beneficial for generating creative ideas, which is beneficial for businesses to foster creativity (Ritter et al. 2020). Organisational managers of M&S recommended increasing their focus towards divergent thinking in order to be creative and generate new positive ideas that would enhance profitability rather than making foolish decisions like providing two-time VAT in China.
Expatriates’ training and development
The case study clearly indicates that the organisation witnessed issues in analysing the requirements of the Chinese employees in terms of people management (Chan, 2018). Hence, the company is recommended to be focused on training and development of expectorates while trying to achieve success in foreign countries in the future, which would be helpful to deal with people management issues.
Cross-cultural management
In order to deal with employee management issues, it is beneficial for businesses to work in accordance with labour law and with the support of labour unions of foreign countries. Considering this, the company is recommended to be focused on collaborating with labour unions along with following different level laws while operating business in foreign markets.
Product development
From the case study, a clear contribution of the product design of the organisation to its failure is noted (Chan, 2018). Considering this, the organisation should be focused on the development of products considering the need for new markets to avoid such issues, which would also help to satisfy consumers in the new international market.
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