The paper 'The Extent to Which MNC Subsidiaries Act and Behave as Local Firms - McDonald’ s " is a good example of a management case study. International Human Resource Management field has experienced a great attractiveness in recent years as the integration of countries becomes closer and the globalization and internationalization discussion gains momentum (Myloni, Harzing & Mirza 2007, p. 2057). While many kinds of literature demonstrate that human resource practices in numerous US affiliates of multinational companies adopt local strategies with disparities among particular practices, others think otherwise. Therefore, this essay will critically analyze the extent to which MNC subsidiaries act and behave as local firms versus the extent to which their practices resemble those of the parent company.
Using McDonald’ s as the company of choice, and to put the essay into context, the paper will discuss the degree to which multinational enterprises internationally standardize their HRM and work practices. In addition, the paper will explain the extent to which MNEs are local to cultural work practices. The Extent to Which MNC Subsidiaries Act and Behave As Local Firms McDonald’ s remain one of the leading fast-food restaurants in the world.
Despite being a big brand, the company has faced stiff competition in its domestic market from KFC, Subway, Burger King and Wendy's among others forcing to review its strategy to remain competitive. Pangarkar and Subrahmanyan (2011, p. 126) argued that expansion is one of the strategies which have been pursued by McDonald’ s to neutralize competition. Today, McDonald’ s now operates in several countries including Australia, the UK, France, China, and India among others in pursuance of global opportunities (Pangarkar & Subrahmanyan 2011, p. 126). The research shows that the company has enjoyed success in other countries due to its adoption of both the global and local standards. According to Taylor, Beechler and Napier (1996, p.
962), IHRM has played a very important role in the adoption of local or global responsiveness. Schuler and Rogovsky (1998) argued that IHRM is the glue which integrates the multinational and its subsidiaries together and serves as a process for management and control of global operations. As such, there have been numerous MNEs’ endeavors to transfer IHRM practices to their subsidiaries overseas. Pangarkar and Subrahmanyan (2011, p. 122) state that McDonald’ s adopts global standards at its overseas subsidiaries in order to maintain competitiveness.
Some of the areas where the company adapts the global standards are selection and recruitment, remuneration. McDonald’ s IHRM coordination practice involves standardizing compensation policy. Whereas tangible compensation rates differ based on the economic situations and domestic wages of different countries, McDonald’ s structure of executives’ compensation levels are more standardized (Myloni, Harzing & Mirza 2007, p. 2059). In this way, the company created a global compensation policy which operated as a practice for the compensation of senior executives in McDonald’ s subsidiaries in Australia.
This guide considers five levels of management with full remuneration divided between a predetermined income part, a performance-based fringe benefits and management bonus. Additionally, every executive was working on personal employment contracts which were agreed on outside any collective agreements which might have been practiced in the subsidiaries. Senior managers at the top management level are entitled to additional incentives whilst the performance-based part of their wages was worth 50 percent of the total remuneration (Gamble 2003, p. 373). The practice of harmonizing the compensation of managers at the subsidiary to match that at parent company is a competitive strategy which is perceived by the employees as a fairness policy.
However, the practice has also been criticized by managers from more successful subsidiaries. The managers from successful affiliates have felt that they need more compensation based on performance as compared to less performing subsidiaries.
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