Impact of COVID-19 on MNEs &International Human Resource Management
Task: Prepare an essay on the topic “The COVID-19 pandemic has offered new opportunities for MNEs to be more successful on an international scale and its impact on international human resource management”.
This essay involves an in-depth analysis of the present COVID-19 pandemic situation and illustrates its implications on “Multinational Enterprises (MNEs)”, and their business on international human resource management standards. It involves demonstration of clear understanding of potential concepts and overall influence of pandemic situation on international business.
The influence of corona virus or COVID-19 pandemic is being felt through all businesses in the global context. It is essential to note that MNEs has been navigating a broad range related to different issues, which span from keeping their staff as well as consumers safe, reorienting major operations as well as shoring-up cash flow and major liquidity (Kyoveet al. 2021).
Shortcomings of MNE’s due to COVID-19
Major shortcomings related to business responsibilities in international businesses have been exposed with non-essential supply-chains being collapsed globally due to border closure and lockdown rest”, riction (Umi?ski&Borowicz, 2021). A major example will be “Unilever”, the Dutch consumer-good organisation, faced major risks in their businesses, reporting down nearly decline of 1.6% sales within first six-months of 2020, losing nearly 25.6 billion GBP (Unilever.com, 2021). Major industries saw bailouts because of lack of potential resilience. The pandemic situation has shown requirement of MNEs to strengthen their operating reserves; which in most of the cases are not enough for lasting till a quarter even. As the international business environment is becoming increasingly complex, with the pandemic situation MNEs are facing hard times in terms of consisting right staff along with carrying out correct IHRM practices (Zhan, 2020).
Negative Impact on domestic and international market
The COVID-19 situation has resulted MNEs for a hardening risk-transfer market, which will continue because of combined influence of falling investment income and litigation from current pandemic as well as concern of systematic nature of the risk. Lower-income nations will require additional catastrophe response and recovery (Van Zanten& Van Tulder, 2020). It can potentially illustrate that relative size of domestic market of a business directly affects how a company operates on international terms. Therefore, pandemic situation has raised difficulties for MNEs to respond in a discriminate or proportionate manner, in their domestic market, which has caused them long term negative impacts in terms of growing and operating internationally. For example, Unilever operates in 75 countries and their food as well as refreshment business wiped off 42% of their profit in fiscal year of 2021 as domestic markets of host countries were forced to shutter due to lockdown restrictions (Unilever.com, 2021).
According to “Kluckhohn& Kroeber”, culture comprise of patterned ways related to thinking, feeling as well as reacting and essential core of culture comprise of potential traditional ideas along with its attached values (Pla-Barberet al. 2021). Understanding and working in context of organisational culture is important for MNEs to operate in international environment. Provided high impact of COVID-19 uncertainty related with trajectory of the potential virus, it can be expected that societies that are low on “uncertainty avoidance”, fails to conjure with greater certainty and leads to lack of social-distancing norms. MNEs operate largely in global market in different countries. MNEs tend towards employing labour from developing and less-developed countries for assuring cutting of employment cost and assuring better business. However, cross-cultural differences present in operating countries can lead to lack of potential corporate trust and social distancing measures.
Drawing upon theory of cultural dimension by Hofstede, it can be stated that Anglo sphere and western countries such as Australia, Canada and US have been individualistic and potentially correlates to low “power distance”, assuring “high uncertainty avoidance, masculinity”, along with medium-term orientation as well as indulgent form of cultures (Verbeke& Yuan, 2021). On the other hand south-east Asian countries, Eastern-European regions and South-American cultures are more collectivistic and comprise of higher power-distance index, low form of uncertainty avoidance along with a masculine society and prolonged orientation resulting in restrained cultures. Therefore, MNEs operating in these countries can face potential problems in terms of growth amidst the pandemic period.
Additionally, slowed growth and lack of potential industrialisation in developing world will restrict cash flow of MNEs and make it subjected to the cultural shock (Pla-Barberet al. 2021).The disrupted supply-chain and adverse working behaviour of employees in mentioned countries cultures is likely to lead to lack of interaction between different employees, suppliers and stakeholders, resulting in slowed business growth in domestic as well as international aspects, adversely affecting the overall international business.
The complex “global matrix structures”, of MNEs can create potential problems in the pandemic situation (Strange, 2020). For instance, dual reporting can result in potential conflict and confusion and different communication channels further establishes potential information logjams. Overlapping managerial responsibilities often creates turf battles and loss of potential accountability. Growing social-distancing measures in different parts of world, time as well as cultural challenges makes it difficult for managers and leaders of MNEs to resolve conflicts along with clarifying confusion.
Influence of Host country on parent country for MNE during pandemic MNEs comprise of “The Heterarchy”, that is various centres apart from their ‘headquarters’. Lack of potential communication, control and monitoring can lead to business disruption over global context of the business. The resources along with responsibilities of MNEs are often “transnational”, as they are further interdependent across their national boundaries. Lockdown restrictions along with border closures with growing effects of COVID-19 are likely to weaken interdependence of the resources and disrupt the supply-chain of businesses (Unctad.org, 2021). Host-country environment for MNE will directly influence the parent-country environment. For example, COVID-19 situation has negatively impacted international trade and FDI and lead to slow the global production, employment along with individual livelihoods. Asymmetric regulations and government in host country will directly affect the MNE’s parent country; therefore directly impacting overall international business performance and slowing down overall business scope.
Due to the economic recession, “merger and acquisition”, attributes of MNEs, partnerships can help in assuring better cash flow and provide support with appropriate workforce standards (Verbeke& Yuan, 2021). However, due to slow economic development in pandemic period, there can lay typical cross-border issues and “merger and acquisition problems”. In this concern, within first year of M&A nearly 20% of executives will be lost and personnel issues can be further neglected or delayed, due to lack of proper monitoring and communication attributes. Unilever, the Dutch consumer goods and food maker is expected to cut around 20,000 jobs on global terms for cutting business expenses (Unilever.com, 2021). It illustrates that although the company merges with potential other mergers due to restriction of cash flow it has been facing supply-chain disruption on major terms.
Furthermore, lack of proper resources, that is money, brands and relationships with other organisation can raise difficulties for business expansion in international standards in this pandemic situation (Verbeke, 2020). For Unilever acquirers can result in not adjusting to suit local cultural aspects that can negatively influence national form of business culture in present global dynamics. Although joint ventures in International business work as a change facilitator and helps in innovation in business, the difficulties with border closure and lockdown restrictions can lack the process of collaboration between organisations. It can also result in potential barriers towards international markets for MNEs such as limited information for locating and analysing markets.
It can be concluded from the above discussion, that COVID-19 does not offer many opportunities for MNEs in terms of being successful on an international scale. Rather, the host countries environment and unstable economy cross cultural differences and negative local responsiveness can directly mark adverse impacts on business of the parent country for the MNEs. Supply-chain disruptions can lead to lack of proper business control ad restrict cash flow; therefore lacking opportunities for MNEs in international standards. ?
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