Page 187 - DMGT548_GLOBAL_HRM

Global HRM

Notes Union structures differ considerably among Western countries. These include industrial unions,
which represent all grades of employees in an industry; craft unions, which are based on skilled
occupational grouping across industries; conglomerate unions, which represent members in
more than one industry; and general unions, which are open to almost all employees in a given
country. Enterprise unions are common in Asia-Pacific nations, although there are national
variations in their functions, and in the proportion of enterprise unions to total unions.
The lack of familiarity of multinational managers with local industrial and political conditions
has sometimes needlessly worsened a conflict that a local firm would have been likely to
resolve. Multinationals are recognising this shortcoming and admitting that industrial relations
policies must be flexible enough to adapt to local requirements.

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Caution Trade unions limit the strategic choices of multinationals in three ways:
1. By influencing wage levels to the extent that cost structures may become
uncompetitive.

2. By constraining the ability of multinationals to vary employment levels at will.
3. By hindering or preventing global integration of the operations of multinationals.
Let us explore in detail, how trade union limits on MNC’s strategic choices:
1. Influencing Wage Levels: Although the importance of labour costs relative to other costs is
decreasing, labour costs still play an important part in determining cost competitiveness
in most industries. The influence of unions on wage levels is important. Multinationals
that fail to successfully manage their wage levels will suffer labour cost disadvantages
that may narrow their strategic options.
2. Constraining the Ability of MNCs to Vary Employment Levels at Will: For many MNCs
operating in Western Europe, Japan, and Australia, the inability to vary employment
levels at will is more serious problem than wage levels. Many countries now have
legislation that limits considerably the ability of firms to carry out plant closure,
redundancy, or layoff programmes unless it can be shown that structural conditions make
these employment losses unavoidable. Plant closure or redundancy legislation in many
countries also frequently specifies that firms must compensate redundant employees
through specified formulae such as two weeks’ pay for each year of service. In many
countries, payments for involuntary terminations are rather substantial, especially in
comparison to those in the United States.
Unions influence this process in following two ways:
(a) By lobbying their own national governments to introduce redundancy legislation,

(b) By encouraging regulation of MNCs by international organisations such as the
Organisation for Economic Cooperation and Development (OECD).
Multinational managers who do not take these restrictions into account in their strategic
planning may well find their options severely limited.
3. Preventing Global Integration of MNC Operations: MNCs make a conscious decision not
to integrate and rationalise their operations to the most efficient degree because to do so
could cause industrial and political problems.

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