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No multinational company can avoid employing nationals of the country where it has subsidiaries. However, employees in many nations have organized themselves into labor unions. In this regard, multinational firms are always faced with the problem of dealing with labor unions of the country in which they aim to invest.
Multinationals usually come from different countries with different regulations regarding how labor unions carry out their daily duties. As a result, they need to come up with strategies that can enable them to avoid conflicts with local labor unions.
To begin with, multinational companies will need to understand the regulations that are put in place to monitor the operations of labor unions. This will help in guiding managers about the extent to which they can go during their negotiations. Moreover, it will be vital to understand the influence that various organizations for example, religious organizations have on labor unions.
If there is an organization that can negotiate better, then a multinational company may choose to use the organization as an entry strategy. Arguably, the most crucial point to understand about labor unions is their structure. It will be difficult to deal with labor unions whose structural make up is unknown.
Additionally, multinationals will need to give their subsidiaries liberty to make policies regarding negotiations with labor unions. This will not only provide flexibility to accommodate local culture, but will also ensure that local regulations are easily met. Furthermore, multinationals should be ready to approach each venture objectively to avoid stereotyping which ends up leading to conflicts.
The argument that labor unions do not have much influence on the relationship of employers and employees is misplaced. Labor unions are very powerful in some nations and will determine whether an organization will get employees or not. Almost every organization aims at reducing its expenses as much as possible, wages included.
In this regard, wages highly influence the relationship between employers and employees. However, labor unions are very influential in fixing average wages in a country. If labor unions have high bargaining powers, they can raise the wages that employees are paid thus reducing profits of firms.
On the same note, labor unions have the ability to prevent firms from altering either their levels of employment or the terms of employment. In this regard, labor unions can determine whether firms will implement lay off policies or not. Similarly, in some instances firms cannot close plants or even relocate without consulting labor unions.
Moreover, it should be understood that labor unions have powers of requesting governments to increase restrictions on firms. Labor unions have also the ability of restricting international firms from synchronizing operations. This increases structural costs thus affecting competitiveness of firms. Consequently, labor unions have a lot of influence regarding relationships between employers and employees.
Having standardized products and services is advantageous for firms because it makes the process of integration of operations easy. It is quite easy for one expert to work in several branches if a firm uses standardized operations. In this regard, McDonald’s do not have to employ an expatriate each time they open a subsidiary.
On the contrary, the firm can take an expatriate from one of the existing subsidiaries to oversee implementation of operations in a new subsidiary until the new staffs learn how to carry out day-to-day activities.
Moreover, firms with specific products as well as services can come up with a common training center where employees will be trained on what is expected of them. This will require very few expatriates to accomplish the task. As a result, I am not surprised that McDonald’s employs very few expatriates.
Employing local managers is among the strategies that a multinational firm may use to manage local labor unions. This strategy has various advantages. To begin with, local managers are well informed of the local practices and governmental regulations. Similarly, local manages will be in a good position to deal with the problem of cultural differences given the fact that they understand it perfectly.
On the other hand, there is a possibility that labor unions will be more flexible when they are negotiating with one of their own rather than when they are negotiating with a foreigner. This will ensure that the firm gets a favorable deal which will not be costly.
Furthermore, local managers will be able to understand the language used by the local people thus giving them an upper hand compared to foreign managers. In addition, local mangers are better placed to eliminate fears of local labor unions about multinational companies which might worsen negotiations.
However, local managers can also have disadvantages. Firstly, there is the ideology that multinational companies have vast financial resources. This can make local managers to settle for high wages that will reduce profits of the firm.
Secondly, local managers might not be well conversant with the operations of the firm and will therefore not be carrying a true picture of the firm. Moreover, negotiations require somebody who is fully aware of the firm’s organizational culture and local managers may not be the best people to do this.
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