Analyse the impact of the key external environmental influences on HRM, using examples to illustrate.

3926 Words Mar 20th, 2006 16 Pages
The external environmental factors described in the following essay have a direct or indirect influence on HRM. To be effective, HR managers must monitor the environment on an ongoing basis; assess the impact of any changes; and be proactive in implementing policies and programs to deal with such challenges.

Economic Environment

The economic environment has a major impact on business in general and the management of human resources in particular. Economic conditions affect supply and demand for products and services, which, in turn, have a dramatic impact on the labour force by affecting the number and types of employees required, as well as an employer's ability to pay wages and provide benefits.

When the economy is healthy, companies
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Labour market conditions should also be monitored to determine present and emerging trends (such as the changing composition of the labour force) as well as changing values and expectations, so that policies and programs can be adapted and/or designed in order to recognize and take advantage of these trends.

Globalization

Globalization refers to the tendency of firms to extend their sales or manufacturing to new markets abroad. For businesses everywhere, the rate of globalization in the past few years has been nothing short of phenomenal.

"The bottom line is that the growing integration of the world economy into a single, huge marketplace is increasing the intensity of competition in a wide range of manufacturing and service industries."

Production is becoming globalized, too, as firms around the world put manufacturing facilities where they will be most advantageous. Also, there are increasing numbers of multinational corporations--firms that conduct a large part of business outside the country in which they are headquartered and that locate a significant percentage of their physical facilities and human resources in other countries. Many organizations are locating new plants in areas where wages and other operating costs are lower. For example, Australia's Hewlett Packard's computers are assembled in Singapore.

While cheaper labour is one reason for transferring operations