Benefits and Challenges of Globalization
Discuss about the Secret to McDonald’s Global Branding.
Globalization can be considered as a result of knowledge development in businesses. The enhancement of technology enabling organisations to carry on their business without borders has undeviating impact on development of globalization. The benefits like availability of information, free flow of products, monitoring competition and availing better work force have made many organisations undertake globalization through creation of single market for all. Overall economic process has been greatly influenced by globalization as organisations in today’s world follows free movements by enabling global practice as well as liberalisation of technological developments. Globalization has also brought businesses and people together and therefore the impacts on global business are huge and remarkable (Tanushevski, 2016). International business and globalization are interrelated in which international organisations have taken benefits of globalization while contributing towards development. Globalization has made everything available worldwide that were considered difficult for businesses along with making utilisation of resources that were not easy before (Nwaigwe & Okoye, 2015). Many service industries as well as merchandise business along with small traders have benefitted from global transactions. Globalization has resulted bringing a wave of entrepreneurship along with encouraging people for starting new ventures of their own. In other words, globalization has brought an era of oneness that was not present before. Bad impacts of globalization are not faced by those firms who match up with competition and gain from global markets. Examples of successful businesses that have expand their business internationally and gained from globalisation are Starbucks, Coca Cola and McDonalds.
One of the goals of international managers is to develop innovative skills and competitive nature in global marketplace to stay ahead of the game. The changing demands of international market have made difficult for today’s managers in integrating necessary skills required for brining work efficiency in global marketplace. Even the change have kept most of the mangers and decision makers react to global change rather than addressing changes of globalization that will be further increased (Zynczak, 2012). Determining exact skills for global managers becomes difficult unless innovative ways are developed in learning about effective ways of global management. New skills are developed by making reference to innovative decision making methods that requires global managers keep up to date. Global managers along with human resource departments are entitled to consider groups and individual tasks that need to be managed in global context. Multiple IQ’s of global manager’s helps in developing inventories in individual level where decisions are made after recognising present needs of business (Harvey et al., 2009). Global tasks of complex nature are managed by managers after considering group decisions that predominantly insures that sufficient aptitude had been provided in global decisions. Group interactions are given more importance while making global decisions which make global managers face more competencies within organisation’s management. Outsourcing and of shoring decisions made by managers must ensure the requirements of local and international environment so that they do not have to face environmental configuration after making decisions. Economic developments in different phases of industrial development like pre development stage, industry setup and post industrialised stage have direct impact on strategically made decision of global managers. The kind of decision made influences the economic growth of countries also and therefore global managers need to employ strategic consideration before coming up with any idea. Internal environment of organisations situated in different countries are completely depended on global manager and thus requires managers addressing each MNC unit before making any alteration in operations (Guedes & Faria, 2007).
Impact of Globalization on Businesses
Outsourcing and off shoring has been a part of business for developing success in it from very long time. With globalization, it has become more relevant in trade processes where global markets have found new-fangled perception in off shoring and outsourcing. Its incorporation brought success in business by making transition in business process outsourcing in universal marketplace. Its presence can be seen in almost every industry and has proved as an evidence for bringing successful changes in many organisations. Outsourcing and off shoring has brought innovations in business practices by connecting nations towards core development (Mukherjee, 2014). Possibilities of future wars have also been reduced since all countries lies upon each other regarding business requirements. Its influence can be seen in globalization process as outsourcing and off shoring involves exchange of products and services in diverse countries thereby resulting in increase of foreign capital flow. Cultural diversity along with working under diversified environment is enabled that facilitates global technological infrastructure. The impacts of outsourcing and off shoring are bringing fast developments in organizations along with widening its range in various benefits. To understand the topic clearly, this essay will use McDonald’s case study in which the company has proved that globalization has been core reason behind its success in international market.
McDonalds is a multinational company whose headquarters is situated in Illinois of US. From globalization and outsourcing, McDonalds has become one of the biggest chains of fast food suppliers in universe. McDonalds Brothers together with Ray Croc opened its first restaurant n United States and have been successful in establishing more than 30,000 food chains in around 120 states situated at different parts of the world. Presently, the company recognises annual turnover not less than 210.49 billion dollars and with the velocity it is growing, shall incur highly increased revenues in future. Main Products Company deals in are eatables and carbonated drinks like Coca Cola and its products along with providing many offer and promotions. Company also controls many eating houses like Donatos Pizza, Aroma Cafe, etc. Over half of the company’s eating places are situated overseas that shows globalisation schemes of McDonalds’s. McDonalds entered Canadian market in the year 1967 followed by partnership with Den Fujita in 1971, it entered Japan’s Tokyo. After twenty years it again entered Moscow city of Russia in 1990 and at the time of opening, over 40,000 customers were found in ques. Later it developed its chain in China, Poland, India and other East European countries that show global concern of McDonalds Corporation (Tanahashi, 2008).
Case Study: McDonald’s
One thing global companies understood is that human resource department and efficient global manager can develop consumer brand loyalty by bringing strategic development in the management areas. In a multinational company, positions needs to be filled by those employees who can mange timely events and possess skilled qualities along with familiarising with company’s practices and policies (Shaban, 2016). Of shoring and outsourcing assignments bring opportunities and global managers are responsible for making significant steps to benefit out of them (Nwaigwe & Okoye, 2015). International companies adopt different approaches in recruiting and operating their business in fresh markets. Language and culture barriers challenged the most while making globalisation strategy for the McDonalds. The company has to face many challenges in its growth period. Few countries in which McDonalds entered the company had to face many challenges like anti WTO organisation, anti-globalization, anti America and anti capitalism etc. (Sarazin, 2010)Even, WHO argued to McDonalds Corporation claiming whatever products were sold by McDonalds were harmful to youngsters and teenagers. Increase in obesity was seen among people that concerned many people thereby avoiding its products. Along with it many competitors were faced by the company especially in US market like Starbucks, KFC, Subway, and Pizza Hut, etc. McDonalds also faces challenges in American markets as same store sales strategy decreased its sales over there. This challenge has affected company’s overall international franchise strategy along with effecting future applications of franchise policies. The company even gave consideration in changing its menu, but was unsuccessful. Here the company requires making research on customers’ demands so that crowd sourcing strategy can be applied for making the brand more consumers oriented. Again, in 1990 McDonalds was suspected in maintaining cleanliness in its kitchen and services that impacted its reputation worldwide. McDonalds also face competencies in fast food business for which maintenance of quality of food and service along with cleanliness becomes very significant. The company requires implementing internal controls while introducing inspections and regulations so that future error is avoided (Kim, 2015).
Although McDonalds faced many challenges in its growth path, by finding opportunities in it the company has been able to capture global market in food industry with much recognition. The company follows the policy “Think Global Act Local” and for this McDonalds applies transnational strategy in global integration and local responsiveness context. The company realised that overseas market requires high degree of local response and as McDonald’s business has been growing, they require managing global business standards according to different regions (Vitasek, 2014). The supply chain of the company needed to be constructed after considering local culture along with other economic and political demands. It is apparent that strategies are been taken significantly in regards to supply chain management and business outsourcing and off shoring. It becomes integral part of businesses to undertake CSR while moving together with ethical and social responsible way. McDonalds have also undertaken similar steps while outsourcing its IT and supply chain relationships in various countries (Rathi, 2013). Steps undertaken by McDonalds for strengthening their outsourcing strategies included supply chain sustainability by making partnerships with non government organisation. Following it, the company made a Suppliers code of conduct along with increasing supplier’s capacity in rising economies. The supply chain goals initiated protocols for identifying and measuring sustainable beef production, augmented usage of bio fuels, sustainable logistics and promoting environmental friendly operations. Even the performance index tools had helped McDonalds evaluate present suppliers according to different needs like social and environmental metrics.
Importance of Global Managers and Human Resource Departments
McDonalds emphasised on local management to get better response in international market. It brought culture of innovation and better customer feedback by having local management to address local employees more effectively. Through franchise model in of shore countries, McDonalds reduced cost setting in new ventures of different countries. Political threats has always bothered the company and has affected its global decisions regarding outsourcing its products and services (Tanushevski, 2016). But, by making collaboration and mutual connectivity with local authorities, McDonalds have been able to gain sustainable social and long term relationship within many countries. For example, in countries like India where people do not prefer eating beef due to religious beliefs, McDonalds customised its products offering in accordance with local beliefs and through ways it can avoid political offences. Environmental strategies are new concept that has developed many countries by enforcing environmental laws for making MNC’s comply with norms and regulations (Pine, 2017). Environmental friendly acts brought opportunity to McDonalds by building a brand that enabled compilation of country’s laws. McDonalds also engaged itself in CSR activities by providing nutritious and healthy foods along with maintaining effective supply chain management. The company also came up with few products that have less calories elements in it for obesity concerned people (Bailey, 2017).
The success behind organisations is determined by its foundation principles that require matching with environmental demands and customer’s desire (Harvey et al., 2009). McDonald actively operated under four principles to overcome its issues. These included excellent services, differentiated quality, and affordability of products and standardisation of operations. These four pillars are utilised by international companies to maintain innovation and environment while managing customer satisfaction. In accordance with it, McDonalds prioritised speed in its operations from taking orders till delivery of it. From the time customers enters any eating area and places order, the company’s staff remains answerable in quick fashion along with prompt delivering their requirements so that their customers feel satisfied. The company also follows various promotional schemes to attract their customers and make them visit more often (Mujtaba, 2007).
Global companies needs to standardise there systems and processes to provide efficient and effective management for smooth running of business in diversified territories. By integrating effective outsourcing strategies across various continents, the company associated standardisation in its business units (Cornell University, 2010). For example, the policy of providing food after making them on the time of order has standardised the McDonalds work culture. This even reduced McDonalds cost of keeping ready products stock along with making work culture more transparent in sharing product information with its stakeholders. With the increase in challenges of competitors, the company followed pricing strategy while implementing outsourcing techniques in its business. The countries in which McDonalds entered followed a pricing strategy after making an evaluation of countries GDP, local inflation and currency exchange rates. The company’s main targeted customers were middle and upper class people who can afford products prices and they started targeting middle class people first. The company realised outsourcing benefits by increasing chain of restaurants for maximising sales and revenues along with enhancing international profitability. The opportunity by increasing sales was accomplished by McDonalds through realisation of profits in existing chains. Through better investment structure, the company made its operations in improved manner. Refining existing products and effective outsourcing strategies made operation costs minimal along with realising effective marketing in different countries. With globalisation, McDonalds earned from two sources, one in home country and secondly the foreign countries it outsourced its operations (Gadsden, 2014).
Conclusion
During the growth stages, McDonalds had to face many problems especially during the foreign countries entry phase. The events of 2012 recorded flicking sales in McDonalds international and home country market in which it had to face multiple set of international issues. The restaurants were recorded having moderate growth in 2012 while losing customer’s confidence in its products. For consecutive five years, McDonalds faced low revenue figures when financial crisis hit European regions. The new trend of outsourcing was proved to be a failure in the early years of McDonalds in spite of taking strategic decisions and effective tactics in international regions. Competitive environment and decline of customer satisfaction have reduced company’s sales many times (Kapoor, n.d.). Establishments of rivalries and other dominant companies in foreign countries like Wendy’s, Yum Brands and Burger King have always made issues arising in companies operations. Moreover, companies that provided with more fresh food were considered by customers thus discarding long term loyalty with McDonalds. With the emergence of rival companies, human resource management have envisioned mass reduction of efficient labour. McDonalds also faced severe problems where many units of the company were found lacking efficient staff to compete with rival companies. Many of the McDonalds units were closed due to this reason which shows self defeating mechanisms faced by company. The global strategies of the company keeps fixed pricing strategies according to which its franchises are operated. This has resulted making many customers resistant from taking McDonald products due to high pricing. From McDonald’s point of view, outsourcing in foreign countries brought additional cost of operations that demanded higher price from its franchises. Managing global franchises became challenging for the company as individual units opted to conduct their operations under their own style while denying the conformity of restaurant needs in terms of service.
In spite of providing quality products and meal values, McDonalds have been accused by health practitioners by highlighting their cynic in nutrition echelon of its stuff. They have also been acclaimed of hurting children food balance by enabling junky foods at several places. Its outsourcing strategy in few markets have generated cultural conflicts of awareness like slow food customs in Italy. In Italy, local public sensitizes consumers for snubbing American food and embrace only national cuisines. Lastly, the advertising strategies followed by the company are of traditional forms that fail to compare against contemporary technological marketing. For example, comparing customer touch from emerging influence of mobile marketing does not allows McDonalds gathering enough information about present demands and customer preferences since the company does not follow mobile marketing strategy. Along with it, McDonalds fails to match marketing techniques in new trend of social media marketing due to which it loses personal contacts with its customers and local public.
Conclusion
Outsourcing and off shoring are largely responsible in bringing globalization in today’s businesses. Impacts of globalization can be seen in organisations from both negative and positive perspectives. The positive impact of it brings advancements and development of nations along with utilising available resources to its maximum. Negative impact of globalization focuses on unsteadiness of economic systems in diverse countries along with universal financial crisis. Globalization and role of global managers can be made clear after analysing McDonald’s case study by evaluating the procedures company followed in undertaking globalization in its business. McDonalds is one of the successful businesses who have given an example about the way successful company’s implements globalization through of shoring and outsourcing. With the quick embracement of globalisation, the company had been able to expand its business in diversified countries as well as still progressing to explore its augmentation potential in upcoming years. The leaders of the company have established the company’s reputation worldwide by making ready to eat food available at affordable price. However, challenges and issues bothered the company many times while settling in foreign countries, McDonalds slowly catered all of them with the help of strategic management and sound leadership control in global context. On concluding note it can be said that globalization of business has brought auspicious effects and all companies must implement outsourcing and of shoring in their activities if they desire global recognition.
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