Managing Globalization and Outsourcing
Discuss about the Globalization And Outsourcing And Off Shoring.
Globalization is a process in which regional societies, economies and cultures become integrated through trade, communication and transportation. This term is mostly associated with ‘economic globalization’ where nations gets engaged to form integrated economic structure through foreign investments, capital flow, technology awareness and migration. Globalization can also be referred to transnational transmission of languages, ideas and culture through acculturation. This process has brought many impacts on environment, political systems and cultural developments along with bringing prosperity in human and societies. From last few decades, globalization has increased to a remarkable extent in which all the companies are getting more involved in sharing global marketplace. Missing regulations and spread of corruption are few of the negative impacts realised through globalization in which main motive of the companies becomes profiteering only (Rzepka & H?awko, 2016). Therefore many countries and WTO (World Trade Organisation) has enabled free flow of trade among borders after making negotiable contracts and agreements to monitor implementation of operations. Globalisation is also associated with outsourcing and off shoring in communication process of logistics and transport. Both, globalisation and outsourcing contributes to offer this world with high tech global civilisation. Through media marketing and constant flow of information between countries, outsourcing and globalisation makes many organisations realise enhanced growth in businesses (Bulajic & Domazet, 2012).
In order to stay ahead of the game, global managers are developing key knowledge within themselves for bringing administrative reforms in organisations. Global leaders require leadership qualities that gears impetus innovation and critical implementation of business processes. The globalization process requires progressive alteration in assessment of organisations for which management requires giving consideration to the human resource management of the firm (Kapoor, n.d.). For managing diversified cultures and regions, organisations involve global managers who can think and manage people from global perspective while possessing global skills and global mind. Cultural empathy and desirable skills makes them more adaptable in workplaces where other employees seek guidance from their global manager (Gurnani, 2015). In this changing environment, people needs to be modified in order to adopt diversified behaviours and make changes in their attitudes to gain long term relationship within workplaces. Through critical frameworks and models, global mangers can give value to actions while concentrating on realities. Gaining optimum knowledge regarding globalization, outsourcing and off shoring is required so that managers can integrate comprehensive aspect of globalization within organisations. Nowadays government and other responsible agents of them are studying organisations so that regulations and protocols are followed by senior staff of the companies. Therefore, taking necessary measures becomes significant for which companies hire top quality experts in their global management departments (Secretariat , 2000).
The Role of Global Managers
There is no uncertainty that outsourcing and off shoring has changed the economic standards of many countries worldwide. Countries holding huge amount of human resource and natural assets becomes target for foreign countries where they make investments for gaining future profits. This trend has been visualised largely because of the presence of new technologies and media networking’s that had brought significant changes especially in big organisations. Outsourcing is a tool that gives shape to competitive advantages and generation of strategic advantages in businesses (Bulajic & Domazet, 2012). Strategies of outsourcing and off shoring results in internationalisation of companies while bringing stimulation in the operations towards international expansion. They also improve growth of firms by undertaking considerable use of available resources and making connections between nations. Besides, organisations who have already implemented globalization and outsourcing in their management shall decide critically upon various departments and other materials to affiliate with foreign branches. Global scale acting requires specialists who not only anticipates future but also undertake outcomes of present economic and political activities. To identify further about challenges, opportunities and problems associated with global companies, this essay will use the case of globalisation process in Coca Cola Company.
One of the most popular brands that deal in food and beverage industry is Coca Cola that was established in the year 1886 in Georgia’s Atlanta. Presently, Coca Cola is considered as top company in non alcoholic beverages and leading manufacturer and distributor of food products. Syrups and concentrates are sold in packages and bottles for final dilutions in various factory outlets for making end products for its customers (Gomez, 2012). The company produces about 500 various kinds of brands in beverages that are distributed all over the world. The globalisation journey of the company began in the year 1920 and presently it operates in more than 200 countries. Coca Cola shares its key formula with its stakeholders “Provide a moment of refreshment for a small amount of money- a million times a day” (World of Coca Cola News, 2018). Coca Cola has a great reputation as producer and distribution network systems globally where the systems are designed in such a manner that employees put their entire effort in fulfilling the core objective of the company. The products of the company is been liked by people and have proved as one of the best soft drink (non alcoholic) all over the world.
To enter any international market, there are several modes that organisations follow according to their business. Coca Cola uses several stages of entry in foreign markets depending upon the markets present there. Main considerations of the company are size of market and population, quantity of products that can be sold in the market and lastly the scale of population that uses similar kind of products of the company. Once they select and identify the market, considering the scale of resource commitments becomes next priority. Along with it, company also finds out the extent to which Coca Cola can get involved in operation in those countries. They first helps their bottlers set up their firms in selected companies since Coca Cola follow bottling strategy. By making equity investments, they provide funding to their bottlers. This has benefitted the firm many times during the rise of production capacity and high concentrated sales. For enabling long term relationships, Coca Cola considers reducing their ownership as bottlers by making local authorities taking part in their business activities. However, the company monitors the production levels for quality maintenance. Coca Cola is one of the global brands that have standardised its operations with number of alterations in its growth stages. Although the company had to struggle many times during the entry phases in diverse countries, the integrated adaptation approach of the company had been supported by many associates also.
Coca Cola: A Case Study
After the firm selects its distributors and suppliers, considering challenges while dealing with them also becomes necessary. Coca Cola has faced many challenges during its globalization phase. In some countries it entered had limited storage facility while some had other issues like lack of money for inventories, transportation problems, lack of digitalisation etc. With the globalization, bad aspects of foreign diversification also affect the company’s global policies. Coca Cola also faced many cultural challenges like in few countries it entered followed strict national cuisines and criticised excessive intake of soft drinks. The health conscious and obesity concerned people started avoiding fasts food and soft drinks while moving towards healthier food options. These challenges affected the growth of the company by reducing its overall turnover (Stewart, 2014). Coca Cola also had to face competition with local companies during the entry mode. The local manufacturers and suppliers remained tough and opposed the entry of Coca Cola brand into their country as they would have to face competition with it. Therefore company started adopting bottling technique to make local suppliers contended. Political challenges like country laws and restrictions restricted the growth of Coca Cola in many regions where country‘s government rejected entry of foreign company for safeguarding their own home companies. These obstacles have many times restricted global expansion of the company in desired countries. Coca Cola has to face competitive challenges also where its strong competitors like PepsiCo and Dr Pepper Snapple gives constant confront in food and beverage market. Coca Cola have wide range of products in juices and water that helped the company build a strong portfolio. But, challenges related to health and safety made company make alteration in its recipes several times during manufacturing process (THE COCA-COLA COMPANY, 2015). This not only disturbed its manufacturing processes but also wasted huge resources that were already purchased for manufacturing. Public pressurised for reducing sugar in regular diet that automatically dropped company’s sale as it deals mainly with carbonated soft drinks. Alternative products like Fairlife milk made huge impact on company’s sale in America where people opted for regular milk products and functional beverages rather than highly sweetened carbonated drinks (Telford, 2015).
During the globalisation phase, Coca Cola entailed many challenges but with strategic management and sound decision making quality, was able to convert challenges into opportunities. During outsourcing and off shoring process, global companies have to face many legal and political difficulties like compilation of country’s laws along problems like managing transportation, storage in warehouses and environment hazards. An effective global team will always respond to such difficulties rather than only addressing them (RajaRajeswari, 2010). Similarly Coca Cola’s efficient management team was able to make their company sustain in the global environment with critical thought out ways. Coca Cola made many acquisitions in its lifetime which also helped company in expanding its business in lesser time. In the year 2006, the company acquired Kerry Beverages that made Coca Cola enter and capture Chinese market. Later, to expand its business in Germany, Coca Cola acquired Apollinaris and engaged itself in sparkling mineral water over there. In South Africa, company owns 100% interest in one of the company situated there named TJC Holdings. In New Zealand and Australia many acquisitions were made during the year 2006 that not only expanded Coca Cola’s wings but also strengthened its international operations. It added advantage to the company along with realising increased revenues from developed and developing countries (Gomez, 2012).
Modes of Entry in Foreign Markets
Bottled water has been entering markets of almost every country which had been identified by Coca Cola. Bottled water business itself generated annual revenue of 15.5 billion dollars in 2006. Due to the increase of health concerned people, the consumption of bottled water increased and the opportunity behind it was benefitted by Coca Cola. Coca Cola made its bottled water little sweetened that made customers prefer buying it over other common bottled water and within no time Dasani, the brand of Coca Cola became third largest seller of bottled water. Growing population within the countries Coca Cola operated also brought opportunity for the company by getting huge turnovers and increased sales. Moreover, the busy lifestyles of people that made them choose buying ready to eat food and canned juices, made Coca Cola products more preferable among them.
In outsourcing process, economy is highly influenced by import and export activities where countries integrates economies and becomes depended on each other regarding business scaffold (Anon., 2013). Therefore, recession in one country affects other countries also as consumer markets are considered as an important aspect in overall economy of the country (Architexa , 2017). In global companies, business processes are highly depended on tastes and preferences of available customers along with the scale products that can be sold in the market. Coca Cola has given a great example here by forming multinational units in different countries while making expansion strategies in prompt manner. The participation of local public in Company’s share has also enabled company gain local support due to which it has been operating in more than 200 countries successfully. Around 84,000 suppliers outsource raw materials in various countries that make up to 70% of company’s turnover from foreign countries. Due to globalisation and off shoring, Coca Cola had became a reputed company with constant growth and maintaining high quality where in early stages it had to request shopkeepers for selling its products under Coca Cola brand. The foundation strategy of the company was to maintain unified colour of the brand which is red, and thus became a popular strategy for other companies also (Vontis & Sharp, 2003). During World War II and Cold war, Coca Cola expanded in several countries and was marked as accurate globalised corporation.
During the growth stages, Coca Cola also faced many problems that show hurdles are also a part of globalisation process. The company is highly depended on bottle manufacturers across the world. Due to this dependency, bottle maker’s partners make their individual business decisions. Their decisions may not align with Coca Cola’s business standard always for which the company has to face many issues (Chalamish, 2017). Many bottle partners even have the rights to produce bottles for other brands also which makes company face severe delays. Competitive factors have always bothered the company. PepsiCo is presently the biggest rival of Coca Cola which had made the company change its pricing strategy many times to align with it. Decline in share market prices in home country also affects the company as it shows that the customers have started liking other drinks or have became more health conscious. Other problem faced is related to governmental force which has reduced the scale of water usage in manufacturing plants in most of the countries. In reference to globalization, there has been many ethical issues arising from international organisations where cross border cultural difference had made many of them misconduct during operations (Ambavale & Surti, 2015). Operating internationally requires organisations operate under cross cultural setting along with maintaining social norms and values (Irani & Noruzi, 2011). Coca Cola has faced ethical issues and moral decision problems due to which the stock prices of the company had to face breakdown many times. The problem in Belgium in 1999 when few children became ill after consuming Coca Cola product made the company fall into ethical and legal stance. Soon after the incident, the country boycotted Coca Cola products and the company had to face severe destruction in its reputation. The neighbouring countries like Netherland and Luxembourg also followed the suit and summoned all the products of Coca Cola throughout the country. One of the batches of the finished products was found to be a bad lot filled with carbon dioxide. Company made a quick announcement of it but social media made up the story and the company had to face worse situations. Coca Cola-France case also proved nightmare for the company when more than hundred people fell ill due to consumption of Coca Cola products. All the products of the company were banned in France until the issue was resolved. The company also faced problems in marketing with European countries where they followed anti-trust laws. Coca Cola wanted to make a merger with a French company named Orangina but, over aggressive nature of people over there proved too much to bear for foreign companies to deal with. Coca Cola even crossed the line of antitrust in Italian country where the company was sued by Italian government. Italy won the case which made Coca Cola fall under suspicion by entire nation about presence of ethical stance in it.
Challenges and Opportunities in Globalization
Conclusion
Globalisation, outsourcing and off shoring are inter related terms in which companies needs to respond to the demands of local customization and global standardization. Excessive emphasis on accumulating efficiencies with paradigm of marketing mix can result in inflexibility of operations. On the other hand, to capitalize on local responsiveness, overlooking opportunities behind standardization shall also be avoided. Challenges and opportunities are two features associated with globalization for which companies are considering recruiting top level management teams for avoiding problems in global management. Principles behind successful organisations global strategy are to provide with offerings that can be designed according to the preference of different market. Therefore, success behind globalisation can be attained only if a company balances between customization and standardization. The above case study example had made clear that globalization is not an easy process that comes with many challenges and problems. Coca Cola had to suffer many issues during its growth period but with efficient global team, it had become one of the top brands in its category. Outsourcing and off shoring related decisions at the time of supply chain and logistics of the company shows that they are integral part of globalization process and cannot be overlooked while making globalization strategy.
References
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