Benefits and challenges of globalisation and international business
Discuss about the Communities and Business Organisations.
Globalisation is the process of connecting firms, people and government of diversified countries to get integrated with globalisation of companies. During the process, both distribution as well as manufacturing takes place along with making sales in marketplace across borders which links different countries through global trade and commerce. Impact of globalisation and international businesses is enormous and remarkable as it has brought businesses and people mush closer. International business and globalisation are interrelated terms where global organisations have taken benefit of globalisation process through incessant development (Edwin & Okpara, 2015). The idea behind making companies global is to make things accessible at desired places, irrespective of countries borders along with utilising available resources to the extreme. Service industry as well as manufacturing firms have both benefitted from globalisation process along with other small units related to them. If organisations are able to cope with current international business needs, they gain from international markets whereas rest of the world benefits by getting desired products and services (Muciimi & i Ngumo, 2014). The reason behind augmentation of globalisation is astounding growth in technological and communicational fields. Enhanced technology and internet has resulted in fast development of internationalisation process along with development of human civilisation. As compared to earlier years, businesses have been seen from different perspective where people demands for more innovative and developed products. Environmental changes in last few decades have also made changes in business policies where organisations ventures across borders in detection of business opportunities. Today, products manufactured in one country are easily available in different countries which show the dimension in which businesses have developed across borders and are likely to get more augmented in upcoming years. Although globalisation is a common practice adopted by today’s firms, its impacts are also realised by them that can affect organisations both negatively as well as positively. Globalisation enables sound relationships among diversified countries along with developing international trade. However, negative impacts of it like exploitation of foreign county resources, manipulation of market trend, unethical code in practices along with degradation of small scale industries makes globalisation process fall into negative stance (Okoye & Nwaigwe, 2015).
Staying ahead of the game becomes difficult for those managers who fail to understand the reason behind globalisation of their company along with unawareness of globalisation effects. Tasks and duties of global managers become difficult as globalisation process entails complex issues and tricky situations. Global companies’ possesses diversified people who belong to different cultures and backgrounds. Managing work force under such situations requires managers undertaking training of diversified languages so that communication between them and employees becomes operative (Bertrán, 2006). Along with it, global managers require having future envisaging capabilities to remain ahead of the game. This means, a global manager must think about different issues from broader perspective while focussing more on development of firm in attaining firm’s objectives. International managers responsibility does not limits in home country only and thus they require taking responsibility of nurturing people in operating countries also by considering their ideas and demands. Along with it, global managers must be aware of different countries laws and regulations so that any unethical move during internationalisation process is avoided (Tanushevski, 2016). Leadership traits and moral insights of global leaders become significant while managing employee’s of global firms. For this, they need to implement effective leadership theories in their practices so that valuable leadership model is utilised for enhancing work force of employees. Other personal qualities like intellectual power, sound communicational skill, motivational spirit and ethics in work policies makes global manager’s best suited for global firms.
Importance of effective global management
Globalisation has been possible because of increase in outsourcing and off shoring activities of companies across borders. Outsourcing has provided many companies, especially manufacturing hubs, with cheap labours and desired resources that enabled them to gain competitive advantage over the others (Pine, 2017). Even government supports internationalisation process as both outsourcing as well as outsourced countries benefits from international trade and commerce. However, government monitors these activities so that violation of laws and regulation can be avoided. Internationalisation has saved many companies from getting a breakdown during economic crisis in countries which shows positive effects of globalisation. With outsourcing function, the revenues realised from other countries have provided them with great help during difficult times. As more and more people are becoming aware of globalisation and outsourcing advantages, they try to implement globalisation in their businesses to get more concentrated organisational establishments. Outsourcing and off shoring have not only aided with high profits but also helped in getting desired labour and elongated marketplace (Palugod & Palugod, 2011). With diversified cultured teams, business practices have been able to become more customised and systematic that allows smooth transferring of products and services. Therefore, it can be said that outsourcing and off shoring of activities have contributed in effective globalisation of companies. In order to get practical knowledge about global companies, this report will identify a case study of a very popular brand, MacDonald’s, who deals in food and beverages industry in more than 100 countries.
MacDonald is one of the largest chain suppliers dealing in food and beverages whose franchise cum retail restaurants are situated all over the globe. The company was established in the year 1955 by Ray Kroc and went public in the year 1965. Presently MacDonald’s operates in around 30,000 food outlets situated in more than 100 countries and have became one of the most recognisable brands in global marketplace. From the beginning, company targets its customers that include children with parents, teenagers and corporate people. Perhaps mostly the company is been seen targeting more towards children along with their parents by introducing gifts attached with combo meal packs and making the environment of restaurants more family oriented.
MacDonald also treats their business partners as integral part of their business and they are allowed to decide on their own about work timings according to market requirements and thus are able to provide with good quality food. The company’s mission is to become a powerful brand in restaurant business and supply chain. The company tries to maintain long term and transparent relationship with its outsourcing companies and suppliers to carry business with trust and loyalty (Vitasek et al., n.d.). Macdonald’s also deals in other brand products like Coca Cola along with offering many discounts and promotions to keep its customers attracted. Company also controls other eating house across the globe like Aroma Cafe, Donatos Pizza and many more. In regards to emerging strategies while expanding its business globally, MacDonald focused more upon emerging markets (Rathi, 2013). The company not only deals with developed nations but also focuses on developing countries as its main targeted customers belong to middle and upper middle class people. Company tries to deliver service in those areas where the demand for fast food is high as success in those regions can become comparatively easier. MacDonald’s have incredible niche while dealing with food varieties and it specialises in providing food according to cultural demand of diversified regions. For example, in countries like India, where beef eating is prohibited, Macdonald has altered some of its food recipes to ensure compiling with country laws.
Case study of MacDonald’s global strategies
Globalisation of companies requires global standards in its operation. Despite Macdonald tries to maintain lawful and transparent business, the outsourcing of company’s supply chain business has always provided company with additional challenges. There were many times the company had to face health and food safety scandals due to which all its retail stores had to face severe breakdown (Food Logistics, 2015). The China’s scandal in which few of its products were found unhealthy and contained harsh chemicals, made company fall under ethical stand along with reducing its market scale during that time (Erickson, 2016). Therefore the company has to deal with great precautions while dealing with outsourcing supply chains. Off shoring and outsourcing undoubtedly brings many opportunities in business and global mangers play a significant part while making decisions regarding global management. Recruitment and managing staffs in international companies are made after considering global business requirements so that entering fresh markets becomes more concentrated. Although MacDonald has high spirited and efficient management, problems related to diversified culture and different languages have always challenged the company during entry phase in new countries. Even the company faced many challenges while selecting their supply chain partners as any unwanted move of them can hamper company’s reputation in outsourcing country (Vitasek, 2014).
Internationalisation challenges during entrance in few countries have made MacDonald growth slowed in few desired regions like Italy and Germany. The public and local government over there supported Anti-American, Anti Fast-food and Anti Capitalism laws that restricted entry of foreign brands in those countries. Food departments and eatable products dealing companies have to pass WHO standards. Few products MacDonald deals in came under WHO standards where the products proved harmful to people, especially children. This made company alter its recipes many times to maintain food standards irrespective food savour. Even few of its kitchen were found having inefficient kitchen management due to which the store needed to be closed until renovation. This even affected company’s reputation in public image as cleanliness in kitchen environment is very essential to maintain food quality. Changing demands in customer preferences and concern for high obesity food products challenges MacDonald to make reduced obesity food products. Also, many customers have become aware of fast food negative effects and thus demands in freshly cooked food. Even the company has to face competition challenges from other brands like KFC, Starbucks and Subway for which Macdonald’s had to face reduced sales many times. During outsourcing of supply chain in foreign countries, the challenges related to supply chain partners have also affected company’s sales in those areas. The supply partners many times demand undertaking businesses over there according to their norms which often violates company’s core objectives (Vitasek, 2014).
Challenges faced by MacDonald’s in meeting global standards and ensuring food safety
Many challenges have come in MacDonald growth path and globalisation process but, with strategic formulation and sound management system, the company has been able to sustain the global market with strong reputation. The company has been able to recognise opportunities out of challenges by capturing global market after considering issues and difficulties in its outsourcing countries. The CEO of the company believes in ‘think global and act local’. With such beliefs, MacDonald has remained transparent while maintaining transnational business strategy along with integrating local responsiveness in global environment (Tanahashi, 2008). The outsourcing partners of different countries reacted according to their country’s culture and thus MacDonald realised to remain responsive to their reaction (Kim, 2015). They tried to manage global transaction according to their outsourcing and of shoring countries regulations which avoided business conflicts in foreign countries. Even the supply chain partners are managed after considering local needs and other political and economic demands. In outsourcing and off shoring business, globalisation strategies need to be made significantly as they reflect corporate social responsibility of the companies. MacDonald from the beginning has tried to maintain CSR strategies in its business policies which is the reason behind the growth of its outsourcing and off shoring activities in diversified countries. Macdonald also makes partners with country government to maintain friendly relation with them. This strategy enhances company sales with governmental support in those regions along with getting support from food regulators of the countries. Since the company faces challenges in maintaining supply chain partners demands, Macdonald have made a common code of conduct for them that requires to agreed by them during making of partnership agreements. This has saved company from getting violated in foreign countries that was earlier recognised by the company many times. Following it, Macdonald made code of conduct for its store franchise partners also to maintain supplier’s capacity during economic rise. The suppliers initiated protocols to determine and identify sustainable production of required resources and beef along with other bio fuels required for production purposes. The supply chain logistics promoted environmental friendly operations by considering reduction in green house gases by adopting enhanced tools in their processes. Therefore, they were able to meet all the required socio economic and corporate social metrics (Bailey, 2017).
Opportunities during maintenance of local franchise management emphasised growth in those areas through innovation and getting customers feedbacks. In international market, getting support from local customers becomes very important and thus MacDonald has tried to alter its menu many times according to their preferences. The franchise models of off shoring countries were established with cost reductive ways that helped their partners realise profits in shorter time period (Mujtaba, 2007). Even the services provided in those outlets were made sure of meeting with standardise operations, distinguished food quality and affordability of products around the clock (Gadsden, 2014). These principles helped MacDonald’s penetrate in new countries easily as they contained every principle of internationalisation demands. The company also followed pricing strategy to gain enhanced sales while developing outsourcing techniques in business. The company evaluated country’s GDP and economic conditions along with measuring other inflation and currency toll. This helped MacDonald’s in making strategic choices between franchise partners as effective partnerships always provides with effective businesses. Through sound investment structures in outsourcing franchises and supply chain, MacDonald have made its operation in foreign countries efficiently while realising successful marketing policies in diversified countries.
Like many global companies, MacDonald also had to face many problems during globalisation process. MacDonald’s has to face assumptions made in its food products by health practitioners. Macdonald’s food highlighted sceptic in nutritional stratum where some of its food products were believed to be contained of unhealthy elements. Many countries even acclaimed that fast food products imbalanced children food diet and thus demanded reducing its stores in cities. Regarding Macdonald’s outsourcing function, the strategy used by the company have generated cultural conflicts in few countries like slowing down of regional cuisines. For example, in Italy people are more sentimental regarding food choices and snubbing on foreign country food made them oppose entrance of MacDonald outlets.
During entry phase and partnering with new outsourcing supply chain retailers, MacDonald had to make many compromises regarding their term and conditions for which it has to follow different set of guidelines for each outsourcing country. Economic disruption in outsourcing countries has also brought issues with regular functions in the company. For example, the European crisis of 2012 abridged company’s sales during that time along with its home country sale due to downsizing of its supply partner’s. For five consecutive years Macdonald faced stumpy revenues which slowed its globalisation process utterly. Outsourcing trends have also provided with failures in its early stages of globalisation as the management lacked adequate knowledge about new emerging trends. But, with strategic management and effective policies, company’s global manager handled the situation promptly and gave Macdonald a new facade. Constant competition with other brands has also bothered the company where Macdonald has to alter its food menus many times. While altering food menu, the company had to suffer failures as few of its new products were not liked by people. And thus other rival companies gained advantage out of it. Availability of desired labour and skilled professional in all countries have been constant reason for company’s concern as they play significant role in creation of desired products for the company (Toronto Star Newspapers Ltd, 2015). In countries were demographic changes were seen in large number, Macdonald had to face problems while selecting appropriate staff for managing their retail outlets. Again, during intense situations and inappropriate management of few of its partners stores where they showed unsuitable mechanisms in food production made closures to the stores which also affected MacDonald’s reputation in those areas. The pricing strategy, as mentioned above showed that the company targeted middle and upper middle class people through fixed pricing strategy which made many lower middle class people against it along with reducing sales volume. Outsourcing its manufacturing units in foreign countries also added manufacturing costs to the company and thus demands elevated cost operations to maintain superior quality in franchise stores (Emirates, 2015).
Conclusion
Globalisation of companies is apparent for which managers of contemporary organisations are considering adaptation of modern business techniques and globalisation related work principles. Outsourcing and off shoring has given opportunity to organisations while making expansion strategies in international countries. The impacts of globalisation are also an area that necessitates consideration for which global managers are undertaking different work principles and theories of global management to stay ahead of the game. Negative impacts of globalisation also needs to be realised for which global companies hires superior quality staff that can handle outsourcing and off shoring activities exclusively in globalisation process of company. The above essay has verified the impacts of globalisation process from view point of researchers and authors while giving practical example of Macdonald case study. Since MacDonald is one of the leading brands worldwide, sufficient information about the company was realised that helped in getting profound knowledge about global company challenges, opportunities and problems in globalisation process. Although many issues and challenges faces global company but still globalising and internationalisation of organisations is apparent as it not only enhances business opportunities but also helps in uniting different nations.
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