The 21st century is termed as an era of globalization. Globalization is a process whereby a business or an organization starts operating on an international level (Ritzer, 2010, pp. 85). Before the advent of international business, companies solely operated in their home markets and were generally isolated and protected from the international business environment, due to restrictive trade and lower degree investments (Ritzer, 2010, pp. 126). However, the process of globalization has integrated several markets across the world. Owing to this integration, different economies have contributed towards the development of a unified global market. Globalization has encouraged firms to go global and operate outside their local market. It is healthy for businesses to go global because it helps in spreading risk, challenging new competitors and expanding the customer base (Steger, 2017, pp. 38). In short, globalization allows firms to see the world as one big marketplace for labor, capital, goods and services.
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Although globalization provides many new opportunities to the businesses yet it also poses a number of challenges. Literature holds that international businesses have to encounter certain challenges while operating in other countries (Steger, 2017; Ritzer, 2010). The purpose of this report is to analyse the effect of globalization on McDonald’s. There are many factors of globalization which affect the international business but this report will focus mainly on how technology and innovation, government policies and attitudes, corporate social responsibility and associated ethical issues and cultural factors influence Effect of Globalization on McDonald’s.
Since its inception in 1948, McDonald’s has expanded from a local burger stand to an international fast-food goliath, while developing its operations in more than 122 countries across the world (Sturcken, 2018). Nonetheless, the global chain has to face many challenges in order to continue its operations globally. So, the challenges McDonald’s faces because of globalization have been discussed in the following sections of the report.
The rapid advancements in technology have changed the face of almost every business. Now-a-days, customers have become more tech savvy than ever (Team, 2017). Thus, firms have to streamline their operations according to the changing demands of customers. According to Drew (2015), keeping pace with changing technology is one of the biggest stressors of a firm’s operations. By the same token, technology affected the business of McDonald’s to a great extent. First things first, the most significant impact of technology on the strategy of McDonald’s is that its enterprise resource planning- ERP. The firm has introduced a revamped menu and rapidly focuses on the integration of technology in its business operations to improve its efficiency. It has partnered with Fujitsu to forge a custom, agile IT support model in order to ensure ultra-high reliability in its tech-rich restaurants (Maclver, 2016). An eminent effect of technology on the operations of McDonald’s is the introduction of self-serving kiosks. These self-serving booths have automated the ordering system of the firm, thereby increasing its efficiency (Team, 2017).
Another impact of technology on the strategy of McDonald’s is the paradigm shift in customer relationship management. Owing to the mushroom growth of social media platforms, customer relationship management has become more cost effective and efficient. The direct marketing costs have reduced and McDonald’s can now reach its target audience across the world through Facebook, Twitter posts and YouTube videos. These platforms have reduced the costs entailed in customer acquisition, thereby increasing sale revenues
Apart from the benefits offered by technology, these interventions also pose some challenges to McDonald’s. The most significant impact of employing technological tools to automate McDonald’s’ systems is an increased employee turnover. The firm has faced backlash from employees who charged that they are unable to cope with high-end technology being introduced in McDonald’s systems. The issue is not confined to the home country i.e. U.S only, but employee stress due to the inability of keeping pace with new technology has been reported in several countries like China, India and Kenya (Patton, 2018)
The important aspects of globalization impacting the business of international companies are the facilitators and barriers of trade enforced by the governments of respective countries. The governments of host countries tend to establish many rules and regulations for foreign companies to guide their businesses in their territories. Regarding the effect of globalization on McDonald’s, it should be noticed that in its history of global expansion, the company has faced a number of barriers in international trade. The firm has come a long way fighting the anti-globalization inspired by communist attitudes of governments (Smith, 2014). It has faced a massive retaliation in Russia due to cold Western-Russian relations (Natalia, 2014). Nonetheless, by strengthening the local supply chain and educating local producers, McDonald’s managed to earn a strong position in Russia (Natalia, 2014). Similarly, the communist attitude of Chinese government acted as a barrier for McDonald’s’ entry in China. Red tape or bureaucratic nature of Chinese government necessitated the company to go through a lot of paperwork, unlike West, thereby making it difficult for McDonald’s to venture into China (Business Insider, 2010).
The effect of globalization on McDonald’s also entails minimum wage. McDonald’s has been facing minimum wage scandal since a long time. In 2015, it promised that it will pay its workers at the corporate owned rates in U.S. and will provide at least $1 per hour more than the bare minimum wage. However, the firm failed to fulfill its promise, thereby instigating a backlash from Government and employees over compliance issues (Fortune, 2018). Moreover, with the rise of gig economy and zero-hour contracts, the wage systems have changed to a great extent. McDonald’s is been in hot waters since it announced the choice of flexible or fixed contracts with minimum hours for its workers but failed to keep its words. The firm promised an increase of 17% in the average hourly pay of workers who are paid according to the number of hours (The Guardian, 2017).
The corporate social responsibility mandates a business to meet the ethical and legal expectations of its stakeholders, as well as the community in which it operates. It helps customers to differentiate a firm from its competitors and enhances its brand image (Beal, 2013). Thus, Corporate social responsibility- CSR is a most important element for the reputation of a company and it can be used to establish trust among stakeholders.
Effect of Globalization on McDonald’s has taken many measures in order to fulfill its corporate social responsibility. The firm claims “At McDonald’s®, giving back to the community has always been a key mission and part of our heritage” (Singh, 2010). Although the firm supports children with life threatening illnesses through Ronald McDonald house charities, yet Munshi (2015) claimed that the food offered by the corporation contributes to stoutness, rise in cholesterol levels and heart diseases. The author asserted that how the firm can promote health of the children when it contributes to the development of a number of health issues in children.
Some of the practices of Effect of Globalization on McDonald’s are also questionable from an environmental point of view. held that unlike a typical hamburger patty, a hamburger patty offered at McDonald’s contains meat from the beef obtained by more than thousand cattle, reared in different countries. It raises concerns about the potential contaminants that a McDonald’s’ patty might contain. Epidemiologically, the use of beef from multiple sources makes it difficult to trace the original source of contamination. Likewise, the firm was accused of using expired meat in China, being exported by OSI, the largest meat exporter of China (Cendrowski, 2014).
McDonald’s also has to encounter some ethical issues which affect its corporate social responsibility. In 2012, almost 200 workers of the industry went on strike to demand hourly wages of 15 dollars. These strikes waged protests in almost 150 cities of U.S. Nonetheless, McDonald’s allegedly mistreats its employees in countries other than its home country as well. For instance, Food and Hospitality Workers Union in Brazil battled with McDonald’s over poverty level pay, theft and ill-treatment of pregnant women. Similarly, workers of McDonald’s staged a protest in South Korea planned in South Korea demanding justice over low wage and unstable employment issues (Frizell, 2014)
Condition of McDonald’s’ workers in Malaysia is no different. Unlike its other major markets, McDonald’s operates through franchise model in Malaysia. Malaysian workers faced exploitation at the hands of a labor supply company contracted by McDonald’s to supply workers at its outlets in Kuala Lumpur. Some workers, who were contracted from Nepal, argued that their passports were taken away in breach of Malaysian laws. Furthermore, the workers claimed that they were charged additional taxes in Malaysia, therefore their basic monthly salary were decreased and they were unable to make both ends meet (Pattisson, 2016).
These incidences mirror that McDonald’s fails to meet ethical standards as it abuses the rights of its employees in various countries; principally less-developed and third world countries. The firm gives poor working hours to its employees and underpays them, thereby disturbing their work-life balance and worsening their health rates significantly.
Culture is the set of beliefs, customs, arts, values and other products that characterize the people in a given society (Bryan, 2013, pp. 14). An international business should be cognizant of the variations in cultural factors in order to be successful as culture has impeccable impact on any society. If a global business fails to meet cultural standards of a host country, then it loses its credibility. It receives negative feedback from the public and eventually its revenues get decrease (Bryan, 2013, pp. 29). To avoid this worst-case scenario, it is vital that an organisation acknowledges how cultural factors of host country can affect its operations. Culture manifests itself in behavioral norms, societal conventions, and nature of humans living together as a community. It generally entails the language, religion, history, communal institutions, economic systems and symbols of a society (Bryan, 2013, pp. 46). Therefore, while analysing the impact of any international business on a particular culture, these factors should be taken into account.
Being a global food behemoth, McDonald’s has to pay special attention to the cultural environments of the host countries where it operates. The firm does pay attention to cultural factors as it avoids selling beef burgers in India and pork in Muslim countries (Kazmin, 2015). Nonetheless, a lot of incidences indicate that McDonald’s still has to learn how to preserve cultural and religious tendencies of people. For instance, McDonald’s faced severe retaliation when it introduced a mighty sandwich in Norway under the name “McAfrika”. The protestants claimed that it was very insensitive of the firm to introduce the sandwich at such a time when hundreds of people are facing famine in Africa. McDonald’s realized its mistake soon and agreed to print and dispense famine related information in solidarity with the people of South Africa (Wahba, 2015).
By the same token, the company faced vengeance in India when it was discovered to have used beef fat for vegetarian French fries. Although company offered a settlement of $12 million to Hindu and Jewish organizations, yet Muslims were left out from this deal, despite the fact that Muslims also had concerns over the unislamic slaughtering of cows whose fat was used in the making of fries. This has spurred an alienation between McDonald’s and the Muslim community (King, 2014). These examples of company’s policies in India show that it has not been careful about the effect of globalization.
The controversies surrounding McDonald’s’ insensitivity towards cultural factors and values are not confined to foreign cultures only. In fact, McDonald’s was accused of capitalizing on 9/11 strategy when it launched an advertising campaign entailing billboards with the sign “We remember 9/11” and having McDonald’s trademark golden arches on the sign boards. However, the firm defended its campaign by claiming that it was trying to be more empathic with its target audience (Kazmin, 2015). These occurrences reflect that cultural aspect of globalization can severely impact the overall business of any internationally operating firm, if they are not given sufficient consideration.
The advent of globalization has reduced the trade barriers and consequently international trade has eyed mushroom growth. Firms which expanded their operations across the globe have garnered immense benefits in the form of increased revenues, expanded clientele and a better brand image. Nonetheless, globalization also presents various challenges to these firms in the form of technology and innovation, government policies, corporate social responsibility and ethical issues and cultural factors. This report has analysed the effect of globalization on McDonald’s. It has been observed that McDonald’s has made efficient use of technology and innovation to streamline its business practices, yet the integration of high-tech procedures in business has also caused reprisal from employees who are unable to cope with the advancements in technology. Therefore, McDonald’s should conduct employee training workshops and address the concerns of employees regarding the use of new technology. In this way, the firm can keep the employees in loop and their productivity can be increased. Analysing the government policies affecting the business of McDonald’s, it was seen that McDonald’s has faced strict government policies due to the bureaucratic governments and communism in countries like China and Russia. Nonetheless, owing to its efficient strategies and resilience, the firm managed to win the hearts of its target customers in the said countries. However, McDonald’s face several ethical dilemmas concerning its corporate social responsibility, ascribed by the scandals of employee mistreatment and minimum wage. In much the same vein, McDonald’s has been the center of many controversies stemming from its inadequacy to cater cultural proclivities. These controversies signal that the executive management of McDonald’s need to make strict policies in order to address issues relating CSR and cultural aspects of host countries, so as to save the brand image of McDonald’s and ensure successful globalization.
Quality Management at McDonald’s
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