Globalization is the prime aim of organizations that supports in increasing revenues of company and giving international presence to the corporation. Present assignment is based on the global policy and strategy. Aim of report is to find out the impact of globalization on multinational company. Concepts and definitions of globalization will be discussed in this study. Objective of the report is to identify advantage and disadvantage of international business. Corporations have to face many issues at the time of working with different countries as well as all problems, causes and drivers of globalization will be discussed in this study. Present assignment is based on McDonald's which is a multinational brand that provides quality food and services to customers across the world.
Definition and Concept of globalization
According to Dasgupta and Ghatge Globalization can be explained as the trade relationship with more than two countries. In the modern era, most of the businesses are highly depended upon international trade, finance and macro-economic policies. It can be defined as diffusion of values, technologies and practices that can influence the business worldwide. Globalization is the enlarged movement in many countries with respect to trade, money, investment, etc. It has four main dimensions, that is, economic, environmental, political and cultural. Globalization has influenced the world’s economy and due to this, businesses are operating across border rapidly as well as there is fast flow of information. It supports organizations in gaining global presence and helps in enhancing their revenues as well. Now, entities have huge target market and they can attract more customers towards the brand. Statistics show that merchandise trade has been increased since 1950 to 2004 approximately 7.5 times. It can be explained as elimination of state restriction of exchanging goods and services across border. Globalization has positive and negative impact on McDonald's as to sustain in the global world, cited firm has to produce quality food and has to provide excellent services. It has improved the standard as well as it is getting competitive advantage in the global market. It is utilizing resources well and giving flexibility to its workers so that it can sustain in the international market for longer duration. Apart from this, company is spending sufficient amount in research and development so that needs and requirements of customers can be identified. By this way, cited firm can be able to trade well in the new country. This is the reason; products of McDonald's are satisfying the needs of service users in each nation.
According to the Grear and Weston globalization is an integrating process through which companies can integrate with government, economy and companies of different nations. It has brought lots of strategic changes in the business world and organizations are free to trade across the border. Hill has argued that transnational formalities in Foreign policy are better than globalization (Hill, Cronk and Wickramasekera, 2013). It is very important to have a strong relationship between foreign policy and globalization that put its huge impact on the overall growth of organizations. Globalization is giving many opportunities and creating threats to companies. Managers of McDonald's should provide flexibility to the workers so that they would feel comfortable in the organization. Managers of cited firm have to lead the team well and involve them in decision making process. Participative approach of leadership helps McDonald’s in globalizing its business. As it has hired employees across the world, so, due to globalization, company is getting learning opportunity for the workers. According to Hill report, approximately 1.5 billion foreign transitions are taking place daily and approximately, 8.9 trillion goods are transacting across the border (Hill, Cronk and Wickramasekera, 2013). After the Second World War, communication, technologies and processing have been changed to a great extent. Globalization has removed barriers and now, companies can trade easily with international countries. With the help of this concept, entities are working well in the international market. McDonald's is a multinational brand and supplying quality services to customers across the world. It has good connection with many nations and employees are skilled that support the cited firm in expanding its business globally. Globalization is the concept which defines that whole world is a single market and companies are free to produce similar products and can trade freely across the world. Due to this, FDI has been enhanced from 2.2 billion to 154 billion.
McDonald's is continuously bringing innovation in its workplace so that workers will feel encouraged and they would stay in the organization for longer period. To survive in the competitive global world, it focuses on introducing new services and implement the latest technologies. By this way, it would be able to sustain in the highly complex environment for longer span of time . For instance: Brexit was the great issue which has affected he political and economic condition of UK. Now, UK is free to make new trade agreement. By this way, it would be able to make a strong relationship with other countries. This political relationship can help McDonald's in expanding its business across the world.
Apart from this, due to this issue, economic condition of nation has been affected. Initially, UK had to face many financial problems as foreign reserves were not sufficient. It negatively affected the business of organization. Later, that with the help of trade agreements with developed countries entities are now able to expand their business well. It has impact on the exports and imports of the organizations. Being the member of EU, Britain was getting inward foreign direct and portfolio investments. But free trade can give benefits to the countries and it would help in improving economic condition of the nation. Therefore, it would help in doing business with international countries.
Causes of globalization
Globalization is beneficial for the countries, as organizations can exchange their goods and services with other nations. Causes of globalization are as following:
it is one the main cause that has helped in globalization of the business. Development of internet, email, mobile phones has helped the McDonald's in growing well and in expanding its operations across the world. Development of TY channels, Sky, CNN has helped the firm in spreading brand name of the firm globally. Due to increased communication cost of the company has got down to great extent.
Transportation facilities have been improved that has caused to globalization. Improved air transport, bulk shipping etc, has supported in easy movement of goods throughout the world.
Free trade agreement
It is the main cause, as rich capitalist countries welcome to such business for their own wealth. World trade organization (WTO) and IMF also promote free trade. That impacts positive on the McDonald's, as by this way cited firm being able to make effective connections with mass audience.
Growth of MNCs
These multinational companies invest much amount that is the cause and consequence of globalization.
Drivers of globalization
There are many factors that drive the globalization. Technological innovation is one the main element that brings revolution in the company. McDonald's is introducing innovative food products to customers so that it can sustain in the competitive environment for longer period. Hygienic food items, quick services, online orders is giving success to the cited firm. Strategic decisions of McDonald's is depended upon its resources, as entity utilize its human and technical resources well. Services diversification and advanced knowledge of the latest technologies are giving support to the McDonald's to survive in the international market.
Market is another factor that drive globalization. Use of media for advertising the brand is giving high support to cited firm. As organization is engaged in online business as well and with the help of technical advancement it is adopting direct marketing techniques that increasing its profit significantly. McDonald's is giving training to its staff members and motivating them by giving rewards and recognition. That helps the entity in bringing down weakness of its workers. Political drivers of globalization help the entity in growing well. FDI activities, trade agreements drive the company towards the globalization.
Production is another factor that drive globalization. Many countries are producing quality products to consumers. Globalization is driven by the production, as due to this McDonald's is able to know about food standards and it can match with these benchmarks. Cited firm uses fresh and quality raw material and give training to its staff members so that its production can get improved. That is why cited firm is able to meet needs and the consumers to great extent. On other hand production cost of the multinational company get increased by his way.
Types of globalization
There are mainly three types of globalization; economic, cultural and political. Economic globalization can be defined as interconnections between two country's economy in the form of trade and exchange of resources. Political globalization is the term that defines the political relationship between two countries. Free trade agreements, similar policies are the example of such type of globalization (Globalisation, 2005). The third type is cultural globalization which can help in getting information about values and culture of other countries. These types help the McDonald's in expanding its business and running its business in different nations. With the help of economic globalization multinational companies can do business with other nations and can enhance its revenues to great extent. It is related with the international trading, unregulated market and uninhibited tariff barriers can help the entities like McDonald's in expanding its business across the world. Similar polices and trade agreements impact positive on the firm as by this way it would be able to run its operations in the different countries well. Cultural globalization is differed from both above types (Drivers of Globalization: Integration of Theories and Models, 2005). As with the help of this cited firm will be able to identify needs and culture of customers of particular country. And it would be able to offer them such food which people can take and can enjoy. For instance McDonald's offers vegetarian food varieties in the Indian market whereas in British market it offers variety of non-vegetarian food products. This supports the entity in satisfying he desires of consumers by his way people like the food and be loyal towards the brand.
Pros and Cons of globalization
Globalization has made drastic change in the business world. Free trade agreements. Easy movements of capital, foreign investments are giving huge benefits to the multinational organizations.
Advantage for McDonald's of globalization
Globalization has reduced trade barriers and now multinational companies are able to do business with many other countries. Reduction of restriction has given benefits to McDonald's and it can expand its business easily. That is why number of customers of entity have been increased to great extent. Due to this, organizations get to know about culture and tests of other countries people (Are we truly globalizing the world marketplace? A critical view, 2014). It has impact positively on the corporation as now it is able to serve such food what people like most. It is advantage for the McDonald's as it has developed good will of the company in the international market. Apart from this, revenues and profit of cited firm has been increased to great extent. Reduction in import and export barriers have given positive results to the entity.
Competition drives price down
Due to globalization McDonald's can trade in many countries that is why it is gaining competition advantage. That supports the cited firm to sell its products to distributors. It has helped the firm in contacting with number of suppliers those who can offer raw material at lower cost. By this way organization can offer its food at lower cost to customers.
Movement of labour
With the help of globalization employees of the McDonald's can travel in different countries and can identify the needs of consumers. It would impact positive on the cited firm, as company will be able to provide goods and services to customers as per their needs and demands. By this way economic condition and good will of the organization will get improved. Apart from this, McDonald's can get to know about the latest technologies and it will be able to train its workers accordingly so that they can operate machinery easily. By this way productivity of the employees have been increased and helps in the economic growth of McDonald's.
Expanding knowledge of foreign culture
As McDonald's is working in the international market that helps the firm in getting information about foreign culture. By this way buying behavior, test, preferences of customers can be identified by he cited firm. It would help the firm to modify its operations accordingly so the needs of the users can get fulfilled.That is advantage for the company and it will create positive image of the entity in front of consumers.
Foreign investment and development of human resource
Knowledge of employees of McDonald's is increasing, they are getting knowledge about latest trends, technologies and foreign market. Some time different policies create problem for them but training supports them in getting career opportunities.
Cons of globalization
Due to movement of employees from one country to another can create problem of labour drain for the McDonald's. By this way skilled persons would get better job opportunities and they can leave the job, which can negatively impact on the organization.
Multinational firms like McDonald's has to follow rules and regulations of particular country. That can create problems for them because they have to modify its operations and working practices. Due to this, employees can get dissatisfied and it can harm the overall efficiency of the services. As wages, employment laws of each country are differed from each other so it can create problems for the workers and they will not like the workplace so job turn over can get increased .
Affect internal environment
As company has to modify its operations according to the norms of foreign country. That can be negative and can reduce profit of the organization.
McDonald's can give cultural and technological training to its staff members. It would help in making them comfortable thus, they will support the firm well. Company can motivate them by giving rewards and recognition so that skilled persons stay in the organization for longer period. It would be better for the multinational entity like McDonald's as managers need not to hire new staff, so this cost will be reduced if existing employees work with the corporation for longer period.
Political decisions can affect negatively to the working of the company but by making good relationship with government and by spending more amount in the research and development cited firm can find out the market worth of the country. By this way corporation can make such environment which can give positive results to the organization and can fulfill needs of customers. That would give economical benefit to the entities.
From the above report it can be concluded that global polices and strategies impact on the multinational organizations. Firms have to identify the culture and working pattern of particular nation and accordingly they have to modify their operations. Globalization can give economical benefit to the entities as it can help in increasing number of consumer of the firm and can enhance its brand image across the world