Managing in a Global Context: Impact of Globalisation - Essay Example

?Managing in a Global Context This paper explains and illustrates the impact of globalization on the food and retail industry. The industry choice of ‘food and retail’ has been made because food and retail is the pioneer in the consumer industry. This paper is prepared on a report format and contains factual evidence and is analytical in nature. A group of professionals have prepared this report in a very professional manner and demonstrated the understanding of the growth and development of globalization. The report also provides a brief overview of the top ten global companies in the food and retail sector, which have played an important role in this industry. The report covers four topics relevant to the globalization of the food and retail sector which are the globalization of markets within the industry, Global Joint Ventures, Strategic Alliances in Food Retailing Industry and the Ethical and corporate social responsibility issues specific to the industry that are a result of globalization. Introduction: Globalization is an integral part of economic and market liberalization. The food and retail industry is very large and is a critical part of any society because the food and retail industry is the key provider of nutrition in a country. Globalization in the food and retail industry does not simply signify the reach of a food product globally, but it is also associated with the globalization of food habits. It is only because of globalization that McDonalds and Hamburgers have so many openings across various countries. Cultural globalization in the food and retail industry is argued to be one of the causes of obesity. Technology plays an important role in globalization. The world has also seen a global distribution of the genetically modifies crop technology, which is said to have contaminated nature. So the advent of globalization in the food and retail industry has been more than countable. Reasons for the Study: Food and retail is the pioneer in the consumer industry therefore this industry has been chosen for the purpose of this study. Globalization is very important in this sector as the tastes of one country travel to the other. Therefore it is important to conduct a study on the topic as this study will ensure the availability of the food products globally. Top 10 companies in the food and retail sector The leading 10 companies who have global influence in the food and retail industry are as follows (this report is according to Data monitor’s global top 10 food retail companies report as on April 30, 2011): 1. Wal-Mart stores Inc. 2. Carrefour S.A 3. Metro AG 4. Tesco Plc 5. The Kroger Co. 6. Auchan Groupe SA 7. Seven & I Holdings Co. Ltd. 8. Safeway Inc. 9. Supervalu Inc. 10. Aeon Co. Ltd. All these 10 food and retail industries have a global influence and they are spread across the world. Their turnover is an indication of the widespread and global business, which they conduct. “Wal-Mart serves customers and members more than 200 million times per week at more than 9826 retail units under 60 different banners in 28 countries” (Walmart n.d.). Wal-Mart and Tesco plc are the two biggest retailers among the companies who have a global market. The next in position is Carrefour SA. Wal-Mart has generated an amount of $ 405 billions of sales in the year 2010. This high volume sale amount is associated with the factor of globalization. Tesco, headquartered in UK, has its stores across 14 countries worldwide and generated a sale amount of 495 million pounds this year. Carrefour SA is headquartered in France and is a large chain of hypermarkets, which is spread across Europe, Argentina, Brazil, China and the Asian and the North African countries. The net sale generated in the year 2010 of the firm is $ 90099 million euros. While Metro Ag has its base in Germany, yet it is the fourth largest retailer in the food industry and has stores in Germany, Europe, parts of Asia and Africa. The Metro Group recorded high sales of 53,965 million euros in the year 2010. The group is planning to expand its business further in Asia and Europe. The Kroger co. has made several takeovers and is the fifth largest in the food and retail sector and has generated net revenue of $ 76 billion in 2010. The firm also has their drug stores spread across the world. Auchan group is a widespread group and has its own hypermarket chain and reported revenue of 42.5 billion euros before tax in the year 2010. The Seven & I Holdings Co. Ltd is headquartered in Japan and has its stores spread across 100 countries. The firm recorded revenue of JPY5, 111297 million. Similarly the Aeon group and the Supervalu Inc are also a part of the globalize food and retail industry. Globalization of Markets within the industry: The globalization is a much widely used term in the current scenario. The concept of globalization has emerged in the early 90’s as a result of the market liberalization and invasions in the technology. The globalization in the industry can be considered as the cultural globalization, economic globalization and the institutional globalization. As a whole, the mixed globalization in the companies can have a direct and an indirect effect in the global economy. It is very important to realize the probable effect of economic globalization in the food industry, from the various fields like the agriculture, processing industries of food to the retail and services. Subsequently the food industry is a huge and significant element for any people, as it by now has amounted to further increase of 5 trillion sales globally. The food retail is a very important industry, as it generates vital nutrition for the inhabitants. As the market trends and the surroundings are considered nationwide, the market volume is mainly related to the nation’s standard per capita income. The question here raises today is how modern process is helpful in making the critical economy effective. In recent times, both some experiential and theoretical literature has developed aiming at approximating the impact on the economic globalization. “A few recent examples must suffice here to illustrate the purport of this literature. Gow and Swinnen (1998) argue how foreign direct investment will help Eastern and Central European agricultural industries to recover from the breakdown after the abrupt move toward capitalism. Rae and Josling (2003) simulate the impact of trade liberalization in the processed food industry on welfare in developing countries, arguing that the net effect is positive, particularly in the longer run” (Witteloostuijn 2007, p. 5). The dealing of the food retail industry with the international trade mainly prevail in developed countries, which are mainly into the business of processed foods, which have the direct contribution to the retail food stuffs. The food industry is extremely concentrated in numerous developing countries together at the retail and processed levels. The industrial food sector had made an eye opening growth in the recent years. This kind of consolidation in various aspects of the globalization in the retail industry has given much importance for the upcoming mergers and acquisitions. Taken together, the underlying data usually propose growing deal in processed food products relating a progressively more concentrated food sector. The current research on rising country issues has founded extra barriers, investigated by exporters, in terms of developing country markets. The concept of ‘value chain’ is helpful for the diverse trade and market structure issue facing by the emergent country exporters. It requires a recognized arrangement that industrial organization or trade economists would enthusiastically recognize, and gives the clear idea and the deep insights on the vague aspects of the policy. Using a somewhat more diverse ‘value chain’ framework, the prototype openly recognizes the issues relating to market power at various stages of the food chain and provides opportunities for increasing nation exporters. Taking into account that the processed food exporters and the raw products and the service exporters are from the different countries, the various aspects like the tax reduction support to the identical level in terms of market entree consideration. This is a disparity to the universal awareness of trade policy of reducing taxes by the similar amount, if they are necessary to avoid the deceptiveness in the processed food stuffs. Globalization of food retail sector is not an up-coming strategy, but an existing focus for numerous retailers. The retailers recognize that with domestic organic development, which is much more difficult to maintain in mature markets, growth into new markets is an essential footstep towards protecting potential profitability. The main intend of this study is to realize the impact, rapidity and present status of globalization, which is prevailing in the food retail market and the possible impact this will persist to have an effect on the foodstuffs and retail industry . The various statements also reflect on existing trend affecting the globalization of the food retail market. “Recent developments in the Asia-Pacific Economic Cooperation (APEC) process are interesting in this regard. A few months ago the Asia Pacific Business Advisory Council (ABAG) endorsed the idea of an ‘open food system’ in the region. The concept of an open food system is one that is bound to attract business interest, in particular those already operating on a multilateral basis” (Josling 1999, p. 11). There are various trends which are dampening the price of globalization of the food industry. The increasing significance of local markets is a reason for the increased number of customers to avoid food products. There are constant increasing needs for imported fresh products as a result of seasonality and product variety, whereas the transportation space is becoming progressively more scrutinized throughout the buying process. “Another facet of globalization is convergence of consumer demand and this is also becoming increasingly evident in the organic food industry. Although consumers buy organic products for a range of reasons that vary according to geographic region, culture and socio-economic factors, there is becoming some commonality in consumer behavior. The organic food industry is becoming global in that large Multinational Corporations (MNCs) like Heinz, Danone, and PepsiCo are wielding increasing influence” (Globalistaion of the Organic Food Industry 2006). Thus it is clearly understood the clear impacts of the global market in the retail sector. Global Joint Ventures, Strategic Alliances in Food Retailing Industry Food and retailing industry is the one of the emerging industries towards the world economy. Technology has changed a lot due to the impact of globalization and also it is very much necessary to study about the impact of globalization on that global food and retailing industry sector. Organizations which are functioning in the different nations are capable to produce profit mainly by the way of unique strategies and polices of the particular country. And also in some occasion their profit margins defeat the nation state. In many situations organizations find out various new destinations and succeeding to maintain the particular marketplace. Global Joint Ventures, Strategic Alliances and Licensing, are three different ways that adopt by the company to open its business globally. This is mainly due to the impact of globalization in the today’s world economy. The capability to make use of cooperative inter-firm relations will be a significant factor in business success. Inter-relationship among business establishments can taken place in many ways, from marketplace transactions to relations and they are so close that it is hard to differentiate where one organization endings and the next starts. Many small retailers are leaving the market because of the tight competition occurring in this market. The effects of globalization have a huge impact on this, as many new players are coming into food retailing industry, which has led to a tough competition. Global Joint Ventures:        Global Joint venture is a one of the useful approach for successful industry launching in any of the foreign states. Joint venture between the food retailing industries helps to the better functioning of the company. By creating amalgamation of business with the local business organizations, their marketplace experience can be more successfully used for the successful business functions. Joint ventures by way of the local firms can help the foreign firms to get hold of local firms’ practice and information in the development program. The huge growth expenses and risks can be shared by way of the local partners in the course of joint venture formation. Political restriction from the region can also be avoided in the course of this approach. Joint venture requires more straight investment, training, managerial help and technology transfer. A domestic business must have the following home state benefits; it is well-known with local client requirements and local manufactured goods features, it has long standing relations with consumers, it may have a cost benefit for the reason that of simpler product plan and lesser operating, overheads and transportation expenses.  Strategic Alliances:        In this method the operating organizations in the launching nation are selected for developing the business in the course of supply of goods, promotion and sales. Wellbeing of technology is possible in this approach. Partners of the companies are mainly sharing their resources so that the higher expenditure and risks associated to this approach are capable to share with the partners associated. But, at last, the instances demonstrate that the competition remains among the huge players only. The other small players usually give up because of the tight competition among the huge players. Many companies are coming to UK and also many UK based companies are starting their operations in other states. This is one of the best examples of globalization.        In whole Europe we could see Asians opening their own retail stores. All these are the best examples of globalization. As an effect of which the traditional retailers are losing out and therefore leaving the UK market open for the Supermarkets and The Big players in the marketplace. The competition among the super markets in UK is mostly based on the prices. Due to this it has effected in low turnover margins for the industry and it has influenced its development. As a result of globalization, majority other companies in the food retail industry have entered in the UK marketplace. “Strategic alliances are defined as cooperative relationships between2 organizations that meet the following criteria: • Partners share resources, capabilities and/or knowledge on a Continuing basis; • The alliances have strategic intent for the partners; and • Alliance objectives include the sharing and/or exchange of products, services, knowledge and profits” (Sparling & Cook n.d., pp. 70-71). Licensing:        In this method, company grants the patent right and trademark right to another company for the particular period of time. These two are the intangible property of the company. In this method earnings are mainly by way of the royalty fees. And also it consists of low development expenses and risks. But in the case of any of the other method, development costs and risks are high. Company with advanced and unique talent can accept this mode of entry approach in worldwide business growth. Globalization is creating countless chances to the new competitors and existing players. In UK itself we could make out examples of new business began by the other country origins. “Licensing is the popular method of profiting from a foreign market without committing sizable funds. Because the foreign producer is typically 100 percent locally owned, political risk is minimized. Licensing provides foothold in a foreign market without large capital investment” (Luo 1999, p. 151). The Impact/influence of Emerging Markets within Food and Retailing Industry: The food and retailing production is a complicated global collective of diverse businesses that jointly supply a large amount of the food energy consumed by the globe inhabitants. Only subsistence farmers, those who stay alive on what they produce, can be measured outside of the capacity of the modern food and retail industry. The important feature that differentiates the food industry from other business is the amount of its reliance on unrefined material. This is important at both ends of the food chain, its derivation in agriculture and its purpose in the human body. “The food industry is extremely important economically. Taking the UK industry as an example, there was a total household expenditure on food of ?49 billion in 1995, this represented about 11% of household expenditure” (Heap et al. 1998, p. 32). A suggestion of the industry’s importance and size is also given by the size of its labor force. The food and retailing sector employs about three million people. This represents about 14 percent of the industry. Food, consequently, continues to symbolize a major item of expenses for most households. The quantity of customer’s expenses on food and retailing has remained comparatively steady in the UK in current years. This signifies the unchanging nature of the food and retailing market and means that person tends to improve their performance at the expense of other companies market share and profitability. Trends in both foods retailing and manufacturing in latest years have reflected the rising level of competitiveness in the business. The main food retailers have been rising in significance in recent years. This has happened both in conditions of their market share of the food retailing manufacturing and in the authority that they exert over other parties in the food series. The main impact/influences on food and retailing include international organizations, national government policy and war. Impact on Producers: “There are significant impacts along agri-food cost chains happening from the opening of guarantee based private food protection standards. These reflect the level of the changes that are essential to be made to recognized methods of manufacture and the degree to which the connected costs are ‘shared’ along the value chain” (Henson & Humphrey 2009). The fundamental values of standards method are: • Control of risks through opening of control points and utilize of procedures specified in the standard. • Confirmation of application of specified procedure controls throughout certification. • Internal audit by the production worker. • External audit by a certification body, which is generally itself recognized by an accreditation body. There is very small research on the efficiency of these diverse public and private plans to develop diet, healthy food spending and health results. Most strategies to decrease the influence of food access restrictions have concentrated on improving or increasing the source of healthy foods. This could be a significant savings in underserved parts for social, cultural and economic reasons, and can make it easier for residents of the part to access strong food. Other than it is improbable that these rules will create a lot of a dent in improving diets, improving dietary health and reducing obesity unless customers transform their eating habits. “Almost two-thirds of Americans are overweight, but national estimates presented here indicate that only 2% to 8% of Americans have limited access to healthy food. Even though most Americans have fabulous access to healthy foods, on average, they eat only about half the recommended daily levels of fruits and vegetables” (Ploeg 1999). Even if superstores are obtainable to every one, it is not obvious that consumers will considerably progress their diets by shopping at them. Supermarkets carry all the damaging foods that little keystones do and generally offer them at lower prices. The influence of high prices on the wider financial system is determined by a quantity of structural characteristics. At the state level, small income food importing states that rely greatly on tradable cereals for their diets are the majority susceptible to international food price shocks. None of the seven rising financial systems fit into this group. However, within every country the sharp increase in prices for staple foods has an important impact on the poor who are net food purchaser. “The food manufacturing and retailing industry is still comprised of large multinational food manufactures and large, mainly national retail groups” (Kehal & Singh 2005, p. 137). In the UK the top five supermarkets carry on to manage the grocery market. Nevertheless, close empirical study discloses that the competitive dynamics within these two organizations has changed considerably, with the balance of influence shifting from firms engaged in manufacture to those in closest control and proximity over information regarding the end customer. Conventional dealings of industrial formation for instance concentration ratios fail to sufficiently describe the changes in measures under taken by firms and fail to reflect the significance of the great number of small dealer, who are critical to the operation and performance of flexible business networks. Corporate Social responsibility also known CSR has become very essential action to every business organizations domestically and globally. One of the main aspects of this is due to globalization many organizations are functioning around the globe. Such multinational companies are responsible for serving the society. In simple words we could express that, organizations are running in cooperation with the people and society, they are manufacturing their particular products or services and selling to the customers which are part of the society. So these organizations are responsible to give something that has great value to the society. This is a kind of give and take policy. Organizations or companies are utilizing resources from the society and as a part of the CSR they are liable to give the society something that is helpful for them. For instance, Multinational giants like PepsiCo, Coca cola etc are utilizing a huge amount of water resources from the earth. For manufacturing a small bottle (250 ml) of Coca cola or Pepsi soft drink; more than one liter of water is needed. This one liter water is used for cleaning purpose of that bottle only. So it is easy to assume that how much quantity is needed for the entire manufacturing process. So as a part of Corporate Social Responsibility these companies are conserving rain water. Huge amount of rain water is conserved by these companies. CEO of PepsiCo Indra Nooyi states that “we work hard to improve our water-use efficiency, preserve water resources and provide public access to clean water through alliances with nonprofit groups such as the Earth Institute and Water.org” (PepsiCo Marks World Water Day 2010 with Global Water Goals 2011). The growth of food retailing industry was very rapid; the rapid growth was a result of liberalization and globalization. Food retailing companies started their operations in both developed and developing countries. The significant thing is, in developing countries also the growth of food retailing stores was rapid. Food retailing stores like KFC, Mc Donald’s had a rigid foundation and a rapid growth. Supermarket chains such as Tesco, Sainsbury, and Carrefour etc enhanced their networks around the world. These all was a result of globalization and all these Multinational companies enjoyed the opportunity they got. We could focus on the other part also. i.e. The Challenges from rivalries and new entrants. “Corporate initiative is important to assess and take responsibility for the company's effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups” (Corporate Social Responsibility 2011). Companies have a great strength in the society and in the nationalized economy. They have power over a bunch of resources, and would have billions in money at their removal for socially aware savings and programs. By using their money power and influence they could really serve the society, it would be a corporate Social responsibility.  Food retailing giant KFC is also into CSR programme. They are offering various schemes in order to help the society and the customers, schemes like scholarship to college students. Cash price up to 20000 USD are given to the students to complete their bachelor’s degree program. (KFC Colonel’s Scholars 2011). Another step from KFC is they have showed their responsibility to the environment by reducing the pollution or harm that caused by KFC. They have replaced their plastic plates with paper serving boxes. All these are various measures taken by Food retail giant KFC as part of their social responsibility. Environment pollutions is reduced by taking these measures, the main thing we could focus into is companies like KFC is making large amount of profit, then also they are showing their commitment towards the society and people. This is really admiring and great policies, so that we should definitely agree that Corporate Social Responsibility is a adorable activity done by the Corporates. “By the late 1990s, many multi-national corporations (MNCs) were redefining their role in society and their responsibility to human rights and the environment.  This phenomenon, termed corporate social responsibility (CSR), has since received considerable attention from supporters and critics alike” (The Ethics of Corporate Social Responsibility: Management Trend of the New Millenium? n.d.). Another main thing is regarding the ethics, corporate social responsibility and ethics are linked together. Every corporate organization is responsible to show ethics in their respective business. It does not matter what kind of business are they doing, every organizations are liable to perform ethical business. Ethics should be performed in every bit of business. “Business ethics is the behavior that a business adheres to in its daily dealings with the world. The ethics of a particular business can be diverse. They apply not only to how the business interacts with the world at large, but also to their one-on-one dealings with a single customer” (What is Business Ethics 2003). While coming to the Corporate Social Responsibility topic, there should be ethics in CSR also. That means Corporate Social responsibility should not be a gimmick to cheat the society or the corporate world. We should discuss about the darker possibility of CSR and its ethics also, there is definitely a chance to show some kind of gimmicks in order to make cheap publicity. There should not be any fraud policies while doing CSR, it should be completely dedicated and must be done for the sake of the society. In food retailing industry they have many things to give in return to the society they operate. The companies should be aware about the ethical aspects when they functions in the society. The companies could produce good and fine quality food products for reasonable price, and then only it would become ethical. This ethics should be performed inside and outside of organizations, because if the inside crew (workforce) is satisfied definitely they would give their effort to satisfy the outside force (Customers).  Globalization and business ethics are related as they influence a company’s capability to consign to its shareholders, in exacting to outside financier, and save the faith required for advance savings and development. Ethics is very important in every organization; if it is applied correctly it would really improve the lives of the inside and outside of the organization and also it would create a value for relationships. When it comes to the Globalization context, its importance would increase more. Both Corporate Social Responsibility and Ethical considerations has deep and more value when it comes in a global context. Things are admitted seriously in the global context, as more competitors, more opportunities, more spaces are available in the Globalization. Ethical considerations and Corporate Social Responsibility has a big role when it comes to globalization.   Conclusion: Globalization of the industries has created a very high impact on all the global economies because globalization brought all the countries and people closer to each other. There are powerful impacts of globalization not only in business terms but also in the exchange and adaptation of cultures. The globalization has developed the food and retail sector immensely. There are competing firms, who are trying to extend their brand products to as many nations as much possible and they are on a race to take the world over. 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