Strategic Alliance: McDonalds and Environment Defense Fund US - Research Paper Example

? International Joint Venture Strategic Alliance: McDonalds and Environment Defense Fund US Grade Introduction Corporate collaborations can be defined from different aspects but each definition has certain features in common. One of the salient features of such collaborations is that partners voluntarily decide to collaborate with each other for future common or synergistic business motive. During the process, the partners involved coordinate with each other, share and transfer resources amongst themselves. Independent partners agree to collaborate with other companies to accomplish a goal which they cannot do with their own resources (Farag, 2009). The resources pooled in by each of the collaborators promote the business goals of other partners; thereby, partners work together and share complementary resources to strengthen their objectives. There are different types of collaboration and they can be classified into four main groups: strategic collaborations, equity alliances, product and product collaborations, marketing collaborations, supply partnerships and other partnerships. Strategic collaborations include alliances, informal and gentlemen’s agreement and strategic alliances. Strategic alliances can be defined as the mutual agreement between two or more partners, without ownership of each other, to achieve common goals. It includes merging together two value chains of a minimum of two companies. However there is no limit to the number of organizations that can be part of the alliance. The importance of strategic alliances has increased significantly over the period of time. Not only small businesses but also larger businesses are making alliances either with large corporations or smaller businesses to sustain or gain complementary aims and objectives. Over the time, the trend towards environmentalism has become popular amongst corporate businesses. Previously, environmental watchdogs used to follow a solitary, opposing approach to promote corporate social responsibility and to make production, manufacturing and distribution environment-friendly. For organizations, these groups were vital to the functioning of the organization since they often had shares in the ownership of the company. Nevertheless, companies started to realize the need to move from a defensive position to a conciliatory approach towards environmentalists. Instead of regarding environment watchdogs as the main strategic danger to the organization, they embraced the notion of market-based environmentalism (1998). The purpose of such a relationship is embedded in the advocacy and publicity of corporate environmentalism. In fact, according to Milne, Iyer, and Gooding-Williams (1996), the vanguard of corporate environmentalism has become the alliances between environmentalists and corporations. There are a number of examples of such green alliances. One such example is the alliance between McDonald’s and Environmental Defense Fund (EDF). The alliance between McDonald’s USA and EDF began in 1989. With this partnership, McDonald’s has been able to make its production processes greener and make packaging more environment-friendly. The alliance has several benefits to both the partners. Environmentalists have for long been concerned about the impact of business activities on the environment. In a political environment that is largely confrontational, partnering with organizations is a new approach to bolster a healthy attitude towards the environment from a business point of view. This paper will explore the green alliance between McDonald’s USA and EDF. The reason for selecting this particular partnership is that strategic alliances have become one of the most popular forms of collaboration for businesses today. Moreover, the corporate-environmentalist relationship is becoming the mainstay of socially-active business partnerships after increasing pressures from marketing, political and global forces. According to the World Trade Organization, the advent of globalization, influx of technology into the business milieu, augmentation of economic authority and increased competition sets the stage for the formation of strategic alliances, since they allow businesses to be more flexible and adjust to the changing times (Fyall and Garrod, 2005). For instance, strategic alliances are increasingly being used in the tourism industry to be at par with global organizations and to adapt to the increasing demands for globalization (Fyall and Garrod, 2005). They are also being formed between consulting firms, financial organizations like banks and organizations from the field of Information Technology. It is imperative for businesses today to be flexible and be able to adjust in a converging business arena. Strategic alliances offer companies this advantage. Moreover the reason for choosing a green alliance is that there is increasing concern over environment-friendly production. Thereby, given the increasing role of strategic alliances in the business world today and the emphasis on green production, this paper will explore the nature of the relationship between McDonald’s and EDF. Strategic and Green Alliances in the World Today Strategic alliances confer a number of advantages to its partners. As mentioned previously, they allow organizations to respond to the challenges of globalization effectively. The pooling in of resources, expertise and skills allows for mutual decisions to be taken which in turn augment the performance of the partners. It allows partners to achieve competitive advantage, improve the reputation of the business and to increase its marketing potential by penetrating related marketing segments (Kangas, 2003). Strategic alliances are important for the survival and sustainability of the business. This is particularly significant for a business like McDonald’s. With time, there are changes in markets, and subsequently in customer preferences. Consequently, fast-food chains have to introduce innovations in their production range and cater to the needs and preferences of its customers accordingly. For McDonald’s this has meant a number of things over the past few years; from partnering with Disney to increasing its product range, it has struggled to maintain its position as one of the most famous fast-food chains of the region. McDonald’s partnership with Disney and the promotion of Disney characters allowed McDonald’s to increase its consumer base. Disney benefitted from the billion dollar revenues that such an alliance provided by marketing movies on McDonald’s products. However, this alliance ended due to obesity concerns and Disney withdrew to pursue more profitable ventures (Hickman, 2006). In the innovation for product range, McDonald’s has been providing offers that suit the changing preferences of customers like introducing breakfast edibles and drive-throughs (Reid and Bojanic, 2009). Nevertheless, Reid and Bojanic (2009) observe that McDonald’s is not as powerful and influential as it was earlier amongst its competitors. Therefore the company has consistently been engaged in accruing greater revenues and catering to customer preferences. Another aspect that affects sales of a business is the consumer attitude, which in particular has been an important determinant of sales in the US. Of late, Americans have become increasingly conscious about the effect of human on the environment. The percentage of votes given to Al-Gore along with awarding the Nobel Prize for Peace for his efforts against global warming represent the support he has in the community. More importantly, it depicts the attitudes of the common people and the significance they attach to environmentalist efforts. Erdman (2008) asserts that eco-consciousness has now evolved into an expectation for businesses, with organizations competing to be the “greenest”. The Partnership Agreement Companies like Coca Cola and IBM have taken concrete steps to show their eco-consciousnesses. The trend towards green advertising and production is over three decades old. McDonald’s has also directed its efforts towards green advertising. For this reason, it partnered with EDF over two decades ago. At the time the alliance was formed, there was increasing concern being raised on the issue of solid waste disposable. An aspect of the issue was the use of food packaging which does not need to be reused and can be disposed off easily. The problem for McDonald’s remained not only in the packaging and its disposal but also the disposal of waste that was generated during production processes. This included waste that was produced by supply processes as well as the waste made during food preparation. There were a number of benefits McDonald’s derived from pursuing such an initiative. Authorities suggest that the ideal way to recycle is through source reduction. This entails cutting down waste production from its point of origination. The secondary objective is to decrease the deleterious effects of waste that has already been produced. There are many advantages rendered to a food service business by engaging in waste management activities. Firstly, it decreases the amount of money spent on managing waste that has already been produced. If the waste produced is cut down, less rubbish skips are needed to manage the minimum waste generated. Moreover, production becomes environment-friendly, since less waste means less methane gas would be produced. Less pollution will ultimately affect the levels of greenhouse gases. Participating in green measures of production allows the business to operate within the pollution cut-offs implemented by the government. Complying with rules and regulations decreases the budget spent in paying fines and fighting court cases against environmental degradation and allows revenue to be channelled into greener measures. Lastly, it perks up the reputation of the organization and renders it public relation advantages. Taking corporate social responsibility seriously and following sustainable and green business practices gains the approvals of the more eco-conscious customers living in the US (Katsigris and Thomas, 2008). Thus, given the waste-disposal crisis of the 1980s along with the added advantages of green production, McDonald’s decided to pair up with EDF (CQ Researcher, 2009). EDF is a non-profit organization established in the US. It was in 1989 when the formal meeting between the Executive Director of EDF and the President of McDonald’s USA took place. The agreement was signed on 1st August, 1990, and the two partners decided to make a task force for managing the solid waste produced by McDonald’s. The members of the waste management team initially carried out a survey of the production processes and the disposal of waste to ascertain the extent of recycling initiatives that were required. Not only were the places of production analyzed, such as restaurants, but distribution centres and suppliers were also included in the survey report. The objectives of this strategic green alliance were classified as: sources reduction, reuse, recycling and composting (Environmental Defense Fund, 2010). Thereby, McDonald’s and EDF focused their efforts on the cutting down the material used in the production process, replacing non-reusable items in the supply process with those which can be utilized repeatedly before disposal, turning used material into useful products and reusing organic material. The measures would improve the reputation of McDonald’s and convince end-customers to opt for its products. They were also expected to counter and thwart any negative publicity gained by the issue of CFCs. During the start of the 1990s when the agreement was signed, US had more than 8,500 McDonald’s outlets spread all over the country. Furthermore, the number of suppliers and food packaging material providers totalled to approximately 600. Research on production and recycling was carried out on such an extensive scale. It also signified how the scope of measures that needed to be implemented and the large-scale impact that they would bring. The task force of EDF and McDonald’s focused on the management of bulk storage, particularly at the level of salt, mustard and picket packet, cleansing materials, shipping pallets and coffee filters (Farmer, 2011). The criteria used to evaluate the effectiveness of these green measures under the task force were also set before the introduction of the measures. The Environmental Protection Agency has a Food Waste Recovery Hierarchy which gives guidelines on the management of waste. Amongst the components of the Hierarchy are source reduction and compost (Bloom, 2011). In compliance with a similar hierarchy focusing on reuse, source reduction, recycling and management of landfill, the task force set it as a standard to adhere to the components of the hierarchy for a sustained period of time. Other criteria for judging the measures included its expediency and feasibility, the effect it would have on the environment, the health of the public and the economic feasibility from the perspective of McDonald’s and the community (The Economist Intelligence Unit, 1999). The implementation of these criteria was within the business objectives of McDonald’s as a fast-food chain. The business thereby worked to achieve the goal of serving fresh, good quality food for both take-away and dine-in customers, produced with environment-friendly processes. Initially the task force came up with 42 initiatives for source reduction, reuse and compost. During the first year, 19 of the measures were put into action. In the past two decades, forty more initiatives have been practically put into effect. These include measures that were initially qualified but not implemented in the first year as well as newer measures which were not part of the original initiatives (The Economist Intelligence Unit, 1999). Consequently, this partnership brought about many different changes in the production processes of the company. The foremost measure that they took was to put an end to the use of clamshell boxes. The production of polystyrene foam sandwich clamshell boxes generated chlorofluorocarbons which were deleterious to the ozone layer. Therefore, clamshell boxes were replaced by paper wraps and recycled boxes which were light in weight and easy to carry. This allowed for more than a three-fourth decrease in the packaging volume of sandwiches. For some items, the packaging volume was brought down to more than 90% (Farmer, 2011). Reduced packaging volume, along with the use of recyclable packaging material, decreased the waste produced and the landfill space used by it. Production of lesser material denoted savings in energy as well as a decrease in the waste produced during the production lifecycle. Moreover, the packaging of the bags was changed as well. Bags were now being made out of unbleached paper. The target for the introduction of these brown paper bags, which were completely recyclable, was April 1991. Reusable coffee filters started to be used to boot. Furthermore, reusable containers for condiments and cleansing materials were introduced (Farmer, 2011). Where it was applicable, the task force performed a test to determine if a cutlery made out of starch material could be used instead of plastic cutlery. This was carried out in 1991 as well (The Economist Intelligence Unit, 1999). The use of individual packets for condiments also contributed to the waste produced. For reducing this type of waste, a pump-dispenser for distributing condiments was set up in McDonald’s outlets. It was initially tested in 1991 before widespread implementation for in-store production. Coffee cups which could be used over and over again replaced one-time use only cups and covers for salad containers and breakfast entrees were used more than once (Farmer, 2011). After introducing reusable materials, the next step was to determine the material that could be recycled. When the task force started its research, more than one-third of the solid waste compromised of corrugated cardboard. The simple solution to that was its recycle rather than disposal. The target for the recycling of corrugated cardboard was late 1991 (The Economist Intelligence Unit, 1999). The material that could be reused, recycled or replaced during shipment processes was also scrutinized. Evaluation of shipment products were to be carried out each year to filter out those which can be removed. The businesses which used to supply McDonald’s with raw materials for food production and food packagings were encouraged to engage in more green supply processes. They were convinced into supplying materials in cardboard that can be reused; the limit set for the minimum cardboard content was 35% and the deadline for it was December, 1991. Suppliers also supplied napkins which could be recycled (Farmer, 2011). Suppliers were required to adhere to the dictate put forth by McDonald’s to cut down their solid waste by 15% and were given the deadline of December 1991 for achieving it (The Economist Intelligence Unit, 1999). Moreover, they had to comply with the volume packaging particulars as put forth by the task force by June of 1991. McDonald’s bought only those packaging paper bags which had a certain degree of recyclable material in them. This ranged from 5 to 30% (Farmer, 2011). Farmer (2011) also documents that the task force focused on the homogenization of the different plastics utilized in the production lifecycle including those required for containers and jugs used for drinks. The wrap that was used for Big Mac burgers was also being produced out of unbleached paper. The task force also decided to alter and replace the components of packaging materials and to use those instead which were recycled easily. The initiative also suggested an investment of $100 million in recyclable packaging materials and other production items every year (The Economist Intelligence Unit, 1999). Another combined initiative the task force undertook was the introduction of compost measures. In order to make use of the organics and stop their disposable into streams, composting was a good option for McDonald’s (Russo, 1999). More than one-third of the waste produced on-site included organic materials. Food scraps such as eggshells and coffee grounds along with paper napkins were discarded after use. This used to be a major component of the waste haul produced. Thereby, McDonald’s started to use paper napkins and food scraps for composting. Initially a pilot program was launched in Northeast to determine which materials underwent composting effectively. Materials like paper wraps which composted well were separated from those which were only moderately composted. It has been over 20 years since the implementation of this program (Farmer, 2011). According to Farmer (2011), food chains like Ronald and Grimace are also following the likes of McDonald’s to compost organic materials in order to reduce the landfill space consumed. This highlights the effectiveness of the composting initiative launched by the task force. Results and Feedback A decade since the establishment of the task force and the implementation of several initiatives aimed at sustainable production, EDF gave a press release that the McDonald’s have been able to reduce 150,000 tons of its packaging material either by making changes to the composition of the packaging or by cutting down on the percentage of different non-reusable materials. Moreover, McDonald’s saved more than 500 kilowatt hours of energy by improving its efficiency and through source reduction (Environmental News Network staff, 1999). The investment in reusable products, such as recycled glass, rubber and paper along with trays and bags amongst others, totalled to a hefty sum of $3billion. EDF also reported that the corrugated cardboard task force initiatives were able to recycle a million ton in weight (EDF, 2012). The initiatives also allowed for economic benefits; McDonald’s saved more than $6 million in packaging annually (EDF, 2012). McDonald’s CEO and Chairman observes that with its energy-efficient production, McDonald’s has been able to devise models of green production not only for other competitors in the industry but generally for other service sector businesses as well (EDF, 2012). The alliance between the two was also appreciated by CNN. Despite dubbing the alliance as “unlikely”, the Environmental News Network staff (1999) at the CNN acknowledged the achievement of the partners in following sustainable business practices. Following the accomplishments of McDonald’s and the EDF, Pew Charitable Trusts have also collaborated with EDF to start the Alliance for Environmental Innovation, to make production measures sustainable in other organizations in the US including Starbucks and Dell Computer (EDF, 2012). According to Laws (2000), these efforts at recycling and reusing are reflective of the awareness people now have regarding environmental conservation and sustainability. Over the time, this level of awareness will increase the pressure on businesses which are not following green measures in their production, supply and distribution. The green initiatives undertaken by the task force are not confined to the 1990s. The collaboration is still working for the promotion of green production in McDonald’s. The initiatives that the business has announced in 2012 include the conversion of play places into compost gardens. In a report by Dogwood Alliance’s "Greening Fast Food Packaging" published in March 2012, McDonald’s has been acknowledged as one of top names in the field of sustainable production, along with companies like Starbucks (Green Retail Decisions, 2012). The report documents that the criterion for selecting these companies as leaders in sustainable production is the time, resources and capital being invested in environment-friendly production. Moreover, these companies are engaged in resourceful stakeholder alliances for the realization of their objectives. The report also comments on the effectiveness and utility of the Environmental Scorecard made by McDonald’s in boasting competition amongst suppliers and encouraging them towards the supply of sustainable products (Green Retail Decisions, 2012). According to Green Retail Decisions (2012), McDonald’s has come up with successful ways of reducing the non-recyclable content in its waste and the percentage of fibre in the packaging material. For instance, the introduction of fluting and corrugation has brought down the waste produced. Alyce Lomax (2012), analyst at the Motley Fool, argues that large corporations can bring about significant changes by making use of their inventiveness, originality and ingenuity. By cutting down on its waste products and decreasing the deleterious impact they have on the environment, McDonald’s can more holistically develop “a much Happier Meal” (Lomax, 2012). The alliance is deemed a success in environmentalist-corporate relationships. The Environmental Management professor at Harvard, Richard Vietor, accepted that the strategic alliance between EDF and McDonald’s was the pioneer of a unique model for the solution of environmental concerns raised against production activities. The recent announcement by McDonald's directed to one of its suppliers to provide better living conditions to pigs is another successful measure towards a more ethically-aligned, sustainable production. This has been appreciated by New York Times’ food and opinion columnist, Mark Bittman (2012), for pursuing the right direction. Farmer (2011) implies that the green production objective of the task force is being realized well enough. He asserts that although McDonald’s has brought about significant changes in its production, there still is space for improvement. Moreover, the task force realizes this and McDonald’s poses that it is working to improve the percentages and making production a zero-landfill process now. Farmer (2011) contends that if the task force continues its endeavours at sustainable and eco-conscious production, it can have a long-lasting impact on environmental conservation for years. Conclusion The strategic alliance between EDF and McDonald’s is now over twenty years old. Over the past two decades, the two allies have worked together to achieve sustainable business production. For McDonald’s, the alliance has provided a better reputation, as implied in the feedback from various sources previously. It has also been able to establish itself as an energy-efficient, leading fast-chain. EDF has also been able to attain its goals. It aims to protect and conserve the environment and to provide current and future generations their environmental rights. It was EDF which approached McDonald’s to redefine its waste management processes. It gained from this alliance since it serves to provide its partners business-friendly solutions to their environmental dilemmas (SourceWatch, 2012). It should also be noted that the strategic alliance between the two rendered McDonald’s benefits which extend beyond the obvious need to make its practices more sustainable. By becoming more eco-conscious, McDonald’s was able to gain a competitive edge over other competitors in the market. This is because a number of people do not prefer buying from companies which are engaged in business activities that are deleterious to the environment (Dalton, Hoyle and Watts, 2010). It also allowed McDonald’s to redefine its markets. Consumer observation and behavior is affected by the changes that a company brings in its operations. By pursuing sustainable measures, McDonald’s improved its market position and augmented its customers and the financial market (Dalton, Hoyle and Watts, 2010). However, in order for McDonald’s to maintain its reputation, it must continue to be a part of measures which conserve the environment. The CEOs and the Heads of both the allies are aware of this. The partnership must continue as there is still a lot that needs to be accomplished, as Farmer (2011) observes. Thereby, it is important for the alliance to keep looking for new ways of environmental innovation. There needs to be an increased emphasis on the diversification of efforts into areas which have still not been closely scrutinized or been the subject of initiatives, including distribution. The demand for environmentally safe goods is ever increasing and companies which are not looking into this aspect of market will be at a loss. 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