Marketing and Service Strategies in Global Business - Essay Example

Ethics and Policies in Managing MacDonald's UK Briefly identify the reasons why many organisations seek a distinctive ethical position, and the advantages that are expected to accrue. Presently, the impact on global business is now widely recognized and generally assumed to be inevitable because of the increasing scope of trade. Corporations adapt research, production, marketing and service strategies in an effort to "think global, act local" (Kline, 2005, p. 1). National governments have come to accept growing constraints on their sovereign scope for unilateral action even as they manoeuvre for competitive gains from global commerce. These changes supply both the building blocks and much of the driving force behind the emergence of "globalization" as a contemporary phenomenon. When operating, a company should consider its mission (what it will seek to do and become over the long term), its objectives (specific performance targets to fulfil its mission), and strategy (the means to fulfil its objectives). Daniels, Radebaugh & Sullivan (2004) suggested that the three major operating objectives that may induce companies to engage in business. They are To expand sales. To acquire resources. To minimize risk. Kotler and Keller (2006) deemed that companies should strive to raise the level of socially responsible marketing that calls for a three-pronged attack that relies on proper legal, ethical, and social responsibility behaviour. In this case, companies must adopt and disseminate a written code of ethics, build a company tradition of ethical behaviour, and hold its people fully responsible for observing ethical and legal guidelines. In fact, Kotler and Keller (2006) revealed a 1999 poll by Environics International, a public opinion research firm, found that 67 percent of North Americans are willing to buy or boycott products on ethical grounds. With the globalization of business, the issue of ethical positioning had become vital because "ethics emerge from the degree of agreement among societies, corporations and other organizations regarding the appropriate ethical frameworks and behaviors in a given situation" (Buller, Kohls & Anderson ,1991). Furthermore, Buller, Kohls & Anderson (1991) had explained that business ethics take into account both moral attitudes and moral reasoning. However, the relationship between these two elements is unclear. How do reasons and attitudes diffuse in the development of an ethical position Recent studies in business ethics have shown both remarkable similarities and differences across cultures with respect to attitudes toward questionable business practices. During the decades of the 1980s and 1990s business ethics was predominately a subject taught at business schools and debated by academics. It had little impact in the international business world, where the prevailing attitude was that anything goes and everyone is paid to cut a deal. Many governments (including France, Japan and Germany), recognizing the reality of doing business in certain parts of the world, actually allowed businesses to write off bribe payments on their corporate income tax (Mitchell 2003, p. 7). Recently, business leaders and CEOs already have realized the repercussions of not having solid ethical guidelines. Corporations of all sizes, especially multinationals, are more attuned to the bottom-line value of being a good corporate citizen and playing by the rules. Individual business people are seeking to do "what is right" (though this is often prodded by corporate ethics standards and local laws) rather than maintaining an attitude of "anything to close the deal." For example, Royal Caribbean Cruise Lines was indicted for criminal violation of the Clean Water Act. The company acquired much costs as it put together an all-star defense team including two former federal prosecutors and two former United States attorneys general to defend itself (Sorkin 2004, p. A1). Briefly identify the ethical pressures present in the food industry, making reference to one organisation in particular. As the world's leading consumer foodservice company, McDonald's currently operates and franchises more than 31,500 restaurants in 119 countries on five continents, which generate over US$19 billion in revenues annually. On a typical day, the McDonald's System serves 2.5 million consumers in the UK. The company also operates other restaurant concepts under its partner brands: Boston Market and Chipotle Mexican Grill, which are located primarily in the US. However, in 2003, the company sold the previously owned Donatos Pizza and announced a scaling back of its other partner brands. In the UK, the company also has a stake in Pret A Manger (www.McDonalds.co.uk). As a global food corporation, McDonald's is facing some pressures in different sectors with regards to the health hazards that is contained in the products they offer. With consumers becoming increasingly health conscious, the food industry is facing numerous ethical pressures. For example, the Economist Intelligence Unit (16 November 2006) predicted that the consumption of meat will be particularly susceptible to health scares such as BSE (bovine spongiform encephalopathy, or mad-cow disease) and avian flu. McDonald's is caught in this pressure because their products have beef and chicken in it. However, past experience suggests that the effects of such scares are rarely long-lasting, with consumption rapidly returning to previous levels once the scare is over. Abstracting from possible disruptions caused by future food scares, households' consumption of meat is forecast to follow a modest secular upward trend over the next five years. However, consumption, at an average of 89 kg per head in 2011, will remain markedly lower than in neighbouring France (at around 100 kg). Despite increased health consciousness, fish consumption is forecast to remain broadly flat over the forecast period, as depleted stocks in the North Sea-particularly for popular varieties such as cod-drive up prices and limit the market's potential for volume growth. As ever, demand for vegetables and fresh fruit will be affected by the impact of weather on prices, but the Economist Intelligence Unit (16 November 2006) expects it to grow at an average annual rate of around 1.9%. By 2011 consumption will average over 100 kg per head for both fruit and fresh vegetables. With this pressure, McDonald's is prompted to offer healthier choices in their menu. Another pressure for the food industry is from the World Health Organization that promotes changes in food labels, proposing more nutrition and serving size information. U.S. companies got a boost in March 2005 when the World Trade Organization (WTO) ruled that geographic labels such as "Idaho potatoes" and "Florida oranges" should be allowed on products exported to the European Union. The EU had previously banned such labelling, recognizing only geographic areas within the EU. Consumers are pushing for a more detailed food labels that are easier to read. Specifically, food labels are being altered to include total calories per package in addition to serving sizes and calories per serving. Calorie counts are listed in bold type that is often larger than that used for other information. Opponents to the changes, generally food manufacturing companies, argued that there was already enough information on food labels. Previously, labels were required to list calories per serving, number of servings per package, fat, cholesterol, sodium, carbohydrates, sugar, fiber and protein amounts, as well as the amounts of certain vitamins. The change is prompting food companies to spend billions of dollars to reformulate food products to reduce or remove trans fats and allergens and revamp labels. Lastly, obesity is increasing in nearly every country in the world and this puts pressure in food companies regarding the products they offer. The problem is at its worst in the U.S., where obesity has doubled in the past 20 years. A study of a sample of 4,115 adult Americans published in the Journal of the American Medical Association (Freedman et al, October 2002). found that the age adjusted prevalence of obesity (a much more serious problem than being merely overweight) was 30.5% (the study was actually conducted in 1999-2000). This was a significant increase from 22.9% in the previous study (made during the 1988-1994 period). The number of adults either overweight or obese was estimated at 64.5%, up from 55.9%. Moreover, the Organization for Economic Cooperation and Development (OECD) reported that Britain and Australia are not far behind the U.S., with obesity rates of 21% and 20% respectively, while the obesity rate in France is only 9.6%, and in Japan it is only 2.9%. This is why McDonald's have studied their products. For example, Quarter Pounder with cheese, supersized fries and supersized soft drink totaled a whopping 1,550 calories, until the widely anticipated release of a 2004 documentary called Super Size Me. The film, which chronicled the filmmaker's experience of a month-long, McDonald's-only diet, attracted hundreds of thousands of moviegoers and likely influenced the fast food giant to discontinue its supersize promotions altogether in the U.S. McDonald's resolved the scrutiny of their "fattening" food items by offering healthier, lower-fat items such as salads. For the example chosen, identify the specific leadership and organisational responsibilities that are present. The McDonald's business model is slightly different from that of most other fast food chains. In addition to ordinary franchise fees, supplies and percentage of sales, McDonald's also collects rent. As a condition of the franchise agreement, McDonald's owns most properties. Since rent is a fee that is not linked to sales, this practice allows McDonald's more control over its franchisees (Rumbelow, 1 February 2001). Gaining consciousness about health concerns, McDonald's added to their menu salads and McTreats, such as low-fat Chicken Salsa Flatbread, alongside the notorious Big Macs and Chicken McNuggets. McDonald's is also planning to introduce further new products in 2004 to satisfy consumers' expectations for fresh, healthy and value-for-money food propositions. McDonald's already improved both dcor and outlet layout over the review period to tempt consumers. What have McDonald's burgers brought to Britain First, McDonald's has helped change the British dining experience. Inexpensive meals and snacks, of a consistent quality, are readily available at over a thousand outlets in Britain. Restaurant hours are very long, and include Sundays, which support the expanded Sunday shopping hours in many British cities. Often McDonald's has the longest open hours of any shop or restaurant on a downtown street, and is therefore the most visible local business, with its lights glowing in the dark British winter. As discussed earlier, children and teenagers are especially welcomed, and can often create their own social spaces in individual restaurants. "Take-away" dining, which was well known in Britain at fish and chip and ethnic restaurants, has expanded and, as in the United States, has changed the meaning of a family meal, especially in urban locations (Debres, 2005). McDonald's focuses its operations on fast food with its world famous burger brand and also owns a third of Pret a Manger in the UK. The company aims to satisfy consumers' desire for fast food products at affordable prices in a more upmarket eating environment, with McDonald's intent on broadening its UK consumer base. To support its new strategy, McDonald's launched a new global advertising campaign, calling it "I'm lovin' it". McDonald's also began an innovative rollout of e-media internet terminals in 2003 with Data Vision Europe, a designer and manufacturer of touch-screen computer technology solutions. A milkshake- and burger-proof computer solution, The Woody touch-screen terminal was modified especially for McDonald's, with a smart and durable solid oak frame and stainless steel keyboard. This has been an important move in order to stay ahead with the youth of today, which has grown up with mobile phones and messengers instead of Game Boys and walkmans (Design Week, 8 April 2004). Despite negative press and an adverse trading environment, McDonald's maintains its position as a leading player in consumer foodservice, second only to Enterprise Inns in the UK. Within fast food, it remains the number one with a value share of 9% share in 2004. Its main strengths lie in its mass appeal to consumers and its international brand recognition. McDonald's is consistently named among the top 10 most recognised brands worldwide. McDonald's has always capitalised on the strong appeal to families and children with Ronald McDonald and by offering birthday parties for children. Teenagers like to hang out there as an affordable place to eat before going to the movies, for example. In addition, once consumers grow up with a certain brand, they will continue to frequent the restaurants, especially when they are as heavily advertised as McDonald's. Finally, the "I'm lovin' it" campaign helped to attract new consumers as it features mostly younger men and women going to McDonald's as part of following a balanced diet and lifestyle. Identify other ethical issues that are present in the particular case, and draw conclusions as to the overall ethical stance adopted by the particular organisation Ethical Pressures Strategic Responses Leadership Factors - Immense Market Competition (e.g. Burger King, KFC) - Health Concerns (e.g. Slow food movement, food safety & hygiene, Mad Cow scare, Bird Flu scare) -Social Concerns (e.g. Global anti- American sentiments, Animal rights, Wage issues, Moving from U.S. to local UK market) - Government Policy (e.g. Advertising ban for the fast food industry) - Economic Issues (e.g. Rising prices of raw materials, economic recession after 9/11) - Increasing Consumer Requirements (e.g. diversity in menu, healthier choices, services) - Internal Pressures (High centralisation, Franchise versus Management, Communication problems) New Product Range (e.g. Introduction of healthier choices, more variety, inclusion of local food in their menu). - Persuasive Marketing & Advertising (e.g. Celebrity endorsers, "I'm Loving It" campaign, Changing brand image) - Diversifying into McCafe (To answer upmarket segment) - Community Sponsorships (e.g. Sports, Community events, Charities) - Service Strategies (e.g. Refurbishing restaurants, Friendly crew, Customer feedbacks, Cleaner stores) - Training & Restructuring (e.g. decentralised power, safety training, globally competitive staff training) - Managing Culture (e.g. diversification, localisation of service, educating crew) - Health Consciousness (e.g. Hiring cooks & nutritionists, Better products for different consumers, Providing safety and health checks) - Staff Motivation (e.g. Developing career progression & charitable schemes, Service awards) - Effective Communication - Downsized Sales in UK Being the world's largest fast food company, McDonald's inevitably takes several media "mudslingings" as it is the target of criticism. It has been accused of the exploitation of entry-level workers and ecological damage caused by agricultural production and industrial processing of its products with high levels of packaging waste. Critics claim it sells unhealthy or non-nutritious food with exploitative advertising targeted at children and contributes to the suffering and exploitation of livestock. McDonald's has also been criticised for its litigious and heavy-handed approach to preserving its image and copyrights. Consequently, McDonald's recorded its first ever global loss in the last quarter of 2002 and in Europe sales plunged 3.8% in January 2003. To combat this, McDonald's underwent a fundamental revolution in its approach to menus, marketing and consumers in 2003. In the UK, McDonald's is improving its standards and continued to work with government and health officials to investigate improvements (Euromonitor, 29 November 2005). The ethical stance of McDonald's regarding the environment has been considered when it formed its 1990-1991 precedent-setting alliance between McDonald's Corporation, the leading quick-service restaurant chain, and Environmental Defense Fund (EDF), a United States-based mainstream environmental organization. McDonald's and EDF formed a joint task force that publicly released a six-month study of McDonald's entire range of packaging and materials management practices. The partnership is most widely known, under pressure from EDF, McDonald's abandoned the polystyrene boxes (called clamshells) it had traditionally used to package Big Macs and other sandwiches. This dramatic event tended to overshadow other - arguably more important, and certainly less controversial - work, including a 42-step action plan to lessen the environmental impacts of McDonald's business (Livesey, 1999). Moreover, in an article that appeared in Personnel Today(10 October 2006), the chief executive and president of McDonald's UK voiced out that he likes to run his business with the same transparency as one of the famous fast-food chain's 1,225 UK outlets. The 2.5 million people that visit a McDonald's each day can clearly see the kitchens and the preparation that goes into their meal. McDonald's UK employees are also given a window into the mechanics of the company, according to Easterbrook. "Businesses today have become increasingly transparent - from employment practices to how and where your food is made. Anyone that joins McDonald's needs to understand the processes that make it work," says Easterbrook. All new starters, from marketing executives to senior managers, spend at least a week in one of the restaurants as part of their induction. Easterbrook's philosophy is simple and he is clear about where his priorities lie: "If you get the people part right, the rest will follow". He deemed that human resources (HR) at the centre of their business and Easterbrook sought to create an egalitarian working environment. He informed that "HR is a key driver in shaping and implementing our strategy as a progressive employer," he says. The 67,000 UK staff all have Easterbrook's e-mail address and, he claimed, he answers all queries personally. Easterbrook is focused on recruitment and getting service-orientated people with a positive attitude. This is clearly relayed by their "Hire The Smile" recruitment strategy. And despite the "McJob" reputation (defined by Canadian novelist Douglas Coupland in his cult 1991 novel Generation X as a "low-prestige, low-dignity, low-benefit, no-future job in the service sector", McDonald's only takes on one in four of the applicants that apply to work for them. As a global brand, McDonald's is an ubiquitous pioneer of American fast-food and its name has been attached with capitalism. Easterbrook is candid about its corporate reputation and his objective is to improve it. He deemed that in the past, McDonald's have seemed somewhat apologetic about who and what they are, but they have to believe in the brand. Fact is that the burger giant's image was severely tarnished by producer Morgan Spurlock's "Super Size Me" documentary in 2004, in which Spurlock damaged his health and gained about 12kg after eating nothing but McDonald's food for 30 days. With this, McDonald's has since added so-called "healthy options" to its menu, including salads, paninis and orange juice. But this only goes some of the way towards overcoming the poor public perception of the McDonald's brand. Easterbrook pointed out that every customer is a potential employee, and the majority of new recruits come from the customer base. This is why the company's employee satisfaction surveys speak volumes. Nine out of 10 young McDonald's employees showed high levels of satisfaction and commitment to their jobs in a recent survey. Eight out of 10 of McDonald's UK restaurant managers started as crew members on an hourly rate, and the average length of service is three years for each employee. And while current staff turnover levels are about 67%, this is a significant improvement from five years ago when they stood at 100%. Another fact is that McDonald's was also one of the first companies in the UK to set up an equal opportunities working group in 1992. McDonald's employees are recently trialling a new innovation in flexible working being pioneered by the company. They called it the Family Contract enables two people from the same family working in the same McDonald's restaurant to cover each other's shifts - with no prior notice. McDonald's believes the Family Contract is a UK first which could re-define flexible working as we know it. Employees are now putting pen to paper on the contracts - at a time which many psychologists say is the most stressful of the year. It is set to benefit busy mums juggling childcare and work, students with last minute deadlines and people who care for a parent or relative. David Fairhurst, Vice President, People, McDonald's, introduced this scheme. Fairhurst elaborated that their employees are incredibly diverse but they have one thing in common - hectic lives. For that, Fairhurst conceptualized the Family Contract to help their staff juggle their busy lives. He said that "By giving our employees the freedom to manage their shift commitments, we will increase their motivation and enjoyment of work. That is fundamental to our business because it is a simple fact that happy employees mean happy customers" (Company Press Release, 26 January 2006). In McDonald's European Corporate Responsibility Report 2005, they showcased an endorsement from its think-tank "The Work Foundation" that voiced out the company's commitment to development and its ethical position, with all staff working towards food hygiene qualifications. The foundation assured that after training, McDonald's pay rates appear to increase quite dramatically, and to significant points well above the national minimum wage (NMW). In late 2005, the company was also awarded a "world class" score for its people management strategy by Investors in People. Developing intellectual potential, knowledge, skills, and experience of the enterprise's management should be taken into consideration for a team to be successful. Drucker (1996, p. 90) stated that the number of qualified people is practically meaningless. Their quality is much more important. He further emphasized this point with a mathematical equation proposing that the number of competent researchers increases proportionally to the square root of the number of all employees in a research team, while the number of people capable of working highly productively in a systematic manner increases proportionally to the cube root of the number of all team members. In McDonald's, after an initial 21 days' probation, crew member benefits include a free meal allowance and paid holidays (four weeks pro rata). Those who stay for three years also get additional benefits. There is private healthcare, and, for the committed, long service awards at three, five, 10 and even 15, 20 and 25-yearly intervals (those who stay a quarter-century get a 750 voucher). Others may be more interested in discount cards on holidays, computers, shoes, holidays and DVD rentals.The two performance reviews in the first year are designed to move people up quickly, provided they can convince restaurant managers of their abilities. There is also an additional bonus system for high-performing teams -- any restaurant that figures in the top 10 per cent in a league table run by the director of operations wins a 50p-an-hour bonus. In an article entitled McDonald's Serves up HR Excellence, it claimed the chain excels at pulling potential employees into its company: As such, one-eighth of the American work force has, at some point, worked in a McDonald's branch. This fact alone speaks volumes on McDonald's HR, as if quick-service food chains make for easy recruiting. Still, employees have several good reasons to crown McDonald's their employer of choice. Flynn (1996, p. 55) enumerated the reasons: 1.) Intense training efforts - McDonald's surpasses even the U.S. Army as the nation's largest training organization--the company gives employees ample means for self-advancement. "When we hire someone, we put in such an investment that we want them to stay with us for their careers," explains Stanley Stein, senior vice president, HR and labor relations. Proof: More than 60% of McDonald's restaurant managers started as crew. Education is everywhere at McDonald's. The company offers beginners orientation through its Crew Training Program, and a Management Development Program takes up where the Crew Training leaves off, developing a cadre of leaders for the future. 2.) Top-of-the-line training at the Hamburger University home campus - Based at the company's headquarters in Oak Brook, Illinois, the Hamburger University has resident professors that serve up a variety of management and restaurant operations courses to McDonald's owner/operators and management employees from around the world. "Hamburger University, which we're very proud of, is really the finishing touch to a lot of the training," says Stein. Accredited by the American Council on Education, Hamburger University has graduated more than 50,000 McDonald's management employees. It's no easy task, when students often herald from dozens of countries. To keep them all on equal footing, the HU classrooms resemble a United Nations assembly. With the help of translators and electronic equipment, professors teach and communicate in 20 languages. Also aiming to become a globally diverse company, McDonald's maintain diversity through other facets of the work force. According to the article, McDonald's diversity in its workforce is well-established as an open-arms- to-all company, even to people who have mental or physical disabilities, who can get extra support and training from the McJobs program, which has matched more than 9,000 employees with job coaches who customize training to suit each individual. With their aim of making the customers still "the boss", McDonald's heritage of innovation encourages their system to embrace change and continuously improve their overall customer experience. They have pioneered drive-thrus, creating a successful breakfast business, staying open later, reimaging restaurants, introducing premium salads or encouraging people to lead balanced, active lives. For its customers, McDonald's UK market is still improving, despite the media's continued focus on obesity. McDonald's responded offering a website that informed the customers and initiated activities intended to challenge misconceptions about the food offered in their fast-food chain. In a global organization like McDonald's, ethical values and rules control self-interested behavior that might threaten the collective interests of an organization and society in general. Ethical values establish desired end states-for example, equitable or "good" business practices-and the modes of behavior needed to achieve those end states, such as being honest or being fair. Another important reason to act ethically is that when an organization follows accepted ethical rules, it gains a good reputation. This is a valuable asset that entices people to do business with it, including customers, suppliers, and the best job applicants. On the other hand, organizations with unethical reputations breed hostility and mistrust. Although unethical organisations might reap short-term benefits, they are penalized in the long run because eventually people will refuse to deal with them. This is primarily why McDonald's is changing its company to proactively act on different ethical pressures and balancing it out as it integrate it in their company strategies. References Buller, P.F., Kohls, J.J. and Anderson, K.S. (1991). The Challenge of Global Ethics. 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