Foreign Direct Investment and Technological Change - KFC in Malaysia - Assignment Example

Foreign Direct Investment and Technological Change (KFC Corporation (Malaysia)) Student’s Name: Instructor’s Name: Course Code: Date of Submission: Question 1: Foreign Direct Investment Introduction With the advancement in technology and removal of trade barriers that in the past used to hinder the movement of goods, services, resources and labor across borders, now business can be easily moved from one country to another with more easy. This is because the world market has now become single large market that can accommodate everybody. It is from this ground that Foreign Direct Investment (FDI), which is the establishment of a venture or business in a foreign country has come into play. a) An overview explanation of what is meant by ‘foreign direct investment’ (FDI) and its role in globalization. Foreign Direct Investment (FDI) according to International Monetary Fund (IMF) is the investment that is made by an investor with the aim of acquiring a lasting interest in a particular enterprise that is operating outside one’s economy. The investment is referred direct because the entrepreneur or investor could be a foreigner to the company, business or entity that is seeking to control or even have significant influence on. FDI in the contemporary business environment is playing a very critical in motivating globalization where the whole of the world economy is seen as one single large market that each and every entrepreneur has access to. A good example is Kentucky Fried Chicken (KFC), which despite having been established in the United States over 70 years ago has made remarkable presence in different parts of the world including Europe, Asia and Africa. Through FDI, different companies are invading the world market and have continued to more presence in those regions that they did not seem to exist before (Aseem and Matthew 2007). What this kind of move is contributing to, is globalization, which is a process of international integration that comes into being as a result of exchange of world views, services and products and other material like culture. Some important examples of companies that have contributed to globalization include General Motors, Sony, Marriot Corporation, Hilton worldwide and many more. b) FDI affects on the chosen organization and/or industry and its operations With the emergence of FDI, different effects on different organizations are now witnessed and which have continued to influence on the operations of different businesses. Stiff competition for the available market, customer relationship management (CRM) and Investor relationships, are among the top effects that businesses are facing with intensity of FDI and this what even has been witnessed in the case of KFC Malaysia. To start with, FDI has contributed immensely to the way different companies are approaching the market. This is because each every company in the industry is looking for away to entice, attract and retain the market. What this kind of competition has had on KFC Corporation (Malaysia) is the diversification of its menu from fried chicken as its main meal in the restaurants to other businesses like Ayamas retail, Poultry and ancillary operations. The agenda behind this diversification in the business is to ensure that the organization has more revenue bases and also ensure that sustainability into the future is sustained. Customer relationship management (CRM) and investor relations are also among the areas that FDI has impacted at KFC Corporation (Malaysia). Having an online help desk and sharing important information, financial highlights, and shareholder information have come as result of the demand to be a responsible corporate citizen by the public (Nigel and James 2007). c) How the chosen organization or industry has responded to and/or utilized FDI. KFC Corporation (Malaysia) has responded FDI in different many ways. First and foremost, the business has chosen apart from the restaurant business, to go into other related businesses such as Ayamas retail, poultry and Ancillary operations. These are all important business responses since they are used to add value to the business by adding on its package of services to the customers. For instance, Ayamas was introduced as the first company in the country to deal in both selling chicken and other related products in an air-controlled environment. Ayamas was also the first of its kind in Malaysia to offer what can be termed as chicken roasters and light and chicken-based snacks. The intention of Ayamas is to help the business is on top in selling high quality chicken that has been prepared hygienically and packed as well processed by the company itself. The ultimate objective of having Ayamas alongside the restaurant unit in ensure that company is able to offer a variety of services to meet the world standards and also to be able to penetrate into those businesses which the competitors have penetrated (Klaus and Evis 2009). Further, these other business units, have been introduced in the company with the intention of supporting core business which is the restaurant. In the future, it is expected that FDI may lead to increased competition in terms of wage pay, labor utilization and increased use of modern technology. Conclusion In general, it can be argued that FDI in many different ways has impacted on globalization and the way businesses are operating. This is because competition has become stiff and also the market has interacted in different ways changing on the demand patterns of the customers prompting the company to respond accordingly. Question 2: Technological Change Introduction In the contemporary world of business because of the changing situations, different businesses are now more than ever before looking for best ways to ensure that their businesses are becoming competitive and can sustain their operation irrespective of the change. One way that many of the businesses are considering sure way to do business is to be innovative and this is supported with appropriate technology that is relevant in the market. a) An overview explanation of what is meant by ‘technological change’ Technological change in simple terms refers to the process of inventing, innovating and diffusing certain technology into a given context, situation or business. The term can be used synonymously with such terms as technological development and technological achievement as well as technological progress (Danna 2007). In the business context, technological change can be used to refer to ways in which different products and services are developed using different technologies. For instance, in the recent past, the development of the internet and more particularly the social media have impacted on the way businesses are operating. For example, the new communication technology, businesses are now able to interact more frequently with the customers both already existing and new potential customers (Rogers 2003). Further, technological change is playing a very significant role in modifying customer services to meet their expectations and also develop new products and services for the market. In the case of KFC Corporation (Malaysia), technology has been put into use since 1990. For example, in 1990, a computer feedmill was introduced which led into the capacity production of 120,000 metric tons each year. This also led to significant increase in quality which is a high customer requirement. Today, new technology is used by the business in improving on the ways it relates with the customers, discovery of new products and also establishing a business system that links all business units for a common purpose. b) Explain of how ‘technological change’ affects the chosen organization. Like many other global companies operating in the 21st century, technological change, has continued to play a critical role in the way businesses are operating. In the case of KFC Corporation (Malaysia), the effects of technological change can be witnessed from different perspectives (KFC Holdings 2012). First and foremost, the technological change has enabled the business website through which communication with the customers and the market as a whole can be done. Unlike in the past when the company predominantly relied on printed media like magazines and newspapers, to convey important information about the company and more so its menu and other news, the company website is now used to relay such information to many different customers within Malaysia and outside. This because just with a single log to the company website, one can access all the news that may help him understand what is happening and consequently make informed choices about the same. This technology is important both for the customers and the investors (Hall 2004). For example, on 24th April 2012, the company online web was used to communicate the company’s move to invest RM45mil in opening 25 retail outlets in the country. This is especially important in ensuring that all major stakeholders are in touch of what is happening in and outside the business. c) How the chosen organization has responded to or should respond to technological change’. Technological change in the business environment has prompted for various responses from KFC Corporation (Malaysia) and this include the use of company website for communicating to the market more about the company. Therefore, technological tool at KFC is considered a critical tool in business promotion. This is because customers can actually access any information they want about the business through. This response is especially important in the era competition and more particularly in a situation where efficiency in businesses is becoming paramount. This kind of response can be termed as a business strategy to deal with high cost of operations that results from promotions, advertisement and marketing and bring them into the minimal. The company therefore stands a better chance of reducing costs of operations by using services provided by the social media to link and interact with the customers irrespective of their geographical location. Further, the company has responded to the technological change by using computer enabled programs in order to support the rearing of chicken and processing of feedmills. This is apart from enhancing quality and diversity has helped the business increase its efficiency by making good use of available resources for profit maximization (Ansfield 2003). This is especially important in delivering quality services in a more affordable price and consequently competitive advantage. Conclusion In general, in the world of business today, technological change is no longer a new phenomenon. This is because it is come with both challenges even tough benefits seem to be more. This is because apart from enhancing efficiency, it is also applied in promoting the business, developing new products and services and delivery of services alongside improved customer relationship management. References Ansfield, E 2003, Microeconomic Theory and Applications, 11th ed. W.W. Norton. Aseem, P and Matthew, P 2007, Investing Up: FDI and the Cross-Country Diffusion of ISO 14001 Management Systems, International Studies Quarterly, 51(3), p. 723-744. Danna, W 2007, "They Had a Satellite and They Knew How to Use It," American Journalism, Spring, Vol. 24, Issue 2, p. 87-110. Hall, B 2004, “Innovation and Diffusion”, NBER Working Paper No. 10212. p. 12 KFC Holdings 2012, About us, retrieved on 16th January 2013, available online: http://www.kfcholdings.com.my/about-us/ Klaus, EM and Evis, S 2009, When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies, 40(7), p. 1075- 1094. Nigel, D and James, H 2007, Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis. Journal of International Business Studies, 38(3), p. 460-473. Rogers, E 2003, Diffusion of Innovations, 5th edition, Free Press. Smeets, R 2008, Collecting the Pieces of the FDI Knowledge Spillovers Puzzle, The World Bank Research Observer 23(2), p. 107-138. Read More