Pros and Cons of Standardisation of Business Operations - Case Study Example

Question 1: The appropriate expansion path a. The success stories of McDonalds and Denny The success stories of McDonalds as it operated in China and Denny’s operations in Japan has attracted attention from contemporary scholars. When a company first enters a new environment with diverse culture, it is apparent it will have to device some mechanisms of countering the cross-cultural effects. Facing the same situation, what McDonalds did upon entering China market was to blend standardization with adaptation. Lee and Ulgado (2009) define standardization as the process through which companies decide to remain with their characteristics upon entering new markets. On the other hand, adaptation is the decision of adopting new cultures and brand with a view to accommodate demands of the new market (Qin et al. 2010). Partly, this is what Lee and Ulgado (2009) has suggested as being the reason as to why McDonalds succeeded in China. However, it has to be noted that with standardization, McDonalds faced a number of climatic environment, legal and cultural challenges and as a result it was forced to modify its products and features. This was the case with its market in Shenzhen and as Special Economic Zone getting support from Chinese government, the standardization strategy used here was to re-position its target consumer from family with children into young generation and teenagers with not only uniform quality standard but also uniformed marketing strategies such as “I’m lovin it” (Ryu et al. 2012). Similarly, Denny’s operations in Japan were a success story due to product innovations to cater for Japanese taste (Trieger 2009). Much of its efforts were re-adjusted to establish what seemed to be Japanese brand that could adjust to ever changing Japanese tastes and preferences. On the hand, the company adopted a different perspective compared with that of McDonalds. That is, they adopted what the management termed as “strong pipeline of products” where customers in Japan were attracted by the tag “Build Your Own Omelette, Build Your Own Slam” as a marketing strategy (Trieger 2009). It meant that the Company was ready to design food products in accordance with Japanese culture, demands, preferences and taste. Differently, upon entry into the market, the Company knew that it needed to adjust its prices to compete with other companies such as Kentucky Fried Chicken (KFC) and McDonalds that had established itself strongly in the market. As a result, its success was the adjustment of its prices in what the management termed as “Attractive Entry Price Points” that succeeded in enhancing value positioning (Lin et al. 2011). b. The pros and cons of standardisation of business operations The literature on international marketing has been representing a confrontation regarding the benefits and negative effects of standardization. For instance, scholars such as Gabrielsson et al. (2012) argue for the process of standardization and one of the benefits they see is that as a marketing strategy, there is need for the uniformity of multinational companies’ behavior. When this is done, there will be minimization of total costs besides promoting corporate image. However, there are other schools of thought believing that the process of standardization kills the spirit of competition thus favouring other marketing strategies such as adaptation. For instance, Cavusgil et al. (2014) taking a case study of Kentucky Fried Chicken argued that standardization if not effective marketing strategy as it does not consider the effect and the nature of the country of origin in the process of running business. Basically, this was the case with KFC. When a corporation first enters a new environment with diverse culture, it is generally expected that the cross-cultural communication creates stress for them therefore remaining with their characteristics was the best option for the company. Basing on the case study of KFC, the advantage of standardization is that it helps companies deal with diverse cultures and cross-cultural communication. Theodore Levit, one of the strongest believer of standardization as a marketing strategy posit that due to technological innovations, consumer mobility, mass communication and consumer needs globally, uniform marketing strategies allows for the convergence of consumer needs (Cavusgil et al. 2014). Other reasons for supporting standardization are that it helps in the economies of scale (Aguilera-Caracuel et al. 2012). Taking a case study on company such as Levendary Café, Kentucky Fried Chicken and McDonalds, global brands are currently having more bargaining power compared to local customers. Contrariwise, there are other disadvantages of standardization other than the ones aforementioned. Technically, standardization may not be practical and feasible owing to the fact that different countries operate under different cultures, legal terms and climatic environment. Using products from Levendary Café, consumers in other countries may reinterpret the brand’s marketing actions according to their cultural backgrounds and lenses. Brands’ proximity to local culture will allow them to build better relations with their consumers and to better respond to their needs. c. A recommendation on what Foster should adopt It has to be noted that Foster is managing an organization that has not been afraid to take risks. Secondly, the organization foundation shows that it has been blending concepts and operations. Taking these into considerations, Foster should recognize Chinese culture but avoid strategies that have been used by McDonalds especially in the establishment of its market without considering climatic environment. For that matter, for Foster, it is a case of interaction which will result in marketing strategy which is neither homogenous across China nor quite global. Mia Foster needs to reach a balance between adaptation and standardization so as to fulfill the newly emerging fragmented consumer culture in China. Question 2: Qualities of a good global manager a. The qualities that should be possessed by a good global manager Vrontis et al. (2009) took a case study on how economic environment in United States of America, China, Australia and Canada affect multinational business processes. The research noted that macroeconomic environment in these countries are characterized by incidences of still-accommodative monetary frameworks, quick improvement when it comes to labor market outcomes and favorable financial conditions. This is to mean that international businesses processes are embedded on factors such as reliability, tangibles, responsiveness and assurance. This is what a good global manager should take note of. Taking a case of Telstra as a multinational company, the management noted that there is need to assess economic environment before entering as this is a factor that has positively affected the implementation of service excellence (Telstra Environmental Guidance Document 2013). Concretizing this argument, in 2014/15 financial year, the Government of Australia had an underlying cash deficit of $29.8 billion (which basically translated to 1.8 per cent of GDP) with regard to 2014‑15 (Australian Government 2015). Therefore a good global manager should consider this as favorable economic environment for operation. Secondly, good managers should have the ability of assessing the company’s susceptibility. For instance, the European financial crisis and downturn in the export market can impact the Company’s sustainability if there is no proper assessing of factors such as competition and risks. The best way to achieve this is to have a manager who receives daily, weekly, monthly and annual reports from the various heads of departments within the institution or organization and shares the same with the Board of Directors (BODs) so as to come up with the necessary recommendations that can improve the general growth and performance of the institution or organization in question. Conceptualizing this point, Barclays Bank has operations managers monitoring and controlling the performance of different portfolios. Based on his/her reporting it is possible to know the asset class of the loans advanced to customers as well as whether the loan is performing or has moved to bad books (Baruch 2002). A good manager should be a good communicator; He/she should be able to have clear clarification of the duties and responsibilities expected of his/her staff in terms of report submissions. Taking a case of McDonalds, the Company has units in different countries but there need to be strategic communications that will affect operations across all countries. In such cases, the manager in charge of all units should be well informed of all the various issues and measures that need to be implemented towards profit maximisation. Another example was seen with David Lewis as the CEO of Tesco as he managed to organize a meeting of all the stakeholders and get to engage them in coming up with new policies of running Tesco (Daley et al. 2012). b. Characteristics possessed by Chen for Chinese business environment It is apparent that actors and competitors in the market have been seen to be struggling with the increasing cost of operation, production, development and mature market. It is for this reason that Louis Chen is unwilling to conform to the company’s planning and reporting process. However, this is a good quality that will spun the Company’s operations in China since Chen is simply keen and as a result he will be able to integrate its undertaking when it comes to profit maximisation and how sustainable the Company intends to operate with regard to the environment, competitors and specific objectives. It has been described that Chen has entrepreneurial spirit thus willingness to create a strong market position for franchising outlets in China. Integrated with close operations with Denver team, Chen has the potential of succeeding in China. Chen is ethical decision maker; an attitude that entails standards and principles that guide managers’ behaviour in line with food production and terms of service in China. c. Foster and lack of international management experience Basically, what matters in a company such as Levendary Café are the components of behaviourist theory. According to this theory, focus is on what managers can do rather than specific quality, qualification or attribute. That is, different patterns of individual behaviours are linked to ethical decisions that are made by the company. In connection to this, Foster tends to engage in vertical management. Paul (2000) defines vertical management as a case where a company liaises with regulatory organization so as to have a common agenda and conform to the requirements of the industry. This is what is making Foster have credential of managing multinational company despite the fact that she may be lacking the experience. Conceptualist theorists and ethical formalism argue that ethical decision making process in management encompass evaluations of fairness product stewardships but with respect to firm’s overall culture (Schlevogt 2000). This is yet another quality possessed by Foster thus needless to argue that she lacks the needed experience. Question 3: Involvement of head office a. The role that HQ should play in managing external company operations First head office should play management role. That is, due to competition head offices should adopt contingency theory where they identify the situational variables which can predict the most effective and appropriate outcome for a given circumstance. For instance, in 2012 Telstra management team at its head offices in Australia invested A$ 210 million to upgrade its broadband asymmetric digital subscriber line (ADSL) to conform to its mission statement (Telstra Environmental Guidance Document 2013). This on the other hand helped its operations in China to deal with competitions emerging and in particular was that from Optus. It is the responsibility of head offices to note that the level of competition dictates the company towards sustainable competitive advantage. The operational structure of the company describes the extent of its operations. All these have been brought by economic, social, political and legislative environment under which it companies operate. Based on these attributes, head offices should spearhead a series of restructuring measures that bring the understanding that traditional fixed operations are no longer the driving force of revenue growth. A good example of this case was the step taken by Vodafone head offices to restructure so as to expand its operations and penetrating other markets outside Australia, including India (ResearchMoz 2013). In such connectedness, Vodafone engaged in value added and content services through single portal known as BigPond. The market is currently full of inevitable variables thus making income difficult to control. This means that there is always risk and one role of head offices of to assess and manage risks. Risk management is a systematic process of identifying, assessing and taking actions in a company to help in protecting against any unforeseen occurrence. The personnel at the head office should ensure policies, rules and regulations that are initiated by the Board of Directors (BODs) of the institution or organization are adhered to and implemented as stipulated in the memo. b. Freedom given to management of external entities Managers should be given freedom to integrate new models and work within the realm of theoretical frameworks. In an industry where competition is rife, analysis of a company’s management issues and current events is the responsibility of managers therefore giving them the freedom to integrate new models and working within the realm of theoretical frameworks enables the manager to maintain competitive position. Secondly, managers should be given opportunity to explore what they have created as goals and aspirations rather than what the head office wants. For them to sell out the goods and services, managers will need to be allowed to devise methods of becoming competitive. For example, management team in sales department has strategies of competing through combining their marketing and operations functions. Marketing influences competition between organizations through several ways, which include identification of consumer needs, price and quality, advertising. Thirdly, managers should be given the freedom to recruit. Human resource managers have specific role that they have been doing to help the organization recruit and retain top performers. Therefore if this freedom is taken away from them it means that the process will be denying managers the opportunity to employ better human relations as a strategy of excelling. The managers of companies should be given freedom on how they relay communication in a company rather than dictating for them. This can be from top-bottom or from bottom-top. If given the freedom chain of command will be extending from the top to the bottom of the organizational structure. Classic principles of organizing emphasize that one must be aware of the need to define the extent of managers' responsibility and authority by specifying their place in the chain of command. c. A foreign subsidiary of a firm that has benefited from direct HQ involvement Vodafone is a multinational company headquartered in London but has benefitted from direct HQ involvement. Much of decisions are coming from London (headquarter). Such involvement has driven the re-structure of the Company thus enabling it to accommodate the ever dynamic demands of its customers. From this decision they managed to curb derailing issues such as stiff competition for the 4G service, overdependence on Australia and London resources, pressurised average revenue per users (ARPUs) and managing to leverage on the growth in mobile internet through launching long term evaluation (LTE) services (ResearchMoz 2013). On the other hand, Michael Patterson (Telstra’s General Manager for Tasmania) argued that the Company from headquarter has been sensitizing laissez faire-like approach where managers from different countries are given opportunities to be innovative and come up with their policies of managing. Overall, ResearchMoz (2013) notes that the approach made the company improve in its planning, leading, organising, controlling and functioning. In particular, Michael Patterson noted that there was improvement in telephony inputs and components that are required in the market. Other firms have comprehensive and well-coordinated corporate social responsibility (CSR) programs (Gabrielsson et al. 2012). This is an indication that there is long term transparency and conformity to CSR and Vendors Code of Conduct models. Question 4: Expansion through joint ventures a. Review of Chinese restaurant market Chinese restaurant market has a number of uncertainties for Leventhal to operate in. secondly, the aspect of joint venture would not have been tenable for Howard Leventhal. The first step of assessing this idea is to analyse Chinese eating habit. Culturally, Chinese people going to food restaurant or any other joint means more than just going for dinner (Cavusgil et al. 2014). This means that they will be found in Howard Leventhal business if they are going to meet a friend or any other function that cannot be conducted in their houses. However, for American, going to a restaurant is the order of the day and most of them would prefer first food. Secondly, Howard Leventhal wanted to establish its joint venture using operators who had established themselves in the country. Assessing these two points from evidence based perspective, McDonalds and Kentucky Fried Chicken struggled to establish their customer base in the market and at some point, they had to re-invent their strategies over and over due to eating habits of Chinese people. It is apparent that trying joint venture would not have succeeded owing to the fact that Howard Leventhal was to the idea of standardization rather than adoption. Basically, Chinese markets are even lacking the “Drive-Thru Restaurants” therefore it would have been unrealistic to imagine a joint venture as the approach would not have facilitated efficient and entrepreneurial management that could deliver shareholders’ value over the longer term. Secondly, joint venture within Chinese markets would not have reflected broader organizational principles of governance. Unlike companies such as McDonalds who have been in Chinese market for long, Levendary Café have not had instances where they need to change their products and services with regard to the changing taste, preferences, customs, eating habits among others. Apparently these are what Chinese market needs regardless of whether it is a sole entity or joint venture. It would mean that a decision to enter into a joint venture without considering these factors would have been a challenge. With these challenges, it would have been possible that the Company would have lacked significant lead in the industry as a first-mover in locking in high-value customers that would have given it a competitive advantage over companies such McDonalds. What Leventhal attempted to do was the cause of failure for Parmalat group which reflects the old problem of shareholders who have failed in their oversight role in monitoring the Company’s ventures and opening of new markets (Gabrielsson et al. 2012). b. Factors that have made some international joint ventures unsuccessful One of such factors is the situation where international joint ventures operate in opaqueness. Despite the opaqueness, the management, however, may continue convincing other stakeholders that the group is healthy and operating efficiently. To some extent some joint ventures may be compounded with a complicated organization structure that comprise of many subsidiaries. In some cases, there have been dubious deals where management organizes fictitious trades and financial transactions to offset company losses of operating subsidiaries and to inflate assets and the company income. Invoice duplication and securitization schemes based on the false trade receivables that can recurrently be used to finance the group can be other problems. Taking a case of Parmalat group, it failed because the management team tasked with the responsibility of the joint venture understated its debts in fraudulent schemes, recording non-existent repurchases of bonds, falsely describing non-recourse in order to remove the liabilities from the records. Again, the dominant recurring theme is that risk management is an integral part of the process of corporate governance. Management of risk could be another reason for the failure. Management of risk is the pillar of corporate governance; it is capable of achieving better and more efficient use of the organization resources and help in better management of international joint ventures. The arguments that are underlying the need for formal risk management control system may therefore, appear to have strong similarities across both public and private institution. Society, the marketplace, technology and economy are transforming at an unprecedented speed and account for the largely unpredictable and uncertain environment. However, if joint ventures do not give considerations to these factors then it is likely that they are going to fail. Additionally, globalisation means that the environment which needs to be assessed for strategic business decision making is continuously expanding. International collaboration and technologies need to be closely examined because they inevitably affect the domestic market. References Aguilera-Caracuel, J., Aragón-Correa, J. 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International marketing adaptation versus standardisation of multinational companies. International Marketing Review, 26(4/5), 477-500. Read More