Overview of BRF SA Foods - Case Study Example

BRF S.A Foods By: Institution: Course: Instructor: Date of submission: Multinational Company (MNC) entails a large company comprising of considerable resources that accomplishes numerous activities of business through affiliates and subsidiaries network located in various countries. Although they have their main headquarter in a certain country, multinational companies carry out their operations in a number of countries. The best way to identify these companies is through their activity of direct investment, their operations in numerous countries, and derives a considerable total sales portion from operations across the border. Globalization has led to the expansion of companies in other countries other than the home country (Asmussen 2011, p. 7). There has been an ongoing debate on globalization spanning from social, technological, and political arenas and this form part of connectivity of individuals around the globe. Nations such as India, China, Brazil, Turkey, as well as Russia are termed as emerging markets since they are experiencing rapid growth of the economy, industrialization, and modernization. International trade as well as investment has the capacity to assist in stimulating the growth of the economy, creation of jobs, lower services and product prices, as well as raise income. An emerging market like Brazil has a rapid living standards as well as aspiring economies (Cuervo-Cazurra & Ramamurti 2014, p. 2). For numerous years, Brazil has experienced instability in its economy, high income inequality level, as well as high rate of inflation. However, the nation has recently embarked on new reforms and at the same time ensured that the domestic markets are opened. Such a move has ensured the stability of the country’s economy. The phenomenon of globalization is growing and it has had an enormous effect around the globe. The liberation of trade has resulted into increased the inflow of FDI (foreign direct investment).The paper will focus on BRF S.A, a multinational company headquartered in Brazil, an emerging market. It will also look at the globalization and its effects (Asmussen 2011, p. 13). Overview of BRF S.A, Brazil BRF Foods SA is one of the globe’s leading food companies and is headquartered in Brazil. The company came about following the 2009 merger between Sadia SA and Perdigão Agroindustrial. It is the globe’s biggest food company with 105,000 employees within 35 units of industry located in Brazil Argentina, Holland, UAE, and the UK. The company heavily relies on domestic market but has aimed at expanding to other countries. Much of the company’s growth is as a result of dynamic domestic market. In 2013, the company’s first processing plant outside Brazil was constructed in United Arab Emirates. During the globalization era, international organizations have made Brazil to become more powerful and this has made the nation to be essential in the global politics (Hauge, 2012). The stability of the nation has helped BRF Company to continue enjoying the local market. Many factors have contributed to the internationalization of BRF Food SA Company and they include the growth need, scale economy exploration, efficiency search, utilization of existing technology as well as various features including lower cost-capital accessibility and labor. Since internationalization is a long-term process, it requires the company to have a significant as well as a large commitment. Brazilian companies in the industry of meat such as BRF are faced with the reality of internationalization and are experiencing important changes. The stabilization as well as opening of new international markets lead to an increase in domestic demand of the product and at the same time allows the domestic MNC to improve administrative and technological processes BRF (Brasil Foods SA 2015, p. 1). BRF expands to the international markets upon the realization that its advantage competitively is only unfavorable of the domestic market. The production of BRF has become globalized and the company is expanding to other areas other than Brazil. MNC from emerging markets are growing at a fast pace to become leaders in the globe (Burton, Chapman, & Cross 2012, P. 17). BRF company enjoys competitive advantage at home because the presence of high quality labor for the purpose of manufacturing, and large law material reserves. An Overview of Globalization Concept Through globalization, multinational companies (MNC) are able to find new market for their products and at the same time solicit for raw materials. Globalization has ensured that the world is becoming like a village where it is possible for one to get a product from various corners of the globe. MNC from an emerging market are the key players in the globalized village creating a phenomenon of convergence for nations around the globe. Inviting as well as creating a favorable environment for the operation of the MNC enhances the country’s economic development (UK Essays 2013, p. 1). In 1920s, there was the establishment of the first MNC and by 1960s, more MNCs were established and expanded globally.in 1950s and 1960s, there was a global spread of MNCs since many governments across the globe imposed high import tariffs, forcing these companies to have their manufacturing operations at a certain location ad at the same time becoming “domestic producers” in numerous countries. Globalization Drivers Various factors driving the phenomenon of globalization do exist. The market drivers entail the considerations of market made by MNC to invest. The policy shifting of various governments across the globe towards a free market has led to the expansion of many MNCs. The driver of production cost enables MNCs to shift their production operations in another country where the cost is low compared to the home country. In Brazil for instance, the cost of production is lower than that in the US. Another driver is the government whereby the government may be involved in the trade tariffs reduction as well as free market adoption. The phenomenon has also led to the nations borrowing money from each other. The government has an effect on the performance, governance, as well as operations of MNC since they are responsible for distributing benefits as well as burdens to the firm (Vitousek 2016, p. 13). International Business and Globalization International business entails trade performance as well as investment activities by companies across the various nations. Markets globalization entails the ongoing integration of the economy as well as growing interdependency of nations around the globe. MNCs conduct various business activities such as organizing, sourcing, manufacturing, as well as marketing on global scale (Kumar & Pattnaik2014, p. 20). Through international business, MNC together with the host nations are able to exchange numerous intellectual and physical assets, services, technical know-how, labor, as well as products and this can be through importing or exporting the national economies’ integration has both the threats as well as well as opportunities for developing and industrialized nations across the globe. The opportunities provides the explanations of the movement towards globalization while the danger gives the description of the latest challenges to present day economists, politicians, sociologists, and environmentalists. Different approaches can be utilized to explain the process of internationalization and the interest of comprehending this process has been growing. Internationalization ensures that the BRF Foods SA Company as well as the country is obtaining new revenue form to ensure that their participation in global trade has increased (Hauge 2011, p. 27). Opportunities and Threats of Globalization Numerous opportunities have been created by globalization. For instance, it has enhanced the integration of many countries across the globe. Brazil’s GDP has for instance has greatly benefited as a result of globalization. Cultural change is another notable globalization impact. An example is instances where a change in the manner by which people act, talk, dresses, among others. In globalized word, there has been the emergency of business opportunities for numerous businesses across the globe. In the current day globalization world, MNC have been pivotal in developing the home countries in which MNC have their operations in (Gorodnichenko, Svejnar, & Terrell 2008, p. 73). Foreign direct investment by MNC not only involves capital transfer but also lead to the transfer of production technology, managerial practices, as well as other practices of business. MNC have also led to the creation of employment, solving an essential unemployment problem common in emerging markets such as Brazil (Burton, Chapman, & Cross 2012, P. 23). Among the opportunities offered by globalization is the free trade as well as its effect on the economy of the globe. Free trade would translate into increased flow of finances and with this increase; capital will redistribute laterally meaning that many developing countries will become more and more developed. According to Smith, privatized businesses as well as trade lead to the promotion of economic activities compared to the businesses that are controlled by the state and at this would lead to the generation of more capital through the income tax collection. Free trade can benefit both the developing as well as the developed countries and the only way for the developing countries to make a step towards economic development is through global capitalism (Strombom 2010, p. 27). Globalization is also essential as it leads to the TRF (transnational regulatory frameworks) creation. As nations lose their control on the economy, the control is left for global networks and this leads to the development of the social network (Hauge 2011, p. 27). However, this has adverse effect on the environment due to the emission of greenhouse gases such as carbon dioxide and this eventually lead to environmental pollution. In some cases, Brazil has to cope with harmful products being dumped from other countries. However, numerous countries have signed treaties on environmental protection (Mirza 2008, p. 13). Although globalization has been in place for a while now, various risks can prevent it from further developing. Among them include the political risk; the adverse effect on the profitability as well as operations of a multinational company as a result of development in the economic, legal as well as political environmental in an overseas company. It also involves the probability of the interventions of a foreign government in the business activities of the firm. Among these risks include terrorism, international and civil war, uprising, as well as political repression, among others (Bazuchi et al 2013, p. 34). The score is high for stable countries such as Australia, the US, Canada, among other, but low for unstable countries including Somalia and Syria. Other political risks include the inflation as well as other forms of financial risks. Internationalization of the Firm The financial and trade globalization has led to the transformation of world economy’s structure, ensuring the transformation of businesses into competitive arena. Over the last few decades, there has been an increase in the global competitiveness and this has forced many multinational companies including BRF S.A to embark on new production as well as technological standards (Önmez 2013, p. 72). Internationalization entails a process by which a MNC reduces risk in case of financial and economic fluctuation, respond to pressure, and this is by either increasing or maintaining the competitive of the company in the market. It is therefore, essential for an action to be taken globally following the economic opening to ensure the expansion of business in the competitive context of the globe. Through globalization, the national economies are integrating as well as becoming interdependent as the world appears to be a cohesive marketplace. Declining barriers to trade as well as ease of conducting international business transactions owing to social media and other internet platforms are ensuring a gradual integration of majority of global economies into a integrated market. It (globalization) has been facilitated by efficient sea transport, growth of railroads rise in large trading and manufacturing companies (Kumar & Pattnaik2014, p. 35). Other factors that enhanced globalization included rise in steel as well as electricity production. Brazil has for instance adopted free trade treaty and at the same time has integrated into financial markets of the globe. This has allowed for foreign direct investment in the country. Despite the many benefits brought about by globalization, it has also affected various sectors of the economy such as the environment, national culture, flight of jobs and offshoring, as well as national sovereignty loss (Strombom 2010, p. 38). Globalization is a concept that has been in existed for a long time. The Asian nations for instance used the monsoon winds to enhance their movements from their countries to Africa where they would conduct trade. Europe and China were also connected during the period of middle age via Silk Road across the Central part of Asia. The rapid rate of globalization at the present period is as a result of various policies that have led to opening of international as well as domestic (internal) economies. The emerging markets such as Brazil have been tremendously been impacted by globalization (Gorodnichenko, Svejnar, & Terrell 2008, p. 73). In Brazil, the environment is favorable for MNC to invest because of the capacity to offer lower labor cost as well as the presence of large number of customers. Unlike other regions of the globe, the emerging markets have large population (Burton, Chapman, & Cross 2012, P. 37). Brazil for instance has a population of over 200 million people and this makes it a favorable destination of many multinational companies (Önmez 2013, p. 98). The growth of the nation’s GDP is also high and part of that growth is as a result of FDI from other counties such as the US. Lifestyle in this nation is also changing as the nation is becoming more urbanized, industrialized, as well as modernized. FDI is of benefit to emerging market because it results into creation of new jobs, technology transfer, production capacity, as well as linkage to international market (Cuervo-Cazurra & Ramamurti 2014, p. 12). MNCs from other countries experiences various difficult conditions while expanding to emerging markets and these include unreliable info, limited data, and high cost of conducting market research (Bazuchi et al 2013, p. 34). Lessons for Managers Managing MNC is different from managing a local company because it (MNC) has its operations in various countries with diverse social-political, strategic, and organizational issues. Such issues have effect on BRF’s expansion plan. One of the managerial dilemmas faced by managers of multinational companies the balance between global integration and local responsiveness. Apart from that, managers need to take note of the relationship dynamics between the local interest group within the foreign nation and the firm. Before their entry into an international market, it is important for managers to understand the ethics, language, and culture of the people in that country as this forms the means of success. Bibliographies Asmussen, C. G. 2011. Dynamics of globalization: location-specific advantages or liabilities of foreignness? Bingley, Emerald Group. http://site.ebrary.com/id/10482218. Bazuchi et al. The role of home country political resources for Brazilian multinational companies. Brazilian Administrative Review. vol.10 no.4 Rio de Janeiro Oct./Dec. 2013 BRF Brasil Foods SA. 2015. Business Strategies. Burton, F., Chapman, M., & Cross, A. 2012. International business organization: subsidiary management, entry strategies, and emerging markets. New York, St. Martin's Press. Cuervo-Cazurra, A., & Ramamurti, R. 2014. Understanding multinationals from emerging markets. http://dx.doi.org/10.1017/CBO9781107587632. Gorodnichenko, Y., Svejnar, J., & Terrell, K. D. (2008). Globalization and innovation in emerging markets. Cambridge, Mass, National Bureau of Economic Research. http://papers.nber.org/papers/w14481 Hauge, H, M. 2011. How globalization affected the economic, political, and social conditions in Brazil. Copenhagen Business School. Kumar, V., & Pattnaik, C. 2014. Emerging market firms in the global economy. Bingley, U.K., Emerald. http://public.eblib.com/choice/publicfullrecord.aspx?p=1865238. Mirza, H. 2008. Global competitive strategies in the new world economy: multilateralism, regionalization, and the transnational firm. Cheltenham, UK, Edward Elgar Önmez, A. 2013. Multinational companies, knowledge and technology transfer Turkey's automotive industry in focus. Cham, Springer International Publishing. http://public.eblib.com/choice/publicfullrecord.aspx?p=1636473. Strombom, B. 2010. Globalization and MNCs: globalization and management of multinational companies. Gothenburg, Sweden, BAS Publishing. UK Essays. November 2013. The Impact of Globalization in the Emerging Market Economies Economics Essay. [online]. Available from: https://www.ukessays.com/essays/economics/the-impact-of-globalisation-in-the-emerging-market-economies-economics-essay.php?cref=1 [Accessed 25 August 2016]. Vitousek, P. 2016. Globalization, Trade, and the Environment: The case of Brazil. Retrieved from http://fsi.stanford.edu/ Read More