Influencing the Decisions Made by Multinational Companies - Case Study Example

Running header: The world is still not homogeneous Student’s name: Instructor’s name: Subject code: Date of submission How far is the world still not homogeneous? How does this influence the decisions made by multinational companies? Introduction The world could be described as increasingly becoming homogeneous especially with the advent of globalization since most goods offered in most markets are identical with markets also having similar characteristics to a large extent. It has been said that globalization has made the world homogeneous. For instance, when one visits big cities across the world, one will notice a lot of homogeneity in their architecture as well as businesses in terms of designs and products being offered. For example, brands like Starbucks, Gap, Zara, Nike and MacDonald’s will be found in almost all major cities of the world. In addition, we find signs in almost all cities in English though the city might not be in an English speaking country. All these are signs that the world has become homogeneous (Mark, 2014). But is this the actual truth? Is the global business/marketing environment homogeneous with multinationals operating in similar environments in all their markets? In other words, will the MacDonald in Japan be run in a similar way to the one in New York while offering identical products? This essay examines the extent to which the world is still not homogeneous and how this influences decision making by multinationals. The world is still not homogeneous Currently, the world can be said to be homogeneous as far as technology is concerned with fluidity o communication as well as ability to travel globally having increased such that people nowadays are no longer confined to only buying/ consuming what is specific to their nation, traditions, status or class but are now increasingly able to explore and consume globally thus making the world more homogeneous. In addition, the traditional sumptuary laws and restrictions have increasingly been removed. There has also been increased democratization and democratization of fashion hence making them available and consumed by people everywhere. Global food and fashion chains found everywhere paint a picture of a homogeneous world which is seen to have made the individuality of different cultures disappear. According to Lee (2003), the world has become increasingly homogeneous. However, despite the presence of such homogenized commodities and fashions, it is worth noting that consumption of such commodities cannot be said to be homogenized. In addition, the world is not homogeneous to a large extent because the boundaries that divide countries still exist. In other words, the world is still not homogeneous to a large extent since markets are divided by different cultures, politics and economics. The world is still not homogeneous politically Different markets in the world are still operating while confined in national territories. This calls for multinationals to understand the political systems of the countries in which they operate or where they would want to establish their branches (Kamal, 2013). This is because while some political systems are safe for business, others provide a hostile business environment. For example, some markets such as the USA are democracies while others such as China are not true democracies. For democracies, everyone including the government is under the law and follows the rule of law. On the other hand, markets that are authoritarian in nature are usually not characterized by protection of rule of law since those in authority do what they want. A good example of an authoritarian market is North Korea where the leader does as he pleases. In addition, different markets are still characterized by trade barriers which differ from market to market meaning that there is no homogenous operating environment. Such trade barriers include protectionism policies aimed at protecting domestic businesses from competition. For instance, multinationals may be confronted with differing levels of tariffs in different markets imposed on imports. Multinationals may also face import quotas that differ from market to market. Different markets are also faced with different levels of political unrest (Douglas, 2004). For instance, while the US market may be considered as safe, the Syrian market as well as the Iraq market is characterized by war and terrorism. Hence, while there is free movement of goods and commodities in the US as well as fluidity of communication, the Iraq and Syria market have their distribution systems clogged up by war and terrorism. In such markets, employees of multinationals may even become targets of terror while embargoes may also prevent a certain multinational from operating in a certain market. This shows the extent to which the world is not homogeneous. It is also worth noting that while economic integration may be seen as helping the world to become homogeneous, it is worth noting that it only helps the markets within a certain economic integration treaty to become homogeneous which may in fact lock out goods from other markets from accessing the integrated economic block. For instance, countries within the EU zone prioritize goods originating from member states thus making trade harder for countries outside the block to trade with them in effect making the world less homogenized. Existence of different economic systems The world is still not homogeneous since the global market environment is still characterized by differing economic systems. For instance, multinationals face different economic systems as they expand abroad. While the best business environment is to be found in a free market system where the government stays out of business while ensuring minimal regulation, only a few economic systems globally can be described as free markets today (Lars, 2015). There are extreme cases of command economies which are characterized by most production and distribution of goods and services being done or controlled by the government. It is worth noting that majority of economies in the world today are mixed economies having both the aspects of a free market and those of command economies. From such an analysis therefore, it can be concluded that the world is indeed still not homogenous as far as economic systems are concerned. Culturally, the world is still not homogeneous The main reason why the world could still be described as not being homogeneous is probably existence of different cultures and subcultures within markets. Culture is indeed one of the biggest handles that multinationals would face when operating in the global market. Culture is generally regarded as the sum total of communities or group’s beliefs, values, practices and customs. It means that different markets would be characterized by different cultures which would affect their preference for different goods and services even though the goods and services be homogeneous. As such, though commodities may be homogeneous globally, existence of different cultures and subcultures may affect their consumption. This is because cultural practices may dictate to a large extent what is to be consumed in a certain market and what is not to be consumed in the market (Rao, 2005). Thus a multinational may for instance be forced to tailor make their products in a bid to suit that market. For instance, while the McDonald in Japan may be looked at as being similar to the one in New York, they are very different in reality. This is because each of them tailor make its products as well as services to suit the needs of the local culture. Similarly, Coca-Cola is also forced to produce different flavors for different markets in which they operate. Different adverts are also tailor made for different markets in line with the prevalent culture in a bid to ensure they achieve the intended purpose since an advert that is taken well in the USA may not be well received in China for instance due to cultural differences in the two markets. This shows that cultural diversity is still rampant and hence the world is still not homogeneous. Religion is an aspect of culture that greatly hinders the world from being homogeneous thus affecting business operations. For instance, it is highly unlikely for a multinational that specializes in the production of pork products to succeed in a Muslim world no matter how good its products are (Sham, 2010). Similarly, Christians would not buy hijab since these are Muslim religious attires. The implication of this is that the global market is still divided along religious lines and hence it is still not homogeneous. Technological divide makes the world still not homogeneous Technology has been hailed for bridging the geographical divide that existed between different markets. This is because it has made communication easier and in essence made transactions especially by multinationals easier. However, technological divide still exists. For instance, while we can consider the USA to be technologically advanced, we cannot say this for Africa. Furthermore, markets differ in terms of production technologies (Zaem and Zghidi, 2011). Thus, while most African countries export and even consume their produce in raw form, most advanced countries are able to add value to their products enabling them to fetch higher prices. As such, it can be concluded that existence of different levels of technological advancement is an element of a world that is still not homogeneous. How the world still not being homogeneous influence the decisions made by multinational companies As has been analyzed above, the world is still not homogeneous. This implies that different multinationals operate in markets with differing needs. As such, though they may offer homogeneous commodities to these markets, the products may experience differing levels of demand depending on the characteristics of the market involved. As such, the fact that the world is not homogeneous influences the type of decisions made by the multinationals. For instance, the multinationals have to choose between product standardization and product adaptation. As such, multinationals will generally adopt both strategies in accordance to the needs of the market. This is because failure to adapt a product to the needs of the local market may lead to the product failure in the market concerned. For instance, McDonalds will have to modify the products it sells in New York to fit the Saudi market. This could for instance be done by substituting pork for pig in order to suit the Muslim culture. This is because standardizing a multinational’s products may lead to challenges in certain markets whose culture is significantly different from the home culture. For example, the standardization of McDonald’s products did face great challenges in India where KulKarni and Lasser (2009) established that the issue with McDonald’s standardized products was beef. As such, such a company had to make a decision to adapt its product to a largely vegetarian population. As such, the world still not homogeneous affects multinationals decisions on the products to produce and how to produce them for certain markets due to cultural diversity. As stated above, the world is still not homogeneous a fact that has been made worse by differing political systems. As such, this affects decisions by multinationals regarding whether or not to enter certain markets. For instance, a multinational would make a decision to enter a market with minimal government intervention while shunning a market where the government does not respect business. The ease of doing business index produced by the world bank can attest to the fact that those countries that are the easiest to invest in attract major investments with those that are hard to do business in failing to attract foreign investments (Zou, 2004). This means that investors base their investing decisions on the kind of political system existing in a certain market. The decision to enter a certain market by a certain multinational would also be based on security as well as endowment of natural resources. For instance, few or no multinationals would invest in Somali owing to the security threat attached. Conclusion This essay has examined the extent to which the world is still not homogeneous. It has been stated that the evolvement of technology is quickly taking the world to a homogeneous state through easing communication. However, it has also been stated that despite this progress, the world is still not homogeneous. It has been stated that although companies may produce homogeneous commodities, they will not find uniform demand owing to cultural differences across markets. In addition, the decision to enter certain markets by multinationals and continue operating there has also been found to be influenced by political, technological and economic factors. As such, multinationals ought to recognize that the world is still not homogenous and hence appreciate these differences if they are to make the right international investment decisions. 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