Introduction
Many of the corporations doing business in the global environment have had to encounter various economic, cultural, environmental, and social challenges while doing business. This is unlike other businesses that operate within confined geographical environments. The modern-day economic landscape is highly dependent on international logistical and operational capabilities. As competition in the global market intensifies, so too does the risk of doing business internationally.
This increases the need to acquire necessary resources to accomplish this goal. Although international business expansion gives the business numerous opportunities to increase its sales revenue and market share, on the other hand, there is also a significant increase in the number of challenges faced by such a business.
The only way international businesses can benefit from globalization is by first understanding these complexities fully in order to enhance efficiency. This will also enable them to uphold their competitive edge in the market. The current essay is an attempt to explore how the issue of globalization has affected businesses.
To do so, the essay shall dwell on the fast food industry. Special focus shall be on MacDonald’s and KFC as global players in this industry. The ethical challenges faced by the fast food industry shall be examined using the five “impact areas” model of globalization namely, labor conditions, socioeconomic equality, culture and community, government power, and the environment. This model has been proposed by Joyce Osland. Additionally, the fast food industry shall also be analyzed using such ethical theories.
Globalization
Globalization is a highly polarized topic. Proponents and opponents of globalization have already expressed their views on the complexities, challenges, and opportunities that the phenomenon presents to the businesses. The globalization debate is largely based on two perspectives.
The first perspective is for individuals who favor globalization. This perspective holds that globalization gives businesses a chance to pursue economic growth and expansion. In contract, those opposed to globalization argue that the phenomenon is a threat to cultural integrity and prosperity.
Concerns have also been raised on the possible loss of jobs and economic shrinkage owing to globalization. This is especially the case with the developed nations. In contrast, their developing counterparts are worried that globalization will threaten their political sovereignty and their economic status.
The fast food industry and globalization
The fast food industry is a major player in the global economy. In the United States for example, some of the major players in the industry include McDonald’s, Kentucky Fried chicken (KFC), Taco Bell and Burger King, among others. The US fast food industry has left an inedible mark in the global fast food industry.
Although the fast food industry has had its fair share of controversies both in the US and globally, especially with regard to their impact on the environment, nonetheless, we need to appreciate the fact that the industry has enjoyed tremendous growth in the past few decades.
A report released in 2010 by the National Restaurant Association indicated that the global fast food market realised a 4.8 percent growth, while the revenue generated was pegged at $ 102.4 Billion. At the same time, the industry recorded approximately 80.3 billion transactions (National Restaurant Association, 2010).
Globalization on equality
Statistics show that globalization has brought with it losers and winners. This is also true in the fast food industry where multinationals like KFC and McDonald’s have used their extensive financial resources, influence, and wide supply chain to open up huge fast food outlets in the developed and developing countries.
In the process, these firms have gone ahead to gain sizeable market shares at the expense of local small firms who neither have the financial resources nor the influence to expand rapidly. In addition, multinationals can also capitalize on their economies of scale to sell their products cheaply in comparison with the smaller firms. This further translates into increased market share.
Thanks to globalization, the fast food industry has managed to penetrate and expand the international market and in the process, offer stiff competition to local monopolies, in effect reducing prices. In addition, poor people in such regions as Asia for example have had the luxury and chance to sample fast foods from MacDonald’s outlets, something that would not have been possible in the absence of globalization.
By embracing globalization, McDonald’s has played a key role in bringing about economic growth to various economies, especially the developing economies in Asia. In addition, the fast food chain had helped to create jobs in each of the various countries where it has invested. Such jobs have helped to improve their disposable income of the people. In addition, the fast food industry has contributed to the growth of respective economies through their involvement in foreign direct investment (FDI) in such economies.
Globalization has led to the availability of more products in many countries. In the case of MacDonald’s the company has managed to bring the American cuisse to such regions as Asia and blend it with the Asian cuisine, thereby giving the customers a chance to sample both.
On the other hand, globalization of the fast food industry has led to cannibalism, in which small players in the industry have been forced to close shop after finding it hard to compete with the big players in the market. Others have been acquired by the big players. This has resulted in the loss of jobs and economic earning power of the people who depended on the defunct firms for their livelihoods.
Labor conditions
Thanks to globalization, there has been improvements in employee training and education in the fast food industry, as a result of the stiff competition in the industry. Companies have been forced to upgrade the educational levels of their workforce.
However, labor movements are of the opinion that globalization has led to the abuse and deterioration of global labor standards. Improved labor standards should ideally lead to higher pay, especially by multinationals. In this respect, a multinational like McDonald’s has been accused of paying its workers poorly (Schosser, 2004).
Globalization of the fast food industry has resulted in a shifting and unequal triangular relationship between trade unions, employees, and other consultative bodies and representatives. As multinationals like McDonald’s and KFC have superior resources, trade unions appear handicapped in the ensuing power relations and this calls for the intervention of the government.
A case in point is the intervention of the Canadian government in British Columbia (Royle & Towers 2002). The labor board directed that non-franchised and franchised KFC outlet all have a common employer. This is intended to enable the trade union in the province to successfully negotiate a collective bargaining for its employees.
How globalization affects culture and the community
Globalization could have a positive effect on cross-cultural understanding by exposing individuals to various cultural setting, in addition to fostering cultural ties as well. However, globalization can also be a double-edged sword that offers wider and newer perspectives of various cultural setting even as it endevours cultural security of the individuals at the local setting.
Critics argue that globalization has brought about a monoculture that tends to encroach on local cultures. Multinational fast food companies like McDonald’s have been accused of negatively influencing foreign cultures, especially in Asia where they are accused of doing little to promote local cuisines. There have been reports that the fast food chains tends to undermine indigenous cuisines in its attempt to establish a homogenous, global culture (Watson 2006).
Corporate Social Responsibility (CSR)
A lot of firms are now moving away from the self-interested CSR model whereby the management of the company is responsible to the owners or shareholders. There appears to be a realization among corporations that they need to give back to society as this is likely to translate into additional profits and growth.
Even as firms pursue CSR it is important to note that the need to remain profitable and hence economically responsible to both the owners and shareholders act as the foundation for the other plans. In addition, the business has to obey laws that have been put in place.
This is the hallmark of legal responsibility. Ethical responsibility entails avoiding harm and doing what is just, right and fair (Osland, 2003). Finally, once a firm has attained all the above, it also endevours to remain a good corporate citizen by attempting to add value to the members of community by for example, contributing to the improvement of their health, living standards, and cleaning the environment.
McDonald’s are known to donate part of their annual profits to welfare groups and children’s homes not just in the United States, but also in the other countries where the fast food giant has a presence. Like McDonald’s KFC is also involved in CSR activities in such areas as education, the environment, and diversity.
For example, fast food chain offers educational scholarships to need high school seniors who have demonstrated strong entrepreneurial drive. KFC is also committed to a globally diverse workforce in its quest to let everybody make a difference in the company and in their lives as well. The fast food chain is also committed to sustaining the environment with its special focus on such key areas as efficient utilization of energy and water, supporting green building standards, and sustainable paper-based packaging (KFC, n.d.).
Even as such fast food chains as McDonald’s and KFC give back to the community in the from sponsoring children afflicted with life threatening illnesses, on the other hand, fast food companies have been taken to task by health watchdogs and support groups under the pretext that they promote products that when consumed contributes to heart diseases, obesity, and asthma, among other chronic diseases (Tanner, 2006).
There is a close association between CSR, ethical issues, and marketing strategies adopted by firms in the fast food industry. Some of the players in the fast food industry have been put to task on account of their unethical marketing practices. Ethical marketing practices entails the adoption of marketing practices with a view to pursuing individual managers’ or corporate ends with little regard for what is beneficial or right for the society and firm as well (Panda, 2008).
An example of unethical marketing practices that has seen a number of players in the fast food industry put to task is the issue of deceptive advertising. In this case, fast food firms have been accused targeting certain food advertisements that have high fat or sugar content or limited nutritional value to children.
Such a practice is often seen as unethical as it is likely to have an effect on the nutritional status of children (Harris, Pomeranz, et al., 2009). In the same way, there has also been concerns that some of the fast food companies like KFC and McDonald’s unethically targets ethnic minority and low income populations, thereby playing a key role in increasing the incidence of obesity (Grier, Mensinger, Huang, Kumanyika, & Stettler, 2007; Ramirez-Ley, et al, 2009).
Conclusion
Businesses that have gone global with their operations have had to encounter numerous social, cultural, economic, environmental and political challenges. As competition intensifies in the home market, companies are forced to explore international markets in a bid to increase their revenue and market share.
However, such a move comes with its fair share of risks. This sit ruse for the fast food industry as well. Some of the well known fast food giants like McDonald’s and KFC have expanded rapidly into the developing economies and in the process, gained sizeable market shares and revenue. However, this has come at the expense of the smaller local firms who do not have similar financial and logistical strengths.
Such multinationals have also been accused of paying low wages to their workers, not to mention that they are more powerful than the labor unions. This makes it hard for the labor unions to undertake collective bargaining of the rights of their workers. Multinationals in the fast food industry are also involved in various CSR activities, although they have also been criticized for engaging in such activities purely for economic gains and popularity, as opposed to giving back to the community.
Reference List
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