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04/24/2012

The Challenge of Globalization - McDonald's


THE CHALLENGE OF GLOBALIZATION: MCDONALD’S

 

A. World Systems: Local, National and Global

            Globalization affected McDonald’s in different ways. McDonald’s is the leading global foodservice in the world with 30,000 local restaurants in the world that serve more than 52 million people in more than 100 countries every day. McDonald’s is considered as one of the most important icon or symbol of globalization in the world. This is because of the fact that the company enables to take advantage of the globalization, at the same time; McDonald’s affected the eating lifestyle of people around the globe. Globalization enables McDonald’s to expand its market which had helped to increase its revenue and sales. Furthermore, the company also enables to create a brand that is loved by many. However, it is important to consider that even though there are lots of advantages, there are also different challenges to be faced in order to fully acquire the benefits of globalization.

B. Globalization Theories

            McDonald’s symbolizes globalization both in its already ubiquitous presence in the world and its corporate model and expansion which influenced a host of similar franchising corporations. According to the work of Ritzers on McDonaldization, the way social institutions more generally are being organized, which consequently, some scholars and travelers considered as a vehicle for possible cultural globalization (Davidson & Smith 2007).

            Popular concepts of globalization view the global movement of information, idea and cultural expression as movement to increase the cultural homogeneity. The said conceptualization of cultural globalization is vital to consider in serious manner. One of the most popular cited cases of how globalization creates not just a single, homogenized global culture, but often a specifically Americanized global culture, is the subsistence and influence of the official franchisee of McDonald’s in more than 56 countries. This excludes the existence of the equally vital unofficial McDonald’s restaurants or international restaurants with names designed in order to invoke McDonald’s towards the public. The book edited by James Watson, Golden Arches East: McDonald’s in East Asia, scrutinize and inspect the cultural role of McDonald’s restaurants in five East Asian countries including China, Hong Kong, Japan, Taiwan and South Korea. The book discuss the ways in which the global corporate culture of McDonald’s changed the local methods of restaurant management, placing a decidedly American stress on the concepts of orderly queuing to order food and cleanliness of the bathroom. On the other hand, it also shows how the restaurant of McDonald’s have become localized in different manners. The types of food being offered on the menu changes in order to cater to the tastes of the local customers, employees consider their role in the workplace with more pride than the average American employees of the company, and the pricing of the menu items means that the cuisine of McDonald’s are for special occasions. These localization examples show one of the basic truths about the horizontal flows of the global meaning which include – the cultural objects as well as movements may circulate on global level, but they are commonly interpreted via largely local criteria (Vaidya 2006).

Theories of Globalization and World System

            Globalization is considered as the process that has been completed during the twentieth century, by which the capitalist world-system spread in the entire globe. Since that world-system has maintained some of its vital features over a number of centuries, thus, globalization does not comprise a new phenomenon. During the turn of the 20th century, the capitalist world economy is in crisis; consequently, the theory of the leading proponent stated that the current ideological celebration of the globalization in the reality of the swan song of the entire historical system (Wallerstein 1974). A world system is considered as any historical social system of the connected aspects which create a bounded structure, at the same time operate with accordance to the distinct rules, or it can be considered as “a unit with a single division of labor and multiple cultural systems” (Wallerstein 1974). There are three concrete examples and cases which stands out which include mini-systems, world empires and the world economies. The modern world-system is considered as a world-economy – it is larger than any of juridically defined political unit and it is considered as the basic connection between its parts is economic. In addition, it is capitalist world-economy because of the fact that there are accumulation of private capital, via exploitation in the process of production and sale for profit in a given market as its driving force: it is considered as a “system which operates on the dominance of the endless accumulation of the capital through the ultimate commodification of everything” (Wallerstein 1998).

            There are different driving forces which motivated and pushed McDonald’s to jump to the bandwagon of globalization. This can be explained by different theories of globalization. This enables to show the different factors which affected how companies and organizations used globalization in order to improve their power, and then later on improve productivity and revenue.

            Wallerstein makes his most significant sociology and globalization in the form of World-Systems theory. It is different from other Marxist historical work because it mainly focuses on the process of analyzing the development of capitalist economic inequalities and it does not focus on the connections between social classes or between the state and workers. Somewhat, it also focuses on a large, borderless economic entity that is called the World-System. The said system is distinguished by an unjust division of labor which produces some unequal exchange relations in connection with the different geographical areas of the world. The World-System, then, is not maintained via consensual agreement, but rather via social forces that are in steady conflict, which threatens to collapse the system (Wallerstein 1980).

            According to Wallerstein argues that the modern capitalist world-economy is the current type of the World-System. Rather than depending on the political domination as did an earlier in order to form the system, this one performs on the basis of the economic exploitation via an unjust global division of labor. With this, the World-Systems is consists of three vital geographical areas including core, periphery and semi-periphery. The core is considered as the geographical region which dominates the economy of the world (Cook n.d.). This can be applied in the case of McDonald’s which pertains on its mother country or headquarter, the United States. It exploits the peripheral region, which offers raw materials and other cheaply produced commodities to the core, while being forced in importing expensive finished products from the core region. On the other hand, the semi-periphery is the remaining areas that are concurrently exploited by the core and taking advantage of the periphery (Cook n.d.). Unlike the common industry, McDonald’s is different, importing expensive finished products signify the revenue or sale itself. McDonald’s will sell its franchise for high amount in different countries, therefore, McDonald’s and the United States is taking advantage of that high revenue. In return, McDonald’s will offer its protocols and standards to be used in the restaurants, its brand name and brand symbol. With this, it can be said that McDonald’s only capital is its experience and brand name, which will enable it to earn great amount of money, from royalties, at the same time, it enables McDonald’s to expand its operation.

As a result, as the World-System slowly expands across the global, it exerts a pressure on individual nations in order to become part of the world economy. This can be seen on the case of McDonald’s where in it focuses on influencing the performance of franchisees in different parts of the globe to be in uniform with the global standards being implemented. Furthermore, the result of globalization enables McDonald’s to influence the expectations and standards of restaurants in different countries. Nations maintain its status as independent states as long as they connect themselves into the interstate system. Or else, they will risk of being take over by the states already incorporated into a political system. Once the states become part of the World-System, these nations will make use of different strategies which include cultural denigration of others in order to protect the economies from outside influence (Cook n.d.).

            Another important factor to consider is the process of production. It is significant to note that the human resource is a vital aspect of production. The primary mean by which the capitalist worldwide have been able to limit the political pressure is to relocate the production to other zones of the world which there are low average wage (Wallerstein 1999). By doing this, companies will be able to save money and cost to be spent in the production process. In the case of the McDonald’s, it takes advantage of low average wage in other countries in the world in order to manage its human resource. Particularly, the company is taking advantage of students who are part-timers, offering them lower wage. It can be observed that in the US, the company has its Hamburger University, where it offers its employees the different benefits of development and improvement in terms of skills and career. This aspect is not available in other countries, particularly those that are related in Asia. As a matter of fact, career advancement and development is not that high in the company.

            On the other hand, it is also important to focus on the trend about the price of the raw materials or the costs of input. While the cost of the purchase is commonly stood entirely by the firm that will consequently get the profits, the cost of the materials are practically bear by others (Wallerstein 1999). This is another reason for McDonald’s in taking advantage of globalization, because of the fact that there are different countries in the world that offer low price of materials, which will help in order to save their overall cost to be spent.

            Another important change which influenced the movement of McDonald’s in the globalization bandwagon is the impact of advancement of technology. According to Sassen, the master image in the presently leading account about economic globalization focuses on the hypermobility, global communication, the neutralization of place and distance. There is a propensity in that account to take the existence of the global economic system as a given, a function of the power of the transnational corporations and global communications. Because people focus on the production of the said capabilities, the people started to neglect different dimensions to the recognizable and well-known problem of the power of huge corporations and the new technologies. The focus changes from the practices which show the economic globalization and global control: the process of producing and reproducing the organization as well as management of a global production system and a global marketplace for finance, both under the conditions of the concentration. The focus towards these practices draws the categories of place as well as production process into the vital analysis of the globalization of the economy. These two categories can help to easily overlooked accounts that are concentrated towards the hypermobility of the capital, together with the power of transnational. Furthermore, the development of the categories including place and production process does not counteract the centrality of the hypermobility as well as power. Relatively, it focuses on the fact that many of the resources needed for global economic activities are not hypermobile and are deeply embedded in place, particularly in places such as global cities and export processing zones (Sassen n.d.).

            The most important aspect to be considered is the impact of the growth of different industries and cities in the world. This enables to speed up the globalization process of McDonald’s. The speedy growth of the industries that have strong concentration of high and low income jobs has unspecified distinct and different forms in terms of the consumption structure which in return has a feedback influence on the organization of work, together with the jobs that are being created. In addition, the expansion of the high income work force in the combination with the emergence new cultural forms resulted to a process of high gentrification which shows a great supply of low wage workers. Furthermore, the consumption needs of those low income population in the huge cities are all being met by the manufacturing as well as retail establishments that are small and rely on the family labor, and commonly fall on the below minimum safety as well as health standards (Sassen n.d.). As a result of this, McDonald’s have been able to increase its target market from different parts of the globe, because of the availability of the possible customers. With this, it can be said that the impact of the current living status as well as economic condition affect the globalization.

In general, the main factors that affected the decision and action of McDonald’s in globalization are the cost of labor force as well as the cost of the needed raw materials. In addition, it is also important to consider the influence of technology, together with the influence of the income of the people.

C. Developments and Changes

            McDonalds already have a strong position in the global economy. The company enables to maintain performance in global market. However, it is important to consider the different threats and problems that this company will face in the future.

            The first and major factor to consider is the aspect of financial performance and condition. Just like any other companies and organizations that are operating in global market or those multinational companies, McDonald’s is also exposed to any changes in the local and global economy. With this, because the company has an aggressive international expansion, the company is very sensitive to other economic slowdown in other countries or nations (Orji & Bao 2005). This is an important aspect to be considered, particularly because of the fact that different economies have its unique characteristics. In the case of McDonald’s because it has restaurants in almost every part of the globe, the company will have to focus on the individual problems of every economy. Currently, it is important to focus on the problem of the world regarding the global financial crisis. This is particularly because of the fact that the US and Europe, which are two of the most successful markets of the company are facing financial problems, which might affect the company’s overall operation. Furthermore, there are also some important markets in Asia, particularly those industrialized countries that are also affected by the said crisis. With this, McDonald’s must focus on planning and implementing strategies that will help in order to maintain its performance in the midst of the financial crisis in the globe.

            In connection with this, it is important to consider the fact that globalization will just affect some economies in positive manner. Thus, globalization will not be global, because of the fact that there are some first world countries that may not maintain their power status. This can be observed in the situation or status of the USA in the global aspect. The US will see its relative power position to erode, however, it will maintain its position as the most vital single country across the dimensions of power up to 2020 (Brandon 2005). This will particularly affect the performance of McDonald’s, particularly because it is an American brand. Furthermore, the fall of the US, will also affect the image of the brand, because it is connected to the overall image of the US. Based on this, because globalization will just positively affect some of the nations in the world, it will be hard for McDonald’s to focus on implementing plans and strategies, together with policies that will be implemented on its entire system. With this, it can be said that the company will have to face threats and problems that are related with the process of management and control. This is because, it will be hard or difficult to focus on individual needs and demands of each and every country. With this, it is vital for the company to maintain and even improve its current communication channel and process towards the local branches or headquarters in different parts of the globe in order to be informed regarding the local and international changes in both micro- and macro-environmental environment that will affect the overall operation of the company. In connection, globalization will also be very beneficial to those countries that can adopt new technologies. Regarding this, there are still many economies and nations that do not have the capability to adopt and follow technological development because of economic condition.

            Another important factor to consider is the growing debate of the public and different governments in the world regarding the unequal wage or labor cost. Globalization is a major disadvantage for the workers because it enables lower wages, labor cost and rates. In connection, it is important to focus on the theory of absolute – the international trade history which asserts individuals or nations trade based on their superior productivity in any given industry. In connection with the theory, nations must produce and export good that they possess an absolute advantage and import from other nations that also possess an absolute advantage (Economic Professor n.d.). As a result of this theory, many countries, which are not that fortunate with many natural resources are focusing on selling the skills of their workers in low cost. One of the best examples is the case of Europe, USA and China. According to the Peoples Daily Online (2007), a common worker is paid US$30/hour in the Europe, US$15 in the US and below US$1 in China. This show that in order to save cost, multinational companies from USA and Europe will invest their production process in China because of low labor cost. This can affect the overall economic condition of the mother country.

            Globalization also intensifies competition. This is particularly important in the local situation. For instance, because of globalization, McDonald’s together with its competitors including Wendy’s etc. enables to enter a new possible market, in order to compete with other local brand. With this, the competition increases up because globalization enables to increase the number of possible players or investors in a given place. This is observable in the current situation of many market in the world, where in there are different brands and stores that are competing in order to gain revenue and increase their position in the market. As a result, only those companies and organizations that have been able to create a strong connection and relationship with the customers will enjoy success and improvement in the revenue and sales performance. With this, it can be said that McDonald’s will be able to take advantage of the result or outcome of globalization in the world, because the company had been able to create a strong connection towards its customers in any part of the globe. Aside from that, McDonald’s is also considered as one of the most popular brand in the world. Therefore, it is just vital to focus on the different strategies and actions that will help in order to maintain its current popularity with the customers, at the same time, ensuring that the tie of the company to those local loyal customers will be maintained to the highest level.

            As have mentioned, human resource or labor force is vital aspect in any company. This is particularly very significant in company in the service industry like McDonald’s. Aside from the impact on the different debates and policies about the cheap labor, it is also important to focus on the quality or standard of labor. There are many debates and criticism about globalization which focus on the quality or standard of labor. According to these critics, standard of labor is at stake in globalization. The quality of products and services that most of developing countries manufacture are important aspect. It is somewhat given that due to the low rate of labor cost or wage, the quality of service and work of those employees will have a high level of lacking in quality. According to Bhagwati (2004), this situation will create some pressure towards the rich countries to abandon their high standards in order to compete with the poor countries. This is still connected with the theory of greater advantage. As a result, in order for other countries to gain investments, to improve the economy, there are some rich or developed countries that will lessen the labor cost in order to compete with countries like China. With this, it can affect the overall perception of the employees or worker which will eventually affect the quality of their service or work. In the case of McDonald’s, it will eventually affect how the workers serve or treat the customers, at the same time, it will also affect on how they work on the establishment, particularly regarding how they clean the restaurants. This is important because, as have mentioned, when the franchisee buy the franchise, they will have the name and the symbol of that company. McDonald’s has always been one of the most loved and famous brands in the world, because of this low standard of work, it will affect the overall image of McDonald’s because the customers are not satisfied with what quality of service and product that they have received.

            Above all, it is important to consider the current changes in the culture of the world. Particularly, because of the growing condition and development of the economy of Asia, the trend will change. The firms that are operating globally will become more Asian and less Western in terms of orientation. This is because by 2020, globalization could be equated in the popular mind with the rising Asia, which will eventually replace the current connection with Americanism (Brandon 2005). This is very important because, McDonald’s is an American brand, with American brands and service being offered. This will be the ultimate challenge for the company, to incorporate some Asian feeling and touch to their products and services.

D. References

Bhagwati, J 2004, In Defense of Globalization, Oxford University Press, Oxford

Brandon, H 2005, The World Ahead: More Competition, Globalization, http://deltafarmpress.com/ [Accessed on April 6, 2010].

Cook, N, Immanuel Wallerstein, http://www.globalautonomy.ca/ [Accessed on April 8, 2010].

Davidson, J, Smith, M & Bondi, L 2007, Emotional Geographies, Ashgate Publishing, Ltd.

McDonalds Corporation, McDonald’s Corporation, http://www.mcdonalds.com/ [Accessed on April 6, 2010].

Orji, A, Bao, C, Zino, A & Philippis, E 2005, McDonald’s Corporation Analysis, St. Johns, http://www.stjohns.edu/media/3/56b4dec8650c44b7adcc81d25da93148.pdf [Accessed on April 8, 2010].

Sassen, S, The Global City: Strategic Site/New Frontier, http://www.india-seminar.com/ [Accessed on April 8, 2010].

Vaida, A 2006, Globalization: Encyclopdia of Trade, Labor and Politics, ABC-CLIO.

Wallerstein, I 1974, ‘The Rise and Future Demise of the World Capitalist System: Concepts for Comparative Analysis’, Comparative Studies in Society and History, vol. 16, no. 387 – 415.

Wallerstein, I 1980, The Modern World System II: Mercantilism and the Consolidation of the European World-Economy, 1600 – 1750, Academic Press, New York.

Wallerstein, I 1998, Utopistics: Or, Historical Choices of the Twenty-First Century, The New Press, New York.

Wallerstein, I 1999, Globalization or the Age of Transition: A Long Term View of Trajectory of World-System, http://fbc.binghamton.edu/ [Accessed on April 8, 2010].

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