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Industry Globalization In this essay I am going to analyses the pressures for globalization for two different industries using globalization drivers. The two industries I am going to research is the Airline industry, using British Airways for examples and the Fast food Industry, using examples from McDonald’s. I will then try and evaluate how firm strategy has changed in response to globalization pressures.
Yip believes there are eight key drivers for industry globalization. These Include common customer needs, global customers, global channels, global economies of call, favorable logistics, information technology, government policies and regulations, and transferable competitive advantage. Looking in detail at both the Airline and Fast food industries I am going to see what pressures are faced by these service Industries using drivers for globalization. Firstly there are common customer needs that need to be met.
Customer tastes and needs are consistently changing and so industries with little changing customer tastes and needs across different countries gives that Industry more potential to expand and gain globalization. Both the fast food and airline are ore likely to be successful in standardizing the services and tightly controlling customer involvement. This allows both these services to meet the needs of the consumers all around the world. The airline and fast food Industry both also try to encourage local employment where the services are based to make standardization easier. Coal nationals as service providers may overcome the foreignness of a standardized (Yip and Lovelace, 1996). This enables the service to be customized to meet the needs of the local and foreign customers if demanded and also supply a globally standardized service. Another driver is global customers, who demand the same quality of service everywhere and try to standardize and simplify the services they consume. Possession-processing services such as Airlines now offer common procedures and standards to Its global customers to help satisfy this need.
The fast food Industry along with the airline industry also focuses more on the service characteristics of customers worldwide. Global channels have been improved through the increased availability of electronic channels of distribution. It is now easier for service industries as the electronic channels provide almost worldwide coverage. This advantage is more significant in the airline industry compared to the fast food industry as now travelers can book tickets online, look at travel details, compare competitors easily and examine services and offers.
It has helped the fast food industry source ingredients in other countries but the distribution of physical goods is still globalization slowly and so ingredients cannot be easily distributed from few sources in certain countries. Global economies of scale enable some companies to provide services or produce products cheaper than its competitors to get the price competitive advantage. For his reason, companies are expanding and competing globally to benefit from the economies of scale to keep up with competitors.
To increase scale, can be increased through participation in multiple markets, combined with product standardization and/or concentration of selected value and Lovelace, 1996). Fast food companies such as McDonald’s try to standardize their products throughout the world to cut costs. They also substitute equipment for labor to lower costs and perform better than local competing companies. The effect of cutting costs and achieving global economies of scale depends on the amount of iced costs needed to locate in other countries. Because of this it is expensive for airlines to get the airspace to expand their services.
The fast food industry however including companies like McDonald’s franchise their services to local investors to minimize this barrier to entry. Similarly the airlines can try to lease planes to try and minimize the barrier faced by the industry. A favorable logistic will balance both logistics and appeal. For services such as the airline industry and fast food industry there is a big need for convenience. In the airline industry some customers are willing to travel to another location in order to chive a better service, such as airlines bringing their aircraft to Singapore.
British airways boosted their favorable logistics in the past by providing limousine transport to and from Concorde flights. Information technology is one of the most dominant and important drivers of globalization. I. T. Has enabled companies to simplify systems, communicate more effectively, by operating supplementary services (such as reservations) in one or more countries and globalize its services cheaper, easier and more efficiency. Yip states Г?? a globalization driver in its own right, information technology also interacts with all other and Lovelace, 1996).
For Airlines, increased security, easy booking for customers, baggage systems and other ordering systems simplify and improve the service. The fast food industry also benefits from improved ordering systems to enable a faster, more convenient service. These drivers are often favorable for both the airline and fast food industries as they both require a significant presence in the country and area they are operating in and because of this, usually employ locally which creates Job opportunities for the area.
However these businesses can also be seen to take business from local monitors and so some measures may be put in place to regulate this. For example, they could restrict airlines landing rights to protect home based airlines international routes. Another example that government drivers can affect the fast food industry is in the case of McDonald’s, EX. refused to accept imports of American hormone-enhanced beef, the USA in response, under World Trade Organization rules, put tariffs on foe grass, Roquefort cheese and other European farm productsГ?? World Service).
This shows the impact of the government on global companies can also affect government decisions on international trade as a country. A transferable competitive advantage is when one company in an industry can use its competitive power and position to build a competitive advantage in other countries and thus expand the business. This then forces other competitors in the industry to follow to keep their customer share and remain competitive in other countries.
McDonald’s in the fast food industry is probably the leader of this and is a very good example of how brand image and recognition can help globalize a company and remain competitive in so many countries. The airline industry competitors find this ore difficult as many airlines need large bases and it is harder to acquire new locations and airspace in other countries due to regulations and to protect local companies. With the increase of globalization in various industries it is important for competitors in the industry to follow in order to maintain competitiveness and market share.
Both the airline and fast food industries operate as services and it is important for them, in order to globalize successfully, to develop and integrate a global strategy for the organization. As a result, firm strategy has changed in response to the globalization pressures arisen by the key drivers. Products and services are becoming more standardized in order to cater for different cultural differences across the world. These standardized products or productsГ??CГ,-1Г??0 are perhaps the one feature most commonly identified with global and Lovelace, 1996).
The fast food industry leaders such as McDonald’s offer standardized burgers and service to customers all around the world, although some deviation from standardization is almost always needed. For example, McDonald’s now the 34 restaurants in India, the MacГ??CГ,-1Г??0 is made of mutton, and the vegetarian options contain no meat or World Service), although asses like this are very rare and standardization seems to be the standard procedure for global businesses. In the Airline industry companies try to standardize flights by using procedures and regulations.
For individual companies such as British Airways quality brand name worldwide. The airline industry does not need to cope with taste and cultural differences but more on the technical specifications needs in different countries. Global marketing of services is an important factor of globalization. Companies need to gain recognition and reassurance worldwide to expose their message to the new customers in different countries. Uncertainty engendered by intangibility requires strong branding to offset and Lovelace, 1996).
In the fast food industry the brand name, for example McDonald’s, has to be the same all around the world so both locals and travelers know what they will be getting, and it should be the same genuine McDonald’s experience everywhere although variance in costs and income in different countries and regions can be a problem. Travel-related services can benefit from global advertising although the communication of their message may impact different cultures in different ways. A solution can be to have one campaign for global themes and local campaigns for local messages.
For this reason, Airline industry giant British Airways for many years has a succession of dramatic global advertising campaigns to establish its position as Worlds Favorite at the same time, British airways provides a smaller budget for local campaigns that focus on schedules, prices and promotion of special tour & Lovelace, 1996). The airline industry in particular often attracts multinational customers which means it is vital for these companies to offer uniform terms of service. Businesses may develop a strategy to take advantage of their size and power in foreign markets to build more efficient and effective value chains.
This way they can become more price competitive and enables them to operate different activities in different countries. This is also a more cost effective way to operate as not all operations of the business need to be present at each location of its services. They can employ locally to simplify the globalization process and other areas of the business can be located elsewhere. For both the airline and fast food industries it depends on the local presence needed in each particular area. Airline industry competitors can easily relocate and go from airport to airport, allocating slots for flights when needed.
Global fast food companies however need more presence of higher management and guidance especially when a new service is being introduced to a different country. Partaking in the global market creates more benefits for these companies. Businesses can expand their services to enable them not to be absent from that market and to improve the appeal of the organizations products and services. Companies are also able to sell in larger volumes and thus benefit from improved economies of scale. This is apparent with the fast food industry, McDonald’s is a perfect example of a company that has benefited in this way.
Because of McDonald’s very standardized and easily replicable products and service it is easily able to franchise its services to local businesses. For travel-related services such as the airline industry, international may be inclined to stay loyal to a particular airline. This means the brand of service the airline offer is more valuable to the customer. Because operate in heavily regulated environments with many rules and regulations it is harder to enter and penetrate foreign markets as quickly and successfully as a fast food industry competitors.
From this essay and using my research I can see that globalization is a growing trend that is slowly developing in most industries. There are many benefits and drawbacks of operating a global organization that vary from industry to industry. Problems arise from location of services and each industry depending on the service or product being offered can operate either on-site or off-sight and the ability to operate services from different countries will enable companies in that particular industry to take greater advantage of globalization.
Globalization of industries can push impasses to standardize products however customized products should still be considered to cater for the different emerging markets and meet local needs and requirements. The location of operations of the business can also be a deciding factor as some supplies may have to be transported from one country for consumption in another. This may be apparent in the airline industry for supplies such as fuel. Companies can form a base of local suppliers and train locals for Jobs quickly to give them a competitive advantage globally such as what McDonald’s has tried to achieve in the fast food industry.