Globalisation Process Essay

The business world is becoming increasingly global. As a result of this, many companies, such as Costa Coffee and Dyson, have changed their strategies in relation to the markets they target or where they produce. Does the increasingly global nature of business mean that all organisations need to change their strategies significantly to achieve higher profits? Justify your answer with reference to Costa Coffee, Dyson and/or other organisations that you know. Globalisation is the process by which the world is becoming progressively interconnected as a result of significantly increased trade and cultural exchange. It has also increased the production of goods and services. The biggest companies (such as McDonald’s, Starbuck’s, Costa Coffee, Tesco, Dyson) are no longer national firms, but multinational corporations with subsidiaries in many other countries. The aim of this essay is to justify whether organisations need to change their strategies significantly to achieve higher profits as a result of the increasingly global nature of business. As a result of globalisation, the world has become a smaller place; however this is a potential benefit for companies that are looking to expand because communication, trade and travel are becoming increasingly easy. Many countries, especially the ‘BRICS’ economies are undergoing industrialisation, giving Western companies the cheaper infrastructure they need to expand. If the business does the market auditing efficiently and they target the right market, with the cheap infrastructure and more potential customers, there are minimal reasons why the business would not achieve higher profits. So having said that, businesses like McDonald’s are a perfect example that higher profits are a result of changing their strategy to relate more to the market they target. Originating from America, McDonald’s are currently market leaders in 96% of the markets they do business in; they operate in 119 countries on 6 continents, with over 33,000 restaurants worldwide, employ ing over 1.7 million people. (http://www.mcdonalds.ca/ca/en/contact_us/faq.html) They first expanded internationally when they opened in Canada in 1967. The international section of McDonald’s has become increasingly more important to the company’s overall success. As of this past year, non-US based restaurants account for over half of the company’s $40 billion in revenues. Foreign restaurants now account for about 60% of McDonald’s total profits. Since coffee has become a necessity in a person’s every day routine rather than a luxury, McDonald’s has recognised this is an opportunity to increase their product portfolio. With the majority of McDonald’s customers being business men and women, coffee is an increased purchase amongst their sales, therefore they have recently announced they will be opening up a â€Å"McCafe† in the UK, having already been opened in Australia since 1993, they’ll be selling a variety of coffee’s other than your standard black, white, latte and cappuccino. As a consequ ence, for companies like Costa Coffee and Starbuck’s, this means that McDonald’s will continue to add to the markets they are in and become increasingly intense competitors. So the increase use of necessities globally definitely has an impact on a businesses strategies. McDonald’s have had to identify a person’s every day need, and cleverly made it as sort of a luxury item because it’s ‘new’ it will be new to McDonald’s. As a result of their new investment, the McCafe generates 15% more revenue than an ordinary McDonald’s. On the other hand, Globalisation is proven to have had a negative effect for some other businesses such as Tesco. This is a business that has strived to expand internationally, and as a result, they struggled/failed as they couldn’t easily adapt to the market change. Tesco has expanded into many other countries over the years, but as the â€Å"BRICS† economies are becoming increasingly attractive, an opportunity to venture into these economies seemed to be a ‘rising star’ for Tesco. Tesco’s ‘eye on the prize’ meant that they took their eyes off what made them successful in the first place- their UK stores. Ultimately, expansion into China, India and Thailand has left what was their ‘cash cow’ UK stores to currently become their ‘problem child’. Losing focus on their original investments meant that they â€Å"slipped behind in terms of stores, service and innovation.† http://www.bbc.co.uk/news/magazine-177 67565 In addition to their struggles to maintain the success of their UK stores, focus on China, Thailand and India had a massive impact on their competitors such as Asda, Sainsbury’s, Lidl and Aldi. During the time that Tesco focused on the new move, it was an opportunity for its competitors to steal Tesco’s 30% market share – Sainsbury’s brought in â€Å"By Sainsbury’s† and Asda brought in â€Å"Chosen By You†. When Tesco realised their mistake and focused their attention on their UK stores, they invested in the â€Å"Big Price Drop Flop† but the  £500m campaign only damaged their branding image, as customers thought the quality of their products had dropped. It was a clear step by step process for Tesco losing its place in the market. All of this is a result of changing their strategy by expanding overseas into a better economy, and that is a result of Globalisation. Overall, Globalisation has so far cost Tesco to invest in a new economy, invest in strategies to save their place in the market, and has now cost them a  £1bn investment making their UK stores a â€Å"warmer look and feel†. It’s safe to say that Gl obalisation has definitely not achieved higher profits for Tesco, only slandered them. Overall, Globalisation has effect on all businesses whether positive or negative, but it does not necessarily make them achieve higher profits due to a changed strategy. In my opinion, it’s not Globalisation itself that makes a business achieve higher profits, it’s how the business takes advantage of the situation, and there are other internal factors involved that make a business achieve increased profits. Tesco could have easily become more successful if they balanced out their investments, keeping the UK stores as a ‘cash cow’ while they invested in their ‘rising star’ in China, and also kept their attention on their main rivals: Asda and Sainsbury’s. Sometimes a business does not need to change its strategy, an investment into the ‘BRICS’ economies could potentially mean more money is required. Having said that, some businesses already have the infrastructure they need to maintain their businesses over in the UK and it would seem moronic to expand overseas, especially if the business is maintaining profits. Although McDonalds has taken advantage of Globalisation, and used their strategy efficiently to become successful and to be as big as they are now – they are one company in a million. They are not proof that just because they managed to successfully adapt to the market, expansion into other countries is not guaranteed success, as proven by Tesco. So no, not all businesses need to change their strategy significantly due to Globalisation, in fact, some businesses don’t need to change their strategy at all.