Globalization and Outsourcing: A Case Study of MacDonald's

This report discusses and examines globalisation process of companies and its impacts in today’s businesses. The role of international manager’s while managing global companies is also realised while verifying desired qualities in them. The impacts of globalisation process can be seen in today’s businesses and thus this report focuses more on international trade and commerce along with role of outsourcing and off shoring business activities. This report has made a case study of Macdonald’s Company after analysing its global business strategies and impacts globalisation have made on its business functions.

MANAGING ACROSS BORDERS
MACDONALD’S CASE STUDY
STUDENT NAME
INSTITUTIONAL AFFILIATION(S)
Research, discuss and identify how ‘globalization’ impacts business today, and what
international managers must know to stay ahead of the game. Identify and discuss how
outsourcing and off shoring contribute to globalization using a company case study to
identify the challenges, opportunities and problems that globalization presents

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EXCECUTIVE SUMMARY
This report discusses and examines globalisation process of companies and its
impacts in today’s businesses. The role of international manager’s while managing global
companies is also realised while verifying desired qualities in them. The impacts of
globalisation process can be seen in today’s businesses and thus this report focuses more on
international trade and commerce along with role of outsourcing and off shoring business
activities. This report has made a case study of Macdonald’s Company after analysing its
global business strategies and impacts globalisation have made on its business functions. This
report will demonstrate opportunities, challenges and issues that take place in international
companies while carrying businesses in global context. This report will highlight more upon
outsourcing and off shoring activities taking place during globalisation process as both the
activities is seen increasing in present business environment.

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Section 1
INTRODUCTION
Globalisation is the process of connecting firms, people and government of diversified
countries to get integrated with globalisation of companies. During the process, both
distribution as well as manufacturing takes place along with making sales in marketplace
across borders which links different countries through global trade and commerce. Impact of
globalisation and international businesses is enormous and remarkable as it has brought
businesses and people mush closer. International business and globalisation are interrelated
terms where global organisations have taken benefit of globalisation process through
incessant development (Edwin & Okpara, 2015). The idea behind making companies global
is to make things accessible at desired places, irrespective of countries borders along with
utilising available resources to the extreme. Service industry as well as manufacturing firms
have both benefitted from globalisation process along with other small units related to them.
If organisations are able to cope with current international business needs, they gain from
international markets whereas rest of the world benefits by getting desired products and
services (Muciimi & i Ngumo, 2014). The reason behind augmentation of globalisation is
astounding growth in technological and communicational fields. Enhanced technology and
internet has resulted in fast development of internationalisation process along with
development of human civilisation. As compared to earlier years, businesses have been seen
from different perspective where people demands for more innovative and developed
products. Environmental changes in last few decades have also made changes in business
policies where organisations ventures across borders in detection of business opportunities.

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Today, products manufactured in one country are easily available in different countries which
show the dimension in which businesses have developed across borders and are likely to get
more augmented in upcoming years. Although globalisation is a common practice adopted by
today’s firms, its impacts are also realised by them that can affect organisations both
negatively as well as positively. Globalisation enables sound relationships among diversified
countries along with developing international trade. However, negative impacts of it like
exploitation of foreign county resources, manipulation of market trend, unethical code in
practices along with degradation of small scale industries makes globalisation process fall
into negative stance (Okoye & Nwaigwe, 2015).
Staying ahead of the game becomes difficult for those managers who fail to
understand the reason behind globalisation of their company along with unawareness of
globalisation effects. Tasks and duties of global managers become difficult as globalisation
process entails complex issues and tricky situations. Global companies’ possesses diversified
people who belong to different cultures and backgrounds. Managing work force under such
situations requires managers undertaking training of diversified languages so that
communication between them and employees becomes operative (Bertrán, 2006). Along with
it, global managers require having future envisaging capabilities to remain ahead of the game.
This means, a global manager must think about different issues from broader perspective
while focussing more on development of firm in attaining firm’s objectives. International
managers responsibility does not limits in home country only and thus they require taking
responsibility of nurturing people in operating countries also by considering their ideas and
demands. Along with it, global managers must be aware of different countries laws and
regulations so that any unethical move during internationalisation process is avoided
(Tanushevski, 2016). Leadership traits and moral insights of global leaders become
significant while managing employee’s of global firms. For this, they need to implement

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effective leadership theories in their practices so that valuable leadership model is utilised for
enhancing work force of employees. Other personal qualities like intellectual power, sound
communicational skill, motivational spirit and ethics in work policies makes global
manager’s best suited for global firms.
Section 2
ESSAY
Globalisation has been possible because of increase in outsourcing and off shoring
activities of companies across borders. Outsourcing has provided many companies, especially
manufacturing hubs, with cheap labours and desired resources that enabled them to gain
competitive advantage over the others (Pine, 2017). Even government supports
internationalisation process as both outsourcing as well as outsourced countries benefits from
international trade and commerce. However, government monitors these activities so that
violation of laws and regulation can be avoided. Internationalisation has saved many
companies from getting a breakdown during economic crisis in countries which shows
positive effects of globalisation. With outsourcing function, the revenues realised from other
countries have provided them with great help during difficult times. As more and more
people are becoming aware of globalisation and outsourcing advantages, they try to
implement globalisation in their businesses to get more concentrated organisational
establishments. Outsourcing and off shoring have not only aided with high profits but also
helped in getting desired labour and elongated marketplace (Palugod & Palugod, 2011). With

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diversified cultured teams, business practices have been able to become more customised and
systematic that allows smooth transferring of products and services. Therefore, it can be said
that outsourcing and off shoring of activities have contributed in effective globalisation of
companies. In order to get practical knowledge about global companies, this report will
identify a case study of a very popular brand, MacDonald’s, who deals in food and beverages
industry in more than 100 countries.
MacDonald is one of the largest chain suppliers dealing in food and beverages whose
franchise cum retail restaurants are situated all over the globe. The company was established
in the year 1955 by Ray Kroc and went public in the year 1965. Presently MacDonald’s
operates in around 30,000 food outlets situated in more than 100 countries and have became
one of the most recognisable brands in global marketplace. From the beginning, company
targets its customers that include children with parents, teenagers and corporate people.
Perhaps mostly the company is been seen targeting more towards children along with their
parents by introducing gifts attached with combo meal packs and making the environment of
restaurants more family oriented.
MacDonald also treats their business partners as integral part of their business and
they are allowed to decide on their own about work timings according to market requirements
and thus are able to provide with good quality food. The company’s mission is to become a
powerful brand in restaurant business and supply chain. The company tries to maintain long
term and transparent relationship with its outsourcing companies and suppliers to carry
business with trust and loyalty (Vitasek et al., n.d.). Macdonald’s also deals in other brand
products like Coca Cola along with offering many discounts and promotions to keep its
customers attracted. Company also controls other eating house across the globe like Aroma
Cafe, Donatos Pizza and many more. In regards to emerging strategies while expanding its
business globally, MacDonald focused more upon emerging markets (Rathi, 2013). The

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company not only deals with developed nations but also focuses on developing countries as
its main targeted customers belong to middle and upper middle class people. Company tries
to deliver service in those areas where the demand for fast food is high as success in those
regions can become comparatively easier. MacDonald’s have incredible niche while dealing
with food varieties and it specialises in providing food according to cultural demand of
diversified regions. For example, in countries like India, where beef eating is prohibited,
Macdonald has altered some of its food recipes to ensure compiling with country laws.
Globalisation of companies requires global standards in its operation. Despite
Macdonald tries to maintain lawful and transparent business, the outsourcing of company’s
supply chain business has always provided company with additional challenges. There were
many times the company had to face health and food safety scandals due to which all its retail
stores had to face severe breakdown (Food Logistics, 2015). The China’s scandal in which
few of its products were found unhealthy and contained harsh chemicals, made company fall
under ethical stand along with reducing its market scale during that time (Erickson, 2016).
Therefore the company has to deal with great precautions while dealing with outsourcing
supply chains. Off shoring and outsourcing undoubtedly brings many opportunities in
business and global mangers play a significant part while making decisions regarding global
management. Recruitment and managing staffs in international companies are made after
considering global business requirements so that entering fresh markets becomes more
concentrated. Although MacDonald has high spirited and efficient management, problems
related to diversified culture and different languages have always challenged the company
during entry phase in new countries. Even the company faced many challenges while
selecting their supply chain partners as any unwanted move of them can hamper company’s
reputation in outsourcing country (Vitasek, 2014).

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Internationalisation challenges during entrance in few countries have made
MacDonald growth slowed in few desired regions like Italy and Germany. The public and
local government over there supported Anti-American, Anti Fast-food and Anti Capitalism
laws that restricted entry of foreign brands in those countries. Food departments and eatable
products dealing companies have to pass WHO standards. Few products MacDonald deals in
came under WHO standards where the products proved harmful to people, especially
children. This made company alter its recipes many times to maintain food standards
irrespective food savour. Even few of its kitchen were found having inefficient kitchen
management due to which the store needed to be closed until renovation. This even affected
company’s reputation in public image as cleanliness in kitchen environment is very essential
to maintain food quality. Changing demands in customer preferences and concern for high
obesity food products challenges MacDonald to make reduced obesity food products. Also,
many customers have become aware of fast food negative effects and thus demands in freshly
cooked food. Even the company has to face competition challenges from other brands like
KFC, Starbucks and Subway for which Macdonald’s had to face reduced sales many times.
During outsourcing of supply chain in foreign countries, the challenges related to supply
chain partners have also affected company’s sales in those areas. The supply partners many
times demand undertaking businesses over there according to their norms which often
violates company’s core objectives (Vitasek, 2014).
Many challenges have come in MacDonald growth path and globalisation process but,
with strategic formulation and sound management system, the company has been able to
sustain the global market with strong reputation. The company has been able to recognise
opportunities out of challenges by capturing global market after considering issues and
difficulties in its outsourcing countries. The CEO of the company believes in ‘think global
and act local’. With such beliefs, MacDonald has remained transparent while maintaining

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transnational business strategy along with integrating local responsiveness in global
environment (Tanahashi, 2008). The outsourcing partners of different countries reacted
according to their country’s culture and thus MacDonald realised to remain responsive to
their reaction (Kim, 2015). They tried to manage global transaction according to their
outsourcing and of shoring countries regulations which avoided business conflicts in foreign
countries. Even the supply chain partners are managed after considering local needs and other
political and economic demands. In outsourcing and off shoring business, globalisation
strategies need to be made significantly as they reflect corporate social responsibility of the
companies. MacDonald from the beginning has tried to maintain CSR strategies in its
business policies which is the reason behind the growth of its outsourcing and off shoring
activities in diversified countries. Macdonald also makes partners with country government to
maintain friendly relation with them. This strategy enhances company sales with
governmental support in those regions along with getting support from food regulators of the
countries. Since the company faces challenges in maintaining supply chain partners demands,
Macdonald have made a common code of conduct for them that requires to agreed by them
during making of partnership agreements. This has saved company from getting violated in
foreign countries that was earlier recognised by the company many times. Following it,
Macdonald made code of conduct for its store franchise partners also to maintain supplier’s
capacity during economic rise. The suppliers initiated protocols to determine and identify
sustainable production of required resources and beef along with other bio fuels required for
production purposes. The supply chain logistics promoted environmental friendly operations
by considering reduction in green house gases by adopting enhanced tools in their processes.
Therefore, they were able to meet all the required socio economic and corporate social
metrics (Bailey, 2017).

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Opportunities during maintenance of local franchise management emphasised growth
in those areas through innovation and getting customers feedbacks. In international market,
getting support from local customers becomes very important and thus MacDonald has tried
to alter its menu many times according to their preferences. The franchise models of off
shoring countries were established with cost reductive ways that helped their partners realise
profits in shorter time period (Mujtaba, 2007). Even the services provided in those outlets
were made sure of meeting with standardise operations, distinguished food quality and
affordability of products around the clock (Gadsden, 2014). These principles helped
MacDonald’s penetrate in new countries easily as they contained every principle of
internationalisation demands. The company also followed pricing strategy to gain enhanced
sales while developing outsourcing techniques in business. The company evaluated country’s
GDP and economic conditions along with measuring other inflation and currency toll. This
helped MacDonald’s in making strategic choices between franchise partners as effective
partnerships always provides with effective businesses. Through sound investment structures
in outsourcing franchises and supply chain, MacDonald have made its operation in foreign
countries efficiently while realising successful marketing policies in diversified countries.
Like many global companies, MacDonald also had to face many problems during
globalisation process. MacDonald’s has to face assumptions made in its food products by
health practitioners. Macdonald’s food highlighted sceptic in nutritional stratum where some
of its food products were believed to be contained of unhealthy elements. Many countries
even acclaimed that fast food products imbalanced children food diet and thus demanded
reducing its stores in cities. Regarding Macdonald’s outsourcing function, the strategy used
by the company have generated cultural conflicts in few countries like slowing down of
regional cuisines. For example, in Italy people are more sentimental regarding food choices
and snubbing on foreign country food made them oppose entrance of MacDonald outlets.

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During entry phase and partnering with new outsourcing supply chain retailers, MacDonald
had to make many compromises regarding their term and conditions for which it has to
follow different set of guidelines for each outsourcing country. Economic disruption in
outsourcing countries has also brought issues with regular functions in the company. For
example, the European crisis of 2012 abridged company’s sales during that time along with
its home country sale due to downsizing of its supply partner’s. For five consecutive years
Macdonald faced stumpy revenues which slowed its globalisation process utterly.
Outsourcing trends have also provided with failures in its early stages of globalisation as the
management lacked adequate knowledge about new emerging trends. But, with strategic
management and effective policies, company’s global manager handled the situation
promptly and gave Macdonald a new facade. Constant competition with other brands has also
bothered the company where Macdonald has to alter its food menus many times. While
altering food menu, the company had to suffer failures as few of its new products were not
liked by people. And thus other rival companies gained advantage out of it. Availability of
desired labour and skilled professional in all countries have been constant reason for
company’s concern as they play significant role in creation of desired products for the
company (Toronto Star Newspapers Ltd, 2015). In countries were demographic changes were
seen in large number, Macdonald had to face problems while selecting appropriate staff for
managing their retail outlets. Again, during intense situations and inappropriate management
of few of its partners stores where they showed unsuitable mechanisms in food production
made closures to the stores which also affected MacDonald’s reputation in those areas. The
pricing strategy, as mentioned above showed that the company targeted middle and upper
middle class people through fixed pricing strategy which made many lower middle class
people against it along with reducing sales volume. Outsourcing its manufacturing units in

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foreign countries also added manufacturing costs to the company and thus demands elevated
cost operations to maintain superior quality in franchise stores (Emirates, 2015).
Section 3
CONCLUSION
Globalisation of companies is apparent for which managers of contemporary
organisations are considering adaptation of modern business techniques and globalisation
related work principles. Outsourcing and off shoring has given opportunity to organisations
while making expansion strategies in international countries. The impacts of globalisation are
also an area that necessitates consideration for which global managers are undertaking
different work principles and theories of global management to stay ahead of the game.
Negative impacts of globalisation also needs to be realised for which global companies hires
superior quality staff that can handle outsourcing and off shoring activities exclusively in
globalisation process of company. The above essay has verified the impacts of globalisation
process from view point of researchers and authors while giving practical example of
Macdonald case study. Since MacDonald is one of the leading brands worldwide, sufficient
information about the company was realised that helped in getting profound knowledge about
global company challenges, opportunities and problems in globalisation process. Although
many issues and challenges faces global company but still globalising and
internationalisation of organisations is apparent as it not only enhances business opportunities
but also helps in uniting different nations.

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APPENDICES
Appendix A
Figure: Challenges faced by MacDonald‘s in worldwide market (THE FINANCIAL
TIMES LTD , 2018)

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Appendix B
Figure: MacDonald’s globalisation in foreign countries (Management Today, 2014)