University of Sunderland HK: Global Business Environment Report

This report examines the multifaceted impact of globalization on businesses, particularly within the context of the Hong Kong-based food industry, using Yummy Food Limited as a case study. It begins with a comprehensive introduction to globalization, detailing its key drivers such as containerization, technological advancements, economies of scale, tax system differences, reduced protectionism, and effective growth strategies. The report then delves into the strategic complexities businesses face in a global environment, employing SWOT and PESTEL analyses to evaluate internal and external factors. It addresses challenges in international supply chain management and explores the influence of globalization on organizational culture, structure, and decision-making, referencing the McKinsey 7S model and Hofstede's cultural dimensions. Furthermore, it considers the impact of ethical and sustainable globalization on organizational functions and concludes with an analysis of Yummy Food Limited's strategic expansion routes, providing recommendations to overcome identified challenges. The report is a comprehensive analysis of the effects of globalization on business operations.

2019 UNIVERSITY OF SUNDERLAND HONG KONG
Global Business Environment
Assignment Title
Global business environment and strategic complexity
LEUNG SIN KI
(Student No.189130103)
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Running head: Business Globalization
Abstract
Globalization is the process of expanding the world’s economy, culture by expanding the
exchange of technology, goods and services and many others. This research paper is going to
analyze the impact of globalization in context of the Hong Kong based food industry.
Globalization gathers higher profit for the organization by enhancing its market presence and
reputation. However, there exists some internal and external organizational factors that might
create strategic complexities for the particular process. This paper is going to discuss the impact
of globalization on the structure, culture and decision making of the business.

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Table of Contents
Introduction......................................................................................................................................3
Globalization....................................................................................................................................3
Key factors driving towards globalization.......................................................................................4
Containerization...........................................................................................................................5
Technological change..................................................................................................................5
Economics of scale......................................................................................................................5
Differences in the tax system.......................................................................................................6
Less protectionism.......................................................................................................................6
Effective growth strategies..........................................................................................................6
Strategic complexities in operating in a global environment..........................................................7
SWOT analysis........................................................................................................................7
PESTEL analysis.....................................................................................................................9
Complexities of the international supply chain management........................................................11
Impact of global market on culture, structure and function of the organization...........................12
McKinsey’s 7S model................................................................................................................12
Influences of ethical and sustainable globalization on the organizational functions.....................14
Hofstede’s dimension of culture theory.....................................................................................15
Influence of business globalization on the strategy and decision making of the organization......17
Strategic Expansion Routes of Yummy Foods..............................................................................18
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Conclusion.....................................................................................................................................19
Reference.......................................................................................................................................21
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Introduction
The term globalization is mainly used for describing the emerging interdependence of the
world’s cultures, populations and economies that are brought about by the cross-border trade of
technology, information, investment, people, services and goods. Under this phenomenon
different countries have built efficient economic partnerships for facilitating these movements in
several centuries. According to Dunning (2014), globalization can be explained by the change in
the world where in which the individuals moving from the self-contained countries to an
integrated world. Globalization in case of business describes a business change of a firm that
associated with a particular country to one, which operates in several different countries.
Globalization, in recent days has become an important matter of concern due to the growing
demand of high tech technology and industry revolution around the globe; working globally,
business or the industries can have the potential capacity of making huge profits (Castello and
Ozawa 2014).
This report is going to give a broad description about the business globalization; the key
factors responsible for driving towards the globalization along with the strategic complexities of
globalization in context of the Hong Kong based emerging fast food chain named Yummy Food
Limited. The market opportunities and challenges for this business will be explained by
performing the SWOT and PESTEL analysis. Hofstede’s Dimensions of Culture will be also
discussed here for demonstrating the influence of globalization on this organization.
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Globalization
According to the information provided by Ghemawat (2017), broader than the concept of
international business, globalization explains a shifting toward an integrated economy, where the
world evidences exchange of ideas, beliefs and culture along with exchange of different
resources, goods and services. In a simpler term, the process of globalization indicates that the
world is getting smaller and due to the invention of new communication and transportation
technologies, individuals around the globe can geographically and virtually connect with each
other (Bond and O'Byrne 2014).Globalization, as explained by Velthuis (2013), is the spread of
technology, products, information as well as jobs across the national borders. Explaining it in
economic terms, the process explains an interdependence of different nations around the world
fostered by the free trades.
Mainly, globalization can be identified as a cultural, legal, political and social
phenomenon: Socially, this process leads towards a wider interaction between various
populations (Govil and Rashmi 2013). Culturally, it describes the interchange of artistic, ideas
and values, among various cultures. Legally, the process can be related to the process in which
international laws are created as well as enforced and politically, the process explains how to
shift attention to the intergovernmental organizations. Evolution of the recent economic systems
has enhanced the process of industrialization and created major financial opportunities for many
countries. Additionally, the government is also focusing on discarding the existing barriers
related to the trade and giving opportunities for promoting the international commerce (Kaynak
and Hassan 2014).
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Key factors driving towards globalization
Looking towards the case scenario of the discussed Hong Kong based fast food chain
yummy food limited, it can be said that the food delivering organization has already created a
well-defined market position and reputation in the Hong Kong market by establishing a customer
satisfactory profitable business. Following is a list of factors that are responsible for driving the
process of globalization.
Containerization
The costs related with the ocean shipping have decreased to a great extent and it is due to
the bulk shipping, containerization and other different efficiencies. In addition, the minimal unit
cost of product shipping around the economy of the world has helped to bring costs in the
manufactured country closer to the export markets (Potrafke 2013). This process has beneficial
for the markets to become comparatively contestable in a global point of view.
Technological change
The recent era is identified by the name technological era. The sustained and rapid
technological change has majorly discarded the additional cost related to the transmission and
communication of information. The organizations in current days are taking help of several
technological advantages such as, ICT (Information and Communication technology) and many
such, for spreading the product and business related information over the world (Bowen, Baker
and Powell 2015). Apart from that, several technologies are invented for improving the supply
chain and other business functionalities; thus providing major opportunity towards globalization
of the discussed food business.
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Economics of scale
As per the information provided by Dancygier and Walter (2015), most of the economists
believe that, there need to have a growth in the minimum efficient scale (MES) related to
different industries. In case, there is an increasing MES, it can be said that, the domestic market
might be regarded as quite small for satisfying the selling requirements of these organizations.
Moreover, several emerging countries have own transnational corporations. Overall, it can be
said that the improved economy of scale has acted as a major driving factor towards a well-
shaped business globalization.
Differences in the tax system
Intention of every businesses to get profit from the minimal unit labor costs and several
other suitable production factors in abroad has created higher opportunity for the countries to
adjust their existing tax systems so that the foreign direct investment (FDI) can be attracted and
enhanced. Moreover, several countries have also become engaged in performing tax competition
among each other with an intention of winning the foreign investment projects, thus enhancing
their overall business profitability.
Less protectionism
Traditional forms of the non-tariff protections, like foreign exchange controls and the
import and export licensing have been dismantled gradually. Now the borders have also opened
and import tariff level has also decreased up to a major extent. In the past few years, a
continuous rise has been noticed in the non-tariff barriers (for example import quotas) and due to
which higher economic growth and business development have also noted.
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Effective growth strategies
Advanced business models, technologies have helped the business managers to sharpen
the decision making process, thereby earning higher revenue and profit for the organization. In
addition to that, the global brands and businesses have also expanded internationally.
Strategic complexities in operating in a global environment
Strategy, in context of business, can be explained as the means to facilitate different
changes in order to achieve the long term and short term goals, uncertainty, complexity and
competitive pressures. Complexity usually rises from the uncertainty, unpredictability, and
difficulties faced by the organizational managers while operating in the global environment
(Crane, Kawashima and Kawasaki 2016). A business will said to be global while barriers related
with the trade across the national borders gets dismissed for enabling higher integration of
operations, products, capital markets, financial flow, technical innovation, labor, cultures,
knowledge as well as the goods and services between different nations; thereby expanding the
economic growth and international trade. This again indicates that, organizations and nations will
interdependent and the national borders will be virtually discarded. The strategic complexities
related to the organization can be discussed by focusing on the internal and external environment
of the organization. The internal organizational environment can be analyzed by performing the
SWOT analysis; on flip, PESTEL analysis will give an idea about the external complexities.
SWOT analysis
Strength
 Globally recognised brand
 Provides different type of discount to
Weakness
 Weak quality control
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attract the customers
 Maintains cleanness and hygiene
 Matching inventory management of
company with business model
 Structured supply chain to reduce
inventory delays
 Conflicting franchise management
 Poor reputation to manage vendors
 History of mistaken purchases
 Late payments for supplying of
products and services
Opportunity
 New innovative technologies
 Increase in space of warehouse
 Improvement over storage by
expansion of the warehouse
Threat
 Issues of cash flow
 Inventory damage expensive
 Downturn of the company due to
issues of cash flow
(Table 1: SWOT analysis of Yummy food limited)
Looking forward to the above table, it can be said that, the unique food preparation
method and unique food preparation tactics has helped the particular organization in gathering
more number of customer and more annual profit. On flip, the inefficient quality control and
disturbance in managing the franchises have created weakness for the organization. Meanwhile,
the higher technological growth, creation of new markets and increasing demand for fast food
among the customers have acted as major opportunities for the organization. With the existence
of higher market competition always creates threat for this food business.
Managing the franchise plays an important role while thinking about globalizing the
existing business. As shown above, due to the conflicting franchise management, the discussed
organization is facing issues. Following the proven system, hiring the suitable people for the
business and managing them properly can lead to minimization of this weakness. In addition, it
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is necessary for the higher authorities of this organization to delegate the employees,
communicating with the franchisors for more fruitful results. Moreover, managing the resources
and time efficiently, evaluating the franchising assistance and monitoring it can also be another
solution to it. Existing competition in the market will always be a threat to the business; yet,
collection of information about the competitors, there business, product and pricing strategies
can also become beneficial for the selected organization in expanding their business. Apart from
concentrating on these factors, the organization need to put focus on collecting advantages from
the opportunities. Customers now days are looking for verities, therefore, the new market trends
along with emerging technologies can provide major opportunity to the organization in
expanding the business and deliver many kind of foods to the customers.
Below, the PESTEL analysis is given for gathering idea about the external market
condition for the organization. Yummy Foods is currently operated in Hong Kong and decided to
expand their business operations in Japan.
PESTEL analysis
Political factors: As the organization plan to expand its business globally and meet the long-term
goals, some political complexities do exist that might hinder this decision. The political factor in
the food industry of Hong Kong is free trade agreements as well as low labor of standards in the
country (Dancygier and Walter 2015). Yummy food has opportunity to expand the business in
Japan based on the trade agreements like throughout new location overseas.
Economic factors: Predicting the economic trends and factors related to this is difficult.
Therefore, the uncertain economic forecasts sometimes create major challenges showing wrong.
However, Hong Kong evidenced a stabilized economy along with a stabilized Gross domestic
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product and the nominal GDP (Hong Kong Company Directory 2019). Yummy Food has
opportunity to grow their business in Japan based on economic stability as well as rise in
employment rate. Rise in cost of labor is a threat as the supply chain is based on producers.
Social and cultural factors: The root cause of strategic complexity is the sociocultural issues
mainly due to the changes occur in the lifestyle trends; change in preferences of the consumers;
demographics present in several different countries; religious beliefs of the individuals; along
with the awareness of corporate social responsibilities. Changes in these issues might not be that
rapid, but any change in the customer preferences can unpredictably change and rapid. As the
cultural values are no longer limited to the national borders; hence, cultural diversity is getting
minimized (Song, Sun and Jin 2017). Yummy food has opportunity to rise their business in
Japan based on their quality of food which can satisfy healthy lifestyle of trend in Japan. The
company has opportunity to provide diverse product mix for matching with rise in the cultural
diversity of target customers.
Technological factors: With the increasing technological innovations, countries and the
industries in it are adopting the technical solutions significantly. However, the technical changes
are also uncertain and rapid change can create strategic complexity for the organization. With
expanding the business in other country, the company has opportunity to implement the
automation of the technologies for gaining a business profits and productivity (Kaynak and
Hassan 2014). The firm has opportunity to provide online services to the customers.
Environmental factors: Due to the growing environmental awareness among the individuals,
several strategic complexities are raised for industries. When it is found that the operations of the
firm may create threat for environment, environmental activists such as, Greenpeace might affect
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