Globalization And Its Impact On Yummy Food’s Expansion Into China

Key factors driving globalization

The aim of the report is to conduct an extensive evaluation of the company named Yummy Food based in Hong Kong as it is trying to expand in the market of China. The company is a huge contributor in the company’s fast growing food chain and after attaining success in internal market of Hong Kong the company is making efforts to expand their business over the board. The report has thus been furnished to present a proposal in front of the board of directors of Yummy Food, elaborating a comprehensive understanding of the situation in front of them.

In a broad way, globalization can be considered movement that involves and increasing interactions and dependencies between organizations and individuals by removing the disparity of geographical barriers. The attributes that are on the platform of globalization, interacting with each other are the ones of culture, economy, social, political and many others. Such changes in the mode of interaction have been brought about by the exchange of services, factors of technological advancement, and information (Hirst, Thompson and Bromley 2015).

Globalization has been facilitated by and also led to the integration of the economy of the world and leading to a sense of interdependency among the stakeholders with the nation involved in this interdependent interaction which opens up their economy in front of the market for its perusal. The process of Globalization is not equal in all the countries and have been varying from one nation to another. The process is thus marked by the dynamic aspect of its development. It has allowed the markets that has been separate on different grounds come together under the title of global market keeping aside the regional disparities. The emergence of the global market has led to the development of the global customer base and the global taste (Beck 2018).

In the surveys conducted it has been seen that the globalization has contributed towards enhancing the uniform functioning of the market however the impact of globalization and the complete realization about the matter has not yet been received. This is evident in the reaction of certain sectors, as they have preferred to constrain their functioning within the local market. 9.7 % of the total market has been estimated to have less than a number of 500 employees while 98% of the total industry present in the marketing sector of Germany has participated in the event of Globalization (Eriksen 2018).

Challenges of operating globally

With the advent of Globalization in the marketing scenario has resulted in diversifying of the market in terms of sourcing from different geographical location of the country. Thus, the impact of the globalization has not been experienced exclusively on the matter of marketing but has brought under its functioning the aspects of capital, labor, energy, land and similar others. It allows the company to improve upon the functioning and their production as well as services provided by them. In the domain of production, globalization has led to the transformation in the mode of manufacturation (Lechner and Boli  2020).

Thus, the driving forces behind the advent of globalization has been enumerated in the following section:

1. The primary factor, which has facilitated in the dynamic changes in the scenario of globalization is the dilution of the barriers across the nation. The dilution of the barriers have resulted in the free flow of the services, goods and capital negating the factor of geographical boundaries. Globalization in terms of the fast food market in Hong Kong has been resulted in by the dilution. The market in Hong Kong is therefore marked by the influences from the market in the west as well as from the ones in China (Taneja,  Pryor and Hayek 2016).
2. Advancement in the technology is another driving force of Globalization which involves the incoming of telecommunication and usage of microprocessors. The influx and the exchange of information have been facilitated by the changes in the flow of information. Such advancement has also been noted in the domain of transport that has enhanced the exchange of goods (Tvaronavi?ien?, Grybait? and Tun?ikien?, 2013).

Strength · Emergence in the fast food industry and the rapid expand in its developmental nature (Inglis and Gimlin 2015). · Financial strength that facilitates it to diversify in globalization · The Chinese food market has received a boost from the large population of China, creating a large customer base.	Weakness · Innovation of the product · High calorie content decreasing its value for the calorie conscious generation (Nestle 2013) · Disregard for the cultural differences might create a weakness for the company as the population in China is marked by a culturally diverse customer base.
Opportunities · Sought to expand in the global market (Sharma and Kiran 2013) · Diversification in the marketing opportunities · Innovation in the product and the addition of health as a factor · Enhanced structure of tourism in Perth and other countries marked by traditional attributes of China establishes a strong ground for the company to expand	Threats · Intensification of competition with the changing global economy. · Increase in the consciousness for health

Political	Lack of consumer protection rights along with the taxation and initial stages of E-commerce Presence of dispute between the employees On national level Hong Kong enjoys a stable politics Chinese food market experiences greater support in terms of policies WTO promotes the fast food industry Absence of service tax
Economic	Share in the growing rate Increase in the cost inculcated in the supplies Localization as a strategy would be required by the company in order to minimize the cost
Socio-Cultural	Impact of colonization exposed the market both to the western and the eastern world (Petras 2016) Health Awareness among the customer base when China is rooted in the culture of diet
Technology	Access to easy payment The Advantage will be equally available in the Chinese market Advent of developed technology (Narula 2014)
Environment	Fast paced social life Adopting a smoke-free environment policy for the company The cultural environment of China is almost same as that in Hong Kong in terms of Fast food inductry
Legal	There are certain acts concerning the quality of the food that need to be taken in concern before marketing. The laws in concern are FSMA(2011), IFR (2011) and the act of May 2016 urges the introduction of label mentioning the scientific values.

The local representative of Hong Kong that is concerned with SCM is the ECR that has included objectives like standardized and simplified infrastructure, consistence managing and developing equivocal measures. In case of an organization, taking initiatives to function within the global market ECR assists the organizations, particularly the one concerned with the fast food industry. Thus, the benefits are generalized one and is applicable to the Yummy Food Limited as well. The benefits include increasing the competence of the company in terms of the stock so that they do not face stock run out. ECR enables the easy and facilitated representation of the organization in different terms as well as enables the parallel standardizations.

The Chinese market has notable contribution in the global supply chain. The Chinese market has joined with WTO in the year 2001, which allowed it to access the global market in an increased way. There has been a change in trend of the global market where the firms from the global business scenario has expressed their willingness to give up their ownership to the Chinese market. China has taken up to the transition path of Global operation. As such in order to develop itself in the global market, the companies willing to enter the Chinese market are facing challenges from the complexities in the legal measures, complexities in the cultural differences along with the regulations of the environmental factors.

For a company to function in the fast food industry, it is important for the organization to evaluate the environment concerning the organization. The environment in concern includes social, legal and competitive. Such evaluation allows the company to furnish its strategies in an effective way. Certain global challenges that are common to the global situation in the fast food market scenario.

SWOT/PESTEL analysis of cultural, economic, political and social dimensions

According to the researches conducted on the global level it has been seen that the contemporary scenario is marked by obesity and health related concern among the people (Andrée et al., 2014). Out of 100 people 58 people of china are willing to pay extra for the service and the product that are ethical in nature. As such in the advertisement of prominent fast food, organizations there have been a portrayal of the concern about the health of the customers. Certain companies even came up with strategies like giving out toys to the children in order to attract a huge amount of children towards the product thereby increasing the market share (Wood et al., 2015). It has been found that in China, the customers are very much health conscious and have been concerned about purchasing fast food items that are ethically produced in the market. Due to this, it has also become essential for the company to consider the health related issues such as obesity and other health issues among people at first and then undertake approaches to ensure that the ethical challenges are being dealt with properly. Within the fast food market, the consumers’ perceptions and buying behaviors have changed from time to time, which has also made companies trying to enter China, prioritize on healthy consumption behaviors. There are speculations that fried items often could be the result of obesity and other health problems, which could also deter individuals from making purchases and thus it could also be considered as a major ethical challenge. Other ethical challenges could be experienced due to failing to adapt to the culture, religion, values and beliefs of the target market, thus make the company unable to suit the global needs of target market in China. Another major challenge could be the present scenario in China, where Corona virus has been widespread and thus people have become health conscious and tend to move on to vegetarian items, which reduced the demands for fried meat items and this also could be a major challenge for the organization. The cultural differences and language barriers are also considered as few other ethical challenges that might hinder the capability of the business to sustain in the global competitive marketplace while moving from Hong Kong to China.

In the recent times, there has been a raising concern for the health amongst different groups of customers. According to a report conducted maximum portion of the Chinese population are willing to pay extra for the food that has index of being healthy food. Such attribute has awarded the nation a health conscious status. Certain fast food companies started to provide their customers with salads, distilled waters and foods with less fat content. Certain company has worked upon the calorie content of the food in order to cater to their customer. It has also become imperative of the companies to take into consideration of the changes of the customers in terms of food preference. This is also important for the companies who had taken up to diversify their service based on regional variations (McMichael 2013).

Impact of globalization on organizational structures, cultures and functions

The diverse differences in culture has marked the scenario of globalization in China. The cultural differences demands the competence of the organizations entering into the global market of China to the diversity of the Chinese population. However, the challenges can be developed into opportunities if the companies reframe their marketing and production in order to cater to the need of the diverse population.  (Rosenmann, Reese and Cameron 2016.).

McKinsey’s 7s factors	Hong Kong	China
Strategy	The concerned organization, Yummy Food has taken the initiative of improving their lime of propositions in the existing markets for improving their market  share in Hong Kong	The organization has taken the initiative of differentiating the line of propositions in China with the objective of coping with the purpose of increasing the sales revenue in the Chinese markets
Structure	The concerned organization operates through a centralized hierarchical  structure where the decisions are made by the management and the employees follow the same	The organization’s joint venture with a Chinese entity would decentralize the decision making structure while collaborating with the Chinese partner for making a decision
Systems	The majority of the systems that are undertaken by the staff members while operating in the Hong Kong’s markets are related to the assessment of demand for the proposition in the economy and improving the inventory management related activities with the purpose of empowering the availability of the offerings to the customers	The organization analyzes the market demand and brings about modifications in the current propositions with the purpose of improving the market position in the Chinese economy
Staff	The concerned organization recruited skilled  workforce from different regions in Hong Kong for undertaking the proposed operational model of the venture	The organization will be hiring skilled workforce from China while sending off expatriates from Hong Kong to China for the smooth functioning and expansion of the venture in the Chinese markets
Style	The organizational leaders focused on imposing a transformational style of leadership which helped the same in not only integrating the workforce but also induce subtle modifications in the business model for supporting sustenance	The organizational management would take the initiative of inducing the transformational servant leadership style with the purpose of improving the operational processes and performance of the workforce as per the common goals of the venture
Skills	The organization employs skilled and effective employees with the purpose of increasing the efficiency of the business operations	The organization will be taking the initiative of recruiting knowledgeable and skilled workforce while using the advanced technologies that are developed by the Chinese partner with the purpose of improving the performance of the venture
Shared values	The organization aims at providing the customers with quality propositions while offering optimum value. The increased quality of the propositions would allow the organization in increasing customer commitment and loyalty towards their business venture.	The organization would aim at providing the customers with the best possible propositions and consider on the price offerings for gaining a sustainable edge in the Chinese markets.

 

Such changes in the organizational scenario has been brought about to ensure the maximum possible competitive advantages in the business scenario where the company was going to mark its presence felt. The innovation in the product was needed because the company had to cater to the demand of the health conscious customers. The expansion strategies to bring about the joint venture and the Franchisee could have been an aim towards grabbing the market with lesser expenditure.

Geert Hofstede is hailed for forming the framework of guiding the communication along the line of culture. The primary concern of the theory is to map the impact of the culture on the values nurtured by the members of the society. The theory also moves a step further to consider the relation of the values to the reaction of the members and their behaviors as well. The theories takes into consideration certain factors of binaries in order to create a comprehensive understanding. The factors in concern are uncertainty-avoidance, individualism-collectivism, gender binaries and power distance for its dealing (Venaik and Brewer 2013). 

Hofstede 5 dimensions	Hong-Kong	China
Power Distance	Polarized relationship between the superiors and the inferiors affecting gap between the management and the employees	Higher power distance gaps between management and employees
Individualism vs Collectivism	Collectivistic culture reflecting the group oriented activities of the people	Highly collectivistic culture- people believing in team work
Long Term Orientation	Pragmatic culture is noticed where people believes that truth depends on different situations and circumstances	The cultural situation is pragmatic where people believe that truth depends on situations and circumstances which are variable by nature
Uncertainty avoidance	Uncertainty avoidance is low due to the flexibility of the legislation to cope with circumstances or situations	Ambiguity in the social structure and legislation has minimized the overall rating of uncertainty avoidance in the Chinese economy
Masculinity vs Femininity	The organizational structure is rigid and the authoritative and more driven toward achieving success	Success oriented society where people might sacrifice on their leisure needs for achieving the common goals of an organization

 

Fig: Hofstede’s country comparison

(Source: Hofstede Insights 2020)

The factors of cultural differences are almost same in the Hong Kong and in China. However the challenges faced by the company as it is moves into the market of the China is the cultural variation in terms of taste and other additional factors. The factors highlighted by the Hofstede are the basic values that are intrinsic to the culture and less likely to affect the business scenario of food industry. The factor of collectivism is greater in the respect of China where by the segregated groups nurtures their intrinsic differences in the form of a group that needs to be catered.

• Considering the first dimension of the model, it is recommended for Yummy Food to maintain a bottom up approach so as to allow the employees have full freedom to express their views, ideas and opinions, thereby, facilitate the managerial ability to make decisions. This could also resolve the polarized relationship that has been affecting the gaps between management and employees, furthermore, maintain a corporate culture.
• This could enable the information to flow from bottom to up, furthermore, assist the manager or leader of the organization to acquire the opinions and ideas of employees, develop good relationship with them and make decisions to sustain in the global competitive marketplace.
• As China and Hong Kong, both possess more or less a similar kind of collectivistic culture, so it is recommended for the employees to do the same, i.e., work as a team and in coordination. This could allow them to work with the Chinese people and promote diversity within the workplace
• The pragmatic culture in both countries would allow the employees to adapt to the similar kind of culture and ensure production of ethical food products that could be suitable and easily accepted by the health conscious clients in China
• Due to the minimization of uncertainty avoidance, it is also recommended for Yummy Food to assess the economic structure of China at first and then establish business considering adaptation to the global marketplace for attracting more customers
• In China, the organizational structures are flexible when compared to the rigid structure in Hong Kong, which ensures the need to provide the employee with rewards and benefits for keeping them motivated, encouraged, cope up with different situations and achieve the shared vision and goals

In order to function effectively in a global scenario it is imperative for the company attain a clearer idea about the intrinsic differences in the cultural scenario. Such understanding can be developed and the understanding can be implemented in the case of the Yummy Foods as it has been done in the previous section using the frameworks proposed by Hofstede. However, the closeness of the adaption to the cultural differences can be anticipated by the proximity that the organization to the Global perspective where the organization is trying to diversify (Peng 2013). At times, there are demands for implementing changes in the organizational structures in terms of their policies in the HRM, managerial and marketing. Out of all these aspects, regulations and modifications in HRM demands crucial mention and consideration (Rothaermel 2017).

Globalization’s effect on decision-making and strategy

The relationship between the differences in cultural attributes and the values of the organization can be categorized in two different level. the One form of relation involves the stakeholders of the organization carries the values that they have inculcated in order of their interaction with the Global culture and implement them in their interaction with their newer business environment.  The second form of relation involves the affect that the interaction causes on the wider culture. As in the case of the McDonalds in Chinese market it has been seen that the interaction of the organization with the children as their customer base, brought about certain changes among the culture of the students as they started turning towards the company because of the toys that has been given away by the company as a take away with their food.

Whole Owned Subsidiary

It refers to a company where the entirety of the stock is maintained by the parent company however, the company can run the business in an independent manner with its specialized managerial style. Subsidiary can be considered as a unit of integrated part of the parent one.

Advantages: It include simpler reporting in cases of managing the financial resource. Income from the subsidiary can be used to grow the business. It also opens the avenue for integration of the technological system that would bring them on the same line. It also allows joined integration of newly developed product.

Disadvantages: Chances of possible error includes execution based error and thereby run off the chances of impacting the status of the parent company in the long run. It is also capable of leading to a loss in the organizational flexibility.

Joint ventured is considered as an entity based on the contract where more than one entity come together on the basis of a contract.

Advantages: This includes better availability of resources along with shared capital and equipment, thereby decreasing the cost of setting up the business

Disadvantages: Can lead to the competitive disadvantage as the idea of shared benefits have turned out to be a myth

It is a kind of license granted to the party known as franchisee that grants them the access to the business process and trademark to run the business under the name of the concerned company.

Advantages: It has been noted to have better success as compared to a startup

Disadvantages: Disrupted reputation of the franchisee impacts the brand name in a negative way.

	Sustainability	Acceptability	Feasibility
Wholly-owned subsidiary	Market of china laden with tourist and changes in the food taste	Allow the company to establish the brand name
Joint Venture	to develop its competitive advantages in the highly competitive market	different shareholders willing to collaborate.	To work closely with the competitor attain efficiency in the operational related functions
Franchisee	to cut down the cost of setting up own outlets	different shareholders willing to invest.	Grab the market in a greater extent

Proposal for CEO to advise board of directors of Yummy Food on expansion into the Chinese market

The implication of bringing about Wholly owned subsidiary can be experienced in the company establishing its brand name in the newer market which is filled with opportunities for the fast food companies. The joint venture would cut down a considerable portion of the cost incurred in grabbing the foreign market. It would also allow the organization to gain competitive advantages by working with the competitors. The company would also be able to gain competitive advantages in this way. Franchisee would also help the company to cut down the cost and grab the market in a faster rate. However, the risk of franchisee diminishing the brand image does not exist in case of joint venture.

The discussion of the report was in consideration of the fast food company Yuumy food Limited placed in Hong Kong. The company after establishing a strong base in Hong Kong has sought to expand its business in other countries in the trend of globalization. the countries that it is targeting currently is China. However, the case study of the company has elucidated certain aspects where the consultant would like to put forward certain recommendation that would be guiding the company in the business endeavor.

• In order to establish themselves to the market without incurring much loss and the cost and also will be able to grab a position by taking up joint venture where the values of the product can be highlighted.
• The company can improve upon the quality of the food keeping in count the global concern for health. This might include the company adopting a safer mode of production and include them in the marketing, primarily social media marketing. The quality of the food can be aligned along the line of the health by using organic components and by bringing about health and food experts in the team to ensure the food value.

Conclusion

Yummy Food Limited has sought to diversify in the market of China under the influx of globalization. Thus, there has been a crucial need to understand the dynamic process of globalization and the intrinsic factors that involves it. Globalization has been looked upon as the a movement  towards unifying different institutions placed at a geographically dispersed location and by the virtue of interaction  enabling newer relationships to be formed by the virtue of newer communication. There are certain factors those need to be considered while considering the globalization as globalization demands a greater understanding of those involved in the process with the cultural factors of the place with whom they were seeking to interact. With the dynamic changes being the guiding factor of globalization, it is connected by the advancement noted in the scenario of technological advancement that has contributed to the process. However, there are certain complexities present in the scenario of globalization are the location of the newer ventures and the need to change the organizational setup has been crucially felt in the status. In terms of the company of Yummy Food, there are certain factors of weakness and threats to the company that it needs to work upon as they stepping into a newer environment. The factors are that of organizational structure and the quality of the product in compliance to the global concern. The company also needs to bring about competence in its interaction with the different cultural setup where the company is trying to mark its step. Along with these, the company also needs to strategize certain methods to function in the global business environment. The strategies include whole owned subsidiary, franchise and joint ventures that might be undertaken for their expansion out of which joint venture appears most suitable. However, the strategies come with their own advantages and disadvantages which the organization needs to cater to in order to make them beneficial in increasing the productivity of the company.

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