Introduction many firms in the industry (“Fast Food

Introduction

Advancement
of modern technology has led to increase in trade across countries physically
and through ecommerce. Industries adopt globalization strategy in order to reach
a wider market share in different markets across different countries. However,
in globalizing their operations, industries can either be multi-domestic or
global industries. Both global and multidomestic industries are similar in that
they have operations in more than one country. However the underlying
difference is the strategy adopted by each industry for expansion in the global
market. Global industries compete in all the markets and offer homogenous
products to their customers whereas multi-domestic industries compete in each
market separately and independently. The paper examines the drivers of
globalization in the Fast Food industry which has evolved significantly over
the one century.

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Industry definition

Fast
food industry refers to the collection of firms/businesses that provide mass
produced food usually produced very fast and served quickly at low costs. The
food is packaged in bags and boxes to reduce operational costs. Fast Food
industry has become quite popular over the past two decades due to the high
convenience provided by these firms where customers are able to serve food via
a drive-through given the low time required to prepare it. However, the food
has been criticized because of being less nutritious compared to traditional
meals.

Brief history of Fast food industry development

The
introduction of the white castle in 1921 marked the start of the fast food
industry (Makhija, Kim &
Williamson, 1997). After the popularization of automobiles, life became
increasing faster and people needed convenience in access to food, hence food
that could be prepared and served quickly become highly demanded. The
introduction of assembly line by McDonald’s further increased the speed of preparation
of fast food which enhanced efficient and increased flow of money thus
attracting many firms in the industry (“Fast
Food Industry Analysis 2018 – Cost & Trends”, 2018). Currently, there
are many firms across globe with the market leaders being McDonalds who were
able to exploit the first mover advantages in the market.

Industry globalization
drivers in fast food industry

Market
driver

One
of the major determinants of the strategy adopted by a company during its
expansion is the market drivers (“The
Globalization of Companies and Industries”, 2018). Based on the type of
products and services offered in the market, the industry expands to the global
market through adaptation of its products and services to the local markets or provision
of homogenous products in the global market. Hence, the degree of homogeneity
of the customer needs, tastes and preferences, global distribution networks as
well as the existence of the opportunities for shared marketing are the major
determinants of expansion strategy adopted in various industries (“The
Globalization of Companies and Industries”, 2018). Fast food industry
provides similar but not identical products to its consumers. Because the
industry is involved in provision of food and beverages, the cuisines of
different countries implies that expansion through adaptation of their products
to the local cuisines has been the best strategy that has enabled the industry
to achieve tremendous success across the globe. Further, national competition
in the local markets is common hence the need to provide customized products
that create value for their customers (“The
Globalization of Companies and Industries”, 2018). Moreover, because of
the easy transferability of knowhow in production of fast food in various
countries, the industry has been able to expand without incurring huge expansion
costs, mainly through franchising. For instance, McDonalds’s operates over
31000 restaurants across 119 countries in all the six continents. They employ
over 1.5 million people who are skilled in operations of McDonalds despite
their various cultural backgrounds (“Fast Food Industry Analysis 2018 –
Cost & Trends”, 2018). McDonalds adjusts the products provided to the
local culture of the host country. For instance, Indian McDonalds outlets do
not serve beef because cows are considered sacred in India.

Cost driver

Cost
drivers that drive globalization include the potential for or lack of existence
of economies of scale, low costs of transportations, and low product
development costs (Makhija,
Kim & Williamson, 1997). Globalizing the customer needs as well as the
existence of opportunities for economies of scale are key determinants of costs
incurred in running the operations of a firm in an industry and hence its
profit (“Globalization,
Fast Food and the “Threat” to Local Culture – The Global Entrepreneur”,
2018). The fast food industry have evolved and expanded by adopting the multidomestic
approach due to the industry’s ability to cut costs through separations of
operations in each market. Across the globe, the industry maintains same
standards, same distribution channels and most of products used in preparations
of their products such as oils are the same. However, the products are adapted
to the local culture to ensure the acceptability by the local customers. The
firm has franchised its operations due to easy transferability of knowledge
knowhow, reduction of costs of operations through use of local distribution channels
and easy access of input resources from the central distribution channel. In
addition, the fast food industry, cannot take advantages of economies of scale
because they do not exist in the industry hence the adoption of the
multidomestic approach for growth and expansion in the global markets. Further,
product development and sourcing is different in various parts of the world.
Due to existence of low barriers of entry in the industry, the industry adopted
the multidomestic approach in order to compete effectively with the local firms
that provide fast food and hence establish their own unique market niche by
taking advantage of their global popular brands. Further, location speed and efficiency
has seen the fast food industry continuously minimize costs of operations while
maximizing the profits as they create even more unique value for their
customers.

Government driver

Government
drivers to globalization refers to the trade policies, ownership rules, common
regulations of marketing and the compatibility of the technical standards
authorized in each country/market (Makhija,
Kim & Williamson, 1997). These factors have huge impacts on global trade
and hence they are key determinants in determining the expansion strategy
adopted by any industry. For instance, most of the firms in the fast food
industry have been expanding through Franchising where the original business
owners provide Franchise license to respective franchisees in every country in
exchange for franchising fee. For this arrangement to work, the new market in
which the firm is expanding must be accommodative to franchise arrangements. However,
expanding in developed economies for fast food industry has been difficult
compared to expansion in the emerging markets. This is mainly attributed to the
current climate in developed economies such as complex regulatory framework,
restrictions on taxes, increasing regulations on ethanol resulting to increased
costs of beef. Other impediments are the rising costs of wages and labour. The
costs of labour in developing economies is usually lower and there are few
trade restrictions as governments seek to attract foreign investors and create
more jobs for the locals. However, to curb these costs and maintain
profitability, firms in the fast food industry have adopted technology and incorporated
it in their operations. Hence, as a result of these factors, the industry is
best suited to adopt the multidomestic approach of expansion to the global
market.

Competitive driver

Competitive
drivers are other major drivers of globalization in any industry. Competitive
drivers refers to the tender of all firms in a particular industry to adopt a
global strategy by following a differentiated globalization strategy (Makhija, Kim & Williamson, 1997).  For instance, expansion of McDonald’s in the
global economy opened way for other firms in the industry to start franchising
their operations in the international markets in order to beat competition,
popularize their brands and reach more customers. The characteristics of the
industry such as the exports and import volume of sales, diversity of the
number of competitor in the market based on their origins, extend to which the existing
market players have globalized their operations and interdependent of nations
affect operations across the globe. The globalization of the global economy,
has led to increased trade between nations and opening of new economies as well
as easing the restrictions of trade through creation of trade zones, trade
agreements and relaxation of market barriers which have paved way for thriving
of the Fast food industry in the globe. In addition, the increased levels of
partnerships and focus on engagements has enabled faster growth of the fast
food industry. This is because of the advantages associated with adaptation of
the firm’s products to the local economies and the potential of businesses to
create opportunities for the locals.

Why the industry is multi-domestic or globalized

Various
factors affect the choice of multi-domestic strategy approach or globalized
strategy approach. In the fast food industry, there is customized products
needed in different countries, existence of national competition, existence of
unique distribution channels and low or lack of economies of scale hence the
adoption of multidomestic approach in expansion (Makhija,
Kim & Williamson, 1997). These are the main factors that influence an
industry to adopt the multi-domestic approach for expansion in the global
market.

The adoption of global
strategy would be inappropriate for the fast food industry because industries
adopting global strategy must have homogenized products with needs that cut
across the markets such as the case in motor vehicle industry, have global customers,
enjoy economies of scale and have high costs associated with research and
development for new products such as it is the case in the production of
aeroplanes. Further, such firms should also have a global product differentiate
strategy, appropriate technology and product mobility across markets.

Introduction

Advancement
of modern technology has led to increase in trade across countries physically
and through ecommerce. Industries adopt globalization strategy in order to reach
a wider market share in different markets across different countries. However,
in globalizing their operations, industries can either be multi-domestic or
global industries. Both global and multidomestic industries are similar in that
they have operations in more than one country. However the underlying
difference is the strategy adopted by each industry for expansion in the global
market. Global industries compete in all the markets and offer homogenous
products to their customers whereas multi-domestic industries compete in each
market separately and independently. The paper examines the drivers of
globalization in the Fast Food industry which has evolved significantly over
the one century.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Industry definition

Fast
food industry refers to the collection of firms/businesses that provide mass
produced food usually produced very fast and served quickly at low costs. The
food is packaged in bags and boxes to reduce operational costs. Fast Food
industry has become quite popular over the past two decades due to the high
convenience provided by these firms where customers are able to serve food via
a drive-through given the low time required to prepare it. However, the food
has been criticized because of being less nutritious compared to traditional
meals.

Brief history of Fast food industry development

The
introduction of the white castle in 1921 marked the start of the fast food
industry (Makhija, Kim &
Williamson, 1997). After the popularization of automobiles, life became
increasing faster and people needed convenience in access to food, hence food
that could be prepared and served quickly become highly demanded. The
introduction of assembly line by McDonald’s further increased the speed of preparation
of fast food which enhanced efficient and increased flow of money thus
attracting many firms in the industry (“Fast
Food Industry Analysis 2018 – Cost & Trends”, 2018). Currently, there
are many firms across globe with the market leaders being McDonalds who were
able to exploit the first mover advantages in the market.

Industry globalization
drivers in fast food industry

Market
driver

One
of the major determinants of the strategy adopted by a company during its
expansion is the market drivers (“The
Globalization of Companies and Industries”, 2018). Based on the type of
products and services offered in the market, the industry expands to the global
market through adaptation of its products and services to the local markets or provision
of homogenous products in the global market. Hence, the degree of homogeneity
of the customer needs, tastes and preferences, global distribution networks as
well as the existence of the opportunities for shared marketing are the major
determinants of expansion strategy adopted in various industries (“The
Globalization of Companies and Industries”, 2018). Fast food industry
provides similar but not identical products to its consumers. Because the
industry is involved in provision of food and beverages, the cuisines of
different countries implies that expansion through adaptation of their products
to the local cuisines has been the best strategy that has enabled the industry
to achieve tremendous success across the globe. Further, national competition
in the local markets is common hence the need to provide customized products
that create value for their customers (“The
Globalization of Companies and Industries”, 2018). Moreover, because of
the easy transferability of knowhow in production of fast food in various
countries, the industry has been able to expand without incurring huge expansion
costs, mainly through franchising. For instance, McDonalds’s operates over
31000 restaurants across 119 countries in all the six continents. They employ
over 1.5 million people who are skilled in operations of McDonalds despite
their various cultural backgrounds (“Fast Food Industry Analysis 2018 –
Cost & Trends”, 2018). McDonalds adjusts the products provided to the
local culture of the host country. For instance, Indian McDonalds outlets do
not serve beef because cows are considered sacred in India.

Cost driver

Cost
drivers that drive globalization include the potential for or lack of existence
of economies of scale, low costs of transportations, and low product
development costs (Makhija,
Kim & Williamson, 1997). Globalizing the customer needs as well as the
existence of opportunities for economies of scale are key determinants of costs
incurred in running the operations of a firm in an industry and hence its
profit (“Globalization,
Fast Food and the “Threat” to Local Culture – The Global Entrepreneur”,
2018). The fast food industry have evolved and expanded by adopting the multidomestic
approach due to the industry’s ability to cut costs through separations of
operations in each market. Across the globe, the industry maintains same
standards, same distribution channels and most of products used in preparations
of their products such as oils are the same. However, the products are adapted
to the local culture to ensure the acceptability by the local customers. The
firm has franchised its operations due to easy transferability of knowledge
knowhow, reduction of costs of operations through use of local distribution channels
and easy access of input resources from the central distribution channel. In
addition, the fast food industry, cannot take advantages of economies of scale
because they do not exist in the industry hence the adoption of the
multidomestic approach for growth and expansion in the global markets. Further,
product development and sourcing is different in various parts of the world.
Due to existence of low barriers of entry in the industry, the industry adopted
the multidomestic approach in order to compete effectively with the local firms
that provide fast food and hence establish their own unique market niche by
taking advantage of their global popular brands. Further, location speed and efficiency
has seen the fast food industry continuously minimize costs of operations while
maximizing the profits as they create even more unique value for their
customers.

Government driver

Government
drivers to globalization refers to the trade policies, ownership rules, common
regulations of marketing and the compatibility of the technical standards
authorized in each country/market (Makhija,
Kim & Williamson, 1997). These factors have huge impacts on global trade
and hence they are key determinants in determining the expansion strategy
adopted by any industry. For instance, most of the firms in the fast food
industry have been expanding through Franchising where the original business
owners provide Franchise license to respective franchisees in every country in
exchange for franchising fee. For this arrangement to work, the new market in
which the firm is expanding must be accommodative to franchise arrangements. However,
expanding in developed economies for fast food industry has been difficult
compared to expansion in the emerging markets. This is mainly attributed to the
current climate in developed economies such as complex regulatory framework,
restrictions on taxes, increasing regulations on ethanol resulting to increased
costs of beef. Other impediments are the rising costs of wages and labour. The
costs of labour in developing economies is usually lower and there are few
trade restrictions as governments seek to attract foreign investors and create
more jobs for the locals. However, to curb these costs and maintain
profitability, firms in the fast food industry have adopted technology and incorporated
it in their operations. Hence, as a result of these factors, the industry is
best suited to adopt the multidomestic approach of expansion to the global
market.

Competitive driver

Competitive
drivers are other major drivers of globalization in any industry. Competitive
drivers refers to the tender of all firms in a particular industry to adopt a
global strategy by following a differentiated globalization strategy (Makhija, Kim & Williamson, 1997).  For instance, expansion of McDonald’s in the
global economy opened way for other firms in the industry to start franchising
their operations in the international markets in order to beat competition,
popularize their brands and reach more customers. The characteristics of the
industry such as the exports and import volume of sales, diversity of the
number of competitor in the market based on their origins, extend to which the existing
market players have globalized their operations and interdependent of nations
affect operations across the globe. The globalization of the global economy,
has led to increased trade between nations and opening of new economies as well
as easing the restrictions of trade through creation of trade zones, trade
agreements and relaxation of market barriers which have paved way for thriving
of the Fast food industry in the globe. In addition, the increased levels of
partnerships and focus on engagements has enabled faster growth of the fast
food industry. This is because of the advantages associated with adaptation of
the firm’s products to the local economies and the potential of businesses to
create opportunities for the locals.

Why the industry is multi-domestic or globalized

Various
factors affect the choice of multi-domestic strategy approach or globalized
strategy approach. In the fast food industry, there is customized products
needed in different countries, existence of national competition, existence of
unique distribution channels and low or lack of economies of scale hence the
adoption of multidomestic approach in expansion (Makhija,
Kim & Williamson, 1997). These are the main factors that influence an
industry to adopt the multi-domestic approach for expansion in the global
market.

The adoption of global
strategy would be inappropriate for the fast food industry because industries
adopting global strategy must have homogenized products with needs that cut
across the markets such as the case in motor vehicle industry, have global customers,
enjoy economies of scale and have high costs associated with research and
development for new products such as it is the case in the production of
aeroplanes. Further, such firms should also have a global product differentiate
strategy, appropriate technology and product mobility across markets.

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