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Globalization can be defined as a practice which results in the integration of international businesses taking place due to exchange of international perspectives, ideas, produces and several other facets of culture. Advancement and modernization in telecommunications, transportation and overall technology are the chief contributing factors in the rise and success of globalization. Globalization comprises of flow of technology, ideas and practices
It is much more than universalization and internationalization. This cannot be simply referred to as westernization or transformation. It is also not simply confined to liberalization of trade. As per Anthony Giddens, globalization is the strengthening of global social relationship that connect societies in a manner that local occurring are transformed by happenings taking place miles away. This phenomenon has strong political, economic, social and cultural dimensions. Most of the operations that were earlier on a small or local scale and comprised of face to face interaction, are now being conducted on a global scale.
The economic and social exchanges have witnessed considerable de-localization (The Global Village: Connected World Drives Economic Shift, n.d). As stated by Thomas Steger and Moritz Schularick, the expression globalization refers to a set of social processes which transforms the existing condition of waning nationality into that of globality.
New avenues have opened up for international business due to globalization. International business is a wide term, which collectively describes all the commercial and business transactions, whether governmental or private, happening between two or more countries. This term is freshly coined, but its concept is quite old. It is basically the interchange of goods and services beyond one’s national boundaries . In many countries such trade forms a considerable part of GDP. Globalization, Industrialization, technology advancement, outsourcing, modernized transportation and MNC’s etc all significantly influence international business system. Escalating international trade is vital for prolongation of globalization. There are several theories relating to this global trade proposed by many renowned personalities.
The first theory is Absolute Advantage theory which was proposed by Adam Smith in the year 1776. As per this theory every nation identifies certain absolute advantage from another nation for the generation of a specific good or service . Some nations have a natural lead as cheap and skilled labor, fertile land etc. abound there. Such countries are capable of producing goods at lower costs in comparison with others. Every country has some or the other natural advantage and they trade with each other to capitalize on other country’s advantage. However, this theory does not validates every aspect of international business as there is no scope of trading internationally for countries either possessing absolute advantage in all areas or in none.
The second theory has been proposed by David Richardo who presented the Richardian model. According to this premise, two nations should engage in business with each other if one of them has an upper hand in manufacturing one product relative to other product as weighed against another nation’s relative competency of manufacturing the same product. This theory explains well the motivating forces behind global trade .
Globalization strategies have both benefits and challenges posed in front of them. One of the major benefits as advanced by the supporters of globalization is that elevated liberalization of business facilitated higher efficacy in allocation of resources. Another advantage of this phenomenon is the availability of competent and capable workforce. Companies have a wide pool of applicants to select from and they can make their best choices .
Due to globalization remarkable advancements and innovations have taken place in global telecommunications capabilities. Companies also get new and better production ideas on road to international trading. In addition to this, companies get access to a broad customer base by intelligent global marketing strategies.
This also provides organizations worldwide recognition and augments their brand image. However, this trend is not free from challenges also. The primary matter of concern is privacy and security issues . As companies source from all across the globe, vital business information and secrets are exposed to threat of outflow. All the countries have different legal setups therefore if any fraudulent mishap occurs then it becomes difficult to take any legal recourse against citizens of different countries. Companies also encounter risk of disruption in operations because of natural disasters, political or economical unrest and terrorist activities etc. Internationalized marketing strategies generally contemplate the entire world as one and thus undermine the disparities in customer perceptions and needs. This might result in failure of company’s products. Apart from this cultural issues pose considerable challenge for globalized firms. People of a particular country might resist to the changes introduced by an MNC. Thus globalization has both benefits and drawbacks attached to it.
Actions Determining the Survival or Death of a Company
There are several actions that determine the survival and prosperity of Marks & Spencer. Firstly, it has been able to successfully acquaint with the tastes and preferences of customers all over the world. This is one of the reasons for its worldwide success and acceptance. Secondly, the management is proficient enough in prioritizing its functional activities. In addition to this, there is a trend among the managerial staff to inspire their employees to do the same thing differently every day. This leads to innovation and removal of boredom plus customer satisfaction also increases (What are the secrets of successful retailing and how can retailers survive and prosper in a downturn, n.d). Thirdly, the appointment of a global workforce helps the company in sustaining in this competitive world. Company’s supply chain management system is also very open and modular which helps it in achieving optimization.
The firm has been able to come out with shining colors on the road to globalization due to its networked organizational structure. The correct organizational structure, culture and infrastructure have been consciously built and this adds to the critical success of the company. In addition to this, it has given due consideration to the culture of all the regions in which it opened up its stores. The information system of the company is also very well integrated (Morton, 2005). The use of ERP which is a high end solution not only integrates the entire organization in one place but also all the branches worldwide. In addition to this, the management has been successful in motivating its employees to accept change whole heartedly.
Hard and soft system factors that impact business plan
There two types of factors one is critical success factors and another is failure factor which creates impact on development as well as implementation of business plan of the company:
Critical success factor – Marks and Spencer is successful retail sector from many years, due to varied reasons. Firstly, in market terms, the organization has created good brand image and also offers clear image to their clients. The market strategy of business is not much deviated, rather it is focused. The next contributing determinant to firm success is its proactive approach to manpower. Moreover, the organization understands their buyers by offering best value for money, rather than concentrating on price only. Besides this, the same quality level is maintained by business throughout its all stores, by utilizing St.Michael brand. Furthermore, the firm exercised considerable control with their suppliers. Lastly, the important success factor of the company is its adequate store inventory system and effective supply chain management activities .
Failure factors – There are some factors, which build obstacles in attaining business plan success of Marks and Spencer. These include increasing global population along with rising consumption based customers from middle class, who creates pressure on developing low cost products. Competition in relation to finite resources also grows in the marketplace. Moreover, raw materials availability is reduced by climatic changes, which creates pressure of utilizing less quantity of country’s resources in an optimal way. Extreme weather makes disruption in regular supply chain. Now day’s due to enhancement of IT industry.
Marks & Spencer’s external business environment
All the happenings and occurrences in a company’s external business environment shape up its policies and survival strategies. The external environment of Marks & Spencer comprises of its political, social, economical, legal and technological environment. It can be elaborately explained through company’s PEST analysis which is as follows:
Political environment – As per the European Integration and Free Trade Agreements, British companies can now more conveniently invest in Eastern Europe. This liberalization of business trade has opened up new avenues for expansion for the retail giant and an aggressive marketing strategy can be followed to better penetrate those marketplaces.
Economic environment – The retail sector is very much prone to recession and even a slight change in the economy of a country can pose considerable damage to its business. The adverse situations like the September 11th event posed a large influence on global economies, prices and stocks. The taxation policy for instance of London compelled the company to curtail its advertising expenditure and use other sources of promotion instead so that ultimately the product prices remain unchanged.
Social environment – The social environment of the company mainly consists of the people and various other demographic factors. The culture, traditions, income level, age group and ethics of the society are all encompassed in this environment. The social environment of all the countries in which Marks & Spencer operates is seen in this context. However, currently only the social environment in United Kingdom is being taken into account. Any change in the disposable income of the citizens or any modification or alteration in their living styles and tastes can largely impact company’s product line and its marketing strategies as well .
Legal environment – The rules and regulations imposed by the UK government have a considerable role to play in company’s business operations. As the awareness and government’s regulation related to environment protection have increased, customers are also switching to eco-friendly products. Government produces certain subsidies to open up factories in some specialized zones while on the other hand several rules and regulations impediment the growth of the company .
Technological environment – Technological innovations and advancement are the most important feature of a globalized business environment. Continuous improvements in technologies in the retail sector force the company to adopt and implement them in their business processes. In addition to this, the current competitive environment also compels the company to introduce some breakthrough technology by making sufficient investments in Research & Development activities
Effect of changes in corporate governance on Marks & Spencer
Corporate governance can be defined as the chief element in enhancing the operational efficiency and growth of a company. This feature also improves investor’s confidence. Strong corporate governance provides good incentives to the management and stakeholders to follow those objectives which are in the interest of the company. Thus, it won’t be wrong to define corporate governance as a process by which organizations are controlled as well as directed. Any changes in the corporate governance of a company will have considerable impact on any organization . This process ensures that shareholder’s are being treated fairly and that their rights are being given due consideration. Secondly, the company must recognize the fact that it has a contractual, binding and social obligation towards its external stakeholders who are not its shareholders.
Apart from this, adequate understanding and skills are required by the board for reviewing and challenging management performance. Integrity and ethical behavior are of utmost importance and thus the company will have to redevelop a new code of conduct for its executives and directors so that ethical decision making can be promoted . Any change in corporate governance should ensure that proper disclosure and transparency is maintained. The company should make it public that there has been a change in its corporate governance policy. A change may require certain amount of business process reengineering. The firm will also have to incorporate procedures which can independently examine, verify and defend the reliability of its financial reports.
Effect of a move to ethical management in Marks & Spencer
Today’s managers are generally relatively sensitive towards issues concerning social responsibilities as well as ethical behavior as there is continuous and mounting pressure from society and government. It is still quite ambiguous as to where to sketch the line between socially acceptable and responsible behavior and other concerns of the company or between the various differing expectations and definitions of ethical behavior in different societies. International interdependence is a persuasive aspect of the international business environment which continuously demands the managers to take constructive stances on matters of ethical behavior and social responsibility, environmental protection throughout the globe and sustainable economic development in the host nation. Multinational companies are constantly the topic of debate relating to the advantages v/s impairment created by their worldwide operations. Due to their significant size, scale of operations and substantial power, these large organizations are expected to give high standards of performance.
Managing the interests of all the stakeholders is a point of significant contemplation for senior managers. Companies who were earlier not following their responsibilities towards the society properly now have to mandatory incorporate ethics in their behavior. Their corporate governance needs to be very powerful and enable complete transparency of accounts . The interests of the external stakeholders will now have to be maintained. As it is the society that provides a business with all the requisite things it is the duty of the business to return whatever it can to the society. The company will have to incorporate a new set of ethical standards and behaviors for all its operations. A new code of conduct will also have to be set up for all its employees. New initiatives will have to be taken to like a social cleaning drive and etc. to gain more visibility in the eyes of the society. It has to bring in complete transparency in all of its operations plus bring integrity and honesty in all its functions. Only when it incorporates all such things in its business processes can it be called an ethically and socially responsible organization .
Monitoring implemented strategies and plans of Marks & Spencer
The strategies and plan implemented by Marks & Spencer to become an ethical organization have been critically analyzed. The company has only recently contemplated ethics to be a justifiable and reasonable subject matter for strategic thinking and organizational planning. The senior management of Marks & Spencer has been spending time regularly on functional and enterprise strategic planning activities. Earlier the strategic plans concerned mainly growth and brand development and ethics was a mere regulatory compliance. But now, with increasing awareness among people ethical behavior requires some serious attention at both directorial and managerial levels. Although new, but Marks & Spencer’s ethics programs and strategies but they are so designed to ensure that all their functional activities and operations are legal, ethical plus comply with all the regulatory instructions . Ethics programs have been initiated to train the employees regarding importance of ethical behavior in work. These programs have been started because in today’s aggressively competitive world, employees have forgotten the difference between right and wrong. The ethics program of the company consists of statement of values, code of conduct and an executive leadership system.
The ethical plan of Marks and Spencer pays attention on corporate culture, organization’s value system, its structure as well as design plus leadership and mentoring programs. However, there are certain loopholes in these strategic plans (Steger, 2009). Firstly, the planning team comprises of only the Board of Directors and no staff is involved therein. This is a basic level flaw as only one perspective is taken into consideration. In addition to this no specific time lines have been established to achieve these strategies. Even if in some plans there is a time line then there is no specific start or finish dates. There has been no provision for dealing with the risks connected with these strategies (Schularick and Steger, 2010). Thus, although the strategic planning is good and encompasses almost every aspect, the above mentioned loopholes can prove to be an internal weakness which needs to be covered up.
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