TMA 02

TMA 02

This paper is divided into three parts addressing the Yum! as the case study. Part A discusses threats and opportunities, concepts of convergence, divergence and crossvergence; benefits, and challenges.  Part B entails a mind map illustrating the relationship between critical aspects in competing in a global setting. The final part, Part C, is a discussion of key learning points.

Part A

Threats and Opportunities

Yum! has so far developed and expanded to reach out to the global market. However, even as the company continues to inflate its international market share, it faces numerous threats and opportunities. Significant risks include increasing costs of employee benefits, the danger of losing experienced talent, and new entrants. On the other hand, the company can capitalize on available opportunities such as technology, changing consumer preferences, and improving economic levels.

Employee benefits include health, insurance, retirement contribution, paid time off, and fringe benefits. The world is witnessing a gradual change in employees’ benefits, shifting from defined benefit to defined contribution (Garabato, Gardner and Nyce 2018, p.195). However, the shift has not brought any significant decrease to the costs. Notably, if the company commits a slight mistake in not satisfying the needs of its workers, the company stands to lose a competent workforce. Losing talented and experienced employees add to the overall operational costs in terms of hiring and training new workers (Shariff, and Katuse 2016, p.9). Also, it results in other indirect expenses associated with the loss of team productivity. As such, the company has to stay updated with the growing needs of its workers, changing employment requirements, and also transforming professional situations to motivate and maintain its employees..

Besides, given the economic advancement, the company faces a formidable threat of new entrants. Also, the industry has high potentials and limited restrictions for new entries, which according to Porter’s model, attracts new restaurants to offer substitute products and have a share of the thriving industry (Porter 2008, p 26). For instance, the move by MacDonald to join the Chinese market can attract other foreign and local competitors into the industry. Although the company has a competitive advantage in its supply and distribution approach in new markets, Bol et al. (2016) agree that any new entrants into the industry will result in a significant decline in Yum!’s aggregate returns and profits (p.163).

The application of advanced innovations in production, marketing, and distribution is vital in enabling clients to obtain products at a faster rate. According to Wamalaratne (2017), investing in modern technology such as online support systems through tailored phone applications or social platforms like Facebook, the fast-food industry offers customers the opportunity to order and even pay for products online. Moreover, Yum! can take advantage of the highly vulnerable consumer preference, which is motivated by an expanding economic level, to offer quality and convenience in speed, location of delivery, tastes,  and incorporating cultural dynamics and wellness concepts (Mathur and Patodiya 2016, p.48). Mainly, consumers desire food that does not only satisfy their distinct international and local standards but also does not negatively interfere with their health.

Furthermore, the economic level in the global market is experiencing an increasing trend with a growing number of the middle class, as witnessed in China, which in turn promotes an increase in production scale. Primarily, increasing consumers’ income amplifies the demand for food products.  In collaboration with keeping-fit awareness, the global health eating trend is continuously inspired (Christian and Gereffi 2018, p.720). Therefore, investing in such opportunities will add to the competitive edge of the company against its competitors.

The concepts of Convergence, Divergence, and Crossvergence

Convergence as a concept entails coming together and the resulting connection and likeness. According to Kaufman (2010), Yum! can productively apply convergence concepts by bringing its global stakeholders together to form a concrete team. With a coordinated team working together as a unit, the company can quickly motivate the achievement of its core objectives in the global spectrum. Moreover, bringing all the stakeholders together will add to the team diversity, especially given the varying market environments in different foreign nations. Such diversities are vital in facilitating team learning at a global level; hence, promoting global knowledge. The company can then harness the international skills and intelligence in formulating improved and competent operational strategies to enhance its competitiveness in the worldwide market further.

Joshua (2016) concurs that convergent thinking stimulates performance besides equipping a person and a team with relevant resilience to withstand challenges and adapt in new environments (p. 494).  However, it is inevitable for Yum! to come across different market situations in different nations due to varying economic landscapes, policies, regulations, production, and consumption behaviors.

Consequently, the company can implement a divergent principle to suitably deal with distinct conditions. Necessarily, the divergent concept entails the application of different techniques based on situation specifics (Kaufman, 2016: Mitchell, 2019). Besides, the use of divergent theory necessitates flexibility in strategies to facilitate the assimilation of unique requirements to address the particular local needs adequately. Furthermore, according to Al Ariss et al. (2016), Yum! should consider a crossvergent approach to attain the best appropriate strategy (p.2). Such a strategy necessitates a combination of both local and global intelligence to meet the market needs effectively.

Benefits and Challenges

As Yum! expands in foreign nations like China, it is perceptible to experience gains such as accessing new clients, off-shoring, and spreading risks. Mostly, the company stands to attain a new and growing customer base, given the growing Chinese economy, which is characterized by an increasing level of middle-class income population. Also, by investing in emerging markets such as India and China, Yum! gains access to cheap labor, which in turn helps in lowering operational costs, boosting production, and hence achieving a cost advantage essential in the global competition (Edwards 2014). Off-shoring is necessary for stimulating sales volume and economies of scale, which generally lowers the aggregate and average costs of production. Moreover, opening a business in emerging markets helps Yum! to diversify its business risks. As such, given the economic uncertainties and natural catastrophes like earthquakes, a failure in one given market will not entirely cripple the company.

On the other hand, the company faces setbacks from the political environment. The possibility of government interference with business operations poses a challenge to its performance and success. For instance, an unstable political climate characterized by frequent violent protests may result in damage to property and even complete closure of the business.

Moreover, Yum! faces a challenge in economic risks comprising of restrictive policies and regulations. Regulations and procedures define the protection of patent rights and the exchange rate of currency (Edwards 2014). Nevertheless, the economic risks are not predictable; hence, posing an even major challenge to the management of the company.

Lastly, investing in foreign countries implies interacting with different cultures and beliefs. Some customs may be detrimental to the business, especially if they oppose the consumption of what the company is producing (Edwards 2014). Generally, Asian countries are known for not eating pork. As such, Yum! should be keen not to launch operations in a market that does not consume its products owing to cultural practices. Besides, cultural beliefs are deeply embedded in the customary way of living, and they cannot be changed.

Part B

Mind Map Illustrating Competing in a Global Context

Rapid transformations and immense uncertainties characterize the global market. To effectively compete in such a setting, it is essential to consider both internal and external capacities (Tallman, Luo, and Buckley, 2018, p.3). The internal position should entail consideration of critical competencies in management, finances, and human resource. Primarily, the management concept involves the leadership approach adopted, while finances facilitate all business operations, including market research and development of suitable products. On the other hand, a competent human resource in collaboration with an enabling environment is necessary for boosting teamwork, team diversity, commitment to the set goals, and overall business performance (DeCenzo, Robbins and Verhulst, 2016, p.11). A competent team is a requisite in effecting change and establishing innovations.

Similarly, it is vital to understand the underlying critical external aspects like threats, opportunities, possible gains, and challenges. Such comprehension is essential in formulating an appropriate strategic plan that would ensure the success and sustainability of the company in the global market. Apart from presenting a viable ground for growth, external factors also pose formidable unpredictable uncertainties (Madinda, 2014). Also, the company should understand its obligations and legal requirements in the global market. Different countries may impose various regulations on foreign businesses based on the availability or absence of bilateral, multilateral, or global memorandums. Notably, a company competing in the international market should optimize all available competencies.

Diagrammatic illustration showing the relationship between critical aspects in competing in the global market

Part C

Key Learning Points

The global market changes drastically in terms of innovations, policies, and consumers’ behaviors. It is, therefore, necessary to critically understand the global economy before venturing into international trade. Mainly, different countries impose different economic policies, of which not all may be favorable and worth investing.

Cultural diversity is vital when expanding a business to foreign countries. Some cultures may not readily accept any product offered, given their strict belief systems. Understanding the culture of a country is necessary for developing culturally appealing commodities; hence, it is appropriate to carry out market research.

The concepts of internal and external business environments are essential in establishing the position of the business, its productivity, and its future. Understanding what the company can control and what it cannot control is vital in making critical decisions, including prioritizing projects and allocating resources.

Every industry has numerous competitors, and the only way for a business to attain a competitive state is by optimizing on distinct competencies. Such strengths help a firm to stand out and achieve a significant market share despite the level of competition.

Porter’s model, with its five principles, has helped me understand how to establish the competitive advantage of business concerning existing competitors in the industry. Furthermore, every company needs to evaluate its competitiveness to aid in formulating appropriate strategic plans to ensure success and sustainability in the industry.

References

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Christian, M., and Gereffi, G., 2018. Fast-food value chains and childhood obesity: a global perspective. In Pediatric Obesity (pp. 717-730). Humana Press, Cham.

DeCenzo, D.A., Robbins, S.P., and Verhulst, S.L., 2016. Fundamentals of human resource management. John Wiley & Sons.

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Garabato, N., Gardner, J., and Nyce, S., 2018. Global Developments in Employee Benefits. How Persistent Low Returns Will Shape Saving and Retirement, p.194.

Joshua, J.M., 2016. The Relationship between Convergent Thinking and School Performance among Secondary Schools in Tanzania. International Journal of Science and Technology, 5(10).

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Mathur, S., and Patodiya, P.K., 2016. Global perspective of fast food consumption: a systematic literature review. Indian Journal of Management Science, 6(2), p.46.

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Porter, M.E., 2008. The five competitive forces that shape strategy. Harvard business review, 86(1), pp.25-40.

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Tallman, S., Luo, Y. and Buckley, P.J., 2018. Business models in global competition. Global Strategy Journal, 8(4), pp.517-535.

Wimalaratne, S., 2017. How Technology is Shaping the Fast food Industry. [Online] Retrieved from https://www.cambridgeconsultants.com/insights/opinion/how-technology-shaping-fast-food-industry on February 20, 2020. Posted, November 17, 2017.