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Global Business Environment: Culture, Management and the Economy

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Table of Contents

Executive summary. 3

Introduction. 4

Country. 4

Organization. 4

Analysis and Discussion. 5

Culture. 5

The global economy. 9

Conclusion and recommendations. 13

References. 14

= Executive summary = The purpose of the report presented below is to critically analyse the international environment of a business and pay specific attention to the impact of cultural differences and the global economy on operations of the business. In the report presented below McDonald’s is chosen from a developed nation America to expand its operation into a developing country India. There has been the utilisation of some major theories like Hofstede’s cultural theory and international trade theories for analysing the culture and the global economy. The findings of this research report that India provides favourable and this table conditions for the expansion of MacDonalds. However, some cultural issues can be experienced by MacDonald in India which can be addressed by using strategic recommendations and by making changes in policies.

= Introduction =

Country
India has been selected as a developing nation for this report and it is situated in South Asia. By area, India is the 7th largest nation in the world and the population of India is the second highest in the world. Hindi and English are the two official languages of India and it is the largest democracy in the world with a population of 1.3 billion. The gross domestic product of India for the year 2022 is 236.65 trillion. India can be described as a land of diversity as more than 300 languages are spoken in India. India has every main religion in the world and it is culturally a very diverse country (Bagchi and Bhattacharyya, 2019).

Organization
McDonald’s is the organisation chosen from the developed country United States. McDonald’s is an American-based multinational fast-food chain that was founded in the year 1940. McDonald’s is the largest restaurant chain in the world by revenue and serves more than 6 million consumers daily in more than 100 nations (Phoon, 2019). The revenue of MacDonald’s comes from royalties, rent, fees by the franchise, and also sales through its restaurants. McDonald’s has a lot of potential and the company has always prioritised product innovation as the best strategy to get success and development globally.

= Analysis and Discussion =

Culture
1.     Globalisation and culture

Globalisation can be described as the developing interdependence of the economies, cultures, and populations of the world which is brought about by the cross-border trading of goods, technology, services, and flows of investment along with information and people (Oyekola, 2020). Cultural globalisation can be described as the transfer of meanings, ideas, and values around the globe in a manner as to extend social relations and intensifies them (Hue, 2020). Cultural globalisation provides a contribution to the cultural values exchange of distinct countries. As MacDonald's has become the largest restaurant and fast-food chain in the world it has majorly impacted the local culture. The company MacDonald has today become a common voice that demonstrates global communication. Because of globalisation the organisation McDonald’s went from being a local restaurant in the United States to a worldwide sensation in the industry of fast food (Rana, 2018). In almost every Nation Today McDonald’s is present and this demonstrates how globalisation impacts the local culture in terms of food preferences. McDonald’s is the best example of cultural globalisation because it has created effectively a cultural identity throughout the globe. Cultural globalisation affects the everyday lives of people and it gets impacted by the diffusion of goods and ideas and it demonstrates cultural expressions standardisation around the globe (Hue, 2020).

2.     Culture and communication

Culture and communication are associated closely because cultures are formed through communication this implies that communication is the way of interaction of humans through which the characteristics of culture like rules, customs, roles, laws, and rituals are shared and created (Gladkova and Larina, 2019).

The cultural model of Hofstede can be used for comparing the culture of America and India in terms of communication.

Power distance: This cultural dimension is associated specifically with the fact that people in society are not equal (Beugelsdijk, and Welzel, 2018). A country with high power index like India demonstrates that communication in this culture is close from top to bottom. A country with a low power index like America demonstrates that there is a flow of communication in all directions.

Individualism versus collectivism: America is an individualistic society in which prioritisation is there of the individual and that is why direct communication is used by the people of America (Szkudlarek et al., 2020). While on the other hand, India is a collectivistic society where People pay attention to the goals and requirements of the group and communication takes place in both direct and indirect forms.

Masculinity versus femininity: India is characterised by masculinity along with America. In these societies, the communication style is focused on the instrumental task and the communication is more concise and focused (Rana, 2018).

Uncertainty avoidance: The United States and India both the countries have medium uncertainty tolerance. In both countries, people do not accept change very easily (Stadler, 2019).

Indulgence versus restraint: India is a society where people know how to control their desires and impulses and that is why it is low in indulgence while the other hand in the United States people has high desires. Freestyle communication is there in the United States where people like to connect through the Internet.

Figure 1: Hofstede’s Cultural Dimension

Source: (Beugelsdijk and Welzel, 2018)

3.     Cultural differences

Cultural differences can be described as the maintained and integrated system of values and beliefs acquired socially. It can also be described as various practises behaviours, expressions, and languages that are unique to a particular group of people (Boussebaa, 2020). The culture of America and India is quite different and the Hofstede's dimension can be used to describe them. Major differences are there in India and America in three dimensions of culture: In power distance, the score of the United States is 40 and India is 77, In individualism, the score of India is 48 while the United States has 91 and in indulgence, India is 26 and United States is 68 (Rana, 2018). This implies that India is a hierarchical society and there is unequal Power Distribution. The high score of the United States in individualism demonstrates that people think about themselves first and lack interpersonal connection. While in the culture of India people show respect to elderly people. India is a collectivist society and collaboration holds high value while this is not the case in America (Rana, 2018).

The people of America give priority to personal satisfaction and comfort and they have a high tendency to indulge (Hofstede Insights, 2022). While on the other hand the people of India have a low tendency to indulge and they can control their desires and satisfaction. In American culture people are impatient and these differences play a major role in how MacDonald’s conducts operations in India (Rana, 2018). One of the best examples of cultural differences matter is that in America MacDonald’s serves beef in its offerings but in Indian culture, the cow is considered sacred. People in India like vegetarian food while in America people are fonder of non-vegetarian food items (Rana, 2018).

4.     Managing people in the international business environment

Conducting business in an international environment is complicated and dynamic and there is a requirement for competent individuals to develop and direct teams (Trompenaars and Hampden-Turner, 2017). Management of human resources in an international business environment is challenging because intercultural conflicts can be there (Ererdi et al., 2020). Cultural issues can arise like miscommunication, cross-cultural issues, and misunderstandings.

There would be a requirement for highly trained managers and experience expatriates for McDonald’s to manage culturally diverse teams in India. To manage cross-cultural teams an experienced leader is required who can motivate team members and knows how to acknowledge and respect the cultural background of the team (Aust et al., 2018). Several aspects of human resource management like work relationships, leadership, team dynamics, and training and development have to be considered by McDonald’s while conducting its business operations in India. India is a very diverse country and the culture of India is quite different from America and that is why high chances of cross-cultural conflicts are there. McDonald's has to adopt proper methods of training and development for its employees to conduct smooth operations in India.

5.     Managing cross-cultural negotiation and conflict

Cross-cultural conflict arises because of cultural diversity between individuals and social groups that get separated by the boundaries of culture (Khan and Ebner, 2019). In negotiation cross, cultural conflict occurs because of cultural differences and differences in the behaviour of people. Appropriate and effective communication is the key to avoiding cross-cultural conflicts and also intercultural training is important. Cross-cultural negotiation gets impacted by various factors like language, norms, business, religion, values, and etiquette (Van Dyne et al., 2018). Cultural intelligence can be used for managing cross-cultural conflict and it is the skill to work and relate effectively in culturally diverse scenarios. According to the cultural intelligence postulated by Caputo, four components are there which are knowledge, motivation, strategic thinking, and behaviours (Van Dyne et al., 2018). These four elements of cultural intelligence can be utilised for solving the cross-cultural conflicts which can be faced by MacDonald in India.

Various cultural dimensions can be used to understand cross-cultural conflicts and negotiations between Indian and American cultures.

Individualism versus communitarianism

America is a highly individualistic society while on the other hand in India if it is provided to groups. This might become the reason for cross-cultural conflict (Beugelsdijk, and Welzel, 2018).

Neutral versus emotional

In the culture of India, people are mostly emotional while on the other hand American people know how to control their emotions. Unknowingly might be possible that an American individual might hurt the sentiments or feelings of an Indian employee.

Universalism versus particularism

Universalism implies that practises and ideas can be implemented without any change while on the other hand particularism implies that situations dictate how practises and ideas should be applied (Beugelsdijk, and Welzel, 2018). America is a Universalistic society where there is the importance given to correct behaviour. In India, relationships are more significant and that is why it is a particularistic society. This will impact how cross-cultural conflicts and negotiations will be handled.

Achievement versus ascription

Status is provided on the basis of performance and achievements of people in America while on the other hand in India status is provided according to the personal identity of a person. This might impact the rewarding policies of McDonald's in India (Rana, 2018). This will also impact how people will get promoted and how to cross constant negotiations will take place.

The global economy
1.     Globalisation and the world economy

Globalisation can be described as the procedure in which organisations and businesses initiate to operate on an international scale and it is utilised most often in the context of the economy (Shpynova et al., 2021). Globalisation has been demonstrated to enhance the living standard in developing nations but it can also affect negatively emerging or local economies (Salvatore, 2016). Economic globalisation implies the enhancing interdependence of the economies of the world as an outcome of the developing scale of cross-border trade of goods and services. Because of economic globalisation, MacDonald can expand its operations in other nations without any issues. Because of globalisation, MacDonald can offer its products at lower prices and this leads to an increase in the living standard of people (Thornton et al., 2019). For McDonald’s, there is the availability of cheap labour and low-cost raw material which can provide the company with an opportunity to increase its profitability (Michie, 2019). Also, MacDonald’s entry into India has helped the Indian economy to develop because it not only improved the living standard of people but also it generated various Employment Opportunities and improved the economic growth of India.

2.     International trade

International trade is the concept of the exchange of goods and services along with capital across the borders of countries or territories due to the fact that the requirement or want of goods is there (Jeyarajah, 2019). International trade can be explained by various trade theories which can guide the operations of McDonald's in India.

Mercantilism: This theory of international trade implies that a country's wealth is determined by its gold reserve of the country (Shpynova et al., 2021). Several nations like China implies a protectionist policy but the country India does not discourage import. India promotes free trade (Lam, 2015).

Absolute cost benefit: This theory demonstrates the requirement and necessity of free trade and according to this theory a nation should produce or manufacture those goods in which it has an absolute advantage (Jeyarajah, 2019). The arrival of McDonald's in India enhances the living standards of its citizens which is a major specification of this theory.

Comparative cost-benefit: According to this theory the focus of a nation should be on the production of those goods in which it has the most benefit.

Porter’s diamond Theory: According to this theory of international trade the qualities of the domestic nation are quite significant for an organisation (Johns, 2017). Various factors are there which can impact the success of McDonald which comprises the demand conditions, the strategy of the firm, factor conditions, and the related and supporting industries.

3.     The macroeconomic environment

The macroeconomic environment of a country is the external forces or conditions and the macroeconomic conditions in which a company operates. The macroeconomic environment of India will have a direct impact on the operations and activities of McDonald’s. PESTLE analysis can be utilised for analysing the Indian macroeconomic environment.

Political factors: The political environment of India is quite stable and it is one of the most powerful nations on the globe and has the largest democracy in the world. However, the political relations of India with Pakistan are not that good and one of the major concerns faced by organisations is corruption (World Bank, 2018).

Economic factors: The country India is one of the largest economies in the world and the economic growth of India signifies that the country is rapidly developing. India also has the second largest population in the world which provides McDonald's with a huge consumer base

Social factors: As mentioned India is one of the most popular nations in the world with a population of over 1.3 billion. India also offers cheap labour to multinational corporations and it is a multi-ethnic and multilingual country.

Technical factors: India is one of the most technically advanced nations in the world and also it is considered one of the best destinations to have a highly skilled IT workforce (World Bank, 2018).

Legal factors: India enjoys a stable legal environment. Several Indian laws are there to protect the rights of employees and it also has several laws governing discrimination.

Environmental factors: A lot of development has been made in India but it’s still a lot of environmental issues there like air and water pollution which require immediate attention. McDonald's has to take into consideration various environmental laws and concepts of sustainability (Gupta, 2019).

According to the PESTLE analysis of India, the macro-environmental conditions of India for MacDonald are quite favourable. The company can easily conduct its activities and operations in India and India provides favourable and stable conditions.

4.     Exchange rate and competitiveness

An exchange rate can be defined as the value of the currency of a country in terms of the currency of some other country or economic zone (Vasani et al., 2019). Competitiveness is impacted by the rate of exchange and its movement because the exchange rate indicates the international competitiveness of a nation. The Indian exchange rate is 79.41 rupee for $1.00 in the United States.

A trade-off is faced by policymakers by selecting 2 choices from the three choices of policy: Exchange rate stability, monetary independence, and financial openness. This is referred to impossible Trinity. The exchange rate of India is quite stable. The fluctuation in the exchange rate can be quite risky for a multinational corporation because it will directly impact the future cash flows and market value of the company (Bostan et al., 2018). However, as the exchange rate of India is quite stable and it will help McDonald’s to have a good competitive position. Two major ways are there in which the exchange rate of India can impact the operations and business of McDonald’s: By modifying the supplies cost that is purchased from a distinct nation and by modifying the attractiveness of their product (Gupta, 2019). Also, the exchange rate affects the investment performance and interest rate which is a direct impact on the operations of a business and also it can influence or impact the job market.

5.     The new economy: Knowledge effect, technology, and network effects

India is an open economy and hugely independent of the economy of the world. India is emerging with the potential of becoming one of the economic superpowers of the world and it is the 6th largest economy in the world. India has one of the highest gross domestic product growth rates in the globe (Girisha and Nagendrababu, 2020). Several strengths are present for the company in the Indian economy because India is a knowledge-based economy with the ability of hugely skilled human resources and also India provides macroeconomic stability.

The knowledge-based economy can be described as the trends in the economies which are advanced toward greater reliance on knowledge and information. India utilises its innovation and research along with information and communication technology to create and apply knowledge for development and growth. The ranking of India is 109 out of 145 nations on the knowledge economy index of the World Bank based on indicators (Girisha and Nagendrababu, 2020). India is also one of the most technically advanced nations in the world and it has a strong focus on technology and science because it is one of the major components of economic growth. India can provide a technically advanced infrastructure to McDonald’s. There is the rapid development of digitalization in India which will influence strongly the manner that most of the industries in India operate and particularly the food service industry.

= Conclusion and recommendations = From the above report, it can be concluded that the macroeconomic environment of India is quite stable and favourable. India is a country with diverse culture and with changes in its policies according to the culture of India, McDonald's can smoothly run its operations in India. The culture of India is quite different from that of Western countries and that is why it is important to take into consideration various cultural dimensions when operating in the Indian market. In terms of the global economy, the economy of India is developing rapidly and provides a lot of opportunities for multinational corporations. India provides a favourable macroeconomic environment for operations of international companies and the exchange rate of India is also stable. India is a knowledge-based economy that is also technically advanced.

It is recommended for McDonald’s implement some policy changes so that it can smoothly run its operations in the Indian environment. McDonald’s should change its product offerings according to the Indian culture and the preferences of Indian people. McDonald’s should also incorporate the concept of sustainability in its operations and should try to stay affordable in the Indian market because the people of India are price sensitive (Thornton et al., 2019). MacDonald should incorporate locality in its operations and activities so that it has long-term potential in the Indian market.

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