PGBM 04 Effect of Globalization in Decision of Wilko Retail Assessment 1 Answer
Globalization has helped in spreading new technologies are across the globe, helped to make economies greener and effectively productive. The globalization has also enabled contemporary companies to improve their profitability. It is quite evident that a lot of companies around the globe have expanded their business to new lands. It can be identified that expansion is a prominent strafe for retail companies. As a dominant retail company in with distinctive market share, Wilko wants to expand its business to countries such as China and Spain. This study reflects the way globalization affects this decision of Wilko. Or in other words, the study analyses the way forces of globalization will affect different functions within the business. The study also adds a recommendation for the company to succeed in their business expansion.
Wilko Retail Ltd. Is a prominent high-street chain in the UK. Headquartered in Nottinghamshire, the company is known for selling household goods and homewares. The organization was found by Wilkinson in 1930. The company operates in 413 locations around the world with a product line of basic groceries, consumer goods, toiletries, pet supplies, DIY and stationery. The company also offers seasonal lines such as gardening products Christmas decorations. The organization also has almost 14,000 own-brand products that comprise of half of the annual sales of the company (Corporate.wilko.com, 2020). The company also has an eCommerce website through which the company connects with the global marketplace. The company shops their product all over the world with the help of their shipping partner FedEx.
2.0.Company Vision, mission and Objective
The Mission of Wilko retail is to become the largest retail company in the UK. The values of the organization include be better every day, pull together, respect each other, Show we care and make it fun.
The company is keen on delivering quality products that help in solving the needs of the company and a website that people love to shop. The vision of the company is developing a business that believes in treating people with respect and fairness.
The objectives of Wilko retail are
- To provide high-quality service to the consumers
- To provide a good financial return to the stakeholder
- To exceed customer's expectations for high-quality products to make their lives easier
3.0.Literature review and critical analysis
In order to understand the impact of globalization in the selected company’s expansion or overseas operation, it is very crucial to evaluate the fundamentals of globalization. It can be identified that Globalization plays an immensely critical role in the expansion of a country’s business to other countries (Corporate.wilko.com, 2020). The perception of globalization is significantly broad and associated with a range of elements (Erixon, 2018). Globalization refers to the interdependence of the economies, population, and cultures of the world with the help of cross border trade in services, goods, flows of investment, technology, information and people. A range of theoretical perspectives have been integrated within the context of globalization,
There are numerous reasons for Globalization, but at the heart of it are two driving forces, Man’s search for knowledge and desire for profit.
The desire for Profit: The first wave of globalization about early 19th century was fueled by the invention of the steam engine. The productive capacities were unshackled from the confines of physical/animal power and moved to unbounded mechanical power (Kwon, 2019). Western societies witness an increase in production as a result of the ensuing industrial revolution.
Further uses of the steam engine in ships and trains transformed the pace of transporting goods and people in a way unimagined before, leading to a steep increase in the inter-connections between people and communities across the world. The side story or main one depending on your ideological leaning and geographical locations is the story of colonialism as a result of an increase in trade and the battle to control and profit from it.
Search for knowledge: The second wave of globalization began about late 20th Century (the 1980s) this time fueled by advances in Communication Technology and Information Technology. These advances rendered even travelling obsolete as it was possible to communicate with another half the globe across at the click of a button (Ali and Garg, 2017). The increase in communication channels led to a spurt in knowledge sharing and dissemination. As is the nature of knowledge, such communication resulted in a phenomenal increase in discoveries and inventions that have set forth a cycle of increasing inter-connectedness.
In order to be competitive and compete with other companies in the same industry, Wilko must derive the forces of globalization as most of the companies in the retail industry have already globalized their functions. Wilko is extremely keen on expanding their businesses to Ares such as Spain and China. China is currently known for its approach towards the globalization of business. China doesn't have minimum wage systems or unions that fight for the employee ensuring fair pay and average workweeks of 40 hours with the weekend. It gives them an advantage in the context of globalization (Meyer, 2017). China over the past decade is experiencing a similar change the big difference is they are a Communist country and do not have a Free Market Economy. The Communist Government runs all industry in China. However, the government does not care about the labour and the poverty-stricken area. As a result, it becomes easy for the companies to produce goods at low cost. Here the example of Nike can be introduced. For Nike to produce its goods over in China where the average pay-rate per employee is probably 10 times cheaper if not exponentially lower than if they were to produce their goods here in the USA (Coulibaly et al. 2018). It helps them saving them Billions of Dollars in labour costs. So if Wilko wants to survive and remain competitive as a company they need to do the same thing. Entering into emerging economies or just other economies across the World Gives the organization more market share to pick up.
Globalization has both positive and negative impact on a business. On the positive side, the trade barriers for making business (and making money and profit) are disappearing through globalization. A direct consequence is the improved standard of living (rising middle class). When countries are integrated through trade there is more transparency (in theory) and a better record of human rights. Also, culture is spread easier and faster.
On the “challenges” side there is a threat to small businesses that cannot compete against international behemoths (Gavril et al. 2017). There is also a risk of nations' cultural identity because the local markets can be flooded with foreign culture.
All in the entire world is developing and it is not possible live in the past. The only way forward is embracing development and adapt to it. It may mean for example job losses in the developed countries on the short run, poor human rights record in the developing countries but the opportunities that globalization is bringing far outweigh any negative effects on the long run.
Also, China, being a Communist Country can influence their currency rate, pushing it down and keeping it there so it is much more attractive for Companies to also import products out of China (Mahmutović et al. 2017). It is the main reason President Trump has called out China (Finally Someone Does it) and created what they call a trade or currency war— These typically harm both countries’ economies and people; the winner will be who can hold out the longest though.
Globalization enhances the human condition on a whole, and this is a key point to consider in the debate about the merits and demerits of globalization. For example, consider the phenomenon of Corporations outsourcing Manufacturing and Services to lower-income countries. While people lose the manufacturing jobs in advanced capitalist countries, those jobs go to people in middle or lower-income countries, who by definition were worse off (Topno, 2019). Though it might be insensitive to preach altruism to a person who loses his or her source of income, the outcome is more humane, on a whole. There is a marked difference in third world poverty and poverty in rich countries. Forget about universal social security, in lower-income countries, governments are often ill-equipped to provide for even their most vulnerable citizens (Radović-Marković et al. 2019). A poor man in rural China or India, who is just as capable of doing a job as his American or British peer, is objectively and quantifiably in much more need of it.
Furthermore, considering an admittedly cynical outlook of the world, globalization helps consumerism, and hence the corporations too. The outsourcing of jobs to poorer countries helps their economy, stimulating growth and business activity. Over time enough people raise their income to occasion a significant surge in demand for goods and services. In effect, the corporations can cut down on their production/operations costs (cheap labour) at first, and then benefit from a growing consumer base over time. This is a simplistic picture of course. Not all corporations operate on this crude model (Liñán et al. 2019). The whole moving operations to another country deal should be viable, and it depends on a lot of factors, such as, whether there are enough expertise, basic infrastructure and business-friendly regimes in the destination country, as well as, on what kind of products & services the corporation is selling, and to whom.
Globalization has always had its critics. However, there is a widespread backlash against globalization now, especially in the ‘West’, as evidenced by the resurgence of isolationist and anti-immigration movements in these countries. These movements are tapping into people’s anger, which is stemming from, among other things, stagnant incomes, rising unemployment and overall stunting of the economy. But, at the same time, globalization is bringing about significant change in the lives of millions of people in Asia and Africa, mostly for the better. Indian and China are the two fastest-growing major economies in the world. There is a great sense of optimism about the future among young people here (Islam et al. 2019). Both countries have lifted millions of people out of desperate poverty and brought them into the mainstream in just a few decades. All this is down to businesses, capital and technology coming in from around the globe, as well as evolution in the composition of labour and capital.
4.0.Discussion and analysis
It can be identified that Wilko is interested in expanding its business to different parts of the area. Especially, the company is keen on expanding its business to China as there is a lucrative market for the retail industry in China. Hence, the company should integrate the forces associated with Globalization that helps them to understand the credibility of the business. It can be identified that with the help of an appropriate strategy, the company can efficiently penetrate the Chinese market. However, certain limitations hamper the business to a significant extent (Rosnerova and Hraskova, 2020). It can be identified that globalization has a crucial impact on different functions of the business. Hence, Wilko needs to apply the theoretical perspective of globalization to identify the impact on different functions of the business.
Impact of globalization on different functions of the business
Globalization is responsible for increased competition. The competition can be aligned with the product, service, cost price, technological adaptation, a target market, quick response and quick production. If Wilko takes the approach of producing with less cost and selling cheaper in the expanded areas, the market share of the company likely to increase. However, business expansions are largely influenced by the forces of globalization. There are certain areas within the business that depends upon globalization (Jones, 2018). For example, functions such as marketing, finance, HRM and operations management care influenced by globalization alter the outcome of the organization to a significant extent. Therefore, to evaluate the potential performance of the firm while expanding its business to China, it is crucial to analyze the impact of globalization in areas such as HRM, operations management, marketing and finance.
Globalization has distinctively increased the chances of profitability of a firm. Nowadays, it is easy for the businesses to expand overseas and fetch an exponentially high growth to the company. However, in a multinational business ecosystem, globalization plays a significant role in the business to understand the way products are marketed. One of the prominent determinants in this context is competition. With the expansion of the market and audiences due to globalization, the competition increases drastically (Vasyurenko et al. 2020). Especially in China, a lot of international retail chain has introduced its products along with domestic companies. Therefore, to penetrate the market effectively, robust marketing strategies play an important role. Globalization is the response for developing the need for change within the marketing policy of the organization. The company needs to take account of the cultural differences and create a plan concerning that. On the other hand, technological, Efficiency and remote hiring are other areas that help in creating a feasible marketing policy as per the requirement of the target market (Nikolova et al. 2017). It can be identified that marketing is a broad area and includes a variety of factors the effects of globalization in firms can be segmented into two dimensions. These are global market opportunities and global market threats. These major effects are typically managed along with testing by two conceptual models that help in examining the relationships by the cooperation of alliances, and firm performance.
In the case where business tends to expand its operations to other countries, globalization plays a significant role in shaping the HRM strategies of the organization. Companies tend to consider a range of adjustments that can be crucial to train, retain and hire a workforce that tends to spread throughout different countries that helps in identifying cultural identities. There is a range of areas within the human resource management cluster that are influenced by the forces of globalization. The human resource department of the company is responsible for understanding the local labour laws in the expanded locations. Further, globalization also has a crucial impact on overseas recruitment (Beruashvili and Chitadze, 2017). Globalization also creates recruitment of different training module. Cross-culture communication is another crucial factor within globalization that influences the HRM of the company. Especially, to set the business in China, the language barrier can significantly affect the company's performance. Hence, the Human resource management of Wilko needs to strategize effectively for synchronized coordination among local and global employees (Boon, 2017). Expatriation is another crucial area that should also be addressed by human resource management. Due to the expansion into a foreign, it is required to take the home country employee to work in that land or managing all the activities. However, preparing employees to work in a different culture can be extremely challenging.
Operations management and supply chain management are the two most important clusters of a business. Especially for a retail firm, operations and supply chain management plays an extremely crucial role. Ther operations and supply chain management have become more complex in the advent of globalization. Setting up a manufacturing facility in other areas of the world requires outsourcing of operations and supply chain activities. Management of operations and management become more complex for a firm while moving globally. Wilko’s will also face similar difficulties while expanding its business to countries like Spain and China (Coeurderoy and Yang, 2020). The global reach of the company requires it to understand a range of markets, risks, regulations and potential parts. Globalization has helped the import-export alignment more effective, which will help companies like Wilko to have a simplified communication between business owners, vendors and consumers.
Globalization also has a crucial impact on the financial performance of a business. It can be identified that the per capita income and disposable income are different in different countries. Hence, the profitability of the firm varies from county to country. The requirements of the products and acceptance of the brand also play a crucial role in organizational economics. The globalization of financial service has also helped the firm to manage its expenses and profitability in compliance with the government (Dodd, 2018). It can be identified that Asian markets integrated the globalization movement after the Big bang financial reform. As a result global financial systems have changed predominantly while the Asian market has become more competitive. Hence, the profitability of a firm is largely influenced by the financial system of the country. Econ0mic globalization refers to an increasing interdependence of world economics. The trade relations between China and the UK are quite good as both countries are at open trading with each other. These relations effectively help a company’s performance in terms of financial gains while expanding their business to China.
5.0.Recommendation and Conclusion
Therefore, from the relative literature, it can be identified that globalization plays an en extremely curial role to the outcome of the business. Business tends to have multiple functions associated with it Globalization has a specific impact for all the functions within the business. Hence, to expand their business to China, Wilko needs to understand the impact globalization have on each of the segment of the business. Being a retail company, operations and supply chain are the two most crucial areas of the business. Hence, the company needs to identify the areas within operations and supply chain that are affected by globalization. To come up with an effective strategy, the company needs to align its operations and processes effectively. The company also requires considering important factors such as disposable income, trade relations between supply chain and operations. The company needs to emphasize on a strategy than emphasizing on tactics. Besides, it is also very important for the company to understand the culture to conquer a market within immense growth potential. Further, the company needs to understand its competitive edge through which they can outlay their competitors in the respective market. China is known for cheap labour and a big market. Hence, the company can opt for developing a manufacturing facility in China. Wilko regularly delivers a range of products china through their website ordering system. By integrating operation and supply chain in China can help them, to improve their profitability in the first place.