CASE STUDY BUSINESS ETHICS
Overview
After the Second World War, multinational corporations have sort entry open markets that were previously closed. Despite the promising opportunities with significant social economic benefits are yet to be realized. The MNC in developing countries has been widely oversold due to the prospect of the middle-class consumers. The MNC have been further affected by financial crises in the Asian and Latin America further diminishing the attractiveness of the emerging markets. It has been identified that the emerging markets are larger than previously though not because of the few developed countries or the middle-income consumers from the developing market but rather because of poor billions entering the market for the first time (Hartman, DesJardins & MacDonald, 2014). In order for the MNC will only be at the bottom of the economic pyramid if they are able to discover the fortune in the developing countries through immeasurable contribution towards humankind. Therefore MNC has to invest in a way they bring out the billion out of poverty, desperation, terrorism, political chaos and environmental meltdown.
Strategic Issues
MNC have a fundamental policy affecting the institution mandates, values, mission, structure, resources, management, and stakeholders. The MNC requires rapid innovation in technology and the business models (Prahalad, 2008). Price performance is another issue affecting the organizations by establishing the relationship between the product and the service. In order to be successful efficiency is demanded as well as transforming its scale from bigger to better. Managerial challenges greatly affect MNC which is evident in today’s market (Hartman, DesJardins & MacDonald, 2014). The corporations differ as some sell to the poor and help them improve their lives through proper distribution that is culturally sensitive, has economic profitability and is environmentally sustainable. This is difficult because the global cultures are diverse hence making it difficult for the organization to balance due to different beliefs and customs.
Key Issues
Decision making is the major strategic issue as it is an extensive process that involves international business, interrelationships, and highlighting of the significant empirical trends. The international strategy requires a consideration of the strategic decisions that the business is in. The decisions involve the business aspects that are critical for the business survival of the corporation (Hartman, DesJardins & MacDonald, 2014). This includes the marketing positioning, the service, and the product offered that will be able to target the consumer need at a profitable rate. Financial backing is a key issue as it is required to achieve the business goals. A production system is another key issue that should be technologically advanced in order to enhance the operational process that will facilitate the delivery of goods and services as promised (Prahalad, 2008).
Human resource management in MNC is a significant issue. It is the backbone of the organization in that it deals with recruitment, retention and motivation of the employees in the relevant field by enhancing knowledge and skills all at an affordable cost. The role of HRM has a direct implication to the employment of the organization and the working conditions. Therefore the key issues of MNC are based on decision making which entails which market to serve, what to produce, employment and finance (Hartman, DesJardins & MacDonald, 2014).
Key Problems
Expansion of MNC to new geographical areas is a key problem. This is because the new region has its fair share of challenges that are different from other regions. This requires the corporation to have unique strategies that will help it overcome the challenges it faces. Trade union tactics differ from one nation to the other (Sarin, 2013). This affects the operations of the MNC due to the pressure extended, the bargaining power of the union that weakens the financial resources of the MNC. Strikes are a common occurrence in the developing market further making it difficult for the MNC to conduct business. Political instability is a problem the MNC face as well as the government may have different interest as those of the trade unions create an unstable ground for conducting business. Social and identity problem, knowledge and power have greatly shaped the local market making MNC stretch beyond the national borders.
Analysis and Evaluations
Great Britain Unilever is an MNC which has a subsidiary Hindustan Lever Limited (HLL). HLL dismissed Nirma strategy a small company that offered detergent products at low prices especially to the poor in the rural areas of India. However, HLL had to change its strategy because Nirma strategy enabled it to grow rapidly due to the value pricing, special packaging, and its great distribution network (Hartman, DesJardins & MacDonald, 2014). As a result, HLL had to change its strategy by first changing the ratio of oil to water to respond to the poor washing style. This was a major strategy implemented by the organization. HLL also decentralized its manufacturing, marketing, and distribution in order to reach the rural areas of India. This has made Nirma and HLL close competitors with 38% market share each. This has increased competitive detergent industry in India.
For the year ended on 31 March 2016, HLL revenues have increased by 4 % which is equivalent to 331.94 Rs Billion. However, the net income reduced by 6 % equivalent to Rs 40.82 Billion. Despite the decrease in income, there was an increase in revenue of personal products by 7% translating into RS97.72 Billions (Hindustan Lever Limited, 2016). The soap and the detergent segment sales increased by 1 % translating to RS 150.53 Billion. The Indian segment increased by 4 % to RS 312.33 Billion and outside India it increased by 1 % which is RS19.23Billion. This financial summary indicates a strong financial position of the corporation. The corporation has positive cash flow as the organization has increased its total assets lowering debt to equity ratio (Hindustan Lever Limited, 2016).
The success of the HLL is attributed to clear objectives developed as they reflect the stakeholder’s expectations as well as constant evaluation. Its core competence has led to competitive advantage by enhancing skills and capabilities (Sarin, 2013). The organizational structure and the control system by the HRM have ensured that employees are motivated and performance standards are met. The organization has also embraced differentiation strategy making their product unique making it earn above the average. However despite the success, the organization is faced with some challenges especially outside India such as creating the buying power, consumer education, tailoring its product to that of other regions and enhancing the distribution channels (Hindustan Lever Limited, 2016).
Recommendations
The organization has to venture into extensive marketing strategy in order to ensure that people get to know about the product. Educating the consumer plays an important role as it will create awareness to them as they will know its advantages and the benefits it has as well as a range of products they can offer. As the needs are different in various markets HLL management has to come up with the solution of tailoring the product to the targeted group as their need differs from that of India. Distribution is a major struggle in the external market. Great infrastructure has to be put in place in order to ensure that the products are readily available (Hartman, DesJardins & MacDonald, 2014).
Action Plan
Objective: To enhance trade within and out of India
Step 1: Build an extensive local base support. This will enhance that the product is widely used locally creating the need to venture into other markets
Step 2: Focus on the poor rather than the wealthy and the middle class. This will ensure that the market is well exploited and more potential areas are identified.
Step 3: Create new alliances. As an MNC it will be of importance because it will provide an oversight of other markets.
Step 4: Increase employment intensity of the poor. This will uplift them and make them new customers.
Step 5: Cost structure. This will enhance the management decision making as they will venture in reducing cost while maintaining quality.
There is a likelihood that there will be challenges in implementing the strategies. However they with a great management team in place the plans will be implemented together with the help of the new alliances.
Reference
Hartman, L.P, DesJardins, J., & MacDonald, C. (2014). Business Ethics: Decision Making For Personal Integrity &Social Responsibility. McGraw-Hill Irwin
Hindustan Lever Limited (2016). Annual Financial Report 2015-2016. Retrieved from https://www.hul.co.in/Images/annual-report-2015-16_tcm1255-482421_en.pdf
Prahalad, C. K. (2008). The fortune at the bottom of the pyramid. Upper Saddle River, NJ: Wharton School Publ.
Sarin, S. (2013). Business marketing: Concepts and cases. New Delhi: McGraw Hill Education (India.
