Thesis on "Country Company Social Responsibility"

Thesis 7 pages (2118 words) Sources: 6 Style: APA

[EXCERPT] . . . .

Country/Company Social Responsibility

McDonald's in Iraq

The sole common feature that unites all players in the contemporaneous society is change. This is obvious in the way we live our lives, our modifying hobbies and interests, our living standards or our purchasing habits. But the changes are also obvious at corporate levels, which now place an increased emphasis on the employees, the customers and the environment. The ultimate purpose remains however the registration of high profits. What has changed then is the approach to this desiderate, in the meaning that corporations no longer use machines to expand, but people, strategies and policies. One of these expansionist measures refers to globalization, the buzz word of the twenty first century, which sees the transfer of numerous values from a country to another. But globalization has often been assimilated with the expansion of the American corporations, or Americanization. Companies such as Microsoft, Nike or McDonald's are now present in most regions of the globe, where they promote not only the American products and services, but also the American fashion and the traditions. Some countries have embraced Americanization, whilst others still reject it. The reasons for how the American cultural and economic expansion are perceived by foreign countries vary, to include beliefs that the Americans want to control the world or that they in fact are not as powerful as they present themselves. Whichever the case, fact remains that the U.S. based companies have generally succeeded in expanding their businesses overseas. And this was often possible due to a clear understanding and adaptation to the needs of the local markets. But there are still regions which are difficult to penetrate. A case in this instance is McDonald's penetration of the Iraqi market.

2. McDonald's in Iraq

The saga of McDonald's potential operations in Iraq is longer than a decade. In 1990, former fighter in the Kurdish resistance Suleiman Qassab filed a request to open a McDonald's franchise in Iraq, but was turned down by the corporation's managerial team. He ended up creating his own store, resembling the American McDonald's (MaDonal), but without any actual ties to the U.S. fast food chain. There are others such stores in Iraq, resembling the real McDonald's, but without any direct involvement with the company (Goering, 2003).

It is quite probable that the American corporation came to regret their decision of not allowing franchising operations within Iraq on the grounds of the country not being a democratic one (McCarthy, 2006). In more recent times, they strive to enter the market, but have constantly encountered difficulties. The company's website does not reveal the actual number of countries which have McDonald's stores, but increased chances are that Iraq is not one of them. According to the stories of American soldiers in the region, they are sometimes able to find McDonald's products at military camps, but never in the cities (Answers Yahoo, 2008).

The U.S. based fast food giant is continually making increased efforts to successfully penetrate the Iraqi market. In 2003 for instance, they participated to an international investors' conference that also addressed the matter of expansion to Iraq. "Doing Business in Iraq: Kickstarting the Private Sector" saw that McDonald's would begin to sell their fries and burgers by 2004 (Docena, 2003); this initiative however failed to materialize. In 2006 then, they won the auction for the opening of a store in Baghdad, in the detriment of Burger King and Wendy's. The selling point of their winning strategy was their ability to design the first "culturally sensitive" McDonald's (Druckman, 2007). The store has yet to open.

3. The Iraqi Environment

An analysis of the Iraqi environment from various perspectives is crucial to the identification of several forces in the economic, political or social backgrounds which might influence the corporate strategies (including those relating to the corporate social responsibility) developed and implemented by the U.S. based fast food chain.

Demographics

Iraq has an estimated population of 28,221,180 inhabitants, growing at an annual rate of 2.56%. The population has an expectancy of life at birth, of 69 years. However, out of the total population, only 3% are 65 or older. 39% are 14 or younger and the remaining 57.9% are aged between 15 and 64 (Central Intelligence Agency, 2008). McDonald's would generally address the younger population, represented by adolescents and young adults. The responsibility agenda could be centred on allowing the youth to become part of a global fashion and integrating them within the international trend. However, given the general reticence, to say the least, the Iraqi citizens reveal towards the Americans, it could be rather risky to implement such a strategy. It could on the other hand manage to attract the youth and through them, sensitize the adult population.

Socio-cultural factors

The Iraqi population pries on their long standing traditions and culture inherited from the Sumerians, the first advanced civilization of the earth. The works of arts, including music, paintings and writings reveal Mesopotamian influences. The Iraqi people place an increased emphasis on honesty and generosity. Their favourite leisure activities are soccer, swimming and fishing in the Tigris and Euphrates, and generally out door activities. Men generally shop in the local bazaars, fish or hunt with friends while women get together to talk, cook or make handicraft. Relevant about the leisure activities is that these often happen in groups as the Iraqis are very social individuals (My Arabic Story). All these features could stimulate McDonald's to implement a social responsibility plan that embraces the Iraqi ways and traditions. And not only this, but it also creates better opportunities for the leisure activities to occur and respect the traditions. For instance, they should create separate McDonald's parlours for men and women, in which both groups could discuss freely.

An important aspect to be considered here is the perception the Iraqi population has over the Americans. This is generally divided between those who feel that the Americans would enslave them for oil, and those who see the Americans as their rescuers. There are also a multitude of less drastic perceptions, situated between the two previously presented ones.

Political forces

The Republic of Iraq is a parliamentary democracy, meaning that the core of their political system is the parliament, which is considered supreme. The members of the Iraqi Parliament are selected through elections. The current president of Iraq is Jalal Talabani, selected on the 6th of April, 2006. The Iraqi legal system is "based on European civil and Islamic law under the framework outlined in the Iraqi Constitution; has not accepted compulsory ICJ jurisdiction" (Central Intelligence Agency, 2008). The multitude and complexity of the Iraqi regulations could pose some difficulties for McDonald's but they should not interfere significantly with the corporate operations. Foremost, clearly implementing them would only lead to a better perception from the local population, which would be able to acknowledge the efforts made by the American company to comply with the Iraqi ways.

Economic factors

Iraq is the 62nd largest economy of the globe in terms of measured gross domestic product, with a GDP of $102.3 billion, revealing a 5% annual growth rate. 68% of all incomes come form the industrial sector, followed by services with 27% and agriculture with 5%. The national currency is the New Iraqi Dinar, traded at an exchange rate of 1,255 dinar per dollar. The country's international trade operations are mostly based on exporting oil and fuels (96%) and 4% foods; the primary imports consist of foods, followed by medicine and manufactured goods (Central Intelligence Agency, 2008). Iraq's massive imports of food reveal the lack of internal capabilities of growing and processing foods, which could constitute an external opportunity for McDonald's.

The Iraqi economy is still encountering major difficulties due to its involvement in the war with Iran, which was extremely costly and demanded the implementation of austerity policies. The unemployment rate is uncertain, but for 2006, it was estimated between 18 and 30%. This also presents an opportunity for the American fast food giant as it could implement a social responsibility agenda based on the creation of additional jobs, which would increase the living standards of the population.

Competition

However the country is steadily regaining its economic status and trying to restructure itself, it still has a long way to go. And the fast food industry is a relevant example in this sense. Barely existent not so many years back, the industry is beginning to show signs of growth. McDonald's competition would primarily come from Burger King, which was already able to penetrate the market. The company should not however become disappointed by the previous arrival of their competitor, moreover when in Russia, immediately after the fall of the soviet regime, McDonald's managed to crush all rivals, coming to now own more than 80% market share (Wilson, 2004). From the same experience however, McDonald's learned about the importance of being the first. As a result, this time, it will not be sufficient to be there, but they will also have to develop and implement a rich palette… READ MORE

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