Impacts of International Business on Food Industry

Running head: IMPACTS OF GLOBALIZATION ON FOOD
INDUSTRY 1
Impacts of International Business on Food Industry
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IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 2
INTRODUCTION
Background to the study
There has been a considerable universal agreement that international business has had an
undeniable and significant impact on the food industry across the developing countries with
India being no exception (Barbara & Fransesco2014). Imperatively, the forces of international
business which encompasses aspects such as the flow in capital, urbanization, market together
with a liberalization of the trade as well as the establishment multinational companies in India
has contributed to the changing the nature of the food industry systems(John, 2004). Notably,
there has been an increment in the diversification and affordability of the food which is coupled
with a change in the quality of the nutritional value. Surprisingly, according to the John (2004)
the establishment of the multi-national companies in India which has had the impacts of the
controlling of the market share consequently resulted into competition and struggles for the
controlling the food systems in India (William, Lawrence & Joe, 2013). This establishment of the
transnational food companies coupled with the spread of the product s of processed food has
impacted food security together with the patterns of nutrition globally.
India is reported to be emerging as the potential together with being a diversified market
for the transnational corporation and the foreign investors attributed by the economic reforms
thus smoothening the entry of the business magnet from foreign investors (William, Lawrence &
Joe, 2013). The food industry is playing a fundamental role in the Indian economy and across the
globe. Additionally based on the reports from the Ministry of Food Processing Industry in India,
the industry is approximated to be $40 billion combined annual growth which is recorded at 11%
.According to the World Bank Enterprise the survey, the industry is approximated to have 81.8%
as its capacity utilization coupled with sales growth recorded at 4.5 % annually compounded
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 3
with employment rate of 6%, (Rais, Acharya, & Sharma, 2013). According it is plausible to
focus on this sector for control in the inflation and security compounded with the impacts of
globalization on the sector. In the same breath, this sector is pivotal in linking the agriculture and
the industrial components of the economy. It is against this backdrop that the suit tends to
explore the impacts of the international business on the food industry in India.
Research objectives
The cardinal objectives that the study will explore are the impacts of the international
business on the food industry in India.
The specific objectives that will be investigated as part of study include:
I. To investigate the impacts of the international business on the food industry in
India.
II. To examine the forces of the international business that affects the food industry
in India.
III. To examine the changes adopted by the transnational corporation in the food
industry in India.
IV. To examine the current status of the food industry in India.
Research questions
The following question will guide and shed light on the study.
I. What are the impacts of the international business on the food industry in India?
II. How do the forces of the international business that affects the food industry in
India?
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 4
III. What are the changes adopted by the transnational corporations in the food
industry in India?
IV. What is the current status of the food industry in India?
Literature review
The food industry in India
Based on the reports from the Ministry Of Food Processing industry in India, the industry
is approximated to be $40 billion combined annual growth which is recorded at 11% (Mehreen,
2016).According to the World Bank Enterprise, the industry is approximated to have 81.8% as
its capacity utilization coupled with sales growth recorded at 4.5 % compounded with an
employment rate of 6 %. According to the reports by the Department Of Agriculture in the
United States, the Indian food coupled with grocery market is probably the largest globally while
at the same time retail is contributing to the 70% of the total sales. According to Mohammad,
Shatroopa, and Neeja (2013), they opine that food industry in India has been one of the most
important branches of the economy thus contributing to the processing of the raw material from
agriculture combine with the food supply. The food industry in India is characterized by a
mixture of unorganized and organized players making it different from the established markets.
Notably, consumption in India involves procuring and consuming the fruits and vegetables that
are not processed by means of converting them by using homemade techniques. This is different
from other similar countries that like eating ready make food. Wide variety combined with the
incomplete evolution of the food system has been influencing the difference in the marketing
system despite the shift in the consumer consumption behavior.
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 5
The food industry in India is contributing to the 21% of the Indians GDP combined with
a market size of 9050 billons which s consider the biggest category in the consumption. Based
on the study by McKinsey (2013) suggest that food industry in India displays a multiplier effect
on the economy. In his view McKinsey (2013) he suggests that there is a target in increasing the
level of processing the perishables from 6% to 20% combined with increasing the share of the
global food trade ton 3% thus higher avenues upon the implementation by the government.
However, there are constraints that are significant which must be addressed to enhance the
prospects slowdown of the industry. Based on McKinsey (2013), the share of the processed food
that was processed was constant at 1.5% by the year 2013 implying the slow nature of the
competitiveness of the Indian export. According to the report by MOFPI released in 2009, the
production of milk was 105 million tons, the production of fruits and vegetables was 105 m.
Forces of international business
There are several forces of international business that play a fundamental in affecting the food
industry in India. Some of the tenants which are relevant to the food industry in India include:
Foreign direct investments
Foreign direct investment has had a considerable impact on the food industry in the
developing country it. Babu& Sekhar (2009), define Foreign Direct Investment as the investment
which is long-term in nature made by one enterprise into another country by the foreign
enterprise consequently becomes the transnational company. Thus, there has been saturation of
the market in the India which has prompted the transnational food businesses to invest in the
food industry (Babu& Sekhar 2009). The food industry in India has been at the receiving end of
the of the capital flows since it is considered as one of the fastest growing sectors due to the
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 6
economic policies and the need to encourage sharing of the technology between the
transnational corporation and the firms(Babu& Sekhar 2009). Imperatively the growth of food
processing industry has made the government permitting 100 % of many firms from the United
States showing interest in the food industry sector in India. The entry of the transnational
companies into the market while paying attention to the highly packaged as well as the packed
ones has resulted in the marketing of the exotic, modern and convenient foods. Accordingly, the
investments have led to the food industry in industry receiving the largest amount of the foreign
direct t investment unlike other parts of the food system (Babu& Sekhar 2009). Surprisingly,
foreign direct investment in the international processed food market has proved to be more
important than the foreign direct investment in the global trade.
Impacts of Foreign direct investments
The growth of the foreign direct investment in India has been fundamental in the
following ways which are worth mentioning. First, it has led to led to the availability and
affordability of the processed food to the public thus encourages the consumption and purchase
of foods that have no nutrients (Ali, Singh, & Ekanem, 2009). Secondly, it has led to the creation
of the fast food in a restaurant, chain store together with supermarkets which offered diversity,
improved quality as well as the convenience which compromises on the health and nutrition.
Foreign has resulted in the concurrent existence of the adoption and convergence of the diet.
Thus there has been an increase in the food consumption and a wide availability of the processed
food to the various markets in India. It has also enhanced an increment in the sale of the
processed food by means of lowering the prices implying the creation of new was in the purchase
of the food coupled with effective strategies in the marketing and advertising which influence the
preference of the consumer. Additionally, foreign direct investment has on an increase in the
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 7
control of the local food system by the good producers which are international which has been
associated with fuelling economic growth in their countries. Thus, the foreign transnational has
been receiving advantages which are unilateral in nature a result of seeking their investments.
Some of the unilateral advantages encompass the exemption from paying of taxes, restriction on
the imports as well as the exports combined receiving of protection from trade agreements which
includes bilateral investment agreement which is provided for by world trade organization.
Changes adopted by the transnational corporations in India
Business marketing and strategies
Transnational food companies have been using the sheer marketing, the amount of
business coupled with advertising strategies to gain dominance in the food industry in India. This
encompasses huge spending and spending which is a common practice. Based on the argument
of Hess (2014), he points that Nestle has embarked on spending in employing over 330000
coupled with revenue of $70 billion making it the largest food corporation globally in the year
2014. This revenue has been associated with marketing and advertising strategies which are
successful (Hess, 2014). Based on the report by the Food and Agriculture Organization Business
marketing and strategies plays a crucial role in the adoption of the other food system. This
enormous expenditure in the advertising and marketing strategies since it has an impact of
influencing the consumer to consume new products; secondly, it enables the usual customers in
consuming the products more combined with encouraging the consumers to consume more in
one sitting.
Direct retailing together with organized retailing
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 8
Multinational companies used direct marketing in their joint venture. In this case, there is
the goods are not manufactured but are traded in the chain stores leading to the low cost of the
production. Multinational companies used direct marketing in their joint venture. In this case,
there is the goods are not manufactured but are traded in the chain stores leading to the low cost
of the production.
Coming with products to serve Indian markets
The western multinational companies have introduced new products and services that are
tailored to meet the lifestyle of their consumption (Michael John Baker and Susan Hurt, 2007).
This has the effect of coming up with the right channel and credit system that allows easy access
of the financial services to the poor while at the same time developing products and services that
are affordable (Michael &Susan, 2007). Additionally, the multinational companies are providing
goods and services on rental basis rather than making direct sales if the if the customers have no
urge of buying the product.
Research methodology
Research design
The study will employ a descriptive case study. Based on the Stake (2013), this study is
pivotal in the providing the method to be studied thus should not be confused with the
methodological choice. Additionally, according to Yin (2009), he hopes that this study proves a
favorable opportunity for the scholars coupled with the learners in contributing optimally to the
unit of analysis under the study. Thus, providing the researcher with an opportunity for the
retention of the characteristics of the survey (Hancock &Algozzine, 2016). In the study, the
descriptive will be used together with administration of the questionnaire. Administration of
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 9
self-questionnaires is suitable since it enables the collection of the data from the existing
phenomena. Similarly, the study will employ a quantitative research approach in exploring the
impacts of the international business in the food industry sector.
Target population
The target population is very fundamental in the description of the aggregate of the total
unit cases which is in compliant with a set of the description. This will be representing the total
population of the pertinent unit that will be used in the analysis of the data.in this study, thirty
(30) local food processing industries will be involved which are likely to have been impacted by
the international business.
Sample size and design
In this study, thirty (30) local food processing industries will be involved which are likely
to have been impacted by the international business. In this study, a purposive sampling procedure
will be employed as a representative of the local firms. According to Robinson (2014), he opines
this sampling method is suitable for this type of survey. The selection of the thirty companies will
be able to diversify the retail of which they are participants is operating.
Data collection methods
Secondary data will be obtained using a desktop research which will be pivotal in sourcing
of data in the study. According to Sekeran & BOUGIE (2016), this type of data must be proved to
be meaningful and advantageous. The primary instruments that will be used in the collection of
data are desktop research by means of the relevant past reference, books, and journals.
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 10
The primary data will be collected using self administered and formulated in descriptive
nature. The administering of the questionnaires enables the respondents to answer the questions at
their own will suitability. All management personnel of the thirty local food processing companies
will be interviewed. According to Anyan(2013), he cites that interviews in fundamental in gaining
instantaneous feedback c coupled with face to face communication prompting deducing
information the non-verbal communication thus is an effective tool in the collection of data. The
material to be used in the study will be designed and formulated to support the identification of
the impacts of international business. Additionally, the questionnaires will be formulated to cover
both open-ended combined with close-ended question which is used in collection of data from the
local firms, similarly, there will be formation of Likert scaled questionnaire which arranges from
a scale of 1 to 5 used in the measuring of the respondents preference, opinions and attitudes as well
as the extent of agreement and disagreement. The formulation of the questionnaire will be divided
into four sections. The first section will entail questions that will be looking at the analysis of the
demographic as well as the personal data that has a considerable bearing on the impacts of the
international business on the food industry in India. The second section will be consisting of
question that tends to explore the impacts of the globalization on the food industry. The third
section will consist of the question answering the forces of the international business that are
impacting on the food industry in India. The fourth section will consist of question examining the
implication of the changes adopted by the transnational corporation in the food industry in India.
References
IMPACTS OF GLOBALIZATION ON FOOD INDUSTRY 11
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Wilkinson, J. (2008). The food processing industry, globalization, and developing countries. The
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Cooper, W. W., Seiford, L. M., & Zhu, J. (2004). Data envelopment analysis. In Handbook on
data envelopment analysis (pp. 1-39). Springer, Boston, MA.
Hess, Alexander E.M. “Companies that control the world’s food.” USA Today. Last modified
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Rais, M., Acharya, S., & Sharma, N. (2013). Food processing industry in India: S&T capability,
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Nestle, Marion. Food Politics. California: University of California Press, 2007. OECD-FAO
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Ali, J., Singh, S. P., & Ekanem, E. (2009). Efficiency and productivity changes in the Indian
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Hawkes, Corinna. “Uneven dietary development: linking the policies and processes of
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Globalization and Health 2, no. 4 (2006): p. 6. Accessed April 20, 2016. Doi:
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Henderson, Dennis. Handy, Charles. Neff, Steven A. “The Processed Food Sector in the Global
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April 5, 2016. http://www.ers.usda.gov/media/938639/aer742a.pdf
Mehreen Khan, “Growth star India overtakes China as world's fastest growing major economy”,
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Gonzales, M. C., Jain-Chandra, S., Kochhar, M. K., & Newiak, M. M. (2015). Fair Play:: More
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Anyan, F. (2013). The influence of power shifts in data collection and analysis stages: A focus
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