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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