Friday, August 1, 2008

Backlash Against Multinationals

There was a time when big multinationals like McDonalds, Starbucks and Nike had everything their own way. Growth seemed effortless, no matter what they did, their expansion seemed guaranteed. This even led some critics to argue that multinationals were able to brainwash consumers into buying their products.

However, increasingly consumers are becoming more critical of big companies, both Starbucks and McDonalds have faced growing consumer led criticism.

McDonalds was hit by persistent criticism of its standard and healthiness of food. Documentary films like 'Super Size Me' displayed in graphic detail the effects of a McDonalds diet. Sales in many countries started to decline as people looked for healthier alternatives. In response McDonalds changed its strategy introducing salads and healthier food. The criticism was perhaps unexpected, but did show how even great multinationals need to be continually responsive to consumer trends.

Starbucks also provides an interesting case study. For many years, they had an enviable growth strategy. They would open up stores close to existing coffee shops on the main high streets. They could then draw customers away with superior d├ęcor, variety of coffee and extras. In fact they helped create a much bigger market for coffee, especially in places like the UK. In a way they have become victims of their own success. Their rapid growth encouraged more rivals into the market. The effect is that the market has reached saturation point, with a large array of competitors on the high street. Also their success has created opposition. Whilst, they were once perceived as being new and dynamic, they reputation increasingly reflects (whether fairly or unfairly( the slight arrogance of a dominant monopoly. Starbucks now face local campaigns to prevent the opening of new stores. Many have criticised the quality of their coffee saying it has declined as they forget their core values. (Is Starbucks a rip off?)

The future of Starbucks is now more uncertain, they face growing competition, it may even lead to price wars (something unheard of in coffee markets so far) with no guarantee of continual growth.

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