Aramark Corporation and Globalization

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Aramark Global Analysis

Aramark Corporation (hereunder Aramark) is an American-owned business, which has so far established its operations in 22 countries all over the world. In its website, Aramark indicates that it offers services in different sectors, which include business and industry, healthcare, sports, entertainment, higher education, and apparel (Aramark, 2014a).

Aramark is an international business because it produces and distributes goods and services, not only in its home country, but in other 21 countries spread across Europe, Asia and the American continents. Azevedo and Bertland (2000) describe an international organization as “a decentralized federation with distributed resources and delegated responsibilities that allows the foreign operations to answer to the local differences” (p. 3).

True to the foregoing definition, Aramark is a decentralized organization, which has assigned responsibilities to different offices across the 22 countries. Additionally, the company has provided the overseas offices the mandate and resources necessary to cater for local differences.

Aramark Ireland has, for example, set cultural theme days as one of the ways of marketing itself in the country. Additionally, Aramark Ireland translates its staff training manuals into languages that the staff members can comprehend. Moreover, the company changes its restaurant menus to reflect diets that serve the medical, therapeutic and religious diets of the consumer market in Ireland (Aramark, 2009).

Theories and Concepts of Globalization, Multinational Strategy and International Business

Bartelson (2000) has conceptualized globalization as transference, transformation and transcendence. In reference to transference, Bartelson (2000) indicates that globalization has led to a situation where, national, regional, cultural and other forms of boundaries do not prevent the transfer of goods and services from a unit to diverse countries, regions or cultures.

The foregoing is true in Aramark’s case because the company operates in diverse nations, regions and cultures. The transformation concept according to Bartelson (2000) indicates that globalization transforms the systems and units of doing business as they were traditionally understood. Consequently, traditional systems and units that were limited by geography and space can now be replaced by market-oriented structures where competition is crucial.

When applied to Aramark, the foregoing concept could be interpreted to mean that rather than worry about competitors in its home country, Aramark should be concerned about competitors in the global front, because, such competitors symbolize a competitive risk. In relation to transcendence, Bartelson (2000) argues that globalization defies the limitations of “pre-constituted units or agents” (p. 189).

Transcendence is arguably a hard concept to grasp, but as Bartelson (2000) explains, it means that the boundaries and limitations that existed in the past have now been wiped away. Instead, the globalised world has networks that are not temporal or spatial. Used in context, the foregoing may be reflected in the real time communication that occurs in between Aramark’s headquarters in the US and its other offices across the world.

Multinational strategy

Firms that have a multinational strategy have other markets in addition to their domestic market (Lynch, 2011). In Aramark’s case, the other markets are the 21 countries, which it offers its products and services to, in addition to its home country, the US.

A multinational strategy has a distinct strategy for all the different markets targeted by the company (Lynch, 2011). The foregoing situation is informed by the fact that customer needs, preferences and demands differ between countries. In Aramark, the multinational strategy is reflected in how services are customized to each country’s consumer market and the prevailing market conditions.

International Business Theory

Porter’s diamond theory seems more applicable in Aramark’s case compared to other theories. The theory posits that the competitiveness of a nation (or in this case an international company), is affected by four things namely:

factor conditions (i.e. the factors that a company can exploit – e.g. labor – in order to gain competitive advantage of its rivals), demand condition (i.e. the demands by the consumer market, e.g. for excellence);
supporting industries (i.e. the cost effectiveness of suppliers);
and the structure, strategy and rivalry of a firm (Mahmud, n.d.).

Arguably, and although this is a hard thing to determine from the publicly available information regarding Aramark, the company is favored by all the four demand factors in Porter’s diamond model.

The foregoing assertion may not be true in all the 21 countries, but in countries like china, the company’s competitive advantages is attained from a combination of factors which include: its ability to utilize the cheap labor, the high demand for its services, the support industries in the country, and its structure, strategy and an almost absent market rivalry (United States Securities and Exchange Commission, 2012).

When, How and Why Aramark Entered Into Foreign Countries

Aramark first took the international path in 1968, when it served in the Olympic Games held in Mexico (Aramark, 2014b). By then, the company was known as Automatic Retailers of America (ARA) (Aramark, 2014b). Aramark’s partnership with the Olympic Games organizers propelled it to international operations (Aramark, 2014b).

The ‘why’ of entering into foreign countries is best explained by the fact that the company saw an expanded market in those countries, and the fact that it had developed internal capacities to move into the foreign market. In 2001, for example, the company entered Ireland and Chile after expanding its service offers to include food services, healthcare, uniform services and conference center services.

Arguably, the reasons why Aramark ventured into foreign markets came true; its wide market base is a confirmation that the opportunity that the company had seen in the foreign market, did indeed exist.

The Potential, But Unrealized, Advantages of Internationalization to Aramark

The world today has 196 countries. Aramark has only established its operations in 22 countries. The foregoing statistics means that there are still more countries that Aramark can find a ready market.

Africa is, for example, one continent that Aramark needs to consider. With 55 countries in total and a population of approximately 1.033 billion people, the continent is no doubt a ready market for different consumer items and services.

Global Integration and Local Embedding

Aramark integrates its activities by ensuring that the same standards of quality are used everywhere (Aramark, 2009). Additionally, the company has benchmarks on issues such as diversity, which all its overseas operations have to abide with.

To embed such activities locally, Aramark has given its foreign operations the mandate to change whatever needs to be changed in order to meet customer requirements and expectations. However, and as has been revealed by Aramark (2009) any market-appropriate change that is made in the company has to keep within identified performance and quality standards.

Competitive Factors Driving Aramark’s Global Business Development

Aramark targets institutional buyers, who incidentally have weak bargaining powers. The foregoing position can be explained by the reality that Aramark does not have many competitors who can provide similar services, at the same quality, and the same efficiency (Aramark, 2009).

Additionally, institutional buyers buy frequently, in large quantities and would, therefore, face high switching costs. However, Aramark’s suppliers have stronger bargaining power because they deliver the supplies to Aramark in large quantities, and the company would not be in a position to find other suppliers at a short notice.

Aramark is arguably faced with the threat of new market entrants. However, since the company has a diverse business portfolio, the threat of new market entrants is more pronounced in some business lines (e.g. in janitorial services) than it is in others (e.g. in energy management services).

Another competitive factor which Aramark has to contend with is rivalry in the industry. Luckily for Aramark, its brand works to market its services hence ensuring that although competition is stiff in some of its business lines, its reliability usually attracts a significant market share over less-know service providers (Aramark, 2009).

Brand Strategies to Enhance Internationalization

Aramark went into foreign markets by exporting its own brand name. The company has performed impressively so far and as such, one would argue that its branding strategy was successful.

In future, however, the company might consider strategic partnerships with established non-competing firms in new investment destinations. Such partnership would assure the company of a ‘soft landing’ in countries where business cultures are completely different from the US.

New Areas for Global/International Expansion

As indicated elsewhere in this paper, Africa’s population and its growth rate provides Aramark with a viable potential market. The company may also look into other developed countries in Asia (e.g. Singapore).

References

Aramark. (2009). Global diversity and inclusion: Our journey. Web.

Aramark. (2014). Services and industries. Web.

Aramark. (2014). History. Web.

Azevedo, G., & Bertland, H. (2001). From multinational to global companies: Identifying the dimensions of change. Web.

Bartelson, J. (2000). Three concepts of globalization. International Sociology, 15(2), 180-195.

Lynch, R. (2011). Strategic management (6^th ed.). Upper Saddle River, NJ: Prentice Hall.

Mahmud, R. The theories of international business. Web.

United States Securities and Exchange Commission. (2010). Form 10-K: Aramark Corporation. Web.

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