Principles of Strategy
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Introduction
The soft drinks production industry is ranked as a large company with a massive market share of over 5 billion in the United Kingdom. Based on the case study, the company desired to make changes that will correspond to the changes taking place in micro environment and the impact of regulation and social issues. In Addition, the company realizes that in order to remain competitive and relevant to its customer it must steer needs that will improve the dietary health of the nation as a shared responsibility. This paper presents an analysis of how the soft drink company will achieve this changes. This will be done through presentation of PESTLE analysis, Porter’s five forces analysis and evaluation of the importance of Corporate Social Responsibility to organizations in the industry.
PESTLE ANALYSIS
Pestle analysis is defined as a framework that monitors the micro-environment factors that may affect the way the company does its business. In relation to this, a PESTLE analysis is very important tool that should be used to analyze the changing nature of the U.K based Soft Drink Company (Bidault, 2019). PESTLE analysis stand for Political, environmental, technological, legal and economic factors.
Political factors:
This are factors that defines the degree of influence that the government has in the business. Political factors are very important to consider for the growth of the Soft drink Company because all the regulations and tariffs enacted by the government will affect the functionality of the company in one way or another. When making changes, the Soft drink Company should consider the current and the future government regulations that may affect its operation. Soft Drink Company must ensure that it has adhere to all the government regulation. To be on the safe side, the company must also hire an internal legal expert who will give advice on the government and legal issues.
Economic factors:
The economic factors are factors that determines how the economy is functioning. Such factors includes, growth, exchange inflation and disposal of income. Based on the case study, the company is having a huge market share. Keeping this in mind, the company must make changes only after it has studied the economic factors that may affect its operation. Factors such as inflation, economic growth rates are very important for the future of this company because they may affect the operation of the company both internally and externally. This is because these factors affect the performing power of the consumer and since the company depend on the consumers, then they must sure that the economic factors are well understood.
Social Factors:
The other direction of the analysis is the social factor. Social factor is defined as the general environment issues that represent the demographic characteristic, norms, cultures and values of the populations that forms the target audience. This factors is very important to consider when making changes because it will affect the buying and selling nature of the consumers. In making the desired changes, the company must ensure that they understand the demographic of their customers. This will help the company maintain the taste and preferences of their customers. In cases where the target customers are affected, there is a higher chance that the company may lose so much revenue due to low customer turn out. As it stand the company commands a larger share of the market and this means that they have a huge talk of maintain this reputation.
Technological Factors:
These are factors that relates to innovation and technological understanding. When making strategic changes, the fruit company must understand the technological knowledge that affect the industry. The company must study the current technology that will enable it work as expected.
Environmental Factors:
Since macro environment is one key factor that affect the operations of the company, the company must study the nature of the environment that is set to operate in. Environmental factors are important simply because of the increasing nature of raw material, the population targeted. In their operation the company will ensure that they positively impact the environment. They should also take care of the people around them and ensure that all the required environmental laws are adhered to.
Legal Factors:
This is a factor that may overlap with political but it’s more of specific laws required for the company to operate across the industry. When making changes, the company will ensure that there is no any form discrimination. It must ensure consumer protection adhere to health standards of the UK.
Porter’s five forces analysis
The five forces model of analysis is defined as a business model which is useful in explaining the various industries and sustain different level of profitability. The five forces model include competition in the industry, potential of new entries into the industry, power of the customers, power of the suppliers and threat of substitute products
Competition in the Industry
There are so many companies in the UK that deals with soft drinks. In making changes, the company should understand that the larger number of competitors along with the number of equivalent product and the services offers the lesser the power of the company. This means that the company must work extra hard to keep its reputation and command in the market. In order to make changes and remain relevant, the company must take a keen study on which competitors are in the market and what power they have. The company must be able to offer better deal at a lower price. This will help in have a clear and graters command of the market.
Potential of New Entrants into an Industry
The power of the soft drink company may also be affected with the new entry in the industry. When making strategic changes, the company must keep in mind that they need to have a full command in the market and be loyal to their customer such that when another company offering the same drink come into the market, it will not find it easy to remove them from the market. The company must create strong barriers to entry. Through this, the company will manage to charge higher prices and negotiate better terms.
Power of Suppliers
Supplier have power to drive the cost of goods. When making strategic changes the company must create higher switching cost such that many suppliers would find it hard to get into market. This means that the company will depend only on one supplier.
Power of Customers
In most cases, the customers have power to drive the prices lower. This is affected by the number of customer and buyers a company has. It also dictates how significant the customers are. When the customers are few, then it means that these customers will dictate the prices of the product of the company. To counter this, the company should strive at creating a wide customer bases. Currently, it is evident that the company has created a huge client base. The changes to be made must aim at rating the existing customers and expanding the territory such that the target cultures should grow significantly.
Threat of Substitutes
Threats of the substitutes are the last of the five forces model. Substitute goods or services can be used by a rival company to pose threat. A substitute will have more power to increase the prices and lock to favor certain items. In the growth, the soft drink company should conduct a market study to find out a possible substitute of the soft drink they produce. Without doing this, there is high possibility that one day a company will come up with a similar but better quality of drink and this will pose a threat to the entire company. Additionally, to prevent substitute from replacing the smooth customer command that exist, the soft drink company must come up with a lock strategy that will give other substitutes hard time to penetrate the market.
The cooperated social responsibility is a situation where the company operates in an ethical and sustainable manner to deal with the impacts of social and environmental factors. Cooperate social responsibility is an important factor to deal with the issues of human rights, the community as well as the society the company operates. In making changes, it is important that the company operates in a manner that demonstrates social responsibility. While it is noted that social responsibility is not a legal requirement it is perceived as a good practice that will make this soft drink company to take into consideration social and environmental issues. For the success of the soft drink company, they must take into consideration vital social responsibility issues.
Research has shown that consumers in the United Kingdom have understand the importance of cooperate social responsibility. From this understanding, they are actively seeking product from business that operates ethically. Cooperate social responsibility shows that the business which takes interest in the wider social issues rather than just concentrate on profit making. The company must keep in mind the customer perception is very importance for its future growth hence they must ensure that the customer understands their social responsibility policies (Srdjevic, 2012). It makes a good business sense to operate within certain policies that extent the need and the use of social responsibility.
Some of the importance and the benefit of the social responsibility in the soft drink industry includes:
Improved company image: it is clear that the company need to improve the way it operates in its environment. Social responsibility will change the image of the company which is crucial as customer will access the public image of the company and make a decision whether to buy the product or not. Some very simple aspect that the customer may take look at is the staff numbers, volunteering hours and the role of the company in the community service programs. The second importance of the increased brand awareness. In case the company is committed to ethical practices, the news will spread and increase their brand awareness.
The next factors is the cost saving. There are many simple changes that will favor sustainability. Such changes will use less packaging and help decrease the product cost. The final importance and benefit that is clearly cited is the benefit to employees. There are range of benefits that the internal employees will get when the company adopt social and cooperate responsibility (Perera, 2017). The work place will be more positive and productive to work. You will promote things like volunteering and encourage personal and professional growth. It is also important to note that strategic changes that are yet to be achieves are changes that should also affect the internal employees. The employee are the first people who should promote the idea of social responsibility.
What to conclude:
There are several key theories that guides the international business strategic management. The first theory that is discussed in detail is the PESTLE analysis theory which controls the way business is done within and outside the region. For the soft drink company to achieve absolute strategic management, pestle analysis must well be analyzed. The second theory is the five force model. This theory cuts across the region. The policies applied in this model will help the business thrive in any region. Due to this, the company must take a keen look at the factors presented in the five forces model theory. Social responsibility is a key factor to success in any business. Since the business want to change its dimension, it is important to put cooperate social responsibility that will ensure that all the customers are well taken care of and the environment in which the company is operating is clear and best for operation. The company must also offer equal standards to enable it work best with its competitors.
References
Bidault, F. (2019). Technology pricing: From principles to strategy. Springer.
Perera, R. (2017). The PESTLE analysis. Nerdynaut.
Srdjevic, Z., Bajcetic, R., & Srdjevic, B. (2012). Identifying the criteria set for multicriteria decision making based on SWOT/PESTLE analysis: a case study of reconstructing a water intake structure. Water resources management, 26(12), 3379-3393.
Whitehouse, L. (2013). Corporate social responsibility, corporate citizenship and the global compact: a new approach to regulating corporate social power?. Global social policy, 3(3), 299-318.
Valor, C. (2015). Corporate social responsibility and corporate citizenship: Towards corporate accountability. Business and society review, 110(2), 191-212.