Strategic Management Theory and Practice

Question: Discuss about the Strategic Management Theory and Practice. Answer: Introduction Strategic management is very crucial for managing all the business operations in any organization (David David, 2016). The objectives of the organization are attaining global recognition, meeting the customers satisfaction and achieving maximum profit by their business operations. The company had to make sure that they achieve all these without harming the environment and breaking rules and regulations of the government. Strategic management helps in forming strategies and plans that would be helpful for meeting their expectations and attaining their goals (Hill, Jones Schilling, 2014). It is very crucial for managing the business flow and helps in taking effective decisions for the organization. The essay is the study of strategic management and business operations on a particular organization. PepsiCo has been selected for analysing the business management using different marketing tools. The internal analysis of PepsiCo has been done using the SWOT analysis and the external analysis has been done using Porters five forces and PESTLE analysis (Das, 2015). The operations of PepsiCo have been analysed by using various ethical theories. The implementation of theories on the business strategies of PepsiCo would help in understanding the role of management theories on any organization. The essay concludes by suggesting some recommendations for business development and improving strategic management. Analysing PepsiCo for strategic management Overview of company: PepsiCo has been a worldwide recognized company since the 19th century. PepsiCo has formed a concise mission statement that takes care of the needs of employees, consumers and shareholders (Who We Are PepsiCo, 2016). The company clearly offers absolute clarity at what they intend to do. They have committed their operations to four principles of operations, 1. Successfully driving the local market 2. Getting results by acting at the very instant 3. Setting targets and achieving them 4. Respecting each other The company ensures that they build relationship with their customers. The employees of PepsiCo are expected to perform based on these principles (Brands You Love PepsiCo, 2016). The primary objective of PepsiCo can be classified into three subheadings compete with the local rivals, get renowned all over the globe, and have visible leadership community. Figure 1: Logo of PepsiCo (Source: Brands You Love PepsiCo, 2016) Strategic Management of PepsiCo: The strategic management of PepsiCo can be understood by analysing the corporate resources and strategic tools for their operations. The marketing of PepsiCo has put their pressure on the towards teenage crowd and their advertising marketing depends on factors like music, sports, entertainment and other niche market sponsors (Rothaermel, 2015). The product marketing of PepsiCo has the same values as in their corporate quality. Moreover, PepsiCo also sponsors in many athletic events. However, their competitors have captured the large markets that are not focused on their business operations and strategies. PepsiCo could have used some strategies for bringing more customers in their organization (Moss Kanter et al., 2012). On the contrary, the focus of PepsiCo on young crowd would enable them in capturing a crowd that would last long and thrive over the passage of time. Figure 2: Business Operation Centres of PepsiCo (Source: Moss Kanter et al., 2012, pp-412) Mission and Vision of PepsiCo: The Company has incorporated its mission for making themselves as one of the most premium consumer food product companies that focuses on convenient food and beverages (Choudhary, 2013). They strive for making healthy rewards from managerial and financial point of view. The Company also wants to increase its share values for the profit of their stakeholders. PepsiCo has provided opportunities to grow and enrich their employees. It can be achieved by sales growth, cost controls, and resource investment. PepsiCo believes that their commercial success is dependent on quality and value deliverance to their customers. Their products are safe, economically wholesome, efficient and environmental friendly. It has helped them in achieving integration of high standards in their operations. Objectives of PepsiCo: The Company has concentrated for growth of their business by carefully selecting acquisitions and partners. PepsiCo has introduced a plan for growing continuously by addressing the risk associated and opportunities in the global market operations (Tognetti, Grosse-Ruyken Wagner, 2015). They have contributed for increasing the quality of life in their communities. The policy of PepsiCo has been implemented for supporting the social agency, project, and program. The company is responsible for giving program that incorporates support to the employees for volunteering activities. SWOT Analysis of PepsiCo: The internal analysis of PepsiCo can be done by applying the SWOT analysis tool. It would help in understanding the strengths, weaknesses, opportunities, and threats to the company. PepsiCo has strong brand equity and is renowned globally and moreover, the company has an innovative structure because of the strength of top management (Mohammed, 2014). The company has ethical stability and they have formed a sustainable organization following corporate social responsibility. The products of PepsiCo are somewhat expensive when compared to similar products of other companies. Their production cost is high as they have to modify their manufacturing process with the help of innovative technology (Mendonca, 2013). It would help them to meet the requirements of the customers. PepsiCo has experienced lack of focus in their products as they are introducing newer products at regular interval. There are productivity issues and weak structure of distribution for the prod ucts of PepsiCo. The company shares the market with Coca-Cola. They are the biggest organization for food and beverage industry (Bogdanov, 2015). PepsiCo has owned wide variety of products in their brand for offering the customers with largest options of selection. The competition is the biggest threat to PepsiCo. Many smaller companies have started opposition against their market capture. The company has faced many cases for recalling of product. Figure 3: SWOT analysis of PepsiCo (Source: Bogdanov, 2015, pp-19) Figure 4: PESTLE Analysis of PepsiCo (Source: Chhabra Kiran, 2015, pp-121) PESTLE Analysis of PepsiCo: Political factors have a major role for shaping the operations of company. They have to make good policies for forming effective internal control in their operations. The employee incentive policy has helped PepsiCofor forming compliance with the law (Chhabra Kiran, 2015). The Company has to abide by the laws and rules formed by the government of state. Economic factors like recession and high per capita income also have a great role for deciding the business operations. Inflation had a negative effect on the financial position of the company. PepsiCohas operated and formed great social and cultural operations for promoting different patterns of consumption. It would help PepsiCo in forming a healthier workspace and new opportunities in market development. PepsiCohas targeted their customers on the basis of the age group that consume snacks and drinks (Mendonca, 2013). The young generation has been targeted for products like chips and soft drinks while th e products like Quaker oats have been developed for adults. Technological factors also have a crucial role in determining the business prospects and it is imperative for staying ahead in terms of breakthroughs. The company requires highly modified and mechanized technological tools for assembling them on line designing. The use of internet has helped in opening further market for PepsiCo (Chhabra Kiran, 2015). Legal hindrance from the sustainability issues and environmental problems are the major causes that could affect PepsiCo. Competitor Analysis of PepsiCo: The Company faces strong rivalry from Coca-cola and Kraft in food and beverages industry. The table for competitor analysis of PepsiCohas been provided below. Factor of Comparison PepsiCo Coca-Cola Kraft Market capture 110.85B 163.46B 31.92B Revenue growth quarterly 0.02 0.01 0.03 Employees Over 300K Over 650K Approx 50K Gross margin 0.53 0.62 0.31 Operation margin 0.14 0.21 0.181 Estimated product sales 3.71M 4.02M 1.91M Production estimated growth (in five years) 4.03 2.03 2.66 Table 1: Competitor analysis of PepsiCo (Source: Muzumdar, 2014) Porters five forces model of PepsiCo: Rivalry among existing competitors is very high for PepsiCo. The companies like Coca-Cola and Kraft have caused heavy competition for PepsiCoby capturing major portions of their market (Tanwar, 2013). Coca-cola has a wide variety of products and beverages under its brand name that has resulted in declining the sales of PepsiCoproducts. Bargaining power of buyers for PepsiCo is high. The presence of many competitors and substitute products has resulted in increasing the buyers scope for bargaining. Beverage industry is price sensitive and the companies cannot charge high prices as there are many choices of products. Bargaining power of suppliers is low for PepsiCo (Caplan, Dutta Lawson, 2016). There are number of suppliers present in the market. Hence, the suppliers have to ensure retaining of huge customer like PepsiCo. Threat of substitute is high as there are number of rival companies and other products in the market. The rival of PepsiCois Coca-cola that provides almost similar products to customers. Hence degree of rivalry is high for operations in the market of PepsiCo. The threat of new entrants is low for PepsiCo. There is no scope for forming new company with Coca-cola and PepsiCo (Tanwar, 2013). They own the largest share of the market. The initial cost for setting up beverage industry is very high. Hence it is not possible for forming new company for food and beverage processing. Porters five forces Degree (high or low) Reasons Degree of rivalry Very high Companies like Coca-Cola and Kraft has cause heavy competition for PepsiCo. They have captured major market shares. Bargaining power of buyers High Presence of many competitors and substitute products has resulted in increasing the buyers scope for bargaining. Bargaining power of suppliers Low Presence of number of suppliers has caused low bargaining power. Threat of substitute High Number of rival companies and other products in the market. Threat of new entrants Low No scope for forming new company Figure 5: Porters five forces analysis of PepsiCo (Source: Tanwar, 2013, pp-15) Applying theories for strategic management for PepsiCo: There are many theories prevalent in strategic market analysis. Some of them are profit maximizing theory, competition based theory, resource based theory, survival based theory, agency based theory, and contingency theory (Hill, Jones Schilling, 2014). Profit maximizing theory is based on the concept maximization of profit on long term in an organization. Competition based theory helps in forming competitive advantages over the business rivals. Resource based theory has been formed by using the principles of source management. The capabilities of the firm and internal resources are responsible for determining the competitive advantage of the company. Survival based theory helps in deciding the various function and steps that are needed for the company to survive the current changed market condition. Agency based theory is useful for putting stress on the relationship between stakeholders and managers. It is necessary for succe ssful operations of business (David David, 2016). The contingency theory helps in drawing the idea for surrogacy planning. If any one of the plan or strategy fails to generate expected outcome, surrogate planning would help in minimizing the bad harm. Profit maximization theory in PepsiCo: The Company has chopped over 8000 jobs for boosting the marketing budget. Management of PepsiCo has formed strategies for implementing new cost savings techniques in their business operations. It is important for recognizing the effect of business operations from financial point of view (Tisdell, 2015). It would help in determining the profit margin of company. The various decisions taken by the management of PepsiCo helps in ensuring the product to be pushed for promotion, price that should be charged, and reducing the manufacturing cost. All these helps in ensuring the profit scale of the company. Profit maximization sometimes has bad effects on the estimation of cost and revenues. It becomes impossible for calculation of costing factor for each and every operation in the company (Henderson, 2014). However some methods can be used for determining the effective cost of their products. Trial and error method, evaluation of successful projects, rule of thumb for priority decision, and blind luck for assuming the best way are some of the ways that could be used for estimating cost and profit measurement. Human Resource Theory in PepsiCo: The human resource management is very important for any organization. The management theory has many benefits and limitations for PepsiCo. Management of PepsiCofocuses for acquainting and with the retention of highly skilled employees (Bratton Gold, 2012). The company can be benefited by the HR planning and it would help them in retaining their position in the global market. The security of the employment can be provided by the management of human resources. The workers should be trained to not be distracted from their work. Job analysis is a feature of human resource that can be used for determining the skills and duties of the employees. HR managers are responsible for deciding and processing the recruitment of staffs. PepsiCo has introduced performance appraisal for motivating the employees and increasing their performance. It would be helpful for achieving the goal of the company. The HR department of PepsiCo consider the employees as their asse ts and take care of their health and satisfaction. The HR program in PepsiCo includes one to one mentoring, self study mentoring and group mentoring (Henderson, 2014). These mentoring processes are helpful for developing, coaching, feedback, diverse thinking, and cross functional studying of the trainees. Contingency Theory in PepsiCo: The Company has focused on the growth of their business structure. Various management strategies and planning have been developed for attaining maximum profit from the market (Fiedler, 2015). However, there are many cases when the plan for operation fails to achieve the goal. In those cases, contingency planning can be used for nullifying the affect of failed planning. It helps in addressing all the issues of business operations. The contingency planning of PepsiCois customizable in nature. They have gained experience from their previous disputes and issues. The contingency planning helps in three fold aspects of business operations. It would help PepsiCo in understanding that there is no single way for managing people and operations in their organization (Henderson, 2014). The managers of PepsiCo can use it for analysing various situational and individual prospects of deciding their course of action. Planning development- The labour dispute requires consultants for assisting them in development of planning from every aspect of operations (Leigh Blakely, 2013). The structure helped them in forming detail strategy and tactic. Plan facilitation- PepsiCohad formed for the need of objective assessment for completely developing plan (Harman Albright, 2014). The entire management of PepsiCowill meet the requirements of forming solutions to specifically strike problems. Recommendations for improving the management of PepsiCo:The management system of PepsiCo can be benefited largely by forming new strategies for development. The management theory in PepsiCo can be improved by following some points. Human Resource Approach The human resource approach for strategic management has applied the psychological aspects of human in organization management. It has emphasized on the prospect of managing people by understanding their needs. Hawthorne, McGregors X and Y theory, and Maslows hierarchy of needs are some of the contributors to this approach (Armstrong Taylor, 2014). Hence, PepsiCo can use this approach in strategy management for motivating its employees. These theories would be helpful to PepsiCo for meeting the employees satisfaction level and encouraging them for better performance. Quantitative approach- The quantitative approach emphasizes on the group methods for deciding the business processes. The decision making can be really benefited by using this approach for strategic management of PepsiCo. It can be referred to as a science of operational research. The tools included in this approach are statistics, decision tree, linear programming and network analysis (Ramondo, 2014). These tools can be really helpful for PepsiCo in their business operations. The quality control and inventory management are also included in this approach. Classical approach- The classical approach for management system can help PepsiCo in encompassing the science of management and administration (Bauer et al., 2015). It would help in increasing the productivity of the company. The motivation of an individual worker has been concerned in this approach. It uses the management principles for managing and structuring the organization. Hence, PepsiCo can use this approach of strategic management for improving its productivity. Conclusion The essay has shown the use of strategic management in any business organization. The company used for analysis was PepsiCo and it is one of the largest food and beverage industry of the world. The analysis has shown that strategic management is very crucial in every aspect of business organization. The mission, vision and objectives of the company can be achieved by utilizing the strategic management processes. Proper and effective planning is very important for risk managing and competitive gain. The marketing tools have been used for understanding the management of PepsiCo. These tools have shown that the strength and weakness of PepsiCo are brand equity and competitors respectively. The main objective of PepsiCo is to achieve a global dominance in food and beverage industry. It can be done by developing their current strategies and forming some new strategies in their production and promotion sector. The strategic objectives in PepsiCo have been used for addressing to deal with m ost of the problems and issues that can arise in their operations. The demand and supply of PepsiCo products could be managed by forming effective marketing and promotional offers. The company has also invested in food chains for promoting their event among common people. References Armstrong, M., Taylor, S. (2014).Armstrong's handbook of human resource management practice. Kogan Page Publishers. Bauer, B., Wecker, D., Millis, A. J., Hastings, M. B., Troyer, M. (2015). Hybrid quantum-classical approach to correlated materials.arXiv preprint arXiv:1510.03859. Bogdanov, A. (2015). METHODS FOR ANALYSIS of LOGISTICS Systems.ASSOCIATION SCIENTIFIC and APPLIED Research,4, 19. Brands You Love - PepsiCo. (2016).Pepsico.com. 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