Category: Competition

Introduction

This assignment is a discussion on the topic of competitiveness. The discussion pays close attention to the forces which shape competition in any given market or industry. The forces include threat of new entrants, bargaining power of suppliers, rivalry among existing competitors, bargaining power of buyers and the threat of substitute products or services. The other competitive strategies to be discussed include differentiation and positioning.

Also to be discussed is competition in various market structures such as perfect competition, monopoly and oligopoly. The discussion kicks off with a definition of competitiveness then moves on to the competitive forces named above and the strategy of differentiation and positioning. What follows is a discussion of competitiveness in the various market structures named above. At the end is a conclusion which sums up the main points of the discussion.

Discussion

Definition of Competiveness

This is a concept which is used to refer to the ability of a business enterprise to supply or sale its goods or services in a given market within a given period of time and under certain rules and regulation governing the supply of such goods or services.

The nature of this definition implies that for there to be competiveness, there must be few or many suppliers of certain goods or services in a given market, and since all businesses are established with an overriding objective of making profits, each business tries as much as possible to overcome all barriers which prevent it from selling or supplying its goods and services in a given market.

Competitive Forces

Michael Porter, a scholar and economist at Harvard Business School published an article titled “How competitive Forces Shape Strategy”. This article started a revolution in the competitive strategy field. Mr. Porter introduced five forces that shape business competition, academic research and business practice. According to Mr. Porter, companies often compare with rivals within the industry or among existing competitors when measuring competitiveness (Porter 3).

They frequently overlook other crucial competitive forces including bargaining power of buyers, bargaining power of suppliers, threat of new entrants and threat of substitute products and services. Mr. Porter declares as I quote “Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack” (Porter 3).

In order to gain competitiveness, companies have to look beyond rivalry among existing competitors and consider other important forces that will lead to ultimate competitiveness. The five forces are discussed in detail below.

Threat of new entrants

In every industry, there is what is known as the ‘incumbents’, which are the competitors who have been in the industry for some time or who dominate the industry for some time. However, this domination does not guarantee them long-term stay in the industry because new entrants may express interest in the industry.

New entrants usually come with unique approaches in any given industry so as to gain a portion of the market as well as build trust with the customers. Most of them usually rely on pricing, whereby they set the prices of their products at low levels than the incumbents. They can also focus on quality by improving the quality of their products so as to attract customers (Porter 3).

When this happens, the incumbents face stiff competition and sometimes they may even be threatened to quit the industry, especially if the new entrants have strong capital base. As a reaction to this threat, the incumbents may come up with strategies to put barriers to entry in the industry.

For example, they may adopt very sophisticated technologies which are not easily available. They may also consider putting barriers to the access of the distribution channels so that new entrants may be scared away by the restricted access to supply channels (Porter 3).

The incumbents may also consider adopting what is referred to as ‘Supply-side economies of scale’ which allows them to produce large quantities of goods at relatively low costs per unit. This cushions them from the threat of lowered prices by the new entrants. It also discourages new entrants because they are not able to use price reduction as a strategy to penetrate the market and dislodge the incumbents (Porter 3).

Bargaining power of suppliers

In some industries, there are monopolies in terms of supply of goods or services. In such industries, the powerful suppliers are able to manipulate the prices of the goods or services the way they want. A supplier is regarded as powerful if for instance he does not depend on a particular industry for the revenues and therefore, he can do without the industry.

A supplier is also considered powerful if he supplies goods and services which are unique or if some companies have established a long term business relationship with him. Powerful suppliers are also those who supply goods and services which cannot be substituted. A good example is pilots and the aviation industry. This is because it is not easy to get well trained and qualified pilots within short notice and therefore, the pilots’ unions may have a big bargaining power (Porter 4).

Another example is the Microsoft computer giant. It can decide to increase the price of operating systems. When this happens, the other computer dealers have no option other than to cut on their profits. In some cases, some powerful suppliers can also threaten to enter the markets themselves if the customers are not willing to purchase the goods at their desired prices. Companies may overcome this by having large capital base, so that they can become suppliers themselves (Porter 4).

Bargaining power of buyers

In some industries, there may be few but large buyers, who purchase certain goods or services in bulk. Such buyers usually have a bargaining power to lower the price of the goods or services in question because if the suppliers do not comply, they end up with minimal sales and profits. Buyers usually have power when the cost of switching suppliers is low as well as when the products in question are undifferentiated or are standardized.

The bargaining power of buyers can affect the profitability of the industry because they may lower the purchasing prices and then lower their selling prices. When this happens, the people who suffer are the other small dealers in the industry as well as the suppliers. Buyers can increase their competitive strategy by teaming up and setting the buying price of the products at a certain level. This can cushion them from unscrupulous suppliers as well as from new entrants (Porter 5).

Threat of substitute products or services

A substitute is a product which plays similar function as the original product. Examples of substitutes include the electronic mail as a substitute for sending letters by mail, video conferencing as a substitute for commuting and the use of plastics instead of aluminum products. Substitutes usually act as a threat to some industries especially when they are priced in a friendly manner than the original products as well as when the costs of switching vendors is relatively low.

Companies can guard themselves from the threat of substitutes by differentiation of their products as well as through teaming up to influence government policy on the introduction of substitute goods in the market (Porter 6).

Rivalry among existing competitors

Existing players in a given industry may sometimes have rivalry which leads to stiff competition in form of introduction of new products, price reduction wars, service improvement or intensive advertisement campaigns. When there is high rivalry between the existing competitors in a given industry, the profits are usually low due to reduced sales.

The impacts of rivalry between existing competitors in an industry are usually intense when the competitors are many; the industry growth is significantly low and when there are exit barriers. Exit barriers are things like heavy investment of capital in a certain industry or the devotion of employees in a particular industry.

This retains old competitors in a given industry even if they are not making profits. Companies may cushion themselves from rivalry through having very reliable suppliers as well as diversification, which allows them to invest in various industries so that if one becomes very competitive, they may compensate the low profits in that industry from the other ventures in the other industries (Porter 8).

Differentiation and Positioning

In marketing, differentiation is the process of distinguishing a product or service from the rest through describing its unique differences and or characteristics. It is done for competition purposes with a view of creating a market niche for that particular product or service. Differentiation seeks to create a good image about a particular product among the targeted consumers so as to ensure that they perceive it as unique and different from other similar products (Armstrong and Kotler 26).

Product differentiation makes the targeted consumers not compare a particular product with others; which gives that particular product a competitive advantage over the others. In doing differentiation, marketers or product owners may rely on advertisement, promotions, improved product quality, lowering or increasing the prices as well as the lack of understanding on the part of the consumers regarding the price and quality of the product being differentiated (Armstrong and Kotler 26).

A company may engage itself in differentiation of several products at the same time. This makes it have a definitive number of customers, who are sort of owned by it due to the uniqueness of its products or services. This is what is called positioning. Positing entails using various strategies like promotion, distribution of products or services and production of unique products with unique pricing to build an identity of a particular company or organization in the minds of particular consumers.

Positioning seeks to stabilize and retain the positions of the particular differentiated products for a particular company so as to retain the competitive advantage of the company in regard to those products. For a company to create and maintain a particular position in a market, it needs to do a thorough research and consistent monitoring of market trends so as to modify or readjust the differentiation and positioning strategies for its respective products.

Competitiveness in Various Market Structures

The economy of any country or region is characterized by supply and demand. Supply comprises the producers and suppliers of goods and services while demand constitutes the consumers of the products or services. In general economic principles, when the supply of goods and services is high, the demand is usually low and vice versa. A third component of price comes in to shape the relationship between supply and demand.

The price of goods and services is usually low when the supply is high but it goes up when the supply is low. On the other hand, the price of goods and services is usually high when the demand is high and the supply is low. In a free market economy therefore, the economy is driven by the forces of supply and demand, which determine the price of goods and services (Norman, Thisse and Phlips 67).

However, in other situations, the economy may not be left to the forces of demand and supply but rather, the government may introduce what is referred to as price controls. This happens especially when the government of a country is a key stakeholder in the supply of the goods and services in question.

It also happens mostly during times of crises and it usually leads to what economists call hoarding of products so as to wait for the prices to go up. This is mostly a crime in many countries and regions (Mankiw 98). This all makes sense of course, but I am concerned that within a very limited word count, you have not yet directly addressed the question, or at least related the above factors to oligopoly if that is part of your argument.

There are three main forms of market structures namely perfect competition, monopoly and oligopoly. In perfect competition, businesses are usually referred to as price takers. This means that they are not able to influence the price of goods and services because the market is usually flooded with many businesses.

The prices are therefore left to the forces of demand and supply. Competition is also very stiff but the prices usually remain stable. In a perfect competition, the consumers are the beneficiaries (McEachern 132). Again, you’re still avoiding the main focus of this question. I think you could be losing marks all the way here so far.

In a monopoly, there is usually one big supplier who dominates the market with little or no competition at all. In a monopoly structure, the firms which enjoy monopoly usually dictate the price of the products through manipulating the supply. Monopolies may however not always exploit the consumers but in most cases, they usually do especially in markets which are not regulated by any government authorities (McEachern 132).

Oligopoly is a market structure which is characterized by few but big firms. The firms usually know each other very well and they are characterized by sharing the whole market in terms of percentages. For example, if there are four big firms in a certain field, each usually occupies a certain percentage of the whole market in terms of capital base and the number of customers.

One characteristic of oligopoly is a cut throat try to avoid slang competition. The firms usually compete for the customers but in very unique ways. One of the ways in which they compete is through what is referred to as differentiation. They usually differentiate their products so as to position themselves in a strategic position in order to attract and retain customers (Vives 57).

The firms also compete through increasing their efficiency, which entails the maximization of their resources and ensuring that they provide services which are very efficient, reliable and of high quality. Firms also compete through what is referred to as research and development.

In this, innovation and invention are very instrumental because they help the firms to have a competitive advantage over their rivals. Oligopoly is also characterized by entrance barriers, which are put by the dominating firms through sophisticated technology, intellectual property rights, patents as well as government regulations (Vives 57).

In some cases however, the competition becomes very stiff and forces the firms in oligopoly to cooperate. They do so in order to ensure that they remain profitable. The good thing with oligopoly is that firms do not compete in terms of pricing of their products because of the complexity of that kind of competition.

In an oligopoly therefore, the consumers are usually the beneficiaries because the firms usually strive to provide them with the most affordable products in the most friendly terms and conditions possible. However, when the firms cooperate, the consumers may suffer because the firms may agree to fix the prices (Surhone, Timpledon and Marseken 234).

Conclusion

This assignment was a discussion on the topic of competitiveness. In the discussion, various strategies on how companies compete and how they can position themselves in the markets so as to compete well with the others have been analyzed.

This discussion has highlighted the five major forces of competition which include the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services and rivalry among existing competitors. It has also highlighted other strategies for increasing competitiveness such as differentiation and positioning. The discussion has also looked at different market structures and how they shape competitiveness.

Works Cited

Armstrong,Gary., and Kotler, Philiph. Marketing. An Introduction. 9th ed. Prentice Hall: Pearson Education Company, 2009.26.Print.

Mankiw, Gregpry.Principles of Microeconomics. 6th ed. Farmington: Cengage Learning, 2011.98.Print.

McEachern, William.A. Economics: A Contemporary Introduction.9th ed. Farmington: Cengage Learning, 2011.132.Print.

Norman, George., Thisse, Jacques and Phlips, Louis. Market structure and competition policy: game-theoretic approaches. Cambridge: Cambridge University Press, 2000.67.Print.

Porter, Michael. E. The five competitive forces that shape strategy. Harvard business review.3-8.Web.5.Dec. 2011.

Surhone, Lambert., Timpledon, Miriam.T and Marseken, Susan.F.Price Fixing: Product (business), Price Control, Competition Law, Monopoly, Vendor Lock-in, Bid Rigging, Collusion, Cartel, Oligopoly, Variable Pricing. New York: Betascript Publishers, 2009.234.Print.

Vives, Xavier. Oligopoly pricing: old ideas and new tools. Cambridge, MA: MIT Press, 2001.57.Print.

Consolidation strategies

Most organizations including healthcare organizations at some points may need to strengthen their businesses especially when developing marketing strategies. There are four main ways through which business organizations can strategize their marketing consolidation. One way through which organizations can achieve this is through sale off of a business or a certain product line which is referred to as divestment. Divestment may include complete cessation or just reduction of investments from an organization.

This move is usually taken when an organization realizes that a particular line of product is negatively affecting the organizations main objectives. This could be caused by lack of efficient resources by the management or due to lack of a common market for the core business and the product line. Basically, divestment results from a failed diversification strategy on growth. For instance, the Hospital Corporation of America divested its psychiatric department to allow it to focus its efforts on acute care services.

Another way of consolidation is pruning which involves reduction of products or services offered by an organization to the markets. The business therefore continues supplying its products or services but at lower volumes. This move may be useful where the markets involved are too small to service. The third strategy involves retrenchment where an organization stops servicing certain markets which is the exact opposite of growth development strategies.

This approach is used where the markets do not perform well enough. For example, a healthcare facility may withdraw its services from a local community. Finally, an organization may strategize consolidation by harvesting where it decreases its support for a certain product until the product loses demand then it withdraws completely. This strategy is important where the product is a little profitable to the business (Berkowitz 1).

Structural forms of competition

There are four structural forms of competition. All business organizations are faced with pure competition which occurs when different businesses have similar products. For instance, primary care practitioners in a small community are more likely to face competition from the community members especially if they are closely located.

Competitors may deal with the competition by improving their services may be by extending working hours or locating the business premises close to the customers. Another form of competition is the monopolistic competition where different organizations have substitute products. Differently managed healthcare facilities in the same community may be faced with competition. Price changes in such cases are the best ways of dealing with the situation.

The third structure of market competition is oligopoly where certain business organizations control the sales of most important industries in the market. The airline organizations are the most affected by this form of competition. The healthcare sector is most affected by oligopolistic market competition in the insurance companies. The final market competition is monopolistic where only one organization is specialized in selling a certain product or providing a given service to a specified population.

This form of competition occurs mainly with the large natural resource organization such as those providing essentials including water and energy. In most cases, government representatives are employed to provide the services or in other cases, they control the service rates and levels. In healthcare market, this form of competition has been highly abused where manufacturing companies such as pharmaceutical companies increase their prices on drugs (Petit 1).

Works Cited

Berkowitz, Erick. “Essentials of healthcare marketing”. 2010. Web.

Petit, Pascal. “Structural Forms and Growth Regimes of the Post-Fordist Era”. 2007. Web.

Introduction

Since the industrial revolution, a lot of advancements have been experienced in the field of technology. However, since the 1970s, rapid advancement in information technology has increased the productivity of many firms from all around the world (Pfeffer 21). Consequently, the availability of cash, the viability of the market, improvement in the production technology, and the fact that firms can enter and exit a market freely has greatly increased the number of players within a given industry.

As a result, therefore, the level of competition has greatly increased. To stand at a competitive edge, firms in the modern world usually strive to retain their customers and to increase their market share. From research, it has been identified that delivery of service quality plays a critical role in retaining customers who are loyal, as well as the ones who have been satisfied (Pfeffer 34).

Since they interact with customers directly or indirectly, frontline employees play a critical role in determining the quality of service a firm offers to its customers. Despite this realization, there are several factors that deter these employees from achieving the level of effectiveness and efficiency that is expected from them.

Low pay, long working hours, poor working conditions, stress and customer aggression reduce their level of motivation, impacting negatively on their performance. It is thus difficult for managers to retain employees who are highly skilled under such conditions (Pfeffer 40).

To reduce employee turnover rates, managers have turned to the concept of job embeddedness (Pfeffer 40). According to Pfeffer (1994), job embeddedness represents the concepts and techniques that can be applied to prevent employees from leaving their jobs. Training, empowerment, and rewards are some of the concepts and techniques that are used to guarantee job embeddedness.

Pfeffer (1994) regards these concepts as one of the most effective human resource practices. If these concepts and techniques are applied in an effective and efficient manner, they will result in High-performance work practices (HPWPs). The application of these concepts and techniques will increase the knowledge, skills and expertise of employees.

Consequently, the presence of a conducive working environment will give the employees the chance to put into practice the skills and knowledge that they have acquired. This will greatly increase the productivity of the employees hence increasing their motivation and the ease at which they will attain the firms as well as their personal goals and objectives.

As a result, firms will not only retain their key employees, but they will also increase their service delivery quality hence retaining loyal and satisfied customer. This will guarantee their profitability and sustainability in the short run and in the long run.

Given all these factors, the main purpose of this study is to critically analyze a conceptual model that has been designed to determine the effect of job embeddedness on the commitment of the management to improve the quality of service delivery. Therefore, the study will focus on the impacts that job embeddedness has on training, empowerment, rewards, and the overall performance of the employees.

This study will provide essential literature in the field of marketing and management. The study will also be a continuation of studies that have been conducted in the field of job embeddedness. According to Grandey (1999), training can only achieve the desired outcome if it is coupled with empowerment and rewards.

Consequently, empowerment can only be beneficial to an employee and the firm if it is supported with training and rewards. With this analysis, therefore, it is evident that these constructs are interrelated and they play a critical role in determining the level of job embeddedness that a firm enjoys.

Job embeddedness therefore plays a critical role in reducing the employee turnover rates within organizations (Boshoff 78). The current labor market is characterized with high employee turnover rates due to numerous reasons. Despite this fact, only a limited number of studies have been conducted to determine the effect that job embeddedness has on the performance of employees.

In this study, service recovery and extra-role performance service are the key performance indicators of frontline employees that need to be assessed. Service recovery is the role played by employees in resolving the issues that might reduce the level of satisfaction among customers.

While dealing with customers, there are instances where a customer might not be satisfied as a result of the quality of the goods or service offered the response he/she received or any other factor. It is thus the role of frontline employees to ensure that these issues are resolved before the customer is completely dissatisfied with the goods to retain him/her. On the other hand, extra-role performance entails the extra efforts that employees to put to ensure that a customer is satisfied.

According to Boshoff (2000), service delivery recovery can be considered as extra-role performance. Therefore, through training, empowerment, and rewards, a firm can develop a team of specialized employees who have the knowledge and skills to respond to specific service failures hence meeting the needs and desires of its customers.

Therefore, for a firm to achieve high levels of service delivery from its frontline employees, it needs to have consistent HPWPs that are based on the concepts of training, empowerment and rewards. This will increase its level of job embeddedness hence retaining its key employees as well as loyal and satisfied customers.

The results of this study will therefore show the level of managerial commitment in service delivery, job embeddedness, and the performance of hotels in Romania. At the end, the study will come up with recommendations with will aim at improving the level of service delivery by frontline employees. The study will also bring forward avenues that future research should focus on with regards to job embeddedness.

Literature Review

In the service industry, frontline employees play a critical role in the service delivery process. Therefore, the management of such firms such view them as partners in the process of meeting the needs and desires of their customers as well as retaining loyal and satisfied customers (Grandey 355).

For such employees to offer effective and efficient services to customers, they need to work in an environment where their efforts are supported by the management. In an event whereby the management is not fully committed in offering excellent services to its employees, the efforts put by frontline employees will therefore not be fruitful.

As a result, it will be difficult for such employees to successfully deal with complaints and requests that come from the customers that they are serving. Therefore, to ensure that their operations are sustainable in the short term and in the long term, the management of service delivery firms needs to be results oriented. In the process, frontline employees will get the motivation they need to meet the needs and desires of their customers (Grandey 362).

In the line of work, mistakes are always inevitable. Therefore, service organizations, through their frontline employees need to ensure that, “…they do the right thing the second time to avoid adverse effects that might have negative impacts on the operations of the organization” (De Ruyter 96).

The management of any given organization is driven by its mission and vision. However, the vision and mission set by organizations need to be designed from the viewpoint of frontline employees who are in direct contact with the customers. This will ensure that the management empowers its frontline employees through training, rewards, up to date technologies, and effective and efficient recruitment services (Bishoff 67).

According to Boshoff (2000), these are some of the factors that determine best human resource practices within an organization. Due to the fact that they result in a consistent performance by frontline employees, their presence in any organization is a good indicator of management commitment to service quality.

Consequently, it has been determined that training, empowerment, and rewards not only increase the performance and motivation of frontline employees, but they also attract highly qualified individuals (Bishoff 68). This greatly increases the versatility, effectiveness, and efficiency of the workforce of a given organization.

Several models have been advanced to show the relationship between HPWPs and performance within a given organization. The Ability, Motivation, and Opportunity (AMO) model is a prime example. The AMO model focuses on the individual variables within an individual that affect the level of his/her performance (Podsakoff 881).

Thus, the model focuses on competence of a given employee, his/her level of motivation and the opportunity such an employee has to put into practice their skills and expertise. Through training, the performance of employees is increased as a result of the additional knowledge, skills, and expertise that they have acquired (Podsakoff 883).

Through rewards, such employees will be motivated to put into practice the acquired knowledge and skills hence enabling them to deal with the complaints and request that have been raised by customers in an effective and efficient manner.

The level of commitment that the management has with regards to HPWPs plays a significant role in determining the level of job embeddedness that it wants to achieve. According to Podsakoff (2003), job embeddedness has three dimensions; links, fit, and sacrifice. Links is the formal or informal relationship that an employee has with an institution, or other individuals (Podsakoff 884).

An employee will have high levels of job embeddedness if the links that he/she has within his work environment increase. Fit is the compatibility that an individual has with his working environment (Podsakoff 885). With regards to this dimension, the level of job emdeddedness can only be increased if the goals and values of a given employee are in line with the overall goals and objectives of the organization he/she is working for.

Finally, sacrifice can be defined as the benefits that an individual is willing to forego by leaving a particular job (Podsakoff 885). An employee will have high levels of job embeddedness given the fact that the benefits he is enjoying from his current employment exceed the costs incurred.

Therefore, firms need to focus on achieving HPWPs to increase their levels of job emdeddedness. This will reduce their employee turnover rates and will play a critical role in encouraging extra-role performance (Podsakoff 885).

From the literature that has been covered so far, it has been identified that training, empowerment, and rewards are the key indicators of the commitment that the management of a given organization has on service quality. Through training, employees develop their skills and expertise in their respective fields.

As a result, such employees become acquitted with the role that they are playing within an organization, as well as with their values and beliefs. On the other hand, it will be difficult for employees who do not have relevant training to handle customers’ complaints and requests with a high degree of effectiveness and efficiency (Grandey 366).

Empowerment on the other hand gives employees the authority and responsibility to respond to the customers’ requests and complaints since the exact tasks that might be required to satisfy the needs of the customers cannot be predetermined. Thus, empowerment motivates employees and maintains employees within an organization (Grandey 366).

Rewards such as promotions, bonuses, passages and so on show the commitment that a given organization has to service delivery by appreciating the efforts of its frontline employees (Grandey 366). With regards to training, empowerment, and rewards, the following hypotheses can be developed for this study:

H1: Training has a direct relationship with frontline employees’ job embeddedness.

H2: Empowerment has a direct relationship with frontline employees’ job embeddedness.

H3: Rewards have a direct relationship with frontline employees’ job embeddedness.

Training, empowerment, and rewards also play a critical role in determining the quality of service delivery from frontline employees. According to Karatepe (2012), empowerment and rewards are one of the main factors that affected the performance of bank employees in South Africa.

With an effective training, empowerment, and reward system, employees develop listening and problem solving skills that make their response to customers’ complaints to be quick, appropriate and equitable hence conducting their services to effectively and efficiently. With regards to performance outcome, the following hypotheses can be developed for this study:

H4: Training has a direct relationship with frontline employees’ service recovery and extra-role performance.

H5: Empowerment has a direct relationship with frontline employees’ service recovery and extra-role performance.

H6: Rewards have a direct relationship with frontline employees’ service recovery and extra-role performance.

Consequently, the performance of employees who have several links and have developed a desirable fit with individuals and the organization is usually high (Grandey 367). Such employees will incur a lot of costs as compared to benefits if they decide to leave their work.

Therefore, it will be wise for such employees to retain their current jobs. With regards to these facts, the following hypothesis can be developed for this study:

H7: Job embeddedness has a direct relationship with frontline employees’ service recovery and extra-role performance.

H8: Job embeddedness has a direct relationship with the effects of training, empowerment, and rewards on frontline employees’ service recovery and extra-role performance.

Methodology

This study will focus on seven 4 star hotels and one 5 star hotel in the Poiana Brasov region of Romania, a key tourist destination in the winter. The study will only focus on frontline employees who have face-to-face contact with customers (tourists). This will include but not limited to:

1. Front desk agents
2. Food servers
3. Bartenders
4. Door attendants
5. Guest relations representatives
6. Bell attendants

To ensure that the collected data is credible, effective and efficient, questionnaires will be administered using random sampling. The study will have a sample size of 200 respondents ranging between the ages of 18 to 65 years. This will ensure that the views of the individuals of all age groups have been collected and considered in the study.

To collect data from these individuals, the management of these hotels will be contacted. However, due to the fact that it might be difficult to get direct access of frontline employees of these hotels, the questionnaires will be sent to the management. It is the management that will distribute the questionnaires to its frontline employees.

The consent of the respondents will be sought prior to the exercise. Consequently, this study will guarantee the confidentiality and anonymity of the participants. There will be two sets of questionnaires. The first questionnaire to be administered will collect information regarding training, empowerment, and rewards. The second questionnaire will collect information regarding service delivery recovery and extra-role performance.

To ensure that the data collected in this study are consistent and useful to the study, the questionnaires will be administered simultaneously. This will ensure that the respondents of the first questionnaire will also take part in the second questionnaire. After filling the questionnaires, the respondents (frontline employees) will seal them in an envelope and deposit it in a special box where the research will come to collect all of them at the end of the session.

In this study, literature review will be used as the main source of secondary data. This will include literature, information, and ideas from studies that have been conducted by other researchers. Therefore, peer reviewed journals, books, magazines, dissertations, and any other credible source of literature relevant to the topic of study will be used.

For accurate analysis of the statistical data, SPSS 16.0 will be used for descriptive data analysis. The data will be explored using descriptive statistics and histogram plots to determine the shape of the distribution for each sample variable. The name given to each variable in the data analysis will be provided in a table.

Data analysis will be carried out using parametric tests where the data will follow a normal distribution and where the sample number will be equal to or greater statistical power. Where the data will not follow a normal distribution or where the data will be split into groups of less than the sample size (n), non-parametric test will be used.

Conclusion

The high level of competition in the service industry has prompted the management of most organizations to come up with effective measures that will ensure that they stand on a competitive edge over their rivals to be sustainable and profitable in the short run and in the long run.

To achieve this, it has been identified that the frontline employees of these organizations need to be trained, empowered and rewarded to reduce their turnover rates and to increase their service delivery recovery and entry-role performance. As a result, a firm will be able to meet the needs and requirements of its customers hence retaining satisfied and loyal customers in the long run.

Works Cited

Boshoff, Charles. “The influence of selected antecedents on frontline staff’s perceptions of service recovery performance.” International Journal of Service Industry Management, 11.1 (2000): 63–90. Print.

De Ruyter, Kings. “Customer equity considerations in service recovery: a crossindustry perspective.” International Journal of Service Industry Management, 11.1 (2000): 91–108. Print.

Grandey, Andrew. “The conservation of resources model applied to workfamily conflict and strain.” Journal of Vocational Behavior, 54.2 (1999): 350–370. Print.

Karatepe, Michael. “Does job embeddedness mediate the effect of work engagement on job outcomes? A study of hotel employees in Cameroon.” Journal of Hospitality Marketing and Management, 21.4(2012): 440–461. Print.

Pfeffer, John. Competitive Advantage through People: Unleashing the Power of the Work Force. Boston: HBS Press, 1994. Print.

Podsakoff, Peter. “Common method biases in behavioral research: a critical review of the literature and recommended remedies.” Journal of Applied Psychology, 88.5 (2003): 879–903. Print.

McCormick & Company is a global company that is involved in manufacturing, marketing, as well as distribution of spices over the entire world. Also inclusive in their customer base is the retailing outlets, food production industry and organizations involved in food production.

Their scope ranges from North America and Europe. However, they also have additional services that offer their products to parts of Asia, Central America and southern Africa. The company has two segments that it operates with; the consumer segment and industrial segment.

The consumer segment is involved in selling its products while the industrial segment is involved in the production. The annual sale was about $345 million in year 2010. It is also notable that the sales are expected to increase to about 5% to 7% in year 2010 (Zacks Investment Research, 2007).

On the other hand, Unilever company is a double listed company in both the United Kingdom and Netherlands. It is also notable that both companies operate under the same directors and as a single business organization.

The scope of operation of the company ranges in different fields such as skin care, hair care products and food brands. Being involved in this came about due to their action of acquiring various organizations involved in different fields. Annuals sales revenue in 2010 was $44,262 million.

The two organizations used to control markets in different regions of the world. The action of consolidation therefore widens the market base that the two organizations had, as there are increased resources for expansion due to the knowledge of different areas each of them controlled (Bofah, 1998).

In turn, the revenue generated from the sales is likely to reduce due to the fact that only a single management body would be in existence as other managers that may be there are distributed to serve other purposes.

The synergy approach tends to be beneficial to the organization as there is a revenue enhancement as well as savings in the cost of production (Guthrie, 2000). Enjoyment and enhancement of the food sector, which both these organizations are involved in is also possible.

The revenue that was being realized by McCormick would also increase due to the fact that they would have lesser competition. In turn, even an increase in the price by McCormick would not automatically mean that they would lose sales.

The incentive of developing new products would also reduce as competition reduces, which may be seen as detrimental to the consumers. Control of the market, which is usually the dream of every organization will also take place as the combined contribution of these two organization accounts for about 80% of all the sales in the United States (Katz, 2008).

The acquisition would involve Unilever brands; Lawry and Adolph, McCormick and Morton Inc. It is however notable that the two companies that would be involved in the acquisition is McCormick and Unilever.

Morton was only meant to feature in the bid to ensure that there exist the needed competition in the market to ensure minimum exploitation of the customers in the market. Both McCormick and Unilever are involved in seasoned foods and are major competitors in the market (Katz, 2008).

On the other hand, Morton deals with salty products and was meant to improve the competition that would have been lost.

Attempts of merger between organizations are meant to reduce competition and increase control of the market. Success of the above mentioned merger would mean that the public is denied the chance to enjoy cheaper prices as well as variety of products, as there is creation of an oligopolistic system (Krugman, 2007). Such is not welcome as it only benefits the organization and not the people in general.

References

Bofah, K. (1998). What Is Industry Consolidation? Web.

Guthrie, C. (2000). The Benefits of Server Consolidation for Utilities Infrastructure. Web.

Katz, M. J. (2008). McCormick Required to Sell its Season-All Seasoned Salt Business to Morton, Inc.FTC Challenges McCormick’s Acquisition of Unilever’s Lawry’s and Adolph’s Brands. Web.

Krugman, P. (2007). Economics 2. Worth: Wells Publication.

Zacks Investment Research,. (2011). Growth & Income Stock: McCormick & Co, Inc. Web.

Introduction

The human resource field has taken a strong stand in the global competition for prominence and performance. (Bartholomew et al 2000, p 86-321).This paper interrogates the relevance or otherwise of various information units that are produced by the mixed method approach stating the case for the prominence of the approach in the contemporary human resource pretext.

It will go further to try the propositions of the approach through a proposed research on the impact of organisational retrenchment strategies on job satisfaction in a case study from the Uganda public service.The volatile nature of the environment makes human resource management a key determinant of the success of the organization. (Bassanini and Duval 2006).

In the prospect of providing a solution this paper underscores the analytical options available to managers in need of information. It provides a manual or employers who need to adopt a retrenchment strategy as part of a downsizing method of their staff.

This also acts as a justification to such managers in relying on a specific source of information or data (Deniva, 2000). As for employees this proposal will allow them comprehend better the place that retrenchment has in their career paths and more so provide them with alternatives in information gathering and presentation.

Background

An examination of the Ugandan civil service retrenchment policy and process provides an appropriate human resources practice scenario for investigation.

Retrenchment can be objectively defined to be a government based initiative and policy that seeks to reduce the number of employees and subsequently as well, as comply with the prevailing, market conditions that demand cost reduction at every situation (World Bank Group 2000).

The creation of retrenchment strategy was a response to the continued abuse of the employee by employers in matters such as low pay and unqualified management structures that were marred with corruption moonlighting abuse of office and misuse of state property (Hauptmeier et al,2006).

The reform agenda that is suggested by the Civil Service Reform had specific objectives. These objectives are the fundamental principles that the human resources laws and procedures uphold in the short and medium term.

The public service is still oversized and needs to be drastically cut down for purposes of efficiency and economy (Cenfetelli 2004). At the same time, there is an urgent and pending need to provide the appropriate skills, strategies and tactics for the effective and consistent management of public resources.

Inadvertently the state as the greatest employer in Uganda needs an urgent solution to facilitate their strategies to control and regulate this situation for the benefit of both the employees and the employers. This proposal will recommend the most appropriate reference and information resource in the diverse human resource sector.

The state and government as well as other stakeholders such as private sector employers and employees stand to benefit from the recommendation analysis and review of the various uses of information in human resources with specific interest in the Ugandan civil service.

Good practice

The Ugandan human resource system has for a long time served the country’s population in different capacities. In fact the system has made several attempts at making sure that it keeps at bay the whims of corrupt members to ensure that the labour forces is much more effective and efficient in its performance of its duties (Mugabi, 2006).

The country’s retrenchment plan is designed to motivate the employees by guaranteeing them a secure future in the organisation depending on the provisions of the retrenchment plan (Houser, 2008). The retrenchment strategies have failed both in substance and form in ensuring that the strategies adopted sustained and maintained a strictly stable level of satisfaction among the employees.

Other organisations in the public and private sector such as multinational national and local companies and nongovernmental organisations have adopted generic retrenchment practices that are more employees friendly(United Nations Development Group 2003). Organisations and state management across the globe also recommend the techniques that involve a multi-stage retrenchment process.

The technique begins with evaluation of the personnel in aspects such as cutting on the personnel development expenditure, using unpaid or lower cost labour, sharing of personnel reassessment of equipment needs of the employees as well as re evaluation of staffing ratios. This allows the management to separate the redundant employees for selection for retrenchment and trim down the labour force (Joumard et al, 2004)

It then re valuates the revenue from sources with characteristics such as increased cost of service, ensuring efficiency in service delivery as well as a standard benchmark for minimum service (Ingraham and Rosenbloom 1992). Any employee who fails to meet these standards in revenue generation will be considered for retrenchment. (Wilbur 2008).

Human resource scientists have suggested that the justification for the relationship between retrenchment and the general motivation levels of the individual workers was the objective of their employment. The retrenchment strategies had little connection to workers of different ages and age groups (Slabbert et al 2003, p 65-99).

Chartered Institute of Personnel and Development suggests that an average of one in ten (7%) workers is considered for retrenchment in organisations intending to cut costs. Up to two-thirds (65%) of retrenchments are expected to be compulsory (CIPD 2011).

Literature review

To put the discussion into perspective a constituent approach to the various options available to managers will suffice. Managers have a range of primary and secondary methods for obtaining information for human resource purposes.

Primary methods are more interactive and involve manual gathering of data from the subject phenomenon. They involve collecting data for the first time. There are two commonly accepted primary approaches to research; the qualitative and the quantitative.

There are many ways of distinguishing between these two approaches, which can also overlap or complement each other, as in mixed methods designs. However, the basic difference between these methodologies are described by (Mertens, 2009)

The study employs the conventionally recognised questionnaire methods that allow the researcher to engage the subject stakeholders in the retrenchment process. The questionnaire allows the researcher an opportunity to adjust the questionnaire to suit the research and the objectives of the research.

This method is cheap and easy to understand and use. They are also easy to administer to the individual respondents of the research (Jupp, 2006).

The research will also take advantage of online research methods of research. Online research methods vary from online focus groups, online surveys, and online questionnaires, web based experiments as well as clinical trials performed online.

Focus groups allow the researcher to gain an in-depth analysis of the attitudes beliefs and anecdotal data from a large group of respondents (NTSIKA 2001). They take advantage of group dynamics to generate more ideas through individual interviews and reflections.

Secondary methods provide a construction of information from studies that draw upon data that has been collected by someone else. Secondary methods provide the researcher with an opportunity to gain an upfront insight into the research questions and also develop a foundation on which the research is founded (Bartholomew 2000, p 283-321).

Secondary methods engage two main types of sources internal and external sources. Internal sources are those that come from within the organisation entity or subject of research. External data on the other hand is obtained from outside sources (Houser 2008).

Internal sources of secondary information are a cheap and convenient way of obtaining answers to research questions (Buys and Havenga 2006, p86). The three main internal secondary sources are sales and marketing reports, accounting, financial records, and miscellaneous reports (Sachinis 2003, p137). They are fundamental measure of the performance of the human resources.

Companies consider this information when compiling and creating performance indicators. These sources are important in understanding the good practice of various organisations. In this proposal, these internal sources and methods were scarcely relied on since there is little information available due to government restrictions (Cenfetelli 2004)..

External secondary sources present a great wealth of data on almost any topic. These sources are meant to comprise of federal government as well as statistical agency report. They also include others such as publications from trade associations, general business publications and academic reports as well as industrial reports (Buti et al 2003).

Academic reports such as research papers journals and books contain the relevant philosophical and theoretical analysis justifications and explanations. These however fail to present the reality of the situation in the market as it is (Flick’s 2009).

An analysis of the existing secondary information from industrial and academic sources disclosed that the majority of the employees who fell in the retrenched category had a high education qualification and therefore had enough qualifications for the job (Kelly 2001).

Industry reports such as company reports from the various employer bodies and employee organisations and trade unions provide a historical and obligatory statistic of the situation in the market (Wilbur 2008).

Industry reports from independent bodies such as the Chartered Institute of Personnel and Development also provide an updated reference and analysis that makes the proposal more relevant to modern trends(Logan & Machado, 2002).

These sources however raise questions of viability since these institutions have vested interests and make their data mere references and not authorities (Mertens 2009). This makes it more credible to undertake the research as compared to relying on these sources.

The research will approach the data collection process from a quantitative and qualitative stand. These two approaches are often said to overlap and complement each other at times.The quantitative approach engages in actual practical experiments that are used to gather information on the subject matter (Havenga 2005, 41-50)

Strengths and weaknesses

Data collected from academic materials presented serious viability concerns since most of these resources were outdated and backdated to more than ten years. The level of reliability of this information is therefore questionable (Balogun and Hailey 2004).

This however does not defeat their purpose in establishing a factual stand for and against the retrenchment process. These inconsistencies are complemented by the use of primary sources in the form of questionnaires and interviewed as well as focus groups.

Stakeholders

The retrenchment process is quite sensitive since it could affect the long-term reputation of the company if not handled adequately (Houser, 2008). The major stake holders are the

• State.
• Employees.
• Employers.

The employer is relevant to the research because he motivates and spear heads the process in other organisations that undertake the retrenchment process. They are therefore appropriate respondents to the contentious issues that affect the retrenchment process. Their responses are expected to be motivated by self interest and the need to defend the retrenchment process as being the only way out(Hass et al 2008, p94).

This will however be handled by consulting several employers. Employees are the victims and the appropriate respondents to the retrenchment process since they are on the receiving side.

Most of them are expected to avoid responding to the questionnaires due to the fear of victimisation and possible retrenchment (Charney and Liebcap 2002 pp1-34). They will however be motivated by the promise of anonymity as well as concentration on the online surveys that collect information from a wide range of employees.

The state is the greatest employer in Uganda and therefore takes the greatest responsibility for the retrenchment process(Bassanini and Duval 2006). The state representatives are however expected to be reluctant to provide information as to the modalities they use since these are considered confidential.

This information will therefore be gotten from alternative secondary sources from industry reports and academic analysis. (McLean et al 2004, p6).

Data presentation

The research will present the information and data conclusions in this form of graphs and charts that will support the results of the interviews and questionnaire results. These will be further supplemented by pie charts retrenchment on the labor force. They will be used to explain to senior management the effects of the retrenchment process as well as the consequences of adopting a specific strategy.

The employer and employee will also have the benefit of understanding how specific retrenchment processes operate through descriptive schematics and flow charts that are self explanatory and easy to follow and interpret.

The data generated from the secondary sources will be analyzed and presented in the form of a report containing diagrams and illustrative diagrams, descriptions and schematics that are easier to understand. The charts and diagrams show the general and specific trends of the retrenchment practice. This will allow the estate as well as other employers in selecting the most widely used retrenchment strategy.

Employees will receive newsletters that have interpreted analysis and comments on the findings of the report. The comments will contain recommendations on the suitability or otherwise of the retrenchment schemes that their employer has adopted.

References

Balogun, J. & Hailey, H. V. (2004) Exploring strategic change. New York: Prentice Hall.

Bartholomew, K.et al. (2000) Coded semi-structured interviews in psychological research. In H.T. Resi & C.M. Judd. Handbook of Research Methods in Social and Personality Psychology. Cambridge: University Press. 286-312.

Bassanini A. and Duval R. (2006) “Employment Patterns in OECD Countries: reassessing the Role of Policiesand Institutions”, Economic Department of the OECD, working paper, 486.

Buti, M., Franco D. and Sylvester E. (2003) Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment, CEPR Working Paper, 3692.

Buys, P. & Havenga, J.J.D. (2006) Entrepreneurial Functionality of New Venture Creation Learners. Unpublished paper: University of Johannesburg, p86.

Cenfetelli, R.T. (2004) Inhibitors and enablers as dual factor concepts in technology usage. Journal of the Association for Information Systems, 5(11). Web.

Charney, A.H. & Liebcap, G.D. (2002)“The contribution of entrepreneurship education: An analysis of the Berger programme”: International Journal of Entrepreneurship Education (3):1-34.

CIPD. (2011) Labour Market Outlook CIPD: London.

Deniva, (2000) 1999 Annual Report, Kampala: DENIVA. Nd.

Flick, U. (2009) An introduction to qualitative research. Thousand Oaks, CA: SAGE.

Hass, B. et al. (2008) From Analyst to Leader: Elevating the Role of the Business Analyst Management Concepts. Vienna Leesburg Pike p94.

Hauptmeier ,S.et al. (2006) “Expenditure Reform in Industrialised Countries: a Case Study Approach”,European Central Bank working paper, 634, p 234-567.

Havenga, J.J.D. (2005) “Perspectives on post-employment: Balancing wealth and community wellness” Management Today. 20(10). 41-50.

Houser, J. (2008) Nursing research: Reading, using, and creative evidence. New York, NY: Jones & Bartlett Learning.

Ingraham, P. and Rosenbloom, D. (1992) The Promise and Paradox of Civil Service Reform. Pittsburgh.University of Pittsburgh Press.

Joumard, I. et al. (2004) Enhancing the Effectiveness of Public Spending: Experience in OECD Countries”, OECD Economics Department Working Papers, 380.

Jupp, V. (2006) The Sage dictionary of social research methods. Thousand Oaks, CA: SAGE.

Kelly, D. (2001) Dual Perceptions of HRD: Issues for Policy: SME’s, Other Constituencies, and the Contested Definitions of Human Resource Development. Web.

Logan, C.and Machado, F. (2002) Afrobarometer Round 1: Compendium of Comparative Data from a Twelve-nation Survey, Afrobarometer Working Paper 11,. Nd.

McLean, G., et al. (2004) (Eds.) Human resource development as national policy. Advances in Developing Human Resources, August 6 (3).

Mertens, D.M. (2009) Research and evaluation in education and psychology. Thousand Oaks, CA: SAGE.

Mugabi, J.B., (2006) Civil Society Index Fact Finding Studies, DENIVA, Kampala: unpublished paper.

NTSIKA. (2001) State of Small Business in South Africa (Annual reviews). Johannesburg. RSA: NTSIKA Enterprise Agency.

Sachinis, K. (2003) The importance of a post-employment strategy in addressing the outcome of globalization. Ph-d – Dissertation. Rand Afrikaans University Johannesburg, p137.

Slabbert, J.A et al. (2003) Managing Employment Relations in South Africa – Global perspective. Durban: Butterworths. p 65-99.

United Nations Development Group. (2003) Indicators for Monitoring the Millennium Development Goals: Definitions, Rationale, Concepts and Sources, United Nations, New York.

Wilbur, K. (2008) Integral theory and practice. Binghamton, NY: SUNY Press.

World Bank Group, (2000) Supporting small and medium enterprises. Key to increasing employment in developing countries. Web.

Executive Summary

North America’s wholesale club industry is characterized by three major competitors. These competitors include Sam’s Club, Costco Wholesale, and BJ’s Wholesale Club (Thompson, Strickland, & Gamble, 2012). These warehouse clubs offer a wide range of products such as books, food materials, electronics, office supplies, and tires.

The competitors use reduced prices to attract more customers. These clubs attract many clients such as businesspeople and churches. Costco commands over 56 percent of the market share. Sam’s Club has a stake of 36 percent in the industry. BJ’s Wholesale Club has around 8 percent market share. Competition in this sector is “based on prices, locations, services, and merchandise quality” (Thompson et al., 2012, p. 55). The other competitors include Kohl’s, Dollar General, Office Depot and Staples, and Target.

Introduction

The level of competition in the warehouse and wholesale club has grown steadily within the past one decade. The three leading competitors focus on specific strategies and business practices in order to emerge successful. Costco Wholesale, Sam’s Club, and BJ’s Wholesale Club use powerful approaches in order to produce the best outcomes.

Each firm has its unique strengths and weaknesses that determine the level of performance in the sector (Thompson et al., 2012). This discussion therefore identifies the specific issues, strategies, and problems that affect these competitors.

Identification

These competitors focus on specific strategic issues in order to emerge successful. For instance, Costco’s markets quality products at reduced prices. The main goal is to make Costco more competitive. The firm stocks specific products that could be marketed at lower prices. The price-reduction philosophy makes it easier for the firm to increase its sales (Kotler & Keller, 2012). This business strategy supports the firm’s goals.

The treasure-hunt merchandising strategy is used to market expensive products that can attract more customers. However, the firm sources such merchandise from the gray market. The company uses mail programs and special campaigns to advertise its products (Thompson et al., 2012). Costco Wholesale’s distribution network is also sustainable. Online marketing has also been embraced. The presence of good leaders such as Jim Sinegal continues to support the firm (Thompson et al., 2012).

Sam’s Club has many stores in the United States, Mexico, Brazil, Canada, Puerto Rico, and China. Some of the underperforming stores have been closed in the recent past. The firm’s stores have “sparse décor, concrete floors, and wooden shelves” (Thompson et al., 2012, p. 77).

The firm’s products include grocery items, soft-goods, and hard-goods (Thompson et al., 2012). The “company’s treasure-hunt goods are usually less upscale and cheap” (Thompson et al., 2012, p. 68). Cross-docking strategies are used to distribute most of the firm’s products. Shipping is also done within 24 hours.

The main strategy used by BJ’s Wholesale Club is to have high-quality merchandise. As well, prices are reduced in order to attract more customers. The firm stocks “a wide range of product assortment” (Thompson et al., 2012, p. 70). The firm also uses three price categories in an attempt to attract more buyers. Online shopping is also becoming common in the firm. Clustering technique is also “used to improve efficiency, marketing, and brand positioning” (Thompson et al., 2012, p. 71).

The Inner Circle members are supposed to pay a fee of 45 US dollars annually. The use of Information Systems (IS) has made it easier for the firm to improve its efficiency. Community involvements are used to attract more customers. The company also uses powerful advertising strategies. The use of personalized marketing also attracts more customers. The company’s Charitable Foundation supports the needs of many communities.

Analysis and Evaluation

Each of these three companies has its unique weaknesses and strengths. A proper understanding of such weaknesses can be used to design better business strategies. The level of competition is high in this market segment. As well, new opportunities have emerged such as computer technologies and changing consumer behaviors. A proper SWOT Analysis can be used to understand the issues affecting every competitor.

This tool can “identify the major aspects that make the internal activities of such companies successful” (Kotler & Keller, 2012, p. 48). As well, the tool will identify the major threats and weaknesses affecting the firms. The SWOT Analyses presented below indicate that BJ’s Wholesale Club will succeed in the future. BJ’s Wholesale Club has the potential to achieve its goals much faster.

Costco SWOT Analysis

Sam’s Club SWOT Analysis

BJ’s Wholesale Club

Recommendations

Costco Wholesale is the leading player in the targeted industry. However, it should embrace the power of modern technologies in order to improve its business strategy (Grewal & Levy, 2011). The company should also consider the level of competition and identify new strategies.

It should also hire the best candidate to succeed Jim Sinegal. Sam’s Club can also embrace similar recommendations and support its failing stores. This move will produce the best results. BJ’s Wholesale Club is currently using powerful strategies that can produce the best outcomes (Finch, 2012). Sam’s Club and Costco should embrace the power of corporate social responsibility (CSR) in order to support many communities. Modern technologies should also be used to support the strategies embraced by these competitors.

Reference List

Finch, J. (2012). Managerial Marketing. New York, NY: Bridgepoint Education.

Grewal, D., & Levy, M. (2011). Marketing. New York: McGraw Hill.

Kotler, P., & Keller, K. (2012). Marketing Management. Upper Saddle River, NJ: Prentice Hall.

Thompson, A., Strickland, J., & Gamble, E. (2012). Crafting and Executing Strategy: The Quest for Competitive Advantage. New York, NY: McGraw-Hill.

Background material

The soft drink industry has been dominated by some major companies like the Coca-Cola Company and PepsiCo. Prior to the 21st century, these companies concentrated in the processing of carbonated drinks. The drinks had an exceptionally high demand and companies that processed such drinks flourished by making enormous sales.

However, as consumers have been informed on the dangers or health risks associated with the consumption of carbonated drinks, they have shifted their attentions to other drinks. As the demand for soft drinks continued to rise, dominant companies took advantage of this and hiked the prices.

All these contributed to a shift in consumption of the drinks as consumers sought for alternative drinks. Therefore, alternative drinks came not only as an option, but also as a change in strategy for beverage companies to address the needs of customers (Gamble, 2012).

From the year 2000, the alternative beverage market has been extremely active with many companies coming into the alternative beverage industry. However, the international market for alternative beverages was immensely affected by the economic recession of 2008 – 2009.

The United States, which is the main market for the alternative drinks, recorded a significant drop in the sale of alternative beverages and drinks. There was a 12.3 per cent drop in the sale of sports drinks between 2008 and 2009. During the same period, vitamin-enhanced waters recorded a 12.5 percent decline in sales. It is only the energy drinks which recorded a rise in sales during the recession period. The sales rose by 0.2 per cent (Gamble, 2012).

Beverage producing companies capitalized fully on the demand growth by extending their products. Many companies have been developing new products, as well as diversifying their existing products so as to capture a bigger share of the market.

Beverage companies sought to further extend and venture into the manufacture and processing of relaxation drinks to address the needs of the depressed people. Therefore, the alternative beverage industry has been marked with high scale competition. There exist too many alternative beverages and drinks in the market now (Katz, 2010).

The major strategy of the beverage companies has been to diversify and make enormous extension of their brands in the market. Increased competition has resulted in unhealthy or unethical business practices within the alternative beverage and drinks industry. Market capture and expansion has been the main objective of the beverage companies. They do not pay much attention to the aspects of sustainability in the market.

A number of companies have been receiving criticism owing to the effects of their products to the health of consumers. Some products like the beverages with high caffeine content were critiqued for promoting unhealthy consumption patterns. Companies do not let the consumers know the patterns of consuming these beverages and drinks.

Some companies do not expose the contents and the side effects of these contents to the consumers. Physicians have been warning consumers of the dangers associated with some of the ingredients in these drinks like kava and melatonin (Gamble, 2012).

The global beverage industry is still projected to grow as the beverage companies are sprouting and finding new markets across the globe. Therefore, better strategies have to be adopted by the companies in the beverage industry. This will assure that these companies achieve market sustainability (Gamble, 2012).

Strategy identification in the alternative beverage industry

For a company to beat the competition in the market, it must first understand and pursue a strategy. The company must understand the industry in which it is competing as this is the main source of competition. Also, a company has to know all the rules that are governing competition within the industry.

Notably, there have been many players in the beverage industry. Each of the major companies in the industry has its own way of enhancing its competitive advantage. However, since these companies are operating in the same industry, they tend to use almost similar strategies with only slight differences (Gamble, 2012).

There are different approaches or strategies to competition. The five main generic strategies to competition are focused low-cost strategy, focused broad differentiation strategy, a market niche strategy based on low cost. Others are a focused market strategy that is based on differentiation and a best-cost provider strategy.

Some companies do apply a mix of these strategies. It is advisable for companies to choose and pursue a single strategy. The pursuance of one policy helps in easing the positioning of a company. This helps in eliminating the complexities that may arise from integrating the varied strategies (Katz, 2010). Major firms in the alternative beverage industry have been applying most of these strategies in order to enhance their performance in the market (Gamble, 2012).

The Coca-Cola Company stands out as one of the oldest company in the soft drink industry. Also, the company is ranked as one of the best performing companies in the industry. In the year 2009, the company was the best manufacturer and distributor of soft drinks within the global market. Coca-Cola has a very wide market with different brands. Brand extension is the major strategy of competition for the company.

It has the widest distribution network with its plants located in over 200 countries globally. The Coca-Cola brand has been very helpful to the company. It positioned the company in the wider market enabling it to enter alternative beverages into the market effectively. With its new and high quality brands of alternative drinks, Coca-Cola has continued to maintain a competitive position (Gamble, 2012).

Similar to Coca-Cola, PepsiCo has a number of popular products like Pepsi. The company has employed several competitive strategies to survive in the competitive alternative beverage and drink industry. One of the key competitive strategies has been brand-extension and brand-diversification.

PepsiCo has established itself in the market as a company that has quality products. The company is creative and has been coming up with different products that are filing the market and making it a strong player (Shankar & Carpenter, 2012). As one of the biggest beverage companies, PepsiCo noted this demand and ventured into processing the different brands. Some of its products were rated the best in the industry in the year 2010.

There are various advantages associated with broad brand distribution. However, what stands out is that this form of distribution provides a wide range of options for customers. The company has further expanded these brands into different flavors. Brand differentiation and extension has been the leading force behind the organization’s performance in a competitive industry (Katz, 2010).

Hansen Natural Corporation has ben dealing in the manufacture of alternative beverages for a long time. The company sales have been growing in the recent years. This growth is equated to the launch of several other beverages by the company from the beginning of the year 2002. The company has adopted an aggressive differentiation strategy.

Apart from coming up with many brands of products and taking them to market, the company also uses price as a means of differentiating its products in the market. In the year 2002, the company decided to lower the prices of its products with the price of Red Bull products. In-store promotions have also been extensively used by the company in familiarizing its products to customers.

The company uses creative promotional strategies. They promote their products in the events that they sponsor for instance sporting events and art and music concerts (Gamble, 2012).

Red Bull GmbH has been one of the leading companies in the processing of soft drinks in the beverage industry. The company concentrated in the manufacture of beverage drinks since its inception. This explains why the company is a strong force in the industry. Whereas other companies have diversified and produces products in different categories within the industry, Red Bull has concentrated in one lane of products.

The concentration in these products has made the company a master in such products. However, all other companies in the industry have been diversifying their products and even becoming good producers of sports drinks. This competitive strategy is not very favorable in an industry which has many players. Dependence on a single product is highly risky for a company. The company is bound to flop in the event other companies develop stronger substitutes (Trigg, Himmelweit & Simonetti, 2002).

The alternative beverage industry has been marked with competition. Companies in the industry are using almost similar strategies of competition. With products in the industry being close substitutes, broad differentiation strategies are the main focus of the companies.

Most of the main firms in the industry are coming up with more products so as to fill and dominate the market. In this aspect of differentiation, quality is also playing out as an important element of differentiation. Some companies are earning fame in the industry because of the quality of their substitute products (Thompson, Gamble & Strickland, 2006).

Analysis of performance of the broad differentiation strategy by major firms in the alternative beverage industry

Just like many other strategies, differentiation strategies are aimed at maximizing profits in companies. It enables firms to raise the unit of sales, gain the loyalty from their customers, and commanding a premium price for company products. When this has been achieved, the company gains competitive advantage over its competitors in the market (Shankar & Carpenter, 2012).

PepsiCo gained access into the alternative beverage market by virtue of having dealt in the soft drink industry for a long time. The broad brand differentiation strategy has been argued to be the main reason why the company has been ranked first in the alternative beverage industry globally (Thompson, Gamble & Strickland, 2006).

PepsiCo has been remarkably innovative knowing the amount of efforts that are being employed by its competitors like Coca-Cola and Red Bull. The company formed vast distribution systems for its carbonated soft drinks like Pepsi-Colas. As it introduced its new brands of the alternative beverages, it ensured that the new brands were found where in the distribution centers for its famous brands. Therefore, as people purchased these products, they came across the new products.

PepsiCo has over one hundred sub–brands of brands in the market that have been developed from the main brands. The first aspect of differentiation in the company was the venturing into the production of alternative beverage drinks. At one point, PepsiCo has managed to come up with over 12 different flavors of products from a single product. There are different methods or approaches of differentiating products in a competitive market (Gamble, 2012).

Differentiation can focus on either the main products or even on other aspects of product marketing like pricing and other marketing approaches (Keller, 1998). PepsiCo has concentrated much on diversifying its alternative beverage drinks. This forms the core of its differentiation strategy. The company has many alternative beverage drinks in the market. This means that the company attests to the differing tests of customers.

This also aids the company to have a wider market relative to its competitors, and thus a competitive advantage to PepsiCo. A company can choose to pursue brand differentiation in multiple ways. This gives the company a stronger platform on which to compete with its competitors. However, it is suitable for a company to identify its strong pointer in differentiation as this will serve the company best when competitive pressures mount (Kotler & Pförtsch, 2006).

Differentiation is an extremely broad strategy. For a company to realize the benefits of differentiation strategy, it has to incorporate differentiation activities in its supply chain. A strong and differentiated supply chain ensures that products reach customers in time and required qualities and quantities (Thompson, Gamble & Strickland, 2006).

PepsiCo has done well in sustaining its supply chain by enhancing its distribution channels and points. Its products are easily found in the market. This boosts the sale of the products. Research and development have also helped the company in its initiatives of brand diversity.

With a significant number of products in the market, the company has to shift its attention to active marketing practices like advertising and promotional activities. There are many products from the company that are not yet known by many potential customers. The brands that have been developed in the recent years need to be made known to the potential customers of the company (Gamble, 2012).

Recommendations for future decisions for a new company in the industry

Companies that are aiming to venture into this industry have to be extremely creative. Nonetheless, with many customers, this industry is highly saturated with master companies. The first thing for a new company will be to assess the industry in terms of the main companies operating in the industry and strategies that they use. The attractiveness of a firm in any industry is the attractiveness of the industry. Industry attractiveness is determined by the profits that are being made by the firms in the industry (Porter, 1998).

The new firm must also be familiar with the rules that govern competition in the industry. According to Porter (1998), the rules are to be found in the five forces of competition. These are competition for new entrants, threat of substitutes, the buyers and their bargaining power, the bargaining power of suppliers and rivalry in the industry. The most compelling force in the beverage industry is the issue of the threat posed by substitute products and rivalry among the firms.

When a company chooses to pursue a certain competitive strategy, it does not imply that the company should work with the strategy in an isolated manner. Strategies do not work in isolation just as it is in the business. Other strategies have to be incorporated within the main competitive strategy to make it work efficiently.

Each strategy has its advantages, as well as disadvantages to the company. Therefore, the company must ensure that it maximizes on the strengths of a strategy. Capitalization on the strengths of a strategy helps in eliminating the negative effects of a strategy. The broad brand differentiation strategies have been applied in greater heights. Ii is more risky for a new firm to concentrate on a single strategy in a market that has highly volatile activities (Thompson, Gamble & Strickland, 2006).

The company has to monitor the different companies and capitalize on the aspects of weakness in the competitors. As a company develops products in the market, it has to monitor competition both from within and without the organization. The company must fully understand its competitors so that it can choose the best strategies to out-compete them. As a market leader, a company is always prone to scrutiny from other firms (Yoffie & Kwak, 2001).

The adoption of blue ocean market strategy could also be favorable to the new company. The beverage industry is marked by similar products with only slight differences in flavor. This can be effectively applied in marketing by choosing inventive strategies, which will help the company set itself above the other companies. The strategy chosen by the company has to be integrative basing on the assessment done to the strategies of the other companies already in the industry (Kim & Mauborgne, 2005).

The new entrant has to adopt defensive strategies as it enters the market in the first time. Open competitive strategies will then be applied when the company has attained a significant market share. This is because the activities of the company can be influenced be put to jeopardy by the actions of the smaller (Thompson, Gamble & Strickland, 2006).

References

Gamble, J. E. (2012). Competition in Energy Drinks, Sports Drinks, & Vitamin Enhanced Beverages. Web.

Katz, J. S. (2010). Competing for global dominance: Survival in a changing world. Silicon Valley, CA: Superstar Press.

Keller, K. L. (1998). Strategic brand management: Building, measuring and managing brand equity. Upper Saddle River, N.J: Prentice Hall.

Kim, W.C. & Mauborgne, R. (2005). Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Boston, Mass: Harvard Business School Press.

Kotler, P. & Pförtsch, W. A. (2006). B2B brand management: With 7 tables. Berlin: Springer.

Porter, M.E. (1998). Competitive Advantage: Creating and Sustaining Superior Performance: with a New Introduction. New York: Simon and Schuker Inc.

Shankar, V. & Carpenter, G.S. (2012). Handbook of marketing strategy. Cheltenham [etc.: Elgar.

Thompson, A. A., Gamble, J. & Strickland, A. J. (2006). Strategy: Core concepts, analytical tools, readings. Boston, Mass: McGraw-Hill.

Trigg, A., Himmelweit, S. & Simonetti, R. (2002). Microeconomics: Neoclassical and institutionalist perspectives on economic behavior. London: Thomson.

Yoffie, D. B., & Kwak, M. (2001). Judo strategy: Turning your competitors’ strength to your advantage. Boston, Mass: Harvard Business School Press.

Simulation overview

Quasar computer has won populace and reputation for its innovation of the revolutionary wonder, the ‘Neutron’. The product high speed microprocessor feature makes it outstanding. History marks that the company enjoyed monopoly from 2003 to 2006.

As such, this paper simulation advances to explore strategic variables that will that will sustain Quasar computer after several years of monopoly following assumption of market structure changes.

Non pricing strategies

Non pricing strategies undertaken by Quasar Computers were geared to distinguish its products from those offered by the competitor. As such, it is overbearing that the digital company apply the unsurpassed strategies for the notebook in an effort of maximizing its revenue as well as enjoying pure monopoly.

The pure monopoly does not disqualify other market structures. Quasar computers undertook an innovative approach to the build a high class technology on their notebooks. This is because the company coined the first production of all-optical notebook computers (McConnell, Brue & Flynn 2009).

The management had two options to operate competitively. One is to have Ceres, which will present a distinguished model with less investment in the new product features. Furthermore, premium pricing will be realised as well as low bull’s eye of volumes. Undertaking to explore the little amount of unutilised capacity will lead to the price per unit cost to be at its lowest.

As such, applying twelve million units of production capacity not utilised brings down the production costs of both Neutron and Ceres. As such, adopt a brand advertising strategy that may take up to $200 million. On the other hand, go ahead to build Neutron at present advertising budget.

In essence, spending two hundred million on aggressive advertising to launch again would propel the sales to two million more units simultaneously. In effect, enhance use of excess volume by aggressively encouraging demand to reach optimum quantity (Pugel, 2009).

Managerial Decision Making for each Market

According to the economic concept, the market structure is composed of firms producing identical goods and services. As such, the managerial decisions will cover the production of these products to achieve the common business goals (profits maximization, cost minimization) in the face of surrounding competitors acting independently to take up their business by giving better services.

Monopoly

The best managerial decision making for the firm as a monopoly that will sustain the profits will be to assume that Marginal Cost equals Marginal Revenue (MC=MR rule). For instance, prices should be reduced to $2,450, a point where MC = MR as per the year 2004. Subsequent advertising campaign led to large revenue sales to a total of $2.74 billion.

Oligopoly

This marks end of monopoly (entry of Orion Technologies) and the management anticipates fierce competition, a downward sloping demand curve. As such, prices will begin to reduce corresponding to decreasing demand.

As such, the management will strategize its investment on promotional activities for brand awareness and confirmation. At the same time, focus on improving and streamlining productivity. In addition, the management will focus on protecting its market through competitively setting its price (McConnell, Brue & Flynn 2009).

Monopolistic competition

This market brings more competitors to the industry. As such, one loses market shares and straining to earn profits. Management has to diversify its production to introduce a new product such as Ceres as well as invest in brand development of neutrons. Again, div

Perfect market competition

Profits can barely be increased and costs minimized and the company market share depleted. The management will take decisive action to stimulate demand in an effort to increase the market share in the short run. As such, the company may set $ 200 million to advertise for new product with a view of exploiting fresh target industries (Pugel, 2009).

References

McConnell, C. R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, problems, and policies, 18^th ed. New York: McGraw Hill/Irwin.

Pugel, T. A. (2009). International Economics 14th ed. New York: McGraw Hill/Irwin.

Introduction

Throughout their existence, organizations and businesses are considerably pressured to raise their levels of performance and productivity. This is especially so in the modern day business environment which is characterized by aggressive and excessive competition.

Businesses are therefore constantly forced to exhibit innovation and enhanced performance so as to remain relevant and profitable in the ever increasingly competitive arena. To achieve the organizational goals of increased productivity and profitability, many businesses have shifted towards expanding their operations to other regions.

While this is a noble move as well as a strategic one, careful considerations should be made regarding the new market. Without such considerations, businesses are bound to fail in the new markets mainly due to lack of know-how and competition. This paper shall set out to recommend strategies that ‘Teejays’ can implement to ensure that it remain competitive in the Asian market.

Steps to follow in devising a successful competition strategy

According to Kotler (2011) the success of any new or existing company is based on answering the following questions: what does my company have that others in the same industry lack? What extra value do I give to my clients? And; how do I increase this value in years to come? By answering these questions, a company is bound to stay ahead of the game regardless the competition.

However, answering these questions is never enough. You must develop a strategy that ensures that your company places its focus on reinventing itself so as to wade off competition. The following steps may help ‘Teejays’ develop an all-inclusive competition strategy.

Financial perspective

Arguably, this may not be mush of a strategy, but it comes in handy when you need to determine the rate of success to be expected from a new venture. This is especially so since a business that cannot deliver a significant return is never a worthwhile risk.

In this scenario, ‘Teejays’ is getting in a market flooded with companies that offer customer care training and consultancy services. As such, it is important to determine the costs that will be incurred while investing in this market and evaluate those against the expected returns. If the numbers do not add up, then ‘Teejays’ should consider investing in another market.

Market profile

A good competitive strategy should always consider the market environment in which a business is to operate from (Armstrong et al, 2009). In this case, ‘Teejays’ should have a profile detailing the size of the market, the competitors that operate within that market and the stage of growth the market is currently experiencing.

By documenting the size of the market and how competitors are positioned, ‘Teejay’s will be better placed to decide whether to take a profit or a sales maximization strategy. In addition, understanding the stage of growth (introductory, growth, mature or declining stage) being experienced at the target market enables an organization to determine which marketing strategy it can use in order to gain a competitive advantage.

For example, the Asian market is at its mature stage. This means that competition is stiff and the cost of running business is considerably low to the existing competitors. As such, ‘Teejays’ should invest more on advertising (as a marketing strategy) than pricing and sales. This is because, at this stage of growth, the competitors do not advertise as much and focus more on product/service development and sales.

Therefore, advertising is a good way of informing the customers that a new player is in town, all the while detailing the services that a new organization is bringing into the market. In other words, advertising is always a good way to entice consumers into buying your products or services in a new market.

Market segmentation

Arguably, for any competition strategy to be successful, the company must understand how the market works. This concept is quite different from market profiling in the sense that market segmentations explores deeper market dynamics, as well as the forces that influence the success or failure of the market. Market segmentation aims at analyzing the potential and existing problems in the target market.

This can be achieved by talking to different stakeholders (consumers, suppliers and competitors whenever possible) within the market. Alternatively, an organization should conduct thorough research with an aim to uncover different characteristics of the market (Kotler & Armstrong, 2010).

By following these strategies, ‘Teejays’ will be able to uncover such problems and devise viable solutions for the same, consequently allowing the company to beat the competition. In addition, ‘Teejays’ should group its potential clients into manageable segments which share common problems and use its services in the same way.

This will enable it to market to each segment more efficiently, thereby increasing its chance of attracting more clients. This strategy is supported by Kotler and Caslione (2009) who state that total customer satisfaction guarantees success regardless of the existing competition.

Competition analysis

It is always very easy to think that your organization offers the best products and services in the market. This is a slippery slope that most companies (big and small) have failed to recover from. As such, it is always important to consider the existing competition and devise measures to counter their influence in the target market.

As a result, ‘Teejays’ should list all the existing competitors in the market especially those that may have solutions to problems that the company foresees or has. Even if their solutions seems different to what ‘Teejays’ have, they are still a threat and should be watched more carefully.

After listing all competitors, ‘Teejays’ should rate itself and its competitors in regard to pricing policies (operational efficiency), product or service leadership, and commitment to customer satisfaction (customer intimacy). This will enable the company to identify opportunities in the market as well as vulnerabilities.

Make a stand (positioning strategy)

According to Kotler (2011), competitive positioning is all about coming up with a different way of doing business, such that you create value for your targeted market. In this regard, ‘Teejays’ should conduct a SWOT (strength, weakness, opportunity and threat) analysis of its competitors so as to identify and expose their vulnerabilities.

After the SWOT analysis, the company should determine how best they can exploit those vulnerabilities since they present ‘Teejays’ with opportunities to beat the competition. Other than that, ‘Teejays’ should develop a list of products and services that it can bring to the market, in order to meet the specific needs of its prospects and clients in a new and better way.

Value scheme

At the end of it all, you must decide on the type of value you wish to bring to the market. When it becomes evident that you are bringing something different from your competitors into the market, the chances of you getting new clients becomes higher.

Without product/service differentiation it takes more money and time to convince potential as well as existing customers to prefer you over your competitors (Walker, 2003). In most cases, businesses that undermine differentiation often end up competing on price. This is a risky and tough strategy especially if you are in it for the long haul.

There are three types of value that an organization may decide to choose from. The first one is customer intimacy, which focuses on availing to the customer goods and services that are uniquely customized to meet their needs. The second one is product leadership which aims at providing the best products through innovation and product improvement.

Companies that adopt this technique always ensure that they stay ahead of their competition in regard to product/service development. The final type is operational efficiency. This type of value is focused on cost reduction and competes through pricing. Companies following this technique strive hard to ensure that they have the most competitive price in the market.

With this in mind, the best value that ‘Teejays’ can bring to this market is customer intimacy. This is mainly due to the fact that product leadership and operational efficiency are too expensive and risky for a new company in this market. However, customer intimacy will ensure that ‘Teejays’ provide services that meet the clients’ needs thereby increasing its competitive advantage over its competitors.

Discussion

Customer satisfaction often refers to the ability of a product or service to fully satisfy the needs of the intended consumer. This should be the primary concern of any organization willing to survive the aggressive nature of today’s business environment.

This is mainly because satisfied clients mean more sales, increased market share and unwavering consumer loyalty. These elements ensure that an organization makes profits which can be used to research for cheaper and better ways of production, expanding an organization’s market base and expand the business.

In addition, Gilmore (1998) states that customer intimacy is an effective strategy that can be used to minimize negative variations in the production or service delivery processes thereby increasing an organization’s chance of producing quality products and services, which meet (if not exceed) the needs and expectations of the consumers.

The author further states that, in every organization there should be various departments and offices that cater for different needs of the consumers. These factions make up quality chains which depend on each other to produce the final product or service.

Conclusion

Managing the quality levels exhibited by an organization in terms of products, services and processes is seldom an easy undertaking and in many situations, businesses have failed in this regard due to lack of know-how by the business owners. As such, it is always important to ensure that competition strategies are implemented before an organization initiates a project, process or operation.

This paper set out to explore various steps that should be followed to ensure that a new company has the ability to compete effectively in a hostile market. To that end, the concepts of space matrix and competitive strategies have been used to come up with viable measures that can be implemented to guarantee success in the Asian market.

References

Armstrong, G, et al 2009, Marketing: An Introduction, New York, Financial Times Prentice Hall.

Gilmore, H 1998, ‘Product and Service Quality-The South Pacific Way, Fiji Islands: A Case Study’, Quality Engineering, vol. 11, no. 2, pp. 207 – 212.

Kotler, P 2011, Marketing Insights from A to Z: 80 Concepts Every Manager Needs to Know, California, John Wiley and Sons.

Kotler, P & Armstrong, G 2010, Principles of marketing, New York, Pearson.

Kotler, P & Caslione, J 2009, Chaotics: the business of managing and marketing in the age of turbulence, USA, AMACOM Div American Mgmt Assn.

Walker, G 2003, Modern Competitive Strategy, New York, McGraw-Hill International.

Executive Summary

The beverage industry faces high competition amongst the highly established industry players, which also command the global market. The buyer power is relatively average, as consumers do not have immense powers to drive prices lower.

The industry, however, lacks switching costs, which provides consumers with the freedom to determine their drink of choice. New entry threats are low as brand loyalty and brand name are critical factors that help to determine performance.

The existing industry players are well established. This requires significant capital for any new entrant to compete with them. The varying political and legal factors that manufacturers put up with in the global arena make it more challenging for business performance.

PepsiCo’s critical success factors include attaining competitive edge, expanded product portfolio, as well as strong corporate culture. Health concerns and technological advancements play a major role in driving changes within the beverage industry.

Increasing awareness about the health challenges posed by carbonated and other processed drinks is pushing buyers into adopting bottled water as an alternative. PepsiCo should consider sustaining a significant research and development strategy, to enable it to compete effectively with its rivals.

The short product life cycle in this industry requires an effective research and development strategy to ensure that new products are availed to the market at the opportune time.

Five Forces Analysis of the Industry

Buyer Power

In general, buyers enjoy an average bargaining power in the industry. While the manufacturers enjoy higher bargaining power for energy drinks, vitamin-enhanced beverages, and sports drinks, the buyers have an equally higher bargaining power in terms of the carbonated soft drinks.

There are no switching costs involved, which makes it difficult for industry players to lock in their customers. The non-carbonated drinks are marketed at premium prices, sometimes up to 75% higher than the carbonated soft drinks (Thompson et al., 2013).

Supplier Power

Suppliers have a low bargaining power in the industry. The industry has numerous suppliers who supply numerous other industry players, which reduces the overall bargaining power.

Additionally, some of the industry players, including PepsiCo and Coca-Cola, have elaborately established themselves (Thompson et al., 2013). This gives such firms immense bargaining power over the suppliers.

The elaborate establishment of these industry players also affords them the ability to pursue backward integration.

Competitive Rivalry

There are several large manufacturers in the industry, who strongly compete in the market with almost similar capabilities.

PepsiCo, Coca-Cola, and Red Bull, all have significant market shares in the US and the global market, which makes them great industry rivals (Thompson et al., 2013). All these companies offer products that are equally attractive in the market.

Threat of Substitution

The threat of substitution is low in the industry. There are fewer alternative drinks that buyers can acquire in place of carbonated drinks and the energy drinks.

Consumers seeking to acquire safely sealed, ready to drink beverages have to make up with products manufactured and processed by the industry players in one way or another (Thompson et al., 2013).

Threat of New Entrants

The beverage industry faces a low entry threat. The market relies on strong brand names, which requires a lot of time to establish.

Additionally, the leading industry players, including Coca Cola and PespsiCo, have elaborately established their operations and business across the globe (Thompson et al., 2013), which makes it costly for any new industry player to compete with them.

Macro Environmental Characteristics

Political Factors

Soft drinks manufacturers have a global market outreach, which has seen players establish operations in virtually all regions in the world. However, with different regulatory frameworks applied by different countries across the world, the manufacturers endure many challenges.

Global politics may also influence the manner in which foreign markets accept PepsiCo products (Hill, Hill & Jones, 2008).

With PepsiCo originating from America, foreign countries that do not support the American position and interest in the global politics may end up denying the firm access to its markets.

Economic Factors

The globalization phenomenon has transformed the world into a tiny village, where economic ramifications occurring in one region of the world affect the entire global economy.

The global economic crisis that began in the USA in 2008 spread across all economies in the world, thus slowing down market buying power in virtually all the countries of the world (Thompson et al., 2013).

Social Factors

A transformation of social lifestyles, especially in the USA, has seen many people consider leading healthier lifestyles than before.

With health experts raising concerns about the health implications involved when people consume carbonated and other processed drinks, most people abandoned such drinks (Lawrence, 2002).

Instead, people have been moving towards consuming bottled water as a healthier alternative. This poses a great threat to the soft drinks markets, as sales are most likely set to deteriorate.

Technological Factors

Technology is advancing at a fast pace, which is making it difficult for companies to keep pace with (Hill, Hill & Jones, 2008).

While adopting new technology is crucial in making operations more effective and thus cutting down on operating costs, the technology is short-lived is on the other hand short-lived.

This forces companies to spend more on acquiring the latest innovations in technology, which ends up driving operation costs higher.

Legal Factors

Different countries have their own food and drug administration laws, which may differ with those used in the USA, where PepsiCo originates.

Such regulations may involve restrictions on alcohol contents in drinks, or restrictions on ingredients used in the manufacture of particular soft drink brands (Thompson et al., 2013).

This may in turn force players to drop brands that fail to meet regulations that are applied in particular countries, or manufacture new brands altogether in order to continue serving certain foreign markets.

Environmental Factors

Businesses are continuously being compelled to ensure that their operations and activities do not pollute the environment. These new requirements are forcing firms to spend more in attempting to achieve environmentally friendly practices.

Beverage manufacturing companies, for instance, have to ensure that bottles and cans used in packaging their beverages are recyclable to achieve the required environmental standards (Hill, Hill & Jones, 2008).

These requirements, however, are a challenge to the manufacturers because this is not their core business area. The doubling up of business focus can potentially affect the ability to achieve desired business objectives.

Company Mission

PepsiCo’s mission in business is to emerge as the leading consumer products’ manufacturer that focuses on beverages as well as conventional foods in the world. The firm targets to offer investors with financial rewards, while providing growth and enrichment opportunities at the same time.

The achievement of honesty, fairness, as well as the integrity remains as PepsiCo’s main target in business (PepsiCo, 2013).

Key Success Factors

Competitive edge

PepsiCo requires enhancing its competitiveness in as far as the performance of other rival beverage manufacturers is concerned. As a critical player in the fast food industry as well, the firm has to ensure that it builds significant competitive edge with other fast food manufacturers.

To emerge as the leading consumer products’ manufacturer, PepsiCo has to look for ways of attracting new customers, which includes pursuing a differentiation strategy.

Expanded product portfolio

Providing investors with financial rewards, on the other hand, require that the company should expand its product portfolio to increase its profit potential.

With more products, the company will reduce its overall business risk. This, in turn, reassures the investors of stable and better returns sustained over longer periods.

Strong corporate culture

Maintaining high levels of honesty, fairness, and integrity calls for PepsiCo to build a strong corporate culture that will in turn sustain it. This entails training workers on good business practice and curbing high turnover rates.

Employees must be satisfied always to make them enjoy their roles, and act with honesty and fairness whenever they are transacting company business.

Drivers of Change and Industry Dynamics

Health Concerns

Changing social lifestyles play an influential role in determining industry trends and changes.

As consumers began shunning carbonated soft drinks in the mid 2000s, because of rising concerns over the health implications (Lawrence, 2002), a huge market for the energy drinks, vitamin-enhanced beverages, and sports drinks, was created.

However, with the huge popularity of these alternative beverages in the recent past, there have been growing health concerns over the dangers of consuming these beverage types.

Currently, most consumers have been shifting towards bottled water as a health precaution, which in turn also diminishes the market for the beverages.

Technology

Advancements in technology are changing the way in which industry players are conducting operations and business in general (Thompson et al., 2013).

As innovations continue to be witnessed, firms are transforming towards full mechanization and total computerization. This is set to increase efficiency and lower the cost of doing business even further.

Prices

The beverage industry in general is poised to register a rapid increase in prices. This phenomenon is more likely to be registered in the developing world, such as in India and China.

As the middle class population surges in these countries, the uptake of carbonated drinks is also likely to increase, thus pushing prices high (Lawrence, 2002).

Recommendations

PepsiCo should consider sustaining a healthy competitive edge in the industry to achieve market leadership. The industry is highly competitive, and the best alternative to remain the leader is to achieve differentiation.

An expanded product portfolio is also crucial in cushioning the business from poor market performance and scenarios. With a more expanded portfolio, PepsiCo will achieve higher profits, which will be significant in funding other important business ventures by the organizations.

The company must put strategic measures in place to help in supporting research and development activities.

With high competition and short periods of product maturity, only an elaborate spending in research and development will ensure that the company avails new and unique products into the market at the opportune time.

References

Hill, C. W. L., Hill, C. & Jones, G. R. (2008). Essentials of strategic management, 2^nd edn. Mason, OH: Cengage Learning.

Lawrence, P. (2002). The change game: How today’s global trends are shaping tomorrow’s companies. London, UK: Kogan Page.

PepsiCo (2013). Our mission & values. Web.

Thompson, A., Peteraf, M., Gamble, J., & Strickland III, A. J. (2013). Crafting & executing strategy: the quest for competitive advantage: Concepts and cases. New York, NY: McGraw-Hill Education.