No organization can operate in isolation because reaching strategic objectives such as continuous growth and high levels of performance requires cooperation with customers and other economic agents. In addition to it, organizational performance is often influenced by the developments in the external environment, which includes legislation, technology, the situation in the national and global economy, public opinion, etc. (Oginni & Adesanya, 2013). The analysis of this environment is the first thing to do when making vital decisions, such as redesigning the organizational structure of an international corporation.
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Companies functioning in the food and beverage industry are not an exception to the trend of overall interdependence. When speaking of this sector, it is significant to remember that it involves all firms specializing in growing, processing, packaging, and distributing food and beverages. In general, this industry combines all companies turning out products for human consumption but medications. It is fragmented, and it means that the production is driven by several companies, but none of them is big and influential enough to evoke changes in the balance of powers and the level of prices.
While assessing risks and the external environment in foreign markets with the aim of redesigning organizational structure, it is crucial to keep in mind that there are two groups of drivers in the food and beverage sector. The first one includes demand forces such as demographic shifts, i.e., preferences based on income, household size, age, etc., and consumer tastes. The second one covers profitability drivers, such as effective marketing and operations, product mix, and a high level of services. Moreover, the industry is highly labor-intensive while the level of using capital is low, making it similar to retail, construction, and hospitality and travel sectors (Food and beverage: Introduction, 2016).
Another vital thing to concentrate on while assessing potential risks is the importance of becoming market-driven and consumer-oriented. It means that it is significant to focus on the primary trends in the foreign and even global markets and consumer tastes (Aziz & Yassin, 2010). There are some established trends in the food and beverage industry that lead to higher levels of risks when looking for ways for the further development of companies operating in this sector, especially in the case of striving to win foreign markets. First of all, recent economic turmoil forced people to cut their expenditures to the maximum possible extent.
It means that people prefer generic food that can be cooked at home to eating out (Food and beverage: Background, 2016). This trend makes companies attract investments to innovate processes of production with the aim of reducing prices. Otherwise, they face the risk of losing positions in the market as well as customers, who might want to switch to competitors offering cheaper products of the same or nearly the same quality.
Second, there has been a rise in the level of obesity resulting from the changes in the food and beverage industry and propaganda of processed meals. It made companies turn out low-calorie and low-fat products and reposition themselves as healthy brands. For this reason, it is important to design labels containing all necessary nutritional information (Food and beverage: Background, 2016). Otherwise, there is a risk of failing to meet the demand for healthy food in case of ignoring.
Moreover, it is critical to guarantee the high quality of products and that they are safe to avoid instances of food intoxication. Failing to follow safety rules and regulations evokes the risk of losing market positions because customers might choose to switch brands if they believe that competitors produce healthier, safer, and fresher food and beverages (SAGE PFW, n.d.).
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Finally, it is crucial to keep in mind the growing green consciousness and popularity of sustainability programs aimed at diminishing the impact of industries on the natural environment. It is closely related to the issue of producing healthy food. For this reason, it is recommended to follow provisions controlling greenhouse gas emissions into the atmosphere, water consumption, and energy efficiency (Food and beverage, n.d.). Potential risk as well involves losing companies’ positions in the industry because people are seeking to buy environmentally friendly goods believing that it might help save the planet.
In conclusion, it should be highlighted that there are several details to assess when entering a new foreign market or redesigning organizational structure in order to minimize the risks of failing to achieve a company’s strategic objectives and win customers. First and foremost, it is the level of income. It is necessary to determine the target population and find out which price rate is acceptable for people. The second thing is the commodity price level, which has a direct impact on the price of the finished good. In this case, if it is too high, and the income rate is low, the risk of becoming unsuccessful is as well high. Third, it is vital to learn consumers’ tastes and their preferences to know whether they need healthier food packed with the detailed label. Finally, it is critical to explore local legal acts regulating the food and beverages industry to find whether a company complies with all provisions and guarantees a flawless production process.
Aziz, N. A., & Yassin, N. M. (2010). How will market and external environment influence the performance among SMEs in the agro-food sector in Malaysia? International Business Research, 3(3), 154-164.
Food and beverage: Background. (2016). Web.
Food and beverage: Introduction. (2016). Web.
Food and beverage. (n.d.). Web.
Oginni, B. O., & Adesanya, A. S. (2013). Business environmental factors: Implications on the survival and growth of business organizations in the manufacturing sector of Lagos metropolis. Business and Management Research, 2(3), 146-155.
SAGE PFW. (n.d.). Managing business risk in the food and beverage industry. Web.