AFI2421 Accounting standards and theory Assignment

Introduction - AFI2421 Accounting standards and theory Assignment

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This study is conducted to analyze the Diageo Group in the relevance of social values along with the organisation goals of the company which they want to achieve in long term. In this study system, orientation theory is used for assisting with their social and other issues of company in the market. Further, in this study Contingency theory is used for better identification of Diageo Group's social issues and also help in overcoming the issues in the market for the company. Overall, this study critically evaluates the performance of the company and indicates the major issue which can be faced by the couple due to global presence in the market.

Overview of System Orientation Theory

System orientation theory can be defined as the theory which interlinked society and business management for the overall growth of business along with society in the market. System orientation indicates continuous monitoring in the external and internal environment in which the company or management needs to operate their business activities. It involves two different values and provides conjunctions for the achievement of organization value along with societal value for overall growth in the market. System Orientation theory guides management for making the bridge between societal value and organization value so that management of the company can overcome threats and cope up in the market.

Contingency Management Theory

Contingency can be identified as a future event or situation which have probable chances to occur and can be controlled by management in present actions. Contingency theory indicates that there is no one best way to lead the organization. There are too many internal and external factors that can affect the decisions of management in every condition. Contingency theory indicates that management needs to consider various factor from the internal and external environment so that there can make all factors considered and define a unique stage strategy which can be helpful in near future.

Contingency theory also states that management need to adopt different strategies and various conditions for example in current conditions of management need to be stable or adopt retention strategy so that they can boost up in a given chance to achieve organization goal

This theory provides a better assessment of the internal and external environment so that management and organization can develop adaptability for both internal and external environment which helps management to achieve social and organizational goal. This theory further helps management in overlook all the factors and also guide to be developed strategy which can be future-oriented and also helps management to achieved desirable goals in the market.

Contingency Theory helps management in the understanding of the complex environment and also provides assistance in drafts of the appropriate framework of external and internal which can be most effective in the near future for the company.

Focus on Diageo's position

Diageo Group is the leading beverage company around the globe that provided various beverages and alcohol in many countries. The company had the vision to be the best trusted and consumable brand in the world in beverages and alcohols. Currently, Company is providing its products in approx... 180 countries which helps them to be the most valuable brand in alcoholic beverages around the world. As the company operates their business in various countries they need to focus on various national and international factors which can be more effective on their business and operational activities. The company had the vision of providing positive drinking and sustain the quality growth for which they need to be more conscious for their operational activities and strategic decision which defines the future goal and objectives of the company.

Contingency theory can be more helpful for the MNC like Diageo group as they are spread so widely so that they can't manage all trigger forces and also can't make a USP for all functional activities. Diageo Group can look at the external factors for the different companies where they operate their business activities so management or higher authority need to drafts strategies as per the conditions or environment of operational plants in various countries.

The alcohol beverage industry had a highly complex regulatory framework for which is spread among countries and jurisdictions. Management of the company needs to rethink the policies of the countries and need to draft strategic plan specific as per the requirement of the country and society so that management can achieve sustainability goals in the market.

Contingency theory indicates all things in one and also guides management for the uncertainty of the future in the market. This theory helps the company to take care of the CSR policies and also guide management for healthy alcoholic beverage campaigns, minimizing plastic, overcome carbon wastage. This kind of activity helps companies generate more social value in society so that they can assure overall growth which can be named as sustainable growth in the market.

Contingency theory defines that one strategy can't be good for another condition and for Diageo Group it looks useless because the company operates their business in 180 countries in which they need to adopt various strategies which need to be drafted as per the society and environment in which company needs to operate their business activities.

Market dynamics for Diageo Group

Consumers want to 'drink better' - This can be a major challenge for Diageo Group as in current conditions where people are more concerned with their health. The company needs to redrafts their products in more healthy ways due to the requirement of the market as the consumer wants to drink better. Contingency theory and its principal can be more helpful to analyze market and supply chain which guide management for better options of raw material which is used for the production of healthy and better quality products for the market.
An emerging middle class who can afford - Diageo Group is providing various types of drinks to their customer in which some of the new market segments are recently developed. Companies need to be more concerned about the newly emerged market of the middle class who can afford their products. Management can use contingency theory in which they can re-analysis internal factors and supply chain along with logistics so that company can provide cost-effective drinks in the market.
International-style spirits - Diageo Group is a multi-national company that operates its business activities in around 180 counties in which each country had a different taste of style for its products. The company can't be set with one significant framework for the international market as the market is rapidly changing from year to year. Contingency theory elaborates various factor which can be effective in near future as future prospective approach Diageo Group can list some of the trigger forces which can affect the international market.
A complex regulatory environment - Beverage (Alcohol) is the most complex industry in terms of the regulatory framework due to social pressure among various countries. Alcohol can be against Hindus and Muslim belief which is majorly affected consumption of alcohol in the Asian market in the globe. Diageo Group can make. Contingency theory can be helpful in a better understanding of the complex regulatory environment as it is focused on multivariate functions of any framework in the market.

With all the analysis company is going with the "Cocktails to go" campaign for online purchase of cocktails to their customer as due to Covid-19 all bars and restaurants are majorly closed for the year. The company further Invested 100 Million in their Bar to provide financial assistance due to covid-19 conditions in the market.

Conclusion

This study is conducted to analyze the System orientation theory and its impact on the business activities of Diageo Group. In this analysis, contingency theory is used which helps to correlate with business issues of Diageo Group and guided adequate solution which can be helpful for better decision making for the company. Further, in this study financial reports of Diageo Group is analysis for the future issue which can occur in complex market for the company and also interlinked those issues with contingency theory so that management can take broad ideas to resolve them.

Reference

Boehe, D.M., 2016. Supervisory styles: A contingency framework. Studies in Higher Education, 41(3), pp.399-414.

Cheng, Y., 2020. Contingent organization-public relationship (COPR) matters: reconciling the contingency theory of accommodation into the relationship management paradigm. Journal of Public Relations Research, pp.1-15.

Diageo, 2020, Annual Report, Online, Diageo, Available at: [Accessed on 20.03.2021]

Otley, D., 2016. The contingency theory of management accounting and control: 1980-2014. Management accounting research, 31, pp.45-62.

Steinbach, A.L., Holcomb, T.R., Holmes Jr, R.M., Devers, C.E. and Cannella Jr, A.A., 2017. Top management team incentive heterogeneity, strategic investment behavior, and performance: A contingency theory of incentive alignment. Strategic Management Journal, 38(8), pp.1701-1720.

Yuan, Q., 2020. Research on the Construction Path of Organizational Performance Management System Based on "Strategic Orientation".