Strategic Business Management And Planning A Swot Analysis Of Pepsico Business Essay
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Published: Mon, 5 Dec 2016
The greatest rival of Pepsi is Coca Cola. Coca Cola is an international recognized brand. Its brand name is its basic strength. But Pepsi is successfully maintaining its No.1 position in India as with its aggressive marketing planning and quick diversification in creating and developing more ideas and product packaging. Pepsi is operating in India, through 36 bottlers all over India. These bottlers are Pepsi’s strength. Pepsi has given franchise to these bottlers. Bottlers distribute, produce and help in promoting the brand. Pepsi also launched its fast food chain KFC i.e. “Kentucky Fried Chicken.”
Pepsi is a very well organized multinational company, which operates almost all over the world even in India it has also proved to be the No.1 soft drink. The purpose of this assignment is study the strategies which Pepsi has applied in India market for its product Pepsi Cola. Pepsi International is a world renowned brand.
Also did analysis of the soft drink industry in India and worldwide. The world’s leading beverage sector are soft drinks. Global consumption of soft drinks is rising by 7-9% a year and soft drink consumption increased by almost 500% during last 50 years (Putnam and allshouse 1999).
Index Page No.
Pepsi operates almost all over the world and it is a very well organized multinational company. Pepsi International is world renowned brand. One of the best carbonated drink producers is Pepsi. It is best in quality, hygiene and serving all over the world. The production of Cola by Pepsi is more than 100 years and it has controlled the world market for over a century now, its head office is situated in New York.
About PepsiCo in India
PepsiCo arrived in India in 1989 and has become the country’s largest selling food and beverages Company. PepsiCo has created a business which serves the long term dynamic needs of consumers in India and it is one of the largest multinational investors in the country. Soft drinks observe healthy growth in India. The group has developed an expansive beverage and foods business. There are 36 bottling plants in India of which 13 are owned by the company and 12 are owned by the franchisee, to support its operations. In expansion to this, PepsiCo’s Frito Lay foods division has 3 state-of-the-art plants. PepsiCo’s vision is to make tomorrow better than today as it business is based on sustainability. Its commitment to living by this vision every day is visible in its contribution to the country, consumers and farmers.
Every business starts with mission and vision. A mission statement is an approved, short, written statement of the purpose of the company or organization. The mission statement should teach the activity of the organization, give out its overall goal, and guide the sense of direction and decision making. It arranges “the framework or context within which company’s strategies are designed.” (hughes K 2005)
According to the company’s official site, PepsiCo Incorporated’s mission is to make it:
“the world’s chair consumer products company, focusing on benefitted foods and beverages. PepsiCo contest to produce healthier financial rewards to investors as it provides chances for growth and enhancement to its employees. So the overall mission of PepsiCo is to expand the value of shareholders’ investments. This is resulted through growth of sales, cost controls and wise investments of resources. PepsiCo believes in providing products that are safe, wholesome, economically efficient and environmentally sound and also believes that their commercial success depends upon offering quality and value to their customers and consumers.
PepsiCo is one of the largest companies in the world. It is the world’s largest consumer products companies. PepsiCo initiates in focusing various strategies and believes that they will drive growth and ensure the company’s success. When planning any change in mission and objectives it is important to consider their result of such a change on the company’s long term strategies. Whatever PepsiCo is doing, it seems to be doing well. The biggest exposure combined in changing mission and objectives would be a loss of focus and loss of momentum. (PepsiCo Vision and Strategy)
A SWOT analysis summarizes the key issues from the business environment and the strategic capability of an organization. SWOT helps the company to look itself for better and for worse. SWOT is a mean by which the company can better understand what it does very well and where its shortcomings are. It helps company size up the competitive landscape and gets some insight into the vagaries of market place. SWOT is centered to make an internal analysis effective and accurate so that specific strengths and weaknesses of the company with the sound strategy can be built.
Porter Five Forces
One of PepsiCo’s top brands i.e. Pepsi is one of the most acknowledgeable brands of the world, ranked according to Interbrand. It was ranked 26th amongst top 100 global brands since 2008. The strength of the brands of PepsiCo is distinct in PepsiCo’s presence in over 200 countries. It has the largest market share at 39% in the US beverage and at 25% in snack food. It is a multinational company which is very strong and has strong and vast distribution channels. It has a very good relation with Franchise. This company is quality conscious and provides good quality products.
Technology is used in manufacturing and packaging of the product, transportation of raw material or delivery of product. Technology affects the transportation costs, production costs and unskilled labor. It also plays an important role in packing of product. The market need to study several important topics to make the best use of modern information technology and marketing information system as strategic asset. The company has a tag line “Ye Hi Hai Right Choice Baby.” Technology is shaping people’s lives as the most dramatic forces. PESTEL Framework relates this factor.
By using weakness analysis we can know about the company’s weaknesses and shortcomings so that the profit can be rebuilt. PepsiCo is reliant upon particular carbonated drinks and there is a saturation of carbonated soft drink segment. The company has centralized making factor. One of the strongest weaknesses of this company is that the products it produces target only the young customers. The Franchises are political. Not all products bear the company name.
Overdependence on Wal-Mart
The largest customer of PepsiCo is Wal-Mart. Therefore the business strategy of Wal-Mart influenced the PepsiCo’s fortunes. PepsiCo is in pressure to hold down its prices because of Wal-Mart’s low price themes.
Bargaining Power of Customers
The power of buyers is the force that customers have on a producing industry. In general, when buyer power is strong the relationship to the producing industry is near to what economist terms- a market in which there are many suppliers and one buyer. Under such market conditions the buyer sets the price. In India the bargaining power is low as the products produces the company is accepted by the consumers. There is no participation of consumers in deciding the taste of soft drink. (Porter’s Five Forces)
Bargaining Power of Suppliers
For carbonated soft drink industry there are few suppliers. Every producing industry requires raw materials- components, labor and other supplies. This enhances the buyer-supplier relationship between the industry and the firms that provide it the raw materials used to create products. Also, it is safe to assume that Pepsi and Coke sales account for a large percentage of the suppliers’ total revenues. The overall bargaining power of suppliers is resulted to be low. Porter’s Five Forces model can be applied from the above.
Today the people are very trendy sensitive towards the advertisement. Therefore people drink Dew on fashionable and trendy. Considering this PepsiCo targeted new generation people and they are able to differentiate between them, few people are conscious about caffeine so they might have negative anticipation about soft drink. Also some people think that in manufacturing process soft drink companies spreading the pollution. We can relate this above statement by applying PESTEL analysis as the social factor is affected because of above point.
By the increasing population in India it increases the opportunities to the company. As more people keep more demands and also the continuous shifting trend of population also increases the opportunities for the company. For instance, people will exchange to soft drinks from juice and fast foods as the effect from changing social trends. One of the most potential weaknesses seeking by PepsiCo is dependency on US Markets by acquiring Russia’s leading Juice Company, Lebedyansky in the United Kingdom. By introducing TrueNorth Nut Snacks and increasing its Lipton Tea venture with Unilever, it continues to expand its product based. These recent initiatives enable PepsiCo to regulate in changing lifestyles of its consumers.
The demand of Pepsi is over the competitor. PepsiCo can join with major showrooms & restaurants with more opportunities. New products can easily penetrate in the market and the most benefitted chance for this company is that non-carbonated is fast growing industry in the world. With increasing opportunities the company does internet promotions and ordering processes.
Any firm can enter or exit in a market and if free entry or exit exists, then profits always could e nominal. As the raw materials, machinery, labors are easily available in the country there are no barriers to entry in the soft drink processing industry. Because of the generations of loyal customers, the retaliation level of the companies in the industry is very low.
According to Porter’s Five Forces model a new entrant to an industry brings new competence a wish to gain market share position and rather new approaches to serving customer. New player means price will be decreased and margin squeeze’s which results in low profitability in long run. (Michael Porter, competitive strategy 1980 pp7- 33). The challenge to Pepsi is to build further the brand loyalty in their core cola products so that the consumers will not switch to the cheaper, private label imitations products. Pepsi must maintain the good relations with large retailers as the access to distribution channels is currently one of the largest barriers to entry.
Rivalries can also affect the threats of the company. From the model of Porter’s Five Forces rivalry refers to the actions taken by the firms in the industry to improve their position and gain advantage over each other. All the companies are charging the same prices against their products in the industry. If Pepsi increases the prices of the soft drink, all the companies follow the same path. In a maturing market such as the domestic carbonated sodas, the only way to gain market share is to steal from one’s rivals.
Substitutes- Substitute products refer to the products in other industries. A threat of substitutes occurs in the change of prices and the product demand is affected of a substitute product. If the more substitute products become available of Pepsi, the demand becomes stretchier since customers have more alternatives. (Michael E Porter Competitive Strategy 1980 pp7-33)
Pepsi has a substitute available in the market so that the cola consumption decreases it increases the consumption of bottled water, juices, teas and energy drinks of Pepsi.
From the above discussion on PepsiCo should increase its market share by tie up with different restaurants and clubs as well as continue or go up with already adopted strategies increase its share through huge advertisement and through sponsoring different events such as it continuously sponsoring cricket matches at national and international levels. It is concluded that the strategies bought up by PepsiCo is not making any effect on the sale of Cola, whereas one is cannibalizing others market only. It is also found that Pepsi brand is behind the Coke especially in Muslim dominated area, which makes a major difference in the market.
Pepsi should also focus on increasing pricing advantage. This can be done by one of the ways by giving reverse quantity discounts on new packaging. Another strategy can be used y providing bundled products to convenience stores and restaurants. It can be said that although lagging behind in different products or different areas Pepsi has been able to market their products and increase market share and market growth by applying different strategies and approaches.
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