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PepsiCo is renowned brand among multinational enterprises which operates internationally in producing of soft drinks. PepsiCos headquarter place in New York which producing cola over 100 years and has dominated the market by symbols of hygiene, quality and serving worldwide.
Mission and Vision
A mission statement is enduring statement of an organization's purpose which uses to achieve the sales growth, cost controls and prudent investment of resources.
Based on mission of PepsiCo Incorporated make sense of "The world's premier consumer products company, focused on convenient foods and beverages. PepsiCo seek to produce financial rewards to investors as to provide opportunities for growth and enrichment to our employees". Therefore, overall mission is aim to maximize shareholder wealth by providing quality and value to stakeholder, dealing products that safe, enhance economic and environmentally sound are the path of succeed by PepsiCo.
PepsiCo is globalization companies with concept of "Continually improve all aspects of the world in which operate such as environment, social, economic and creating a better tomorrow than today" meaning that focused on several strategic initiatives in growth and ensure the company's success in depth of built shareholder value by making a truly sustainable company.
PESTEL AnalysisÂ of The Macro-Environment
PepsiCo is a non-alcoholic beverage, and is governed by the FDA, which set the firm standard of the laws. There is competitive pricing by PepsiCo's competitors. Therefore PepsiCo has to comply with all the policies that set by international markets, examples civil unrest, trading policies, government changes, foreign pressure, conflict in the political arena and etc.
The economic downturn in 2008 diminishing profits of the company, company had restructured their sales and marketing strategy in order to enter the markets, boost and sustain the economy return.
Citizens nowadays practicing healthier lifestyle, these affect the non-alcoholic beverage industry (PepsiCo) involves in changing attitudes and lifestyles in order to cater the demanding of customers.
PepsiCo had developed 'i-crop' water usage monitoring and management programs. This program is to reduce their agricultural growers, which is "water impact by 50% in 5 years".
PepsiCo was charged by using polluted water in India, which water flowing into the factory by nearby industrial estate. All products were being taken back from shelves and were lab tested costing the many billions of dollars.
PepsiCo had committed in innovating and effectively use of the earth's nature resources in their all business operations.
Porter's five forces
Analyze structure of an industry by using five forces developed by Michael Porter that to act either increase or decrease the competitive issue. Meanwhile, greater competitive forces in industry lead to greater pressure on price setting and vice versa.
Rivalry among existing competitors
Soft drink industries carrying an oligopolistic market structure and thus create great rivalry like Coca-Cola. Firms with high strategic stake might destabilizing due to accepting low average profit margins in huge marketing fields.
Threat of new entrants
Beverages and food industries are highly saturated in resulting of barrier of new entrants are low. PepsiCo could defend their retail channels such as possess characteristic with high profit levels.
Bargaining power of suppliers
Bargaining power of suppliers of PepsiCo is low since those supply sugar and packaging materials are present abundant in the market.
Bargaining power of buyers
Impact of the buyers is low as PepsiCo could not exist with pure monopolistic as consumer purchase finished goods in market means no involvement in deciding the taste of soft drink.
Threat of substitute products and services
Threat to PepsiCo is substitute emerging as replacement of fresh juices due to consumers' demand and health consideration causes divergence between price and demand on the core product- soft drink.
Based on Pepsi's net revenue, it is the world's second major beverage and food company. It is also a strong multinational corporation, which is offering manufacturing, distribution and marketing of all company products, and thus it has diversified business divisions. Besides, it has good financial backing, therefore no capital limitation. Moreover, Pepsi have strong and infinite distribution channels, have become one of the largest consumer products company in the globe with world well- known brands.
PepsiCo has failed acquisition of diversify businesses externally of it main businesses of packaged food and beverage brands. Many of its own products, does not have corporate name. Besides, it aim on younger customers, some senior citizen declines the taste of their products. Company internal control system is weak.
PepsiCo well recognized by global consumers and fast- growing industry, new products could easily access in the market. High technology development can be improving efficiency of company operations and productivity. Increase tendency of healthy food and beverages.
Food and beverage industry have huge competitors in the market. Unspecified people are supplying fake beverages by using name of PepsiCo, it could destroy good name of PepsiCo in the market. Others competitive beverages and foods could be substituting PepsiCo products.
This approach was first proposed by Michael Porter (1985) to describe how customer accumulates along a series of business activities that lead at the end good or service. Porter is categorized the business activities under 2 categories which are primary activities and support activities. (Refer Diagram 1)
In the primary activities of Pepsi are concerned about the transformation of the inputs into outputs and distribute and after-sales service of output. Firstly, in Inbound Logistics is including product pricing, transportation of products and production material. Secondly, under Operation are production of drinks, storage facilities and maintenance of assets. Thirdly, Outbound Logistics is that Pepsi act as wholesalers and retailers. Next, Sales and Marketing is focuses on promotion and advertising of products. Finally, Service is involved feedback of customer or ordering online.
However, support activities are the activities that support primary activities, so primary activities can perform properly. The Procurement is involving in purchasing of equipment and raw materials. Moreover, Technology Department is responsible on the database marketing, market research and transaction processing system that needed in every value chain activity. In addition, Human Resources Management is mainly focuses on staff recruitment and training. Finally, under Firm Infrastructure, it is driven by general management planning, business strategy, and market strategy and marketing policy.
Socio-Economic Environment Of Consumer
PepsiCo strengthen its business operations in food chain business, mainly consists of the companies which engaged to business of beverages, snacks, food and restaurant like KFC, Pizza Hut etc. PepsiCo is also inventing different many refreshment beverages in its retail chain over hundred countries. With the strong franchise system, PepsiCo was success along with a great entrepreneur spirit. With promotion and advertisement, PepsiCo reinforce its products by introducing new beverages. With products distribution, PepsiCo aims on all conceivable spots. With liberalization policies since 1991, PepsiCo start its operation in India towards positive outlook in Asia rather than North America.
However, PepsiCo could not pure monopoly the market where buyers' power is strong in resulting of many suppliers and one customer. For example, Coca Cola, competitor of PepsiCo is engaged to McDonald fast food restaurant. Besides, consumers are usually concerning with quality on food and beverages. Therefore, it's important to decide their satisfaction levels towards product, their buying behavior and attitude toward market strategies. Thereafter, we have carried out a survey to analyze how the consumer is important on the PepsiCo products and to recommend business strategies the company should interest in.
PepsiCo has a decentralized organizational structure, in which their operational decisions made within the separate business units were being governed by policies at the corporate level.
A decentralized structure is less controllable where company had put faith in others to continue to carry out company's vision and mission. Fragmentation of business unit might cause lack of coordination between the departments of the organization. Normally decentralized units will focus on their own best interest rather than company. PepsiCo may have many distribution centers in the worldwide that comprises operation and sales. These two divisions may encounter conflict over issue, example which division to bear the cost for the certain expenses that benefit both groups.
Decentralized organization structure facilitates creativity and flexibility, this strategic objectives sets and goals not in line with the company objectives. This may cause confusion in the customer. Thus, if the customers experienced a different decision at another, they might decide to buy another.
In decentralized management structure, a lower-level manager was placed into strategic decision-making, but they have a limited perspective in some issue. Unlike the executive level management, they tend to provide a broader perspective and understanding on company's objective and issues.
The concept of PepsiCo's branding is failed to offer the product a stand-alone identify. Thus, the brand essence of Pepsi is not deeply-rooted as Coca-Cola.
PepsiCo is made a poor choice on choosing colours of brand which is blue and red. Red is represent cola and blue is used for differentiate with Coca-Cola. The logical colour for cola is red because the cola is a reddish-brown drink. Nowadays Pepsi's has forfeited red and mainly focuses on blue to form a stronger distinction between the Pepsi and Coca-Cola but the visual identity of Pepsi is weak through red and blue branding.
Moreover, the evolution of PepsiCo's brand is changed in a drastic way. PepsiCo brought their brand in an absolutely new direction by substituting their basic structure and personality of the generally identifiable icon. Higher advisement cost is required to refresh the public mind on the PepsiCo's mission and vision. For example, Tropicana (2008) was received negative response from customer about the new packaging.
In addition, mostly products of PepsiCo are no corporate name on package of products. Thus, many customers don't know product such as Tropicana is under PepsiCo. It proved that PepsiCo is no clear brand image.
The strategic issue that PepsiCo encounter is has many competitors in this fast growing foods and beverage industry in the global market. Since food and beverage is fast growing industry, therefore have many business are developed in this type of industry. The major competitor of the PepsiCo is Coca- Cola Company. Coca-Cola Company is also a well-known brand in the worldwide market. Coca- cola has very forceful competition with PepsiCo, it threat PepsiCo by used effective advertisement to attract more consumer recognize their products.
Besides that, some unknown competitor would use the PepsiCo name to supply fake beverages and foods in the market. This showed the intension of unknown competitors to demolish PepsiCo's original brand name and company reputation. If this situation involves and does not take action immediately, it will cause more unworthy consumers of the company not liable and declines buy their products. It significantly influences company's revenue and products trustworthy.
Furthermore, some competitor would pursue and take over the effective strategic to competitive the strategic of the company in the business trends. For example, some competitive would plan to allocate their products to same place as that PepsiCo in the outlet of hypermarket, supermarket or small grocery. Those issues would affect PepsiCo's revenue and future performance, since it has many competitors in the market.
Strategies Choices and Recommendations
Socio-Economic Environment of Consumer
Based on the survey, we know that consumers like soft drinks in all occasions but various brands of soft drinks available in market. It's a threat to PepsiCo in huge marketing fields. So, PepsiCo has to take consideration of taste of products by reinforcing in research and development to improve the existing one rather than inventing various types of products.
Besides, most of respondents unrealized that PepsiCo is string up with KFC, Pizza Hut and other food chain business indicated that promotional strategies need to be restructure so that it could help to attract consumer more prefer on Pepsi's product in order to maintain good reputation of company. We may see an example of Coca Cola, their updating promotion in McDonald by giving free gift and on-going a tactic policy with McDonald by allowing consumer to re-fill only Coca Cola while visit to the restaurant.
In addition, consumers are also concerning with brand attributes like taste, pricing, packaging and any other specific quality which may help the marketers towards appropriate direction and positioning of the brand in the mind of customer.
Consumption of soft drinks not only quenches thirst of consumers but also have a psychological linkage with consumers mean that consumer's satisfaction level on the product. All soft drink companies are producing the concentrated syrup to sell their bottlers in different geographical location. Thereafter by adding water before sell to the market, in such process is indirectly affected the quality of the product due to the bottlers may have ideal cost saving strategies. Thus, PepsiCo has to focus rigorously on such issue by measuring syrup used in producing how many bottles.
Centralize organization structure.
The main reason is to ensure their control is well maintained, consistency of customer experience and the quality of products over worldwide. Centralization are an organization's ability to tightly control operations, provide a standardized set of policies, procedures, and practices throughout the organization and better use the knowledge of centralized experts.
A centralized management structure is vision focused. They provide effective leadership to keep all levels in the organization to focus on one vision. The company president and executive establish and communicate company's vision or strategy to employees and ensure all levels moving in the same direction in order to prevent potential inconsistency in vision. Besides, helps company to deliver message to customers and public.
Since fewer people involved in decision making on strategy and action, centralized organizations usually react faster to a dynamic marketplace. Strong leadership in gather information and efficiently in discussion of pros and cons of decisions, enable the decision making process and communication of participants more efficient than decentralized structure.
Strong and useful decision making of top management can minimize the conflict and disputes among the employees. Since the decision making not involved many of the employees, not much conflict and difference created in implementation. This also reduces the burden of risky and unfavorable decisions made by the incompetence manager.
It's easier for co-ordination and control where each department's manager has set own cost and profit that prevent the employees from access to the resources within their work scope.
Improve Image Brand
PepsiCo should revert and deeply leveraged the roots of its brand. PepsiCo should only use blue colour inside their identification icon, so there is significant differentiate between Pepsi and Coca-Cola. Then, PepsiCo must completely target on what people look as the core of the Pepsi image and enlarged it by stripping everything. It would result regeneration in the public's love for the Pepsi brand. PepsiCo should depict human experience through a strong emphasis on families. Pepsi should not always focus on young customers. PepsiCo can create an emotional appeal that makes Pepsi become an important part of the family's life experiences.
PepsiCo should expand more into social benefit, especiallyÂ those countries which are still backward. Cola-cola had applied a water purificationÂ program in African Villages, which gives a valuable requirementÂ and simultaneously introducing their brand name. If PepsiCo used this same philosophy with food products or water purification, will has significant influence in rising brand recognition.
In other hand, the packaging style of all PepsiCo's products should be unique. Pepsi maybe can include a high resolution image of PepsiCo's icon in all PepsiCo products. Therefore, the customers will realize those products such as Lipton and Tropicana are under PepsiCo. Moreover, PepsiCo could do market surveys of their target market segment to investigate the current brand awareness in the worldwide market every quarters. Through market survey, PepsiCo is able to evaluate the overall change and trend for every year.
Since PepsiCo, have many competitors in the food and beverage industry market. PepsiCo should plan ideal strategic to overcome the entire problem and defeat the competitors, become the most famous and the best quality products in the global market.
The main strategic is to develop trustworthy and liable products to consumers. PepsiCo should ensure the quality of the products by the products analyzers. Besides that, PepsiCo accomplish a specific brands name cop on their products, which cannot make fake brand name of PepsiCo by others unknown competitor. Loyalty consumers of the PepsiCo will easily recognize the brand name cop on their products, to ensure that products are produce by the PepsiCo. In the fact, it can reduce the fake products of Pepsi company distribute to the market and keep liable of PepsiCo products to their loyalty consumers.
Furthermore, PepsiCo could be enhancing the company advertisement of promoting their products through internet, media, banners and famous artists to promote their new products in the international market. Through effective advertisements, the company's products can be keeping well - known by worldwide consumers.
Moreover, PepsiCo also should have to development and exploitation of the hi-tech technologic, such as technical machinery to improve their company products quality and productivity. The good quality and efficient productivity of the company's products will be increase or achieve the demand of the consumers.
Besides that, PepsiCo's products should be innovative, to attract more others consumers. For example, PepsiCo can be more practical in health foods and beverages in the market trends. It could attract, more ranges of age consumers and not just in younger market.