SWOT and PEST Analysis on Gatorade

4162 words (17 pages) Essay in Marketing

24/05/17 Marketing Reference this

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In order to satisfy unfulfilled customers the marketing managers have to know the capabilities and the environment including external environment and internal environment in which it is operating.

There are several ways to analyze the situation depend on the aspect of situation:

5 – C analysis: (company, customer, competitor, collaborators and climate). It helps companies identify and select better opportunities to provide value to customer.

SWOT analysis: (strengths, weaknesses, opportunities and threats.) SWOT analysis helps you understand business better, recognize weakness, deter threats, catch opportunities, take advantage of strengths.

PEST analysis: helps provides an understanding of the wider business environment, anticipate the difficulties and minimize its effects.

Political: the level of political stability, the tax regime and fiscal policy affect directly to organizations and change completely the marketing plan of any companies.

Economical: includes changes rates or wage and price control.

Social: includes level of educations, trends in fashion and taste that organizations have to consider carefully.

Technological: includes new technologies and inventions.

Marketing strategy

A marketing strategy defines missions and shows the way organization is going to satisfy customer needs and wants in its target market. The marketing strategy includes:

Porter’s Five Forces:

Bargaining power of suppliers

Supplier power is often held by PepsiCo when they increase costs or reduce the quality

Bargaining power of consumers

They are the main key of success. Consumers affect business performance of PepsiCo and control competition in market.

Threat of entry

New entrants will prevent PepsiCo from getting success

Competition from substitutes

The same products come from competitors will affect Gatorade’s market.

Porter’s generic competitive strategies:

Cost leadership

Create a low cost of operating

Differentiation

Produce a different product with competitors in order to get attention

Focus

Select a segment; satisfy and make potential customer in this segment become loyal customer.

Porter’s growth strategies:

Market penetration

Selling more in existing market for existing customer

Encouraging new users to buy product

Market development

Bring Gatorade into new market, new segment.

Product development

Improve the quality of Gatorade

Diversification

Bringing new product into new market, taking business risks.

Marketing mix decisions

The marketing decisions are made based on four P’s: Product, Price, Place and Promotion.

Product: represents goods, services or ideas.

PepsiCo has many brand, products are available in markets such as: Gatorade, Pepsi-Cola, Quaker, and Frito-Lay.

Price: generally is how much customers are willing to pay for products. For example, a company provides services or sells products then customer exchange money for receipt those products or services that satisfy their wants.

Place: represents the way in which goods and services are allocated by a firm.

Promotion: historically means advertising and advertising is marketing. But now, promotion is only a small part of marketing. Promotion alone, in other words, without other elements can’t be marketing.

Implementation and control

“Implementation is the process that turn marketing plan into action assignment.” (Kotler 1997) This process creates specific actions to ensure that organizations’ missions are achieved well.

Evaluate the benefits and costs of a marketing orientation for a selected organization

There are five marketing concepts including production, product, selling, marketing and social marketing.

Marketing philosophies

Characteristics

Production concept

Supply creates its own demand. In other words, the sales will grow with the increase in production and distribution facilities.

Product concept

The providers tend to focus on improving the quality, performance, and innovation.

Selling concept

Organizations usually focus on selling and promotion activities.

Marketing concept

Organizations research and understand what customer wants and provide better satisfied products than competitors do.

Social marketing concept

Social marketing concept = Marketing concept + society.

Organizations focus on improving the well-being of customer and society

According to Chee (2012), PepsiCo is definitely a market-oriented corporation.

Name

Evaluation

Opinions

Costs

Benefits

Customer focus

Cost lots of money and effort.

Need huge human resources.

Bring back customer’s satisfaction and loyalty customer

Need to speed up research programs, take full advantage of human resources.

4P(s)

Product

Takes time and money to create an innovation.

Can address the needs and get customers’ attention.

PepsiCo should concentrate on brands which has been recognized and could bring benefits such as Gatorade, Pepsi-Cola.

Price

A large increase will be recognized and hard to gain extra profit margin.

By setting a logical price, PepsiCo can earn profit and steal competitors’ customer at the same time.

When set price for a product, such as Gatorade, PepsiCo has to carefully think about the cost, the competitors’ price and the consumers’ perceptions.

Place

It takes lots of time to research carefully.

Expand the business and make more funds for the company.

PepsiCo should have a carefully research and marketing strategies which have low cost and will gain much profit.

Promotion

Time consuming and money for campaign or advertisement.

More advertisements mean more products capable to be sold.

Need change from the original way in communication with customers to the new way to get more attention.

The table above shows the benefits and costs of marketing concept of PepsiCo with their product which is Gatorade. It’s clear that being one of many famous brands of PepsiCo, Gatorade has satisfied very well what customer needs and wants, mostly the high-performance athletes. But like many other companies and products, PepsiCo has to improve their strategy in order to promote Gatorade to the customers and compete with PowerAde which is the main competitor with Gatorade in markets.

Show macro and micro environmental factors which influence marketing decisions

Macro Environmental

Factors

Influences in decision making

Political: All Gatorade in Vietnam are imported from Philippines and when Vietnam became 150th member in WTO in 2007, the import tax was decreased

Increase the price of each 1.5 liter bottle in Vietnam into 45,000 VNĐ.

Economical: Increasing in fuel price means a lot of expenses

Increase the price to reduce the expense.

Social: Instead of drinking beer and alcoholic beverages, people are going to choose bottled water and diet sport drinks

Increase the quality of products and provide non-alcohol products

Technological: Require new kind of bottle which is friendly with environment

Produce new bottle and increase the price to reduce expenses

SWOT analysis:

Opportunities

Threats

Gatorade has some products which are not promoted as much, they need to promote other kinds of Gatorade, not only soft drink but also energy bar or protein shakes.

They can also add a vitamin-enhanced hydrator in order to compete with energy drinks.

Vietnamese people used to buy products in grocery store instead of buying in supermarket. Meanwhile, Gatorade is sold mostly in supermarket.

Vietnam economic fluctuates especially fuel price. It affects the costs and the price of Gatorade.

Micro Environmental

Strategy: “Sarah Robb O’Hagan shares Gatorade’s strategy to be sports nutrition leader.” (Jennifer Rooney, 2012) and “Gatorade wants to dominate $20 billion sports nutrition market” (Jeff Reeves, 2008).

In order to achieve these strategies, PepsiCo decided to change the logo to the sample “G” in 2009. The new logo was expected to appeal to a whole new generation and could be used in many different products of Gatorade.

Skills: PepsiCo are using new bottle which is called “Green” bottle for all their products. These bottles are made from bio-based raw materials including switch grass, pine bark and corn husks.

Share Value:

Gatorade is the third important brand of PepsiCo. It makes up about 11.9% of PepsiCo stock price. Compare with Frito-Lay, Quaker & Others and PepsiCo soft drinks, Gatorade plays less important roles than other products. It could affect the decisions making of PepsiCo that the company would promote Gatorade to be a more important product that company will produce and serve.

Strengths

Weaknesses

Gatorade is the leader in the sport drink market following by PowerAde.

Gatorade has a loyal consumer base.

Customers might be confused and annoyed because there are too many varieties and flavors.

Gatorade doesn’t have an energy drink.

Five forces:

Rivalry among competitors: There are a lot of competitions for Gatorade because other sports drink companies are also provide the same products in many aspects.

Threats of new entry: Vietnam is a potential market so not only PepsiCo and Gatorade came to Vietnam but also many other companies are coming with other kinds of drink.

Threats of substitutes: Many existed sports drinks in Vietnam are doing the same work as Gatorade does.

Bargaining power of buyers: If Gatorade doesn’t satisfy customer so they can switch to other brand which also provide the same quality as Gatorade does.

Bargaining power of suppliers: is very low in Vietnam because the main competitor which is PowerAde is also in sale. It means that suppliers can’t charge Gatorade high cost by the customers than PowerAde.

Trends

Customer trend: Vietnamese people tend to buy drinks without understanding exactly what kind of drinks they are going to buy. It’s a difficulty for Gatorade to sell their products in Vietnam even though Vietnam is still a potential market.

Competitor trend: Based upon their company website design, PowerAde is trying to offer the “cooler” drink than Gatorade but PowerAde doesn’t have the same quality that Gatorade has.

Market trend: Now, people like to choose the products that wealthy and friendly with environment.

Propose segmentation criteria to be used for products in different markets

Segmentation is “process of defining and sub-dividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics.” (Transportation Research Board, 2011)

Segmenting consumer market

There are a number of ways which a consumer market can be segmented. Usually, consumer market is segmented based on geographic, demographic, psychological, behavioral, usage and benefits.

Gatorade in Vietnam should continue to segment the market in these ways, but change from focusing on segmenting by location to segmenting by demographic. The target audience in the segment would be athletes or sport man in the ages of 16 – 35. There are many reasons which will explain this change.

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Firstly, the athletes and sport man is 2 types of groups who play sports regularly and require a lot of energy during the performance. By advertising through sport channels or selling products near gyms or small football ground, this segment is accessible to Gatorade.

Secondly, the majority of people who play sport regularly are in the ages of 16-35. It particularly will bring back profits for the company. It’s measurable.

By changing from geography to benefits, Gatorade will take a serious step into Vietnam market.

Segmenting industrial market

Industrial market usually seems smaller that consumer market. However it is easier to be identified than consumer market. In Vietnam, Gatorade is imported from Malaysia or Philippine then allocated for shopping malls, department stores or retail stores. The target audience in the segment is reseller based on geographic.

By focusing on selling in two biggest cities in Vietnam which are Hanoi and Ho Chi Minh, Gatorade can have more benefit than other cities. Hanoi and Ho Chi Minh City are believed that gathering a huge number of resellers. And these numbers is increasing day by day. It means the size of segment is also increasing. It’s measurable.

Choose a targeting strategy for a selected product / service

A target market is a market or segment selected for special attention by an organization (possibly served with a distinct marketing mix) (Marketing Course Book, 2004)

Choosing a targeting strategy

Instead of following Undifferentiated (Mass) Marketing or Differentiated Marketing which seems to be unrealistic for Gatorade, they should focus on Concentrated (Niche) Marketing which enables them to achieve goals and has more loyal costumer. Specifically, Gatorade should concentrate in the high – performance athletes who in the ages of 16 – 35.

To consumer market, Gatorade will focus individuals who are playing sport regularly. Products could be sold in gymnasiums, mini football ground…

To organizational market, Gatorade should become the promoter of big tournaments such V-league or AFF Cup which means selling directly to Institution.

Advantages and criteria to meet

Niche marketing allowed Gatorade keep focusing on only one segment. For example, if athletes in the chosen segment want a better quality Gatorade which means better taste, more Sodium and Potassium and Gatorade satisfied them better than competitors then the company obviously would have a huge number of loyal customers.

The concentrated marketing is chosen based on many factors which influence the decision making and also the whole company.

Company resources: Gatorade has a competitive advantage than other competitors which is the brand image. Gatorade is already known as the number one sport drink in US and Europe. It makes everything easier for them to sell products in Vietnam market. Moreover, PepsiCo who own Gatorade brand is one of the biggest beverage companies in the world. Obviously, they have much stronger financial resources than other competitors, especially local company.

Product’s life circle stage: Although was created in 1965 but Gatorade is still going through growth stage because there are a growth in market. According to PepsiCo, total revenue has nearly tripled from 2006 to 2011, increased from $8 billion to $22 billion in Vietnam. New targeting strategy come along with many competitive advantages will earn more revenue.

Market variability: Because of Vietnam has joined in WTO in 2007 and Gatorade just focuses on only one segment that is the athletes from 16 – 35, the market will be stable.

Demonstrate how buyer behavior affects marketing activities in different buying situations

Consumer buying behavior

According to Dibb (2008), consumer behavior is “the decision processes and acts of individuals involved in buying and using products or services”.

The process of consumer behavior and its impact on different marketing situation:

Athletes and sport man require energy comes from sport drinks every day. It’s routine and doesn’t require much information and recognition to make a decision. For that reason, Gatorade is a low-involvement product. It affects mostly in Purchase decision. In the straight rebuy situation, consumer is going to buy exactly the same product as they did before. It this situation, together with being a low-involvement product, Gatorade should speed up consumer’s buying process by more advertising or by choosing a convenient place (near gymnasiums, in mini football ground)

Before a person decide what he is going to buy and how much he is willing to pay, his purchase action was affected by many factors.

Cultural factor: divided into three sub factors Culture, Sub Culture, and Social Class

Social factor: Being a member of a group, an individual is directly affected group buying behavior. For example, among 7 people in a football team, there are 6 people drink Gatorade. It seems very easy that the last one would also drink Gatorade.

Personal factor: Gatorade is produced mostly for athletes but its potential costumer is people which are in the ages of 30-35. These people need more energy to do exercise or play sports than others.

Psychological: Obviously, selling Gatorade in Vietnam is affected by many stimuli such as people’s belief. Fortunately, Vietnamese prefer imported goods than the local one. It creates more opportunities to attract consumers.

Organization buying behavior

Tom McKaskill (2011) said that: “Organizational buying is very similar to individual buyer behavior with some contextual differences. Organizations buy in furtherance of organizational objectives, such as to manufacture and deliver goods and services to members, customers or the community.”

The process of organization behavior and its impact on different marketing situation:

The process of organization behavior is quite similar to the process of customer behavior except how decisions are made. For the consumer, the decisions are based on personal interests or lifestyles. Conversely, the organizational buying decisions usually have to go through a more complex decision making process and be affected by many factors.

Environmental: such as primary demand, the economic outlook, the rate of technology change. All these forces must be monitored to determine how they will affect buyers.

Organizational: such as organizational structure, objectives or procedures. These forces constrain the freedom of action of organizational buyers and affect the decision making process.

Interpersonal: Within the buying group, the use of power and the level of conflict could affect organizational decisions.

Individual factors are the personal characteristics of the individuals in the buying groups. These will affect the decision making process and the seller must be aware of their potential influences.

The organizational decisions are usually made by a number of people in many functional areas. There are six groups create Decision Making Unit (DMU) which gathered people who involved in purchasing marketing decisions.

Users: are those who put the services or products into operation when the deal has been made.

Influencers: are those who help define the specification and provide the input for process.

Deciders: are responsible for making decisions on products requirements.

Approvers: are those who help define the specification and provide an input into the process.

Buyers: are generally responsible for purchasing.

Gatekeepers: are individuals who control the flow of information.

Differences between organizational and consumer buying behavior

The differences between organizational and individual buying processes are shown in the following table:

Buying step

Organization

Consumer

Problem recognition

Anticipates and plans for purchase on a routine basis

Reacts to needs when they arise

Need description

Extensive, objective cost-benefit analysis

Limited analysis of benefits; concern with total cost

Product specification

Precise technical description using techniques such as value analysis

Description more in terms of benefits

Information/ Supplier search

Extensive search that extends to the search for supplier

Limited search – geographically and in terms of sources

Proposal solicitation

Formal, such as in a tender process if large volumes or values involved

May be verbal

Supplier selection

Made after extensive evaluation of objective information

Limited analysis with subjective and anecdotal information influencing the decision

Order-routine specification

Routine calculation of re-order points as well as time and place of delivery

Not routine

Post-purchase performance review

Extensive comparison made and feedback given, concern with quality management at source

Little basis for comparison

Different types of buying situation in the buying process affects marketing activities

Storytelling is a powerful form of marketing which was taken full advantage by Replay – a project which was started by Gatorade. It’s about men who are in the ages of 30. They used to use sport drinks before but recently, they are lacking of time for exercise. Replay creates a sport field for them in order to complete their champion dream. Through Replay, people can see and remember Gatorade brand as a drink that bring back their inspiration in sport. It helps increase the Gatorade’s sales in 2 different buying situations:

Gatorade use Replay as an advertisement to get attention from people who have never used Gatorade before. It’s not the main purpose of Replay but still important for marketing strategy. Because of being a low-involvement product, Gatorade is easily sold for new customer once they were excited with it.

Gatorade use Replay to give these men great encouragement to take part in sports again. For those men who have played sports, they definitely heard or used Gatorade. After Replay, they are going to buy Gatorade again. It’s the main purpose of Replay project which would help Gatorade increase 63% its income in the areas the campaign took place.

Propose new positioning for a selected product/service

Kotler (1997) defines positioning as “the act of designing the company’s offer and image so that it offers a distinct and valued place in the target customer’s mind.”

Identify new positioning

In Vietnam, Gatorade is already known as a low price product and offered a low quality because from the beginning, Pepsi was just exploring the situation and market in Vietnam. They were trying to build their image in customer mind. Gatorade is sold at the price of 13,000 – 15,000 VND for each 500ml bottle and 40,000 – 45,000 for each 1.5 liter bottle. Compare with other beverages in market, these prices is lower than Redbull (8,000 – 10,000 VND for each 250ml bottle) and Number One (6,500 – 7,500 VND for each 250ml bottle). And these products also taste better.

Gatorade should improve its image in order to offer a distinct and valued place in customer’s mind. As a number one sport drink in the world, Gatorade should build a new positioning strategy which is pay more for more value proposition.

Criteria to meet

There are three reasons that encourage Gatorade to take that bravely step.

Firstly, Gatorade obviously has to improve their quality, especially their taste, in order to compete with existed brands such as Red bull or Number One. Better taste, better nutrients means higher satisfaction and more customers. It’s profitable.

Secondly, the majority of Vietnamese people tend to buy the higher product when they’re confused between two new products. It means if Gatorade offers a higher but also logical price, they can steal customers from the competitors. It’s preemptive and superior.

Finally, offer higher quality and higher price products for high living standard people makes Gatorade become more distinctive than competitors.

Meeting these criteria brings back competitive advantages to Gatorade in market in order to defeat all competitors in beverage industry in Vietnam.

Using 4P to meet new positioning

To meet the new positioning, Gatorade needs a new positioning statement. It could be: “Old bottle but new drink”. The new statement also gives consumer a hopeful change in new image of Gatorade. Besides, using 4P(s) is the main key to achieve new positioning.

Product: The Company should make Gatorade a better taste. Otherwise, Gatorade is a sport drink which means they also need to focus on the quality of the product. Sodium and Potassium is two substances that are very important to high – performance athletes. They should increase Sodium and Potassium content (the quantity of these 2 substances is Sodium 110mg and Potassium 30mg for 240ml bottle) in products while still keep the others balance.

Price: Increasing price in a logical way will bring back unexpected successful. For those people who would spend more money to get real quality, a little bit increasing in price, for example from 15,000 to 20,000 VND for each 500ml bottle, is just one way to commit with customer that Gatorade is offering a high quality product.

Place: Come along with new image, Gatorade also change the target customer. Company should focus on selling product in areas which gather many people who have high or normal living standard. Gymnasiums, mini football grounds…still are the most important place.

Promotion: Start new campaign which presents a famous Asia athlete. Use Vietnam sport news channels as advertisement channels. Advertise and sell product through social networks such as Facebook, Twitter…

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