Pepsi-Co's Three-Year Strategic Plan

Company history 

Caleb Bradham is credited with developing a beverage that led to the establishment of PepsiCo. The company became successful and gained popularity after Charles Guth acquired it. In the late 1950s, it expanded its operations to other countries. The company was initially known as Pepsi Cola. Still, it was renamed PepsiCo Inc. in 1965 after a merger between Pepsi-Cola and Frito-Lay Inc. Currently, the companies boast of 142,000 employees, with operations in over 200 countries (Ghazzawi, 2018) . The company headquarters are in Purchase, New York. 

The influence of multiple acquisitions and mergers is largely responsible for the evolution of PepsiCo's marketing mix. Presently, the multinational company employs different tactics and strategies on its products. Its 4 Ps comprise soft drinks distribution, and others include bottled water, sports nutrition, breakfast bars, side dishes, rice snacks, cereal, and energy drinks (Keegan, 2017). In terms of the place/distribution element, most PepsiCo products are found in retailers such as convenience stores and supermarkets. The company promotes its products through aggressive advertising, public relations, direct marketing, and sales promotion. The price of its products is primarily based on the market-oriented pricing approach. 

PepsiCo's mission statement is mostly aligned with the organizations' present business condition. It illustrates the company's dedication to serving its customers. It emphasizes on products and consumer characteristics. It reads: 

To provide consumers around the world with delicious, affordable, convenient, and complementary foods and beverages, from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats (PepsiCo, 2020) . 

Besides, the mission statement outlines the main features, including the convenience and affordability of its products. 

PepsiCo has registered significant growth in revenue and profitability over the years. It occupies the top stop as the world's largest beverage company. Astonishingly, Coca-Cola rejected several bids from Pepsi to acquire the company many years ago. In 2019, PepsiCo made more than US $65 billion in sales. Even with the coronavirus pandemic that continues to ravage the economy, the multinational organization has tried to maintain revenue. However, it registered a 3% dip in revenue in the second quarter of 2020 (Keegan, 2017). The drop in revenue was attributed to reduced sales at convenience stores and restaurants due to the coronavirus restrictions and nationwide lockdown. 

Additionally, the organization spent close to $400 million on purchasing PPEs (personal protective equipment) for its staff (Lucas, 2020). However, while PepsiCo registered a decrease in beverage sales, it was complemented by increasing its food products' sales. For instance, many customers purchased a lot of oatmeal for baking and breakfast. Some of the regions that registered growth in organic food sales include North America, China, New Zealand, Australia, and the Asia Pacific. A significant trend observed was the growth in online sales, which prompted the company to open two eCommerce websites: PantryShop.com and Snack.com. 

The SWOT analysis reveals several opportunities for change that PepsiCo can implement. Some of the main opportunities are expansion into foreign markets and the development of nutritious products. Exploiting such opportunities will lead to enhanced revenue and profits. 

Porter's five forces analysis is a crucial tool used to assess a specific business sector, especially the main competitive force influencing profitability. One of the aspects of the framework is the threat of new entrants. In the food and beverage sector, the threat of new entrants is exceptionally high. PepsiCo effectively overcomes this challenge through economies of scale, innovation, and significant investment in R&D (research and development). The bargaining power of supplies is a crucial aspect of Porter's framework. Suppliers have considerable bargaining power in the food and beverage sectors and can easily influence an organization's probability (Quan, 2020). PepsiCo addresses this aspect by maintaining a dedicated team of suppliers, a diversification that addresses rising costs of certain raw materials, and the creation of highly efficient supply chains. 

The organization deals with buyers' high bargaining power by introducing new products and effectively creating a large customer base. Since the threat of substitutes is high in the industry, PepsiCo effectively knows customers' core needs, has increased the switching cost and is service-oriented (McGrath, 2017). The multinational company addresses intense rivalry in the industry by maintaining competitive and affordable prices, product differentiation, building scale to compete better, and sometimes collaborating with its competitors. 

Analysis of an organization's financial performance allows one to access an organization's financial status and its ability to meet its financial obligations. There are various ways to access the financial performance. The best approaches include ratio analysis. To conduct financial research, one must have crucial financial data about the organization. Below is the financial data of PepsiCo: 

The financial data can calculate the following; debt ratio, current ratio, asset turnover ratio, return on asset ratio, and the profit margin. The current ratio is calculated from the existing assets divided by current liabilities (Quan, 2020). Total liabilities over total assets obtain the debt ratio. The asset turnover ratio is net sales over total assets, while the return on asset ratio is calculated from the net income divided by total assets. Lastly, the profit margin is the ratio between net income and net sales. The following information was calculated: 

PepsiCo's current ratio of 0.86 shows its liquidity is significantly high and can meet its liabilities. PepsiCo's debt ratio seems to have reduced over the years; currently, it stands at 0.81. (Young, Cohen & Bens, 2018). A debt ratio tending to zero is preferred, as the organization has sufficient assets to pay off debts. However, PepsiCo registered a reduction in return on assets between 2018 and 2019 (Nasdaq, 2020). Additionally, a rising profit margin is considered beneficial. PepsiCo reported a decrease in profit margin between 2018 and 2019. 

Expansion of the existing product portfolio is a core strategy of PepsiCo. In recent years, wellness consciousness and growing health concerns have led to subdued carbonated soft drinks (CSD). Intense competition from other giant beverage companies such as Dr. Pepper Snapple, Monster beverage Corporation, and Coca-Cola reduced the profit margin in CSD sales. The company quickly recognized this trend and effectively expanded its product portfolio to include organic food products and non-carbonated drinks (Tabassum et al., 2015). The change served as a crucial turning point for the organization. 

Ideally, the massive growth of PepsiCo to its current size is mostly attributed to mergers and acquisitions. Its extensive portfolio of products is a result of numerous large-scale acquirements. Through mergers and acquisitions, PepsiCo introduced numerous product categories, including non-carbonated beverages and organic food items. The most recent acquisition that had a profound impact on PepsiCo was purchasing a large stake in the Russian food company Will-Bill-Dan Foods in 2011. That acquisition made PepsiCo the greatest food and beverage company globally at the time (Tabassum et al., 2015). Its most recent addition includes purchasing BFY Brands in 2019 and the formal agreement to purchase Rockstar Energy for US $ 3.85 billion in 2020. 

Penetration to emerging markets is another core competency of PepsiCo. For instance, in 2018, the organization registered a revenue growth of 4.3% and increased core earnings by 3%. The substantial growth was attributed to PepsiCo's entry in developing/emerging markets and high performance in international divisions. For instance, the firm registered a 20% increase in organic sales in Brazil. PepsiCo increased its global penetration from less than 30 markets in 2015 to more than 200 markets in 2020 (Zacks, 2018) . 

The best organizational structure PepsiCo should adopt to its global operations is the internal division structure. The approach allows the organization to effectively carry out operations in other regions without necessarily disrupting its operations at home. Besides, it effectively allows for preserving the corporate culture since all the operations, including foreign activities, are coordinated by the international division head who reports directly to its CEO (Cohen, 2018) . Besides, the corporate human resource department directs and facilitates training and development, expatriate management, and staffing at the corporate level for international duties. Regular communication with the HR division of various subsidiaries ensures that the organization's culture is maintained. 

One of the core strategies PepsiCo should implement is the provision of healthier products. Nowadays, customer preference is changing toward more nutritious products. Besides, in the SWOT analysis, one of the opportunities was increasing health consciousness among customers. Thus, PepsiCo must address this need through the manufacture of healthier products. Again, from the SWOT analysis, one of PepsiCo's weaknesses was low global penetration as it obtains over 70% of its revenue from America alone (Thach et al., 2018). Its expansion into Africa is relatively low, where Coca-Cola dominates. The multinational organization is yet to exploit potential revenues in other nations. Thus, it should invest more in expanding its global footprint to other countries of the world. 

Global success makes PepsiCo the largest beverage company globally and the second-largest food and beverage company. Such a powerful position means the organization should leverage its strength to identify and attract more customers towards purchasing their products. Creative advertising and investment in research and development to create superior products are methods the organization can employ to attract more customers. PepsiCo should also concentrate on overcoming competition (Cohen, 2018) . It should be a top priority since the food and beverage industry is exceedingly competitive and unforgiving. A slight slack in performance can easily lead to a loss in customer base and a dip in financial performance. PepsiCo must always overcome competition through innovative strategies to keep its customers satisfied in such a competitive business space. 

The recommended marketing position PepsiCo should pursue is increased licensing and franchising. The strategy is effective in enabling easy entry to foreign markets. Rather than create company-owned enterprises in foreign countries that are quite expensive, PepsiCo should use licensing and franchising where another organization takes responsibility for the sale and distribution of products (Zacks, 2018). Through licensing agreements, foreign organizations assume most of the multinational organization's risks – the firm benefits through the royalty fees paid for the manufacture and sale of its products. 

Another recommended marketing position is the use of joint ventures and strategic alliances. PepsiCo can pull resources with other organizations to better attain their strategic goals. Strategic partnerships can save an organization numerous costs incurred in sourcing for resources and expertise (Zacks, 2018). Therefore, PepsiCo should create more alliances with popular organizations to boost revenue and expansion to numerous regions outside of the United States. 

Key performance indicators (KPIs) or metrics are useful in measuring the success of the recommended strategy. For a long time, organizations have employed such methods to evaluate organizations' performance and are quite reliable. They include analysis of profit margins, returns on investment, debt, and current ratio (Kaganski et al., 2017). The metrics/ performance indicators are compared against the set targets of an organization, i.e., the objective of attaining a 20% increase in revenue by the end of the year. Performance is reviewed regularly, i.e., monthly or quarterly, to observe how well the organization is doing. 

Another way to measure performance is to understand what the report is telling. Sometimes, key performance indicators are not useful in disclosing the performance of an organization. One has to go much deeper to understand some of the reasons behind global marketing campaigns' failures and success. Such analyses provide an educated hypothesis that enables the management to direct the global marketing strategy in the right direction. The approach is practical due to the differences between the home and foreign markets. Besides the financial information in the metrics and performance indicators, it is critical to have a marketing insight into the data's story.