Introduction
PepsiCo was founded on August 28, 1898, and has grown significantly over the years towards becoming one of the largest corporate companies not only in the United States but also in the world today. PepsiCo operates within the beverage, as well as, food processing industries and is considered as the second largest company after Coca-Cola (Antebi & Krauthamer, 2015). However, it is essential to take note of the fact that the top-level management within PepsiCo has taken proactive steps towards promoting the company’s competitive advantage. This has involved a process of having to take advantage of both the internal and external environments as a way of ensuring that indeed the company effectively projects itself. To help in evaluating the company' competitive position, the report will assess the external environment, as well as, the internal profile.
Porter’s Five Force Model
The following is an external analysis focusing on the influence associated Porter’s five forces and how they impact PepsiCo’s market performance.
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Competitive Rivalry - High
PepsiCo faces a significant issue due to competition within different markets from Coca-Cola, which is the largest beverage company in the world. The analysis of the competitive environment indicates that although PepsiCo has been on the forefront in trying to create a platform from which to define its competitive position, it has faced significant issues in trying to position itself effectively within the market environment.
Bargaining Power of Customer - High
PepsiCo faces strong force associated with the buyers’ bargaining power attributed to the fact that most of the customers associated with the company tend to have clear-cut expectations in the products they order. That has created a situation where the company has been forced to embark on in-depth research and development approaches with the focus being towards enhancing its ability to maintain positive performance. The customer bargaining power can also be seen from the fact that customers tend to shift from one company to another at a rapid rate based on the products offered.
Bargaining Power of Suppliers - Low
The bargaining power associated with the suppliers for PepsiCo is limited taking into account that the company has focused much of its attention on cultivating a positive relationship with the suppliers (Greenberg, 1993). The overall supply levels for the raw materials that PepsiCo needs is high, which has resulted in a situation where it has become somewhat easier for the company to source for cheap products matching their operational cost margins.
Threat of Substitutes - Moderate
The threat of substitutes for products offered by PepsiCo is somewhat moderate considering that the company finds itself in a situation where the number of products in the market is increasing at a significant rate (Kish, Riskey, & Kerin, 2001). However, PepsiCo has sought to position itself in a much effective way from which to ensure that it creates a viable avenue that aims to enhance its capacity to deliver on set out objectives in the market.
Threat of New Entrants - Low
The level of investment that PepsiCo has made in trying to define its market position is substantial, thus, creating a situation where the possibility of experiencing a threat due to new entrants is notably low. The fact that PepsiCo finds itself in a position where it has become a multinational brand creates that positive avenue from which the company would be able to reduce the possibility of threats from new entrants into the market.
PEST Analysis
The following is an external analysis of the political, economic, social, and technological factors affecting PepsiCo’s market performance.
Political Factors
From a political perspective, PepsiCo faces essential avenues for investment due to political stability in a majority of the countries around the world. That paves the way for a much better platform for market performance focusing on the company's ability to invest in a significant number of economies around the world. However, it is equally important to take note of the fact that PepsiCo faces a significant threat due to governments' initiatives against carbonated drinks on health grounds. That has created a situation where it has become somewhat challenging for the company to establish itself in some countries where governments remain health conscious about some of the products offered (Barrett, Haug, & Gaskins, 2013).
Economic Factors
Economic stability remains as one of the critical opportunities for PepsiCo in its bid to defining its market performance. From a general perspective, PepsiCo has been able to build its market position based on the economic stability experienced around the world. The fluctuation in exchange rates acts as a critical threat for PepsiCo taking into account that it is a multination brand (Srivastava & Deolekar, 2010). Operating in different countries means that the company must remain conscious of the exchange rate, as this would create a platform from which to determine whether it would meet it set profit projections.
Social Factors
From a social perspective, PepsiCo faces a significant threat due to a higher level of health consciousness among consumers of its products with different markets. That has created a situation where the company finds itself trying to engage the consumers at a much higher level as a way of meeting its sales targets. However, the increasing busy lifestyle for the majority of consumers acts as a critical opportunity for the company, as it increases their possibility of having to buy products offered by PepsiCo.
Technological Factors
Technological advancements have had a significant impact on PepsiCo, as this has created a platform for increased research and development. The outcome of this is that the company has been able to advance the quality of products offered while ensuring that it works out an approach from which to define market performance (Bernard, 2013). On the other hand, increased demand for automation of its processing plants has helped towards reducing the possibility of errors in the processing process, thus, building a front for enhanced market performance.
SWOT Analysis
The following is an internal environment analysis focusing on PepsiCo’s strengths, weaknesses, threats, and opportunities.
Strengths
The first major strength associated with PepsiCo is its strong brand image, which creates a higher platform from which the company would be able to build its overall capacity to deliver positive results. Secondly, PepsiCo has a broad product mix, which plays a critical role towards enticing consumers from a broad spectrum as a way of ensuring that it delivers on its expected outcomes. Thirdly, PepsiCo has a global distribution network, thus, meaning that it is better positioned towards reaching some of the far markets around the world (Cone & Woodard, 2007).
Weaknesses
The first notable weakness that the company is facing revolves around the fact that PepsiCo has a low penetration level in markets outside the United States and Canada. This has impacted its ability to maintain positive performance in outside markets taking into account that this only created an avenue for market performance in a single market. Secondly, the health-conscious consumer remains a fundamental threat for PepsiCo taking into account that it has become somewhat challenging for the company to achieve its expected market performances. Consumers are becoming more health conscious, which has, in turn, limited their intake of carbonated beverages such as those offered by PepsiCo.
Opportunities
The first significant opportunity for PepsiCo would focus on business diversification. That would mean that the company may focus on other areas of business performance including investment in bottled water as a way of increasing its revenue stream. Secondly, PepsiCo may focus much of its attention on market penetration into developing countries, which would pave the way for that broad avenue from which to ensure that indeed it meets some of its set out business targets (Dhar, Chavas, Cotterill, & Gould, 2005). Investment in developing countries would mean that the company will experience higher demand for its products, thus, increasing its market share significantly.
Threats
The main threat that PepsiCo is facing reflects on increasing competition from other multinational companies offering similar products. One of the notable competitors that have been identified is Coca-Cola, which has been noted as a critical threat for PepsiCo in its approach to advancing its market performance. The second notable threat revolves around the healthy lifestyle adopted by a majority of consumers, which has translated to a significant reduction in demand for some of its products within multiple markets. Consumers are taking a healthy lifestyle, which has played a crucial role towards shifting the demand for carbonated drinks among other products offered by PepsiCo.
Analysis of Internal Environment
From a general review of the internal environment, as can be seen through the SWOT analysis, it is clear that the company's strengths and opportunities tend to outdo the weaknesses and threats that the company is facing. That means that the company may find itself in a favorable position from which to advance its market performance if it would invest in its strengths and opportunities. On the other hand, the internal environment also indicates that the company faces a significant challenge due to the issue of competition. That is an area that the company would need to reflect on with the intention of advancing its position through product differentiation.
Recommendations
Based on the analysis, both external and internal, it is essential to consider some of the key recommendations that may work for PepsiCo in its bid towards advancing its market position. The first significant recommendation would involve having to ensure that PepsiCo engages in an in-depth investment in developing countries, especially in Africa. The investment would not only focus on delivery of products but would also focus on ensuring that the company engages in marketing and advertisement of its products. The second recommendation that would be viable for PepsiCo would touch on product diversification with the focus being towards ensuring that the company would be able to increase its revenue base. Through diversification, the company would be in a better position from which to advance its market position while ensuring that indeed it maintains that avenue for market delivery. Diversification will also help in ensuring that the company would be able to appeal to the health-conscious consumer as a way of advancing the overall structure of performance in determining market presence.
Conclusion
In summary, PepsiCo was founded on August 28, 1898, and has grown significantly over the years towards becoming one of the largest corporate companies. PepsiCo faces a significant issue due to competition within different markets from Coca-Cola, which is the largest beverage company in the world. PepsiCo faces essential avenues for investment due to political stability in a majority of the countries around the world. PepsiCo has been able to build its market position based on the economic stability experienced around the world. PepsiCo faces a significant threat due to a higher level of health consciousness among consumers of its products with different markets. The main strengths are associated with Pepsi Co is its strong brand image and a broad product mix. The first notable weakness that the company is facing revolves around the fact that PepsiCo has a low penetration level in markets outside the United States and Canada. The main threat that PepsiCo is facing reflects on increasing competition from other multinational companies offering similar products.
References
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Barrett, P. T., Haug, J. C., & Gaskins, J. N. (2013). An Interview on Leadership with Al Carey, CEO, PepsiCo Beverages. Southern Business Review , 38 (1), 31.
Bernard, H. (2013). Pepsico promotion under the ASA cosh. Journal of Direct, Data and Digital Marketing Practice , 14 (3), 269-271.
Cone, J., & Woodard, M. (2007). Action learning helps PepsiCo's sales leaders develop business acumen and innovation skills. Global business and organizational excellence , 26 (4), 27-35.
Dhar, T., Chavas, J. P., Cotterill, R. W., & Gould, B. W. (2005). An Econometric Analysis of Brand ‐ Level Strategic Pricing Between Coca ‐ Cola Company and PepsiCo. Journal of Economics & Management Strategy , 14 (4), 905-931.
Greenberg, K. E. (1993). Pepsi's big scare. The Public Relations Journal , 49 (8), 6-10.
Kish, P., Riskey, D. R., & Kerin, R. A. (2001). Measurement and tracking of brand equity in the global marketplace-the PepsiCo experience. International Marketing Review , 18 (1), 91-96.
Srivastava, D. K., & Deolekar, A. (2010). Non-surgical closure of Pepsico plant: a case study. Indian Journal of Industrial Relations , 492-504.
