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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Competition in Alternative Beverages Industry-

PepsiCo's Case

10

consumption of soft drinks have decreased. Continuous product innovation is also important for gaining larger market share in international markets with low saturation rate (Gamble, 2014). Volume and market share is another key factor for Pep

sico's success in this industry.

Large scale distributors such as PepsiCo and Coca-Cola are able to benefit not only from

"economies of scale but also

from reducing its business risks substantially

" (MarketWatch, 2009,

 p.53).

This leads to distribution as another key factor for company's future success.

 Without effective distribution channels, PepsiCo is not able to reach a wide range of wholesale stores making it harder to achieve the high volume sales and large market share. However, PepsiCo is already known for having highly-effective and multi-distribution system which helps the company maintain the current market share position in both national and global markets. In addition, strong brand image and recognition is another important aspect of the alternative beverages industry. As mentioned above, strong brand image also means loyal consumers. Usually, alternative beverage consumers are very dedicated to a specific brand and hardly ever purchase another kind (MarketWatch, 2009). Strategic Group Map When analyzing the strategic group map (see exhibits 4 and 5) to identify which industry

members are close rivals and which are distant rivals exhibit 4 "

Market Share in the US

" shows

that PepsiCo holds the largest market share 47.8% and it is positioned high on the map. The width of the circle is created based on sales revenue in 2009 ($43 billion) meaning that the company enjoys great advantage over its rivals in both, sales revenue and market share however the top product line shows a bit narrow for PepsiCo but that is because I only selected 14 of

Pepsi's top brands. The closest PepsiCo's

rivals in this map are other companies or products however, this may not be correct as some of the products listed under this point may belong to

Competition in Alternative Beverages Industry-

PepsiCo's Case

11

PepsiCo or Coca-Cola. On the other hand, Red Bull and Coca-Cola seem as close rival  positioned very closely to each other on the same strategic group with Coca Cola holding 10.2  percent of the market share and product line of 33 while Red Bull holds 10.6 percent of US market share slightly above Coca-Cola. Red bull has a product line of 40 the widest line in this map. Exhibit number 5 Worldwide market share demonstrates that point others is positioned highest on the map with 55.1 percent of global market share, the second is PepsiCo with 26.5  percent, Coca Cola is next with 11.5 percent and Red Bull is listed very closely to Coca-Cola with 7 percent of the global market share. The closest rivals again in this map are Red bull and Coca-Cola positioned in the same strategic group while PepsiCo and Coca-Cola are the next closest rivals positioned in the immediately adjacent group (Thompson, Peteraf, Gamble & Strickland, 2012).

Recommendations

Looking towards the future, with potential economic condition improvement in the United States and consumer preferences shifting towards alternative beverages, the anticipated growth and potential for this industry is high and promising. However, this leads to fiercer competition as more companies will attempt to enter the market by offering innovative products to the consumer. One of the most important recommendations for PepsiCo is to continue product innovation through adding new beverages, developing more flavors and utilizing healthier components to their existing brands to gain competitive advantage over the rival firms. Broad diverse product portfolio will allow the company to attract more consumers and to penetrate new and untapped markets. The emerging international markets and low saturation rate for all types of beverages in the developing countries present an excellent opportunity for the company to increase its profits and continue to grow. Moreover, global expansion will most likely provide long term growth opportunities

.

Besides,

PepsiCo should constantly work on widening its

Competition in Alternative Beverages Industry-

PepsiCo's Case

12

"

 product offerings to consumers to satisfy their diverse lifestyles and desires

" (MarketWatch,

2009, p. 55). In addition, PepsiCo should focus on maintaining and increasing national and global market share. This is of crucial importance for the company to sustain its profits because losing market share also means losing profits as well. Acquisitions seemed to have worked before in

this industry. Rockstar's acquisition proved to have been successful and I recommend that

PepsiCo strengthens this alliance.

 Next, effective distribution channels to ensure that PepsiCo's products reach a wide

-range of retailers and wholesale stores is very important for business sustenance. Final recommendation for PepsiCo is to sustain and increase its brand image and loyalty.

PepsiCo's best

-selling sport drink Gatorade maintains the highest brand loyalty in the sports drink market. However, crucial to maintain brand loyalty is the ability to reach young consumers-

"

the needed demographic to replace the aging consumers from previous decades, check

" (Simon, 2010, para. 5). This can be done through effective marketing and

firm advertising campaigns. Finally, having a strong brand name allows PepsiCo to leverage this name to generate more revenues

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