PepsiCo is a food and beverages co-operation which is based in New York. It is in particular interested in the manufacturing and distributing and marketing of various grain based food, beverages and other products. It was established in the year 1965 with the merging of the original Pepsi-Cola company and the Frito-Lay inc. 50 percent of the total revenue accounted is generated from beverages. Since its incorporation it has acquired many other companies such as the Tropicana products, Quaker Oats Company and Gatorade. It also has made partnerships with several other beverages companies. Which are mostly to distribute and market the brands. Some of the well-known companies such as Lipton and Starbucks are in partnership with the company
It’s the world’s second biggest food and beverages company with an annual revenue exceeding 43.3 Billion US dollars in 2012 alone. Compared with other food and beverages companies by continent in the North Americas it is the largest food and beverages company. In the year 2009, United states 39 percent of all snack food market was held by the PepsiCo with their closest big rival holding up to only 11 percent
The company has been in intense competition with their prime competitor the Coca Cola company for more than 112 years now and since then the PepsiCo have surpassed them once in 2005 in market value. Though through merging with other companies PepsiCo now hold higher market value than the Coca Cola company. The company’s product bases have drifted apart as a result of merging.
As a result of global expansions the company as of 2016 has six main divisions of global operations that include of North America bevarages, Latin America, Europe sub-saharan Africa, quaker foods North America, frito lay North America. All of these divisions combined the organization as a whole employs an estimated 264000 people.
The company also runs a charity foundation by the name of pepsi foundation which was formed in the year 1962. According to the website of the foundation the focus is to help fund education, clean water and efficient water use.
Sine the year 2006 the company’s mission statement states that the company ‘‘committed to delivering sustainable growth by investing in a healthier future for people and our planet” as the purpose of the company.
The organization structure of PepsiCo has changed many times due to the volatility and uncertainty of the market conditions. The earlier years of the company saw it follow a very hierarchical structure but as through mergers and aqcuisitions this system was not reliable so it has to shift. Currently the aim of its organizational structure is to maximize share in global markets paralleled by control and leadership.
The characteristics of the organizations structure include of its global heirachy which spans through out all the divisions. The top-down communications help the top level to maintain control. This policy of hierarchy helps the company align its divisions to the main policy and strategies and keep them from deviating. its divisions are based on the geography and the particular regions business level. The functional and corporate offices are maintained to ensure the rapid changes in policies and strategies are implemented. These are headed by an exuctive vice president and a senior vice president. Some of the functional groups of PepsiCo are Global research and development, Global categories and operations and government affairs and legal.
PepsiCo has high diversification of products. The company produces around 100 different brands. In 2015, 22 of the brands had generated more than $1 billion. With their high variety of different products, they can meet the consumer’s needs. As most of the products are a success, it generates more income for Pepsi Co. One of their strength is their branding recognition. Pepsi had been one of the top 100 most valuable brand. According to the Interbrand’s Best Global Brands 2015, Pepsi Co. is ranked at the 24th among the 100. The value of the brand increases by 3% compared to year 2014 which is now worth $19,662 million. Besides, in 2013 Pepsi Co. won 6 out of 10 from Global Snack Brands by share.
One of the weaknesses of Pepsi Co. is its overdependence on America markets. The 70% revenue that Pepsi Co. derives from is from the markets of North America and South America. Pepsi. Co should expand their business more outside of America region. This shows that there is still space of expansion for the business. This weak distribution is restricting Pepsi Co. to go further. Compared to its main competitor which is The Coca-Cola Company, they have much more to grow from. Their marketing intermediaries is lesser than The Coca-Cola Company which benefits Coca-Cola more.
The second weakness of Pepsi Co. is the company depend too much on Walmart. Pepsi Co. sell their products in Walmart, and the sales they derived from there is 12% of the overall revenue. A Walmart usually sells their things in a lower price which then restrict PepsiCo to set their price of the products slightly higher, they are forced to hold the prices relatively lower for their products.
The third weakness identified is the low productivity. PepsiCo had around 198 thousands of employees in the year of 2008, its revenue gained from each employee was $219,439 but it was lower than the revenue that their competitors got from their employees instead. This shows that the productivity might be low. If the productivity is higher, the revenue that they gain from the employee would’ve been higher. Therefore, what Pepsi Co. can do is to increase their productivity.
The forth weakness is the reputation damaged due to recalling of products. Recently (2016) There was a recall of Pepsi Max cans and some beers from Finland due to some mix up during the filling of the drinks stage. This actually will show the consumers that PepsiCo. made such mistakes. Consumers will have no confidence in PepsiCo.
Pepsi Co. can increase shipping their products into more developed countries and capture their market share. This expansion has to be taken in order to compete with their greatest enemy which is Coca-Cola company. Pepsi. Co can also diversify in other industries rather than keep focusing on Food & Beverages. Who knows they might excel in that industry that which Coca-Cola would never thought of. PepsiCo. should also increase the amount of marketing intermediaries or retailers. They can actually work with more fast food chains, so far Pepsi is most seen at fast food chains like KFC. PepsiCo. can also come out with a new product which shows that they aren’t just focusing on snacks and carbonated drinks. They can produce healthy products which then the elderly people can also be targeted as PepsiCo. is always targeting youngsters and their target is ever-changing. They should target their consumers at all ages which is from teenagers to elderly people.
As health is so important to people nowadays, they actually consume lesser on carbonated drinks as these high sugary drinks can cause obesity and diabetes. The government is also concerned with his citizen’s health condition nowadays, therefore there might be possibilities for the government to impose some rules like setting a limit for the sale of carbonated drinks or other drinks that contain high amount of sugar.
Being Coca-Cola’s competitor can be a threat to Pepsi Co. because Coca-Cola Company is successful but we believe that one day Pepsi Co. can outdo Coca-Cola because of the space of expansion. Although there is space for expansion but Pepsi Co. have to look out for changes in market trends. If other companies adapt faster to the changes, it would be a disadvantage to Pepsi Co. The threat that Pepsi Co. faces is strict regulations in other countries. Pepsi Co. can use its strength to overcome its threats and weaknesses from this SWOT Analysis.
Factors that affect decision making
A company would usually conduct external and internal analysis before proceeding to implement any plans or strategies.
Internal or micro analysis is an analysis done on the company’s resources and capabilities. Examples of company’s internal resources and capabilities are goodwill, the personnel expertise they hired, skills and abilities of the people in the company and even physical resources like the machines they own. They can later find out their strengths and weaknesses. A company is considered to be strategic when they have core competencies that will distinguish them from other companies. A company’s core competencies are not easily replicated.
When performing external analysis, companies would usually study the trends, changes, competition, opportunities, and threats around them and also examine the PESTEL analysis which are categorized under macro factors. PESTEL is an acronym for Political, Economics, Social, Technological, Environmental, and Legal.
Before a company carries out PESTEL analysis, they should take into account these questions; what is the political situation of the country and how can it affect the industry, what are the prevalent economic factors, how much importance does culture has in the market and what are its determinants, what technological innovations are likely to exist and affect the market structure, are there any current legislations that regulate the industry or can there be any change in the legislations for the industry, and what are the environmental concerns for the industry?
Political factors are those that determine the extent to which a government may influence the economy and the company, in this case PepsiCo. Who governs the country at the current period also plays a big role. For PepsiCo, the political factors that are significant to them are the opportunities from political stability in major economies, improved intergovernmental cooperation, and the threat that exists due to the initiatives the government has against carbonated drinks. PepsiCo can easily grow as most of the major economies they are in like the United States and Canada are politically stable. They are also given the opportunity to expand globally as the intergovernmental cooperation improves. Unfortunately, PepsiCo may lose customers and gain lesser revenue due to the government initiative against carbonated drink that influences consumers to avoid carbonated drinks.
Economy would affect the purchasing power of consumers and will alter demand and supply. Example of economic factors include inflation rate, interest rates, foreign exchange rate, and economic growth patterns. These economic factors are most important to PepsiCo; The economic stability of most major markets and the rapid growth of developing economies which are considered the opportunities to PepsiCo, and the slowdown of the Chinese economy which is a threat for PepsiCo. PepsiCo has opportunities to grow and expand in stable economies of developed countries like United Sates and also in fast-growing economies like the Asian countries. Currently, one of the biggest economies in the world which is the Chinese economy is slowing down and that is affecting PepsiCo by threatening their potential international growth. Therefore, from this part of PepsiCo’s PESTEL analysis, PepsiCo must make sure to diversify the market in order to achieve stable international growth. Fluctuations in exchange rates can also affect PepsiCo as they trade overseas and source materials. They can incur loss if exchange rates keep fluctuating.
Social or the sociocultural studies the social environment of the market, cultural trends and demographics. This mainly focuses on the buying trends. The relevant external sociocultural factors for PepsiCo are the opportunities in increasing busy lifestyles, more discriminating attitudes about product quality and higher health consciousness which is both and opportunity and a threat to PepsiCo. Although it is a threat to PepsiCo when people are more health conscious, PepsiCo actually instead gained more interest from consumers in healthy lifestyles when they shared the knowledge of nutritional info especially the sugar and fat contained in their products. PepsiCo has more opportunities in the urban and industrial markets around the world because people in these markets are more likely to buy ready-made food and drinks like what PepsiCo produces. With the increasing discrimination attitudes consumers have towards product quality, it gives PepsiCo the opportunity to gain more revenue as they improve on their quality of products. PepsiCo thus have to adapt well between their products and marketing strategies with the changes in consumer behaviours.
Technological are factors concerned with innovations in technology that may affect the operations of the company, in particular PepsiCo, and the market favourably or unfavourably. The significant opportunities PepsiCo gained from technological external factors are; Moderate research and development investments in the food and beverage industry, improving knowledge management systems and increasing automation in business. PepsiCo can untilise the benefits of knowledge management systems to aid its various business processes like innovation of new products and strategic decision-making. The technological element of the PESTEL analysis done on PepsiCo shows that they should include new technologies as tools so that the company can continue to be competitive.
Environmental factors include climate, weather, geographical, global changes, increasing search of raw materials, and responsibility towards the ecology. The relevant maro environmental factors for PepsiCo are the opportunities they gain from high focus on business sustainability, more complex expectations and standards on waste disposal and climate change that can also be a threat apart from opportunity. PepsiCo is challenged to package their products using more eco-friendly products. They also encourage their customers to recycle by stating on the cans and bottles if they are recyclable and how to dispose them properly.
Lastly is the legal factors. Examples of legal factors are consumer laws, safety standards, and labour laws. PepsiCo has actually gained a lot of opportunities from the legal factors in their company. PepsiCo has reduced the use of Genetically Modified Organisms (GMO) ingredients in order to satisfy the regulations made on the ingredient. They also improved their products so that they safe and do not have hazardous health effects on consumers. When regulations do not change often it allow PepsiCo to grow with the expectation that any strategic decisions made now will continue to satisfy the regulatory requirements in the long term.
We have learnt the level of business done by the company and how the company has adapted to changes in the market by developing their organizational structure. We have also seen their weaknesses, strengths, opportunities and threats. Then we did and analysis of the factors that has binded them in decision making.
There are many things the company can improve in. The company should make wise decisions when it comes to aqcuisitons and mergers by merging or acquiring companies which are already firm on the market or they can expand by doing the following with smaller competition so as to increase market share and business level.
The company currently depend a lot on the wal-mart which demand a lower price on PepsiCo products. The company can start distributing with other stores in order to balance out the level on dependency.
I also recommend the company to increase the prices to improve profit levels.
Global divisions- PepsiCo 2016
Retrieved from: pepsico.com
Performance with Purpose- PepsiCo 2016
Retrieved from: pepsico.com
Willem, A., & Buelens, M. (2009). Knowledge sharing in inter-unit cooperative episodes: The impact of organizational structure dimensions. International Journal of Information Management, 29(2), 151-160.
John Dudovskiy (2016, May 1). PepsiCo SWOT Analysis.
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