History, products and major competitors
PepsiCo, Inc was incorporated in Delaware in 1919 but latter reincorporated in North Carolina in the year 1986. The company is a major food and beverage company and boasts of having various brands such as Pepsi-cola, Tropicana, and Gatorade amongst others. The company’s origin dates back from the year 1880 when a pharmacist Caleb Bradham discovered it. The term Pepsi-cola was coined in the year 1898 and was the main competitor to the then gaining popularity brand Coca-cola. The company diversified its products through acquisition of other companies that were not necessarily in the food and beverage sectors. However, in order for it to remain competitive and efficient, the company had to offset some of the companies that were not in the core business. The company uses third party contractors in the manufacture and distribution of the products and has market in over 200 countries.
The company’s goal is to deliver sustained value, through the production and distribution of various brands of beverages and snacks while reducing the environmental impacts and increase the efficiency in terms of energy and water conservation while ensuring the safety and welfare of the employees and the communities in which the company operates. PepsiCo, Inc products are 63% food and 37% food which together form a portfolio of several hundred brands. Since its incorporation, the company has been expanded exponentially to achieve its current position. Amongst the major strategic actions include the merger with Frito-lay, Inc and the acquisition of Tropicana and Quaker Oats in the year 2001. The company management structure has been changed several times in the history owing to the international expansion. The most recent structure included Pepsi Americas Food, Pepsi Americas beverage, Pepsi Europe, Pepsi Asia, Pepsi Middle East and Africa.
The company is the largest food and Beverage Company in North America based on the Net revenue and it’s the second largest worldwide after Coca-Cola, Inc. Coca-Cola produces almost similar products and operates in the same market as PepsiCo Inc. Thus, Coca-Cola, Inc is the main competitor of PepsiCo, Inc. and has been so since its incorporation. In the year 2005, PepsiCo, Inc surpassed Coca-cola by market value for the very first time in the over 110 years of operations. In this paper, we shall detail a strategic plan that will help to grow the company in the next three years.
Current Situation in the market
Food and beverage sector is made up of a wide array of products. Although the segment is a subject to the economic cycles, it has continued to show a continued growth of the long term past. Although the revenue has slowed down over the last few years, the company over the long past have been performing well. There is however a key spotlight in South America that has continued to experience increased growth rates to date. From the 2014 financial statement, PepsiCo, Inc large portion of the revenue is generated from the United States. Thus, this is a key market section. There is a continued growth in the popularity of the energy drinks as compared to the traditional soft drinks. The consumers are gaining interests in clean and green packaging processes and materials and thus products that adhere to the environmental requirements are gaining more popularity.
There are only few large players in the carbonated soft drinks as compared to hundreds of both small and as well large players in the bottled water and snacks. There is a shifting trend from the traditional soft drinks to wellness and heath products that are deemed healthier. There are growing concerns over health a campaign that warns against negative impacts of sugar and other products that are used in the manufacture of the carbonated drinks. The growth in this market is in most cases driven by the emerging markets. This explains why sales in South America, Africa and Middle East and as well China.
Strengths, Weaknesses, Opportunities, and Threats
SWOT analysis is one of the most widely used tools in the strategic management. It helps to identify areas of strengths, weaknesses, opportunities and threats and helps the management in the decision making. PepsiCo, Inc is among the largest food and beverages companies in the world. Below is a SWOT analysis for the company.
One of the key strengths of our focus company is key brands that are recognizable throughout the world. Amongst the major brands include Pepsi cola, Gatorade, mountain dew, 7 up and Tropicanna beverages. These brand portfolios are focussed and create huge volumes of sales. They also enhance customer loyalties throughout the world thus increasing the customer base. Owing to the large size of the company, it has developed one of the most sophisticated products chains of distributions thus enhancing the efficiency and saving on the distribution costs. The large size of the company allows it to target and acquire smaller organizations that are strategically placed in the lines of growth and thus it enhances the growth and development. The company operates on a global scale and has access to markets in over 200 countries. The company improves its image through its wide range of corporate social responsibilities in water conservation, water and as well in the heath issues. Owing to Pepsi’s size, the company is able to gain and fund sports deals in uniform and as well in other products.
Expanding the product base; in spite of the fact that the company has over 200 brands that are circulated throughout the markets, there are rooms for new products. This is due to the fact that the customers from different regions have diverse tastes and thus products ought to be differentiated to meet the customer requirements. In that effort, the company targets acquisitions of established companies in those target markets and incorporate its other products to the ones that were being distributed.
International expansion: The Company has operations in over 200 markets, but there is still need for it to evaluate markets that have not acquired market. These countries provide the company with growth and expansion benefits. The market for snacks and light foods is still young and is still evolving. The company should position itself strategically to reap on the benefits that are associated with this market. There is also a growing market for health and wellness products. Besides the Pepsi diet, the company should come up with other lines of products that promote healthy living.
The company highly depends on large supermarkets such as Wal-Mart for the distribution of the products. Thus, the company growth and development are shaped by the strategies of Wal-Mart. Wal-Mart aims at providing products to the customers at lower prices, thus the company’s profits are reduced. On a larger scale, the company depends mostly on the US market for their distribution. From the financials, about 70% of the company’s revenue comes from the US market, 13% from the South American and the remaining part from the other parts of the world. Thus, large customers from the region have higher bargaining power over the supplier and they may suppress the prices and thus negatively affecting the revenues.
There have been some product recalls that have led to lower popularity of the company products. In the year 2008, the company was forced to recall Aunt Jemima pancake and waffle mix from their distribution channels which was after an issue of exploding cans which happened in the year 2007. There have also been cases of recalls of Tropicana kids’ juice and Aquafina tap water scandal. These scandals have negatively affected the company brands thus lowering the image status and public trust. This in turn affects the company revenue.
Decline in the popularity of carbonated soft drinks. Carbonated products have continued on a downward trend in term of their popularity. This has been brought about by media and other stakeholders increased campaign in favour of products that are perceived to be healthier. The company has been on a verge of diversifying its product lines but in the short run, the company feels the impacts.
Threats to the changes in regulations: There are constant changes in the government regulations in regards to the environment, health and safety. These changes may have a negative impact on the organization. Some of the chemical ingredients that are used in the manufacture are evaluated by the governmental chemists and they may be deemed as harmful and altering the products formulation may be very expensive. The company may be forced to put warning signs on the products and this harm the sales. Changes in the laws and regulations may affect the labour and thus interfering with the company’s production.
Fierce competition: Coca-Cola is the main rival, other competitors include Nestlé, Groupe Danone and Kraft Foods. This intense competition may affect the prices or force the company to spend more on advertising. Other threats that the business faces include the economic slowdown and or inflation. These factors may affect the company’s future growth. An example is the competitor’s performance prior year, the company revenue was lower from the foreign companies owing to the strengthening US dollar and this affected the overall performance of the company.
For the company’s strategic plan, we shall consider the competitiveness of the organization, opportunities that the company is yet to exploit and finally the threats that the company faces. Our strategic plan aims at maintain a steady growth in net income by 10% over the next three years. The growth in the net revenue will be used to measure the success of the strategic plan. We aim to defy the competition and harsh economic times to achieve the company’s growth. Our strategic plan will focus on the competitiveness, opportunities and mitigating threats.
Strengths and Competitiveness
Strategic management refers to the anticipation skills, adaptation and then driving and focusing on the change. One of the key areas that we shall focus on is the involvement of all the stakeholders. Very, the management ignore the view points of the employees and they end up making the wrong decision. In order for PepsiCo, Inc to promote a culture that encourages innovation and that works together towards a particular goal, the company will introduce a management culture that is all inclusive. The employees’ will be encouraged to air their views on the course of actions that should be taken. These suggestions will then be evaluated and the best course of action implemented with the support of the entire workforce. This will also boost their confidence level and thus enhancing their proactiveness and diligence in making the company more successful.
In order for Pepsi to gain an edge over the rest of the players in the industry, the company should first recognize that greatness comes from people. In line with this, we will focus enhancing the company ability to attract and retain the best talents. High skilled employees are keys in enhancing efficiency. One of the strategies that will be utilized will be an active pursuit of highly qualified personnel that will deliver in accordance with the organization business strategy. Then remuneration structure will be made competitive to ensure that the company does not lose out on the best personnel. Other strategies that we shall employ include good working conditions and training programs and collaboration with the universities to ensure relevant skills are taught.
The third aspect that will be employed to enhance the competitiveness of the company is fostering mindsets that put customer as the first priority. PepsiCo, Inc always pays attention to the employees’ views on the products that they produce. Going forward, these views will be incorporated into the new product designs and re-launching to ensure they remain favourite amongst the customers. Besides the final customers, the company will strive to make the operations more efficient through streamlining the operations and facilitating communication between departments. This will ensure that are the team members are working towards one goal.
Pursuing new market opportunities
From literature reviews, we have noted that areas that have experienced high growth rates include Latin America and Asia. In order for the company to remain competitive in the business, there is need to keep pursuing such markets. Thus, PepsiCo, Inc should actively launch marketing campaigns in the emerging markets in an effort to capture a larger part of it. We have also learned that there is a declining demand for the carbonated drinks and sweetened ones. This has been brought about by the increased levels of awareness of the health risks that are associated sugar. As a result of this, people have turned to health and wellness products. Examples include Pepsi-diet, ginger tea, and green tea among others. Thus, the company should focus on either developing or acquiring such new products that will help retain the market share. Finally, there are still rooms from new products, the company should continue investing in the research and developments and focus on creating new products that will capture the attention of the customers. Innovation should be encouraged.
We identified competition, health consciousness, and changes in regulations and economic factors to be the key threats that the company faces. In order to neutralize these threats and stay on course to achieve the three years strategic goals, the company should respond to the above threats. As identified above, Coca-Cola is the main competitor of PepsiCo. The company should compete on product innovations and integrations. The company should then focus on enhancing the brand to command a wide range of customers. There is thus need to invest in marketing strategies that are aimed at strengthening the brands. The company should continue sponsoring the sporting events as a way of reinforcing the brand.
In conclusion, PepsiCo, Inc is one of the largest multination food and beverage companies. The company has managed to edge its main rival Coca-Cola off the top position in the US market. Food and beverage sector has been on an upward trend over long periods of time but have recently slowed down. The decline is due to competition from other sectors such as health and wellness products. There glowing awareness of these products has eroded the demand for carbonated drinks. We conducted a SWOT analysis and further based the results on the threats, opportunities and strengths, we developed a strategic plan.