The report based on the procedures of PepsiCo was done in the satisfaction of an Dynamics of Strategy Task. The company original location is in america of America but the company also manages in countries globally ranging from large appearing countries, the "BRIC countries": Brazil, Russia, India and China to the small Caribbean Islands.
PepsiCo, initiated as Pepsi: a carbonated cola drink in the drink industry initiated in 1968 and has extended to increase since. The company has broadened through diversification and acquisitions into both the food and drink industry. The business has been examined in terms of its internal and exterior environment and tactical opportunities for improvement has been suggested.
PepsiCo's mission "Our mission is to be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to buyers as we provide opportunities for growth and enrichment to your employees, our business companions and the areas where we operate. And in everything we do, we shoot for integrity, fairness and integrity. "
PepsiCo's perspective, "PepsiCo's responsibility is to continually improve all areas of the world in which we operate - environment, sociable, economic - creating a better tomorrow than today. "
Introduction
PepsiCo, one of the very most diverse and leading companies in the food and drink industry initiated as Pepsi Cola in 1898 producing only cola beverages. In 1965, the company required the step to combine with another company, Frito Place, in the meals industry to create the business as the name is today, PepsiCo. PepsiCo control buttons 103 billion litres in market level in the US beverage industry and concurrently a UDS $321billion in market value.
PepsiCo with competition in both food and drink industry, centered on international growth and further diversification. PepsiCo is the second largest beverage developer in the world and the world's leader in its Frito Place division in the food (salty appetizers) industry. PepsiCo has numerous competition in both food and drink industry: CoCa Cola, Kraft Foods, Unilever, and Nestle. PepsiCo expanded its production in the beginning from Pepsi, a cola beverage to diversifying to water (Aquafina), Quaker Oats in the cereal and treat industry to juices and energy drinks such as Gatorade.
The company further bought and created joint projects increasing its product line to teas and root beers. The company acquired and produced joint ventures, along with the purchase of famous restaurant chains such as Kentucky Fried Fowl. PepsiCo currently targets progress through Performance with an objective: to enhance the performance of the company, real human and talent sustainability as they move towards being more environmentally friendly.
The assignment looks for to examine and evaluate the external and internal environment, evaluating if the company is tactical fit or drift. When this is set, the researcher would assess the feasibility, acceptability and suitability of the suggested tactical option of progress in emerging market segments. The researcher would then continue to recommend an in depth execution plan of the chosen strategic option in terms of new product development.
Task 1
Evaluation of the External Environment
The evaluation of the exterior environment was carried out through the use of various tools which analyses conditions, entities, situations and factors of the environment in which PepsiCo operates. The various tools used by the researcher were the PESTLE research, Porter's Five Forces, the 3 C's and the Industry Life Pattern. This analysis of every tool was embarked to determine how the actions of PepsiCo are influenced by the macro environment and if the company is in strategic fit.
"PESTLE Research is a tool that could aid organizations making strategies by supporting them understand the external environment in which they operate now and how they will operate in the future. "
In all market segments PepsiCo has got into, the federal government has intervened somewhat, where these were met with several political barriers to entry, adhering to laws and regulations. These issues increased, as the business expanded its procedures and collection. PepsiCo was further influenced when the financial downturn adversely impacted on their financial record as costs fluctuated. Not surprisingly, PepsiCo was awarded approval for investment in to the company.
Cultural and demographic aspects, cultural factors also influenced the businesses of PepsiCo such as a change towards healthier lifestyles. PepsiCo has placed up-to-date with technological advancements by presenting the most recent improvements to machinery in the industry. They have implemented modern media solutions to increase brand recognition, permitting them to being innovative, reduce costs and improve quality.
PepsiCo encounters legal troubles where there have been bans placed on advertising in some countries. In some countries the government authorities have reduced the granted contract previously placed at a term of five years to 1 yr. PepsiCo has went "green" and become environment friendly, concentrating on water, local climate changes, agricultural and product packaging change. They may have initiated to lessen their utility ingestion.
"Michael Porter provided a framework that models a business as being affected by five pushes. "
Porter's five makes is a construction utilized by the researcher to determine the competitive power of the macro environment in which PepsiCo operate. Considering PepsiCo is one of the dominants in the meals and beverage industry there may be little room for new entrants to generate competitive pressure. Due to capital, market knowledge and experience, PepsiCo has the absolute gain in terms of cost which would deter new opponents.
PepsiCo with the good thing about high bargaining ability of suppliers have the ability to identify, differentiate and alternative inputs. In case the suppliers have higher affect on the industry, then PepsiCo would have to pay high prices for the raw materials. PepsiCo allows the clients a strong bargaining power in order that they could maintain the number of potential buyers they have got and appeal to new ones. Clients may have increased impact on PepsiCo since you'll find so many substitutes because of its products.
The threat of substitutes which is present within the beverage and food industry is a significant issue for PepsiCo, where a price change can demonstrate futile for the business. PepsiCo is lucky since although there are substitutes for the products there are no close competitor, with a diversified portfolio that links right to PepsiCo by any means product levels. This, a durability to the business provides them the competitive benefit of operating on the market.
"The 3C's Model is a business model that provides a strategic go through the factors necessary for success"
The researcher would use the 3C's model to gauge the differences between the real and the recognized quality of the business's product portfolio, assisting to assess the value of the brand name PepsiCo.
Market dominance of certain products such as Frito Lay and Gatorade has been a success since PepsiCo could have increased market share. PepsiCo can maintain this dominance by obtaining control of their brand through patenting. The company can further seek other methods to keep this success, through advancement by bettering existing products.
PepsiCo segments its market and goals are aimed towards consumers since it is the consumers who the business depends on for income and income. PepsiCo portrayed them as the "New Generation" or the "Pepsi Generation. " PepsiCo has even tweaked its stock portfolio by enhancing existing products and developing new ones to meet current trends in the market: a healthier lifestyle.
Although PepsiCo is dominant in some products on the market they still need to give attention to its rivals' strategies and techniques. Coca Cola, head in the drink industry relishes the largest market show for carbonated carbonated drinks. Smaller rivals use strategies to allow them to remain on the market and their size, although smaller than PepsiCo to gain competitive gain.
PepsiCo is in the older level of the Industry Life Cycle in the meals and drink industry. This tool with understanding of past and current market trends are being used to anticipate future fads and potential entrants or risks that may arise in the market. PepsiCo preserves its position by using techniques such as diversification strategies and expanding products towards current fads and market development.
Critical Analysis of Strategic Resource Capabilities
The researcher undertook an examination of PepsiCo's inner environment, made up of the organization's resources, capabilities and competencies. This diagnosis helped to determine whether the company is in a tactical fit or drift. Several tools such as the SWOT analysis, the VRIO construction and the Key Success Factors were used.
PepsiCo gets the second highest market share in the drink industry but have always experienced and continues to keep a strong brand image. The business had the advantage since using their diversified portfolio; they were in a position to create a graphic for not only for their cola beverage but for almost all their products. Due to this PepsiCo came across additional revenue for development and could invest in technology with helped those to benefit from economies of scale.
Despite PepsiCo's many talents that they had their fair talk about of weaknesses. The company has limited themselves using their diversified portfolio given that they have concentrated largely in North America. This could establish they are not completely utilizing their resources available to them globally especially in appearing countries. This weakness can be converted to an opportunity where it could be used as a technique towards development. Further opportunities may emerge where PepsiCo can further diversify through new product development, improvements to old products and acquisitions, towards changing demand, a healthier lifestyle. PepsiCo encounters challenges from competitors and the declining current economic climate could also show as a hazard where there is slow development of the current economic climate.
PepsiCo with a strong inner work culture, an intangible source, is organized toward the business's "Performance with an objective" to encourage professionalism and reliability and personal development while subsequently having fun. Ideas and commentary are most welcomed by the management team. Young employees receive the chance to embrace early responsibility, to simply accept risks and make some decisions permitting them to develop and be prospective leaders. PepsiCo also focuses exterior culture where they give back to neighborhoods.
Geographic location has impacted on the inner culture of PepsiCo where culture is modified towards employees in various regions. The tactical location of the company also really helps to improve the circulation of products. At some locations, PepsiCo use with their benefit government incentives to decentralize their functions. This helps to lessen operating costs.
Brand imagery, reputation and high worker morale plays a huge role in increasing goodwill of PepsiCo. This intangible property could lead to a positive effect on the financial claims. Regardless of the negative perspective from the financial assertions because of the economic surprise and money fluctuations, the company was able to achieve expansion in 2008. Although numerous government bodies organized to increase taxes for appetizers and cola beverages and PepsiCo had a high short term debt, they sustained to get for long-term prospects.
"VRIO framework is an inside tool of examination in the context of businesses. VRIO is an acronym for the four question construction you ask about a learning resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Decrease/Difficulty to Imitate), and the question of Group (potential to exploit the resource or capabilities). "
PepsiCo was able to add value to their processing process through advancement and efficiency in every resources: Culture/HR, Location, Brand Image, Goodwill and Economically. All these resources are aligned, structured and exploited by PepsiCo. Culture/HR is the one resource of PepsiCo which may be identified as rare and not possessed by opponents. Although Goodwill is not uncommon, it is not easily duplicated by customers, hence is imitable and has a suffered competitive advantage. Not surprisingly, if given sufficient time, money and resources most of PepsiCo's other resources such as location, brand image and financial prosperity can be emulated, referred to as developing a competitive parity.
Key Success factors necessary for the success of PepsiCo in the market is that they should continue their use of stars in their marketing campaign. This would help lure customers toward the product. The company can give attention to widening their circulation programs as they increase their portfolio. This might help inject additional income into the company.
Strategic Fit
PepsiCo is a proper drift to the degree where there is minimal innovation to build up new products. The company prefers to acquire products through mergers and acquisitions, since the products would have been founded already and it reduces PepsiCo's risk of a declining product. The downside of this is that the brands of the bought products are standardized. When PepsiCo acquire these products, they continue to operate under their original name and not the name of the business, such as Gatorade. Another drift of the company is where they fail to have optimal utilization of all their resources. Their promotional initiatives do not add a wide target market. Although the company serves roughly 86% of the world's population, their advertising is mainly positioned towards North American marketplaces.
Despite the strategic drift of PepsiCo, the business is a tactical fit due to their strong Culture and RECRUITING. This is plainly used within the goals of the business "Performance with a Purpose. " This is beneficial to them since the management team ensures they are simply practice of good work culture, factors that are unusual and cannot be imitated easily. The culture of the organization plays a part in standardized functions which lead to high quality of the products, providing them with the competitive benefits. Another factor which plays a part in PepsiCo's being in a fit is the fact the business has a diversified portfolio without other sole company in the food and beverage industry directly rivalling with PepsiCo's range of products allowing them to preserve their competitive benefits.
PepsiCo's most recent targets in their sustainability survey is being accomplished and puts the business in tactical fit where they can be moving towards meeting the needs of the changing demand towards better products. This not only increase income but creates a strong brand image and provides the business the competitive advantage. Another subject from PepsiCo's sustainability article which sets them in a fit is their drive towards going green by reducing energy consumption, the labels in their product packaging and usage of plastics. The business currently takes under consideration Green Initiatives, such as building codes when entering new market segments. Despite of having few tactical drift issues which cannot be ignored, PepsiCo carries on to keep up their competitive gain in the changing market segments which is in a strategic fit.
Task 2
Discussion of Strategic Option
PepsiCo, since founded in 1898 is continuing to grow into an enormous well established firm with a varied portfolio. The business has achieved this through all factors in the Ansoff Matrix, allowing them to be the world's greatest food and drink company. The company has achieved and continues to achieve expansion through improvement, diversification of the product portfolio, joining new marketplaces and through new product the development.
Through extensive research into PepsiCo, the researcher found PepsiCo has experienced a severe fall in sales in recent times as a result of the global economical recession and scheduled to changing consumer needs. CEO of the company, as well as management has proposed to introduce new products to beat this predicament so the company can maintain their market status and continue to achieve development. Through serious investment and technology, PepsiCo is targeting emerging markets: BRIC countries.
In maintaining PepsiCo's quest grounded on "Performance with a Purpose, " their goals of Human being Sustainability, and their current proposal, the researcher has chosen new product development as a rise strategy to the improvement into the future strategic direction of the organization.
By this course the company would
Suitability
Feasibility
Acceptability
Implementation Plan
Conclusion
Appendix 1
PESTLE
Appendix 2
Porter's Five Makes Model
Appendix 3
3C's Model
Appendix 4
SWOT Analysis
Appendix 5
VRIO Framework
Resources
Valuable
Rare
Imitable
Organized
Competitive
Implication
Hierarchy of Resources
Culture/HR
YES
YES
YES
YES
SCA
Core
Financial
YES
NO
NO
YES
CP
Base
Location
YES
NO
NO
YES
CP
Base
Brand Image
YES
NO
NO
YES
CP
Base
Goodwill
YES
NO
YES
YES
SCA
Core
Appendix 6
Ansoff Matrix
SOURCE: http://tutor2u. net/business/strategy/ansoff_matrix. htm
