Discuss about the International Business for International Product Life Cycle.
The primary motive of this paper is to outline the various issues or challenges that could be faced by the PepsiCo in near future. PepsiCo is one of biggest brands in food and beverage companies with having good and strong portfolio over the beverage products. Here is the discussion that how the company uses international product life cycle and comparative advantage theory to gain competitive benefits in global market. Furthermore, foreign direct investment, international financial market and international monetary system in the context of PepsiCo also have been explained in the paper.
The organization was formulated in 1965 with merger of Pepsi-Cola and Frito Lay. In today’s era, the organization is considering one of the leading and growing leaders globally (PepsiCo, 2018). It is measured that the company provides ample of opportunities to the people who lead the business operational widely. The firm provide enormous food and beverage products to the large number of customers in the marketplace.
Political, legal and cultural issues: It has been found that various political factors affect the growth and success of the company adversely. The political factors include changes in regulations and laws, political conditions, and changes in the non-alcoholic industry environment (Meyer, 2017). All these factors will affect the progress and targets of the company negatively. Thus, it is difficult for the company to come up, pricing fixing thus, it would affect the market share of the company in the international market. Changes in laws and regulations also have adverse impact on the profitability of the firm (Wiist, 2011). The changing is accounting standards, taxation and ecological laws in domestic jurisdictions. This will affect the selling price of the food and beverage products negatively. The political reforms of the firm are also be affected by the trade relations with the firm (Nestle, 2013). Along with this, ample of legal responsibilities, rules and regulations also affect the image and growth of PepsiCo adversely. It has been found from the various analysis that Pepsi is a non-alcoholic beverage and thus it is governed by the FDA.
The socio-cultural issues would also affect the outcomes and revenue of the firm adversely. The socio-cultural factors include culture, values, customs, beliefs, attributes and behaviour of the people that put ample of impact on the performance of the company. Thus, socio-cultural issue is one of the biggest issues for the firm (Barbera, 2014). Furthermore, the social behaviour of the people is also changes thus it has direct impacted on the revenue and success of PepsiCo. The religious and caste of different people would also affect the efficiency and effectiveness of the organization. The buying behaviour of the consumers also is a big challenge for the company. If the consumers change their behaviour and aspects in terms of purchasing the food and beverage products thus it can affect the growth and sales volume of the company (David, 2011). Sometimes, the corporation is failed to fulfil the needs, requirements and demands of the customers due to changing in consumer behaviour. Furthermore, PepsiCo is unable to make food and beverage products according to the choices and preferences of the customers therefore it has a great impacted on the goodwill and effectiveness of the firm. Due to spread of various diseases, the customers become know of the threats of the carbonated drinks and they also have the issue about salt, sugar and fat content in these products. People also become aware of the healthy and effective habits and they are moving towards the traditional food and beverages that is creating a threat for PepsiCo (Atkins & Bowler, 2016). It is one of the important and effective threats for the organisation. Along with this, most of the consumers between the ages of 40-55 are generally worried with nourishment. Thus, it will have great impact on the non-alcoholic beverage company by rising in demand for healthier food and beverage products. All these socio-cultural factors affect the financial image of the company adversely.
If the changes are made in the food standard agency then it can have various direct and indirect impacts on the business operations and activities of the company and the federal rules, regulations, norms and standards can also put ample of impact on the food and beverage sector. All these factors will affect the growth rate and revenue of the company adversely in near future. Hence, the company should make unique and effective policies, standards and plans to handle and manage the political, legal and cultural issues. It also will help in competing with competitors in the international market (Farah, 2011).
Economic issues: The main and significant factor is steady and rapid change in the currency exchange rate that affects the financial position and reputation of PepsiCo. Unemployment rate also has direct impact on the growth rate of the corporation negatively. GDP rate, global recession, interest rate and exchange rate would also lead to ample of losses and damages in the global market. Inflation rate also has an adverse impact on the effectiveness and efficiency of the organization adversely (Rothaermel, 2015). PepsiCo might face many of the economic issues in the global expansion with the present slowdown in China as it also affects its worldwide business activities and functions. The economic element of the firm is directly interconnected with the income of the workers that PepsiCo is planning to achieve it. The challenges and issues that being faced by the firm is income level of the people. Along with this, the significant factor that affecting the growth and progress of the firm is payment method. The changes in economy and behaviour of the consumers lead to ample of challenges and crises in the organization (Nelson, 2015).
Technology issue: It has been clearly noted that various technological factors affect the performance of the workers at PepsiCo adversely. The innovative and advanced technologies are introduced by the firm that will have adverse and positive impact on the reputation of the company. The organization is changing its technology and strategy which could lead to plenty of losses and damages in the competitive market. It is analysed that technology is changing constantly thus the organization will have to invest large amount on the advanced technology (Scott & Reynolds, 2010). Hence it is the biggest concern for the company. Furthermore, PepsiCo also needs talented and skilled employees to perform roles and responsibilities effectively however due to high recruitment cost, the company is failed to appoint these talented and skilled workforce. There is high training and development cost thus the organization is unable to conduct training and development coaching in the workplace. Therefore, employees may fail to accept new technology and resources within the organization. The employees are afraid to opt new and advanced technologies because they do not want to change their process and procedures for conducting the business globally. All these issues would also be dealt by the company while initiating or implementing the business worldwide (Yam & Lee, 2012).
Competitive issues: It has been noted that ample of competitive issues would be faced by the company. The major competitors of the company include Coca Cola, Red Bull, Nestle, Parle and Dr Pepper Snapple. The competitors are selling the products at cheap prices thus it affect the outputs of the company adversely. No company can survive and grow its business activities and operations globally without identifying and analysing the plans and policies of the competitors. Along with this, rising popularity of one brand can also affect the demand of the others. In addition, competition at times can be the significant and effective element to manage and handle. Coca Cola covers the US market with 43% share same as followed by PepsiCo at 30%. In this way, it is noted there are various direct and indirect competitors which can influence the demands and needs of the customers in the international market. Aside this, competitors such as Coca Cola focuses on the plans, strategies, products and policies to attain maximum profit and result.
Physical, natural and demographic issues: It is analysed that various physical, natural and demographic issues also have direct impact on the marketing of a food and beverage company. The six major forces such as natural, economic, technological, demographic, and socio-cultural factors affect the effectiveness of the company negatively. Many of the poor countries are not focusing on the pollution, and climate change (Hoffman, Corbett, Joglekar, & Wells, 2014). It is noted that the packaging of PepsiCo is closely interconnected to the natural environment. It has been found that demographic forces are related to the people and their behaviour. The demographic forces include age, gender, density, size, occupation and other statistics. The large and diverse demographics offer opportunities but it also entails ample of challenges for the business. The overall demographic changes also affect the buying behaviour of the consumers in the competitive market. The changing buying behaviour could also lead to losses and damages in the marketplace. Due to demographic and natural issues, the company needs to keep an eyes on these forces. For this purpose, high investment is done by the on marketing survey and research and it is time consuming process.
Changing family and age structure also affect the sales and growth rate of the company adversely. Beside this, the cost of the machinery or equipment is high in the company. This it will also affect the targets of PepsiCo adversely (Hedge & Borman, 2012). On the other hand, income level and education level of the people could also lead to ample of losses and damages in the global market. All these issues will also affect the sustainability and performance of PepsiCo globally. The organization needs to make unique and effective policies to handle and manage these future challenges or issues related to the competitors. It will also help the firm to compete with rivalries in the international market. The organization also needs to focus on the current natural and environmental issues such as climate change, pollution, resource depletion and environmental degradation etc. It also identifies and analyses the adverse impact of natural disaster and global warming. Furthermore, PepsiCo should also focus on the products and services of the competitors to strive with rivalries in the marketplace.
It has been evaluated from the various analysis that various theories related to the international trade also have direct impact on the growth and targets of PepsiCo. There are ample of theories include absolute advantage, mercantilism, factor promotion theory, comparative theory, international product lifecycle theory, national competitive advantage and new trade theory. The two theories that have direct impacted on the growth and success rate of PepsiCo are discussed below.
International product lifecycle: It is one of the significant theories that can be applied in PepsiCo. The international product life cycle may be defined as a theoretical model explaining how an industry develops over the time and around the national borders. Along with this, this theory also chart the expansion and development of the organization’s marketing program when striving on both the foreign and domestic fronts. It is analysed that this theory is interconnected with international trade and economic theory. The international product life cycle includes various stages that help in making a food and beverage products effectively. The workers play a significant role in international product life cycle because they help in making or producing the products successfully. The international product life cycle includes introduction, growth, maturity, saturation and decline (Adebisi, Maleque, , & Rahman, 2011).
In introduction stage, PepsiCo introduces the new and innovative beverages in the international market because the customers are not aware about the products. In growth stage, the products become well known and it increases the demand of the products widely. As a result, it reduces the production costs in the global market. The third stage is called maturity, the demand levels off and sales volumes increase in this stage. In saturation stage neither company increase nor decrease the sale volume. The firm can get competitive advantages in this stage (Baker & Hart, 2008). The fourth stage is called decline. Under this stage, the product becomes familiar to consumers and producers as well. This theory has put direct impacted on the sales volume of the company. By using this theory, PepsiCo has been able to make a good image in the minds of the customers. Furthermore, the firm is importing the food and beverage products in only their home country. In addition, low production price policy is followed by PepsiCo to overcome the competitors in the global market. In this way, the organization has been able to gain confidence and loyalty of the customers in a large extent. With the help of international trade policy, the company has been able to attract maximum number of customers in the international market (Saaksvuori & Immonen, 2008).
Comparative advantage: It is one of effective and dynamic theory that is used by the company and it has put great impact on the sales volume of the company. This theory is also related to the prices of food and beverage products. The theory helps in attaining competitive advantages in the international market. The prices of the food and beverages must be lower as compare with competitors. This theory has effective impact on PepsiCo business operations and functions. By using this theory, the company is able to attract medium class and lower class people in the global market. They can easily buy the products of the company at affordable prices (Onkvisit & Shaw, 2008). Furthermore, the company also focuses on the prices of the competitors to attract more and more people in the marketplace. Through comparative advantage theory, PepsiCo has been able to provide ample of opportunities for the customers by rendering healthy products to them. The international trade of PepsiCo also increases with the help of comparative advantage theory. Globalization and climate change could also affect the comparative advantage theory. The factor of production also has direct impact on the comparative advantage theory. Under comparative advantage theory, PepsiCo has been able to compare the quality of the products with competitors. Furthermore, it is measured that production and products of the company are also influenced by the mobility in other nation. The comparative advantage theory gives a PepsiCo the ability to sell food and beverage products at a lower price than its rivalries and realize stronger and effective sales margins. In this way, this theory plays a vital and empirical role to cope with rivalries in the international market (Porter, 2011).
The comparative advantage is one of significant and effective concepts in economic theory. By using this theory, PepsiCo can concentrate on core products and competencies. The advantages of comparative advantage might explain whether how an organization can increase and enhance its profits and revenue by concentrating and monitoring on producing and introducing those products for which it has a comparative advantage over its rivalries in the competitive market. The advantage of comparative advantage might thus result in greater and effective national income. Therefore, comparative advantage theory further put ample of impacts on the progress and success of the company positively. Aside this, it also helps in attaining long term mission and vision successfully (Ferraro, 2008).
A foreign direct investment is an investment in the form of a monitoring and controlling ownership in businesses in one country by an entity based in other country. It is therefore distinguished from a country a foreign portfolio investment by a notion of direct control. In today’s modern world, PepsiCo has become one of the biggest and effective leaders in food and beverage industry (Sauvant & Sachs, 2009). The company is maximising and improving its profitability and outputs worldwide to strive with rivalries in the market. The organization is expanding and flourishing its business activities in various countries thus, it is able to increase and enhance the sales volume effectively. Various investments are made by the company to produce food and drinks products in other countries. It is considered as the movement of capital around national frontier in an effective manner that permits the investor to have a control over the various investments. PepsiCo invests money to promote and encourage the business in different countries. With the help of FDI, the company has been able to participate in economic growth and expansion. Furthermore, the organization also provides employment opportunities in the country through foreign direct investment. FDI provides various opportunities to the firm by reducing the impacts of politics in the home country as well as host country. The FDI also provides ample of benefits to the government thus it was a great and favourable impacted on the business operations of the firm. In addition, the trade of the firm has become easier and attractive with the help of foreign direct investment and on the other hand, it also helps in increasing and enhancing the sales of PepsiCo. It is also effective and unique for the workers because it provides various opportunities to them by enhancing and improving their skills and talents (Sauvant, 2009).
Along with this, it also boosts and develops confidence among the employees by providing job opportunities to them. Beside this, it renders ample of tax incentives and further maximum utilization of resources can be done with unique and effective foreign direct investment. It minimizes and averts the inequality between the cost and profit rates. This helps PepsiCo to make production at lower rate as compared with competitors. The productivity and performance of the workers are also increased in the host country with the help of foreign direct investment. Increment and enhancement in income can be possible with effective foreign direct investment. Thus, it helps in standing out against the competitors in the international market (Stuckler & Nestle, 2012).
Furthermore, it also provides various benefits to the target country by providing employment opportunities to the employees. In this way, it also helps in filling the job vacancies in the target country. PepsiCo can use talents and skills of the workers through foreign direct investment. Hence, it is significant noted that foreign direct investment proves to be effective and beneficial because it increases and improves the global economy and in addition, it also helps in carrying out the business successfully and effectively. By using foreign direct investment, the organization has been able to get popular the food and beverage products in the foreign market. It also helps in determining and measuring the future growth and success by analysing the market survey and stability. It also boosts and develops the financial position and goodwill of the company in the international market. In this way, foreign direct investment has put various positive impacts on the growth and progress of PepsiCo (Stuckler & Nestle, 2012).
PepsiCo is trying to make a dynamic image and gaining competitive benefits by manipulating the various elements that are detailed below.
International financial markets: The international financial markets play an empirical role in expanding and exploring the business of PepsiCo globally. It has been found that the company has earned US$63.525 billion in 2017 and it conducts business activities in more than 200 countries (Jurevicius, 2018). The firm sells approx 100 different brands in the marketplace. Furthermore, the company’s brand portfolio is highly diversified and dynamic. No competitors have as many high and constantly earning brands as PepsiCo. The financial history of PepsiCo is strong and effective. In today’s competitive world, firm is producing innovative and unique products to reduce the gap between the poor and rich people. In this way, PepsiCo manipulates the financial market in an effective way to attract more and more target audience in the competitive market and it has positive impact on the financial growth and targets of PepsiCo (Kapferer, 2012).
International monetary system: The international monetary system is a set of internationally agreed rules, conventions and supporting institutions, the facilitate international trade and redistributing of capital between nation states. The rules, standards and procedures explained to exchanging currencies fall under the international monetary system. The international monetary system also helps in attaining rivalries benefits and it also helps in increasing and enhancing the production and effectiveness. Along with this, it also includes the basic and fundamental exchange rate policies and standards that help to run the business effectively and hassle free manner (Hart & Spero, 2013).
Conclusion
On the above mentioned analysis it can be concluded that PepsiCo is one of growing company in food and beverage industry. The above analysis shows that how the firm would face various types of issues while conducting the business internationally. Furthermore, it also explains various theories such as comparative advantage theory, international product life cycle theory and FDI that used by the company to beat the competitors.
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