PepsiCo: Strategies For Growth And Competitive Advantage

Nature of Business and Present Situation

Generic strategies are the specific strategies of an organization through which it try to achieve competitive advantage over its rivals (Salavou and Sergaki 2013). The organization chosen for this study is PepsiCo. It is an American multinational food and beverage company, which operates on global basis (Pepsico.com 2017). The study will introduce the nature and present scenario of the organization. The study will evaluate the inside-out and outside-in approach of the organization towards analyzing its business environment. Moreover, the study will also evaluate the product, market and competitive strategies of the organization. Furthermore, the study will also provide recommendation and future strategies for the organization.

Nature of Business

PepsiCo is a popular American multinational beverage corporation offering food, drinks and snacks all over the world (Wu, Huang and Chou 2014). Moreover, the organization operates under beverage industry and mostly popular for its carbonated soft drinks under the namesake of Pepsi. It is the leading food and beverage company, which manufactures and distributes products all around the world and operates in more than 200 countries. The food products of the organization include flavored snacks, rice, chips, pasta, cereals and dairy-based products (Pepsico.com 2017). On other hand, the beverage products of the organization include carbonated soft drinks, sport drinks, ready-to-ready to drink tea and coffee, juices and bottled water (Jolink and Niesten 2015). 

Factors	Explanation Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
Mission	“To become the global consumer premier product company concentrated on convenient food and beverages”
Values	PepsiCo’s value or philosophy depicts what is considered to be a social and responsible organization and its aspiration to grow.
Vision	“Our responsibility is continuous improvement on global aspects considering social economic and environmental factors and thereby creating better future”
Strategy	· Believes in market penetration strategy through product diversification · It always aligns its product specifications with the changing taste of the customers · PepsiCo has maintained a healthier relationship with customers through providing a range of nutritional choices to them
Objective	ü To care for customer, consumer and the society ü To speak with candor and truth ü To win with inclusion and diversity
Scope of Expansion	Ø Rising population creating high demand on USA Ø Concentration of greater number of immigrant from neighbor countries increasing the demand

Table 1: Nature of PepsiCo Business

(Source: Hafiz 2015)

PepsiCo is mostly popular for its carbonated soft drinks like Pepsi-Cola, Diet Pepsi and Mountain Dew, Mirinda, Tropicana and many more. The organization has strength of talented people towards making uniqueness all the products it manufactures. It believes in acting ethically and responsibly towards getting success in the business. Moreover, the organization has reduced the sugar level, saturated fat and salt in all of its product categories. Furthermore, the increasing demand of nutritional foods and beverages increases the growth potential of the organization.

PepsiCo is facing huge competition from the top brands like Coca-Cola, Campbell Soup and Kellogg. PepsiCo is quite capable of beating this competitive through providing uniqueness in all their product range. The share of the organization has hit an all-time earlier in this year and has gained 12% rise in the market share (Hossain, Kumar and Rahman 2016). With the popular snacks and beverage products, the organization has become the leading contributor to the retail growth of US in 2014. Moreover, the organization has contributed almost $1 billion in US sales growth (Sethuraman and Gielens 2014). The stable high profitable brands of the organization are mainly Pepsi, Doritos, Quaker and Gatorade, which make majority of its revenue. Last year, the organization has invested more than $718 million to its product innovation (Hafiz 2015). As per Pepsi, its innovative has been accounted for 9% of its total revenue in 2014. As per the company survey of 2016, PepsiCo has revenue of over US$ 62.799 billion (Xie and Wang 2014). However, while considering the market share, the PepsiCo is lagging behind the Coca-Cola in US (Katsoulacos et al. 2014).

Outside-In Approach

Factors

The outside-in approach indicates the fact that long-term shareholder value can be obtained through listening and providing value to the customers. Moreover, this value should always be better than the other competitors. PepsiCo always looks at its business from customer’s perspectives and then only design its business process and products (Farazuddin, Ahmed and Maddali 2016). The organization always incorporates the changing needs of the customers in all their product categories. In this way, the organization has identified the health importance of the customers. Therefore, the organization reduced the sugar level and saturated the salt and fat level in all their snacks and beverage products. Moreover, the organization maintains high level of interaction with the customers and provides value their preference throughout their business model (Block, Fisch and Sandner 2014).

The organization has turned on crowd-sourcing in their business model in which organization ask for suggestion to the customers regarding any changes or additions in their product feature (Radulescu and Tîrla 2014). In this way, the organization gets new ideas towards their product development. This approach of the organization also minimizes the customer complaints through increasing customer interaction. The organization offers true benefits to the customers through offering three global categories namely beverages, snacks and nutrition (Simanis and Duke 2014). Moreover, the organization is also highly capable of managing customer engagement through interacting with them over the social media channels.

General Environment (Macro)
Demographic	Ø No limitation in gender, marital status, education, income and occupation
Economic	Ø Economic stability in USA favoring business growth Ø High economic growth rate in developing countries like USA Ø Fluctuation in fuel prices affecting transport cost and distribution
Political	Ø Political stability in USA favoring business growth Ø Enhanced intergovernmental cooperation flourishing business Ø Initiatives taken by government against carbonated drinks imposing threat
Socio-cultural	Ø Threat from health-conscious consumers as high sugar gives rise to health issues and on the other hand, this acts as an opportunity to innovate zero-sugar drinks Ø Increase in busy lifestyle favoring business growth
Technological	Ø Less R&D investment is required in beverage industry Ø Product innovation though knowledge management system Ø Wind power manufacturing and SAP software coordinates branches
Global	Ø Slowdown in Chinese economy is imposing threat Ø Issues rising from global campaigns due to differences among cultures
Physical	Ø Product differentiation through varying packaging and product sizes Ø Well-known brand creates a feeling of acceptance among all cultures

Table 2: General Environment Analysis

(Source: Wu and Huang and Chou 2014)

Inside out approach believes on the facts that internal strength and weakness of the organization prevails the success of the organization. PepsiCo has got the largest brand recognition within the world. The strong brand recognition of the organization has made it capable of positioning its products all around the world (Lopez, Liu and Zhu 2015). Furthermore, the diversified product portfolio of the organization has increased its customer volume. The success of the organization is also highly dependent on its strong distribution network. Strong relationship with the small and mega retailers has made the organization to reach their products nearby the customers (Banterle et al. 2014). Moreover, partnership with the small retailers has enabled the organization to take its products to remotest parts of the world. Furthermore, the organization has employee strength of over 264,000 and all the employees are highly dedicated to the organizational success (Pepsico.com 2017).

Porter’s Five Forces (Competitor Environment)
Threat of new entrants (Moderate)	Ø Very low barrier to new entry giving rise to new companies such as Mondelez International, INC. and Dr Pepper Snapple Group, Inc. Ø Moderate customer loyalty and high cost of brand development makes PepsiCo ahead of its competitors
Bargaining power of suppliers (Low)	Ø Huge supply opportunity and low integration of suppliers does not impact PepsiCo’s operation
Bargaining power of buyer (High)	Ø Tremendous availability of soft drinks increases bargaining power Ø Huge availability of substitutes increases bargaining and competition
Threat of subsitute products (High)	Ø Local companies and entrepreneurs placing new line of soft drinks with extremely low price Ø Fruit juice and energy drinks affecting market share
Intensity of rivalry among competitors (Moderate)	Ø Greatest competitor being Coca Cola Company imposing strong low switching cost Ø Competes with multitude of small and medium scale beverage companies

Table 3: Competitor Environment Analysis

(Source: Hafiz 2015)

Product Strategy

Present Scenario

Product Strategy
Strategies	Explanation
Feature	· PepsiCo has wide range of product category including soft drinks, fruit juice, foods, snacks, breakfast and sport drinks. · Customer can avail the products at an affordable price. · Carbonated soft drinks are extremely refreshing for the customers. · Wide variety of snacks food for meeting the temporary hunger of the people · Healthy choices for the health-conscious people
Quality	· Maintains the food standard towards marinating the healthy body of the customers · Low fat and sugar level al all the product category · Customers can avail nutritious foods and drinks, which contain vegetable, fruits, low fat dairy and whole grain · Foods and beverages fuel the body of the customers and their life quality · Diet Pepsi for capturing youth spirit
Branding	· Uses strong celebrity advertising for reaching mass customers · Flexible interaction with the customers through social media channel · Uses various customer loyalty program for engaging with the customers · Strong brand image and packaging attractiveness creates strong customer perception
Target Market	· PepsiCo has gained success in capturing the youth mind through refreshing drinks and healthy snack products · It has targeted all average and high income group customers · People having determined personality are the customers of the organization
Positioning	· Always targets youth segments · Use cricket and celebrity advertisement for reflecting on healthier and determined personality of the brand · Pepsi logo is associated with the core emotion of the customers

Table 4: Product Strategy of PepsiCo

(Source: Chong and Hashim 2016)

Market Strategy
Strategies	Explanation
Product	· Wide variety of product portfolio including soft drinks, sport drinks, foods, snacks, fruit juice and breakfast · Nutritious and healthy ingredients in the products · Expanded in breakfast foods. · Unique taste of the foods and snacks and refreshing attribute of the drinks · It has also included teas and coffee (Islam 2013)
Price	· Sets price as per the demand of the customers · Prices of the products are also set depending on their sizes · The price of Tropicana drink is set at little bit higher, as they are targeted to the health-conscious people · Discounts are available at bulk buying · Moreover, the organization uses affordable price of the products top beat market competition (Griffith, O’Connell and Smith 2017)
Place	· Uses global distribution network for transferring the products to the end customers · Products are available at retailers, grocery stores, supermarkets and restaurants · Products are available to all people easily · The organization maintains strong distributor relationship
Promotion	· Uses direct market, media advertising, sales promotion, public relation and social media · Uses celebrity endorsement to promote the products · Uses TV, radio, newspaper, print media and online media · Uses sales promotion like discounts and package deals · Maintains public relation through financial assistance and sponsorship of various sports events (Ghosh Dastidar and Raghavan 2013)

Table 5: Market Strategy of PepsiCo

(Source: Busco et al. 2014)

Competitive Strategy
Strategies	Explanation
Cost Leadership	· PepsiCo uses cost leadership strategy for beating its main competitor Coca-Cola · It offers low price for the products based on low operating cost · Sometimes uses special promotions through offering discounted prices over the products (Gopaldas 2015)
Differentiation	· It has expanded beyond beverage section and launched various snacks products to beat its competitors · The famous snacks like Kurkure, lays, cheetos are in great demand · It has also launched Quaker oats to beat the competition · PepsiCo has owned maximum of the restaurants like Kentucky fried Chicken, Pizza Hut and Taco Bell. · Launched various health drinks, fruit juices, sports drinks and teas for competing in US market · The organization has hired Global Nutrition Group to promote healthier choices through reducing fat, sodium and sugar level in the products (Banks et al. 2016)
Focus	· The organization has targeted both average income group as well as higher income group to enhance their sales volume and beat the competition · Uses automate production system to minimize operating cost and use cost leadership strategy · Innovate products for health-conscious people

Table 6: Competitive Strategy of PepsiCo

(Source: CharlEBoiS et al. 2015)

From the above, it can be identified that PepsiCo falls in the differentiation source of competitive advantage as it has extremely penetrated into food segments, which none of its rival have achieved yet. Product differentiation has resulted in making PepsiCo ahead of competition in USA.

PepsiCo can diversify their product portfolio for minimizing the risk factor of its business. Until now, the organization is only limited within food and beverage products. Therefore, the organization is to depend only on food and drink lover people. This dependency can bring risk for the organization. Therefore, the organization should diversify its product portfolio in some other categories. This diversification can be anything including cloths or some other grocery products.

The people of US are now extremely health conscious and they are now highly concerned about the ingredients within the foods and drinks they consume. Therefore, PepsiCo should concentrate more on manufacturing healthy foods and drinks for the customers in this market. However, the organization has already launched some healthy foods and health drinks, but the promotion for these products is not strong. The customers are not highly aware of such healthy products. Therefore, the organization should adopt aggressive promotional tools towards promoting such healthy products.

The organization has strong presence in US market and has huge customer bases that lead to high sales volume. Obviously, they have presence beyond US market, but the organization is not much focused on these foreign markets towards promoting their products. It is ultimately weakening their competitive position in those markets. Therefore, PepsiCo should give more focus on these markets and attract the foreign customers towards increasing the overall sales of the organization. It is needs strong promotional activities in those foreign markets. Moreover, it would make PepsiCo a stronger company and give it much more of an edge overall.

Conclusion

While concluding the study, it can be said that PepsiCo is a highly popular American multinational food and beverage company. The organization offers wide range of carbonated soft drinks, health drinks, sports drinks, foods, breakfast and snacks. It operates on almost 200 countries and has made strong global network. As per the survey of 2016, the organization has overall revenue of US$ 62.799 billion. However, the organization is lagging behind Coca-Cola in terms of its market share. The organization has created high customer value for gaining more customer attention. Moreover, the dedication level of the employees has brought the success of the organization. The organization has wide range of product portfolio and it sells its products as affordable price for gaining competitive advantage over the competitors. On the other hand, the organization has started to launch various soft drinks for gaining competitive advantage. Moreover, the organization maintains high level of interaction with the customers through social media channels. However, the organization should enhance their promotional activities for promoting the healthier products.

Outside-In and Inside-Out view of strategic planning

Reference List

Balakrishnan, M.S., 2015. PepsiCo MEA: the role of packaging in brand activation. Emerald Emerging Markets Case Studies, 5(3), pp.1-18.

Banks, M.A., Vera, D., Pathak, S. and Ballard, K., 2016. Stakeholder management as a source of competitive advantage. Organizational Dynamics, 1(45), pp.18-27.

Banterle, A., Cavaliere, A., Carraresi, L. and Stranieri, S., 2014. Food SMEs face increasing competition in the EU market: Marketing management capability is a tool for becoming a price maker. Agribusiness, 30(2), pp.113-131.

Block, J.H., Fisch, C. and Sandner, P.G., 2014. Trademark families: Characteristics and market values. Journal of Brand Management, 21(2), pp.150-170.

Busco, C., Frigo, M.L., Quattrone, P. and Riccaboni, A., 2014. Leading practices in integrated reporting: management accountants will guide their companies on the journey to value creation. Strategic Finance, 96(3), pp.23-33.

CharlEBoiS, S., DimiTropouloS, K., Haskins, C. and Foller-Carroll, A., 2015. Focus on Better Together: How co-branding can create strong synergies within a global company. Journal of Brand Strategy, 4(4), pp.388-402.

Chong, K.W. and Hashim, N.M.H.N., 2016. Threats to New Product Innovativeness and the Effects of Supplier Influence Processes. International Journal of Marketing Studies, 8(1), p.170.

Farazuddin, S., Ahmed, F. and Maddali, A., 2016. Article on Pepsi’s Promotional Strategies. Journal of Management Research and Analysis, 3(1), pp.56-58.

Ghosh Dastidar, S. and Raghavan, S., 2013. Mountain Dew. Emerald Emerging Markets Case Studies, 3(8), pp.1-6.

Gopaldas, A., 2015. Creating firm, customer, and societal value: Toward a theory of positive marketing. Journal of Business Research, 68(12), pp.2446-2451.

Griffith, R., O’Connell, M. and Smith, K., 2017. The importance of product reformulation versus consumer choice in improving diet quality. Economica, 84(333), pp.34-53.

Hafiz, R., 2015. Rethinking Brand Identity to Become an Iconic Brand-A Study on Pepsi. Asian Business Review, 5(3), pp.97-102.

Hossain, M.K., Kumar, S. and Rahman, M.A., 2016. Consumer Perception of Selecting Brand: A Comparative Study between Pepsi Cola and Mojo Cola. Global Disclosure of Economics and Business, 5(1), pp.47-56.

Islam, M.T., 2013. A comparative study and mother Brand influence on determining the consumer perception of Diet Coke and Diet Pepsi: A UK market perspective. International Journal of Marketing and Technology, 3(9), p.128.

Jolink, A. and Niesten, E., 2015. Sustainable development and business models of entrepreneurs in the organic food industry. Business Strategy and the Environment, 24(6), pp.386-401.

Katsoulacos, Y., Konstantakopoulou, I., Metsiou, E. and Tsionas, E., 2014. Quantitative price tests in antitrust market definition with an application to the savory snacks markets. Journal of Agricultural & Food Industrial Organization, 12(1), pp.1-33.

Liu, Y., Lopez, R.A. and Zhu, C., 2014. The impact of four alternative policies to decrease soda consumption. Agricultural and Resource Economics Review, 43(1), pp.53-68.

Lopez, R.A., Liu, Y. and Zhu, C., 2015. TV advertising spillovers and demand for private labels: the case of carbonated soft drinks. Applied Economics, 47(25), pp.2563-2576.

Pepsico.com. 2017. The Search for Hidden Figures. [online] Available at: https://www.pepsico.com [Accessed 27 Feb. 2017].

Radulescu, R. and Tîrla, F., 2014. Guidelines in the Adaptation of Business Models to Different Markets in the Context of Globalization. Revista de Management Comparat International, 15(4), p.479.

Salavou, H. and Sergaki, P., 2013. Generic business strategies in Greece: Private food firms versus agricultural cooperatives. Journal of Rural Cooperation, 41(1), pp.44-59.

Sethuraman, R. and Gielens, K., 2014. Determinants of store brand share. Journal of Retailing, 90(2), pp.141-153.

Simanis, E. and Duke, D., 2014. Profits at the bottom of the pyramid. Harvard Business Review, 92(10), pp.87-93.

Wu, P.H., Huang, C.Y. and Chou, C.K., 2014. Service expectation, perceived service quality, and customer satisfaction in food and beverage industry. International Journal of Organizational Innovation (Online), 7(1), p.171.

Xie, B. and Wang, X., 2014. Choosing R&D or advertising for competing firms in uncertain market. Journal of Industrial Engineering and Management, 7(3), p.716.