The SWOT Analysis: Pepsi

The SWOT Analysis: Pepsi PEPSI is an international player in the soft drink market and operation across the world. In 1893, PepsiCo started its manufacturing in 1893. It got a new name as Pepsi-Cola on August 28, 1898. Then in 1961, it was ultimately named as Pepsi. Initially it was marketed as Brads Drink. The substitutes available in the same market are as follows: 1) Coca-Cola 2) Cola Turka 3) Big Cola 4) RC-Cola In every segment of the target market, Pepsi is highly favorable. Due to its wise spread use at homes, ceremonies and during travels, it has been chosen for this project. Problem Statement In these days, management at the company has observed a significant delay in the sales of their product, Pepsi in this case. The demand for the particular has also declined with time. These business managers have proposed different factors affecting this problem. For instance: 1) A relatively good taste of Rival Products 2) Improvedvalue of Competitors Products 3) Low Price Rival Product 4) BetterPremeditatedDevelopment of Rival Companies Consequently Company Managers have comprehended the need of RE-FINANCING STRATEGIC MANAGEMENT PLAN. It evaluated the company processes on the followings fators: SWOT ANALYSIS PEST 5 Cs (company/collaborators/customers/climate/competitors) 4/7 Ps-product,price,place,promotion,people,process,physical Environment. Market Analysis In the cold drink market, some of the players were: Distributers Retailers Customers Suppliers and Competitors With the entrance of other players into the market, there can have threats or benefits. In the case of Pepsi, this was of a significant value. We will analysis these factors as entrance to barriers on the SWOT basis. SWOT ANALYSIS:PEPSI Strengths Branding The premier brand of PepsiCo is Pepsi. In 2008, it got ranked at the 26th position out of 100 top brands of the world. The value of annual sales is $15000 million Other brands of the company include Diet Pepsi, Gatorade Mountain Dew and have the presence in over 200 countries. In the US beverage industry, it has a market share of 39% and 26% in the Snacks Industry. A large proportion of the sales is accumulated through these brands. Diversification The diversification includes the aspect that each top 18 brands of PepsiCo generates approximately $1000 million of annual sales. Distribution The wider distribution network of Pepsi works such that the manufactured product is delivered to warehouses, then to customers ware houses and then to retailers. Weaknesses Overdependence on Wal-Mart PepsiCos largest customer is Wal-Mart. Wal-Mart operates through low price themes which indirectly put pressures on Pepsi to lower down its prices in accordance with its biggest customers. Overdependence on USMarkets The US market generates around-+ 52% of Pepsis total revenues. Low Productivity Low productivity is evident from the fact that in 2008, the revenue that it generated was $219,439 per employee. It was significantly lower than its rivals in the market. Opportunities Expansion of Product Base PepsiCo is pursuing to cope with one of its major weakness: enslavement on US markets by getting Russias topJuice Company, Lebedyansky, and vwwater in the UK. In this way, it would be able to increase its product base in a more competitive market. International Expansion Currently PepsiCo is expanding by making investment in China ($1000 million) and India ($500 million). This points out towards the fact that it is trying to increase its international base and lower its dependency on the US market. The future plans include expansions in Brazil and Mexico through huge investments. Growing Savory Snack and Bottled Water Market in US There is a huge potential for PEPSICO to capitalize on the expanding bottle water market which is expected to have a $24 billion volume by 2012. Threats Sharp Decrease in the Sales of Carbonated Drinks The sales of soft drinks have decreased significantly.Though PepsiCois experiencing diversification but it projected that it would be facing the impact of this decrease. Possible Negative Influence of Government Regulation PepsiCo can be negatively affected as the state and central laws would hinder its operations in marketing, sales and manufacturing. Powerful Competition The one major competitor of PepsiCo in the market is Coca-Cola. Nestle and Marina is also counted as its rivals. The intensive, edge to edge competition in the market can affect pricing policies, marketing, sales and other promotion strategies put forward by the company. For instant the sales of juice has significantly increased for Coca-Cola as compared to Pepsi. Potential Commotion Due to Labor Unrest Pepsi Co is susceptible to strikes and other labor disputes. For example, a strike in India in 2008 had prevented the manufacturing for almost a month. These can exacerbate problems for the company. PEST ANALYSIS: PEPSI A particular business is dependent on an environment to get its revenues for the goods and services that it provides. These environments can both be external or internal. Political Environment: Pepsi To run a successful business, PepsiCo is dependent on the public policy as it is one of the largest multi nation companies in the world. Thus an active participation is essential for the company towards the deliberations of public policy. Political Involvement Policy Citizens Fund (CCF) is the respective entity of PepsiCo that gets voluntary employee assistances to make political campaign contributions to Federal and state political parties, PACs and electoral candidates. These actively help the company to take part in the democratic process in the country. Economic Environment: Pepsi The Primary responsibility of the company, PepsiCo, is to take the necessary measures to preserve the sustainability of the environment in which it works for instance ecological environment, social and economic. Pepsi Co is aware of the critical role that agriculture plays towards different aspects of the business operations. Pepsi Co also recognizes the dangers emerging out of the shortage in food supply and the respective food security threats. Social Environment: Pepsi The unique social environment at Pepsi Co is very desirable where its people are working together for a sustainable present of prosperity. This, in turn, would be beneficial for Pepsi itself. Its promise is to provide the localize versions of its products by keeping in mind the preferences of the local communities in which the business is operating. Technological Environment: Pepsi Technological advancements have helped PepsiCo to enhance its production capacity. Therefore it is making full use of the new technology. PepsiCo is getting a key help through advancements in IT. Situation Analysis: Pepsi It is very necessary for a company to satisfy the needs of its customers while maintaining the profitability through sales. This can be achieved if company keeps track of all the internal and external factors in that environment. 5Cs provide the Situation Analysis for a particular firm operating in a particular market. These are as follows Company Product line Image in the market Technology and Experience Goals Culture Collaborators Distributers Suppliers Coalitions Customers Market size and growth Market Segments Retail channel-where does the consumer actually purchase the product? Consumer Information Sources-where does the customer obtain information about the product? Rate of Purchase, seasonal factors Quantity purchased at a time Trends-how consumer needs and preferences change over time Competitors Real or Potential Direct or Indirect Products Positioning Market Shares Strengths and Weaknesses of competitors Climate or Context The climate or macro-environmental factors are: Political and Regulatory Environment: Which specific policies affect the company Economic Environment: business cycle, inflation rate, interest rates, and other topics Social/Cultural Environment: Trends and fashions in a particular society Technological Environment: The relationship between demand and the impact of technology 7 Ps -Product,Price,Place,Promotion,People,Process, Physical Environment: Pepsi 7 Ps are called Marketing Mix and help in meeting marketing objectives for a company. Pepsi-Product The cola drink includes the ingredients such as carbonated water, high fructose corn syrup, sugar, colorings, phosphoric acid, caffeine, citric Acid and natural flavors. Following are the popular brands of PepsiCo: Pepsi Twist, Pepsi Tarik, Pepsi Samba, Mountain Dew, etc. Coke v/s Pepsi-Product Pepsi and Coke are the major rivals in the market and compete against a verity of products in the market: COKE PEPSI 1) The dark colored Cola drink initiated the rivalry with Pepsis carbonated drink 1) Pepsi too has a cola version of carbonated drink which competes against the coke 2) Vaultwas released by the Coca-Cola company in June 2005. It is a carbonated drink. 2) Mountain Dew MDXis the version released under Mountain Dew in 2005 after a new marketing campaign 3) Spriteis a clear lemon- time flavored soft drink manufactured by the coca-cola company. 3) 7 UP is a lemon carbonated drink competing with Sprite 4) Diet Coca-Colais a sugar free soft drink produced and distributed by the Coca-Cola Company 4) Diet Pepsiis a low-calorie carbonated cola. 5) Fantais a soft drink citrus brand owned by The Coca-Cola Company. 5)Mirindais soft drink brand owned by PepsiCo and it competes with Fanta Table : Coke v/s PEPSI Price Price is the monetary value of a good in a particular currency. Pricing is the major portion of the marketing mix. Before the entrance of PepsiCo in the market, Coke was the only player in the market nd it directed the price of the cola drink. The competition emerged after the entrance of Pepsi. Now the price is determined on the basis of competition between Coke and Pepsi. Pepsi portrays a flexible attitude and cut downs its prices at times. This has also incurred some loses for Pepsi due to the risks attached. Though the lowered prices would attract more customers, it also badly affects the production cost which becomes difficult to cover. This was an early phase situation for Pepsi but now it has recovered due to the rapid growth that it is making. Place In marketing, is a geographic location, an industry, a group of people to who company wants to sell its products. Pepsi like Coke has its network all over the world. Pepsi has joined forces with companies like Quaker Oats,Lipton etc. It runs ads in different localities of the world. Promotion Promotion encompasses 4-subcategories: Advertising Personal selling Sales Promotion Publicity and Public Relations A promotional strategy can include: a) Sales Shootouts b) New product reception c) Brand Equity Emergence d) Positioning e) Competitive retaliations f) Creation of a corporate image Pepsi and Coke have a special status regarding their promotional activities.The rivalry was initiated when Pepsi started its blind taste challenges. It took the method of a taste test at public places like shopping malls, community centric hubs etc. By letting people taste both the colas, they asked the people to select the preferred one so that people would buy Pepsi. The following chart provides a comparison between Pepsi and Coke: Figure : Price Comparison People- Pepsi Pepsi has deeply affected the lives of people by changing their preferences. Process-Pepsi Process involves the transformation of inputs into outputs. With the latest technology, pepsi has helped people to get a much better carbonated product. Physical Environment-Pepsi The internal and external environment has been affected by the operations of Pepsi and it holds a well-established position for that. THE RE-FINANCING STRATEGIC MANAGEMENT PLAN It is the particular strategy of framing, executing and gauging decisions that allow an organization to meet its objectives. The making and designing of a strategy includes the following: Vision and Mission(the target of the business) Strength and Weakness Opportunities and threats The contemplations for top strategy devising are: Allocation of resources Business to enter or retain Business to divest or liquidate Joint ventures or mergers Whether to expand or not Moving into foreign markets Trying to avoid take over HRM and Strategy Strategists: are individuals who are most responsible for the success or failure of an organization. They are individuals who form strategies. They have various job titles, such as CEO, President, owner etc. Pepsi- Vision Statement PepsiCos responsibility is to continually improve all aspects of the world in which we operate- environment, social, economic-creating a better tomorrow than today Pepsi Cola Mission Statement Our mission is to increase the value of our shareholders investment. We do this through sales growth, cost controls, and wise investment resources. We believe our commercial success depends upon offering quality and value to our consumers and customers. Providing products that are safe, wholesome,economically efficient and environmentally sound, and providing a fair return to our investors while adhering to the highest standards of integrity. Types of Strategy Competitive Advantage: Pepsi By taking our competitive strengths, and investing in them to create longer-term value to sustain growth. PepsiCo has 3 key advantages: big, muscular brands the proven ability to innovate and create differentiated products , and Powerful go-to-market systems. Cost Advantage It is the global leader in savory snacks, and those snacks can be paired with its beverages in the marketplace. Those pairings will enable PepsiCo to provide unique offerings to retail and foodservice customers. Market Dominance It is one of the worlds most familiar consumer food and beverage companies, offering brands like Frito-Lay, Gatorade, Tropicana and Quaker. The Coke vs. Pepsi conflict raged on for decades across the country on supermarket shelves, fast food restaurants and the like. New Product Development Pepsi As a consumer-focused company, we want to enrich the lifestyles of our consumers while increasing the local relevance of the products we make. We recognize the need to understand and respect local cultures, rituals, patterns and intake gaps when developing delicious-tasting convenient and affordable products for consumers in that market. For example, in India, we have introduced a whole-grain product for breaking the fast around the observance of Ramadan. In China, we have introduced congee (with whole grains and reduced sodium) as a locally relevant breakfast offering to add nutritional value to the Chinese diet, and were introducing products made from grains in sub-Saharan Africa as a change from those made with plain flour. Contraction/Diversification IndraNooyi, PepsiCo Chairman and Chief Executive Officer, said, Our results this quarter reinforce the advantages of our balanced portfolio, as our food and international businesses delivered solid performance while we continued the transformation of our North American beverage business. As part of its strategy to grow in key markets, the company recently announced plans to invest $1 billion over the next four years in China, PepsiCos highest priority growth market. And, in Russia, PepsiCo along with its partner The Pepsi Bottling Group, Inc. announced a plan to invest $1 billion over the next three years. Price Leadership Strategy An observation made of oligopolistic business behavior in which one company, usually the dominant competitor among several, leads the way in determining prices, the others soon following. The context is a state of limited competition, in which a market is shared by a small number of producers or sellers. Pepsi- Global Strategy It is not just another beverage on the vast shelf of choices. Pepsi made a decision years ago to diversify its offering and branch into the global arena. Pepsi is an American multinational corporation headquartered in Purchase, New York. It is a manufacturing company distributing beverages and snack foods across 200 countries. Pepsi-Reengineering Strategy Reengineering initiatives typically lead to a business organization with these characteristics: 1. Business processes are simplified rather than being made more complex. 2. Job descriptions expand and become multi-dimensional people perform a broader range of tasks. Downsizing PepsiCo Inc. is considering cutting approximately 4,000 employees and reducing pension contributions in order to increase their income.Citing a source, reported the New York Post, quoted by Reuters on Friday (06.01.2012), currently the company offers retirement plans and matching contributions to 401 thousand retirement savings account.One of these large companies believes that by offering both of these are an act that is more generous.Pepsi-party claims when 401 thousand by eliminating the retirement savings account that will save the company up to USD75 million. The layoffs, accounting for approximately one percent more than the payroll company, will include a small number of workers at its headquarters. Delayering To lessen the size of a business hierarchy, especially in terms of a reduction in management. This creates a flatter(less layered) organizational structure. There have been numerous cases of companies delayering their organization structures over the past few years. Many of these companies include industry leaders rarely satisfied with their past success, continually searching to improve all facets of their business, including their management structure. Recent examples of well-known companies that have delayered include Pepsi-Cola, Hewlett-Packard, Corning, Tenneco, and General Electric, to name only a few. RESTRUCTURING PepsiCo Inc. plans to cut 8,700 jobs in a restructuring as it seeks to offset high commodity costs and increases investment in advertising and marketing in North America.Its a lower figure than sources had expected. Of PepsiCos 100,000 U.S. workers, about 2,000, or 2 percent, are on the chopping block, say knowledgeable sources, a figure Mr. Nicolas couldnt immediately confirm. Some 1,800 people work at the West Loop headquarters of Quaker Oats, Gatorade and Tropicana. Other PepsiCo teams plus its global nutrition group also are in Chicago. Mr. Nicolas declined to comment on specific jobs or people before the company notifies workers of their status this week. The Financial Analysis Pepsi Bottling Group is the worlds largest manufacturer, seller and distributor of Pepsi-Cola beverages. With annual sales of nearly $11 billion, the companys fastest growing segment is non-carbonated beverages, including the number one brand of bottled water in the U.S., Aquafina, as well as Tropicana juice drinks and Lipton Ice Tea. As part of a 24/7 production operation, the companys Detroit plant ships about 27 million cases per year. Production at the plant begins as empty bottles are unloaded from trucks via conveyor and transported to a depalletizer. From there, they are, rinsed, dried and sent to a filling machine (filler speeds at the plant vary based on bottle size, ranging from 350 to 1,000 bottles per minute). The bottles leave the fillers and make their way to a packaging machine, and then to a palletizer. Each pallet is wrapped for distribution and moved to the warehouse for shipping. We can show the statement of financial position of PEPSI Inventory (raw materials) in different years in the following chart. Figure : Financial Position of PEPSI Inventory (raw materials)