Essay on Pepsi: PESTLE Analysis, Five Forces Analysis, Product Life Cycle Theory

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Essay on Pepsi: PESTLE Analysis, Five Forces Analysis, Product Life Cycle Theory

Introduction

International trade allows countries to expand their markets for goods and services that may not have been available locally. As a result of international trade, the market has greater competition and hence more competitive prices, making the product cheaper home for the consumer. Global trade allows rich countries to use their resources – be they labor, technology or capital – more efficiently. Because countries have different natural assets and resources, some countries may produce the same commodity more efficiently and therefore sell it at a cheaper price than other countries (Gunaratne, 2018). If a country cannot produce an item efficiently, it can obtain it by trading with another country that can.

Pepsi is one of the largest food and beverage industries. Pepsi was founded in 1898 in the United States by Caleb Bradham. Pepsi now generates more than $ 60 billion in revenue with one million employees globally working in the industry. The company that looks to be the world’s largest consumer producer is working to improve the standard day by day. Pepsi cola has always focused on product innovation, helping the company maintain stability and value throughout the industry (Monica, 2017).

Despite being the leading brand in the beverage industry, Pepsi is not immune to various political, social or economic fluctuations. Political or economic changes can adversely affect their profits. There are laws and regulations that vary from country to country and directly affect them. At the same time, cultural factors are important. Pepsi operates in more than 200 countries. Social and cultural factors are particularly important in this case (Barry, 2016). Pepsi’s PESTLE analysis will identify all these factors that can affect its business in the global environment.

Political factors

Political factors include external factors such as government factors. Effects of government policies and regulations that directly affect the company. These policies are derived from the government. These policies may sometimes have tax reforms that directly affect the company. Political stability in the region where the company operates will certainly be an opportunity for the company. Similarly, good intergovernmental relations are a source of global companies such as Pepsi. Threat factors include many of the government’s soft drink and population health policies are one of the main threats to Pepsi (MEYER, 2017). For example, good economies like the USA and Canada are businesses for Pepsi the best, whereas in third world regions the opportunity process is indirectly stopped.

Economic factors

The performance of a company like Pepsi is directly proportional to the economic stability of the country in which the company operates. Similarly, in regions where countries are more developed, there are more ways to company opportunities (Haseeb, 2017). The potential threat in this perspective is a slowdown in the Chinese economy, as the Chinese economy is now one of the largest in the world.

Social factors

Social factors include people’s beliefs and lifestyle, and most importantly the culture of the region (Dudovskiy, 2016 ). For example, people in the modern state are more likely to fast food and soft drinks, and this culture becomes an opportunity for beverage companies like Pepsi. In countries where the population is more aware of their health, such statements can sometimes be a threat and sometimes an opportunity for the world. The frenzy of life and the habits of soft drinks after a few hours and with every meal is Pepsi’s main opportunity.

Technological factors

Moderate R&D in the food and beverage industry has always been a great opportunity for companies like Pepsi. Improving the knowledge management system with the help of technological advances is an opportunity. The growing trend of automation in business strategies certainly represents a great opportunity to expand business to recognized international companies such as Pepsi (Newhart, 2018). Other technological factors include the trend of Internet marketing and many of the latest technological tricks. Therefore, this technological renaissance has explored many new ways as opportunities for modern contemporary brands such as Pepsi.

Legal factors

Legal elements are always present to connect competitors and Pepsi. For example, various regulations such as health safety regulations are great opportunities for the Pepsi industry. Many other legal aspects of government reforms have had a direct impact on companies such as Pepsi. Sometimes laws act as bonds that are an obstacle to the expansion of a company (FERGUSON, 2017 ). However, there are potential benefits to these legal issues, as they have provided because they provide more organized work environments for related companies such as Pepsi.

Environmental factors

These factors include high standards and policy expectations for waste disposal. There must be a focus on business sustainability. One of the world’s concerns about climate change is the threat and sometimes an opportunity for global companies like PepsiCo. PepsiCo was one of the greatest companies. The bottom line in the discussion above is that there is a whole lot of opportunities for PepsiCo. If the right strategies and the right future plan are developed, the company can keep the name in the market (Kiran, 2012). Careful planning and taking the company in the right direction will always provide a new space for opportunities. On the other hand, there are also many potential threats in terms of competitors and change in the global scenario of new business laws and practices.

Pepsi’s Five Forces Analysis

Pepsi and Coca Cola are leading brands in the soft drink industry. However, the soda industry has felt cold during the past few years. Apart from comprehensive health awareness, other factors also affect their profitability. Pepsi had a bad 2015, and it seems that things don’t take a big turn. There are economic and social factors that affect business in the industry. The following is an analysis of the five forces analyzing the state of competition in the soft drink industry and how Pepsi controls it. The five forces model was developed by Michael E Porter (Karanis, 2013). These five forces are part of every industry and market and have an important impact on profitability.

Bargaining power of the suppliers:

Suppliers form a strong group and exert little pressure or pressure in the case of Pepsi. The reason is that they are fragmented and there is a high number as well. Therefore, Pepsi has many options and low conversion costs. Pepsi has more control and suppliers want to keep their business with the soda giant. These individual suppliers are not very large in size, and their chances of integrating forward and competing with Pepsi are very low. All of these factors work for Pepsi and give it a higher bargaining power than its suppliers (Gunaratne, 2018).

Bargaining power of buyers:

Individual buyers do not exert significant influence and do not exert any significant pressure on Pepsi business. Except for large corporations / retailers or distributors, small businesses and individual buyers have no significant bargaining power. No matter how big the bargaining power of big buyers, they buy in large quantities. Retailers like Costco have some negotiating power and influence because they buy in bulk. Moreover, the Pepsi market is not concentrated in a particular region but is spread all over the world. Given all these factors, the bargaining power of clients is weak (Jurevicius, 2018).

Threat of new entrants:

Global brands such as Pepsi cannot be established overnight. It takes both investment and great efforts. From operations to marketing, all regions require huge investments and highly skilled staff. Not only this, to build a brand image and gain customer loyalty, it is a difficulty. Small brands are still competitive in local markets. However, these brands are still generally confined to small areas. Pepsi has very few direct competitors and with the exception of Coca Cola, no one has the ability to look at it in the eye. Therefore, the threat of new entrants to a brand like Pepsi is reduced with a strong brand image. Becoming a key player in the soft drink industry is not easy. Apart from product quality and brand image, there are many other challenges that discourage new players (Monica, 2017).

Threat of substitutes:

There are many alternatives to Pepsi products in the market. Switching costs for customers are also low. Apart from Coca Cola products, fruit juices, energy drinks and many hot and cold drinks are alternatives. This threat is mitigated to some extent by Pepsi commercial image and global presence. The brand also invests a lot in marketing to keep the threat from alternatives under control (Gunaratne, 2018). Moreover, alternative products are generally good in quality. Pepsi focuses heavily on customer engagement for this purpose. In general, the threat of alternatives is a powerful force that Pepsi must constantly confront.

Competitive rivalry among the existing players:

Without the competition between Pepsi and Coca Cola, the soda giants would have invested less in marketing and advertising. These two brands remain preoccupied with intense competition and people also believe that the cola wars continue. Dr. Pepper Snapple is also a competitive threat to the soda giant. The competitive threat from other brands is lower, but among the major players is a very strong force (Haseeb, 2017). Therefore, overall competitive competition in the industry is the strength of the chain. The competition between Coca Cola and Pepsi has always attracted a lot of publicity and interest.

Product Life Cycle Theory

The International Product Life Cycle Theory was written by Raymond Vernon in the 1960s to explain the product cycle when it is exposed to an international market. Cycle describes how the product matures and declines as a result of the internationalization. It contains four stages; research and development, introduction, growth, maturity and decline (Newhart, 2018).

Research and development:

This is when the product is developed. Market research and analysis is conducted to find out the four points of marketing – product, price, location and promotion. Pre-release of the product may also be performed at this stage – this is done by advertising harassment of the product either through electronic media printing (Kush, 2017). Keep in mind that there is no profit or sale as the product is still under development at this stage.

In 1898, Bradham developed ‘Brads drink,’ a formula designed to aid digestion. After receiving a strong positive response from consumers in the pharmacy, Brad renamed the drink as ‘Pepsi-Cola’ and bought the brand ‘Pep-Cola’ for $ 100. Although $ 100 does not appear much, after adjusting for inflation, this amount of money in the 19th century is equivalent to $ 2,516.34 at present (Murphy, 2018). This indicates the difficulties faced by companies in the pre-launch phase with continuing periods of negative cash flow, significant research costs and development expenses. Within PepsiCo R&D, they knew they needed to shape their business environment rather than just respond to it. So, starting in 2007, they decided to help transform their company and food and beverage portfolio by expanding it. Commit to evolve from the Go-do function that simply implements product line extensions to the global R&D “Go-to” function that delivers innovative precision with new products and new categories; Contains less sugar, salt and fat; the ‘go to’ function is recognized by shareholders as contributing to the growth of their company’s highest level, as a result of the accuracy of their R&D strategy (Jurevicius, 2018).

Introduction:

New products are introduced to meet local (i.e. national) needs, and new products are first exported to similar countries, countries with similar needs, preferences and incomes. Initial sales are made for innovators, retailers and consumers looking to try new products, yet the profits received are still insufficient to recover development costs (FERGUSON, 2017 ). Brad started selling Pepsi-Cola and achieved sales of 7,968 gallons of syrup in the first year. His first goal, or in terms of marketing, was only to generate initial awareness and experience of his product. Thus, to begin, only a basic product – Pepsi-Cola, which was initially sold by soda fountains found in Brad Pharmacies, was launched instead of bottles (Monica, 2017). Therefore, a simple cost and price strategy was used. Pepsi-Cola can be applied in a smart and safe way, by starting a skimming strategy, so that you quickly withdraw from start-up costs. When it comes to Place, a highly selective distribution is initially recommended, and this is only offered with the launch of Pepsi-Cola in Brad’s pharmacies. To generate awareness, for example, to advertise the product, celebrity endorsement was used with race car driver Barney Oldfield (above). Pepsi-Cola has not been launched with any promotions (Barry, 2016).

Growth:

A copy product is produced elsewhere and is introduced in the home country (and elsewhere) to attract growth in the local market. This transports production to other countries, usually based on the cost of production. At this stage, sales begin to increase rapidly as the product gains popularity among the early majority, and this leads to the first generation of profits (Murphy, 2018). After bankruptcy and after becoming Loft Inc. Having acquired it, Pepsi-Cola’s sales increased dramatically in the Great Depression. Consumers were fascinated by the competitive position of value for money: 5 cents would buy consumers 12 ounces of PepsiCo, while only 6 ounces of Coca-Cola. During growth, market share acquisition is critical. Thus, PepsiCo was aggressively marketed against Coca-Cola to encourage consumers to imbalance and build a larger consumer base (Newhart, 2018). To support the goal of gaining market share, the low price penetration strategy was one of the main reasons for the brand to grow significantly in this time period. A wide distribution network is needed to support rapid sales growth; therefore, the exclusivity in pharmacies has ended and the product has become the mainstream consumer commodity. It is necessary to capture the early majority stage, and so, the ads are designed to effectively reach a large audience. For example, the radio was chosen as an intermediary because of the low cost of access. PepsiCo continues to invest in expanding its business in developing and emerging markets. For example, PepsiCo plans to invest nearly $ 5.5 billion by 2020 in India, one of the company’s main global markets (Newhart, 2018). PepsiCo also enters into key alliances and develops products that meet local tastes and preferences. For example, in 2012, the company entered into a strategic alliance with Tingyi Holding, a leading food and beverage company in China. Under this alliance, PepsiCo has made Tingyi Beverage Company a subsidiary of China Beverage Bottling Company. Tingyi’s strong network has helped PepsiCo strengthen its business in China (Murphy, 2018).

Maturity:

This is the longest phase and generates the majority of product sales and profits from the late majority. In order to ensure the product to achieve the greatest possible profit, extension strategies are often implemented for maturity (Harshill, 2014). Industry contracts and concentrates – the least expensive product wins here. Since the 1980s, Pepsi has been maturing in the product life cycle, helping the parent company earn nearly $ 20 billion in annual revenue. At this point, the products are more profitable, which is why PepsiCo is likely to consider Pepsi as a cash cow and aim to maximize profits from the brand (Harshill, 2014). Now that the product is firm, full ranges can be introduced that serve as extension strategies to extend the most profitable phase of product life. These include the highly successful Pepsi Max, to the Pepsi Raw disaster. It is clear that PepsiCo and Coca-Cola do not want to engage in a price war, which is very dangerous during this very competitive phase. As a result, the price rarely fluctuates away from the market average. Also, the product now has a global distribution to penetrate emerging economies. The main focus of Pepsi ads during maturity is the distinction between brands. This was mainly achieved by using celebrity endorsements – such as Beyoncé and Michael Jackson – to position the product as a smaller, richer alternative to Coca-Cola (Barry, 2016). To maintain consistency with brand value determination, Pepsi often offers to increase value and added value. An example of the first offers larger bottle sizes – to this day – of Coca-Cola; the latter can be seen in competitions advertised on Pepsi bottles.

Conclusion

Pepsi enjoys a worldwide reputation as a key player in the soft drink market as well as a leader in the snack industry. This has been done by creating a healthy environment for its customers all the time while maintaining its integrity. They are currently facing stiff competition from Coca-Cola, but with their various marketing projects, Pepsi is preparing to give Coke a definite battle in the future over what Cola consumers want. PepsiCo’s success is a product of superior products, high levels of performance, distinctive competitive strategies, and high integrity for its people. Their main objective is to increase the value of shareholders’ investments through integrated operating, investment and financing activities. Their strategy is to focus their resources on growing their business, through internal growth and carefully selected acquisitions. Their strategy is constantly adjusted to address opportunities and risks in the global market. The company’s success reflects their continued commitment to growth and focus on those companies where they can lead their growth and create opportunities.

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