Category: Pepsi

Porter’s five forces

The degree of rivalry in the carbonated soft industry is highlighted by two major brands: Pepsi and Coke. These two companies account for 72% of market share while the rest of the market is covered by other organizations such as Dr. Pepper, Snapple Group and Cott Corporation.

Some private label products also contribute a small portion to the sales in this industry. Pepsi has eroded Coke’s market share in the past through low prices and aggressive promotion efforts.

In the 60s and 70s, Pepsi marketed itself as being the preferred brand, which caused a substantial reduction in Coke’s market share. Coke on the other hand has altered its product contents and prompted Pepsi to do so as well.

In terms of substitution as a Porter’s-five force, Coke and Pepsi have to deal with numerous substitutes for carbonated drinks.

Some of them may include bottled water, juice, tap water, powdered drinks, milk, beer, spirits, sports drinks and coffee. In the past, these substitutes were not a threat because consumers stayed loyal to Pepsi and Coke.

However, the substitutes are a strong factor in the industry because of health and environmental consumers.

Pepsi and Coke have responded to the threat of substitutes by producing those products themselves. The firms have ventured into juice, bottled water and coffee over the past few years.

Pepsi and Coke’s main buyers are bottlers, who purchase concentrate and package it in plastic or canned containers. The bottlers do not have as much power as the concentrate makers because they cannot negotiate concentrate prices.

Coke has a contract that establishes maximum prices for its concentrate while Pepsi determines prices on the basis of the consumer price index. It often exceeds market rates and thus has the final say.

Furthermore, because Coke and Pepsi give bottlers exclusive territorial rights, then bottlers cannot diversify their portfolio by selling products from competing brands. Their buyers are restricted to their either Coke or Pepsi.

One of the most significant barriers to entry in the carbonated soft industry is trademark domination. Coke and Pepsi have invested substantial amounts in development of their trademarks through intense advertising, bottler support, and product development.

New companies do not have the capital or ability to match such strategies. Negotiations made between the two major carbonated soft drink makers (Pepsi and Coke) and national retailers like Wal-Mart ensure that these firms dominate shelf space. New players may find it difficult to penetrate into such airtight deals.

The main suppliers in the carbonated industry are high fructose corn syrup manufacturers, food coloring industrialists, citric acid producers, caffeine makers and flavor manufacturers.

The citric acid or the food coloring industry has several small players who make it difficult for them to exert influence on large buyers like Coke and Pepsi. Therefore, supplier power is relatively weak in the soft drink industry.

Responses

How Coke and Pepsi compete

The two companies initially competed as friendly rivals (between 1970 and the mid 1990s). Pepsi prompted Coke to avoid complacency and continually improve its business efforts. Likewise, Coke caused Pepsi to become more innovative and thus successful.

This level of friendliness was permissible because both companies enjoyed increasing profits. However, that competiveness lost its agreeableness when both firms lost market share among the carbonated soft drink consumers.

In the 1970s, Coke altered its marketing strategies in response to the efforts made by Pepsi. It changed concentrate pricing and advertising strategies when Pepsi claimed to offer a superior cola to theirs.

Pepsi on the other raised the prices of its concentrate shortly after Coke did. Therefore, these companies compete through alteration of products, supply chain and distributional management and changes in marketing.

Product differentiations

In terms of carbonated drinks, Coke’s main product was its cola brand, but it has several other flavors such as Sprite, Fanta, Diet Coke and Tab. Similarly, Pepsi also started with the cola version then introduced other flavors such as Diet Pepsi, Teem, and Mountain Dew.

Both companies also diversified into non-carbonated drinks such as Minute Maid, Belmont Water and Duncan Foods for Coke and Lipton and Gatorade for Pepsi. Both firms have also introduced a number of diet products such as Diet Coke and Diet Pepsi. In the past decade, Pepsi and Coke have entered into the bottled water market.

Regardless of large investments in various soft drink and non carbonated industries, the most successful products are still the initial ones. Pepsi Cola and Coca Cola are still the most profitable products for both organizations.

The move into unconventional drinks was driven by changes in market trends as well as pressure from the US government.

Channels used by Pepsi and Coke

Both companies have a distribution channel that consists of bottlers and retail channels. However, the organization of these channels differs substantially in both companies. Pepsi has a preference for retail outlets while Coke has sold its products through fountain sales (dominates 69% of this market).

Nonetheless, both firms have competed for fountain sales by acquiring restaurant franchises. Coke worked hand in hand with McDonalds and Burger King while Pepsi purchased KFC, Pizza Hut and Taco Bell.

Both organizations purchased fountain equipment for these restaurants, as well. Pepsi and Coke also utilize the vending channel for distribution and have both done relatively well here.

Bottlers are also a crucial part of the distribution channel for both companies. At Pepsi, deals with bottlers are more flexible, especially in terms of pricing. Coke tends to exert greater control over prices by charging flat prices for concentrate.

These organizations have retained control over their bottling networks through consolidation. Coke started by created a bottling subsidiary in 1986 that would purchase ailing bottling franchises and revive them.

Currently about three quarter of Coke’s bottling is handling by this subsidiary. Similarly, Pepsi also started bottling consolidation by purchasing most of its bottlers like MEI Bottling and General Cinema. Now, 56% of Pepsi’s bottling is done internally.

Why the soft drink industry has been so profitable and whether it is changing

Profitability stemmed from a number of factors. First, the distributional arrangements were made in a way that favored concentrate makers. They had control over concentrate pricing, location of bottlers as well as advertising and promotion.

Pepsi and Coke were also successful because at the time, carbonated drinks were a favorite for most North Americans. Few of them had objections with the product content and there were minimal alternatives in the market.

Profitability has reduced dramatically in the soft drink industry. This stems from health concerns. Numerous consumers feel that high fructose corn syrup is detrimental to their health. Government programs are designed to punish soft drink makers through excessive taxation.

These charges stem from initiatives aimed at fighting obesity. Furthermore, traditional institutions, such as high schools, that sold most of Coke and Pepsi’s vending machines have banned them. Now the organizations have minimum distributional avenues for their products.

Both firms have also ventured into non carbonated drinks such as bottled water and juices. These new ventures do not elicit as much brand loyalty as carbonated drinks.

Therefore, the companies dedicated a substantial share of their resources to these new products, yet they did not enjoy anticipated returns. Non profitability of products other than soft drinks affects the success of soft drinks because little capital is left to invest in them.

Non profitability has also emerged from the poor management of international business. Some countries impose excessive foreign exchange controls, unfavorable trade regulations and advertizing restrictions.

How Coke and Pepsi can stay profitable

The major cause of concern among both organizations is the health campaign against soft drinks. Pepsi and Coke ought to identify the sources of high sugar content in its products and then work on developing alternatives.

However, the companies should still maintain the taste that made those products so likeable initially. Pepsi is already doing this through its Pepsi Throwback brand and Mountain Dew Throwback brand.

Now the company ought to go back to the public and inform them about the changes it has made to these products. Coke has also initiated its own changes through the use of a stevia-based additive. Aggressive marketing campaigns should be done to win back traditional clients such as school institutions.

Both organizations have already realized that non-carbs have a lot of growth potential. This can be seen by their acquisition of energy drink companies as well as vitamin water firms.

The two organizations now need to build their brands around these sectors by following the same strategies that they employed to make their carbonated drinks so popular.

Consumers need to recognize the zero-carbs products in the same way that they recognized the other ones in the past.

Although diversifying into other products is a plausible idea, these organizations should not focus on bottled water. There is minimal room for differentiation in the bottled-water industry as the product is quite basic.

In fact, low differentiation explains why consumer loyalty for Coke and Pepsi’s water declined sharply over the past few years. Consumers tend to buy the least expensive brand if a product is not highly differentiated.

Pepsi and Coke should also deal with some of the environmental concerns that customers have about their products. They need to place their products in biodegradable packages.

Product development experts should also anticipate consumer complaints through market research and respond to demand before the external environment forces them to do so.

The two companies need to refine their international expansion strategies. These organizations need to rethink their bottling strategies in global markets. Most North American bottling is directly handled by the company’s bottling subsidiary, and this has given the company reasonable control over its product.

The same model should be replicated in different international markets. This would mean that the company will not lose any of its profits to third parties who keep demanding for new things. The company should start with developed nations and then transfer consolidation to developing ones.

Introduction

Pepsi Company serves as one of world leader producers of food and non-alcoholic beverages. The company has got branches in North America such as Frito-Lay which deals with snacks and Pepsi Quaker Foods dealing with the sale of beverages. Generally the competition within the industry is intensive with major players being Pepsi, Coca-Cola and Cadbury Schweppes.

Pepsi controls around 20% of the total market share with its constituent branches also controlling major segments. Frito-Lay controls approximately 60% of the total snack-food market within the United States (Pepsi Company Overview). The industry is characterized by stiff competition with Coca-Cola and Pepsi being the dominant companies.

Other players within the market include; Snapple, Cott, National heritage, Hansen natural, Red bull, Big red, Rock star and others with Coca-Cola being the leading producer and Rock star the least contributor with market coverage of less than 1% (Pepsi Company Overview).

Effective and efficient management of customer requirements within the rich beverage market environment calls for shortening of product life cycles through virtual operation of respective supply chains (Cachon and Fisher, 2000). Integrated supply chain should have the ability to seamlessly respond to changing demand and customer requirements with minimal disruptions and costs.

Both theory and practice suggest that a truly integrated supply chain has the potential of assisting firms in achieving significant cost savings, while at the same time creating value for supply chain members and their respective stakeholders.

Reaching the goal of an integrated supply chain is difficult, due to the fact that there are multiple lines of definitions describing this concept. Much of the previous research has primarily addressed either the supplier domain or the customer domain portion of the supply chain.

Research problem

Supply Chain Management approach involves integration and coordination across organizations and throughout the supply chain. It means that supply chain management requires internal and external integration. This makes it clear that the role of supplier and supply management practices is relevant in this context.

However, the integration of supplier in supply chain is always different depending on the nature of industry in question. Recent development in SCM offers the opportunity to reduce costs and ultimately increase profit margin. The remaining challenge is to link the novel approaches together for the purposes of gaining competitive advantage of continuous flow of Supply Chain.

Creating collaborations outside and across-company in the process of designing appropriate tools for the purposes of meeting market demand poses many challenges. Designing supply chain involves four stages which should be the center of focus, namely, supply chain network, internal supply chain, distribution systems, and the end users (Barrat, 2004).

The problem here is on how PepsiCo can design an integrated supply chain capable of efficiently performing on a global scale and at the same time essential for the purposes of optimizing business operations and meeting the market demand.

Proposition

There have been lots of issues affecting the efficient management of the supply chain within PepsiCo. The Company has undergone tremendous changes in the past in an effort to leverage its global presence and also benefit from synergies within its factories. The proposition in this case study presents a defined prospect subject to proof and consideration.

In this case the whole issue involves development and initiation of appropriate models capable of delivering results within the supply chain. Some of the changes included initiation and implementation of above market business model in the United States. The model incorporates diverse reporting structures where several operating companies and regions report to the main company headquarters in the United States.

This resulted in specialization and greater division of activity within multiple locations which is contrary to the norm where operating companies could concentrate on vast activities as stand alone. The new operating model resulted in end markets i.e. customers relying on supply hubs for product delivery.

The whole process of supply chain integration requires widespread research interest in information and communication technologies (ICTs). According to Christopher 2000, ICTs are crucially important for sustainable development in developing countries. Sila and Ballard, 2010, notes that for the past two decades most developed countries have witnessed significant changes that can be traced to ICTs.

These multi-dimensional changes have been observed in almost all aspects of life: economics, education, communication, and travel. In a technology driven society, getting information quickly is important for business operations. ICTs have made it possible for quick and efficient dissemination of information.

The various technological changes brought by implementation of IT have positively influenced business processes within companies.

Challenges experienced made beverage business significantly costly as exceptional costs resulting from airfreights and write-offs of both raw materials and finished product are on the rise. This had a direct impact on companies’ profit margins. Due to this Pepsi management team virtually got involved in tackling supply chain issues directing their efforts in the operational rather than strategic matters.

Supply hubs are on the verge of being extinct due to the escalated operation costs experienced across board as a result of above market model means and ways of working. Pressure exerted on the supply hubs is immense since their existence requires some mode of justification. This requires solution at some point since the escalated costs incurred need to be addressed for the purposes of avoiding further losses.

Units of analysis

Supply chain management (SCM) executives face unique challenges, with respect to integrating supply chain specific strategies with the overall corporate business strategy. In recent years, given changing business realities related to globalization, the supply chain within the Company has moved up on the chief executive officer’ s (CEO’s) list of priorities. But it’s not always for the right reasons.

In many cases, CEOs only pay attention to the supply chain when they want to cut costs or when something is wrong. Since the supply chain essentially moves the lifeblood of the organization, process efficiency on a global scale is essential for the purposes of optimizing business operations.

The importance of global integration lies in the differential advantage derived from the abilities to exploit differences in capital and product markets, transfer of learning and innovation throughout the firm, and management of uncertainty in the economic or political environment within different countries or regions.

However, the general understanding of the business environment in most industries is that competition has increased and the conditions under which business are made seem turbulent.

The supply chain logistics problems facing multi-site companies like Pepsi can be complex, involving multiple stakeholders and constraints across the entire enterprise. The complex nature of the supply chain makes it more difficult for companies to answer basic questions involving the nature of goods to be purchased, the means of transport, facilities to be involved in processing and the kind of business components to involve.

In many cases, different departments or divisions within company’s trade, supply chain planning, operations and blending have a hand in these decisions, but communication among these entities is not always clear or consistent, and each may optimize to their own objectives without regard for others. Hence the results drastically affect the level of profitability (Cottrill, 1997).

Companies gain flexibility to quickly realign the supply/demand mix to satisfy changing global demand. Switching as well as coordination of costs presents potential barriers to flexible operations. Switching costs can be reduced if all supply chain partners standardizes their products and processes globally which presents some degree of challenges.

Coordination costs can be significant for global integration of cross-functional supply processes. A well-structured global demand forecasting and planning process is an important mechanism for global coordination across functions. Regional representation to ensure all relevant input is considered is also important.

A globally integrated process with regional representation requires costly resources, information infrastructure, and travel. Globally integrated information systems are critical to reduce the cost of communications and to make relevant information readily accessible or to reduce coordination costs (Fisher, 1997).

The forces of globalization and commoditization in business within beverage industry are not easy to control. Globalization and commoditization have created a challenge for companies that are as tough as it is clear that price control is a challenge. During the industrial revolution, companies looked for new markets, new sources of raw material and new sources of labor.

The revolution was fuelled by globalization and companies thrived by taking advantage of economies of scale. Senior executives now understand that they can’t just focus on supply chain operations to create efficiencies. The challenge is to integrate supply chain execution with the overall corporate business strategy, and to use the supply chain as a catalyst for business transformation or business reinvention.

Information integration refers to the sharing of information among members of the supply chain. The ability to seamlessly connect with customers, partners, and co-workers is vital for success; yet most enterprises store and exchange data in dissimilar formats, such as databases, EDI systems, text files, and, increasingly, XML-based applications.

The ability to map between these different formats is critical in the pursuit of the company’s mission. This includes any type of data that could influence the actions and performance of other members of the supply chain.

The meaning of all data items should be understood and the same data item should have the same definition across multiple applications both within and outside the firm. To make the integration process worth the effort, the data should be of high quality, timely, accurate and relevant (Sila and Ballard, 2010).

From inside the organization the decision to outsource business processes and create a supply chain outside of the organization is clearly one which requires an assessment of where the boundary of the organization should reside. As such, an economic assessment is required of the various supply/demand mix to satisfy changing global demand.

Thus, decision is based on a transaction costs approach where there is an “examination of the comparative costs of planning, adapting and monitoring task completion under alternative governance structures”.

The outsourcing decision focused primarily on the management of recurrent transactions; the key dimensions of this context are the uncertainty and asset specificity germane to the transaction. Since these dimensions will vary, this creates a variety contexts and the result will be diversity within governance structures (Chan and Qi, 2003).

If supply chain management is to be considered an essential component of long-term business competitiveness, it is sensible to consider how it relates to strategy concepts. An effective supply chain should be able to cope with uncertainty; it follows that it should also be flexible.

Therefore, supply chain management will be one of the organizational processes, or functions, that are a key to strategic success if an organization is to achieve its mission in an adaptive and changing environment. Customers are becoming more demanding and their expectations evolving towards greater levels of service and responses with higher degrees of product and service customization.

Value chain partners which include suppliers and service providers should be integrated for the purposes of providing differentiated segment products and at the same time superior customer service levels. Increased profitability is the top driver of customer order management performance.

This centered attention on profitability is probably resulting from the economic market conditions of the past few years, but may be a short-term view. Customer responsiveness leads to customer retention and revenue growth. In the longer term view, concentration customer-facing initiatives and improvement will be significant to profitability achievement (Christopher, 2000).

The logic linking the data to the propositions

The integration of supply chain processes can provide an effective means by which costs can be reduced and customer service levels improved (Cottrill, 1997).

In the context of a highly volatile global business environment, dynamic supply chain planning is essential in building agility into supply chain operations and ensuring visibility across the entire supply chain. This can be achieved using standardized technology platforms and integration of systems and data.

It has also been demonstrated that the implementation of Enterprise Resource Planning systems and the resultant standardization of business processes and information across the organization enables supply chain integration through automation and streamlining of planning, scheduling and execution at every link in the supply chain.

Electronic commerce has not only created new distribution channels for consumers but also revolutionized the industrial marketplace by facilitating inter-firm communication and by creating efficient markets through trading communities. Moreover, combination of enterprise information infrastructure and the internet has paved the way for a variety of supply chain optimization technologies (Cox, 2004).

The criteria for interpreting the Findings

This section presents the methodology that will be used to carry out the research. It presents the research design, the target population, sampling procedures, data collection procedures and instruments and data analysis.

Research Design

The research design in this case is a study of management level staff of Pepsi. The employees will be drawn from different departments/divisions. Proportional sampling technique will be used to select the sample size of each department/division.

The population of this study will be 37 management level employees, drawn from different departments/divisions in the organization. The sample size will be the 37 staff in management level as follows;

Data Collection

Primary data will be used in this study; a structured questionnaire will be used to collect data. The questionnaire will contain both closed-ended questions and few open ended. The questionnaire will consist of two sections.

Section one is designed to obtain general information on person and organizational profile, while section two consists of consists of questions on the application of information technology in supply chain management. The questionnaire will be administered through “drop and pick later” method (Fisher,1997).

Data Analysis

Before analysis, the data will be checked for completeness and consistency. Descriptive statistics will be used to analyze the questionnaire. Data will be summarized and presented in form of tables and charts. The mean, standard deviation, frequencies and percentages will be used.

Conclusion

This study will be important to the manufacturing industry players in beverage industry as it will assist them to asses their supply chain management strategies and realign them with the changing IT trends. The study results will also inform other industries that are adopting information technology in supply chain management on its practicality, success and challenges which arise with its use.

Scholars/researchers will find it important as the study will increase to the body of knowledge in this area as the findings will act as basis for further research.

This study will also highlight the inter-dependence between integration (technologies, logistics, and partnerships), a strategic view of supply chain systems, and implementation approach. All three need to inform and underpin each other in order for management of supply chains to be able to deliver on the promise of benefits for all trading partners

The level of concentration of firms within the beverage industry majorly defines three major firms Pepsi, Coca-cola and Cadbury Schweppes which accounts for over 80% of the entire global market. The largest market share within the industry is under the command of Coca-Cola accounting for almost 50% while Pepsi controls around 21% of the total global market share, Cadbury has below 10% coverage.

The level of competition amongst these firms is basically based on product differentiation. Some of the key accounting policies applied in the analysis and valuation of the company’s financial status include revenue recognition, income tax expense and ascertained accruals, quality of brand and valuation of goodwill as well as stock compensation expenses.

For the purposes of maintaining high reputation for superior products, Pepsi resorts to recognizing their revenue upon delivery of products (Sila and Ballard, 2010).

Reference List

Barrat, M. 2004. Understanding the meaning of collaboration in the supply chain. Supply Chain Management. An International Journal, 9 (1),pp 30-42.

Cachon, G., & Fisher, M. 2000. Supply chain inventory management and the value of shared information. Management Science, 46 (8), pp1032-1048.

Chan, F., & Qi, H. 2003. An innovative performance measurement method for supply chain management. Supply Chain Management: An International Journal, 8 (3), pp 209-223

Christopher, M. 2000. The agile supply chain competing in volatile markets.Industrial Marketing Management, 1(29), pp 37-44

Cottrill, K. 1997. The Supply chain of the future. Distribution, 11 (96), pp. 52-4.

Cox, A. 2004. The art of the possible: Relationship management in power regimes and supply chains.Supply Chain Management: An International Journal, 9 (3), pp346-356.

Fisher, M. L. 1997. What is the right supply chain for your product? Harvard Business Review, 2, (75), pp.105–116

Pepsi Company Overview. 2006. Pepsi. Available at https://www.pepsi.com/en-us/

Sila, E. & Matt, B. 2010. Pepsi Valuation. Available at https://www.pepsi.com/en-us/

PepsiCo was founded in 1965 as a result of a merger between Frito-Lay and Pepsi-Cola which were the major salty snack and soft drinks giants respectively. During the first five years after its establishment, the company introduced more other products in the market. In addition, the company augmented its sales by engaging into international markets.

It extended its international sales to other areas outside North America such as Eastern Europe and Japan. These changes enabled the company to enhance its growth considerably and after three years it had been successful to double its revenues and had accumulated enough revenue to expand its operations through acquisitions (Gamble, 2008).

In 2007 the company had been very successful in commanding greater international market shares for its beverages and salty snacks, but unfortunately the company had not been successful in establishing a good international market for its Quaker branded products. Moreover, it was noted that the company’s international operations were not as profitable as the local operations.

For instance, during the period between 2004 -2007, the operating profits margins for its local operations ranged between 21.3%-25% while its international operating profits margins ranged between 13.4%-15.6% during the same time period.

Therefore despite the good performance of the PepsiCo Company, the company has still more opportunity to enhance its revenues by improving its international markets. The company should devise strategies that will make the global market for its Quaker branded products successful. In addition, the company should look for better strategies that they can employ to ensure that their international operations are as profitable as the local operations (Gamble, 2008).

SWOT analysis

The PepsiCo Company should look for a very strategic move to improve its international markets and particularly a strategy that will boost the global performances of the Quaker brand products that are performing poorly in the global market. One of the strategies it can use is to merge will foreign companies that are specializing with similar products and are performing very well.

A better option is acquisitions of such companies to help it increase its market share in the global markets. Similarly, the company should adapt better strategies while venturing in international markets to help it make more profits. It should avoid direct financial investment in areas where the costs of productions are very high. Instead it should look for alternative means of venturing such as franchise

Reference List

Gamble, J. (2008). PepsiCo Diversification Strategy 2008. Alabama: University of South Alabama.

Introduction

PepsiCo is among the leading players in the soft drinks industry. The Coca-Cola Company is the main rival of PepsiCo in this industry, although Cadbury Schweppes also has a sizeable market share. This industry report is an analysis of PepsiCo as a key player in the global soft drink industry.

Industry Overview

Market size is one of the three key economic indicators used by analysts to assess the soft drink industry. The other economic indicators are overall profitability and growth rate. In the last couple of years, the market size for the soft drinks industry has changed dramatically. Soft drinks falls under the non-alcoholic industry and as of 2005, the consumption of soft drinks was estimated at 46.8% market share (Data Monitor 2005).

At the same time, Data Monitor (2005) reported that by 2004, the soft drinks industry had attained a market value of $ 307.2 billion. In the same year, the soft drinks industry is believed to have produced 325, 367.2 million liters of soft drinks. This indicates a lucrative industry capable of attaining even higher profits. Nonetheless, to do so, the industry players such as PepsiCo have to surmount several obstacles that they are faced with.

Market share

Coca-Cola has the largest share of the soft drink industry, at 42 %. The company is closely followed by PepsiCo with a market share of 32 %. Cadbury Schweppes is the third largest company with a market share of 15%. The other companies constitute the remaining 11% of the market share. The 2004 Coca-Cola annual report reveals that the Coca-Cola Company sold soft drinks worth $ 22 billion (The Coca-Cola Company 2004). On the other hand, PepsiCo sold soft drinks worth $ 18 billion in the same year (PepsiCo 2004).

Main competitors

The Coca-Cola Company is the main competitor of PepsiCo in the soft drink industry. Some of the most popular products from the Coca-Cola’s product line include Diet Coke, Coca-Cola, Sprite, and Barq’s. The company has over 400 drinks brands and these are sold in nearly 200 nations (Murray 2006).

After Coca-Cola, PepsiCo comes next as the second largest competitor. The company’s product line includes such products as Mountain Dew, Slice, and Pepsi. The three products account for over 25 % of PepsiCo’s sales. The third main competitor is Cadbury Schweppes. Some of the key brands in the company’s product line include Canada Dry, A & W Root Beer, and Dr. Pepper (Cadbury Schweppes 2004).

Market Research Programme for PepsiCo

Sales

As of 2009, the global retail sales of PepsiCo were estimated to be worth $ 108 billion. 52% of these sales were made outside the US (PepsiCo 2009). In 2009, the company realised net revenue of $ 43, 232

Competitor

Coca-Cola is the main competitor in the soft drinks industry. The company’s product line has different products of varying sizes and flavors. In terms of price, the Coca-Cola Company capitalizes on better quality as a justification for the high price of its products. The company also seeks to create value and consumer perceptions through its products. The company employs a pull strategy as a way of promoting its products. Other strategies that the company has adopted include attractive advertisements and sponsoring of events.

Cadbury Schweppes

The company is ranked third in the soft drinks industry in terms of market share. The global mix of Cadbury Schweppes has ensured its stronger global presence (Cadbury Schweppes 2004).

Promotional effectiveness

PepsiCo promotes its products by offering free product sampling, cents-off, and rebates. Other promotional strategies that the company has adopted include refunds, coupons, games, contests, and sweepstakes (PepsiCo 2004).

New products

In order to remain ahead in the competitive soft drinks industry, PepsiCo is committed to the development of new products. As a result, the company now manufactures various healthy brands under the name Pepsis Fresh as a way of keeping in touch with the changing lifestyle of the consumers.

Customer and consumer behavior

PepsiCo’s products are categorized into three main demographic segments. To start with, majority of the consumers are youths of between 10 and 19 years. They assume brand loyalties that spills over into adulthood. The second category consists of young adults of between 20 and 24 years who are the main consumers of PepsiCo’s diet products.

On the other hand, adults of between 25 and 25 years are on the lookout for caffeine free and diet products. PepsiCo’s products reflect both individual and group personality. There is also the “cool” image associated with the products and this endears the consumers to purchase them.

STP strategy for PepsiCo

Segmentation

PepsiCo’s segmentation of the soft drinks market is through niche marketing and demographics. In terms of niche marketing, varietal differentiation has been the main focus for PepsiCo since 1990, when the company first introduced various niche products in an effort to counter sales volumes by Coca-Cola.

In terms of demographics, PepsiCo has identified the youth as its main target market. This is because the youth is the largest segment of its users. Consequently, the “Generation Next!” that PepsiCo has adopted has turned into a popular marketing slogan for this target market.

Targeting

PepsiCo mainly targets young adults and teenagers of between 14 and 30 years. Other targets include universities, schools, colleges, hotels, homes, and stores.

Positioning

PepsiCo aims to further assert its presence in the soft drink industry by positioning its products in such a way that they provide more benefits to the target market. The positioning of the brand is on the basis of direct comparison of the company’s products with those of its competitors. This positioning addresses the target market.

Branding

Branding is the use of a name, design, term, or symbol to distinguish your services and products from those of your competitors (Kotler & Waldemar 2006). Thus, branding gives you a corporate identity. Through branding, PepsiCo markets its products so that the customers can easily recognize the company’s products in the midst of the products from competitors.

Reference List

Cadbury Schweppes., 2004. 2004 Annual Report. Web.

Datamonitor., 2005. Global Soft Drinks: Industry Profile. Web.

Kotler, P., & Pfoertsch, W., 2006. B2B Brand Management. London: Sage

Murray, B., 2006. The Coca-Cola Company. Hoovers. Web.

PepsiCo, Inc. 2009. PepsiCo annual report 2009. Web.

PepsiCo Inc., 2004 Annual Report. Web.

The Coca-Cola Company., 2004. 2004 Annual Report. Web.

Company background

Pepsi Company is the world’s second largest beverage and food processor. It was formed through a merger between Frito-lay and Pepsi Cola in 1965 (Anon., 2009). Today, the company offers wholesome and enjoyable products to consumers all over the world. It has undertaken mergers and acquisitions with Quaker Oats and Tropicana. Besides, it has acquired PepsiAmericas and Pepsi Bottling Group which are two well established bottlers.

This acquisition has tremendously boosted its transactions and significantly strengthened its position as a beverage company in Europe and northern America. Under Indra Nooyi who is the Chief Executive officer and chairman, Pepsi has employed over 300,000 workers globally (Anon., 2009).

Additionally, annual revenue from sale of its products and services is approximately $60 billion dollars (Mohanty, 2011). Besides, an estimated 49% of its annual revenue comes from foods and snacks while 51% is derived from sale of beverages (Mohanty, 2011).

In terms of earnings from regions, 47% of its annual revenue comes from conducting business internationally while the remaining revenue is tapped from sale of products in Canada and USA.
Moreover, Pepsi company has a corporate structure that is made up of several business units including PepsiCo Africa, middle East and Asia, PepsiCo Europe, PepsiCo Americas foods (PAF), as well as PepsiCo Americas beverages (PAB) (Anon., 2009).

Customer segments

Developing and delivering services that keeps customers attracted and satisfied is the main goal of PepsiCo. This goal aims at maintaining customers’ loyalty and satisfaction towards increasing its profitability, market share, customer equity and revenue. Its food and beverage products mainly target primary, secondary and emerging markets (Carrigan, Marinova & Szmigin, 2005). The company has targeted market segments ranging from individual customers to large global corporations.

How it determines needs and wants

PepsiCo focuses on customers’ unmet needs by bridging market gap and also through its regular potential offerings. It achieves superior returns and growth on invested capital by using new offerings to target existing market segments, using existing offerings to target new segments and addressing the needs new offerings and new segments.

Most importantly, as a good business, it is in a position of understanding how to meet consumers’ needs (Carrigan, Marinova & Szmigin, 2005). This has been achieved through considering and exploring social issues that may potentially affect business operations and creating awareness of its. These needs can be met by engaging consumers in order to understand their feelings, beliefs, attitudes knowledge and motivation.

Besides, it seeks to understand how psychographics, market mix factors, social class and culture influence behaviour of consumers. This influences intentions of consumers to make purchases. Therefore, actions such as disposal, use, decision, alternative identification and evaluation are some of the strategies applied to meet the needs of consumers (Carrigan, Marinova & Szmigin, 2005). Through consumer feedback, the company is capable to meet their tastes and preferences.

Products offered

On a global scale, PepsiCo owns the largest billion dollar beverage and food brands. Each of its product lines generates annual retail sales of more than 1billion.

The company has laid strong foundation in the market with most of its product being widely used by businesses and other consumers. Some of these products include Aquafina, Tostios, Quakers, Doritos,Ruffles, Mirinda, Tropicana and Pepsi.
In terms of characteristics, Quality has been viewed as a competitive marketing strategy in PepsiCo (Carrigan, Marinova & Szmigin, 2005).

Its quality strategy revolves around creating products geared towards providing excellent services. Its quality products have made it take a lead in the market and be recognized as a responsible company. The brand of this company has become popular worldwide as one of quality, reliability, integrity and safety care and service. The commitment on quality service towards sustainable development is driven by the responsibility the company has to its stakeholders.

Pricing strategies

Low price is important since it enables PepsiCo to gain competitive advantage known as cost advantage. The lower the price, the lower customer’s perceived value. However, this is specific in some products and not others. As a business, PepsiCo has put in place strategic initiatives that target its growth through the sale of its large range of food and beverage products (Mohanty, 2011).

To achieve this, it attracts price sensitive customers and enthusiasts through discounted prices. Low prices aid the business in underpinning competitive prices. Its strategy in food and bevarage market is to target segments of high growth, open more new stores while improving profitability and efficiency of the existing ones.

Promotional strategies

Through concerted efforts to promote its products, build and develop consumer engagement, the company has adopted several strategies that includes doing one-to-one marketing via blogs and forums where customers interact qualitatively with other customers, the company or brand (Baker, 2011).

To make this long term strategic plan easy, the company is seeking to determine how to increase its marketing organization, how to make their brand more attractive to consumers and what consumers seek in a product that benefits them and meet their needs through forums, FAQ’s and customer care.

Distribution of products

Distribution at PepsiCo plays an important role in enhancing its performance and sustaining competitive advantage. The company has been able to effectively manage its distribution processes through organizing the functions of customer care, consumer engagement, transportation, inventory control and management materials.

In consumer engagement, organized forums, FAQ’s, product review and advertising has helped pepsiCo to know how to effectively improve its distribution. Efficient and effective distribution systems eliminate inventory, effort and time wastage. Its customers’ needs have been satisfactorily met when they receive their products in good time (Baker, 2011).

To achieve proper distribution, PepsiCo has synchronized the industry’s supply chain with the demands of customers through functions such as distribution, procurement and production. Additionally, it has tackled and mitigated its distribution problem through forming collaborative efforts with its chain supply partners. This has helped in reduce stock-outs, lead time, costs, inventory levels, and conversely increase accuracy of information and service to customers.

Marketing plan

In PepsiCo, Marketing entails all those activities that precipitate the knowledge on the availability of certain products and services so that appropriate levels of production can be attained in accordance with the movements in demand and supply. It also features the strategic movement of finished goods and services to various points of sale as dictated by demand.

Social responsibility and marketing programs

Social responsibility at PepsiCo involves quality control, grading, wastage reduction, packing, processing, transport and physical handling processes that it does in marketing (Baker, 2011). Its marketers put concerted effort in examination of ethical implications of differentiated marketing and market segmentation when targeting consumers of diverse groups.

It is imperative to note that social responsibility is part of PepsiCo program since it understands that the ethical complexities of the market exchange requires factors such as market selection, consumer characteristics and nature of the products be understood and also integrated in the framework. Public policy makers and marketers will be faced with different ethical when the aforementioned factors interact.

References

Anon. (2009). PepsiCo’s Strong, Diversified Portfolio and Growth Strategy Deliver Sold Second-Quarter Results; Company Reaffirms Full-Year Guidance The Free Library. Retrieved from https://www.thefreelibrary.com/

Baker, J. (2011). Conceptualizing the dynamic strategic alignment competency. Journal of the Association for Information Systems, 12(4), 299- 322.

Carrigan, M., Marinova, S. & Szmigin, I. (2005). Ethics and international marketing research background and challenges. International Marketing Review, 22, 481- 493.

Mohanty, S. (2011). Having analytics may not be enough: Organizations need to improve business intelligence and decision-making through guided, predictive analytics. Information Management, 21(1), 30.

Introduction

In the world where information acquires new frontiers to be exposed to people one should bear in mind that the influence of printed ads is high. This essay illustrates the analysis of two different ads concerned with merely similar kind of product. In this respect two brands, Coca-Cola and Pepsi, are provided for detailed analysis. The thing is that it is vital to designate where the points on attraction on the part of viewers lie. It is possible to delineate the marketing tricks corresponding uniqueness of each ad on the example of two ones. The ads were found via engine searching in Google. There was a great variety of different ads, but the bellow mentioned ones seem to be original and fun. Coca-Cola and Pepsi are ostensive competitors in the market of beverages in the United States as well as overseas. These giants need to make more efforts in their marketing strategies, so that to shape all categories of population. Two ads are full of ideas on the significance of the product that are illustrated by means of sense of humor and associations.

Main discussion

First of all, it is high time one looked at the advertisement of the Coca-Cola Company. It is fun at a glance. The main idea is that this beverage cools a person off. Thus, a man cannot realize where is his bottle when he wants to drink a bit.

One should pay attention to the fact that the situation occurs at the seashore, somewhere in Florida or so. An observer also takes a look at ideal sunburn of a man. On the other hand, a penguin seems very fun. He (penguin) can be said as the smartest in this situation, for he has concealed himself under the shade of the chaise longue. He is up to chill out due to Coca-Cola at hand. He wants to make this pleasure long, because he uses a straw. One may single out an expression of delight and satisfaction on the face of a penguin and amazement along with despair on the face of a man.

To lay more emphasis on the idea of this ad, one should provide parallels with associations that are obvious in it. First of all, Coca-cola positions itself, as a beverage for successful people. Second, it is a way to have fun and to know how to get pleasure. Third, it describes an enormous eagerness of a penguin to taste the beverage getting through thousands of miles separating the place described from Antarctic. Sense of humor is used here to attract all categories of people.

The second ad is related to Pepsi-Cola. The whole outlook of this ad is also very ridiculous. Children especially might like it. The concept of the ad provides a scope of ideas tracking the importance of Pepsi at the moment.

A snowman is the main character in the ad. He tries his best to reach out, perhaps, the last tin of Pepsi. He is half-melted, but he struggles with the physical reality. The main foreshortening is on the tin. It is seen from above in order to focus on the higher place of the beverage in comparison with lower one of a snowman. The similarity that lies between a snowman and a tin of Pepsi is that both are cold. This idea provides an assumption that Pepsi can make anybody (even a snowman) enjoy a unique taste of the beverage. One should also point out that a snowman owes his life (better to say existence) due to his eagerness to drink some Pepsi. Apparently, he will not be capable of opening the tin, but his attempts tend to assume an extra-ordinary place of Pepsi among the main privileges in life.

Both ads are spiced with good sense of humor that makes each of them quite unique. Both show that everything is going around the product described. In this respect pleasure, rest, parties, and life, on the whole, are at a focus. All these features unintentionally make people think of the reliability of drinking a cold bottle or tin of a lovely beverage. The target market in both ads is the youth and people far from being old in souls. The positive character of the advertisement is that they inevitably become associated with this or that product owing to their quite picturesque and absurd performance.

Conclusion

To conclude, the ads are saying that the society is used to drink beverages like Coca-Cola or Pepsi. It is also peculiar that these two are the part of the entire American culture. They represent the way people in American society are likely to spend their time and achieve their goals. The first ad provides a scope of associations with a good life. The second one outlines that finding out what one is eager most of all is a real challenge. It is a way to think either the society is manipulated and controlled by such printed advertisements. All in all, both ads serve to stimulate buying power among current and potential customers.

Introduction

PepsiCo is a leading manufacturer and seller of non-alcoholic beverages in the global beverage industry. The success of PepsiCo is mainly attributed to sound marketing strategies and product differentiation. Due to the high competition in the global and US beverage industry, PepsiCo must always review its marketing strategies and product portfolio. This will enable it to produce the right products and access new markets.

It is against this backdrop that this report seeks to analyze PepsiCo’s situation and future prospects in the alternative beverage industry. The report begins with the five forces and driving forces analysis.

This will be followed by an evaluation of PepsiCo’s business model and financial performance. A SWOT analysis as well as an assessment of PepsiCo’s competitive strategy will, then, be conducted. Finally, recommendations on how PepsiCo can enhance its position and Future performance in the Industry will be presented.

Porter’s Five Forces Analysis

The Porter’s five forces analysis is a technique used to assess the competitive environment of a business. It particularly assists in gaining insights on the factors that affect competition in any given market. Competition in the beverages market can, thus, be explained as follows.

Threat of Substitutes

Currently, the alternative beverages are competing with a large number of substitutes. Such substitutes include carbonated soft drinks as well as juices. Additionally, the prices of alternative beverages are significantly higher than those for substitute drinks. For example, the prices for sports drinks as well as vitamin enhanced beverages were 50% to 70% higher than the prices of carbonated soft drinks of comparable sizes.

Consequently, there is a possibility that customers shifted their preference from alternative beverages to carbonated soft drinks. Contrary to alternative beverages, substitute drinks such as juices are associated with low health risks.

This differentiation is likely to make substitute drinks a better choice, especially, among customers who are concerned about their health. Thus, the threat posed by substitute products in the beverage industry is high.

New Entrants

The threat attributed to new entrants in the US and global alternative beverage industry is low due to the following reasons. First, the incumbent firms enjoy economies of scale. For example, Coca-Cola and PepsiCo have large production plants and operate in over 200 countries. Besides, the dominant firms command large market shares. PepsiCo, for instance, had 47.8% market share of alternative beverage market in US in 2009.

Second, there is high product differentiation in the industry in order to counter competition. For instance, most companies focus on the taste, image and energy-boosting capabilities of their energy drinks in order to ensure customer loyalty. Third, joining the beverage industry requires a lot of financial capital. It is for this reason that small firms such as Hansen have had to outsource all their production and distribution activities.

Fourth, the incumbents have a great control over the distribution channel. All small firms have contracted bottling companies and distributors such as Anheuser-Bosch to manufacture and distribute their products. Finally, the incumbents have high propriety knowledge in production and marketing. Dominants firms such as Coca-Cola have used patents to prevent new firms from accessing their production techniques.

Power of Suppliers

There are many suppliers of most of the production inputs in the beverage industry. Besides, there are many substitutes for production inputs such as packaging material. Product differentiation in the suppliers’ industry is high since the large number of suppliers leads to high competition.

Additionally, the buyers (beverage manufacturers) are important to suppliers since they purchase large volumes of inputs. However, the buyers have low switching cost. For instance, a manufacturer can easily shift from one supplier to the other. This leads to the conclusion that the suppliers have a low bargaining power.

Power of the Buyer

There are many buyers in the beverage industry. The buyers have low switching costs, and can thus, obtain their supplies from different suppliers. The suppliers’ products are highly differentiated due to competition in their industry.

Besides, the suppliers’ products are of great impotence since they determine the quality of the buyers’ end products. The threat of backward integration is, however, high since the dominant firms such as Coca-Cola and PepsiCo have the financial resources to purchase the input producing firms or to produce their own inputs. Thus, buyers have a moderate bargaining power.

Competitive Rivalry

The threat attributed to competitive rivalry is very high in the beverage industry due to the following reasons. First, there are very many competitors, and this makes it difficult for each firm to expand its market share. Second, the beverage industry has a low growth rate. The industry’s growth rate is projected at 12% in five years (from 2009 to 2014).

This is attributed to the fact that the industry is at its maturity stage. Besides, the 2008/2009 financial crisis negatively lowered demand in the industry. Third, distribution in the industry is associated with high fixed costs and storage costs. Finally, the products are highly differentiated. These conditions have contributed to high competition in the industry.

Driving forces Analysis

Driving forces are both internal and external factors that cause change in an organization. The main driving forces in alternative beverage industry include the following.

Social

The social factors include the behaviors of the consumers of various alternative beverages and the social events associated with the consumption of alternative beverages. Undesirable behaviors such as “mixing alcohol and energy drinks” led to disapproval of alternative beverages. This is because such behaviors can lead to over consumption of alcohol.

The criticism had negative impacts on the demand for various alternative beverage brands. In response to customers’ need to simultaneously consume alcohol and energy drinks, companies such as Miller-Coors developed new products, alcohol energy drinks, which contain both alcohol and energy boosting capabilities.

Demographic factors such as age and occupation also influenced the consumption of alternative beverages. For instance, energy drinks are frequently consumed by teenage males, sports professionals, and manual laborers. Vitamin-enhanced beverages on the hand are highly purchased by adults.

The marketing of most alternative beverages depend on social events. Most producers build their brand image by sponsoring sports activities, and music festivals. For instance, Red Bull sponsors sports such as athletics as a way of marketing its energy drinks. They also depend on celebrity endorsements to enhance the popularity of their products.

Economy

The economic performance of a country or region has significant effect on demand for alternative beverages. The financial crisis in US, coupled with the maturity of beverage industry led most producers to seek new markets.

The rapid economic growth in emerging economies, especially in Asia, is expected to enhance demand for alternative beverages. Consequently, producers are exporting their products to overseas markets such as Australia.

At the firm level, high cost of production has forced firms to seek efficient distribution techniques. For instance, small firms outsource various production and distribution activities in order to lower costs.

Technology

As competition intensify, firms focus on product differentiation on the basis of quality. This has been achieved through modern technology that facilitates research and development and efficiency in production.

Modern communication technology enhances marketing in the industry by facilitating the design of clever adverts and appealing packaging. Communication technology also promotes synchronization of supply chain activities for firms that outsource various production and distribution activities.

Political and Legal Factors

Alternative beverages such as energy drinks and relaxation drinks have been associated with health risks such as heart arrhythmia. This has a negative impact on the production of these products.

For instance, Miller-Coors had to eliminate the caffeine in its energy drink when attorney generals counseled for the ban of energy drinks with high caffeine content. Besides, health professionals are advising the public to avoid consuming relaxation drinks that contain kava.

Competence

Dominant firms such as Coca-Cola and PepsiCo owe their success to their core competencies. Both firms boast of a strong brand image. Besides, they have vast experience in production, and this enables them to access new markets. Finally, environmental factors such as weather patterns affect the consumption of alternative beverages. For instance, energy drinks are likely to be consumed on a hot day.

PepsiCo’s Business Model

PepsiCo directly produces and distributes its range of beverages in the markets it operates in. The customer segments served by PepsiCo include teenagers, adults, sports professionals and celebrities. The value proposition of the firm is characterized with a wide range of beverages and foodstuffs.

The company sells both carbonated drinks such as sodas and alternative beverages such as energy drinks, vitamin enhanced drinks and sports drinks. In order to create value for its customers, each of the company’s drinks is tailored to meet specific needs for every customer segment. For instance, sports drinks are tailor made for sports personalities.

PepsiCo offers its value proposition through different distribution channels. Its products are retailed by “supermarkets, supercenters, restaurants, and natural food shops”. The company also reaches its customers by sponsoring sports and music events as well as advertising its products.

PepsiCo ensures customer loyalty by maintaining positive relationships with them. For instance, it ensures timely delivery of all alternative drinks to retailers such as convenience stores.

The firm has the largest market share for alternative beverages in US, 47.8%. Thus, the sale of alternative beverages is the main revenue stream for PepsiCo. Other revenue streams include the sale of carbonated drinks and snacks.

The key resources that support PepsiCo’s business model are a strong brand image, high product visibility (operates in over 200 countries) and a stable financial position. However, the firm incurs high sales costs (about 46% of its net income).

Evaluation of PepsiCo’s Financial Performance

The firm’s revenue in the 2007 financial year was $ 34,474 million. The revenue grew to $43,251 in 2008, reflecting a 9.6% growth. However, the revenue declined by 0.04% to 43,232 million in 2009. PepsiCo incurred sales costs amounting to $18,038 million in 2007, and $ 20351 million in 2008. This reflected a 12.8% increase in sales costs. In 2009, it managed to reduce its sales costs by 1.2% to $ 20,099 million.

In 2007, PepsiCo made a profit of $ 7,182 million. The profits fell by 3.1% in 2008. Thus, it made $ 6,959 in operating profits. However, the firm managed to increase its profits by 15.6% in 2009. Thus, it made $8,044 in operating profits.

The above information shows that PepsiCo increased its revenue by 9.6% in 2008. However, the increase in sales costs over the same period led to a 3.1% reduction in profits. The reduction in sales costs by 1.2% probably led to the 15.6% increase in profits. Overall, the company remained profitable between 2007 and 2009. We can conclude that it is financially stable.

SWOT Analysis

PepsiCo has the following strengths. It has a large market share that enables it to earn high revenues. Overall, PepsiCo is the “fourth-largest producer of food and beverages”. It also has the largest market share of alternative beverages in US. PepsiCo has a well established brand image. It sells some of the most popular drinks such as Lay’s and Tostito.

The brand image is a core competence that enables it to venture into a variety of markets, thereby increasing sells. Finally, PepsiCo has a stable financial position. Consequently, it can easily finance its expansion programs.

The main weakness of PepsiCo is its inability to outperform Coca-Cola (its main competitor) in the manufacture and sell of carbonated soft drinks. Since carbonated soft drinks and alternative beverages are substitutes, PepsiCo might lose its overall market share if there is a major shift in preference in favor of carbonated soft drinks.

PepsiCo has the following opportunities in the industry. The threat attributed to new entrants is low in the industry. This means that competition is not likely to increase as a result of new firms joining the industry. Thus, PepsiCo has the opportunity to increase its production in order to meet future increases in demand.

The low bargaining power of suppliers in the industry is also an opportunity for PepsiCo. In particular, it has the opportunity to bargain for cheap supplies. Besides, it has the opportunity to obtain high quality inputs as suppliers compete among themselves. The rapid growth in purchasing power in emerging economies is an opportunity for PepsiCo to expand by joining the emerging markets.

The threats facing PepsiCo include the following. The threat attributed to substitute products is likely to constrain PepsiCo’s ability to increase the prices of its products. This will have a negative impact on revenue and profits. Besides, it can lead to significant loss of market share. The threat attributed to competitive rivalry is likely to reduce PepsiCo’s revenue and ability to expand.

This is because sales and marketing costs rise as firms attempt to counter competition through advertising and differentiation. The alternative beverage industry in US where PepsiCo has the largest market share is at its maturity stage. Besides, the economic down turn in US has shifted demand away from alternative beverages. Thus, PepsiCo’s revenue streams from the US market are likely to reduce.

PepsiCo’s Competition Strategy

As a dominant firm in the beverage industry, PepsiCo is pursuing market leadership strategies. The company has focused on market expansion programs by joining new markets. Additionally, the firm focuses on new product development in order to find new market segments.

PepsiCo is also keen in defending its large market share in various regions. This has been achieved through innovation that helps to improve its marketing mix. Such innovative activities involves promotion blitz that engage celebrities and the youth in order to ensure customer loyalty. The firm’s products are constantly improved and differentiated on the basis of quality, tastes and visibility.

The expansion strategy is likely to help PepsiCo to maintain its dominant position in the industry, especially, in the alternative beverage market. However, in addition to being defensive of its market share, PepsiCo needs to be offensive. As more firms compete for the alternative beverage market share, PepsiCo should also aim at increasing its market share for alternative beverages as well as carbonated soft drinks.

Recommendations

Given the analysis of PepsiCo’s competitive and internal environment, the following recommendations can be considered by its management in order to improve its competitiveness.

Cost Leadership Strategy

In order to pursue this strategy, PepsiCo must aim at producing at the lowest cost in the industry. Thus, it can sell its products at the prevailing prices, thereby making higher profits than its competitors. In order to enhance market penetration for its new products, PepsiCo can reduce its prices below the prevailing prices. This will lead to an increase in market share for the new products.

The cost leadership strategy can be implemented by improving production efficiency which reduces production costs. The firm can also focus on optimal outsourcing in order to avoid unnecessary costs. PepsiCo can gain access to cheap and reliable supply of raw materials through backward integration.

PepsiCo has the ability to pursue cost leadership strategy since it has the financial resources to invest in production assets. Such an investment will be an entry barrier to the small firms that lack adequate financial resources. PepsiCo also has the experience and expertise in manufacturing high quality products. Additionally, its efficient distribution channel will enable it to reduce sales costs.

The benefits of this strategy are as follows. First, the ability to reduce prices will act as an entry barrier to firms that intend to join the alternative beverage industry where PepsiCo has the largest market share. Second, PepsiCo can use low prices to counter the threat attributed to substitute products. Finally, competing on the basis of price will enable PepsiCo to counter the threat attributed to competitive rivalry in the industry.

Differentiation Strategy

This involves producing products that “offer unique attributes that are valued by customers”. Currently, every firm in the industry is focusing on product differentiation, thus, PepsiCo can only defend its market share by doing the same. In this context, the firm must continue to improve its existing range of products. This will enhance customer loyalty. Besides, it must produce new products that meet emerging needs of the market.

PepsiCo has the ability to pursue the differentiation strategy since it has the financial resources to undertake research and development. The research and development will help in developing high quality products. Additionally, it has a reputation for producing high quality products through innovation.

The benefits of differentiation strategy include the following. Customer loyalty will act as an entry barrier if potential entrants can not attract PepsiCo’s customers. The customers will be attached to the differentiating characteristics, and this helps in countering the threat posed by substitutes. Finally, brand loyalty will help in countering competition.

Conclusion

PepsiCo is a leading manufacturer and seller of various beverages and foodstuffs. The analysis of the competitive environment indicates that suppliers have low bargaining power. The substitute products and competitive rivalry pose high threats in the industry. However, new entrants have low threats for the incumbents. These forces present both threats and opportunities to PepsiCo as discussed above.

The main driving forces in the industry include technology, social, core competence, political/legal and economic forces. PepsiCo’s main strengths are its brand image and large market share. Its main weakness is its inability to lead in the carbonated soft drink segment. In order to improve its competitiveness, the firm can pursue both cost leadership and differentiation strategies.

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The beverage market is actively developing not only in the United States but also globally. Referring to the carbonated soft drink (CSD) segment, it is important to focus on the prolonged competition between Coke and Pepsi in the market. In spite of the fact that the CSD industry was actively developing during the 1990s, the 2000s demonstrated the decline in the customers’ demand for CSDs. Thus, it is important to focus on strategies followed by Coke and Pepsi in order to sustain their profits in the situation of decreased demands for CSDs.

Focusing on Porter’s Five Forces of Competition, it is important to pay attention to the high threat of substitutes for CSDs in the form of non-CSDs and alternative beverages and to the high bargaining power of buyers because of the role of the demand for products in the beverage industry. In this situation, the bargaining power of suppliers and the threat of new entrants remain to be low (Porter’s Five Forces of Competition, 2010).

That is why, in order to sustain the profits in the wake of flattening demand and in the age of consuming a lot of non-CSDs, Coke and Pepsi can modify their business strategies and approaches to forming the brand image while proposing drink alternatives such as non-CSDs (UOIT, 2014a; UOIT, 2014b). The focus on promoting new brands and diversification can be discussed as an effective strategy to decrease the threat of substitutes for Coke and Pepsi in the market.

In the 2000s, Pepsi was the first to launch an aggressive but effective strategy in proposing new alternative beverages in the US market (Yoffie & Kim, 2011, p. 1). In 2007, Coke presented the new non-CSD products portfolio in response to Pepsi’s initiatives, but the rivalry among Coke and Pepsi was still intensive because Pepsi became to share 43% of the US non-CSD market in comparison with Coke’s 32% (Yoffie & Kim, 2011, p. 10). These initiatives can be discussed as effective attempts to adapt to the changes in the industry and to sustain the necessary profits, and they were supported with the active expansion of non-CSD products to the international market.

In order to discuss the general attractiveness of the CSD industry in the 2010s, it is necessary to state that the CSD industry was not as attractive for entrants and consumers as it was in the 1990s. Referring to Porter’s Five Forces of Competition and to the rivalry among Coke and Pepsi, it is important to note that both the companies experienced challenges in gaining high annual revenues because the CSD consumption began to decrease significantly in the 2000s.

If Coke produced about 90% of bottles of beverages in the United States and Pepsi produced about 80% of bottles, the situation changed in the 2000s. The decrease in the demand for CSDs was associated with the health concerns which were actively discussed in 2010 (Grant & Jordan, 2012, p. 112; Yoffie & Kim, 2011, p. 9). Thus, CSDs were associated with the children’s obesity, and the debates led to the significant shift in the consumption of beverages.

From this perspective, the CSD industry was not an attractive arena to do business in the 2010s, and Coke and Pepsi had to intensify the rivalry and to refer to the new strategies in order to cope with the observed challenges. In order to ensure the sustainable growth during the 2010s, Coke and Pepsi focused on increasing the competition between the companies in order to gain more shares in the new attractive non-CSD market.

References

Grant, R., & Jordan, J. (2012). Foundations of strategy. New York, NY: Wiley.

Porter’s Five Forces of Competition. (2010). Web.

UOIT. (2014a). Session 1: Introduction. What is (and isn’t) strategy. Canada: The University of Ontario Institute of Technology.

UOIT. (2014b). Session 3: The strategy process. Canada: The University of Ontario Institute of Technology.

Yoffie, D., & Kim, R. (2011). Cola Wars Continue: Coke and Pepsi in 2010. Web.

Indra Nooyi Leadership Style: Level 5 Leader

PepsiCo Inc. is an organization that was created more than half a decade ago, but its origin can be traced back to 1898. It produces food and snacks but is mainly known to the representatives of the general public as a beverage corporation. Its headquarters can be found in New York, USA, but the company serves the whole world. For ten years already, Indra Krishnamurthy Nooyi is one of the key people in this organization. She is the chief executive officer (CEO) whose enormous positive influence on the PepsiCo’s success is undeniable.

Indra Nooyi was born in India in 1955, and later she moved to the USA. She joined the company in 1994 and worked in it for twenty-two years before she received an opportunity to obtain her current position and become a chairperson. Such experience provided her with the opportunity to get to know how the organization works from the inside, how its workers cope with their duties, what they value and want to reach, which is critical for every successful leader. As the CEO studied at Yale School of Management, she learned a lot of information on how to work with diverse personnel and become a leader who is supported by her team. As a result, she entered the lists of the most influential and powerful people several times.

According to the leader hierarchy developed by Collins (2011), Indra Nooyi is level 5 leader. She does her best to combine personal humility and professional will. She is rather charismatic, which provides her with the opportunity to transform PepsiCo from a good to great company. She focuses on people and only then refers to the organizational strategy. Indra Nooyi determines short- and long-term goals that must be achieved by the personnel. She encourages people to keep working for the company, but is not that focused on moving the wrong employees off. She encourages the staff to provide clear information to realize if something is wrong in the company, but also wants the staff to always feel optimistic about the future. Thus, she reveals a Stockdale paradox.

The CEO realizes that good-to-great transformations require much time and effort, so she does not make snap decisions. She constantly uses technology to interact with employees and customers, to receive their feedback, to gather information and create new products. Using different leadership approaches, Indra Nooyi develops a culture of discipline that combines different forms but emphasizes disciplines action, which allows the staff to avoid excessive control. She is rather modest and usually speaks about the whole organization but also reveals her personal achievements in some interviews. The CEO does not believe that being good is enough and she emphasizes the necessity of constant improvement. She wants PepsiCo to become extremely successful and does her best for this purpose. Looking in the mirror, she reconsiders her actions and always takes responsibility for them.

Indra Nooyi also successfully utilizes the hedgehog concept, which presupposes the focus on one concrete thing. She believes that she is the best when she is a ‘mother’: a person who cares about others, revealing humanism. She is deeply passionate about making the world better for the people. Her economic engine is driven by the provision of those products that are required by the targeted market. However, it cannot be denied that Indra Nooyi is “foxy” because she tries to unite her work and personal life. She is always ready to reconsider the situation and change it if having enough ground for doing so. She believes that interaction between employees with the diverse background can lead to constant change and innovation that ensure competitive advantage (Lockhart, 2015).

PepsiCo Leadership Style: Rise to Business Prominence

Indra Nooyi does her best to ensure that the company and more than twenty brands that exist in its framework improve their performance with the course of time and develop continuously. She is focused on the performance with purpose, which means that she encourages the personnel to meet the goals of the organization when maintaining their tasks (PepsiCo, 2016a). The organization considers such approach to be critical for reaching competitive advantage and remaining on the stable position regardless of the global competition.

The company focuses on its people, including both clients and personnel. Trying to reach sustainable growth, it invests in its workers, providing them with the opportunity to affect society and the environment positively. Realizing this, Indra Nooyi encourages her team to be clear, honest and accurate. She emphasizes the necessity to be transparent and present understandable communications. Following the purpose of PepsiCo and its values, the CEO gives prominence to the fact that it is critical for the organization to achieve mutual success through both individual excellence and collaboration (PepsiCo, 2016b).

Indra Nooyi ensures the long-term sustainable performance of PepsiCo with her leadership approach that is focused on collaboration and is considered to be extremely significant for the whole company. Trying to meet business needs, she focuses on “building the next generation of capabilities and talent” (PepsiCo, 2015, p. 42). In this way, the CEO makes sure that the workforce of the organization consists of people with diverse backgrounds because only in this way PepsiCo can streamline innovation and meet the needs of different markets. What is more, she pays much attention to the development of workers’ functional and technical skills, without which it would be impossible to ensure appropriate performance. Allowing individuals with various traits and ways of thinking to cooperate, Indra Nooyi meets organizational needs and increases the possibility to reach appropriate solutions rather quickly. In addition to that, the CEO tries to ensure that individual goals of the workers and those of PepsiCo coincide to reduce issues within the company.

A great example of the way Indra Nooyi utilized her leadership skills to improve business prominence is her strategy of making PepsiCo design-driven. Referring to her needs as a consumer, she defined what change is needed by the organization. Then she addressed her direct reports with a creative task for redesigning which met their individual interests and increased collaboration. She received feedback and interacted with a team, which made them closer (Ignatius, 2015).

Indra Nooyi Leadership Style and Managerial Approach

In one of her interviews, Indra Nooyi said that leadership for her “is hard to define and good leadership even harder. But if you can get people to follow you to the ends of the earth, you are a great leader” (Neck, Houghton, & Murray, 2015, p.11). Considering the success she was able to achieve already, it can be claimed that the CEO is one of such people.

Her personal traits allow her to be a great leader undoubtfully. The CEO is a competent extrovert. She easily communicates with other people referring to the knowledge and skills needed to achieve success in the sphere. Indra Nooyi pays enormous attention to her followers and tends to ensure that they receive everything needed. In the framework of relation management, she developed blogs that are used by the personnel. With their help, the CEO enhances interaction among them and develops trust-based relations, which allows her to motivate employees to work hard. Trying to appeal to them emotionally, and create an image of a family within PepsiCo, she contacts personnel’s parents through letters to reveal her gratitude for their talented children.

In addition to that, she interacts with company’s customers, which makes them feel valued and improves loyalty. Emphasizing integrity and being honest with her team, Indra Nooyi also paid much attention to their livelihood. She ensures that everyone can benefit from provided packages, including pensioners. Indra Nooyi leads her team by personal example, which is considered to be one of the greatest leadership approaches by many scientists, including Greenberg (2013). She is always ready to take responsibility for her decisions and actions, which prevents the occurrence of issues among the personnel. What is more, she educates herself continuously to be able to reconsider the situation and make the most advantageous for the company decision. Strong emotional attachment to PepsiCo makes Indra Nooyi treat the company and its people as those people who are close to her and who depend on her. She realizes the necessity of accountability and accepts it but also expects personnel’s feedback.

All in all, Indra Nooyi tends to have a situational leadership style, which proves her to be a flexible person able to adapt to the environment and improve it. In this way, the CEO utilizes four major leadership styles, selecting the one that fits the situation the best. Such approach is highly valued by all professionals who discuss leadership and its influence because it provides the opportunity to act appropriately always (Schermerhorn, 2010). It strengthens good relations with the personnel, allows positive transformations, and presupposes the usage of personal example for raising standards, which makes employees more willing to change and develop.

As a democratic leader, Indra Nooyi interacts with those qualified teams that are able to make sufficient decisions on their own and take responsibility for them along with the CEO. In this framework, she listens to employee’s ideas but evaluates them and makes the final decision. She considers the needs of her employees and encourages them to speak up.

As a charismatic leader, Indra Nooyi tries to make her workers feel comfortable and valued as if they are a part of a big family. She takes care of the personnel, keeps contact with them and their families, invests in communication to ensure that different ways of interaction are available and all people can engage without misunderstandings. She makes her business up-to-date to ensure that the staff members are inspired and encouraged to move forward.

PepsiCo Leadership Style: Successes and Failures

Following the values of the organization, Indra Nooyi pays much attention to personnel collaboration. Since she became a CEO, she improved the understanding of the business direction among the employees, enhanced their satisfaction, made working conditions better and decreased employee turnover, which had the positive influence on the overall performance. However, it seems that the orientation on the workers represented by Indra Nooyi is excessive. Focusing on people, she pays less attention to the profit management, which is critical for the business.

Of course, she supports research and development greatly, proving her emphasis on innovation. During the last 5 years, the funds allocated to this department increased by 25% (Fortune, 2015). In this framework, Indra Nooyi tries to meet the needs of the diverse targeted market and achieves success. Her new products enter the lists of bestselling items in the industry and enhance company’s revenue greatly, which provides it with the opportunity to improve its position. However, as a mother, she does not forbid family phone calls during the working hours and meetings, which appeals to the staff members but prevents them from reaching their potential and achieving maximum revenue. In a similar way, she does not really separate her personal life and work, allowing them to interfere and affect each other, which has some advantages but mainly leads to an inability to reach greater goals.

It can be concluded that Indra Nooyi’s leadership style is not ideal, but it is rather advantageous when working in the environment that requires constant changes and creative ideas. In my quest to improve my managerial leadership skills, I noticed that the CEO values her workers greatly and focuses on them and only then on the organization. I believe that such approach can help me to become a great leader if I find a balance and do not reveal this trait excessively. I also value the fact that Indra Nooyi conducts research before implementing a change but consider that decision-making takes her too much time. Still, I cannot but admire her flexibility and readiness to accept alterations. What is more, her focus on communication and collaboration seems to ensure a half of achieved success. In addition to that, I cannot but admit that she successfully uses her personal interests for organizational purposes, such as a focus on maternity and sensibility.

References

Collins, J. (2011). Good to great: Why some companies make the leap… and others don’t. New York, NY: Harper Collins.

Fortune. (2015). The most powerful women in business. Web.

Greenberg, J. (2011). Organizational behavior: The state of the science. Hillsdale, NJ: Routledge.

Ignatius, A. (2015).How Indra Nooyi turned design thinking into strategy: An interview with PepsiCo’s CEO. Web.

Neck, C., Houghton, ‎J., & Murray, E. (2015). Organizational behavior: A critical-thinking approach. Thousand Oaks, CA: SAGE.

Lockhart, L. (2015). Advertising agencies & clients: The fox or the hedgehog?Web.

PepsiCo. (2016a). PepsiCo’s strength is its people. Web.

PepsiCo. (2016b). What we believe. Web.

PepsiCo. (2015).Annual report: Performance with purpose. Web.

Schermerhorn, J. (2010). Management. Hoboken, NJ: John Wiley & Sons.

The following is an analysis of the Pepsi ad that captures the attention of the on-lookers as in the figure shown. The research question will therefore be; what would be the impact of displaying a forged Pepsi bottle in an amazing blue color background? It follows that thesis statement will be; a forged Pepsi metallic can will improve the appearance of the poster. This poster portrays utility satisfaction from taking the drink. It is from this idea that I am drawing my research in coming up with the best ad to give to this drink.

A great post gives audience a sense of anxiety. It is from this anxiety that many will proceed to trying out the product. An appealing poster should have a universally accepted icons and message that will find place in the hearts and minds of the target consumers. The poster used in creating an advert should be highly raised, well illuminated and readily visible for improving vicinity across a wide area. All the writings used should be eligible. The on-lookers should not experience difficulties in trying to capture the message contained in the poster because in such a case, most will not even struggle to understand but will only pass.

Analysis of the Photo

A photo of a truck transporting Pepsi alongside a mind capturing statement is the poster to sell this brand. In this regard, the statement portrays quality of the drink and satisfaction in the units of utility attained after its consumption. The poster is influential in a positive way to the general society by having a universally accepted values and icons. It is estimated that a good poster should attract at least 80% of the on-looker. Out of the 80% on-lookers, it is also estimated that about 65% will end up trying the product.

Pepsi Poster Ad Development and Analysis

The photo on the poster incorporates the appeals to the logos, pathos and its ethos. The notion of refreshment can be deduced on the poster as evidenced from the bottles state. Its forged form shows a creative and imaginative aspect attracting the attention for many onlookers. The poster presentation is appealing from the background colors applied in creating it, therefore, the ad creates memory to any person looking at it; a quality that a good should advert should have.

The bottle in the ad remains in a steady intact condition retaining all the important features of a bottle. This is an important feature since it assures potential customers of a reliable product that can stand external forces and still maintain its quality characteristics. In the poster are transparent truck walls. This notation conveys transparency in the process applied in manufacturing Pepsi and the transport mechanisms. It can be deduced from this aspect that the drink is valid and safe to drink.

Safety to the user is a paramount consideration in creating a selling brand. From the selling statement of the post, some form of goodness is seen emanating from abruptly opened can. The blending of this feature and the matching of colors in the display is culturally relevant. This is a universally accepted notation, acceptable to diverse cultures across the world. The Pepsi post creates a mixture of emotions among the onlookers capturing the sense of heritage.

The poster is designed in a rather cognitive appearance that will ensure that onlookers will spend some time in trying to analyze its contents. This way, the message sticks in their minds, making the brand memorable. The poster also conveys a quality product based on its realness in the design. As such, it is anticipated that the ad will address anxieties caused in the quest of deep desires to unravel the meaning contained in its contents.

Blue, red and white colors used in the poster are visible from far. In spite of being attractive, the colors are considered as a symbol of beauty. This analogy blends well with most societies and regions, giving the ad acceptability to most societies. From the same, it can be deduced that the product is clean. White color symbolizes cleanliness, with which Pepsi will be considered to be clean for consumption among many consumers.

The design of the post has trickling meaning that is self-sufficient. It appears consistent with the desires of many drinks to quench thirst. This can be deduced from the warm conditions surrounding the poster, hence, it can be seen to be a possible solution. Such an analogy helps to create a mind perception that the drink is a timely and readily available response in dare needs. It is the expectation of every product manufacturer to compete favorably with other competitors in acquiring consumers as potential customers.

However, this expectation is not met by most companies because of poor advertisement techniques applied. The truck used in the poster is seen to be fast moving. This aspect displays responsiveness of the Pepsi manufacturing company to the customers’ needs. In this way, the advertisement of the Pepsi will be iconic to attract consumers and enhance the purchase of the product.