Final Integrated Project
PepsiCo
Strategic management
Introduction
Company Background
Back in the 1880s, the recipe for Pepsi was developed by Caleb Bradham in new Carolina
who had renamed it ‘’ Pepsi-Cola’’ in 1898. As the coal industry develops in popularity, Caleb
created Pepsi-Cola Company in 1902 and registered a parent for his recipe in 1903.
As Pepsi –Cola Company went bankrupt in 1931, Charles guft who owned a syrup
manufacturing in Baltimore Maryland acquires the trademark and recipe to Loft Inc. In the
year 1941, Pepsi was formally absorbed into Loft, and Loft Inc. rebrands its company name
to Pepsi Cola Company.
Till Today, Pepsi Cola Company which is now mentioned as PepsiCo has successfully
expanded its area of products through mergers and acquisitions of other companies such as
Frito-Lay Company, Quaker Oat Company, and other companies. PepsiCo has developed its
divisions into 5, PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo
Europe and PepsiCo Asia, Middle East and Africa with the structure shown below
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PEPSICO
PepsiCo PepsiCo [Link]
America foods Americas ational (PI)
(PAF) Beverages (PAB
Frinto-Lay United kingdom &
North America europe ( EKEU)
( FLNA)
Middle East , Africa &
Asia ( MEAA)
Quarter Foods North
America (QFNA)
Latin America Foods
( LAF)
Mission and Vision Statement
Mission Statement:
As one of the largest food and beverage companies in the world, PepsiCo mission is to provide
consumers around the world with delicious, affordable, convenient and complementary
foods and beverages from wholesome breakfasts to healthy and fun daytime snacks and
beverages to evening treats. We are committed to investing in our people, our company and
the communities where we operate to help position the company for long-term, sustainable
growth.
Vision Statement:
PepsiCo is committed to achieving business and financial success while leaving a positive
imprint on society – delivering what they call Performance with Purpose.
In practice, Performance with Purpose means providing a wide range of foods and beverages
from treats to healthy eats; finding innovative ways to minimize PepsiCo impact on the
environment and reduce operating costs; providing a safe and inclusive workplace for
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employees globally; and respecting, supporting and investing in the local communities where
PepsiCo operate.
Wherever PepsiCo do business, Performance with Purpose is the guide. PepsiCo believe that
delivering for consumers and customers, protecting the environment, sourcing with integrity
and investing in employees are not simply good things to do, but that these actions fuel
returns and position PepsiCo for long-term, sustainable growth.
‘’2025’’ Goals of PepsiCo
PepsiCo continues to build on their decade-plus commitment to Performance with Purpose
with specific and time-bound goals (to achieve by 2025) across focus areas what they called
Products, Planet, and People. Below.
Products: Continue to refine food and beverage choice to meet changing consumer needs
by reducing
1) Added sugars – less than 100 calories per 12-oz serving for 2/3 of global beverages
2) Saturated fats – less than 1.1 grams per 100 Calories for ¾ of global foods portfolio
3) Salt content - less 1.3 mg of sodium per calorie for 3/4 of global food portfolio
To Increasing positive nutrition – By expanding portfolio of foods containing whole grains,
fruits and vegetables, Dairy protein and hydration.
Planet: To reduce environmental impact while growing business and helping to meet the
food, Beverage and natural resources need of changing world by
1) Positive water Impact – 100 % reuse of waste water released from the operations
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2) Lower carbon emissions -Reducing absolute greenhouse gas across value chain by 20
%
3) Sores sustainability - PepsiCo's Sustainable Farming Initiative (SFI) or equivalent
industry programs, strive to sustainably source our direct agricultural raw materials
by 2020; and seek to sustainably source our non-direct major agricultural raw material
ingredients by 2025
4) Achieving zero waste to landfill- efficient and responsible waste management
5) Halve waste food - Work to reduce the food waste we generate in our direct
operations by 50%
6) Recyclable packaging- Strive to design 100% of our packaging to be recyclable,
compostable or biodegradable, increase recycled materials in our plastic packaging,
reduce packaging’s carbon impact,
People: Working to advance respect for human rights, promote diversity and engagement,
and spur prosperity and economic development in communities around the world by
1) Advance respect for human rights - to expand our Sustainable Farming Initiative (SFI)
across approximately 7 million acres to increase environmentally responsible
agricultural practices, improve crop yields and growers' livelihoods, and advance
respect for workers' fundamental human rights
2) Support diversity & working caregivers - to achieve gender parity in our management
roles and pay equity for women; and support working caregivers
3) Spur prosperity - Investing $100 million to support initiatives to benefit at least 12.5
million women and girls around the world in communities near where we work
External Analysis: PESTEL Analysis
Political and legal Forces:
PepsiCo operates in different countries such as United States, Europe, Africa and Asia. Thus,
it must consider the legal and labour forces of the countries in which it operates. It has to
make a good policy and have a good internal control about its operation and employee’s
incentives in order to be compliance with the law. The things that PepsiCo should consider
are tax laws, labour union and environmental law. It should operate in accordance to the laws
in the country to have a good corporate compliance and governance
Economic Forces:
Economic Factors have some significant impact on PepsiCo’s business. If the income level per
capita of the people increases, it will have a positive effect on the consumption of its products.
Meanwhile, if there is an inflation, it will have a negative effect on PepsiCo as people’s
purchasing power decrease. They will consume less. Since PepsiCo is operating and
distributing in different countries, while the head quarter is in the USA, dollar strength has an
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impact on PepsiCo’s business. When there is a decrease in the dollar strength. It gives a bigger
opportunity for PepsiCo for exports.
Social, Demographic, Cultural and environmental Forces:
The healthier lifestyle of the people promotes different patterns of consumption. This could
be either a threat or new opportunity for PepsiCo products. PepsiCo can support sports in
order to give a message to the people that Pepsi concerns about the health of the people.
Besides that, the requirements of different age groups are different. PepsiCo should target
that age group that consumes the soft drink or snacks. For products like Pepsi, and lay’s, it
should target young generation, while for the healthy meal like Quaker Oats, it should target
adults. PepsiCo should also consider the education level within the country for making its
strategy since education has direct impact on promotion and marketing. It should make
marketing / Promotional campaigns that can make people aware of its brands and products
according to the country’s education level. In addition, PepsiCo should also consider about
the natural environment factors in operating the business as a form of contribution and
responsibility to the community
Technological forces:
Given how capital-incentive the food/beverage industry is, it is imperative for PepsiCo to stay
ahead of the curve in terms of the most advanced technological breakthroughs, as the
company requires highly mechanised assembly lines designed both for long production runs
and flexibility. The growing technology gives new opportunity for PepsiCo to have new ways
for PepsiCo marketing strategy .The proliferation of Internet users also opens up further
market opportunities for PepsiCo to market its products.
Competitive forces:
In the Food and beverages company, PepsiCo is second largest market share. The summary
of PepsiCo performance compared to its competitors within food and beverages industry is
given below.
PepsiCo Coca-Cola [Link] Snapple Kraft Heinz company
Revenues( $) 63525 35410 6690 26232
Gross Profit ( $) 34740 22154 3995 9703
Operating Income ($) 10509 9427 1388 6773
Net Income ($) 4857 1248 1076 10999
Diluted EPS($) 3.38 0.29 5.89 8.95
From the analysis above, we can conclude that the opportunities of PepsiCo are easy new
products penetration in the market, it operates in fast growing industry, changing social
trends, and new media promotion opportunities. In addition, it has the opportunity to make
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a partnership with well-known brand Starbucks, and more sport tournaments that PepsiCo
cam support. On the contrary, the threats of PepsiCo are strong competition in every division
it has, such as competition from Coca-Cola and Kraft Heinz Company It operates in the mature
beverage / Food industry, and aggressive top management strategy by its competitors. There
is also growth in the carbonated drink sector which will bring new substitute products to
entry.
Porters Five forces Model:
Bargaining
power of
suppliers
Threats of
Rivalry
New
Threat of Among
entrants
substitute existing
competitors
Bargaining
Power of
Analysis of Porters Five forces Buyers
model:
1. Rivalry Among Existing Competitors : Very High
a) High Diversification from the competitor like coca cola
b) Few strong companies have a control over the market
c) At present the main competitor is coca cola which also provide a wide range of
beverage products under its brand. Both Coca cola and Pepsi are the predominant
carbonated beverages and commit heavily to sponsoring outdoor festivals and
activities.
2. Bargaining Power of Buyers : High
a) There are many substitute products in the market ,therefore customer has large
varieties of product
b) The customer in the beverage market is price sensitive as company cannot charge
high price because they have many choice of product
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c) The consumer can switch to other product or other company product as there are
many same kind of drink in the same market
3. Threat of substitute : High
a) There are many kinds of energy drink and soda products in the market
b) Many companies provide similar product in the same market
c) Not only coca cola is the main competitor but PepsiCo also have other product line
, which means that they also have other competitors
4. Threats of new Entrants : Low
a) Entry barriers are relatively low for beverage industry as there is already various
number of the company in the market
b) Few multinational groups own the largest part of the market share
c) There is high initial cost, therefore few company want to enter this market
5. Bargaining Power of Suppliers : Low
a) Dependence on raw materials, however , there are a lot of suppliers available in
the market
b) The main ingredients for soft drink include carbonated water, phosphoric acid,
sweetener and caffeine. The suppliers are not concentrated or differentiated
c) Any supplier would not want to lose a huge customer like PepsiCo.
EFE Matrix
Key External Factors Weight Rating Score
Opportunities
1 Easy new products penetration in markets 0.09 4 0.36
2 Operate in the faster growing industry(Non-carbonated 0.10 3 0.30
drinks )
3 Changing social trends (Healthy foods) 0.10 3 0.30
4 Media promotion and vending machines 0.10 2 0.20
5 Partnerships with well-Known brands (i.e. Star bucks) 0.07 2 0.14
6 More sport tournaments are being held worldwide 0.09 4 0.36
Total 0.55 1.66
Threats
1 Strong competition in every division 0.10 2 0.20
2 Growth of energy drinks in carbonated drinks sector 0.08 1 0.08
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3 Mature industry (Beverages ) 0.10 2 0.20
4 A few Frito Lay products resulted in abdominal cramps in 0.07 2 0.14
customers
5 Aggressive top management strategy by 0.10 1 0.10
competitor(Coca-Cola)
Total 0.45 0.72
Grand Total 1.00 2.38
External factor Evaluation (EFE) Matrix holds the information of two lists which are important
to the company. These lists are identified as opportunities and Threats. These factors inside
this matrix are rated from 1 to 4, where 1 is the lowest and 4 is the highest.
The total score of 2.38 is below average of 2.50. This means that PepsiCo is currently not
responding very well to existing Opportunities and Threats. It also shows that PepsiCo should
improve their response towards the environment in a more positive way.
Internal analysis
Strengths
Strong Brand name is one of the greatest strengths for PepsiCo. It is one of the largest brands
that could be recognised by the people in the world. In all around the world the company use
the name ‘’PepsiCo’’ in every country in the world. The strong brand presence makes it easier
for the company to market its product around the world. PepsiCo did not provide only the
cola product but also provide various numbers of products. All these brands have rode on the
success of the company brand and have found it easy to sell since the company brand in
largely accepted in the market. The popularity of PepsiCo corporate brand has also made it
easier for the company to introduce new products in the market. Pepsi Co has to do in order
to make a new product success is to attach it with the company’s corporate brand which has
already attained a significant level of brand loyalty in the beverage market.
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PepsiCo has a large distribution network which is other strength of PepsiCo. The
organisation’s ability to take it product near the consumer is one of the core elements that
define the company success. The firm has managed to do this through creation of a massive
distribution system. The organisation runs bottling units in diverse geographical regions which
enables the company to produce its products near the consumers by this it reduces the
transportation cost and storage cost of the company, which leads to the higher profit as it
reduces the expense.
The company has also has established good connection with small and mega retailers who
sell PepsiCo products to the final customers. Forming partnership with large retailers such as
Wall-Mart has enabled the company to expand its reach to the market. Also Partnership with
small retail business has helps the firm to take it products to even the remote parts of the
world. Apart from retail chains the company has also corporate with fast food restaurants
around the world such as KFC etc., which have also provided the company with a wide
network of outlets
Competitive advantages
PepsiCo is in the beverage industry and it is one of the most competitive industries in the
world as there are numerous of products competing against one other, In order to survive in
the market, any company needs features that gives it an edge over it competitors. Innovative
line of products is one of the PepsiCo competitor advantage. The organisation has been on
fore front in the development of innovative beverage products for different segments of the
market. The company has different groups of target market over 30 – different products. The
ability of the company to come up with new and innovative products has enabled the
company to change as consumers needs evolve and thereby remain relevant in the market.
PepsiCo capability to respond quickly to market opportunity and threats is the other
competitive advantage. The organisation innovativeness provides it the capability to respond
quickly to changes in the market. The company convenient size also gives it the ability to
change quickly. The firm structure is neither to small like most of its competitors neither too
large like its main competitor, Coca-Cola. The relatively large size of the company gives the
organisation access to resources that also make it easier for the company to move quickly
Internal weaknesses
The company’s reliant on franchised bottling company to distribute its products is one of the
internal weaknesses found in PepsiCo. This strategy has seen the company create very
powerful bottlers that it cannot exert control over. Occasionally the franchises oppose
introduction of new products by PepsiCo while other refuse to produce some of the products.
Sometimes the franchises also create their own product lines that are not part of the
PepsiCo’s Brands. Moreover this franchise system also limited the ability of the company to
expand its operations. On the other hand the company main competitor like Coca-Cola is
being able to invest in its bottling companies but the company cannot invest in its bottling
companies since it does not own them. This has hampered the growth and expansion of the
firm since most of the individual investors have limited capacity to make such investments
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Internal Factors Evaluation (IFE) matrix
Key Internal Factors Weight Rating Score
Strengths
1 Strong Brand 0.09 4 0.36
2 Strong marketing and advertising of 0.07 3 0.28
products around globe
3 Products availability 0.08 3 0.24
4 Revenue and profits 0.08 3 0.24
5 Market Share 0.07 3 0.21
6 Competent workforce 0.05 3 0.15
7 Wide variety of products 0.05 3 0.15
8 Earnings per share 0.02 4 0.08
Total 0.51 1.71
Weakness
1 High debts 0.07 2 0.14
2 Health issues 0.08 1 0.08
3 Low sales in some products 0.09 2 0.18
4 Negative Impact on Brand image due to 0.10 1 0.10
product recall
5 Lack of product focus 0.05 1 0.05
6 High operating expense 0.10 1 0.10
Total 0.49 0.65
Grand Total 1.00 2.36
This internal position consists of strengths and weaknesses. These factors inside this matrix
are rated from 1 to 4, where 1 is the lowest and 4 is the highest.
PepsiCo is below average with the score of 2.36. This means that PepsiCo did not know their
current strengths and weaknesses. Although they know they did not use them effectively.
SWOT – Matrix
Favourable Unfavourable
Internal Origin Strengths Weakness
1. String brand 1. High debts
2. String marketing and advertising 2. Health issues
3. Products availability 3. Low sales in some
4. Revenue and profits products
5. Market share 4. Negative impact due
6. Competent workforce to product recall
7. Wide variety of products 5. Product focus
8. High EPS 6. High operating
expense
External Origin Opportunities Threats
1. New products penetration 1. Strong competitions
2. Fast growing industry 2. Carbonated drinks
3. Social trends sector growth
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4. Media promotions and vending 3. Mature beverage
machines industry
5. Partnerships 4. Health issues
6. Sport tournaments 5. Aggressive strategy
conducted by
competitor
Opportunities S-O Strategies W-O Strategies
1. New products penetration 1. Increase marketing 1. Extend R&D
2. Fastest growing industry and advertising to section to cope
3. Social trends penetrate new products health
4. Media promotions and products in the issues to
vending machines market comprehend
5. Partnerships 2. Promote social threats
6. Sport tournaments investments in the 2. Sampling in
company with events to
existing promising capture
feedback customers by
offering better
taste and quality
Threats S-T Strategies W-T Strategies
1. Strong competitions 1. Sufficient financial 1. By improving the
2. Carbonated drinks sector resources can help taste and quality,
growth company to develop company can
3. Mature beverage industry more in carbonated reposition its
4. Health issues and non-carbonated products in a
5. Aggressive strategy conducted drinks sector long term
by competitor 2. Overwhelm main position on
competitors by maturity stage
conducting 2. Develop healthy
aggressive strategies energy drinks for
in other sectors youth for
customer
retention
BCG Matrix
Relative Market share
High Low
Growth Rate
High Stars Question Mark
( Frito-Lay) (Aquafina)
Market
Low Cash cows Dogs
( Pepsi-Cola)
Analysis:
1. Aquafina: Low market share, Low growth chances
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2. Frito-Lay : High market share , High growth chances
3. Pepsi-Cola: High market share, Low growth chances
Recommendations
Strategy recommendation and implementation for PEPSI CO
Pepsi Co is currently a strong worldwide leader in the food and beverage industry. Throughout its
growth, it has stayed true to its mission and objectives, while becoming a dominant force within the
united states as well as abroad. Known throughout the world for quality products and customer care,
Pepsi Co should make no major strategic changes to its plan. However, Like in any business situation
there are areas that PepsiCo can improve upon.
Some of the recommendations are as follows
1) Continue to expand with their ‘’Human sustainability ‘’. The healthy eating market is a
demographic that will continue to grow in the future and will provide generous profits if
PepsiCo is able to obtain a large market share.
2) Expand more into social benefits, especially for those in developing nations. PepsiCo’s main
competitor Coca Cola has implemented a water purification program for African villages,
which provides a valuable need and at the same time introducing their brand name where it
was before unknown. If Pepsi followed this same ideology with food products and water
purification it too would significantly increase brand recognition
3) Capture more of the aging population’s market share. Pepsi is a company focused on a
younger market hoping to repeat the worldwide success of Coca Cola in regards to brand
loyalty with the generations born after 1985, however, there is still a large market with the
Baby boomer demographic that they could break into.
Overall PepsiCo is a successful company with substantial revenue and a large footprint in the
marketplace. PepsiCo should continue to expand their growth and take advantage of potential
opportunities by continuing to improve on areas at the corporate top level in the markets that
they currently are in and in new markets and market segments that they wish to expand into.
4) PepsiCo should expand into markets and market segments that they are currently not in, such
as Asia, India and South America in order to expand their market share at the global level and
to increase their overall revenue
5) PepsiCo should improve their employee relations in order to create employees all over the
world that will both promote the product both during their work day and in their personal
life in order to create ‘’word of mouth marketing’’
6) PepsiCo needs to continue to expand their market share in the markets where they currently
have a strong presence in order to maintain their market share and their footprint in the
market place.
7) PepsiCo should become more proactive in the health food/product market place rather than
being reactive to the market trends. They need to improve their responsiveness and future
projections to market trends and changes that can therefore allude to different product
segments and target markets
Strategy Evaluation and control
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1. PepsiCo should expand into markets and market segments that they are currently not in , such
as Asia ,India and south America, in order to expand their market share at the global level and
to increase their overall revenue.
2. PepsiCo should do market surveys of their target market segments in order to analyse the
existing brand awareness in the market place every two quarters and then analyse the overall
change and trend on the calendar year
3. PepsiCo should cut their expenses by a set percentage every quarter in order to increase their
Net Income each quarter and year. This would increase the bottom line and benefit the
stockholders. It would be advised to reduce costs by 10 % as an original amount and then
potentially increase the percentage after a few trial quarters
4. PepsiCo should position themselves on the cutting edge of the health trend in the marketplace
by increasing funds for R&D in order to research potential new product ideas. Funding should
be increased significantly and then the ROI on the positioning should analysed after multiple
quarters of study.
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References:
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