Impact of External and Internal Factors on Business Operations

This report provides a deep insight into the external and internal factors having an influence over the business. Businesses is required to analyse these factors based on which strategies are built for the business operations. In this report, Pepsi-Co corporation is taken as an organization.

Report on Impact of Externa
and External

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
LO3............................................................................................................................................3
P4 Identify the positive and negative impacts the macro environment has upon business
operations...............................................................................................................................3
LO4............................................................................................................................................5
P5 Applying SWOT analysis to evaluate internal environment............................................5
P6 Interrelation of strengths and weaknesses with the external macro factors......................6
M4 Influence of SWOT over decision making......................................................................7
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
This report provides a deep insight into the external and internal factors having an
influence over the business. Businesses is required to analyse these factors based on which
strategies are built for the business operations. In this report, Pepsi-Co corporation is taken as
an organization.
LO3
P4 Identify the positive and negative impacts the macro environment has upon business
operations
An enterprise is established while considering many different factors. The members of
the organization try hard to bring in additional benefits to the business. These factors are
mainly the macro environmental factors which has a huge influence over the business and
timely analysis of it is necessary. But these factors can bring in benefits as well as
disadvantages to the business. The Pestle analysis of Pepsi-Co corporation is drawn below to
get a clear understanding.
Political factors: Not just the development of the economy is important but also the
political system of UK. There has been a certain change in the regulations and laws of the
country in addition to the political stability in the country. Currently, UK is facing political
unrest with respect to change in government and imposition of certain restrictions (Hamilton
and Webster, 2018). The company is also facing issues in other nations as well such as
introduction of soda tax in Berkeley in 2015 and this has led to the reduction in soda
consumption. There is change in the alcoholic industry environment as well which consist of
competitive products, pricing pressures and the target to achieve the share of sales in the
global market. Government has a huge role in it by setting rules which acts as a barrier to the
company.
Positive impact- The political situation is more and more widespread and uncertain but has
the capacity to bring in many benefits to the industry. Also, the trend of integration is
increasing which will provide an opportunity to expand abroad.
Negative impact- The country is not stable over the few years. There the investors of the
Pepsi need to analyse the market in detail if they want to expand their earnings and market
share.

Economic factors: Pepsi Co is currently facing global recession mainly in US and
UK. This factor has affected the industry in many ways such reduction in the purchasing
power of the consumers, fluctuation in the exchange rates etc. Further, the economic
recession left behind a stronger dollar that has continued to affect the soda giant’s profits
(Prajogo, 2016). Volatile commodity markets and inflation as well as contraction in
availability of credit too has adversely affected the beverage industry.
Positive impact- This factor doesn’t have a positive impact but the company can look for an
alternative market till the time the situation changes in this market. Pepsi Co can enter the
new market which will help it in taking advantage of the present situation.
Negative impact- The economy is facing the rapid change because of inflation and these
inflationary factors influence the market share of the Pepsi products in the market.
Social factors: There is a change in the mentality of the consumers. The consumers
are demanding more and more energy drinks in place of carbonated drinks as the consumers
are becoming awareness of their health. The diseases such as obesity are in association of the
consumption of the carbonated drinks and this has changed the mindset of the population
towards a healthy living.
Positive impact- The sustainability of the cultural values has made Pepsi to come in close to
the consumers across the world. People prefers Pepsi while doing work, talking to friends and
relatives, watching movies etc. Pepsi has affected the lives by creating a sense of well-being
and comfort at work and life as well.
Negative impact- In this industry, Pepsi has to compete with many similar products available
in the market. Also, the consumers taste also plays an important role in the growth of the
beverage industry. There are many companies offering similar products to the consumers and
consumers have a wide range of products to choose from. Hence, the risk is large for the
Pepsi.
Technological factors: The immense use of technology has taken a boon for the
brands in the market. The increasing use of social media as the platform for advertisement
has led to the higher number of followers for the company. It has served as a primary method
for reaching the target market. Also, the emergence of Artificial intelligence based analytics
and big data has helped the brands in serving the market and effectively managing it. Pepsi

uses latest technology for bringing innovation in the business which helps in increasing the
target market.
Positive impact- The technological changes will help in meeting up with the target
customers and achieving the goals and objectives of the business.
Negative impact- The implementation of the new and latest technology will pose huge
expenses for the business and also training staff for using those systems.
Legal factors: It refers to the local law of the countries in which the business is
operating. In case of beverage industry laws such as caffeine standard and sugar consumption
(Ajayi, 2016). The companies are required to make sure that the they meet with all the
regulatory requirements. Also, company is required to adhere to the labour practices as well.
Positive impact- The company can take advantages of these changes by coming up with the
new range of products as per the law so that it can attract the customers towards it before its
competitors.
Negative impact- These changes may lead to the loss of the certain customers if the
company is not able to meet the requirement and this may lead to loss of market share.
Environmental factors: The beverage industry is known for consuming the highest
amount of freshwater in the world because of this reason the companies are facing lashes
from the environmental groups. Thus, effective steps are required to be taken by the
companies to overcome it.
Positive impact- This has led to the implementation of the innovative methods such as water
smart farming which includes RAIN and CARE which emphasis on using little water and
harvesting the maximum amount.
Negative impact- The negative impact of it has put restriction on the usage of water and this
led to the limited production of the products by the company.
LO4
P5 Applying SWOT analysis to evaluate internal environment
Strength
 Pepsi Co has shown strong financial
performance consistently. In 2017,
the company has delivered
Weaknesses
 The increasing ‘unhealthy’
perception of the consumers about
the brand is its major weakness.

shareholder returns with 2.3% of
organic revenue growth and 9% of
the EPS growth.
 It has diversified product range
which makes it unique. Based on the
research on consumers preferences,
Pepsi Co is termed to be the most
powerful brand (Hillary, 2017).
 Its innovative marketing strategies
for promoting the brand and the
products.
 Over dependence on the Walmart.
Opportunities
 Pursuing inorganic growth by
offering customers healthy products.
 Introducing the digital technology as
a medium for promotion.
 Implementing analytical tools and
AI based technologies.
Threats
 Intense competition prevailing in the
market.
 Impact of Brexit on the supply of
goods.
P6 Interrelation of strengths and weaknesses with the external macro factors
 The strong financial performance which is the strength of the company which has a
strong relationship with the political factors as it takes into consideration the various
laws in respect to accounting, taxation which has turned in favour of eth company in
some way.
 The wide product range of the company is possible all because of its customers base.
It has an interrelation with the social factor which is based on the customers tastes
and preferences according to which product is developed.
 The innovative marketing strategies used by the company has worked positively in
attracting the customers and the retaining its market share. The technological factors
have a huge interrelation with this strength (Saleem, 2017). The company has come
up with the changing technological factors which has resulted into leading with the
changing environment.

 Considering the brand and its products as unhealthy by the consumers which is also
because of the interrelation it has with the social factors of external environment.
Under this, consumers perception is considered.
 Pepsi Co is largely dependent upon the Walmart as it is Pepsi Co’s largest customer
which operates on low priced products. The economical factor plays a role in this
which considers the disposable income of the consumers and according to which
price is set.
M4 Influence of SWOT over decision making
After analysing the strengths, weaknesses, opportunities and threats. It helps the
company in taking strategic business decisions. This helps in attaining the business objectives
in an appropriate manner and as per the plan.
CONCLUSION
It can be concluded from the above that for taking any business decision it is essential
to take into account the environmental factors which will affect the business strategies. For
this, pestle analysis for external environment analysis and swot for internal analysis is carried
out. Also, the interrelation between the strengths and weaknesses with the external factors is
carried out.

REFERENCES
Books and Journals
Ajayi, A., 2016. Impact of external business environment on organisational performance of
small and medium scale enterprises in Osun State, Nigeria. Scholedge International
Journal of Business Policy & Governance. 3(10). pp.155-166.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford
University Press.
Hillary, R. ed., 201 7. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Prajogo, D. I., 2016. The strategic fit between innovation strategies and business environment
in delivering business performance. International journal of production
Economics. 171. pp.241-249.
Saleem, M. A., 2017. The impact of socio-economic factors on small business
success. Geografia-Malaysian Journal of society and space. 8(1).