PepsiCo Strategic Analysis Report

This assignment requires a detailed strategic analysis of PepsiCo. It necessitates examining the company's external environment using a PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis to identify key influences and trends. Additionally, it involves applying Porter's Five Forces model to assess the competitive landscape within which PepsiCo operates. Finally, a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) is required to evaluate PepsiCo's internal capabilities and external challenges.

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MANAGEMENT THEORY AND PRACTICES
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MANAGEMENT THEORY AND PRACTICES 2
INTRODUCTION
Among few organisations being in the news during the last two years is PepsiCo which is a
multinational company dealing in food and beverage. (Jeffery, 2017) It is one of the most
popular American MNC whose headquarters is situated in Purchase in New York. Since its
foundation in 1903, it has grown enormously gaining much reputation with strong market
portfolio (Bailey, 2014). It supplies food, snacks, fruit juices and beverages to more than 200
countries. The history of PepsiCo began in New Bern, North Carolina, in 1896. Caleb
Bradham was a pharmacist and industrialist who founded the recipe of famous Pepsi and
under its namesake was able to expand its venture across the globe. The company had made
many acquisitions and mergers one of which was famous and was all over the news in 1965
when it merged with Frito Lay and named the soft drink Pepsi-Cola. Again in 1998 another
successful purchase was made by the company, Tropicana, following with another merger of
Quaker Oats in 2001 (Pepsico , 2017). Holding the second position worldwide in food and
beverage business, the company is owner of chief brands like KFC, California Pizza Chicken,
Taco Bell, Wilson Sporting Goods, Pizza Hut, etc. Under the management of Indra
Krishnamurthy Nooyi, CEO of the company, the organisation has reached to new highs and is
successful in employing more than two hundred and seventy four thousand satisfied people
globally (PepsiCo Inc. Success Story, 2017). Though there are many challenges met by the
company, but with strategic management and proper analysis, PepsiCo is able to overcome
them with ease and have been able to survive in the market with reputation. The vision
PepsiCo declare is to become world’s top company dealing in food and beverage. To achieve
the goal of becoming first in position, the company follows a strategy to provide value to
customers through product diversification and for that constant mergers and acquisitions is
been made by the company in order to make a wide range of product portfolio. The corporate
strategy provides customers with different quality products according to their preferences

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which have made PepsiCo recognised as a strong brand and the pattern company follows to
come up with new products, helps in maintaining their competitive advantage. (Jannet, 2010)
THEORITICAL CONCEPTS OF STRATEGIC MANAGEMENT
The concept of strategic management has developed gradually, and the role of intellectual
management with practical reasoning has helped in concluding with carving out its own role
by means of theoretical concepts in business. (KALPIČ, 2002) Management uses several
concepts and theories to associate the performance of employees with those of organisation’s
management. Selecting theoretical concepts to strategic management is a major task as in a
competitive and unstable market, the objective of strategy engages to prepare the organisation
to tackle the unreceptive environment and to sustain the same requires appropriate
management operations. (Emerson Wagner Mainardes, 2014) It also allows the management
to perform systematically and helps in attaining the core object to organise the skills,
recommendations, and internal resources of the company. In order to apply theoretical
concepts to strategic management, the theory is needed to be examined so that it can be
applied to the organisation to provide assistance in gaining sustainability and growth. In order
to evaluate the strategy PepsiCo follows, theories like SWOT analysis, PESTLE analysis ,
and Porter’s five force analysis is been used which will help in understanding the policies and
framework of the company with which it has made the company an example of sound
strategic management in planning and organising. (RICHARD A. BETTIS, 2014)
SWOT ANALYSIS THEORY IN STRATEGIC MANAGEMENT
SWOT analysis is a framework which allows the managers to amalgamate internal resources
of the company. Strengths and weakness in them forms a basis for analysis of threats and
opportunities of external sources. It is an initial method followed by managers in which
collection and evaluation of information about external and internal data is made. (Strategic

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analysis of Pepsi Co., 2017)It is one of the most important parts of strategic management
planning process as great number of issues in the internal and external part is found and leads
way in which it can be sorted (Jofre, 2011). Internal strengths and weakness of the company
can be managed by organisations, while external threats and opportunities are only reactions
of anticipation or regression due to them. The major benefits of SWOT are that it is simple to
use and has practical nature which makes it clearly understandable which is why used in most
of the organisations. It focuses on internal and external factors which affects the company
directly or indirectly and thus helps in identifying goals. Threats and opportunities are
uncontrollable factors which usually arise due to variation in the macro environment or
competitor’s actions. While opportunities represent external conditions that bring competitive
advantage if recognised properly, threats may harm the company if not avoided or defended
appropriately. This SWOT analysis illustrates PepsiCo’s position which has grown and
reached top position in global market. Also this framework will provide PepsiCo to analyse
issues and ways to minimise obstacles in its performance. (Strategic analysis of Pepsi Co.,
2017)
PepsiCo attains one of the major brands in the global market and has achieved in gaining
attention of the customers by launching new and innovative products. Few examples of its
successful brands are Quaker Products, Pepsi Products and Frito Lay Products, which have
been able to capture the entire food market with prominence. The strength of the company
lays in effective and advanced global production and supply chain which has made PepsiCo
an example of well established company in managing international growth and expansion
strategy. Since large number of its operation is limited to the area of its main hub i.e. North
America and South America, out of its total revenue 70% is observed from it and thus shows
its weakness in internal strategic management. It shows that the company is not been able to
recognise and yield maximum possible revenues out of American region, and if any

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uncertainty occurs in food and beverage industry in those areas, the company can face
immense threats. Penetration in the marketplace of other developing countries can help
PepsiCo in generating increased revenues globally. Dependency on other food market can
also be said as one weakness company possess which can only be overcome if the company
makes amendments in growth strategy of the company. The marketing strategy which the
company management follows also lacks efficiency. Most of its products do not reach to the
consumers who are more conscious about health as proper marketing regarding health
conscious products have not been noticed recently. On the other hand if the company
succeeds in giving stress on its marketing strategy, it can expand its business and reach to its
ultimate consumers in all areas. (Pratap, 2016)
PepsiCo from the beginning has believed in the strategy of constant mergers and acquisitions
in other brands and companies related to food and beverage. (Fergusan, 2017) Although it
had made company’s portfolio strong, but the weakness which lies is that the company
becomes highly dependent on food and beverage market and any sudden change in it can be
appalling for the company. In order to make this weakness turn into strength, the company
can make purchases of other companies who do not deal in food and beverage and with the
product diversification; the risk associated can become less. Collaboration and alliance with
other complimentary corporations can also increase market sustainability and company’s
existence with power. Other companies like Coco-Cola, Dr Pepper Snapple etc. have always
given PepsiCo tough challenges and influenced the organisation severely. Changing habits of
customers have also been one reason of threat for the company as with growing concern
regarding health and lifestyle has made PepsiCo constantly generate new and innovative
ideas to satisfy its consumers failing which it might lose them (Divine, 2017). Management
must look into the issue and take strategic approach to reduce the threats. To observe the

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possible opportunities behind them, SWOT analysis can prove to be the most excellent
median and can be applied in strategic management of PepsiCo. (Young, 2017)
PESTLE ANALYSIS THEORY IN STRATEGIC MANAGEMENT
In strategic management PEST or PESTLE analysis is the theory which can prove to be an
effective tool to analyse and identify major external forces that can affect the company. The
main objective behind this application is to recognise current external factors that affect the
business in positive or negative way and to identity directions which might be required to
make changes accordingly. (Frue, 2017) In order to access any new market, management uses
PEST analysis before entering in it. With planning and strategic approach, the negative forces
are observed before handed and dealt with. PEST analysis can be performed by the
management only after gathering external and environmental information as much as
possible. Internet and customer survey is the most reliable way in which the information can
be gathered quickly and organised accordingly. The major areas covered in PEST analysis is
political aspects, environmental factors, social factor, and technological factor along with
legal aspects, economics, and socio cultural aspects are taken into account by management.
(Jurevicius, 2013) Since PepsiCo has an immense structure that makes it the second largest
company globally dealing in food and beverages, PEST analysis is an effective tool that can
provide great assistance for to the managers of the company to enable strategic management.
(Kevin-F, 2010)
PESTLE analysis will help in conducting an evaluation which are exterior to the company’s
control but are relevant to smooth functioning of PepsiCo. Global market challenges are one
major threat faced by the company which also provides scope of opportunity to make
improvisation in its growth path. By making acceptable external evaluation and reformation
on its basis, PepsiCo can attain sustainable market with longevity. Political aspect of the

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countries it deals in is very important as if the government is stable and co operative, it
provides opportunity for global expansion and diversification. In PepsiCo, political stability
and inter governmental support has played an important part in its growth and sustainability.
Economic threats faced by the company is on a regular basis as initiatives against carbonated
and sweetened drinks and an increase in concerns among consumers regarding healthy
products affects the income of the company. The same threat can be avoided and turned into
opportunity if the company keeps changing its recipes and product presentation along with
making it healthier. (Meyer, 2017) Countries which PepsiCo deals in are fairly developed and
have stable economy with soaring growth rates which again gives good opportunity for
extending its division globally besides development is also possible to great extent. Thus, to
attain intercontinental growth and expansion, PepsiCo can utilise economic factor of
countries and create steady market diversification. On the other hand there are few
developing countries like China, whose unstable government has affected the company’s
growth in those areas.
Social factors on which the company depends on is the changing habits and standard of living
in people who are more inclined in purchasing ready to eat foodstuff. PepsiCo’s strategic
management has played here well and provided its customers with food and beverages
according to their preferences, especially in urban and industrial areas worldwide. After
considering social factors of PepsiCo it can be said that if the company is able to align
consumer’s choice and product with suitable marketing strategy, it can gain competitive
advantage also. In PepsiCo, acquiring latest technology and advanced equipments can
enhance the production quality and speed. Thus in technological aspect, the company requires
taking strategic decision and increase application of latest trends and methods which can
develop PepsiCo technologically. (Meyer, 2017) Since PepsiCo is a recognised brand and
possesses an example of sustainable brand image, environmental links are concerned with it

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as consumers expect the organisation to be more eco friendly and non hazardous. The
environmental element in PESTLE analysis enables company to take strategic decisions
regarding ecological issues. PepsiCo can utilise this opportunity to gain public support by
improving waste management strategies and increase its recycling processes. The company
also faces problems related to climatic change as if any uncertainty occurs it might disturb the
supply chain management and availability of food crops for its production. On the other hand,
with proper diversification in global supply chain and utilising resources to maximum extent
can enable PepsiCo rise above the threat (Swe, 2011). With enhanced environmental force
and stable supply chain, it can catch the attentiveness and increase strong relationship with
customers. Genetically Modified (GM) crops in European countries are being modified and
developed which is not accepted by some customers and taken as non healthier substance.
With the reduction of GM substance in products, PepsiCo can give country regulations
assurance by presenting safe and healthier consumable products. With this legal analysis, the
management of the company can gain opportunity by complying with legal aspects of the
country while focussing on product improvisation which also provide external benefits to the
organisation. (Dudovskiy, 2016)
PORTER’S FIVE FORCE ANALYSIS IN STRATEGIC MANAGEMNT
Five force analyses is another important tool in strategic management which was created by
M. Porter to recognize the key competitive forces affecting an organisation and examining
the reasons behind them. This tool is applied in corporate management to determine the
strength of competition in the organisation and its productivity level. The forces recognised
are threats of entrants which allows new entrant to enter the market if they see higher profits
in the organisation or scope of high return with sustainability. Bargaining power of suppliers
is the ability of suppliers to increase the cost of raw materials due to their monopoly or
scarcity of resources. Bargaining power of customer’s shows the strength customer possesses

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to make down the company’s rates due to large availability of other identical brands or
products from other company. Threat of substitutes is the extent of availability of different
products or services that can be used instead of the determining company. Lastly, rivalry
among existing competitors establishes the force of competition in the market. It is very
necessary to verify the competitive factors as stronger the forces are, profits comes down in
the industry. Thus, it becomes an important role for strategist’s to evaluate the competitive
position of the company and make out its strengths and weaknesses that can be subjugated to
strengthen its position. (Martin, 2017) Similarly in PepsiCo, the success can be linked to its
core capability and way it holds the challenges which is shown while evaluating Five Force
analysis. To sustain in the market with top position it is necessary to identify potential
problems and adjust its strategy to bring effectiveness in external factors that are significant
in food and beverage industry.
While evaluating competitive rivalry in PepsiCo, the management has to tread cautiously as
the firms in food and beverage industry generally possess aggressiveness like innovating
products constantly, changing marketing policies and switch costs frequently. Therefore it is
a strong force on PepsiCo as strengthening of its rivalries makes its customers easily shift
from one provider to the other. This analysis suggests management to identify the
competitive force strategically as it is the strongest one. To satisfy customers is the main
objective of PepsiCo and the affect of customers can be determined with the help of five
forces analysis. In food and beverage industry, since there are lot of competitor’s, customers
are more prone to switch to other company. As information about food products is written on
the package, customer gains more than required information which also makes them easy to
compare and choose between PepsiCo and other brands. Thus it is shown that bargaining
power here is strong in PepsiCo’s case and requires the management to ensure customer
satisfaction by providing efficient products or else it may lose them. Bargaining power of

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suppliers of PepsiCo seems fairly weak as the overall supply of raw materials is enough and
exceeds demand sometimes. Also, the integration between suppliers is not so strong which
limits their control over supply to PepsiCo. Although there are few big suppliers also, but the
weak forces applied to them weakens their influence on the organisation. This element of
analysis regarding suppliers bargaining power can prove to be beneficial for PepsiCo and a
positive approach for further expansion. (Smithson, 2017)
The threat of substitutes in PepsiCo is a strong force as there are many other satisfactory
products available in the market which can make customers shift easily to them. Since
PepsiCo deals in soft drinks, availability of other fresh juices can easily attract customers,
along with it the availability of instant tea or coffee can substitute its Tropicana products also.
High availability of substitutes in groceries and food markets makes consumers buy those
along with other necessary items. This component of five force analysis shows strong force
of external factor and must be taken by the management as priority issue facing the company.
Threats relating new entrants seem moderate for PepsiCo. To enter in the market is easy for
new entrant as customer can easily shift to another product. But at the same time brand
recognition plays an important part as it becomes difficult for new entrant to directly compete
with company like PepsiCo. With availability of strong portfolio and holding the strongest
brand in food and beverage industry, PepsiCo can prove as a threat to new entrant and makes
this element as secondary concern for the management.
CONCLUSION
The above evaluation shows the impending performance PepsiCo has followed and the way it
has cultured its organisation is outstanding which makes the company an example for well
established management. The potential PepsiCo has is on high while selling more products

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worldwide and with expansion to other developing countries can prove more advantageous
for the organisation. (PepsiCo Inc. Success Story, 2017) Therefore committed and integrated
management team who are also aware of cultures and customer preference, can make the
company come in first position from second (Jofre, 2011). Although there are few areas like
marketing and limited diversification which holds back the company, with the help of
strategic management and strategic approach can deal with the situation. While gaining
loyalty among customers is uncertain, PepsiCo with the aid of efficient supply management
and by adding on new products like Cheetos, Gatorade, Lipton Teas, Lays Potato Chips,
Fritos Corn Chips, etc and still counting has gained much attention in recent years. (News
about Pepsico Inc., including commentary and archival articles published in The New York
Times., 2017) The efficient company’s management has also enabled PepsiCo gain a reputed
position in food and beverage market in spite of facing many threats and challenges like
increase in competitors and increasing concern for healthy products. The company’s
innovative to safeguard natural resources by utilizing different methods like use of solar
energy; rain water capture, recycling wastes etc have also made PepsiCo one of the common
topics in news recently. On concluding note it can be said that a company whose products are
liked and consumed by billion’s of people, shall be taken as an example of strategic
management practices.

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