Business Strategy : Sample Assignment

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Report Cover Sheet
Student Name/ID Olja Duseckin/ 20191221419
Course Title Unit 32: Business Strategy
Report Individual report
Learning Outcome LO2+LO4
Submission Date 15.11.20. Assessor: Dr. Wassim Haidar
Declaration: I confirm that all the work included in this assignment is my own. Where I have used the work of
others, I have referenced it accordingly and provided a list of references of all the sources used.
Signature: Date: 15.11.20.
Grade: Assessor Signature: Date:
Areas of strength and areas for improvement:
Internal Verifier’s Comments:
Signature & Date:
* Please note that grade decisions are provisional. They are only confirmed once internal and external
moderation has taken place and grades decisions have been agreed at the assessment board.

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Business Strategy report
Internal analysis of Pepsico
PepsiCo was established in 1965 after Pepsi and Frito-Lay merge together. Since the
merger Company has been working on transforming their products range and we drove
there marketshare and brand awareness. Nowadays PepsiCo is the second largest
carbonated drink Company after the Coca-Cola company. They have grown into a global
brand that keeps growing and expanding every year. Mexico is present in over 200
countries. PepsiCo has 22 Brands which are worth billions of dollars. They are
continuously working on finding innovative ways for product strategy and marketing in
order to grow faster globally. Nowadays the Company puts a lot of focus on corporate
social responsibility and sustainability in order to keep the good image and good
reputation. With healthy lifestyle becoming more popular they are focusing on
introducing more healthier options in their portfolio.
SWOT Analysis (only strengths and weaknesses as they are internal)
Strengths:
One of the biggest strengths of PepsiCo is that they are the global brand and have a
strong brand image. Their present globally and their products are sold in over 200
countries. They are the second largest food and beverage company in the world. They
invest a lot in marketing and managing their reputation. Their marketing complains are
strong and they invest a lot of money into them. In 2017 PepsiCo has spend over $4
billion on marketing from which $2.4 billion dollars went into advertising. They put a lot
of emphasis on sustainability and corporate social responsibility in the order to keep a
good image in the countries they operate in. PepsiCo has a high level of net revenue
and income and they are very financially stable. This gives them a vantage because
they can invest more into marketing and research and development. In 2019 PepsiCo’s
global net revenue reached 67.16 billion US dollars which is a 2.5 billion US dollars
increase from the 2018. PepsiCo also has strong supply chain and distribution network
which is strongly managed globally. PepsiCo constantly works on increasing the
partnerships with different food service companies in the order to expand their marked
share and distribution. PepsiCo’s portfolio is extensive and varied. They have 22 billion
dollar worth brands. Each of their brand brings more than billion dollars revenue each
year. In the last few years they worked on growing their healthy products range and
further extending their product portfolio.
Weaknesses:
One of the biggest weaknesses of PepsiCo is that they're still very dependent on the US
market. Over 58% of the revenue comes from the US market. PepsiCo also needs to
work on increasing their presence in Asia. Back in 2017 PepsiCo was Middle East not
revenue dropped because of weakening of the Egyptian pound. International currency
exchange rates can play a huge role and bring negative effect to do revenue of
PepsiCo. Another weakness with PepsiCo is their weak marketing of the new healthier
product range. One more weakness is that people consider PepsiCo an unhealthy brand
and even with their introduction of the healthier food options health-conscious people
are still cautious when it comes to their brand. One more weakness of the brand are
there failed products such as Crystal Pepsi (colourless Pepsi) and Pepsi Blue which gave
the company a bad image. Another weakness are there two bad marketing campaigns

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from 2013. and 2017. For which people accused them of racial discrimination. PepsiCo
had to release public apology statements after both of them. This has impacted their
brand in a very bad way.
VRIO Analysis
VRIO Analysis PepsiCo looks at all of their internal resources and analyzes whether
these provide sustainable competitive advantage or not.
Valuable:
The financial resources of the PepsiCo are highly valuable and they help the company in
investing into opportunities that can arise and they also help the company in dealing
with external threats. PepsiCo’s use of local food products is a very valued resource as
it brings diversity in the products which gives a high value for the customers. Their
product differentiation makes the customers value them more than the competition.
PepsiCo's employees are also very valuable resource of the company. Majority of their
staff is highly trained which brings more productivity for the company. The retention
rates of the employees it's very high which means that the employees are very loyal to
the company. All of this brings greater value to the customers of PepsiCo. One more
value of the PepsiCo are their patents as this removes the possibility of competitors
copying their products. Their patents also bring them licensing revenue when they
license them out to their manufacturers. One more very valuable resource for PepsiCo
is their extensive distribution network. This helps them in reaching more markets and
thus more customers and increases their revenues.
PepsiCo’s cost structure is not a valuable resource. Their methods of production bring
bigger costs that's those of their competition and lower the profits of the company. This
is their competitive disadvantage that should be fixed.
Rare:
The very strong Financial resources of PepsiCo are very rare and only a few companies
in the industry have such a strong financial resources. Their usage of local food
products is not rare is this can also be used by their competitors in the same market.
However this resource is very valuable so PepsiCo can still use it. Employees of PepsiCo
are a rare resource. This is because of them being highly skilled and trained which
competitive companies lack. It’s important for PepsiCo to keep these employees happy
and well compensated so that they do not leave the company. PepsiCo’s patents are a
rare resource because they are not available to the competitors. This allows the
company to use them without fear of them being used by the competition. PepsiCo’s
distribution network he’s a real resource because in order to get to their level their
competitors Will need a lot of investments and time to come up with a better
distribution network. Not a lot of companies in the industry have such an extensive
distribution network.
Inimitable:
PepsiCo’s financial resources are hard to imitate because they are so extensive.
PepsiCo has achieved these financial resources by increasing profit over a period of
many years. Their competitors in new entrance would have to have similar profits that
they will have to acquire in the long period of time. Their usage of local food products is
not hard to imitate as these can be used by competitors who invest in research and
development. PepsiCo’s usage of local food products gives them only a temporary

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competitive advantage that's competitors can also achieve in the future. PepsiCo’s
highly skilled and trained employees or not expensive to imitate because any company
can invest in training their employees and improving their skills. Competitor companies
can also steal the employees by giving them better compensation packages, benefits
and opportunities to grow. This makes their employees only a temporary competitive
advantage. Patents PepsiCo are hard to imitate because it is illegal to imitate a
patented product. And creating patent products is a very costly investment and not a
lot of competitors have the financial means to do it. PepsiCo’s distribution network it’s
very costly to imitate because it has been developed gradually over the span of many
years. Competitors would have to invest a lot in order to imitate their distribution
system.
Organized:
PepsiCo’s Financial resources are organized to capture value. The company uses these
resources strategically and invests in the right opportunities and avoids threats.
Financial resources bring sustainable competitive advantage for the company.
PepsiCo’s patents are not very well organized which means that the company is not
using them in the full extent. This is an unused competitive advantage which can easily
be switched into a sustainable competitive advantage. Company’s distribution network
is very well organized. PepsiCo uses their distribution network to keep their customers
happy by making sure that their products are available in all of their outlets. This gives
them a sustained competitive advantage.
Conclusion of the VRIO analysis:
From the analysis we can see that distribution network and financial resources give
PepsiCo a sustained competitive advantage. Their patents are an unused competitive
advantage. Their employees and their usage of local food products gives them a
temporary competitive advantage. Their cost structure is a competitive disadvantage.
Value chain analysis
Inbound logistics:
PepsiCo sources their agricultural goods and raw materials from many countries. Do use
their comprehensive transporting network to transport these goods to the facilities of
their suppliers. They also use a very advanced software for logistics and keeping track
and records of these goods. They also use their IT for their inbound logistics.
Operations:
PepsiCo has an extensive network of factories, warehouses, distribution centres, offices
another facilities globally. Their company is divided into six different operational
segments which are: Frito-Lay North America, North America beverages, Quaker Foods
North America, Latin America and Europe and sub-Saharan Africa. All of these up ration
all segments operate on their own or with the help of third parties.
Outbound logistics:
PepsiCo delivers their products to markets through distribution networks, customer
warehouses or direct store delivery. The distribution system that they use to bring their
product with certain markets varies according to the customer needs, trade practices of
that region or the characteristics of the products.

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Sales and marketing:
PepsiCo invests a lot of their profits into marketing their products and their brand. In
2017. they spent over $4 billion on marketing and promotions.
Procurement:
PepsiCo’s procurement team is in charge of procuring raw materials and goods from
different parts of the world.
Human resource management:
PepsiCo puts a lot of focus on their human resource management and developing their
employees. They have many different training programs for the growth and
development of their staff. In 2019 the company had 267,000 of employees.
Company’s infrastructure:
PepsiCo manages and expensive infrastructure which includes offices in human
resources. They are spread across many regions worldwide.
Technology:
PepsiCo puts a lot of focus on the technology. They use digital technology for marketing
and creating a better customer experience. Invest in the newest technology available
for their production system and supply chain management.
Strategic planning for PepsiCo
Internal environment factors that play a role in strategic planning are: organizational
culture, human resources, organizational structure, physical assets, profit and cash flow
and management. External environment factors that play a role is strategic planning
are: political, economical, social, technological, legal and environmental.
As the healthy food market is rapidly growing worldwide PepsiCo should focus on
further developing their healthy food and beverage range in order to keep up. PepsiCo
should invest more in their research and development department in the order to
identify customer needs so that they can create the products which will be liked by the
customers who want to live a healthy life. They should also further invest in the
technology needed to create these healthy snacks and beverages. They need to shift
the focus from barely keeping up with the healthy food and beverage trends into
leading and being innovative in this field.
PepsiCo should also work on expanding to even more markets especially to Asia where
their presence is not that strong at the moment as well as developing nations.
PepsiCo has to continue working on their corporate social responsibility in order to keep
their good image within the markets they operate in. They should also further invest in
the water purification program and reducing waste in order to be more eco- friendly.
PepsiCo’s main focus is the young population and they should wear a condom
improving their market to reach to the aging population. Expansion of their healthy

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snacks and beverages could help them with this as the older population is more
concerned about health.
Since their cost structure is much higher than that of the competitors and brings them a
competitive disadvantage they should work on lowering it and thus bringing more
revenue.
Their employees bring them a temporary competitive advantage as they can easily shift
to the competitors. This is why PepsiCo needs to provide their employees with
competitive benefits, compensations and opportunities for growth in the order to keep
them satisfied and less likely to switch to the competitor.

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