Assessment of PepsiCo's Corporate Strategies using SAFe Framework

Desklib provides past papers and solved assignments for students. This report analyzes PepsiCo's business strategies.

Running Head: Business Strategy 1
Strategic Management
Student’s name:
Student’s ID number:

Business Strategy 2
Task 1
Table 1: Five Forces
Force Nature of force Key points
The rivalry of
competition in the
industry
High  High aggressiveness
of companies
 Low switching costs of
customers
 The high number of
companies in the
industry
The threat of new
entrants
Medium  Moderate customer
loyalty for soft drink
 The high cost of brand
development in the
industry
 Low switching cost
among customers
The threat of buyer
power
High  High availability of
substitute products
 Easy access to
product information
 Low switching cost

Business Strategy 3
Threat of substitutes High  High availability of
substitute products
 Excellent performance
of substitute products
The threat of supplier
power
Low  Low forward
integration of suppliers
 The medium size of
individual suppliers
Supporting discussion
A. Rivalry of competitors
In the food and beverage industry, most of the companies are aggressive in terms of
marketing and innovation. Competitive rivalry is strong as there is low switching cost
among the customers. There are strong competitors of Pepsi, i.e. Coca-Cola and other
small and medium companies. This component of Porter’s five forces shows that Pepsi
is facing strong competition in the industry from the established companies which is the
most serious concern.
B. Threats of new entrants
New companies are threatening Pepsi as there is low switching cost among the
customers. Due to moderate customer loyalty, Pepsi is affected by strong competition in
the market. But, the high cost of brand development makes it difficult for new entrants to

Business Strategy 4
compete with Pepsi. This component makes a threat of new entrants which is a
secondary concern for management of Pepsi.
C. Threats of buyer power
Customers can easily shift from one company to another. This condition improves the
buying power of customers that affect Pepsi. Consumers have easy access to product
information by which they can compare the products (Fifield, 2012). Due to substitute
products, customers are able to switch easily from one company to another. It is
required for Pepsi to ensure customer satisfaction to maximize profit and revenue.
D. Threat of substitutes
Most of the substitute products to Pepsi products are satisfactory in the market. For
instance, customers enjoy coffee products and real fruit juices instead of drinking Pepsi.
For the customers, the substitute products are affordable so switch to the substitute
easily. Substitute products are also available in stores and other providers. Companies
having substitute products are trying to identify the needs and requirements of the
customers so that maximum customers can be targeted.
E. The threat of supplier power
In the beverage industry, supplier power is relatively week. There are various options for
the companies to acquire raw materials so this reduces the bargaining power of
suppliers in the industry. This power of supplier is also weakened due to low forward
integration, and this limits the control of suppliers of Pepsi’s supply chain. These
external factors are making the weak influence of suppliers on the company.

Business Strategy 5
Task 2
Table 2: Corporate strategy options and their implications
Corporate Strategy
options
Benefits to the firm Disadvantages for the
firm
Market Penetration  Discouragement of
competition
 The increment in
customer referrals
 Increase in efficiency
and turnover
 Unmet production cost
 Missed opportunities
Market Development  Attract new customers
for the products
 Branding as an
industry leader
 Increase revenue
 Product failure
 Impact of external
resources
Product Development  Increase the customer
base for the company
 Improved business
performance
 Improve brand image
 Risk of failure of new
products
 Can be costly due to
lots of Research and
Development and
experiments

Related Diversification  Good financial results  Difficulties in

Business Strategy 6
 Low risk in investment
 Secure fund on hand
management
 Low growth for
individuals
 Requires significant
financial and human
resources
Unrelated
Diversification
 Achieving competitive
advantage
 Secure the fund on
hand
 Spread the risk in
various sectors
 Requires good
management skills
 Risk of harming
business
 Impact on
performance
Supporting Discussion
A. Market Penetration
In the case of Pepsi, there can be various advantages to business in terms of
discouraging competition from rivals. In addition to this, market penetration is also
helpful for Pepsi in increasing the customer base in the operating market. The company
would be able to improve the efficiency and turnover to earn more profit in business
operations. On the other hand, there can be some disadvantages for the company in
terms of missed opportunities in the market and unmet production cost. If the company
could not earn a profit equal to production cost, then the company has to face loss in
the business.

Business Strategy 7
B. Market Development
The second strategy is a market development strategy that could be beneficial for Pepsi
to ensure the growth and success in the market. The market development strategy is
beneficial in attracting a large customer base for soft drinks. In addition to this, the
strategy would also be beneficial in improving the brand value of the company as a
market leader. But there are some disadvantages of the strategy for the company, i.e.
risk of failure of the new product in the market. In addition to this, there are various
external factors that can impact on the implementation of market development strategy.
Those external factors can also impact on the business efficiency of Pepsi in the
operating market (Drummond, Ensor & Ashford, 2012).
C. Product Development
This is an essential strategy to enhance the sales of the product in the market. In the
case of Pepsi, this strategy can be beneficial to increase the customer base of the
company. By new product development, the company can improve its brand image
among the customers as well as performance in the operating market. There could be
some disadvantages of this strategy for Pepsi in terms of risk of product failure due to
changed taste and preferences of the customers. With this, the new product
development can be costly due to lots of experiments and research and development
processes.
D. Related Diversification
This strategy could be beneficial for Pepsi in terms of improved financial results, low risk
in investment and Secure fund on hand. The strategy can provide advantages in terms

Business Strategy 8
of improving sales and revenue of the business. Some of the disadvantages of the
strategy are that the strategy requires significant financial and human resources for
implementation and difficult for management to monitor the progress.
E. Unrelated Diversification
This strategy could be beneficial for Pepsi in terms of achieving competitive advantage,
securing the fund on hand and minimizing the level of risk in the business. But there can
be a risk of harming the business if the diversification is not implemented successfully.
This can impact the business performance of Pepsi in the market in a negative manner
(Biggadike, 2010).
Task 3
Table – 3 SAFe evaluation of Corporate Strategy
Corporate Strategy
options
Suitable Acceptability Feasibility
Market Penetration  Support
business
growth
 Minimize cost
and prices
 Attract more
customers
 Helpful in
enhancing profit
and turnover
 Attract more
customers
 Increase in
efficiency
and profit
Market
Development
 Supportive
intensive
 Expand
distribution
 Expand the
supply chain

Business Strategy 9
growth strategy
 Support
business
growth and
new market
network
 Develop new
regions
to support
growth
 Cost
minimization
in business
Product
Development
 New products
to capture new
customers
 Variants in
existing
products
 Boost R&D
investments
 Product
innovation and
differentiation
 Growth of
business
 The
increment in
the sales
and profit
Related
Diversification
 Capture
business
opportunities
 Expand the
existing
product line
 The opportunity
of good returns
 Increase sales
and revenue

 Long-term
relationships
with
customers
 Maximize
business
value at the
lowest price

Unrelated
Diversification
 Expand
unrelated
product line
 Offsetting cash
flow in business
 Low-risk
 High
potential for
return

Business Strategy 10
 Many cost
efficiencies
investment  Increase
brand
awareness
among
customers

Recommended strategy option and justification
Based on the evaluation of the strategies, Pepsi has to adopt one of the growth
strategies to enhance business performance. In order to improve business efficiency
and increase the sale of the products, Pepsi can use product development strategy in
business operations. This is an intensive growth strategy to develop a new product. This
strategy would be helpful for the company to capture more customers in the market. For
instance, Pepsi can develop new products or variants in existing products like low-
calorie, low saturated fat variants of beverage products and reduced-salt products. The
strategic objective associated with this intensive growth strategy is to improve research
and development investments for innovation in the products. This strategy would
support the company to offer novel and unique products to attract more customer base
and grow the business. The product development strategy would also be helpful in
improving the customer base of the company. By new product development, the
company can improve its brand image among the customers as well as performance in
the operating market (Braun & Latham, 2014).

Business Strategy 11
Currently, there is a major change in the preferences of the customers. Customers want
more healthy products in food and beverages. In this manner, Pepsi can develop the
product by understanding the needs and desires of the customers. The company can
release a large range of health-friendly products including less sugar and high nutrition
value. This would be helpful for the company is targeting the health-conscious
customers.
Along with this, the company can also make innovations for children and offer the
products for them too. Various fruit juices in different flavored can be produced to attract
children. The company can add nutritious value in those products for targeting the
parents of children. These practices would be helpful for Pepsi to compete with rivals in
the industry.

Business Strategy 12
References
Biggadike, E. R. (2010). The contributions of marketing to strategic management.
Academy of Management Review. 6. 621-632.
Braun, M. & Latham, S. (2014). Mastering Strategy. Santa Barbara: ABC-CLIO.
Drummond, G., Ensor, J. & Ashford, R. (2012). Strategic Marketing: Planning and
Control. (4th). London: Palgrave Macmillan.
Fifield, P. (2012). Marketing strategy (2nd edition), Berlin: Reed educational &
publishing Pvt Ltd.
Martínez, P. (2012). The Consumer Mind: Brand Perception and the Implications for
Marketers, USA: Kogan Page Ltd