Strategic Management Analysis

This report analyzes the strategic management practices of Pepsi and Coca-Cola, focusing on their competitive positions, marketing strategies, and the impact of product failures. It includes a SWOT analysis for both companies and discusses the implications of their strategic decisions on their m...Read More

Strategic
Management
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TABLE OF CONTENTS
INTRODUCTION............................................................................................................... 3
MAIN BODY..................................................................................................................... 3
CONCLUSION.................................................................................................................. 9
REFERENCES................................................................................................................. 10
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INTRODUCTION
Strategic Management includes various types of strategies which are used for
defining the goals and objectives by the top management with determining the internal
and external environment in order to gain competitive advantage (Lubin, 2016). For
conducting the present research, food and beverage industry has been chosen. In that,
two organizations are selected such as Pepsi and Coca-Cola. These two organizations are
identifiers of food and beverage industry. This report consists of several factors that have
influenced the company's image through its strategical decision taken by the
management. Furthermore, both the organisations have faced strategic issues which
have affected the company’s competitive position.
MAIN BODY
Strategic Management
Strategic management can defined as a tool which is carried by the top
management of company to achieve better performance and accomplish their goals as
well as objectives. Strategic management also helps in enhancing the level of
competitive advantage which in turn leads to maximize the revenue of business. It
further includes a set of decisions which ensure about the future aspects of organizations
and leads to enhance the company's growth and performance (Strategic Management,
2016). Top management must have complete knowledge and analysis of the competitive
business environment so as to take correct decisions for the company. Top management
should conduct SWOT Analysis which describes about strengths, weaknesses,
opportunities and threats. Through which, managers can make the best possible usage of
strengths, reduce the organization’s weaknesses, ensure about developing opportunities
in the business environment and consider threats to overcome the situation (Hill and
et.al., 2014).
Strategic management is applicable to both the small and large sized organizations
because in this competitive world, company should have some strategies which can help
them to gain competitive advantage. It further plays a significant role in the organization
through which decisions are benefited to the organization (Rothaermel, 2015). It helps in
making strategic decisions, developing business policy, formulating, implementing and
evaluating various strategies etc. which help in developing major position in the
marketplace as compared to their competitors.
Company Overview
Companies chosen for the present report are Pepsi and Coco -Cola which come
under the food and beverage industry and both are famous brand for the carbonated soft
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drink. Overview of both the companies are as follows:
Pepsi
Pepsi is a carbonated soft drink which is produced and manufactured by the
PepsiCo Company. PepsiCo is a multinational food, snack and beverage organization
which is concerned mostly about the manufacturing and marketing of products in an
effective manner. Initially, it was introduced as Pepsi– Cola which later changed to Pepsi.
The original recipe of the Pepsi included sugar and vanilla (PepsiCo, 2016). The Pepsi is
named after pepsin that is the digestive enzyme which are contained in the drinks.
Effective marketing strategies of Pepsi make their brand to grow in the market and try to
compete with the other soft drink companies in the market. Marketing strategies through
which it sells its products include print media in which company uses different slogans,
jingles etc. which help in attracting large number of customer base.
Pepsi tries to target the youth through which it gains competitive advantage. Its
price is also reasonable so this helps in influencing all the middle and upper middle class
people to buy their products (Hitt and et.al., 2012). Segmentation for Pepsi considers
people who are seeking for a soft drink for regular occasion and parties. Positioning
strategy of Pepsi is very powerful through which it displays its brand as an iconic youth
brand in order to attract large number of customer base and to increase its profitability.
Company is also investing money in the sponsorship deals in international cricket teams.
Its main strategy is to strengthen the marketing position and their promotional activities
(Menon and Yao, 2014). In UK market, it has started to use a new Pepsi logo in cans so
that it differentiates from the US Pepsi can. Company is doing some charitable activities
which come under cause added value services through which company is gaining the
publicity as well as it is contributing in CSR activities.
Coca – Cola
Coca–cola is also a carbonated soft drink which is produced by The Coca–Cola
Company. This drink is often referred as Coke and in earlier times, it intended as patent
medicine which later changed into Coke. The Coca–Cola name was originated from kola
nuts which is source of caffeine and coco leaves (The Coca Cola Company, 2016). There
were many circumstances where many times Coca–Cola has opportunities to purchase
the Pepsi company but the former refuses on each occasion. This company sells their
products through retail stores, restaurants and vending machines. Under this name,
company is also offering various types of drinks such as Diet Coke, Caffeine–free Coca-
Cola, Coca-Cola Zero, Coca- Cola Cherry etc. In UK, company has introduced “share a
Coke” campaign on the some Coca- cola bottles to strengthen their marketing strategies
(Kapferer, 2012). This company also uses this tool to promote its products and increase
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its profitability.
Coca–Cola is targeting the people of all income class like lower, middle and upper
because price of its products is cheap and people are purchasing such products
continuously (Menon and Yao, 2014). As per the segmentation, company targets people
who want soft drink for any occasion and also the restaurants which serve soft drinks to
their customers. Company is positioning their product through a catchy slogan that is”a
soft drink for spreading happiness”. Advertisement from Coca – Cola is a powerful
strategy which uses to attract large number of customers and increase the sales revenue
of business. Coca–cola is a partner of RED campaign with other brands included in it. This
campaign is named as “Fighting For An AIDS Free generation” (The Coca Cola Company,
2016). Such campaign's mission is to prevent the transmission of HIV virus from mother
to child as soon as possible. Through this, company is adding the value added service to
the company in order to enhance its sales performance and profitability.
Factors affecting Competitive Position
Factors which affects Pepsi competitive position
The factors which are affecting the company's reputation is the introducing the
new Pepsi by the company named as Crystal Pepsi. In this contemporary era, the
customers are health conscious and want less calorie cola so the company launch Crystal
Pepsi which is new beverage in the market (PepsiCo, 2016). The Crystal Pepsi is clear,
caffeine -free soft drink which was the total failure. The company has promise that the
Pepsi will be clear liquid which was hard to believe by the customers because it can't be
possible. The tastes also also fails because it doesn't taste as cola at all. After two years,
the product was shut down by the company due to the failure. The company has
promoted the product as a healthy and pure diet beverage and done huge investment in
advertising campaign which gives positive outlook but it later failed in the market. The
issues which raised from the failure of the Crystal Pepsi are the competitors of the Pepsi
gained the competitive advantages.
By this, failure, Coca – Cola gained the competitive advantage among media and
public. This failure also introduced issues likes the taste of both the Pepsi are considered
as the same which doesn't attract more customers for the drink. PepsiCo tried to rescue
Crystal Pepsi’s negative positioning in the market performance by adding citrus flavour to
its clear cola. The company also decided to shorten its name to just Crystal and added
“from the makers of Pepsi” on the packaging (Raja and Kumar, 2014). The steps taken
were intended to reinforce that Crystal was a completely different formula and brand
from Pepsi-Cola. However, the product still failed eventually. Lack of market
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attractiveness was another major factor of failure of Crystal Pepsi. The other factors
includes poor name execution and significant point of differences.
Impacts on Pepsi when its product fails
There are various implications which affects the competitive position of the
company. The negative impact is that the rival of Pepsi that is Coca–cola gets advantages
to sell their products. However, it also gain some positive advantages to the company
due to their short- lived because it was the innovative product which has favourable
consumer attitudes towards the brand name (Iwamuro and et.al., 2015). Because of this
people has buy the product as well as contribute in the profitability. The main reason of
failure of Crystal Pepsi is it did not have significant point of difference compare with other
regular colas. However, this will results in failure which stopped the repeated purchases
from consumers. This product does not meet the needs and requirements of the
customers.
here was the less market attractiveness of the Crystal Pepsi. This has provide
negative impact on the company. Health-conscious and less frequent cola drinkers were
the target market of Crystal Pepsi (PepsiCo, 2016). However, it failed to provide the
image of healthy and distinctive beverage, so Crystal Pepsi could not fully attracted its
target market. Although Crystal Pepsi had a clear look from outside the bottle but it lack
in the pureness of taste. The name “Crystal” was very average that could not attract
Generation-X to purchase or try (Vedwan, 2012). In addition, consumers had the
impression of Pepsi related with Pepsi Cola, it was very difficult for health-conscious
consumers to accept that the Crystal Pepsi was healthier simply from its brand.
Factors which affects Coca - Cola competitive position
The factors which affects the Coca – Cola's image was branding strategy of the
company which has affects its reputation. The branding strategy which has company
decides was to terminate its most popular soft drink and replace it with a “New Coke”.
This results in, Coca – Cola brand failure strategy. The main reason behind this strategy
was the war between the two leading cola company (The Coca Cola Company, 2016). The
company has faced other issues like competing with arch- rival Pepsi who has
repositioned itself as the youth drink which has narrow the sales of the Coca – Cola
company. The company was to failed to make new taste for the customers. When
company launch new coke to the customers, at that time company has stop the
production original Coca Cola which is the the biggest mistake was done by the company.
The biggest issues was the company does not done any research in the market
and the Coca – Cola company does not considered the tastes and preferences of the
customers. This is because they assumed that taste was deciding factor in consumer
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buying behaviour. The company doesn't realize the emotional involvement of the
customers and symbolic value of the original Coke (Wilson and et.al., 2016). In this, the
decision making power is the wrongly done which has caused this type of issues in the
Coca cola company. The other problem was that the Coca-Cola company had severely
underestimated the power of its first brand. In other words, Coca-Cola had learnt that
marketing is about much more than the product itself. The market research and copied
formula from Pepsi are also the main issues for the Coca – cola company. Despite of the
tremendous amount of promotion which encircled the launch of New Coke it was destined
to fail.
Impacts on Coca - Cola when its product fails
There are various impacts which affects the competitive position of the company.
The negative impact is that the rival company of Coca – Cola is Pepsi which is gaining
competitive advantages for their soft drink. Coke had underestimated the power of its
iconic brand which has the negative impact on the organization. Due to this, consumers
has outraged on the new product and wanted their original product back and started
boycotting the New Coke (The Coca Cola Company, 2016). After few months later, the
company brought back their original formula back but the new product was disappeared
from the market. This will lead to the decrease in their sales and market share which is
biggest loss to the company. To stop their original coke by launching new one is the key
blunder from the company which has affected the brand image as well its profitability.
The company has lower their sales by diminishing their originality which has the great
impact of the company (Aaker, 2012). The research has not done properly which is also
the major setback for the organization.
Coca – Cola always emphasis on the 'original' status in their various advertising
campaign. These has put the negative effect on the advertising campaign of the Coca –
Cola company because launching of the New Coke, Coca-Cola was thus, contradicting its
previous marketing efforts. Some theorists like Lubin (2016) concluded that it may be the
publicity stunt to gather large number of customers and indirectly shows the power of
the original Coca – Cola (Lubin, 2016). But, this was denied by the company that it was
not done for the publicity which has preserved some loyal customers to not lose trust on
the company. The has not considered the brand's perception which results in negative
impact as well as affected the company's sales performance (). There are some positive
impact also which is developing the strong bond between the original Coke and their
loyal customers. Not doing the perfect market research on the customer's tastes,
preferences and perception can led to the negative impact on the company' reputation.
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SWOT Analysis
Pepsi
Strengths:
 Its excellent Branding and Advertising done by the PepsiCo company.
 The company enjoys a high – profile global presence in the world.
 The company is making aggressive marketing strategies to increase their
profitability. The company is using excellent distribution channel and easily available to their
customers (Mundra and et.al., 2012).
Weaknesses:
 The biggest weakness of the company is launching the Crystal Pepsi which is
unable to attract customers (PepsiCo, 2016). Other weaknesses can be carbonated drink market is declining because people is
becoming more health conscious.
Opportunities:
 The company is increasing consumer concerns in comparison to bottled water. The company can produced more healthier beverages such as growth in tea and
Asian beverages (Hitt and et.al., 2012).
Threats:
 The biggest threats from Coca Cola soft drink.
 Threats from substitutes like fruit juices. Boycott from health conscious people.
Coca-Cola
Strengths:
 Greater brand recognition in the world.
 Customer loyalty towards the original coke.
 Market leader in the United Kingdom. The company has secret formula for their coke (Smith, 2014).
Weaknesses:
 The biggest mistake done by the company was to introduced new soft drink as
“New Coke” which has been boycott by the customers. It does not contain any fruit or pulp, it has all artificial flavours (The Coca Cola
Company, 2016).
Opportunities:
 It has potential to acquire other companies. Expanding in new and existing markets.
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Threats:
 The biggest threats from Pepsi soft drink which is targeting the youth.
 The company has higher commodity prices (Hill and et.al., 2014).
 Health conscious people are avoiding the aerated drinks.
CONCLUSION
This report concluded that the Pepsi and Coca – cola are the arch competitors in
the market. The biggest mistakes which done by the company was launching new
products which results in the failure. These failure gives negative impact to the company
and affects the company reputation. Crystal Pepsi and New coke is the biggest loss to the
company in terms of sales performance and in the profitability and this happens when
company does not consider customers' needs and requirements.
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REFERENCES
Journals and Books
Aaker, D. A., 2012. Brand extensions: the good, the bad and the ugly. Sloan management
review. 31(4). pp. 22-33.
Hill, C. and et.al., 2014. Strategic management: theory: an integrated approach. Cengage
Learning.
Hitt, M. and et.al., 2012. Strategic management cases: competitiveness and
globalization. Cengage Learning.
Iwamuro, M. and et.al., 2015. Gastric Bezoar Treatment by Endoscopic Fragmentation in
Combination with Pepsi-Cola® Administration. The American journal of case reports.
16. p.445.
Kapferer, J. N., 2012. The new strategic brand management: Advanced insights and
strategic thinking. Kogan page publishers.
Menon, A. R. and Yao, D. A., 2014. Elevating Repositioning Costs: Strategy Dynamics and
Competitive Interactions in Grand Strategy.
Mundra, N. and et.al., 2012. A Comparative Analysis of the Customer's Perception on
Carbonated Drinks: Pepsi versus Coca-Cola versus RC-Cola. Khoj Journal of Indian
Management Research & Practices, 3(2). pp. 22-34.
Raja, R. V. and Kumar, A., 2014. The impact of harmful ingredients over the consumers in
reference with coke and pepsi. ZENITH International Journal of Multidisciplinary
Research. 4(6). pp.147-162.
Rothaermel, F. T., 2015. Strategic management. McGraw-Hill.
Smith, C. W., 2014. " We didn't want to totally break the law": Industrial Legality, the
Pepsi Strike, and Workers' Collective Rights in Canada. Labour/Le Travail. 74(1).
pp.89-121.
Vedwan, N., 2012. Pesticides in Coca-Cola and Pepsi: Consumerism, Brand Image, and
Public Image in a Globalizing India. Cultural Anthropology. 22(4). pp.659-684.
Wilson, T. and et.al., 2016. Beverage Trends Affect Future Nutritional Health Impact. In
Beverage Impacts on Health and Nutrition. 2. pp. 351-358.
Online
Lubin, G., 2016. Here's The Real Difference Between Coke And Pepsi. [Online]. Available
through: <http://www.businessinsider.com/the-difference-between-coke-and-pepsi-
2012-12?IR=T>. [Accessed on 22nd March 2016].
PepsiCo. 2016. [Online]. Available through: <http://www.pepsico.co.uk/company>.
[Accessed on 22nd March 2016].
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Strategic Management. 2016. [Online]. Available through:
<http://www.businessdictionary.com/definition/strategic-management.html>.
[Accessed on 22nd March 2016].
The Coca Cola Company. 2016. [Online]. Available through: <http://www.coca-
colacompany.com/stories/coke-lore-new-coke/>. [Accessed on 22nd March 2016].
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