operations would be done; and critical appraised of theimpact of social, environmental, ethical, legal and governance issues on theorganisation would be examined.
Havingassessed the extent to which the organization is managing tensions betweencorporate responsibilities and maximizing shareholder value, the assignmentwould be concluded in such a way critical thinking and original thought wouldbe demonstrated. Critical Analysis of PepsiCo PepsiCo is anAmerican Multinational company specializing on manufacturing marketing, anddistribution of grain based snack, foods, beverages and other products formedin 1965 with the merger of the Pepsi cola company and FritoLay, Inc., PepsiCohas since expanded from its namesake product Pepsi to a broader range of foodand beverages brands. According to PepsiCo Annual Report (2016), the company isa leading global food and beverage company with a complementary portfolio ofenjoyable brands, including Frito-lay, Gatorade, Pepsi cola, Quaker, Tropicana,Pepsi, Mountain Dew, Sierra Mist, WBD, Role Gold, Dontos, and Cheetos etc. PepsiCoReport (2016) declares that the company’s brands generated retail sales of morethan $62.799 billion as 0.4% decrease our that of 2015, and the companyproducts were distributed across more 200 countries with 264, 000 employees allour the globe through its standard operators, authorized bottlers, contractmanufacturers and other third parties.
Pepsi cola, as one of the beverages produced by the PepsiCo,has gone above and beyond the original beverages to incorporate a wide varietyof brands. In US, some of the most well-known brands include Mountain Dew,Sierra Mist, IZZE and Aquafina beverage. However, the growth of soft drinks hasbeen decreased because of a new wave of health consciousness that swept thenation. In view of this, it is required of PepsiCo to innovate so as to produceor acquire healthier brands that appeals to the masses and some of the drinksare: Muscle Milk, Honest Tea, and Vitamin Water (Kaplan, 2010).
Gatorade becomesthe third most popular selling drink under popular selling drink under PepsiCoafter acquiring it from Quaker Oats Co. in 2001. Despite Gatorade’s success,the product faces the lack of appeal for the younger generation which thereforemakes PepsiCo spend the largest amount of money in its history to create a newGatorade campaign and line up called “G Series”. The G series has two major purposesin revitalizing the Gatorade brand: It seeks to demonstrate that Gatorade canbe used for more than hydration and Nutrient replacement, and it is targeted inone towards teens.
PepsiCooffered products mainly for all types of customers, but there are situationswhere products are specifically made for certain customers. The company seesteenagers as the prime market for the G series with the belief that peoplefirst become Gatorade fans at that age (Elliot, 2008). With this marketingstrategy, PepsiCo hopes to effectively target two distinct markets.
Critical Analysis of PepsiCo’s Environment Whenanalyzing the environment of the company, both internal and external factorswould be examined. The internal analysis encompasses SWOT analysis and theexternal analysis includes PESTLE and Porter’s five force model. Under the SWOT analysis, both internal andexternal strategic factors would be considered.SWOT ANALYSIS OF PEPSICO The SWOTanalysis framework identifies the strengths and opportunism that the businessand opportunities that the business can tap to address its weaknesses andthreats. As a global company, PepsiCo must see to the issues shown in this SWOTanalysis to reduce barriers to its global performance. Therefore, SWOT analysisenhances the position of a company to grow and reach the top position in theglobal food and beverage industry (Piercy, 1989).
PepsiCo’sSWOT analysis presents major challenges in the area of competitions changingconsumer behaviour, and product development.PepsiCo’s Strengths (Internal Strategic factors). According to PepsiCo 2014 annual report, PepsiCo’s continuedglobal growth and prominence reflects the company’s strengths. This componentof the SWOT analysis framework outlines internal strategic factors that enablefirms to fulfill their business goals (Leigh, 2006). The most significantstrengths of PepsiCo are in examined in the following areas.
As asuccessful global company, PepsiCo has comprehensive product portfolio withmore than 100 brands serving nearly ever niche in the beverage, good and snackindustries. Having commenced operations in 1965, PepsiCo become the secondlargest food and beverage company earned US$62.799 billion in 2016 consequentupon strengthening its product portfolio and offering as many differentbeverages and foods as possible (PepsiCo Annual Reports, 2016). PepsiCo’sbrand portfolio is highly diversified. No competitor has as many high earningbrands as PepsiCo. They each rely on a few main products to each the majorrevenue which makes them very vulnerable to any changes in their core products’markets.
PepsiCo isbetter equipped to satisfy the needs of its customers with its under variety ofsuccessful products. The company offers different type of beverage of shack andits brands can be often be substituted for each other. For instance, lays canbe substituted for Doritos, Cheetos, Ruffles, Fritos or Tostito. PepsiCo canoffer many more choices if one product doesn’t not satisfy a consumer’s needs.
Truly, changes in consumer tastes do not affect the company as severely as theywould other companies. Secondly, PepsiCohas strength in the area of brand recognition and reputation. PepsiCo ours andmarkets some of the most recognizable global brands, including Pepsi,Tropicana, Gatorade, Mountain Dew and many other popular brand. According to PepsiCoInc. (2015), the Pepsi brand is the 22nd and 30th mostvaluable brand in the world, worth US$18.
2 billion respectively. No othernon-alcoholic beverage brand besides Pepsi which has been recognized as beingone of the top 100 most valuable brands in the world, except for Coca-Cola andsprite. PepsiCo’sextensive global production and distribution network are strengths that supportthe company’s international growth and expansion strategies. In view of SWOTanalysis, PepsiCo’s strengths are sufficient to support its global growthstrategy (PepsiCo Inc.
, 2012).PepsiCo’s weaknesses (Internal Strategic Factors). The companyis faced with a number of weaknesses acting as barriers to internal growth. Theinternal strategic factors that limit organizational development are consideredin this component of the SWOT analysis framework.
The PepsiCo’s main weaknessesare low penetration outside the Americas, limited business port-folio, and weakmarketing to health-conscious consumers (Morris, 2008). PepsiCoderives about 70% of its revenue from North America and South America markets.Impliedly, this weakness indicates that the company has not yet maximizedpotential revenues outside the Americas. In addition, PepsiCo operatesprimarily in the food and beverages industry. This is a weakness in that itmaximizes the company’s vulnerability to risks in the food and beveragesindustry. This is a weakness in that it maximizes the company’s vulnerabilityto risks in the food and beverage market. Also, PepsiCo fails in effectivelymarket many of its products to health-conscious consumers.
This aspect of theSWOT analysis signifies weaknesses that PepsiCo must handle through changes inits growth strategy. PepsiCo’s Opportunity (External Strategic Factors) Opportunitiesarise consequent upon environmental factors and changes. Changes in theeconomic environment, such as a new Finance Act, might create opportunities forthe introduction of new savings, such as ISAS, (ABE, 2008). PepsiCo hasopportunities for continued and sustained global growth. In view of thecomponent of the SWOT analysis framework, external factors that promote optionsfor business improvement are identified.
The areas in much PepsiCo’sopportunities are obvious are business diversification, Market penetration indeveloping countries and global alliances on the complementary business PepsiCo hasthe opportunities to diversity its business in that it acquired a complementaryfirm that is not in the food and beverage industry. For instance, PepsiCo brokeinto the bottle of water in 1997. Other principal PepsiCo acquisitions includedtaco Bell and Pizza Hut Inc. (From which they were later spun off the company1997); 7up international in 1986, and Tropicana products in 1998. Pepsi hasalso profited through corporate partnerships, such as a joint venture with theThomas J. Lipton Company in 1991 and a partnership with Starbucks in 1994 and apartnership with Starbucks in 1994 to develop coffee drinks (Cooper, 1997).
Anotheropportunity is for PepsiCo to increase its penetration in developing countriesto generate more revenues from markets outside the Americas. Also, PepsiCo hasopportunities in creating alliances with complement any business to increaseits market presence. Therefore, based on this aspect of the SWOT analysis, PepsiCohas significant opportunities to strengthen its business resilience (PepsiCoInc., 2012).Threats facing PepsiCo (External Strategic Factors) These arealso the result of changes in the environment increases in interest rates(which may have to come sooner rather than later) and a downturn in the economyforce banks to make increased provision for bad debts, threateningprofitability and capital adequacy.
(ABE, 2008). PepsiCo experiences threatswhich are aggressive competition, healthy lifestyles trend andenvironmentalism. These threats which are external strategic factors could reducebusiness performances which are seriously considered in the aspect of the SWOT analysis. Aggressivecompletion is a major threat against the company. The Coca-Cola company hashistorically been considered as PepsiCo’s primary competitor in the beveragemarket (Pyke, 2010), and in December 2005, PepsiCo surpassed the Coca-Colacompany in market value for the first time in 112 years since both companiesbegin to compete. The Coca-Cola held a higher market share in carbonated softdrink sales within the US (PepsiCo Annual Report, 2009). Anotherthreat experienced by the PepsiCo is the healthy lifestyles trend which hisagainst the company’s products, many of which are seen as unhealthful due totheir salt, sugar, or fat content.
Likewise,environmentalism threatens the company as the way consumers negatively respondto product waste and life cycle issues. Therefore, this component of the SWOTanalysis shows that the company must reform its strategies to overcome threatsto business undertakings (Jackson, 2003).