PepsiCo Company is one of the leading food and beverage companies in the global market. It holds the significant market share in snack and beverage industry worldwide with brands such as Pepsi, Doritos and Tropicana among others. PepsiCo Company will be interesting for the economic analysis because there are both macroeconomic and macroeconomic factors that influence the company value in the global market. The general economic condition of the PepsiCo affects the prices to varying degrees and economic recession has a great impact on the prices of its products that in turn affects the profit. Thus, in the economic analysis of the PepsiCo Company we will focus on demand and production that depends on the price and cost of the products.
The reduction in the demand for goods by the firms in the consumption goods industries such as PepsiCo affects the market prices of these goods. In every firm, the equality between supply and demand can be realized at a level of production that corresponds to the level of production related to maximum utilization existing capacity of the company. Thus, most of the producers are a price taker in that they consider how the change in demand will affect their production and sales in the market. The producers aim at minimizing the cost of production and maximizing their profits, therefore a growing demand is a great advantage whereas a decrease in demand affects their company negatively.
The buyers of PepsiCo determine the demand for its products because demand refers to the behavior of people as they interact with one another in the market. Increase in Demand and introduction of new outlets of PepsiCo Company has led to the decline in production this year. The company has managed to employ strategies to allow expansion of its facilities to take advantage of a powerful demand. This is so because when demand improves, the price of the product increases in order to achieve the market equilibrium.
The company starts producing more in order to match the increased demand in the market. Opening of new outlets in different regions has made the market for products to grow and increased PepsiCo facilities. However, the expansion to match the growing demand requires production capacity because it allows the company to boost the capacity to achieve the market requirement. The company aims at maintaining constant growth and profitability via continued strategies to sustain cost management. The company is meeting increased demand via new production lines and enhanced distribution network.
According to the New York Times (2013), PepsiCo realized a higher profit than expected last week, despite high competition from Coca-Cola. This was due to price increases and productivity development that helped its margins because of weak soft drink sales in Europe and North America. Meanwhile, the company reported a decline in the tax rate and a $137 million profit associated with refranchising of its operations in Vietnam. The company increased its earnings growth of 7 percent and net income that amounted $2.01 billion. Thus, the net revenue increased by 2 percent to 16.81 that shows the demand for its product has grown significantly. Despite stiff facing stiff company from Coca-Cola, PepsiCo has managed to report increased growth because of growing demand of its product and improvement in productivity. The article shows how demand and production plays a significant role in the economic analysis of the company in the global market.
Reference
PepsiCo Profit Climbs Despite Weakness in Soft Drinks - NYTimes.com. (2013). Retrieved from http://www.nytimes.com/2013/07/25/business/pepsico-profit-climbs-despite-weakness- in-soft-drinks.html?ref=pepsicoinc&_r=0
