Introduction
The leading companies with a global footprint in the soft drink industry are Coca cola, Cadbury Schweppes and PepsiCo. The rivalry between these giants has shifted gears from the pop fight to other product flavors in order to seek exponential growth. The main areas of comparison of the giants are by market size, growth rate and profitability. The market size has been on the rise with 2004 clocking at $307 billion and an increase to $367 billion in 2009 (Kish u. a., 2001). The growth rate has been on the decline largely due to market saturation in the United States market. Stiff competition from substitute products such as coffee and tea are also observed to be a reason for the gradual decline. Profitability has been solid for the three companies but to increase further, the companies will have to diversify their product portfolio. In terms of geographical popularity coca cola dominates the market with a 50% share, followed by PepsiCo at 21% and Schweppes at 7% (Bedawy, Shawky, 2013). Coca cola derives most of its supremacy from Europe, Asia and North America while PepsiCo is dominant in the US market. Cadbury Schweppes has a stronger global presence than Pepsi due to their superb global mix. The graph below illustrates the soft drink dominance within the three giants.
General Environment Analysis
In order to understand the external uncontrollable factors affecting PepsiCo from a broader perspective the paper will break down the factors using the PESTEL and the PORTER’S FIVE FORCE analyses.
Political Factors
Governments of various countries affect businesses by imposing the requirements and modes of operation. A stable government provides an avenue for favorable growth and even more when there is intergovernmental cooperation. However, any initiatives against carbonates drinks by the government can ruin PepsiCo’s reputation and the company could take care of that by modifying its products to overcome any health issues identified in the products.
Economic Factors
Economic stability is crucial towards the growth of PepsiCo. Stable economies like the United Kingdom and the Unites states provide a favorable environment for business. The same can be said for fast growing economies like Asia and Africa. Conversely, a threat looms in slowdown economies like China this endangers the international growth potential but cautions the company to diversify more in order to achieve steady international growth.
Sociocultural Factors
Many consumers are following the ever-growing trend about health concerns in soft drinks. In this instance, the threat also offers PepsiCo an avenue for improvement of its products to factor in the concerns. Secondly, the busy lifestyle of the 21st century means that people are ready and willing to buy ready-o-drink foods and drinks. PepsiCo can take advantage by producing more for the large and busy consumer markets. Finally yet importantly, consumers are increasingly being discriminative about quality. PepsiCo can align to the consumers’ attitude by making sure marketing and products concur with current consumer behavior (Yüksel, 2012).
Technological Factors
The food and beverage industry is very dependent on technology in this regard it is essential for PepsiCo to boost and stream line its research procedures in order to provide utmost competence at this business level. Additionally in support core business processes such as strategic decision-making and product innovation, PepsiCo can run knowledge management systems in full throttle. Lastly, automation is key in the industry and PepsiCo ought to develop in this aspect as well, increasing the automaton machines would do well in stepping up the competition .(Description, Fruit, 2004)
Ecological Factors
With an increasing global environmental concern, consumers are pushing corporates to act their part in giving back to the environment. In this respect, PepsiCo can improve its sustainability standards by recycling and reusing which would not only conform to environmental standards but also attract customer support. Along the same lines, PepsiCo is facing climate change concerns over its supply chain. To reduce the risk facing the business the company can expand its borders and diversify more.
Legal Factors
The legal factors that PepsiCo conforms to include; GMO regulations, health, safety, and regulatory requirements satisfaction. GMO conformity particularly in Europe is a concern that will push PepsiCo’s innovation towards decisions that strive for satisfactory legal requirements in the long-term
In terms of the consumers bargaining power they wield a load of information that enables them to switch producers, the have access to information that enables them to choose rival products and the huge number of substitutes. PepsiCo can overcome this force by ensuring customer satisfaction.
The Company also has the duty to maintain a positive relationship with its suppliers. The suppliers provide raw materials that are critical towards integration and the final products. However, not very compulsive, this force should be considered by PepsiCo.
The threat of substitutes exists because of high performance by the rivals and availability of substitutes. The suitable substitutes and variety means that the company cannot enjoy steady market share. This is a strong threat that the company should give extra attention in order to reinforce customer loyalty.
The threat of new entrants though existing remains moderate due to the advanced stage of the industry and strong customer loyalty (Chun, Lee, 2013). New entrants will find it hard to penetrate the market due to the long serving giants that are well-recognized world over. Pepsi alongside Coca cola have the strongest brand names in the market and it this makes the threat subdued in their respect.
Recommendations
PepsiCo can utilize its strengths in order to overcome the threats that it faces. In order to improve their competitive advantage PepsiCo should to diversify its portfolio in order to minimize risk. The company can work towards implementing strategies that penetrate fast growing markets in order to grow their revenue. To cover for the health concerns, more health friendly products could be produced and more research and development done on the same. From an environmental standpoint, recycling and reuse should do enough in curbing any emerging questions and work towards business sustainability.
Conclusion
The Soft Drink industry is on the matured stage with all almost everything in the market having being exhausted. However, for PepsiCo their global footprint has been far from desirable and improvement in this area could breathe life into their business operations. The prosperity attained in the United States if replicated in the international market will put the Company toe to toe with Coca cola and increase revenue even further. Going forward it is important that the company deal with emerging issues that seem to derail the vision of the company. To thrust the company towards global dominance strategic decision should be geared towards a global perspective. For instance, marketing and advertisement should be cultural sensitive and designed for a specific niche around the world. This way the consumer can establish a sense of belonging with the company and consequently increase sales. PepsiCo can also work on increasing brand loyalty. The company has a very low score in brand loyalty and improvement could definitely increase and maintain market share. For instance, this could be done by targeting the health conscious consumer and developing strong advertisement with a complementary product for such a niche.
References
Bedawy, Randa El; Shawky, Zeinab (2013): „Upholding Competitive Advantage through Endorsing Corporate Social Responsibility: Case Study Pepsico Egypt“. In: Procedia - Social and Behavioral Sciences. 106, S. 3216–3234, DOI: 10.1016/j.sbspro.2013.12.371.
Chun, Yoon-Young; Lee, Kun-Mo (2013): „Life Cycle-Based Generic Business Strategies for Sustainable Business Models“. In: Journal of Sustainable Development. 6 (8), S. 1–15, DOI: 10.5539/jsd.v6n8p1.
Description, Business; Fruit, Quaker (2004): „COMPANY SPOTLIGHT: PEPSICO.“. In: New York. 8, S. 26–34.
Kish, Paulette; Riskey, Dwight R.; Kerin, Roger a. (2001): „Measurement and tracking of brand equity in the global marketplace - The PepsiCo experience“. In: International Marketing Review. 18 (1), S. 91–96, DOI: 10.1108/02651330110382014. — ISBN: 02651335
Yüksel, I (2012): „Developing a multi-criteria decision making model for PESTEL analysis“. In: International Journal of Business and Management. 7 (24), S. 52–66, DOI: 10.5539/ijbm.v7n24p52.
