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A low concentration of market share is always held by many rival firms making the competitive landscape more intense.
Threat of substitutes; Substitutes refer to other products in other industries. Pepsi deals with beverage industry and food industry for example. The private label food products that are low priced compared to those of Pepsi which is highly priced, is leading to price wars as customers opt for cheaper products.
Buyer power; The purchasing power of buyer increases when suppliers are many and few buyers of a product and is low when buyers are many with few suppliers'. It's important for Pepsi the behavior of their customers in order to lay effective strategies.
Supplier power; Suppliers' if powerful can exert an influence on the producing industry. As a producing industry, Pepsi can use this platform to establish a buyer-supplier relationship and capture some of the industry profits. This is possible through merger with other suppliers' in the same industry.
The threat of new entrants and entry barriers
The ease with which other firms can enter and exit a particular market the higher the rivalry. Soft drinks industry requires huge capital investments and entrant in this market is low. Thus, Pepsi can maximize its profits through steady price levels.
Internal Analysis
PepsiCo has wide financial base obtained mostly from its sales, infrastructures such as control systems, materials supplies and equipments. Intangible resources include; the company culture, training and technologies that add value to operations of Pepsi.
To gain much value from the use of the above resources, the managers have to cooperate in designing of market tools and synchronize all the operations to minimize the cost and maximize on the gains. In addition, Pepsi should lay emphasis on the use of technology to support its value creating activities (NetMBA, 2010).
Other value chain activities...
According to prenhall, (2010) Pepsi has embarked on the use of Business Process Transformation (BPT), an initiative geared towards integration of key business processes such as finance, consumer insight, purchasing and supply chain as well as customer service. Furthermore, technological development will aid PepsiCo to minimize its haulback costs while improving the delivery system and reduction of inventory handling costs. This would enable Pepsi to price the products consumers will be willing to pay just above the cost of activities in the value chain.
Once this is done, Pepsi will develop strong core competencies in cost reduction that will eventually improve its sales performance. The cost-benefit analysis will help the firm to allocate such costs in value chain activities through interrelationship of business units.
References
NetMBA,(2010). Strategic Management: Value Chain. Retrieved on December 2, 2011 from http://www.netmba.com/strategy/value-chain/
Prenhall, (2010).Enterprise Integration: The Pepsi Challenge. Retrieved on December 2, 2011 from http://wps.prenhall.com/bp_laudon_essbus_7/48/12303/3149766.cw/content/index.html
QuickMBA (2010). Porter's 5 Forces: A Model for Industry Analysis. Retrieved on December 2, 2011 from http://www.quickmba.com/strategy/porter.shtml
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