Pepsico in This Text, I Select Pepsico

PepsiCo

In this text, I select PepsiCo as my company of choice for the analysis. Amongst other things, I will determine the impact PepsiCo's primary stakeholders, vision, and mission have on the company's overall success. I will also carry out an analysis of the five forces of competition and how they impact on PepsiCo. Further, in addition to conducting a SWOT analysis of the company, I will also discuss a wide range of other strategic management issues in relation to PepsiCo.

PepsiCo: Overview

PepsiCo describes itself as "a world leader in convenient snacks, foods and beverages" (PepsiCo, 2012). Some of the most popular brands on PepsiCo's stable include but they are not limited to Pepsi Cola, 7UP, Lay's potato chips, Tropicana Juices, etc. Headquartered in New York, the company's main competitor remains the Coca-Cola Company. PepsiCo's current chief executive officer is Indra Krishnamurthy Nooyi.

Impact of PepsiCo's Primary Stakeholders, Vision, and Mission on its Overall Success

PepsiCo (2012) outlines its mission as:

Our mission is to be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners, and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

In basic terms, a closer look at PepsiCo's mission statement clearly indicates that it has its focus on all the key stakeholders of the company, i.e. investors, employees, business partners (e.g. suppliers), communities in which it operates, as well as consumers. This unifying approach in my opinion acts as a lighthouse of sorts for the company as far as its purpose and direction is concerned. In that regard, it is unlikely that PepsiCo could veer off the path as it seeks to attain its purpose and/or fulfill its commitment to stakeholders. The relevance of the said mission statement cannot hence be overstated when it comes to the enhancement of the PepsiCo's overall success.

When it comes to the PepsiCo's vision, the same is outlined as: "PepsiCo's responsibility is to continually improve all aspects of the world in which we operate -- environment, social, economic -- creating a better tomorrow than today" (PepsiCo 2013). Essentially, a vision statement captures a given company's aspirations. PepsiCo's vision statement tells us what the company wants to become. In that regard, it is largely motivational and inspirational to PepsiCo's employees, shareholders, customers, and other partners. Thus in addition to serving as a roadmap for the company's future, PepsiCo's vision statement acts as an adhesive that bonds together all the relevant stakeholders of the company. The vision statement thus remains critical as far as the overall success of PepsiCo is concerned.

PepsiCo's key stakeholders also have an important role to play in the overall success of the firm. The company's key stakeholders include but they are not limited to customers, employees, shareholders, suppliers, and the government. Customers purchase the products offered for sale by the company. Their purchase decisions affect PepsiCo's bottom-line and hence its overall success. Employees on the other hand affect PepsiCo's overall performance through the level of commitment that they exhibit in their work. When it comes to shareholders, it is important to note that their decisions (via the board of directors) have a significantly impact on the success of the firm going forward. To ensure that its operations run smoothly, PepsiCo needs the cooperation of suppliers. This is more so the case given that the overall success of the firm on this front, especially as far as production is concerned is largely hinged on the timely, efficient, and cost effective delivery of the required raw materials. Lastly, government regulation could force PepsiCo to modify, review, or even disrupt some aspects of its operations. This could have an impact on the overall success of the firm.

The Five Forces of Competition and their Impact on PepsiCo

Designed by Henry Porter, the five forces of competition according to Henry (2008) include "(1) threat of new entrants, (2) bargaining power of buyers, (3) bargaining power of suppliers, (4) threat of substitute products or services, and (5) intensity of rivalry among firms in an industry." As the author further points out, it is by examining these forces that an organization enhances its ability to assess how effectively it can compete in a given industry (Henry, 2008).

When it comes to the threat of new entrants, Henry (2008) points out that the more profitable an industry is; the higher the probability of new firms setting up operations. The entry of new firms in an industry effectively intensifies competition in the said industry leading to decreased profits. New firms could also be attracted into a specific industry by the relative ease of setting up a business. As Henry (2008) notes, "the threat of entry will depend on the existence of barriers to entry and the reaction of existing competitors." It is important to note that in the industry PepsiCo does business in, i.e. beverages - soft drinks industry, there are significant barriers to entry including but not limited to intense capital requirements. There are also a wide range of regulatory standards companies wishing to establish operations in this particular market have to satisfy. In that regard, there is no immediate threat of new entrants in the beverages - soft drinks industry. For this reason, it is highly unlikely that PepsiCo could lose its market share to new entrants.

Next, in regard to the bargaining power of buyers, Henry (2008) is of the opinion that "buyers can affect an industry through their ability to force down prices, bargain for higher-quality or more services, and to play competitors off against each other." In PepsiCo's context, buyers could be the individuals who purchase and consume the various products offered for sale by companies in the industry. Buyers could also be the firms, i.e. wholesalers, who distribute the brands of various companies in the industry to individual customers. In seeking to chart the bargaining power of buyers, it would be prudent to analyze the nature of the beverages - soft drinks industry. To begin with, the beverages - soft drinks industry is made up of only a few big companies. Products in this case are also significantly differentiated, that is; the products offered for sale by the Coca-Cola Company significantly differ from those offered for sale by PepsiCo. In such a case, it would be hard for buyers, i.e. supermarket chains, to force down prices by threatening to play individual companies against each other. Thus in the final analysis, buyers in the beverages - soft drinks industry do not possess sufficient power to force down the prices of products individual companies like PepsiCo offer for sale.

When it comes to the bargaining power of suppliers, Henry (2008) indicates that "suppliers can exert bargaining power over participants in an industry by raising prices or reducing the quality of purchased goods and services." In regard to the beverages - soft drinks industry, suppliers include all the firms that provide players in the industry with the relevant inputs including services, materials, or even labor. Given the many products offered for sale by PepsiCo, it would be appropriate to take into consideration only its beverages segments in this particular case. Some of the materials used in the manufacture of most of PepsiCo's beverages include but they are not limited to sugar, natural flavors, and citric acid. Essentially, although the products listed in this case do not have substitutes, they are sold by many suppliers who also happen to be small in size. Companies in the beverages - soft drinks industry could therefore choose to purchase a product from any of the many sellers available. Further, the sheer size of companies like Coca-Cola and PepsiCo means that their purchase volumes are rather high. For this reason, they can exert significant pressure on the margins of their suppliers. Suppliers in this industry cannot therefore be said to be in a powerful position and for this reason, they do not have the ability to significantly influence PepsiCo's bottom-line.

Fourth, we have the threat of substitute products or services which according to Henry (2008) "is not competition from new entrants, but from products and services which can meet similar needs." As the author further points out, substitutes can effectively limit a given industry's returns by imposing the maximum price players in a given industry can charge. Substitutes to the various soft drink brands offered for sale by companies in the beverages - soft drinks industry include bottled water, coffee, energy drinks, etc. The existence of substitutes according to Henry (2008) effectively means that an increase in price could motivate customers to switch to substitutes. In that regard, it would be hard for PepsiCo to revise the price of its products upwards.

Lastly, the intensity of rivalry among firms in a specific industry according to Henry (2008) can be regarded "a determinant of the competitive state of most industries and their overall profitability." A high degree of rivalry according to the author leads to decreased profitability. The main competitors in the beverages - soft drinks industry are the Coca-Cola Company and PepsiCo. Other significant players in the industry include Mondelez International and Dr. Pepper Snapple Group. Traditionally, competition in this particular industry has been most intense between Coca-Cola and PepsiCo, with both companies fighting for market dominance. Both companies also have huge advertising budgets and from time to time, competition has been on the basis of price. The intense competition in the market could have a negative impact on PepsiCo's bottom-line. This is more so the case given that the elaborate marketing campaigns mounted by its rival Coca-Cola could end up eroding PepsiCo's market share.

PepsiCo SWOT Analysis

SWOT Analysis

Internal Analysis

Strengths

Weaknesses

* The Company's brands are recognized globally. Its flagship brand is Pepsi

* Has a product portfolio that is significantly diversified.

* Has a supply chain network that is regarded efficient

* Significant market share

* Inefficient quality and assurance controls that lead to product recalls

* Lagging sales in some markets as a result of poor marketing strategies

External Analysis

Opportunities

Threats

* Emerging markets

* Possible growth of some segments, i.e. The bottled water segment

* Growth in population

* Strong competition from competitors like Coca-Cola

* Brand image could be affected by cases against product

* Increased health consciousness among the masses

* Changes in government regulation

Strategy: How PepsiCo Could Minimize its Weaknesses and Threats While at the Same Time Capitalizing on its Strengths and Opportunities

In an attempt to minimize its weaknesses and threats, PepsiCo should first conduct an audit of its quality assessment team in an attempt to determine its readiness to identify and appropriately address defects in any of its products. This could help the company avoid future recalls of defective products which in a way hurts its image. Further, such a move would also protect the company from legal liability while at the same time preserving its image. Last year, the company had to recall dozens of orange juice cartons after it was established that the drinks were contaminated (Batty, 2012). The company should also develop a different marketing strategy for each of the regional markets it operates in. In addition to seeing the company enhances its sales across all markets; such a move would also enable PepsiCo to counter the stiff competition it faces from Coca-Cola in markets such as China. Coca-Cola according to Bloomberg News (2012) controlled approximately 15.8% of the Chinese beverages market as of 2011. In seeking to minimize the effects of the changing tastes of customers, the company has in the past released Diet Pepsi -- a more healthy variation of the traditional Pepsi Cola.

The company could capitalize on its strengths and opportunities by amongst other things defending its market share. In this case, PepsiCo could seek to further enhance its operational effectiveness so as to further expand its market share. This is more so the case given that most of PepsiCo's brands already have global recognition. PepsiCo could also adopt the flank attack approach in which case it may choose to challenge Coca-Cola's uncovered segmental or geographical areas. The company's efficient and impressive distribution network could come in handy in this particular case.

The Types and Levels of Strategies PepsiCo Could Utilize so as to Maximize its Profitability and Competitiveness

To begin with, PepsiCo could make use of one of Porter's competitive strategies to enhance its competitiveness as well as profitability. In my opinion, a cost leadership strategy would be most appropriate given the nature of the industry PepsiCo operates in. A firm adopting this particular strategy according to Griffin (2012) "attempts to gain a competitive advantage by reducing its costs below the costs of competing firms." In so doing, PepsiCo would be able to rake in profits while offering its products for sale at a price that cannot be matched by any of its competitors. This it could achieve by improving not only its organizational systems but also its distribution and operating efficiencies. By making use of this strategy, PepsiCo will secure a larger market share in the long-term.

PepsiCo could also make use of vertical integration to not only enhance its competitive position but to also strengthen its business model. Vertical integration according to Cole (2003) has got to do with the expansion of operations by taking over a distributor firm or a supplier firm. In my opinion, PepsiCo's adoption of this strategy could further advance its cost leadership strategy. This is more so the case should PepsiCo utilize the strategy to establish its presence in industries that in one way or the other add value to its core business.

Communicating the Strategies Identified Above to Stakeholders

In seeking to develop a communication plan, I will first clearly define the message I would wish to communicate, the stakeholders to receive the message, and the communication tools to be utilized. The message to be communicated in this case has got to do with the various strategies to be utilized in seeking to maximize both the profitability and competitiveness of PepsiCo. Stakeholders to whom the message should be communicated to include the company's shareholders, the government, trade unions, and employees. In this endeavor, I could utilize a variety of communication tools such as mailings, emails, newsletters, company website, etc.

Corporate Governance Mechanisms Used by PepsiCo

Two of the many corporate governance mechanisms PepsiCo makes use of in a bid to protect the interests of stockholders include a Board of Directors and audits. According to PepsiCo (2012), its Board of Directors comprises of a dozen independent outside directors and one executive director. Using its various committees, PepsiCo's board serves as a bridge between the company's management and shareholders. By reviewing the actions of PepsiCo's management, the board ensures that individuals who do not make meaningful contributions towards the achievement of organizational objectives are identified and replaced.