Case Study Analysis: Pepsi Co

Introduction

Established by Caleb Bradham in 1893 in New Bern. North Carolina, Pepsi has grown to be one of the most remarkable and respectable brands within the food and beverage industry with its powerful global Slogan, "Embrace your past, but live for now." Pepsi is recognized and respected for its concern about the ecosystem, the people and its products. To begin with, the brand aims to minimize the impact of their business on the environment. In addition to that, the brand has made its mission to meet consumer requirements by constantly, it ensures to refine its food and beverages in a way that their consumers are satisfied. Lastly, its concern for the people has caused the brand to work to promote the recognition and appreciation for human rights, encourage engagement and diversity, and prompt profitability and economic progress in different communities worldwide.

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Just like any other established food and beverage brand, PepsiCo requires a strategic plan to ensure an organized marketing plan that leads to progressive growth. Considering the fact that PepsiCo's mission is to be "the world's premier consumer products company focused on convenient foods and beverages" (Lombardo, 2017), it only means that the brand has focused its business operations, policy, strategy, and marketing towards the provision of convenient food and beverages. PepsiCo has opted to attract consumers by building its legacy is the first food and beverage company to participate in the marketing of health awareness and willingly eliminating trans-fat from their products through the reduction of saturated fat, sodium, and added sugars in its products. By doing so, the food and beverage are able to focus on its fundamental capabilities, and this has led to the production of products that intrigue the millennials, therefore, increasing its customers within the food and beverage industry.

The Porter's five forces model will be used to determine PepsiCo's position in the food and beverage industry. The chief five elements in Porter's five force model include the power of suppliers, the power of buyers, competition intensity, threats from substitute products and threats from new entrants. Each of these elements plays a significant role in the analysis and decision-making process that determines whether a certain threat if either low, medium or high in relation to PepsiCo.

The Porter's Five Force Model

The Bargaining Power of Suppliers (Low)

To begin with, PepsiCo is known for its unique health-oriented products. Therefore, it is mandatory that PepsiCo maintains a cost-effective association with its suppliers due to the fact that the power of suppliers could have an impact on PepsiCo's industry domain. PepsiCo's supplier's bargaining power is based on:

• High comprehensive supply.
• Low onward incorporation of suppliers.
• Moderate magnitude of independent suppliers.

To begin with, the high comprehensive supply expands PepsiCo's alternatives in obtaining the raw materials for its business. As a result, the bargaining power of suppliers is reduced. In addition to that, the bargaining power of suppliers is also reduced by the low onward incorporation of suppliers since the control of the suppliers over PepsiCo is limited due to the fact that the brand has a variety of alternative suppliers. Lastly, given the fact that most of PepsiCo's independent suppliers have a moderate magnitude, their individual bargaining power is reduced. To conclude this, it is evident that the bargaining power of PepsiCo's suppliers is low. (Smithson, 2017).

The Bargaining Power of Buyers (High)

Considering the fact that PepsiCo depends on its customers for growth means that its buyers are among the top priorities. The aspects that determine the bargaining power of PepsiCo's buyers include:

• Low switching cost.
• High accessibility to information on PepsiCo's products.
• High availability of product alternatives.

Firstly, Pepsico's buyers have the capability to shift to another brand and but similar products at the same cost without any consequences. This provides the customers with a higher bargaining power as this shift could have a major impact on the brand. In addition to that, the presence of easily accessible information empowers buyers to know more about other products that are similar to PepsiCo's products. With this information, buyers could compare which products are better; therefore, buyers are presented with a variety of choices, and this increases their bargaining power. Lastly, the presence of alternatives from other brands such as Coca-Cola increases the buyers bargaining power. It is therefore evident that buyers have higher bargaining power over PepsiCo, this makes it mandatory for the brand to ensure that it meets the needs of its buyers in order to keep them from considering products from other brands. (Pratap, 2017)

Competition Intensity (High)

Just like any other brand in the food and beverage industry, PepsiCo faces competition from other brands. In this case, one of the major competitors of PepsiCo is Coca-Cola. The principal external factors that help determine the competitive intensity against the brand are:

• High competition from other existing brands.
• Low switching costs.
• A high number of existing brands.

First and foremost, most of the businesses in the food and beverage industry are highly competitive since they all want to be recognizable in order to attract more customers. This, therefore, increases the competitive intensity for PepsiCo. Besides that, the competition intensity increase due to the fact that consumers could easily switch brands and buy products elsewhere without any additional cost. Lastly, the existence of other well-established brands such as Coca-Cola elevates the competitive intensity. For example, Coca-Cola has been a long-term rival for PepsiCo since they both produce almost similar products. Coming to a conclusion, the competitive intensity is generally high for PepsiCo, and this is a significant concern for the brand. (Smithson, 2017).

Threats of Substitute Products (High)

Despite having established itself as a unique brand, Pepsico still faces threats of substitute products that consumers could opt to buy. The threat of substitute products is faced by most of the businesses in the food and beverage industry, due to this, Pepsi constantly aims at substituting its products based on their customer's needs. The threat of substitute products is determined by:

• High production of substitute products.
• Low switching costs for buyers.
• High obtainability of substitutes.

Considering the fact that most of the substitutes to PepsiCo's products have the same satisfactory quality, consumers could easily switch products and still be content. Other than that, some substitutes are more affordable than PepsiCo's products. This prompts consumers to prefer consuming these substitutes instead of PepsiCo's products. Lastly, taking into consideration that these substitutes are available in most grocery stores, it only means that consumers have easy access. With these factors, it is apparent that PepsiCo is facing a high threat of substitute products. (Dudovskiy, 2016)

Threat of New Entrants (Moderate to High)

As a business, it is PepsiCo's goal to remain strong and relevant despite the fact that there is a possibility of the threat from new entrants in the food and beverage industry. The dominant factors influencing the threat from new entrants include:

• Low switching costs for buyers.
• The high cost of brand evolution.
• Moderate buyer allegiance and loyalty.

To begin with, with the emergence of new entrants I the business, buyers could easily shift to other products if they have the same quality and affordable prices compared to PepsiCo. In addition to that, putting into consideration that PepsiCo's buyers have moderate loyalty, their buyers are more likely to continue buying their products even if new entrants emerge in the market. Lastly, it is difficult for new entrants to directly compete against PepsiCo due to the fact that the cost of brand development and establishment is relatively high. This slightly lowers PepsiCo's threat from new entrants. (Pratap, 2017)

To conclude on Porter's five forces on PepsiCo, the analysis shows that the bargaining power of buyers, the threat from substitutes, and competition are the most significant issues to the business. Therefore, the company should focus on being aggressive in order to increase its competitiveness through product innovation.

Generic Competitive Strategies

As a brand, it is vital that Pepsico uses a generic competitive strategy in order to minimize or eliminate any forms of competition within the industry. For PepsiCo to achieve a competitive advantage over its competition, it needs to have a lead over its rivals in consumer attraction and methods of managing its competitive intensity. Pepsico, therefore, makes use of Porter's generic competitive strategies: cost leadership and broad differentiation.

Cost Leadership Competitive Strategies

To begin with, Pepsico utilizes the cost leadership as its main generic competitive strategy. This particular strategy mainly aims at minimizing the cost incurred by a company as a means of improving the overall competitiveness and performance (Gamble, 2013). For example, in order for PepsiCo to effectively compete against its main competitor, Coca-Cola, the brand would lower its prices based on low operational costs. In other instances, the brand organizes promotional offers that have discounted prices.

Broad Differentiation Competitive Strategies

In addition to that, the brand makes use of broad differentiation as its subordinate generic competitive strategy. This type of generic strategy enables PepsiCo as a business to have a competitive advantage over its business rivals by attracting buyers and consumers using the unique features of their products. An evident example of how PepsiCo uses the broad differentiation strategy is when the brand markets its Lay's potato chips as a beneficial health product due to the fact that it has minimal saturated fat properties. The main purpose of this strategy is to create new products that address people's concerns about their health. This is exactly why the brand aims at eliminating trans-fat from their products by reducing saturated fat, sodium, and added sugars in its products. (Ferguson, 2017). As a result, the brand is seen to attract more consumers, and this is beneficial for the brand as it results to increase in sales which in turn increases the profit levels and this leads to the overall growth of the brand. In the end, the PepsiCo brand performs better than its competition.

External Environment Factors

PepsiCo has established branches in different locations across several countries; therefore, the brand has to deal with customers from different cultures and markets. In order to function well and meet consumer needs, the brand has been working around the PESTEL analysis which is based on five chief external environment aspects: political, economic, sociocultural, technological and legal factors. Each of these factors has impacted Pepsi as discussed below;

Political Factors

Just like any other business, PepsiCo is at the risk of being affected by political factors that are as a result of governments imposing certain requirements on businesses. Pepsico faces the following political factors:

• Political stability.
• Intergovernmental cooperation.
• Initiatives against carbonated drinks.

To begin with, political stability can be considered as an opportunity for PepsiCo to expand and open other branches; however, political instability may be a threat, and this would affect the performance of the brand. In addition to that, government cooperation is also an opportunity as it encourages the expansion of the brand...