Stretegic Analysis of Pepsi

Strategic Analysis of PepsiCo | | Introduction Pepsi co is a carbonated beverage that is produced and manufactured by PepsiCo. It is sold in stores restaurants and from vending machines. The drink was first made in the 1890s by a pharmacist Caleb Bradham in New Bern, North Carolina. The brand was trademarked on June 16 1903. The has been many Pepsi variants over the years since 1903 to name a few they have Diet Pepsi, Crystal Pepsi, Pepsi Twist, Pepsi blue, Pepsi raw, Pepsi one etc. PepsiCo is situated in a soft drink industry that is dominated by Coca Cola. By the time it got into the market Coca cola had already made its mark among the public and the newcomer Pepsi found it hard to find a consumer base. Their first effective marketing strategy, they put their sodas in beer bottles and sold them cheaper than Coke. There was more drink for less money. They started selling, and Pepsi was seen as the poor man’s cola. Although this strategy worked, Pepsi recognized that if their image remained as that of the Poor Man’s Soda, their customer base would never widen. In order to improve its image, Pepsi devised a new marketing strategy by employing celebrities for its advertisements. One of their first celebrity endorser was Barney Oldfield, the pioneer for automobile racing. Afterwards, PepsiCo dipped its marketing hands into acquiring even more business. They bought Taco Bell and Pizza Hut and exerted effort into developing overseas restaurant ventures. One of the most successful advertising and promotion campaigns in history. SWOT Analysis Strength †¢ Pepsi has a broader product line and outstanding reputation. †¢ Merger of Quaker Oats produced synergy across the board. †¢ Record revenues and increasing market share. †¢ Lack of capital constraints (availability of large free cash flow). †¢ Great brands, strong distribution, innovative capabilities †¢ Number one maker of snacks, such as corn chips and potato chips Weakness †¢ Pepsi hard to inspire vision and direction for large global company. Not all PepsiCo products bear the company name †¢ PepsiCo is far away from leader Coca-cola in the international market – demand is highly elastic. Opportunity †¢ Pepsi should expand into markets that they are not currently in. †¢ Food division should expand internationally †¢ Noncarbonated drinks are the fastest-growing part of the industry †¢ Pepsi should position itself on t he cutting edge of the healthy food trend in the market place by increasing trend toward †¢ Changing customer tastes e. g. variants of drinks †¢ Focus on most important customer trend – â€Å"Convenience†. Threats †¢ Pepsi is blamed for pesticide residues in their products in one of their most promising emerging market e. g. in India †¢ Over 50 percent of the company's sales come from Frito-Lay; this is a threat if the market takes a downturn †¢ PepsiCo now competes with Cadbury Schweppes, Coca-Cola, and Kraft foods (because of broader product line) which are well-run and financially sound competitors. †¢ Size of company will demand a varied marketing program; Social, cultural, economic, political and governmental constrains. External Analysis PEST Analysis: Political influences: – The production distribution and use of many of PepsiCo product are subject to various federal laws, such as the Food, Drug and Cosmetic Act, the Occupational Safety and Health Act. – The businesses are also subject to state, local and foreign laws. – The international businesses are subject to the Government stability in the countries where PepsiCo is trying get into (underdeveloped markets). Businesses are also subject to de taxation policy in each country they are operating. They also have to comply with federal, state, local and foreign environmental laws and regulations. Economic influences: – Pepsi is subject to the harvest of the raw material that they use in their snack foods, soft drink and juice, like corn, oranges, grapefruit, vegetables, potatoes, etc. Because of they rely on trucks to move and distribute many of their products, fuel is also an important subject, so they are subject to the fuel price fluctuation, and to possible fuel crisis. Operating in International Markets involves exposure to volatile movements in foreign exchange rates. The economic impact of foreign exchange rates movements on them is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. PepsiCo is also subject to other economical factors like money supply, energy availability and cost, business cycles, etc. Social influences: – Pepsi is subject to the lifestyle changes, because of it bases its advertising campaigns in a concrete kind of people with a special lifestyle, it is for that PepsiCo has to pay a special attention on the lifestyle changes. Around the world Pepsi drinkers are defined, there is a kind of people who drinks Pepsi another kind who drinks Coca-Cola; it is for that they have to pay attention to the social mobility for not losing a possible market. – Taking into account that PepsiCo is trying to introduce itself in underdeveloped markets, they have to be careful with the possible problems with the governments of this countries, and with the problems could rise from PepsiCo act with the people of this countries. Technological influences: – PepsiCo is subject to new techniques of manufacturing, for their three business sectors, snack food, juices and soft drinks. It has to pay attention to the new distribution techniques. – And they have to fix their attention in the competence developed, to know about the new products. Porter’s Diamond: The Porter’s Diamond Analysis tries to explain the Competitive Advantage of Nations. There are four attributes of a nation comprise Porterâ₠¬â„¢s Diamond of national advantage, they are: Factor Conditions: The basic factor conditions are natural resources, climate, location, the more advanced factor conditions are skilled labour, infrastructure and technology. There are some of these factors that can be obtained by any company (like unskilled labour and raw materials) and, hence, do not generate sustained competitive advantage. Below is a market share structure, Pepsi has around the world as of 2007. Pepsi has a long standing commitment to protecting consumer whose trust and confidence in its products. In order to ensure that consumers stay inform about the quality of all Pepsi products sold in the world. Summary of the Pepsi Strategy Conclusion Assessing Pepsi’s marketing strategies; shows that Pepsi has made several right choices. With the existence of Coke, Pepsi can never lay claim to true originality. It is not that unique. So, before it entered the international market, it first familiarized its customers with its product thoroughly in its home base and lowering their prices. By the time Pepsi was ready to enter the international market, it had a good grasp of what its target audience really is. In conclusion, Pepsi’s marketing strategies, from past to present includes: enhancing their distribution system, knowing the environment of the foreign market and finding the things their target buyers had in common, adding new innovations and products while improving the old products, imaginative advertising, use of advanced technology, assertive promotions, trendy, socially-aware campaigns, alliances with major corporations and expansion into other industries such as restaurants. Al in a one Pepsi-Cola  concentrates on markets where it could prosper alongside  Coca-Cola,  rather than trying to defeat it and its still progressing well. The King III Report and its implications in IT Introduction King III states that – In contrast to the King I and II codes, King III applies to all entities regardless of the manner and form of incorporation or establishment applies to all entities regardless of the manner and form of incorporation or establishment. Unlike previous reports, King III deals with IT governance in detail. According to the introduction of the Report: information systems were used as an enabler to business, but have now become pervasive in the sense that they are built into the strategy of the business and the risks involved in information technology (IT) governance have become significant. The King Report III provides a list of best practice principles which have become an indispensable guide on Corporate Governance to directors, executives and regulators alike. King III provides guidance to all corporate entities on various governance related aspects, including: Ethical leadership and corporate citizenship, Boards and directors, Audit committees, The governance of risk , The governance of information technology (IT), Compliance with laws, rules, codes and standards, Internal audit, Governing stakeholder relationships, Integrated reporting and disclosure. IT governance Unlike previous reports, King III deals with IT governance in detail for the first time. In exercising their duty of care, directors should ensure that prudent and reasonable steps have been taken in regard to IT Governance. IT governance should focus on four key areas: †¢ Strategic alignment with the business and collaborative solutions, including the focus on sustainability and the implementation of ‘green IT’ principles; †¢ Value delivery: concentrating on optimizing expenditure and proving the value of IT; †¢ Risk management: addressing the safeguarding of IT assets, disaster recovery and continuity of operations; †¢ Resource management: optimizing knowledge and IT infrastructure. KEY PRINCIPLES OF THE KING III REPORT The Report places great emphasis on: †¢ Leadership; †¢ Sustainability; and †¢ Corporate Citizenship. The importance of the concepts of integrated sustainability and social Transformation is highlighted. This leads to a lasting concentration on the effects of business on society and the environment. The concept of sustainability is linked with the evaluation of ethics and the improvement of ethical standards in business and in the community. The Minister of Environmental Affairs has pointed out that, unless measures are adopted, greenhouse gas emissions in South Africa will quadruple by 2050. This would result in South Africa becoming a pariah nation. Sustainability reporting is also emphasized in the need to utilize suppliers from amongst previously disadvantaged people. The success of companies in the 21st century is likely to involve: †¢ The natural environment; †¢ The social environment; †¢ The political system; and †¢ The global economy. The King III Report has placed great emphasis on an integrated report, which will evaluate the company’s impact on the economic life of the community in which it operates, as well as many other matters. Conclusion The release of King III is welcomed and represents a significant advance in good corporate governance that looks to the future. Companies will also find King III more user-friendly, in particular the new format of the Code which briefly sets out the recommended best practices against the applicable principles, should constitute a handy quick reference guide. In addition, the Practice Notes, when released, will greatly assist with implementation and going forward, the Institute of Directors will also be developing tools to assist different types of entities identify how to apply relevant principles and recommendations. All in one I would say the release of King III is welcomed and represents a significant advance in good corporate governance that looks to the future. Companies will also find King III more user-friendly, in particular the new format of the Code which briefly sets out the recommended best practices against the applicable principles, should constitute a handy quick reference guide. In addition, the Practice Notes, when released, will greatly assist with implementation and going forward, the Institute of Directors will also be developing tools to assist different types of entities identify how to apply relevant principles and recommendations. Reference http://www. sirpepsi. com/pepsi11. htm â€Å"compiled by 2002† http://www. radessays. com http://www. bookrags. com http://www. allbusiness. com. http://www. peerpapers. com http://www. michalsons. com/king-3-published-for-comment/1463 http://www. pwc. com/en_ZA/za/assets/pdf/pwc-draft-kingiii-presentation-09. pdf