1. Scan of the Environment in Which the Firm Exists Situational Analysis (next three to five years)
a. Technological trends
In an age where rapid virtual transactions are needed for business success, it can be difficult to know which payment method Pepsico should be offering to customers. Over approximately the last decade, businesses have gradually integrated themselves online, as this is a low-cost location to promote the company, while getting to many people – whether that is through a website, Facebook fan page, or on LinkedIn, for example (Grandinetti, 2013). Contemporary businesses are often primarily concerned with one thing, and that is ensuring they are offering customers the best options. Ease of access to the company and to payment are vital for business success in the 21st century. However, knowing which payment method to offer, and medium by which to communicate with clients, is a growing challenge. Pepsi needs to make customers feel safe about completing online transactions, whether that is through Bitcoin, PayPal, or an online credit card transaction. These methods greatly reduce the costs of operations for many companies, and this can be the deciding factor in whether the business is successful. Bitcoin is the most affordable of these options, which makes it a preferred choice over the others. In order to get to the point where businesses can take advantage of affordable e-commerce methods, Pepsi needs to build morale with consumers, and that means having a strong online presence (Grandinetti, 2013).
b. Demographic trends
The demographic trends; specifically, the growing elderly demographic, does not largely affect Pepsi, and does not need to be taken into consideration when developing a marketing plan.
c. Economic trends
Pepsi products are relatively affordable, and difficult economic times do not largely affect the company’s sales.
d. Political-legal trends
The political-legal trends only affect Pepsi in the distribution of its product to foreign countries, and on health regulations. However, Pepsi has not faced major hurdles in either category (Promoting, 2013).
e. Sociocultural trends
A sociocultural tendency towards eating and drinking healthier products has not made a major impact on Pepsi. The company is now taking action by implementing various actions that have been recommended by the World Health Organization (WHO). Specifically, the Global Action Plan for the prevention and Control of Noncommunicable Diseases (Pepsico, 2013).
f. Global trends
The reason why the business is set for major growth in the years ahead is because of the emerging markets. A growing middle class in many nations throughout the world means more people will be able to afford more Pepsi products. And, because a large percentage of the developing nations (Latin America, India and China), are near the equator, where it is hot, the people there will need the refreshing beverages (Grandinetti, 2013).
2. Industry Analysis
Threat of New Entrants
Pepsi and Coca Cola have dominated the market for nearly the duration of the capitalist system. The two companies have a very wide economic moat, and there is only really room for the two of them, due to their massive sizes.
Threat of Substitute Products or Services
Snapple has taken some of the customer base away from Pepsico and Coca Cola. However, the firm does not compete in the carbonated beverage market, which demands a considerable amount of Pepsico and Coca Cola’s businesses.
Bargaining Power of Customers
The company does face some pressure from consumers to have a low price. However, the firm has managed to increase its price incrementally over the years to achieve the best return on investment.
Bargaining Power of Suppliers
Pepsico has its own factories and only relies on itself as the supplier.
Intensity of Competitive Rivalry
Pepsico and Coca Cola have an intense rivalry. The two have continued to square off over the decades over which company produces the best products.
3. Competitor analysis (current strategies, intent, mission, capabilities)
As the main competitor, Coca Cola is largely identical to Pepsico. However, Pepsico has managed to more effectively dominate the sports drinks market. Furthermore, Pepsi is taking hold of the snack food market as well, and this has become one of the company’s missions. Coca Cola is lacking in that division, and has instead secured major contracts with large firms, such as McDonalds, to distribute its product (Grandinetti, 2013).
4. Internal Analysis
Value Chain Analysis
While interpreting the needs of the customers, as indicated in the proper discourse of internal marketing, Pepsi has determined that the customer desires a drink that is both tasty and affordable (Khan, 2013). By developing such a product, Pepsi is appealing to this need of the customer and the marketplace. The information collected by Pepsi in making the drink is brought to all departments so that they are able to create a product that appeals to their target market. In attaining this information, Pepsi would have listened to what its employees had to say about the needs of the public in this internal analysis. The support of the employees would also be needed when bringing the plan back to the employees for their input. This will continue to help identify who the customer is, and then customer valuation.
5. Identification of Environment Opportunities and Threats and Firm’s Strengths and Weaknesses (SWOT analysis)
In analyzing the SWOTs it is important to look at the marketplace conditions. Because there are more people with less cash, since the onslaught of the global recession several years ago, Pepsi has added a line of beverages to address the customers who do not have as much money (SWOT, n.d.). The ability of the company to add a line of drinks and snacks that are more affordable is a definite strength, and a reaction of a weakness in the economy, though that weakness is out of the company’s control and considered a threat. The company has learned to adjust to the demands of its product due to the weak economy (SWOT, n.d.).
Pepsi has reached the public, which is a strength. It has done considerable marketing to put this product into the minds of the public. The price is another factor that is a strength of the company, as it gives Pepsi a competitive advantage over many of the other companies that perhaps cannot afford to produce the drink at a price as low as Pepsi. The brand’s image is also very strong, which is another strength, as well as the financial strength of Pepsi and its wide range of beverages and snacks (SWOT, n.d.).
The SWOT Analysis for Pepsi helps point out some of the internal strengths and weaknesses of the brand. In discovering these issues, the company is better able to make a determination of the best course of action to ensure the most profitability in the future (SWOT, n.d.). The company is relatively strong, but there is room for growth in the database management systems, such as an email mailing list. Information provided from people who are signed up for a card will be helpful in developing this mailing list (SWOT, n.d.). Having the card will also help in ensuring that the company has the information needed to develop this list and to have a conversation with the customers, which will ensure there are many loyal customers who continually come back to Pepsi.
Because the company has been so successful with other products, it was able to leverage some of the risk in relation to launching its relatively new line of snack foods. The success of the beverages that the brand is known for is a help to the company because it was able to afford the risk of taking a loss on some snacks that changed the image of the company to more health-oriented. These healthier products are relatively new steps for the company, as it is moving away from just being a business that caters to those who are looking for junk food (SWOT, n.d.)
The email list, while seemingly trivial in the brand’s success, can be used as a catalyst to building the culture with the Pepsi brand. There is realistic damage that is being suffered by the company because it is not connecting enough with its customers through an email list (SWOT, n.d.). The email list is not a quick and easy fix, as there needs to be a process where the company is able to develop a list of the email addresses. This could be accommodated in several ways. The first way is the most challenging, and that would be through the development of a card that provides the customers with a way in which they can keep track of the dollars they spend, and if they spend a certain amount within a specific timeframe, they receive a significant rebate on their next Pepsi purchase. When people sign up for the card, they are asked personal information, including their email address, which then goes into a database that is used by people on the email list (SWOT, n.d.). The other way is to have an option on the company’s website that allows people to sign up for email notices.
By following through with this plan, the company will see a realistic benefit if the opportunity is leveraged. The mailing list will facilitate the communication among Pepsi owners and it will begin to form a community (SWOT, n.d.). The following that Pepsi could receive will form the type of atmosphere that could lead to meet-ups, where people meet with their Pepsi to sample new products, for example.
This type of a plan would require some start-up costs for implementation, but once rolling, it could be well worth it. The most expensive option would be the card that provides people who sign up with discounts when they spend a certain amount of money on Pepsi products. This type of a plan has a relatively wide window of opportunity, but the sooner it is executed, the quicker the database can form and the quicker the Pepsi culture can begin to take hold. But there are also quick fixes, such as updating Facebook and Twitter statuses more often and having an option on the company’s website to register for newsletters (Pepsico’s, 2013).. There would, of course, have to be a certain amount of work involved with writing the newsletters and updating the Facebook and Twitter pages, but the company is well-positioned to afford projects such as these.
6. Strategy formulation
The first objective is to develop the strategies by which to gain the customers’ email addresses. Once these are attained, either through the card sign-up process or through a registration option on the company’s home page, the company can begin to build the Pepsi culture and the customers’ loyalty. The objective is to have a database of thousands of customers who would be interested in learning more about the Pepsi activities (Khan, 2013). The goal should be to have the email addresses of roughly 75 per cent of those who buy a Pepsi. Building the customer loyalty with that many people would help build the Pepsi culture.
The second objective is to start a conversation with the customers online via Facebook and Twitter (Khan, 2013). There currently is not enough activity on these social networking sites and this needs to be approached in order for the company to continue its customer loyalty and culture building practise. It is interesting to note that Pepsi already has a culture of people who love the drinks, and the brand has appeared in many pop songs. This says there is a desire for people to be more involved in the activities of Pepsi. The brand can easily calculate the number of people who approve of the brand via Facebook by the number of “likes” it receives on its status updates (Khan, 2013).
The third objective is to have the customers communicating with each other without the need for Pepsi to get involved. Once Pepsi has set the wheels in motion, the customers will likely take the wheel and start having their own conversations about their products. While it is difficult to set a number to this objective, it would be nice to have the first Pepsi fan club page set up on Facebook by an outside source within six months of launching the dialogue on the Facebook page.
7. Strategic Alternative Implementation Action Items and Action Plan
Pepsi needs to provide new products a lot quicker than what it is currently doing. There are many companies vying for market share, and these new products, while typically short-lived, are eating away at some profits. However, with Pepsi, there are drinks that will never get old, and the firm can rely on a solid customer base for many years ahead.
The company might also be able to benefit from a lifetime promotion option. If they offer the promotion for a short period, it would get the attention of many people. Those who end up getting the promotion will help the company’s bottom line, and this could prompt the company to reduce the price to be more attractive to those in emerging markets.
Grandinetti, J. (2013). Cultural imperialism and globalization in Pepsi marketing. James Madison University.
Khan, A. (2013). Pepsi marketing report. Academia.edu.
“Pepsico’s journey toward an ethical and socially responsible culture.” (2013). University of New Mexico.
“Promoting healthy lifestyles.” (2013). Pepsico.
“SWOT analysis for Pepsi Cola.” (n.d.). Perdue College.