Competitive Review of PepsiCo - Term Paper Example

Management Report On Table of contents Chapter Page No. (i)Introduction''''''''''''''''''''''...3 a) (a)Company history''''''''''''''''''3 b) (b)Mission Statement'''''''''''''''''..3 (ii) Findings'''''''''''''''''''''''..4 a) Managing marketing'''''''''''''''''.4 b) Products and brands'''''''''''''''''..4 c) Competitive review of PepsiCo'''''''''''''4 d) Major competitors for PepsiCo'''''''''''''.5 e) Target customers''''''''''''''''''...5 f) Competitive advantage''''''''''''''''..5 g) Marketing strategies'''''''''''''''''..5 h) Marketing mix'''''''''''''''''''...6 i) Web presence of PepsiCo and its importance'''''''....6 j) Advantage of web presence over its competitors''''''..6 k) Processes involved''''''''''''''''''7 (iii) Managing Change'''''''''''''''''''8 a) Changes which ca affect the company in next 5 years''''.8 (iv) Recommendations'''''''''''''''''''9 (v) References''''''''''''''''''''''..10 (vi) Appendix 1'''''''''''''''''''''....11 (vii) Appendix 2'''''''''''''''''''''...12 INTRODUCTION Company History: PepsiCo is a world leader in convenient snacks, foods and beverages, with revenues of more than $43 billion and over 185,000 employees. The company consists of PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB) and PepsiCo International (PI). PAF includes Frito-Lay North America, Quaker Foods North America and all Latin America food and snack businesses, including Sabritas and Gamesa businesses in Mexico. PAB includes PepsiCo Beverages North America and all Latin American beverage businesses. PI includes all PepsiCo businesses in the United Kingdom, Europe, Asia, Middle East and Africa. PepsiCo was founded in 1965 through the merger of Pepsi Cola and Frito Lay. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001.PepsiCo offers product choices to meet a broad variety of needs and preference from fun for you items to product choices that contribute to healthier lifestyles. In 2008 PepsiCo was among Forbes best big companies. The company continues to maintain its sustainability by introducing new products according to the changes in the tastes of its customers. Mission Statement: "To be the world's premier consumer "Products Company" focused on convenient foods and beverages. We seek to produce healthy 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." (www.pepsico.com) Findings: Managing Marketing: PepsiCo is one of the biggest soft drink, beverage and convenient snacks companies. Pepsi has been bringing refreshments to its customers for over 100 years. Is has almost 18 brands in its portfolio. The soft drink and beverage market is highly competitive with changing customer tastes and preferences and therefore to maintain sustainable growth the management constantly has to introduce new marketing strategies, conduct market research and thereby position and reposition their brands or introduce new brands. Introduction of new brands have always been a favorite marketing strategy with the PepsiCo management. Products and Brands: Pepsi has 18 mega brands available in nearly 200 countries and generate sales at the retail level of more than $1 billion. (See appendix 2 for PepsiCo mega brands and annual retail sales of each) Competitive review of PepsiCo: Demand for non-alcoholic beverages is driven by consumer tastes and demographics. The profitability of individual companies depends on effective marketing. Large manufacturers have economies of scale in production and distribution, with average annual revenue per production worker close to $1 million. Small companies can compete by producing new products, catering to local tastes, or selling at lower prices. Major competitors for PepsiCo: Coca-Cola Dr Pepper Snapple Group Kraft Foods Coca Cola being the world's number 1 producer of carbonated soft drinks is Pepsi's biggest rival. In the soft drinks industry Coca Cola and Pepsi together has a market share of 95%. Where Coca Cola has a market share of 43.1% and Pepsi has a market share of 39.2%. Target Customers: The target customers for Pepsi customers are mostly teens and young adults between the ages of 12 to 35 who are fast and lively. They have high expectations in life and are very mobile and active. Pepsi promotes itself as the choice of the "New Generation". One of its recent advertisement slogans is "Taste the one that's forever young ". Competitive advantage: "According to the Competitive Advantage model of Porter, a competitive strategy takes offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces and generate a superior Return on Investment"(competitive advantage Porter). According to me Pepsi's biggest competitive advantage is strength of it brands, innovation and its extensive distribution network. Marketing Strategies: Pepsi operates a very dynamic and highly competitive market; it therefore has to adopt new marketing strategies to deal with competition. Pepsi in the recent past has been trying position its brand within the younger generation. Over the past few months it has extended its marketing hand to try and capture the allusive younger market by launching a music initiative on MySpace to help users find new music, with the help of famous curators. Even in its advertisement campaigns it markets itself as drinks for generation X. Identifying the preference of the target consumers (sports, entertainment, music, movies) Pepsi has also been introducing some sports drinks such as Getorade etc. In most of its TV commercials it has been featuring movie artists or sports stars. Marketing Mix: Pepsi's unique marketing mix is its pricing policy and distribution system. It uses the psychological pricing strategy. For example in India a small Pepsi can costs Rs. 19. Pepsi also has an extensive distribution network which creates an advantage for it. Web Presence of PepsiCo and its importance: Pepsi is one of the star brands of PepsiCo. The company has revenues of over 43 million with 185000 employees. A company of that size definitely needs a web presence to 1) It will be a connecting door between the company and its customers 2) The shareholders would be easily able to access the company's financials 3) Site will give an interaction between the company and its distribution partners and vendors 4) Site is also required to maintain financial accuracy 5) Website creates image creation and image enhancement tasks The economic model of a Brand website is similar to mass media advertising. While the Internet is still a developing medium, the basic principles of brand marketing remain. Because of the unique measurement abilities of the Internet brands can measure the success or failure of their websites. The goal of the branding site is to use the opportunity to strengthen the brand identity, to build upon the intangible emotional connection in the mind of the loyal consumer. Pepsi's URL site"Pepsi.com" an excellent example of a branding website-the use of colors, logos and complete look and feel integrate well into the overall brand image. The site is clearly designed to attract and entertain teens and young adults, the current target demographic for Pepsi. Pepsi.com ranked #4 by visits in the Food and Beverage Brand category, (Coca-cola.com ranked #14) by Hitwise. Advantage of Web presence over its competitors: An excellent example for a branding site, Pepsi.com has hit the key components: A clear brand identity-the site's colors, use of logos and complete look and feel integrate well into the overall brand image Fully integrated online and offline marketing, with offline promotions driving traffic to the site, and online promotions gathering more information from visitors for offline marketing efforts Interactive functions that encourage repeat visits and viral marketing, including downloads, online games and music mixing applications. Providing the visitor with what they want is the only way to fulfill your business goals. PepsiCo. a huge company with many brands, has chosen a URL strategy and a target audience for their Pepsi.com site. They chose a target audience (teens and young adult consumers), found out what they want (entertainment, music and sports), determined their own business goals (build the brand, traffic and awareness) and designed a smash hit of a site. The pepsi.com site speaks to its customers. All these factors have definitely given Pepsi an advantage over its competitors especially over coke. Processes involved: It is very important for a company like PepsiCo to build and sustain proper information technology infrastructure. Pepsi has SAP enterprise resource planning application as well as common business processes installed across its operations. In addition, we have outsourced certain information technology support services and administrative functions, such as payroll processing and benefit plan administration, to third-party service providers in order to save costs. Managing Change PepsiCo operates in an industry which is fast and dynamic with strong competitors. One of the biggest challenges for Pepsi is to deal with the changing consumer tastes and preferences while being one step ahead of its competitors. The consumer's tastes are constantly changing with their changing lifestyles. Changes which can affect the company in the next 5 years: Changing consumer tastes and preferences Demand for Pepsi's products can be adversely affected with its target consumers (teens and young adults) changing tastes. Change in consumer taste usually occurs due to change in target consumer lifestyle, change in social trends, ageing. Changing competitive environment ( introduction of new brands by Coca cola) Pepsi operates in a highly competitive market. The Pepsi Cola competitive war has always been hitting the headlines. Coca cola has a larger market share in the beverage industry, therefore any change in its marketing strategy or any product innovation by it can provide a higher competition to Pepsi. Changing regulatory environment (increasing the taxes on the consumption of its products, restrictions on import /exports) To carry out production, distribution, sales, advertising and labeling of its products are subject to the laws and regulations of the local government. The legal and regulatory environment of a country is influenced by its political parties forming government. Any change of party forming government can also lead to changes in regulatory and legal environment. Changing economic environment ( economic downturn of 2008-09) The beginning of 2008 saw economic downturn which affected the entire world. According to analysts crisis is expected to persist for another 2 to 3 years. The crisis has affected Pepsi in the form of reduced demand for its products, increase in the costs of raw material, contraction in the availability of credit etc. Changing commodity prices which causes change in raw material costs Cost of production is dependent on the raw material prices therefore changes in the commodity prices can adversely affect the company. Recommendations In order to sustain growth Pepsi has to adapt itself to the changes that can affect its operations and demand for its products. In order to understand the shifting patterns of its target consumer's tastes and preferences Pepsi should conduct market surveys on a regular basis. On the basis of these surveys it should bring about innovation in its products and introduce new products according to the preferences of the consumers. In the recent past the consumer tastes has been shifting to healthier products., studying this trend Pepsi introduced "Diet Pepsi". Such innovations are required also in the future to sustain. In a competitive environment Pepsi is required to stay one step ahead of its competitors. In order to do this it has to have effectiveness in its advertising campaign and marketing plan. It also needs to study each and every move of its competitor and change its marketing plan accordingly. It should also innovate and build an extensive distribution network. Pepsi should dedicate a legal team to study the changes occurring in the legal environment and its impact on the business results. After making a detailed study the legal team can handover the repot to the top management which can thereby bring about necessary changes in its policies or methods. References Lovelock & Wirtz 2002,Services Marketing-People, Technology, Strategy Pepsi annual Report 2008 PepsiCo site www.pepsico.com Appendix 1 The year over year comparison of financial results of PepsiCo: Source: PepsiCo Annual Repot 2008 Appendix 2 Source: PepsiCo Annual Report 2008 Read More