The Macro Environment Analysis - Essay Example

Research into the Marketing Environment Contents Background and Selection Criteria 3 The Macro Environment 4 Political 5 Economic 5 Social 5 Technological 6 Environmental 6 Legal 6 Researching Customer Segments 6 Conclusion 8 Referrences 9 Introduction The driving force for a company’s revenue is its marketing and marketing revolves around customers. The customer’s buying choices are however not uniform and there are lot of factors that influence the choice that a customer ultimately makes whether or not to buy a product. The factors that influences a customer’s buying behaviour are psychological, cultural, social and personal. A successful company considers all these factors and accordingly devices its marketing mix for a product. Since customer’s buying behaviour is influenced by different factors. Therefore, the marketing mix designed cannot be uniform. To cater to the needs of different customers, companies have to rely on market segmentation. The markets may be segmented on the basis of demographic, geographic, psychographic, and behaviouristic. The markets can be segmented based on other factors as well such as geography. Let us look into PepsiCo as a particular company and it is affected. In this study, PESTEL analysis will be used to understand the effect of macro environment on PepsiCo and then suggest ways by which it can achieve smart objectives. Background and Selection Criteria PepsiCo is a multinational food and beverage corporation with its headquarters in the United States. Best on net revenue it is second largest food and Beverage Company in the world. Its revenue based on the 2013 data was 66,415.00 million USD and Gross profit levels were 35,340.00 million USD (PepsiCo Inc., 2014). Starting from its incorporation in Delaware in 1919 PepsiCo now has its presence in almost all countries starting from USA to New Zealand. PepsiCo has performed so well goes on to show that company has effectively and efficiently catered to the needs of various customers in various environments. It has understood the customer’s mentality correctly and has developed products that cater to their taste buds. For example, to be successful in Chinese market the company started manufacturing potato chips that are cucumber flavoured and which is not available in other countries. They got the idea of this flavour from a common Chinese dish named as “pai huanggua” (shredded cucumber) and surprisingly it is one of its best selling potato chips products in china (Ho, 2013). They have developed marketing strategy including use of celebrities with whom the customers can relate to for brand endorsement. For example, in their campaign for European market they have used David Beckham, for their campaign in India they have used celebrities such as Shah Rukh Khan and Sachin Tendulkar who have mass followings in India and Cater to the emotional appeal. However, irrespective of who is used to endorse the brand the underlying theme of its campaign has remained constant across geographies that are to project it as a drink for the youth and market it as a cool product and differentiate it from its arch rival coca cola. PepsiCo used the strategy of merger, acquisitions, entering into license agreements in order to enter newer markets. For example, PepsiCo acquired Wimm-Bill-Dann Foods a Russian company in 2011 and has subsequently become the largest food and Beverage Company in Russia. PepsiCo has also focused to selectively expand its line of business into other categories of food and beverage products. For example, PepsiCo acquired Tropicana Products in 1998 to enter into the orange juice market and merged with Quaker Oats in 2001 to enter into oats market. To understand in detail as to how PepsiCo successfully operates in different countries and economy let us perform an analysis on the organization based on the PESTEL framework. The Macro Environment There are several factors that influence a company’s decision making. The factors which are uncontrollable are named macro environment. The forces in the macro environment are political, economic, social, technological, environmental and legal. Let us perform an analysis on the organization based on the PESTEL framework to understand how these factors affect the company (Dransfield, Fox and Guy, 2004). Political As a company that manufactures soft drinks that falls in the non alcoholic category it is regulated by the rules and regulations set up by FDA. However as it operates in different markets across the globe it is also subjected to rules and regulations set by other countries where their business operates. For example in India it was subjected to a controversy regarding pesticides that were allegedly above the prescribed limit set by the Bureau of Indian Standards. The other factors likely to impact are the general political situation in the country. Economic Economic condition of the general public at large plays a major role in predicting the sales figure for any company. Normally recession has an adverse effect on the sales as customers try to spend less. However the economic recession of 2009 went in Pepsi’s favour as its sales increased in the period. Social Social factors play a major role in deciding the sales figure of companies such as PepsiCo. As the food and beverages manufactured by it is likely to be consumed by friends together and specifically on festive occasions. So understanding various cultures and how they undertake purchase decisions is a major criterion. Technological Technology is a major tool in today’s competitive environment. Successful companies in today’s market scenario have to use technology to better connect to its customers to for an emotional bonding with them, to listen to their complaints and to develop products that cater to their needs. In this scenario social media plays a major role as a bridge between the customers and the company. Environmental Any company today, specially manufacturing companies has to comply with environmental norms and practices. Pepsi has been in controversies on environment fronts specifically about use of water but has been able to steer clear of the controversies. Legal Multinationals like Pepsi has to be aware of the legal code of not just one country but of different countries where it operates. As a legal case may not only bring in financial damage but also loss of reputation. Researching Customer Segments Market research is an organized effort to gather information about the target markets. As Pepsi operates in various markets across the globe so choice of its customers about the products it delivers varies from place to place and across cultures. There are several ways to segment markets as I have touched upon in introduction based on factors influencing customer behaviour. For a company like Pepsi the major factor that it uses in market segmentation is Geographic segmentation (Armstrong and Stephens, 2005). Pepsi has several brands in its portfolio specifically catering to the tastes of countries it operates in. For example to be successful in Chinese market the company started manufacturing potato chips that are cucumber flavoured and which is not available in other countries and surprisingly it is one of its best selling potato chips products in china. Recently it has launched four new flavours for its china market namely meat, seafood, spicy and cool. Another segmentation that Pepsi has used since long is based on Demographic segmentation. Pepsi has always like to project itself as a brand for the youth and forward thinking people thus differentiating itself from its arch rival coca cola (Michman and Mazzee, 1998). It has tried to boost this image of the company through its ad campaigns, slogans, and roping in of stars to endorse brand that the youth feel connected to. Pepsi’s demographic segmentation can also be likened to its attempts at Psychographic segmentation by projecting and endorsing a cool, forward thinking lifestyle to be associated with its products. The beverage industry is supposed to grow at the rate of 2-3% over the coming years. So if Pepsi has to increase its dominance in the beverage industry and increase its market share to 40% within a span of three years it has to do certain things. 1. Pepsi is generally found to be quenching the thrust of urban people and is found to more associated with urban people than rural masses. So to increase its market share it has to increase its connectivity and project itself as a brand for people of all economic classes. 2. In order to avoid saturation Pepsi has to continue product innovations and bring out products with newer tastes catering to the particular locality or region of operations. Another thing that Pepsi can aim at is to increase customer loyalty towards the company and its brands. It can achieve this through 1. Interaction with customers through social networking sites. 2. Bringing out different competition aimed at engaging itself with its customers. 3. Being sponsors of games particular to a country. Conclusion As discussed above it was clearly seen that marketing research is a very important tool in identifying customer segments and how to cater individually to each market segment. We saw through the example of PepsiCo how it operates in various countries and how different cultures influences buying decisions and how it delivers different products to cater to the tastes and preferences of people belonging to different countries. At last we saw how PepsiCo can form several smart objectives and can try to achieve them effectively. Referrences Armstrong, M., Stephens, T., 2005. A handbook of management and leadership: A guide to managing for results. London: Kogan Page Publishers. Dransfield, R., Fox, E., Guy, P., Needham, D. & Wilde, J. 2004. Business for foundation degrees and higher awards. Halley Court: Heinemann. Ho, L., 2013. PepsiCos strategy wins market share. [Online]. Available at: http://www.globaltimes.cn/content/829870.shtml. [Accessed on 05 November, 2014] Michman, R. D., Mazzee, E. M., 1998. The food industry wars: Marketing triumphs and blunders. West Port: Greenwood Publishing Group. PepsiCo Inc., 2014. Income statement. [Online]. Available at: https://www.google.com/finance?q=NYSE:PEP&fstype=ii. [Accessed on 05 November 2014]. Read More