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PEPSICO ANALYSIS.

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PepsiCo Analysis.

Introduction 

PepsiCo is an American based multinational food and beverage company

headquartered in Purchase, New York that manufactures and distributes its

products in more than two hundred countries. PepsiCo has a complementary of

enjoyable brands such as Pepsi-Cola, Tropicana, Quaker, Gatorade, and Frito-

Lay. PepsiCo operates through six segments which include Latin America, North

America Beverages (NAB), Europe Sub-Saharan Africa (ESSA), Quaker Foods

North America (QFNA), Frito-Lay North America (FLNA), and Asia, Middle

East and North Africa (AMENA). Latin America segment consists of its

beverage, snack and food operations in Latin America. NAB comprises the

beverage business in North America and Canada. ESSA and QFNA segments

include its beverage and snack and food operations in Europe and Sub-Sharan

Africa, rice, cereal, pasta and other branded food in the U.S and Canada

respectively. The FLNA segment consists of branded food business in Canada and

U.S while AMENA comprises of beverage, snack and food operations in Asia,

Middle East and North Africa (Reuters.com, 2019).

Discussion

Companies that operate internationally face two primary problems on the

way to coordinate and configure their chain of value most profitably and

efficiently, that is global integration and local responsiveness. Multinational

corporations like PepsiCo have grown as a result of the globalization of the world

market and economy. However, these multinational companies need a global

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network, global processes, and globally functioning infrastructure such as supply

chain management and communication to increase their profits which have

resulted in a move towards global integration. Forces for integration include

industrial and environmental forces that enhance the deployment of global

resources and global integration of spread businesses across countries. PepsiCo

has faced global competition challenges. Besides, the policies of the host

government and consumer preference compel companies to change their

operations and adjust to the requirements of the local market. This remains a huge

act of balancing for multinational companies to control the gap of this evident

problem (Lasserre, 2017).

One of the global integration problems that PepsiCo has faced is the

integration of supply chain management. As noted by Venkataraman, &

Summers, 2017 the approach of supply chain management entails coordination

and integration across organizations and in the entire chain of supply which

requires supply chain management to have an external integration. Having

collaborations across and out of the organization while designing the correct tools

to meet market demand creates many problems. A lot of problems have been

influencing the efficient supply chain management within PepsiCo. The company

has experienced very great changes to leverage its global presence as well as to

develop from in its factories. Since PepsiCo experienced a problem of

development and implementation of the right models to deliver results within the

supply chain, it designed models that incorporate diversified structures of

reporting where several regions and companies report to the main headquarters of
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the company in the U.S. This led to specialization and vast division of activity in

many locations which are against the norm where the companies that are

operating could focus on many activities as stand-alone. Besides, PepsiCo has

encountered global completion. PepsiCo has major global competitors like Coca-

Cola, Campbell and Conagra Brands. For the company to retain its competitive

advantage in the global market, it has merged with other companies. In 1965,

Pepsi-coal Company merged with Frito-Lay Company to form PepsiCo. In 1998,

the company introduced the Tropicana brand and in its effort to expand the soft

drink market, it merged with Quaker Oats Company (Park, & Mense-Petermann,

2014).  

Executives of supply chain management experience unique problems, as a

result of integrating specific strategies in the supply chain with the entire

corporate strategy of the business. With the evolving business realities related to

globalization, the chain of supply in the company has recently moved on the

CEO’s priority list. Most CEO only pays attention to the supply chain only when

they want to reduce costs or when things are not going well. The supply chain

moves the organization’s lifeblood, hence efficient process on the global scale is

vital for the importance of business operations optimization (Kates, & Kesler,

2015). Global integration importance lies on the advantage obtained from the

capabilities of exploiting distinctions in product and capital markets, innovation

and learning in the entire company as well as management of uncertainties in the

political or economic environment within different regions or countries.

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On the other hand, the local response is another force faced by PepsiCo.

Customer preferences and health concerns have been a major threat to PepsiCo

due to the content of sugar, salt and fat in their products. The demand for the

majority of consumers is continuing to shift towards healthier products. As a

result, PepsiCo has shifted its portfolio towards products which are “good” and

“better-for-you” through inorganic innovations as well as strategic acquisitions

and mergers. PepsiCo has increased its investment in development and research

by forty-five per cent, which has seen it invest around three and a half billion

dollars on development and research within five years.

Numerous PepsiCo snack and food products have an important leadership

position in the industry of food and snack within the U.S and globally. According

to Torkornoo, & Dzigbede, 2017, PepsiCo and the Coca-Cola Company were

representing around 24 and 20 per cent respectively, of the United States category

of refreshment beverages estimated by retail sales in measured channels in 2016.

However, in global markets, the Coca-Cola Company has a remarkable share

advantage in carbonated soft drinks. Beverages, food and snack products of

PepsiCo mainly compete based on taste, price, loyalty, quality, and brand

recognition as well as the ability to respond effectively and anticipating consumer

choices and trends, particularly the customers’ focus on wellness and health.   

Even though PepsiCo has been losing carbonated soft drinks market share

to Coca-Cola, its true strength is based in its diversified portfolio which

specifically prevents it from woes in the category of carbonated soft drinks. In the

long run, PepsiCo’s leadership is in some of its developing and fast-moving

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beverage categories like juices, bottles water as well as sports drinks, further

enable it to outperform its competitors (Torkornoo, & Dzigbede, 2017). This

could help it play out to its merit as the volume of drinks in developed markets

reduce and as concerns of health around the consumption of soft drinks spread to

growth markets.

Recommendations.

The problems in the supply chain logistics that multinational companies

like PepsiCo encounter can be complex and makes it difficult to answer questions

connected to goods to be bought, means of transport as well as facilities to be

included the processing and business components to involve. Therefore, it is

recommendable that PepsiCo should gain the flexibility to realign supply so that it

can meet the changing global demands. Besides, coordination costs are essential

for global integration in the supply chain processes. PepsiCo should have a good

system of global demand prediction and planning process which is a vital

mechanism for multinational coordination. PepsiCo management can virtually get

included in handling supply chain problems and focusing on the operational

instead of strategic matters. However, the entire process of integration of the

supply chain requires extensive research in information and communication

technologies. One way of dealing with global competition, where globalization

forces are strong managers must rethink their business models (QUINTERO, et

al, 2016).   

Besides, PepsiCo can have vast research and investment activities globally

aiming at fulfilling the changing consumer preferences and demands as well as

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fastening sustainable growth for the multinational. The main activities can involve

developing new flavors, ingredients and products; improving the appeal of

existing products; product quality, integrity and safety improvement; improving

dispensing equipment, sizes and designs of packaging as well as producing

products that have improved nutrition profiles that minimize fats, sugar and

sodium and also offering products that has more positive nutrition such as whole

grains vegetables, daily, hydration and fruits; and improvement in energy

efficiency.

Conclusion

As a company operating globally, when establishing and penetrating in

new markets, PepsiCo should have global thoughts but take local actions. For it to

gain competitive advantages it has to consider both globalization and localization

forces. The company forces for global integration, as a result, of the expanding

globalization spiral, costs, and economies of scale. Besides, PepsiCo forces for

local responsiveness due to consumers’ preferences. PepsiCo considerations for

thriving in the global business strategy is based on the integration of various

initiatives and strategies. The company considers its primary capabilities,

opportunities as well as challenges and problems when participating in global

markets. Moreover, companies that are operating globally succeed for the most

part, by acquiring enough profits through a value chain that is well structured,

functional and globally integrated as well by successfully adapting to the local

necessities. The core secret for the success of multinational companies is

efficiency. Flexibility and delivering fast, certainly are two extra variables
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necessary to make profits, gain market share as well be sustainable on a

multinational scale. PepsiCo remains a good company in the global beverage

market as a result of integrated and interdependent networks. 

Word count: 1500          

 
 

References.

Kates, A. and Kesler, G., 2015. Activating Global Operating Models: the Bridge

from organization design to performance. Journal of Organization

Design, 4(2), pp.38-47.

Lasserre, P., 2017. Global strategic management. Macmillan International Higher

Education.

Park, K. and Mense-Petermann, U., 2014. Managing across borders: Global

integration and knowledge exchange in MNCs. Competition &

Change, 18(3), pp.265-279.

Reuters.com. (2019). PEP.O - PepsiCo, Inc. Profile | Reuters. [Online] Available

at: https://www.reuters.com/companies/PEP.O [Accessed 6 Nov. 2019].

Torkornoo, H.K. and Dzigbede, K.D., 2017. Sustainability Practices of

Multinational Enterprises in Developing Countries: A Comparative

Analysis of Coca-Cola Company and PepsiCo Inc. Journal of Global

Initiatives: Policy, Pedagogy, Perspective, 11(2), p.3.

Venkataraman, S. and Summers, M., 2017. PepsiCo: The challenge of growth

through innovation. Darden Business Publishing Cases.

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Verbeke, A. and Asmussen, C.G., 2016. Global, local, or regional? The locus of

MNE strategies. Journal of Management Studies, 53(6), pp.1051-1075.

QUINTERO, L.M., WU, J., CHAUDHRY, S. and FENG, Y., 2016. CASE

SYNOPSIS.

        
       
 
 
APPEDIX

PEPSICO SWOT ANALYSIS

Strengths Weakness
 Large and focused portfolio in  Depends highly on domestic
beverage and food industry. market in the United States.
 Extensive experience in  Overdependence on Walmart
mergers and acquisitions.  PepsiCo brand perceived as
 Strong leadership unhealthy.
 Aquafina tap water scandal

Opportunities Threats
 Improving health complaints  Recall of products due to
of products quality cases
 Diversification in other  Product being criticized on
industries high amounts of sugar or salt
 Aim on research and by government and non-
development government health
organizations.
 High competition
 Loss of large market share in
carbonated soft drinks