Running head: PEPSICO’S STRATEGIC CHOICES 1

TRIDENT UNIVERSITY

Module 3 Case: PepsiCo’s External Environment, Internal Profile & SWOT

MGT599: Strategic Management

May 21, 2018

Executive Summary
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The focal point of this paper is to recognized PepsiCo’s business level strategy and its

systematic analysis on their strategic choices. Additionally, it will be vital to discuss their

business plan for the upcoming years and applying the analysis for their Strength, Weaknesses,

Opportunities and Threat (SWOT). This case study will determine PepsiCo’s competitor in this

type of business environment, the analysis will be based on Porter’s Generic Tactics which help

tremendously on developing plan for improvements. In addition, to give an accurate course of

action for PepsiCo; using the Porter’s five strategies and SWOT analysis we identify its

competitive advantages. According to quickmba.com (2010), “competitive advantage is when

firm have a sustainable profit exceeding the average amongst its rival”.

Introduction

PepsiCo’s strategy emphasized the characters within the Porter’s model in competitive

advantages and reflects credit upon its decision makers and planners. This norm is a great

reflection on how they give importance towards this tool to better their plan and be competitive

into the line of business.

This model provides analytical advantage amongst PepsiCo’s rivals, identifying these

factors is crucial to the success of the company. “Porter’s diagram combines the resource-based

and positioning views illustrating the concept of competitive advantages” (quickmba, 2010). It is

imperative to generate this analysis through Porter’s Five strategy, which can provide awareness

within its parameters. Every company has its exclusive market environment therefore, mitigating

the risks will also differ from each entity. PepsiCo today is a multi-business corporation, the top

level within the level of organizational strategy. This level “seeks to determine what businesses a

company needs to be in or wants to be in” (Robbins & Coulter, 2003). The company’s strategic
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choices correlate with their mission statement to “provide consumers around the world with

delicious, affordable, convenient and complementary foods and beverages” (pepsico.com, n.d.).

Generic Strategy for PepsiCo

PepsiCo’s mission statement is considered within the definition on what differentiation

strategy means. In Robbins & Coulter’s (2003) book, “defines differentiation strategy as a

business level strategy in which a company offers unique products that are widely valued by

customers”. Based on Porter’s approach for generic strategy which is an easy framework to

follow by any manager to develop competitive strategies. PepsiCo capitalized its strategy within

the targeted scope in broad or as a wide industry, integrating other product to its global brands.

In fact, as quoted from pepsico.com (n.d.) “throughout the world; PepsiCo provides 22 brands

both food and beverages”. This provides the company some competitive advantages specially

their strong rival in the marketplace, the Coca-Cola corporation. In addition, PepsiCo’s product

sets its cost a little less compare to Coke products. The company must maintain as a low-cost

producer into the market both abroad and specially here in the US. Low-cost producer defines

business-level strategy as Cost leadership strategy. As Mr. Porter portray, “organization succeeds

in cost leadership strategy merely if they have the internal strengths with; access to capital for

significant investment on production assets, skills in designing new products, expertise in

manufacturing process engineering at high level and efficiency in distribution channels”.

PepsiCo is well stablished within these internal strengths, bringing other parties to its Global

Divisions. The PepsiCo’s global division are strategically position for “long-term goal and

providing them a sustainable growth” (pepsico.com, n.d.). Thus, provides the company a unique

combination of skills and resources from these other parties worldwide; required within the

scope of Differentiation Strategy.

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Differentiation strategy merely relates to an organization for having unique products and

much better than its competitors in the market. “The PepsiCo’s 22 global brands are definitely

the flagship for their food and beverages that makes them more unique from others”

(pepsico.com)”. These are a multi-billion-dollar brands that brings PepsiCo images apart from its

rival, sources that range from better quality, superb service, ambitious designs and unmatched

technological capabilities. According to Mr. Ferguson (2017), “PepsiCo uses broad

differentiation as its secondary generic strategy”. The company’s advantage with this strategy is

the diversification of various products and its innovative approach towards healthier delicious

brands. Promoting nutritious products provides them significant numbers of new customers. This

derives within the leadership focus towards intensive growth. In combination of low cost and

product uniqueness gives PepsiCo more advantage and flexibility against strong rivals. With

these solid foundation of strategies, PepsiCo can divert its attention towards focus strategy to aim

narrow targets or consumer’s needs.

In order not to get Stuck in the Middle, PepsiCo needs to put some efforts towards

narrower target scope and market segmentation. This is a Focus strategy to provides consumers a

healthier options or products while maintaining both lower cost and uniqueness of its product.

Focus strategy “is a business-level strategy in which companies pursues a cost or differentiation

advantage in a narrow industry segment” (Robbins & Coulter, 2003). The company can direct

their smaller partner to develop of produce products that focuses towards nutrition. This since

narrow segment approach comes with extensive risks. According to Mr. Porter, “narrow market

focus has lower volumes; therefore, they have less bargaining power with suppliers”

(quickmba.com, 2010). However, due to having both lost cost and product uniqueness; this

strategy gives PepsiCo some positive advantages against their competitors, but they must

differentiate its branding image and maintaining lower-cost processing. Otherwise, they will be
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vulnerable to the threat of substitutes or brand switching. Nonetheless, it will be a great

challenge for the rivals to compete with PepsiCo’s products specifically with unique formulation

of their food and beverages. In addition, PepsiCo have been in the business since late 1890’s

thus, the company have a rock-hard foundation of policies towards its merger. Meaning they

have a gigantic advantage to protect against the threat of substitutes simply for having foregoing

procedural guidelines aiming solely at certain strategic targets. From previous assignment,

threats of rivalry and substitutes are increasing in the global market.

PepsiCo must recognize these threat from rivals, substitute product and unpredictable

regulations worldwide. Being in the global market, they must recognize other environmental

threats both external and internal such as geo-political and cheap labor. The threat can have a

significant affect towards their competitiveness, enhancing industry’s forces on entry barriers,

buyer and supplier power, threat of substitutes and rivalry. Therefore, it is vital for PepsiCo to

follow their policies, mission and vision to achieve the goals they set.

Today, soft drinks industry is booming, and products are much more competitive. Health

have been the most concern amongst consumers and government are almost politicizing this

issue, placing additional barriers concerning sugary products. Anti- sugar movements send its

message and provide alternatives to consumer in a faster way through social media. Therefore,

this is an additional industry force that threaten every single business. Social media however, is

also an opportunity that gives organization an instant feedback about their product or services.

Conclusion

This case assignment recognized most of Mr. Porter’s Generic Strategies to the

application of PepsiCo’s strategic choices. Being one of the most popular brand in this

marketplace worldwide with diverse products, PepsiCo needs to apply wide variety of strategic
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choices. However, its most advantageous strategies are the Cost Leadership Strategy and

Differentiation Strategy. Thus, from this fast moving and unpredictable global economy,

PepsiCo has to take advantage in technology to collect data from consumers on what they need.

References

Competitive advantage (2010). Quick MBA. Retrieved on August 27, 2014, from
http://www.quickmba.com/strategy/competitive-advantage/
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Robbins, S. P., & Coulter, M. K. (2003). Management(7th ed.). Upper Saddle River, NJ: Prentice
Hall.

Ferguson, E. (2017, February 6). PepsiCo Generic and Intensive Growth Strategies. Retrieved
May 21, 2018, from http://panmore.com/pepsico-generic-strategy-intensive-growth-
strategies

Porter's Five Forces: A model for industry analysis. (2007). Quick MBA. Retrieved on May 21,
2018, from http://www.quickmba.com/strategy/porter.shtml

Soft Drinks in the US. (n.d.). Retrieved May 21, 2018 from http://www.euromonitor.com/soft-
drinks-in-the-us/report

Hammonds, K. (2001). Michael Porter's big ideas, Fast Company, 44,

Retrieved May 21, 2018, from: https://www.fastcompany.com/42485/michael-porters-
big-ideas

PepsiCo Website. (n.d.). Retrieved May 7, 2018, from: http://www.pepsico.com/our-history