ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 32:Business Strategy (574)

Submission date 07/07/2021 Date received (1stsubmission)

Re-submissiondate Date received (2ndsubmission)

Student name Trieu Manh Cuong Student ID BHBF190213

Class BH-BF2005-2.1 Assessor name Bui Le Thuy Trang

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Contents
I. Introduction.............................................................................................................................................................4
II. Identify the strategic capabilities of the chosen company by using at least two of the methods including:
benchmarking, the value chain & the value system and activity system..................................................................4
Benchmarking.............................................................................................................................................................4
2.1 The value chain & The value system.................................................................................................................5
2.1.1 The value chain...........................................................................................................................................5
2.1.2 The value system........................................................................................................................................8
III. Carry out the strategic capability analysis by using VRIN/VRIO framework to assess which strategic
capability(ies) can be a basis to achieve sustainable competitive advantage...........................................................9
III. Based on the internal analysis above and other credible sources of information; identify and analyze the
main strengths and weaknesses (S & W factors from SWOT) that the company is currently having.....................12
IV. Conclude..............................................................................................................................................................13
V. Reference..............................................................................................................................................................13
I. Introduction
PepsiCo serves 200 countries and is a world leader in food and beverage products. Its brands include
Frito-Lay North America, PepsiCo Beverage North America, PepsiCo International and Quaker Foods
North America. Some of PepsiCo's brands are more than 100 years old, but the company was only
founded in 1965 when Pepsi-Cola merged with Frito-Lay. PepsiCo then acquired Tropicana and Gatorade
when they merged with the Quaker Oats Company. Combined retail sales average around $92 billion.
The company is focused on being the leading manufacturer of healthy food in the world. They also offer
a wide selection of food, including healthy options. Today I will do a report on benchmarking, the value
chain, VRIN/VRIO, S & W factors from SWOT of Pepsico.

II. Identify the strategic capabilities of the chosen company by using at least two of the methods
including: benchmarking, the value chain & the value system and activity system.
Benchmarking

PepsiCo
PepsiCo is currently the world’s largest beverage company by sales and market value. It is one of the
world’s largest soft drink companies that offers products on categories including juice and smoothies,
carbonates, and bottled water. PepsiCo sells its products in more than 200 countries with a portfolio of
iconic and prestigious soft drink brands like Pepsi-Cola, Frito-Lay, Gatorade, Naked Juice, Quaker, Lipton,
Mirinda, Kero Coco, and many others. PepsiCo is one of the world’s largest soft drink companies that
offers products on categories including juice and smoothies, carbonates, and bottled water. In 2019,
PepsiCo’s total sales reached $65 billion.

(Top 10 Largest Beverage Companies in the World 2020 | Global Beverage Industry Factsheet, 2021)

2.1 The value chain & The value system

2.1.1 The value chain

Inbound logistics:

Pepsi has a global supply chain and it sources raw materials from several nations around the world. The
company works with thousands of suppliers around the world to source raw material and primarily
agricultural raw material. The company has established a strong supply chain and distribution network.
The integrated logistics function of the company plays a key role in the smooth operation of inbound
logistics and to ensure that raw materials flow into the system seamlessly. In recent years, the company
has made a lot of investment into its existing fleet to make it more efficient, modernized, and
environment-friendly. The company has established warehouses at key locations worldwide and in close
proximity to its suppliers to reduce transportation and logistics-related expenses. The company also uses
advanced software for inventory management and to manage logistics.

Operation

The importance of analysing operational activities raises when raw material arrives, and PepsiCo is ready
to process the raw material into the end product and launch it in the market. Some examples of
operational activities are machining, packing, assembling and testing. Equipment repair and maintenance
also falls into this category.

It includes both- manufacturing and service operations. Analysis of operational activities is important for
improving productivity, maximising the efficiency and ensuring the competitive success of PepsiCo. The
increased productivity can help PepsiCo to achieve consistent economic growth, increase profitability
and set a powerful basis for competitive advantage.

Outbound Logistics
Outbound logistics include the activities that deliver the product to the customer by passing through
different intermediaries. Some outbound logistics activities are material handling, warehousing,
scheduling, order processing, transporting and delivering to the destination. PepsiCo can analyse and
optimise the outbound logistics to explore competitive advantage sources and achieve its business
growth objectives.

Because, when outbound activities are timely managed with optimal costs and product delivery
processes put a minimum negative effect on the quality, it maximises the customer satisfaction and
increases growth opportunities for the firm. PepsiCo should pay specific importance to its outbound
value chain activities when its offered products are perishable and require quick delivery to the end
customer

Marketing and Sales

At this stage, PepsiCo will highlight the benefits and differentiation points of offered products to
persuade the customers that its offering is better than competitors. Only producing a high quality
product at affordable costs and distinctive features cannot create value until PepsiCo invests on the
marketing and sales activities. The sales agents and marketers play an important role here.

Some examples of PepsiCo's marketing and sales activities are- sales force, advertising, promotional
activities, pricing, channel selection, quoting and building relations with channel members. The company
can use the marketing funnel approach to structure its marketing and sales activities. The marketing
strategies can either be push or pull in nature, depending on the PepsiCo’s business objectives, brand
image, competitive dynamics and current standing in the market.

Effective and wisely integrated marketing activities can develop the brand equity of PepsiCo and help it
stand out from the competition. However, PepsiCo must avoid making false commitments about product
features that cannot be fulfilled by the production department. It indicates the need to ensure
coordination between different value chain activities.

Services
The pre-sale and post-sale services offered by the PepsiCo will play an important role in developing
customer loyalty. The modern customers consider post-sale services as important as marketing and
promotional activities. The power of negative e-WOM due to poor support service cannot be
undermined in the current technologically advanced era. The company must analyse its support activities
to avoid damaging brand reputation, and instead use it as a tool to spread positive word of mouth due to
quick, timely and efficient support services.

Technology

Pepsi heavily uses technology to maximize the efficiency of its global operations. Apart from that, it has
continued to grow its investment in digital technology and sustainability to improve the efficiency of its
supply chain, manufacturing, marketing as well as sales and distribution network. The company also uses
technology for employee training as well as inventory management and to grow customer relationships.
Apart from operational efficiency, the focus of the company is on sustainable business operations and
therefore it invests in technology to develop environment-friendly solutions, minimize its carbon
footprint, and leverage data and analytics for serving customers better.

HRM:

HR management is one of the key areas of strategic focus for the company. Employees are a source of
competitive advantage in the industry and therefore apart from attracting talented people, the company
has to focus on their training, retention, and continuous growth. As of December 29, 2018, Pepsico and
its consolidated subsidiaries employed approximately 267,000 people worldwide, including
approximately 114,000 people within the United States (Annual report, 2018).

Infrastructure:

Pepsi has divided its business operations into divisions based on geographical regions. However, the
company also manages its global business operations on a functional basis, and the management of its
global business is handled through various departments and functions. This has helped the company
with efficient management and a leadership model which ensures higher success and organizational
productivity. Each of the various functions has a Vice President leading its global operations. The board
of directors that includes two executive directors and 12 independent directors also plays a central role
in guiding business strategy and decision making at Pepsico.
Procurement:

As a leading manufacturer of soda beverages, snacks, and food products, the company depends heavily
on its suppliers globally for the supply of good quality raw material. The company places a special focus
on managing suppliers, supplier relationships, and sustainability in its supply chain. Apart from product
quality, the procurement team at Pepsico also oversees other areas related to the supply chain like the
Code of Conduct as well as supplier audit and training. This ensures a continuous supply of good quality
raw material to the company for its manufacturing operations as well as ethical supply chain operations.
The procurement team also evaluates supplier performance continuously through the help of suppliers
scorecards for improvement and to achieve higher efficiency and productivity throughout the company’s
supply chain network.

(https://notesmatic.com/pepsi-value-chain-analysis/)

2.1.2 The value system

It is important for PepsiCo to base its competitive advantage on activities in which it has access to the
rare or scare resources. It may include- intellectual capital, assets, skills or distribution network. The
Value Chain Analysis can help PepsiCo identify those activities and develop those areas to get a strong
competitive edge over rivals. There are many examples (like Toshiba and Sharp) that consider Value
Chain Analysis as a tool to get a competitive advantage and invest heavily in research and development
activities within their value chain network. Porter’s generic strategies for achieving the competitive
advantage and value chain model can be used together to set strong competitive advantage basis.

Cost advantage through Value Chain Analysis of PepsiCo:

PepsiCo can avail the cost advantages by reducing the costs associated with the value chain activities.
However, it requires the company to firstly map the activities and then associate costs to make
necessary adjustments. The connection between the value chain and costleadership strategy reflects a
parallel focus on the low cost operational activities. If PepsiCo aims to obtain cost advantage, it needs to
identify each element within the value chain can be optimised to get the whole effect

A Value Chain Analysis Example for PepsiCo is that it can use the analysis as a tool to negotiate the best
prices and maximise the in-bound and out-bound transportation processes.

Another Value Chain Analysis Example is using the value chain information to make modest advertising
budget that can reduce marketing costs and offer the product at an affordable cost.

If PepsiCo aims for the low-cost, the Value Chain Analysis can optimise the profitability. If product
differentiation is the aim of PepsiCo, Value Chain Analysis will help the company in maximising the
efficiency and enhancing the product quality by improving processes.
Cost drivers of PepsiCo Value Chain Analysis:

PepsiCo can control following drivers to add value, set differentiation basis and enhance efficiency.

Organisational policies

Integration

Timing

Economies of scale

Linkages

Interrelationships

Capacity utilisation

Learning and Spillover

However, it is important to note that costs can be reduced only to some extent. PepsiCo Value Chain
Analysis must also consider the customers’ perceived value that may justify the higher price charged by
the company compared to competitors.

(Pratap, 2021)

III. Carry out the strategic capability analysis by using VRIN/VRIO framework to assess which strategic
capability(ies) can be a basis to achieve sustainable competitive advantage

VRIO of Pepsico

Valuable

The Pepsi VRIO Analysis shows that the financial resources of Pepsi are highly valuable as these help in
investing into external opportunities that arise. These also help Pepsi in combating external threats.

According to the VRIO Analysis of Pepsi, its local food products are a valuable resource as these are
highly differentiated. This makes the perceived value for these by customers high. These are also valued
more than the competition by customers due to the differentiation in these products.

The Pepsi VRIO Analysis shows that Pepsi's employees are a valuable resource to the firm. A significant
portion of the workforce is highly trained, and this leads to more productive output for the organisation.
The employees are also loyal, and retention levels for the organisation are high. All of this translates into
greater value for the end consumers of Pepsi's products.

According to the VRIO Analysis of Pepsi, its patents are a valuable resource as these allow the firm to sell
its products without competitive interference. This results in greater revenue for Pepsi. These patents
also provide Pepsi with licensing revenue when it licenses these patents out to other manufacturers.

The Pepsi VRIO Analysis shows that Pepsi’s distribution network is a valuable resource. This helps it in
reaching out to more and more customers. This ensures greater revenues for Pepsi. It also ensures that
promotion activities translate into sales as the products are easily available.

According to the VRIO Analysis of Pepsi, its cost structure is not a valuable resource. This is because the
methods of production lead to greater costs than that of competition, which affects the overall profits of
the firm. Therefore, its cost structure is a competitive disadvantage that needs to be worked on.

The Pepsi VRIO Analysis shows that the research and development at Pepsi is not a valuable resource.
This is because research and development are costing more than the benefits it provides in the form of
innovation. There have been very few innovative features and breakthrough products in the past few
years. Therefore, research and development are a competitive disadvantage for Pepsi. It is
recommended that the research and development teams are improved, and costs are cut for these.

Rare

The financial resources of Pepsi are found to be rare according to the VRIO Analysis of Pepsi. Strong
financial resources are only possessed by a few companies in the industry.

The local food products are found to be not rare as identified by Pepsi VRIO Analysis. These are easily
provided in the market by other competitors. This means that competitors can use these resources in
the same way as Pepsi and inhibit competitive advantage. This means that the local food products result
in competitive parity for Pepsi. As this resource is valuable, Pepsi can still make use of this resource.

The employees of Pepsi are a rare resource as identified by the VRIO Analysis of Pepsi. These employees
are highly trained and skilled, which is not the case with employees in other firms. The better
compensation and work environment ensure that these employees do not leave for other firms.

The patents of Pepsi are a rare resource as identified by the Pepsi VRIO Analysis. These patents are not
easily available and are not possessed by competitors. This allows Pepsi to use them without
interference from the competition.

The distribution network of Pepsi is a rare resource as identified by the VRIO Analysis of Pepsi. This is
because competitors would require a lot of investment and time to come up with a better distribution
network than that of Pepsi. These are also possessed by very few firms in the industry.
Imitable

The financial resources of Pepsi are costly to imitate as identified by the Pepsi VRIO Analysis. These
resources have been acquired by the company through prolonged profits over the years. New entrants
and competitors would require similar profits for a long period of time to accumulate these amounts of
financial resources.

The local food products are not that costly to imitate as identified by the VRIO Analysis of Pepsi. These
can be acquired by competitors as well if they invest a significant amount in research and development.
These also do not require years long experience. Therefore, the local food products by Pepsi provide it
with a temporary competitive advantage that competitors can too acquire in the long run.

The employees of Pepsi are also not costly to imitate as identified by the Pepsi VRIO Analysis. This is
because other firms can also train their employees to improve their skills. These companies can also hire
employees from Pepsi by offering better compensation packages, work environment, benefits, growth
opportunities etc. This makes the employees of Pepsi a resource that provides a temporary competitive
advantage. Competition can acquire these in the future.

The patents of Pepsi are very difficult to imitate as identified by the VRIO Analysis of Pepsi. This is
because it is not legally allowed to imitate a patented product. Similar resources to be developed and
getting a patent for them is also a costly process.

The distribution network of Pepsi is also very costly to imitate by competition as identified by the Pepsi
VRIO Analysis. This has been developed over the years gradually by Pepsi. Competitors would have to
invest a significant amount if they are to imitate a similar distribution system.

Organisation

The financial resources of Pepsi are organised to capture value as identified by the VRIO Analysis of
Pepsi. These resources are used strategically to invest in the right places; making use of opportunities
and combatting threats. Therefore, these resources prove to be a source of sustained competitive
advantage for Pepsi.

The Patents of Pepsi are not well organised as identified by the Pepsi VRIO Analysis. This means that the
organisation is not using these patents to their full potential. An unused competitive advantage exists
that can be changed into a sustainable competitive advantage if Pepsi starts selling patented products
before the patents expire.

The distribution network of Pepsi is organised as identified by the VRIO Analysis of Pepsi. Pepsi uses this
network to reach out to its customers by ensuring that products are available on all of its outlets.
Therefore, these resources prove to be a source of sustained competitive advantage for Pepsi.
From the VRIO Analysis of Pepsi, it was identified that the financial resources and distribution network
provide a sustained competitive advantage. The patents are a source of unused competitive advantage.
There exists a temporary competitive advantage for employees. There exists a competitive parity for
local food products. Lastly, the cost structure of Pepsi is a competitive disadvantage. Research and
Development is also a competitive disadvantage.

(VRIO Analysis of PepsiCo, 2021)

III. Based on the internal analysis above and other credible sources of information; identify and
analyze the main strengths and weaknesses (S & W factors from SWOT) that the company is currently
having. 

Strengths of Pepsi (PepsiCo)

PepsiCo is one of the most famous companies in the world. It has 23 brands that generate more than $1
billion each in estimated annual retail sales (PepsiCo, 2021). Both Pepsi-Cola and Diet Pepsi are two of
the top 10 beverages in the United States (Hartlaub, 2019). In fact, PepsiCo is the 4th largest beverage
company in the world (Conway, 2020).

PepsiCo operates in more than 200 countries and territories around the world. Its products are
consumed more than one billion times a day! This clearly demonstrates how far deep the company has
already reached. It should be mentioned that it generated more than $67 billion in net revenue in 2019
(PepsiCo, 2021).

PepsiCo has three distribution channels i.e. direct store delivery (or DSD), customer warehouse, and
third-party distributor networks. These channels enable the company to deliver its products even in
remote areas based on customer needs. As PepsiCo is one of the largest nonalcoholic beverage makers
in the world, retailers are often more than happy to offer it major shelf space. This helps PepsiCo
increase its visibility and presence and influence consumer purchase decisions effectively.

PepsiCo has a broad and strong range of product mix that has enabled the company to achieve
competitive advantages over many of its competitors. Pepsi, 7up, Mirinda, Doritos, Quaker, Walkers, and
Tropicana are some of the most famous members of the PepsiCo family.

PepsiCo has made a number of acquisitions over the years. For instance, it purchased Tropicana Products
in 1998 and merged with Quaker Oats Company in 2001. It is worth mentioning that the Pepsi-Cola
Company merged with Frito-Lay, Inc. in 1965 to become what is known today as PepsiCo.

Weaknesses of Pepsi (PepsiCo)

Many people often perceive soft drinks as unhealthy. This is not only a perception but also supported by
research. For instance, according to a research conducted in the USA as reported by the British
newspaper ‘the Daily Mail’, people who drink more than one fizzy soft drink a day are up to 60 per cent
more likely to develop obesity and high blood pressure, leading to heart attacks and strokes (NHS, 2017).
This is certainly alarming and more public awareness of the issue may heavily impact on the
consumption of soft drinks of PepsiCo and other similar companies.

Some analysts argue that though PepsiCo has reached out many countries and regions, its primary focus
remained on some of its key markets. Likewise, its marketing efforts to reach out to health-conscious
customers have not been that impressive.
Celebrity endorsements are often useful to take a brand’s messages to wider audience. However, not all
celebrity-oriented campaigns are successful and some may indeed cause controversies. For instance,
PepsiCo faced a backlash in 2017 for releasing an advertisement starred by reality TV star Kendall Jenner.
The ad was criticized for seemingly co-opting the resistance movement while framing a privileged, white
21-year-old supermodel with a can of soda as a peacemaker between civil rights activists and police
(Solon, 2017).

(howandwhat.net)

IV. Conclude
Through the above report, I have clarified Pepsico's strengths through benchmarking, the value chain,
VRIN/VRIO, S & W factors from SWOT of Pepsico.

V. Reference

Bizvibe. 2021. Top 10 Largest Beverage Companies in the World 2020 | Global Beverage Industry
Factsheet. [online] Available at: <https://www.bizvibe.com/blog/food-beverages/top-10-largest-
beverage-companies> [Accessed 1 July 2021].

Pratap, A., 2021. Pepsi Value Chain Analysis. [online] notesmatic. Available at:
<https://notesmatic.com/pepsi-value-chain-analysis/> [Accessed 1 July 2021]

Case48. 2021. VRIO Analysis of PepsiCo. [online] Available at: <https://www.case48.com/vrio-

analysis/12651-PepsiCo> [Accessed 1 July 2021].

Howandwhat.net. 2021. [online] Available at: <https://howandwhat.net/swot-analysis-pepsi-pepsico-

swot-analysis/> [Accessed 1 July 2021].