Business-Level and Corporate-Level Strategies

Pepsi’s Business-Level and Corporate-Level Strategies

Shelbie D Parks

Dr. Marilyn Carroll, PhD

BUS 499 – Business Administration Capstone

March 12, 2018

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 BUSINESS-LEVEL AND CORPORATE-LEVEL STRATEGIES 2

Pepsi’s Business-Level and Corporate-Level Strategies

Introduction

“Strategies in any business are instrumental in the proper growth and expansion of a

company. A strategy is a set of analytic techniques for understanding and influencing the firm's

position in the marketplace” (Raimundo, 2001). Moreover, the business strategy enables a

company to match its internal capabilities and its external environment. Also, the plan assists the

company to realize its objectives and mission set at its inception or along the course of its

operation in a particular period. The business-level strategy involves organizational decisions on

how to compete for customers in the market and industry. It includes choices about the service

mix, products, new technologies, facility locations and the like. Conversely, corporate-level

strategies direct an organization towards the sustainable competitive edge. They are concerned

with how companies create value across different businesses in the market. It also refers to the

overall strategy of an organization that is made up of multiple business units, operating in

various markets. They are long-term directions for the enterprise. The aim of a corporate-level

strategy is to guide the resource allocation and set guidelines for the entire industry. For instance,

as an independent, publicly traded company, the Pepsi all started with a man named Caleb Davis

Bradham. When he moved back to his home town to North Carolina and opened a drug store on

the corner of Middle and Pollock Streets in downtown New Bern. Bradham’s Drug Store would

later become the very place Pepsi-cola was invented. In the year of 1893 “Brad’s Drink,” made

from a mix of sugar, water, caramel, lemon oil, nutmeg, and other natural additives, became and

overnight sensation. The business began to grow, on June 16, 1903, “Pepsi-Cola” became an

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official trademark. “PepsiCo's food and beverage products are sold around the world. Our six

global divisions, either independently or in conjunction with third parties, make, market,

distribute and sell a wide variety of food and beverages in our diverse product portfolio, drive

innovation, and are focused on delivering Performance with Purpose - our goal to position

PepsiCo for long-term, sustainable growth by aligning what is good for our business with what is

good for society and the planet” (Global Divisions). With such strategic intent, one cannot expect

to find Pepsi investing in foods and convenience snacks as does its main competitor Coca-Cola.

At a business and corporate level, PepsiCo adheres to a set of ideals that enable the

company to create value and make a difference. The business-level strategy of the company

integrates unique products associated with the following six principles: achieving fourth through

mergers and acquisitions. Forming strategic alliances in the global scale, focusing on emerging

markets, focusing on organizational culture, developing and promoting the idea of One PepsiCo,

and innovation in marketing initiatives. Such drive is what connects the company to strive when

marketing and selling their products. Through powerful advertisement campaigns, PepsiCo. has

managed to market its brands all over the world. An important business-level strategy

implemented by PepsiCo. is achieving growth through mergers and acquisitions. This has very

great advantages of gaining access to competencies and infrastructure, reducing direct costs and

overheads and achieving organic growth. Also, the company has also introduced in 1964 a

healthier soft drink like Diet Pepsi, and this has appealed to many consumers globally. The need

for developing corporate-level strategies enables an organization to be globally efficient. Also, it

is seen as a way of remaining competitive and creating more standardized products as is the case

of Coco-Cola.

Purpose Statement
 The goal regarding this study is to analyze the business-level and corporate-level

strategies of PepsiCo. and determine the most relevant strategies that align with the long-term

success of the firm. Also, this paper will discuss PepsiCo. competitive environment to determine

the organization's most aggressive competitor. A comparison of both strategic levels (PepsiCo.

and competitor) will evaluate which company is most likely to be long-term successful.

1. Business-Level Strategies for PepsiCo.

“Our Performance with Purpose efforts are directed toward creating a healthier relationship

between people and food while continuing to grow our business. Through our 2025 Agenda, we

are making progress on our goals, which aim to deliver change across our company, value chain,

industry and the world” (Our Goals).

Furthermore, Pepsi is one of the world’s most iconic and recognized consumer brands globally.

Three main products that make more than $1 billion is Pepsi, Diet Pepsi, and Pepsi MAX.

Through their new Planet goals, Pepsi will work to reduce the environmental impact while

growing the business and helping to meet the food, beverage and natural resource needs of our

changing world. “PepsiCo’s business depends on the availability of the natural resources needed

to make out products. Agriculture uses the vast majority of the world’s available fresh water at

the same time that water availability is becoming increasingly limited. As the world’s population

grows, the demand for water and energy will also rise. And if society follows business as usual,

leading global organizations expect that greenhouse gas (GHG) emissions will increase in the

coming years, further accelerating climate change and putting crops at potential increased risk”

(Global Context).

On the business-level, PepsiCo uses a differentiation strategy by making it unique. The

company remains widely recognized in spending enormous amounts of money on advertising its

products. The differentiation strategy has been very much successful for the corporation and
allowed the firm to gain a competitive advantage over its main competitors. The company

differentiates itself by using unique advertising campaigns that enable its customers to stay loyal.

PepsiCo. uses a vast amount of information technology and information systems the Diversified

Business Model has really helped Pepsi. “PepsiCo is a company known for a highly-diversified

product portfolio. This means PepsiCo’s products in the snack food category account for more

than 50% of its business revenue” (Investopedia). If Pepsi ever declines in overall revenue Pepsi

is in a good position to where nothing will happen to the company. With PepsiCo’s diversified

business model, the company has been able to create products from both food industry and the

beverage industry. Through Strategic Grants, since 2005, PepsiCo, through its foundation and

divisions, has donated than $900 million in cash and product to agencies. Also, PepsiCo supports

programs that increase positive nutrition, work to achieve positive water impact, reduce and

eliminate waste, and spur prosperity. “As a leading food and beverage company that operates in

every corner of the globe, we’re deeply committed to improving the communities where we

operate—and the lives of the people who call them home. With priorities in the areas of strategic

grant making, community service and volunteering, and disaster relief and humanitarian support,

PepsiCo's Global Citizenship work advances our Performance with Purpose vision - to deliver

great performance while doing the right things for people and communities around the world.

Did You Know? In 2015, we estimate that more than 120,000 volunteer hours were completed by

PepsiCo employees around the world” (Global Citizenship).

In this light, because PepsiCo are so large, they face the issue of market saturation. PepsiCo

decided to start its own energy drink: Mountain Dew Kickstart as a recommendation to the long-

term success of this strategy, the corporation must adapt its products to the changing needs.

Alternatively, a better approach would be integrating the beverage industry with the alcohol-
drinking culture such as 81 Camaro which contains Pepsi Cola; this will see both beverage

companies selling as one.

2. Corporate-Level Strategies for PepsiCo.

As a multinational corporation, Coca-Cola operates in more than 200 countries worldwide.

Alongside Apple and Google, PepsiCo. is extremely esteemed. The ‘one brand’ approach is a

corporate strategy by PepsiCo. that seeks to unite three brands (Diet Pepsi, Pepsi Max, and Pepsi

XL) under a single brand, Pepsi. The strategy plays an integral part in achieving more than 50%

of Pepsi sales from no-calorie beverages by 2020. The corporation believes that the ‘one brand’

approach through advertising will ensure global consumers are clear about the choices offered to

there. PepsiCo has a wide range in innovative marketing. The “Do Us a Flavor” campaign that

had 17 countries involved. Many pop stars are associated with PepsiCo for example, Beyoncé

Knowles. Importantly, cross-cultural differences in various markets are taken into account when

developing and delivering PepsiCo marketing messages.

As a brand, it has taken years to build and all this has been made possible due to its

corporate-level strategies that align with its mission and vision statement. PepsiCo mission

statement has been worded by CEO Indra Nooyi as ‘Performance with Purpose’ These principles

are closely integrated with strategic direction. The following six principles are the most

prominent aspects of PepsiCo; achieving growth through mergers and acquisitions (M&A),

forming strategic alliances in the global scale, focusing on emerging markets, focusing on

organizational culture, developing and promoting the idea of One PepsiCo, and lastly innovation

in marketing initiatives. We will just be focusing on the first three:

The company's obligation to the interests of the shareholders demonstrates an important

part in the long-term success of the firm; this is a good choice because it addresses the
customers, employees, and shareholder's interests. More so, these areas are fundamental to the

sustainability of the organization; this is critical in ensuring that trust and confidence of the

customers and employees are maintained. Through superb marketing and advertising ways, the

consumers are always informed about the quality of the brands; this is relevant to ensuring the

long-term success of the corporation. Also, quality assurance seals on Coca-Cola products enable

the customers that the products are original and meet specific target markets (Pendergrast, 2013).

3. The Competitive Environment

As a non-alcoholic beverage company, Coca-Cola competes in a multi-geographical region.

In many of the countries in which the corporation operates, PepsiCo remains as the primary

competitor. Other leading competitors include Unilever, Nestle, Groupe Danone, and Dr. Pepper

Snapple Group Inc. (Sec. Gov, 2011). The findings further echoed in the annual report provided

by Coca-Cola with the Securities and Exchange Commission EDGAR database that indicates the

commercial beverage industry is highly competitive and has numerous companies.

Pepsi's business level strategy is a low-cost differentiation strategy and uses the

economies of scale together with the mass production of its products. According to the

company's website, Pepsi differentiates its products through taste and marketing (Pepsico.com,

2015). A key business strategy the company integrates is the pricing strategy which is part of the

low-cost differentiation strategy. PepsiCo’s products are offered at low prices, hence the high

demand and market share. As part of the global strategy, the expansion plan was implemented by

PepsiCo as their corporate-level strategy. Over 190 countries operating in globally, the company

is slowly emerging in new markets and their international development is mainly geared to the

developing nations.
 Both Coca-Cola and PepsiCo have a potential for growth and sustainability in the future.

However, the business-level strategies in both companies demonstrate that PepsiCo is better

positioned globally than Coca-Cola. PepsiCo has a more competitive edge because of its

presence in many countries than Coca-Cola. However, the business-level strategies in both

companies are similar as both have a different approach. In contrast, Coca-Cola focuses more on

the interests of shareholders on the corporate-level; while PepsiCo's corporate strategy is towards

international expansion (Pepsico.com, 2015).

4. Slow Cycle and Fast Cycle Markets

As Campbell (2013) points out, the business-level and corporate-level strategies used by
both companies (Coca-Cola and PepsiCo) vary with the markets of operations. Both fast and
slow cycle markets depict the 21st-century business environments. A segmentation strategy is,
therefore, crucial to groups diverse markets by characteristics and performance. The market
segmentation in both companies will enable them to promote their distinct products to various
and specific target markets; this will ensure the corporation fulfills the market needs and
consequently encourages the increase in purchases.
Conclusion

The PepsiCo case study on this report has demonstrated that business-level strategies and

corporate-level strategies are crucial in developing sustainable organizations. As discussed, the

long-term success of a company depends on the efforts of the diverse stakeholders in formulating

policies that best serve the interest of the enterprise. PepsiCo and Coca-Cola are both well-

respected companies globally and have become the notion of strategic management in the ever-

increasing dynamic market. Therefore, formulating an effective strategy adequately covers the

steps a company needs to take to attain its objective. Moreover, the business-level and corporate-

level strategies provide solutions to a corporation such as how to create and capture value in a

particular product market.

 References

Campbell, A. (2013). Corporate-Level Strategy: Making Decisions about the Business

Portfolio. Hoboken, New Jersey: Jossey-Bass.

Dudovskiy, J. (2016, May 01). PepsiCo Business Strategy and Competitive Advantage.
Retrieved March 05, 2018, from https://research-methodology.net/pepsico-analysis-of-corporate-
strategy/

Global Citizenship. (n.d.). Retrieved February 21, 2018, from

http://www.pepsico.com/sustainability/Philanthropy

“Global Context.” PepsiCO, www.pepsico.com/sustainability/Performance-with-

Purpose/Planet.

“Global Divisions.” PepsiCo, www.pepsico.com/About/global-divisions.

Investopedia. (2015, August 14). Comparing Coca-Cola and Pepsis Business Models
(KO, PEP). Retrieved February 21, 2018, from
https://www.investopedia.com/articles/markets/081415/comparing-cocacola-and-pepsis-
business-models.asp

“Our Goals.” PepsiCo, www.pepsico.com/sustainability/performance-with-purpose/our-

goals.

Pepsico.com,. (2015). Twitter: Experience 50 years of PepsiCo People, Products, and

Performance. #PepsiCo50. Retrieved 16 November 2015, from http://www.pepsico.com/