STRATEGIC MANAGEMENT REPORT 2010

INSITITUTE OF BUSINESS AND TECHNOLOGY BIZTEK

Submitted To: Sir Rana Zeeshan Strategic Management MBA (Spring 2010) Submitted By: Adeel Jabbar Fahad Abbas Noor-Us-Saba BM-25012 BM-25078 BM-25052

LETTER OF ACKNOWLEDGEMENT
STRATEGIC MANAGEMENT REPORT 2010

Dear Reader, We would like to thank ALLAH Almighty, for finally making our efforts worthwhile. We also like to thank Sir, Rana Zeeshan Course instructor, Strategic Management, biztek, Karachi for his amiable support and guidance in completing this report. It is due to him that, we had the opportunity of learning how to carry out and conduct a report. This report about Pepsi, this will help us in enhancing research and creative skills in the practical scenario.

Sincerely,

Fahad Abbas Adeel Jabbar Noor-Us-Saba

TABLE OF CONTENTS
STRATEGIC MANAGEMENT REPORT 2010

1.0 Introduction----------------------------------------------------------------------------------02 2.0 Mission and Vision Statement------------------------------------------------------------02 3.0 Pepsi In Pakistan----------------------------------------------------------------------------03
3.1-PRODUCTS IN PAKISTAN--------------------------------------------------------------------------03 3.2-MARKET ANALYSIS OF SOFT DRINKS--------------------------------------------------------03 3.3-MARKET SHARE OF SOFT DRINKS IN BEVERAGE INDUSTRY------------------------04 3.4- PAKISTANI SOFT DRINK INDUSTRY----------------------------------------------------------04

4.0 Industrial SWOT Analysis----------------------------------------------------------------05 4.1 PepsiCo SWOT Analyses---------------------------------------------------------06-07 5.0 Internal Factors Evaluation----------------------------------------------------------08-09 6.0 External Factors Evaluation ---------------------------------------------------------10-11 7.0 Twos Matrix & Strategies Development-------------------------------------------11-12 8.0 Suggestions-----------------------------------------------------------------------------------13 9.0 Conclusion------------------------------------------------------------------------------------14

STRATEGIC MANAGEMENT REPORT 2010

Pepsi International is a world renowned brand. It is a very well organized multinational company, which operates almost all over the world. They produce, one of best carbonated drinks in the world. Pepsi is a symbol of hygiene, quality and service, all over the world. Pepsi is producing Cola for more than 100 years and it has dominated the world market for a long time. Its head office is in New York.

VISION STATEMENT Our vision is to be the world's best beverage company. Being the best means providing outstanding quality, service, cleanliness and value, so that their every customer is contented and happy with their products. MISSION STATEMENT To be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

STRATEGIC MANAGEMENT REPORT 2010

The market in Pakistan is surely dominated by Pepsi. It has proves itself to be the No.1 soft drink in Pakistan. Now days Pepsi is recognized as Pakistanis National drink. In 1971, first plant of Pepsi was constructed in Multan, and from their after Pepsi is going higher and higher. Pepsi is the choice soft drink of every one. It is consumed by all age groups because of its distinctive taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all. Consumer’s survey results explain the same outcome and Pepsi has been declared as the most wanted soft drink of Pakistan. Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand. Coke’s basic strength is its brand name. But Pepsi with its aggressive marketing planning and quick diversification in creating and promoting new ideas and product packaging, is successfully maintaining is No.1 position in Pakistan. When Pepsi was introduced in Pakistan, it faced fierce competition with 7up, lemon and lime drinks, which was established during 1968, in Multan. Pepsi introduced its lemon and lime, "Teem" to compete with 7up. It successfully, after some years, took over 7up, and this enhanced Pepsi's profits and market share. In Pakistan, Pepsi with 7up enjoys 70% of the market share where as the coke just has 20% markets share. Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.”

3.1-PRODUCTS IN PAKISTAN
Pepsi Cola, Mirinda, Teem, 7UP, Mountain Dew, Diet 7UP, Diet Pepsi, Lays, Kurkure, Aquafina, Pepsi Twist and Tropicana Juices.

3.2-MARKET ANALYSIS OF SOFT DRINKS
Soft drinks set to become world's leading beverage sector Global consumption of soft drinks is rising by 5% a year, well ahead of all other beverage categories, according to the new 2003 Global Soft Drinks Report from leading drinks consultancy Zenith International. Now challenging hot drinks to become the largest overall sector, soft drinks volume is projected to reach 467 billion liters in 2003, equivalent to 75 liters per person. "Economic and climate variations around the world present complications for all soft drinks companies, but many have succeeded at weathering the elements," commented Zenith Research Director Gary Roethenbaugh. "As a combined category, soft drinks offer a powerful growth proposition. The unrelenting advance of bottled water and still drinks, coupled with the scale of carbonates, help place soft drinks on track to become the number one beverage sector in 2005.

3.3- MARKET SHARE OF SOFT DRINKS IN BEVERAGE INDUSTRY
Concern over diet has persuaded many consumers to scale down their consumption of sugary drinks, instead choosing ‘healthy’ products such as fruit juice and bottled water. Despite this shift in attitude, the majority of consumers around the world still favor carbonated soft drinks over these alternatives,

STRATEGIC MANAGEMENT REPORT 2010

according to latest data from TGI. In 11 out of 15 countries analyzed, it is revealed that consumption of carbonated soft drinks is higher than consumption of fruit juice or bottled mineral water.

3.4- PAKISTANI SOFT DRINK INDUSTRY
About 75 million cases a year for Pepsi alone; the total beverage market is about 120 million cases of which 65% per cent are Pepsi products; about 20 to 22 per cent are Coca-Cola products and Zum Zum cola and Mecca Cola, Amrit Cola and Muslim Cola... there are so many colas; there is RC and Double Cola which are franchised products. Altogether they have around 5 per cent of the market. Due to the Afghan and Iraq wars, they did get a little footing especially in the frontier and Islamabad area but still they are not hugely popular Total annual sale of soft drink in Pakistan 120 million cases • • • Pepsi annual sales in Pakistan 75 million Market share of Pepsi 65% Consumption growth 1.7 % per year  

STRATEGIC MANAGEMENT REPORT 2010

STRENGTHS:
The soft drinks market in Pakistan enjoyed dynamic growth over the review period in both volume and current value terms. Carbonates dominate the market in both the on-trade and off-trade with the lion's share of sales. Carbonates have become part of the culture in Pakistan and multinational companies have maintained their standards over the years to provide consumers with high-quality carbonated drinks. Off-trade sales of carbonates are higher than those of the on-trade but both achieved strong growth over the review period

WEAKNESSES:
Liquid concentrates and powder concentrates are both seasonal categories in the market and their sales peak in the summer in Pakistan. Both Rooh Afza and Jam-e-Shirin are traditional sandalwood drinks in Pakistan which are highly regarded by consumers. These drinks can be found in every home in Pakistan, especially in rural areas, throughout the summer and are the mainstay of liquid concentrates

OPPORTUNITIES:
The government of Pakistan has reduced excise taxes to encourage soft drinks manufacturers and importers. The government also reduced other applicable taxes to promise more profits not only for soft drinks manufacturers already in the market but also to attract potential soft drinks manufacturers to invest in Pakistan. Tax reductions proved extremely beneficial to the soft drinks market in Pakistan and certainly encouraged and attracted multinational companies to invest in the country's soft drinks industry. The government also decided to tax the beverage industry on capacity of production rather than on actual production and that brave move encouraged soft drinks manufacturers to maximize production and reduce prices

THREATS:
Increasing health and hygiene awareness among Pakistanis has greatly increased sales of fruit/vegetable juice products. Both the government and the media have started health awareness campaigns to make Pakistanis realize that consumption of fruit/vegetable juice is as essential as eating food. Fruit/vegetable juices are doing very well in both urban and rural areas. On the other hand, health and hygiene awareness has also led to increased sales of bottled water in Pakistan. Previously bottled water was targeted only at major cities where consumers are more health-conscious and aware of the difference between bottled water and tap water. Nowadays, health-conscious rural inhabitants also drink bottled water due to health concerns.

SWOT Analysis, which is based on thorough review of the business (corporation, product category competition, customers and products), identities and evaluates the internal strengths and weakness of

STRATEGIC MANAGEMENT REPORT 2010

the companies well as its external threats and opportunities. The marketing mix is driven by the results of the SWOT analysis.

STRENGTH
1. Company has a very established name and a good reputation. 2. Pepsi has large market share than its competitors. 3. As the target customers of Pepsi is young generation, so Pepsi has more brand loyal customers. 4. Pepsi is an international company and it has a very strong position internationally. 5. The environment of factory is very good and attractive. 6. Pepsi spends a lot of budget on its advertising. 7. Pepsi has a very vast distribution channel and it is easily available everywhere. 8. Employees are also motivated. 9. Pepsi offers many discount schemes for customers time to time. 10. Pepsi Cola is sponsoring sports, musical concerts, walks.

WEAKNESSES
1. 2. 3. 4. 5. 6. 7. Pepsi does not offer any sort of incentive or discount to its retailers. Pepsi target only young customers in their promotions. Pepsi tin pack is not available in far off rural areas. Unavailability of all products of Pepsi at the same time at the same outlet. Offering low margins to its retailers Political Franchises Not all the PepsiCo products bear the company name

OPPORTUNITIES
1. 2. 3. 4. 5. 6. 7. 8. 9. Demand of Pepsi is more than its competitors. Increase in population The company may also diversify its business in some other potential business. Increased interest of people in musical groups, cultural shows and sports has provided an opportunity for Pepsi to increase its sales through them. Increasing demand of beverages among young generation will increase growth rate in this industry. Usage of products among target market consisting young generation has been increasing day by day. Changing Social Trend Distribution of snack foods Diversification

THREATS
1. Tough rivalry among competitors 2. Cola drinks are not good for the health so the awareness level of the people is in creasing which is a big threat to the company. 3. Economic downfall might bring meaning full damages. 4. Government regulations 5. Law & order situations of the country 6. Non-Carbonated Substitutes

STRATEGIC MANAGEMENT REPORT 2010

7. Political Instability 8. Threat of Labor Strikes 9. Shortage of resources 10. Shortage of electricity

Weight

Rating

Weighted Score

Strength

STRATEGIC MANAGEMENT REPORT 2010

1. Company has a very established name and a good reputation. 2. Pepsi has large market share than its competitors. 3. As the target customers of Pepsi is young generation, so Pepsi has more brand loyal customers. 4. Pepsi is an international company and it has a very strong position internationally. 5. The environment of factory is very good and attractive. 6. Pepsi spends a lot of budget on its advertising. 7. Pepsi has a very vast distribution channel and it is easily available everywhere. 8. Employees are also motivated. 9. Pepsi offers many discount schemes for customers time to time. 10. Pepsi Cola is sponsoring sports, musical concerts, walks.

0.1 5 0.0 5 0.0 2 0.1 0 0.0 2 0.1 0 0.1 2 0.0 4 0.0 2 0.0 4 0.6 6 00 00 00 00 00 00 00 00 00 00

4. 0.60 4. 0.20 3. 0.06 4. 0.40 3. 0.06 4. 0.40 3. 0.36 3. 0.12 3. 0.06 3. 0.12 2.38

Weaknesses
1. Pepsi does not offer any sort of incentive or discount to its retailers. 2. Pepsi target only young customers in their promotions. 3. Pepsi tin pack is not available in far off rural areas. 4. Unavailability of all products of Pepsi at the same time at the same outlet. 5. Offering low margins to its retailers 6. Political Franchises 7. Not all the PepsiCo products bear the company name
0.0 5 0.0 4 0.0 2 0.1 0 0.0 4 0.0 5 0.0 4 0.3 4 0.50 00 00 1. 0.04 00 2. 0.10 00 2. 0.08 00 1. 0.10 00 2. 0.04 00 1. 0.04 2. 0.10

Strong Internal Position

1.0 0

2.88

Criteria
If total weighted score less then 2.5 it means the company has weak internal position If total weighted score more then 2.5 it means the company has strong internal position 4 3 2 1 Major Strength Minor Strength Minor Weakness Major Weakness

STRATEGIC MANAGEMENT REPORT 2010

Weight

Rating

Weighted Score

Opportunities
1. Demand of Pepsi is more than its competitors. 2. Increase in population
0.1 5 0.0 2 00 00 3. 0.06 3. 0.45

STRATEGIC MANAGEMENT REPORT 2010

3. The company may also diversify its business in some other potential business. 4. Increased interest of people in musical groups, cultural shows and sports has provided an opportunity for Pepsi to increase its sales through them. 5. Increasing demand of beverages among young generation will increase growth rate in this industry. 6. Usage of products among target market consisting young generation has been increasing day by day. 7. Changing Social Trend 8. Distribution of snack foods 9. Diversification

0.0 5 0.0 5 0.0 6 0.0 3 0.0 5 0.0 5 0.0 4 0.5 0 00 00 00 00 00 00 00

4. 0.20 4. 0.20 3. 0.18 4. 0.12 3. 0.15 4. 0.20 4. 0.16 1.72

Threats
1. Tough rivalry among competitors 2. Cola drinks are not good for the health so the awareness level of the people is in creasing which is a big threat to the company. 3. Economic downfall might bring meaning full damages 4. Government regulations 5. Law & order situations of the country 6. Non-Carbonated Substitutes 7. Threat of Labor Strikes 8. Shortage of resources 9. Shortage of electricity
0.1 0 0.0 5 0.0 5 0.0 2 0.0 5 0.0 5 0.0 4 0.0 4 0.1 0 0.5 0 More Then Average Criteria 4- Superior 3- More then average 2- Average 1- Poor 1.28 00 00 4. 0.40 00 4. 0.16 00 4. 0.16 00 1. 0.05 00 1. 0.05 00 3. 0.06 00 1. 0.05 00 1. 0.05 3. 0.30

1. 00

3.00

STRATEGIC MANAGEMENT REPORT 2010

SO Analyses & Developing Strategies  S6+O1  S6=Pepsi spends a lot of budget on its advertising  O1=Demand of Pepsi is more than its competitors  Pepsi has a budget capacity to avail or maintain its products’ demand.  Advertising/Promotional Strategy in order to maintain or increase its demand.  S7+O3  S7=Pepsi has a very vast distribution channel and it is easily available everywhere.  O3=The company may also diversify its business in some other potential business  Pepsi has a strong and wide distribution channel which will help in placement of new products also.  Product diversification ST Analyses & Developing Strategies  S6+T1+T2  S6=Pepsi spends a lot of budget on its advertising  T1=Tough Rivalry Compaction  T2= Cola drinks are not good for the health so the awareness level of the people is in creasing which is a big threat to the company.  Pepsi has a huge budget for advertising.  Advertising/Promotional Strategy in order to place its positioning step ahead among its competitors.  Awareness Campaigns in order to increase people awareness about products benefits while using its brand.

 S4+T3+T9  S4=Pepsi is an international company and it has a very strong position internationally.  T3=Economic downfall might bring meaning full damages. (Cost of raw material, purchasing power etc)  T9=Shortage of electricity  Wide Target market and huge market segmentation.  Market Development will help to maintain its profits if any undue or uncertain events will occur.

STRATEGIC MANAGEMENT REPORT 2010

 Backward Integration will have its own electricity generation equipments WT Analyses & Developing Strategies  W6+T1  W6= Political Franchises  T1=Tough Rivalry Compaction  Political Franchises may lead to the conflicts and it could be the strength for the competitors.  Forward Integration In order to have its own distribution channels  W7+T1  S4=Not all the PepsiCo products bear the company name.  T3=Tough Rivalry Compaction  Promotional Campaign for individual products  Promotional Campaign will help to increase awareness among people about every products of the company. WO Analyses & Developing Strategies  W5+O8  W5= Offering low margins to its retailers  O8= Distribution of snack foods  Local brands of snack foods provide higher margins.  Pricing strategy will enhance the retailer’s interest to stock company’s snack products.  W4+O1  W4=Unavailability of all products of Pepsi at the same time at the same outlet.  O1=Demand of Pepsi is more than its competitors.  Unavailability of every product might lead bad image on the customers which will directly benefits to the competitors.  Placement strategy is more important in order to have every products of the company at the same outlet.

STRATEGIC MANAGEMENT REPORT 2010

Today we live in a fast moving world where novelty and newness count a lot. One cannot rest on one’s laurels. Fresh efforts, newness of approach must remain the cardinal principles of a well orchestrated management strategy and the campaign must be relentless. A continuous bombardment in advertisement would convince the clients that Pepsi is a part of their lives. In order to live with style, Pepsi ought to be an essential ingredient of one’s life. The Pepsi is at its maturity stage and the sales of company are not growing very rapidly. Company is doing a lot of promotional activities to let the product remain in the market. It holds a large share of the market and whenever the sales state declining, the company can improve it by different promotional activities. Marketers of Pepsi can try to improve sales by improving one or more marketing mix elements. They can cut prices to attract new users and competitor’s customers. They can also launch a better advertising campaign or use aggressive sales promotion to improve the sales. Thus, Pepsi is at its maturity stage

STRATEGIC MANAGEMENT REPORT 2010

Pepsi is a well renowned company and it has maintained its position well by understanding the client psychology, by ensuring quality, by introducing ingenuity in products, by enlarging its product base, by keeping economic factors in view and by intense and jazzy advertisements. Whenever and where ever there is a spotlight event, Pepsi must figure in, like the one day international cricket matches between India and Pakistan many other such occasions. The key word for success in the Marketing World is to “remain in the spotlight” and that is what Pepsi is doing.

STRATEGIC MANAGEMENT REPORT 2010