External Analysis of PepsiCo Company

Table of Contents:

Abstract 3
Introduction 4
The theoretical aspect of External 5
Analysis:
Practical Section: 9
Conclusion and Recommendations: 16
References: 17

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1. Abstract:

The primary aim of this report is to conduct an external analysis of PepsiCo, one of the
world’s leading food and beverage companies. This report presents a detailed analysis of
PepsiCo’s external environment, utilizing several theoretical models, such as the
PESTEL, Five Forces, and SWOT analysis. The purpose of this analysis is to identify the
opportunities and challenges that PepsiCo faces and make recommendations for
enhancing the company’s performance and competitive position in the industry.

This report begins with an in-depth Introduction section that provides a brief overview of
PepsiCo and its operations. The Introduction is followed by a theoretical aspect of
external analysis, which discusses the definitions, importance, and steps of external
analysis, as well as the description of the models used in external analysis, their
advantages and disadvantages, and other pertinent information.

The practical section of the report includes the company profile, which provides detailed
information about PepsiCo, its history, core values, and strategic objectives. Additionally,
the report covers PepsiCo’s vision and mission statement and provides a thorough
description of the company’s organizational structure.

Furthermore, this report examines PepsiCo’s external environment using various models.
The PESTEL model analyzes the company’s political, economic, social, technological,
environmental, and legal factors. The Five Forces model assesses the intensity of
competition in the industry, bargaining power of suppliers and buyers, the threat of
substitutes, and the threat of new entrants. The SWOT analysis outlines the company’s
strengths, weaknesses, opportunities, and threats.

Based on the analysis, this report concludes that PepsiCo has a strong market position,
supported by its diversified portfolio of products and brands, global reach, and robust
financial performance. However, the company faces several challenges and opportunities
that require attention, such as the changing consumer preferences, increased competition,
and the need for sustainable practices.

To enhance its performance and competitiveness, this report recommends that PepsiCo
focus on innovation and product development, diversify its product portfolio, invest in
sustainable practices, strengthen partnerships and collaborations, and continue to expand
its global presence. Additionally, the report suggests that PepsiCo should continue to
prioritize customer satisfaction and experience, employee development and retention, and
ethical and responsible business practices.

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2. Introduction:

PepsiCo is a multinational food and beverage corporation headquartered in New York,

USA, with operations in over 200 countries worldwide. The company’s product portfolio
includes a wide range of snacks, beverages, and food items, including popular brands like
Pepsi, Frito-Lay, Quaker, and Tropicana. As a market leader in the food and beverage
industry, PepsiCo faces constant competition and challenges from various external
factors, making it critical for the company to conduct an external analysis regularly.

Therefore, the purpose of this report is to conduct an external analysis of PepsiCo, using
different strategic management models and techniques to identify the opportunities and
threats facing the company. The report will analyze the macro-environmental factors
affecting the company’s operations, the competitive forces in the industry, and the
internal strengths and weaknesses of the company.

The report will present a comprehensive analysis of PepsiCo’s external environment

using the PESTEL model, Five Forces model, and SWOT analysis. The PESTEL model
will examine the Political, Economic, Social, Technological, Environmental, and Legal
factors affecting the company’s operations. The Five Forces model will analyze the
competitive forces in the industry, including the bargaining power of customers,
suppliers, new entrants, substitutes, and industry rivals. Finally, the SWOT analysis will
evaluate the internal strengths and weaknesses of the company, as well as the external
opportunities and threats facing the company.

The report aims to provide valuable insights and recommendations for PepsiCo to
improve its performance and competitive position in the market. By analyzing the
external environment of the company, the report will identify the potential opportunities
and threats facing the company and provide recommendations for the company to
leverage its strengths and address its weaknesses to remain competitive in the industry.

Furthermore, the report will highlight the importance of conducting an external analysis
for any organization to identify the potential opportunities and threats facing the
company. By using different strategic management models and techniques, the report will
provide a comprehensive understanding of the external environment of PepsiCo, which
can help the company make informed decisions and strategic choices.

The report will also discuss the significance of a well-designed external analysis in
identifying potential risks and uncertainties, enabling the company to develop effective
strategies to mitigate these risks. By conducting a thorough external analysis, PepsiCo
can identify the external factors that may impact its operations, allowing the company to

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 prepare and respond accordingly. The recommendations will be based on the insights
obtained from the analysis and aimed at improving PepsiCo’s performance and
competitive position in the market.

3. The theoretical aspect of External Analysis:

External analysis is a critical process in strategic management that involves evaluating an

organization’s external environment to identify opportunities and threats that may impact
its operations. The external environment includes factors that are beyond the
organization’s control, such as economic, social, political, legal, technological, and
environmental factors.

The main objective of external analysis is to assess the attractiveness of the industry or
market in which the organization operates. It helps the organization to understand the
dynamics of the industry and its competitive position. The analysis involves evaluating
the industry’s structure, identifying the key players and their strategies, and assessing the
trends that may affect the industry’s growth and profitability.

External analysis is essential for organizations because it provides a better understanding

of the external environment, which can help to develop a more effective strategy. It
enables organizations to anticipate changes in the external environment and respond
proactively to emerging trends and threats. By understanding the external environment,
organizations can develop strategies that are aligned with their strengths, weaknesses,
opportunities, and threats.

External analysis is also important because it helps organizations to identify potential

opportunities for growth and expansion. By assessing the external environment,
organizations can identify new markets or products that they can explore. They can also
identify potential partnerships or alliances that can help them to achieve their strategic
objectives.

In summary, external analysis is a critical process in strategic management that enables

organizations to assess the attractiveness of their industry or market and identify
opportunities and threats. By conducting regular external analysis, organizations can stay
ahead of their competitors, maximize opportunities for growth, and mitigate risks and
threats.

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External analysis is a crucial step in strategic management that involves evaluating
an organization’s external environment to identify opportunities and threats that
may impact its operations. The following are the key steps involved in conducting an
external analysis:

Identify the scope of the analysis: The first step in external analysis is to identify the
scope of the analysis. This involves defining the industry or market that the organization
operates in and identifying the key players and stakeholders.

Gather data: The next step is to gather data on the external environment. This involves
collecting information on economic, social, political, legal, technological, and
environmental factors that may impact the industry or market.

Analyze the data: Once the data has been gathered, the next step is to analyze it. This
involves evaluating the trends, patterns, and relationships between the different factors
that may impact the industry or market.

Identify opportunities and threats: Based on the analysis, the next step is to identify
opportunities and threats that the organization may face. Opportunities are external
factors that the organization can exploit to its advantage, while threats are external factors
that may pose a risk to the organization.

Prioritize the opportunities and threats: The next step is to prioritize the opportunities
and threats based on their impact on the organization. This involves evaluating the
likelihood and severity of each opportunity or threat and identifying those that are most
significant.

Develop strategies: Once the opportunities and threats have been identified and
prioritized, the next step is to develop strategies to address them. This may involve
developing new products or services, entering new markets, forming partnerships or
alliances, or improving operational efficiencies.

Monitor the external environment: Finally, it is important to monitor the external

environment regularly to identify any changes or trends that may impact the organization.
This will enable the organization to adapt its strategies accordingly and stay ahead of its
competitors.

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 In summary, conducting an external analysis involves identifying the scope of the
analysis, gathering, and analyzing data, identifying opportunities and threats, prioritizing
them, developing strategies, and monitoring the external environment regularly. By
following these steps, organizations can gain a better understanding of the external
environment and develop effective strategies to achieve their goals.

There are several models used in external analysis, including PESTEL, Five Forces, and
SWOT analysis. Each model has its advantages and disadvantages:

PESTEL Model:

PESTEL is an acronym for Political, Economic, Social, Technological, Environmental,

and Legal factors. The model is used to analyze the external environment of a company.

Advantages:

1. Helps in identifying the macro environmental factors affecting the company.

2. Provides a comprehensive view of the external environment.
3. Helps in anticipating future changes and trends.
4. Can be used in combination with other analysis tools for a more comprehensive
understanding of the external environment.

Disadvantages:

1. The model is general and may not be suitable for every industry.
2. The model does not provide recommendations or solutions, only a snapshot of the
external environment.
3. The model may not take into account the complexity of the external environment.

Five Forces Model:

The Five Forces model was developed by Michael Porter and is used to analyze the
competitive forces in an industry.

Advantages:

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 1. Helps in identifying the competitive forces affecting the company
2. Provides a framework for analyzing the competitive forces in an industry
3. Helps in developing strategies to mitigate the impact of the competitive forces
4. Helps in identifying the attractiveness of an industry for investment.

Disadvantages:

1. The model is static and may not take into account the dynamic nature of the
industry.
2. The model may not be suitable for industries where there is high uncertainty and
rapid change.
3. The model may not take into account the impact of non-market forces on the
industry.

SWOT Analysis:

SWOT analysis is an acronym for Strengths, Weaknesses, Opportunities, and Threats. It

is used to analyze the internal and external environment of a company.

Advantages:

1. Helps in identifying the internal and external factors affecting the company.
2. Provides a framework for developing strategies based on the analysis.
3. Can be used for both strategic planning and operational decision-making.

Disadvantages:

1. The model may be subjective and may not provide a comprehensive view of the
external environment.
2. The model does not provide recommendations or solutions, only a snapshot of the
internal and external environment.
3. The model may not take into account the interdependence of factors.

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A. Practical Section:

- Company Profile:

PepsiCo, Inc. is a multinational food and beverage corporation headquartered in

Purchase, New York. The company was founded in 1965 with the merger of Pepsi-Cola
and Frito-Lay. Today, PepsiCo operates in over 200 countries and territories around the
world and employs over 300,000 people. The company's portfolio includes iconic brands
such as Pepsi, Frito-Lay, Quaker Oats, Tropicana, Gatorade, and Mountain Dew, among
others.

PepsiCo's global reach and diverse product portfolio have made it a leader in the food and
beverage industry. The company's mission is to "create more smiles with every sip and
every bite", and its vision is to "be the global leader in convenient foods and beverages
by winning with purpose". To achieve this, PepsiCo has adopted a "Winning with
Purpose" strategy, which focuses on three key areas: performance, people, and planet.

In terms of performance, PepsiCo aims to deliver consistent and sustainable financial

performance by focusing on its core business and investing in high-growth areas. The
company also aims to create value for its shareholders by returning capital through
dividends and share buybacks.

In terms of people, PepsiCo is committed to attracting, developing, and retaining a

diverse and talented workforce. The company recognizes that its success is driven by its
people, and it invests in employee development and training programs to foster a culture
of innovation and collaboration.

In terms of planet, PepsiCo is committed to reducing its environmental impact and

conserving natural resources. The company has set ambitious goals to reduce greenhouse
gas emissions, water usage, and waste, and it is investing in renewable energy and
sustainable packaging solutions to achieve these goals.

Overall, PepsiCo's strong brand portfolio, global reach, and commitment to sustainable
growth make it a major player in the food and beverage industry.

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- PepsiCo’s Vision Statement:

“PepsiCo’s responsibility is to continually improve all aspects of the world in which we

operate – environment, social, economic – creating a better tomorrow than today.”

This vision statement highlights the company’s commitment to being a responsible

corporate citizen and making a positive impact on the world. PepsiCo aims to improve
the environment through sustainable business practices, promote social well-being
through its products and community initiatives, and drive economic growth by creating
jobs and contributing to local economies. This vision statement aligns with the
company’s core values of integrity, diversity, and teamwork.

- PepsiCo’s Mission Statement:

“Our mission is 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.”

PepsiCo’s mission statement highlights the company’s commitment to producing high-

quality and convenient food and beverage products while maintaining strong financial
performance. Additionally, the company aims to provide growth and enrichment
opportunities for its employees, business partners, and communities. The mission
statement emphasizes the importance of integrity, honesty, and fairness in all of
PepsiCo’s operations and business practices. This statement aligns with the company’s
focus on delivering sustainable long-term growth while staying true to its values and
commitments to stakeholders.

- Organization structure:

PepsiCo’s organizational structure is hierarchical, with several layers of management and

functional departments. The company operates under a functional organizational
structure, which groups employees based on their specific roles and responsibilities. This
allows for clear lines of authority and communication throughout the organization.

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 At the top of the hierarchy is the CEO, followed by the executive leadership team, which
includes heads of different business units and departments such as finance, marketing,
human resources, and operations. The business units are organized by product lines, such
as beverages, snacks, and nutrition, each headed by a president or CEO.

Below the business unit level are the functional departments, which include marketing,
finance, human resources, supply chain, and research and development. These
departments are responsible for providing specialized support services to the business
units.

The organizational structure of PepsiCo is designed to ensure effective decision-making,

efficient operations, and optimal use of resources. It also facilitates communication,
collaboration, and innovation across the organization. By maintaining a clear and well-
defined structure, PepsiCo can respond quickly and effectively to changes in the market
and adapt to new opportunities and challenges.

❖ PESTEL Model:

PESTEL analysis is a strategic tool used to identify the external factors that can impact
the operations and growth of a business. Here is a PESTEL analysis of PepsiCo
Company:

o Political Factors:

✓ Government regulations on the food and beverage industry.

✓ Trade policies and restrictions on international trade.
✓ Changes in tax policies that affect production and sales.

o Economic Factors:

✓ Fluctuations in exchange rates that impact international sales.

✓ Changes in consumer income levels that affect demand for PepsiCo products.

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✓ Economic conditions in different regions, including recessions or booms that affect
overall demand.

o Social Factors:

✓ Increasing consumer preference for healthy foods and beverages.

✓ Shifting demographics and consumer preferences.
✓ The rise of ethical and sustainable consumerism.

o Technological Factors:

✓ Advancements in technology that enable efficient production and distribution.

✓ The rise of e-commerce and digital marketing.
✓ New innovations in packaging and manufacturing.

o Environmental Factors:

✓ Government regulations related to environmental sustainability and climate change.

✓ Consumer demand for environmentally-friendly products and sustainable packaging.
✓ The need to manage and reduce waste.

o Legal Factors:

✓ Compliance with regulations related to advertising, labeling, and safety.

✓ Intellectual property laws and regulations.
✓ Compliance with employment and labor laws.

❖ Five Forces Model:

The Five Forces Model is a framework developed by Michael Porter for analyzing the
competitive forces in an industry. It helps in identifying the factors that affect the
profitability and sustainability of a company in its respective industry. The five forces
include the threat of new entrants, bargaining power of suppliers, bargaining power of
buyers, threat of substitutes, and intensity of competitive rivalry.

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1. Threat of New Entrants: PepsiCo has a strong presence in the beverage and snack
industry, which makes it difficult for new entrants to establish themselves. The
company has a well-established distribution network, economies of scale, and
brand recognition that new entrants will find difficult to match. However,
PepsiCo must still be wary of potential new entrants that could disrupt the
industry with innovative products and technology.

2. Bargaining Power of Suppliers: The bargaining power of suppliers for PepsiCo is

relatively low. The company has a large number of suppliers for its raw materials,
and it has established long-term contracts with many of them. PepsiCo also has
the power to switch to alternative suppliers if necessary. However, the company
must still manage its relationships with suppliers to ensure the quality and
reliability of its inputs.

3. Bargaining Power of Buyers: The bargaining power of buyers in the beverage and
snack industry is relatively high. Customers have a wide range of options to
choose from, and they can easily switch to other brands based on price and
quality. PepsiCo must continuously innovate and differentiate its products to
maintain customer loyalty and ensure that its prices remain competitive.

4. Threat of Substitutes: The threat of substitutes for PepsiCo is relatively high.

There are many substitutes available in the market for both beverages and snacks,
including healthier options such as water and fruits. PepsiCo must continuously
innovate and develop products that cater to changing customer preferences and
trends to remain competitive.

5. Intensity of Competitive Rivalry: The intensity of competitive rivalry in the

beverage and snack industry is high. PepsiCo faces competition from many well-
established brands such as Coca-Cola, Nestle, and Unilever, among others. The
industry is also characterized by price wars and aggressive marketing strategies.
To remain competitive, PepsiCo must continually innovate and develop new
products and marketing strategies to differentiate itself from its competitors.

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❖ SWOT Analysis:

SWOT Analysis for PepsiCo Company:

o Strengths:

✓ Strong brand portfolio: PepsiCo has a diversified portfolio of well-known brands,

including Pepsi, Frito-Lay, Gatorade, Quaker, and Tropicana. These brands enjoy strong
brand recognition and customer loyalty, which contributes to the company’s market
position and revenue growth.
✓ Wide geographic reach: PepsiCo has a presence in over 200 countries and territories
worldwide. This global presence allows the company to tap into different markets and
expand its customer base.
✓ Strong supply chain: PepsiCo has a well-established supply chain network, which allows
it to efficiently manage the production, distribution, and delivery of its products. This
also enables the company to quickly respond to changing customer demands and market
trends.

o Weaknesses:

✓ Dependence on carbonated soft drinks: Despite efforts to diversify its product portfolio,
PepsiCo still heavily relies on its carbonated soft drinks segment. This dependence
exposes the company to fluctuations in consumer preferences and health concerns over
sugary drinks.
✓ High levels of competition: PepsiCo faces intense competition from other beverage and
snack food companies, such as Coca-Cola, Nestle, and Kraft Foods. This competition
puts pressure on PepsiCo to constantly innovate and invest in marketing efforts to
maintain its market share.
✓ Dependence on external bottlers: A significant portion of PepsiCo’s products are
produced and distributed by external bottlers. This dependence can make it difficult for
the company to control the quality of its products and may affect its ability to respond to
changing market demands.

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o Opportunities:

✓ Expansion into emerging markets: PepsiCo can tap into the growing demand for
packaged foods and beverages in emerging markets, such as India, China, and Brazil.
This can provide the company with new growth opportunities and a larger customer base.
✓ Diversification into healthier products: With increasing consumer demand for healthier
products, PepsiCo can diversify its product portfolio to include more nutritious options,
such as organic snacks, juices, and low-sugar drinks. This can also help the company
address concerns over the health impact of sugary drinks.
✓ Investment in sustainability: With growing concerns over climate change and
environmental sustainability, PepsiCo can invest in sustainable practices, such as
reducing its carbon footprint, water usage, and waste production. This can help the
company improve its reputation and appeal to environmentally conscious customers.

o Threats:

✓ Health concerns over sugary drinks: The increasing awareness of the health risks
associated with sugary drinks poses a significant threat to PepsiCo’s carbonated soft
drinks segment. This could lead to declining sales and revenue for the company.
✓ Economic downturns: Economic downturns can impact consumer spending and result in
lower demand for PepsiCo’s products. This can also affect the company’s ability to
access capital and invest in growth opportunities.
✓ Changing regulations: Changes in regulations, such as taxes on sugary drinks or
restrictions on packaging materials, can impact PepsiCo’s operations and increase its
costs of doing business.

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 4. Conclusion and Recommendations:

In conclusion, PepsiCo is a well-established multinational company with a strong brand

reputation and a diversified portfolio of products. Through the external analysis
conducted using PESTEL and Five Forces models, it is evident that the company faces
several challenges such as increasing competition, changing consumer preferences, and
strict regulations in the food and beverage industry. However, PepsiCo has several
strengths such as a strong distribution network, established brand name, and product
innovation that can help the company overcome these challenges.

The SWOT analysis further highlights the company's strengths, weaknesses,

opportunities, and threats. Some of the key recommendations for PepsiCo include
increasing investment in research and development to keep up with changing consumer
trends, diversifying its product portfolio to appeal to a wider audience, and expanding its
presence in emerging markets to drive growth.

Overall, PepsiCo is a strong and resilient company that has demonstrated its ability to
adapt to changing market conditions and consumer preferences. With a strategic approach
to addressing its weaknesses and leveraging its strengths, PepsiCo is well-positioned to
continue its success in the food and beverage industry.

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Pearson.
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