Headquartered in New York, PepsiCo is a multinational beverage, snack and food corporation with interests in the manufacture and sale of snack foods and beverages. One of its major products is Pepsi which is very popular drink in the US and across the entire world. Today, the company has expanded from the Pepsi product to a wide array of food products such as Tropicana and Gatorade. The expansion of the corporation has culminated in many mergers and takeovers as is evidenced by the continuous entry of new products into the company’s wings. Indeed, such is the growth of the company that the distribution of its products has grown over time to include more than 200 countries. In reaching the vast size of the global market, PepsiCo employs the services of licensed bottlers in certain regions thereby saving the company the hustle of having to purchase and install new equipment in the different countries (Wikipedia, 2013).

The PepsiCo Corporation was formed in 1965 after the merger of Pepsi-Cola Company and Frito-Lay Inc. In its current second position in terms of food and beverage manufacture, the company ensures that its mission and vision statements reflect its current business condition. In fact, both statements are aligned to the company’s overall growth strategy both in the short term and long term periods. The vision statement explores the corporation’s desire to deliver top-tier financial performance over the long term by integrating sustainability into our business strategy, leaving a positive imprint on society and the environment. Evidently, the vision statement is all encompassing and covers the wide operations of the corporation. Its mission statement is even more fascinating as it emphasizes the organization’s desire to provide consumers around the world with delicious, affordable, convenient and complementary foods and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats. Again, the corporation’s mission is effective in pointing out the numerous operations in its production.

The origin of the company dates back to the 1880s when the recipe for the first Pepsi was developed by Caleb Bradham. In 1902, after wide popularity of the drink, he formed the Pepsi-Cola Company which faced initial challenges to a point of going bankrupt in 1931. However, shrewd management and mergers maintained the company’s growth. In the following years, the operations of the company diversified to reach an even larger market thereby sustaining its development. For instance, the company was rebranded in 1941 and Diet Pepsi product created in 1960. Moreover, the same period saw the expansion of the company through the acquisition of Mountain Dew product, a decision that enhanced the company’s growth. The strong corporate governance at the organization is the foundation for investor confidence, financial integrity as well as superior performance. The corporation’s model for success is anchored around collaboration with investors, internal colleagues and other stakeholders in the industry.

The organization’s structure is continuously reformed in line with the changes in the global market conditions. Currently, the company’s organizational structure is reflective of its aims of global expansion and leadership. The global leadership structure of the organization is a complex hierarchical structure with more than 220 executives stationed in the different countries of operations. The overall management of the organization is bestowed upon the board of directors comprising of Indra Nooyi, the CEO, and fourteen directors. In addition, there are various executives both at the headquarters and in the different regions and countries of operations. Ideally, the executives report to the board via their supervisors such as the Chief Finance Officer who supervises the Procurement and Control executives.

The organization has a diversified business model as is evidenced by its two main divisions of beverages and snack foods (Bchmeier, 2013). In essence, each business division is able to support the other in times of difficulties on the part of one. For instance, the decline in carbonated soft drinks is leveraged by the company’s presence in the snack food category. This model is superior to that of its competitor, Coca-Cola that is heavily reliant on carbonated beverages. Currently, PepsiCo’s food business accounts for more than half of its total revenues at 53% while the beverage business lies behind at 47%. The company thus benefits from its booming presence in two complementary categories: food and beverages. In essence, most consumers who buy one of the products end up buying the complementary product as well therefore increasing the company’s revenues.

PepsiCo, like most companies in the current market are faced with numerous challenges. In particular, the beverage and snack food industry is faced with challenge of increased health concern among the consumers. At PepsiCo, the biggest challenge facing its growth prospects is the increased focus on negative health effects of soft drinks and unhealthy foods. The risk with these developments is the fact that the company may lose in soda and snack food consumptions due to persistent and continued emphasis on the negative health effects. In fact, the issue is so big that soda makers are banding together in hope of tackling the issue proactively. In fact, scientific findings have in recent years found a correlation between consumption of these products and the incidence of such diseases as heart failure and diabetes. For the organization to maintain its market share, it needs to overcome this challenge and rise against the backdrop of such revelations (Penzkofer, 2007). There is also planned installation of vending machines that display the calorie content of drinks on sale while still suggesting alternatives that have less calorie content to the consumers. This development is sure to impact on PepsiCo due to its venture in the salty snacks business that is considered unhealthy.

The organization is at the center of competition from other organizations dealing in the same beverage and snack food business. Several factors are taking shape in the industry and could shift goal posts leading to a decline in the productivity of the organization if proactive measures are not initiated. One of the biggest changes is the company’s restructuring and acquisition costs that continue to affect its operations. The company’s credit rating was lowered due to the debt that it took to finance bottler acquisitions. The acquisitions are thus expected to affect the short term productivity of the organization through pressuring bottom line growth. In addition, there is increased regulatory scrutiny in the industry owing to the association of the products with negative health conditions among the consumers. For instance, there is a proposed soda tax that is aimed at curbing obesity and could thus affect the sale of PepsiCo products therefore reducing its revenues.

The beverage industry is very competitive owing to a number of factors analyzed through the Five Forces Model. The supplier power is quite high as the suppliers can effect changes in the price of commodities therefore driving the costs of production high (Cummings & Worley, 2009). Although there are many suppliers of the raw materials, they are very likely to work in collaboration to drive up costs. This exposes the industry to risks of exploitation from the suppliers and thus increasing the control of suppliers over the companies. In addition, the buyers have immense power owing to the availability of easy alternatives. For instance, there are many manufacturers of beverages in the market therefore giving the buyers a wide array of alternatives in terms of choice.

In addition, the existence of more healthy alternatives such as fresh juice means that the competition is very high. In the same fashion, the industry has intense competitive rivalry owing to the numerous battles for control of the market. In particular, Coca-Cola is the leading competitor and the price battles between the two companies present a fierce competitive rivalry. In addition to these three factors, the industry and PepsiCo faces the threat of substitution from consumers. The fact that people can take other drinks beside beverages present a threat to the sustainability of the organization. In the wake of recent findings associating the products with negative health conditions, people may opt to buy healthier products such as fresh juice therefore dealing a big blow to the company’s products. In addition, the diversity of the industry present a threat of new entry as smaller companies fight for a share of the market size. The availability of technology and the ease of information technology mean that small companies have the capacity to initiate competition at relatively low prices therefore presenting threats to PepsiCo.

The internal environment at PepsiCo is favorable in pushing the organization to better times in the future (Hill et al, 2014). The company has a unique and strong working culture structured towards professionalism and personal development. As thus, the management team welcomes ideas and comments and is renowned for retention of talent. In particular, the diversity of the staff and leaders at the company is one to adore as their competencies can sustain the company’s competitiveness. The vast equipment at the company’s disposal represents immense resources to drive the company to great heights. For instance, the many laboratories that the company owns present an important asset for research and development of the products to meet the market needs in the world. Moreover, the patent of the recipe for the production of its products means that no other company can make substitutes with the same taste.

The brand imagery and reputation at PepsiCo present an intangible asset that plays an important role in the increased goodwill of the company. In addition, the organization has the second highest market share of the beverage industry thereby presenting an important asset in the growth of the company. The diversified products at the organization further present an opportunity for stability in the organization as it deals with both beverage and snack foods. The increased revenue from the two business divisions avails enough capital for investment in technology thereby helping in economies of scale.

The strengths at PepsiCo have continued to enhance its global development and prominence over the many years that the company has been in operation. Among the strengths include the company’s broad product mix and its strong brand image and reputation (Bachmeier, 2013). The strong brand is a key recipe in attracting consumers to the company’s new products and its ability to reach various market segments. In addition, the company benefits from the extensive global production and distribution networks that facilitate its complex business. The company is not short of weaknesses as is seen in its barriers to international growth.  The high concentration of its products in the Americas is a big weakness to the company as it curtails its international growth. As thus, the organization has low penetration outside the Americas and it derives about 70% of its revenue from that region. Moreover, the organization has a limited business portfolio that is restricted to food and beverage production. As thus, the company is highly exposed to risks in the food and beverage business making it very vulnerable to collapse in case shocks in the industry. In addition, the company has a weak marketing plan to the health-conscious consumers thereby limiting the consumption of its products.

PepsiCo has opportunities for international growth owing to various openings in the external environment. The organization has the opportunity to diversify its business operations by venturing in production of goods outside the food and beverages bracket. This can be done through mergers and acquisitions and could increase the revenue as well as the stability of the company. In addition, the company has the opportunity of venturing in the developing world where it is least visible and tap from the large population in these countries. This opportunity would increase the revenues of the company through products that meet the needs of such markets such as low cost beverages. Finally, the company could form global alliances with complementary businesses to improve the market share of the company. The company also faces threat in its expansion agenda including aggressive competition from such firms as Coca-Cola. Another threat is the emergence of healthy lifestyle trends in the world that limits the number of people taking beverages.

The firm’s business model is effective in positioning the company as a market leader in the beverage and snack food business. The diversification of products within the company’s production further presents an important recipe for the company’s growth. The availability of these differentiated products presents internal competition and thereby reducing the competitive share of other external products. As thus, consumers are presented with a variety of choices from the same company thereby increasing its market share and reducing external competition. The company has further segmented the market with different products depending on region of operation among other factors. In addition, the company has a product known as Diet Pepsi that is targeted for the health-conscious consumers thereby tapping on consumers that consider beverages to be unhealthy. This approach has the net effect of increasing the sales of the company through diversification of products.

The company relies of mergers and acquisitions for new business as they present viable and operational avenues for new ventures. This approach is solely executed for its ability to cushion the company from market failures since the products have been tested prior to the acquisitions. The company is aligning itself towards technological innovation in terms of their products. For instance, the company is going green as is evidenced by utility consumption reduction at its plants and changes in their packaging and labeling. In addition, the organization continues to be most innovative according to the dynamics of the market. For instance, the development of health conscious drinks as a response to high consciousness among consumers is one such example. In so doing the company not only improves its revenue but its image and reputation among consumers.

Over the recent past, PepsiCo has experienced declines in sales and revenue from its products due to the global financial recession. Further, the changing consumer demands have also lowered the sales volume of the company products. The developments in the external environment require a strategic change including the development of new products to help in entry into the developing markets. This can only be achieved through heavy investment and innovation as grounded in its mission on ‘performance with a purpose’. The new product should focus on low costs to effectively penetrate the emerging markets including Sub Saharan Africa where the company has a low penetration level currently.

In leading this path, the company should identify possible companies in the industry for possible acquisitions and mergers (Rao et al, 2008). Obviously, the acquisition path has proven most effective for the company as is seen in past developments. Therefore, the management should focus on identifying possible and healthy organizations to purchase with operations in these areas. In addition to development of low cost products in the developing markets, the emphasis on healthy beverages should be a key factor in the strategic drift. The company should focus on producing new products that cater for the market segment comprising the health conscious consumers.

Implementation of a strategic plan poses the biggest challenge to PepsiCo as it caps the strategic planning process (Rothaermel, 2015). In implementing the plan, the organization needs to identify existing businesses in each of the targeted regions to purchase and help in actualizing the plan. This requires a lot of money and could mean that the company turns to external borrowing in actualizing the plan. In the past, borrowing has been a viable option, not just for PepsiCo but a myriad of other international brands. In Africa for instance, PepsiCo could acquire the Softa Drinks Company that has headquarters in Kenya. However, the acquisition should mainly be used to effect the distribution and production within the continent and should not solely be used to market the Softa drink product. Next, the company should then rebrand the product and repackage it to represent the ideals of PepsiCo thereby banking on its international reputation and brand imagery.

In implementing the strategy, PepsiCo should consider the competition in the target market and plan adequately. For instance, Africa is dominated by Coca-Cola Company which has low cost beverage drinks for its customers. Lowering the price of PepsiCo products below that of Coca-Cola could spark competition wars between the two companies. Moreover, the idea could be unviable because of the high production and operation costs of entering a new market. To avert the associated risks, the company can diversify the product to include products with low calories and use that as a marketing point to the burgeoning middle class in the continent. Further, the company should consider timelines and ensure timely implementation of the strategic plan. Eventually, the company should be able to achieve success in its strategic shift thereby enhancing its international growth

PepsiCo is gradually improving in terms of market share in the world due to shrewd management from its leadership. The diversity of its products is one of the strong points and presents a competitive edge over other companies in the beverage industry. Moreover, the company’s preference for acquisitions and mergers in improving business is a sure way of global expansion. However, the company faces new threats from the changing consumer trends as well as the dynamism in the beverage and snack food industry. The company needs to change its business strategy to safeguard its global development through the development of new products that meet the needs of the consumers. The implementation of this strategy requires heavy and committed input from both the management and the staff and is a collective effort in maintaining the company’s growth.

References

Hill, C., Jones, G., & Schilling, M. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill.

Rao, C. A., Rao, B. P., & Sivaramakrishna, K. (2008). Strategic management and business policy: Texts and cases. New Delhi, India: Excel.

Penzkofer, A. (2007). The Market of Pepsi / PepsiCo. München: GRIN Verlag.

Bachmeier, K. (2013). Analysis of marketing strategies used by pepsico based on ansoff’s theory. Place of publication not identified: Grin Verlag.

Cummings, T. G., & Worley, C. G. (2009). Organization development & change. Australia: South-Western/Cengage Learning.

Wikipedia, S. (2013). Pepsico soft drinks: Amp energy, aspen soda, caffeine-free pepsi, citrus blast, crystal pepsi. Place of publication not identified: Booksllc Net.