Introduction

Pharmacist Caleb Bradham established PepsiCo Inc in the 1890s, in New Bern, North Carolina. After a few years in operation, the company became a public traded company in 1903. As such, the company was provided with an excellent opportunity to operate within the larger United States of America market, and this set the beginning for the globally recognized company.

Currently, PepsiCo operates in more than 200 countries around the world. In the year 2015, the company reported net revenue of $ 63,056 million resulting in an operating profit of $ 8,353 million. The company has maintained its mission of being the market leader, especially in the US.  As of the year 2015, the company commanded a market share of 20.5% worldwide in the beverage industry (The Statistics Portal, 2015).  The company seeks to continue producing quality products to its customers. At the same time, the company endeavors in providing success and growth opportunities for its employees, investors and all its business partners.  PepsiCo is a major producer and supplier of a variety of energy drinks, soft drinks, relaxation drinks and vitamin drinks.

The acquisition of a number of companies that operate in similar activities such as Frito-Lays, Tropicana, Quaker Oats Company, Quaker Foods North America and Gatorade is the major attribute that has enabled the company to grow rapidly. Currently, the company produces products such as Pepsi Max, Pepsi Samba, Mirinda, Pepsi Twist, Crystal Pepsi, Pepsi Jazz, and Pepsi One. The company also produces and supplies salty snacks and has a market share of 56% in this market segment.

Microeconomic environment

The beverage industry has entry barriers. Although it is possible for new entrants to get into the beverage market in the US, as the legalities are favorable, the threat of arrival is high (Gamble and Thompson, 2013). It is hard for a new beverage company to maneuver in the industry in the presence of the well-established companies, which have been in the industry for a long time (BMC, 2013). The reason behind this argument is that the industry is very competitive. Any new entrant in this industry must be financially stable and have well-formulated strategies to help expand the market share and enhance competitiveness. A small number of dominant companies, differentiated goods and barriers to the market industry are characteristics of an oligopoly market.

In an oligopoly market, companies do not compete on prices because it leads to low profits. The decision made by one company affects all the other players in an oligopoly market. For example if one company reduces prices, demand for its prices will increase rapidly. When the other players will in turn be forced to reduce prices to remain competitive. When PepsiCo Inc is making the price and output decisions, it has to consider the likely reaction of the other firms. The pricing decision is not independent. Oligopolies compete through advertising and promotions.

Oligopolists are thus left with only two options. This is to either compete or collude with each other. In case of collusion, they form a monopoly thus maximizing industry’s profits. However, in most cases, the companies in an oligopoly compete to increase the market share. The key factor that affects the demand of PepsiCo Inc in the oligopoly market is consumer tastes and preferences. Products in an oligopoly market are highly standardized or differentiated. This means there is no competition in pricing leaving the consumers to decide what to consume based on tastes and preferences.  Players in an oligopoly influence customers through advertising and promotions.

Macroeconomic environment

For PepsiCo Inc to succeed there is a need to build relationships with customers, employees, external links and the environment at large. The market trends are affected by different factors ranging from micro and macro factors. Some of the macroeconomic factors that can affect the PepsiCo company market include

Fiscal policy

The government to control the economy by increasing or reducing government spending uses fiscal policy. The government achieves this by either increasing or reducing tax rates. If the government wants to increase government spending in the economy, it will increase the tax rates in the market. An increase in the tax of the PepsiCo products will mean that the company has to increase the price of the products (Baber, 2013). This in turn will reduce demand. However, if the government wants to stimulate the economy by reducing tax rates, the price of PepsiCo products will reduce thus increasing the demand.

Monetary policy

Governments mainly to control the money supply in the market adopt the monetary policy. Controlling money supply is associated with inflation. When inflation is high, the government reduces the money supply in the market. This in turn increases the real income of the consumers. With increased real income, consumers will consume more. The demand for PepsiCo products will thus increase.

Aggregate demand and supply

Aggregate demand is the summation of single demands from all sectors or countries. In seasons such as Christmas, the demand for PepsiCo products usually increases thus increasing aggregate demand. An increase in aggregate demand forces the company to increase aggregate supply to meet the demand (Baber, 2013). This will translate to high earnings. However, in times like winter when aggregate demand reduces, aggregate supply also reduces leading to low productivity.

Trade barriers

Trade barriers are measures adopted by governments to make imported goods less competitive than local goods. An example of trade barrier is tariff barriers. These are taxes imposed on certain imports with an intention of raising their prices to make them less competitive. For PepsiCo products, if a country adopts tariff barriers, the demand for the products will reduce thus reducing aggregate productivity.

Assessment of ethical and regulatory considerations

Every industry has ethical and regulatory requirements. Being in the beverage industry, PepsiCo has to consider any ethical issues that might affect their conduct of business. A major ethical issue is the production of safe for consumption products. Though regulated, it would be unethical for PepsiCo to produce consumables that are not safe. Many of the countries are yet to allow the use of bioengineered food and ingredients. In that PepsiCo operates in many countries, it would be unethical to use bioengineered ingredients and sell the products all over the world. PepsiCo dedicates itself in using ingredients approved by the appropriate authorities (Dhanagom, 2012). The company also has PepsiCo Inc has a food and safety regulatory department that work closely with suppliers to ensure the safe and integrity use of bioengineered ingredients.

One of the major regulations faced by the company is on accounting standards. The Non-Alcoholic Beverages Sustainability Accounting Standard Board (SASB) sets the sustainability accounting standards to be used by the publicly listed companies in the beverage industry. PepsiCo Inc being a publicly traded company has to follow the guidelines set by SASB. Another regulation is by the Food and Drug Administration (FDA) agency to protect the public against any food borne diseases.

Conclusion

Owing to the market share and financial position of PepsiCo, it has a potential to expand more not only in the U.S. but also in other countries. The company has been in existence for many years and has gained brand loyalty in the industry. The long-term outlook of the company is to be competitive in terms of market share and productivity. Any publicly traded company endeavors to increase productivity, which increases its value in the financial market.

There are strategies that the company can use to increase productivity. One of these strategies is to increase its advertisement efforts. The major competitive aspect in the beverage industry is advertisement. Player in the oligopoly beverage industry depends on advertisements and promotions to woe more consumers (Gamble & Thompson, 2013). The company should come up with more enticing advertising tactics. However, after acquiring a higher market share, PepsiCo should be able to maintain the share and build Brand loyalty.

Another strategy would be to introduce more differentiated products. The main idea is to change consumer taste and preferences. The company should introduce more products in the market. This will enable the company acquire more market share. However, the products differentiation should be tactical. Remember the decision of one company in an oligopoly market affects all the other players. PepsiCo should first evaluate what effects the decision to introduce more products would have in the market.

References

Baber, A. (2013, October 19). Macro analysis of Pepsi by Alina Baber. Retrieved April 01, 2016, from http://www.slideshare.net/AlinaBaber/macro-analysis-of-pepsi-by-alina-baber

Beverage Marketing Corporation (BMC), (2013). Press Release: The U.S. Liquid Refreshments Beverage Market Grew By 1.0% in 2012. Retrieved on 21^st November, 2013, from http://www.beveragemarketing.com/news-detail.asp?id=255

Dhanagom, C. (2012, March 27). Pepsi named one of “world’s most ethical companies” despite exploitation of aborted babies. Retrieved March 20, 2016, from https://www.lifesitenews.com/news/pepsi-named-one-of-worlds-most-ethical-companies-despite-exploitation-of-ab

Gamble, J., & Thompson, A., (2013). Essentials of strategic management: The Quest for    Competitive Advantage. New York: McGraw-Hill/Irwin.

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

 
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