PepsiCo’s Operations Management, 10

Decisions, Productivity
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY LAWRENCE GREGORY

An old machine that

vends 7 Up, which PepsiCo manufactures outside the United States. PepsiCo’s 10
strategic decisions of operations management address productivity concerns about
business areas and products, such as Pepsi. (Photo: Public Domain)
PepsiCo is the second biggest player in the global food and beverage industry. To
maintain this position, PepsiCo’s operations management (OM) practices must
effectively address business needs in the 10 strategic decision areas. These decision
areas refer to the aspects of business that need to be streamlined together to achieve
optimal performance. PepsiCo’s continuing international growth and expansion also
warrant continuing reforms in such operations management practices. However,
PepsiCo’s operations management approaches are generally appropriate for the global
organization. Thus, PepsiCo’s policies and approaches effectively address the main
issues and concerns linked to the 10 strategic decisions of operations management.

PepsiCo has an integrated approach to the 10 strategic decisions of operations

management (OM). This approach considers variations in PepsiCo’s business areas
and markets, as well as different productivity requirements based on product, market
conditions, and other variables.
PepsiCo’s Operations Management, 10 Strategic
Decision Areas
1. Design of Goods and Services. The objective in this strategic decision area of
operations management is to match goods and services, organizational capacity and
market demand and preferences. PepsiCo’s operations management does so through
market-based research and development and product innovation. For example,
PepsiCo conducts market research about current trends, such as consumer lifestyles.
The results of such research are used to determine future directions of PepsiCo’s
products, such as future variants of Pepsi.

2. Quality Management. This strategic decision area has the objective of optimizing
quality based on business and consumer expectations. PepsiCo’s operations
management aims to provide the highest quality products under the company’s “Human
Sustainability” goals. For example, new PepsiCo products are usually improved
variants, such as low-calorie Pepsi products and less-salt Frito-Lay products.

3. Process and Capacity Design. Capacity utilization and process efficiency are the
emphases in this strategic decision area of operations management. PepsiCo aims to
maximize its productivity-cost ratio in this area. For example, the company’s
manufacturing facilities are designed with high-output assembly lines. Also, many of
PepsiCo’s production processes are automated for optimal efficiency.

4. Location Strategy. PepsiCo has many company-owned facilities and partner-owned

facilities in strategic locations. Such an operations management approach is based on
this strategic decision area’s objective of maximal reach to target markets. In PepsiCo’s
case, such facilities are located in key areas near most retailers. PepsiCo is especially
interested in large retail outlets and food service establishments with high sales volume.

5. Layout Design and Strategy. Efficient movement of people, materials and

information is the operations management concern in this strategic decision area. In
PepsiCo’s case, spaces are designed with efficiency and productivity in mind. For
example, layout design in PepsiCo production facilities is centered on the principles of
assembly line production and total quality management (TQM).

6. Job Design and Human Resources. PepsiCo’s human resource management

addresses this strategic decision area through a combination of global corporate HR
practices and divisional HR practices. The main operations management objective in
this area is to ensure the adequacy of PepsiCo’s workforce. For example, PepsiCo has
an HR policy and job design process for Frito-Lay, and separate HR policy and job
design process for Quaker Foods. However, all of these policies and processes comply
with PepsiCo’s corporate standards and “Talent Sustainability” policy.
 7. Supply Chain Management. This strategic decision area focuses on operations
management practices that optimize the supply chain to match demand for materials
and intermediary products. PepsiCo’s approach is to diversify and distribute its supply
chain hubs. For example, the company operates supply chain hubs for each regional
market. In this way, PepsiCo optimizes response times to fluctuations in demand.

8. Inventory Management. PepsiCo’s inventory management emphasizes automation.

Adequacy, scheduling, and cost minimization are the key objectives in this strategic
area of operations management. PepsiCo does so through computerized monitoring of
inventory. Inventory managers can access real-time data to help them make decisions.

9. Scheduling. Facility and human resource schedules are the primary concern in this
strategic decision area of operations management. PepsiCo facility managers
implement human resource schedules based on local data. However, automated
scheduling is also used for some of PepsiCo’s production space schedules.

10. Maintenance. PepsiCo’s maintenance concerns are widely varied, considering the
company’s wide array of products and markets. This strategic decision area of
operations management focuses on adequate workforce and other resources that grow
with the business. PepsiCo continues to hire individuals and promotes from within the
organization to grow its workforce. Facilities are expanded, constructed or acquired to
support PepsiCo’s growth.

Productivity at PepsiCo
PepsiCo’s operations management practices ensure high performance and productivity.
The company uses different measures or criteria to evaluate actual productivity. The
following are some of the productivity measures used at PepsiCo:

1. Batches per facility per day (PepsiCo production facility productivity)

2. New product ideas per year (product R&D productivity, such as for Pepsi)
3. New accounts per year (marketing productivity)

PepsiCo’s Stakeholders: A CSR Analysis

UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY ROBERTA GREENSPAN
 The 2004 Jersey of
Club Atlético Boca Juniors of Buenos Aires, Argentina, promoting the Pepsi brand.
PepsiCo’s corporate social responsibility (CSR) strategy satisfies the interests of its
stakeholders worldwide. (Photo: Public Domain)
PepsiCo’s strategy to address stakeholders’ interests is integrated in the company’s
Global Citizenship policy, which serves as its primary strategy for corporate social
responsibility (CSR). In the stakeholder model of business, firms affect and are affected
by stakeholders. In PepsiCo’s case, these stakeholders have expanded in terms of the
variety of their demands alongside the company’s international growth and expansion.
Nonetheless, PepsiCo’s corporate social responsibility strategy adapts with the
changing business environment. As such, stakeholders’ interests remain satisfied.
PepsiCo’s corporate social responsibility initiatives reflect the needs of the business as
well as the concerns of stakeholders, thereby supporting a holistic approach to global
business management.

PepsiCo’s corporate social responsibility (CSR) programs align with the interests of the
company’s stakeholders. Variations among stakeholders and markets are addressed in
a general way through PepsiCo’s global CSR initiatives.

PepsiCo’s CSR Initiatives & Stakeholders’ Interests

PepsiCo’s corporate social responsibility strategies are supported based on how
stakeholders impact the business. The company’s prioritization of stakeholders is stated
in its corporate beliefs and purpose of business. The following are PepsiCo’s major
stakeholder groups, arranged according to the company’s prioritization:
1. Consumers and customers (top priority)
2. Communities
3. Employees
4. Investors
5. Government (least priority)

Consumers and Customers. Consumers and customers have the highest priority in
PepsiCo’s corporate social responsibility strategy. This stakeholder group determines
the financial standing of the company in terms of revenues. Consumers and customers
are interested in high quality and reasonably priced products. Customers in business
partnership with PepsiCo are interested in stable and improving business performance.
Based on the significance of these stakeholders, PepsiCo uses continuing innovation
processes to improve its products, such as products under the Pepsi brand. For
example, some of the company’s products now have less salt, less fat, and less sugar
content to improve their effects on consumer health. PepsiCo calls these efforts “Human
Sustainability.” Thus, PepsiCo’s corporate social responsibility strategy flexibly
addresses the interests of consumers as stakeholders.

Communities. Part of PepsiCo’s thrust in corporate social responsibility is to ensure

that it always has a positive impact on society. As such, the company considers
communities as a second-priority stakeholder group. Communities are significant
stakeholders because they influence the consumers’ and employees’ perspectives
about PepsiCo. The interests of these stakeholders include corporate support for
community development programs. The PepsiCo Foundation provides financial
assistance for such programs. The Foundation invests in organizations like Diplomas
Now, which supports education and career development in city neighborhoods. Also,
the firm expands recycling and waste management programs. These corporate social
responsibility approaches are part of PepsiCo’s “Environmental Sustainability” policy.

Employees. PepsiCo believes that employees are significant determinants of the

company’s long-term growth. This stakeholder group is interested in career
development and fair compensation. To address such concerns, PepsiCo’s “Talent
Sustainability” policy goal is “to provide a safe and inclusive workplace globally.” This
goal highlights fairness and employee welfare in the company’s human resource
management approaches. Thus, PepsiCo’s corporate social responsibility activities
directly address some of the major concerns of employees as stakeholders.

Investors. As stakeholders, investors are interested in PepsiCo’s higher financial

performance. Investors significantly affect the company through availability and cost of
capital. PepsiCo believes that its focus on consumers/customers, communities, and
employees contribute to optimal financial performance. As such, the company always
aims to address the concerns of consumers, employees and communities, while using
financially sound strategies. PepsiCo’s corporate social responsibility strategy
adequately covers the interests of investors as a major stakeholder group.
Government. Governments are significant in terms of imposing rules and requirements
on PepsiCo’s business. This stakeholder group is interested in ensuring that companies
comply with regulations. PepsiCo’ global legal team and public relations team address
issues related to governments. Furthermore, the company has policies for bottlers,
distributors, and suppliers to ensure that they comply with government requirements.
Thus, the interests of governments as stakeholders are included in PepsiCo’s corporate
social responsibility strategy.

PepsiCo’s Marketing Mix (4Ps) Analysis

UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY JUSTIN YOUNG

A business sign that

promotes Pepsi in Winnipeg, Manitoba, Canada. PepsiCo’s marketing mix addresses
variations among markets and products. (Photo: Public Domain)
PepsiCo’s marketing mix has evolved over time, especially because of the effects of
mergers and acquisitions. The marketing mix or 4Ps (Product, Place, Promotion &
Price) is the combination of strategies and tactics that the firm uses to implement its
marketing plan. In this regard, PepsiCo employs various strategies and tactics based on
its array of products and brands. The differences among markets also require variations
in approaches used in the marketing mix. However, despite these variations, PepsiCo’s
marketing mix has a number of general characteristics that define the company’s
general corporate approaches to its marketing plan implementation. PepsiCo remains
effective and globally successful in this aspect.

PepsiCo’s marketing mix (4Ps) addresses a wide array of products. This marketing mix
also responds to considerable variations among markets where PepsiCo operates.

PepsiCo’s Products (Product Mix)

 This element of the marketing mix identifies the organizational outputs made available
to customers. PepsiCo started as the Pepsi-Cola Company, with all original products
under the Pepsi brand. The following are the current product lines of PepsiCo:

1. Soft drinks
2. Energy drinks
3. Cereal
4. Rice snacks
5. Snacks
6. Side dishes
7. Breakfast bars
8. Sports nutrition
9. Bottled water
10. Other merchandise

Many of PepsiCo’s current brands and products were added to the product mix through
acquisitions. For example, snack products were added after PepsiCo acquired Frito-
Lay. Other merchandise includes tumblers and t-shirts, which are manufactured by
other companies with license from PepsiCo. This element of the marketing mix is linked
to PepsiCo’s generic strategy and intensive growth strategies, which highlight
international expansion.

Place/Distribution in PepsiCo’s Marketing Mix

PepsiCo uses a global network for distributing its products to consumers. Venues for
distribution and sale are considered in this element of the marketing mix. PepsiCo’s
places for distribution are as follows:

1. Retailers
2. Online merchandisers

Most PepsiCo products are available at retailers, such as supermarkets, grocery stores,
and convenience stores. However, customers can access PepsiCo-licensed
merchandise like tumblers and t-shirts through retailers and their websites. Based on
this element of the marketing mix, PepsiCo’s places for distributing its products are
mostly non-online retailers.

PepsiCo’s Promotion (Promotional Mix)

PepsiCo promotes its products to attract target customers. This element of the
marketing mix covers the marketing communications strategies and tactics that the
company uses to reach its customers. The following are the tactics in PepsiCo’s
promotional mix, arranged according to significance:
1. Advertising
2. Sales promotion
3. Direct marketing
4. Public relations

Advertising is PepsiCo’s primary tactic for marketing communications. For example, the
company is popularly known for using celebrity endorsers to promote its products on
TV, radio, print media, and online media. The firm also advertises through business
signs it sponsors or gives to stores and other establishments. PepsiCo occasionally
applies sales promotions, such as package deals or discounts. Also, the company’s
local offices sometimes implement direct marketing through agreements to provide
products to organizations at wholesale prices. Furthermore, PepsiCo uses public
relations through financial assistance and sponsorships, such as in sports events. This
element of the marketing mix indicates that advertisements are the main determinant of
PepsiCo’s ability to communicate with target customers and promote its products.

PepsiCo’s Prices and Pricing Strategy

PepsiCo’s prices are considerably varied because the company has a wide product mix,
which means that it has a large number of product lines and brands. Approaches used
to set prices are analyzed in this element of the marketing mix. PepsiCo’s main pricing
strategies are as follows:

1. Market-oriented pricing strategy

2. Hybrid Everyday Value pricing strategy

Most of PepsiCo’s products are priced based on the market-oriented pricing strategy.
The company’s objective in using this strategy is to ensure that its prices are
competitive, based on other firms’ prices and prevailing market conditions. On the other
hand, Hybrid Everyday Value is PepsiCo’s pricing strategy for some of its products,
especially soft drinks. The company’s objective in using this pricing strategy is to close
the gap between regular/everyday prices and discounted holiday prices. In this way,
PepsiCo expects consumers to buy more of its soft drinks everyday and not just during
the holidays.

PepsiCo PESTEL/PESTLE Analysis &

Recommendations
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY PAULINE MEYER
 A Pepsi-Cola
signage in New York City. PepsiCo must improve its products, supply chain,
sustainability, and expansion strategies based on the company’s PESTEL/PESTLE
analysis. (Photo: Public Domain)
PepsiCo is the second biggest company in the global food and beverage industry. To
keep this position, PepsiCo’s strategic decision-making processes must account for the
issues outlined in this PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis
model is a strategic management tool that identifies various external factors relevant to
firms, based on the conditions of their remote or macro-environment. In PepsiCo’s case,
these factors determine the company’s growth path. The global market presents
challenges that threaten PepsiCo while creating opportunities for improvement. Thus,
strategies and reforms based on the elements of the PESTEL/PESTLE analysis model
can boost PepsiCo’s long-term growth.

PepsiCo’s long-term growth trajectory is partly dependent on how the company

addresses the major issues identified in this PESTEL/PESTLE analysis. PepsiCo must
develop strategies that enhance its abilities to withstand the external factors in its
remote or macro-environment.

Political Factors Affecting PepsiCo’s Business

Governments are external factors that impose requirements on PepsiCo. This element
of the PESTEL/PESTLE analysis considers the effects of governmental action on
 companies’ remote or macro-environment. PepsiCo must address the following political
factors:

1. Political stability in major economies (opportunity)

2. Improved intergovernmental cooperation (opportunity)
3. Government initiatives against carbonated drinks (threat)

Major economies like the United States and Canada are politically stable, thereby
presenting growth opportunities for PepsiCo. In addition, the trend of intergovernmental
cooperation improves opportunities for global expansion. However, government
initiatives against sweetened carbonated drinks are a threat that could reduce
PepsiCo’s revenues from affected segments. In this element of the PESTEL/PESTLE
analysis, PepsiCo must consider changing its products to overcome the identified threat
about carbonated drinks.

Economic Factors Important to PepsiCo

PepsiCo’s performance is directly linked to the economy. The influence of economic
conditions on the remote or macro-environment of businesses is covered in this element
of the PESTEL/PESTLE analysis. The political external factors that relate to PepsiCo
are as follows:

1. Economic stability of most major markets (opportunity)

2. Rapid growth of developing economies (opportunity)
3. Slowdown of the Chinese economy (threat)

PepsiCo has opportunities for growth and expansion based on the economic stability of
developed countries like the United States, as well as the high growth rates of
developing economies, such as those in Asia. However, the current slowdown of the
Chinese economy threatens PepsiCo’s potential international growth, considering that
China is among the biggest economies in the world. This element of the
PESTEL/PESTLE analysis shows that PepsiCo must ensure market diversification to
achieve stable international growth.

Social/Sociocultural Factors Influencing PepsiCo’s

Business Environment
Many of PepsiCo’s consumers follow sociocultural trends. This element of the
PESTEL/PESTLE analysis identifies the impact of social conditions and changes on
companies’ remote or macro-environment. The following are notable sociocultural
external factors relevant to PepsiCo’s business:

1. Higher health consciousness (threat & opportunity)

2. Increasing busy lifestyles (opportunity)
3. More discriminating attitudes about product quality (opportunity)

Higher health consciousness is a threat to PepsiCo because of concerns about the

sugar, salt, and fat content of its products. However, this external factor also presents
the opportunity for the company to improve its products to address such concerns.
PepsiCo can also take advantage of the busy lifestyles of consumers, especially in
urbanized and industrializing markets around the world. People with these lifestyles are
more likely to purchase ready-to-eat food products like those of PepsiCo. The company
has the opportunity to continue enhancing product quality to maximize revenues, with
regard to consumers’ increasingly discriminating attitudes about product quality. Based
on this element of the PESTEL/PESTLE analysis, PepsiCo must align its products and
marketing strategies to changes in consumer behaviors.

Technological Factors in PepsiCo’s Business

PepsiCo’s business is partly dependent on technologies. The link between technological
change and companies’ remote/macro-environment is examined in this element of the
PESTEL/PESTLE analysis. The technological external factors significant to PepsiCo are
as follows:

1. Moderate R&D investments in the food and beverage industry (opportunity)

2. Improving knowledge management systems (opportunity)
3. Increasing automation in business (opportunity)

Based on moderate research and development (R&D) investments in the industry,

PepsiCo can boost its own R&D investments to improve its competency in this business
aspect. Also, PepsiCo can exploit the benefits of knowledge management systems to
support its various business processes, such as product innovation and strategic
decision-making. In addition, an increase in the number of automated processes in the
company can enhance business performance. This element of the PESTEL/PESTLE
analysis indicates that PepsiCo must include new technologies as tools to improve
business competitiveness.

Ecological/Environmental Factors
PepsiCo’s supply chain and brand image are linked to environmental concerns. This
element of the PESTEL/PESTLE analysis considers the ecological trends and issues
that affect consumers, employees, and companies’ remote or macro-environment. The
following ecological external factors are significant to PepsiCo:

1. High focus on business sustainability (opportunity)

2. More complex expectations and standards on waste disposal (opportunity)
3. Climate change (threat & opportunity)
 Consumers are now pushing companies like PepsiCo to improve their sustainability
standing. In relation, PepsiCo can improve its waste disposal strategies, such as
recycling, to gain more support from customers. On the other hand, climate change
poses a threat to PepsiCo’s supply chain. However, the company can further diversify
its global supply chain to minimize risk exposure to climate change. Based on this
element of the PESTEL/PESTLE analysis, PepsiCo must improve its environmental
impact to attract and retain customers, and to stabilize its supply chain.

Legal Factors in PepsiCo’s Industry

PepsiCo and its competitors are subject to legal requirements. Such requirements and
regulations are evaluated in this element of the PESTEL/PESTLE analysis in terms of
their effect on the industry’s remote or macro-environment. The legal external factors
relevant to PepsiCo’s business are as follows:

1. Regulation on GMO ingredients (opportunity)

2. Health and product safety regulations (opportunity)
3. Moderate rate of regulatory change (opportunity)

Genetically modified organisms (GMOs) are now increasingly regulated worldwide,

particularly in Europe. PepsiCo has the opportunity to reduce its use of GMO
ingredients to satisfy these regulations. Similarly, the company can improve products to
address regulations about product safety and health effects. The moderate rate of
regulatory change gives opportunity for PepsiCo to grow with the expectation that its
current strategic decisions will satisfy regulatory requirements in the long term. In this
element of the PESTEL/PESTLE analysis, it is shown that PepsiCo can focus on
product innovation to comply with regulations.

PepsiCo’s PESTEL/PESTLE Analysis –

Recommendations
PepsiCo remains one of the strongest companies in the food and beverage industry.
This PESTEL/PESTLE analysis indicates that the company has many opportunities and
a number of threats regarding its growth and international expansion. The following are
some of the key points that PepsiCo must address based on the results of the analysis:

1. Expansion in developing economies

2. Product innovation to address concerns on quality and health effects
3. Business sustainability
4. Supply chain diversification
 PepsiCo Five Forces Analysis (Porter’s
Model)
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY NATHANIEL SMITHSON

A 1950s steel sign

for Pepsi-Cola in Huntsville, Alabama. A Porter’s Five Forces analysis of PepsiCo
shows that the business is under the major influences of competitors, consumers, and
substitutes. (Photo: Public Domain)
PepsiCo’s global success is linked to its business capabilities, especially in overcoming
the challenges shown in this Five Forces analysis. Michael Porter developed the Five
Forces analysis model to determine the most significant external factors that influence
firms. For PepsiCo to maintain its market position as the second biggest food-and-
beverage company in the world, it must address the potential problems identified in this
Five Forces analysis. PepsiCo also needs to continually adjust its strategies to
effectively respond to the external factors significant in the food and beverage industry
environment.

A Five Forces analysis of PepsiCo reveals that the company must prioritize the impacts
of competition and the influences of consumers and substitutes. These forces shape
PepsiCo’s strategies.

Overview: PepsiCo’s Five Forces Analysis

Because of the global nature of its business, PepsiCo faces varying external factors in
its industry environment. However, the overall impact of these factors and the
corresponding five forces are summarized as follows, with indicators of the
strengths/intensities of their forces on PepsiCo:

1. Competitive rivalry or competition (strong force)

2. Bargaining power of buyers or customers (strong force)
3. Bargaining power of suppliers (weak force)
4. Threat of substitutes or substitution (strong force)
5. Threat of new entrants or new entry (moderate force)

Recommendations. PepsiCo’s Five Forces analysis indicates that competition, the

bargaining power of customers, and the threat of substitution are the issues most
significant to the company. PepsiCo can improve competitiveness through aggressive
marketing combined with product innovation. In such product innovation, PepsiCo must
consider current market trends, such as environmentalism and healthy lifestyles.

Competitive Rivalry or Competition with PepsiCo

(Strong Force)
The Coca-Cola Company is one of PepsiCo’s biggest competitors. However, this
component of the Five Forces analysis shows that there are other factors that determine
the influence of competitive rivalry. The following are the most notable external factors
that create the strong force of competition against PepsiCo:

 High aggressiveness of firms (strong force)

 Low switching costs (strong force)
 High number of firms (moderate force)

Most firms in the food and beverage industry are aggressive, such as in product
innovation and marketing, thereby exerting a strong force on PepsiCo. Competitive
rivalry is also strengthened because consumers can easily shift from one provider to
another (low switching costs). In addition, PepsiCo competes with many other firms,
including big ones like the Coca-Cola Company and a multitude of small and medium
ones. This component of the Five Forces analysis shows that PepsiCo faces strong
competitive rivalry as one of its most pressing concerns.

Bargaining Power of PepsiCo’s Customers/Buyers

(Strong Force)
Consumers are among the top priorities in PepsiCo’s mission statement. The effects of
customers on the firm’s industry environment are determined in this component of the
Five Forces analysis. The external factors that lead to the strong bargaining power of
PepsiCo’s consumers/buyers are as follows:

 Low switching costs (strong force)

 High access to product information (strong force)
 High availability of substitutes (strong force)

As noted, consumers can easily shift from one firm to another. This condition
strengthens customers’ ability to influence PepsiCo. In addition, consumers have
 extensive information for them to easily make choices between PepsiCo products and
competing products. Also, substitutes give buyers even more reasons to stay away from
PepsiCo products. Based on this component of the Five Forces analysis, PepsiCo must
ensure customer satisfaction to maximize its revenues.

Bargaining Power of PepsiCo’s Suppliers (Weak

Force)
PepsiCo must maintain profitable relationships with suppliers. This component of the
Five Forces analysis covers the impact of suppliers on the company’s industry
environment. The weak bargaining power of PepsiCo’s suppliers is based on the
following external factors:

 High overall supply (weak force)

 Low forward integration of suppliers (weak force)
 Moderate size of individual suppliers (moderate force)

The high overall supply increases PepsiCo’s options in acquiring raw materials, thereby
reducing the bargaining power of suppliers. This power is also weakened because of
the low forward integration, which limits suppliers’ control of PepsiCo’s supply chain.
These external factors weaken suppliers’ influence on the company even though some
of them are moderately sized or large firms. This component of the Five Forces analysis
indicates that suppliers’ bargaining power are a low priority for PepsiCo.

Threat of Substitutes or Substitution (Strong Force)

PepsiCo’s products could be substituted, based on consumer preferences and other
variables. The influence of substitution on the firm’s business and industry environment
are examined in this component of the Five Forces analysis. The following external
factors contribute to the strong threat of substitutes against PepsiCo:

 High performance of substitutes (strong force)

 Low switching costs (strong force)
 High availability of substitutes (strong force)

Most substitutes to PepsiCo’s products are satisfactory. For example, consumers easily
enjoy real fruit juices and brewed coffee products instead of drinking Pepsi or Tropicana
products. In addition, PepsiCo consumers can easily shift to these substitutes, which
are generally affordable. Also, most of these substitutes are widely available in grocery
stores and other providers. Based on this component of the Five Forces analysis, the
external factors make the strong threat of substitution a priority issue facing PepsiCo.

Threat of New Entrants or New Entry (Moderate Force)

 PepsiCo must remain strong despite the possibility of new firms competing against it.
This component of the Five Forces analysis covers the influence of new entrants or new
firms on the food and beverage industry environment. The external factors that maintain
the moderate threat of new entry against PepsiCo are as follows:

 Low switching costs (strong force)

 Moderate customer loyalty (moderate force)
 High cost of brand development (weak force)

New firms threaten PepsiCo because consumers can easily shift from one company to
another (low switching costs). However, through moderate customer loyalty, PepsiCo
has a corresponding level of protection from new entrants. Also, the high cost of brand
development makes it difficult for new entrants to directly compete against PepsiCo,
which has one of the strongest brands in the industry. In this component of the Five
Forces analysis, external factors make the threat of new entrants a secondary concern
for PepsiCo’s management.

PepsiCo SWOT Analysis &

Recommendations
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY JUSTIN YOUNG

PepsiCo and other

products in a Woolworths supermarket in Australia. PepsiCo’s SWOT analysis
emphasizes international growth and a number of strategic reforms. (Photo: Public
Domain)
PepsiCo’s current position as the second biggest firm in the global food and beverage
market is based on the company’s ability to wield its strengths to continue growing. The
company grows despite an increasing level of market saturation. This SWOT analysis
shows that PepsiCo is positioned to grow and reach the top position in the global food
 and beverage industry. The SWOT analysis framework identifies the strengths and
opportunities that the firm can tap to address its weaknesses and business threats. As a
global company, PepsiCo must address the issues shown in this SWOT analysis to
minimize barriers to its global performance.

PepsiCo’s SWOT analysis presents major challenges in the areas of competition,

changing consumer behaviors, and product development.

PepsiCo’s Strengths (Internal Strategic Factors)

PepsiCo’s continued global growth and prominence reflects the company’s strengths.
This aspect of the SWOT analysis framework outlines internal strategic factors that
enable firms to fulfill their business goals. The following are the most significant
strengths of PepsiCo:

1. Strong brand image

2. Broad product mix
3. Extensive global production network
4. Extensive global distribution network

As a successful global company, PepsiCo has one of the strongest brands in the
market. This strength enables the firm to attract consumers to its new products. In
addition, the broad product mix represents PepsiCo’s increasing ability to reach various
markets and segments, such as through Frito-Lay products, Quaker products, and
Pepsi products. PepsiCo’s extensive global production and distribution networks are
strengths that support the company’s international growth and expansion strategies. In
this aspect of the SWOT analysis, PepsiCo’s strengths are sufficient to support its
global growth strategy.

PepsiCo’s Weaknesses (Internal Strategic Factors)

PepsiCo suffers from a number of weaknesses that act as barriers to international
growth. The internal strategic factors that limit organizational development are
considered in this aspect of the SWOT analysis framework. The following are PepsiCo’s
main weaknesses:

1. Low penetration outside the Americas

2. Limited business portfolio
3. Weak marketing to health-conscious consumers

PepsiCo derives about 70% of its revenues from markets in North America and South
America. This weakness indicates that the company has not yet maximized potential
revenues outside the Americas. In addition, PepsiCo operates primarily in the food and
beverage industry. This is a weakness because it maximizes the company’s
 vulnerability to risks in the food-and-beverage market. Also, PepsiCo fails to effectively
market many of its products to health-conscious consumers. This aspect of the SWOT
analysis highlights weaknesses that PepsiCo must address through changes in its
growth strategy.

Opportunities for PepsiCo (External Strategic Factors)

PepsiCo has opportunities for continued global growth. In this aspect of the SWOT
analysis framework, external strategic factors that provide options for business
improvement are identified. PepsiCo’s opportunities are as follows:

1. Business diversification
2. Market penetration in developing countries
3. Global alliances with complementary businesses

PepsiCo has the opportunity to diversify its businesses, such as by acquiring a

complementary firm that is not in the food and beverage industry. Another opportunity is
for PepsiCo to increase its penetration in developing countries to generate more
revenues from markets outside the Americas. In addition, PepsiCo can create alliances
with complementary business to increase its market presence. Based on this aspect of
the SWOT analysis, PepsiCo has significant opportunities to strengthen its business
resilience.

Threats Facing PepsiCo (External Strategic Factors)

The food and beverage industry experiences a variety of threats. External strategic
factors that could reduce business performance are considered in this aspect of the
SWOT analysis framework. In PepsiCo’s case, the following are the most significant
threats:

1. Aggressive competition
2. Healthy lifestyles trend
3. Environmentalism

Aggressive competition is a major threat against the company. The influence of the
Coca-Cola Company is especially significant against PepsiCo. In addition, the healthy
lifestyles trend is a threat against PepsiCo’s products, many of which are seen as
unhealthful because of their sugar, salt, or fat content. Also, environmentalism threatens
the company in how consumers negatively respond to product waste and lifecycle
issues. This aspect of the SWOT analysis indicates that PepsiCo must reform its
strategies to overcome the threats to business.

PepsiCo’s SWOT Analysis – Recommendations

 PepsiCo can use its strengths to effectively respond to the issues identified in this
SWOT analysis, especially those considered as threats. The realistic actions that
PepsiCo could take to improve its competitiveness and international growth are as
follows:

1. Diversify businesses to minimize market risk exposure

2. Further penetrate developing markets to grow revenues
3. Improve product healthfulness to attract more consumers
4. Enhance recycling efforts to address environmentalism

PepsiCo’s Organizational Culture

Characteristics: An Analysis
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY DANIEL KISSINGER

A Pepsi vending
machine. PepsiCo’s organizational culture integrates excellence and corporate social
responsibility. (Photo: Public Domain)
PepsiCo’s organizational culture indicates the company’s commitment to maximizing
the strengths of its human resources. A firm’s organizational culture defines the
traditions, values, and ways through which workers perform. In PepsiCo’s case,
employees are encouraged to focus on excellence in a collaborative way. As the
second biggest food-and-beverage company in the world, PepsiCo continually strives to
improve its workforce. It is essential to maintain a high performance culture to sustain
this market position. PepsiCo uses its organizational culture as a strategic approach to
optimize its performance by harnessing the strengths of its people.
 PepsiCo’s organizational culture emphasizes taking care of employees and using their
capabilities to achieve high business performance.

Features of PepsiCo’s Organizational Culture

PepsiCo adjusts its organizational culture through the years. This aspect of the
business responds to changes in leadership as well as business situations. At present,
the following are the main characteristics of PepsiCo’s organizational culture:

1. Performance with Purpose

2. Real World Leadership
3. Collaboration

Performance with Purpose. PepsiCo employees perform with the purpose of

achieving excellence for the company, customers, communities, and the planet. This
feature of the organizational culture indicates PepsiCo’s commitment to fulfill its
corporate social responsibilities. In essence, employees are encouraged to address the
concerns of PepsiCo’s stakeholders. The most significant impact of this characteristic of
the organizational culture is that it motivates workers to do better. For example,
PepsiCo employees are motivated to excel in what they do, and to ensure that their
efforts contribute to the improvement of the business and its stakeholders.

Real World Leadership. PepsiCo’s organizational culture emphasizes leadership

based on what employees, investors, customers and communities really need. The
company uses employee knowledge to develop its leadership. More specifically,
PepsiCo promotes employees to leadership positions. This internal leadership
development indicates that PepsiCo’s organizational culture facilitates the use of
employees’ work-based experiential knowledge to fuel business leadership and growth.
As a result, the process of organizational learning is maintained through PepsiCo’s
organizational culture.

Collaboration. Teamwork is an integral part of PepsiCo’s organizational culture. The

company believes that collaboration enables the business to achieve excellent
performance. While PepsiCo recognizes the strengths of individual employees, its
corporate culture sustains the use of these strengths through collaborative efforts. For
example, teams are used throughout the organization. Through this feature of the
organizational culture, PepsiCo supports synergy in its human resources, instead of just
relying on separate individual efforts.

PepsiCo’s Organizational Culture: Advantages &

Disadvantages
PepsiCo’s organizational culture has the advantage of motivating employees. The
emphases on purposeful action and internal leadership development give meaning to
employees’ contributions to the business. In addition, collaboration optimizes employee
morale, which reduces PepsiCo’s employee turnover rates. However, a disadvantage of
PepsiCo’s organizational culture is that it has limited support for autonomy and
individual flexibility, which partly determine employee morale, motivation and
performance. While PepsiCo recognizes the importance of task delegation, its
organizational culture does not specifically include autonomy or individual flexibility.

PepsiCo’s Organizational Structure Analysis

UPDATED ONUPDATED ON SEPTEMBER 8, 2018 BY ANDREW THOMPSON

Pepsi cans in China.

PepsiCo’s organizational structure emphasizes market divisions. (Photo: Public
Domain)
PepsiCo’s organizational structure has been reformed several times to address
changing global market conditions. The company’s current corporate structure reflects
the business aims of global expansion and leadership. These aims highlight PepsiCo’s
mission and vision statements. PepsiCo’s strategies are also manifested in how its
organizational structure supports international growth. A firm’s organizational structure
defines the system and design of business components, and how these components
interact to fulfill the firm’s mission and vision. In PepsiCo’s case, the organizational
structure enables control over the expansive reach of the company around the world,
considering significant differences among market conditions.
 PepsiCo’s organizational structure’s characteristics are based on the company’s
approach to maximize its control of the business while continuing to grow
internationally.

Features of PepsiCo’s Organizational Structure

PepsiCo originally had a hierarchical organizational structure in its early years.
However, after a number of key mergers and acquisitions, along with global expansion,
the company has changed its organizational structure accordingly. The following are the
main characteristics of PepsiCo’s organizational structure:

1. Market divisions
2. Functional corporate groups/offices
3. Global hierarchy

Market Divisions. The most prominent feature of PepsiCo’s organizational structure is

its market divisions. These divisions are based on two variables: business and
geography. In terms of business, PepsiCo’s maintains one global division for Frito-Lay
and another global division for Quaker Foods. In terms of geography, the company has
divisions for the Americas, Europe, and other regions. The following are the market
division in PepsiCo’s organizational structure:

1. PepsiCo Americas Beverages

2. Frito-Lay
3. Quaker Foods
4. Latin America Foods
5. PepsiCo Europe
6. PepsiCo Asia, Middle East & Africa

Functional Corporate Groups/Offices. This characteristic of PepsiCo’s organizational

structure refers to basic business functions. The company has global or corporate
offices for these functions. PepsiCo’s objective in having functional groups is to ensure
corporate control and rapid implementation of policies and strategies. An Executive Vice
President or Senior Vice President heads each of these groups. The following are the
main functional corporate groups/offices at PepsiCo:

1. Global Categories and Operations

2. Global Research and Development
3. Human Resources
4. Finance
5. Government Affairs and Legal
6. Talent Management, Training and Development
7. Communications
Global Hierarchy. PepsiCo’s organizational structure also features a hierarchy that
spans the global organization. A hierarchy typically supports monitoring, control and
governance at the global/corporate level. PepsiCo has maintained considerable
hierarchy for top-down communications, monitoring and control. This characteristic of
the organizational structure also provides a means through which PepsiCo minimizes
deviations from its policies and strategies.

PepsiCo’s Organizational Structure Advantages &

Disadvantages
The primary advantage of PepsiCo’s organizational structure is the ability to focus on
regional market needs. This is possible through market divisions. The organizational
structure also has the advantage of supporting PepsiCo’s global corporate control.
However, PepsiCo experiences the disadvantage of the limits of its organizational
structure in terms of flexibility. For example, the company has a single global division for
Frito-Lay. This characteristic reduces PepsiCo’s ability to respond to market variations
and changes in its Frito-Lay business. Thus, a possible improvement is to divide such
single global divisions into regional market divisions, so that PepsiCo could enhance its
responses to market variations around the world.

PepsiCo’s Generic and Intensive Growth

Strategies
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY EDWARD FERGUSON

Georgian President
Saakashvili symbolically starting a Pepsi bottling plant in 2004. PepsiCo’s generic
 strategy (Porter’s model) and intensive growth strategies empower the company to
maintain strong competitiveness. (Photo: Public Domain)
PepsiCo is the second biggest player in the global food and beverage industry. The
company offers a diverse array of products. PepsiCo’s generic competitive strategy is
based on the need to address market pressure coming from its biggest rivals, including
the Coca-Cola Company. A firm’s generic strategy (based on Porter’s model) defines
the basic strategy used to maintain competitive advantage. On the other hand,
PepsiCo’s intensive growth strategies are a response to the evolving global food and
beverage market conditions. Intensive growth strategies outline how firms support their
growth. PepsiCo’s generic strategy for competitive advantage matches its intensive
strategy to ensure long-term growth.

PepsiCo’s intensive growth strategies enable the company to effectively use its generic
strategy to maintain strong competitive advantage. PepsiCo’s success is an indicator of
the appropriateness of these strategic directions, especially how the generic strategy
supports competitiveness.

PepsiCo’s Generic Strategy (Porter’s Model)

PepsiCo applies different generic competitive strategies, considering the company’s
wide array of products. However, the main generic strategies that contribute to
PepsiCo’s competitive advantage are as follows:

1. Cost leadership
2. Broad differentiation

PepsiCo uses cost leadership as its primary generic competitive strategy. This generic
strategy focuses on cost minimization as a way to improve PepsiCo’s financial
performance and overall competitiveness. For example, to compete against Coca-Cola
products, PepsiCo offers low prices based on low operating costs. The company also
sometimes has special promotional offers with discounted prices. On the other hand,
PepsiCo uses broad differentiation as its secondary generic competitive strategy. This
generic strategy enables business competitive advantage by attracting consumers to
some unique features of the firm’s products. For example, PepsiCo’s Lay’s potato chips
are marketed as a healthful snack product because of reduced saturated fat content. A
strategic objective for the cost leadership generic strategy is to automate production
processes to minimize PepsiCo’s operating costs. In relation, PepsiCo’s strategic
objective for the broad differentiation generic strategy is to innovate products to address
concerns about their health effects.

PepsiCo’s Intensive Strategies (Intensive Growth

Strategies)
Market Penetration. PepsiCo implements market penetration as its primary intensive
growth strategy. This intensive strategy supports business growth through increased
sales, such as from a bigger market share. For example, PepsiCo uses aggressive
marketing to attract more consumers. A strategic objective linked to this intensive
growth strategy is to minimize costs and prices to attract more consumers despite
market saturation. As such, PepsiCo’s generic competitive strategy of cost leadership
supports this intensive strategy for growth.

Product Development. PepsiCo’s secondary intensive growth strategy is product

development. This intensive strategy requires offering new products to capture more
consumers. For example, PepsiCo continues to develop products or variants of existing
ones, such as low-calorie, reduced-salt, or low-saturated-fat variants of its food and
beverage products. A strategic objective linked to this intensive growth strategy is to
boost R&D investments for product innovation. PepsiCo’s generic competitive strategy
of broad differentiation supports this intensive strategy by offering unique or novel
products to attract more consumers and grow the business.

Market Development. PepsiCo applies market development as its supporting intensive

growth strategy. This intensive strategy supports business growth by capturing new
markets or market segments. For example, PepsiCo continues to expand its distribution
network to reach the last remaining markets or segments, especially in developing
regions. However, market development is only a supporting intensive growth strategy
because PepsiCo already has significant presence in all regional markets worldwide. A
strategic objective for this intensive strategy is to expand PepsiCo’s supply chain to
support the growth of its distribution network. The cost leadership generic competitive
strategy enables PepsiCo to effectively use this intensive growth strategy through cost
minimization despite additional investments used for expansion to new markets or
market segments.

PepsiCo’s Vision Statement & Mission

Statement Analysis
UPDATED ONUPDATED ON FEBRUARY 6, 2017 BY JESSICA LOMBARDO
 An old Pepsi enamel
billboard from the Pepsi-Cola Company. PepsiCo’s mission statement and vision
statement are based on the original mission and vision of the Pepsi-Cola Company.
(Photo: Public Domain)
PepsiCo Inc. was created in 1965 through the merger of the Pepsi-Cola Company and
Frito-Lay Inc. As the world’s second biggest food and beverage firm, PepsiCo ensures
that its mission statement and vision statement are aligned with its current business
condition. This condition highlights the diversification of the company in terms of its
product mix and markets. PepsiCo’s mission statement leads the business to develop
products that suit market demand. A firm’s corporate mission statement identifies
actions to achieve the organizational vision. PepsiCo’s vision statement specifies the
company’s role in the global market. A firm’s corporate vision statement indicates the
direction of organizational development. PepsiCo’s mission and vision statements
complement each other to push the company toward the top global market position.

PepsiCo’s vision and mission statements are designed to complement each other. The
company continues to satisfy the corresponding business requirements based on its
vision and mission statements.

PepsiCo’s Vision Statement

PepsiCo’s vision statement is “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.” PepsiCo adds that this vision
statement is built on the idea of “Performance with Purpose.” Based on these
considerations, PepsiCo’s vision statement has the following main points:

1. Top financial performance

2. Sustainability
3. Corporate social responsibility

PepsiCo emphasizes high financial performance as one of the aims included in its
vision statement. This factor is a basic business expectation. In addition, the vision
statement indicates that PepsiCo integrates sustainability in business activities.
 Sustainability enhances corporate and brand image. Also, PepsiCo’s vision statement
includes corporate social responsibility. This factor is a major influence on the
company’s policies and strategies on organizational development, especially with
regard to its impact on stakeholders. All of these points of the vision statement motivate
PepsiCo to achieve high performance.

PepsiCo’s Mission Statement

PepsiCo’s mission statement is “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.” This mission statement highlights PepsiCo’s desire to satisfy
customers. In conjunction with the mission statement, PepsiCo also states, “We are
committed to investing in our people, our company and the communities where we
operate to help position the company for long-term, sustainable growth.” The main
points of PepsiCo’s mission statement are as follows:

1. Consumers around the world

2. Delicious, healthy and fun products
3. Affordability
4. Convenience

PepsiCo’s mission statement focuses on consumers and product characteristics. For

example, the mission statement shows that the company targets all consumers
worldwide. This implies that PepsiCo aims to provide products that appeal to all
consumers despite differences in backgrounds, cultures, and other variables. The
mission statement also defines the basic characteristics of PepsiCo’s products. The
point on affordability implies PepsiCo’s approach to pricing. Moreover, based on the
mission statement’s convenience point, PepsiCo makes its products easily accessible,
implying the firm’s market strategy.

PepsiCo’s Mission & Vision Statements –

Recommendations
PepsiCo’s mission statement gives specific details about the company’s products and
target market. However, the company can improve this mission statement by adding
more information about general approaches, strategies or courses of action to achieve
the firm’s vision statement. On the other hand, PepsiCo’s vision statement is adequate
in showing where the company wants to be in terms of financial, sustainability, and
corporate social responsibility performance.