Pepsi Conclusion Client Report

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Pepsi Conclusion Client Report

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Running head: CASE STUDY: PepsiCo Case Study: PepsiCo Catarina Ju-Yu Xiyi yan Yizi Dong Yuxi Zeng California Institute of Advanced Management 1 Running head: CASE STUDY: PepsiCo Executive Summary and Background In this case study, we will be analyzing Indra Nooyi’s decision to add healthier products to PepsiCo’s portfolio. In order to understand the case’s central ethical issue of a well-known fast food brand entering the healthy foods market, we will take a look at the overall environment of the company as well as its SWOT in order to understand whether the decision could have been implemented with more success. The Case: The main issue that seems to arise in this case are the barriers against PepsiCo’s (led by India Nooyi) effort to move their products to the “Good For You” segment of the market. On the one hand, although there has been a general change in demographics towards a desire in more “health-conscious” habits, there are still consumers who don’t want companies to dictate their lives for them. Some consumers believe it is the individual’s responsibility, and not a company’s, to make the necessary lifestyle changes in their lives towards their health. On the other hand, there is pressure coming from PepsiCo’s board which looks towards reaching profitable results rather than social or moral results. At the same time, there seem to also be questionable motives behind their ethical decision. While the company set partnerships with health organizations and has offered financial support to public institutions and organizations tied to the health industry, it has also been fierce in its fight against the setting of marketing limits, taxes and regulations on fast food products. PESTLE Analysis ● Political Environment When PepsiCo decided to transition to the “Good For You” products in order to improve the general health of the American population, which was struggling with a high rate of obesity, there were some barriers in the political environment. 2 Running head: CASE STUDY: PepsiCo These, however, benefited the old model of the company. In one case, Mississippi introduced a law to prevent local governments from limiting portion sizes, believing that it isn’t the government’s responsibility to regulate citizens’ dietary choices. At the same time, when other states and cities tried to implement soda taxes, officials were met with strong resistance. Even though political representatives have tried hard to define rules that addressed obesity, strong lobbying efforts have mostly managed to succeed in stopping them from being implemented. To make matters more complicated, PepsiCo itself was known for impeding the advance of those rules and regulations. ● Economic Environment The economic environment has many factors such as inflation and interest rates, taxes affect, economic growth, international trends, and globalization. The economic factors determine the economy’s performance, which causes impacts on companies and generates long term effects. For instance, a rise in the inflation rate would affect the company’s price of their products and services. Therefore, it would affect the supply chain management, and production cost, and customer purchasing power. According to the key economic indicators show that the U.S economic outlook is healthy and stable. From 1947 until 2019, the GDP growth rate in the U.S averaged 3.21 percent (n.d). The household consumption increased at a fast rate which means more consumers and larger spending power. PepsiCo as a successful big company has a great opportunity for growth and expansion based on a stable economy in the United States. Moreover, globalization has a high effect on PepsiCo’s development in the foreign market. The globalization increases the company in different culture get to communicate and also enhances corporation among companies. Thus, it brings more opportunities and helps PepsiCo achieve stable international growth. 3 Running head: CASE STUDY: PepsiCo ● Social Environment What is Social Environment? Social Environment has many dimensions including age distribution, sex distribution, income distribution, demographic characteristics, variety customs, population growth rate and values of the different group of population. Many factors can affect the social environment through influencing the overall market and customers. In addition, those factors can identify emerging trends, which are helpful for companies and marketers to obtain further understanding of their target market and customers’ needs and wants. PepsiCo is the company that focuses on producing various food and drink from the very beginning, and recently, PepsiCo wanted to change it’s brand positioning now from unhealthy food to healthy food. What are the social environmental factors that make PepsiCo wanted to change? After conducting research, we concluded that there are three main factors: higher health consciousness, increasing busy lifestyles, and more discriminating attitudes about food quality. How do those three factors impact the Social Environment for the PepsiCo? First, the higher health consciousness is the signal PepsiCo obtained from its customers. Currently, customers are seeking for the less sugar, less salt, and less oil eating habit, which is opposite against the food and drink PepsiCo has. This signal is also the threat for PepsiCo. If PepsiCo does not make changes accordingly, PepsiCo will lose the majority of its market share or profit sooner and later. However, increasing busy lifestyles and more discriminating attitudes about food quality are more like the opportunities for PepsiCo. If PepsiCo can satisfy customers with those three social environmental factors, and also align its products and marketing strategies to changes in consumer behaviors, PepsiCo can definitely obtain more market shares and profit. ● Technology Environment 4 Running head: CASE STUDY: PepsiCo PepsiCo has a lot of things on the technology side that they can leverage to improve its competency in the business. First and foremost, as the leaders in the food and beverage industry, they have resources, knowledge, and skills needed to create a product with quality. Secondary, PepsiCo has figured out ways to scale its business by leveraging the existing business product line. In this case, they are able to roll-out new products in an efficient manner. Thirdly, PepsiCo needs to improve the knowledge management system. As the business continue to grow throughout the years, it’s critical for PepsiCo to store and manage its recipe for success in an efficient and digital way. Also, to further scale the business, PepsiCo is working on making the manufacturing process more automatic. The optimization and automation process will help PepsiCo to experience new areas even faster. Lastly, PepsiCo needs to continue to moderate the technology impact on its product line. ● Legal Environment Legal factors are considered in any business in a given region are the new policies in areas accompanied by different laws that are passed for every business to follow. In every country, there are specified labor laws, safety principles, and consumer laws that must be adhered to by PepsiCo. Many organizations are not robust enough to protect intellectual property rights. PepsiCo has to thoroughly evaluate such scenarios just before plunging into the market (Bagley, 2015). PepsiCo should be able to identify any anti-trust laws in beverages. For example, the controversy of taking drinks with less sugar is very hot. Many people are now shifting from taking sugary drinks that cause obesity and other heart-related diseases. The company got to be well conversant with prevailing discrimination, employment, health, and safety laws. Other legal factors that can affect the incorporation include Ecommerce and rules guiding protection of the buyer. PepsiCo must consider environmental 5 Running head: CASE STUDY: PepsiCo safety standards before entering into new markets to avoid environmental pollution that can lead to the ban of manufacturing in some countries. Laws regulating ecological pollution are very tough and can deny an organization to operate (Bagley, 2015). They have to embrace recycling, proper waste management, and have that attitude of green ecology. To be successful in the legal environment, PepsiCo concentrated on environmental, talent, and human stability. It would cut costs and minimize any impact on the environment through conservation and provision of a safe and inclusive workplace in all countries of operation. SWOT Analysis ● Strengths As the leader in the food and beverage industry, PepsiCo has lots of resources, knowledge, and experience to leverage compared to other players in the field. This means that they tend to get more attention, have more brand awareness, and have a stronger brand. Also, PepsiCo has an existing audience that they can rely on when launching new products. As a company, PepsiCo put its community first to stay connected with its customers and brand ambassadors. Next, since PepsiCo has such as huge customer database, they are empowered to use a data-driven approach when making business decisions. ● Weakness The SWOT Analysis focuses on the Strengths, weaknesses, opportunities, and threats that PepsiCo face. However, we will only look at the gaps and a recommendation to minimize such barriers. PepsiCo has had low penetration outside America, which means that it only maximizes its susceptibility to risks in the marketplace (Dess & Miller, 1996). The company also has minimal business portfolio due to the technological advancement and developing business strategies that its competitors such as red bull and Coca-Cola have. It also has very weak marketing to health- conscious consumers which has deteriorated its 6 Running head: CASE STUDY: PepsiCo efforts to plunge fully into the market and release the guilt-free products. The recommendation that PepsiCo design a strong portfolio for non-carbonated drinks that have low risks also attracts many customers who are health-conscious getting more information about obesity. PepsiCo must change its business growth strategy in to counteract the weaknesses by coming up with concrete solutions to give opportunities for growth (Bagley, 2008). ● Opportunities PepsiCo has opportunities to keep and increase current market shares and continue its global growth. After conducting market research, we concluded that there are three main opportunities for PepsiCo. The first one is business diversification. However, this opportunity is actually PepsiCo’s weakness now. Majority of customers cannot connect all products PepsiCo has together. Without online searching, we do not even know Starbucks, Evian, or Lay’s are belong to PepsiCo. However, if PepsiCo can take advantage of “business diversification”, PepsiCo can build the strong brand positioning in the market. Before further business diversification, PepsiCo has to connect all products together through marketing and advertising approaches. After connecting all product, PepsiCo should think about produce tasty and healthier product to meet customers’ current needs. The second opportunity for PepsiCo is Product Innovation. In the current market, customers have already had so many options for healthy food and drink. Product Innovation can help PepsiCo to attract customers’ attention. For example. PepsiCo now has Quaker as its main oatmeal brand. However, in the current market, there are so many options for breakfast bars and instant oatmeal. How to do the Product Innovation in the saturated market? PepsiCo can produce yogurt oatmeal, oatmeal pizza, oatmeal candy etc. Alternatively, PepsiCo can produce more flavors than the market has now. 7 Running head: CASE STUDY: PepsiCo The third opportunity for PepsiCo is Cost Cutting. We have to admit that cost cutting is a very useful approach if a company’s products are not unique or special. In other words, if there are so many substitute goods exist, the best approach for a company to keep profit is cost cutting. I believe PepsiCo has already noticed the importance of cost cutting, since in 2017, PepsiCo has already came up with the new idea, smart spending, which requires more plant automation and rationalization and higher supply chain efficiencies. ● Threats The threats the company faced as it added “healthy” products to its portfolio were mostly related to the market’s reaction to the decision. In fact, Nooyi faced a lot of criticism with the decision. Health advocates did not defend the strategy and instead urged to company to go out of business if improving the health of the population was in fact their concern. At the same time, PepsiCo performed very poorly after this decision. Not only did it lose customers that were loyal to the original brand, it also failed to attract health-conscious consumers. Many believed the company, who was known to fight political efforts to improve the general health of the population, to be entering the health market purely for financial reasons, since it was a growing market at the time. The fundamental question to answer was whether or not it was possible to succeed in a healthy food market when the broad portfolio of the brand is largely unhealthy. Mission Statement We can use the question from Drucker “What is our business?” to start with mission statement. In theory, each company has its own mission statement, which states why the company established, what are the company’s goals, and what kind of services or products the company focuses on. After conducting some online research, we concluded that the mission statement for PepsiCo can be separated into 4 parts. First part is for customers: PepsiCo 8 Running head: CASE STUDY: PepsiCo wanted to “create smiles for customers” via providing good food and great brand experiences. The second part is for the associates and the overall communities: PepsiCo wanted to help its employees to obtain the unique working experiences in Pepsi, and all employees can enjoy the time they spend on Pepsi. The third part is for the whole world, Pepsi hopes to “foster a more sustainable planet for children and grandchildren.” The last part is for the shareholders, PepsiCo wanted to make sure that all PepsiCo’s shareholders can be satisfied while investing at PepsiCo. Vision Statement A vision statement is so important because it points out a clear direction to the business. A clear vision statement helps businesses set a long-term goal and helps explain what a business exactly stands for. Besides, it also can provide benefits and motivate employees in a corporation. A good vision statement is like a guide book which leads the business to succeed. Why Vision Statement is important for a big company? First, it can help businesses and employees to achieve a specific goal. It increases working efficiency and productivity. Second, it can keep a close relationship with social media and attract attentions to develop business partnerships with other companies. Last, it helps the company to build direct strategic plans. Thus, companies following by step to step strategy will achieve a long-term goal and bring company a solid vision for the future. Recommendations Although PepsiCo has been working on a few challenges, we believe they can reinforce its leadership position in the food and beverage industry by doing three things right. Firstly, we recommend PepsiCo to implement the 80/20 rule. The 80 20 rule is not only a 9 Running head: CASE STUDY: PepsiCo helpful concept for life and time management, but also a guiding policy for companies that want to gain long-term success. This principle states that, for many events, roughly 80% of the effects come from 20% of the causes. This is a lesson learned for a company for PepsiCo as big companies tend to think they have unlimited resources and focus on too many things. To avoid losing track of direction, it’s important for PepsiCo to stay focused while experimenting a few things that drive innovation. Secondly, we recommend PepsiCo to focus on word-of-mouth promotion instead of spending tons of budget on advertisement. word-ofmouth describes the times when one person tells others a story about a real event or something. This type of communication is more effective versus the advertisement campaigns because it’s more real and it’s through the community. Since PepsiCo has faced a couple challenge on public relations and communication, we recommend the company to focus more on community building and word-of-mouth promotion. Lastly, we recommend the company to go beyond food and beverage industry. While the key products should still fit into its existing product line, we thought the company can explore things outside of their own market for less competition and higher margin. Conclusion 10 Running head: CASE STUDY: PepsiCo References: Bagley, C. E. (2008). Winning legally: The value of legal astuteness. Academy of Management Review, 33(2), 378-390. Bagley, C. E. (2015). Managers and the legal environment: Strategies for the 21st century. Cengage Learning. Dess, G. G., & Miller, A. (1996). Strategic management (Vol. 2). McGraw-Hill. 11


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