Case Study : PepsiCo Competitive Analysis

IoanaT
Dec 10, 2021
2 min read

This research covers the challenges faced by the food processing and beverages industry in response to the ever-changing global business environment.

A giant food and beverages chain - PepsiCo is analyzed using PEST, Porter's Five Forces and SWOT – powerful frameworks used to monitor the macro-environmental factors that may have a profound impact on an organization’s performance.

Note that all information has been taken from public references and my own contribution and interpretation.

PEST Analysis

Helps organizations take better business decisions by studying political, economic, social, and technology factors.

Political factors

The US and Canada are politically stable, representing opportunities for PepsiCo. In addition, the trend towards intergovernmental cooperation improves opportunities for global expansion. However, government initiatives against sweetened carbonated beverages are a threat that could reduce PepsiCo's revenue. Therefore, PepsiCo needs to adapt its products to keep up with these changes.

Economic factors

PepsiCo has opportunities for growth and expansion based on the economic stability of developed countries, such as the USA, as well as in developing economies, such as Asia.

Social factors

Increasing interest in health is a threat to PepsiCo due to concerns about the sugar, salt and fat content of its products. However, this external factor represents the company's ability to improve its products. PepsiCo can also take advantage of the busy lifestyle of consumers, especially in urban areas. People with these lifestyles are more likely to buy ready-to-eat foods. The company has the opportunity to improve their products’ quality.

Technology factors

PepsiCo can invest in research and development to improve its expertise. They can also leverage the benefits of knowledge management systems to support 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 improve business performance. PepsiCo needs to include new technologies as tools to improve business competitiveness.

Porter's Five Forces

The key success factors for the food and beverage industry are:

high production capacity to have a low manufacturing cost
diversified product portfolio
effective advertising campaigns to present new products to potential customers

The entry barriers in the industry are high: large investments required (factory, staff), consumer loyalty for products already on the market, distribution network (need to create partnerships with supermarkets, distribution points). The exit barriers are low: high degree of assets’ specialization, complementarity with the beer industry.

The most notable external factors that create a strong competitive force against PepsiCo the low change costs and the large number of rival companies. Most companies in the food and beverage industry are innovative consumers can easily switch from one supplier to another.

Consumers have a strong bargaining power due to their access to product information and high availability of substitute products.

The company must maintain profitable relationships with suppliers.

In terms of substitute products, consumers can easily enjoy real fruit juices and coffee products instead of Pepsi or Tropicana. Most of these substitutes are also widely available in grocery stores and other suppliers.

External factors that maintain the moderate threat of new entry against PepsiCo are the moderate customer loyalty and the high cost of brand development. Despite of all of this, PepsiCo has one of the strongest brands in the industry.