Strategic Management and Organizational Dynamics - Case Study Example

1. Introduction The aim of this report is to identify the current strategic position of PepsiCo. Additionally, the current business model of the company is also evaluated and assessed to identify the success of PepsiCo in terms of strategy formulation and implementation. In order to analyze the PepsiCo’s strategic position certain tools has been used. The strategic tools that have been used are TWOS matrix and Grand Strategy matrix. Based on these matrixes, future strategy and business model have been proposed along with its justification. 2. Current Strategic Position of Pepsi The current strategic position of PepsiCo shows that the company has done considerably well in the beverage market along with other markets it operates in. From a strategic perspective, it could be observed that PepsiCo is the global leader in convenient snacks, foods and beverages market. According to Ansoff Matrix, PepsiCo has been using the growth strategy of product development. It has been observed that the company is constantly introducing new products into existing market and this has been the strategy that has helped Pepsi to grow. Some of the popular brands that have been introduced in the existing market i.e. food and beverage includes Mountain Dew, Diet Pepsi, Lays, Doritos, Tropicana, Gatorade and Quaker. The aim of such constant development is to remain ahead of competitors in the market and to enhance the market share by providing the customers with variety of products. 3. Current Business Model of Pepsi In order to create value, the core strategy of PepsiCo is to enhance the product offering in the same market. This has been continuously observed that PepsiCo has introduced several brands in its existing market to create value and to tackle its competition. According to a research conducted, it has been that in emerging markets like India, 25 percent of the sales volume comes from juices and water. Similarly, 60 percent of the volume in North America comes from non-carbonated drinks. 4. Recommendations for the Future Strategy of Pepsi TWOS and Grand Strategy have been used in order to identify the future strategies of Pepsi. Each of the matrixes has been separately elaborated in order to provide concise and logical future strategy. 4.1. TWOS MATRIX The TWOS matrix has focused on providing recommendations for the future strategy of PepsiCo. TWOS matrix is an important tool to formulate strategies (De Wit, & Meyer 2004). In order to do so, the strategies for the company have been analyzed and identified using the strengths and opportunities of the company, using the weaknesses and opportunities, using the strengths and threats of the company and then using the weaknesses and threats of the company. TWOS Matrix Strengths 1. Strong brand equity 2. Well established in local and international market 3. Innovative company 4. Socially responsible 5. Strong advertisement campaign and high advertisement budget 6. Second largest market share in beverage and first largest in food industry 7. Wide variety of smaller brands that provides the company with ability to provide large product range from beverage to snacks 8. Brand loyal customers as it targets young generation i.e. youth 9. Motivated employees 10. Constantly provides its customers with discount schemes from time to time 11. Sponsors events i.e. sports, musical concerts etc. Weaknesses 1. Expensive production due to constantly changing demands of the customers 2. Lack of focus on Pepsi sodas 3. High product recalls 4. Dependent on US market 5. Far behind Coca Cola in international market 6. No incentive or discounts to retailers 7. Limited target customers i.e. youth in advertisement 8. Unavailability of all products at same outlet 9. Low margin to retailers 10. Political franchises 11. Lack of potential outlets Opportunities 1. Less costly products in markets 2. Growth opportunities in developed and developing countries 3. Acquisition of bottlers i.e. integration 4. Ability to compete in different industries 5. High growth in carbonated drinks in Asia and Europe 6. Increasing demand on sports drinks and energy drinks in the market 7. High demand of Pepsi products in the market 8. Diversification in potential businesses 9. Growing interest of people in concerts and events 10. High demand and interest of customers regarding beverages 11. Changes in customer buying behavior and trends SO 1) From a strategic point of view, PepsiCo should continue to offer variety of products to remain ahead of competitors. (S1, S2, S6, S7, O4) 2) PepsiCo should expand in markets where the demand of the products in constantly on the rise i.e. Asia and Europe. (O2, O5, S2) 3) PepsiCo should focus on extensive product development to respond to the increasing demand of its sports drinks, bottled water and energy drink. (O4, O6, S6, S7) 4) PepsiCo should enhance its advertisement budget to create additional demand of its products. (S5, O7) WO 1) The company should expand its market and products offering in Asia and Europe. (W2, W4, W5, O2, O5) 2) To revamp sales in the market, PepsiCo should focus highly on the changing demands of its customers in the market. Additionally, the company should enhance its products in bottled water, sports and energy drinks. (W1, O4, O6) 3) PepsiCo should change its pricing strategy which will eventually lead to increase in interest of retailers to increase PepsiCo’s stock. (W8, O11) 4) The company should rethink its placement strategy and should focus on providing the retailers with all the products at the right time. (O2, O10, W11) Threats 1. Cut-throat competition among competitors 2. Negative perception of customers towards carbonated beverages 3. Economic crisis in countries 4. Increasing government regulations 5. Political instability of the countries 6. Threat of labor strikes 7. Shortage of resources 8. Campaigns against plastic containers 9. Dependent on supplies of clean water to prevent contamination ST 1) Strategically, PepsiCo should provide its customers with innovative products that could differentiate the brand from its competitors. (T1, S1, S2, S3, S8) 2) The company should promote the brand by offering incentives and discounts to revamp its sales in the market. (S1, S3, T2, T3) 3) PepsiCo should focus more on environmentally friendly processes and should support environmental issues. (T8, T9, S1, S2, S4, S6) 4) PepsiCo should focus more on advertisement and promotion of its brand to provide the customers with positive benefits while using the brand. (S5, T1, T2) 5) PepsiCo should focus highly on market development along with backward integration. (T3, T7, S2) WT 1) PepsiCo should focus on forward integration to eliminate conflict of interest. (W9, T1) 2) PepsiCo should enhance its marketing and advertisement campaign to great extent. (W10, T1) 3) Production of bottles in greater size and to sell them at the same price as small bottles. (T3, T8, W1) 4) Increase in training and development of employees to enhance supply chain production (W1, T9) 4.2. Grand Strategy Matrix Grand strategy matrix is also an important tool that has been used by organizations to formulate strategies (Mintzberg, Lampel, Quinn & Ghoshal, 2003). By evaluating the strategic position of PepsiCo, it could be observed that the company is located in the first quadrant of Grand Strategy Matrix. This indicates that PepsiCo is in excellent strategic position. From a strategic point of view, it has been observed that the company has undertaken several strategies to revamp its sales and market share. Using the grand strategy matrix, some of the strategies that PepsiCo can adapt have been discussed below; 4.2.1. Product development This is one of the aggressive strategies that have been undertaken by PepsiCo. Moreover, as the company is in the first quadrant so it can follow the strategy of product development. It has been observed that PepsiCo has introduced several brands in the market with an aim to revamp its sales and market share. Examples of product development strategy undertaken by PepsiCo are soft drinks like Pepsi and Mountain Dew; Snacks like Frito-Lay and Rold Gold pretzels; beverages like Dole juice, bottled water, Lipton tea, Tropicana juices and sports drinks. So with the passage of time, Pepsi can come up with more products and thus this strategy would allow the company to grow. 4.2.2. Integration strategies Integration is another important strategy that can be adapted by Pepsi. Pepsi has previously also been following the strategy of integrating it with other companies to grow. Acquiring of two the largest bottlers in US is an example of PepsiCo’s integration strategy at work. From a strategic point of view, the acquiring of two largest bottlers was an example of forward integration. Thus, to grow further Pepsi can integrate with other companies in future as well. 4.2.3. Diversification In terms of strategy, PepsiCo focuses on related diversification and it could continue the same way because the brand image of the company would not be hurt. Diversification strategy of Pepsi shows that the company constantly adds new products in brand portfolio but these products are related. Introduction of Mountain Dew is an example of related diversification in the beverage market. 4.3. Proposed future strategy and business model Some of the strategies to enhance the success of PepsiCo are as follows; a) The company should focus on market development along with product development. PepsiCo is well reputed in the food and beverage market which provides the company with higher opportunities in order to enhance its market. PepsiCo should focus all its attention of Asia and Europe market as the chances of success in these markets are greater than others. b) PepsiCo along with product and market development should also focus on market penetration. Strategically this would allow PepsiCo to enhance its market share with the help of enhanced marketing effort. Although, the target market of PepsiCo is quite familiar with the brand, the company should focus on advertisement and promotion. This would help in creating awareness regarding all the products that PepsiCo is currently offering to its customers. c) PepsiCo should focus on placement strategy as well. It has been observed that due to lack of placement strategy, the company is constantly facing competition from competitors in the market which leads to decline in the market share and loss of customers. Regarding the business model of PepsiCo, it would be proposed that the company should focus on continuous innovation. With the help of such innovative business model, the company would be provided with several opportunities to enhance its sales and product offerings in the market. Additionally, the company would be able to provide its customers with products that could meet the needs and demands of the customers. With such a business model at work, PepsiCo would be able to take the lead in the beverage market which would eventually lead to the accomplishment of long-term goals and objectives of the company. For further success in the market, PepsiCo should focus more on the non-carbonated products as much of the customers are shifting from carbonated energy drinks to non-carbonated products in the market. With such a shift, PepsiCo would be able provide the customers with healthier products that could meet their wants and demands in the market. 5. Academic Justification for the Proposed Future Strategy Being in the first quadrant of Grand Strategy Matrix indicates that PepsiCo is provided with several opportunities in the market. Attaining such opportunities should be the priority of PepsiCo. The justification of the proposed future strategies is as follows; 5.1. Geographical expansion Geographic expansion is one of the most common strategies undertaken by companies. With the help of such expansion, the company is able to enhance its sales and market share. Additionally, the expansion in the new market provides the company with several opportunities. One of such opportunity is to meet the demands and needs of the customer which in return provides the company with loyal customers. Rising competition in the market is quite common and the best strategy to eliminate the threat of competition is to expand globally (Stacey, 2000). 5.2. Product innovation Product innovation is one of the strategies that provide the organization with competitive edge over others in the industry. It has been observed that this strategy has always been the core reason for the success of multinational and national businesses (Johnson, Scholes and Whittington, 2011). As the company innovate its product in the market, the threat of competition reduces to great extent. PepsiCo is one of the companies that has innovated its brand portfolio to great extent due to which the company enjoys superior position in the food and beverage market. 5.3. Increase in advertisement and promotion campaigns The aim of advertisement is to create awareness in the customers regarding the products offered by the organization. Advertisement and promotion campaigns could be said as the back bone of an organization as with the help of such strategies, the organization can communicate with its customers in the market. By offering the customers with discounts and coupons, the company can enhance its sales and market share. TV campaigns and advertisement are the most frequently used strategies in the current market situation. 5.4. Placement Strategy Placement strategy plays a crucial role in the enhancement of sales and market share in the industry. With such strategy at work, an organization can provide its customers with company’s product at different locations (Barney, 2001). It has been observed that PepsiCo lacks placement strategy due to which the company has constantly been facing decline in sales and market share. With such strategy at work, the company would be able to meet the needs of the customers by providing them with the products at more accessible locations. 5.5. Product diversification Product diversification is one of those strategies that provide an organization with an effective path to growth. With the help of such strategy, an organization is able to provide its customers with more of the products which lead to increase in customers spending (Aaker, 2005). Strategically, such a strategy provides an organization with an opportunity to attain more of market share (Balogun, & Hailey, 2004). One of the core reason as found in researches regarding product diversification is the survival of organization. It has been observed that organization with diversify products are able to attract infinite customers whereas companies with limited range of products only attracts finite customers. 6. Conclusion PepsiCo has been provided with several opportunities in order to grow and prosper in the current food and beverage market. With the strengths and opportunities greater in number, PepsiCo can do considerably well in the market. Even the strategic position of the company is excellent and indicates that the company has greater options than its competitors in the market. While considering the TWOS Matrix of PepsiCo, it was noticeable that with such great reputation in the international market, the company can expand its operations in Asia and Europe. Both these continents could provide an effective path to growth in the food and beverage market since the demand of non-carbonated as well as carbonated beverage is on the rise. Along with geographic expansion, PepsiCo should consider the placement strategy. Compared to others in the food and beverage market, it has been observed that the company lacks such a strategy due to which the company is constantly losing its competitive edge over others in the market. Along with this, product diversification is one of the strategies that should be considered important for the success of PepsiCo. With diversification strategy, the company would be able to attract infinite customers in the market which would eventually lead to the increase in market share and sales. References Aaker, D.A. (2005). Strategic Market Management. New York: Wiley. Balogun, J. & V.H. Hailey (2004). Exploring Strategic Change. Harlow: Prentice-Hall. Barney, J.B. (2001). Gaining and Sustaining Competitive Advantage. Reading, MA: Addison-Wesley. De Wit, B. & R. Meyer (eds.) (2004). Strategy: Process, Content, Context. London: Thomson. Johnson G., Scholes K. and Whittington, R. (2011). Exploring Strategy: Text & Cases (9th ed.). Harlow: Prentice Hall / Pearson Education. Mintzberg, H., J. Lampel, J.B. Quinn & S. Ghoshal (eds.) (2003). The Strategy Process. Harlow: Pearson Education. Stacey, R.D. (2000). Strategic Management and Organizational Dynamics: The Challenge of Complexity. Harlow: Prentice Hall. Read More