Business Environment of PepsiCo - Case Study Example

External environmental changes have impacted to PepsiCo Company either directly or indirectly. The company has come with strategic plans that will enable it continue stay and compete favorable with other companies such as Coca Cola. PepsiCo Company is a multinational company located in the United States of America and deals with sales of beverages and food (David, 20). It is considered among the most well known, successful, and a company with good management in the globe. The company has made various changes to ensure that it continues to remain competitive in the current market. The company plans to promote water, diet drinks and smaller drinks sizes. The latest changes are the reactions to the latest criticism of their products contributing the American obesity. Some of the external environmental factors that have impacted on the industry include; political environment, technological, economic, legal and environmental factors. The paper seeks to identify the various external factors that impact on Business industry with PepsiCo industry as case study. Analyzing business environment is vital for the performance of any business. Knowledge on business environment will enable young and well known industries to flourish in the competitive world (David, 20). The business environment keeps changing from time to time and therefore effective research should be done to help understand the various changes and challenges in the current market. The findings of such a research will enable the industry to come up with effective strategic plans to help them continue existing in the market. The chief executive manager of PepsiCo Company has exceeded the expectations of the analyst by increasing the shares of the company through efforts such as strategic management. The company has made improvement despite decline in global sugary drinks consumption. The products were among the top fifty new beverage and food introductions to the United States of America. The CEO has stand against efforts to split the company with the aim of spurring growth and slashing the cost (Brien &Jonathan, 80). The current business environment is considered competitive and it has become difficult for investors to sustain and gain a competitive advantage. Political stability The stability of the government selling PepsiCo products especially the United States and other governments in the globe impact on the performance of the industry. The government may increase the tax rates to the industry or come with legislations and policy initiatives that are related to the employment (David, 20). Employee’s safety and health regulations impact either negatively and positively to their environment. Such policies are regulated by the government and calls upon the industry to apply after it is enacted. Economic factors The economic factors affecting the industry include unemployment and inflation rates in the United States of America. The industry has to spend a lot of capital in purchase of raw materials due to the rise in their prices. In addition, changes in the customer’s income level can be seen to impact directly to the industry. Low income level means fewer sales while high income level means high sales. The income level ranges from country to country and not only the United States of America. Social factors Social environmental factors that impact to the industry include health lifestyle changes, consumer consciousness on green packaging and changes in the attitude of consumers targeting the carbonated drinks. Health lifestyle changes for example have impacted negatively on the industry (Brien &Jonathan, 80). Decline in sales has been reported as a result of people associating the soft drinks and food to obesity. However the industry has come up with effective ways of increasing the sales by packaging smaller sizes and manufacturing diet products. The attitude of the consumers toward the carbonated drinks has also declined the sales of the products. Technological factors Some of the changes in technology have increased production at the industry. Some of the changes are internet enabled technologies which has boosted advertisement of the product and information passage to the consumers. Product research innovations and development of the various market practices has increased production at the industry. Innovation of new products and market orientation that is consumer based has led to increase in sales (Hitt et al, 58). Use of new and sophisticated technology in the manufacturing of the products has ensured continued supply of the products to reach the various markets in the United States and in other countries throughout the world. The companies have changed from producing products manually to mechanical production with the current equipments producing more than 1200 bottles in a minute. Legal factors Legal changes that have affected the industry include; changes in the regulations of the food standard agencies, varying regulations and federal rules specific to beverage and food sectors, regulations on the protections of consumer data and intellectual property protections (Dhar et al, 98). Protection of the consumer data has negatively affected advertisement. Decline in advertisement result to less consumer reach hence decline in profit. Environmental factors Some of the changes in the environment have continued to impact on the performance of the PepsiCo Company (Hitt et al, 58). The changes include the effects of global warming on the drinking patterns of the consumers, rise in the utilization of the alternative sources of energy and impacts of the environment on the practices of packaging. Competitors The industry has had competitors such as Coca Cola which has made the market more competitive. However, strategies such as lowering the prices of their product and continued advertisements have increased the number of customers that have continued to consume the PepsiCo products (Dhar et al, 98). Labor Market Labor market has influenced the company in many ways. Changes in labor regulations targeting the safety and health of workers have prompted the company to comply and spend more capital in the process (Hitt et al, 58). The high unemployment rate has put pressure on the industry to expand. Supervision of international workers comes with extra costs too. Suppliers The number of suppliers has continued to increase and expand as a result of expansion of the new market. The good relationship that exists between the companies has promoted continued business and performances of the company (Doz &Yves, 42). The extension of the market in various countries has resulted to the company looking for cheap supply in the host country to help in reaching more consumers. Customers The presence of new innovation and the manufacture of products that are health conscious have increased the number of consumers in the United States and even beyond (Hitt et al, 58). The continued demand due to reduction of the prices on products and increased market has forced the company to produce more and even taking the manufacturing plants closer to the customers in other countries International factors The company has been forced to increase production and supply to the international market (Dhar et al, 40). Some of the markets abroad are still inaccessible due to political conflict between the home country and the host countries for example the Arab world. Such factors tend to affect extension of market. Changes in trade restrictions in various countries have ensured the company is able to open up new markets. Increased global security has boosted the company business. Natural environmental factors Natural disasters such as hurricane and tsunami in the affected market impact on the business cycle of the company (Dhar et al, 38). Such calamities have led to closure of the company’s store and destruction of the products. Product destruction and closure of the stores has caused decline in the profits of the company. Socio cultural factors Changing demographics, shifting consumer buy patterns and recent trends are some of the socio cultural factors impacting on the business. Socio cultural factors affect both the competitors and customers (Dhar et al, 36). Recently issues on health targeting the industry have impacted negatively on the sales of the products. The products produced by the industry are being associated with obesity. The association has prompted the industry to change into producing products that are more diet conscious. The production of the Diet Pepsi is one of such changes. Other changes have included lowering of the prices which has increased its customers and more sales. Government policies The government has come up with regulations and changes in law due to the argument that some of the drinks produced had many chemicals that predisposed the customers to the development of cancer (Hitt et al, 58). An example is the United States setting up 5ppb as the level of benzene in the drinks that should not be exceeded. Pepsi products contained more than these. The incident resulted to decline in the customer number especially adults since they are more health conscious. Environmental pollution and global warming The company has in the recent past worked to cut on the green house gas which is in line with the world’s effort of reducing the green house effect (Hitt et al, 58). The company has employed the use of safe energy in some of its companies as a way of decline emissions from its manufacturing plants. The opening of the Frito Lay plant in Texas which is considered environmental friendly is just but an example of its effort towards decreasing green house effects. External environmental analysis has played a critical role in the ever increasing performance of the PepsiCo Company. Globalization and internalization has enabled the company to extend and invest in foreign markets (Hitt et al, 58). Changes in the trade restriction have favored foreign investment with the company extending its business cycle to new market in various countries in the world. Such changes have been vital to the company because it has increased sales due to the expansion of the market. the companies strategies in dealing with environmental hazard has reduced the loss incurred in cases of emergency with the increase in the number of suppliers promoting the company’s business by increasing products to reach more and more consumers in the world. The other external environmental factor that has played a critical role in the performance of the company is the use of the current technology. Use of Current technology in the production process has enabled the company to increase production. The company is said to produce more than 1200 bottles of the soft drinks in a minute. Political stability in most countries of investments has increased production and sales. Increase in economy and per capita income of the consumers in the majority of the countries has also increased the sales of the company. However, some external environmental factors have been found to impact negatively on the business of the company (Leibold et al,36). Natural calamities such as earthquakes, hurricane and tsunami have led to destruction of the products and have hindered supply in the affected country. Political instability in some of the Africana and Arabic countries has prevented the company from extending its market in such countries. The company has also spent capital in implementation of new labor regulations and policies such as increase in taxes levied on their product in foreign countries (Drejer, 56). Social factors such as the products being considered unhealthy have caused the company to register decline in customers. However, current innovations such as diet Pepsi have won back the hearts of consumers. Presence of competitors in the market is a threat to the company and has declined the number of customers though strategies such as reduction in the prices have caused a shift of customers from competitors to the company. Despite the challenges faced by the company, PepsiCo has continued to make positive impact in the current market and is still among the most competitive companies in the globe. Continued market research has enabled it deal with various threats and competitors. According to the chief executive officer, current changes such as global leadership expansion, maintaining growth of the beverages globally, unleashing ‘power of one’ strategy and continued delivery of commitment and goals that are environmental sustainable will enable the company remain competitive and profitable (Leibold et al,36). Positive impact of analyzing external environment towards performance is unquestionable. Both small and well known companies should assess the opportunity and threats presented by the external environment to help set strategies that will aid in continued performance. Marketing research and orientation should focus on the customers and changes in the external environment. The companies have to come up with ways of dealing with social factors, legal factors, competitor factors and policies in the government so as to ensure performance is achieved. Works Cited Brien, Jonathan. 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Strategic Management in the Knowledge Economy: New Approaches and Business Applications. Erlangen: Publicis ;, 2002. Print. Read More