SWOT Analysis of PepsiCo - Case Study Example

Name Course Institution Lecturer Date Comparison of Corporations Introduction The food industry is a wide sector in the market. The industry is characterized as being multi-complex as it comprises different sub-sector. Its importance cannot be overemphasized bearing in mind the contribution it has made of food and beverages for the world population. PepsiCo is a great world leader in convenient food, beverage and snacks. It was founded in 1965 after the merger of Frito-Lay and Pepsi-Cola. For the past 40 years, the organization has delivered consistent and significant business growth. PepsiCo, according to the 1999 annual report, is described as a growth company. Indeed, in 2007, it recorded a 13 per cent growth in the total net revenue of $40 billion. The company iconic brands are in nearly in 250 countries. These generate sales at the retail level of more than $99 billion. The main corporate objective of the company is to capitalize on the value of the shareholders’ investment via a strategy of a close control of prices, increased sales and astute the investment of the financial resources. With a series of company acquisition, PepsiCo grew to become of the leading Food and Beverage Company in the United States1 . Murray Goulburn (MG) is a leading food company in Australia in the sector of dairy industry. The company was established in 1950 and it is entirely owned by the Australian dairy farmers. The growing and important area of the company does cover a range of products for the consumer and this represent over 40% of the total company sales. As seen in the PepsiCo, MG is also growing company. This is attributed to the fact that export has been on the increase in the recent years. Export sales have increased by 5% with the main markets in South Asia and China. These countries accounted for the majority in exports. It is important to note that PepsiCo operates as a beverage producer, the soft drinks while Murray Goulburn is in a special category of food sector mainly producing products that are essential in health. Another difference between the companies is level of operation. PepsiCo is a multinational company whose presence has been felt in the international market. MG, on the other hand is a large industry trying to create a niche in the international market. Food Industry in America The food industry is a major manufacturing sector in the United States. It has continued to experience steady growth in recent years. PepsiCo is one of the ten largest manufacturing companies that falls in the food processing sector. Others included Kraft Foods, Dean Food, Tyson Food and Nestle2. Several food companies have continued to venture in the industry. This is attributed to the fact that the America population has continued to increase and therefore, an increase in demand for food products for the consumers has increased3. PepsiCo Strategy in the Market At present, PepsiCo has grown to be a global powerhouse4. It has grown to be the largest food and Beverage Company in North America and indeed, the second largest company in the world. PepsiCo main mission is to captivate the consumers with the world’s convenient and loved beverages and food. PepsiCo has key strengths that allow it to deliver their mission; creation of super brands that consumer enjoy around the globe; well positioned to grow by region, trend and category. The beverages, nutritional and snacks categories have attractive margins, returns and growth. These categories are positioned to increase revenue at 6% or higher globally; by delighting locally the company is able to innovate globally. It has been observed that the balance of local and global innovation has delivered sustained strong growth; intense productivity focus; phenomenal employees who drive the success of the company through commitment to excellence and performance and dedication to deliver purpose and performance. PepsiCo has continued to focus on five main strategies that will indeed assist the company in creating larger strides than the previous years. One of the strategies is to build and widen macro snacks portfolio in the global market. The company prides itself as an undisputed leader in macro snacks in the world. Under this strategy, it will continue to introduce new flavors that will flow with the consumers’ tastes and the availability of the brands will be to the consumers’ reach5. Another strategy is to profitably and sustainably grow the beverage business globally. As such, the company plans to grow the already developed market beverage while establishing on promising gains in developing and emerging markets. Still, the company plans to expand the nutrition business. Under this, the wellness and health of the consumers is considered while producing the products6. The other strategy is to capitalize and increase the high chance of beverages and snacks consumption. This is attributed to the fact that most consumers are increasingly buying the products, that is, the buying power for both the snacks and beverages has increased. PepsiCo also plans to ensure that responsible and prudent financial management. This will definitely focus on the value created by the shareholders. This will be achieved by maintaining the strong value shares in the main markets, profitable growth, pursue sustainability relentlessly and rigorously scrutinize the capital investments. Indeed, these strategies will help the company compete effectively in the market. It is important to note that the main competitor is the Coca-Cola Company which has a large share of carbonated drinks consumption. Coca-Cola Company still has an added advantage in that it has a large market outside the US. Challenges in the market There are various factors that are likely to affect business operations in PepsiCo. Fluctuations in the exchange rates have had adverse effects in the previous years. PepsiCo incur liabilities and hold assets, pay expenses and earn revenues in several currencies other than the US dollar. The consolidated financial statements are, however, presented in the US dollar. Therefore, the financial statements have to be translated to the dollar. As a result any fluctuation in the exchange rate may thus unfavorably affect the financial conditions and business results. The operating results may also be affected by disruption of supply, increased costs and shortage of some supplies and raw materials. This is attributed to the fact that the company is exposed to market risks that arise from adverse changes in costs of commodity that result to a change in the cost of energy and raw materials. Disruption of the supply chain would have a great effect on the financial conditions, business and the operations results. Finally, regulatory, market, legal measures and climate changes may SWOT analysis The company enjoys basics strengths including strong market position which permits the company to open new products and increase the bargaining power both at the local and international market. Other strengths are strong growth in profits and revenue and brand portfolio. One of the weaknesses that is challenging the company is the concentration of the business. It is obvious to some extent that its operations may be concentrated in one given region giving the competitors and added advantage. The company’s opportunities include; alliances and acquisitions which have placed the company in a better position compared to the competitors, a niche in the market for bottled water and the growth of Hispanic population in the United States that provide a large market for the local products. As seen in other companies, PepsiCo experience various threats which include; intense competition from companies that are well established such as Coca-Cola, increase in the prices oil which affect the production cost and transportation cost. The cost of fuel has resulted to adverse effect on the margins of Pepsi. It is important to note that it is difficult for the company to pas the operating costs to the consumers. Another threat is the slow growth of carbonated beverages due to their saturation in the major markets. PepsiCo and Health issues In the late 1950s, PepsiCo started introducing novel products that did focus on wellness and health. The products ranged from Tropicana’s, Diet Pepsi containing zero calories, an orange juice containing 50% less calories and sugar. In addition, the orange juice lacked artificial sweetening. The company also started nutrition criteria in order to guide product, labeling and marketing in the early 1990s. At the moment, the company has put measures in place to ensure that the development and research team has the capability sustain product transformation and addition of nutrients in order to address specific needs of a population. In 2010, the company unveiled commitments and goals that form the main ways in which PepsiCo plans to encourage people to live a healthier life. It involves product reformation, changes in information and marketing, and methods to improve accessibility and affordability of products in communities that are said to be undeserved. Indeed, the company has continued to utilize the nutrition criterion that is based on recommendations contained in reports from FAO, United States Dietary Guidelines for Americans and WHO. The criteria are laid on two concepts; food groups and nutrient to encourage and nutrients to limit. In the nutrients to limit, it involves issues that are major concern to the public health when taken in excess. It includes reduction effort on saturated fats, sugar intake and sodium. The other concept is based on local nutritional needs. They include needs that are related to essential fatty acids and micronutrient deficiencies. These criteria do serve a s a significance practical translation of dietary recommendation and nutrition science for food, beverages and marketers developers7. More attention is being given to increase the nutrition quality of the products portfolio by adding more wholegrain, fruits, vegetables and nuts in the products. Indeed, these commitments and goals will definitely enable the company to contribute in addressing nutrition needs. Of importance is the fact that PepsiCo plans to match the basic health commitments with approving environmental targets that are related to water use, energy, recycling, reduce carbon print of products and soil conservation. In making progress in these goals, the company has to depend on integrating actions and policies on environment, agriculture and human health in order to make sure that they support one another. There is a need of developing impact assessment methods that involve development of environment and health when considering new processes and products Food industry in Australia Indeed, the food industry in Australia is undergoing tremendous changes. However, the industry does make a significant contribution to the country economy. Nevertheless, various concerns have been raised over the food quality and safety, consumer preferences and taste for a healthy lifestyle. Major companies in Australia include Murray Goulburn, Dairy Farmers, Pauls, Tatura Milk industries and Fonterra. Increases in demand for dairy product have been a great advantage to the industry both at the national and international level8. Murray Goulburn Murray Goulburn is one the largest food business in Australia. The company participates in dairy farming. It handles approximately 400% of the Australia milk. The company is owned by farmers. The company has nine factories and it is a crucial contributor to wealth mainly in the rural economies. In addition, it is a significant player in the domestic food market. Most important is that apart from contributing majorly in the country, it is also the largest exporter of processed product in the country. The company does process over 30% of the country milk supply into quality such as cheese, milk powder, skim milk powder and butter. The products are exported to more than 100 countries in the globe market. The company has eight manufacturing sites located in Tasmania and Victoria. Strategy in the market One of the strategies that the company has planned is in the area of research and development. As a result of increase in competition in the dairy products, there is a need to intensify research in different field related to the industry. The company is mainly focusing on innovation, cost minimization and quality. It is important to note that product development is focuses on differentiation and customization across the dairy ingredients especially milk fat, cheese products and milk powders. The company has planned on commercializing a range of innovative milk mineral products that offer consumers with exclusive ingredient solutions for use in health related foods which are enriched with calcium or mineral profiles. The company is also looking forward to establish a Dairy Innovation Centre Ltd. This Center’s charter is to offer integrated management processes and crucial dairy science and recent technology capabilities that is required to maintain the growth of the company and the dairy industry in the country. Indeed, this will support the development of the cooperative products. Various logistics have been targeted in the implementation of the company’s strategy. MG is working towards the mitigation of the costs that have been experienced early on as a result of high fuel prices. This is one of the exogenous threats to the company. The dcompany will carry out a phase implementation of updating refrigerated pantechs, wingliners and B-Double tautliners. The fleet that is positioned at Leongotha will be converted to LNG fuel which will deliver operational savings in the factory and distribution centers. The company has resolved to collaborate with the domestic consumers in order to review and later improve the supply chain processes. The main objective of having a combined program of supply chain is to ensure the company reduces on the operational costs and build on the current relationships. In the information technology sector, the company has laid strategies that will ensure that the company will be able to enhance data flow and reduce the operational cost. The IT platform that will be developed will result to an increase in distribution efficiency, increase in production and improve the management of communications and reporting. The IT will definitely drive innovative projects that will support the company business operations, monitor technological advances and implementation of appropriate operational changes. The performance and capacity of the company networks will indeed be upgraded in response to the demand for better communication services. The company has also laid down plans to open up new offices in Vietnam and Singapore. The move, according to the company will grow the market presence in Asia and also increase the shareholders returns. This will increase its international accounts which are at 9% in the dairy trade. Challenges in the market There are several factors that affect the operations of the company. Availability of water is a major issue that affects the performance of the company. Given that, the dairy industry is a key user of water that is allocated to groundwater and irrigation in Australia. Therefore, there is evidence of water competition in the agriculture sector which may undermine the dairy industry. Change of climate is another factor that influences the performance of this industry. It is obvious that climate change creates new challenge for GM cooperative. In reducing the effects of these changes, the company, operating within the dairy industry, the company supports comprehensive government response to climate change. Bio-security is another issue that may affect the operation of the company. Like other dairy industries, the dairy company requires protection from exotic diseases. Any outbreak of animal disease may affect the company negatively. SWOT analysis The liberalization nature the company does place it in a favorable place compared to most of her competitors. This has been as a result of strong herd genetics and effective production techniques. A SWOT analysis gives a clear analysis of some of the opportunities and the challenges the company experience. The strength of the company includes; establishment of a good market both locally and internationally; the company is placed in a good position for export growth and efficient and effective production method. Its opportunities; the company has been able to attain greater efficiencies and demand in the Asian markets. The company faces some weakness such as volatile climate which has a profound effect on the produce; policy uncertain and wholesale selling after buying at a retail price. Threats such as input prices, climate change and competitors at the local scene face the company. Murray Goulburn and Health issues As seen in the PepsiCo, MG is also committed to health promotion among the consumers. According to the company, it is not the role of food industry to offer promotion to the consumers. They believe that the food manufacturers are at a position to understand their products and therefore, offer products that have maintained the essential nutrients. The manufacturing process does preserve the natural nutrients and ingredients in the products9. MG is the first dairy company in Australia to start an audited Hazard analysis and Critical Control Point. This is an evident that the company is dedicated to provision of healthy and quality products to the consumer. Essentially, food industry is a major and significant sector in the world. It is the basic provision for food and beverage that is essential for human consumption. Of most important is the fact that the companies that are in this sector should maintain healthy standards in their operation. PepsiCo is a large beverage and snack company in America. Its structural organization is large due to its widespread operations. Murray Goulburn is a leading dairy company in Australia producing healthy product for local and international consumption. Both companies have different strategies, challenges and competitive advantage in the market. The differences are as a result of their operations needs and the extent of international presences. However, the fact that both companies advocate for good health in the population, depicts their efforts that is directed to increase quality in their products. Work Cited Bureau of Labor Statistics, U.S. Department of Labor, Career Guide to Industries, Food Manufacturing, 2009 Delforce, Robert, Andrew Dickson and John Hogan. "Australia’s Food Industry." Australian Commodities 12.2 (2005): 379-390. Kanter, Moss, Lai, Rajiv and Baldwin, Eric, PepsiCo performance with purpose, achieving the right global balance, Harvard: Social Science Research Network, 2012 Siegel, Karen and Stuckler, David, Sick Societies: Responding to the global challenge of chronic disease. Oxford: Oxford University Press, 2011 Xun, Lei. The determinants of US outgoing FDI in the food-processing sector. Delaware: University of Delaware, 2006. Annual Report, The power of PepsiCo, 2011 MarketWatch. "PepsiCo, Inc." MarketWatch August 2010: 45-52. Penzkofer, Andreas. The Market of Pepsi / PepsiCo. Munich: München GRIN Verlag, 2007 Murray Goulburn. "Quality, safety, efficiency and innovation." 2012. . Read More