Pepsi 2025 Business Plan - Example

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Pepsi 2025 Business Plan

Business plans are the pivotal elements in any organization or firm. These are the formal goals of an organization and the main reasons they are to be attained. The business plan may favor the responsiveness of the clients, customer and the community as a whole. In this research work, I being the senior management team would make tremendous changes to ensure that the organization gets to the ultimate capacity.

Part 1

The Organizational Mission

PepsiCo being a company that thrives under the slogan performance with purpose, the mission of PepsiCo in 2025 would be to be a business that thrives in the provision of beverages and snack at the most affordable prices in the market to ensure good health and prosperity reigns. By the use of this mission, it will make sure that the entire subordinate and the high managers can achieve this goal. Customer satisfaction would be our end goal coming first to ensure we can maintain the loyalty and trust of our customers worldwide.

The Leadership and Management method

The kind of the management that I would advocate for the PepsiCo would be the participative or the democratic style. These are because the primary objective of the firm would be building on the commitments and great consensus among the employees. The leadership would be decentralized and delegated to the subordinates. However, I would make the final decision after adequate consultation with the subordinate. I would use the two-way challenge in giving the authority to the subordinate and define the necessary limit in which people function. I would have the high sense of the subordinate and the works as a large. The slogan that would be efficient for the firm would be ‘Together we stand toward goals achievement’.

The Broad Strategic Objectives

Broad differentiation strategy

The broad differentiation strategy would seek to differentiate the products the company produces would be able to appeal a broad range of buyers. These products would ensure that we can offer unique products that our rival does not offer. By the use of these products, for example, the snacks sector, we would be able to advertise the beverage section. These would wholly be possible since, we would use two brand names, that is, the snack and the beverage. We would later place the two brand names under one umbrella body that would work as the watchdog towards the realization of the organizational goals and vision. The sales of the more profitable item would act to sustain the product that is operating at a loss. This process would be in a way that it does not endanger the existence of the giant performer. It would put the organization at the upper position of dominating the market as many people would have the concept of the existence of a great company with great performance level (Pangarkar, 250-255).

Part 2

By exploring the North Africa beverage market, we would be able to gain more dynamic market share. By the employment of aggressive tactics that would respond to the shifts in the customers demand and behavior, we would be able to experience a considerable increase in the number of sales (Nechyba, 989). Egypt, Morocco, Algeria and Tunisia being among the most dynamic countries in the North would serve as the best recipient for our products. The knowledge of the market trend would be a critical part of the settlement of the business in that market. By the evaluation of the very best latest beverage, it would aid in the comprehension of the consumption patterns. The future growth of market would be pivotal as it will aid in identifying the likely impact on the company's performance. The interrogated data would be helpful in determining the historical and the likely future performance that the firm. Great support would be put in the long-term strategic planning. These would increase the percentage of the market as a vivid understanding of the targeted market is well understood. By this, we will be less dependent on the macro environmental variables like the state of the economy and the change in the tax policy. The clear sensitization of the products would be good for the advertisement of the product to many individuals.

Part 3

The launch of the nutritious oatmeal would be a great deal of health as it would in cooperate various nutrients with the composition of 96% manganese, 64% molybdenum, 29% phosphorous,27 % copper,25% vitamin B1 and 17 % magnesium (Yoffie and Kim, 12-20). With just a handful of the nutritious oatmeal, it would serve to provide a great content of nutrients to deal with the malnutrition and the less amount of food in the area resulting in the dry and drought situation in the region. The daily nutrition goals of the children would be efficiently reached.

Company structure

The organizational chart would aid in the proper knowledge of the division of power and enhance the great hierarchy of power to the realization of the authority percentages.

The role of all the individuals will be focused as each person knows what is expected of him or her. Delays in accomplishing the mandate will mean actions to be taken to cover the deficit. It is illustrated in the chart below;

Markets

The creation of an efficient framework will ensure that the products can reach the ultimate customers. In Africa, the retail shop will be the most dynamic way of reaching the customers. The beverage machine will be the best way to retail the product. By the use of the coins, one will be able to get the cold beverage. The fast food chain will be established in the urban centers where it is easy to make the sales. The online shopping platform would be developed by forming on an account where the client can make an order, stipulate the location and the sales team being able to deliver to the individuals as soon as possible (Pangarkar, 289).

Key products

The key products that the firm will venture in will be the traditional coke, low-sugar coke, healthy beverage and the newly designed bottle drink. These products will be dispatched according to the taste and preference of the customers.

Customers

The major customers of the firm will be the North American, Asia, Europe.By the investment of about $5.5 billion in India; it will ensure the majority of the individuals get the general glance of what the market is. In this progress, we are assured of having a big market share in the most populated country in the world (Yoffie and Kim, 18-20). By the general synopsis, the message will shift to Africa and enhance the good quality of the product resulting to high purchasing of the unique products.

Part 2: Industry Analysis

By the use of the Five Forces Analysis, it will attempt to analyze the level of competition within the industry as well as the business strategy development. It revolves around the competitive intensity and the attractiveness of the industry.

Section 1

The main threat of the new entry will be determined by the market share the giant firms hold in the population. If the giant firm can block our entry, we will be operating at a zero abnormal profit. By the value of the 2015 current market value which is a forecasted at 1.41% increase in the market value, the probable market value will be US$147277.743. In the prospect of a growth of 9.10% each five years, it is deemed to be double the growth; hence 18.10% increase by 2025 (Yoffie and Kim, 18-20).

This growth will mean the capital requirement of entering the North Africa market will be US$ 173935.01

The distribution channel of North Africa

The distribution channel in the North Africa of the beverages, food and snacks will be carried out independently or in conjunction with the third parties bodies. The brands will be sold to the authorized bottlers, the independent distributors, and the retailers. An own bottling plant can be established as well as the distribution facilities. Independently or in conjunction with the third parties, they will make, market the product and sell the ready-to-drink product through an international joint venture. The retailers will make up for the best people who can ensure the distribution as they will be positioned in the interior regions of the North Africa. They will be sourcing the product from the authorized wholesaler who will be getting the inventory from the manufacturing plant.

Brand loyalty

The brand loyalty refers to the moment the costumes are interested in a brand of a commodity, and they make multiple purchases of the product often. It will be affected by the customer’s preference. The key advantages of brand loyalty are that the customer will be willing to pay even a higher price to get the brand. The price will not matter as he or she seeks to satisfy the want needed. It will also cost less to serve the customers in the North Africa as they already know what they want hence will just go for it. It will also bring new customers to the market as they will be informed of the availability of the product in the market.

Industry profitability

The profitability of the firm will be determined by the level of cooperation made between the subordinate staff and the top managers. The estimated profit will be a 35.8% from the 2013 net income prices. The estimated amount will be $9152.92. These will be reflected after the ten year period. The increase in the profit will mean the expansion of the firm in the market in North Africa. Hence, the profit margin will be US $2412.92 from the initial 2013 (Yoffie and Kim, 16-19).

Economic of Scale

Economic of scales are the cost advantage that the firm is going to gain because of the size of the inventory. By making sure there is always a high inventory level, it will ensure the firm gets the ultimate benefit of it all. This inventory will be achieved by ensuring that the store is always stocked to the maximum level. Any delay in the stocking will mean the firm does not enjoy this advantage. A necessary measure like high production rate will make this a success.

Treat of substitutes

There being a high number of substitutes such as instant coffee, effervescent tablets of the juice, cola and tea bag, the firm will work hard to ensure that it produces are very competitive within the current market. The more the level of differentiating, the higher will it be for the firm to dominate the North Africa as the costumes will be focusing on the products that have a high number of varieties. These will ensure that the customer with varying taste will get a piece of the firm products.

Switching cost

The switching costs are the negative cost that a customer incurs. These costs are experienced as a result of the clients changing the suppliers, brands and the products (Pangarkar, 211-213).

Level of product differentiation

It is aimed to showcase the differences between the products within the market. It is aimed to compare the product with another to determine the unique characteristic of the competing products. The best product differentiation leads to the creation of a competitive advantage for the seller as the customers view these products like the unique components.

Availability of close substitute

The presence of the close substitute dictates that there will be an easy opportunity for the consumers to switch to the substitute when there is a price increase for that good or services.

Bargaining power of buyers

The medium bargaining power of the customers will ensure the price reduces to a manageable level just intact to manage the firm at no loss.

Switching cost

Switch cost refers to the customer changing the supplier. The low level of this will mean that the firm has an advantage as it tries its best to retain the acquired clients. It makes all the relevant changes to ensure that the customers do not change their prospects toward the firm.

Force down prices

The force down of the prices may result due to a situation may have occurred that led to the firm reducing the prices of the commodity. This situation will result in the increase in the number of customers as they will be focusing on the low price for the same quality of products.

Brand loyal

Brand loyal refers to the situation whereby there is a relative possibility of the customer shifting to another independent brand in the case where there will occur a change in the product's features, price or even the quality. These ensure that ready market of the product will always be available.

Bargaining power of suppliers

Low bargaining power of the supplier results to the selling the goods at a higher price hence the much profit. If the material commodities are low, it will mean a high-profit margin. Different supplier of concentrator, sugar, bottles and cans will influence this practice efficiently. It will be difficult to cut the supplier competition which is the ability to forward the vertically integrate and cut out the buyer from the existing market

Industry rivalry

The high level of the industry rivalry in 2025 by the coca cola and other beverage company will ensure that the firm is always on the toe to the best method of advertising. In 2025, the level of advertising will be high regarding the improvement in technology and online advertising. The growth level is expected to be at a rate of 35.8% judging from the year 2015 preliminaries reports.

Low differentiation

It will result in the firm making less profit due to locking down of other customers who have their taste and preference.

Fix cost

The competitor balance will influence the competitors as they will almost be equal in size as the Coca-Cola is normally the same size of Pepsi Company. The low fixed cost will be used to accumulate a greater profit margin (Nechyba, 987-992).

Part 3: Create Shared Value.

A company has to be beneficial to the community or return benefits to the community because it is the society that has contributed to its growth. This Pepsi Company will be similar to others in returning those benefits to the community and helping in minimizing poverty. In the year 2025, the company is planning to create a shared value to the society through various ways. Pepsi Company has many rivals in the business, and it will be choosing to focus on the Africans countries to return its benefits. A company like Coca-Cola has focused on developed countries like America, and when PepsiCo focuses on Africa, it will be increasing its fame and helping African to develop like the rest of the world (Pangarkar, 259-266).

Nutrition

PepsiCo is focusing on launching a nutritious drink that will help Africans to meet the daily nutrition goal required to live healthily. An addition of vitamin B-12 in the energy drink will increase energy among consumers. This vitamin B-12 helps in making red blood cells and in making the DNA of a person. Africans are experiencing malnutrition, and this drink will help in restoring the energy they require for survival. Also, adding vitamin B-6 in the energy drink will help in converting the food that they eat into energy. Drinking of this drink which will be rich in vitamin B-6 will help in metabolizing food to energy. When vitamin B-12 and vitamin B-6 are combined, they will help in sustaining life and lower the death rates which are mainly caused by lack of food (Yoffie and Kim, 12-19).

Alcoholism has also affected the African nations and launching a wheat beverage will be a great idea because people will still have the same taste like that of beer but the drink will be non-alcoholic. For instance, go with the grain, is a non-alcoholic drink made from wheat but it contains all features like that of beer from taste to bottling. A drink similar to this one can help in minimizing criminal rates because it will help in diverting people from the beer to the non-alcoholic drink with the same taste.

Water

Consumption of contaminated water keeps a person at the danger of contracting diseases like cholera, typhoid, and other water-borne diseases. In developed countries, people have adopted the technology to purify water through the use of distillers and packing the water in clear bottles which also help in killing germs. Distillers and other home methods can be used for purifying water for drinking. For instance, filtering and boiling water are home remedies that can help a person to overcome contracting diseases because the water is clean and safe to drink.

There are companies that emit their fumes to the atmosphere causing aridity is other parts. If these companies can regulate their fumes to the atmosphere, they can help in preventing desertification which is the reason behind poverty and dependency. Energy conservation can help in raising the economy of a country since the conserved energy can be used in the production of other commodities. Glass bottles have been a problem when it comes to efficiency and packing drinks in recyclable bottles will be an environmentally friendly process. These plastic bottles will be convenient for people, and when it comes to recycling, they are easier to collect, unlike the glass bottles which can break in the process.

Community

PepsiCo will have to gain its fame first before it launches a community campaign to attract people in helping to solve African issues. The Pepsi drink has been common in Egypt, Morocco, Nigeria and other African countries, and they can take these countries in starting these campaigns. These campaigns can also focus on women health and AIDS. People in Africa are prone to AIDS and other sexually transmitted infections due to lack of knowledge. There is a shortage of condoms in the African nations thus causing people to be in the danger of being infected with AIDS. PepsiCo has to work in hand with other organizations for charity donations to provide education and the required safety items in curbing the disease.

Circumcision of females is also a problem which is facing the traditionalist African nations. There is also poor maternity health for women, and these issues have to be addressed to eradicate poverty in Africa. Donations from well-wishers together with donations from Pepsi can have a big impact in improving the African people to have better lives. Scholarship for children to learn in foreign countries can contribute to development because the educated child will return home and start developing the nation from the aspect learned from the developed countries. Setting public libraries and computer labs can help in imparting knowledge on people and minimize the disparity gap between nations.

Part 4: Financial Analysis.

Revenue, profit and market shares

Financial analysis of the PepsiCo indicates that the revenue of the company has been increasing progressively. In the year 2009, the total revenue of the company was amounting to forty-three thousand, two hundred and thirty-two million dollars. When comparing these figures to those of the year 2013, there is an increase in total revenue earned. In the year 2013, the company earned a total revenue of sixty-six thousand, four hundred and fifteen million dollars. The overall five-year growth has increased to 9.10% from a one-year growth of 1.41%. The net income which is the profit also increases progressively with the progress in years. There is a difference between the year 2009 and 2013 seven hundred and ninety-four million dollars difference when comparing the net profit. Comparing market share of Coca-Cola Company and Pepsi Company there is almost a double difference where the Coca-Cola Company holds the majority shares. On speculating from these trends, there is the possibility beating Coca-Cola Company, who is the major rival in the business (Nechyba, 987).

The importance of Financial Strategy

Financial strategy is important in different aspects for the development of a company. For instance, the financial strategy can be used in setting the financial goal and in this case, a good financial strategy will help in increasing profits. The Pepsi Company started by making losses and fewer profits but with the progression of years the company is making profits which are reasonable. A financial strategy for this company in the year 2015 will focus on maximizing profits thus keeping the current financial reports which will help in speculation of future sales. A financial strategy will be required in financial projections.

When launching new products, the financial history will be useful in calculating the expected profits. Also, the financial strategy helps in establishing and communicating the operational cost to the investors and company executives. When these financial strategy trends are followed, then they will help in predicting the future of the company. These trends are positive indicating that there is room for success and increase of income and revenue for the PepsiCo.

Overall Financial Strategy

When launching the new energy drink, financial history will help in predicting the market share thus being able to know if the new product will meet or exceed the financial target. And speculating from previous financial history, it can be seen that there is a chance of the drink to exceed the financial target. In the year 2009, there were two hundred and eighteen million people who were consuming energy drinks which are an increase when compared to the previous years. In the presiding year, there were 217.3 million people who were consuming energy drinks and with this knowledge it can be depicted that the value is increasing hence there will be more demand hence exceed of the estimated financial returns. Gross margin improves with the increase in operating margin, and PepsiCo needs to advertise more to beat their rivals. Comparing the advertisement cost of Coca-Cola Company and PepsiCo, it is noted that PepsiCo is using more money in advertising hence in the right path to attract customers (Yoffie and Kim, 15-17). By the year 2025, the company will have minimized the money used on advertising because it has already acquired it targeted market share.

The invested capital in the project will repay itself because the company will be making huge profits. Also, the market share will have increased by the year 2025 because currently, PepsiCo is the second leading soft drink producer after Coca-Cola Company and since it is marketing more than the latter, and then there is the possibility of leading by that year. Investing in research and development is also a great strategy that will help in creating a market for the produced commodities. For instance, the non-alcoholic wheat drink requires more research to be able to know that people will be willing to buy it while the beer still exists. Using reusable bottles will save the PepsiCo in minimizing the bottles production cost hence increasing revenue.

Forecasting

There are various methods a business can use to forecast. All those methods could be categorized into two overarching approaches that is qualitative and quantitative approaches. The qualitative approach has been effective with short-term forecasting, where the prediction scope is limited. Furthermore, they are expert-driven, that is, they rely on the market as a whole to assess in with up-to-date consensus. In comparison to a qualitative approach where it is useful to predict the short-term success of the product, service and companies.

The nutrition product revenue growth shows a five percent increase in sales of the product hence the company has the ability to earn more income and manages to sustain growth in short-term operations and long-term business operations. Even though, the company experiences stiff competition in the highly competitive environment, with the five percent positive revenue growth in nutrition sector, indicates that the Pepsi Company is expanding in its activities. Furthermore, shows that the company is still a major player in the beverage industry and will continue to be in the future times.

EPS Growth is used to show the earnings per share growth over time. Its primary purposes are to assist the investors to see the stock that is rising and declining in profitability. The Pepsi’s EPS growth rate is at seven percent. With seven percent EPS growth indicates that the company has a positive EPS. Also, gives the investors the needed confidence to invest in the company without the fear of investments loss. Therefore, the company has a higher chance of receiving more capital to undertake more expansions activities and has a positive future.

During the year, the company experienced more than seven billion dollars of free cash flow. Cash flow analysis of a business is that process of analyzing the inflows and outflows of cash from the business during a particular financial period. It is mostly used for predicting and forecasting the viability, profitability, and stability of the business. The Pepsi’s seven billion plus dollars shows that the company has a positive liquidity. Therefore, able to fulfill its temporary obligations, as it has a steady cash flow income hence viable and stable in the future times to come.

Market share

Beverage market segment is a highly competitive market segment that is being dominated by the Coca-Cola Company, the Pepsi Company being the major player in the drinks sector has managed to gain a five percent of market share in the market segment. The increase in market share indicates an increase in revenue for the company. The increase in market share could be attributed to massive investment by the company in promotional activities such as an advertisement, public relation, and retail selling. It further indicates that the company is stable and will continue to be so for unforeseeable future.

Net Return on Invested Capital Improvement (+50 bps)

The return on invested capital is the calculation applied to assess the efficiency of the company regarding the allocation of money under its control to investment that is profitable. Furthermore, it enables one to understand how well the business uses its capital to generate revenue. The improvement of the company net return on invested capital by fifty bps shows that the company uses its capital efficiently regarding generation of profit to the firm. Therefore, the company invests in profitable business activities. Also, improvement predicts that the company has high profitability, viable and stable in future times.

Conclusion

From the financial analysis of the PepsiCo it is noted that the company is making progressive profits and by the year 2025, it can be a leading soft drink producing company in the world. Creating a shared value and returning benefits to the community will also help in increasing the success of the business (Yoffie and Kim, 9-11). This increment in success will be as a result of the community familiarity with the product hence no marketing required. Setting its campaign in Africa will contribute to the creation of a new market to its products. In Africa, the Pepsi drinks are not common and on launching new drinks, there is a positive speculation that the targeted consumers will consume the product resulting to the realization of profits.

Reference List

Nechyba, T. (2011). Microeconomics. Mason, OH: South-Western Cengage Learning.

Pangarkar, N. (2012). High performance companies. Singapore: John Wiley & Sons (Asia).

Yoffie, D. and Kim, R. (2011). Cola Wars Continue: Coke and Pepsi in 2010. [online] Hbr.org. Available at: https://hbr.org/product/cola-wars-continue-coke-and-pepsi-in-2010/711462-PDF-ENG [Accessed 22 May 2016].