Current Marketing Situation, Objectives and Issues of Pepsi - Assignment Example

Stage Two: Marketing Plan of the of the Contents Executive Summary 3 Current Marketing Situation 3 Financial Review (Five Years) 3 Market Description 6 SWOT Analysis 7 Objectives and Issues 8 First Year 8 Second Year 8 Issues 9 Marketing Strategy 9 Positioning 9 Product Strategy 10 Pricing 11 Distributional Strategy 11 Communication Strategy 12 Marketing Research 12 Action Programs 13 Budget 14 Break Even Analysis 14 Controls 15 References 16 Executive Summary The assignment focuses on a two year marketing plan of PepsiCo. The company is considered to be the second largest beverage and soft drinks producing multinational firm in the world, but is still found to face numerous trading issues. This stage two marketing plan has precisely analyzed that PepsiCo has adequate financial reserves to increase marketing expenses. Since the organization conducts business within a highly competitive monopolistic market, products experience a strong substitution effect (Kotler, 2008). At this juncture, differentiation, innovation and intensification should be the product, place, promotional and pricing strategies for PepsiCo. The company should introduce new products in the market and modify existing less popular items according to taste and preference patterns of contemporary consumers. The success of the current marketing plan should be reviewed and determined with the help of several assessment means such as, market share analysis, target customers sales, budgeting and customers’ feedback (Stryker, 1998). Current Marketing Situation Financial Review (Five Years) The research paper elaborates on an appropriate marketing plan for Pepsi Company. The company operates in a highly competitive industry. With the help of a marketing plan, the company can improve brand position within the industry. However, marketing strategies of the company cannot be formulated without a precise analysis about financial status of PepsiCo (Kotler, 2008). The following financial analysis is based on data collected from financial review of the company in stage one marketing plan. Figure 1: Revenue (Source: PepsiCo, 2013) The above graph shows that since last five years, aggregate revenue of the firm is increasing. It signifies rising popularity of company’s products across its marketplaces. Figure 2: Profit (Source: PepsiCo, 2013) The above figure shows that the company had lost its profit share during 2011. Then again, the gross surplus is increasing since 2012. Figure 3: Profit % (Source: PepsiCo, 2013) The percentage of profit generated by the company is increasing with time. This signifies success of trade conducted. Figure 4: Growth Rate (Source: PepsiCo, 2013) From the trend line above, it can be claimed that scale of business operations of PepsiCo had significantly fallen after the financial crisis (Kotler, 2008). Even so, company’s business has achieved high growth rates 2011 onwards. Figure 5: Stock Price (Source: PepsiCo, 2013) The above graph shows that stock value of PepsiCo is increasing with time. Hence, it can be said that Pepsi Co owns adequate financial reserves to finance new marketing plans in business. Market Description PepsiCo operates within the beverage industry. Over time, the global beverage industry has adapted to several changes, due to shifts in taste and preference patterns of consumers. The extent of market rivalry experienced by firms within this industry is high, where the biggest rival of PepsiCo is Coca-Cola. Both these firms adopt competitive pricing strategies in business. The products of these firms are sold at reasonable prices so as to capture a wide range of potential customers from different income strata. Hence, it can be claimed that firms within the beverage industry faces monopolistic competitive pressure as they sell qualitatively differentiated products (Kotler, 2008). As in a typical monopolistic industry, each firm functions as a profit maximize, enhancing revenue through increased marketing activities. SWOT Analysis The following SWOT analysis is based on the products of Pepsi Co. The analysis is done after considering the review of PepsiCo’s product, competitor and supply chain process from marketing plan stage one. Strengths The products of PepsiCo are diversified in terms of tastes and components. The products are easily available in infinite number of retail shops in each market. The prices of products are low and hence the company is able to offer special opportunities, thereby expanding customer base. The products of the company are highly standardized. The standard quantities sold in each bottle are 250 ml, 500 ml, 1 liter and 2 liters. May brands under the firm, such as, Tropicana, produces juices with soy proteins. Weakness The revenue generated from sales of each product depends on that of giant retailing chains like, WalMart and Tesco. The beverages of the company are less popular than that of Coca Cola in the international market. There are cases where the company has faced criticisms regarding quality and taste of its soft drinks. The products of PepsiCo are not easily available in rural regions. There are several close substitutes for soft drinks of the company. Opportunities The demand for snacks and beverage drinks is substantially increasing in emerging BRICS (Brazil, Russia, India, China and South Africa) economies. The company can reap the growing market demand of these countries. The company can produce new juices and drinks with organic fruits and vegetables. Similar to Diet Pepsi, such products would capture more number of health conscious consumers. The company can improve the existing bottling or packaging system. A new external outlook would help to attract more buyers. Threat Most aerated drinks produced by the company contain high calorie, fat and carbohydrates. Modern individuals are highly health conscious and prefer to consume calorie free organic juices. Companies like, Innocent Drinks (producing organic smoothies and juices), have lowered popularity of PepsiCo’s products across European markets. Water scarcity in certain developing nations (primarily in the African continent) has enhanced cost of producing the drinks and juices. Demand experienced by company’s products is highly elastic in nature due to strong substitution effect. A slight increase in price lowers demand in a multiplicative manner. Objectives and Issues The primary business mission of PepsiCo is to conduct business with fairness, integrity and honesty. The firm desires to grow by enhancing values and utilities of its primary corporate stakeholders like, employees, customers and shareholders. At the same time, PepsiCo also desires to carry out trade on grounds of Tripple Bottom line principle, whereby the company improves business aspects related to People, Planet and Profit. Even so, if the company needs to upkeep its position within the industry, then an appropriate long-term marketing plan needs to be framed. The marketing plan can be made for a period of two years. The objectives of the plan should be SMART in nature, implying parameters such as, specific, measurable, achievable, realistic and time bound. First Year In the first year, the company might aim to enhance gross sales by 5%. Second Year In the second year, the company might intend to increase gross profit by 3%. Issues The marketing plan should address to product related issues faced by the organization. Since last few years, several consumers have criticized the bad taste of soft drinks produced by PepsiCo. The short run advertisement approaches of the company are not accurate. Unlike Coca Cola, products of PepsiCo are not easily available in the rural areas. Nonetheless, products of PepsiCo face strong substation effect within the market. Moreover, consumers are gradually showing greater interest towards consuming healthy products or organic beverages compared to the high calorie soft drinks and juices of PepsiCo. Marketing Strategy Positioning The new positioning strategy of the company should be created as per the segmentation and market targeting strategies. The most potential customers of PepsiCo are individuals of all income groups and ages. Figure 6: Position Map High Quality Low Price High Price Low Quantity (Source: Author’s Creation) From the above position map, it can be claimed that PepsiCo should state its products as low in price and high in terms of quality. Product Strategy The primary products of the company such as, Pepsi, 7 UP, Mirinda and Pepsi Diet, face strong product substitution effect. The strict positive substitution effect for products of PepsiCo can be lowered only with the help of increased product differentiation. The company should try to change or modify existing product quality, flavors and composition. Consumers should be able to differentiate products of the company from that of its rivals like, Coca Cola. By implementing product innovation strategy, PepsiCo can launch a new organic drink (Stolzea & Lampkin, 2009). It is found that demand for organic food and beverages are significantly increasing across different markets. Figure 7: Increasing Demand for Organic Beverages (Source: USDA, 2014) By launching a new organic drink, PepsiCo can capture new loyal customers. Through this, PepsiCo would be able to augment revenue and profit across all marketplaces. Differentiation and innovation should primary product oriented marketing strategies for PepsiCo (Peng, 2008). Pricing Due to strong positive substitution effect, the company faced highly elastic demand for its products. A slight change in price of any of its drink or juice brings about massive changes in demand. Figure 8: Positive Substitution Effect Price of Pepsi Demand Curve for Pepsi Quantity Demanded for its Substitutes (Source: Author’s Creation) As shown in the above graph, a minimal rise in price of Pepsi’s products is able to substantially increase demand for its substitutes. Thus, prices of the products of PepsiCo should be settled according to competitive pricing strategies. However, the firm can implement penetrating pricing formulae while launching any new product within the market. For instance, if the firm launches a new organic drink, then it can settle its prices relatively lower than that of other organic beverage producers in market such as, French Organic Sparkling Juice Company. Over time, as the new product becomes popular in the market, PepsiCo can enhance its price according to profit maximizing level (Kotler & Keller, 2006). Hence, competitive pricing for existing products and penetrating pricing strategy for new product lines should be the ideal pricing strategy for PepsiCo. Distributional Strategy The company should implement intensive distributional strategy in business, while distributing its products across different markets, during the two year marketing program. It is found that products of the company are not adequately circulated across rural regions. It should be noted that aggregate per person income levels of individuals residing in rural regions are gradually increasing. Moreover, it is also found that across many developing nations such as, India and China, population pressure in rural areas are more than the urban localities. If PepsiCo can build a wider network of franchisees within its rural marketplaces, then it would experience increased demand for products therein. As discretionary spending power of consumers living in rural regions is increasing, aggregate demand for beverages and other consumer products are rising across these markets. Hence, employing intensive distributional strategies, PepsiCo should be able to distribute its products evenly in urban and rural localities (Kitchen, 1999). Nevertheless, the new organic drink should be primarily distributed in prominent urban marketplaces of the company. Communication Strategy As PepsiCo operates within a monopolistically competitive market structure, it should invest large amount of money for promotional and advertisement purposes. Such activities would help in enhancing brand value and recognition of the company across diversified marketplaces (Kitchen, 1999). The company can provide special discount facilities to buyers, on occasions of bulk purchases. It can sponsor popular sports shows supporting rigorous advertising activities (Weber, 2007). The commercials for the new organic drink can be initially launched on these shows. Features of new products can be communicated to customers through free sampling methods (Kitchen, 1999). Short-term plans for new advertisements should be introduced by the company and these commercials can be visualized through several means of communication like, television, social media, news papers and radio (Kitchen, 1999). Therefore, increased differentiation should be the primary communicational strategy for PepsiCo. Through commercials, the organization should be able to portray that its soft drinks, juices and other products are qualitatively distinguished within the market. Marketing Research Adequate market research is important for PepsiCo, as this would help sustenance with competitive edge within the industry. Analysis of target market and appropriate positioning strategies of the company cannot be formulated without essence of market research. With an adequate market research, PepsiCo can: Focus on its most potential buyers Forecast the changing taste and preferences of existing consumers Establish realistic targets Formulate effective marketing mix strategies Make new business expansion programs Identify upcoming commercial opportunities (Kotler & Keller, 2006) Solve upcoming trading issues Action Programs The different activities or actions to be undertaken by the company while implementing the two year marketing plan can be represented through a timeline. Table 1: Timeline Moths (Year 1 and 2) 1 and 1 3 and 4 5 and 6 7 and 8 9 and 10 11 and 12 1, 2, and 3 4, 5 and 6 7, 8 and 9 10, 11 and 12 Activities Year 1 Year 2 Conduct a detailed market research Analyzing the objectives for the new marketing plan Estimating the financial budget for the new marketing plan Introducing new product strategies Establishing new pricing, distributional and promotional strategies for the new or modified products Conducting advertisements Estimating the rise in sales and profit Reviewing the success of the marketing plan Budget The marketing budget helps to evaluate the investment that a company is willing to make on each of its marketing activities. If a company desires to earn profit, then total revenue must be greater than total cost. On the other hand, if desired profit is not realized, then the organization tries to experience break even in business. In that case, gross revenue of the firm becomes equal to gross profit. Break Even Analysis Figure 9: Break Even (Source: PepsiCo, 2013) As shown in the above graph, PepsiCo was experiencing normal profit (revenue = cost) during the recession in 2008. Over time, as the economies recovered, the company started to experience increased profit. Due to specific business issues (as stated above) and lower competitive advantage, the firm had experienced normal profit at the end of 2012. However, it is forecasted with the two year marketing plan that the company would be able to experience supernormal profit (revenue > cost) in the long run (Kotler, 2008). Controls PepsiCo can check effectiveness of its marketing plan through certain controlling measures. Some of these methods are: Customers’ feedback The primary motto of the marketing plan is to persuade customers to buy PepsiCo’s products. The company can conduct survey and polling sessions in order to estimate customers’ responses regarding its new marketing activities (Root, 2014). Estimation of target market sales The marketing plan has aimed to enhance revenue of PepsiCo by 5%. At the end of two years, the company can quantitatively estimate the change in revenue. Since the plan is targeted towards a specific customers’ base, rise in revenue should be accrued from sales generated by target customers (Root, 2014). Budgeting The company should ensure that expenses of the two year marketing plan should not surpass its returns (Root, 2014). PepsiCo should be either at or above the breakeven, post-completion of the marketing program. Market share analysis By conducting adequate market research, PepsiCo should analyze the share of market demand that it enjoys against the potential rivals (Root, 2014). If market share of the organization increases at the end of 2 years, then the entire marketing program would be successful. References Kitchen, P. (1999). Marketing Communications: Principles and Practice. London: International Thomson Business Press. Kotler, P. & Keller, K. L. (2006). Marketing Management. New Jersey: Prentice Hall. Kotler, P. (2008). Principles of Marketing. New Jersey: Prentice Hall. Peng, M. W. (2008). Global Strategy. Connecticut: Cengage Learning. PepsiCo. (2013). Annual Report. PepsiCo. Retrieved from http://pepsico.ru/upload/PEP_Annual_Report_2013.pdf. Root, N. G. (2014). Examples of Controls in a Marketing Plan. Retrieved from http://smallbusiness.chron.com/examples-controls-marketing-plan-11575.html. Stolzea, M. & Lampkin, N. (2009). Policy for Organic Farming: Rationale and Concepts. Food Policy, 34, 237-244. Stryker, R. (1998). Globalization and the welfare state. International Journal of Sociology and Social Policy, 18(2), 1-20. USDA. (2014). Organic Market Review. Retrieved from http://www.ers.usda.gov/topics/natural-resources-environment/organic-agriculture/organic-market-overview.aspx#.U5VJOnbaLUc. Weber, L. (2007). Marketing to the Social Web: How Digital Customer Communities Build your Business. 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