PepsiCo Inc. Case Study - Essay Example

PepsiCo Inc. Case Study By PepsiCo Inc. Case Study Pepsi is one of the leading beverage brands globally with operations in nearly 200 hundred countries. Pepsi specializes in food and beverage with equitable brand portfolios such as Frito-Lay, Pepsi-Cola, Tropicana, and Quaker. As a multinational company, Pepsi collaborates with its authorized bottlers, contracted manufacturers, and other third parties to distribute its products (Pepsico.com, 2015). . Fundamentally, the company has six market segments spanning from North America, Latin America, Europe, Middle East, Asia, and Africa. With approximately 100 years of operations in beverage and food industry, the company faces both local and external rivals in its marketing campaigns. It is reasonable to argue that the company enjoys global presence, which drives its revenues to the next level. However, it still faces significant challenges in its marketing efforts, which requires strategic manipulation to foster its future success. Challenges Competition Pepsi faces tough competition from Coca-Cola and others in the crowded beverage industry. Its beverage, snack, and food products compete against others from multinational companies and local manufacturers in the regions where they operate. In many countries where Pepsi operates, Coca-Cola Company is the primary competitor. Other possible competitors are Kraft Food Group, Red Bull, Kellogg Company, and Nestle S.A among others. Despite their products relying on price leadership as their competitive advantage, Coca-Cola offers its products in relatively similar products (Lee, and Scott, 2015). Therefore, the company cannot boast of price leadership advantage because further price reduction may cause losses eventually. As a pioneer in the beverage sector, Coca-Cola controls massive market share due to the heavy investments in creating operation network. In as much as Pepsi brand is popular, Coca-Cola brand is still ahead of it. With the opportunity to sponsor significant events such as World Cup, Coca-Cola enjoys wide viewership that Pepsi must put extra efforts to match. Therefore, Pepsi marketing strategy should strive to create a competitive advantage for its products as a way of increasing chances of success. Research and Development Research and development activities are critical for increasing competitive advantage. Innovation accelerates innovation of products as well as marketing operations. Pepsi products are in constant improvements to increase their equity and competitive advantage. However, budget allocations for research and development section are on the rise because companies revamp their products uniqueness. Additionally, processing, production, and packaging are important components of the company that requires innovation. Development of new products for Pepsi is proving difficult because new products cannot penetrate the market as expected. Product differentiation is the dream of any company operating in highly competitive environment. Pepsi is striving to achieve product uniqueness as a tool for barging market share. Nevertheless, Coca-Cola enjoys huge market size due to its product specialty. Research and development allocation for Pepsi were $718 million, $665 million, and $552 million in 2014 through 2012. It is clear that as such costs are on the rise. Market Penetration Pepsi has a huge global presence yet it does not enjoy the same amount of sales as Coca-Cola, which is a multinational as well. The challenge for Pepsi is market penetration, which results from its weak distribution networks. First, the firm does not offer any particular incentive for its retailers on the basis that it offers minimum prices on the market. Consequently, retailers identify other discounting firms, such as Coca-Cola, that allow them to earn great profits. A deficit of a single retailer is a reduction in the distribution channel for Pepsi products. Second, Pepsi mostly targets the youthful consumers in their product promotions (Bernard, 2013). By over concentrating on young customers, Pepsi fails to appeal mature population. Undoubtedly, the mature and old population also forms a fundamental market segment for Pepsi hence promotional activities should target them as well. Third, Pepsi products do not reach far of rural places in many parts of the world. Coca-Cola success because of rural consumers can get the product conveniently. Lastly, Pepsi outlets are majorly populated chain stores. However, potential outlets exist in canteens, hotels, and colleges. Some Pepsi products do not bear the name Pepsi, which make it difficult to recognize. Therefore, market penetration remains a critical challenge for Pepsi. Strategies Market Positioning The strategic market positioning of Pepsi products will provide the greatest advantage, especially in target markets. Importantly, the company should identify points of differentiation to increase uniqueness in the crowded market. First, product differentiation is one means of achieving special market positioning. Pepsi can put extra efforts in research and development to develop products that exhibit a high degree of differentiation in both taste and quality. Second, channel differentiation is another avenue for making the product available in target markets advantageously. Both Coke and Pepsi distribute their products through private bottlers. Pepsi makes ingredients for drinks and transport them to local partners for finalization and eventual distribution (McMurray, 2015). Therefore, Pepsi can diversify its distribution channels avenues because cheap networks reduce end-user prices and reduce distribution periods. Since shipping is the known majorly preferred distribution means, Pepsi can think of other means of moving its ingredients to local partners in different countries to reduce logistics and supply costs. Lastly, the firm needs image differentiation to create a strong and distinctive marketing force. Signs and logos should increase brand value as well as recognition. Marketing Communication Pepsi is popular as many people identify with it. Customer’s lifestyles change regularly, and the company should understand consumer characteristics to facilitate construction of integrative communication message (Fill, 2009). All beverage companies struggle to convince the same consumers to purchase their products. Therefore, distinct communication tool through media should create a competitive advantage for the firm rather than portray it as another regular promotion. Perhaps using many communication approaches may popularize the brand. For instance, the Coke studio currently running has little to do with drinks but popularizing Coke brand. Again, associating with critical events, such as world cup, increased the brand value of Coke. Pepsi should come up with new ways of appraising its brand and popularize its products. In short, marketing communication tools and design are essential for brand appraisal. Promotion Pepsi should consider applying suitable promotion mix elements to revamp its campaign. Understandably, the company name is common in the market but refreshing consumer memory of its products depends on remarkable promotion. The company currently enjoys popularity among millennial generation because of dominating Yahoo, YouTube, and other social media platforms (Leonhardt, 2015). However, the company must recognize that many other potential consumers or existing ones are outside the digital bracket. In as much as firms neglect conventional promotion avenues, such as newspapers and magazines, Pepsi should not make that mistake because target consumers are using those avenues as well. Sales promotion, through celebs, discounts, rewards, and many others, ensure all possible consumer segment knows the product Pepsi. Moreover, Pepsi should increase its corporate social responsibility programs. Most consumers value and prefer identifying with firms that give back to the society (Stoian, 2015). Environmental conservation and sustainability concerns are some of the areas Pepsi can concentrate on to make its products popular. Conclusion Pepsi faces Coca-Cola as its main rival in the beverage market since they both enjoy global presence. However, Coca-Cola is always ahead in sales and market share. Some of the critical challenges that Pepsi faces include stiff competition both locally and internationally, relatively low market penetration, and weak brand. Therefore, the company marketing strategies should aim at solving the above shortcomings to allow it gain new markets. Possible marketing strategies are identifying market differentiation points, applying effective marketing communication initiatives, and increasing its promotional activities. With sizable investment portfolio and relatively strong brand, Pepsi can shake beverage market remarkably. Above all, agility and diversity in marketing aspects are the best way to retain existing customers and gain others. Bibliography Bernard, H. (2013). Pepsico promotion under the ASA cosh. J Direct Data Digit Mark Pract, 14(3), pp.269-271. Fill, C. (2009). Marketing Communications: Interactivity, Communities, and Content. Pearson Education. Lee, H. W., and Scott, C. J. (2015). Marketing or sales: the executive decision.Journal of Business Strategy, 36(5), 43-49. Leonhardt, J. (2015). Going viral on YouTube. Journal of Digital & Social Media Marketing, 3(1), 21-30. McMurray, D. (2015). The Rise of the Digital Supply Chain. Pepsico.com, (2015). Brand Family | PepsiCo.com. [online] Available at: http://www.pepsico.com/Company/Global-Brands [Accessed 9 Nov. 2015]. Stoian, R. (2015). GREEN MARKETING ADVANTAGES AND THE OPPORTUNITIES THEY PRESENT. Calitatea, 16(S1), 715. Read More