SWOT & PESTAL Analysis of Pepsi - Assignment Example

Marketing Plan: Tropicana Juice Introduction This research paper looks at dynamics of marketing research and how an organization utilize its marketing department to create long term benefits for individual products and for organization itself to maximize shareholders’ wealth. In this regard, PepsiCo has been selected as target organization, which will be utilized as a case study to understand its marketing efforts and the benefits it gains from these marketing efforts. In addition, the researcher will analyze PepsiCo’s strengths and weaknesses and the whether the marketing environment within and outside the organization are favoring it or not. On the basis of this analysis, the researcher will produce a report regarding a new product that can be launched in UK and have the potential to provide solid growth in sales and resulting in increasing the revenues for the company. Introduction to the Organization Undoubtedly, Pepsi is the largest manufacturer of carbonated drinks around the world. Initially, the company was started by a North Carolina based chemist and pharmacist, Caleb Bradham in 1898. He named his cola drink “Brad’s Drink”. The present form of PepsiCo came into being in 1965, when snack giant, Frito-Lay joined hands with Pepsi-Cola and started producing a range of cola drinks and snacks. The corporate structure of PepsiCo expanded as a result of increased sales and popularity of the dink in other regions of the world. Up to this date, PepsiCo generates around $ 60 billion a year, out of which, 51% revenues are generated by beverages and 49% are generated by the sales of snacks. The company has a diversified work force of around 300,000 employees and operates in 175 countries on the map (PepsiCo 2011). Corporate Objectives PepsiCo’s corporate objectives allows it to deliver products to the consumers that are responsibly produced in order to create value for the customers and enhance their experience with the beverages and food items to retain customers and win their loyalty. A concise mission statement of PepsiCo entails that the company will strive to keep all the stakeholders happy, let it be the customers, shareholders or the employees of the company. The top most priority of PepsiCo’s management teams around the globe is to get succeed in local markets, by providing innovative products to generate higher returns, setting futuristic targets and keep monitoring the performance in the process of achieving those targets and give respect to customers and stakeholders (PepsiCo 2011). PepsiCo’s contribution for the improvement of overall environment and avoiding emission of CO2 are also a part of their corporate objectives which compels the company to keep regular checks from the beginning of its supply chain activities, during the production processes and when the finished goods are distributed and made available for consumers. The beverage and food giant also focuses on implementing strategies that helps in reducing the operational costs and produce greater revenues, for the sake of maximizing shareholders’ wealth and invest in the improvement in lifestyle of customers in marketplace. In this manner, PepsiCo has established an environment friendly and a corporate star image in the eyes of the customers and consumers (PepsiCo 2010). Market Overview PepsiCo operations can be divided into four regions in the world. These four strategic business units are PepsiCo Americas Beverages (PAB), PepsiCo Europe, PepsiCo Asia, Middle East and Africa (AMEA) and PepsiCo Americas Foods. It is evident from the marketing analysis of the company that it offers world’s largest range of brands in food and beverages industry (Yahoo Finance 2011). These brands includes, Pepsi, Lays, Gatorade, Mountain Dew, Miranda, Ruffles, Doritos, Quaker, Tostitos, AquaFina, Walkers, Mist, Fritos, Lipton, 7up, Cheetos and diet Pepsi. Each of these brands produces $ 1 billion in revenues annually and is considered as provider of quality and tasty products. PepsiCo’s brands has became a household name in every market where it operates due to the reason that it creates an appeal that every consumer consumes it once in a day on regular basis (PepsiCo 2011). In the marketplace, PepsiCo’s only close rival is Coca-Cola, yet it has been declared as the most dominant organization to keep a firm hold on its market share and keep on attracting more and more consumers. The diversified workforce of 300,000 employees is responsible to cater markets’ needs by producing, distributing and promoting PepsiCo’s products (Kish et al., 2001). As a classic cola producer, Pepsi believes on focusing the younger generation and supplement the product line by producing products that have the ability to attract other demographic segments of the market. This is the reason that the company has managed to generate $ 60 billion annually by catering the needs and wants of a customer base of around 100 billion individuals (PepsiCo 2011). Market Audit Internal Audit: SWOT Analysis Strengths 1. PepsiCo’s major strength is its brand portfolio. Pepsi, the major brand of the company itself is considered to be the most recognized brands in the world and ranks 26th in the global top 100 brands. Having such a strong financial and corporate backup of a parent company would certainly provide great support to Tropicana (Yahoo Finance 2011) 2. Diversified strategic business units. Including iced tea, juices, carbonated drinks, bottled water, breakfast cereals, cakes, snacks and energy drinks. Tropicana will be a good addition to product line that Pepsi offers (PepsiCo 2011). Weaknesses 1. Heavy dependence on retailers for the promotion of the products which would cause marketing related problems for Tropicana to establish itself. 2. Over dependence on US markets, where the changing economic conditions has caused a sharp decline in Pepsi’s sales, which is an alarming situation for the new brand (Yahoo Finance 2011). 3. Pepsi has somewhat failed to leave an impact on consumers that its products are health friendly (Yahoo Finance 2011). Opportunities 1. Preferences and choices of consumers in USA and UK are almost similar. Tropicana is a recognized and loved brand in USA, which entails that it have fair chances to be accepted widely by the consumers in UK. 2. To overcome its dependency on US markets only, Pepsi have the potential and rights to expand its product base in foreign markets to generate more revenues. Keeping this in view, Tropicana can serve as a good option to go for (PepsiCo 2011). 3. Pepsi is making huge investments in markets that were never explored by others, i.e. it invested $ 1,000 million in China and $ 500 million in India. Introducing Tropicana is also a prime example of investments made in international markets, especially in UK. 4. Pepsi can make the non carbonated segment of its products more profitable by investing in research and development of those products (Yahoo Finance 2011). Threats 1. Pepsi’s sales in carbonated drink segment are declining, and expected to continue the trend by 2.7% reduction by 2012. 2. Coca-Cola, Nestle, Groupe DANONE and Kraft Foods are giving tough competition to PepsiCo in international markets (Yahoo Finance 2011). 3. Consumers are now more aware of the adverse effects of utilizing carbonated drinks and snacks on their health. Increasing rates of deaths because of obesity is also becoming a problem for the company. In this regard, introducing a healthy tropical juice based product would be beneficial for the corporate image of the company (Marketing Teacher 2011; Scribd 2007; PepsiCo 2010; Stepheny 2010). External Audit: PEST Analysis Political Factors 1. Tropicana will have to abide by a number of federal laws which compels it to make sure that the company’s products are produced, distributed and made ready for utilization after certifying that the food and beverage items of the company are not harmful for consumers’ health. These laws include Food, Cosmetic Act, Occupational Safety and Health Acts (Ahuja et al. 2010). 2. The business of Tropicana will also be restricted by the federal laws in foreign countries, to invest a certain amount in the research and development and improvement of products. 3. Laws also restrict Tropicana to not purchase or acquire land beyond certain limits. 4. Tropicana will have to acquire the license from respective governments for the acquisition of water resources (PepsiCo 2011). 5. Tropicana is bound to work for the improvement of environment and not practicing any activity that might cause pollution (IVYThesis 2008). Economical Factors 1. PepsiCo operates in 200 countries and majority of the countries are facing economic downturn and debacles, which in return results in lower sales of Tropicana juice in UK. 2. Prices of raw materials in international markets are increasing day by day, which is resulting in increased operational costs that trigger a hike in prices of Tropicana juice. 3. The value chain activities of PepsiCo are also causing huge burdens on finances as the distribution costs are also triggered due to the hike in fuel prices (PepsiCo 2011). 4. Despite of these economic conditions, PepsiCo can seek number of lucrative opportunities in international markets (Marketing Teacher 2011). Social Factors 1. There are societies in some regions of the world who think that carbonated drinks manufacturers are replenishing the water resources. 2. Carbonated drinks are also considered to be hazardous for the health of youngsters therefore the societal structures in most of the regions in which Pepsi operates does not support the utilization of such drinks (IVYThesis 2008). In this manner, a healthy and tropical juice would create a soft corner for the company in consumers’ hearts. 3. Pepsi have to implement a solid waste management program in order to create a positive image in the eye of societies (Marketing Teacher 2011). Technological Factors 1. Pepsi is considered to be the pioneers of bottled water and canned and plastic bottled beverages. 2. Pepsi’s bottle designs and food packaging are innovative, stylish and attractive (Marketing Teacher 2011). 3. Pepsi holds state-of-the-art plants having capacity to produce bulk quantity of products with the help of technologically driven machinery and equipments (Yahoo Finance 2011). Porter’s Five Forces Analysis Rivalry among Competitors There are a number of quality tropical fruit juice producers in UK which provides a saturated market competition environment to the competitors. The presence of Maaza, Healthy People and Milani will provide a tough competition to Tropicana (Kish, Riskey and Kerin 2001). Substitutes A number of viable substitutes are available to the consumers in market. These substitutes include iced tea, cold coffee, soft drinks or fresh juices. Pricing strategies, marketing strategies and making product widely available will help Tropicana to counter the adverse impacts of availability of substitute products (HDC 2004). Suppliers’ Power PepsiCo have its own suppliers within UK and in foreign markets who provides raw material to the company for the production of beverages and food items. In addition, the corporate image and size of the company does not provide many chances to the suppliers to bargain on prices. Therefore; suppliers’ bargaining power is low (IVYThesis 2008). Customers’ Power Pepsi’s pricing strategies are always focused on providing value to the customers. Therefore; it adopts a suitable pricing strategy for its products which favors both customers and the organization. Tropicana’s pricing strategy will also be designed keeping in view customers’ affordability, therefore; there less chances of conflicts on price between the organization and the customers (Wenderoth 2007). Threat of New Entrants Although the machinery and resources required to produce tropical juices is expensive, but the barriers for new entrants are low. Therefore; there exists a chance that someone with better technology, product and resources might enter into the industry and swap market shares of Tropicana, as well as other brands available in the market (HDC 2004). New Product Development The assumptions for launching Tropicana in UK market, the marketing objectives and strategies to promote the new product, identification of alternative plans, promotional plans, monitoring and evaluation mechanisms are discussed in this section of the report. Assumptions UK’s tropical juice market is saturated due to the presence of number of quality juice manufacturers. Still there is space for a new entrant with a huge parent company on its back, to mark its place in UK (Marketing Teacher 2011). Tropicana juice is an upscale caterer of thirst for tropical flavors (Marketing Teacher 2011). Tropicana juice will be able to attract every demographic segment of the market. UK’s customers of tropical juices have tendency to switch to other brands which offer quality at affordable prices. Pepsi is considered to be a company in UK, who delivers quality products in food and beverages segment. Pepsi is a household name in UK and its current and new products are warmly welcomed by the customers (Yahoo Finance 2011). Marketing Objectives To establish start-up sales of around £ 3 million by the end of the first year. Add a customer base of around 500,000 in the first year. Held non-profit events to promote and create awareness about the products. Build brand reputation through utilizing different public resources. Develop a supply chain that makes it possible for PepsiCo. To deliver the quality juice with the name Tropicana. Build a customer base of around 250,000 with the help of utilizing online source of marketing. To attract a customer base of around 100,000 consumers by traditional marketing and a customer base of 750,000 by utilizing the online marketing strategies. To increase the sales revenue of Tropicana juice by more than £ 7.5 million by the end of second year. Specially targeting the youngsters who have the potential to spend reasonable portion of their income and pocket money on purchasing a tropical juice. To establish an image of Tropicana juice that it is healthier as compare to other juices, to drink different flavors of Tropicana juice (Marketing Teacher 2011). Strategies for Tropicana Marketing Mix Strategy 1. Product Pepsi has decided to launch a new product which is a tropical juice, with the name Tropicana. Tropicana is available in two flavors in UK, i.e. Mango and Orange. Now Pepsi has decided launch a modified version of Tropicana, by launching new flavors, like Kiwi and Guava flavor. The modified product will be produced without using sugar or preservatives. The reason for introducing these flavors in UK is that the customers has shown the potential to like different and new flavors that are nutritious and there are no additional ingredients used in the production of these juices. 2. Pricing Tropicana juice will be high-price-sensitive due to the reason that there exist a number of substitutes to what PepsiCo offers (Paley, 2005). Therefore; it is necessary for Pepsi to adapt a suitable pricing strategy that helps it to retain customer base and attract new customers. In such scenario, value addition becomes important, which requires Pepsi to offer quality juice, made from fresh fruits. But before adapting any pricing strategy, Pepsi is advised to adapt penetration strategy which would help to build confidence in the market place and capture market share by attracting more customers (Ferrell and Hartline 2008). 3. Promotion The most appropriate alteration in marketing strategy is to revitalize the marketing communication methodologies. As majority of the customers of Tropicana juice are expected to belong to younger generation, it is necessary to design marketing strategies that are colorful and funky. Online marketing and personal selling will be the most suitable strategies to be proposed to PepsiCo (Kotler 2009; Hauser and Shugan 1983). Online marketing has emerged as the most efficient source of promoting products. People are now using internet more, which requires a brand to vigorously promote its offerings to the customers. It also provides the benefits in the form of enabling marketers to customize marketing messages whenever and wherever they want. The marketing message can be displayed as a text message or sent to the customer as news bulleting or via email. Social networking sides has been most successful source of marketing clothing businesses as the younger generation is linked with these sites through their daily lives (Wenderoth 2007; McDaniel and Gates 1998). Sufficient amount of handy information can also be provided to the customers with the help of personal selling. The staff at stores where Tropicana juice will be placed for sell should be trained to communicate to the customers in a way, that they market the products of the brand. These staff members should be provided with product information and certain gifts that will be offered to the customers, in order to win their loyalty and build a good image for the brand (Nash 2000). In addition to its marketing efforts, Tropicana is advised to introduce promotional offers that attract customers and compel them to at least try the product for once. Promotional offers may be in the form of buy one get one free offers or free sampling in schools, colleges and universities. 4. Placing Tropicana juice is a fast moving consumer good, so the product would be made available by PepsiCo. For consumption at retail outlets, stop and shops, canteens, hotels, restaurants, clubs, casinos and other places where customers have regular interaction with the product (Kaynak 1993). 5. Supply Chain Management The proposed supply chain framework for Tropicana juice entails that the company should acquire best possible raw material, i.e. fruits, from nearly located farms in UK and from international vendors who have good reputation. This raw material will move to the factory where the quality material will be picked by workers to put it in production process according to the instructions. Distributors will take the products and deliver them to the above mentioned placement points. Distributors will also be responsible to handle the online orders. The stock information resource will handle the flow of data regarding the products available, what products are need to be manufactured and predict the most demanded products (Blanchard 2007; Jespersen and Larsen 2005). Alternative Plans For the first year of Tropicana juice, it is expected that the product will report fewer sales due to the reason that it needs time for a new product to mark its place in the market place. In this regard, if the product fails to cover the overhead costs, it seems good in shorter run. But if the product does not produce good results in the second year, PepsiCo should adapt strategies that supplement the growth of the product. In this regard, changing in the marketing strategies, changing the design of packaging, adding more flavors to the product or free sampling of the product seems to be viable options for PepsiCo. Promotional Plan The promotional activities will be distributed in various phases. The complete promotional program will be conducted during the period of one year and is as follows: Phase 1: Teasers, Billboard advertising, free Sampling. (1 month) Phase 2: Inaugural Events: Interactive Events at colleges, universities, schools and libraries. (3 months) Phase 3: Television Advertisements, Newspaper Advertisements, Online Advertisements. (6 Months) Evaluation and planning of alternative marketing strategies. (2 months) Monitoring, Evaluation and Control In order to ensure that the launching of the Tropicana juice is running smoothly and achieving results efficiently, there have to be some measurement and control mechanisms that PepsiCo should implement. These can be formal and informal control systems. Formal control systems are directed and implemented by managers whereas the informal controls are initiated by the employees themselves in order to raise the motivation levels (Blanchard 2007; Jespersen and Larsen 2005). Formal controls can be classified into three types. Process control systems compel management and organization to work in the right direction for achieving the overall objectives of launching a new product (Nash 2000). The output control systems makes sure that the marketing efforts in the change process are implemented in correct manner and helping the organization to achieve the objectives. Marketing audit is the third kind of formal controlling of change process. These control systems are not only implemented at the beginning of the change process, but are utilized throughout the change process. Organizations utilize number of strategic tools to conduct market audits, such as SWOT, PESTEL, Value Chain or Porter’s Five Forces Analysis (Marketing Teacher 2011). Informal Controls aims at motivating the members of the team who is responsible to implement the change process. In addition, it creates an environment which is favorable for launching the new product (Nash 2000). Bibliography Ahuja, A, P Arora, G Gupta, M Kalra, and P. Bhalla. "SWOT&PESTAnalysis ofPepsi." www.scribd.com. August 26, 2010. [Accessed November 9, 2011]. Blanchard, David. Supply Chain Management: best practices. NJ: John Wiley & Sons, Inc., 2007. Dhar, T, J Chavas, R Cotterill, and Brian. Gould. "An Econometric Analysis of Brand-Level Strategic Pricing Between Coca-Cola Company and PepsiCo." Journal of Economics & Management Strategy 14, no. 4 (2005]: 905-931. 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