Strategic Marketing Plan - PepsiCo - Case Study Example

Strategic Marketing Plan (Part II) Name Course Name and Code Instructor’s Name Date Executive Summary Strategic Marketing Plan is a significant and an essential tool that provides a company with greater capacities to market successfully their new and existing products. Marketing strategies in many occasions serve as the guideposts for companies to accomplish successfully their business objectives thus making them attain competitive advantage in the marketplace. The company plans coupled with their objectives are usually gauged or measured to ascertain their relevance. Development of a strategic marketing plan involves different essential undertakings; for instance, it must be designed to meet the market demands, identify different business alternatives, analyse both internal and external environments of the company, establish challenging goals, and finally come up with optimal marketing mix that will ensure that the identified needs are successfully achieved. The bellow described is a strategic marketing plan for Pepsi Next, a recently launched mild cola soft drink by the PepsiCo. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Product Life Cycle 5 New Market entry - pioneer 5 Growth stage – market leader 6 Shake out stage 6 Mature stage 7 Declining stage 7 New economy markets 8 Disintermediation and reintermediation 9 Customization 10 Organization structure 10 Marketing plans 12 Strengths 12 Weaknesses 13 Opportunities 14 Threats 14 Marketing metrics 15 Marketing Audit 16 External environment audit 17 Internal Audit 19 Conclusion 19 Introduction Marketing currently is no longer tied to the products a company manufactures, but rather the stories the company tell consumers. Strategic marketing is a process that allows companies and business organizations to concentrate its resources on the best opportunities to increase significantly their sales and in order to achieve competitive advantage in the market place. It comprises of all fundamental long-term company activities particularly in the field of marketing that main deal with the analysis of strategic situation of a company as well as the development, evaluation, and selection of market-oriented strategies thus contributing greatly to achieving the company goals and objectives. Marketing strategies are regarded as or serve as basics underpinning of marketing plans that are designed to meet the market needs while also reaching the marketing objectives. The plans together with objectives usually tested for measurable results. It also involves careful analysis of the internal and external company environments after which a strategic plan is developed to identify different business alternative, establish challenging goals, come up with optimal marketing mix that will meet the identified goals, and above all coming up with a detailed implementation plan. Another vital step in developing a marketing strategy is coming up with a plan to monitor the progress as well as setting of contingencies especially when problems arise during the implementation of the plan. Pepsi Next is one of new products that PepsiCo has launched into the global market. Pepsi Next is regarded as a mid-calorie cola beverage that is made up of sugar and artificial sweeteners in mixed in equal quantities. This strategic marketing plan, discusses various activities that PepsiCo has undertaken in marketing the Pepsi Next in the Global soft drink and beverage market. For this matter, the paper discusses the products life cycle, the market entry strategy, the growth stage, shakeout stage, mature stage and the declining stage. Accordingly, new economy markets, organizational structure, marketing plans, marketing metrics and marketing audits will be comprehensively discussed. Product Life Cycle The is a business analysis process that is aimed at identifying a set of common stages in the life of commercial products; it is essentially used to map the product’s lifespan including all the stages that it goes through its time of existence such as introduction, promotion, growth, maturity and decline phases (Griffin, 2007). In essence, product life cycle describes the different stages that a product undergoes through from its inception to the final stage when it is removed from the market. It is also important to note that, not all products reach the final stage, other products grows continually while others rise and fall. New Market entry - pioneer This is the establishment stage characterized with low sales growth rates particularly when the product is newly launched into the market (Reed, 2006). With time, if the product does not have a formidable competitor, it can create a monopoly in the market depending on the efficiency and need of the product to the available customers. In many cases, firms introducing a new product into the market incur losses (Griffin, 2007). Accordingly, if the product is a new brand and thus categorized as a new product, the consumers may not be aware of its whole potential. In order to turn the said losses into profits at this stage, the company must extensively inform customers through different media. Some of the main characteristics of this stage include; low competition and firms incur losses (Baker, 2008). Pepsi Next is a pioneer product in the Global soft drink and beverage market, no other product of its kind has ever been launched in this market. Growth stage – market leader Product growth is experienced when consumers accept the innovation in the market thus starting to associate with the product, which on the other hand allows the company to make profits from the ever-increasing sales (Richard & Wilson, 2012). Similarly, if the company experiences or enjoys monopoly, it can experiment with new ideas and innovation for it to maintain a steady sales growth (McDonald, 2007). It is regarded as the best stage for introducing new and effective products to the marketplace, which helps in developing the product class image in the presence of its rivals who may try to copy or integrate the product and present it as a substitute (Griffin, 2007). Branded products are positioned to enjoy continuous growth as they are integrated unendingly to meet customer demands, and through marketing promotional activities like advertising, they maintain strong brand loyalty (Ferrell, 2012). Shake out stage This is also referred to as the cost phase; here the product experiences barriers to entry, where the already established firms in the industry perfect their cost-effective productions methods thus minimizing the cost of production. On the other hand, new companies struggle to keep up with the immense market pressure (Richard & Wilson, 2012). Due to this, companies with less financial capacities are likely to be driven out of the industry while the established and dominant companies continue to produce high-end products through innovation (Hillestad & Berkowitz, 2012). This stage is characterized with mergers and acquisitions thus making the industry more consolidated. Mature stage This phase of the product life cycle is said to be the end of stage of the growth rate, which is characterized by slowdown in sales as the product, has already achieved market acceptance. At this stage also, new competing firms start to experiment by producing substitutes in order to compete the original product (Richard & Wilson, 2012). Accordingly, given the increased number of players in the market, competition becomes fierce regardless of the amplified sales growth rates experienced in the onset of this stage (Anderson, 2012). With stiff and aggressive competition in the market, decreased profits are experienced at the end of this stage, which then paves way for the maturity stage. This is a vital stage for the product’s life cycle. Declining stage This phase of the product life cycle describes the stage where the product class ceases to cope up with the market due to low sales growth rate. This is always because of many firms sharing the same market, which proves it difficult for all entrants maintain sustainable sales levels. As already established, not all products go through all these stages; it virtually depends on the product type, its competitors, and the scope of the product together with other factors. Significantly important to mention, some companies use extension strategies to extend the product life cycle before it enters into its decline stage (Griffin, 2007). They use marketing techniques like advertising, price reduction, adding value, exploration of new markets, and using new packaging methods to improve the product sales. Pepsi Next is at the market entry stage; it is a new product in the Global soft drink and beverage market. In this regard, the company is aware of the losses associated with introducing a completely new product into the market. The company has initiated various marketing communication activities to make the larger potential consumers of Pepsi Next aware of the product quality together with its related values. New economy markets The invention of information technology in the business world has completely changed the way business is conducted (Bachmeier, 2009). The networks and information systems has necessitated the consumer to communicate directly with seller thus eliminating intermediaries and substantially shortening the value chain. Information systems are very powerful commercial entities as they not only reduce the value chain, but also reduce transaction costs (Richard & Wilson, 2012). It has been established that lowers transaction costs results into or enables new kinds of transactions that lead to new market niches and segments thus making the market environment more sophisticated. New economy marketing is characterized by customers being organized into segments, focuses on customer lifetime value, and they look on marketing scorecards. Similarly, this marketing strategy focuses on stakeholders, customer retention and growth, they build brands through customer behaviour, and it measures customer satisfaction and retention rates (Fifield, 2012). Many businesses across the globe are working tirelessly to adapt their marketing strategies to the new economy (Griffin, 2007). For instance, businesses understand that every person is an essential entity in marketing, the create brands based on performance and not advertisement, and they focus marketing strategies towards retaining customers rather than new customer acquisition. They similarly work to ensure in-depth customer satisfaction; and their strategies are being changed from over-promise, under-delivery to under-promise, over-delivery. There are three major drivers of new economy markets: digitization and connectivity, disintermediation and reintermediation, and customization and customization. For the purposes of this marketing, disintermediation and reintermediation, customization will be discussed. Disintermediation and reintermediation Disintermediation is a situation that has been brought about by digitization where old intermediaries in business have been eliminated. It is the processes through which new information systems disturb the market environments and create new market intermediaries whose presence threaten the older established intermediaries due to new market realities. This diversity of distributional services has reversibly reduced the cost of distribution transaction (Richard & Wilson, 2012). With regard to this, it has been noted that digital communication technologies have been instrumental in reducing the cost of distribution; distribution intermediaries in digital economies are increasing in number and diversity since they provide product comparison ratings, provide new product alerts, and prices can be adjusted according to market conditions. Similarly, they enable access to product related discussions through discussion forums and chart sessions, provide recommendations based on users’ search and purchase habits, and they are vital in electronic payment services. Electronic product presentations and product related information including news, regulatory data, reviews and awards are made available through marketing information systems. Customization Across different industries, customers are increasingly demanding for higher levels of customization where products and services are tailored to their needs. Similarly, customers are mainly comfortable and confident that in an economy with versatile and higher degrees of information transparency coupled with information technology as well as operational advances that enable customization they must or stand higher chances of receiving it (Griffin, 2007). Significantly important, companies must adapt business models together with its organization to demands for customization has the ability to influence performance that is above its competitors. Similarly, business organizations that balance the value the benefits of customization to their customers with the complexity costs effectively have the capacity and abilities to generate organic sales growth and profitability than the industry’s average. Organization structure This is the typical arrangement of lines of authority, communication, rights and duties of an organization; these arrangements determines how roles, power and responsibilities are assigned, controlled, coordinated, together with how the information flows across different levels of management. Organizational structure comprise of activities including allocation, coordination and supervision that are directed towards accomplishing organizational goals and objectives. The organization can be structured in many different ways with regard to its objectives; the structure of an organization is vital in determining the models in which the organization operates and performs (Griffin, 2007). For instance, it enables the expressed responsibility allocation with regard to different function and processes to different entities like branch, department, workgroup and/or individual. Similarly, the organization structure affects its actions by providing the basis on which standard operating procedures and routines rest as well as determining which persons are to participate in which decision making process, and hence the level of how their views shape the organization actions. Organizations are structured in specific ways in order to achieve different organizational goals; the structure of an organization is the basic tool that will either help or hinder its progress towards meeting these organizational goals. Different organizations large and small can significantly achieve exceptional sales together with extended profits by properly aligning their organizational needs with the structure they use to operate. It is extremely essential for every organization to have a structure for it to operate coherently and systematically. There are different organizational structures that can be used by any organization particularly if the structure conforms to the nature and maturity of that organization. Organization structure is a hierarchy of peoples together with its functions (Richard & Wilson, 2012). It is also essential to note that, the structure dictates the organizational character and the values it believes in. accordingly, depending on the organizational values coupled with the nature of business, organizations are associated with the following structural settings: Bureaucratic structures, functional structures, divisional structures, and matrix structure. PepsiCo in Global has zeroed to a matrix organizational structure to help the company in accomplishing its operational objectives (Griffin, 2007). The matrix organizational structure is a hybrid structure that comprise of components both from divisional and functional organization structures. For instance, the organization places employees based on the function and product. Similarly, the organization uses teams that are formed based on the functions they belong and products they are involved in to accomplish tasks (Black & Gregersen, 2002). Teams are particularly used in this organizational structure so that the organization can take advantage of the employee strengths as well as make up for weaknesses of functional and decentralized forms. This structure is made up of a simple lattice that emulates order and regularity demonstrated in nature. The PepsiCo Global has a strong/project matrix structure that is, it has a strong project manager who is responsible for all company activities. There are also several functional managers who are essential in providing technical expertise and design resources as needed. Marketing plans Pepsi Next was launched in the Global soft drink and beverage market in 2012 by PepsiCo. It is a new soft drink product described to have a mid-calorie cola beverage comprising of sugar coupled with artificial sweeteners but with full cola test (Griffin, 2007). This product was designed by PepsiCo to lure back the lapsed cola drinkers (Kazmi, 2007). In order to provide an intensive understanding of the company’s marketing plans, a SWOT analysis below will give a clear picture of the product’s strengths, weaknesses, opportunities and threats. Strengths Branding: Pepsi is one of the PepsiCo’s top brands and is among the top most recognized soft drink brands in the world. Pepsi has been joined in broad recognition in PepsiCo brands like Diet Pepsi, Gatorade Mountain Due, Tropicana Beverages, Aquafina Bottled water, and many more. The strength of the Pepsi brand is evidenced by its presence in over 200 countries across the world. Such huge brand dominance ensures customer brand loyalty thus contributing largely to competitive sales Diversification: the company has diversified its products, for instance the company’s top brands broadly influence the company’s annual sales. Similarly, the company also produces ready to drink teas, juice drinks, bottled water, together with breakfast cereals, cakes, and cake mixes. This wide product bases coupled with multi-channel distribution systems has been and still is instrumental to PepsiCo thus insulating it from shifting business environments. Distribution: PepsiCo has distribution structures that are designed to deliver its products from the manufacturing plants and warehouses to customer warehouses and retail stores directly. This distribution approach also involves direct deliveries of beverages and snacks by employees as well as using third party distribution services. Weaknesses Overdependence on Wal-Mart: PepsiCo relies heavily on Wal-Mart, for instance 12% of the company’s total sales comes from this chain store. Wal-Mart is the largest PepsiCo customer (Loudon, Stevens & Wrenn, 2005). Following this observation, PepsiCo profitability is influenced by the Wal-Mart’s business strategy, which emphasizes on private label sales that produce higher profit margin than national brands. However, the law prices themes the Wal-Mart use in its marketing put pressure on PepsiCo to minimally price its products, which significantly affects the company’s overall profitability. Overdependence on US Markets: the company’s international presence is immense; however, 52% of its revenues come from the US. This heavy concentration of PepsiCo in the home market makes the company vulnerable to the effects of changing economic conditions and labour strikes elsewhere in the world. Similarly, the larger US customer base can exploit the company’s lack of bargaining power thus negatively impacting its overall revenues. Image damage due to product recall: the salmonella contamination of 2008 forced PepsiCo to recall some of its products from retail shelves. Similarly, the exploding Diet Pepsi cans in 2007 gravely damaged the company’s image while also reducing customer confidence in the company’s products. Opportunities Diversification of Products: the company has the capacity to address its potential weaknesses by broadening its products and venturing into different markets across the globe. This will help the company to adjust adequately the ever-changing customer lifestyles across the world. International expansion: the venture into new international markets and reducing the overdependence on the US sales will automatically help the company increase its revenues. Threats Decline in the carbonated drink sales: Over the years, there has been progressive decrease in carbonated drink sales across the US and all over the world. Despite the increased diversification efforts of PepsiCo, the company is likely to be negatively impacted by this decline. Potential negative impacts of government regulations: different government initiatives including: environmental concerns, health and safety concerns particularly in countries within which the company has its operations are likely to impact the company’s operations negatively. The company’s manufacturing, marketing, and distribution of its products might be altered by these new regulations. Intense competition: the company has experienced stiff competition from Coca Cola Company: its primary competitor. Other competitors in this market are Nestle, Kraft Foods, and Groupe Danone. Stiff competition usually influence pricing, sales promotion, and extensive advertising activities to be undertaken by the company. Disruptions due to labour unrests: the company is vulnerable to strikes together with other disputes related to labour. For example, in 2008 strike in India lead to the shutdown of production for almost the whole month, which disrupted the production, and distribution of the company products. Marketing metrics Companies which formulate their objectives based on the SMART criteria are likely to succeed in their ventures as they will know exactly what needs to be achieved, how to achieve it, and thus work to achieve it (Griffin, 2007). Similarly, the company will know when it has achieved it since they have a way to measure completion. For instance, SMART objectives are achievable because factors like time and resources are always taken into consideration to make them realistic. In essence, SMART, provides a criteria that is essential in aiding in the setting of objectives in project management, employee performance management, and personal development. SMART is an acronym of specific, measurable, attainable, relevant, and time bound. PepsiCo has the following SMART objectives: increase the market share by 5% within the next three months, serve more than 200 customers daily for the first weak and the second and subsequent weeks should serve 500 more customers, and lastly, the revenues should count to 10% of sales after the first six months. In this regard, PepsiCo Marketing metrics will discussed based on customer satisfaction. ‘ Customer satisfaction is defined as the number of customers or percentage of customers whose reported experience with the firm, its products or services is more than the specified satisfaction goals. The customers satisfaction ratings are very vital and have powerful effects, for instance, they focus on employees meeting the expectations of customers (Griffin, 2007). Similarly, when these ratings decrease, they exhibit that the company is likely to incur losses and hence it must take precaution measures to avoid sales decrease and reduced profitability (Dibb & Simkin, 2008). This metric quantifies a significant and important dynamic, for example if a brand poses strong customer loyalty then it can easily gain positive word of mouth marketing that is not expensive but highly effective. In this regard, business organizations and companies must work hard to ensure customer satisfaction; for this matter, they must have in place reliable and representative customer satisfaction measure. Marketing Audit This is a systematic, critical and impartial review and appraisal of the total marketing operation: in this essence, it involves the basic objectives as well as policies and the assumptions that underlie them together with the methods, procedures, personnel and organization implored to implement the policies and achieve the objectives. In other words, marketing audit is the analysis, examination, evaluation or review of the company’s marketing activities. For this matter, marketing audit is tasked with identifying the defects, problems, vulnerabilities, deficiencies, as well as other weaknesses that are encountered in the organization’s marketing activities. The marketing plans, marketing environments, objectives, policies and strategies of the organization are evaluated. After the evaluation and identification of various flaws, the audit also suggests recommendations that should be undertaken to resolve or overcome the identified limited. Similarly, it also identifies new marketing opportunities for the company. In general, marketing audit works to enhance the marketing performance of the company (Griffin, 2007). Marketing audit provides the company with immense opportunity to review and appraise in entirety its marketing activity thus enabling it to assess the previous and present performance together with establishing the basis for evaluating the possible of future courses of action (Dibb & Simkin, 2008). The business environment is extremely dynamic and changing constantly; in this regard, the marketing audit is used as a reference tool with constant updates that mirror the changes in both external and internal environments of the company. The marketing audit is comprised of the following three major audits: External Marketing Environment, Internal Marketing Environment, and the evaluation of current marketing strategy. For the purposes of this paper, External and internal environments of the company will be audited. External environment audit This mainly refers to the evaluation of all the external factors that affect the organization. External environment audit can be divided into the economic environment, the competitive environment and the company’s own market environment (Dibb & Simkin, 2008). These points should be considered in the company’s own point of view; for instance, will the changes affect the business, will they allow the business to have an added competitive advantage, will they affect the company’s competitors, or will they inhibit the organization’s ability to compete. Economic environment audit: these are mainly analyses the economic environment within which the company operates. This includes politics of the country within which the company operates. For instance, countries with stable political environment will encourage economic activities to thrive while unstable political environments will hinder (Dibb & Simkin, 2008). Similarly, government actions, tax levels of the country, privatizations and school policies also have an impact on the business. The national and international economic state is another key factor in economic environment audit; in this regard, the overall income levels of consumers, employment levels of the country, and the rate of economic growth automatically have influence on business of activities of the company. Accordingly, social and cultural factors including the population growth and/or distribution, age, lifestyles and the markets cultural values such as changing beliefs, skills and family values will influence the activities of any business organization (Griffin, 2007). The changes in technology, is another vital factor including things such as Information Technology, the internet, and home shopping have dramatically changed the way consumers behave on the marketplace and hence have immense impact on the company’s business activities (Schmid, 2011). Legal factors including health and safety regulations, employment laws, and world or global trade regulations will also influence the way the company undertakes its business operations. Lastly, environmental factors this involves the effects that the company’s activities has on the environment; for example the green credentials. Competitive environment: this is basically the evaluation of how competitive the market is, analysing what the competitors are doing or likely to be doing (Dibb & Simkin, 2008). In this economic environment audit involves the evaluation of the threat of the new entrants to the industry, the threat of substitute products, the bargaining power of consumers and suppliers, and the rivalry among the current competitors. The Market Environment: this involves the analysis of the total market size growth and trends; market characteristics, growth and trends; Products, prices; physical distribution channels, consumers; and the industry practices. Internal Audit Under this marketing audit, the company has the opportunity to evaluate its current business activities; is the company aware of its situation as it should be? In this regard, the company sales including total sales, sales per geographic region, and sales per the industry, customer and product are evaluated. The company’s market share, profit margins, costs, marketing information research and the effectiveness of the market mix are evaluated. Conclusion The above discussed Pepsi Next strategic marketing plan provides a comprehensive analysis of the product life cycle giving different phases of product development including the new market entry, growth, shakeout, maturity, and declining phases. This marketing plan, also discusses the new economy markets discussing the strategic relevance of the digital products and their extended use. For this matter, disintermediation and customization have been inherently discussed. Accordingly, the plan also gives an overview of the organizational Structure that PepsiCo use in their business activities. In the same line of discussion, the SWOT analysis, marketing metrics, and marketing audit of have been discussed. References Anderson, D. (2012). Strategic marketing planning for the small to medium sized business: Writing a marketing plan. New York: Business Expert Press Bachmeier, K. (2009). Analysis of marketing strategies used by PepsiCo Based on Ansoff's Theory. 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