The Pepsi Company in the Thailand Market - Case Study Example

International Business Name: Institution; Date: Table of Contents 1.0 Introduction 3 2.0 Market Analysis 3 2.1 Growing Economy 3 2.2 Reduced Transaction Costs 4 2.3 Favourable Market Culture 5 3.0 Company Competencies 5 3.1 Brand Identity 6 3.2 Supply Chain Management 6 3.3 Corporate Social Responsibility Programs 7 3.4 Challenges 8 4.0 Mode of Entry 8 5.0 Operational Strategies 10 5.1 Strategic Alliances 10 5.2 Corporate Social Responsibility 11 5.3 International Human Resource Management 12 5.4 Promotional Strategies 12 6.0 Conclusion 13 References 14 Appendices 16 Appendix 1: Pepsi Company Performance 16 Appendix 2: Thailand GDP Growth 17 Appendix 3: Entry Mode Influencing Factors 18 1.0 Introduction International development is an imperative new concept in business management. In this case, increased globalization has increased the overall international markets. As such, organizations have resulted to increased strategic management structures seeking to venture into these new markets. As the branding manager at Pepsi Company, I recommend the extension of the organizational activities into the Thailand market in order to enjoy the full international markets benefits in the industry. The Pepsi Company is a beverage Company, manufacturing and distributing soft drinks across the globe (Stoddard, 2011). The organisation has registered increased market performance success as evidenced under appendix 1 statistics analysis. Further, Plunkett (2008) states that the organization has a strategic plan for global expansion and influence exertion. In its strategic plan incorporates expanding into markets with both current and future expansion potential. In preparing this report, information is collected from both journals and official market statistics analysis. The business plan is structured on the basis of market analysis, company competencies analysis, and mode of entry, operations and a summary conclusion. 2.0 Market Analysis 2.1 Growing Economy The Thai market is majorly comprised of the tourism industry. The tourism industry accounts for a large percentage of the overall Thai GDP that is growing at an estimated average rate of 3.77% as demonstrated by appendix 2 (“Trading Economics”, 2014). In this case, the economy has developed support industries onto this highly lucrative tourism industry. A market analysis on the Thai market establishes that one such industry is the accommodation industry that offers restaurant and accommodation services to the ever increasing number of tourists in the market (Asafu-Adjaye & Mahadevan, 2012). A major motivating factor for entry into this market is the presence of high temperatures along the beaches. The Thai major tourist attraction sites are its beach lines. However, the temperatures in these regions are relatively high and often lead to thirst and exhaustion. Therefore, this presents an opportunity for marketing the Pepsi products in this region. The analysis establishes that other than Coca-cola, an international soft drinks competitor, no other organization has established its services and branded soft drinks in the Thai market. As such, tourists, rely on both the Coca-cola product and the local soft drinks to quench their thirst and as a fast source of energy. Thus, this represents the existence of a market gap for soft drinks brands in the economy. 2.2 Reduced Transaction Costs Further, the Thai market has reduced transaction costs for international investments. In investing in foreign markets, international business frameworks demand that such organizations evaluate the transaction costs in the market. As such, these transaction costs in the market enhance reduced cost of doing business resulting to increased profitability levels in the long run. The Thailand economy reduced transaction costs have their origin on the existing foreign investment policies in the economy. As Wattanawisitporn (2005) stated, there exists a political goodwill for foreign investments in Thailand. Therefore, the economy has developed favourable investment policies in order to attract foreign investors. One such a policy is a tax exemption policy in the short run upon multinational organizations venturing into the industry. This is in contrast to other emerging markets that have developed strategies to reduce on foreign investments. 2.3 Favourable Market Culture An additionally, a comparative production analysis by Ukrit, Arunotai and Doungchan (2011) established that the Thai economy has a rich culture that is built on honesty, transparency and accountability. Therefore, the cultural background has an implication on the organizational workforce as well as the partnerships and loyalty. The organization has an increased opportunity for recruiting committed workforce for its ventures in the market. Moreover, the honesty culture will perpetuate increased customer loyalty. Therefore, once a brand has been established, it will attain easy market competitiveness. Finally, an infrastructural analysis establishes that the market is among the emerging markets category. Therefore, infrastructure and supply chain and distribution channels are developing and increasingly attaining performance efficiency. Thus, these support structures will enable the organization market and distribute its products on the market. Based on the above market analysis, it is apparent that the Thai market represents a viable investment and venturing opportunity for Pepsi Company. 3.0 Company Competencies In analyzing the Pepsi Company competitiveness in venturing into the Thailand beverage industry, this report reviews a combination and blend between the organizational structures and the market. In this case, the report reviews on the organizational strengths as established under the organizational strength, weakness, opportunities and threats (SWOT) analysis. These strengths are evaluated under the OLI framework to evaluate their application on the Thai market and how they subsequently increase overall market competitiveness. 3.1 Brand Identity A key organizational competitiveness in the market is an existing strong brand name. The Pepsi Company is a multinational organization with a popular brand name. As such, besides the competition posed by the Coca-Cola Company as argued by Tribe and Tribe (2005), the organization has the competitive advantage over other local beverage companies in the market. As already discussed, tourism is a major industry in Thailand. Therefore, Pepsi will focus on establishing a market niche in the tourists. The organization has an over 200 countries presence in the market. As such, the majority of the tourists in the economy are familiar with the brand and its standards and quality levels. Therefore, marketing costs will be significantly reduced to this target market. Due to their prior knowledge and experience with the brand name, tourists have an increased likelihood of purchasing the organizational products over the local unfamiliar brands in the market. This anticipated trend can be justified under the consumer buying behaviour decision making model. The five steps decision making process has its second stage as the information search stage. This stage is highly influenced by the consumers’ perception in the market. As such, information search is based on the available data. As such, the company has an upper hand over competitors in the market as consumers’ prior encounters with the brand are likely to cause an information search bias as well as influence the third stage on alternative's evaluation. Thereof, the organizational ownership of a strong brand name offers its an increased market competitiveness in the Thailand beverage industry. 3.2 Supply Chain Management An additional organizational competitiveness is the local factors in the market that blend with its industrial strong supply network. A location analysis under the OLI framework establishes that the Thailand market has a strong, honest culture as already established under the market analysis. This location factor in addition to the existence of a developing infrastructural network supplements the organizational strong supply chain network. The Pepsi Company has its key market competitiveness in its supply and distribution chain. Through its established strong networks, the organization can deliver its products even to the remote consumers in a market segment. As such, Chen, John and Narasimhan (2008) argued that this has played a significant role in enhancing its current brand recognition and close consumer relationship status. Apparently, the strong infrastructural systems in Thailand will support the organization in its supply and distribution process development. Therefore, investing in the Thai market will enable Pepsi Company increases its supply chain competitiveness. As such, this will not only enhance marketing in the region but will serve as a long term strategic approach for enhancing and retaining market influence in the beverage industry. 3.3 Corporate Social Responsibility Programs Finally, a review of the organizational systems establishes that the organization has a strong corporate social responsibility (CSR) program. The organization has CSR programs in health, and education sectors. The Thailand economy has in the recent past expressed concerns, in the nature of investments by the multinational organizations in the market. As a result, the economy has increasingly advocated and supported organizations adopting CSR practices in their operations. Therefore, the consumer base has a biased preference for organizations with CSR programs. As such, this creates a market preference and competitive edge with its exclusive CSR systems. Expanding systems, especially in the healthcare industry, will offer the organization market competitiveness over competitors both local and international. 3.4 Challenges Despite the established competencies, investment in this market faces a major challenge due to the presence of Coca-Cola Company, a multinational competitive soft drink organisation in the market. Its presence in the market reduces the target market as well as raising the production costs due to the increased need for promotional activities (Jamali & Mirshak, 2007). However, in order to overcome this challenge, this report recommends that the organisation should apply its celebrity marketing strategy. 4.0 Mode of Entry In developing an internationalization plan, the entry mode is an imperative component. Although an organization would have the required competencies, and the market relatively favourable, a wrong entry model would amount to organizational failure. Therefore, despite the established Pepsi Company competences and the favourable Thailand economy market factors, it is imperative for an organization to develop an ideal and appropriate expansion strategy. A sample of such external influencing factors on an entry mode is evidenced under appendix 3. In order to develop an appropriate market expansion strategy, this report reviews the organizational process and the Thailand market traits. An analysis on the Pepsi Company establishes that the organization has over the years adopted a foreign direct investments approach. In this case, the organization establishes fully owned subsidiaries in the foreign markets. Despite the high costs involved in the subsidiary development approach, the entry mode has a range of merits to involved organization. One such merit is the application and use of the organizational business model. A study by Lemi and Asefa (2009) established that the direct investments approach allows for the extension and application of an organizations business model. The Pepsi Company business model is hedged on centralized operations where strategic decision is made at the organizational headquarters, through the application of a centralized management approach, the organization has attained an increased uniformity in its policies application. The established uniformity enhances brand identity development through quality standardization across the market. The adoption of alternative entry methods such as the franchising approaches, through allowing for brand name development, reduces the organizational influence on policies as it denies the organization control over the adopted business model. The application of the direct investment entry methods has registered significant success levels in the organizational 200 foreign market ventures, therefore, its application is recommended in the Thailand market. The Pepsi Company has the potential to implement this entry method. On one hand, the organization with its multinational status has the economic and financial ability to establish the subsidiaries. The organizational capital base and its recent increasing profit margins are an indication that the organization has the financial capability to establish a wholly owned subsidiary in the Thailand beverage industry. Further, the organization can promote and market the brand products in the market to allow for strategic subsidiary sustenance. On the other hand, the organization has a large pool of qualified human resource. Therefore, it seeks to understand the Thailand labour culture, it can use expatriates in the management of its proposed venture. In addition, the application of the direct foreign investment approach by Pepsi is enhanced by the Thailand existing regulations and policies. As already discusses, the market seeks to encourage and attract an increased number of investors. Consequently, it has established attractive packages such as reduced taxation rates for new ventures. Thus, this reduces the overall costs o setting up a subsidiary in the market. A major hindrance to direct foreign investments in the international market is the case of stringent regulations seeking to reduce the influence of foreign organizations in the running and management of the economy. However, Plummer and Chia (2009) argued that the Thailand economy recognizes the role of competition inequality enhancement and the merits of free international trade. As such, the economy has opened up to increased free international trade. Therefore, based on the above organizational ability and industry support analysis, it is apparent that the application of direct investment approach is a viable market entry in Thailand. In recognition of the method merits, this report recommends that the organization ventures into the Thai market, within the next three years, through the application of this direct investment subsidiary establishment approach. 5.0 Operational Strategies Upon establishing an organizational subsidiary in The Thailand beverage market, the organization should establish an operational framework for both the strategic and operational activities. The operational strategies include strategic alliances, supply chain and promotional activities. 5.1 Strategic Alliances As already established under the market analysis section, the Thai market heavily relies on the tourism and accommodation industry. Therefore, it is imperative for an organization to establish links with this industry. This report argues that the formation of strategic alliances in the market will form a significant basis for expansion in the industry. Smith (2003) classified strategic alliances as avenues through which corporations enhance the combination of business strengths in order to collectively overcome their weaknesses. The Pepsi Company should target the accommodation industry that provides foods to the tourists. As such, through contractual agreements and loyalties payments, the organization would achieve increased supply opportunities. The facilities provide strategic sale points as a majority of the tourists get their refreshment and meals in these facilities. Such collaborations would increase market presence as well as overall organizational competitiveness. 5.2 Corporate Social Responsibility The Pepsi Company can apply its corporate social responsibility programs in its supply chain management. Internationally, the corporation is recognized for its efficient supply chain management structures. The organizations advocate for sustainability and adopt the sustainable production and distribution approaches. Such include the use of reusable beverage packaging. Such CSR measures have double implications. On one hand, the use of this approach enhances reduced environmental pollution (Akiyama, 2010). The use of a plastic one off packaging on beverages, as applied by the competitor's results to increased environmental pollution. Therefore, through the use of reusable beverage packaging, the organization will promote environmental conservation efforts in Thailand. Moreover, this will enable the organization complies with the Thailand environmental regulations on pollution. On the other hand, Hennigfeld, Pohl and Tolhurst (2006) argued that the adoption of CSR programs enhances a reduction on production costs. Therefore, uses of the reusable packages reduce the overall organizational needs in the market. As such, reduced overall organizational costs in the market imply increased profitability that is beneficial to the organization in the long run. 5.3 International Human Resource Management With respect to the organizational subsidiary workforce, Pepsi Company should incorporate the use of international human resource management strategies in its operations. As such, the organization should incorporate the use of both the local labour and expatriates. Studies, such as the one developed by Li and Kleiner (2001), argue that the use of a blend between expatriates and a local labour increases organizational performance and systems efficiency. In this case, the study argued that cultural diversity facilitates increased perceptions diversity. Therefore, the inclusion of such different perspectives enhances the development of rational quality decisions and strategies. In its operation, this report recommends that the organization should establish a framework through which cultural integration should be enhanced. However, this report acknowledges the challenges encountered in international human resource management such as motivation challenges. Therefore, in order to enhance increased workforce productivity in the Thailand subsidiary, the report recommends the application of culture specific motivation programs. The Thai culture lays much emphasis on appreciation. Thus, besides financial gains and promotions, the subsidiary should establish an employee recognition platform such as the annual employees’ awards and an organizational newsletter that recognizes highly performing employees. 5.4 Promotional Strategies Finally on operational requirement on the proposed subsidiary, this analysis report recommends the adoption of increased promotional strategies. Pringle (2004) states that the Pepsi Company is globally known for its use of celebrities to promote and market it brand products. With the registered success levels in the global markets, this report suggests that the organization should apply the same promotional strategy in the Thai beverage market. However, in cognition of the target market as the international tourists, the organization should adopt a personality with influence in the tourism industry. 6.0 Conclusion In summary, this report reviews the viability of business ventures in the international market. In particular, the report reviews the possibility for the application of a business venture by Pepsi Company in Thailand. In order to establish the project feasibility, the report evaluated the market, company competencies, viable entry mode as well as the operational strategies. On market analysis, the report analysis established that the Thai economy is among the emerging markets registering increased infrastructural development as well as incomes increase. Moreover, a major attraction to the market is its vast and growing tourism industry. In this case, the report establishes that the tourism industry and the existing market gap in well established soft drink brands, in the market, make the Thai beverage industry uniquely attractive for Pepsi Company. An evaluation of the organizational competencies establishes that the organizational strong brand and supply chain network management form key among its strengths. However, the presence of Coca-Cola Company in the market is a major identified organizational competency challenge, that the report recommends its overcoming through the use of the organizational marketing approach. In entering the market, the report recommends the direct entry subsidiary model citing merits on the organizational other investments and the favourable Thai economy. Finally, the report recommends the application of operational strategies such as alliances, and international human resource management principles. References Akiyama, T. (2010). CSR and inter-organisational network management of corporate groups: Case study on environmental management of sekisui house corporation group. Asian Business & Management, 9(2), 223-243 Asafu-Adjaye, J., & Mahadevan, R. (2012). Managing macroeconomic policies for sustainable growth. Cheltenham, UK: Edward Elgar. Chen, X., John, G., & Narasimhan, O. (2008). Assessing the consequences of a channel switch. Marketing Science, 27(3), 398-416,535-539 Heng Li, Zhigang Jin, Vera Li, Guiwen Liu, R.M. 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Foreign direct investment in Thailand: With special reference on European foreign direct investment in the Thai manufacturing sector. Göttingen: Cuvillier. Appendices Appendix 1: Pepsi Company Performance (“PepsiCo 2009 Annual Report” 2014) Appendix 2: Thailand GDP Growth (“Trading Economics”, 2014) Appendix 3: Entry Mode Influencing Factors (Heng Li, Zhigang Jin, Vera Li, Guiwen Liu and Skitmore, 2013, p.173) Read More