Faculty of Business Administration

American International University-Bangladesh(AIUB)

Report on PepsiCoSummited to

Afdalin Bin HaqueLecturer at AIUB

Department of Management

Summited byGroup name: lotus

SL Name ID

1. ENAMUL HAQUE 15-30070-2

2. ARIF RAIHAN 15-28267-1

3. SUDIPTA SAHA 13-24730-2

4. MASRUR RAHMAN 15-29081-1

5. AREFIN BILLAH MRIDUL 15-29568-2

Subject: principles of managementSection: L

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Acknowledgement

First of all, we wish to express our gratitude to the almighty ALLAH for giving us the strength to perform us responsibilities complete the report within the stipulated time.

We are deeply indebted to our Faculty Mr. Afdalin bin haque, for his kind help.

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Table of Content

content Page number

Executive Summary

Introduction: 4

literature review 5-6

What is SWOT? Why SWOT analysis is important, and how it affects strategic decision making………………………………………………………………………………………………………………………………………

What is BCG Matrix?.......................................................................................................................

Explain Porter’s competitive five forces model. Analyse your chosen company’s competitive environment…………………………………………………………………………………………………………………………………

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Findings & Analysis 7-11

Strength: Explain the strengths of the company………………………………………………………………………..Weaknesses: Discuss the weaknesses of the company…………………………………………………………………Opportunities: Find the opportunities of the business. ……………………………………………………………….Threats: What are the threats for the business in the external environment?................................Plot the company products in the BCG Matrix with proper explanation……………………………………….Analyse your chosen company’s competitive environment in terms of the Porter’s competitive five forces model………………………………………………………………………………………………………………………….What strategies are they using to market their products? (Corporate level strategy, business level strategies and others……………………………………………………………………………………………………………

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Recommendations 12

Match organizational strengths to environmental opportunities (how these can help the business to gain profit) ……………………………………………………………………………………………………………

Correct weaknesses (how they overcome those weaknesses) and guard against threats (how the business can protect itself from those threats) ………………………………………………………………………

What strategies do you recommend?...............................................................................................

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Executive Summary

In 1893 Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins

experimenting with many different soft drinks. In 1898, one of Caleb's formulations, known as

"Brad's Drink" a combination of carbonated water, sugar, vanilla, rare oils and cola nuts, is

renamed "Pepsi-Cola". On August 28, 1898, Pepsi-Cola received its first logo.

Their main strength is High level of customer loyalty for most of the brands within product

portfolio and Extensive experiences in mergers and acquisitions.

Their main strength is high level of customer loyalty for most of the brands within product

portfolio

And extensive experiences in mergers and acquisitions. Their main weakness is high level of

dependence on large supermarkets such as wal-mart And overdependence on domestic market in

the usa. Increasing presence in emerging markets such as China and India. Their main threat is

new competitors from emerging economies from the east.

Star product of PepsiCo: Pepsi, mountain dew, lay’ potato chips, Gatorade, Diet Pepsi,

Tropicana beverages, 7 up (outside us), are star product because they grapes 70 % of market

share of each product industry. growth rate also increasing day by day. Here net cash flow is 15

billion dollars.

The main recommendation for PepsiCo is Continue to expand with their “Human sustainability”.

The healthy eating market is a great fact that will continue to grow in the future and will provide

gigantic profits if PEPSICO is able to obtain a large market share.

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IINTRODUCTION 

COMPANY BACKGROUNDBack in 1880’s, the recipe for Pepsi was developed by Caleb Bradham in New Bern, North Carolina who had renamed it “Pepsi-Cola “in 1898. As the cola industry develops in popularity, Caleb created Pepsi-Cola Company in 1902 and registered a patent for his recipe in 1903.

As Pepsi-Cola Company went bankrupt in 1931, Charles Guft who owned a syrup manufacturing in Baltimore Maryland acquires the trademark and recipe to Loft Inc. In the year 1941, Pepsi was formally absorbed to Loft, and Loft Inc. rebrands its company name to Pepsi Cola Company.

Up until today, Pepsi Cola Company– further will be mentioned as PepsiCo– has successfully expanded it area of products through mergers and acquisition of other companies, such as Frito-Lay Company, Quaker Oat Company and other companies.

PepsiCo has developed its divisions into 5, PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo Europe, and PepsiCo Asia, Middle East and Africa (AMEA). Each of the division has their own R&D team to match local needs of the customers. That explains the broad product line aside from PepsiCo’s massive acquisitions.

Organ gram:

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Chairman

Directors

Assistant Director

General Manager

Directors

Assistant Directors

General Manager

Directors

Asistant Director

General Manager

Managing Director

1: Literature review:

1.1 SWOT: A study undertaken by an organization to identify its internal strengths and weaknesses, as well as its external opportunities and threats.

1.2 Why SWOT analysis is important:A SWOT analysis is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective.. The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic.

Strengths: characteristics of the business or project that give it an advantage over others.

Weaknesses: characteristics that place the business or project at a disadvantage relative to others.

Opportunities: elements that the project could exploit to its advantage.

Threats: elements in the environment that could cause trouble for the business or project.

Identification of SWOTs is important because they can inform later steps in planning to achieve the objective.

First, the decision makers should consider whether the objective is attainable, given the SWOTs. If the objective is not attainable a different objective must be selected and the process repeated.

Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage.

1.3 BCG MATRIX: Was develop by the boston consulting growth and introduced the idea that an organization`s various businesses could be evaluated and plotted using a 2 X 2 matrix to

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identify which is offered high potential and which were a drain on organization resource. The horizontal axis represents market shear and the vertical axis indicates anticipated market growth. A business unit is evaluated using a SWOT analysis and placed is one of the four categories.

1.4. Five forces model:

Threat of new entrants: how likely is it that new competitor will come into the industry?

Threat or substitutes: How likely is it that other industries product can be substitutes for our industry`s products?

Bargaining power of buyer: How much bargaining power do buyers have?

Bargaining power of suppliers: How much bargaining power do suppliers have?

Current rivalry: How intense is the rivalry among current industry competitors?

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Findings & Analysis:

Strength:

Strong leadership from CEO Indra Nooyi Large, yet focused brand portfolio High level of customer loyalty for most of the brands within product portfolio Extensive experiences in mergers and acquisitions   Integrated supply-chain and distribution practices across PepsiCo brands

Weaknesses:

High level of dependence on large supermarkets such as Wal-Mart Overdependence on domestic market in the USA “Aquanfina” tap water scandal Tropicana Kids orange juice product recall.

 Opportunities:

Increasing presence in emerging markets such as China and India Engagement in product differentiation strategy Rising revenues through increasing  the share of healthy food and beverages in product portfolio

Threats:

New competitors from emerging economies from the East High amounts of sugar or salt in products being criticized by government and non-government health

organizations Rapid decline in the sales of carbonated drinks New product recalls due to quality scandals

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PEPSICO BCG MATRIX ANALYSIS

Stars: Pepsi, mountain dew, lay’ potato chips, Gatorade, Diet Pepsi, Tropicana beverages, 7 up (outside us), are star product because they grapes 70 % of market share of each product industry. growth rate also increasing day by day. Here net cash flow is 15 billion dollars.

Cash cows: Doritos tortilla chips, Lipton teas, Quaker foods and snacks, Quaker foods and snacks, Cheetos, mirinda, are cash cow of PepsiCo. Because they have low growth rate, high market share. Here net cash flow is about 10 billion dollars.

Question marks: Ruffles potato chips, Aquafina bottled water, Pepsi Max Tostitos tortilla chips, this kind of product of PepsiCo we can put in question marks site because they have high growth rate, low market share. Here net cash flow is 5 billion dollars.

Dogs: Sierra Mist, Fritos corn chips, Walkers potato crisps, this kind of products we can put on dog side because they have low growth rate, low market share. From those product PepsiCo net cash flow is 0 billion that means they earn few million from those products.

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Explain Porter’s competitive five forces model. Analyze your chosen company’s competitive environment.

The Porter’s Five Forces tool is simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position and the strength of a position you’re considering moving into.

Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are :

1.. Bargaining Power of Suppliers : Here you access how easy it is for suppliers to drive up price. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another.

2. Bargaining Power of Customers (Buyers) : Here you ask yourself how easy it is for buyers to drive price down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on.

3. Current Competitive Rivalry : If you have many competitors, and they offer equally attractive products and services, then you will most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don’t get a good deal from you.

4. Threat of Substitute Products or Services: This is affected by the ability of your customers to find a different way of doing what you do.

5. Threat of New Entrants: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and complete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken you position.

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In every business there are competitors, monopoly market is rare cause with now day’s people always come out with some twist with the old concept. Same as our company “Pepsi Co.” they have their competitors which are :

Coca-Cola Lipton Sprite 7up Mirinda Fanta Mountain Dew

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What strategies are they using to market their products? (Corporate level strategy, business level strategies and others.

PepsiCo adopted business level strategy by engage in a low cost differentiation strategy by taking advantage of economies of scale through mass production of its products and by differing their product through taste and marketing.

A pricing strategy in which a PepsiCo offers a relatively low price to stimulate demand and gain market share. it is one of the generic marketing strategies that can be adopted by any company. And is usually employed where the product has few or no competitive advantage or where economies of scale are achievable with higher production volumes also called low price strategy.

In year 2009, even when the recession ends PepsiCo Inc. made an announcement about creating new products at low prices to continue offering discounts in its Frito-Lay and beverage business.

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Recommendations:

Business environment is the sum total of all external and internal factors that influence a business. You should keep in mind that external factors and internal factors can influence each other and work together to affect a business.

External Factor

Political factors are governmental activities and political conditions that may affect your business. PepsiCo is a biggest company it is top in the market. But is a major factor but PepsiCo made it

Macroeconomic factors are factors that affect the entire economy, not just your business. Examples include things like interest rates, unemployment rates, currency exchange rates, consumer confidence, consumer discretionary income, consumer savings rates, recessions, and depressions. PepsiCo is so much micro economical

Social factors are basically sociological factors related to general society and social relations that affect your business. Social factors include social movements. PepsiCo made it very carefully but every time social factors not remain under control

Technological factors are technological innovations that can either benefit or hurt your business. Some technological innovations can increase company’s productivity PepsiCo has solved this factor.

Internal factors

Value system:The value system of the founders and those at the helm of the affairs has important bearing on the choice of business, the mission and objectives of the organization, business policies and practices. It is a widely accepted fact that the extent to which the value system is shared by all in the organization is an important factor contributing to success.

Mission and Objectives:The business domain of the company, priorities, directions of development, business philosophy, business policy etc.

Management structure and Nature:The organizational structure, the composition of the Board of Directors, professionalization of management etc., are important factors influencing business decisions. Some management structures and styles delay decision making while some others facilitate quick decision-making.

Human resources:

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The characteristics of the human resource like skill, quality, morale, commitment, attitude etc. It is a strong or weak point of a company

Company image and Brand equity:The image of the company matters while raising finance, forming joint ventures or the other alliances, soliciting marketing intermediaries, entering purchase or sale contracts, launching new products etc.

Miscellaneous Factors:There are a number of other internal factors which contribute to the business success/failures or influence the decision-making.

Strength of PepsiCo

Strong leadership from CEO Indra Nooyileadership is a great power of a company PepsiCo has strong enough

Large, yet focused brand they have thousands of product in the market and they are a famous brand & people trust their product

High level of customer loyalty for most of the brands within product people like PepsiCo’s product very much for their loyalty and their services. They trust PepsiCo as well its will make a huge profitable and safe business

supply-chain and distribution practices across PepsiCo brandsit’s a very good strength supply chain is needed strongly. PepsiCo has it if the product is not available in the e market how people take it.

How does PepsiCo strength & environment make it profitable? No question about PepsiCo’s inter factors of environment. It is ok not only ok its good.

External factors is more profitable. Like they have good chain supply. Its means their management structure is well going.

Customer loyalty is very need in business and PepsiCo have it. So that its means social factors is also well going as well political factors is also in it. So its look like that every external factors of environment becomes a strength of PepsiCo.

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Weakness & way to overcomeHigh level of dependence on large supermarkets such as Wal-Mart: PepsiCo can make over this weakness by taking some steps like they can depends on retailer shop or open their own PepsiCo shop where only PepsiCo’s product will be sold

Overdependence on domestic market in the USA: USA is a biggest and most challenging market of the world PepsiCo can make over this weakness by opening business in the other country

“Aquafina” tap water scandal they can make over this problem as well. They can built new source of water and built water purifier and restart the water business

Tropicana Kids orange juice product recall: everybody learn from the past so why not PepsiCo. They can remake kids orange juice and catch the market again but make sure that’s qualities.

Correct weaknesses (how they overcome those weaknesses) and guard against threats (how the business can protect itself from those threatsThreats & way to overcame

New competitors from emerging economies from the East: In business sight competitors are always gives pain from your back or front. They should be ready for that. They can make some different offers. Like combo offers buy 3 get one free or reduce value

High amounts of sugar or salt in products being criticized by government and non-government health organizations: PepsiCo can built verities of same product to recover this threats. Like low sugar low salt low fat of this same product. Ex diet coke diet Pepsi

Rapid decline in the sales of carbonated drinks: for this threats they can make various thing. Like combo offers, reduce value, make value in to 10 15 20 25 like this amount.

New product recalls due to quality: PepsiCo needs to recheck that’s product and make sure it’s better quality and remarketed that product

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Strategic Recommendation for PEPSICO.PEPSICO is currently a strong worldwide leader in the food and beverage industry. Throughout its growth, it has stayed true to its mission and objectives, while becoming a dominant force within the U.S.A as well as abroad. PEPSICO known throughout the world for their quality products and customer care. PEPSICO should make no major changes to its plan. However, like in any business situation there are areas that PEPSI Co can improve upon. Some of the recommendations are as follows:

• Continue to expand with their “Human sustainability”. The healthy eating market is a great fact that will continue to grow in the future and will provide gigantic profits if PEPSICO is able to obtain a large market share.

• Expand more social benefits, especially for those developing nations. Pepsi’s main competitor Coca-Cola has implemented a water purification program for African villages which provides a valuable need and at the same time introducing their brand name where it was before unknown. If Pepsi followed this strategy with food products and water purification it too would significantly increase brand recognition.

• Capture more of the aging population’s market share.

• PEPSICO should improve their employee relations in order to create employees all over the world that will promote the product both during workday and in their personal life in order to create “word of mouth watering”.

• PEPSICO should look to cut some of their expenses as they currently has 10 billion dollar more in revenue than the competition but they have a similar Net income of 5.5 billion dollar.

• PEPSICO needs to continue to expand their market share in the markets where they currently have a strong presence in order to maintain their market share and their footprint in the marketplace.

PEPSICO should become more proactive in the health food/product marketplace rather than being reactive to the market trends. They need to improve their responsiveness and future projections to market trends.

Conclusion:

PepsiCo is a very large company offering low-cost products in several industries. It remains to be easily understandable due to the similarity of its complement products. Due to the current high demand and popularity in PepsiCo products along with the company actions to adapt to a healthier preference market, the long-term prospects for the company appear to be good. The company should continue to grow at a standard rate. The management of PepsiCo is currently filled with honest and experienced employees. They have plans in place to reduce costs and expand their snack segment along with expanding the amount of healthy products offered. While PepsiCo’s management appears strong currently, retirements could cause it to change soon. PepsiCo also

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is not currently available at an attractive price. While the company is low risk and will likely continue to be profitable, there is a low possibility for a high return on investment.

References

Company’s official website ( www.pepsico.com )Wikipedia ( www.wikipedia.com )

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