PepsiCo: The Strategic Choices

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Introduction

PepsiCo is one of the most prominent players in the global food and beverage market. The change in the attitude of customers towards their health and the products they consume has led to the necessity of taking new measures in order to remain on this market. In the present-day situation, the PepsiCo Company needs to align its strategic choices to the selected generic strategy or strategies in the case of the use of multiple options and develop innovative products suitable for the modern customers.

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It is vital to consider all the company’s strengths, weaknesses, opportunities, and threats in order to successfully perform the changes and fill the needs of the market. Therefore, better performance of the company in the new appearing conditions solely depends on its ability to implement the plan of the new market entry faster than its principal competitor, the Coca Cola Company.

In order to analyze the current strategic choices of PepsiCo, it is necessary to identify its keystone, considering the use of generic strategies. The Porter’s model of generic strategies provides three strategic options for a company: cost leadership strategy (provision of low-cost products), differentiation strategy (developing a product with unique characteristics that has no parallel in any other company on the market), and focus strategy (achievement of cost or differentiation advantage within a narrow segment) (Porter’s generic strategies, 2007). Any chosen approach incorporates certain risks for PepsiCo, and the task of the company is to find a method to eliminate them by predicting the market reactions on given changes in the policy.

Generic (Porter) Strategy that PepsiCo Follows

Implementation of certain strategic choices for PepsiCo requires the definition of a chosen strategy from Porter’s model to ensure the increase in the company’s profitability. It is also vital to consider the possible compatibility in the case of selecting multiple strategies to provide the conditions for the future development of the company and eliminate the risks of not having any advantage (Porter’s generic strategies, 2007). Therefore, the quality of PepsiCo’s products should not suffer while reducing the price, which requires the creation of separate cooperating strategies to provide the best possible combination of the products’ characteristics such as their price, quality, and many others.

At present, PepsiCo is using the multi-strategy approach due to the availability of various types of snack and beverage products. Due to the existence of another strong player in the market, the Coca Cola Company, the policy of PepsiCo aims in the first place to reduce the company’s operational expenses to ensure the consequent reduction in the product price in order to remain competitive and make its products available to a more significant number of customer groups. Therefore, the primary strategy the company applies is the cost leadership strategy, which helps it to become a low-cost producer among similar companies (Ferguson, 2017). However, only one strategy is not enough for the company’s future increase in profitability, and there is a need for some other option to complement the cost leadership strategy.

In order to improve its competitiveness and, as a result, financial indicators, the PepsiCo Company resorts to another generic strategy, which is the broad differentiation strategy. The company gains an advantage over its competitors by introducing its new products with unique features to the customers. The diversity of the company’s products allows PepsiCo to introduce innovative solutions to meet the occurring changes in customer’s preferences.

The changes in the present-day society lead to the necessity to create a product with such characteristics that would satisfy most of them. Modern customers have become aware of the harm that food might bring to their health and tend to give preference to the products that have a less negative impact. Therefore, such products of the company as, for example, Lay’s potato chips now contain less amount of saturated fat to make the buyers choose this product over the analogs with a higher level of harmful materials (Ferguson, 2017). The combination of the cost leadership strategy and the differentiation strategy contributes to the increase in PepsiCo’s profitability and allows it to improve its image in the long run.

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Strategic Choices of PepsiCo Considering the Generic Strategy

The implementation of the primary and secondary strategies of PepsiCo requires the analysis of all its strengths, weaknesses, opportunities, and threats in order to align them with the chosen strategies of cost leadership and broad differentiation. The success of strategic choices of the company is defined by the combination of all these characteristics, and, therefore, it is necessary to consider their impact on the process of implementation of the strategic choices as a whole.

The primary strength of the PepsiCo Company is its strong marketing team, whose efforts boost the ability of the company to create the required image of the innovative products. The new aspirations of its customers for health are the principal factor that the company considers while offering its latest products (Pratar, 2018). Hence, PepsiCo positions itself as a brand that includes healthy snacks and beverages as well and benefits from the change of its image in the perception of its customers.

The company’s strong brand image also contributes to the implementation of its strategic choices. There are very few competitors, such as the Coca Cola Company, in this regard, and the situation allows PepsiCo to fill the needs of the market with its products (Pratar, 2018). That is why the possible new entrants on the market represent no threat to the company. The primary target of the company is young people, and the company’s brand is essential for them when making a choice about which product to purchase.

However, due to the pressure from its main competitor, the Coca Cola Company, the principal weakness of PepsiCo is the allocation of resources. Due to the development of innovative products, there is a need to adjust the products to the appearing customer’s demands for their successful representation on the market (Pratar, 2018). At the moment, the company is in the process of finding a suitable solution for the production of healthier products. Its principal target is to reduce costs through improving and modernizing the manufacturing process and packaging technology as well as making improvements to the portion size to satisfy all the customers.

Together with the use of strengths and opportunities of PepsiCo, there is a need for elimination of the company’s weaknesses and the prediction of possible threats. The rapid social and political changes do not leave much time to adjust to the new market conditions, and it is necessary to increase the flexibility to facilitate the process. PepsiCo is, therefore, taking some measures and allocating the resources to achieve better representation on the market, but the situation creates a possible threat for the company (Pratar, 2018). Once its competitor, the Coca Cola Company, becomes more flexible and adjusts to the situation faster, PepsiCo might lose an enormous amount of customers concerned about their health. Moreover, the possible heavy tax policies contribute to the necessity to accelerate the process of gaining the required level of flexibility.

Another threat comes from the increase in operational costs due to such unpredictable economic reasons as the increase in the expected rate of salary or medical and retirement expenses. Besides, some other operational expenses include the development of the mentioned above innovative solutions on the portion size and packaging of PepsiCo’s products. Thus, the primary task for the company is to eliminate the problem of additional operational expenses by taking extra measures and increase its flexibility in general in the event of further economic and political changes.

Ways to Alter the Strategic Choices to Achieve Better Performance

Although most of the strategic choices of the PepsiCo Company align with the chosen generic strategies, it should also expand the cooperation with other companies and promotional campaigns to get a better result and increase its profitability. Up to this moment, the company greatly benefited from sports marketing and sponsorships. For example, being a partner with the UEFA champion’s league, it managed to promote such brands as Lay’s, Gatorade, and Pepsi (Pratar, 2018).

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Such a partnership can contribute to the further increase of awareness of PepsiCo’s latest products and build the customers’ loyalty based on its unique features. The promotion of the PepsiCo’s brand to the new essential markets can help to cover the operational costs partially. Therefore, sports marketing would become the instrument of increasing the company’s flexibility over time in the case of unexpected political or economic changes.

The flexibility of the PepsiCo Company can also contribute to the exploration of the new market spaced without much competition. The so-called “blue ocean” or, in other words, the unexplored niche market ensures a vast range of opportunities for the creation of demand and the consequent growth of the company (Kim and Mauborgne, 2009). Until the rules for the players in the market are set, there is a chance to assert the position of PepsiCo without additional expenses on marketing campaigns and aggressive approach used to outcompete its rivals.

In addition to the already taken measures and the suggestions represented above, there is another method of reducing operational costs while producing innovative products in order to avoid the decrease in the company’s profitability. For this, PepsiCo needs to seek resources from the other companies to facilitate a part of the required operations (Iansiti and Levien, 2004). The production of the innovative products of PepsiCo includes the developments considering their packaging, portion size, and other characteristics. The recommendation to start cooperating with a company that specializes solely in finding solutions for product packaging would be exceptionally profitable for both PepsiCo and the company providing the services. It will also lead to a reduction in operational costs.

PepsiCo’s Vision and Mission

In the new market conditions resulting from the change of customer’s attitude towards their impact on health and the existing risks of economic and political changes, the PepsiCo Company is seeking new ways to satisfy the demand. The mission of PepsiCo contains numerous improvements that have already been implemented together with the new measures that are to be taken at the earliest opportunity. The need for the generic strategy implementation relates to the existing market pressure from PepsiCo’s principal rival, the Coca Cola Company. Therefore, the mission of the PepsiCo Company is to maintain competitive advantages in the conditions of social, economic, and political changes, as well as to improve its financial performance.

Conclusion

The principal risks for the PepsiCo Company in the process of implementing the cost leadership and broad differentiation strategies lies in the lack of the company’s flexibility and need for a change in the allocation of its resources in order to avoid additional operational costs due to the new market entrance. The PepsiCo Company is making considerable efforts to invest in the marketing of new products and improve the brand image among the customers. However, its weaknesses might significantly influence the success of the implementation of the strategic choice. In order to make the company more sustainable, new measures should be taken.

The primary measure to maintain profitability is the search for the new possible partnerships and promoting campaigns, mostly in the area of sports, as it is directly connected to human health as the principal concern of the product’s customers. Another essential strategic choice would be the use of resources of another company, e.g., a packaging company, in order to reduce the production costs. Implementation of the already existing strategic choices coupled with the new suggestions can contribute to the elimination of the company’s principal weaknesses and its promotion on the new market.

References

Ferguson, E. (2017). PepsiCo’s generic and Intensive growth strategies. Web.

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Iansiti, M. and Levien, R. (2004). Strategy for small fish. Harvard Business School Working Knowledge. Web.

Kim, W. C. and Mauborgne, R. (2009). What is BOS? Nine key points of Blue Ocean Strategy. Web.

Porter’s generic strategies. (2007). Quick MBA. Web.

Pratar, A. (2018). Business growth and marketing strategies of Pepsi. Web.

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