(Tiểu luận) topic analyzing the external environment of pepsico(soft drink)

NATIONAL ECONOMICS UNIVERSITY -*** - TOPIC: ANALYZING THE EXTERNAL ENVIRONMENT OF PEPSICO (SOFT DRINK) *** Essentials of Management CLASS: EMQI 63 GROUP 02 Lecturer: Phùng Minh Thu Thủy HA NOI, 2022 MEMBERS OF GROUP 02 Hoàng Khánh Hương – 11212506 Tăng Hà Anh - 11210748 Tạ Ngọc Mai - 11213716 Đặng Diệu Hương - 11212491 Huỳnh Mai Phương - 11214757 Nguyễễn Phương Anh - 11210588 Table of contents I INTRODUCTION Pepsico overview The process of formation and development of Pepsico Socio-cultural factor Technological factor Economic factor Political factor: .6 Natural factor II ANALYZING THE EXTERNAL ENVIRONMENT OF PEPSICO .4 III ANALYZING PESTLE & PORTER’S FIVE FORCES: Pestle a Political Factors Affecting PepsiCo’s Business b Economic Factors Important to PepsiCo c Social/Sociocultural Factors Influencing PepsiCo’s Business Environment .8 d Technological Factors in PepsiCo’s Business e Ecological/Environmental Factors f Legal Factors in PepsiCo’s Industry 10 Porter’s five forces analysis 10 a The threat of new entry: 10 b Rivalry among established companies: .11 c Bargaining power of customers: 11 d Bargaining power of suppliers: 12 e IV The threat of substitutes: .13 CONCLUSION .13 V REFERENCES 16 I INTRODUCTION Pepsico overview PepsiCo, Inc is an American food and beverage company that is one of the largest in the world, with products available in more than 200 countries It took its name in 1965 when the Pepsi-Cola Company merged with Frito-Lay, Inc The process of formation and development of Pepsico - The first Pepsi-Cola was created by Caleb D Bradham, a pharmacist in New Bern, North Carolina The drink proved so popular that in 1902 Bradham incorporated the Pepsi-Cola Company After many years of moderate prosperity, the company fell on hard times after World War I and was reorganized and reincorporated on several occasions in the 1920s - In 1931 the company’s trademark and assets were picked up by Charles G Guth, founder of the modern Pepsi-Cola When in 1941 the Pepsi-Cola Company was merged into Loft, the name Loft, Inc., was changed to Pepsi-Cola Company - In 1950 Alfred N Steele, a former vice president of Coca-Cola Company, became a chief executive officer His emphasis on giant advertising campaigns and sales promotions increased Pepsi-Cola’s net earnings 11-fold during the 1950s and made it the chief competitor of Coca-Cola With the merger, PepsiCo’s popular brands included Pepsi cola, Frito-Lay snack products, Lipton Tea, Tropicana juices, Gatorade sports drinks, Quaker Oats cereals, and Rold Gold pretzels - In the early 21st century, PepsiCo focused on expanding its operations in other countries, notably Russia, which was its second-largest market In 2008 it bought a controlling interest in JSC Lebedyansky, Russia’s largest juice manufacturer, and three years later it completed its acquisition of Wimm-Bill-Dann Foods Those investments helped make PepsiCo the largest food and beverage company in Russia With roots dating back to 1898, PepsiCo Beverages North America (PBNA) is one of the largest beverage companies in North America today, generating more than $22 billion in net revenue in 2020 II ANALYZING THE EXTERNAL ENVIRONMENT OF PEPSICO Socio-cultural factor First, socio-cultural factor influences its customers and competitors The health issue brought by drinking soft drinks is one of the issues of socio-cultural factor Since more and more diseases are caused by unhealthy food, such as obesity and heart diseases, more people are concerned about their health As a result, in 1964, Pepsi produced “Diet Pepsi” which calorie was added while normal coke contained 100 calories It attracted more customers who were concerned about their health would rather prefer Diet Pepsi instead of other high calories soft-drinks because Pepsi promoted a healthier lifestyle It directly reduced the profit of other soft-drinks company In order to compete with Pepsi, Coca-cola followed what Pepsi did before, it produced “Cokezero” to increase profits On the other hand, because of the awareness of healthy lifestyle increase, people are willing to spend more time on exercising and doing sports Hence, Pepsi made some contributions to push this socio-culture forward, for example, it sponsored the United States’ National Football League from 2002 to 2011 Also Pepsi invited David Beckham and Lionel Messi for advertising its products After customers realized Pepsis’ contributions, they will have a good impression for Pepsi and continue to support this company Technological factor Secondly, Pepsi’s technological factor influences its suppliers Since the market for soft drinks is competitive, Pepsi has to maximize the number of its products to enhance its market size PepsiCo is well placed to take advantage of the latest technological disruptions Using big data analytics and machine learning capabilities, PepsiCo can streamline their R&D processes and launch more targeted, focused marketing campaigns across the entire gamut of digital media Automation technologies can also help the company increase the efficiency of their production and logistics processes Advancements in artificial intelligence can help the company optimize their supply chain and build a better infrastructure for catering to its patrons Economic factor Thirdly, economic factor influences its customers and competitors Due to the economic cycle, inflation, changes the demand of Pepsi’s products from the customers Let’s take the Great Depression in 1931 as an example Because of the expensive price of sugar at that time, Pepsi made a huge financial loss and entered into bankruptcy Pepsi had to lower the price of the coke at cents (a nickel) per 12 ounces bottle which was the same price as Coca-cola’s ounces bottle As a result, the demand of Pepsi increased and it expanded its market shares of Pepsi The Great Depression changed the type of Pepsi’s customers and the market power of its competitors Pepsi lowered the price of its products, on the one hand, had increased the willingness of poor people to try its coke On the other hand, it encouraged regular customers of Coca-cola to switch their favorite coke suppliers to Pepsi because the price of Pepsi’s coke was cheaper than Coca-cola’s coke Hence, Pepsi had attracted two types of potential customers Due to more customers preferring Pepsi instead of Coca-cola, the market power of Pepsi became stronger while the market share of Coca-cola shrank Political factor: Fourthly, political factor influences the soft-drink industry regulatory bodies and customers Inarguable, coke is an unhealthy drink, many toxic ingredients are added to the coke which increases the chance of developing cancer Therefore, the government has to set up laws to monitor the ingredients of all kinds of drinks In the United States, the government set up a maximum standard of ppb level of benzene for all drinking products (Ahmed, 2007) In July 2007, the Food and Drugs Administration, the United State’s industry regulatory body, examined the products of Pepsi and found that the products contained more than ppb level of benzene (Ahmed, 2007) Pepsi had to remove its products from stores and offered refunds to the customers Therefore, the incident made the customers lose confidence on Pepsi’s products, especially adult customers because they are more aware of their health than teenagers Natural factor Document continues below Discover more from: Operations Management Đại học Kinh tế Quố… 132 documents Go to course 37 17 29 12.3 Phạm Tố Uyên OM - OM_Individuals_123 Operations Management 100% (1) OM Group-3 Report Business Idea Operations Management 100% (1) Report Artemis Smart Watch Operations Management 100% (1) Tài liệu OM - OM document Operations Management Final Paper Operation… 100% (1) Operations Management 100% (1) Operations and Project Management Fifth, environmental factor influences its advocacy 27 groups Nowadays, the Operations problem of energy shortage becomes more and more serious One of the reasons of 100% (1) Management energy shortage is that industrialization consumes lots of fuels for manufacturing goods that leads to energy crisis Advocates of environmental protection persuade companies to enhance energy efficiency in order to help sustain the environment For example, in 2009 the United States’ Environmental Protection Agency held a program called ”Climate Leaders Program” to persuade companies to protect environment (”Pepsi and the environment.”) 2010 Pepsi participated in this program and the managers stated that they would decrease its fuel use by 25 percent per bottle by 2015 PepsiCo has established a GEHSMS Air Quality Management Standard to define minimum requirements and best management practices to ensure that each applicable PepsiCo facility and selling operation complies with applicable air regulations and applies risk management practices to reduce impacts on human health and the environment In 2010, Pepsi was awarded “Sustained Excellence Award” by Environmental Protection Agency due to their contributions of protecting environment (”Pepsi and the environment.” 2010) III ANALYZING PESTLE & PORTER’S FIVE FORCES: Pestle a Political Factors Affecting PepsiCo’s Business Governments are external factors that impose requirements on PepsiCo This element of the PESTEL/PESTLE analysis considers the effects of governmental action on companies’ remote or macro-environment PepsiCo must address the following political factors: + Political stability in major economies (opportunity) + Improved intergovernmental cooperation (opportunity) + Government initiatives against carbonated drinks (threat) Major economies like the United States and Canada are politically stable, thereby presenting growth opportunities for PepsiCo In addition, the trend of intergovernmental cooperation improves opportunities for global expansion However, government initiatives against sweetened carbonated drinks are a threat that could reduce PepsiCo’s revenues from affected segments In this element of the PESTEL/PESTLE analysis, PepsiCo must consider changing its products to overcome the identified threat of carbonated drinks b Economic Factors Important to PepsiCo PepsiCo’s performance is directly linked to the economy The influence of economic conditions on the remote or macro-environment of businesses is covered in this element of the PESTEL/PESTLE analysis The political external factors that relate to PepsiCo are as follows: + The economic stability of most major markets (opportunity) + The rapid growth of developing economies (opportunity) + The slowdown of the Chinese economy (threat) PepsiCo has opportunities for growth and expansion based on the economic stability of developed countries like the United States, as well as the high growth rates of developing economies, such as those in Asia However, the current slowdown of the Chinese economy threatens PepsiCo’s potential international growth, considering that China is among the biggest economies in the world This element of the PESTEL/PESTLE analysis shows that PepsiCo must ensure market diversification to achieve stable international growth c Social/Sociocultural Factors Influencing PepsiCo’s Business Environment Many of PepsiCo’s consumers follow sociocultural trends This element of the PESTEL/PESTLE analysis identifies the impact of social conditions and changes on companies’ remote or macro-environment The following are notable sociocultural external factors relevant to PepsiCo’s business: + Higher health consciousness (threat & opportunity) + Increasing busy lifestyles (opportunity) + More discriminating attitudes about product quality (opportunity) Higher health consciousness is a threat to PepsiCo because of concerns about the sugar, salt, and fat content of its products However, this external factor also presents the opportunity for the company to improve its products to address such concerns PepsiCo can also take advantage of the busy lifestyles of consumers, especially in urbanized and industrialized markets around the world People with these lifestyles are more likely to purchase ready-to-eat food products like those of PepsiCo The company has the opportunity to continue enhancing product quality to maximize revenues, with regard to consumers’ increasingly discriminating attitudes about product quality Based on this element of the PESTEL/PESTLE analysis, PepsiCo must align its products and marketing strategies to changes in consumer behaviors d Technological Factors in PepsiCo’s Business PepsiCo’s business is partly dependent on technologies The link between technological change and companies’ remote/macro-environment is examined in this element of the PESTEL/PESTLE analysis The technological external factors significant to PepsiCo are as follows: Moderate R&D investments in the food and beverage industry (opportunity) Improving knowledge management systems (opportunity) Increasing automation in business (opportunity) Based on moderate research and development (R&D) investments in the industry, PepsiCo can boost its own R&D investments to improve its competency in this business aspect Also, PepsiCo can exploit the benefits of knowledge management systems to support its various business processes, such as product innovation and strategic decision-making In addition, an increase in the number of automated processes in the company can enhance business performance This element of the PESTEL/PESTLE analysis indicates that PepsiCo must include new technologies as tools to improve business competitiveness e Ecological/Environmental Factors PepsiCo’s supply chain and brand image are linked to environmental concerns This element of the PESTEL/PESTLE analysis considers the ecological trends and issues that affect consumers, employees, and companies’ remote or macroenvironment The following ecological external factors are significant to PepsiCo: + High focus on business sustainability (opportunity) +More complex expectations and standards on waste disposal (opportunity) + Climate change (threat & opportunity) Consumers are now pushing companies like PepsiCo to improve their sustainability standing In relation, PepsiCo can improve its waste disposal strategies, such as recycling, to gain more support from customers On the other hand, climate change poses a threat to PepsiCo’s supply chain However, the company can further diversify its global supply chain to minimize risk exposure to climate change Based on this element of the PESTEL/PESTLE analysis, PepsiCo must improve its environmental impact to attract and retain customers, and to stabilize its supply chain f Legal Factors in PepsiCo’s Industry PepsiCo and its competitors are subject to legal requirements Such requirements and regulations are evaluated in this element of the PESTEL/PESTLE analysis in terms of their effect on the industry’s remote or macro-environment The legal external factors relevant to PepsiCo’s business are as follows: + Regulation on GMO ingredients (opportunity) + Health and product safety regulations (opportunity) + Moderate rate of regulatory change (opportunity) 10 Genetically modified organisms (GMOs) are now increasingly regulated worldwide, particularly in Europe PepsiCo has the opportunity to reduce its use of GMO ingredients to satisfy these regulations Similarly, the company can improve products to address regulations about product safety and health effects The moderate rate of regulatory change gives the opportunity for PepsiCo to grow with the expectation that its current strategic decisions will satisfy regulatory requirements in the long term In this element of the PESTEL/PESTLE analysis, it is shown that PepsiCo can focus on product innovation to comply with regulations Porter’s five forces analysis a The threat of new entry: PepsiCo must remain strong despite the possibility of new firms competing against it The external factors that maintain the moderate threat of new entry against PepsiCo are as follows: + Low switching costs (strong force) + Moderate customer loyalty (moderate force) + High cost of brand development (weak force) New firms threaten PepsiCo because consumers can easily shift from one company to another (low switching costs) However, through moderate customer loyalty, PepsiCo has a corresponding level of protection from new entrants Also, the high cost of brand development makes it difficult for new entrants to directly compete against PepsiCo, which has one of the strongest brands in the industry External factors make the threat of new entrants a secondary concern for PepsiCo’s management b Rivalry among established companies: The Coca-Cola Company is one of PepsiCo’s biggest competitors However, this component of the Five Forces analysis shows that there are other factors that determine the influence of competitive rivalry The following are the most notable external factors that create the strong force of competition against PepsiCo: 11 + High aggressiveness of firms (strong force) + Low switching costs (strong force) + High number of firms (moderate force) Most firms in the food and beverage industry are aggressive, such as in product innovation and marketing, thereby exerting a strong force on PepsiCo Competitive rivalry is also strengthened because consumers can easily shift from one provider to another (low switching costs) In addition, PepsiCo competes with many other firms, including big ones like the Coca-Cola Company and a multitude of small and medium ones This component of the Five Forces analysis shows that PepsiCo faces strong competitive rivalry as one of its most pressing concerns c Bargaining power of customers: Consumers are among the top priorities in PepsiCo’s mission statement The effects of customers on the firm’s industry environment are determined in this component of the Five Forces analysis The external factors that lead to the strong bargaining power of PepsiCo’s consumers/buyers are as follows: + Low switching costs (strong force) + High access to product information (strong force) + High availability of substitutes (strong force) As noted, consumers can easily shift from one firm to another This condition strengthens customers’ ability to influence PepsiCo In addition, consumers have extensive information for them to easily make choices between PepsiCo products and competing products Also, substitutes give buyers even more reasons to stay away from PepsiCo products Based on this component of the Five Forces analysis, PepsiCo must ensure customer satisfaction to maximize its revenues d Bargaining power of suppliers: 12 PepsiCo must maintain profitable relationships with suppliers This component of the Five Forces analysis covers the impact of suppliers on the company’s industry environment The weak bargaining power of PepsiCo’s suppliers is based on the following external factors: + High overall supply (weak force) + Low forward integration of suppliers (weak force) + Moderate size of individual suppliers (moderate force) The high overall supply increases PepsiCo’s options in acquiring raw materials, thereby reducing the bargaining power of suppliers This power is also weakened because of the low forward integration, which limits suppliers’ control of PepsiCo’s supply chain These external factors weaken suppliers’ influence on the company even though some of them are moderately sized or large firms This component of the Five Forces analysis indicates that suppliers’ bargaining power is a low priority for PepsiCo e The threat of substitutes: PepsiCo’s products could be substituted, based on consumer preferences and other variables The influence of substitution on the firm’s business and industry environment are examined in this component of the Five Forces analysis The following external factors contribute to the strong threat of substitutes against PepsiCo: + High performance of substitutes (strong force) + Low switching costs (strong force) + High availability of substitutes (strong force) Most substitutes to PepsiCo’s products are satisfactory For example, consumers easily enjoy real fruit juices and brewed coffee products instead of drinking Pepsi or 13 Tropicana products In addition, PepsiCo consumers can easily shift to these substitutes, which are generally affordable Also, most of these substitutes are widely available in grocery stores and other providers Based on this component of the Five Forces analysis, the external factors make the strong threat of substitution a priority issue facing PepsiCo IV CONCLUSION In summary, it can be said that while PepsiCo faces threats from political instability and economic downturn, innovative, health-driven product lines and sustainable business practices can help global businesses maintain a leading position in the market and even expand into new territories To conclude, to set an intelligent goal, Pepsi should understand its external environment and organizational culture to have more information for formulating strategies For example, managers should understand their customers’ needs in order to maintain their profit margin Having an intelligent goal can help the company to succeed Hence, understanding the external environment of a company is an important step to let it have further development Pepsico has a relatively harsh environment because there are many competitors, global consumers are increasingly health conscious, and the company's raw material supply is limited because Pepsico is a big business However, those limitations help Pepsico perfect and develop further, providing global consumers with better quality products, and meeting the increasing demands of modern consumers 14 V REFERENCES Ahmed E (2007) Pepsi and other settle benzene lawsuit Retrieved January 2, 2014, from http://www.foodproductiondaily.com/Safety-Regulation/Pepsi-and-others-settle- benzene-lawsuit MNN (2010) Pepsi and the environment Retrieved January 2, 2014, from http://www.mnn.com/money/sustainable-business-practices/stories/pepsi-and-theenvironment# foodprocessing-technology (n.d.) PrGatorade Plant, Pepsi Co, Oklahoma, United States of America Retrieved January 2, 2014, technology.com/projects/gatorade/ 15 from http://www.foodprocessing- PepsiUSA (n.d.) Pepsi- FAQs Retrieved January 2, 2014, from http://www.pepsiusa.com/faqs.php?section=highlights Farooq, U (2019) PESTLE Analysis of PepsiCo | Marketing Tutor, Marketing Tutor Available at: https://www.marketingtutor.net/pestle-analysis-of-pepsico/ (Accessed: 15 September 2022) Suntory PepsiCo Suntory PepsiCo (2022) Available at: https://suntorypepsico.vn/ (Accessed: 15 September 2022) 16