Pepsi's strategy development process: Applying strategic management concepts

The main intended strategy for Pepsi is one of growth and competitive advantage within there market share. For Pepsi to develop these strategies effectively it has been noticed that all aspect internally and externally within the industry must be carefully analysed and examined. This means taking a look at the company's' SWOT and PESTEL analyse (section one) to understand how the company has been a continuous success in the industry.

Pepsi has seen that with strong leadership strategic development and change are seen to become dependent of each other.

Pepsi leadership has bought in successful strategies with change of there mission and objectives moving Pepsi into a more forward and productive direction.

Pepsi also uses the idea of logical incrementalism via producing and innovating new and existing products. 'Learning through doing approach' to ensure a successful way to success.

The company having a product/geographical structure plays an important role in developing the growth and marketing strategy.

Also with PepsiCo introducing the Business Process Transformation shows Pepsi is continuously updating there ideas and processes to ensure and improve the products strategy more efficiently and successfully.

Get quality help now

Marrie pro writer

Verified writer

Proficient in: Business

5 (204)

“ She followed all my directions. It was really easy to contact her and respond very fast as well. ”

+84 relevant experts are online

Hire writer

INTRODUCTION

For an organisation to formulate and process their strategies senior managers must be able to objectively assess and analyse their industry and its environment. This is the policy that Pepsi have addressed to hopefully allow their strategies to maximise the chances for success in an uncertain future.

STRATEGIC PROCESS AND DEVELOPMENT

Pepsico had a continual strategy that was to try and beat Coca-cola in markets that they had established themselves over twenty years ago.

Also to keep the fast food segments in the market and profit of them. They did not seem to have any strategy for marketing of Pepsi and other entities. Hence Pepsi focused on aiming for lower cost production in its bottling and distribution units they did not pay much attention on their external reputation.

When John Enrico, CEO of Pepsico, took over he begun to change the mission and objectives of the company. A mission statement and objectives describes the company in terms of its purpose and value they become an 'image of what success will look like'. Enrico showed strong leadership in specific ideas on how to bring the company forward. He recognised the following objectives to be put into place:

* To stop trying to beat Coca-cola in markets in which coke had won over 20 years ago and now focus on targeting underdeveloped markets

* Target grocery dales especially in the US, which seemed to be Pepsi's greatest strength

* Sell of entities that are hurting corporate profits (Pizza Hut, taco Bell and KFC)

* Increase the demand for Pepsi stock

Once these objectives had been put into place it was important to research them on how to implement them within strategy. Enrico personally visited 25 CEO's of major supermarket chains and begun a sales pitch. This emphasised the importance of focusing on the supermarkets sector of the industry and hence introducing a strategy.

Pepsico needed to see where they lied in the market to process there strategies, this can be done by SWOT (see table below) and PESTEL analyse (see section one).

Swot

Bulk of Pepsi profits are in supermarket segments

Weakness

Inability to serve the external stockholders, poor market share, no company direction

Opportunities

Pepsi to target countries that are underdeveloped in the cola market to increase demand

Threat

Competition from Coca-cola, any food restaurants and snack food

(Source: J. Byrne, "Pepsico New Formula", 10 April 2000)

This analysis of the environment of which it is operating in enables the understanding and process of the marketing strategy. As it helps demonstrate how a company like Pepsi has managed to continue to maintain a success for a long period of time. With all the information and analysis of results the critical issues must be addressed and strategies will begin to be implemented to overcome them successfully.

Pepsico has implemented a policy of diversification by structuring their products into three different major divisions; beverages, snack food and restaurants. Pepsico have chosen this approach to allow an overlap between the value chains of its divisions. This allows the company to bring down costs or even increase customer loyalty across its product line (please see section two). Allowing Pepsi to maintain and develop there intended strategy to lower cost production and increase customer loyalty with demand sales also implementing the use of product innovation strategy.

The corporate strategy is one of growth; this strategy can help to be implemented by the process of the company structure. The way the company is set up allows for each division to report the returns on individual products, and how well the products are doing in different geographical locations. If a product is failing in certain area, the company can therefore be able to focus on the specific product to find out reasons for the downfall. Hence allows them to analyse and evaluate individual performance.

Pepsi tends to stand out alot from their company by successful marketing campaigns hence due to their structure they are able to change marketing strategies in different geographic locations with more ease (please see figures 1 and 2).

Figure 1 (Source: Pepsico Annual Report 2004)

Figure 2 (Source: PepsiCo annual Report 2004)

It has been noticed that Pepsi needs very specific strategies based on the certain area what works in one country may not work in another. Therefore with the use of local marketing firms its' important to implement a successful strategy to 'fit' the different geographic locations.

Pepsi uses Business Process Transformation (BPT) to help with the process of there future growth strategy. As PepsiCo has undergone major changes over the past few years, the many products that are part of their 'family' come with there own processes and systems, BPT helps consolidate these to work as one.

As the market place evolved retailers begun to combine, placing growing demands on manufacturers to provide greater efficiency and value. BPT will simplify and improve the process to move strategically forward and result in a stronger performance. Making it easy to adapt to the ever changing preferences of consumers.

BPT allows flexibility in the process of the key activities allowing the company to change any products through better control of their supply chain, greater accuracy in our operations, removing the need for checking which achieves efficiencies and consistency by delivering lower costs through simpler processes and expanded IT capabilities. Most importantly the data it produces is reliable and resourceful that will allow Pepsi to have a reliant strategic tool.

CONCLUSION

For the process of strategic formulation the company must involve intuition, reflection and interaction between thought and action. Pepsi's use of concepts, theories and analytic frameworks all work well to process strategies but also with the company experience, commitment and creativity makes it even more successful. Whether strategies are intended or realised the importance is on the systematic analysis being a vital input into the strategy process. Without analysis the process of strategy formulation is likely to be chaotic with no basis for campaigning and evaluating alternatives.