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When making any investment decision, it is necessary for a prospective financier to gain insight into the company. An examination of the company's strengths, weaknesses, chances, and hazards will assist the financier figure out if the endeavor is worth entering into (Nickels, McHugh & & McHugh, 2010). It likewise provides information about the internal status of business and the future development to anticipate in the future. SWOT Analysis
Carrying out a SWOT analysis of PepsiCo will assist the company figured out where modification is possible.
If the company is at a turning point, a stock of its strengths and weak points can expose possibilities. The recognized strengths can be built on and used to their complete potential and makes can be made to decrease the weak points. Possible problems that need to be addressed or at least acknowledged are identified. It will assist PepsiCo discover what it succeeds, could enhance, whether they are maximizing the chances around them, and whether there are any modifications in the market that might need changes in the company (Nickels et al., 2010).
Strengths
PepsiCo has a varied product portfolio that includes foods, snacks, and beverages with yearly earnings of over billion.
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The PepsiCo brands such as Pepsi, Gatorade, Tropicana, Mountain Dew, Lay's, Aquafina, Sierra Mist, Fritos, and Quake mean quality and are well recognized family names. These brands create over $1 billion each in annual international sales earnings which provides PepsiCo a benefit over its competition that have restricted line of product ("Brands," 2012).
Lower sales in one line of product because of unforeseeable situations can be balanced out with promoting sales from another item line.
PepsiCo's geographical footprint is another strength of the company. It currently runs in more than 200 countries worldwide which supplies PepsiCo with diverse earnings sources. In 2011, only 50% of the company's revenue came from the United States however this did not effect PepsiCo's overall revenue growth because of the business's increasing income from other parts of the world like Asia, Russia, Europe, and Latin America ("The Power of PepsiCo," 2012).
Weaknesses
With the diverse portfolio of PepsiCo, not all products produced by this company bear it name and its holdings are still seen by the public as separate entities, not as parts of PepsiCo. Its branding is not obvious and not easily recognized and this is hurting the image of the company. One of its most popular brands, Gatorade, recently changed its name to multiple sub-brands such as “G Prime 01,” and “G Series Pro 03 Recover” (Edwards, 2011).
PepsiCo is gradually losing its credibility because of its lack of stability in management. The company has a high turnover rate and in the last four years, 26 senior marketing managers have resigned and those that are still with PepsiCo have been moved from one brand to another or from one division to another (Edwards, 2012). The revenue of PepsiCo is over dependent on sales to Wal-Mart. In 2011, approximately 18% of PepsiCo’s North American net revenue was from sales to Wal-Mart (including Sam’s Club). As a result PepsiCo is highly influenced with the business strategies of Wal-Mart (“The Power of PepsiCo,” 2011).
Opportunities
PepsiCo is investing its resources by expanding its operation in emerging foreign markets like China and Russia and developing continents like Africa. With the company’s recent purchase of Wimm-Bill-Dann, a Russian food and beverage company with huge market shares in dairy and juice products, PepsiCo will expand greatly its presence in Eastern Europe and Central Asia and is expected to increase its annual sales revenue by $5 billion (“Pepsi Absorbs Wimm,” 2011).
PepsiCo recently signed a partnership agreement with Theo Muller, a German dairy company to sell its dairy products in the US starting with yogurt. PepsiCo will also invest in research to create new dairy products for the US market. This is a great opportunity for PepsiCo to increase its future revenue because it is predicted that annual revenue of $9 billion will be generated by 2016 with nearly 100 million American households expected to buy yogurt products (Steinberg, 2012).
Threats
PepsiCo faces a strong competition from The Coca-Cola Company, its primary competitor in the carbonated beverage category. These two companies have had a long history of rivalry since the 1800s with Coca-Cola has a leader for most of the period. PepsiCo recently lost its five-year partnership deal with Dunkin’ Brands to Coca-Cola. Coca-Cola products will now be offered in 7,000 Dunkin’ brands outlets instead of PepsiCo products. In January 2012, Dunkin’ Brands announced the plan to double their outlet stores to 14,000 over the next 20 years. This is a huge revenue loss for PepsiCo (Fisher, 2012). Also in 2010, Diet Coke overtook Pepsi to become the second largest soda brand in the Unites States behind Coke, moving Pepsi to third (Theodore, 2012).
There has been a steady decline in carbonated drink sales for the past seven years in the US with total sales dropping one percent in 2011. Americans are now turning to healthier food and drinks like bottled waters to avoid the high sugar contents in soda (“Soda Sales Fall,” 2012). Even with the diverse portfolio of PepsiCo, this decline in sales of carbonated soda drinks will have a negative impact on its total revenue.
United States federal, State, and local laws and other regulatory authority in foreign countries could have a negative impact on the sales and profitability of PepsiCo. PepsiCo’s marketing, manufacturing, and distribution of its products can be affected as a result of what the government dictates. Also Governmental agencies that exist where PepsiCo operates can impose new labeling, accounting standards, product requirement, marketing practices, and taxation requirement. In California, PepsiCo is required to post a warning label on any product sold that contains a substance that the state has found to cause cancer or birth defect. If this type of law is enacted in other states or foreign countries, it would affect the sales of PepsiCo products (“The Power of PepsiCo,” 2011).
Investor Analysis
As a result of the SWOT analysis, investing in PepsiCo would yield a positive return on investment. The analysis shows a strong company with increase in earnings for the past five years. PepsiCo’s increasing presence in developing countries is most relevant in the decision to invest. With nearly 72% of the world’s processed food consumption in 2050 predicted to be happening in developing countries because of increase in population, this will give PepsiCo a competitive edge.
Internal and External Stakeholders
The success or failure of PepsiCo is determined by how the wants and needs of its internal and external stakeholders are met. The internal stakeholders of PepsiCo are associates, shareholders, and board of directors. The external stakeholders of PepsiCo are consumers, local and foreign communities, retail and food service customers, partners, suppliers, and competitors.
PepsiCo meets the needs of its associates by providing a supportive and empowering workplace. The company helps its employees to succeed by helping them develop the skills needed to increase the growth of the company (“Talent Sustainability,” 2012).
The need of the shareholders of PepsiCo is met by striving to deliver top of the line financial performance and providing a high return on their investment (“Performance,” 2012). In 2011, the dividends paid to PepsiCo’s shareholders was six percent higher than 2010 ((“The Power of PepsiCo,” 2011).
PepsiCo provides its consumers with a diverse list of products that delivers affordability and great taste. The company has recently begun offering consumers a wide range of healthy foods and beverages. Current products are constantly been improved and new products created to meet the changing needs of consumers (“Stakeholders Engagement,” 2012).
Local jobs are created in the developing countries that PepsiCo operates in. PepsiCo provides support for education through PepsiCo Foundation grants. The company is working to protect the water resources they have used in India and working with nonprofit organizations to promote sustainable agricultural practices (“Stakeholders Engagement’” 2012).
Products are delivered directly to retail and food service customers such as grocery stores, gas stations, restaurants, and vending machines. PepsiCo also assist these stakeholders with marketing services that contributes to the customers’ growth and profit (“Stakeholders Engagement,” 2012).
Conclusion
A company’s strength, weaknesses, opportunities, and threats must be analyzed to determine the potential of the return on investment. Even with its weaknesses, PepsiCo is a strong company with earnings growth over the past five years, and has enough cash on hand to maintain its operation. With the new initiatives that PepsiCo is working on, such as expanding its market into developing countries and providing healthier options to its consumers, the company will be able to meet the needs of its stakeholders.
References
Brands. (2012) Retrieved from
http://www.pepsico.com/Brands.html
Diet Mountain Dew, Brisk and Starbucks Ready-T0-Drink Beverages Grow to the Billion-Dollar
Brands for PepsiCo. (2012, January 26) Retrieved from
http://seekingalpha.com/news-article/2139612-diet-mountain-dew-brisk-and-starbucks-ready-to-drink-beverages-grow-to-be-billion-dollar-brands-for-pepsico Edwards, J. (2011, June 22). Pepsi Just Can’t Stop Pulling the Tab After Shaking Up Management. Retrieved from
http://www.cbsnews.com/8301-505123_162-42749107/pepsi-just-cant-stop-pulling-the-tab-after-shaking-up-management/ Edwards, J. (2012, May 10). How Pepsi Management Shuffles Led To Sales Collapse.
Retrieved from
http://www.businessinsider.com/how-pepsis-management-shuffles-led-to-sales-collapse-2012-5?op=1 Fisher, B. (2012, June 12). Pepsi loses Dunkin, Eyes Emerging Markets. Retrieved from http://beta.fool.com/bobbyfisher/2012/06/12/pepsi-loses-dunkin-eyes-emerging-markets/5599/?logvisit=y&source=eptcnnlnk0000001 Nickels, W. G., McHugh, J. M., & McHugh, S. M. (2010). Understanding Business (9th
ed.). New York, NY: McGraw-Hill/Irwin.
Pepsi Absorbs Wimm-Bill-Dann. (2011) Retrieved from
http://rt.com/business/news/pepsi-absorbs-wimm-bill-dann-333/ Performance. (2012) Retrieved from
http://www.pepsico.com/Purpose/Performance-with-Purpose.html Stakeholder Engagement. (2012) Retrieved from
http://www.pepsico.com/Purpose/Overview/Stakeholder-Engagement.html Steinberg, J. (2012, July 11). PepsiCo Expanding Its American Portfolio With Dairy Products.
Retrieved from
http://seekingalpha.com/article/714491-pepsico-expanding-its-american-portfolio-with-dairy-products Talent Sustainability. (2012) Retrieved from
http://www.pepsico.com/Purpose/Talent-Sustainability.html
The Power of PepsiCo – 2011 Annual Report. (2011) Retrieved from http://www.pepsico.com/annual11/downloads/pep_ar11_2011_annual_report.pdf Theodore, S. (2012, August 13). Diet Coke Enters A New Decade: The Carbonated Soft Drink
Brand Has Come A Long Way. Retrieved from
http://www.mintel.com/blog/diet-coke-enters-new-decade-carbonated-soft-drink-brand-has-come-long-way Tomlinson, S. (2012, March 3). Soda Sales Fall Faster As Americans Turn To Healthier Options. Retrieved from
http://www.dailymail.co.uk/news/article-2118291/Soda-sales-fall-faster-Americans-turn-healthier-options.html
Analyzing PepsiCo: SWOT and Stakeholder Insights. (2016, Oct 12). Retrieved from https://studymoose.com/pepsico-swot-analysis-essay
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