Soft Drink and Market Share Essay Example for Free

Soft Drink and Market Share Essay Using the appropriate tools and processes taught in class, the group is required to develop business strategies for the organization. Guidelines below might help the group to prepare the written report. 1. Identify the firm’s existing vision and mission. Vision Statement 1. â€Å"To be the world’s best beverage company†. Being the best means providing outstanding quality, service, cleanliness and value, so that their every customer is contented and happy with their products†. 2. â€Å"To increase the value of their shareholder’s investment through sales growth, cost control and wise investment of resources†. Mision Statement 3. â€Å"To be the world’s premier consumer Products Company focused on convenient food and beverages. We seek to produce healthy financial rewards to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity†. 2. Develop vision and mission statement for the organization (if needed). 3. Identify the organization’s external opportunities and threats. External Opportunities and Threats a) Demographic Factors : †¢ Age †¢ Pepsi should target that age group that consumes it the most and make promotional strategies according to their behavior. So their main target is the young generation. †¢ Education †¢ A company has to make promotional strategies keeping in view the customer level. If the percentage of education is high in a country then through advertisements people can be made well aware of their product and can convey their message easily. Promotional and education has a direct relationship. b) Economic Factors : †¢ Economic Policies †¢ Some of the economic policies which can affect the market of Pepsico, it is a: 1. Fiscal Policy ? It is the policy of taxes. If heavy tax is levied on pepsi then its price will rise having negative affect on its consumption. 2. Monetary Policy ? Is made to restrict or increase the supply of money in the market. If the policies are made to restrict the flow of money in the market, inflation can be controlled hence increasing the real income of the people which will ultimately affect the consumtion of pepsi. 3. Price Policy ? If price of Pepsi is increased its demand will decrease and vice versa. 4. Income Policy ? If income of the people will increase their purchasing power will increase and hence increasing the market share of pepsi. c) Physical Factors : †¢ Region †¢ Marketing and sales of Pepsi is different in different geographical regions. In hot areas its demand is more. †¢ City size †¢ The cities which are densely populated the consumption of Pepsi is more. †¢ Climate †¢ Pepsi is more suitable for hot weathered countries. It is a source of refreshment when a person is thirty due to the hot weather. †¢ Infrastructure †¢ Roads are the basic need for transportation of Pepsi from one place to another. d) Technological Factors : †¢ Research and Development †¢ Through research and development quality of the product can be improved or better techniques or machinery can be developed which can increase the production. When technology experiences growth in their business. e) Political and Legal Factors : †¢ Laws Formulation †¢ Government has given copy right to Pepsico so that another company cannot sell their product by the name Pepsi. The countries where laws are formulated, the strategies and activities of the company are different. †¢ Social Responsibility †¢ Is to provide its customers with clean and hygienic products so to do this they have increased the use of disposable bottles. f) Social and Cultural Factors : †¢ Social Status †¢ Pepsi is a well renowned brand. People who are brand conscious will not drink beverages of lesser known brands. They will try to show their status by drinking Pepsi which is known to all as a quality drink. †¢ Media †¢ It is a very important factor for marketing. Media these days is a very effective can boast up sales to a great extent. g) Competitors †¢ Each of PepsiCo’s division has its close competitors. It has been observed that most of their competitors are single-product line companies, giving them a more direct handle of the industry. †¢ PepsiCo will have to compete with these strong competitors head on in order to maintain its market share. If PepsiCo is not careful enough, its competitors may eat its market share. h) Emerging health / environment †¢ More Consumers are starting to eat and live healthy, but as we can see majority of PepsiCo’s products are not healthy (junk food and soft drinks). 4. Construct an External Factor Evaluation (EFE) Matrix. |EXTERNAL FACTOR ANALYSIS (EFE) MATRIX | |KEY EXTERNAL FACTORS |WEIGHT |RATING |WEIGHTED SCORE | |Opportunities | |Pepsico new products can easily penctrate in the market. |0. 10 |4 |0. 40 | |Noncarbonated drinks are the fastest-growing industry. |0. 12 |3 |0. 36 | |Demand of Pepsi is more than Competitor |0. 07 |3 |0. 21 | |Changing social trends (Fast Foods) |0. 09 |3 |0. 27 | |Internet promotion and ordering processes |0. 05 |1 |0. 05 | |May tie up or liaison with major showrooms, computer centre restaurant |0. 06 |2 |0. 22 | |Threats | |Non-Carbonated substitutes (The Mango Season) |0. 15 |3 |0. 45 | |Baverage industry is mature |0. 11 |4 |0. 44 | |Fake products (Imitators) |0. 09 |2 |0. 18 | |Competitor’s schemes |0. 04 |2 |0. 08 | |Strong competition with Coca-Cola company |0. 12 |2 |0. 24 | |TOTAL |1. 00 | |2. 90 | Assign rating between 1 to 4 for each key external factors : †¢ Poor Response 1 †¢ Average  Response 2 †¢ Above  Average  Response 3 †¢ Superior Respons – 4. 5. Identify the organization’s internal strengths and weaknesses. Internal Factors : Organizational Structure 1. Frito-Lay North America (FLNA) †¢ Frito-Lay North America manufactures, markets, sells and distributes salty and sweet snacks. Products manufactured and sold in North America include Lay’s and Ruffles brand potato chips, Doritos and Tostitos brand tortilla chips, Cheetos brand cheese-flavored snacks, Fritos brand corn chips, a variety of branded dips and salsas and Rold Gold brand pretzels. Low-fat and no-fat versions of several brands are also manufactured and sold in North America. 2. PepsiCo Beverages North America †¢ In recent years sales of non-carbonated beverages have grown steadily. 3. PepsiCo International †¢ Snack food businesses are growing fastest in the Asia pacific region si PI should give attention to these market to avail growth opportunity. †¢ Overall carbonated soft drink market has shown less than 1% growth over the past few years and all that growth is came from diet soft drinks and energy drinks. †¢ Consumer has shown an increasing interest in healthy alternatives to carbonated soft drinks, such as ready-to-drink teas, bottled water, sports drinks and juices. †¢ In 2004 more than one-third of PepsiCo’s sales came from spot (no trans fats) products. Internal Strengths †¢ Company Image : †¢ It also is a reputable and is well known all over world. Perception of producing a high quality product. †¢ Quality Conscious : †¢ They maintain a high quality as Pepsi Cola International collect sample from its different production facilities and send them for lab test in Tokyo. †¢ Good Relation with Franchise : †¢ Throughout its history it has a good relation with franchisers working in different areas of the world where they have the production facilities. †¢ Production Capacity : †¢ It has the highest production capacity in South Asia. †¢ Market Share : †¢ It has a highest market share †¢ Large no. of Diversity Business : †¢ This is also its main strength as it ahs diversity in many businesses such as : i. Pepsi beverages ii. Pepsi foods iii. Pepsi Restaurants. High Tech culture : †¢ The whole culture and business operating environment at Pepsi-Cola-West Asia has quick access to a centralized database an they use computers as business tools for analysis and quick decision making. Internal Weaknesses †¢ Decline in Taste : †¢ During the last years, it was published in Financial post that there has been big complaints from the customers with regard to the bad taste that they experienced during the span of six months. †¢ Political Franchises : †¢ Such as in Pakistan, Hamayun Ahkhtar is its franchisee who has a strong political support from a political party which is in opposition. In their era in government less taxes are imposed on them but relation increases as they come in opposition. So the selection is not appropriate as this thing is harmful to their image as well as the strategies. †¢ Short Term Approach : †¢ They have a lack of emphasis on this in their advertising such as currently when they losses the bid for official drink in the 96 cricket world cup. They started a campaign in which they highlight the factor such as â€Å"nothing official about it†. †¢ Weak Distribution : †¢ They lack behind in catering the rural areas and just concentrating in the urban areas. †¢ Low Consumer Knowledge : †¢ Unable to maximize local consumer knowledge. †¢ Lack of Soft Drink : †¢ Lack of soft drink â€Å"know-how† as a result of diversified business units and generalist managers. 6. Construct Internal Factor Evaluation (IFE) Matrix. |INTERNAL FACTOR ANALYSIS (IFE) MATRIX | |KEY INTERNAL FACTORS |WEIGHT |RATING |WEIGHTED SCORE | |Strengths | |Strong multinational (Brand Equity) |0. 11 |3 |0. 33 | |Strong vast distribution Channels |0. 10 |4 |0. 40 | |Lack of capital constraints |0. 07 |3 |0. 21 | |Record market share |0. 10 |4 |0. 40 | |Strong brand portfolio |0. 05 |3 |0. 15 | |Aggressiveness in the market (market leader) |0. 06 |3 |0. 18 | |Brand promotion |0. 13 |4 |0. 52 | |Weakness | |Targeting only young customers |0. 10 |2 |0. 20 | |Political franchises |0. 07 |2 |0. 14 | |Centralized decision making |0. 05 |2 |0. 10 | |Decline in taste |0. 08 |1 |0. 08 | |Motivational factor |0. 05 |1 |0. 05 | |Not all products bear the company name |0. 03 |2 |0. 06 | |TOTAL |1. 00 | |2. 82 | Assign rating rate from 1 to 4 for each key internal factors : o Major weakness 1 o Minor weakness 2 o Minor strength 3 o Major strength 4 7. Prepare a Strenght-Weaknesses-Opportunities-Threats (SWOT) Matrix, Strategic Position and Action Evaluation (SPACE) Matrix, Internal-External (IE) Matrix, Grand Strategy Matrix, and Quantitative Strategic Planning Matrix (QSPM) as appropriate. †¢ Strenght-Weaknesses-Opportunities-Threats (SWOT) Matrix | |STRENGTHS |WEAKNESSES | | |Brand promotion |1. Decline in taste | | |Strong multinational (Brand Equity) |2. Targeting only young customers | | |Record market share |3. Not all products bear the | | |Strong vast distribution Channels |company name | | |Lack of capital constraints |4. Motivational factor | | |Aggressiveness in the market (Market Leader) |5. Political Franchises | | |Strong brand portfolio |6. Centralized decision making | |OPPORTUNITIES |S – O STRATEGIES |W – O STRATEGIES | |1. PepsiCo new products can easily |S1, S2, S3, O2, O3, O4 |W2, O2 | |penetrate in the market |Company can introduce new product or non- |By introducing non-carbonated drinks Pepsi| |2. Noncarbonated drinks are the fastest- |carbonated drinks because it have good brand |can capture different age groups. | |growing industry |equity, large resources | | |3. Changing social trends (Fast Food) |S4, O5, O3 | | |4. Demand of Pepsi is more than of |By having good distribution channel co. Can | | |Competitor |focus easily fast food restaurants, clubs. | | |5. May tie up or liaison with major |. | | |showrooms, computer centers restaurant | | | |6. Internet promotion ordering | | | |processes | | | |THREATS |S – T STRATEGIES |W – T STRATEGIES | |1. Non-carbonated substitutes (The |S4, S5, T1, T3 |W1, T3 | |Mango Season) |Because company has financial recourses and |By improving the taste quality company | |2. Fake products (Imitators) |distribution channel therefore it can produce|can reposition its products can take long | |3. Beverage industry is mature |non-carbonated drinks. |term position on maturity stage. | |4. Strong competition with Coca- | | | |Cola company | | |. †¢ Strategic Position and Action Evaluation (SPACE) Matrix o Competitive Advantage ? Brand recognition- 3. 00 ? Large market share- 2. 00 -11. 00 = 2. 75 ? Wide distribution channel- 1. 00 4 ? Customer loyalty- 5. 00 11. 00 o Financial Strength ? Inventory turnover+ 7. 00 ? Return on asset+ 2. 00 + 12. 00 = + 4. 00 ? Net income+ 3. 00 3 + 12. 00 o Industrial Strength ? High industry growth rate+ 6. 00 ? Profit potential+ 4. 00 +15. 00= +3. 75 ? Financial stability+ 3. 00 4 ? Resource utilization+ 2. 00 + 15. 00 o Environmental Stability ? Economic stability- 2. 00 ? Barrier to entry- 1. 00- 7. 00 = 2. 33? Competitive pressure- 4. 00 3 7. 00 Coordinate –x ( CA + IS )= 2. 75 + ( + 3. 75) = + 1. 00 Coordinate – y ( FS + ES ) = 2. 33 + ( + 4. 00) = + 1. 67 |   | | | |Strong |Average |Weak | | |4. 0 |3. 0 |2. 0 |1. 0 | |The EFE Total Weighted | | | | | |Score | | | | | | |High |i |ii |iii | | |3. 0 | | | | | |Medium |iv |v |vi | | |2. 0 | | | | | |Low |vii |viii |ix | | |1. 0 | | | | IFE Score = 2. 82 EFE Score = 2. 90 ** At the v place = Hold Maintain †¢ Grand Strategy Matrix |RAPID MARKET GROWTH | |WEAK COMPETITIVE |Quadrant II |Quadrant I |STRONG COMPETITIVE. |POSITION | |market development |POSITION | | ||market penetration | | | | |product development | | | | |backward integration | | | | |forward integration | | | | |horizontal integration | | | | |related diversification | | | |Quadrant III |Quadrant IV | | |SLOW MARKET GROWTH | †¢ Quantitative Strategic Planning Matrix (QSPM) as appropriate | |STRATEGIC ALTERNATIVES | |KEY FACTORS |WEIGHT |Non Carbonated product |Tie up with Resturants, | | | | |Clubs, Showrooms | |STRENGTHS | |AS |TAS |AS |TAS | |Strong multinational (brand equity) |0. 11 |3 |0. 33 |2 |0. 22 | |Strong vast distribution channels |0. 10 |2 |0. 20 |3 |0. 30 | |Lack of capital constraints |0.07 |4 |0. 28 |1 |0. 07. Record market share |0. 10 |1 |0. 10 |3 |0. 30 | |Strong brand portfolio |0. 05 |2 |0. 10 |3 |0. 15 | |Aggressiveness in the market (market leader) |0. 06 |3 |0. 18 |4 |0. 24 | |Brand promotion |0. 13 |2 |0. 26 |4 |0. 52 | |WEAKNESS | | | | | | |Targeting only young customers |0. 10 |3 |0. 30 |2 |0. 20 | |Political franchises |0. 07 |- |- |- |- | |Centralized decision making |0. 05 |- |- |- |- | |Decline in taste |0. 08 |3 |0. 64 |2 |0. 16 | |Motivational factor |0. 05 |1 |0. 05 |2 |0. 10 | |Not all products bear the company name |0. 03 |1 |0. 03 |3 |0. 09 | | |1. 00 | | | |. | | | | | | | | |OPPORTUNITY | | | | | | |New products can easily penetrate in the market |0. 10 |4 |0. 40 |1 |0. 10 | |Noncarbonated drinks are the fastest-growing industry |0. 12 |4 |0. 48 |3 |0. 36 | |Demand of pepsi is more than of competitor |0. 07 |2 |0. 14 |4 |0. 28 | |Changing social trends (fast foods) |0. 09 |2 |0. 18 |4 |0. 36 | |Internet promotion and ordering processes |0. 05 |2 |0. 10 |3 |0. 15 | |Tie up or liaison with major showrooms restaurant |0. 06 |1 |0. 06 |3 |0. 18 | |THREATS | | | | | | |Non-carbonated substitutes (the mango season) |0. 15 |4 |0. 60 |2 |0. 30 | |Baverage industry is mature |0. 11 |3 |0. 33 |2 |0. 22 | |Fake products (imitators) |0. 09 |1 |0. 09 |2 |0. 18 | |Competitor’s schemes |0. 04 |1 |0. 16 |3 |0. 12 | |Strong competition with Coca-Cola company |0. 12 |2 |0. 24 |3 |0. 36 | | |1. 00 | |5. 25 | |4. 96 | 8. Provide two recommendations for the organization i. e. , strategies. Support your recommendations. †¢ Out of the many strategic alternatives that PepsiCo could choose to follow, we have chosen to endorse one that fosters continued growth and diversification. Although their over-diversified portfolio has hindered their International Growth, these strategies strengthen their overall corporate worth and market presence domestically. †¢ As consultants for PepsiCo, we are making the following recommendations: 1. Pepsi should focus on increasing sales globally to compete effectively with Coke. They have been beaten badly in some markets, and need to focus more on un-tapped areas. 2. Continue to diversify their beverage selection through acquisitions. This will enable PepsiCo to combat the decreased interest in cola. Going along with this, PepsiCo needs to ensure that they can properly manage all of these acquired companies and should divest those that show limited potential.