Pepsi Strategic Management Case Study

Executive Summary

PepsiCo, as the second leading brand in the non-alcohol drink industry in the US, its main long-term objective is to catch up with the industry leader Coca-Cola and finally exceeds Coca-Cola to become the industry leader itself.

First, PepsiCo’s mission is aim to become the world’s premier consumer products company focused on convenient foods and beverages to its customer, so PepsiCo should put more money into its R&D division to study the non-alcohol drink industry and their customer’s need, then create and modify their products to serve the customer better and satisfy the unmet needs of their customers.

One of PepsiCo’s major competitors is Coca-Cola; compared with Coca-Cola, PepsiCo occupies less market share and has less revenue worldwide after analyzing the strengths, weakness, opportunities, and threats of PepsiCo, we believe PepsiCo should put the focus on striving for the youth market, PepsiCo should invest more to youth advertising and promotion to win over youth customer’s loyalty; youth market could be a good chip for PepsiCo to win.

On the other hand, following the global trend, PepsiCo should emphasize environmentally friendly products and promote the healthy factor of their products. In order to maintain a position in the drink industry, PepsiCo should also develop a non-carbonated drink and healthy food product.

Background

PepsiCo Inc. is an American multinational corporation headquartered in Purchase, New York, United States, with interests in the manufacturing, marketing, and distribution of grain-based snack foods, beverages, and other products.

PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which include an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001 – which added the Gatorade brand to its portfolio as well.

Brief History

Born in the Carolinas in 1898, PepsiCo is the invention of Caleb Bradham, a pharmacist and drugstore owner in New Bern, North Carolina.

PepsiCo is a unique mixture of kola nut extract, vanilla, and rare oils, became so popular his customers named it “Brad’s Drink. ” In 1902, he launched the Pepsi-Cola Company and applied to the U. S. Patent Office for a trademark. On June 16, 1903, “Pepsi-Cola” was officially registered with the U. S. Patent Office. He also began awarding franchises to bottle Pepsi to independent investors, whose number grew from just two in 1905, in the cities of Charlotte and Durham, North Carolina, to 15 the following year, and 40 by 1907.

By the end of 1910, there were Pepsi-Cola franchises in 24 states. From the 1930s through the late 1950s, “Pepsi-Cola Hits the Spot” was the most commonly used slogan in the days of old radio, In 1976 Pepsi, RKO Bottlers in Toledo, Ohio hired the first female PepsiCo salesperson, Denise Muck, to coincide with the United States bicentennial celebration. In 1996, PepsiCo launched the highly successful PepsiCo Stuff marketing strategy. By 2002, the strategy was cited by Promo Magazine as one of 16 “Ageless Wonders” that “helped redefine promotion marketing.

In October 2008, PepsiCo announced that it would be redesigning its logo and re-branding many of its products by early 2009. Timeline: 1898: Pharmacist Caleb Bradham from New Bern, North Carolina changes the name of his carbonated soft drink from Brad’s Drink to Pepsi-Cola. The name Pepsi-Cola is first used. 1902: Bradham files an application to the U. S. Patent Office for the Pepsi-Cola trademark name. 1904: Bradham purchases the Bishop factory in New Bern for $5,000. He moves all bottling and syrup operations to there and sales increase to 19,848 gallons. 905: Pepsi-Cola has a new logo, the first since its inception back in 1898. 1907: Expands to a total of forty franchises. Pepsi-Cola trademark is registered in Mexico. 1909: Barney Oldfield, automobile racing pioneer, becomes the first celebrity endorser. The theme “Delicious and Healthy” will appear on and off for the next two decades. 1923: Pepsi-Cola goes bankrupt. Craven Holding Corporation buys its assets for $30,000. 1931: Giant candy company Loft, Inc. buys Pepsi-Cola. 1935: Moves operations to Long Island, New York. 1939: Pepsi-Cola elects Walter S.

Mack Jr. as its President. 1941: Changes its logo to red, white, and blue in support of America’s war effort. 1950: Alfred N. Steele becomes President and CEO of Pepsi-Cola. 1953: Americans are becoming more weight conscious, “The Light Refreshment” campaign begins. 1958: It has been known as “the kitchen cola” because of its insistence of being a bargain brand. 1961: Realizing the importance of the post-war generation, it changes its theme to “Now It’s Pepsi, For Those Who Think Young. ” 1964: Introduces Diet Pepsi. Acquires the regional brand Mountain Dew. 966: Mountain Dew airs for the first time with the catchy tag line, “Yahoo!, Mountain Dew. ” 1975: Introduces The Pepsi Challenge, eventually convinces millions that Pepsi is superior. 1976: “Puppies,” a 30-second snapshot becomes an instant commercial classic. 1984: Michael Jackson stars in the first two commercials of the new “Pepsi, The Choice of a New Generation” campaign. 1985: Lionel Ritchie appears in “New Generation” advertising followed by Tina Turner, Gloria Estefan, Joe Montana, and Dan Marino. 1987: Pepsi returns to Times Square, New York after a twenty-seven-year absence. 988: Michael Jackson does a four-part “episodic” commercial named “Chase” that is aired during the Grammy Awards. 1990: Joe Montana returns in a commercial that challenges other celebrities to compare their pop to Pepsi. 1996: Lucas film and Pepsi shake hands on a long-term partnership for the Star Wars Trilogy films. 1998: Celebrates its centennial year with a birthday party attended by Ray Charles, Kool and the Gang, and The Rolling Stones. 1999: Pepsi Bottling Group, Inc. (PBG) becomes a publicly-traded company. 2002: Becomes the National Football League’s Official Soft Drink Sponsor.

Cindy Crawford introduces the new look for Diet Pepsi. 2004: Introduces new brand Pepsi EDGE, with the same taste but half the sugar, carbs, and calories of normal colas. 2005: PepsiCo Health & Wellness launch Everyday Smart Moves Magazine. Latte launches in Thailand 2006: PepsiCo Launches Pepsi Limon in Peru. Quaker Snacks Unveils Breakfast Cookies 2008: Frito-Lay Turkey builds the world’s first organic waste treatment facility 2009: PepsiCo is named to the ‘Best Companies for Multi-Cultural Women’ by Working Mother.

Mission Statement

Current Mission Statement

Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment 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. Score: 8/9 Analysis: Overall, the current mission statement is very good. It contains eight components out of nine. The only missing component is technology. What we do to develop a working statement for Pepsi is we start with the current vision, also add technology component, and rewrite existing components to better express “What is our business?”

Revised Mission Statement

Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages and keep being the leading beverage distributor. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners. Besides, we are committed to being a superior corporate citizen to help create sustainable communities through recycling. We will meet customer expectations of the highest quality and leading technology. In everything we do, our philosophy is striving for honesty, fairness, and integrity.

Vision Statement

Current Vision Statement

PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today.

Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company. Analysis: The current vision statement focuses on responsibility. However, the vision statement should answer “What do we want to become? ” Besides, the vision statement should be one sentence. So we reword the vision statement.

Revised Vision Statement

Our vision is to become the number one beverage and snack distributor in the world by relying on our core values of leadership, integrity, accountability, diversity, and quality.

EFE Matrix

EFE Matrix Analysis Opportunities

1. New products can penetrate the market easily Because of the high loyalty of PepsiCo’s customers, the new products, like non-carbonated drinks, can easily be accepted by the target market.
2. Internet promotion and Mobile device promotion Customers become more reliant on the Internet and mobile network, PepsiCo could promote by various media.
3. Sponsor for big events, increase brand recognition To build an impressive public image with positive spirits, PepsiCo can attract and remind customers in different fields
4. Various brands and kinds of choices to satisfied different customers taste With the wide expanded brands, PepsiCo can satisfy more customers in different target markets. The taste and trend are changing, PepsiCo can find which brands and kinds are more popular among market sectors, on which the future decisions can be based.
5. Energy drink consumption is increasing in the US market PepsiCo has a significant portion of energy drink as main products. As consumption is increasing, it is an opportunity for PepsiCo.
6. The fastest-growing of no caffeine, zero-calorie, noncarbonated, and rich vitamin drink market PepsiCo develops the drinks other than carbonated as a big part of main products. The growing of demand can help PepsiCo open new markets
7. Recycled pack, environment-friendly Environment protection is a global trend. Using recycled pack shows Pepsi’s responsibility to society, helping to build a good public image.
8. Changing social trends (fast food industry growing) With the development of society, people turn to save time in getting drinks. So, with the fast-food industry growing, PepsiCo can keep its market by contracts Threats:

• Economic instability, consumers became more price-sensitive Because of the decreased purchase power of customers, PepsiCo suffers the threats of declining capitalization. Consumers could perform more sensitive with limited funds
• Strong competition The Coca-Cola Co. sells almost the same products as PepsiCo, and they also have loyal customers and influence.
• New competitors entering the global beverage market Some new companies share the beverage market. PepsiCo is a global company, in different areas, the local companies are a threat to PepsiCo.
• Unfavorable currency change of dollar, impacting oversea markets PepsiCo has a large amount of oversea transactions. As the purchasing power of the US dollar is declining, it will be a loss when doing transactions among different currencies.
• Human rights Lots of PepsiCo’s factories build in developing countries, in those countries child labor and cheap labor are used normally, so it becomes a moral problem for PepsiCo.
• Trade barriers, trade laws, and policies As a global company, PepsiCo has a large oversea market. The local laws and policies are a limitation.
• The increased cost of raw materials. The cost of raw materials is an important part of total cost. With the high cost, the net income of PepsiCo will be impacted.
• The trend toward healthy drinking without caffeine The most popular and main product of PepsiCo contains caffeine, PepsiCo will lose their advantage of taste.
• Public school bans on soft drinks The youth is the main market of PepsiCo, as banned in public school, PepsiCo will lose a portion of their target market.
• Limitation of water in some parts of world Water is the raw material for beverage companies. Because of the limitation of water in someplace, PepsiCo’s production cost is up.

CPM Matrix

CPM Analysis

Basic on the Competitive Profile Matrix, Pepsi’s overall weighted score of 3. 303 reflects that it is above average on handling critical success factors. They score highly on product quality, strong brand image, price competitive, availability, global location, and advertising and promotion.

We can find Pepsi drink easily in our daily life and does not matter in which country. Availability is better than Coca Cola. According to the matrix, the total average score of Coca Cola Co. is 3. 355 which is higher than that of Pepsi. The reason is that Coca Cola Co. does a better job in market share and financial position than PepsiCo. The total market capitalization of Pepsi is 101,762Million, while that of Coca-Cola is 152,195Million. The gross margins of Coca Cola and PepsiCo. are 63. 86 and 54. 05, respectively. Overall, Coca Cola is the biggest competitor of PepsiCo. Dr. Pepper ranks below the industry standard. In conclusion, Coke Co and Pepsi Co-lead with Dr. Pepper Snapple Group being slightly behind.

IFE Matrix

 IFE Matrix Analysis

Strengths:

1. A leading global beverage, snack, and food company This sentence is expressed in the 10K. PepsiCo manufactures or uses contract manufactures, to make and sell a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages, and foods.
2. Operating in over 200 countries The largest operations are in North America, Mexico, and the United Kingdom. PepsiCo also operates in Canada, Latin America, Europe, Middle East, Asia, Northern Asia, and Australia.
3. Hundreds of brands; Different kinds of beverages: juice, energy drink, coffee, and tea PepsiCo also has a partnership with Starbucks and Lipton. There are a lot of brands: Pepsi Coke, Tropicana, Quaker, Gatorades, and so on.
4. Having a life contract with Yum! Brands Yum! Brands operate or licenses KFC, Pizza Hut, Taco Bell, Long John Slivers.
5. Total net revenue increase 33% from 2009 to 2010 Net revenue go up from $43,232 to $57,838 from 2009 to 2010.
6. Net cash provided by operating activities goes up 24% from 2009 to 2010 Net cash provided by operating activities is $6,796 in 2009 and $8,448 in 2010.
7. Sustain or improve brand equity scores for PepsiCo’s 19 billion-dollar brands in the top 10 markets It is described in PepsiCo 10K 2010. “The reputation and performance of our brands are critical to building brand equity scores. We have sustained or grown brand equity in the majority of the top markets for most of our 19 billion-dollar brands. ”(PepsiCo 10K 2010)
8. Rank among the top two suppliers in customer (retail partner) surveys; Strong customer loyalty It is described in PepsiCo 10K 2010. PepsiCo provides superior services for its customers. It enhances customer loyalty.
9. Increase the number of whole grains, fruits, vegetables, nuts, seeds, and low-fat dairy in our global product portfolio It is described in PepsiCo 10K 2010. The most famous product of PepsiCo is Pepsi Coke. Now, there is a bunch of other more healthy products besides coke.
10. EPS goes up to 38. 30 from 34. 13 from 2009 to 2010 The increase of EPS is a good sign for investors. Investors can get more profit from investing in PepsiCo.
11. A good public image through advertisement with celebrities; Promotion using Web and product-related games There are a lot of celebrities involved in Pepsi TV advertisements: Christina Aquilera, Britney Spears, Mariah Carey, David Beckham, and so on. PepsiCo also uses product-related games to attract web users’ attention.

Weakness:

1. Long-term debt increases 170% from 2009 to 2010 Too high debt increase the risk of the company, the investors will not invest the company.
2. Only focus on young customers The target market of Pepsi is young adults. The advertisements are specifically geared for the younger generation and use advertisements with celebrity endorsements to attracted young customers, such as the popular singers and athletes.
3. Current ratio decrease from 1. 44 to 1. 11 from 2009 to 2010 The ratio of current assets and current liabilities. Liquidity decreased.
4. The different products being offered are not having the company name with them It’s hard for the customers know some of the sports, energy, and non-carbonic drinks are from Pepsi Co., such as Tropicana, Ocean Spray, SoBe, AMP Energy
5. Total market capitalization of Pepsi is 101,762 million, while that of Coca-Cola is 152,195 million It is the second leading brand in the nonalcoholic drinking industry.
6. The net income of Pepsi (6. 32B) is less than that of Coca-Cola (11. 809B) The income compared to Coca-Cola decrease by 5. 489 billion. With this money, Coca-Cola can invest in other markets and develop new products to make more money.
7. Closing six plants in 2008 In 2008 some $543 million was charged to the net income in conjunction with the “Productivity for Growth” program, which included closing six plants, upgrading the product portfolio, and creating a more streamlined organizational structure.”
8. News of contamination destroys consumers’ confidence The principle indigents of its primary product are water. Both nationally and globally, adequate supplies of fresh, clean water become paramount, particularly in developing countries.

SWOT Conversion Matrix Analysis

Strength-Opportunity

• Increase the production of non-carbonated drinks by 15% and increase the promotion of these products on television, and the Internet by 20%.

Corporate Strategy: Market penetration

Advantages: Increasing advertising will let more customers realize that Pepsi provides many kinds of healthy products.

Disadvantages: The customers may react negatively towards healthier options because of the entrenched impression of Pepsi and increased advertising costs may decrease net income.

• Negotiating with FIFA U-20 World Cup (FIFA World Youth Championship), America got talent, and another youth event to become the sponsor.

Corporate Strategy: Market penetration

Advantages: Sponsored more youth events to gain new youth customers because the target market of Pepsi is the youths. Besides, this strategy can steal some market share from the competitors.

Disadvantages: The customers may already be loyal to the current brand.

• Increase Apple applications about Pepsi by 50% in 3 years to build loyalty with youth.

Corporate Strategy: Market penetration

Advantages: Pepsi can bring products that some young customers have not heard of to their attention.

Disadvantages: Customers may not like all of the different brands and have a negative response to the advertising.

• Reinvest $10 million of revenue to expand into markets like some developing country China and Mexico in 4 years and will develop market capitalization.

Corporate Strategy: Market penetration

Advantages: Increase the sales of drinks in developing countries.

Disadvantages: The intensive competition will make Pepsi hard to let customers change the habit to buy their products.

• Increase contracts with fast-food restaurants by 10% in 5 years

Corporate Strategy: Market penetration

Advantages: Cultivate customer habit to drink Pepsi and increase the sale of drinks in fast food restaurants.

Disadvantages: Fast-food restaurants may already be loyal to the current brand.

• Strength-Threat 1. Use $5 million dollars to develop new sports drinks and healthier snacks in 3 years

Corporate Strategy: Product penetration

Advantages: New products widen the Pepsi’s market shares and competition with other brands’ snack.

Disadvantages: The returns of the new products are uncertain and maybe not acceptable to the customers.

• Make a life-long contract with Yum! Brands to get Vitamin Water, sports drink, and other noncarbonated drinks into Yum!

Brands Stores in 2 years

Corporate Strategy: Market development

Advantages: It is a win-win strategy for both Pepsi and Yum! Brands, which can provide healthy eating to customers.

Disadvantages: The customers go to Yum! Brands for cheap food not for health concerns.

• Investment $7 million to promote healthier brands into public schools to increase the sales for $30 million in 5 years

Corporate Strategy: Market development

Advantages: This is a win-win strategy for both Pepsi and public schools, which can provide healthy drinks to students and can increase sales.

Disadvantages: Intensive competition in which the public schools and students may already be loyal to the current brand.

• Spend $8 million to improve and detect the quality of the product and make a partnership with the main suppliers in 5 years

Corporate Strategy: Backward.

Advantages: Making partnerships with suppliers decreases the cost of materials and guarantees quality. This way also helps Pepsi become the market leader if other competitors cannot get raw materials as low as Pepsi. In addition, it decreases the cost of inventory.

It will use a lot of money to acquire partnership.

• Invest $20 million into the foreign market to increase 4 more different flavors coke which takes advantage of local raw materials in 4 different countries in 3 years.

Corporate Strategy: Product development.

Advantages: Different countries have different customs, so people have different flavors of preference. Producing new coke flavor to satisfy different preferences helps to increase local market sales and market share. Besides, using local raw materials is cheap.

Disadvantages: Pepsi takes risk of local people may not accepting new flavor coke.

Weakness-Opportunity

• Increase 10% sales in 3 years

Corporate Strategy: Market penetration

Advantages: The method of expanding the target market is not only focusing on young customers but also on different age groups. This strategy increases Pepsi’s total capitalization competing against Coca-Cola.

Disadvantages: Increasing sales is not the same as increasing net income. Pepsi should control the speed of expanding sales with the balance of increasing gain

• Invest 2 million to R&D division in 5 years

Corporate Strategy: Market penetration

Advantages: R&D division can bring long-term benefits to accommodate the changing demands of customers. The investment is needed for Pepsi’s success in the future. Besides, improving the quality of products and reducing pollution at the same time.

Disadvantages: The process of development is costly of money and time, with a low probability of breakthroughs. The change of social trends is hard to catch.

• Introduce 5 new environment-friendly products in 30 months

Corporate Strategy: Production development

Advantages: Creating a good public image and adding different products can attract customers with more choices.

Disadvantages: Environment-friendly products need improvement or updated formulas, which needs a longer time than develop normal products.

• Total online sales increase 12% by the year 2018

Corporate Strategy: Market penetration

Advantages: It is easy to build a brand image with online advertisements. Purchasing online is easy and convenient.

Disadvantages: Pepsi needs to invest more in web maintenance and security. It has to adjust its distribution system to match its online sale.

• Merger a small organic drink business by 2016, to gain experience and develop market

Corporate Strategy: Horizontal integration

Advantages: Pepsi can spread product lines and expand the scale through a merger against competitors.

Disadvantages: The mission and vision statements of Pepsi and the acquired business can be different.

• Develop a new reward program of all kinds of Pepsi products in 3 years, encourage customers to redeem rewards online or in-store

Corporate Strategy: Market penetration

Advantages: Creating an entire impression of the Pepsi company as a whole can increase in customers’ brand awareness. And the rewards can increase brand loyalty.

Disadvantages: The reward system needs money and human resource to run and maintain.

Weaknesses-Threats

• Increase the production of the non-carbonated drink by 15% and increase the promotion of these products on television, and the Internet by 20% to let more customers realize that we provide all kinds of healthy products.

Corporate Strategy: Market penetration.

Advantages: Increasing advertising will let more customers realize that Pepsi provides many kinds of healthy products.

Disadvantages: The customers may react negatively towards healthier options because of the entrenched impression of Pepsi and increased advertising costs may decrease net income.

• During holidays, Pepsi can host activities that people can buy 10 bottles for 10 dollars increase sales by 5 percent compared to sales of previous holiday seasons.

Corporate Strategy: Market penetration.

Advantages: For price-sensitive customers, it is a good deal for them. Therefore, this marketing strategy will enhance the sales of Pepsi. Besides, the scene of crowds of people purchasing Pepsi is also a good advertisement to encourage more people to buy Pepsi to celebrate holidays.

Disadvantages: Our target customer is young people, so this promotion way may not cause big effect.

• Using merger or stock acquisition methods to increase ownership control of 2 more companies in 5 years.

Corporate Strategy: Horizontal Integration.

Advantages: It is a good way to increase market share in an intensively competitive market.

Disadvantages: It may spend a lot of resources to do merger or stock acquisitions.

It is time-consuming and money-consuming to analyze which company we need to combine. If Pepsi combines with a bad company, it will hurt the whole company’s reputation.

• Increase 4 more different flavors coke, which takes advantage of local raw materials in 4 different country areas in 3 years.

Corporate Strategy: Product development

Advantages: Different countries have different customs, so people have different flavors of preference. Producing new coke flavor to satisfy different preferences helps to increase local market sales and market share. Besides, using local raw materials is cheap.

Disadvantages: Pepsi takes risk of local people may not accepting new flavor coke.

• Close 4 plants of which production is lower and the cost is higher in comparison with other plants, and open 3 new plants before 2014 in growing markets where there is growing sales in the last 5 years.

Corporate Strategy: Retrenchment

Advantages: Pepsi could use more resources in most needed places. Through closing plants, Pepsi has more money to build new plants to produce more products to satisfy the growing demand in different places. This action will increase the income of that growing demand markets.

Disadvantages: It is hard to judge which place Pepsi needs to build new plants. Also, closing plants could bring bad influence on the whole company. Based on the QSPM for Pepsi Co., although the alternative strategies scores are relatively close it seems as though Pepsi should attempt to expand into foreign markets that Coca Cola has market power in such as China and India.

Grand Strategy Matrix

Pepsi Co. should be in Quadrant IV because they are in a strong competitive position and are in a slow-growth industry. Their products such as Lay’s potato chips and Pepsi soda are not necessarily growing and if anything the market is starting to lean to healthier options. Pepsi has the strength to launch diversified programs into more promising growth areas such as tea and healthy foods.

Their cash flow level is relatively high and they have the opportunity to pursue diversification. Strategy Recommendations: Based on the different approaches to analysis that aid in PepsiCo’s strategy selection, it is recommended that PepsiCo pursue a combination strategy that focuses on market penetration, market development, and product development. These intensive strategies will require PepsiCo to improve its position in the market. To focus on the mission of their company and combat competition, Pepsi should pursue these strategies to reach new consumers in new markets, improve branding, and invest in innovation. International markets pose a big opportunity for PepsiCo.

They need to implement these intensive strategies to beat their competition to these new markets. Because the industry is becoming global in scope, market development needs to focus its marketing and branding not only in the United States but also internationally. Acquiring new bottling plants, and purchasing international food and beverage companies will grow their portfolio and diversify the company, which has proven to be successful for PepsiCo over the past few years. Product development should be implemented in their strategy as well. Coca-Cola has a greater cola market share due to doing what they do best and focusing on its soft drink products.

PepsiCo has an opportunity to expand and innovate new drink and food products, like sports drinks and healthy snacks. By diversifying its brand to have products you can enjoy morning, noon, and night, PepsiCo has remained competitive over the last 20 years. Looking towards the next 20 years, they should acquire new products like their acquisition of Russian dairy Wimm-Bill-Dann to offer yogurt. We agree with Mrs. Nooyi’s, CEO, who decided to stop what she calls the “scorched earth policy” of scrapping for a point or two of market share in the shrinking cola market. Instead, innovation for a natural sweetener for their colas and products should be considered, as this will be profitable in the growing health market and demand.

Market Penetration

Pepsi is the second leading company in the soda industry, compared with Coca-Cola, Pepsi cola needs to put more focus on advertising and promotion.

• Invest more in multi-channel advertisement and promotion.
• Develop relationships with major universities’ drink supply system.
• Promote green earth theory, plan campaign of environment protection, and healthy drink.

Market Development

Pepsi should develop a good relationship with the younger generation. And when expanding into the international market, Pepsi should focus on exploring new markets, which have not been conquered by its competitor Coca-Cola.

• Invest in foreign markets; for example, South America and South Asia.
• Put more focus on exposures on the younger generation on social networks; for example, Facebook, Twitter, and MySpace.
• Sponsor global event, FIFA U-20 World Cup (FIFA World Youth Championship), America got talent, and another youth event to win young customer loyalty.

Product Development

Pepsi should develop a healthy drink and environment-friendly products in the future.

• Invest more in the non-carbonated drink; for example, coffee drink, juice, and energy drink.

Strategy Implementation

Establish Annual Objectives

• Resource Allocation:

1. Human – Hire 300 more employees to staff new non-carbonated drink product lines.
2. Marketing – Invest $5 million into online marketing efforts and brand promotion events. Sponsor either a global sporting event, or any event that is popular among the younger generation
3. Technical – Invest $8 million on developing new health-conscious product lines i.e. Such as juices or flavored waters
4. Financial – Invest $1 million into newer financial systems that will improve inter-company dialogue and further enhance quality and efficiency of employee feedback

• Evaluating Employee Performance:

1. Continuing to foster a performance-based payment system. Further implementations of a bonus system i. Via recognition, stock options, salary raises and rewards
2. Managers will provide constructive feedback pertaining to each of their employees’ performance. Should be administered monthly, at the minimum
3. Departments will establish reasonable, but challenging goals to be met each quarter. If department goal is not met, corrective action will need to be taken and will result in the loss of a quarterly bonus for the department

• Monitoring the Progress Towards Long-Term Objectives:

1. Continuous monitoring of … Market share, both domestic and international. Profit margin and other financial indicators
2. Ensure that the number of contracts with entertainment venues and universities is increasing on an annual basis
3. Ensure that marketing efforts are being received by the target market and reflect a positive image on Pepsi Co. Via focus groups, online surveys, questionnaires, interviews, etc.

Establishing and Communicating Company Priorities and Mission

Facilitating an effective communication system that continually allows for up to date information, which is available to every employee that can be accessed for reference at any time. Company newsletter, blogging, company website

Facilitating a work environment that allows for lower-level employee feedback. Employee surveys, suggestion box, and providing incentives or rewards for beneficial or cost-saving ideas from employees

Monthly meetings with upper-level management to ensure that employees have an understanding of Pepsi Co.’s objectives, and also allows for managers to address employee concerns and questions

Strategy Evaluation

Upon implementing PepsiCo’s new strategic recommendations, it is necessary to develop a strategic evaluation procedure. The 3 basic steps in PepsiCo’s strategic evaluation procedure are: 1) examine the underlying strategies, 2) compare expected results with actual results, and 3) take corrective action if necessary. The evaluation procedure will evaluate PepsiCo’s strategy using Richard Rumelt’s criteria for evaluating strategies. The aforementioned criteria are consistency, consonance, feasibility, and advantage. PepsiCo’s strategy review and evaluation will take place quarterly so PepsiCo can identify both negative and positive trends in the company’s performance and react accordingly.

The first stage of the procedure consists of creating revised IFE and EFE matrixes and comparing them to the existing IFE and EFE matrixes. If there are significant differences then the original strategy needs to be revised to account for these changes. If there are no significant differences between the new and existing IFE and EFE matrixes then the evaluation procedure moves on to the second stage. In the second stage, PepsiCo’s performance is measured and compared to the expected results of the original strategy, PepsiCo’s competitors, and to industry averages. PepsiCo’s performance will be measured through the following financial measurements: ROI, ROE, profit margin, market share, debt to equity, EPS, sales growth, and asset growth.

Furthermore, these measurements will be broken down by the different corporate segments and operating regions. If there are significant differences between the actual results and expected results then management should take corrective actions. If there are no significant differences then management should continue the present course. In addition to the evaluation procedure outlined above, management will create contingency plans in an effort to be prepared for favorable and unfavorable events, both firm-specific and industry-wide. Lastly, management will also utilize the balanced scorecard to measure the strategy every 6 months.

Evaluation Tools

• Evaluating PepsiCo through financial reports every 3 months. Measure organizational performance by financial ratios. PepsiCo can compare financial ratios over different time periods, to competitors, and to industry averages.
• Performance evolution meeting should behold monthly to track the implementation of the short-term strategies.
• Using a Balanced Scorecard to evaluate the performance of employees every 6 months to monitor and evaluate their performance.
• Hold the board meeting every 3 months for the shareholder’s level. It is necessary to let the shareholders know how the company’s performance because they are the owner of the company. Use this way to avoid agency problems.

Contingency Planning

• If the healthy products do not satisfy customers’ preference, PepsiCo should find the reason for failure, and try to combine with competitors to increase market share.
• If the market shares do not increase by less than 20% in one and half years even though invest 5 million on advertising. PepsiCo should exam the quality and coverage of the advertising. Our target customers are young men, so PepsiCo should do all kinds of advertisements to attract young men’s attention.
• If PepsiCo failed to make the contract with the top 20 universities for food supply in 2 years, it should check the advantage of its competitors and do more research and development to provide university higher quality and lower prices to increase its market share.
• If PepsiCo cannot be the sponsor of the global environment protection organization, World Wide Fund for Nature (WWF), PepsiCo should check whether they do their best on their public image of environmental protection.

PepsiCo can make more recycling bins in the public place and also make some events about green earth to increase its public image.

Short-Term Objectives:

• Invest 8 million dollars into the non-carbonated drink R&D department to develop healthier products within one year.
• Invest 5 million dollars on advertising aim to increase market share by 20% in one and a half years.
• Invest 500 thousand dollars on social network advertising and promotion in half a year.
• Have contact with the top 20 universities for food supply in 2 years.
• Become a sponsor of a global environment protection organization, WWF, in half a year.

Long-Term Objectives:

• Increase market share to split the cola/diet cola market with Coca-Cola. Because Coca-Cola has a very established market and customer loyalty in the United States, Pepsi should keep its market share objective realistic and strive to come close or best case scenario even match Coca-Cola. It is most likely unrealistic for the company to assume they can beat Coke in the US.
• Be the prevailing leader in contracts with sporting arenas and universities. This is where Pepsi can out-perform Coke. Offering lower-cost contracts to sporting arenas, school districts, and universities.
• Have the majority of the market share in foreign markets. With the introduction of products to new markets, if Pepsi can compete on price and advertise efficiently they should have no problem taking over market share to inexperienced markets or markets that were not predisposed to consuming Coca-Cola.
• Have an advertising campaign that captures the younger generation and makes them lifelong customers. Because people are pre-disposed early to one brand of cola or another, capturing the attention early of the younger generation and getting them to commit to Pepsi will be beneficial in increasing market share.
• Maximize profit margin
• Create a system to minimize costs via continuation of purchasing bottling companies.

Works Cited

1. http://www.pepsico.com/Company/Our-History.html
2. http://www.mergentonline.com/companydetail.php?compnumber=121646