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Situation Analysis – Pepsi

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A Completed Analysis of Marketing Plan for Pepsi New Zealand| Executive Summary This paper presents a completed marketing plan/analysis for Pepsi in order to assist it regain its “second leader” position in the soft drink market in New Zealand. The first half of this paper shows the situation analysis of Pepsi. In particular, the internal analysis focuses on the power of suppliers, buyers, new entrants, and product substitutes.

The results show that the bargaining power of suppliers and buyers are not great, threat from new entrants are negligible but significant from the substitutes.

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The external analysis focuses on the economic, regulatory and industrial environments. The analysis of economics suggests that both the income growth rate and inflation rate over the next 4 years for NZ is positive. The outcomes of regulatory analysis recommend that the company should perhaps not use plastic bottles as they are hard to be recycled.

The industrial competitiveness analysis suggests that Pepsi should develop wider product range to differentiate its’ products from the Coca-Cola.

Following the external analysis is the SWOT analysis. Results from the SWOT analysis are as follows. First, the age of target group is between 12 and 50; second, winder range product development is important to maintain existing customers and attracts new customers; third, PepsiCo should focus on less-developed and developing nations. With the knowledge of the marketing situation of Pepsi, a detailed marketing plan and strategies are discussed in the 2nd half of this paper.

The goal of this marketing analysis is to help Pepsi regain its “second-leader” position in the soft drink market. Without introducing a completely new product, we propose that Pepsi should 1focus on the advertisements (as the result from Pepsi challenge shows that the consumers cannot really distinguish between Coca-cola and Pepsi once the brand name are removed), 2create an image of better taste through charging a higher price, 3increase the “per-shop” volume of Pepsi, and 4distribute their new products only to retailers at the initial stage in order to have effective control over the end price.

In the first section, the situation analysis which conducted in the previous essay will be presented and discussed. In specific, the power of suppliers, power of consumers, threats of new entrants and substitutes, legal and regulatory framework, industrial competitiveness, and SWOT analysis are shown. Following that, the marketing goal and objective are stated and explained. In the third section, an examination of the targeted market is shown. The product strategy, pricing strategy, distribution strategy, and the integrated marketing communication strategy are presented in the 4th, 5th, 6th, and 7th section respectively.

In the 8th section, the market implementation, evaluation and control will be addressed. And the final section is used to discuss the ethics, social responsibility and sustainability issues of PepsiCo Inc. I. Situation Analysis PepsiCo Inc. is an American multinational corporation that manufactures, markets, and distributes grain-based snack foods, beverages, and other products. Of all the products sold by PepsiCo Inc. , Pepsi is one of the most representative and well-known brands and therefore is selected for the analysis, (Bryson York Emily, 2012).

Internal Analysis – Power of Supplier The primary objective for every enterprise is to maximise profit. According to the accounting equation, profit is obtained by subtracting expenses from the revenue. Thus, the analysis of power of supplier is essential as it directly influences the level of expense that a corporation faces. To understand the power of supplier, it is a good approach to first learning the components that manufacture the product sold, and then studying the market structure of each component as the prices are largely influenced by market structure.

The materials used in Pepsi production are (1) cola and (2) can/bottle. Material suppliers for the soft drink industry do not hold much power as the markets of these materials are competitive. The ingredient of cola consists primarily of carbonated water, sugar, and flavourings, (Mitchell, Alan J. , ed, 1995). The price of these materials are maintained at a relative low and stable level as they are (1) non-scarce resources, (2) easily accessible (i. e. many suppliers).

For example, sugar is usually one of the products that are being used by economists to explain the idea of perfectly competitive market structure as the 1number of sugar producers is large, 2each of them occupies a small amount of market share, the 3barriers of entry is low, and 4 the products supplied are considered to be homogeneous. Similar to the suppliers of cola, producers of cans/bottles do not hold much bargaining power as well. Though PepsiCo does not do any bottling, there are many cans and bottles manufacturers providing services in the market.

For example, Amcor, TSL Plastic Ltd, and VISY are all bottle manufacturer supplying both the New Zealand and Australia markets. Hence, it is fairly easy for a company like Pepsi to switch suppliers and so takes away much of suppliers’ bargaining power. Internal Analysis – Power of Customers The study of the power of customers is critical as more power enjoyed by the customers, the lower the price of product would be and hence deteriorates the revenue generated by the producer. The buyers of the Pepsi and other soft drinks are mainly large supermarkets, convenient shops, and restaurants.

The soft drink producers distribute the beverages to these stores, for resale to the consumer. The bargaining power of the buyers is significantly different as the quantity ordered varies dramatically. Large supermarkets and convenient shops buy large volumes of the soft drinks, allowing them to buy at much lower prices. Restaurants have less bargaining power because they do not order a large volume. However, with the number of people are drinking less soft drinks, the bargaining power of buyers could start increasing due to decreasing buyer demand ,(Murray, 2006a).

Internal Analysis – Threat of New Entrant and substitutes The analysis of these two factors concerns the sales aspect as more entrants and substitutes in the industry would increase the intensity of competition and thus lowering the market share of existing company and the price charged. The threat of new entrant in the soft drink market is low as the barriers of entry are great. For example, substantial amount of capital is required for the start of the business as the manufacture of soft drinks requires things such as: factory, liquid containers, filling equipments and packaging machines.

Moreover, the capability of effective and efficient product distribution and the access to retail channels are difficult tasks and usually require some time to build the relationships. However, the threat of substitutes, in the soft drink industry, is significant high. According to GrabStats, the annual industry revenue generated by non-alcoholic beverages in the US is over $100 billions, (GrabStats, 2012). Given the significance of beverage market, it attracts numerous producers to compete in this market by offering a wide range of products.

The substitutes of Pepsi, for instance, are coke-cola, energy drinks, tea, bottled water, coffee, juice, etc. External Analysis – Economic Growth & Price Stability The analysis of economic conditions is of particular importance to huge enterprise like PepsiCo Inc. as these conditions provide a benchmark for estimating the future revenue, which is an essential element in formulating the marketing strategy. In spite of the global economic downturn, the report announced by OECD predicts that the GDP growth of New Zealand will pick up from 1. 25 per cent in 2011 to 2. 75 per cent in 2013, (OECD, 2012).

This prediction indicates a bright future sales of Pepsi as soft drinks are considered to be unnecessary goods. The demand of unnecessary products increases at a faster pace than necessities when income rises as the expenditures on essential daily products are unavoidable even with the shrinkage of salary. Another indicator that is of great concern is the inflation. Inflation rate measures the percentage change of price level over a given period. When the price level rises faster than the increase of salary, then real income shrinks which reduces consumption and forces consumers to change their consuming behaviours/preferences.

The consequence of these two outcomes could cause the sales of Pepsi to more volatile than usual, which is a bad situation for most enterprises. Fortunately, based on the latest report released by The Treasury of New Zealand, the forecasted inflation rates of the coming 4 years (from 2013-2016) are between 2% to 2. 5%, which is well under controlled, (The Treasury NZ, 2012). External Analysis – Legal and Regulatory Framework Since researches indicate “soda and sweetened drinks are the primary source of calories in American diet”, most nutritionists suggest that soft drinks can be harmful if consumed excessively.

Studies have indicated that regular soft drink users have a lower intake of calcium, magnesium, ascorbic acid, riboflavin, and vitamin A, (Michael F. Jacobson, & Kelly D. Brownell, 2000). Furthermore, recent news show that soft drink causes health concern as Natasha Marie Harris, a 30-year-old mother from New Zealand, reported death for drinking nearly two gallons of Coca-Cola each day for several years until she died of a heart attack in 2010, (Ryan Jaslow, 2012).

Given these health concerns, policies such as “special taxes”, “health warning label”, or even “age regulation” could be changed or adopted in the future to deter the consumption of soft drinks. For instance, both Coke and Pepsi changed their recipes to avoid a cancer warning label in compliance with Californian law, (Matt Jackson, 2012). External Analysis – Industrial Competitiveness The soft drink industry is highly competitive for all the companies involved. All soft drink corporations have to think strategically about the pressures; that from rival sellers within the industry, new entrants to the industry, and substitute products.

The competition from rival sellers is the greatest pressure that Pepsi faces in the soft drink industry. Coca-Cola, Pepsi, and Cadbury Schweppes are the biggest competitors in this industry, and they are all internationally established which generates a great level of competition. Although Coca-Cola has four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite), it had lower sales in 2005 than did PepsiCo (Murray, 2006c). Coca-Cola is the main competitor for PepsiCo and these two brands have been in a power struggle for years (Murray, 2006c).

Based on the report presented by Accuval (2010), the market share for the two biggest soft drink producers Coke and Pepsi, are 52% and 33% respectively, (Accuval, 2012).. Brand loyalty is another competitive pressure. According to The Brand Key’s Customer Loyalty Leaders Survey (2004), the customer loyalty for Diet Pepsi is ranked 17th and Diet Coke ranked 36th as having the most loyal customers to their brands. New entrants are not a big concern for the soft drink industry as Coca-Cola and Pepsi Co. dominate the market with their strong brand name and great distribution methods.

Moreover, the soft-drink industry is fully saturated and growth is small. This makes it very hard for new entrants to start competing against the existing companies. In contrast to new entrant, substitute products are posing great pressure to soft-drink sellers. Substitute products are those competitors that are not in the soft drink industry. Such substitutes are sports drinks, bottled water, coffee, juice, and tea. Bottled water and sports drinks are increasingly popular with the trend to be a more health conscious consumer. There are progressively more varieties in the water and sports drinks that appeal to different consumers’ tastes.

In addition, coffee and tea are competitive substitutes because they contain caffeine. The consumers who purchase a lot of soft drinks may switch to coffee if they want to keep the caffeine and lose the sugar and carbonation. It is also very cheap for consumers to switch to these substitutes and thus making the threat of substitute products very strong (Datamonitor, 2005). SWOT Analysis – Strengths The understanding of one’s own strengths is important as they directly provide competitive advantages to the firm that competing in the industry.

The first strength associated with Pepsi is that drinking is part of basic consumer needs. Human beings must absorb a certain amount of liquid in order to survive. Though the daily liquid intake does not need to be soft drinks, some of Pepsi’s market share is ensured by this basic human need. The second strength that Pepsi has is that it is a non-alcoholic drink. There are at least two benefits of being a non-alcoholic drink. First, people under legal age (usually 18) are not allowed to purchase and consume alcohols; hence, soft-drinks’ consumer base is wider than alcoholic liquids.

Second, it is medically proven that alcohol would deteriorate the function of many organs (e. g. liver) and is the cause of many illnesses. Therefore, being a non-alcoholic drink is absolutely more advantageous than alcohol. The last but not least strength to discuss is its relatively low cost of production. As mentioned earlier, the materials of manufacturing Pepsi are non-scarce resources and the bottle providers do not have great bargaining power as bottle-manufacturing industry is competitive. Furthermore, given PepsiCo is one of the leaders in the soft drink industry, it has substantial power in setting the market price.

Combing the features of low cost of production and market price setting power, Pepsi does enjoy a great strength in the soft drink market. SWOT Analysis – Weaknesses It is critical to identify the weaknesses as the sustainability of the business is tightly linked with the ability to minimize or eliminate those issues. The first weakness associated with Pepsi is the consumer perception of health issues. Though the medically proven illnesses that are related to soft drinks are not as many as alcohol, there are still a number of diseases claimed to be caused by soft drinks.

For example, the problem of child obesity is very often claimed to be exacerbated by the consumption of soft drinks. Another weakness to be considered is the narrow range of products offered. Though the variety of Pepsi is evident (i. e. Pepsi-cola, Pepsi-diet), the range of products (e. g. different flavours) is narrow. Unlike Coca-Cola which is offering different flavours’ soft drinks (e. g. Sprite, Fanta), the product range for Pepsi is limited to cola and diet cola only. This weakness is certainly limiting the market share that could be obtained by Pepsi as different individual has different taste.

The third weakness associated with Pepsi is the low brand loyalty. This weakness is pointing out the fact that consumers generally perceive soft drinks as similar product. That is, consumers would be unable to distinguish Pepsi from Coke if the package on cans/bottles is removed. The high degree of substitutability and low brand loyalty imply that consumers would be highly price sensitive. The fact of price sensitive is of great concern to Pepsi as, according to economic theory, the outcome of price war between giant corporations is usually miserable. SWOT Analysis – Opportunities

The identification of opportunities is of great importance as opportunities represent the future of business. The first opportunity that Pepsi has is the new markets. Despite the population growth rate in many developed countries are decreasing, the world total population is estimated to hit 8 billion by year 2025 according to OECD’s forecast. This implies that the population in those less-developed and developing countries are growing at a fast rate, which provides a great business opportunity for Pepsi. The second opportunity associated with Pepsi is better taste than Coke.

According to Consumer Reports, in the 1970s, the taste of Pepsi is preferred by consumers to Coke. Pepsi conducted blind taste tests in stores, in what was called the “Pepsi Challenge”. These tests suggested that more consumers preferred the taste of Pepsi (which is believed to have more lemon oil, and less orange oil, and uses vanillin rather than vanilla) to Coke, (Woolfolk, ME & Castellan, W, Brooks, 1983). The result of this test indicates that the “quality” of Pepsi is probably better than Coke and thus is an opportunity. SWOT Analysis – Threats

The biggest threat concerns Pepsi is Coca-Cola’s dominance in the market. As mentioned earlier, the market structure of soft drink is duopoly that occupied by Coca-Cola and Pepsi. According to economic game theoretical model, Coca-Cola (leader) has the so called first-move advantage that allows it to direct the market as it occupies greater market share. This poses a great threat to Pepsi as second mover, according to economic theory, usually enjoys far less profit and could be wiped out from the market by the leader. Another threat concerns the distribution costs.

It is evident that the price of petrol is increasing and there are still not many substitutes of similar functions as petrol exist today. Hence, the rising cost of petrol would threaten the profitability of Pepsi. II. Marketing Goals and Objectives Based on the situational and SWOT analysis conducted above, the following goal and objectives have been identified to provide the blueprint for Pepsi to enlarge its New Zealand cola market. Goal: To position Pepsi as the second leader in the NZ soft drink markets with the image of better taste.

Creating an image of better taste is the driving theme of this marketing plan. When the brands of Coca-cola and Pepsi are removed, it is commonly believed that is very difficult for consumers to make correct distinction between these two. In fact, as mentioned earlier, the conclusion reached in the 1970’s “Pepsi Challenge” had already shown that consumers prefer the taste of Pepsi over Coca-cola. These findings, therefore, imply that the choice of Coca-cola over Pepsi by consumers is mainly driven by the “feeling” or “image” that Coca-cola tastes better. Objective 1: Increase the “accessibility” (i. . amount on store shelf) by 30% within one year. In addition to strengthening the image of better taste, enhancing the accessibility of Pepsi is another tool to achieve the goal. According to my personal observation, though Pepsi is accessible in many of the convenience stores, supermarkets, and restaurants in NZ, the amount on shelf is far less than other drinks (e. g. Coca-cola, V, and red bull) and is thus identified as a reason that lowers the willingness to buy. Objective 2: Obtain additional 20% market share in the NZ soft drink markets within the next three years.

Through increasing the accessibility, new advertisements and creative container packaging (*will be explained in the following sections), this second objective is another step to realise the goal specified. III. Target Market Pepsi’s target market, broadly speaking, is anyone aged between 3 and 35, both men and women. The reasons of excluding anyone aged above 35 are two. First, most of adults above this age threshold have already developed their own drinking preferences, thus it would be more difficult (i. . not cost efficient as the potential benefits may not meet the target) to persuade this segment of consumers. Second, many of the consumers aged above this threshold have already established family, and as will be explained later, the decision of weekly grocery purchase (e. g. soft drinks), though still made by the parents, can be largely influenced by their children (i. e. people aged under 35). Hence, combining these two reasons, the primary target group for Pepsi would be anyone aged between 3 and 35.

This target group will be separated into three segments, “aged 3 -14, aged 15 – 21, aged 21-35”, and discussed individually. Our primary focus of consumers will be children and teenagers (i. e. aged from 3 to 21) as they 1have not developed their own drinking preferences (or still highly changeable) and thus are easier to be influenced and 2once the brand loyalty developed, they represent the future market; and therefore, from financial perspective, it is cost efficient to focus on this segment as they yield greater benefits for every dollar invested.

Though this targeted segment does not have a regular income since most of them are students, their financial abilities are generally strong and secured as they are “supported” by their parents. Moreover, the segment of consumers who aged between 3 and 14 has a great power to influence their parent’s decision and should be heavily focused as the success in persuading this target group would, at least, bring their parents in and make them become our customers. This strategy is identical to the advertisements made by those toy manufacturers.

By arousing the purchasing desire of children, it has the same (or even stronger) effect as persuading the parents to buy the products. The secondary focus would be the teenagers (i. e. aged between 15 and 21). Generally speaking, many teenagers in New Zealand have started or already had some part-time working experience; as a result, they are financially capable to make the consumption of soft drinks, which lessens the difficulty in persuading them. Moreover, one of the features of teenagers is that they have a high degree of tendency to follow or imitate their friends’ actions.

As a result, a successful change of one teenager’s preference in soft drink is expected to have a great influential power on his/her friends, and therefore, will bring more customers in. The third focus would be those “youth adults” (i. e. anyone aged from 21 – 35). This segment of consumers is generally financially independent and has greater opportunities to be involved in social activities (e. g. clubbing). In addition, this segment of consumers generally has less concern of health issues and is advantageous to soft drink producers.

Given some of the consumers in this age group have already developed their own drinking preferences, Pepsi must retain those who have chose Pepsi as their primary soft drink brand by this point. At the same time, Pepsi must make switchers out of those who have not chosen a specific soft drink brand through social events, which are priority for this segment IV. Product Strategy BRANDING Consumer view a brand name as an important part of the product and branding can add value to the product.

A name, term, sign, symbol or design or a combination of these intended to identify the goods and services of one seller or group of seller and to differentiate them from their competitors. Given the name of Pepsi has already received a great recognition from the consumers; there is no need to make any change to it. LOGO Logo is what establishes a brand name in the consumer mind. It is the brands identify, signature, image and more often it is a logo that makes of breaks a product logo plays a very effective role to improve the product or brand.

Pepsi kept on changing its logo from time to time along with the trade marks. We will also remain the use of current logo. Evolution of Pepsi Logo PACKAGING “Packaging is a part of product planning in which a firm researchers, designs, and produces its packaging. ” The physical container may be a cardboard, metal, plastic or wooden box; a cellophane, wax paper, or cloth wrapper; a glass, aluminum, or plastic jar or can; a paper bag; styro foam; some other material; or a combination of these products frequently have more than one physical container.

But packaging depends upon the product nature as well as structure means either it is liquid, semi liquid or solid. In case of Pepsi Cola, they take the packaging designs by considering what is better for company and what is better or convenient for the transportation. For protecting the syrup, Pepsi Cola uses the glass as well as plastic bottles of different quantity. The variants that are offered by Pepsi in terms of size and quantity, 1. 175 ml Mini Bottle (not available now) 2. 250 ml Regular Bottle 3. 300 ml Tin 4. 1000 ml Regular Liter Bottle 5. 500 ml Disposable Bottle Please note that the strategic focus of this marketing plan is to achieve the marketing goal through 1pricing, 2distribution, and 3integrated communication strategies; hence, the only change that will be made regarding to the product itself is that: after the advertising was launched, the Pepsi cans and bottles must have the image of the advertising actors on it. V. Pricing Strategy In contrast to most usual pricing strategies which try to attract customers by lowering the price, we will price the Pepsi by, on average, 30% higher than Coca-cola.

This pricing strategy is based on two main reasons. First, though Pepsi is no longer as prosperous as before, it is still occupying a certain amount of consumers in the soft drink market and that is estimated to be significant enough to make Coca-cola, the leader in the market, worry. Therefore, by adopting this pricing strategy, it could effectively avoid to have price war with Coca-cola as Pepsi, given the current market situation, will not be able to win if Coca-cola really wants to wipe Pepsi out of the market.

The second reason of adopt such pricing strategy is to strengthen the image/feeling of better quality, which is the main driving theme of this marketing plan. In general, the most common way for consumers to evaluate the quality of a product or service is through the price. More specifically, products that deemed to have better qualities are usually priced higher whereas people tend to believe that cheap products are less effective.

For instance, I am more likely to buy Red Bull than V (*both are energy drinks while Red Bull is priced approximately 30% higher than V) during the exam periods as I want something “stronger and effective” in keeping me awake, and the evaluations of which one is more effective are usually based solely on comparing their respective prices. Hence, charging a higher price could 1avoid entering the price war with Coca-cola, 2strengthening the feeling/image of better quality, and 3ontain a higher margin (sales price minus costs) which gives Pepsi greater bargaining power to motivate retailers to increase the amount of sut tocks on shelf.

In addition, such pricing strategy is unlikely to be followed by Coca-cola as it is experiencing a very stable profitability and market share, and therefore, it does not need to adopt such pricing strategy and risk what it has now as, according to fundamental economic theory, the quantity demanded drops when price went up. VI. Distribution Strategy The overall distribution strategy contains two steps. In the first stage, unlike the traditional approach which distributes products to the wholesalers (e. g. big supermarkets), the products will be directly distributed to retailers.

The purpose of adopting such distribution strategy is to control the final price that consumers receive. Since our marketing goal is to enhance consumer’s perception of “better taste” about Pepsi by charging a higher price, a direct distribution to wholesalers creates difficulty in controlling the final price that consumers receive. Hence, in the initial stage (estimated to be 1 year), products will only be supplied to retailers as it ensures the final price charged aligned with the firm’s marketing goal.

In the second stage, products will also be supplied to wholesalers at a price that is more competitive in order to reduce the end price and distribution costs. Creating the image of “better taste” by charging a higher price is only a short-term strategy as eventually Pepsi will be forced to reduce its product’s price in order to be more efficient in obtaining a greater market share and thus the second-leader position. The objective of getting a larger market share would be more effectively achieved if the perception of better taste is delivered and spread around the market (i. . the outcome from the first stage). Furthermore, by supplying wholesalers at a competitive price, it generates incentives for retailers to source stocks directly from the wholesalers, which in turn reduces the distribution costs incurred from delivering products to retailers. To sum, the distribution strategy consists of two stages. It begins with direct supply to retailers in order to control the end price, and in the second stage, the wholesalers will be supplied at a competitive price with an aim to reduce the market price and obtain a greater market share. VII.

Integrated Marketing Communication Strategy The success of this strategy is very critical as it determines whether the overall marketing plan (i. e. generating the image of better taste) will be effective or not. Though theoretically logical that higher prices creates the image of better quality, it is actually a risky move as if the advertisings are not convincing enough, consumers are unlikely to pay for a product, which is generally considered to be a close substitute of Coca-cola, at a higher price. Hence, how convincing the advertisings are plays an important role in the whole marketing plan.

The overall integrated marketing communications will be directed specifically toward the consumer involve advertising through online advertising (both Internet and mobile phone), outdoor advertising such as billboards, and TV advertising. Advertising efforts will include 25 percent to online advertising, 25 percent to outdoor advertising, and 50 percent to television advertising. The content of advertisement is suggested to involve at least the following three elements: (1) cultural-related, (2) be inspirational, and (3) story typed.

A good advertising must always take into account the culture of its audience since the consumer’s preferences are largely influenced by the targeted nation’s culture. Moreover, good advertising should have the ability to inspire the targeted consumers and arouse their desire to purchase. The third element “story typed”, which separates the advertisement into a number of “story series”, is a common advertising technique used in nowadays. An example that involves all three elements could be a story of All Blacks which tells the difficulty of training processes, the frustration of losing, and the moment of obtaining the championship.

It is important to relate Pepsi especially to the final winning moment as New Zealanders are proud of winning the World Rugby Championship, and by purchasing Pepsi (if the link between Pepsi and Championship is successfully created), it reminds them the honour as well as the moment. It is important to note that the story typed advertising will mainly be shown on TV, which explains why it takes away 50 percent of effort and budget. Moreover, the TV and online advertising will be launched a few weeks before the outdoor advertising. VIII. Marketing Implementation, Evaluation and Control

The implementation of the whole market strategies consists of three steps: (1) film the advertising, (2) withdraw products from wholesalers, and (3) distribute the new Pepsi. The advertising must be filmed and other associated advertisements (e. g. billboard and online advertisements) must all be prepared before launching the further two steps. Though we do not make much change in the end product that the consumers will receive, given one of our strategies adopted to regain the second leader position is through charging higher price, the stocks that hold, especially, by wholesalers must be withdrawn before the distribution of new products.

Since Pepsi has already established its market in New Zealand, it is expected that the withdrawal and distribution processes will be quite smooth and should not cause much difficulty. One thing of concern during the implementation process is the willingness of retailers to upload the targeted amount of Pepsi on shelf as increasing the popularity is one of the strategies in the whole marketing plan. In order to motivate the retailers, the purchasing price that retailers pay will not increase as much as the increase of end prices (i. e. e give some of the enlarged margin to retailers) so they will be able to enjoy a greater profit through selling Pepsi. This marketing plan will be centrally focused on Auckland and Wellington given these two cities contains the majority of New Zealand’s population. However, this does not imply the new products will not be launched in other areas. Our strategy is that, we will persuade retailers in Auckland and Wellington to increase the amount of Pepsi on shop shelf by an additional 40 percent while the retailers in other areas are targeted at a 25 percent level of increase.

And we will monitor the monthly sales volume and profit as a way to evaluate the effectiveness of this marketing plan. It is estimated that the sale volume will increase by 30 percent on average, and if this target is hit after a year, further aggressive marketing plan will be examined and launched. IX. Ethics, Social Responsibility and Sustainability Issues PepsiCo’s success has not come without major challenges or ethical dilemmas. One of the biggest difficulties for any multinational organization is how to successfully enter into other countries, particularly when laws vary from country to country.

Although PepsiCo takes great care in researching potential markets, the company has encountered several problems that have caused tensions with different cultures, in both the U. S. and abroad. Additionally, PepsiCo still faces heavy criticism for products that are viewed as largely unhealthy and whose packaging contributes to a large amount of waste. The nature of the products manufactured and sold by PepsiCo has caused many problems for the company in the issue of health. Although PepsiCo now has numerous products geared toward health, its most popular product is still its signature Pepsi-Cola.

At the same time, America is becoming more health-conscious and desires low calorie, low fat, natural items instead of processed sugary and salty foods. Some of the health concerns of drinking soda include the increased caloric intake as well as the possibility of tooth decay due to soda’s acidity, caffeine dependence, and weaker bones. Pepsi has fought back by creating sodas that have low calorie and sugar content. Unfortunately, this only helps with the weight risk. The acidic nature of the product can still damage the teeth, and the artificial sweeteners used also have their own set of health risks.

PepsiCo’s traditional snack items have met with similar criticism. Most of the products are processed and contain a high amount of sodium and sugar as well as being highly caloric and fatty. Frito-Lay Company has tried to combat the issue by offering Baked Lays, Baked Cheetos, SunChips, and other healthier alternatives. These alternatives are claimed to be healthier all-around. The health issue is going to be an ongoing battle for the company due to the nature of the industry it is in.

Continual research and product development to offer healthier products is essential for PepsiCo’s future profitability. Although the battle may be a long one, PepsiCo is making strides to address these concerns. For example, the Frito-Lay website has a special area devoted to health that describes the ingredients of Frito-Lay snacks and encourages consumers to practice moderation in snack food consumption. One of the goals of PepsiCo CEO Indra Nooyi is to invest more in health food; already the company claims that $10 billion comes from healthy snacks the company offers.

Nooyi anticipates that further investment will yield $30 billion in the future. Interestingly enough, to tackle this issue, PepsiCo is hiring people that are potential enemies of the organization: health officials. Formerly employed at institutions like the World Health Organization and the Mayo Clinic, these Pepsi employees are now researching healthier ingredients to put in PepsiCo snacks. One success thus far has been the introduction of a zero-calorie natural sweetener called stevia into new brands, one of which has become a $100 million brand in less than a year.

It is clear that not only is healthier snack foods socially responsible, but it is also good business in an increasingly health-conscious marketplace References * Accuval 2012, “Carbonated Soft Drinks: Is Demand Fizzing Out? ”, viewed 22 Aug 2012, <http://www. accuval. net/insights/industryinsights/detail. php? ID=142> * Bryson York Emily 2012, “Pepsi says three drinks now billion-dollar brands”, Chicago Tribune, 26 Jan, viewed 19 Aug 2012, <http://articles. chicagotribune. com/2012-01-26/news/chi-pepsi-says-three-drinks-now-billiondollar-brands-20120126_1_starbucks-products-pepsi-max-diet-pepsi> Datamonitor 2005, “Global Soft Drinks: Industry Profile”, New York, Reference Code: 0199-0802. * GrabStats 2012, “Beverage Industry Statistics”, viewed 21 Aug 2012, <http://www. grabstats. com/statcategorymain. aspx? StatCatID=63> * Matt Jackson 2012, “Coke and Pepsi change recipe to avoid cancer warning”, viewed 21 Aug 2012, <http://www. guardian. co. uk/business/2012/mar/09/coke-pepsi-recipe-change-avoid-cancer-warning> * Michael F. Jacobson, & Kelly D. Brownell 2000, “Small Taxes on Soft Drinks and Snack Foods to Promote Health”, viewed 20 Aug 2012. Mitchell, Alan J. , ed 1995, “Formulation and Production of Carbonated Soft Drinks”, * Murray Barbara 2006a, “The Coca-Cola Company. Hoovers”, viewed 20 Aug 2012, <http://premium. hoovers. com/subscribe/co/factsheet. xhtml? ID=10359> * Murray Barbara 2006c, “The Coca-Cola Company. Hoovers”, viewed 20 Aug 2012, <http://premium. hoovers. com/subscribe/co/factsheet. xhtml? ID=10359> * OECD 2012, “New Zealand – Economic forecast summary (May 2012)”, viewed 21 Aug 2012, <http://www. oecd. org/newzealand/newzealand-economicforecastsummarymay2012. tm> * Ryan Jaslow 2012, “Drinking gallons of Coca-Cola daily cited in 30-year-old New Zealand mom’s death”, viewed 21 Aug 2012, <http://www. cbsnews. com/8301-504763_162-57417819-10391704/drinking-gallons-of-coca-cola-daily-cited-in-30-year-old-new-zealand-moms-death/> * The Treasury NZ 2012, “Economic Outlook”, viewed 20 Aug 2012, <http://www. treasury. govt. nz/budget/2012/bps/bps12-eo. pdf> * Woolfolk, ME & Castellan, W, Brooks 1983, “Pepsi versus Coke: Labels, not tastes, prevail”, Psychological Reports 52: 185–186,

Cite this Situation Analysis – Pepsi

Situation Analysis – Pepsi. (2016, Oct 02). Retrieved from https://graduateway.com/situation-analysis-pepsi/

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