PepsiCo’s international strategy analysis

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Final essay: PepsiCo’s international strategy analysis.

Pr.: Luis Marijuan, PhD.

Student ID : 315 330.

International Business Management. MITB.

Table of content :

Introduction

I – PepsiCo’s global overview

I.a Company presentation.

I.b PepsiCo’s key Milestones.

II – Internal and external analysis of PepsiCo.

II.a PESTE analysis/ Key success factors.

II.b SWOT analysis/Porter five forces model

III – PepsiCo’s Value creation and internationalization strategies

III.a Value creation/internationalization strategies presentation.

III.b Positive/negative elements of the strategy.

Conclusions and recommendations.

Introduction :

In the past decades we have seen globalization taking more and more importance over the world, with an increasing number of countries deciding to cooperate and reduce the existing barriers to open their economies to international trade, they did so by creating new organizations to facilitate trade and negotiations between countries such as the WTO (World Trade Organization).

The opening of international markets to foreign companies has made competition between companies even fiercer and at the same time has given the opportunity to some companies to make huge revenues and be present all over the world.

But this companies such as Coca-Cola or Mercedes-Benz didn’t succeed out of nowhere and their incredible growth over the years is mostly due to strong internationalization and value creation strategies that take into account the specificities of every country and help companies decide which strategy fits best the product we want to sell in a specific market.

Through this report we’re going to critically analyze the value creation and internationalization strategy of PepsiCo international and give our recommendations after analyzing the market and Pepsico Operations through different tools.

I – PepsiCo’s global overview

I.a Company presentation.

PepsiCo Inc. is a global and international company created in 1965 through the merger of Pepsi-Cola which produces carbonated drinks and Frito-Lay which was the leader in potato and corn chips.

PepsiCo product portfolio is divised in 5 Global brands in which are sold different products, those 5 global brand are :

• Pepsi which includes all the of the companies carbonated drinks such as Pepsi, Pepsi Max…
• Lay’s, leader in the snack food industry in the united states with products like Lay’s potato chips, Fritos corn chips, Cheetos and many others.
• Gatorade, which includes beverages for athletes and sports aficionados.
• Quaker, which is a food brand proposing products like cereal bars and oat derived products.
• Tropicana, one of the leading producer and marketer of branded fruit juice.

There is several hundreds of products present in the the different product portfolio of these divisions, with the 22 best sellers generating more than 1$ billion in annual revenue, for a total revenue of US$ 63 billion, the products of the company are sold in more than 190 countries and they employ more than 250 000 people.

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Source : PepsiCo’s distribution of net revenue worldwide from 2011 to 2017, f. (2018). PepsiCo's distribution of net revenue worldwide by food and beverage, 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/258121/distribution-of-net-revenue-of-pepsico-worldwide-by-food-and-beverage.

As we can see in this graphic the sales of PepsiCo are practically equally shared between the food and the beverage segments which means that the strategy of PepsiCo is efficient in terms promoting both segments and not leaving one behind.

I.b PepsiCo’s key Milestones.

PepsiCo Inc has always put a lot of importance in expanding their product portfolios since its creation and we can clearly see that through their milestones(figure 1 and 2), they have used multiple ways of internationalization to do so such as acquisition or joint venture with other leaders of these markets.

Which gave them the opportunity to build and expand their consumer base to reach 22 products generating more than US$ 1 billion annual sales.

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Figure 1 and 2’s source : http://www.pepsico.com/About/Our-History.

II – Internal and external analysis of PepsiCo.

II.a PESTE/SWOT analysis         

Peste analysis :

Now that we have saw the key milestones of PepsiCo and saw some of the reasons of its success we’re going to use the Pest analysis to identify the various external factors that can affect its business, so that we can outline the opportunities and threats depending on these factors later on in the SWOT analysis.

Political :

These factors underline the political factors that can affect PepsiCo’s business worldwide such as governmental restrictions and such, The political that PepsiCo should take into consideration are :

• The stability of governments in big economies (opportunity)
• Work to enhance intergovernmental trade.(opportunity)
• Restrictions on sugary drinks(soda, juice…) and snacks in developed countries.(threat)

The stability of governments in large economies presents opportunities for PepsiCo since big companies like PepsiCo bring large revenues for countries they are present in building a good relationship with government is easier where it is politically stable, furthermore PepsiCo should work to facilitate trade between governments by participating in trade organizations, finally the restrictions that are issued by governments on foods can affect terribly PepsiCo’s business such as the recent European act to stop selling sugary beverages in schools in all the European union member from late 2018.

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