Pepsi Global Marketing Strategy

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May 29, 2011
Student author
May 29, 2011
Global Market Entry Strategy
Global Market Entry Strategy

PEPSICO, INC.
PEPSICO, INC.

Pepsi
Pepsi

Market Entry Strategy

PepsiCo, Inc. is currently operating in China. It has been in the country since 1982, when it started its first operation in Shenzhen and later established 30 joint ventures all over the country. Recently CEO Indra K. Nooyi said that China “represents our single biggest opportunity today outside the U.S.” (Einhorn & Balfour, 2009 September 28). Recently PepsiCo is stepping up its investments and interests in the emerging market of China. With 1.34 billion people and a Chinese soft drinks market forecasted to have a $40 billion value by 2014, it’s easy to see why PepsiCo is investing in this country now. With government plans to improve the infrastructure, distribution will further improve as well, making it easier to get Pepsi to the Chinese consumers. According to Datamonitor, the company announced in 2008 that it would invest $1 billion in China over the next four years to tap the potential of this growing market (2010 May 14a). This investment would help expand its business and broaden its product portfolio. And according to an article in Advertising Age in 2008, CEO Nooyi said that this was the company’s largest investment in China in the almost 30 years they have been conducting business there. The investment is consistent with their broader global strategy of investing in high-growth developing markets and they want to sell to China’s fast-growing middle class. The money will go towards bigger manufacturing capacity, R&D, and building Pepsi’s sales force in order to broaden product distribution (Madden, 2008 November 10). But that wasn’t the only recent investment. Benjamin Li notes that in May 2010 PepsiCo announced they would invest $2.5 billion in China over the next three years, which would be used to build food and beverage plants, especially in China’s western regions (2011 April 23).

PepsiCo possesses many strengths that help it compete globally. It has the ability to leverage a strong brand name in order to generate revenue around the world, including China. It has a diversified product base and distribution channels which helps ensure business sustainability. It holds a leadership position in the snack segment and also has undergone bottler consolidation in order to monitor consumer trends and experiment with niche products and packaging (Datamonitor, 2010 May 14a). In addition, PepsiCo is committed to R&D and creating healthier snacks and beverages worldwide. It has an R&D facility in China and has been looking into integrating traditional Chinese medicine practices and ingredients into its products, catering to the more natural palate of the Chinese consumer (PepsiCo, 2011).

The competitors’ weaknesses help PepsiCo compete more effectively in China. The Chinese soft drinks market is fragmented, which helps ensure Pepsi has a fighting chance because there is no one clear market leader. Its competitor Groupe Danone has 18.6% of the market share volume, while the Coca-Cola Company has 9.7%, and the Taiwanese food and beverage company Tingyi Holding Corp. has 7.4%. There is an overall moderate degree of rivalry in the Chinese soft drinks market. The weakness of Groupe Danone is that it does not have a snack business to pair with its beverages, only dairy fresh products, water, baby nutrition, and medical nutrition products. The Coca-Cola Company doesn’t have a snack business either, although they do operate 38 bottling plants in Greater China. Tingyi has instant noodles, beverages, and bakery products, along with an extensive sales network whose offices and warehouses serve 5,798 wholesalers and 72,955 direct retailers. Tingyi, however, doesn’t market carbonated soft drinks, but ready-to-drink tea, bottled water, and fruit juices (Datamonitor, 2010 Julyb). Some analysts believe that Coke has...
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