PepsiCo Business Analysis: Part 1
When making any investment decision, it is important for a potential investor to gain insight into the company. An evaluation of the company’s strengths, weaknesses, opportunities, and threats will help the investor determine if the venture is worth going into (Nickels, McHugh & McHugh, 2010). It also provides details about the internal status of the business and the future growth to expect in the future. SWOT Analysis
Conducting a SWOT analysis of PepsiCo will help the company determine where change is possible. If the company is at a turning point, an inventory of its strengths and weaknesses can reveal possibilities. The identified strengths can be built on and used to their full potential and makes can be made to reduce the weaknesses. Potential problems that need to be addressed or at least recognized are identified. It will help PepsiCo discover what it does well, could improve, whether they are making the most of the opportunities around them, and whether there are any changes in the market that may require changes in the business (Nickels et al., 2010). Strengths
PepsiCo has a diverse product portfolio that includes foods, snacks, and beverages with annual revenue of over $66 billion. The PepsiCo brands such as Pepsi, Gatorade, Tropicana, Mountain Dew, Lay’s, Aquafina, Sierra Mist, Fritos, and Quaker stand for quality and are well recognized household names. These brands generate over $1 billion each in annual global sales revenue which gives PepsiCo an advantage over its competition that have limited product line (“Brands,” 2012). Lower sales in one product line because of unforeseeable circumstances can be offset with promoting sales from another product line. PepsiCo’s geographical footprint is another strength of the organization. It currently operates in more than 200 countries worldwide which provides PepsiCo with diverse income sources. In 2011, only 50% of the company’s revenue came from the United States but this did not impact PepsiCo’s overall revenue growth because of the company’s increasing revenue from other parts of the world like Asia, Russia, Europe, and Latin America (“The Power of PepsiCo,” 2012). Weaknesses
With the diverse portfolio of PepsiCo, not all products produced by this company bear it name and its holdings are still seen by the public as separate entities, not as parts of PepsiCo. Its branding is not obvious and not easily recognized and this is hurting the image of the company. One of its most popular brands, Gatorade, recently changed its name to multiple sub-brands such as “G Prime 01,” and “G Series Pro 03 Recover” (Edwards, 2011).
PepsiCo is gradually losing its credibility because of its lack of stability in management. The company has a high turnover rate and in the last four years, 26 senior marketing managers have resigned and those that are still with PepsiCo have been moved from one brand to another or from one division to another (Edwards, 2012). The revenue of PepsiCo is over dependent on sales to Wal-Mart. In 2011, approximately 18% of PepsiCo’s North American net revenue was from sales to Wal-Mart (including Sam’s Club). As a result PepsiCo is highly influenced with the business strategies of Wal-Mart (“The Power of PepsiCo,” 2011). Opportunities
PepsiCo is investing its resources by expanding its operation in emerging foreign markets like China and Russia and developing continents like Africa. With the company’s recent purchase of Wimm-Bill-Dann, a Russian food and beverage company with huge market shares in dairy and juice products, PepsiCo will expand greatly its presence in Eastern Europe and Central Asia and is expected to increase its annual sales revenue by $5 billion (“Pepsi Absorbs Wimm,” 2011).
PepsiCo recently signed a partnership agreement with Theo Muller, a German dairy company to sell its dairy products in the US starting with yogurt. PepsiCo will also invest in research to create new dairy...
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