PepsiCo, Incorporated, is an American food and beverage company that is one of the largest companies like it in the world, with products in over 200 countries. In 1965, the Pepsi-Cola Company merged with Frito-Lay, Inc., making it the second largest food and beverage company.
This paper will assess how globalization and technology changes have impacted PepsiCo and will also apply the industrial organization model and the resource-based model to determine how PepsiCo could earn above-average returns. Lastly, this paper will assess how PepsiCo’s vision and mission statements influence its overall success and evaluate how each category of stakeholder impacts the overall success of the corporation.
Globalization is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders. Globalization increases the range of opportunities for companies competing in the current competitive landscape (Hitt, Ireland, ; Hoskisson, 2013). PepsiCo products are enjoyed by consumers in more than 200 countries and territories around the world, and has generated over $63 billion in net revenue in 2015. This company has food and beverages that include Pepsi-Cola, Frito-Lay, Gatorade, Tropicana, and Quaker. PepsiCo has 22 brands that generate over a billion dollars each in annual retail sales (Papa John’s, 2017). To expand globally, PepsiCo has partnered with numerous brands and charities like Walmart, Feed the Children, and the Aquafund Project in Mexico, to name a few. PepsiCo is continuing to grow with opportunities in international markets. Per Yahoo Finance, the growth rates in developing and emerging markets are expected to continue to surpass the growth in developed markets (Bailey, 2014). Due to globalization, PepsiCo is dealing with hard competition from its competitors, the main one being Coca-Cola. Coca-Cola is the world’s largest food and beverage company, with 500 brands under its umbrella, as opposed to PepsiCo’s 22 brands. Both of these companies are faced with competition from the growing market of healthier drinks. Companies are coming up with alternatives to the sugary sodas, such as energy drinks with 0 sugar and nutritional drinks. Due to these alternatives, PepsiCo had to adjust with the changes in the market, in order to stay competitive. PepsiCo has developed its own brand of alternative drinks, however, they will still face competition and market share erosion from other competitors.
PepsiCo has had to come up with innovative technology to stay in the race with its competitors, from interesting ways to sell their products to social media platforms. Technology diffusion, which is the speed at which technologies become available and are used, has prompted PepsiCo to come up with innovative ways to compete with its counterparts. In 2011, PepsiCo introduced innovative vend technology, such as the “Social Vending Machine”, that allowed customers to better connect with their brands right at the point of purchase. This machine featured a full touch screen interactive vending technology. The company has also had to create innovative technological ways to make deliveries easier for its clients. PepsiCo partnered with Apple Inc. to change the way the company works, as far as with deliveries. With the use of iPads and iPhones, equipped with the latest technology, PepsiCo is able to efficiently make over 17,000 runs in North America each day (Topic Search, n.d.). PepsiCo’s technological factor influences its suppliers as well. The soft drink market is very competitive, so PepsiCo has had to maximize the number of products to enhance its market size. Installing new and more advanced equipment, has enabled the company to produce more efficiently.
The text states, the industrial organization model of above-average returns explains the external environment’s dominant influence on a firm’s strategic actions. External environment is divided into general environment and specific environment. The model consists of examining the competitive, manufacturing, and general environment, which affects the procedures and strategic results of a business accordingly. The primary background study consists of reviewing the legal, socio-culture, governmental, financial, and demographic factors. One of the biggest socio-cultural factors is the health issues with drinking sugary beverages. These days, many people are concerned with what they put into their bodies due to concerns with so many diseases, such as diabetes, heart disease, and obesity. Because of these issues, PepsiCo introduced Diet Pepsi and Pepsi Zero to its product line, which reduced profit of other soft drink companies (External environment, 2014). If Pepsi can continue to provide healthier options for the consumer, they will produce above-average returns. The political factor influences the soft-drink industry regulatory bodies and customers. Due to soft drinks being unhealthy, with many toxic ingredients that may cause cancer, the government has to set up laws to monitor the ingredients of all kinds of drinks. PepsiCo and its competitors have had to make changes to their soda products and expanding their offerings outside of sugary drinks, due to governments around the world trying to convince citizens to drink less soda, by making it more expensive, which involves taxing (Taylor, 2016). Industrialization consumes lots of fuels for manufacturing goods that lead to energy crisis. PepsiCo can continue to make positive changes in the environment, by having more energy efficient machines and incorporating ways to help sustain the environment, which include water and packaging as well. PepsiCo can continue to make changes with its packaging to include more eco-friendly materials. Also, PepsiCo has installed newer water filtration and purification systems that allow them to recycle most the water used in production (Pepsi, 2017).
The resource-based model assumes that each organization is a collection of unique resources and capabilities (Hitt, Ireland, ; Hoskisson, 2013). This model illustrates a company’s interior background and considers its abilities and resources. The resource-based model will empower PepsiCo to control its strengths and weaknesses and at the same time examine its main competencies. Therefore, PepsiCo can advance and form a strategy, which maintains its powers, as well as minimize its weaknesses to begin its competitive advantage over its rivals. PepsiCo currently has over 2,000 utility patents and patent applications and over 900 design patents and design applications (Mishra, 2015). Many of these patents have nothing to do with food and beverages, however, it shows PepsiCo’s innovative thinking. Today, they are able to satisfy the health conscience and the not so health conscience consumer. PepsiCo will receive above-average returns in the soft drink business and bring about its abilities and capitals, with the resource-based model. The combination of the I/O and resource-based models will contribute to PepsiCo controlling its strengths, weaknesses, opportunities, and threats, effectively. Also, enabling them to develop informed strategies that could help with earning higher returns through fewer efforts (Hitt, Ireland ; Ireland, 2013).
Vision is a picture of what the firm wants to be, and in broad terms, what it wants to ultimately achieve (Hitt, Ireland, ; Hoskisson, 2013). PepsiCo’s vision is “At PepsiCo, we aim to deliver top-tier financial performance over the long term by integrating sustainability into our business strategy, leaving a positive imprint on society and the environment. We call this Performance with Purpose (What we believe, n.d.).” PepsiCo’s vision statement states the company’s role in the global market. PepsiCo aims to have high financial performance, which should be at the top of most company’s expectations. Sustainability in the company’s business activities, such as conserving natural resources and supporting communities, will enhance the corporate and brand image.
A mission specifies the businesses in which the firms intends to compete and the customers it intends to serve (Hitt, Ireland, & Hoskisson, 2013). PepsiCo’s mission states, “As one of the largest food and beverage companies in the world, our mission is to provide consumers around the world with delicious, affordable, convenient and complementary foods and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats (What we believe, n.d.).” The mission statement focuses on providing products for all consumers with different backgrounds and cultures. Also, PepsiCo is focused on providing all types of snacks that are easily assessible and affordable.
Stakeholders are the individuals, groups, and organizations that can affect the firm’s vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance (Hitt, Ireland, ; Hoskisson, 2013). PepsiCo’s capital market stakeholders (shareholders and lenders) expect the company to preserve and enhance the wealth they have entrusted to it. If PepsiCo’s stakeholders are not satisfied, it will result in lenders becoming strict with borrowing capital and shareholders selling their stock. PepsiCo’s product market stakeholders consist of unions, vendor, host communities, and critical consumers that impact the routine of the corporation through an actual supply chain management. This allows PepsiCo to accomplish its stakeholder’s expectations with its consumers looking forward to high quality and dependable products at reasonable prices. Employees, which are the company’s organizational stakeholders, expect PepsiCo to provide a dynamic, stimulating, and rewarding work environment. The company should groom their employees to meet or exceed global work standards (Hitt, Ireland, & Hoskisson, 2013). PepsiCo will have to provide these things if they want to keep employees and make it a company everyone wants to work for.