- April 30, 2020
Deep Review of External Factors of PepsiCo
DeepReview of External Factors of PepsiCo
Operatinga successful business does not only involve working hard but ratherworking smart. It means improving on management, targeting as well asplanning. To start with, organizations needs to keep on reviewing andanalyzing where they are in the market and what they are doing. Inthis case, PepsiCo needs to assess external factors that affect theperformance and operation of the organization. The company needs totake into consideration the external environment to enable it toformulate strategies for further development. The paper aims atreviewing the external factors that affect PepsiCo. In its analysis,it will give a comprehensive review of the target market, markersegmentation, competition profile, distribution aspects and alongsideother external factors.
Atarget market is an organization’s ideal customer base. Identifyinga target market has helped PepsiCo to direct marketing funds to thecustomers most likely to purchase its products. PepsiCo hashistorically targeted young adults from since the 1980s. Lots oftheir ads were typically aimed at teenagers and young adults byincorporating fun, music as well as sports in them. The justificationgiven is that, it is easier to attract young shoppers because theyhave not yet formed brand loyalty. Nonetheless, Pepsi also targetsother age groups, for instance, its diet brands target women of allages (Kotler & Keller, 2012). Additionally, the company targetsathletes, overweight persons as well as individuals from distinctculture and environmental aspects of an individual nation. Forinstance, its products like Nimbooz attract the huge demand for thenation-style lemon beverages.
PepsiCohas over time used effective market segmentation to target itsspecific markets. Effective market segmentation necessitatesmarketers to subdivide market by determining and profiling toestablish a different group of buyers who vary in their wants andneeds (Kotler& Keller, 2012). PepsiCo has segmented its market bydemographic, geographic and psychographics. The assessment ispresented below:
•GeographicSegmentation It involves partitioning the market into larger andsmaller parts. It can begin with countries, states, sectors,counties, towns and lastly neighborhoods. PepsiCo functions in allthese geographic sections nonetheless, it does alter the tastes andpackaging based on the ethnic group or country it is targeting. Forinstance, in Mexico, PepsiCo sells cookies under the name Gamesa. Thecompany global components are split down into four segments namelyPepsiCo Americas Beverages, PepsiCo Europe, PepsiCo Americas Foodsand lastly PepsiCo Asia.
•Demographicsegmentation it splits the market based on the age, gender, income,family life cycle, occupation, education and among other aspects.PepsiCo is one of the major food and beverages firms globally. Itsareas of developing interests include the African –American andHispanic markets (Kotler & Keller, 2012). The Company hasover time diversified its markets into several distinct types ofdrinks that target different parts of the markets and customize theirproducts to meet the needs of everyone such as salty, sweet andgrain-based snacks. PepsiCo’s coffee drink and energy drinks targetcollege kids and athletes.
•PsychographicSegmentation it involves dividing buyers into distinct groupsregarding personality characteristics, lifestyles, and values.PepsiCo has segmented the market based on social class andpersonality. For instance, it tries to capture the young adults byincorporating aspects such as music and sports in its ads. Theirbeverages focus much on lower and upper middle class since they canafford the company’s products. Products such as Mountain Dew istargeted particularly at those persons with adventurous traits
PepsiCooperates in a highly competitive market. It competes against global,local and regional regarding price, product diversity, anddistribution as well as quality. The major competitor of PepsiCo isCoca-Cola Company which has a bigger share of carbonated beverages(CSD) consumption. Besides, Coca-Cola Company has a considerableadvantage in market share of carbonated soft drinks in severalmarkets outside America. Further, PepsiCo’s snacks brands possess asignificant leadership position in the snack industry globally. Totriumph in this competitive environment, the company has incorporatedvalid promotion on existing and new products. The power of thebrands, innovation, effective marketing techniques combined with thequality of the products and flexibility of the distribution set-upallows PepsiCo to compete favorably (Ferguson, 2016).
Withregards to product lines, Coca-Cola has an extremely larger productclassification such as the type of cola beverages, energy drinks,juices and alongside others. The company has introduced lots ofdifferent flavors such as lemon, vanilla, and cherry. PepsiCo comesnumber two in beverages markets. It has also developed lots ofvariations from its principal Cola too the company owns anincredible positioning on the diet cola markets too (Market share ofcarbonated beverages worldwide as of 2015, 2016). Compared to PepsiCowhich has ventured into snacks market, Coca-Cola Company is missingfrom this segment which could have augmented its revenue. In regardsto distribution, PepsiCo’s distribution strategy does not covermost nations as compared to Coca-Cola Company which has ventured intoalmost every country worldwide. The pictures of these two competingbrandsareshown below:
Figureone: PepsiCo products
Figuretwo: Coca-Cola Company’s Products
Distributorsoften have business relationships with the manufacturers. Thedistributors of PepsiCo sustain exclusive purchasing agreements thatlimit the number of participants. PepsiCo supplies their products tothe distributors who in turn resale them to the wholesalers orretailers. It makes use of the following segments direct storedelivery, client warehouse and lastly the distributor network.PepsiCo selects the appropriate distribution channel with regards tothe clients’ needs, product features as well local trade practice.PepsiCo prefers customer warehouse as it is a cheaper channel and itsbest for products that are less delicate and perishable (Bailey,2014). On the other hand, third party distribution channel isutilized by PepsiCo to distribute food and beverages to businesses,schools, and hotels. Direct Store system channels enable the companyto delivers its products directly to the retail stores. This channelis ideal for goods sensitive to promotion as well as marketing.
PepsiCoand Coca-Cola Company differ regarding retailer distribution becauseof the following reasons. PepsiCo has diversified its businessoperations with an incredible presence in food and beverage products.Hence, to market its products effectively, it tends to adopt adifferent retailer distribution as compared to Coca-Cola Companywhich ventures purely on beverages. On the hand, advancement intechnology has enabled Coca-Cola Company to incorporate incredibledistribution channels such as vending machines which have made theCompany create brand loyalty in various nations. Coverage is anotheraspect that makes these two beverages giants differ in their retailerdistribution. For instance, Coca-Cola Company has a wider coverageglobally compared to PepsiCo and for this reason it has incorporateddistinct marketing channels to attract more customers.
How to improve Distribution Channels
Thereare some ways that PepsiCo can consider to improve its distributionchannels. For instance, the company should devote adequate resourcesto channel management as well as recruiting a highly skilled managerto monitor the operations of the distributions. Secondly, it shouldconsider instituting measurements and track performance to assessorders as well as total revenue at every point. With this, theCompany is a position of determining and enhancing underperformingpartners. Additionally, effective communication should be advocatedfor to create relationships at every step of the company’s channel.Communication enables the company to determine as well as solve theproblems emanating from various distribution channels. Lastly,avoiding pricing conflicts, developing a pricing structure andsticking to it helps in improving the distribution channel.Consistency in pricing is a critical aspect of marketing hence thecompany should, by all means, solve any conflict that arises due topricing.
Insummary, as discussed above assessing external factors is worthwhilefor PepsiCo Company in its effort to expand its customer base.PepsiCo needs to take advantage of the current technology toincorporate strategies in its business model such as vending machinesfor it compete fairly with its primary rival, the Coca-Cola Company.
Bailey,S. (2014). PepsiCo’sthree-channel distribution network – Market Realist.
Marketrealist.com.Retrieved 17 November 2016, fromhttp://marketrealist.com/2014/12/pepsicos-three-channel-distribution-network/
Ferguson,E. (2016). PepsiCo’sGeneric and Intensive Growth Strategies – Panmore Institute.
PanmoreInstitute.Retrieved 17 November 2016, fromhttp://panmore.com/pepsico-generic-strategy-intensive-growth-strategies
Kotler,P.,Keller,K.L(2012).MarketingManagement (14thed). Upper Saddle River, NJ: Pearson
Marketshare of carbonated beverages worldwide as of 2015, c. (2016). CocaCola: beverage
marketshare 2015 | Statista.Statista.Retrieved 17 November 2016, fromhttps://www.statista.com/statistics/387318/market-share-of-leading-carbonated-beverage-companies-worldwide/