An internal analysis of Pepsi reveals some core strengths and weaknesses. Their strengths include a broad product line and great reputation, number one maker of snacks, and they sell three products through the same distribution channel. Pepsi, Gatorade, and Tropicana share production capabilities which aids in the reduction of costs, improves efficiency, and smoothes out the impact of seasonal fluctuations in demand for a particular product.
On the other hand, Pepsi has some weaknesses that include Pepsi products that do not bear the company name, a lack of brand awareness with some of their products, and a majority of their sales comes from the U. S. market and about 1/3 of their sales is from Frito-Lay. In Pepsi’s external environment they encounter a few opportunities as well as some threats. Opportunities that they can take advantage of include the increasing trend towards healthier food, noncarbonated drinks which are the fastest growing part of the industry, and international markets that they have not yet tapped into.
However, Pepsi faces threats from several competitors such as Coca Cola and Kraft Foods due to Pepsi’s broad product line. In addition, since sales from Frito-Lay makes up a large portion of their profits, a downturn in the market will pose another threat to them. Pepsi uses a diversification strategy that is keyed towards product innovation, close relationships with distribution allies, international expansion, and strategic acquisitions. Most of PepsiCo brands have achieved number one or number two positions in their respective food or beverage categories through these strategies.
Furthermore, their management has a proven ability to capture strategic fits between the operations of new acquisitions and its other businesses. They have also formulated three divisions that are comprised of PepsiCo Americas Foods division, PepsiCo Americas Beverages division, and PepsiCo International in order to increase efficiency in each area. In 2008, a new element in their corporate strategy was product reformulations to make snack foods and beverages healthier. This was a step in the right direction. It is very important for Pepsi to respond to the current trend of healthier food and drink options.
They should introduce a wide variety of noncarbonated beverages, such as water and orange juice, to the U. S. and abroad to increase their market share and maintain profit growth. They can utilize their Power of One strategy in international markets, where their Frito-Lay brand is doing very well, to encourage the purchase of their beverages. When Pepsi acquired Quaker Oats it was a smart move to be able to offer consumers less fattening snack foods. They should provide such alternatives through their Frito-Lay brand as well. If Pepsi implements these recommendations it will help ensure their top spots in the food and beverage industries.