In 1992 PepsiCo is considering two opportunities to expand its restaurant business, Carts of Colorado, a $7 million manufacturer and merchandiser of mobile food carts, and California Pizza Kitchen, a $60 million chain in the casual dining segment. The discussion focuses on whether PepsiCo should pursue these opportunities, and if so, how the relationships might be structured, given PepsiCo's large organization and decentralized management structure. Examines strategy formulation and coordination issues in a related set of businesses that are part of a large, decentralized consumer products company.
Swot Analysis of "PepsiCo's Restaurants" written by Cynthia A. Montgomery, Dianna Magnani includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Carts Pepsico's facing as an external strategic factors. Some of the topics covered in PepsiCo's Restaurants case study are - Strategic Management Strategies, Organizational structure, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the PepsiCo's Restaurants casestudy better are - – geopolitical disruptions, increasing government debt because of Covid-19 spendings, there is backlash against globalization, supply chains are disrupted by pandemic , increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption,
increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of PepsiCo's Restaurants
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in PepsiCo's Restaurants case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Carts Pepsico's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Carts Pepsico's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of PepsiCo's Restaurants can be done for the following purposes –
1. Strategic planning using facts provided in PepsiCo's Restaurants case study
2. Improving business portfolio management of Carts Pepsico's
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Carts Pepsico's
Strengths PepsiCo's Restaurants | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Carts Pepsico's in PepsiCo's Restaurants Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Carts Pepsico's in the sector have low bargaining power. PepsiCo's Restaurants has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Carts Pepsico's to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Carts Pepsico's is one of the leading recruiters in the industry. Managers in the PepsiCo's Restaurants are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Carts Pepsico's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Carts Pepsico's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in PepsiCo's Restaurants HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Carts Pepsico's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study PepsiCo's Restaurants - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Carts Pepsico's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in PepsiCo's Restaurants Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Carts Pepsico's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Carts Pepsico's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Carts Pepsico's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Carts Pepsico's is one of the most innovative firm in sector. Manager in PepsiCo's Restaurants Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the PepsiCo's Restaurants Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Superior customer experience
– The customer experience strategy of Carts Pepsico's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Carts Pepsico's is present in almost all the verticals within the industry. This has provided firm in PepsiCo's Restaurants case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses PepsiCo's Restaurants | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PepsiCo's Restaurants are -
Products dominated business model
– Even though Carts Pepsico's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - PepsiCo's Restaurants should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Carts Pepsico's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study PepsiCo's Restaurants can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the PepsiCo's Restaurants HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Carts Pepsico's has relatively successful track record of launching new products.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Carts Pepsico's supply chain. Even after few cautionary changes mentioned in the HBR case study - PepsiCo's Restaurants, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Carts Pepsico's vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As PepsiCo's Restaurants HBR case study mentions - Carts Pepsico's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Carts Pepsico's, firm in the HBR case study PepsiCo's Restaurants needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study PepsiCo's Restaurants that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case PepsiCo's Restaurants can leverage the sales team experience to cultivate customer relationships as Carts Pepsico's is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study PepsiCo's Restaurants, in the dynamic environment Carts Pepsico's has struggled to respond to the nimble upstart competition. Carts Pepsico's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study PepsiCo's Restaurants, it seems that the employees of Carts Pepsico's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Carts Pepsico's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– After analyzing the HBR case study PepsiCo's Restaurants, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities PepsiCo's Restaurants | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study PepsiCo's Restaurants are -
Leveraging digital technologies
– Carts Pepsico's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Carts Pepsico's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Carts Pepsico's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Carts Pepsico's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. PepsiCo's Restaurants suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Carts Pepsico's is facing challenges because of the dominance of functional experts in the organization. PepsiCo's Restaurants case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Carts Pepsico's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Carts Pepsico's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Carts Pepsico's to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Carts Pepsico's can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Carts Pepsico's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, PepsiCo's Restaurants, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Carts Pepsico's can use these opportunities to build new business models that can help the communities that Carts Pepsico's operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Carts Pepsico's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Carts Pepsico's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Carts Pepsico's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Carts Pepsico's has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study PepsiCo's Restaurants - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Carts Pepsico's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats PepsiCo's Restaurants External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study PepsiCo's Restaurants are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Carts Pepsico's needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Carts Pepsico's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study PepsiCo's Restaurants .
Stagnating economy with rate increase
– Carts Pepsico's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Carts Pepsico's in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Carts Pepsico's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Carts Pepsico's is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Carts Pepsico's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Carts Pepsico's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Carts Pepsico's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Environmental challenges
– Carts Pepsico's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Carts Pepsico's can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Carts Pepsico's.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Carts Pepsico's in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of PepsiCo's Restaurants Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study PepsiCo's Restaurants needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study PepsiCo's Restaurants is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study PepsiCo's Restaurants is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of PepsiCo's Restaurants is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Carts Pepsico's needs to make to build a sustainable competitive advantage.
