PepsiCo: The Challenge of Growth Through Innovation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of PepsiCo: The Challenge of Growth Through Innovation
This corporate strategy case shows how Pepsico stopped worrying about competing with Coca-Cola, figured out what its real business was, and decided how to build its future. Redefining itself as a beverage and snack business, PepsiCo sheds its restaurant business and acquires Quaker and Tropicana. By rethinking the synergistic relationship between the complementary, combined strengths of the merged companies, it strategizes to develop innovative products that will compete in a changing demographic, cultural, and geographical world. Will this strategy work in an increasingly competitive environment?
Swot Analysis of "PepsiCo: The Challenge of Growth Through Innovation" written by Mary Summers, S. Venkataraman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pepsico Strategizes facing as an external strategic factors. Some of the topics covered in PepsiCo: The Challenge of Growth Through Innovation case study are - Strategic Management Strategies, Competitive strategy, Innovation, International business, Leadership and Strategy & Execution.
Some of the macro environment factors that can be used to understand the PepsiCo: The Challenge of Growth Through Innovation casestudy better are - – talent flight as more people leaving formal jobs, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing household debt because of falling income levels, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of PepsiCo: The Challenge of Growth Through Innovation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in PepsiCo: The Challenge of Growth Through Innovation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pepsico Strategizes, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pepsico Strategizes 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: The Challenge of Growth Through Innovation can be done for the following purposes –
1. Strategic planning using facts provided in PepsiCo: The Challenge of Growth Through Innovation case study
2. Improving business portfolio management of Pepsico Strategizes
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 Pepsico Strategizes
Strengths PepsiCo: The Challenge of Growth Through Innovation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pepsico Strategizes in PepsiCo: The Challenge of Growth Through Innovation Harvard Business Review case study are -
Learning organization
- Pepsico Strategizes is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Pepsico Strategizes is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in PepsiCo: The Challenge of Growth Through Innovation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Pepsico Strategizes is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Mary Summers, S. Venkataraman can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Pepsico Strategizes 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: The Challenge of Growth Through Innovation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Pepsico Strategizes has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pepsico Strategizes 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.
High brand equity
– Pepsico Strategizes has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pepsico Strategizes to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Pepsico Strategizes is present in almost all the verticals within the industry. This has provided firm in PepsiCo: The Challenge of Growth Through Innovation 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.
Sustainable margins compare to other players in Strategy & Execution industry
– PepsiCo: The Challenge of Growth Through Innovation firm has clearly differentiated products in the market place. This has enabled Pepsico Strategizes to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Pepsico Strategizes to invest into research and development (R&D) and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Pepsico Strategizes digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pepsico Strategizes has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– Pepsico Strategizes has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in PepsiCo: The Challenge of Growth Through Innovation 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.
High switching costs
– The high switching costs that Pepsico Strategizes 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
– Pepsico Strategizes 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: The Challenge of Growth Through Innovation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Pepsico Strategizes is one of the most innovative firm in sector. Manager in PepsiCo: The Challenge of Growth Through Innovation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses PepsiCo: The Challenge of Growth Through Innovation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PepsiCo: The Challenge of Growth Through Innovation are -
Low market penetration in new markets
– Outside its home market of Pepsico Strategizes, firm in the HBR case study PepsiCo: The Challenge of Growth Through Innovation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study PepsiCo: The Challenge of Growth Through Innovation, is just above the industry average. Pepsico Strategizes needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Aligning sales with marketing
– It come across in the case study PepsiCo: The Challenge of Growth Through Innovation 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: The Challenge of Growth Through Innovation can leverage the sales team experience to cultivate customer relationships as Pepsico Strategizes is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As PepsiCo: The Challenge of Growth Through Innovation HBR case study mentions - Pepsico Strategizes 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.
Skills based hiring
– The stress on hiring functional specialists at Pepsico Strategizes has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Pepsico Strategizes is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Pepsico Strategizes needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pepsico Strategizes to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pepsico Strategizes is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study PepsiCo: The Challenge of Growth Through Innovation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Pepsico Strategizes products
– To increase the profitability and margins on the products, Pepsico Strategizes needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Pepsico Strategizes has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– After analyzing the HBR case study PepsiCo: The Challenge of Growth Through Innovation, 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Pepsico Strategizes needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities PepsiCo: The Challenge of Growth Through Innovation | 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: The Challenge of Growth Through Innovation are -
Creating value in data economy
– The success of analytics program of Pepsico Strategizes has opened avenues for new revenue streams for the organization in the industry. This can help Pepsico Strategizes to build a more holistic ecosystem as suggested in the PepsiCo: The Challenge of Growth Through Innovation case study. Pepsico Strategizes can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Pepsico Strategizes can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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 Pepsico Strategizes 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pepsico Strategizes 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: The Challenge of Growth Through Innovation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Pepsico Strategizes to increase its market reach. Pepsico Strategizes will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Pepsico Strategizes can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Pepsico Strategizes has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pepsico Strategizes can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Pepsico Strategizes 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. Pepsico Strategizes 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Pepsico Strategizes in the consumer business. Now Pepsico Strategizes can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Pepsico Strategizes 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Pepsico Strategizes 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 Pepsico Strategizes to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Pepsico Strategizes to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats PepsiCo: The Challenge of Growth Through Innovation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study PepsiCo: The Challenge of Growth Through Innovation are -
Shortening product life cycle
– it is one of the major threat that Pepsico Strategizes is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Pepsico Strategizes 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. Pepsico Strategizes can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pepsico Strategizes 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.
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 Pepsico Strategizes in the Strategy & Execution sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Pepsico Strategizes has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Pepsico Strategizes needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pepsico Strategizes 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: The Challenge of Growth Through Innovation .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Pepsico Strategizes 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.
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. Pepsico Strategizes needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pepsico Strategizes with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Pepsico Strategizes 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Pepsico Strategizes business can come under increasing regulations regarding data privacy, data security, etc.
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. Pepsico Strategizes 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.
Weighted SWOT Analysis of PepsiCo: The Challenge of Growth Through Innovation 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: The Challenge of Growth Through Innovation 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: The Challenge of Growth Through Innovation 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: The Challenge of Growth Through Innovation 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: The Challenge of Growth Through Innovation 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 Pepsico Strategizes needs to make to build a sustainable competitive advantage.
