Pepsi vs. Coke in Venezuela SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Pepsi vs. Coke in Venezuela
After Pepsi's longtime bottler in Venezuela switches to Coke in a surprise move, Pepsi's CEO assesses the damage and struggles to find answers: What went wrong and what could he have done differently? Did Coke pay too much for the bottler? Was the entire negotiation ethical? How might the global strategies of both Coke and Pepsi be affected?
Swot Analysis of "Pepsi vs. Coke in Venezuela" written by David Wylie, Kathleen Hagan, Hal Hogan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Coke Pepsi's facing as an external strategic factors. Some of the topics covered in Pepsi vs. Coke in Venezuela case study are - Strategic Management Strategies, International business, Joint ventures, Negotiations and Global Business.
Some of the macro environment factors that can be used to understand the Pepsi vs. Coke in Venezuela casestudy better are - – supply chains are disrupted by pandemic , increasing commodity prices, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings,
there is increasing trade war between United States & China, wage bills are increasing, etc
Introduction to SWOT Analysis of Pepsi vs. Coke in Venezuela
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pepsi vs. Coke in Venezuela case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Coke Pepsi's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Coke Pepsi'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 Pepsi vs. Coke in Venezuela can be done for the following purposes –
1. Strategic planning using facts provided in Pepsi vs. Coke in Venezuela case study
2. Improving business portfolio management of Coke Pepsi's
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Coke Pepsi's
Strengths Pepsi vs. Coke in Venezuela | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Coke Pepsi's in Pepsi vs. Coke in Venezuela Harvard Business Review case study are -
Sustainable margins compare to other players in Global Business industry
– Pepsi vs. Coke in Venezuela firm has clearly differentiated products in the market place. This has enabled Coke Pepsi's to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Coke Pepsi's to invest into research and development (R&D) and innovation.
Ability to lead change in Global Business field
– Coke Pepsi's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Coke Pepsi's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Coke Pepsi's 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 David Wylie, Kathleen Hagan, Hal Hogan 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.
Superior customer experience
– The customer experience strategy of Coke Pepsi's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Coke Pepsi'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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Coke Pepsi's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Coke Pepsi's 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.
Innovation driven organization
– Coke Pepsi's is one of the most innovative firm in sector. Manager in Pepsi vs. Coke in Venezuela Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Coke Pepsi's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Pepsi vs. Coke in Venezuela 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.
Cross disciplinary teams
– Horizontal connected teams at the Coke Pepsi'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.
Learning organization
- Coke Pepsi's 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 Coke Pepsi's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Pepsi vs. Coke in Venezuela Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Pepsi vs. Coke in Venezuela 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.
Ability to recruit top talent
– Coke Pepsi's is one of the leading recruiters in the industry. Managers in the Pepsi vs. Coke in Venezuela are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Pepsi vs. Coke in Venezuela | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pepsi vs. Coke in Venezuela are -
Lack of clear differentiation of Coke Pepsi's products
– To increase the profitability and margins on the products, Coke Pepsi's needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Coke Pepsi's 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.
High bargaining power of channel partners
– Because of the regulatory requirements, David Wylie, Kathleen Hagan, Hal Hogan suggests that, Coke Pepsi's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow decision making process
– As mentioned earlier in the report, Coke Pepsi's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Coke Pepsi's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High operating costs
– Compare to the competitors, firm in the HBR case study Pepsi vs. Coke in Venezuela has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Coke Pepsi's 's lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Coke Pepsi's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Pepsi vs. Coke in Venezuela can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Pepsi vs. Coke in Venezuela, is just above the industry average. Coke Pepsi's 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.
Interest costs
– Compare to the competition, Coke Pepsi's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study Pepsi vs. Coke in Venezuela 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 Pepsi vs. Coke in Venezuela can leverage the sales team experience to cultivate customer relationships as Coke Pepsi'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 Pepsi vs. Coke in Venezuela, in the dynamic environment Coke Pepsi's has struggled to respond to the nimble upstart competition. Coke Pepsi's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Coke Pepsi's is dominated by functional specialists. It is not different from other players in the Global Business segment. Coke Pepsi's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Coke Pepsi's to focus more on services rather than just following the product oriented approach.
Opportunities Pepsi vs. Coke in Venezuela | 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 Pepsi vs. Coke in Venezuela are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Coke Pepsi'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 Global Business segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Coke Pepsi'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.
Buying journey improvements
– Coke Pepsi's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Pepsi vs. Coke in Venezuela 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.
Better consumer reach
– The expansion of the 5G network will help Coke Pepsi's to increase its market reach. Coke Pepsi's 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.
Manufacturing automation
– Coke Pepsi's can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Building a culture of innovation
– managers at Coke Pepsi's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
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 Coke Pepsi'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.
Creating value in data economy
– The success of analytics program of Coke Pepsi's has opened avenues for new revenue streams for the organization in the industry. This can help Coke Pepsi's to build a more holistic ecosystem as suggested in the Pepsi vs. Coke in Venezuela case study. Coke Pepsi's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Coke Pepsi's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Coke Pepsi'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 Pepsi vs. Coke in Venezuela - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Coke Pepsi's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Coke Pepsi's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Coke Pepsi'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. Coke Pepsi'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.
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 Coke Pepsi's in the consumer business. Now Coke Pepsi's can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Pepsi vs. Coke in Venezuela External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pepsi vs. Coke in Venezuela are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Pepsi vs. Coke in Venezuela, Coke Pepsi's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Coke Pepsi'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 Pepsi vs. Coke in Venezuela .
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. Coke Pepsi's needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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. Coke Pepsi'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.
Shortening product life cycle
– it is one of the major threat that Coke Pepsi's is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Coke Pepsi's in the Global Business sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Coke Pepsi's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Coke Pepsi's business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Coke Pepsi'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. Coke Pepsi's can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Regulatory challenges
– Coke Pepsi's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Coke Pepsi's in the Global Business industry. The Global Business 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.
Consumer confidence and its impact on Coke Pepsi'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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Coke Pepsi's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Pepsi vs. Coke in Venezuela 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 Pepsi vs. Coke in Venezuela 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 Pepsi vs. Coke in Venezuela 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 Pepsi vs. Coke in Venezuela 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 Pepsi vs. Coke in Venezuela 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 Coke Pepsi's needs to make to build a sustainable competitive advantage.