Case Study Description of PepsiCo Bottling in Mexico
This case describes Pepsico's program to restructure its Mexican bottling network. It wants to work with existing bottlers and find an organizational arrangement that will allow the bottlers to grow and change with the Mexican soft drink industry.
Authors :: Kenneth A. Froot, Charles M. La Follette
Swot Analysis of "PepsiCo Bottling in Mexico" written by Kenneth A. Froot, Charles M. La Follette includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bottlers Bottling facing as an external strategic factors. Some of the topics covered in PepsiCo Bottling in Mexico case study are - Strategic Management Strategies, International business, Joint ventures, Mergers & acquisitions, Organizational structure and Finance & Accounting.
Some of the macro environment factors that can be used to understand the PepsiCo Bottling in Mexico casestudy better are - – geopolitical disruptions, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China,
central banks are concerned over increasing inflation, increasing energy prices, etc
Introduction to SWOT Analysis of PepsiCo Bottling in Mexico
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in PepsiCo Bottling in Mexico case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bottlers Bottling, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bottlers Bottling 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 Bottling in Mexico can be done for the following purposes –
1. Strategic planning using facts provided in PepsiCo Bottling in Mexico case study
2. Improving business portfolio management of Bottlers Bottling
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Bottlers Bottling
Strengths PepsiCo Bottling in Mexico | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bottlers Bottling in PepsiCo Bottling in Mexico Harvard Business Review case study are -
High switching costs
– The high switching costs that Bottlers Bottling 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.
Sustainable margins compare to other players in Finance & Accounting industry
– PepsiCo Bottling in Mexico firm has clearly differentiated products in the market place. This has enabled Bottlers Bottling to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Bottlers Bottling to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Bottlers Bottling is one of the leading recruiters in the industry. Managers in the PepsiCo Bottling in Mexico are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Bottlers Bottling 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 Bottlers Bottling is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in PepsiCo Bottling in Mexico Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the PepsiCo Bottling in Mexico 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.
Low bargaining power of suppliers
– Suppliers of Bottlers Bottling in the sector have low bargaining power. PepsiCo Bottling in Mexico has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Bottlers Bottling to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Bottlers Bottling digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bottlers Bottling 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.
Diverse revenue streams
– Bottlers Bottling is present in almost all the verticals within the industry. This has provided firm in PepsiCo Bottling in Mexico 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.
Training and development
– Bottlers Bottling has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in PepsiCo Bottling in Mexico 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.
Analytics focus
– Bottlers Bottling 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 Kenneth A. Froot, Charles M. La Follette 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.
Successful track record of launching new products
– Bottlers Bottling has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bottlers Bottling 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.
Innovation driven organization
– Bottlers Bottling is one of the most innovative firm in sector. Manager in PepsiCo Bottling in Mexico Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses PepsiCo Bottling in Mexico | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PepsiCo Bottling in Mexico are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Bottlers Bottling is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study PepsiCo Bottling in Mexico can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Bottlers Bottling 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 Bottling in Mexico should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As PepsiCo Bottling in Mexico HBR case study mentions - Bottlers Bottling 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.
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 Bottlers Bottling supply chain. Even after few cautionary changes mentioned in the HBR case study - PepsiCo Bottling in Mexico, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bottlers Bottling vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Bottlers Bottling 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.
Capital Spending Reduction
– Even during the low interest decade, Bottlers Bottling has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Bottlers Bottling 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. Bottlers Bottling 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.
Low market penetration in new markets
– Outside its home market of Bottlers Bottling, firm in the HBR case study PepsiCo Bottling in Mexico needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Bottlers Bottling products
– To increase the profitability and margins on the products, Bottlers Bottling needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study PepsiCo Bottling in Mexico, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study PepsiCo Bottling in Mexico, is just above the industry average. Bottlers Bottling 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.
Opportunities PepsiCo Bottling in Mexico | 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 Bottling in Mexico are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Bottlers Bottling can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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 Bottlers Bottling in the consumer business. Now Bottlers Bottling can target international markets with far fewer capital restrictions requirements than the existing system.
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 Bottlers Bottling 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.
Learning at scale
– Online learning technologies has now opened space for Bottlers Bottling 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.
Loyalty marketing
– Bottlers Bottling 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.
Better consumer reach
– The expansion of the 5G network will help Bottlers Bottling to increase its market reach. Bottlers Bottling 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.
Buying journey improvements
– Bottlers Bottling can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. PepsiCo Bottling in Mexico 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.
Building a culture of innovation
– managers at Bottlers Bottling 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 Finance & Accounting segment.
Using analytics as competitive advantage
– Bottlers Bottling 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 Bottling in Mexico - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Bottlers Bottling to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Bottlers Bottling 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. Bottlers Bottling 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bottlers Bottling can use these opportunities to build new business models that can help the communities that Bottlers Bottling operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Bottlers Bottling can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Bottlers Bottling 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.
Threats PepsiCo Bottling in Mexico External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study PepsiCo Bottling in Mexico are -
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
– Bottlers Bottling 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.
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 Bottlers Bottling in the Finance & Accounting sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Bottlers Bottling can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Bottlers Bottling 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. Bottlers Bottling can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Bottlers Bottling 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.
Technology acceleration in Forth Industrial Revolution
– Bottlers Bottling has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Bottlers Bottling needs to keep up with the evolution of technology in the Finance & Accounting 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.
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 Bottlers Bottling.
Shortening product life cycle
– it is one of the major threat that Bottlers Bottling is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Bottlers Bottling 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.
Increasing wage structure of Bottlers Bottling
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Bottlers Bottling.
Stagnating economy with rate increase
– Bottlers Bottling 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 Bottlers Bottling in the Finance & Accounting industry. The Finance & Accounting 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.
Weighted SWOT Analysis of PepsiCo Bottling in Mexico 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 Bottling in Mexico 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 Bottling in Mexico 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 Bottling in Mexico 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 Bottling in Mexico 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 Bottlers Bottling needs to make to build a sustainable competitive advantage.