PepsiCo (PEP) SWOT Analysis / TOWS Matrix / MBA Resources
Beverages (Nonalcoholic)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for PepsiCo (United States)
Based on various researches at Oak Spring University , PepsiCo is operating in a macro-environment that has been destablized by – increasing energy prices, there is backlash against globalization, increasing commodity prices, cloud computing is disrupting traditional business models, wage bills are increasing, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that PepsiCo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the PepsiCo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which PepsiCo 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 can be done for the following purposes –
1. Strategic planning of PepsiCo
2. Improving business portfolio management of PepsiCo
3. Assessing feasibility of the new initiative in United States
4. Making a Beverages (Nonalcoholic) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of PepsiCo
Strengths of PepsiCo | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of PepsiCo are -
Ability to lead change in Beverages (Nonalcoholic)
– PepsiCo is one of the leading players in the Beverages (Nonalcoholic) industry in United States. Over the years it has not only transformed the business landscape in the Beverages (Nonalcoholic) industry in United States but also across the existing markets. The ability to lead change has enabled PepsiCo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of PepsiCo
– The covid-19 pandemic has put organizational resilience at the centre of everthing PepsiCo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Beverages (Nonalcoholic) industry
- digital transformation varies from industry to industry. For PepsiCo digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. PepsiCo 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 has one of the best training and development program in Consumer/Non-Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy of PepsiCo comprises – understanding the underlying the factors in the Beverages (Nonalcoholic) 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.
High brand equity
– PepsiCo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled PepsiCo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– PepsiCo is one of the leading players in the Beverages (Nonalcoholic) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– PepsiCo is one of the most innovative firm in Beverages (Nonalcoholic) sector.
Learning organization
- PepsiCo 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 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at PepsiCo emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that PepsiCo 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 Beverages (Nonalcoholic) industry
– PepsiCo has clearly differentiated products in the market place. This has enabled PepsiCo to fetch slight price premium compare to the competitors in the Beverages (Nonalcoholic) industry. The sustainable margins have also helped PepsiCo to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– PepsiCo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – PepsiCo staying ahead in the Beverages (Nonalcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of PepsiCo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PepsiCo are -
Slow decision making process
– As mentioned earlier in the report, PepsiCo has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Beverages (Nonalcoholic) industry over the last five years. PepsiCo 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 cash cycle compare to competitors
PepsiCo has a high cash cycle compare to other players in the Beverages (Nonalcoholic) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Beverages (Nonalcoholic) industry
– The stress on hiring functional specialists at PepsiCo 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.
Lack of clear differentiation of PepsiCo products
– To increase the profitability and margins on the products, PepsiCo needs to provide more differentiated products than what it is currently offering in the marketplace.
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 PepsiCo supply chain. Even after few cautionary changes, PepsiCo is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left PepsiCo vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at PepsiCo, in the dynamic environment of Beverages (Nonalcoholic) industry it has struggled to respond to the nimble upstart competition. PepsiCo has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though PepsiCo has some of the most successful models in the Beverages (Nonalcoholic) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. PepsiCo should strive to include more intangible value offerings along with its core products and services.
High dependence on PepsiCo ‘s star products
– The top 2 products and services of PepsiCo still accounts for major business revenue. This dependence on star products in Beverages (Nonalcoholic) industry has resulted into insufficient focus on developing new products, even though PepsiCo has relatively successful track record of launching new products.
High bargaining power of channel partners in Beverages (Nonalcoholic) industry
– because of the regulatory requirements in United States, PepsiCo 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 Beverages (Nonalcoholic) industry.
High operating costs
– Compare to the competitors, PepsiCo has high operating costs in the Beverages (Nonalcoholic) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract PepsiCo lucrative customers.
Need for greater diversity
– PepsiCo 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.
PepsiCo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PepsiCo are -
Use of Bitcoin and other crypto currencies for transactions in Beverages (Nonalcoholic) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for PepsiCo in the Beverages (Nonalcoholic) industry. Now PepsiCo can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Beverages (Nonalcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. PepsiCo 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 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.
Leveraging digital technologies
– PepsiCo 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for PepsiCo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Beverages (Nonalcoholic) industry, and it will provide faster access to the consumers.
Developing new processes and practices
– PepsiCo can develop new processes and procedures in Beverages (Nonalcoholic) 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for PepsiCo 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 to hire the very best people irrespective of their geographical location.
Buying journey improvements
– PepsiCo can improve the customer journey of consumers in the Beverages (Nonalcoholic) industry by using analytics and artificial intelligence. It 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.
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. PepsiCo can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– PepsiCo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Beverages (Nonalcoholic) sector. This continuous investment in analytics has enabled PepsiCo to build a competitive advantage using analytics. The analytics driven competitive advantage can help PepsiCo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, PepsiCo can use these opportunities to build new business models that can help the communities that PepsiCo operates in. Secondly it can use opportunities from government spending in Beverages (Nonalcoholic) sector.
Manufacturing automation
– PepsiCo can use the latest technology developments to improve its manufacturing and designing process in Beverages (Nonalcoholic) sector. 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.
Loyalty marketing
– PepsiCo 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 PepsiCo to increase its market reach. PepsiCo 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.
Threats PepsiCo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PepsiCo are -
Increasing wage structure of PepsiCo
– 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 PepsiCo.
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 business can come under increasing regulations regarding data privacy, data security, 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 PepsiCo in the Beverages (Nonalcoholic) sector and impact the bottomline of the organization.
Regulatory challenges
– PepsiCo 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 Beverages (Nonalcoholic) industry regulations.
Shortening product life cycle
– it is one of the major threat that PepsiCo is facing in Beverages (Nonalcoholic) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Beverages (Nonalcoholic) industry are lowering. It can presents PepsiCo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Beverages (Nonalcoholic) sector.
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 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for PepsiCo in Beverages (Nonalcoholic) industry. The Beverages (Nonalcoholic) 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 PepsiCo 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 Beverages (Nonalcoholic) industry and other sectors.
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 PepsiCo.
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 needs to understand the core reasons impacting the Beverages (Nonalcoholic) industry. This will help it in building a better workplace.
Weighted SWOT Analysis of PepsiCo Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at PepsiCo 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 PepsiCo 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 PepsiCo 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 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 needs to make to build a sustainable competitive advantage.
