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 – wage bills are increasing, technology disruption, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing commodity prices,
geopolitical disruptions, there is backlash against globalization, 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 -
Diverse revenue streams
– PepsiCo is present in almost all the verticals within the Beverages (Nonalcoholic) industry. This has provided PepsiCo 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.
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.
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.
Analytics focus
– PepsiCo 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 Beverages (Nonalcoholic) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
Superior customer experience
– The customer experience strategy of PepsiCo in Beverages (Nonalcoholic) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of PepsiCo in the Consumer/Non-Cyclical sector have low bargaining power. PepsiCo has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps PepsiCo to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– PepsiCo is one of the most innovative firm in Beverages (Nonalcoholic) sector.
Strong track record of project management in the Beverages (Nonalcoholic) industry
– PepsiCo is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Highly skilled collaborators
– PepsiCo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Beverages (Nonalcoholic) industry. Secondly the value chain collaborators of PepsiCo have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of PepsiCo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PepsiCo are -
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.
No frontier risks strategy
– From the 10K / annual statement of PepsiCo, it seems that company is thinking out the frontier risks that can impact Beverages (Nonalcoholic) industry. 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.
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.
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.
Increasing silos among functional specialists
– The organizational structure of PepsiCo is dominated by functional specialists. It is not different from other players in the Beverages (Nonalcoholic) industry, but PepsiCo needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help PepsiCo to focus more on services in the Beverages (Nonalcoholic) industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, PepsiCo 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 Beverages (Nonalcoholic) industry using digital technology.
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.
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.
Slow to strategic competitive environment developments
– As PepsiCo is one of the leading players in the Beverages (Nonalcoholic) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Beverages (Nonalcoholic) industry in last five years.
Compensation and incentives
– The revenue per employee of PepsiCo is just above the Beverages (Nonalcoholic) industry average. It 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.
PepsiCo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PepsiCo are -
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.
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 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.
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.
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.
Building a culture of innovation
– managers at PepsiCo 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 Beverages (Nonalcoholic) industry.
Learning at scale
– Online learning technologies has now opened space for PepsiCo 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects PepsiCo 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
– 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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Beverages (Nonalcoholic) industry, but it has also influenced the consumer preferences. PepsiCo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Threats PepsiCo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PepsiCo are -
Environmental challenges
– PepsiCo 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 can take advantage of this fund but it will also bring new competitors in the Beverages (Nonalcoholic) industry.
Easy access to finance
– Easy access to finance in Beverages (Nonalcoholic) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. PepsiCo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
Stagnating economy with rate increase
– PepsiCo 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 Beverages (Nonalcoholic) industry.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, PepsiCo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Beverages (Nonalcoholic) 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 PepsiCo business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.