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, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, wage bills are increasing, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google,
there is backlash against globalization, talent flight as more people leaving formal jobs, 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 -
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.
Innovation driven organization
– PepsiCo is one of the most innovative firm in Beverages (Nonalcoholic) sector.
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.
Successful track record of launching new products
– PepsiCo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. PepsiCo 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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Beverages (Nonalcoholic) industry, PepsiCo 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.
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 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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, PepsiCo is slow explore the new channels of communication. These new channels of communication can help PepsiCo to provide better information regarding Beverages (Nonalcoholic) products and services. It can also build an online community to further reach out to potential 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 -
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.
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.
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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, PepsiCo 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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, PepsiCo is facing challenges because of the dominance of functional experts in the organization. PepsiCo can utilize new technology in the field of Beverages (Nonalcoholic) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of PepsiCo has opened avenues for new revenue streams for the organization in Beverages (Nonalcoholic) industry. This can help PepsiCo to build a more holistic ecosystem for PepsiCo products in the Beverages (Nonalcoholic) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– PepsiCo has witnessed rapid integration of technology during Covid-19 in the Beverages (Nonalcoholic) industry. As one of the leading players in the industry, PepsiCo needs to keep up with the evolution of technology in the Beverages (Nonalcoholic) 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.
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.
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.
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.
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.
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.