PepsiCo (PEP) SWOT Analysis / TOWS Matrix / MBA Resources
Beverages (Nonalcoholic)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for PepsiCo (Germany)
Based on various researches at Oak Spring University , PepsiCo is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 Germany
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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the PepsiCo are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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 Germany 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.
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.
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.
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.
Ability to recruit top talent
– PepsiCo is one of the leading players in the Beverages (Nonalcoholic) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Beverages (Nonalcoholic)
– PepsiCo is one of the leading players in the Beverages (Nonalcoholic) industry in Germany. Over the years it has not only transformed the business landscape in the Beverages (Nonalcoholic) industry in Germany 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.
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.
Weaknesses of PepsiCo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PepsiCo are -
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.
Low market penetration in new markets
– Outside its home market of Germany, PepsiCo needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
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.
Aligning sales with marketing
– From the outside it seems that PepsiCo needs to have more collaboration between its sales team and marketing team. Sales professionals in the Beverages (Nonalcoholic) industry have deep experience in developing customer relationships. Marketing department at PepsiCo can leverage the sales team experience to cultivate customer relationships as PepsiCo is planning to shift buying processes online.
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 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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, PepsiCo can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate PepsiCo prominent markets.
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.
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.
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.
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.
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.
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.
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.