swot analysis of pepsi with other soft drinks
A REAL SWOT ANALYSIS
What is SWOT Analysis?
A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats and is a simple and powerful way to analyze your company's present marketing situation.
The best way to understand SWOT is to look at an actual example: AMT is a computer store in a medium-sized market in the United States. Lately it has suffered through a steady business decline caused mainly by increasing competition from larger office products stores with national brand names. The following is the SWOT analysis included in its marketing plan.
Knowledge. Our competitors are retailers, pushing boxes. We know systems, networks, connectivity, programming, all the VARs, and data management.
Relationship selling. We get to know our customers, one by one. Our direct sales force maintains a relationship.
History. We've been in our town forever. We have loyalty of customers and vendors. We are local.
Costs. The chain stores have better economics. Their per-unit costs of selling are quite low. They aren't offering what we offer in terms of knowledgeable selling, but their cost per square foot and per dollar of sales are much lower.
Price and volume. The major stores pushing boxes can afford to sell for less. Their component costs are less and they have volume buying with the main vendors.
Brand power. Take one look at their full page advertising, in color, in the Sunday paper. We can't match that. We don't have the national name that flows into national advertising.
Local area networks. LANs are becoming commonplace in small business, and even in home offices. Businesses today assume LANs as part of normal office work. This is an opportunity for us because LANs are much more knowledge and service intensive than the standard off-the-shelf PC.
The Internet. The increasing opportunities of the Internet offer us another area of strength in comparison to the box-on-the-shelf major chain stores. Our customers want more help with the Internet, and we are in a better position to give it to them.
Training. The major stores don't provide training, but as systems become more complicated, with LAN and Internet usage, training is more in demand. This is particularly true of our main target markets.
Service. As our target market needs more service, our competitors are less likely than ever to provide it. Their business model doesn't include service, just selling the boxes.
The computer as appliance. Volume buying and selling of computers as products in boxes, supposedly not needing support, training, connectivity services, etc. As people think of the computer in those terms, they think they need our service orientation less.
The larger price-oriented store. When we have huge advertisements of low prices in the newspaper, our customers think we are not giving them good value.
SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. The SWOT framework was described in the late 1960s by Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth in Business Policy, Text and Cases (Homewood, IL: Irwin, 1969). The General Electric Growth Council used this form of analysis in the 1980s. Because it concentrates on the issues that potentially have the most impact, the SWOT analysis is useful when a very limited amount of time is available to address a complex strategic situation.
The following diagram shows how a SWOT analysis fits into a strategic situation analysis.
The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.
The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses. Factors should be evaluated across the organization in areas such as:
- Company culture
- Company image
- Organizational structure
- Key staff
- Access to natural resources
- Position on the experience curve
- Operational efficiency
- Operational capacity
- Brand awareness
- Market share
- Financial resources
- Exclusive contracts
- Patents and trade secrets
The SWOT analysis summarizes the internal factors of the firm as a list of strengths and weaknesses.
An opportunity is the chance to introduce a new product or service that can generate superior returns. Opportunities can arise when changes occur in the external environment. Many of these changes can be perceived as threats to the market position of existing products and may necessitate a change in product specifications or the development of new products in order for the firm to remain competitive. Changes in the external environment may be related to:
- Market trends
- Social changes
- New technology
- Economic environment
- Political and regulatory environment
The last four items in the above list are macro-environmental variables, and are addressed in a PEST analysis. The SWOT analysis summarizes the external environmental factors as a list of opportunities and threats.
How to Perform a SWOT Analysis?
A SWOT Analysis is an integral part of a marketing plan and can also be part of a business plan. Knowing what a SWOT Analysis is and how to perform one is very important.
SWOT helps a company to se itself for better and for worse. Companies are inherently insular and inward looking SWOT’s are a means by which a company can better understand what it does very well and where its shortcomings are. SWOT’s will help the company size up the competitive landscape and get some insight into the vagaries of the marketplace.
SWOT analysis has been a framework of choice among many managers for along time because of its simplicity and its portrayal of the essence of sound strategy formulation - matching a firm’s opportunities and threats wit its strengths and weaknesses. Central to making SWOT analysis effective is accurate internal analysis – the identification of specific strengths and weaknesses around which sound strategy can be built.
SWOT ANALYSIS OF PEPSI-CO
The following table shows the internal and external factors affecting the market opportunities for PepsiCo. This SWOT analysis also shows PepsiCo's internal strengths such as their experienced management team, a competitive product line, a global marketing realm, and the continuous efforts by their research and development to research trends in the industry and to be creative in exploiting those trends. Some possible opportunities noted in the SWOT analysis are the growing markets for specialized ethnic foods and healthier food products. Another opportunity is that the income of consumers is high enabling them to be less price sensitive, and convenience is becoming evermore important not only to the United States but to many countries around the world.
Although PepsiCo has much strength, a few weaknesses lie in the fact that the company is so large and could possibly lose focus or have internal conflict problems. A few of the threats PepsiCo must stay aware of are the ease of reliability of its product line, the almost pure competition in pricing for its products, and the quickness of technological advances causing existing products to be no longer the most advanced.
Experienced, broad base of interests and knowledge
Large size may lead to conflicting interests
Unique, tastes good, competitive price, and convenient
New one calorie products have no existing customer base, generic brands can make similar drinks - cheaper
Diverse, and global awareness
May lose focus, may not be segmented enough
International, diverse positions
Possible conflicts due to so many people, possible trouble staying focused
High sales revenue, high sale growth, large capital base
High expenses, may have trouble balancing cash-flows of such a large operation
Low costs and liabilities due to outsourcing of bottling
Lose control and quality standards
Research & Development
Continuous efforts to research trends an reinforce creativity
May concentrate too much on existing products, intra-preneuralship may not be welcomed
Huge market in the healthy products and growing market for specialized foods for ethnic groups
More expensive products than Coke, such a high price may limit lower income families from buying a Pepsi product
Distinctive name, product and packaging in with regards to its markets
Not entirely patentable, constant replicability by competitors
Internet promotion such as banner ads and keywords can increase their sales, and more computerized manufacturing and ordering processes can increase their efficiency
Computer breakdowns, viruses and hackers can reduce efficiency, and must constantly update products or other competitors will be more advanced
Consumer income is high, more tend to eat out, convenience is important to U.S.
Very elastic demand, almost pure competition
High U.S. Food & Drug Administration standards eliminate overnight competitors
SWOT ANALYSIS OF PEPSI IN PAKISTAN
1. Company Image:
It also is a reputable org. and is well known all over the world. Perception of producing a high quality product.
2. Quality Conscious:
They maintain a high quality as Pepsi Cola International collect sample from its different production facilities and send them for lab test in Tokyo.
3. Good Relation with Franchise:
Throughout its history it has a good relation with franchisers working in different areas of the world where they have the production facilities.
4. Production Capacity:
It has the highest production capacity i.e. 60,000 cases per day is not only in Pakistan but also in South Asia.
5. Market Share:
It has a highest market share i.e. 62% in Pakistan and leading a far step head from its competitors.
6. Large No. of diversity businesses:
This is also its main strength as it ahs diversity in many businesses such as
i. Pepsi beverages
ii. Pepsi foods
iii. Pepsi Restaurants.
7. High Tech Culture:
The whole culture and business operating environment at Pepsi-Cola-West Asia has quick access to a centralized database and they use computers as business tools for analysis and quick decision making.
They mainly use celebrities in their advertising campaigning like Imran Khan, Wasim Akram, and Waqar Younas etc. Also sponsor social activates programs like music etc.
1. Decline in taste:
During the last years, it was published in Financial post that there has been big complaints from the customers with regard to the bad taste that they experienced during the span of six months.
2. Political Franchises:
Such as in Pakistan, Hamayun Ahkhtar is its franchisee who has a strong political support from a political party which is in opposition. In; their era in government less taxes are imposed on them but relation increases as they come in opposition. So the selection is not appropriate as this thing is harmful to their image as well as the strategies.
3. Short term Approach:
They have a lack of emphasis on this in their advertising such as currently when they losses the bid for official drink in the 96 cricket world cup. They started a campaign in which they highlight the factor such as “nothing official about it”.
4. Weak Distribution:
They lack behind in catering the rural areas and just concentrating in the urban areas.
5. Low consumer knowledge:
Unable to maximize local consumer knowledge.
6. Lack of soft drink:
Lack of soft drink “know-how” as a result of diversified business units and generalist managers
1. Increase Population:
As almost in all over the world growth rate is increasing which in turn increases the demand of products and necessities and especially in Asia the market is growing at a faster rate as compare to other continents. So they have to attract new entrants.
2. Changing social trend:
As in all over the world people are rushing towards fast food and beverage because of life which has become much faster, it provide the company a favor to capture this fast moving market with its take away product.
They may enter in garments business in order to promote their brand mane, by making sports cloths fro players which represent their name by wearing their clothes.
4. Distribution of snack foods:
Opportunity to distribute Pepsi snack foods in the future.
They also have a problem of imitators as receives complaints from customers that they find take product in disguised of Pepsi’s product.
2. Government Regulation:
They face problem if government employ taxes on them which force them to raise the price of their product.
3. Corporation’s shortage problem:
Again this is also a serious threat from it suppliers as if supplier is unhappy with the company. He may reduce the supply and exploit the company. This action will surely affect the production process.
4. Non-carbonated substitutes:
Non-carbonated substitutes, such as juices and tea brands are maintaining a strong foothold in the market.
5. Political instability:
The big threat to Pepsi in Pakistan is Political instability and civil unrest.
6. Threat of labor strikes:
External threat of labor strikes and power outages in Pakistan.
SWOT MATRIX (TOWS MATRIX)
What is a SWOT Matrix (TOWS Matrix)?
The SWOT Matrix illustrates how management can match the opportunity by facing your institution with its own strength and weekness to yield four sets of possible strategic alternatives. The SWOT Matrix framework lends itself to brainstorming to create alternative strategies that you might not otherwise consider.
How to Perform a SWOT Matrix (TOWS Matrix)?
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:
SWOT / TOWS Matrix
Basically four main strategies are proposed:
- S-O strategies pursue opportunities that are a good fit to the companies’ strengths. These strategies are based on institutional strengths to take advantage of market opportunities.
- W-O strategies overcome weaknesses to pursue opportunities. These strategies are based on overcoming institutional weaknesses to take advantage of market opportunities.
- S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. These strategies are based on institutional strengths to avoid market threats.
- W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats. These strategies are based on overcoming/minimizing institutional weaknesses to avoid market threats.
TOWS MATRIX OF PEPSI
We have discussed SWOT analysis of Pepsi-Co in our previous topic now here we are going to discuss the TOWS Matrix of Pepsi-Co, keeping in mind its SWOT analysis. Following is the detailed analysis of Pepsi-Cola TOWS matrix:
- One weakness that Pepsi possess is that it has very strong taste it really feels that something highly toxic going inside the body, whereas the same product of the coke is not much strong.
- They also have a problem of imitators as receives complaints from customers that they find take product in disguised of Pepsi’s product. During the last years, it was published in financial post that there has been big complaints from the customers with regard to the bad taste that they experienced during the span of six months. If they soon pay no attention towards that this will create a big problem for them.
- Large size may lead to conflicting interests.
- New one calorie products have no existing customer base; generic brands can make similar drinks – cheaper. It is also big threat for any company people may like or dislike new launching product.
- Such as in Pakistan, Hamayun Ahkhtar is its franchisee who has a strong political support from a political party which is in opposition. In; their era in government less taxes are imposed on them but relation increases as they come in opposition. So the selection is not appropriate as this thing is harmful to their image as well as the strategies. So this may become a big threat for the Pepsi.
- They have a lack of emphasis on this in their advertising such as currently when they losses the bid for official drink in the 96 cricket world cup. They started a campaign in which they highlight the factor such as “nothing official about it”. If they don’t focus on sudden changing’s in their advertising then they can convert this weakness into opportunity.
- They lack behind in catering the rural areas and just concentrating in the urban areas. They should try to increase their distributions and also focus on capturing rural areas; this will become a big opportunity for them.
- The other big weakness on Pepsi is that they don’t pay any attention towards garments. They may enter in garments business in order to promote their brand name, by making sports cloths fro players which represent their name by wearing their clothes. That must increase the customer and income of the Pepsi.
- High expenses may have trouble balancing cash-flows of such a large operation. The staff may show dishonesty. They should try to pay much attention towards their cash flow, and audit there statements on regular basis.
- In many countries Pepsi had more expensive products than Coke; such a high price may limit a lower income family from buying a Pepsi product, therefore which is a big threat for Pepsi that may Pepsi have to face in the future.
- In foreign countries Pepsi have many branches with different flavors as compare to Pakistan, which has only 2 or 3 Pepsi products. Non-carbonated substitutes, such as juices and tea brands are maintaining a strong foothold in the market. Pepsi has a big threat from COKE, which are its main competitor from about 100 years.
- Pepsi is a foreign company therefore they have a big threat every time on them of Political instability and civil unrest.
- The whole culture and business operating environment at Pepsi-Cola-West Asia has quick access to a centralized database and they use computers as business tools for analysis and quick decision making. Computer breakdowns, viruses and hackers can reduce efficiency, and must constantly update products or other competitors will be more advanced.
- Continuous efforts to research trends an reinforce creativity, if they fail in their efforts then there is a big threat for the company. The competitors may get benefit by their plans.
- The whole culture and business operating environment at Pepsi-Cola-West Asia has quick access to a centralized database and they use computers as business tools for analysis and quick decision making. Internet promotion such as banner ads and keywords can increase their sales, and more computerized manufacturing and ordering processes can increase their efficiency and that will become such a big opportunity for Pepsi.
- It has the highest production capacity i.e. 60,000 cases per day is not only in Pakistan but also in South Asia. Established network of 45 distributors each supplying 1,100 retailers. High per capita soft drink consumption – average of 22 servings compared to 5 for Pakistan. At will become such a big opportunity. Due to large production the product of Pepsi is always available in the market and that will become useful to attract taste lovers customers.
- Large No. of diversity businesses is also its main strength as it ahs diversity in many businesses such as Pepsi beverages, Pepsi foods, Pepsi Restaurants, and due to large number of diversity they can capture more customer, therefore it will become such a big opportunity for Pepsi.
- Pepsi is also a reputable organization, and is well known all over the world. Perception of producing a high quality product and strength can become a big opportunity for Pepsi if they use it in well arranged manner, such as advertising more and also by conducting concerts to attract more customers.
- They maintain a high quality as Pepsi Cola International collect sample from its different production facilities and send them for lab test in Tokyo, if they show test reports on label of there products this will also attract customers.
- They mainly use celebrities in their advertising campaigning like Imran Khan, Wasim Akram, and Waqar Younas etc. Also sponsor social activates programmed like music etc. this will become such a big opportunity to build such a large number of customers. So we can say that it is one of the big strength that may become a big opportunity for Pepsi.