PepsiCo Inc. External Analysis

PepsiCo Inc. External Analysis

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Contents

TOC o “1-3” h z u Introduction PAGEREF _Toc68613591 h 3Internal Evaluation Matrix PAGEREF _Toc68613592 h 4STWOT Matrix PAGEREF _Toc68613593 h 5PepsiCo TOWS Matrix PAGEREF _Toc68613594 h 6PepsiCo Porter Model (Force Analysis) PAGEREF _Toc68613595 h 7Financial Ratios PAGEREF _Toc68613596 h 8Conclusion and Recommendations PAGEREF _Toc68613597 h 9

IntroductionPepsiCo Inc. is an American-based multinational beverage, food, and snack company with headquarters in Harrison, New York. Incorporated on August 28th, 1998, the company also has interests in marketing, manufacturing, and distribution of grain-based beverages, foods among other products. PepsiCo has over 200 locations worldwide. In 2017, PepsiCo recorded 63, 525 billion in revenue an increase from 62, 799 billion in 2016 (Beba & Church, 2020). PepsiCo’s main competitors include the Coca-Cola Company, Kellogg Company, Hansen Natural Corporation, Monster Beverage Corporation, National Beverage Corporation among other snack and food companies.

Internal and External Factor Evaluation Matrix

External Factor Evaluation (IFE) Matrix

Key External Factors Weight Rating Score

Opportunities

Growing snacks and beverage consumption in emerging markets 0.18 4 0.72

Potential to increase company profits 0.10 2 0.20

Promoting products through sponsoring 0.15 3 0.45

Market for less costly products and lower price than competitors 0.15 3 0.45

Total 0.58 1.82

Threats

Change in customer pattern and lifestyle 0.15 4 0.60

Fierce competition from Coca-Cola change in customer pattern and lifestyle 0.08 2 0.16

Changes in consumer rates 0.11 3 0.33

Water scarcity 0.08 2 0.16

Total 0.42 1.25

Grand Total 1.00 3.07

The overall score of PepsiCo from the evaluation matrix is 3.07. This shows that its evaluation values are above average and it takes into consideration high values instead of average values. The company is responding by overcoming threats and seizing new opportunities.

Internal Evaluation MatrixStrengths Weight Rating Weighted Score

Strong brand 0.09 4 0.36

Strong marketing and advertising of products worldwide 0.07 3 0.28

Products availability 0.08 3 0.24

Revenue and profits 0.08 3 0.24

Market Share 0.07 3 0.21

Competent workforce 0.05 3 0.15

Wide variety of products 0.05 3 0.15

Earnings per share 0.02 4 0.08

Weaknesses

High debts 0.07 2 0.14

Health Issues 0.08 1 0.08

Low sales of some products 0.09 2 0.18

Product recall causing negative brand impact 0.10 1 0.1

Taste differentiation 0.05 1 0.05

High Operating Expense 0.10 1 0.1

Total Weighted Score 1.0 1 2.36

Pepsi Co. The total weighted score stands at 2.36 which is well above average. However, there is a need to find a way to cope with competition

STWOT MatrixStrengths Weaknesses Opportunities Threats

Best global brand Products perceived as unhealthy Product diversification Stiff competition

Power of one strategy Overdependence on food and beverages Expand E-commerce Recession

High diversity portfolio Failed products Enhancing partnerships and alliances Competitors taking up technology more effectively

Strong global presence Controversial advertisements Increase consumer-driven R&D Demographical changes

Direct-store-delivery Expanding Operations in Emerging markets Increased trade tensions

Market dominance Increasing healthy food options Government Laws and Regulations

Effective marketing strategy Enhancing Corporate Social Responsibility Increased health consciousness.

PepsiCo TOWS MatrixS0- ST- WO- WT

Strong image and marketing skills Minimizing competitive threats Innovation in distribution networks Reducing dependence on US markets mainly

Finding international growth Partnerships Ecommerce, partnerships, and acquisitions International commerce will help reduce losses affiliated with economic fluctuations

SPACE Matrix

Rapid Market Growth

Market Development

Market Penetration

Product development

Horizontal integration

Divestiture

Liquidation Market Development

Market Penetration

Product Development

Integration, any direction

Related discrimination

Retrenchment

Related Diversification

Unrelated diversification

Horizontal integration

Divestiture

Liquidation Joint Ventures

Strategic alliances

Merger Acquisition

Related diversification

Unrelated Diversification

Weak competition positionStrong Competitive Position

PepsiCo Porter Model (Force Analysis)Competition Customers bargaining power Suppliers bargaining power Threats/Substitution Threats of New Entrants

High aggressiveness displayed by firms Low switching costs High overall supply High performance of substitutes Reduced switching costs

Reduced switching costs Increased access to product information Reduced forward interaction with suppliers Low switching costs Average customer loyalty

A high number of firms Increased availability of substitutes Average size of individual suppliers High availability of substitutes Increased cost of brand development

Financial RatiosAnnual Data 2020

Current ratio 0.9841

Long-term Debt/Capital 0.7487

Equity ratio 3.2578

Gross margin 54.8158

Operating margin 14.3239

EBIT margin 14.3239

EBITDA margin 17.9446

Pre-Tax Profit Margin 12.8872

Net Profit margin 10.1177

Asset turnover 0.7574

Inventory Turnover Ratio 7.6215

Receivable turnover 8.3736

Day sales in receivables 43.5892

Return on equity 52.9442

Return On Tangible Equity -29.2618

Return on Assets 7.7219

Return on Investments 13.3063

Book value per share 9.8203

Operating Cash Flow per share 0.7664

Free Cash flow per share 0.6469

Conclusion and RecommendationsDespite facing numerous challenges ranging from increased competition from competitors, low sales due to inflation, market tensions, and government-related regulations, PepsiCo Inc. has the advantage of the best global brand. It is also renowned for high diversity in brands, market dominance, and strong global dominance. The beverage and food industry faces many hurdles that have to do with changing trends in lifestyles, environmentalism, and aggressive competition. PepsiCo should employ its strengths in dealing with its weaknesses. It can take real action to improve its growth by adopting recycling efforts that favor the environment, penetrating developing markets, minimizing risk to exposure, and building product health to attract more diverse consumers.

References

Beba, U., & Church, A. H. (2020). Changing the game for women leaders at PepsiCo: From local action to enterprise accountability. Consulting Psychology Journal: Practice and Research, 72(4), 288.