Order custom Harvard Business Case Study Analysis & Solution. Starting just $19
PepsiCo SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by PepsiCo managers to do a situational analysis of the company . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) PepsiCo is facing in its current business environment.
The PepsiCo is one of the leading organizatations in its industry. PepsiCo maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the PepsiCo to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect PepsiCo strengths, and eradicate its weaknesses.
Step by Step Guide to PepsiCo SWOT Analysis
Strengths of PepsiCo – Internal Strategic Factors
As one of the leading firms in its industry, PepsiCo has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of PepsiCo are –
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Highly skilled workforce through successful training and learning programs. PepsiCo is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong Brand Portfolio – Over the years PepsiCo has invested in building a strong brand portfolio. The SWOT analysis of PepsiCo just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Automation of activities brought consistency of quality to PepsiCo products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Superb Performance in New Markets – PepsiCo has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Strong distribution network – Over the years PepsiCo has built a reliable distribution network that can reach majority of its potential market.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Weakness of PepsiCo – Internal Strategic Factors
Weakness are the areas where PepsiCo can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that PepsiCo is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- The profitability ratio and Net Contribution % of PepsiCo are below the industry average.
- Investment in Research and Development is below the fastest growing players in the industry. Even though PepsiCo is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of PepsiCo
- High attrition rate in work force – compare to other organizations in the industry PepsiCo has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Opportunities for PepsiCo – External Strategic Factors
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for PepsiCo. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided PepsiCo an opportunity to enter a new emerging market.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for PepsiCo to drive home its advantage in new technology and gain market share in the new product category.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for PepsiCo in other product categories.
- The new technology provides an opportunity to PepsiCo to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of PepsiCo’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- New trends in the consumer behavior can open up new market for the PepsiCo . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Threats PepsiCo Facing - External Strategic Factors
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for PepsiCo in those markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Liability laws in different countries are different and PepsiCo may be exposed to various liability claims given change in policies in those markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Rising raw material can pose a threat to the PepsiCo profitability.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
Limitations of SWOT Analysis for PepsiCo
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of PepsiCo
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of PepsiCo
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis PepsiCo managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of PepsiCo
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
Previous 5 SWOT Analysis
- Freddie Mac SWOT Analysis
- Marathon Petroleum SWOT Analysis
- Archer Daniels Midland SWOT Analysis
- MetLife SWOT Analysis
- Johnson & Johnson SWOT Analysis