PepsiCo managed to use marketing, sales and innovation process to their advantage, making strong networks with public relations and creating positive, strong brand names. Throughout the year PepsiCo has change their existing products or create a product to remain in consumer’s mind and try to be ahead of it competitors. They have shown to be up to date with changing trends and relate to all age groups.
2.1 Introduction
Strategic capability is referred to the adequacy and suitability of the resources and competences of an organisation for it to survive and prosper (Johnson and Scholes 2005).
To evaluate PepsiCo’s strategic capabilities it is vital to analyse the value chain along with the resources and competences in order for them to gain competitive advantage.
It is also important to evaluate Critical Success Factors (CSFs) that Pepsi perform to be successful and outperform its competitors.
2.2 The Value Chain Analysis
For PepsiCo to achieve competitive advantage it must deliver value to customers and understand how value is created or lost. Below is a diagram of the value chain within an organisation and the keys points are followed
Firm Infrastructure
To build PepsiCo worlds consumer products company on convenient foods and beverages.
Technology
PepsiCo has adapted Business Process Transformation, the technology system that supports the process of the key activities with technology applications, so that data can flow from system to another.
Human resource
They respect everyone within the workforce and work together to succeed with responsibility and efficiently.
Procurement
With growing revenues and reducing cost it has optimise purchasing and ensure that product is always available.
Inbound logistics
PepsiCo has distribution channels within 190 countries that enable them to trade internationally and deliver high quality.
Operations transform
These operations have managed to manufacture create products with high quality and reliable packaging and create great taste that consumers enjoy.
Outbound logistics
PepsiCo’s distribution systems, including direct store delivery (DSD) and warehouses provide considerable cost efficiency and system effectiveness in driving value. Their systems deliver product freshness and quality for their consumers. PepsiCo products sell very fast so it need to be replenished often, by having DSD associates, it deliver products and stock the shelves themselves and help to make sure the products are fresh, available and displayed to their advantage.
Marketing and sales
PepsiCo exclusively supplies beverages to Pizza Hut and KFC with gives them a competitive edge because these outlets do not stock on their competitors products such as Coke Cola.
PepsiCo also use promotions, television, news and etc… At the moment Diet Pepsi advertising and promotion are using the target line, “Diet Pepsi: It’s the Diet Cola” to illustrate that it is a great choice to go with food and social occasions.
As they do not directly sell to the consumer, they provide financial incentives, product placement fees, promotions and displays to their customers
Service
PepsiCo provide customer care, help and support service, this allow consumers to make their comments.
Both marketing, sales and service has a linkage with human resources because using the right skilled and experience employees allow these primary activities to be carried out effectively and build strong networks.
2.4 Resources
The success of PepsiCo relies on the large part on efficiency; PepsiCo converts its resources into output. Resource falls into four broad categories:
This resource is used to sustain a value cycle and to reinvest revenues in innovation fuels on building better products and along with cost savings projects.
The company is built on individual excellence and personal accountability; it has great people who have the capability of working together in structured teams or informal collaboration. This enables to deliver world-class performance.
PepsiCo consist of different well-known brand names, it has manage to obtain a positive brand within the retail environment, which encourage consumers to buy the products.
Plants over the world, which carries out manufacturing, distributing and R&D centers.
2.5 Core Competences
PepsiCo has managed to employ its competences and resources more effectively than it competitors, which has resulted in the output of customer value more highly than its competitors. PepsiCo has gained this by organisational knowledge, information, skills, technology, structure, relationship, networks and reputation.
It is important for PepsiCo to use its resources and competences effectively because there would be no point in having state of the art equipment or valuable knowledge or a valuable brand name if they were not used effectively.
Below table summarise the resources and competence that makes PepsiCo different to its competitors.
The innovation process is a unique resource. Innovation allows to create new ideas like new flavors of existing products It represents delivering new products with additional benefits and meeting consumer requirements, for example light and healthy beverages. Innovation also helps to focus on new platforms, such as delivering chilled products directly to the store.
They have centralized their research and development for this innovation process, so they can put its resources into developing really big ideas.
2.6 Critical Success Factors
PepsiCo has a longstanding history of matching a good reputation globally that is critical to selling branded products. They have managed to maintain high standards for product quality and integrity.
PepsiCo has sustain a value cycle, this is where it takes big brands, innovate and create them into different products and put them into power go-to-market systems. Whilst using generating revenues and reinvesting back into new products and thus the cycle continue.
Another factor is they have the ability to differenate their brands, such as new flavours, different size of existing products. Creating new products that meets consumer’s needs such as light’n healthy beverages.
Another factor is creating “in and out” products that are only available for limited time. This creates a lot of excitement and incremental volume of sales over a set period of time. This means changing product-packaging designs to match the latest entertainment, sports and events, for example teaming up with “Star Wars” the movie.
2.7 Conclusion
The configuration of PepsiCo’s competences and resources do provide competitive advantage. The company need to continue updating and developing their products and keep up with the changing trends.
PepsiCo must continue creating products and packaging to meet consumer needs and create interest in their products while using strong brand names to build the business into the future.
2.8 Bibliography
Textbooks
Campbell, D and Stonehouse, G (2002), Business Strategy, 2nd edition, Butterworth-Heinemenn.
Johnson, G. and Scholes, K. (2005) Exploring Corporate Strategy: Text and Cases, 7th edition, Pearson Education.
Reports
PepsiCo Company Report 2004/5
Websites
www.beveragemarketing.com
References
PepsiCo Annual Report 2004, (pages 2-13), viewed 28th February 2006,
Gerry Johnson and K. Scholes, Exploring Corporate Strategy, Prentice Hall 6th ed 2002 (Chapter 3)
J. Byrne, “Pepsico New Formula”, 10 April 2000
