project final

Pepsi Co. is one of the largest corporations in the United States which produces food, snacks and beverages. The company was formed after merging together with Frito-Lay. This merger took place in 1965. However, the origins of the company are older than 1965. The company was originally formed as Pepsi Cola which was established by an American pharmacist, Caleb Bradham in the late 1800s. Pepsi Co. has had a tough competition with Coca Cola for a long time but it was only after 112 years that Pepsi was able to take over the market value of its competitor.

Pepsi has been selling its product in a number of countries where it has a significant amount of market share. But it is still not as much as Coca Cola so it needs to work on that in order to take over its competitors.

Therefore in order to increase its sales, the company has to conduct a thorough SWOT analysis which will help it to look at its weaknesses and formulate strategies which will help it overcome the competition.

A study conducted by Pommer explains how the company can conduct a SWOT analysis and formulate its strategies while keeping in mind all the important things that will be needed to tackle in order to overcome the competition and increase the market share of the company. (Pommer, 2014)

Another research by Saha analyzes and evaluates all the possible weaknesses and threats faced by Pepsi Co. and gives recommendations which will be necessary to not only increase he sale but also improve its marketing strategy and brand loyalty which will enable the company to expand to new markets globally. (Saha, 2016)

Apart from this, a study conducted showed that Pepsi and Coca Cola both were thriving globally but they were not being as much successful in the Ameriicas. The study pointed out the reasons and gave suggestion regarding what can be done. If the policies are formulated accordingly, then the companies will be able to solve this problem and increase its sales.

Therefore, a thorough analysis is necessary to develop the marketing strategies which will enable the company to increase its market share significantly.

PepsiCo is considered to be the best carbonated soft drink maker and coca cola is one of the strongest competitors in market of soft drinks. Pepsi is distributing its products in more than 200 countries. In this highly competitive market PepsiCo surely need some sharp financial and marketing strategies to remain in the business competition. To analyze the potential growth of the company SWOT analysis is important as following:

Company’s financial strength and position is usually measured by financial strength rank which shows how strong and weak are the company in particular financial year. PepsiCo financial rank is 5 which is good enough for the company because from 2016 to 2017 lot of political and economic factors have affected the company in financial terms. For example debt to revenue ratio of the company for the quarter ended in march 2017 is 3.21 which needs to be bit lower according to financial analysts to be strong financially.

PepsiCo has highly diversified product market it is not selling few products that does not depend on seasonal sales and change in consumer tastes rather it is selling hundreds of brands including water, carbonated and non-carbonated drinks, different kind of snacks that are delivered to more than 200 countries and about 10 million stores per week. Product diversification helps the company to manage the market forces and financial crisis by balancing the financial statement

PepsiCo is highly capital intensive company which makes it suitable for future investments in market, by focusing on capital investment PepsiCo can reap long term economic benefits. According to financial analysis of 2017 retained earnings of PepsiCo is increasing over the time and is consistent with the increasing trend, this may enable the company to invest in more advanced machinery and R&D which will reduce the cost of the company even more.

PepsiCo spends large portion of its income on marketing and advertising which has become one of its strength because according to research on consumer behavior advertisement largely affects their buying decisions. PepsiCo spends almost $2 billion on advertisement to accelerate its growth and market share.

Companies are usually badly affected by downfall in economic and political condition of the country; they have to change their strategies according to the changing economic conditions. Companies are largely influenced by economics scenarios’ that they may have to reduce their production and downsize the industry. In 2016 and 2017 economic conditions for the PepsiCo were not favorable and resulted in decrease in sales because most of the people were jobless and were sitting at home searching for job so the amount spent on snacks and beverages reduced.

Over the past few years net Profit margins of the company is falling due to factors like decrease in water resources and high cost of other raw materials used by the company net profit margin is only 9.7% compared to Coca cola is 18.55%. Also mostly PepsiCo income is generating from other countries and due to the appreciation of dollar or we can say strong position of the dollar compared to other currencies income of the company has gone down. Interest coverage ratio for the quarter end 2017 is low (3.21) which is showing that company is taking too much time to pay off its debts which is badly affecting its balance sheet.

Owing to the tough competition in market PepsiCo sets low prices for its products to keep good position among consumers but low prices means low quality and standard of the product which in turn reduce the sales because now consumers are well aware about the health standards and healthy products and are not willing to compromise on quality.

Overdependence on Wall-mart is one the weaknesses of PepsiCo depends about 13% of its sales on it, Wall-mart is influencing its profit margins because of high buying power so it sets the prices low causing profit margins to go down. If PepsiCo divert its sales to some other big markets in U.S it will be at better position and will not fear of losing its 13% part of revenue coming from Wall-mart.