A Case Study Analysis on the PepsiCo Diversification Strategy
Presented to Mr. Dan Protacio P. Pacoy, MBA
In Partial Fulfillment of the Requirements
for the subject BA 2102 Marketing Management
By
FUERZAS, NOEMI KARLA N.
PAURILLO, ALYSSA NICOLE M.
VEÑIGAS, DERREN IVY SHINE
March 2021
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EXECUTIVE SUMMARY
PepsiCo, Inc., is an American food and beverage company that is one of the largest in the
world, with products available in more than 200 countries. It took its name in 1965 when
the Pepsi-Cola Company merged with Frito-Lay, Inc. PepsiCo is composed of Pepsi Cola,
Frito-Lay, Tropicana, Quaker, and Gatorade brands and offers products in over 200 countries.
The company’s headquarters are in Purchase, New York. In fact, according to PepsiCo’s
official website, PepsiCo is one of the world’s leading food and beverage companies
The company employed roughly 267,000 people worldwide as of 2019 (Wikipedia, n.d). In a
case study conducted by Ferrell, O.C. & Ferrell, L. last 2010; PepsiCo currently holds 36
percent of the total snack food market share in the U.S. and 25 percent of the market share of
the refreshment beverage industry.
PESTLE ANALYSIS
To keep the company’s position, PepsiCo’s strategic decision-making processes must account
for the issues stated in this PESTLE analysis. According to the book of Gillespie, A. (2014),
the PESTLE analysis model is a strategic management tool that identifies various external
factors relevant to firms, based on the conditions of their remote or macro-environment. In
PepsiCo’s case, these factors establish the company’s development path. The global market
presents challenges that pressure PepsiCo while creating opportunities for progress.
Therefore, strategies and modification based on the factors of the PESTLE analysis model
can heighten PepsiCo’s long-term growth.
Political Factors:
● Political standing of major economies (opportunity)
● Government scheme against carbonated drinks (threat)
PepsiCo enjoys good popularity in emergent countries like India, China etc. But, the other
major part of its revenue comes from the U.S.A. and other European Nations (MBA Skool
Team, 2020). Meyer, P. (2017) also stated in her article that major economies like the United
States and Canada are politically stable, thereby presenting growth opportunities for PepsiCo.
However, according to the case study of Valenzuela, A. B. (2018), there is a low penetration
in the Asia market. This indicates that the company has not yet maximized potential revenues
outside the Americas.
The government’s plan against sweetened carbonated drinks is a threat that could decrease
PepsiCo’s revenues from affected segments. According to an article by Rahman, M. (2020),
this includes the sugar tax on soft drinks in the UK, and Thailand, and American soda tax.
PepsiCo has already taken hits now that society is focusing on improving their health (Frue,
2018). Frue, K. (2018) further added that health-conscious laws are rising up all over the
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United States — and there’s nothing PepsiCo can do. But with health organizations
continuing to push for smart, healthy choice-making, PepsiCo will find their backs against
the wall. With this factor of the PESTLE analysis, PepsiCo must consider shifting its
products to overcome the identified threat about carbonated drinks.
Economic Factors:
● Rapid growth of developing economies (opportunity)
● Economic Crisis (threat)
Meyer, P. (2017) stated in his article that PepsiCo has opportunities for growth and expansion
based on the economic stability of developed countries like the United States, as well as the
high growth rates of developing economies. Farooq, U. (2019) further added that developed
or developing economies with a large, young working population provide generous business
opportunities for PepsiCo to expand their operations.
However, according to Farooq, U. (2019) economic crises, such as the ongoing trade wars
between the US and China, are bound to have a negative impact on the revenue of PepsiCo.
So, any changes like ‘fluctuations in the raw materials’, ‘economic slowdown’,
‘Demonetization’ can harm Pepsi’s financials and dampen its growth (MBA Skool Team,
2020). This factor of the PESTLE analysis proves that PepsiCo must guarantee market
diversification to achieve stable international growth.
Social Factors:
● Increasing health consciousness (threat and opportunity)
● Influx of busy lifestyle (opportunity)
Surely, lifestyle changes are taking place swiftly in many countries with more people
becoming conscious of the impacts of sugary drinks on human health. In the case study
conducted by Valenzuela, A. B. (2018), it stated that the healthy lifestyle trend is a threat
against Pepsi-Cola’s products, many of which are seen as unhealthful because of their sugar,
salt, or fat content. A cultural shift from carbonated drinks to healthy ones is apparent in
many countries (Rahman, 2020). Frue, K. (2018) said in her article that buying and drinking
soda is at an all-time low right now. In fact, the beverage of choice for consumers is now
water.
Although it poses a threat to the company, PepsiCo can take advantage of the second factor
which is the rapid influx of consumer’s busy lifestyle. PepsiCo can take advantage of the
busy lifestyles of consumers, especially in developed and industrializing markets around the
world. People with these lifestyles are more likely to purchase ready–to-eat food products like
those of PepsiCo (Meyer, 2017). Based on this factor of the PESTLE analysis, PepsiCo must
align its products and marketing strategies to changes in consumer behaviors.
Technological Factors:
● Increasing automation in business (opportunity)
● Digital Media (opportunity)
An increase in the number of automated processes in the company can enhance business
performance (Meyer, 2017). Farooq, U. (2019) further added that it also helps the company
increase the efficiency of their production and logistics processes. Advancements in artificial
intelligence can help the company optimize their supply chain and build a better
infrastructure for catering to its patrons. Frue, K (2018) stated in her article that with their
resources, PepsiCo can take advantage of the newest technological advancements
regarding artificial intelligence, machine learning, and digital bots.
In an article published by the MBA Skool Team (2020), social media platforms like Youtube,
Instagram and Facebook play a very vital role in reaching out to the youth which is PepsiCo’s
main customer. PepsiCo uses different technologies to reach out to its customers (Rahman,
2020). Apart from TV ads, it uses social networking sites to keep in touch with them. Pratap,
A. (2017), also added that social media has proved useful for brands in terms of marketing of
PepsiCo’s products. This factor of the PESTLE analysis indicates that PepsiCo must take
