Abstract

After the 1965 merging of the Pepsi-Cola and Frito-Lay companies, Pepsi Company was founded. It continued to expand and grow through mergers and acquisitions until it gained entry into the global market. As one of the leading in the food and non-alcoholic beverage industry, the company serves its customers in more than 200 countries. It has employed 274,000 people who helped it get $63.056 billion in revenues with profits reaching $5.452 billion in 2015. Pepsi gets stiff competition from some of the most established international companies that provide similar products such as Coca-Cola and Kellogg companies among many others.

For it to grow beyond the current level, it must understand its market characteristics in every nation through PEST analysis. For instance, political situations impact its operations. It the US, Pepsi enjoys political stability, which is different in many other countries that are affected by instability. However, it tries to influence political factors to favour its operations through practices such as lobbying initiatives. Corruption and trade unions impact its operations. Furthermore, factors like economic inflation, economic growth in developing nations, and economic slowdown in China affects its operations. Finally, social factors such as the overall culture affect it. Pepsi should work to influence all these factors to favour its growth.  

Introduction 

Pepsi Company (PEP) has grown to access the international market in the food and beverage industry. It was founded in 1965 after merging the former Frito-Lay Inc. and Pepsi-Cola Company. Pepsi-Cola was at the helm of manufacturing Diet Pepsi, Mountain Dew, and Pepsi-Cola. On the other hand, Frito-Lay was producing Lay potato chips, Frito corn chips, Rold Gold pretzels, Ruffles potato chips, and Cheetos cheese flavoured snacks among many others. From the time of merger acquisition of the two companies, PEP has been growing tremendously through the expansion and acquisition of other businesses. For instance, in 1998, this company immensely grew after the acquisition of Tropicana followed by the merger with Quaker Oats in 2001. This growth strategy made PEP a robust and diversified consumer staple entity. This research paper looks forward to discussing the PEST analysis of PEP after a brief overview of the company. 

Company Overview

PEP is one of the leading food and beverage in the world dealing with the manufacture and distribution of food and beverages in more than 200 countries. Its international coverage is attributed to its efforts to expand its operations and the strong brand in the competitive market. Some of the food products this global company manufactures and distributes across the world include flavoured snacks, rice, pasta, dairy products, cereals, and chips. On the same line, its product portfolio includes juices, sports drinks, bottled water, ready-to-drink coffee and tea, and most importantly, carbonated soft drinks. Its global nature is reflected in its international team of employees. 

The growth of the company at the international level has made it realise huge revenues. With its headquarters in Purchase, New York, PEP has employed about 274,000 people from many nations and owns around nine of the forty largest US packaged goods trademarks. PEP has gained a huge brand in the market because of its representation before the customers. That notwithstanding, this international business company owns several brands with 22 of them generating more than $1 billion each in annual revenues. Some of the major brands include Pepsi, Gatorade, and Lays. The amount of revenues and profits that PEP generates comes from its strong brands in the global market. In 2015, it generated $63.056 billion in revenues which revealed a decrease by 5.4% compared to $66.683 billion in 2014. The profits also varied accordingly for the two years whereby PEP acquired $5.452 billion in 2015 which is less than that of 2014, which was $6.516 billion. The decrease in its sales may have resulted from the stiff competition from other companies that offer the same products and services. 

This company does not monopolize the food and beverage industry since it has strong competitors. Competition comes from private, regional, and international companies. Some of the major rivalries in the non-alcoholic beverage industry are Monster Beverage Corporation, Cott Corporation, Pepper Snapple Group, Inc. and the famous Red Bull GmbH. Although these companies create intense pressure and rivalry in the beverage industry, Coca-Cola Company is the primary competitor.  On the other hand, PEP receives competition in the food industry from Kellogg Company, Mondelez International, Nestlé S.A, and ConAgra Foods, Inc. among many others. This competition is behind PEP’s innovation that has made it outstanding among many other providers of similar products.

PEST Analysis

In any business company, external factors affect organizational performance either directly or indirectly. All businesses should put these external factors into consideration and respond to them accordingly. After its arch rival Coca Cola, PEP is the world’s largest company that sells beverages. This company accounts for about 37% of the international beverage market. Pepsi is an outstanding brand that comes in the 23rd position in the leading brands across the world. It does well in marketing activities, in particular through advertisements that feature international celebrities such as Michael Jackson, David Beckham, and Britney Spears. For this company to grow beyond its current capacity, PEP should understand its market in every country across continents so as to be in line with its PESTLE situations. PEST analysis is the most appropriate tool for categorizing and specifying all these external factors that affect business operations for PEP.

Political Factors

The stability of the governments of many nations that PEP sells its products is one of the most important political factors that impact this company. It enjoys political stability in the US, but the situation is different in many other nations that experience instability. However, attempts to influence political factors in respective countries of operation through the lobbying initiatives. For the last ten years, the amount of money this global company spends for lobbying initiatives has increased more than six times, reaching $4.47 million in 2015. It uses lobbying firms such as Duberstein and Rusell Groups to secure its business interests through the political platform. Moreover, PEP is also affected by trade unions, home market lobbying, corruption, freedom of the press, bureaucracy, and many other political factors. Meyer explains that government initiatives to encourage the public to avoid carbonated drinks are a strong negative factor for its growth. The use of these drinks has been linked to many health challenges such as obesity. Therefore, political stability, improved intergovernmental cooperation are its opportunities while the increase in government initiatives against its carbonated drinks is a threat. 

Economic Factors

Many economic factors impact operations of this company. In most cases, they revolve around unemployment and rise in economic inflation. In some places, labour is cheap, but in others it is expensive. Such a thing impact its net revenues because of the labour costs. Economic instability results in the variation in income levels among its consumers, something that significantly affects its international operations. Economic growth in most of the developed nations such as the US and the developing economies, particularly in Asia is a positive factor. However, it faces economic challenges from countries that experience economic downfalls. The current Chinese economic slowdown is a tremendous force that threatens its capacity for international growth given that China is one of the biggest economies on earth. For this company to grow further, it should diversify its products and activities. In any business, economic conditions have a huge effect. For instance, the 2008 economic recession was favourable for the growth of PEP. Dudovskiy reiterates that the company registered an increase in the sales of foods and beverages. This increase in sales may be attributed to the fact that people had free time to spend together with their families and friends after they were laid off from their jobs. Economic stability, the rapid growth of economies from developing nations are an opportunity this entity can capitalize on while the economic slowdown is a threat to its international growth and development.

Social Factors 

Pepsi is also impacted by many social factors that vary from one nation to the other. Since it is a global non-alcoholic beverage and food company, PEP should work hard to remain in line with the stark and strict cultural differences among different countries. Furthermore, it should communicate its global brand so that most of the people from diverse cultures can see it as a business entity that unites the world. When it markets and sells its drinks, it should focus and keep in line with its customer’s religious festivals. Moreover, PEP should understand the social factors that guide they purchasing behaviour of its esteemed clients. Health conscious among the customers is an enormous threat to PEP due to the concerns about salt, fat, and sugar content of its products. Although this is a threat, it is also an opportunity for it to address its customer concerns and provide new products that will enhance its growth and development in the competitive industry. This business company can further take advantage of busy lifestyles of its customers, particularly from industrialized or urbanized parts of the world. Busy people are likely to buy ready-to-eat foods and drinks, which are the primary products for PEP. Furthermore, with an overview of this element of PEST analysis, PEP should align its commodities and marketing strategies to consumer behaviour changes. 

Technological Factors

Technology is impacting all business operations, and PEP is not an exception. This company should invest in research and development to benefit from technological innovations and advancements. According to Meyer, PEP should benefit from knowledge management systems that impact product innovation as well as strategic decision-making. Furthermore, it should use technology to automate its processes. Moreover, computer technology should be at the helm of its operations. The most crucial thing is for PEP to computerise its processes and use social media in reaching its international customers. Such a thing can boost its marketing strategies through advertisements.

Conclusion

PEP came into existence in 1965 after the merging of renowned Frito-Lay and Pepsi-Cola companies. It has been growing at the time it was found to date, something that has enabled it to gain access to the international market. Its growth and development have been through expansion of its operations through mergers and acquisitions among others. It gets stiff competition from other established companies in the industry, especially from Coca-Cola Company. PEST analysis reveals the external influences that impact its operations and range from political, economic, and social factors. Political stability is a positive factor that enhances its growth and development because it leads to the increase in sales, hence revenues. Moreover, economic stability positively impacts its activities. For instance, economic stability in developed countries and the developing economies of developing nations are a significant opportunity while the Chinese economic slowdown is a threat to its growth. Socially, PEP should put social factors that guide their customer’s purchasing behaviours into consideration. After understanding the cultural backgrounds of the customers, it should then capitalize on this information to impact the competitive market. 

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