Strategic 2

Case 3 Assignment: Strategic Choices

MGT 599: Strategic Management

Executive Summary

PepsiCo is a leader in a highly competitive market. The company can manufacture, distribute, and sell affordable and convenient foods and beverages. The secret behind the company's success is the cost leadership strategy. The strategy involves being a low-cost producer in the industry. A decision that has ensured the company can sell its products at affordable prices is in line with its mission statement. The company has a presence in over 200 countries and an excellent distribution channel that supports the strategy. Integrating the company's strategy can bring strategic choices like investment in research and development, effective distribution channels, monitoring of operating costs, and investment in production facilities. These strategic choices align with the company's generic strategy of cost leadership. However, there are various disconnect points, especially with the company's weakness of reliance on food and beverages. It should be noted that the company's generic strategy supports the company's vision and mission. This shows that the company's vision, mission, goals, and objectives should not be revised.

Strategic Choices

Introduction

PepsiCo has remained competitive in a highly competitive market due to its competitive strategies like creativity, investing in technology, and research and development. However, companies that are successful in their industries possess a competitive advantage over their rivals. The competitive advantage makes them stand out against their rivals, making them sustain profits over a long period. PepsiCo, like most companies, has a competitive advantage over the competition. Cost leadership strategy is used when a company projects itself as the cheapest provider of goods or services (Roy, 2019). It is a strategy used by big corporations and has worked well with PepsiCo in a highly competitive market. The strategy can be integrated with the company's strengths, weaknesses, opportunities, and threats (SWOT). Comparing prices between PepsiCo and its biggest competitor Coca-Cola has shown that PepsiCo's prices are lower due to PepsiCo being a low-cost producer and has successfully sold its products at average prices and earn a profit. The process of strategic analysis can show which strategy is effective and can help the company create a competitive advantage over its rivals.

Generic Strategies

There are four generic strategies that any company can leverage to create a competitive advantage (Potter, 1998). These strategies are commonly referred to as Porter's strategies, including cost leadership strategy, differentiation strategy, focus strategy, and preemptive move. The company's strength falls under one of two strategies of cost leadership strategy or differentiation strategy. Companies use business-level strategies to sustain a competitive advantage against competitors (Potter, 1998). In a highly competitive market, the company must leverage its strategy to ensure sustained profitability. PepsiCo operates in a highly competitive market that requires applying a generic strategy that will help sustain a competitive advantage over the competition.

PepsiCo follows a cost leadership strategy that allows the company to remain competitive. Cost leadership strategy allows the company to become a low-cost producer for a given level of quality. The strategy requires the company to sell its products at lower prices to earn higher profits than the competition (Roy, 2019). Cost leadership strategy allows the company to have the most competitively priced product in the market (Leonard, 2019). It is a strategy that can be acquired by improving process efficiencies, cutting down or avoiding costs, having access to raw materials at a lower cost, and vertical integration decisions.

PepsiCo's investment in research and development and technology has increased the level of creativity in the company. The company can design products for efficient manufacturing. It can cut down on unnecessary costs allowing them to reduce the prices of their products. The company also has access to vast amounts of capital and has, over the years, enjoyed profitability (Annual Report, 2019). It is allowing the company to make significant investments in production assets. Its presence in over 200 countries shows that it has excellent distribution channels to succeed in cost leadership.

Integrating the Strategy

The SWOT analysis for PepsiCo shows the company's various strengths, weaknesses, opportunities, and threats. The strength of the company is its global presence where the company is in over 200 countries. The global presence shows an increase in branding and awareness among its customers. The weakness is the reliance on beverages and foods. The company depends on carbonated beverages and packed foods when its competitors are diversifying into other products. The increased investment in consumer-related research and development creates an opportunity for the company (Gupta, 2021). The research and development are essential as it will help develop new products which will make the company more competitive. The competition is the main threat for the company, with competitors like Nestle, Coca-Cola, and Dr. Peppers reducing the global market share.

Cost leadership strategy can be integrated with the company's strengths, weaknesses, opportunities, and threats. The company's global presence means that they have excellent distribution channels that allow the strategy to succeed. The company's strength works well with the strategy and can be effective in helping the strategy succeed. Cost leadership strategy has been successful with multinationals with good distribution channels that allow the companies to increase their sales. The strength of the company aligns with the cost leadership strategy. There is an opportunity in research and development with the company being able to increase investment in research. The investment allows for more creative methods of manufacturing. The efficient manufacturing methods will allow the company to reduce the cost of production. This can be done either by shortening the assembly process or by adequate packing.

The competition being the main threat for the company means that the company has to create a competitive advantage. Cost leadership strategy can be a competitive advantage for the company. The strategy is effective with an investment in production facilities, monitoring of operating costs, and experience (Hashem et al., 2012). The strategy can therefore be effective in mitigating the threat of the competition. The cost leadership strategy can be aligned with the threat identified for the organization. Therefore, the strategic choices the company should be taking include; investment in research and development, effective distribution channels, monitoring of operating costs, and investment in production facilities.

The strategic choices of the company align with the company's cost leadership strategy. There is a disconnect on the company's weakness of reliance on beverages and foods. The company relies on carbonated beverages and packed food products. This is a significant weakness considering the competition like Nestle, Coca-Cola, and Dr. Peppers have diversified their products. The company needs to create unique products that will make them stand out against the competition. However, the cost leadership strategy uses the price to create a competitive advantage—the other disconnect on the threat. The competition may use the same strategy to create a competitive advantage, countering what has already been applied, making it difficult for the strategy to work effectively.

Leveraging on Strengths

The primary purpose of having a business strategy is to achieve sustainable competitive advantage. PepsiCo's main strength is its global presence, giving it access to a bigger market than its competition. The company can leverage this broader market to increase its global presence and alter its strategic choices to leverage its strengths. PepsiCo should include value creation among the strategic choices. Value creation involves having specific activities that the company can use to create a competitive advantage (Potter, 1998). Value chain activities include; inbound logistics, operations, outbound logistics, marketing and sales, and service (Potter, 1998). The company can use technology to support the value chain activities.

Altering the strategic choices by including value creation can also be effective in showering up its weaknesses. Value creation activities can ensure that the dependence on beverages and foods is changed. Activities like operations will ensure the final product can compete with the other products in the market. The activity will add value to the already available products making them competitive.

PepsiCo can take advantage of environmental opportunities by altering its strategic choices. Research and development support value creation that will ensure the company sustains its competitive advantage. Value creation will ensure investments are made in the research and development of new products and methods of creating competitive advantage. It will also minimize the threat of competition as the company can engage in activities that will sustain its competitive advantage. Therefore, altering the strategic choices and including value creation will be beneficial for PepsiCo. The company will have to incorporate two or more value creation activities to take advantage of the environmental opportunities and minimize the environmental threats.

PepsiCo's Mission and Vision

PepsiCo's mission statement is " Create more smiles with every sip and every bite. Whereas, PepsiCo's vision statement is "To be the global leader in convenient foods and beverages by winning with purpose (Mission and vision) ". The process of strategic analysis has reconfirmed my view of PepsiCo's mission and vision. Part of the mission statement involves the desire of the company to satisfy the needs of the consumer. This is to be done through the provision of affordable, convenient, and complementary foods and beverages. The mission has been reconfirmed through strategic analysis as the company has a strategy that ensures the products are affordable to the consumers. Strategy analysis has also ensured the strategic choices like value creation will improve customer satisfaction and ensure the brand remains competitive.

PepsiCo's vision and mission should not be revised. The mission caters to the needs of the consumers globally and looks at affordability and convenience. These are part of the areas highlighted in the strategic analysis. The vision statement looks at sustainability and top financial performance, which can only be achieved through competitive advantage. Therefore, the mission, vision, goals, and objectives of the company should not be revised.

Conclusion

Like any other company, PepsiCo can only sustain its profits by possessing a competitive advantage. The company follows a cost leadership competitive strategy. The strategy has been integrated with the company's strengths, weaknesses, opportunities, and threats to develop strategic choices. An evaluation of the strategy shows that the strategy is effective for the company as the strategic choices can be aligned with the company's choice of strategy. The company can also alter its strategic choices and include value creation to leverage its strengths, take advantage of environmental opportunities, and minimize environmental threats. This can be accomplished with the involvement of value creation activities.

References

Annual Report. (2019). Retrieved from https://www.pepsico.com/docs/album/annual-reports/2019-annual-report.pdf?sfvrsn=35d1d2bc_2

Gupta, S., K. (2021). PepsiCo's SWOT Analysis 2021. Retrieved from https://bstrategyhub.com/pepsico-swot-analysis/

Hashem Valipour, Hamid Birjandi and Samira Honarbakhsh (2012). The Effects of Cost Leadership Strategy and Product Differentiation Strategy on the Performance of Firms. Journal of Asian Business Strategy, Vol. 2, No.1, pp. 14-23.

Leonard, Kimberly. (2019). Examples of Cost Leadership & Strategy Marketing. Retrieved at https://smallbusiness.chron.com/examples-cost-leadership-strategy-marketing-12259.html

Mission and vision. PepsiCo, Inc. Official Website. (n.d.). https://www.pepsico.com/about/mission-and-vision.

Potter, Michael. (1998). Competitive Advantage: Creating and Sustaining Superior Performance

Roy, Suvendu. (2019). Cost Leadership Strategy Enhancing Competitiveness: A Critical Study On Mnc Retails. 10.13140/RG.2.2.29115.34083.