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The Pepsi-Cola Company
Competitive Analysis
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Our Task...
Phase 1
Analyse the Market.
Phase 2
Suggest Recommendations.
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CONTENTS
1. Our Industry
2. Competitive Analysis
3. Market Research
4. Issues
5. Competitive Aids (Theories)
6. Recommendations
7. Bibliography
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1. Our Industry
Pepsi operate as producer in the
Fast Moving Consumer Goods (FMCG) Industry.
Other FMCG industry producers could include: Toiletries, groceries,
magazines, Newspapers, even in this day and age mobile phones.
“Fast Moving Consumer Goods are products that have a quick
turnover, and at a relatively low cost.”
(Mingrong, L. 2007)
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Current Position
Oligopoly
Few Market Leaders
High Barriers of Entry
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Current Audience
Typology (Consumer Classification)
Millennial’s (Television Week, 2007)
Advertising and Promotion
Check out the Pepsi Refresh Anthem
Targeting
Multi-Segmented marketing approach.
Audience Motivation
Taflinger, in his book, ‘Taking Advantage’, argued that audience motivation
is a visual or aural influence on one’s subconscious mind and emotions.
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Market Analysis
Important to consider:
Demographics: The global market
Elasticity: The relative effects of changes in price to demand.
Market trends:
The decline of sales in carbonated drinks (Mintel, 2009)
The rise of functional soft drinks: Juices, enriched vitamin water
nutraceuticals. (NutraIngredients.com, 2003).
Streamlining of production lines (Sidel.com, 2009)
and
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2. Competitive Analysis
Direct and indirect competitors
Direct: Cola producers:
Supermarket own brands
Coca-Cola
Indirect: Producers of all beverage types.
Tea/Coffee
Water
Juices etc.
Brand differentiations
Modernity vs. Tradition
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Company Analysis
Combined revenue of $18 Billion.
Earnings per share grew 13%
Net revenue growth of 12% (three times industry growth)
Retained profits of $6.9 Billion
“To be the worlds premiere consumer product company focused on
convenient foods and beverages. we seek to produce healthy financial
rewards to investors as we provide opportunities for growth and enrichment
to our employees, our business partners and the communities in which we
operate. And in everything we do we strive for honesty fairness and
integrity"
- Source: Pepsi. Co. 2007 annual report.
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3.Market Research
•
For our primary market research to be of use to our competitive analysis, we
had various questions we needed answering and therefore split our survey
into three parts.
Branding...
Promotion / Advertising
Taste test
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Results…
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5. Issues…
Hard to differentiate product in terms of taste as product
variety is very limited within cola based beverages.
Coca-Cola has such a strong base of loyal customers, who
identify with the cola brand.
Consumer tastes are changing, away from carbonated
drinks towards functional soft drinks. (Mintel, et al. 2009)
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5. Competitive Aids
Porter’s 5 Forces
S.W.O.T Analysis
Porter’s strategies for Competitive Environments:
Cost-Leadership
Product-Differentiation
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Porters 5 Forces
Competitive Rivalry
Threat of New Entrants
Power of Suppliers
Power of Customers
Threat of Substitutes
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SWOT Analysis
Strengths: Large market share, purchasing
economies of scale, customer loyalty,
world wide brand recognition, huge
distribution network
Weaknesses: Smaller market share than
main rival Coca-cola, inability to
substantially product differentiate, hard to
compete with Coca-Cola’s strong brand
identity and customer loyalty.
Opportunities: Adapting to market trends
(Pepsi health drink) could create an
advantage, opportunity to be known as a
socially responsible producer however this
incurs costs which may not be met with the
current economic climate,
Threats: High levels of competition from
main rival. Pepsi will lose market share if
other companies adapt to market trends
faster.
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Porter’s Strategy
“While strategy may be about competing and surviving as a firm, it is
products, not corporations that compete, and products are developed by
business units”. (Porter, 1980)
Business Unit Level Strategy:
Porters Two Strategies
Cost-Leadership
Product-Differentiation
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Porter’s Strategy Continued…
Cost-Leadership
Industry’s lowest cost producer
Price setting over price following
Benefit from higher profit margins
Product-Differentiation
The differences in one product from another
Unique customer perception
Packaging and Promotional activities
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6. Recommendations
We believe that there are two main areas that The Pepsi Cola Company could
improve on in order to maintain a competitive advantage over its rivals.
Adopting a Cost-Leadership Strategy
New Product Development
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Cost-Leadership Strategy
Advertising and innovative promotion.
Optimal outsourcing for production and vertical integration.
Improving production efficiencies through Kaizen.
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New Product Development
Produce a range of ‘healthy’ alternatives under the brand name ‘Pepsi Fresh’.
Our suggestion would be a range of Vitamin enriched waters under the name
‘Pepsi Fresh’.
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7. Bibliography
Websites:
FMCG Definition:
http://www.shentrepreneur.org/html/oldnewsroom.html
<last accessed 12/02/09>
Modularisation
http://cavehill.uwi.edu/fpas/cmp/online/cs11k/revision/problem%20solving/modularisation.htm
<last accessed 12/02/09>
Consumer Trends
http://www.nutraingredients.com/Consumer-Trends/Functionality-set-to-shape-soft-drinks-sector
<last accessed 12/02/09>
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Oligopoly definition
http://moneyterms.co.uk/oligopoly/
<last accessed 13/02/2009>
Porters Strategy
http://www.quickmba.com/strategy/porter.shtml
<Last accessed 14/02/2009>
Books:
Krugman, P. Wells, R. Graddy, K. (2007).
Economics: European edition 2007. USA: Worth Publishers Inc.
Haig, M. (2004). Brand Royalty: how the worlds top 100 brands thrive and survive. London: Kogan Page ltd.
Online Reports:
Sicher, J. (2008).Beverage Digest: Top 10 CSD Results for 2007. [online] Available from:
http://www.beverage-digest.com/pdf/top-10_2008.pdf [Accessed: 20/02/2009].
Sidel. (2006/9). CSD Market Trends. [online] Available from:
http://www.sidel.com/products/what-do-you-package/csd/csd-market [Accessed: 20/02/2009].
Mintel. 2009, Carbonated Soft Drinks - UK - February 2009 [online], (p. 1), Available from:
http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=393871
[Accessed: 02/03/2009].
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Mintel. (2009), Fruit Juice and Juice Drinks - UK - November 2008 [online], (p. 1), Available from:
http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=393871/display/id=227778
[Accessed: 21/02/2009].
Nexis UK. (2008), Drink Makers' Optimism Not Dry; Coke, Pepsi sales down; Plans Up. [online], (p. 1), Available from:
http://www.lexisnexis.com:80/uk/nexis/results/docview/docview.do?docLinkInd=true&risb=21_T5917131287&format=G
NBFI&sort=BOOLEAN&startDocNo=1&resultsUrlKey=29_T5917131290&cisb=22_T5917131289&treeMax=true&tree
Width=0&selRCNodeID=13&nodeStateId=411en_GB,1,2&docsInCategory=41&csi=8379&docNo=1 [Accessed:
21/02/2009].
Nexis UK. (2008), Pepsi Sales are Flat, but Bottler's Profit Edges Up. [online], (p. 1), Available from:
http://www.lexisnexis.com:80/uk/nexis/results/docview/docview.do?docLinkInd=true&risb=21_T5917131287&format=G
NBFI&sort=BOOLEAN&startDocNo=1&resultsUrlKey=29_T5917131290&cisb=22_T5917131289&treeMax=true&tree
Width=0&csi=6742&docNo=2 [Accessed: 21/02/2009].
Pepsico. (2008) 2007 Annual Report. [online] Available from: http://www.pepsico.com/Investors/Annual-Reports/2007Annual-Report.aspx [Accessed: 02/03/2009].
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Online Journals:
Sharp, B. & Dawes, J (2001), 'What is Differentiation and How Doeas it Work?', Journal of Marketing Management,
Argyll, Vol. 17, pp. 739-59.
Imai, M. (1986), Kaizen: The Key to Japan's Competitive Success., Random House, New York.
Images:
Excelsia. (2009). SWOT analysis. [online] Available from: http://www.excelsia.ch/htmlgb/blog/images/swotanalysis-image.png <last accessed 02/03/2009>
Dublin City University. (2009). Porters 5 Forces. [online] Available from: http://student.dcu.ie/~hillc3/Pmodel.gif
<last accessed 02/02/2009>
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