Strategic management is a set of managerial decisions and actions that determine the long run performance of an organization (David; 1989) . It entails the basic management functions of an organization i.e. planning, organization, implementation and control. The main purpose of strategic management in an organization is to provide an organization with a goal and hence the organization staff has a unified vision (David; 1989). One of the reasons as to why different companies and organizations have a performance variance, in that some perform better than others, squarely lies in the differences in their strategies and differences in competitive abilities.
When an organization carries out a strategic management programme, there are eight steps which the organization has to go through. Among these steps, is identifying the organization’s strengths and weaknesses. Any activities the organization does well or any unique resources that it has are called the resources. Weaknesses, on the other hand, are activities the organization does not do well or resources it needs but does not posses. This paper seeks to bring out the importance of identifying the strengths and weaknesses of an organization. One of the leading soft drinks and potato chip producing companies in the world is Pepsi. Pepsi has its strengths and weaknesses. This paper will look into the internal analysis of the company. This will be done by the identification of their strengths and weaknesses. It will also show how Pepsi capitalizes on their strengths and what they are doing to minimize their weaknesses.
How well does Pepsi capitalize on its strengths and how well are they doing in minimizing their weaknesses?
Pepsi Co.Inc is a major world company dominating not only the American market but the world market as a whole. Pepsi has a world influence where the company boasts as being one of the most recognized in the world. This is, perhaps, because of their diversity and attempt to reach out and tap a wide array of markets in the world. According to Brady D, in the Business Week, issue 3887, “every year, the food and beverage company adds more than 200 product variations to its vast global portfolio”. Pepsi has attempted to reach out to different people of different tastes and preferences; it has therefore come up with a wide range of products from the Quaker soy crisps to the xtremo thirst quencher. This, in m view, is one of their greatest strengths. Pepsi has a wide range of products which has been their greatest asset. Brady notes that “what distinguishes Pepsi Co. from some of its competitors is an intense lack of sentimentality about its principal brands. Sure, it continues to hawk core products such as Pepsi cola and Lay’s potato chips, adding flavors and doing targeted marketing campaigns every year to jazz up consumer interest”. This basically points out the idea about Pepsi and their wide range of products. This has actually increased the company’s revenue immensely.
Another strength associated with Pepsi’s success is the company’s divisions. Pepsi is divided into 4 branches each having its own specialty. One major division of Pepsi Co is the Frito-Lay division. The Frito-Lay division of Pepsi international has played a major role in the creation and generation of revenues or the parent company, Pepsi. As at the end of the 2003/04 financial year, the division had dominated 60% of the US Chip market and had $9.1 billion in revenues. At this point, it is important to note that Pepsi as a company reported a $27 billion dollar revenue in the same year. The implication of this statistic is that Frito-Lay contributed to one third of Pepsi’s revenue in the same year. The creation of divisions has enabled the company to achieve the first strength, provision of a wide range of products.
The brief statistic on Frito-Lay and Pepsi as a whole leads to the company’s third strength, revenues. The revenue collected by Pepsi enables it to meet the ever growing demand for their products. In the article, Brad gives the demographics of Pepsi’s revenues. He notes that Pepsi’s recorded a 7% revenue growth to $27 billion. This implies that the revenue collected in the preceding year was $25.23 billion. Judging by the trend, the revenue collected in 2002 was less than that of 2003 which was in turn less than that of 2004. What Pepsi is doing is that they are using the profit collected to increase their production levels and hence maximize revenue and the profits collected. It was, therefore, no shock that the company was rated no. 44 on the Business week’s list of 50 best-performing large public companies.
With strengths, comes weaknesses and Pepsi Co. has its own. One of the greatest challenges faced by the company is that of minimal distribution. The company was yet to reach out to other communities across the borders with their products. A good example was the Hispanic community living across the border in Mexico. The company responded to a shortage and demand of their products among the Hispanic community by introducing the sabrita brand. In the year 2002, the company decided on a move that would see to it that they have tapped the Hispanic market. They therefore set out to reach out south of the border and bring in four popular brands from its $ 1 billion dollar Mexican subsidiary, sabritas (Brady; 2004). The motive according to Brady “was to win over the foreign-born segment of the 46 million strong Hispanic market that wasn’t warming to Latin-flavored versions of Lay’s and Doritos chips”. This gamble paid off as the US sales of sabritas were expected to exceed $100 million in that year. That was double what they had sold in 2002. This being the main weakness of the company, Pepsi took it upon the management team to find a possible solution to the problem which they did. The US is a large country which hosts people of different ethnic and cultural backgrounds. Tapping into these markets is one thing Pepsi attempts to do under all costs even if it means shaking thy enemy’s hand.
In strategic management, the SWOT analysis is one major way of tackling issues and problems faced by an organization (David; 1989). Examining the strengths, weaknesses, opportunities and threats of an organization will ensure that all issues are dealt with decisively. In the case of Pepsi, the strengths and weaknesses were the subject at hand. Pepsi have realized that their strength lies in their product range. Their weakness is their inability to meet the ever increasing demand for different products. These, they are capitalizing on (the strengths) and they are making great efforts to minimize (the weaknesses). The point, is meeting the consumers demand at all costs. After all, in his article, Brady notes that there is nothing more American than giving consumers what they want.
Brady D. (2004). A Thousand and One Noshes; How Pepsi deftly adapts products to changing consumer tastes. Business week. New York: June 14th 2004, issue 3887, page 54. David F. (1989). Strategic Management. Columbus Merrill Publishing Company