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Pepsi Forces Model Analysis

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PepsiCo’s Five Forces Analysis
PepsiCo’s world-wide success is related to its business capabilities, especially in overcoming the challenges and problem shown in this Porter Five Forces analysis. Michael Porter developed the Five Forces analysis model to determine the most significant external factors that influence Company. For PepsiCo to maintain its market rank as the second largest food-and-beverage company in the world, it must show the potential problems identified in this model. PepsiCo also needs to continually adjust its strategies to effectively respond to the external factors significant in the food and beverage industry competition
A Five Forces model analysis of PepsiCo reveals that the companyshould prioritize the effect of competition and the influences of consumers and substitutes. These forces shape PepsiCo’s strategies..
Because of the global nature of its business, PepsiCo faces varying in external factors in its industry environment. However, the overall result of these factors and the corresponding that model are summarized as the given below , with indicators of the strengths of their forces of model on PepsiCo: 1. Competitive rivalry or competition 2. Bargaining power of buyers or customers 3. Bargaining power of suppliers 4. Threat of substitutes or substitution 5. Threat of new entrants or new entry

Competitive Rivalry or Competition with PepsiCo (Strong Force) –
The Coca-Cola Company is one of most PepsiCo’s biggest competitors in this market. However, this component of the Five Forces model analysis shows that there are other many factors that determine the influence of competitive rivalry. The following are the most notable external factors that make the strong force of competition against company: * High aggressiveness of firms (strong force) * Low switching costs (strong force) * High number of firms (moderate force)

Most firms in the food and beverage industry are aggressive, such as in product innovation and marketing, thereby exerting a strong force on PepsiCo. Competitive rivalry is also strengthened because consumers can easily move from one firm to another (low switching costs). In addition, PepsiCo competes with many other firms like parle in India , including big ones giants like the Coca-Cola and a multitude of small and medium ones. This component of the Five Forces analysis shows that PepsiCo faces strong competitive rivalry as one of its most pressing concerns.
Bargaining Power of PepsiCo’s Customers/Buyers (Strong Force) –
Consumers are in the top priorities of PepsiCo’s mission statement. The effects of customers on the firm’s industry environment are determined in this component of the Five Forces model analysis. The external factors that lead to the strong bargaining power of PepsiCo’s consumers/buyers are as follows: * Low switching costs (strong force) * High access to product information (strong force) * High availability of substitutes (strong force)

As given above , consumers can easily move from one company to another. This condition strengthens customers’ ability to influence PepsiCo. In addition, consumers have external information for them to easily make choices between PepsiCo products and competing products. Also, substitutes give buyers even more reasons to stay away from PepsiCo products. Based on this component of the Five Forces model analysis, PepsiCo must ensure customer satisfaction to maximize its revenues.
Bargaining Power of PepsiCo’s Suppliers (Weak Force) –
PepsiCo must maintain profitable relationships with suppliers. This component of the Five Forces Model analysis covers the effect of suppliers on the company’s industry environment. The weak bargaining power of PepsiCo’s suppliers is based on the following external factors: * High overall supply (weak force) * Low forward integration of suppliers (weak force) * Moderate size of individual suppliers (moderate force)

The high overall supply increases PepsiCo’s options in acquiring raw materials, thereby reducing the bargaining power of suppliers. This power is also weakened because of the low forward integration, which limits suppliers’ control of PepsiCo’s supply chain. These external factors weaken suppliers’ influence on the company even though some of them are moderately sized or large firms. This component of the Five Forces analysis indicates that suppliers’ bargaining power are a low priority for PepsiCo.
Threat of Substitutes or Substitution (Strong Force) -
PepsiCo’s products could be substituted, based on consumers priority and other variables like price ,taste etc . The influence of substitution on the firm’s business and industry environment are examined in this component of the Five Forces Model analysis. The following external factors contribute to the strong threat of substitutes against PepsiCo: * High performance of substitutes (strong force) * Low switching costs (strong force) * High availability of substitutes (strong force)

Most substitutes to PepsiCo’s products are satisfactory. Example, consumers easily enjoy real fruit juices and brewed coffee products instead of drinking Pepsi or Tropicana products. In addition, PepsiCo consumers can easily shift to these substitutes, which are generally affordable. Also, most of these substitutes are wide available in grocery stores and other providers. Based on this of the Five Forces analysis, the external factors make the strong threat of substitution a priority issue facing PepsiCo.
Threat of New Entrants or New Entry (Moderate Force) –
PepsiCo must remain strong despite the possibility of new companies competing against it. This component of the Five Forces model analysis covers the influence of new entrants or new firms or new company on the food and beverage industry . The external factors that maintain the moderate threat of new entry against PepsiCo are as follows: * Low switching costs (strong force) * Moderate customer loyalty (moderate force) * High cost of brand development (weak force)

New firms threaten them because consumers can move from one company to another so low switching costs to company . However, through moderate customer loyalty, PepsiCo have a corresponding level of protection from new entry . Also, the high cost of brand development makes it very difficult for new entrants to directly compete against them, which has one of the strongest brands in the Market. In this component of the Five Forces analysis, external factors make the threat of new entrants a secondary concern for PepsiCo’s management.

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