PEST CASE STUDY: PEPSI
COLA
SOME PERTINENT FACTS:
International markets have now become
the hotspots for Pepsi. These markets are
Eastern Europe, Mexico, china, Saudi Arabia and
India.
- Pepsi has 37% global market share
operating in 190 countries.
- At every level of Pepsi Cola Company
great care is taken to ensure that
highest standards are met in everything they
do. In their product, packaging, marketing
and advertising, they strive for excellence
because they think their customer deserves
better quality products. They promise to
work towards improvements in all areas of
their organisation.
- In their manufacturing and bottling
process, strict quality controls are
followed to ensure that Pepsi Cola products
meet the same high standards of quality that
customers expect from them. They also follow
strict quality procedures during
manufacturing and filling of their packages.
Each bottle and can goes through inspection
and testing process. Containers are rinsed
and quickly filled through a high speed,
state of the art process that helps prevent
any foreign material from entering the
product. Additional quality control measures
help to ensure the integrity of Pepsi Cola
products throughout the distribution process
from warehouse to store shelf.
- Pepsi Cola local bottlers determine
which products to pack and sell in their
territory based on local consumer demand and
other market factors. (VI 12) How do they
promote their product
- Pepsi has a big enough market share to
challenge Coca Cola. They have their best
balance of promotions, communicating to
their target audience through celebrities
like Robbie Williams, David Bekham, Britney
Spears, etc. The Pepsi chart also helps in
promoting as the youth like music. Pepsi is
gaining the football market from Coke. Pepsi
also promotes on internet, newspaper,
through sponsorships, radios, etc (http://www.pepsi.com/current/index.html)
- Pepsi also promote its products in the
supermarkets by keeping discounts like buy
one get one free. It also keeps competition
with great prizes which catches the eye of
the consumer.
PEST ANALYSIS
The PEST analysis examines changes in a
marketplace caused by Political, Economical,
Social and Technological factors.
P: Political change, from one party to
another in control- for example the rise in
private healthcare and privatisations under
Conservative governments.
Political Analysis for Coca-Cola
Non-alcoholic beverages fall within the food
category under the FDA. The government plays a
role within the operation of manufacturing these
products in terms of regulations. There are
potential fines set by the government on
companies if they do not meet a standard of
laws.
The following are some of the factors that
could cause Coca-Cola company's actual results
to differ materially from the expected results
described in their underlying company's forward
statement:-
? Changes in laws and regulations, including
changes in accounting standards, taxation
requirements, (including tax rate changes, new
tax laws and revised tax law interpretations)
and environmental laws in domestic or foreign
jurisdictions.
? Changes in the non-alcoholic business
environment. These include, without limitation,
competitive product and pricing pressures and
their ability to gain or maintain share of sales
in the global market as a result of action by
competitors.
? Political conditions, especially in
international markets, including civil unrest,
government changes and restrictions on the
ability to transfer capital across borders.
? Their ability to penetrate developing and
emerging markets, which also depends on economic
and political conditions, and how well they are
able to acquire or form strategic business
alliances with local bottlers and make necessary
infrastructure enhancements to production
facilities, distribution networks, sales
equipment and technology.
E: Economic change, for example a
recession creating increased activity at the
lower ends of product price ranges. Rate of
interest rises depressing business and causing
redundancies and lower spending levels.
Economic Analysis for Coca-Cola
Last year the U.S. economy was strong and
nearly every part of it was growing and doing
well. However, things changed. Most economists
loosely define a recession as two consecutive
quarters of contraction, or negative GDP growth.
On Monday 26, the government officially declared
that the U.S. has been in recession since March.
(CBS Market Watch. " U.S. Officially in a
recession." Rex Nutting. [nov 26,2001].
www.cbsmarketwatch.com)
However, because of aggressive action by the
Federal Reserve and Congress it will be short
and mild. The economy will return to sustained,
positive growth in the first half of 2002.
Future Outlooks
The Federal Reserve is doing all that it can
help the economy recover. They have cut the
interest rate ten times this year. The rate now
lies at a 40-year low of 2%. Lowering the
interest rates will ultimately excite consumer
demand in the economy. Companies will expand and
increase use of debt as a result of the low
borrowing rates. Coca-Cola can borrow money for
investing in other products as the interest
rates are low. It can use the borrowing on
research of new products or technology. As
researching for new products would cost less the
Coca-Cola Company will sell its products for
less and the people will spend as they would get
cheap products from Coca-cola.
Before the attacks on September 11, 2001, the
United States was starting tot see the economy
recover slightly and it is only just recently
that they achieved the economic levels.
Consumers are now resuming their normal habits,
going to the malls, car shopping, and eating out
at restaurants. However, many are still handling
their money cautiously. They believe that with
lower inflation still to come, consumers will
recover their confidence over the next year.
The non-alcoholic beverage industry has high
sales in countries outside the U.S. According to
the Standard and Poor's Industry surveys, "For
major soft drink companies, there has been
economic improvement in many major international
markets, such as Japan, Brazil, and Germany."
These markets will continue to play a major role
in the success and stable growth for a majority
of the non-alcoholic beverage industry.
S: Social change involves changing
attitudes and lifestyles. The increasing number
of women going out to work, for example, led to
the need for time-saving products for the home.
Social Analysis for Coca-Cola
Many U.S. citizens are practicing healthier
lifestyles. This has affected the non-alcoholic
beverage industry in that many are switching to
bottled water and diet colas instead of beer and
other alcoholic beverages. Also, time management
has increased and is at approximately 43% of all
households. (http://www.cdf-mn.org). The need
for bottled water and other more convenient and
healthy products are in important in the average
day-to-day life.
Consumers from the ages of 37 to 55 are also
increasingly concerned with nutrition. There is
a large population of the age range known as the
baby boomers. Since many are reaching an older
age in life they are becoming more concerned
with increasing their longevity. This will
continue to affect the non-alcoholic beverage
industry by increasing the demand overall and in
the healthier beverages.
T: Technological change - creates
opportunities for new products and product
improvements and of course new marketing
techniques- the Internet, e-commerce.
Technological Analysis for Coca-Cola
Some factors that cause company's actual
results to differ materially from the expected
results are as follows:
? The effectiveness of company's advertising,
marketing and promotional programs. The new
technology of internet and television which use
special effects for advertising through media.
They make some products look attractive. This
helps in selling of the products. This
advertising makes the product attractive. This
technology is being used in media to sell their
products.
? Introduction of cans and plastic bottles
have increased sales for Coca-Cola as these are
easier to carry and you can bin them once they
are used.
? As the technology is getting advanced there
has been introduction of new machineries all the
time. Due to introduction of this machineries
the production of the Coca-Cola company has
increased tremendously then it was few years ago
? CCE has six factories in Britain which use
the most stat-of the-art drinks technology to
ensure top product quality and speedy delivery.
Europe's largest soft drinks factory was opened
by CCE in Wakefield, Yorkshire in 1990. The
Wakefield factory has the technology to produce
cans of Coca-Cola faster than bullets from a
machine gun.
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