However, for most consultants, the framework is only a starting point.
Michael Porter developed the Five Forces analysis model to determine the most significant external factors that influence firms. For PepsiCo to maintain its market position as the second biggest food-and-beverage company in the world, it must address the potential problems identified in this Five Forces analysis.
PepsiCo also needs to continually adjust its strategies to effectively respond to the external factors significant in the food and beverage industry environment.
A Five Forces analysis of PepsiCo reveals that the company must prioritize the impacts of competition and the influences of consumers and substitutes.
Competitive rivalry or competition strong force Bargaining power of buyers or customers strong force Bargaining power of suppliers weak force Threat of substitutes or substitution strong force Threat of new entrants or new entry moderate force Recommendations. PepsiCo can improve competitiveness through aggressive marketing combined with product innovation.
In such product innovation, PepsiCo must consider current market trends, such as environmentalism and healthy lifestyles. However, this component of the Five Forces analysis shows that there are other factors that determine the influence of competitive rivalry.
The following are the most notable external factors that create the strong force of competition against PepsiCo: 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 shift from one provider to another low switching costs.
In addition, PepsiCo competes with many other firms, including big ones like the Coca-Cola Company 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. Low switching costs strong force High access to product information strong force High availability of substitutes strong force As noted, consumers can easily shift from one firm to another.
In addition, consumers have extensive 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 analysis, PepsiCo must ensure customer satisfaction to maximize its revenues.
The following external factors contribute to the strong threat of substitutes against PepsiCo: For 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 widely available in grocery stores and other providers.
Based on this component of the Five Forces analysis, the external factors make the strong threat of substitution a priority issue facing PepsiCo. This component of the Five Forces analysis covers the influence of new entrants or new firms on the food and beverage industry environment. 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 PepsiCo because consumers can easily shift from one company to another low switching costs.
However, through moderate customer loyalty, PepsiCo has a corresponding level of protection from new entrants. Also, the high cost of brand development makes it difficult for new entrants to directly compete against PepsiCo, which has one of the strongest brands in the industry.Latest breaking news, including politics, crime and celebrity.
Find stories, updates and expert opinion. Porter’s Five Forces Model: an overview Porter’s Five Forces Model: an overview Abstract Porter’s Five Forces Model is a structured framework for analyzing commerce and business establishment. It was formed by Michael E.
Porter of the Harvard Business School between and the mid ’s. Updated world stock indexes. Get an overview of major world indexes, current values and stock market data.
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