Compatibility of marketing strategies to environment

Compatibility of marketing strategies to environment The beverage industry is highly taken up by the Cola-War between the two giant rivals, Coca Cola and PepsiCo. However, Coca-Cola holds the major share world-wide, the case is reverse for the Pakistani market, where, Pakistan Beverage Ltd. had been and is a major player in the beverage industry. PEPSI is under PBL and is a market leader with over 70 percent market share of the soft-drink industry in Pakistan. (Indian Pakistani trade unit website). The current marketing plan is aimed at analysing, the scenario of the company with respect to its marketing activities and proposing/recommending, any changes required. This marketing plan aims to identify the compatibity of the companys basic marketing strategies to its marketing environment, its competitors, its customers keeping in lieu its over all strengths, weaknesses, threats and opportunities. This plan then aims to analyse the companys mission statement with respect to its goals and objectives followed by the analyses of the current marketing strategies and marketing mix. Lastly, this report proposes recommendations the company should look into adopting. COMPANY INTRODUCTION AND BACKGROUND INFORMATION: According to the official website of Pepsi Co, PepsiCo is a world leader in convenient foods and beverages, with 2005 revenues of more than $32 billion and more than 157,000 employees. Pepsi co, Inc is founded by Donald M. Kendall, and Chief Executive Officer of Pepsi-Cola and Herman W. Lay, Chairman and Chief Executive Officer of Frito-Lay, through the merger of two companies(official website of Pepsi). However, Pepsi-cola was formed by the end of 1890s. With brands that are almost 100 years old, Pepsi ® Co. PepsiCo is organized in six divisions: Frito-Lay North America, Frito-Lay International, Pepsi-Cola North America, Gatorade/Tropicana North America, PepsiCo Beverages International and Quaker Foods North America. The Companys North American divisions operate in the United States and Canada and accounts for seventy percent of its sales. Its international divisions operate in over 175 countries, with PepsiCos largest operations in Mexico and the United Kingdom. PepsiCo is working hard to build its presence in emerging markets like India, China and Russia. PepsiCo World Headquarters is located in Purchase, New York. PepsiCo is traded as PEP on NYSE. In the year 2006 Pepsi was ranked among Top 100 Brands by Business Week, ranks 18th PepsiCo ranks 18 out of Top 50 Companies for Diversity list by DiversityIncs. However according to the annual report of 2005, the growth in the carbonated sector, had slowed down and due to that, the company is now ahead into diversification in organic products. (Official website of PepsiCo) PepsiCo is a leader in innovation (three of top ten new food and beverage products are Pepsi-Cola brands). Consumers consider PepsiCos Quaker and Tropicana brands the healthiest among all brands. PepsiCos success is the results of superior products, high standards of performance, distinctive competitive strategies and the high integrity of its people. (Source: official website of Pepsi Co, www.pepsico.com) BRANDS AND COMPANIES PepsiCo has hundreds of brands. These are some of the best known: Frito-Lay Brands, Pepsi Cola Brands, Gatorade Brands, Tropicana Brand, and Quaker Brands (Official website of Pepsi Co.). (Source: www.pepsico.com) MARKETING ENVIRONMENT: According to Dibb et.al, (2006), the marketing environment consists of the political, legal, regulatory, societal/Green, technological and economic and competitive forces (also known as PESTLE), that surrounds the buyer and the company. Marketing environmental forces are an important element because; they influence the customer by affecting their life style, standard of living, preferences and needs of a product as well as also alter opportunities that the marketer may want to take advantage of. It helps plan how marketing activities should be planned. The company has to keep a close view of the changes taking place in the marketing environment. To study how Pepsi Co, operates in Pakistan, it is an essential to view the macro environment. It consists of the factors and forces that directly affect the microenvironment of a company. MACRO ENVIORNMENT: The macro environment of Pepsi Co. Pakistan is as follows: ECONOMIC: Inflation: Inflation is basically a rise in the price of goods and services. But with respect to Pepsi, there is a very insignificant price change in the product and consumers drink Pepsi habitually so it does not create an impact on the demand of the product. Price Sensitivity: Because of the nature of the products there are some industries in Pakistan that are highly sensitive to the price. The Beverage industry is one of those sensitive industries because of its nature and competition in the market. The competition between the Pepsi ® and Coca Cola plays a very important role in determining the prices of the drinks. A decrease in the price by one competitor forces the other competitor to reduce the prices as well. Pepsi ® offers various discounts and cutting off the prices, time to time, in order to capture the market and give benefits to the people. Taxation: Taxes are imposed by the governments; it is one of the main reasons for an increase in the prices. Pakistan Beverages Pvt. Ltd. always tries to retain the prices but sometimes it is essential for them to make an upward change Currently the soft drink industry is under double taxation. The current tax rate is 25% at the retail price. According to Senator Ahmed Ali, Chairman, Senate Standing Committee, after the tax reduction, can not only benefit the companies but also result in a three fold benefit to the country. (Source: www.brecorder.com) TECHNOLOGICAL ENVIRONMENT: The technological environment, perhaps, is the most dramatic force now shaping our destiny. Technology has a tremendous impact on lifestyles, consumption patterns and our economic well-being. (Kotler, 2003) Although Pakistan is not a very technologically advanced country, it has always remained up to date with technology. POLITICAL ENVIRONMENT: The political environment includes the laws, government agencies and pressure groups that influence the overall running of the company (Kotler, 2003).The uncertain and unstable political environment in Pakistan causes many hindrances to each and every industry likewise the other industries; the beverage industry suffers a lot. Pepsi had also suffered a lot of boycotts for being an international brand. PORTERS FIVE FORCE ANALYSIS: According to Dibb et al, (2006), Michael Porter defined a model for competitive advantage, which consists of five competitive forces. This report will make use of the Porters five forces, to COMPETITOR ANALYSIS: All beverages available in the market are competitors of Pepsi ®, directly or indirectly. These competitors include Coca Cola, RC Cola, Pakola, Double Cola, Amrat cola, Makah Cola. Pepsis direct competitor is Coca-Cola. The non-soft drink competitors are tea, coffee, water, energy drinks, sports drinks, milks, etc which are all consumed on beverage occasions. Pepsi aims to gain a greater share of these occasions. Although Pepsi ® has captured over 70% of the market share in Pakistan (ipbu.co.uk) there is much rivalry between the two cola giants. They have to observe each others strategies for setting prices and executing promotional ideas. Pepsi and Coca-Cola had/have different brands of soda competing with each other: Brand Pepsi Coke Dark Cola PEPSI COCA COLA Diet DIET PEPSI DIET COLA Low calorie PEPSI ONE PEPSI EDGE PEPSI MAX(outside the US) COCA COLA 2 COCA COLA ZERO Lemon Lime Soda SIERRA MIST 7 UP(outside the US) SPRITE Cherry Soda WILD CHERRY PEPSI CHERRY COKE Orange juice TROPICANA MINUTE MAID Iced Tea BRISK NESTEA Root Beer MUG BARQS Sports Drink GATORADE POWERADE Citrus Soda MOUNTAIN DEW Mello Yello Surge Vault Vanilla-Flavored Pepsi Vanilla Vanilla Coke Lime-Flavored Pepsi Lime Coca-Cola with Lime (Source: website of Wikipedia for cola wars) STRENGTHS AND WEAKNESSES OF COCA-COLA: STRENGTH WEAKNESS Operating System Low market share Financial Strength Less Promotion Weaker Distribution Network (Please refer Appendices 1(a) for the explanation on the Strengths and weaknesses of Coca Cola COMPANY ANALYSIS: In Pakistan PEPSI Co. is operated under Pakistan Beverage Ltd, which is a major player in the beverage industry. It has been the market leader since 1988; still there is a healthy competition between these two major players, Coca-Cola and Pepsi. Over all, Pepsi Co holds a share of over 70% in the industry and the beverage industry of Pakistan has shown an enormous growth of 30% in the year 2006. (Source: www.iptu.co.uk, pepsico.com, brecorder.com) PRODUCTS OFFERS BY PAKISTAN BEVERAGE Ltd. Flavor Brand Color Cola Pepsi ® Orange Marinda Lime 7 Up Mango Slice Lime Mountain Dew Lemon Teem SWOT ANALYSIS: SWOT analysis is a framework, for generating alternatives. It refers to strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal factors whereas, opportunities and threats and external. (Dibb et al. 2006) The SWOT analysis of PEPSI is as follows: SWOT ANALYSIS OF PEPSI: STRENGTH WEAKNESS OPPORTUNITY THREAT Intensive Distribution Network Lacks Worldwide Acceptance Natural Environment Brand Image Sweeter Taste Operating System Population Financial Backup Promotion Financial Assistance Diversification Awareness Target Market Food division should expand internationally Social, cultural, economic, political and governmental constrains Quality Standard Target health conscious customer base National Image Focus on most important customer trend- Convenience (Please refer Appendix 1(b) for an explanation of the points mentioned above). TOWS MATRIX: TOWS matrix makes use of the SWOT analysis to provide strategic options: STRENGTHS S Intensive Distribution Network Sweeter Taste Promotion Target Market Quality Standard National Image WEAKNESSES W Lacks Worldwide Acceptance Operating System Financial Assistance OPORTUNITIES O Natural Environment Population Diversification Food division should expand internationally Target health conscious customer base Focus on most important customer trend- Convenience SO Strategies Intensive distribution network to reach a wider population Expand into healthier products by its quality standards Target health conscious customers through its promotion and new product launches as it has a national image WO Strategies: Gain advantage through expanding into food based products as it has a name for that THREATS T Brand Image Financial Backup Awareness Social, cultural, economic, political and governmental constrains ST Strategies It has a strong national image to overcome the brand image. It can improve on quality to overcome issues such as pesticides in Pepsi Make use of the national image to overcome, social, economic pressures WT Strategies Slowly build up its image in different countries and avoid unnecessary businesses Give financial backup, to franchises in other countries Should be responsive to the needs of customers around the world rather than just the western market STRATEGIC OPTIONS AND EVALUATION: After analyzing, the TOWS matrix, we can evaluate strategic options for PEPSI as mentioned below: OPTION 1: MAKE USE OF THE STRONG DISTRIBUTION SYSTEM TO EXPAND IN THE UNREACHED MARKETS OPTION 2: PEPSIS NATIONAL IMAGE IS VERY STRONG; IT CAN ALSO EXPAND INTO HEALTHIER PRODUCTS AND TARGET HEALTH CONCIOUS CUSTOMERS. OPTION 3: EMPHASIE ON PRODUCT ATTRIBUTES MORE, SUCH AS, QUALITY THAN THE BRAND IMAGE OPTION 4: DIVERFIY INTO OTHER PRODUCTS SUCH AS FOOD AS ALREADY LAUNCHED IN OTHER COUNTRIES AS IT HAS A STRONG PROMOTION BASE OPTION 5: ADOPT SCHOOLS OR CHARIBLE INSTITUTIONS TO MAKE A FAIR IMAGE OF THE BRAND IN PAKISTAN DUE TO BRAND ISSUES OPTION 6: LAUNCH NEW FLAVOURS OF PEPSI, SUCH AS DECAFFINATED DRINKS. OPTION 7: MAINTAIN THE CURRENT POSITION MARKETING STRATEGY AUDIT: According to Dibb et al. (2006) Marketing strategy articulates the best way for a company to use its business resources and tactics to achieve its marketing objectives. It consists of the specific strategies for the target markets and positioning, the marketing mix and marketing expenditure levels. In marketing strategic audit, a company defines its mission statement and marketing objectives and analyzes whether the marketing strategy responds to the threats and opportunities in achieving those goals. BUSINESS MISSION: In the first step of the strategic planning, the company defines its mission statement. A mission statement drives the goals that are to be attained. It also defines the core area of activity of the company as well as, gives everyone a clear view of what the company wants to achieve. (Dibb et al. 2006) Following is the mission statement of Pakistan Beverages Pvt. Ltd. and the analysis of its strength and weaknesses. Pepsi ® Cos overall mission is to increase the value of our shareholders investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers, providing products that are safe, wholesome, economically efficient and environmentally sound, and providing a fair return to our investors while adhering to the highest standards of quality. (Source: www.evablue.com) The mission statement of Pepsi ® Cola International is no doubt a customer and environment oriented mission statement. It identifies the objective of the business that is to increase the profit through customer satisfaction by not compromising on the quality of the product. (Please refer Appendix 3(a) for the strengths and weaknesses of the mission statement) MARKETING OBJECTIVES: The mission of the company leads to a hierarchy of objectives, including the business objectives and marketing objectives. Marketing strategies must be developed in order to support those marketing objectives. The marketing objectives of the company should be clear and specific. (Dibb et al, 2006 and Kotler, 2002). The following are the marketing objectives of Pakistan Beverages Pvt. Ltd. To have the sales figure that is better than the last year The awareness of the product Availability of product to all segment of the consumers (Please refer Appendices 2(b) for an explanation of the points mentioned above.) MARKETING STRATEGY: Strategies direct the opportunities to follow, it leads to the target market that should be captures, the basis for competing and differential or competitive advantage to attain for the desired product. (Dibb et al. 2006) The marketing strategy of Pakistan Beverages Pvt. Ltd. is, To provide the customer the best beverage of the country To create awareness among the customers about the best soft drink available in the country. To give the product, a substantial support to capture its place in the market. (Please refer Appendix 2(c) for the explanation of the points mentioned above) STRATEGIC OBJECTIVE AND STRATEGIC FOCUS: After reviewing the overall corporate vision, mission statement, corporate goals and the SWOT analysis, ANSOFF matrix, provides an overall direction of the firm and it helps in the decision making process. (Dibb et al. 2006) ANSOFFS COMPETITIVE STRATEGIES Fig: 1.1 Ansoffs competitive strategies (source: Kotler, 2002, pg 100) According to the Ansoffs matrix, a company may choose one or more competitive strategies to assist strategies objectives. The three growth patterns defined are, intense growth for existing products, diversified growth for new products and new markets and integrated growth for the growth of the company. (Kotler, 2003; Dibb et al. 2006) Currently Pepsi Co. Pakistan is following Intense Growth Strategy through market penetration. MARKET PENETRATION: Market penetration is a strategy for increasing sales for existing products in the existing market. (Dibb et al. 2006) Pepsi try to achieve increased market share through aggressive advertising. Pepsi also sponsors a lot of sports activities and get into promotional offers and deals with different restaurants and educational institutions THE DIFFERENTIATED MARKETING STRATEGY: Selective Strategy: Selective strategy is also known as differential strategy. The product itself may or may not be different as in many cases only the promotional message and distribution channels vary. (Source: www.netmba.com) The Company is very much selective in all of its effort because any slightest change can affect the company. PBL not always uses the same routine for the overall promotion of PEPSI. Since this company has to compete well and one of the business mission of Pakistan Beverages LTD is to become the number one in the Pakistani market, thats why they dont want to give any place to its competitor untouched to attack on the company brand. Cue Strategy: Having so many competitors in the market, especially Coca Cola, Pepsi ® is facing difficulties in differentiating this product. Now the company is using the Cue strategy so as to perceive the customer, that this is the only brand in the market. Pepsi is made available everywhere through intensive distribution. To do this, Pepsi provides stands and refrigerators to the retailers so that PEPSI is made visible at once. MARKET SEGMENTATION: According to (Dibb et al. 2006) market segmentation is a process where heterogeneity can be grouped into smaller homogenous groups. Pepsis market is segmented into two distinct groups: Distribution. Consumer. Distribution With regards to sale, there are three distinguished areas where Pepsi ® is distributed: Open market place, small shops and kiosks. Institutional sales (hotel, club, restaurants etc.) Educational institutes (school, colleges, universities etc.) Consumers As far as consumers are concerned, undifferentiated marketing is practiced. Company doesnt want to confine Pepsi ® to any particular segment. However, their advertising campaigns depict that Pepsi ® is targeted more towards teenagers TARGETING: According to Dibb et al. 20066, targeting involves, decision required to cater a specific segment. TARGET MARKET STRATEGY: A company must keep in mind its capabilities and resources before following a specific targeting strategy. (Dibb et al. 2006). Undifferentiated Strategy: Undifferentiated strategy is, when a company designs, one market segment to cater the entire target market. (Dibb et al.2006). Although, Pepsi uses an undifferentiated Strategy, yet the main focus of Pepsi ® seems towards youngsters under the age bracket of twenties. This generation is called Generation X and constitutes a larger portion of the population. As a result all promotional schemes are targeted towards them. MARKETING PROGRAMMES: To make the marketing strategy a reality, it is very important to make an appropriate marketing mix (Kotler, 2003; Dibb et al. 2002). MARKETING MIX: Marketing Mix comprises of the 4 Ps as mentioned below: Product Price Place/distribution Promotion These are the very essential parts, which determine the success of any corporation. Among these Product, Place, and Promotion are in the hands of the company but sometimes price may or may not be set by the company as in the case of competitive-based pricing, depends upon competitor price and the market mechanism. (Kotlet, 2003; Dibb et al. 2006). In the case of the Pepsi ®, company sets great stress on these elements, which will be discussed briefly, THE PRODUCT VARIABLE: Product variable involves, creating a product keeping customers wants and need in view. (Dibb et al.2006). Pepsi ® A Consumer Product Pepsi ® is a consumer product. People buy Pepsi ® for the personal consumption. So the attributes of people affect this product very much. Peoples liking and disliking, people views about themselves, their views about the product, product positioning in the peoples mind, their taste, preferences, habits, income are some factors, which affect the sale of the Pepsi ®. Category __ Convenience Product Pepsi ® falls in a category of convenience product because of Low price Widespread distribution, convenient locations. Mass promotion by the producer. Product Attributes Quality: Normally consumer category products are very quality sensitive. Pepsi ® is a drink for refreshment and thirst quenching, therefore; the company must focus on the quality level. PRICE VARIABLE: According to Dibb et al. (2006) Price is very a sensitive issue in the case of every product. It is also a major threat in the competitive market. Sales figures are unusually affected if the pricing for the product is not set according the considerations. It is a common experience that Low-Price strategy is normally used to gain a high market share. This strategy is especially useful for the case of new product. (Kotler, 2003) Also High-Price strategy is also set for the purpose to perceive the customer, a product of high value. (Kotler, 2003) Based on the above assumption, we can say that prices affect the people perception about the product. People perception is very important in the purchase decision. Customer buys the product about which they perceived that it is the better product. Event-Based Pricing Pakistan Beverages Pvt. LTD also makes use of the special events in Pakistan. One of the most important events in the Pakistan is RAMADAN. The price of Pepsi in the season of Ramadan in normally less as compared to other seasons. But this special price is normally on the 1 and 1-1/2 liter bottles not on the 250ml. Pricing Strategies: Different pricing strategies exist for different marketing purposes. So marketing objectives plays a significant role in the determination of pricing strategy. Market-Penetration Strategy: Every firm can easily gain a large market share if it provides the better value that justifies the cost of the value. Pepsis pricing strategy is based on the marketing penetration strategy in order to become a market leader in the beverage industry. Positioning Strategy and the Price: It is a general practice that product price is set according to the product positioning. Product positioning gives an imagery of the product i.e. whether the product is luxurious or the convenience product. (Kotler, 2003) Pepsi ® is positioned as a consumer (convenience) product and people buy this product frequently with little involvement, comparison. Pepsi ® is positioned as a drink for thirst quenching and refreshment. So it cannot charge a high price for the product because several substitutes exist in the market. PLACE/DISTRIBUTION: Place Utility Concept: The product must be available at a convenient place for the customers ease (Dibb et al. 2006). One of the most important Concepts is the place utility. One of among several reasons to get a big market share in the Karachi market is the mass distribution by the company. It has been observed that people value the availability of the product. Thus the company follows an Intensive distribution strategy to make the product available everywhere. Distribution Strategy: Pakistan Beverages LTD has a very strong strategy for the distribution of the product. Company knows the importance of the distribution network in this competitive environment. Thats why a proper distribution network is working under the control of Pakistan Beverages Ltd. Intensive Distribution: Intensive distribution is to make the product available at all possible locations (Dibb et al. 2006). Company believes in the Intensive distribution of the product. What makes the Pepsi ® to adopt this strategy is the nature and category of the product because this product is consumed with little or no involvement so one of the great factors which affect the sales of this product is the availability of this product. PROMOTION: Promotion activities refer to the communication activities used to inform consumer about the product (Kotler, 2003). Integrated Marketing Communication Strategy: Pepsi ® is convenience product and it falls under a category of habitual buying behavior. There are many substitutes of Pepsi ® in the market. People buy this product with little involvement. So this kind of products usually requires a well-established promotion strategy. Pepsi ® is also involved in the heavy promotion of this product. So in order to make its promotion and communication more effective, it uses the integrated marketing communication strategy. Promotion Mix: Pepsi ® uses different promotion tool for the promotion of this product. The selection of the tool depends on the nature of the type of promotion Product Life-Cycle Stage: A companys strategies change according to the product life cycle stage. (Kotler, 2003) Promotions for the products in different stages require different promotion strategy. The product, which is in the introduction strategy, requires heavy promotion strategy to create awareness about the product. In the same way, products in the different stages require some other strategy. Since Pepsi is in the middle of the Growth and Maturity stage, the company uses a Push strategy. . Figure: 1.2 (source: Kotler, 2003 pg, 328) Push Strategy: A push strategy refers to, making use of the companys sales force and promotional activities to create consumer demand. (www.tutor2u.net) Company uses a push-strategy for its product Pepsi ®. Company builds-up the consumer demand by different means i.e. by advertising, sales promotion and consumer promotion, so that the product can be easily pushed through its channels and outlets. In promotion, Pepsi ® focuses on two areas, Sports Music In sports, Pepsi ® gives adequate coverage to cricket, which is the most watched sport in Pakistan and Music, by making Leading Cricketers such as Wasim Akram and Shahid Afridi endorse for the product and as well as Pop singers such as Hadiqa Kiyani promoting Pepsi. Tools of Promotion Another major decision is to determine which tool for the promotion is to use. Some of the tools for the promotion are given below. Advertising: This tool is quite successful for the past few years. Company uses this tool to promote its product among its customer. Advertising Objectives Persuasion: The main primary objective of the advertising of the Pepsi ® is to persuade the consumer to buy this brand. Pepsi ® advertises through the following media: Magazines and newspapers. Radio and television. Outdoor displays (Posters, billboards, signs and skywriting). Pepsi ® conducts advertising to achieve the following benefits: Long-term build up of the Pepsis image Institutional advertising. Long-term build of the brand name, Pepsi ® Brand advertising. Information dissemination about a particular sale (price reduction) or event (new promotional scheme) Classified advertising. (Kotler, 2003) (Please refer APPENDIX 3(A) for brand image and brand identity) RECOMMENDATIONS AND CHOSEN MARKETING STRATEGY: Pepsi is the leading soft-drink brand of Pakistan. Currently all the efforts done by the company, are keeping Pepsi as a market leader however, the company should adopt the following in order to maintain its share and to remain aggressive in the market. ANSOFFS MATRIX: INTENSIVE STRATEGY: The company has already adopted the strategy of Market Penetration through, advertising and pricing however, there is a very little development of Pepsi in the other two strategies: PRODUCT DEVELOPMENT: It is a strategy to increase sales by either developing new products or by making an extension of the current product. (Dibb et al. 2006) Although Pepsi has been in Pakistan from a long time, it has done very little in order to launch new products as already launched in other countries. Pepsi should think about extending the current line of Pepsi to the decaffeinated Pepsi as well as brining other flavors of Pepsi in Pakistan. Expand into Healthier Products: Many consumers are seeking to lead a healthier lifestyle, reducing fat and sugar in their diets. It should, launch Tropicana and energy drink products in Pakistan. Because of the increase in the consumer health awareness, the rise in sales for these markets has steadily grown over recent years. MARKET DEVELOPMENT: Product development is a strategy to improve sales by introducing current products in new markets. (Dibb et al. 2006). PEPSI is right now, catering most urban and some rural areas. Pepsi should reach the old age people and rural places like those in Balochistan and NWFP which remains uncatered. MARKETING MIX: Although the marketing mix of Pepsi is very good, the alternatives and recommendations mentioned above can go with the same marketing mix but, however, it should i