Description
it includes the country analysis of pepsi for growth and expansion
Country Analysis (5 COUNTRIES CASE STUDY WITH REGARD TO PEPSI) India Overview. As can be expected, India is one of the top 3 choices Central Players recommends for foreign market entry. It has the second largest population in the world and is becoming one of the most sought after markets for large corporations. Although it has the lowest per capita income, Central Players believe that the culture continues to be interested in Westernized products, PepsiCo will have a positive influence with its inexpensive products. India’s growth and density measures prove that it would be the most beneficial country to enter because of its potential market share opportunities. GDP and Inflation rates were rather dismal for India but Central Players see potential with the economy because of the increased educational levels and the global demand for Indian contractors. Central Players has identified that import tariffs and infrastructure scores were low and will need to be continuously monitored. Intellectual property rights are essential to the development of foreign markets and India scored high. Unfortunately, India scored extremely low with the political risk indicator that Central Players would have to evaluate and analyze how it could overcome the risks. Finally, India. scored the highest with the level of foreign competition and tax rates that are extremely promising for PepsiCo’s potential revenue.
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Strengths. India has recently become a popular location for expansion. The economy has showed recent growth spurts of 9% annually in recent years and is projected to grow 7 to 8 percent each year for the next 5 years (Johansson, 2009, p.296). An article by the Press Trust of India (2010) stated, “In 2001-02, out of the total of 188.2 million households, the number of high income families was only 13.8 million, whereas those in the low income category stood at 65.2 million.” In the last 30 years, Indian marketing segments have seen a shift from the rural poor population to an “increasingly well-off middle class 62 percent of Indian households belong to the middle class, which is the target of most consumer goods firms” As the middle class continues to grow, they are gaining their own identity in the consumer market and making up a significant part of the market for consumer goods. This coincided with an increase in the size of cities, increases of disposable income, and families having fewer children Even with large city expansion, rural areas still present over 70% of the population in India and also present opportunity This population becomes more aware of popular brands and have started demanding consumer products and services” The fantastic education system and outsourcing of U.S. jobs to India has led to women contributing to household income Increases in expendable income as well as the emerging female segment both present opportunities for American companies looking to expand to India. “Exposure to new products and services has increased the appetite for further purchases…products that were earlier a luxury now have become necessities”
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Indian consumers are starting to look more like the market in the United States, with inessential items becoming desired purchases as a symbol of status and success. However, the similarity to the United States market does not imply that companies will not need to localize their marketing strategy and product positioning. Several companies have overlooked this aspect, along with overestimating demand, and failed in India. Weaknesses/Threats. The emerging economy also presents some weaknesses. Per capita figures are still low due to a rapidly increasing population. In other words, there is an expanding middle class, but there is still a very large poor population in India The upside to the growing economy as a whole is balanced with high political risk due to ethnic and religious violence \ Expanding into India also requires that companies adapt their products to the Indian market and taste, particularly when marketing to the poorer consumer in rural areas.
Potential client size. According to the CIA World FactbookA (2011), India has the second largest population in the world, estimated as 1,189,172,906 people in July of 2011. When comparing the target market to the population in our chosen market area, World FactbookA (2011) indicates 64.9% of the population falls between the ages of 15-64 years old. This is most likely the strongest market for Pepsi Products. This would place our client size in the area of If we estimate having ten percent of the market share, the size of our client will be approximately 77,200,000.
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Proposed entry mode. The four entry modes that PepsiCo could use are exporting, licensing, joint venture, and direct investment. Using joint ventures to enter the market there are strict regulations imposed by the government . But creating a joint venture entry business agreement benefits the two parties that are equally invested and would be most beneficial for PepsiCo. After the success of entry, one of the businesses may decide to buyout the joint partnership of that other half. A joint venture allows both parties to share the burden of the project, as well as the resulting profits. Marketing strategy. The marketing strategies of PepsiCo in India should be to advertise through athletics In India, cricket celebrities have been used to advertise brands It would be valuable to use India’s famous Bollywood celebrities. Using the Bollywood stars would help create and establish product and brand acceptance, similar to how consumers in America look up to celebrities and movie stars PepsiCo should market to the globally adept college-aged and recent graduate students and that are willing to try and adapt to new products. As the Hofstede study mentioned, and like the PepsiCo brand, this market likes to stand out with their unique style (Hofstede, 2009). In our opinion, this market is one to readily adapt to new things and help push the product trend in that market. India is becoming more westernized so the PepsiCo trends may take off if marketed towards this market.
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Adaptation strategy. As previously mentioned, adaptation will be required to enter into India, particularly into the poorer, rural parts of the country. This may include needing to lower prices by “reducing package sizes, simplifying designs, and offering less service” where failing to do so can result in a local company creating a cheaper, knock-off product If this is not possible, going into business with a local company or creating a distribution center in India can help decrease prices, but will likely require a larger overhead.
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JAPAN Overview. Japan scored extremely well with most of the indicators provided by Central Players. It has a high per capita income that would benefit PepsiCo. Its population growth is not PEPSICO positive but it has the second largest density rate that would accommodate PepsiCo’s products quite nicely. It is tied with China for GDP that means it sees healthy growth in the economy in relation to goods and services, ideal for PepsiCo. Japan had one of the highest import tariffs score that represents lower taxes on carbonated sugary beverages. PepsiCo can easily leverage its streamlined infrastructure to deliver products to retailers effectively and efficiently. Japan’s intellectual property rights and political risks scores were not ideal for Central Players because of the intense government regulations and involvement. Its level of foreign competition and tax rates scored average amongst the countries that Central Players don’t see affecting PepsiCo’s brand awareness strategies.
Strengths. Japan’s large population is centrally located and can be conveniently marketed to without having to distribute information and/or products to smaller communities. Unlike Japan, almost all of the population lives in urban locations that would allow PepsiCo products to be easily recognized amongst consumers. The close proximity of the targeted market would also allow operations to easily deliver products to retailers and other stores without traveling long distances. Japan is also known to
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keep its highways and expressways well maintained to support the growing population and increased vehicle usage. Japan has an extensive and wellestablished sea transportation system that includes many ports that its merchant marine fleet of 662 ships maintains Its air transportation system comprises of over 170 airports with well-established paved runways. The telecommunication system in Japan is extremely advanced that delivers quality communication to the large population. Finally, Japan’s multi faceted power generation industry provides efficient electricity demands throughout the entire country. Utilizing all of these infrastructure designs and technology would allow PepsiCo to effectively enter into Japan while maintaining low operations costs.
Weaknesses/Threats. Once PepsiCo has established an effective strategy to utilize Japan’s infrastructure strengths, Central Players would also like to emphasize some of the weaknesses and threats. According to Johansson (2009), “the Japanese [distribution] system features several layers of small, specialized units, each handling small quantities of products” This would mean that PepsiCo could potentially have to go through various levels of distribution paying fees and commissions along each level. This ineffective means of handling distribution could be extremely costly to PepsiCo but points out a significant weakness of Japan’s infrastructure. One of the largest threats that PepsiCo would have is Japan’s emphasis on packaging. The Japanese are extremely particular and demand zero defects in packaging that could once again be costly for PepsiCo. Johansson (2009) explains “Variations in label position, blemishes in the wrapping material, and unappealing color combinations are taken as signs of a poor quality product Central Players and PepsiCo will have to ensure that packaging
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procedures are handled with the utmost care and attention to detail.
Potential client size. According to the CIA World FactbookB (2011), Japan’s estimated population is 126,475,664 people in July of 2011. Central Players does not characterize everyone in the population to be in the market so we need to compare the target market to the population in our chosen market area. World FactbookB (2011) indicates 64% of the population falls between the ages of 15-64 years old. Being the strongest market for PepsiCo, the potential client size would be approximately 80,944,244 (126,475,664 X 0.64 = 80,944,244). If Central Players estimate PepsiCo having ten percent of the market share, the potential client size will be approximately 8,094,424 (80,944,244 X 0.10 = 8,094,424).
Proposed entry mode. PepsiCo has a couple available options as how to enter the Japan market. The quickest way to gain a foothold in the Japanese market would be to export directly to Japan. This would establish product availability in a short timeframe. However, distribution could hinder the success of PepsiCo based on the need of middleman in the Japanese distribution system Couple this with the expenses of exporting make this less than ideal.
PepsiCo needs a brand presence in Japan to gain the affection of the loyal Japanese consumer which exporting does not provide. A strategic alliance with a leading
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brand of carbonated beverages is a possibility but opens PepsiCo up to losing proprietary information to a possible Foreign direct investment is the best option for PepsiCo to enter the Japanese market. This allows PepsiCo retain control over their distribution and how their image is perceived in the Japan market. FDI also allows for PepsiCo to avoid higher taxes as well as take advantage of the local workforce by having facilities located in the Japan market Production located in Japan allows for qualities to be monitored, which is important to the Japanese consumer as well as have a brand presence and financial commitment in the Japan market. FDI in Japan allows PepsiCo to be more flexible to the Japanese market and will increase speed to market for new products.
Marketing strategy. Coca Cola is synonymous with soda in the Japanese market. PepsiCo will need to challenge Coca Cola and win over the Japanese consumers with effective marketing campaigns tailored to their local culture. Through having operations setup in Japan, PepsiCo will be able to utilize local talent to ensure communication remains open between PepsiCo and the needs of the local market Visibility of operations in Japan will reiterate the commitment PepsiCo has to the Japanese market instilling trust in the consumers that PepsiCo is committed to this market .In addition to hiring local talent, PepsiCo will need to remain attentive to listening to the local consumers needs and adjust the marketing strategy accordingly this can be achieved through ongoing market research As incomes continue to rise in Japan, brand names will continue to be important to the Japanese consumer PepsiCo, although challenging Coca Cola,
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will need to retain their brand image through effective positioning and keep pricing centralized to the Japanese market to ensure the products are adopted. PepsiCo through educating the target consumer base in Japan will be able to avoid uncertainty of the quality of their products through effective promotions. One way for PepsiCo to remain innovative is redesigning packaging to accommodate the less than optimal storage spaces within the average Japanese consumer’s home (2009). This is an opportunity for PepsiCo to alter packaging to appeal to this consumer while remaining innovative and not tarnishing their widely accepted brand.
Adaptation strategy. FDI, as mentioned above, allows for PepsiCo flexibility in adapting to the local consumers needs in a more timely fashion. PepsiCo will able to localize products based on specific cultures throughout Japan while adaptation can include different formulas for products to adapt to local taste or product preferences in specific regions Regulatory committees will differ compared to domestically and having a presence through FDI will allow PepsiCo to alter packaging, verbiage and or ingredients to abide by the regulations set forth. It is paramount that the proper market research is prepared on the Japan market as well as micro research conducted on specific regional markets prior to expansion. This research allows for proper adaptation to specific local tastes and will ensure the success of PepsiCo being adopted as a brand by the highly sensitive Japanese consumer and not shunned as a global brand with ulterior motives
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CHINA
Overview. China’s overall score fell only 2 points below Japan’s and is probably the most competitive market. It has a higher per capita income than Japan, which indicates substantial spending power. Although its population is the largest in the world, China has more than half the density rates of India and Japan. This could pose a threat for PepsiCo if it wishes to enter smaller communities in the region. China scored the same with the GDP indicator but has a higher inflation rate. By having the second highest score on import tariffs, PepsiCo will spend less on taxes and regulation fees. As mentioned previously, a significant amount of the population resides in rural parts of the country limiting PepsiCo from utilizing an efficient infrastructure. Political risks and government involvement in China is probably the biggest challenge that PepsiCo would face when entering the market. Similar to Japan, China’s level of foreign competition and tax rate scores would accommodate PepsiCo’s ability to enter the market successfully. Strengths. China became a member of the World Trade Organization in 2001. Since then, China has relaxed its tariffs and has its export based growth has grown substantially. China has the largest population in the world, with 1.3 billion people. According to Johansson (2009), “The size and potential of the Chinese market, coupled with its fast -growing purchasing power, make China a very attractive market Experts believe China is the next super power in the world because China’s foreign exchange reserves, low debt levels, high
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savings rate, strong work ethic and growing domestic consumption make it a rising star among other nations. Those who feel this way see China’s economy as the strongest in the world with the best investment opportunities of all nations.
Weaknesses/Threats. A large risk associated with doing business in China is the role the government plays. China is still a Communist nation and a main concern for most businesses is corruption of Chinese officials and a lack of integrity in the judicial system (Letcher, 2011). Additionally, China’s economic growth is unsustainable and that real estate prices are greatly over inflated, which will likely cause a real estate bust in the near future which will affect foreign investors Other challenges of doing business in China include problems with rural infrastructure, product positioning, inflated tariffs, miscommunication due to language barriers and differences in customs, and counterfeiting or piracy of products Potential client size. According to the CIA World FactbookC (2011), China has the largest population in the world, estimated as 1,336,718,015 people in July of 2011. Because not everyone in the defined market area will be a customer, we need to compare the target market to the population in our chosen market area. World FactbookC (2011) indicates 73.6% of the population falls between the ages of 1564 years old. This is most likely the strongest market for Pepsi Products, placing our client size in the area of 983,824,459. (1,336,718,015 X 0.736 = 983,824,459). If we estimate having ten percent of the market share, the size of our client will be approximately 98,400,000. (983,824,459 X 0.10 = 98,392,445.90).
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Proposed entry mode. Preparation is a key factor success and as with any international business venture, we must be open to differences and aware of our limitations in order to expand. Expansion into China would indeed be a great opportunity for growth, but only if done cautiously and armed with knowledge about the risk factors to the business prior to entering the market. According to Johansson (2009), the best way to enter China would likely be to follow the WTO suggestion and develop a joint venture with a Chinese partner to assist in ease of market access and to help in overcoming cultural and language barriers. Additionally, obtaining a Chinese partner would likely help the business understand inside business information necessary for success in the country. This would include insight on areas with the strongest infrastructure, most receptive customer base, and most welcoming political environment Most of all, I would take extreme caution when dealing with the local government and investing money and assets, while always having a conservative business plan in place
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Marketing strategy. Experts believe China is the next super power in the world because China’s foreign exchange reserves, low debt levels, high savings rate, strong work ethic and growing domestic consumption make it a rising star among other nations. Those who feel this way see China’s economy as the strongest in the world with the best investment opportunities of all nations (Saxena, 2011). Thus, leading the Central Players to implement a marketing strategy of standardizing the products and centralizing the decision making process. Utilizing the macro segmentation will help PepsiCo decipher the appropriate demographics in advertising its goods, such as, population, disposable income, and even education. Coordinating the global marketing campaign will begin with the planning process as discussed by Using a planning guide for any marketing strategy whether domestic or international, mentions “it is best used in conjunction with other planning tools in corporate and marketing strategy and focuses primarily on the systematic assessment of a globally coordinated marketing strategy for a specified product or service”
Adaptation strategy. The importance of designing clear and effective branding in foreign markets has shown globalization has trended all commodities of the world. The strategies of companies operating in international markets, such as, PepsiCo, focuses on the value associated with a brand name, but extending other products in the objective. PepsiCo have traditionally adopted county centered strategies, building or acquiring a mix of domestic and international brands. The organization’s strategy has been to acquire local companies in order to form a
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group of autonomous regional managers who know more about the culture of the local markets worldwide. Adaptation is a powerful strategy if implemented and marketed effectively. As the Central Players suggests innovative techniques to produce visibility and positive foreign reception there will be an increase in investment opportunities and global adaptation of international brands. Using effective marketing and advertising will enforce the organization to adapt to foreign culture tastes, visual concepts, and needed messages. For example, PepsiCo will have Chinese consumers, preferred tasting venues, and colors/slogans that the culture will adhere to for a “new generation”.
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Being in such a tense competition (just like the brand Coca-Cola), Pepsi-Cola should not take the direct and tough attack upon it. There is no good to either side. The best wad is to keep a peaceful relationship with it and always compare with others; we should find their disadvantages and show our advantages on this aspect. Then by and by, the people would think ours is betted Of course the most important rule is to improve ourselves to meet the consumers
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PepsiCo is an organization that strives to be the world’s premier consumer products company. It seeks to produce healthy financial rewards for investors and provide opportunities for growth and enrichment to employees, business partners and the communities in which they operate (Annual Report, 17). In order to remain competitive in the global market, PepsiCo and its subsidiaries must be aware of new trends and preferences that arise, as well as the variety of costs that go into their products. This can be accomplished through investment in health conscious markets and continued innovation in new products. Acquiring companies with “healthy” reputations as well as participation in the Green Movement will have a positive effect on their reputation as a consumer friendly corporation. Finally, monitoring current and potential consumers, as well as constantly reviewing the effectiveness of their marketing program, will allow PepsiCo to detect arising trends and new taste preferences within their target markets. First, it is clear that carbonated soft drinks are suffering a decline in North America. Experts say the soft drink market is expected to fall one percent in 2008. In fact, “…both Coke and Pepsi, the number one and number two beverage makers, have seen their share of the North American soda market fall for two straight years, as more health conscious consumers switch to vitamin-infused energy drinks and bottled water” (Kavilanz). The carbonated soft-drink market, more specifically PBNA, is a major portion of revenue for PepsiCo. In order to avoid substantial losses due to changes in consumers purchasing habits,
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PepsiCo must continue to invest in health conscious markets. For example, the 2001 acquisition of the Quaker Oats Company was a timely acquirement for PepsiCo. With programs such as the “Smart Heart Challenge,” as well as the idea that oatmeal gives “Brain Power,” PepsiCo captured a large portion of the shift toward future healthier living. PepsiCo must either focus its efforts on reinventing its current soft drinks, or focus on marketing itself as a more health conscious product. This can be done by highlighting the benefits one receives while drinking Pepsi in addition to the wonderful and refreshing taste it has. This requires a greater emphasis on the older generation and continued appeal to the individuals 13 to 34 years of age. Next, it is evident through the media that the issue of global climate change is important to worldwide society. This issue has created an opportunity for PepsiCo to appeal to new, environmentally friendly consumers. In order to accomplish this, PepsiCo must invest in green technologies, promote changes in their production techniques, and advertise to the world that they are doing their part to promote environmental sustainability. This can be done through mass recycling projects and engineering containers from less harmful, organic products. In addition, large amounts of money can be publicly donated to foundations that research possible solutions to “Global Warming.” By aligning themselves with a good cause and by giving back to the community PepsiCo is sure to win the approval of a new and loyal customer base.
Finally, customer research is critical to any prolonged success. The information discovered can lead to the release of new products and the termination of those that were unsuccessful. In order to continue to be successful, PepsiCo must maintain
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their investment in new groundbreaking technology. This will allow them to capture the sentiment of current customers and find new ways of convincing others that Pepsi is the best brand available. Continued investment in technology will allow PepsiCo and its subsidiaries to monitor the effectiveness of their marketing program. According to Devon Leonard of Fortune Magazine, the price of a thirty second commercial is continuing to rise at a time when the broadcast networks are steadily losing their audience” (Leonard). If Pepsi continues to pour money into traditional advertising they will see their share of the beverage market begin to decline. Also, “…by 2008 twenty percent of the nations households will have per sonal video recorders this enables viewers to skip ads altogether” (Leonard). It is evident that by monitoring their customer base and continuing to invest in the latest technology, PepsiCo and its subsidiaries will notice new and rising trends within the marketplace. PepsiCo has produced quality products while simultaneously creating healthy financial rewards for investors. These rewards are the result of a tireless effort to be the world’s premiere consumer products company. However, in a competitive market, PepsiCo and its subsidiaries must be aware of new trends and preferences that arise, as well as the variety of costs that go into their products. Together with these recommendations and continued focus on satisfying not only their customers, but shareholders and employees as well, PepsiCo is sure to capture more market share, earn greater returns, and become a source of refreshment and nourishment for an even larger portion of the global market.
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doc_266687622.docx
it includes the country analysis of pepsi for growth and expansion
Country Analysis (5 COUNTRIES CASE STUDY WITH REGARD TO PEPSI) India Overview. As can be expected, India is one of the top 3 choices Central Players recommends for foreign market entry. It has the second largest population in the world and is becoming one of the most sought after markets for large corporations. Although it has the lowest per capita income, Central Players believe that the culture continues to be interested in Westernized products, PepsiCo will have a positive influence with its inexpensive products. India’s growth and density measures prove that it would be the most beneficial country to enter because of its potential market share opportunities. GDP and Inflation rates were rather dismal for India but Central Players see potential with the economy because of the increased educational levels and the global demand for Indian contractors. Central Players has identified that import tariffs and infrastructure scores were low and will need to be continuously monitored. Intellectual property rights are essential to the development of foreign markets and India scored high. Unfortunately, India scored extremely low with the political risk indicator that Central Players would have to evaluate and analyze how it could overcome the risks. Finally, India. scored the highest with the level of foreign competition and tax rates that are extremely promising for PepsiCo’s potential revenue.
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Strengths. India has recently become a popular location for expansion. The economy has showed recent growth spurts of 9% annually in recent years and is projected to grow 7 to 8 percent each year for the next 5 years (Johansson, 2009, p.296). An article by the Press Trust of India (2010) stated, “In 2001-02, out of the total of 188.2 million households, the number of high income families was only 13.8 million, whereas those in the low income category stood at 65.2 million.” In the last 30 years, Indian marketing segments have seen a shift from the rural poor population to an “increasingly well-off middle class 62 percent of Indian households belong to the middle class, which is the target of most consumer goods firms” As the middle class continues to grow, they are gaining their own identity in the consumer market and making up a significant part of the market for consumer goods. This coincided with an increase in the size of cities, increases of disposable income, and families having fewer children Even with large city expansion, rural areas still present over 70% of the population in India and also present opportunity This population becomes more aware of popular brands and have started demanding consumer products and services” The fantastic education system and outsourcing of U.S. jobs to India has led to women contributing to household income Increases in expendable income as well as the emerging female segment both present opportunities for American companies looking to expand to India. “Exposure to new products and services has increased the appetite for further purchases…products that were earlier a luxury now have become necessities”
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Indian consumers are starting to look more like the market in the United States, with inessential items becoming desired purchases as a symbol of status and success. However, the similarity to the United States market does not imply that companies will not need to localize their marketing strategy and product positioning. Several companies have overlooked this aspect, along with overestimating demand, and failed in India. Weaknesses/Threats. The emerging economy also presents some weaknesses. Per capita figures are still low due to a rapidly increasing population. In other words, there is an expanding middle class, but there is still a very large poor population in India The upside to the growing economy as a whole is balanced with high political risk due to ethnic and religious violence \ Expanding into India also requires that companies adapt their products to the Indian market and taste, particularly when marketing to the poorer consumer in rural areas.
Potential client size. According to the CIA World FactbookA (2011), India has the second largest population in the world, estimated as 1,189,172,906 people in July of 2011. When comparing the target market to the population in our chosen market area, World FactbookA (2011) indicates 64.9% of the population falls between the ages of 15-64 years old. This is most likely the strongest market for Pepsi Products. This would place our client size in the area of If we estimate having ten percent of the market share, the size of our client will be approximately 77,200,000.
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Proposed entry mode. The four entry modes that PepsiCo could use are exporting, licensing, joint venture, and direct investment. Using joint ventures to enter the market there are strict regulations imposed by the government . But creating a joint venture entry business agreement benefits the two parties that are equally invested and would be most beneficial for PepsiCo. After the success of entry, one of the businesses may decide to buyout the joint partnership of that other half. A joint venture allows both parties to share the burden of the project, as well as the resulting profits. Marketing strategy. The marketing strategies of PepsiCo in India should be to advertise through athletics In India, cricket celebrities have been used to advertise brands It would be valuable to use India’s famous Bollywood celebrities. Using the Bollywood stars would help create and establish product and brand acceptance, similar to how consumers in America look up to celebrities and movie stars PepsiCo should market to the globally adept college-aged and recent graduate students and that are willing to try and adapt to new products. As the Hofstede study mentioned, and like the PepsiCo brand, this market likes to stand out with their unique style (Hofstede, 2009). In our opinion, this market is one to readily adapt to new things and help push the product trend in that market. India is becoming more westernized so the PepsiCo trends may take off if marketed towards this market.
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Adaptation strategy. As previously mentioned, adaptation will be required to enter into India, particularly into the poorer, rural parts of the country. This may include needing to lower prices by “reducing package sizes, simplifying designs, and offering less service” where failing to do so can result in a local company creating a cheaper, knock-off product If this is not possible, going into business with a local company or creating a distribution center in India can help decrease prices, but will likely require a larger overhead.
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JAPAN Overview. Japan scored extremely well with most of the indicators provided by Central Players. It has a high per capita income that would benefit PepsiCo. Its population growth is not PEPSICO positive but it has the second largest density rate that would accommodate PepsiCo’s products quite nicely. It is tied with China for GDP that means it sees healthy growth in the economy in relation to goods and services, ideal for PepsiCo. Japan had one of the highest import tariffs score that represents lower taxes on carbonated sugary beverages. PepsiCo can easily leverage its streamlined infrastructure to deliver products to retailers effectively and efficiently. Japan’s intellectual property rights and political risks scores were not ideal for Central Players because of the intense government regulations and involvement. Its level of foreign competition and tax rates scored average amongst the countries that Central Players don’t see affecting PepsiCo’s brand awareness strategies.
Strengths. Japan’s large population is centrally located and can be conveniently marketed to without having to distribute information and/or products to smaller communities. Unlike Japan, almost all of the population lives in urban locations that would allow PepsiCo products to be easily recognized amongst consumers. The close proximity of the targeted market would also allow operations to easily deliver products to retailers and other stores without traveling long distances. Japan is also known to
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keep its highways and expressways well maintained to support the growing population and increased vehicle usage. Japan has an extensive and wellestablished sea transportation system that includes many ports that its merchant marine fleet of 662 ships maintains Its air transportation system comprises of over 170 airports with well-established paved runways. The telecommunication system in Japan is extremely advanced that delivers quality communication to the large population. Finally, Japan’s multi faceted power generation industry provides efficient electricity demands throughout the entire country. Utilizing all of these infrastructure designs and technology would allow PepsiCo to effectively enter into Japan while maintaining low operations costs.
Weaknesses/Threats. Once PepsiCo has established an effective strategy to utilize Japan’s infrastructure strengths, Central Players would also like to emphasize some of the weaknesses and threats. According to Johansson (2009), “the Japanese [distribution] system features several layers of small, specialized units, each handling small quantities of products” This would mean that PepsiCo could potentially have to go through various levels of distribution paying fees and commissions along each level. This ineffective means of handling distribution could be extremely costly to PepsiCo but points out a significant weakness of Japan’s infrastructure. One of the largest threats that PepsiCo would have is Japan’s emphasis on packaging. The Japanese are extremely particular and demand zero defects in packaging that could once again be costly for PepsiCo. Johansson (2009) explains “Variations in label position, blemishes in the wrapping material, and unappealing color combinations are taken as signs of a poor quality product Central Players and PepsiCo will have to ensure that packaging
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procedures are handled with the utmost care and attention to detail.
Potential client size. According to the CIA World FactbookB (2011), Japan’s estimated population is 126,475,664 people in July of 2011. Central Players does not characterize everyone in the population to be in the market so we need to compare the target market to the population in our chosen market area. World FactbookB (2011) indicates 64% of the population falls between the ages of 15-64 years old. Being the strongest market for PepsiCo, the potential client size would be approximately 80,944,244 (126,475,664 X 0.64 = 80,944,244). If Central Players estimate PepsiCo having ten percent of the market share, the potential client size will be approximately 8,094,424 (80,944,244 X 0.10 = 8,094,424).
Proposed entry mode. PepsiCo has a couple available options as how to enter the Japan market. The quickest way to gain a foothold in the Japanese market would be to export directly to Japan. This would establish product availability in a short timeframe. However, distribution could hinder the success of PepsiCo based on the need of middleman in the Japanese distribution system Couple this with the expenses of exporting make this less than ideal.
PepsiCo needs a brand presence in Japan to gain the affection of the loyal Japanese consumer which exporting does not provide. A strategic alliance with a leading
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brand of carbonated beverages is a possibility but opens PepsiCo up to losing proprietary information to a possible Foreign direct investment is the best option for PepsiCo to enter the Japanese market. This allows PepsiCo retain control over their distribution and how their image is perceived in the Japan market. FDI also allows for PepsiCo to avoid higher taxes as well as take advantage of the local workforce by having facilities located in the Japan market Production located in Japan allows for qualities to be monitored, which is important to the Japanese consumer as well as have a brand presence and financial commitment in the Japan market. FDI in Japan allows PepsiCo to be more flexible to the Japanese market and will increase speed to market for new products.
Marketing strategy. Coca Cola is synonymous with soda in the Japanese market. PepsiCo will need to challenge Coca Cola and win over the Japanese consumers with effective marketing campaigns tailored to their local culture. Through having operations setup in Japan, PepsiCo will be able to utilize local talent to ensure communication remains open between PepsiCo and the needs of the local market Visibility of operations in Japan will reiterate the commitment PepsiCo has to the Japanese market instilling trust in the consumers that PepsiCo is committed to this market .In addition to hiring local talent, PepsiCo will need to remain attentive to listening to the local consumers needs and adjust the marketing strategy accordingly this can be achieved through ongoing market research As incomes continue to rise in Japan, brand names will continue to be important to the Japanese consumer PepsiCo, although challenging Coca Cola,
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will need to retain their brand image through effective positioning and keep pricing centralized to the Japanese market to ensure the products are adopted. PepsiCo through educating the target consumer base in Japan will be able to avoid uncertainty of the quality of their products through effective promotions. One way for PepsiCo to remain innovative is redesigning packaging to accommodate the less than optimal storage spaces within the average Japanese consumer’s home (2009). This is an opportunity for PepsiCo to alter packaging to appeal to this consumer while remaining innovative and not tarnishing their widely accepted brand.
Adaptation strategy. FDI, as mentioned above, allows for PepsiCo flexibility in adapting to the local consumers needs in a more timely fashion. PepsiCo will able to localize products based on specific cultures throughout Japan while adaptation can include different formulas for products to adapt to local taste or product preferences in specific regions Regulatory committees will differ compared to domestically and having a presence through FDI will allow PepsiCo to alter packaging, verbiage and or ingredients to abide by the regulations set forth. It is paramount that the proper market research is prepared on the Japan market as well as micro research conducted on specific regional markets prior to expansion. This research allows for proper adaptation to specific local tastes and will ensure the success of PepsiCo being adopted as a brand by the highly sensitive Japanese consumer and not shunned as a global brand with ulterior motives
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CHINA
Overview. China’s overall score fell only 2 points below Japan’s and is probably the most competitive market. It has a higher per capita income than Japan, which indicates substantial spending power. Although its population is the largest in the world, China has more than half the density rates of India and Japan. This could pose a threat for PepsiCo if it wishes to enter smaller communities in the region. China scored the same with the GDP indicator but has a higher inflation rate. By having the second highest score on import tariffs, PepsiCo will spend less on taxes and regulation fees. As mentioned previously, a significant amount of the population resides in rural parts of the country limiting PepsiCo from utilizing an efficient infrastructure. Political risks and government involvement in China is probably the biggest challenge that PepsiCo would face when entering the market. Similar to Japan, China’s level of foreign competition and tax rate scores would accommodate PepsiCo’s ability to enter the market successfully. Strengths. China became a member of the World Trade Organization in 2001. Since then, China has relaxed its tariffs and has its export based growth has grown substantially. China has the largest population in the world, with 1.3 billion people. According to Johansson (2009), “The size and potential of the Chinese market, coupled with its fast -growing purchasing power, make China a very attractive market Experts believe China is the next super power in the world because China’s foreign exchange reserves, low debt levels, high
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savings rate, strong work ethic and growing domestic consumption make it a rising star among other nations. Those who feel this way see China’s economy as the strongest in the world with the best investment opportunities of all nations.
Weaknesses/Threats. A large risk associated with doing business in China is the role the government plays. China is still a Communist nation and a main concern for most businesses is corruption of Chinese officials and a lack of integrity in the judicial system (Letcher, 2011). Additionally, China’s economic growth is unsustainable and that real estate prices are greatly over inflated, which will likely cause a real estate bust in the near future which will affect foreign investors Other challenges of doing business in China include problems with rural infrastructure, product positioning, inflated tariffs, miscommunication due to language barriers and differences in customs, and counterfeiting or piracy of products Potential client size. According to the CIA World FactbookC (2011), China has the largest population in the world, estimated as 1,336,718,015 people in July of 2011. Because not everyone in the defined market area will be a customer, we need to compare the target market to the population in our chosen market area. World FactbookC (2011) indicates 73.6% of the population falls between the ages of 1564 years old. This is most likely the strongest market for Pepsi Products, placing our client size in the area of 983,824,459. (1,336,718,015 X 0.736 = 983,824,459). If we estimate having ten percent of the market share, the size of our client will be approximately 98,400,000. (983,824,459 X 0.10 = 98,392,445.90).
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Proposed entry mode. Preparation is a key factor success and as with any international business venture, we must be open to differences and aware of our limitations in order to expand. Expansion into China would indeed be a great opportunity for growth, but only if done cautiously and armed with knowledge about the risk factors to the business prior to entering the market. According to Johansson (2009), the best way to enter China would likely be to follow the WTO suggestion and develop a joint venture with a Chinese partner to assist in ease of market access and to help in overcoming cultural and language barriers. Additionally, obtaining a Chinese partner would likely help the business understand inside business information necessary for success in the country. This would include insight on areas with the strongest infrastructure, most receptive customer base, and most welcoming political environment Most of all, I would take extreme caution when dealing with the local government and investing money and assets, while always having a conservative business plan in place
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Marketing strategy. Experts believe China is the next super power in the world because China’s foreign exchange reserves, low debt levels, high savings rate, strong work ethic and growing domestic consumption make it a rising star among other nations. Those who feel this way see China’s economy as the strongest in the world with the best investment opportunities of all nations (Saxena, 2011). Thus, leading the Central Players to implement a marketing strategy of standardizing the products and centralizing the decision making process. Utilizing the macro segmentation will help PepsiCo decipher the appropriate demographics in advertising its goods, such as, population, disposable income, and even education. Coordinating the global marketing campaign will begin with the planning process as discussed by Using a planning guide for any marketing strategy whether domestic or international, mentions “it is best used in conjunction with other planning tools in corporate and marketing strategy and focuses primarily on the systematic assessment of a globally coordinated marketing strategy for a specified product or service”
Adaptation strategy. The importance of designing clear and effective branding in foreign markets has shown globalization has trended all commodities of the world. The strategies of companies operating in international markets, such as, PepsiCo, focuses on the value associated with a brand name, but extending other products in the objective. PepsiCo have traditionally adopted county centered strategies, building or acquiring a mix of domestic and international brands. The organization’s strategy has been to acquire local companies in order to form a
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group of autonomous regional managers who know more about the culture of the local markets worldwide. Adaptation is a powerful strategy if implemented and marketed effectively. As the Central Players suggests innovative techniques to produce visibility and positive foreign reception there will be an increase in investment opportunities and global adaptation of international brands. Using effective marketing and advertising will enforce the organization to adapt to foreign culture tastes, visual concepts, and needed messages. For example, PepsiCo will have Chinese consumers, preferred tasting venues, and colors/slogans that the culture will adhere to for a “new generation”.
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Being in such a tense competition (just like the brand Coca-Cola), Pepsi-Cola should not take the direct and tough attack upon it. There is no good to either side. The best wad is to keep a peaceful relationship with it and always compare with others; we should find their disadvantages and show our advantages on this aspect. Then by and by, the people would think ours is betted Of course the most important rule is to improve ourselves to meet the consumers
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PepsiCo is an organization that strives to be the world’s premier consumer products company. It seeks to produce healthy financial rewards for investors and provide opportunities for growth and enrichment to employees, business partners and the communities in which they operate (Annual Report, 17). In order to remain competitive in the global market, PepsiCo and its subsidiaries must be aware of new trends and preferences that arise, as well as the variety of costs that go into their products. This can be accomplished through investment in health conscious markets and continued innovation in new products. Acquiring companies with “healthy” reputations as well as participation in the Green Movement will have a positive effect on their reputation as a consumer friendly corporation. Finally, monitoring current and potential consumers, as well as constantly reviewing the effectiveness of their marketing program, will allow PepsiCo to detect arising trends and new taste preferences within their target markets. First, it is clear that carbonated soft drinks are suffering a decline in North America. Experts say the soft drink market is expected to fall one percent in 2008. In fact, “…both Coke and Pepsi, the number one and number two beverage makers, have seen their share of the North American soda market fall for two straight years, as more health conscious consumers switch to vitamin-infused energy drinks and bottled water” (Kavilanz). The carbonated soft-drink market, more specifically PBNA, is a major portion of revenue for PepsiCo. In order to avoid substantial losses due to changes in consumers purchasing habits,
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PepsiCo must continue to invest in health conscious markets. For example, the 2001 acquisition of the Quaker Oats Company was a timely acquirement for PepsiCo. With programs such as the “Smart Heart Challenge,” as well as the idea that oatmeal gives “Brain Power,” PepsiCo captured a large portion of the shift toward future healthier living. PepsiCo must either focus its efforts on reinventing its current soft drinks, or focus on marketing itself as a more health conscious product. This can be done by highlighting the benefits one receives while drinking Pepsi in addition to the wonderful and refreshing taste it has. This requires a greater emphasis on the older generation and continued appeal to the individuals 13 to 34 years of age. Next, it is evident through the media that the issue of global climate change is important to worldwide society. This issue has created an opportunity for PepsiCo to appeal to new, environmentally friendly consumers. In order to accomplish this, PepsiCo must invest in green technologies, promote changes in their production techniques, and advertise to the world that they are doing their part to promote environmental sustainability. This can be done through mass recycling projects and engineering containers from less harmful, organic products. In addition, large amounts of money can be publicly donated to foundations that research possible solutions to “Global Warming.” By aligning themselves with a good cause and by giving back to the community PepsiCo is sure to win the approval of a new and loyal customer base.
Finally, customer research is critical to any prolonged success. The information discovered can lead to the release of new products and the termination of those that were unsuccessful. In order to continue to be successful, PepsiCo must maintain
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their investment in new groundbreaking technology. This will allow them to capture the sentiment of current customers and find new ways of convincing others that Pepsi is the best brand available. Continued investment in technology will allow PepsiCo and its subsidiaries to monitor the effectiveness of their marketing program. According to Devon Leonard of Fortune Magazine, the price of a thirty second commercial is continuing to rise at a time when the broadcast networks are steadily losing their audience” (Leonard). If Pepsi continues to pour money into traditional advertising they will see their share of the beverage market begin to decline. Also, “…by 2008 twenty percent of the nations households will have per sonal video recorders this enables viewers to skip ads altogether” (Leonard). It is evident that by monitoring their customer base and continuing to invest in the latest technology, PepsiCo and its subsidiaries will notice new and rising trends within the marketplace. PepsiCo has produced quality products while simultaneously creating healthy financial rewards for investors. These rewards are the result of a tireless effort to be the world’s premiere consumer products company. However, in a competitive market, PepsiCo and its subsidiaries must be aware of new trends and preferences that arise, as well as the variety of costs that go into their products. Together with these recommendations and continued focus on satisfying not only their customers, but shareholders and employees as well, PepsiCo is sure to capture more market share, earn greater returns, and become a source of refreshment and nourishment for an even larger portion of the global market.
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