PepsiCo PESTEL/PESTLE Analysis & Recommendations

PepsiCo PESTEL PESTLE analysis and case study of external factors, political, economic, sociocultural, technological, ecological, legal
A Pepsi-Cola signage in New York City. PepsiCo must improve its products, supply chain, sustainability, and expansion strategies based on the company’s PESTEL/PESTLE analysis. (Photo: Public Domain)

PepsiCo is the second biggest company in the global food and beverage industry. To keep this position, PepsiCo’s strategic decision-making processes must account for the issues outlined in this PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis model is a strategic management tool that identifies various external factors relevant to firms, based on the conditions of their remote or macro-environment. In PepsiCo’s case, these factors determine the company’s growth path. The global market presents challenges that threaten PepsiCo while creating opportunities for improvement. Thus, strategies and reforms based on the elements of the PESTEL/PESTLE analysis model can boost PepsiCo’s long-term growth.

PepsiCo’s long-term growth trajectory is partly dependent on how the company addresses the major issues identified in this PESTEL/PESTLE analysis. PepsiCo must develop strategies that enhance its abilities to withstand the external factors in the business environment of the international fast-moving consumer goods industry.

Political Factors Affecting PepsiCo’s Business

Governments are external factors that impose requirements on PepsiCo. This element of the PESTEL/PESTLE analysis considers the effects of governmental action on companies’ remote or macro-environment. PepsiCo must address the following political factors:

  1. Political stability in major economies (opportunity)
  2. Improved intergovernmental cooperation (opportunity)
  3. Government initiatives against carbonated drinks (threat)

Major economies like the United States and the European Union are politically stable, thereby presenting growth opportunities for PepsiCo. In addition, the trend of intergovernmental cooperation improves opportunities for global expansion. However, government initiatives against sweetened carbonated drinks are a threat that could reduce PepsiCo’s revenues from affected segments. In this element of the PESTEL/PESTLE analysis, PepsiCo must consider changing its products to overcome the identified threat about carbonated drinks.

Economic Factors Important to PepsiCo

PepsiCo’s performance is directly linked to the economy. The influence of economic conditions on the remote or macro-environment of businesses is covered in this element of the PESTEL/PESTLE analysis. The political external factors that relate to PepsiCo are as follows:

  1. Economic stability of most major markets (opportunity)
  2. Rapid growth of developing economies (opportunity)
  3. Slowdown of the Chinese economy (threat)

PepsiCo has opportunities for growth and expansion based on the economic stability of developed countries like the United States, as well as the high growth rates of developing economies, such as those in Asia. However, the current slowdown of the Chinese economy threatens PepsiCo’s potential international growth, considering that China is among the biggest economies in the world. This element of the PESTEL/PESTLE analysis shows that PepsiCo must ensure market diversification to achieve stable international growth.

Social/Sociocultural Factors Influencing PepsiCo’s Business Environment

Many of PepsiCo’s consumers follow sociocultural trends. This element of the PESTEL/PESTLE analysis identifies the impact of social conditions and changes on companies’ remote or macro-environment. The following are notable sociocultural external factors relevant to PepsiCo’s business:

  1. Higher health consciousness (threat & opportunity)
  2. Increasing busy lifestyles (opportunity)
  3. More discriminating attitudes about product quality (opportunity)

Higher health consciousness is a threat to PepsiCo because of concerns about the sugar, salt, and fat content of its products. However, this external factor also presents the opportunity for the company to improve its products to address such concerns. PepsiCo can also take advantage of the busy lifestyles of consumers, especially in urbanized and industrializing markets around the world. People with these lifestyles are more likely to purchase ready-to-eat food products like those of PepsiCo. The company has the opportunity to continue enhancing product quality to maximize revenues, with regard to consumers’ increasingly discriminating attitudes about product quality. Based on this element of the PESTEL/PESTLE analysis, PepsiCo must align its products and marketing strategies to changes in consumer behaviors.

Technological Factors in PepsiCo’s Business

PepsiCo’s business is partly dependent on technologies. The link between technological change and companies’ remote/macro-environment is examined in this element of the PESTEL/PESTLE analysis. The technological external factors significant to PepsiCo are as follows:

  1. Moderate R&D investments in the food and beverage industry (opportunity)
  2. Improving knowledge management systems (opportunity)
  3. Increasing automation in business (opportunity)

Based on moderate research and development (R&D) investments in the industry, PepsiCo can boost its own R&D investments to improve its competency in this business aspect. Also, PepsiCo can exploit the benefits of knowledge management systems to support its various business processes, such as product innovation and strategic decision-making. In addition, an increase in the number of automated processes in the company can enhance business performance. This element of the PESTEL/PESTLE analysis indicates that PepsiCo must include new technologies as tools to improve business competitiveness.

Ecological/Environmental Factors

PepsiCo’s supply chain and brand image are linked to environmental concerns. This element of the PESTEL/PESTLE analysis considers the ecological trends and issues that affect consumers, employees, and companies’ remote or macro-environment. The following ecological external factors are significant to PepsiCo:

  1. High focus on business sustainability (opportunity)
  2. More complex expectations and standards on waste disposal (opportunity)
  3. Climate change (threat & opportunity)

Consumers are now pushing companies like PepsiCo to improve their sustainability standing. In relation, PepsiCo can improve its waste disposal strategies, such as recycling, to gain more support from customers. On the other hand, climate change poses a threat to PepsiCo’s supply chain. However, the company can further diversify its global supply chain to minimize risk exposure to climate change. Based on this element of the PESTEL/PESTLE analysis, PepsiCo must improve its environmental impact to attract and retain customers, and to stabilize its supply chain.

Legal Factors in the Consumer Goods Industry

PepsiCo and its competitors are subject to legal requirements. Such requirements and regulations are evaluated in this element of the PESTEL/PESTLE analysis in terms of their effect on the industry’s remote or macro-environment. The legal external factors relevant to PepsiCo’s business are as follows:

  1. Regulation on GMO ingredients (opportunity)
  2. Health and product safety regulations (opportunity)
  3. Moderate rate of regulatory change (opportunity)

Genetically modified organisms (GMOs) are now increasingly regulated worldwide, particularly in Europe. PepsiCo has the opportunity to reduce its use of GMO ingredients to satisfy these regulations. Similarly, the company can improve products to address regulations about product safety and health effects. The moderate rate of regulatory change gives an opportunity for PepsiCo to grow with the expectation that its current strategic decisions will satisfy regulatory requirements in the long term. In this element of the PESTEL/PESTLE analysis, it is shown that PepsiCo can focus on product innovation to comply with regulations.

PepsiCo’s PESTEL/PESTLE Analysis – Recommendations

PepsiCo remains one of the strongest companies in the food and beverage industry. This PESTEL/PESTLE analysis indicates that the company has many opportunities and a number of threats regarding its growth and international expansion. The following are some of the key points that PepsiCo must address based on the results of the analysis:

  1. Expansion in developing economies
  2. Product innovation to address concerns on quality and health effects
  3. Business sustainability
  4. Supply chain diversification