Business, Management

PepsiCo PESTEL/PESTLE Analysis & Recommendations

Updated on Updated on by Pauline Meyer
PepsiCo PESTEL analysis or PESTLE analysis, political, economic, social, technological, ecological, legal factors, consumer goods business
A Pepsi-Cola signage in New York City. Product development, the supply chain, and business sustainability and expansion strategies are highlighted in this PESTEL/PESTLE analysis of PepsiCo. (Photo: Public Domain)

This PESTEL/PESTLE analysis of PepsiCo examines external factors and trends affecting the food and beverage business. The company’s decisions account for the political, economic, social/sociocultural, technological, ecological/environmental, and legal (PESTEL) factors influencing the consumer goods industry. The results of this PESTEL analysis indicate business opportunities and threats that affect the fulfillment of industry leadership and customer satisfaction goals established in PepsiCo’s vision statement and mission statement. Strategies for long-term competitiveness and business growth in food and beverage markets need to account for the external factors included in this PESTEL analysis of PepsiCo.

PepsiCo’s long-term growth trajectory is partly dependent on how the company addresses the issues identified in this PESTLE/PESTEL analysis. Addressing these issues strengthens the company against competitors, like The Coca-Cola Company, Keurig Dr Pepper, and Unilever. These competitors present the multinational competitive pressure detailed in the Five Forces analysis of PepsiCo. The company must develop strategies that enhance its abilities to withstand competition and, based on this PESTLE analysis, the external factors in its business environment in the international fast-moving consumer goods industry.

Political Factors Affecting PepsiCo

Governments and politics shape external factors that influence PepsiCo’s market. This PESTLE analysis considers the effects of governmental action and political trends on the company’s remote or macro-environment. PepsiCo is faced with 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 relative to many other economies, thereby presenting growth opportunities for PepsiCo. In addition, intergovernmental cooperation is a trend relevant to this PESTEL analysis because it improves opportunities for the global expansion of the food and beverage business. However, government initiatives against sweetened carbonated drinks are a threat that can reduce PepsiCo’s revenues from affected market segments. Based on the political factors in this PESTLE analysis of PepsiCo, it is prudent to modify some of the company’s products, especially to overcome the threat of policies regarding carbonated drinks.

Economic Factors

PepsiCo’s performance is directly linked to the economic condition of its target markets. The influence of economic conditions on the remote or macro-environment of the food and beverage business is covered in this PESTEL analysis. The economic factors that relate to PepsiCo are as follows:

  1. Economic stability of most major consumer goods 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 relative economic stability of developed countries, like the United States, and based on the high growth rates of developing economies, such as those in Asia. However, in this PESTLE analysis case, the slowdown of the Chinese economy threatens PepsiCo’s potential international growth. This issue is based on the fact that China is among the biggest markets for consumer goods. PepsiCo’s competitive strategies and growth strategies are designed to penetrate markets, although an added degree of business diversification can benefit the company based on the economic factors in this PESTEL analysis.

Social Factors Influencing PepsiCo

Many of PepsiCo’s consumers follow sociocultural trends. This element of the PESTLE analysis identifies the impact of social conditions on the remote or macro-environment of the consumer goods business. The following are social factors relevant to PepsiCo’s business:

  1. Higher health consciousness among consumers (threat & opportunity)
  2. Increasingly 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 snacks and drinks. However, this external factor is also an opportunity in this PESTEL analysis case because the company can improve its products to address such health concerns. PepsiCo can also take advantage of the busy lifestyles of consumers, especially in urbanized markets around the world. People with these lifestyles are more likely to purchase ready-to-eat food products, like PepsiCo snacks and drinks. The company continues enhancing product quality to maximize revenues, with regard to consumers’ increasingly discriminating attitudes about product quality, which presents an opportunity in this PESTLE analysis. Based on these social factors, the company must align its consumer goods and marketing strategies to changes in consumer behaviors. Aligning PepsiCo’s work culture (company culture) with these external factors can improve organizational capabilities in strengthening the business to satisfy social trends in the market. Moreover, adjusting PepsiCo’s marketing mix (4Ps) can deal with these social trends and the opportunities they present in this PESTEL analysis.

Technological Factors

PepsiCo’s business is partly dependent on technology. The link between technological change and the company’s remote/macro-environment is examined in this PESTLE analysis. The technological 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 technology, which presents an opportunity in this PESTEL analysis. These systems can support 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. The technological factors in this PESTLE analysis of PepsiCo indicate that new technologies can improve the company’s business competitiveness.

Ecological/Environmental Factors in PepsiCo’s Business

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

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

Consumers are now prompting companies, like PepsiCo, to improve their sustainability standing. In relation, the consumer goods business can improve its waste disposal strategies, such as recycling, to gain more support from customers. These business actions connect PepsiCo to such ecological opportunities in this PESTLE analysis case. On the other hand, climate change poses a threat to the food and beverage company’s supply chain. However, diversification of this global supply chain can minimize risk exposure to climate change. Based on the ecological factors in this PESTEL analysis, PepsiCo’s CSR and ESG programs for sustainability, environmental impact, and related ecological concerns can help attract and retain customers and stabilize the company’s supply chain.

Legal Factors

PepsiCo is subject to legal and regulatory requirements. Such requirements are evaluated in this PESTLE analysis in terms of their effect on the consumer goods company’s remote or macro-environment. The legal 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, especially in Europe. PepsiCo has opportunities to reduce its use of GMO ingredients to satisfy these regulations, which present business improvement opportunities in this PESTEL analysis case. Similarly, the company can improve its products to address regulations about the safety and health effects of consumer goods, like Pepsi soft drinks. The moderate rate of regulatory change gives opportunities for PepsiCo to grow while expecting that its current strategies will satisfy regulatory requirements in the long term. Based on the legal factors in this PESTLE analysis, PepsiCo can focus on product innovation to comply with regulations.

Recommendations – PESTLE/PESTEL Analysis of PepsiCo

This PESTLE analysis of PepsiCo indicates many opportunities and some threats affecting business growth and expansion. The competitive advantages enumerated in the SWOT analysis of PepsiCo can buttress strategies that build on these business opportunities. Based on the external factors examined in this PESTEL analysis, the following actions are recommendations for PepsiCo:

  1. Grow operations in developing economies that have high growth potential, which can fuel PepsiCo’s international business growth.
  2. Innovate products to address concerns on quality and health effects, which are issues stated in this PESTLE analysis of the consumer goods business.
  3. Continue improving business sustainability that comes with higher process efficiency and cost-effectiveness. This recommendation deals with ecological concerns and related social trends, as well as the improvement of PepsiCo’s corporate image and brand equity.
  4. Further diversify the supply chain to reduce risks linked to ecological trends that are business threats in this PESTEL analysis case.

References

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