Coca-Cola, the major competitor of Pepsi has been exiled from the desert kingdom. Because of this, Pepsi expanded into Arab Countries & has an 80% share of the $1 billion Saudi soft-drink market. Saudi Arabia is the third largest foreign market of Pepsi, after Mexico and Canada. In 1993, about 7% of Pepsi-Cola International’s sales came from Saudi Arabia. The environment in Saudi Arabia makes the country very favorable to soft-drink sales because alcohol is banned & climate is very hot and dry.

Mode of Expansion:

Pepsi uses franchise system for international expansion.

Home

Sources of Competitive Advantage:

PepsiCo has competitive advantage in terms of worldwide distribution & the company is able to produce all its products in the country where they are consumed. Pepsi has a competitive advantage over Coke because of its brand image & good word of mouth. Pepsi promotes itself as the number one choice of the “Next Generation”.

Government Policies:

Currently a 50 percent rise in Pepsi prices in Saudi has angered customers and provoked the kingdom’s government to call on more than 30 soft drink companies to hold off on further price hikes. Pepsi increased the price of a can to 1.50 riyals $0.40 from 1 riyal.it. Saudi Consumer Protection Association investigated the sudden “unjustified” price hike, the Saudi Gazette reported that official permission should be granted to soft drink firms before they are allowed to increase prices and price rise should not be more than 10 percent.

PEST Analysis

Political Influences:

Many PepsiCo products are subject to different federal laws due to their manufacturing, distribution & use, such as the Food, Drug and Cosmetic Act, the Occupational Safety and Health Act ad the Americans with Disabilities. The international ventures are subject to the Government stability and businesses are subjected to different taxation policies in each consumer country.

Economic Influences:

PepsiCo relies on trucks to move products so fuel is an important subject & fuel prices matters. The economic impact of foreign exchange rates movements on them is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, etc. PepsiCo is also subjected to other economical factors like money supply, energy availability, cost and business cycles.

Socio-Cultural Influences:

Pepsi is subject to the lifestyle changes, so it bases her advertising campaigns in people with special lifestyle. For that PepsiCo has to pay special attention on lifestyle changes. It has to be very careful with the possible problems with the governments and those which could rise from PepsiCo act with the people of KSA.

Technological Influences:

PepsiCo is exposed to new manufacturing techniques, for its three business units, snack food, juices and soft drinks. It has to pay attention while adopting flexible & advanced distribution techniques.

PORTER 5 FORCES Analysis

1. Threat of New Entrants: The threat of new entrants in the industry is small yet substantial. This is because there are already four players in the market other then Pepsi itself.

2. Threat of Substitute Products:

Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. Possible substitutes that continuously put pressure on Pepsi include tea, coffee, juices, milk, and hot chocolate.

3. Bargaining Power of Suppliers:

The bargaining power of the suppliers tends to be low according to the recent analysis. PepsiCo needs to manage its relationships carefully with the bottling units in order to make changes in its way to market the local retailers.

4. Bargaining Power of Buyers:

Here the concern is how to increase market share and retain its current customer because customer always try to optimize benefit. The buying po