INFLUENCE OF INTERNET AND GOVERNMENT ON FIVE

FORCES MODEL FOR PEPSICO

ABSTRACT
The study deals with the analysis of influence of internet and government factors on the five forces of PepsiCo
according to Porter’s model. The was mainly based on two markets of PepsiCo mainly India and America and it
analysed the impact of these five forces in the markets based on internet and governmental factors. The main
competitor for PepsiCo is Coca Cola. In both these markets PepsiCo is leading. Porters five forces are competitive
rivalry among existing firms, bargaining power of customers, bargaining power of suppliers, threat of substitute
products and threat of new entrants into the market. The study analysed many aspects of effects of influence of
internet and government policies in the five forces and found out the results. The tool used here is the Porters
model. The information were mainly collected from secondary sources.

INTRODUCTION
The topic for the paper is “the influence of internet and government on the five forces model
for PepsiCo”. PepsiCo belongs to beverages food processing industry and the study is
conducted for Indian and American markets. The study is of great relevance since the present
day market is changing every day. The government policies is affecting the industry along with
another major factor which is the internet. The changes happening because of these two effects
have a bombarding effect on the dynamic markets and the paper studies how it affects the
different markets.

PepsiCo, Inc. is an American multinational food, snack and beverage corporation whose
centred in New York. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola
Company and Frito-Lay, Inc. The product portfolio of PepsiCo includes Pepsi, Mountain Dew,
Lay’s, Gatorade, Tropicana, 7 Up etc. The main competitor the company is Coca Cola. The
revenue of the company is $63 billion with an employee strength of 264000.

Porter's Five Forces model, named after Michael E. Porter, identifies and analyzes five
competitive forces that shape every industry, and helps determine an industry's weaknesses and
strengths. These forces are; competitive rivalry among existing firms, bargaining power of

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customers, bargaining power of suppliers, threat of substitute products and threat of new
entrants into the market. This five force model is very important as far as each and every
company is considered. It makes the brand stronger by analysing their weaknesses and help
them to find possible solutions for their problems. It is also helping the company to form their
strategies with a long term and effective vision.

DISCUSSION
The performance of PepsiCo is been evaluated here by the Porters five force model. Here
various factors under five force model like competitive rivalry among existing firms,
bargaining power of customers, bargaining power of suppliers, threat of substitute products
and threat of new entrants into the market are been analysed. The study keenly observes the
impact the main aspects like government and internet is making in this five factors.

Competitive rivalry among firms

PepsiCo is facing major competitions from the following brands like Coca Cola, DPSG, Kellog
company, Nestle S.A etc. Here Coca Cola is the major rival for PepsiCo. In American market
PepsiCo is having a share of 24% and Coca Cola has only 20%.In Indian market also PepsiCo
is the leader. But world wide Coca Cola has a huge share of 48.6% whereas PepsiCo only has
20.5%.

Effect of internet
Internet has a very huge impact in PepsiCo’s growth in both the markets. It help in giving
PepsiCo a competitive advantage in both these markets. In both these markets they are using
internet technologies better. That is why they are top in these two markets.

Effect of government policies

In India government policies is creating some problems for the company. New government
initiatives like Make in India, liberalisation of FDI is facilitating the entry of new players. Also
in the local level, many schemes like Mudra loan etc, is driving many local layers inside. In
America, the new government is promoting the growth of only American companies and they
have made initiatives for that. So there the company is not going to face severe competition.

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Bargaining power of customers
It is the ability of customers to control prices or even bring the prices down. If the customers
are very low or if there are more competitors, the bargaining power of customers will increase.
It is mainly associated with the switching ability of customers. Because in industry like food
and beverages it is simple. And it will cost greatly to the company.

Effect of internet
Internet has a wide range of connectivity and information in both the countries is easily passed
through it. People makes their statements through different internet platforms which may be
either good or bad. Also company can pass the information about their new products , ads etc
through net. In addition to it, company can share information about CSR and it will add image
to the company.

Effect of government policies

In India after the introduction of GST, even though the taxes went up by 40%, the company
didn’t increased their prices because of competition. So it was actually increasing the
bargaining power of customers. In America, since the government is promoting the American
brands more, the bargaining power of customers is reducing which is good for the companies.

Bargaining power of suppliers

This force is week for PepsiCo. It is because of the reasons like high overall supply, low
forward integration of suppliers and moderate size of individual suppliers. The high overall
supply increases PepsiCo’s options in acquiring raw materials, thereby reducing the bargaining
power of suppliers.

Effect of internet
In both the countries, internet is used to create an ERP, that is Enterprise Resource Planning
database. Here in this data base the company can collect all the details about all the suppliers
and can integrate the process of supply. So it will reduce the bargaining power of the suppliers.

Effect of government policies

In India, serious checking by the government in the quality of raw materials supplied affected
the suppliers. Also, the introduction of GST also altered the mechanism of suppliers. In
America, the bargaining power of suppliers will reduce since the number of companies in the

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market is reducing or either constant due to government regulations. So companies will have
more suppliers. So their bargaining power will reduce.

Threat of substitute products

PepsiCo generally is having the main substitute as Coca Cola. Also they have other substitutes
like Dr. Pepper Snapple Group, Coca Cola enterprises and Reeds. Some of the factors for
threats are high performance of substitutes, low switching costs and high availability of
substitutes.

Effect of internet
In both countries internet is a serious factor. Company website is there at one click for the
customers of all the companies. So there is huge possibility for customers switching from one
to another due to availability of bulk data about companies. Also mass promotions will come
through internet which can be used or will be destroyed.

Effect of government policies

In India, government policies are harm for PepsiCo because government is inviting new players
through make in India campaign and liberalising FDI. Also due to special schemes like Mudra
loan etc government is trying to introduce new players at the base level which may also harm
PepsiCo. In America, government policies are favouring PepsiCo since government regulates
the entry of new players. It helps the company to expand their vastness.

Threat of new entrants into the market

The external factors that maintain the moderate threat of new entry against PepsiCo are low
switching cost, moderate customer loyalty and high cost of brand development. The new
entrants are always a great threat since people have that intuitions to try new things. For a brand
like PepsiCo, even though the customer loyalty is high still there is a great threat.

Effect of internet
A new entrant will definitely make massive promotions. So people will know more about it
and less loyal people tend to move towards it. Also new online presence of similar brands is
also a threat to PepsiCo products in that area

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Effect of government policies
In India new entrants are been welcomed by the government policies. I will affect badly on the
PepsiCo. In America, the government policies are favouring the brand by stopping the further
entry.

CONCLUSION
The study analysed the effect of internet and government agencies on the five factors of Porter’s
model on PepsiCo in Indian and American markets. The internet is giving a competitive
advantage for the company over rivals. It actually adds image to the company. Internet can
reduce the bargaining power of suppliers by creating an ERP. At the same time, internet is not
a good thing for company regarding substitute products because they will also go for wider
marketing and the people came to know about other products also and same is the condition
with new entrants also.

The government agencies also play a major role in the effect of five forces. In India government
is promoting new entry through Make in India campaign and the same time America is
restricting the entry of new entries. In India bargaining power of customers is increasing and
at the same time in America the bargaining power customers is decreasing. In India and
America, bargaining power is becoming a problem for suppliers by even reduction in
bargaining power. In India there is much problems with substitutes due to government policies
and in America the government policies are favouring the company by not allowing new
companies to enter thereby there will not be much substitutes. In India new entrants are been
welcomed by the government whereas in America, New entrants are rejected.

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