Management Term Paper

Question

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Assignment Question
For a company and/or brand of your choice, analyse its current product offering(s) using
the ‘5 levels of product’. Analyse how the total offering of your chosen company/brand
positions itself vis-a-vis its competitors. Discuss how the brand manager can support its
differential product offering(s) through its promotion and place strategies. Please provide
illustrative examples to support your analysis.
Deadline: 31 October 2015
Content
begin with a brief introduction outlining the aims and the structure of the assignment.
Provide a brief description of the chosen company/brand and its product offering(s).
Analyse the ‘5 levels of product’ for your chosen company/brand. You should discuss (a)
the core benefit, (b) generic product, (c) expected product, (d) Augmented Product and
(e) potential product.
Analyse how the total offering of your chosen company/brand differentiates itself from
the competitors. What is the unique selling point of their offering?
Next, consider how your chosen company/brand communicates the differential offering(s)
through promotion. Here, you may wish to discuss the extent to which your chosen
company/brand has adopted an integrated marketing communication approach to
promote their unique offering(s).
Then discuss the distribution (place) strategy your chosen company/brand uses to support
their unique offering(s). Here, you may wish to discuss whether the company/brand
adopts an intensive, selective or exclusive distribution strategy.
Conclude your essay with a summary of key points made and briefly discuss the future
direction of the company’s product strategy.
2
Format
The assignment should
• be word-processed, double-spaced throughout, in point 12 size font, left justified,
with standard margins (at least 2.5 cm on all sides), with all pages consecutively
numbered
• be formally structured, i.e. divided into sections (and, if necessary, subsections)
with meaningful headings
• include a full bibliography as well as a comprehensive range of in-text references,
documenting all the sources used in its preparation
Referencing
Referencing should strictly adhere to the Harvard referencing system, as outlined in
Section 5 of the Foundations of Management module book and your Programme
Handbook. All sources directly or indirectly used for completing the assignment
(including Internet sources and any internal organisational documents), should be clearly
identified and appropriately referenced in both the main text and in the bibliography.
Any unacknowledged or insufficiently acknowledged use of sources will be identified as
plagiarism and will be subject to the appropriate penalties.
Word Limit
Word limit for the assignment is 2500 words. Please do not submit an assignment that
deviates from the word limit by more than 10% (i.e. less than 2250 or more than 2750
words), otherwise the penalties described in your Programme Handbook will apply.
Assessment Criteria
In addition to the criteria outlined above and in the Programme Handbook, students are
expected to fulfill the following criteria for this assignment:
• Understanding of theories and demonstrate how these can be used to inform
marketing decision making.
• Application of theories through the use of illustrative examples.
• Coherent, comprehensive, and reflective critique of existing ideas and its
limitations.
• Evidence of wider reading of key literature and academic references
• Clear development of the argument(s) contained in the essay. The essay should
flow in a way that enables any reader to follow the argument(s) and see how the
various points made are being used to answer the question.
3
• Analytical and clear conclusions that are well grounded in theory and literature
showing reflection upon key issues.
• Clear and coherent structure through the use of headings and subheadings.
• Fluency in the use of the English language and clarity of expression.

Answer

Marketing Management

Contents

Introduction. 1

A Brief Description of PepsiCo. 2

Five Levels of Product for PepsiCo. 3

Core benefit. 3

Generic product. 4

Expected product. 4

Augmented product. 5

Potential product. 7

How PepsiCo Communicates Its Differential Offerings through Promotion. 8

Pepsico’s Use of an Integrated Marketing Communication Approach to Promote Their Unique Offerings. 8

PepsiCo’s Distribution Strategy: Intensive Distribution. 9

Conclusion. 9

Works Cited. 10

Introduction

The aim of this paper is to provide an analysis of the total product offering of a chosen company using Kotler’s “five levels of product” model (Kotler 105). According to Kotler, there are five levels of a product, and the first one is core benefit (108). Core benefit is simply the fundamental need that consumers seek to satisfy by purchasing a product. The second level is generic product, which is essentially the version of product that contains only the attributes that need to exist for the product serve the intended purpose. The third level is expected product, which is the set of characteristics that a consumer agrees to and expects when purchasing a product. The fourth level is augmented product, and it encompasses the additional features, benefits, and related services that can be used in order to bring about product differentiation. The last product level is potential product, which comprises of all the augmentations that a product range is likely to undergo in the foreseeable future.

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            This study begins with a brief description of the chosen company, which is PepsiCo, an American multinational corporation. This description is followed by an in-depth analysis of the five levels of product. This is followed by a discussion of how PepsiCo’s total product offering differentiates itself from the company’s competitors. The paper also examines how the company communicates its differential offerings through promotion as well as the extent to which it has adopted an integrated marketing communication approach in the promotion of its unique offerings. Lastly, the essay discusses PepsiCo’s distribution strategy.

A Brief Description of PepsiCo

            PepsiCo, Inc. is an American multinational company that operates food and beverage businesses worldwide. The company was founded in 1965 and it is structured around six segments: Quaker-Foods North America, Frito-Lay North America, Latin America Foods, PepsiCo America’s Beverages, PepsiCo Asia, and PepsiCo Europe. Some of the main brands of the company include Aquafina, Amp Energy, Agusha, Aunt Jemima, Cap’n Crunch, Chipsy, Chester’s, Cheetos, Mountain Dew, Diet Pepsi, Diet Sierra, Doritos, Diet 7UP, Elma Chips, Frito-Lay, Emperador, Duyvis, Manzanita Sol, Lubimy, Miss Vickie’s, ’ountain Dew Kickstart, Munchies, and Mug. Others include Ruffles, Sabritas, Saladitas, Sakata, Santitas, FUP Free, Tonus, Tostitos, Tropicana Twister, Trop 50, SoBe V Water, Sting, and SunChips. The company’s operations include manufacturing, marketing, distributing, and selling various beverages, snacks, and foods to its customers in over 200 countries.

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            PepsiCo’s Quaker-Foods North America specializes in the manufacture and sale of rice, pasta, cereals, dairy products, and many other banded products of the company. Some of its products include Aunt Jemima mixes, Quaker grits, Quaker Chewy bars, Life Cereal, Quaker oat squares, and Quaker rice cakes. On the other hand, Frito-Lay North America focuses primarily on branded snack foods, which include doritos tortilla chips, Lay’s potato chips, branded dips, Fritos corn chips, and Tostitos tortilla chips. Apart from manufacturing, marketing, distributing, and selling these products, Frito-Lay North America also sells its branded products to independent retailers and distributors. Latin America Foods sells snack food brands such as Ruffles, Marias Gamesa, Doritos, Emperador, Mabel, Chips, and Elma.

The other segment is PepsiCo America’s Beverages, which manufactures and sells beverage concentrates and fountain syrups. Some of the brands under this segment include Mountain Dew, Diet Pepsi, Sierra Mist, Tropicana Pure Premium, and 7UP. The segment has also entered into joint ventures with Unilever and Starbucks, through which it sells coffee and tea products. PepsiCo Asia serves the Asian, African, and Middle-Eastern markets, where it sells various snack food brands, which include Chipsy, Kurkure, Lay’s, and Cheetos. It also sells beverage concentrates such as Mountain Dew, Tropicana, Pepsi, and 7UP. The last segment, PepsiCo Europe, manufactures and distributes various snack food brands such as Cheetos, Doritos, and Walkers. The segment also sells various beverage brands such as Pepsi, Diet Pepsi, and Tropicana. PepsiCo Europe has also partnered with Unilever for the manufacture and distribution of ready-to-drink tea products such as Agusha and Chudo. PepsiCo’s main competitors include Coca-Cola Company, Kraft Foods Group, Monster Beverage Corporation, Red Bull, and Mondelez International.

Five Levels of Product for PepsiCo

Core benefit

            The core benefit of PepsiCo is to quench thirst and provide refreshment. The company provides a wide range of beverages that are designed in such as a way as to serve the basic need of quenching thirst. Examples of these beverages include Pepsi, Mountain Dew, 7UP, Mirinda, Tropicana, and Diet Pepsi. Towards the goal of providing fresh physical energy and strength, the company, through its various segment, also provides a wide range of snacks, including Chipsy, Crunch, Lay’s, Cheetos, Kurkure, doritos tortilla chips, Lay’s potato chips, and Fritos corn chips.

Generic product

The generic product comprises of carbonated drinks and tasty flavors in snacks. To deliver products that actually quench thirst and fight competition, PepsiCo has had to introduce carbonation its manufacturing process. PepsiCo also uses a number of ingredients with a view to make their products fun to drink and sweet, such as caffeine, coloring, electrolytes, juices, phosphorous, sodium, potassium, and sugars.

Caffeine is a naturally-occurring chemical that is found in tea leaves, cocoa beans, coffee beans, as well as many other plants. Its slightly bitter taste is widely liked by consumers since it balances the sweetening elements of beverages while at the same time enhancing some flavors. Juices are also a major ingredient and their role is to provide the necessary nutrients, thereby promoting health. The company’s beverages also contain sugars whose role is to increase sweetness, increase carbohydrate component, and enhance texture.

Similarly, PepsiCo uses colors in its beverages to correct natural variations in ingredient color or simply make the products more fun and appealing. The company also adds electrolytes, which are essentially minerals that play a critical role in regulating muscle contractions, maintaining fluid balance in the body, and transmitting nerve impulses. The main chemicals contained in the electrolytes include potassium, sodium, and potassium.

Expected product

The expected product encompasses safe consumption, good hygiene, high quality, and nutritious elements. PepsiCo consumers expect that the products that they consumer have been manufactured in a safe environment, using high-quality ingredients, and in hygienic conditions. They also expect the company to prioritize on nutritious elements in all its products. In the past, numerous concerns have been raised due to popular sentiments about the role of carbonated drinks and processed foods such as snacks in the contemporary deterioration of public health (Alexander, Yach and Mensah 2). In response to these concerns PepsiCo has redoubled its efforts to reassure its customers that it prioritizes nutritional and health wellbeing of its customers over sales and profit maximization (PepsiCo.com May 10, 2009). Towards this end, the company has taken various measures to inform customers about the ingredients being used to manufacture each product as well as its efforts to reduce those ingredients that may have been found to be potentially detrimental to human health.

One way in which the company seeks to meet customer’s expectations in terms of health is by increasing certain nutrients and reducing others in order to ensure that each calorie contains optimum sugar, fat, and salt content (Yach, Lucio and Barroso 656). This goal is being achieved by developing new methods of measuring sugar, fat, and salt content to cater for all the countries that the company serves. These efforts are largely attributed by public demand for a reduction in the amount of sugar being used to manufacture snacks and beverages (Yach, Lucio and Barroso 656).

Augmented product

The augmented product entails packaging that is easy to open and a wide variety of flavors. The company also uses low-cost differentiation strategy, whereby it offers its products at a relatively lower price in order to stimulate demand and consequently increase its market share. The resulting higher production volumes lead to economies of scale, thereby boosting profitability. For instance, at the end of the recession in 2009, PepsiCo announced that it would create new products at low prices as well as continue offering attractive discounts for its beverage products.

PepsiCo has also been aggressively pursuing the strategy of product differentiation with the aim of making its products different from those of competitors. This element of differentiation is evident in both its beverages and snack foods. For PepsiCo, the objective is to retain a position of market leadership and to pursue its ambitious competitive struggle against The Coca-Cola Company. Towards this objective, one major strength for PepsiCo is its ability to innovate.

The element of augmentation is also evident in the way the company distributes its products. Other than using independent bottlers, PepsiCo has entered into joint ventures with Starbucks and Unilever in order to offer better beverage products, specifically ready-to-drink coffee and tea. For soft drinks like Pepsi and Mirinda, the company makes the necessary ingredients before shipping them to the respective bottlers, who then take over the role of finalizing the product.

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PepsiCo is also using product differentiation to establish itself as an augmented product, thereby reducing the threat of rivalry from major competitors. The emergence of the issue of market rivalry emerges at this point vindicates Kotler’s view that much competition manifests itself at the level of augmented product as opposed to the core benefit level (110). This is because new competition does not arise because of what rival companies product but rather the additions they make to their core products in terms of packaging, customer service, financing, advertising, warehousing, and channels of distribution.

Towards the struggle to edge out fierce competitors, the company has launched numerous products, and this has greatly helped its cause in its intense rivalry with Coca-Cola. In addition to the numerous products on offer, PepsiCo has continued to pursue further differentiation based on flavors in order to satisfy the tastes and preferences of different customer segments in different parts of the world. Indeed, PepsiCo has done an excellent job of spreading its product range worldwide thereby attracting the attention from diverse customer segments.

Potential product

There are numerous ways in which PepsiCo promises to morph into a new product. One way in which this change can happen is through price discounts. In the pursuit of its cost leadership strategy, the company is likely to come with even more attractive price discounts. Similarly, the company may come up with various offers and gifts targeted at specific markets in an effort to widen its market reach.

Moreover, other potential products may arise due to the emergence of new healthy alternatives in the form of drinks and snack foods. This is because the company is still pursuing its strategy of new product development in response to continues public calls for a wider range of more healthy products. This public outcry is a major concern for PepsiCo because it tends to emerge in the wake of damning reports by local regulatory agencies indicating that beverage companies are putting too many harmful ingredients in soft drinks, thereby exposing consumers to various diseases. Similarly, concerns about the depletion of some of the raw materials being used in the manufacturing and distribution processes may compel PepsiCo to come up with structures that are friendlier to both the consumer and the environment.

The issue of further diversification into non-beverage markets, particularly in foreign countries, coupled with innovation, may lead to the development of new products. Another potential product change entails investing in products that can complement the company’s product offerings in terms of beverage drinks. On the same note, the company may also seek to enter into new markets that continue to be dominated by few major multinational corporations. Thus, new product development remains a reality for PepsiCo because of its ability to innovate as well as widen its range of products by responding to market needs worldwide.

How PepsiCo Communicates Its Differential Offerings through Promotion

            One way in which PepsiCo communicates its differential offerings is through rebranding. For example, in 2009, the company rebranded its Tropicana orange juice by replacing its old logo with a new one (Ferrell and Hartline 210). The objective was to give the product a more modern look while associating it with family imagery and fresh taste (Ferrell and Hartline 210). However, this move angered Tropicana’s loyal customers, who ultimately forced the company to revert to its old packaging. Other promotional strategies that PepsiCo has been using to differentiate its product offerings include pairing of healthy drinks and healthy snacks, promotion of customer relationships, and use of direct and indirect distribution channels.

Pepsico’s Use of an Integrated Marketing Communication Approach to Promote Their Unique Offerings

            PepsiCo has embraced an integrated marketing communication approach to a very large extent in an attempt to promote its product offerings. An example of how the company recent used the approach is the case of Pepsi Natural/ Raw. Pepsi Natural is a newly introduced product offering that is being offered as a healthier alternative to the company’s Pepsi drink. Using an integrated marketing communication approach, the company has managed to popularize the product in America and Mexico (where it is being sold under the name Pepsi Natural, and the United Kingdom (under the name Pepsi Raw). In each of these three countries, PepsiCo introduced the new product through a nationwide product launch. This was done with the objective of raising brand awareness among its customers. Some of the objectives that the company has achieved through the approach include creating a unique product image, building consumer loyalty, and obtaining a significant market share with the new product.

PepsiCo’s Distribution Strategy: Intensive Distribution

To support its unique offerings, PepsiCo relies on intensive distribution strategy, which entails placing their products in as numerous outlets as they can in order to make them ubiquitous. Under this strategy, the company makes its products easily accessible through restaurants, grocery stores, confectionaries, and gas stations. Consequently, its brand name can be seen virtually everywhere and easily accessible within any location. The intensive distribution strategy has played a critical role in building and maintaining customer loyalty since customers are rarely forced to go without their favorite PepsiCo product or to begin searching for substitutes.

Conclusion

            In conclusion, the “five levels of product” has proven to be an excellent theoretical approach for analyzing the product offering of a large multinational beverage and food company such as PepsiCo. Findings of the analysis indicate that most competition occurs at the level of augmented product. The main areas where PepsiCo should focus on in future in order to maintain success in product differentiation include new product development, healthier beverages and snack foods, diversification into non-beverage drinks, further differentiation of current product range to target the needs of new markets, and diversification into markets that continue to be dominated by few, high powerful multinational beverage companies.

Works Cited

Alexander, Eleanore., Yach, Derek and Mensah, George. “Major multinational food and beverage companies and informal sector contributions to global food consumption: Implications for nutrition policy.” Globalization and Health, 7.26 (2011): 1-8.

Ferrell, Oakley and Hartline, Michael. Marketing Strategy, Sixth Edition. Mason: South-Western Cengage Learning, 2014. Print.

Kotler, Philip. “Competitive Strategies for New Product Marketing Over the Life Cycle.” Management Science, 12.4 (1965): 104-119.

PepsiCo.com. PepsiCo Joins Healthy Weight Commitment Foundation to Help Reduce Obesity in the U.S. May 10, 2009. Online.

Yach, Derek., Lucio, Antonio and Barroso, Carlos. Can food and beverage companies help improve population health? Some insights from PepsiCo. The Oxford Health Alliance. 2007. Online.

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