Pepsi is among the top food and beverage companies in the world. With its headquarters in New York, the company is heavily involved in the manufacturing and selling of different brands of beverages and foods. While expansion into foreign markets has presented the company with a wider customer base, it comes along with a number of challenges.
This paper looks at external factors affecting Pepsi in the Middle East. As noted by Doole and Lowe (7), a major difference between domestic and international business is the multidimensionality and complexity of the environment a company is expected to operate in. It is thus imperative for a multinational company to understand the complexity associated with operating in a foreign market.
External Factors Affecting Pepsi in the Middle East
As discussed in the following subsections, Pepsi’s operations in the Middle East are affected by a number of external factors. They include social and cultural factors, government and political factors, technological factors, economic factors, and competition. In order to succeed, the company has to be strategic enough to counter challenges posed by these factors.
Social and Cultural Factors
Any company that intends to operate in a foreign country must be aware of how the perception of potential customers can determine its success. Differences in social conditions, religion and material culture all affect customer perception and buying behavior (Doole & Lowe 7). Compared to Coca-cola, Pepsi has been able to survive in the Middle East partly because of religious reasons (Carroll 3). To a large extent, Coca-cola is associated with Israel and this has been of advantage to Pepsi since most countries in the Middle East are not happy with Israel.
Government and Political Factors
The political ideologies in the Middle East have greatly favored Pepsi. According to Carroll (7), countries in the Middle are unhappy with doing business with those they consider to be their enemies. Associating Coca-cola with Israel has therefore given Pepsi a privileged position in the Middle East market. This is despite the fact that Coca-cola has vehemently denied any political bias.
Continued advancement in technology has pushed companies to a point where they have to largely rely on technology for their operations. Like other companies operating in the Middle East, Pepsi is making every effort to leverage available technology. However, this places a heavy financial responsibility on the company.
Over the years, the economy of the Middle East has been growing steadily mainly as a result of oil products that are produced by the region. The growth in the economy implies that citizens are able to spend more of their income on other items other than the basic family needs. Consequently, this positively affected the growth of Pepsi in the Middle East.
As a result of the existence of many players in the food and beverages sector operating in the Middle East, Pepsi is faced with stiff competition. Coca-Cola, for example, has existed longer than Pepsi and controls a wider market in the Middle East. Apart from Coca-Cola, there are many other companies in that are involved in the manufacture of beverages in the Middle East. For this reason, Pepsi is forced to spend heavily on its marketing and advertisement activities in order to survive.
Generally, external factors have not affected the growth of the Pepsi Company negatively. While penetrating the Middle East market is not an easy task, the company has managed to advance as a result of the uniqueness that is presented by the Middle East market.
Doole, Isobel & Robin Lowe. International Marketing Strategy: Analysis, Development, and Implementation, London: Cengage Learning, 2008. Print.
Carroll, Rory. 2005. Cola Wars as Coke Moves on Baghdad. Web.