Would you be able to explain the difference between the:
Vs
How come the first case is reflected in PinYin and the second one is not?
Tone sandhi is systematic and global to Mandarin - it is based entirely on tone adjacencies, with 2 special cases of 不, 一. Word level tone changes like 朋友 are for the most part not systematic or predictable - they just have to be learned with each word separately. That’s the main reason. However, note that not every pinyin transcription follows that guideline - you will frequently see naive algorithms just output the reading of each individual character, writing 朋友 as péngyǒu
Tone sandhi can be thought of broader changes in tones related to the tones themselves or grammatical points. E.g., 3-3 going to 2-3 or differences in tones for 一 depending on its context.
Word-level changes are sort of more inherit to the word itself. Usually the changes are the “neutralization” of the second syllable in a two syllable word. These don’t really have a hard-and-fast rule like tone sandhi changes are.
In other words, tone sandhi changes are changes that can be thought in almost grammatical terms. My grammar book covers many of the tone-sandhi cases and how they relate to grammatical points. Word-level changes are not grammatical, but tied to the word itself.
In terms of the question about transcription of pinyin and how it relates to tone sandhi, we have this documentation article which may be of some help: Word tone sandhi | HanziHero Docs
Hope that helps!