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To analyze how the PepsiCos diversification strategy has maximized the shareholders value. To identify problems, opportunities, and strategic actions that would sustain its impressive financial and market performance.
Agenda
Case Analysis Purpose Strategic Profile Situation analysis SWOT Analysis Strategy Formulation Strategic Alternative Implementation
1977 1986 Acquired 1932 Pizza Hut, Taco Bell, Fritos and and KFC. 1980 1996 Lay were Continued acquired founded. 1961 Fritos and Lay were various foods and merged into Frito-Lay beverages Company. companies, and
quick service restaurants.
1997 2000: various acquisitions on overseas F&B companies (Australia and Saudi Arabia).
2005 2007: various tuck in acquisitions of small, fast growing F&B companies in US and overseas. 2005: $1.1 bio 2006: $522 mio 2007: $1.3 bio
Product Innovation, Close Relationships with Distributors, International Expansion, and Strategic Acquisitions.
Political, regulators, and legal factors Protectionism in emerging countries More and more protected consumers Stricter legislation to defend against obesity Gatorade was not allowed to use PepsiCo distribution channel for 10 years. Economic High growth potential of emerging market with strong competition Population demographics Glee generation prefers healthy foods and concerns with environmental problems. In some countries consumer may prefer noncarbonated beverage. Societal values and lifestyles Start to leave sodas and sugar Healthier lifestyles promotes opportunities and different pattern of consumption Technological Strong research development departments to develop new ingredients, e.g: new substitute of sugar, elimination of trans fat. More efficient value chain Ecological / Natural Environment Environment friendly packaging solutions
Prefer healthier foods and more aware of the nutritional content, e.g.:
concern on salty foods, trans fat, sugar, etc. Desire to escape from the norm and taste snacks from a wider, often global palate. Consumer in developed countries concerns on obesity issues. This drive for smaller snack bags which easier for indulgence and to take during outing. International markets may have different taste preference for snack foods, e.g: spicier snack foods in Thailand market. Closer relationship with distribution allies to analyse the consumer habits and improve the value chain to avoid stock out in the retailers. World class advertising. Intense competition in beverages requires world class advertising. Gatorade sub brand use Tiger Woods as the marketing ambassador. In Indonesia, even local beverages companies use world class celebrities such as Miss Universe. New style of packaging and design. Joint distribution system between PepsiCos products.
40
60%
50% 40% 30% 20% 10%
30
20
How well is the companys strategy working? What are the companys competitively important resources and capabilities? Are the companys cost structure and customer value proposition competitive? Is the company competitively stronger or weaker than key rivals? What strategic issues and problems merit frontburner managerial attention?
#2 :
What are the companys competitively important resources and capabilities? SWOT
Analysis
Alliances/joint ventures with other firms that provide access to valuable technology, competencies and attractive geographic markets. Strong commitment to sustainable growth called Performance with Purpose - focused on generating healthy financial returns while giving back to the communities PepsiCo serve.
trend that is shifting towards non-carbonated drinks. Health Food Alternatives. Consumers are becoming increasingly health conscious. International operations had a low profitability, relative to US operations. Held large market shares on outside US but had been relatively unsuccessful in making international brand. Highly dependencies on key customers, especially bottling partners.
High rivalry competition. Global economic crisis. Environment (packaging) issues Market risks arising from adverse changes in : commodity prices, cost of raw materials and energy; foreign exchange rates; and interest rates.
0.25
0.75
0.75
0.5
1.5
1.5
1.5
0.2
1.4
1.2
1.6
1.6
1.2
Product Innovation
Distribution
0.1
0.15
6
7
0.6
1.05
6
6
0.6
0.9
8
6
0.8
0.9
8
7
0.8
1.05
8
7
0.8
1.05
6
6
0.6
0.9
Resources
0.1
0.8
0.8
0.8
0.8
0.8
0.8
0.2
1.2
1.4
1.6
1.6
1.2
Totals
5.8
5.05
5.6
7.35
7.35
6.2
COST
0.20
0.80
0.40
1.00
RISK
0.20
0.60
0.40
0.80
TIME
0.10
0.60
0.30
0.40
BRAND EQUITY
0.20
1.60
1.80
10
2.00
INTERNATIONALIZATION
0.15
1.35
10
1.50
0.75
CUSTOMER SERVICE
0.15
1.05
0.75
1.35
TOTAL
6.00
5.15
6.30
According to the alternative evaluation, the best choice for the company is Alternative 3. PepsiCo would be try to forecast customer s trends and relying on marketing intelligence with extensive research & development.