xxxx

PepsiCo Strategic Management Case

1) Strengths :

-          Ranked 21^st in the Fortune 500

-          International sales of $29.3 billion

-          Markets more than 500 varieties of food and beverages

-          Distributed in more than 200 countries

-          Third largest food and beverage company in the world

-          16 brands produce more than $1 billion annually

-          Loft Company purchased Pepsi Cola in 1931.

-          Launched first radio jingle in 1939

-          Well diversified

-          Dedicated to growth

-          Frito Lay is the world’s largest seller of snack foods

-          Beverages count for 1/3 of carbonated beverages sales in U.S.

-          Joint ventures with Lipton and Starbucks

-          Concentrates on emerging markets rather than going after markets already held by Coca Cola

Weaknesses:

-          No vision statement

-          Bad press associated with Wow! Potato chips and Olestra

-          Poor choices in acquisitions in the past such as North American Van Lines and Wilson Sporting Goods, both of which were sold off in 1985.

-          Hasn’t been able to consistently achieve 15 or more percent annual increase in earnings since 1996.

2) Opportunities:

-          Production of energy drinks to compete with Red Bull or Rockstar

-          Creating more diet beverages to accommodate market growth in diet soda category.

-          Create or acquire an alcoholic beverage division. None of the top three soft drink makers make alcoholic beverages.

-          Creation of more health foods in Frito Lay division

-          Use completely recycled materials in packaging and take steps to reduce the carbon footprint the company makes.

Threats:

-          Coca Cola is the number one company in the soft drink market, competition from this brand is the largest threat.

-          Healthy alternatives to sodas as competition; bottled water, teas, and sports drinks.

-          Sugar and other raw materials prices fluctuate over the years.

3) Strategic Statement

I. Products Goods or Services

Frito Lay-Snack foods

PepsiCo Beverages North America – carbonated and non carbonated beverages

PepsiCo International – Soft drinks

Quaker Foods North America – Cereals, pancake syrup and mixes, rice side dishes, and oatmeal snacks.

II. Market or Market Segments

Goods are offered in the United States as well as 200 countries outside the United States.

III. Distribution Channels

PepsiCo’s products are distributed through retail outlets

IV. Financing

A. Capital Structure

LTD/TA: 2,397/27,987 = 8.565%

TSE/TA: 13,572/27,987 = 48.494%

B. What is the value of the Firm?

TSE/5 times Net Income: 13,572/5(4212) = 64.444%

V. Uniqueness:

PepsiCo is much more than just a soda company, it competes with many different companies through many different product lines in its four divisions.

4) Grand Strategy Matrix and Recommendations

Because of the low market growth for PepsiCo as stated on page  of the case and the high market share that PepsiCo currently owns with its divisions, it would be in Quadrant 4 of the Grand Strategy Matrix.

Recommendations for this company and the quadrant:

Concentric diversification – PepsiCo should add more diet sodas to the product lines as well as increasing the amount of health food offerings from other subsidiaries.

Joint Ventures – PepsiCo should attempt a joint venture, as it has with Lipton and Starbucks, with the Red Bull energy drink company. Currently, Red Bull only offers one flavor of energy drink in either regular or sugar free versions. As a joint venture, these companies could offer many more flavors and varieties of energy drink to compete with other energy drink companies such as Rock Star, who has many different flavors of energy drink.

Jeremy

View all posts by Jeremy
Jeremys website