I. What is PepsiCo\'s corporate strategy? Briefly identify the business strategi
ID: 2597497 • Letter: I
Question
I. What is PepsiCo's corporate strategy? Briefly identify the business strategies that PepsiCo is using in each 2. What is your assessment of the long-term attractiveness of the industries represented in PepsiCo's business 3. What is your assessment of the competitive strength of PepsiCo's different business units? of its consumer business segments in 2014 portfolio? 4. What does a 9-cell industry attractiveness/business strength matrix displaying PepsiCo's business units look 5. Docs PepsiCo's portfolio exhibit good strategic fit? What valuc-chain match-ups do you sce? What 6. Docs PepsiCo's portfolio exhibit good resource fit? What are the cash flow characteristics of each of 7. Based on the preceding analysis, what is your overall evaluation of PepsiCo's business portfolio in 2014? Does 8. What strategic actions should Indra Nooyi take to sustain the corporation's impressive financial and market like? opportunities for skills transfer, cost sharing, or brand sharing do you see? PepsiCo's four segments? Which businesses are the strongest contributors to PepsiCo's free cash flows? the portfolio provide the company's shareholders with an opportunity for above-average market retums? performance? Should its free cash flows be used to fund additional share repurchase plans, pay higher dividends, make acquisitions, expand internationally, or for other purposes? What other strategic actions should be pursued by corporate level management?Explanation / Answer
Answer 1:-
The corporate strategy of PepsiCo is to diversify the company’s product portfolio into all kinds of categories within the snack, food and beverages industries. They are doing this through product innovation and close relationships with distribution allies. They are also expanding nationally and globally through external acquisitions and mergers, and reformulating their products to be healthier.
Answer 2:-Factors that influence attractiveness of industries are market size, growth, profitability, competitive structure, market diversity, and community risk. Very High-5, High-4, Medium-3, Low-2, Very low-1.
Attractiveness Factor
Assessment
Comment
Market Size
5
$30 billion
Growth
1
1.26% from 2006 to 2007
Profitability
5
PBNA contributes greatly to total profit means the high profitability in this industry.
Competitive Structure
1
Market is dominated by few companies
Market Diversity
5
Lots of market segments
Community Risk
1
No major risks
2. Snack Industry: Moderately Attractive (17)
Attractiveness Factor
Assessment
Comment
Market Size
4
$15.9 billion
Growth
2
FLNA has the largest market share but sales growth slowly, means the market grows slowly.
Profitability
4
FLNA contribute to 36% of total profit mean high profitability in this industry
Competitive Structure
1
Few companies dominate market, PepsiCo 21%.
Market Diversity
5
Lots of market segments
Community Risk
1
No major risks
3. Food Industry: Moderately Attractive (15)
Attractiveness Factor
Assessment
Comment
Market Size
4
Smaller than Beverage, about $20 billion
Growth
1
2% in 2007, and declined in some categories.
Profitability
4
Return far exceeds cost
Competitive Structure
1
Quaker Oats has 58% of market share
Market Diversity
4
Lots of market segments
Community Risk
1
No major risks
Answer 3:-
Overall, PepsiCo and its different business units are in a strong position. The company has such a broad portfolio, which is a strength because the company has leadership across many different product categories. The company’s domination of the beverage and snack food industry has given them large revenues and large growth rates. Within the different industries that Pepsi dominates, Pepsi has many internal strengths that help them achieve such a high level of success. One of their major strengths is their ability to continue to innovate and diversify their products. In 2007, one of Pepsi’s greatest growth areas were their new better-for-you and good-for you products. Pepsi responded to the growing consumer and government concern for healthier snacks and drinks, and delivered different lines of products to appeal to this need. Adding these new products allowed Pepsi to keep a close relationship with their distribution allies.
Answer 4: Summary of 9-cell matrix
While some are above others, all of PepsiCo’s business units are relatively attractive. The reason that these brands are so strong is because of their dedication to R&D, their established brand names, and the variety of products they offer to consumers. Whether it is soft drinks or healthy food choices, PepsiCo has diversified their product set so much that they have options for all different demographics. PepsiCo has developed such a positive reputation because of their continual output of quality products. Soft drinks may see a decline in market share to other refreshments in the long run.
Answer 5:- Yes, PepsiCo’s portfolio exhibits good strategic fit. When many think of PepsiCo they immediately think of the soft drink, Pepsi, but the company has done an extremely great job in terms of expanding their product mix beyond soda. They also have been greatly successful with salty snacks, granola bars, cereal, health drinks, pancake mix and many other different types of products. Although this product mix might seem a stretched at first, this company has managed to keep their products at the top of their respective product categories.
Answer 6:-
PepsiCo’s portfolio also offers good resource fit. They have done a great job in terms of breaking their company into four segments, Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International, and Quaker Foods North America. Frito-Lays brand accounts for 29% of PepsiCo’s total revenue.As one of the snack food branches within this company, it is imperative that they keep up with diet trends especially as this division accounts for over 70% of salty snacks within the United States . This department focuses on three main areas, convince, nutritional content, and indulgent snack foods. Reflecting on these areas, the company has started to use healthier oils when producing chips, while also expanding their line of baked snacks. They have also expanded their product flavors and started making baked fruits and vegetables in order to grow their brand. Keeping up with health trends has truly improved consumption leading to an increase in cash flow. Clearly the Frito-Lay North America is an important division within PepsiCo.
Answer 7:- Based on our analysis of PepsiCo’s portfolio in 2014, it can be concluded that PepsiCo is attractive company. Our analysis shows that the food, snack and beverage industries are attractive and allow PepsiCo the ability to maintain success for the long-run because of the competitive advantage
Answer 8:- Indra Nooyi must continue to innovate and provide alternative complementary products throughout the company’s portfolio. PepsiCo must capture new customers with innovative and complementary products while satisfying returning customers’ wants by providing higher quality products at affordable prices with many varieties to chose from. PepsiCo must continue to strengthen their relationships with distributors and retailers in order to cut unnecessary costs while sustaining the company’s core values vision. International expansion is extremely important for the short and long-term growth and development of PepsiCo. To achieve the greatest economies of scale, PepsiCo must continue to build plants, distribution systems, and service routes in main and developing markets.
Attractiveness Factor
Assessment
Comment
Market Size
5
$30 billion
Growth
1
1.26% from 2006 to 2007
Profitability
5
PBNA contributes greatly to total profit means the high profitability in this industry.
Competitive Structure
1
Market is dominated by few companies
Market Diversity
5
Lots of market segments
Community Risk
1
No major risks