Case Study on Pepsi

IntroductionThis project aim is to analyze the diversification outline of PepsiCo in cc8. PepsiCo is the largest solid food and beverage business in the humanness. The benefits of PepsiCos diversification strategies ar identified. The business strategy is analyzed to determine its efficacy across PepsiCos consumer business segments and output portfolio. The value chain match ups ar fit(p) and analyzed to ascertain their relevance to the success of PepsiCos strategy. The warlike strengths of PepsiCos three structural divisions and sextette reporting segments argon assessed and related to relevant theories and strategy tools.Summary of the casePepsiCo is an the Statesn multinational corporation headquartered in Purchase, New York, join States, with interests in the manufacturing, marketing and distribution of grain-based eat foods, beverages, and other products. PepsiCo is a world leader in at rest foods and beverages, with revenue enhancements of round $39.5 billion and e precise vagabond 142,000 employees.The connections portfolio of businesses in 2008 eat ond Frito-Lay salty sharpnesss, ally chewy granola bars, Pepsi buggy intoxication products, Tropicana orange juice, Lipton Brisk tea, Gatorade, Propel, SoBe, Quaker Oatmeal, Capn Crunch, Aquatint, Rice-A-Roni, aunty Jemima pan cake mix, and many other regularly consumed products. The corporation consists of the snack business of Frito-Lay North America and the beverage and food businesses of PepsiCo Beverages and Foods, which includes PepsiCo Beverages North America (Pepsi-Cola North America and Gatorade/Tropicana North America) and Quaker Foods North America. PepsiCo International includes the snack businesses of Frito-Lay International and beverage businesses of PepsiCo Beverages International. PepsiCo offices are available in nearly 200 countries and territories.Many of PepsiCos brand names are over 100- age-old, but the corporation is comparatively young. PepsiCo was established in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001. PepsiCos success is the result of superior products, high standards of performance,classifiable competitive strategies and the high integrity of our people.VisionThe vision of PepsiCo is to be a amenable company that supports continuous improvement of all areas across the globe in which they operate. These areas include the environment, social, and economic conditions creating a better future then the present.MissionPepsiCos mission is to be the worlds premier consumer harvests Company focused on convenient foods and beverages. They seek to produce healthy financial rewards to investors as they provide opportunities for harvest-home and enrichment to their employees, their business partners and the communities in which they operate. And in everything they do, they strive for honesty, fairness and integrity.SWOT Analys isStrengthsBranding single of PepsiCos top brands is of course Pepsi, one of the most recognized brands of the world, ranked fit to Interbrand. As of 2008 it ranked 26th amongst top 100 global brands.Pepsi generates more than than $15,000 billion of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lays Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled irrigate, Cheetos Cheese Flavored Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and Sierra Mist.The strength of these brands is unembellished in PepsiCos presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. such(prenominal) brand dominance insures loyalty and repetitive sales which contributes to over $15 meg in annual sales for the company.Finance -As one of the leading beverage and food distributors and producers in the world,PepsiCo apparently has very strong financial backing and has been acting especially puff up. Their basic financial statement is very promising with revenues in a high place Coca-Cola and the highest PepsiCo has ever seen, as well as low debt and liabilities.20 PepsiCo has shown and average of six percent growth since the year 2000 and has accomplished many growth goals by acquired and manufacturing a wide range of products.The pure size of PepsiCo is a competitive advantage be bring forth they produce so many commonly used products passim the world and are minimally leveraged by market ups and downs.Illustrating this point is their maturation ROE, ROA, and ROI ratios that have experienced great increases over the past several years where soda sales have declined Diversification PepsiCos diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCos arsenal withal includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes.This broad product base asset a multi-channel distribution system serve to help insulate PepsiCo from transformation business climates.Distribution The company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail repositings. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.WeaknessesOverdependence on Wal-Mart Sales to Wal-Mart correct approximately 12% of PepsiCos total net revenue. Wal-Mart is PepsiCos largest customer. As a result PepsiCos fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Marts low price them es empower pressure on PepsiCo to hold down prices.Overdependence on US Markets condescension its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo moderately vulnerable to the pertain of changing economic conditions, and mash strikes. Large US customers could exploit PepsiCos omit of bargaining power and negatively impact its revenues.Low Productivity In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower than its competitors. This may demonstrate comparatively low productivity on the part of PepsiCo employees.Image Damage referable to Product Recall Recently (2008) salmonella taint forced PepsiCo to pull aunty Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and quail consumer confidence in PepsiCo products. OpportunitiesBroadening of Product Base PepsiCo is s eeking to address one of its potential weaknesses dependency on US markets by acquiring Russias leading Juice Company, Lebedyansky, and V Wwater in the United Kingdom. It continues to broaden its product base by introducing TrueNorth testis Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to counterbalance to the changing lifestyles of its consumers.International Expansion PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessen of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico.Growing Savory Snack and Bottled Water market in US PepsiCo is positioned well to capitalize on the ontogenesis bottle water market which is project to be worth over $24 million by 2012. Products such as Aquafina, and Propel are well established produc ts and in a position to ride the upward(a) crest. PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as a lot as 27% by 2013, representing an increase of $28 million.ThreatsDecline in Carbonated Drink Sales Soft drink sales are projected to decline by as much as 2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the address of diversification, but is likely to feel the impact of the projected decline.Potential Negative feign of Government Regulations It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acrylamide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to concur with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo.Intense Competition The Coca-Cola Company is PepsiCos primary competitors. But others include Nestl, Groupe Danone and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Resently Coca-Cola passed PepsiCo in Juice sales.Potential Disruption Due to Labor fermenting Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down exertion for nearly an entire month. This disrupted both manufacturing and distribution.PepsiCos ProblemNegligence on employees One of the main lacking components of PepsiCos values is their employees. Of the many concer ns they have about the consumer and clients, little is said about the way employees are treated and what expectations and responsibilities are towards them. Programs exist that help employees take part in the community, and also future employees by offering school programs and scholarships. However, little effort is say towards the responsibility of the company to employees. Coinciding with their values, objectives, and commitment, employees are left out of the opulent scheme and mayeven be considered a means to an end. The limited focus on employees may be a problemin the long-run due to retention issues and resulting lack of quality.Poor business strategy PepsiCos business strategies were working out very well for them except for in their international operations. The international segment had relatively low profit margins which meant that PepsiCo needed to implement a hot organizational structure that would better utilize strategic fits between the companys international ope rations Low Productivity In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower than its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees.Image Damage Due to Product Recall Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products.Conclusion and RecommendationOverall PepsiCo is a successful company with substantial revenue, and a large footprint in the marketplace. PepsiCo should continue to expand their growth and take advantage of potential opportunities by continuing to improve on areas at the corporate top level, in the markets that they currently are in, and in new markets and market segments that they wish to expand into and at last PepsiCo should become more proactive in the health food/product market place rather than being reactive to the market trends. They need to improve their reactivity and future projections to market trends and changes that can therefore allude to different product segments and target markets.