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Question 1: What is PepsiCos corporate strategy? PepsiCo was the worlds largest snack and beverage company.

More exactly the companys corporate strategy had diversified the company into salty and sweet snacks, soft drink, orange juice, bottled water, ready to drink tea and coffee... About picking new industries to enter and deciding on the mean of entry, PepsiCo used related diversification through acquisition and merger to quicker launch a brand-new operation, hurdle entry barrier as acquiring technology knowhow, establish supplier relationships, match rivals efficiency and to move directly to the task of building a strong market position. As early as 1968, the company began to pursue growth through acquisition outside snacks and beverages. A list of acquisition is 1977 acquisition of Pizza Hut, 1978-tacobell. 1986-Kentucky Fried Chicken, Mug root beer, &UP international, Smartfood ready to eat popcorn, Walkers Crisps, Smiths Crisps, Mexican cookie Briefly identify the business strategies that PepsiCo is using in each of its consumer business segments. The company was organized into four business division, which all followed the corporations general strategic approaches: Fristo-Lay North America: the business strategy for this segment The first thing need to consider is how PepsiCo provide convenience to its customer over time with its product. For example, they produce snacks packaged in smaller bags to address the overeating concerns and were additionally convenience to take along on an outing. The convenience foods included both salty and sweet snacks. Going abreast with the more conscious about nutritional and healthy content, FLNA provides better for you and good for you snacks. They improve the performance of the divisions score salty brands and further developing health and wellness

productas a key strategic action. They offered fruit and vegetable snacks which is deficientcy in most diets PesiCo Beverages North America For PepsiCo carbonated soft drinks business, PepsiCo use Power of one which is a strategy for supermarkets to place Pepsi and Frito Lay products on shelves. Not only that, they try to improve the local distribution, the information flow coming from retailer through Innovation Summits. Lastly, they enhanced the nutritional properties of soft drink with attempt to develop new types pf sweeteners that would lower the clorie content of nondiet drinks. In other hand, for PepsiCos non carbonated Beverages Brands, PepsiCo offered healthier beverages like flavor and vitamin enriched water... PepsiCo International Applied the global strategy, PepsiCo sale of beverage in international market utilize using Power of One Strategy with a modification for snack foods international to suit the different form country to country Quaker Foods North America PepsiCo tried to enhance the quality of product while diversifying the products categories with hot and ready to eat cereals, pancake mixes and syrup, and rice and pasta side dishes.

Question 2: What is your assessment of the long-term attractiveness of the industries represented in PepsiCos business portfolio?
Industry Attractiveness Measure Market size and projected growth rate Intensity of Competition Emerging Opportunities threats Resource Requirements and weight 0.2 0.15 0.15 0.15 0.05 0.25 0.05 1 beverage 8 9 6 9 8 8 8 1.60 1.35 0.90 1.35 0.40 2.00 0.40 8 cereal 6 8 6 7 8 6 7 1.20 1.20 0.90 1.05 0.40 1.50 0.35 6.6 snack 7 7 6 7 8 7 7 1.40 1.05 0.90 1.05 0.40 1.75 0.35 6.9

Societal Political, Regulatory & Environmental factors Industry Profitability Industry Uncertainty Business Risk TOTALS &

Since all of the industries holding by PepsiCo is cored more than 5, so they pass the attractiveness test as a whole. What is your assessment of the competitive strength of PepsiCos different business units?
Competitive Strength Measure Weigh t Frito-Lay N.A in snack industry 8 7 9 8 9 1.20 1.05 0.90 0.80 0.90 Pepsi N.A in beverage industry 7 8 7 8 6 1.05 1.20 0.70 0.80 0.60 Pepsi International in snack, cereal & beverage industries 5 5 6 6 6 Quaker N.A in cereal industry

Relative Market share Costs relative to competitors' costs Ability to match or beat rivals on key product attributes Ability to benefit from strategic fits with sister business Barraging leverage with suppliers buyers calibre of alliance Brand image and reputation Competitively valuable capabilities

0.15 0.15 0.10 0.10 0.10

0.75 0.75 0.60 0.60 0.60

5 6 5 4 3

0.75 0.90 0.50 0.40 0.30

0.10 0.10

10 8

1.00 0.80

9 8

0.90 0.80

7 5

0.70 0.50

5 5

0.50 0.50

Profitability relative to competitors Total

0.20

1.40 8.45

1.60 7.65

0.80 5.3

1.00 4.85

Since the Frito-Lay N.A in snack industry, Pepsi N.A in beverage industry have the score of competitive strength rating above 6.7 so they are strong market contender in the industry. The other 2 which is Pepsi International in snack, cereal & beverage industries and Quaker N.A in cereal industry have the score in the 3,7-6,7 range so they have moderate competitive strength comparing to other rivals. What does a 9-cell industry attractiveness/business strength matrix displaying PepsiCos business units look like?

So Fristo-Lay N.A, PepsiCo NA and PepsiCo international are for growth and built base on their big size and high level of industry attractive. Besides, Quaker N.A is for maintain, harvesting base on their average industry attractive and relative market size comparing to other industry

Question 3: Does PepsiCos portfolio exhibit good strategic fit? Yes,they had a noteworthy successes with $160 million cost saving from product ingredients and packing material, $40 million cost saving form joint venture. PepsiCos management team was dedicated to capturing the strategic fit benefits within the business line up throughout the value chain. The companys procurement activities were coordinated globally to achieve the greatest possible economies of scale, best practices. They also share marketed research information to better enable each division to develop new product What value-chain match-ups do you see? they combine purchasing activities, gain more leverage with suppliers, and realize supply chain economies; share technology, transfer technical skills, combine R&D; combine sales and marketing activities, use common distribution channels, brand name, and combine after-sale service activities and usingcross-business collaboration to create new competitive capabilities. What opportunities for skills transfer, cost sharing, or brand sharing do you see? I believe that PepsiCo have the all 3 opportunities. For skill transfer, since PepsiCo include much of business units and divisions, they can have skill transferring within the own corporate and the globe. The best practices were routinely transferred between its 230 plants, 3600 distribution systems, and 120,000 service routes around the world. For cost sharing, since PepsiCo can capture the strategic fit and resources fit benefits, they also prove to have cos-saving over time. Like, they achieve $160 million in cost-saving resulting from corporate-wide procurement of product ingredients and packaging material. And for Brand Sharing, we have to mention one of the most successful strategies was Power of One, they allow PepsiCo to obtain the synergistic benefit of combining Pepsi-Cola and Frito-Lay. For instance, in Chile, Frito-Lay has over 90% of the market,

but Pepsi is in lousy shape but due to Frito-Lay image Pepsi able to get a shelf space. Does PepsiCos portfolio exhibit good resource fit? What are the cash flow characteristics of each of PepsiCos four segments? Which businesses are the strongest contributors to PepsiCos free cash flows?
2004 Net Cash Provided by operating activities Capital Spending Sale of property, plant and equipment Management operating cash flow 5,054 (1,387) 38 3,705 2005 5,852 (1,736) 88 4,204 2006 6,084 (2,068) 49 4,065 2007 6,934 (2,430) 47 4,551

Yes, PepsiCos portfolio exhibit good resource fit. Overall businesss

situation is good. There is no Cash Hogs and Dog. Frito-Lay is the

strongest cash generated business unit and Pepsi International is less efficient business unit (revenue/profit/asset) Based on the preceding analysis, what is your overall evaluation of PepsiCos business portfolio? Does the portfolio provide the companys shareholders with an opportunity for above-average market returns? Since there is no cash hogs which will erode all of the cash flow using to fund their expansion, or no Dog which also hurt the cash flow of PepsiCo. All of business units are in its good condition, they can generate enough cash flow for themselves and also for supporting other operating activities. With the companys business portfolios growth and more than sufficient cash-flow, PepsiCo is expected to generate above average market return for now, but in the future if it want to keep its position and profitability, there will need funding to build its business unit further not just stop and be satisfy with what it own right now.

Question 4: What strategic actions should Indra Nooyi take to sustain the corporations impressive financial and market 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? PepsiCo has used very successfully the related diversification corporate strategy as their basic approach. PepsiCo should remain their related activities within the value chain between the various beverage and snack food brands to utilize the strategic fit and resources fit in order to reduce costs and increase profits. Some of the elements of the value chain should be considered is marketing, processing, research and development. An importance noting here is that, PepsiCo should define clearly their priority in order to have a proper decision making and resources allocation. Beside form what is mentioned above, if the company cash flow is enough to pursuing more, then PepsiCo should go after some other option like fund additional share repurchase plans, pay higher dividends and buying security, investing in mutual fund to strengthen their financial performance and secure its profit again rivals. Based on the videos we watched, what strategic actions is Indra Nooyi taking to sustain the corporations impressive financial and market performance? Also, what does

sustainability mean to Indra Nooyi at PepsiCo According to the video, with some change and modification, Indra Nooyi had taken an initiate to restructure the business, he created the new 3-division structure which is PepsiCo America Beverage, PepsiCo America Food and PepsiCo International. Further detail, PepsiCo America

Food include 3 units - Frito-Lay North America, Quaker Foods North America, Latin America Foods, and PepsiCo International includes UK & Europe, Middle East, Africa & Asia Sustainability is defined as "Performance with Purpose. With the consideration that customers now combine the own rules, value and principle with the purchasing decision. Consequently, PepsiCo tried to join purpose and performance in to one. Three specific aspects of Performance with Purpose is presented. First, offering foods and beverages with social responsibility to provide good nourishment to not only customers but also societies is executed. Second, there is a mission to minimize the companys operating impact on the surrounding environment. And third, creating a safe, healthy and inclusive environment where the best people want to work is lead by PepsiCos management and participated by the companys employees. What recommendations would you make to Indra Nooyi and her management team as they expand globally around the world? First, since PepsiCo prove its current Strategy to develop the company is effective, they should remain and pursue it restless. As for international market, company can continue with the multinational strategy to earn every benefit while implementing global strategies and executing marketing and distribution similarly in all regions. Further, PepsiCo need to reconsider their corporate strategy within their international markets to ensure they are able to increase their market share as well as the company growth throughout their sectors. Also, revalue the growth and attractive at the some countries to pull out from country with sluggish growth with low market share, decreasing sale About the R&D, first PepsiCo need to acquire more market information to better enable each division to develop new product. From there, they can continue pursuing product innovation to account for the healthy trend and social responsibility recently.

Question 5: Conduct a financial analysis using the template provided on Beach-board. What does the financial information reveal about the companys success and performance during the 2001-2010 years?
Year (Numbers in $Mil) Revenue COGS SG&A Operating Income Net Income 2001 $23,512.0 $10,750.0 $8,189.0 $4,021.0 $2,662.0 2002 $25,112.0 $11,497.0 $8,523.0 $4,730.0 $3,313.0 2003 $26,971.0 $12,379.0 $9,460.0 $4,781.0 $3,568.0 2004 $29,261.0 $13,406.0 $10,299.0 $5,259.0 $4,212.0 2005 $32,562.0 $14,176.0 $12,314.0 $5,922.0 $4,078.0 2006 $35,137.0 $15,762.0 $12,711.0 $6,502.0 $5,642.0 2007 $39,474.0 $18,038.0 $14,196.0 $7,182.0 $5,658.0 2008 $43,251.0 $20,351.0 $15,489.0 $6,959.0 $5,142.0 2009 $43,232.0 $20,099.0 $14,612.0 $8,044.0 $5,946.0 2010 $57,838.0 $26,575.0 $22,326.0 $8,332.0 $6,320.0

Total Assets Total Liabilities Total Equity

$21,695.0 $13,047.0 $8,648.0

$23,474.0 $14,176.0 $9,298.0

$25,327.0 $13,453.0 $11,874.0

$27,987.0 $14,464.0 $13,523.0

$31,727.0 $17,476.0 $14,251.0

$29,930.0 $14,562.0 $15,368.0

$34,628.0 $17,394.0 $17,234.0

$35,994.0 $23,888.0 $12,106.0

$39,848.0 $23,044.0 $16,804.0

$68,153.0 $46,989.0 $21,164.0

Some financial indicator of PepsiCo from 2001-2010


Year COGS as % of Revenue SG&A as % of Revenue Operating Income as a % of Revenue Net Income as a % of Revenue Return on Assets Return on Equity Financial Leverage (Assets/Equity) 2001 45.7% 34.8% 17.1% 11.3% 12.3% 30.8% 2.51 2002 45.8% 33.9% 18.8% 13.2% 14.1% 35.6% 2.52 2003 45.9% 35.1% 17.7% 13.2% 14.1% 30.0% 2.13 2004 45.8% 35.2% 18.0% 14.4% 15.0% 31.1% 2.07 2005 43.5% 37.8% 18.2% 12.5% 12.9% 28.6% 2.23 2006 44.9% 36.2% 18.5% 16.1% 18.9% 36.7% 1.95 2007 45.7% 36.0% 18.2% 14.3% 16.3% 32.8% 2.01 2008 47.1% 35.8% 16.1% 11.9% 14.3% 42.5% 2.97 2009 46.5% 33.8% 18.6% 13.8% 14.9% 35.4% 2.37 2010 45.9% 38.6% 14.4% 10.9% 9.3% 29.9% 3.22

Some financial indicator of PepsiCo as a percentage of revenue First, the revenue steady rose about 246% from 2001 to 2010 which may show a good indicator for the company current performance. Also, at about the same rate of 247% the cost of good sold increases from 10,750 to 26,575. Additionally, The trend of CoGSs fluctuation indicates a good control over the rising cost over years-not above 50% of revenue is remained. The operating expense is enlarged at the faster rate-273% comparing to the operating income which have the

rising rate of 207%. Despite all of that the net income in PepsiCo shows a good trend of stable increasing-237%. PepsiCo did a lot of acquisition after 2001 with the hope for valuable strategic fits over the value chain of related businesses. Those acquisition-fast-growing food and beverage companies in enable PepsiCo to make a good use of the cost-savings. Its bargaining power and supplier relationship help much in producing at lower cost. Moreover, the ROA has decrease from 12,3% to 9,3%. This may happen due to the aggressive expansion of PepsiCo which pretty much offset the increasing of net income. ROE also in the same road with ROA but its decreasing is just small from 30,8% to 29,9%. The only considerable about ROE is its fluctuation over time which may be the result of the unstable change in the number of share outstanding.

From 2001 to 2006, PepsiCo not really use the financial leverage to finance it operating, but the from 2006 to 2010, the trend of using leverage is gradually increasing. This is understandable since PepsiCo expand its business though numerous acquisition which need to make use of debt.

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