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PEPSICO ANALYSIS
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Contents
1.0 Introduction ............................................................................................................................................ 3
2.0 The Ansoff model .................................................................................................................................... 5
2.1 Application: ......................................................................................................................................... 6
2.1.1 Global Business Units ....................................................................................................................... 6
3.0 Porters Diamond .................................................................................................................................... 9
3.1 Application: ....................................................................................................................................... 10
4.0 Generic Strategies. ................................................................................................................................ 11
4.1.1 Cost Leadership-............................................................................................................................. 11
4.1.2 Differentiation- .............................................................................................................................. 12
4.1.3 Focus- ............................................................................................................................................. 12
4.2 Application: ....................................................................................................................................... 13
4.2.1 Differentiation. ........................................................................................................................... 13
4.2.2 Focus. ......................................................................................................................................... 13
5.0 References: ........................................................................................................................................... 14













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1.0 Introduction
PepsiCo Inc. is an American multinational food and beverage corporation headquartered in
Purchase, New York, United States. The company has interests in the manufacturing, marketing
and distribution of grain-based snack foods, beverages, and other products.










PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay Inc.
PepsiCo has since expanded from its namesake product Pepsi, to a broader range of food and
beverage brands, the largest of which includes an acquisition of Tropicana in 1998 and a merger
with Quaker Oats in 2001, which added the Gatorade brand to its portfolio.
As of January 2012, 22 of PepsiCo's brands generated retail sales of more than $1 billion each
and the company's products were distributed across more than 200 countries, resulting in annual
net revenues of $43.3 billion. Based on net revenue, PepsiCo is the second largest food and
beverage business in the world, second to Nestl. Within North America, PepsiCo is ranked (by
net revenue) as the largest food and beverage business.
Indra Krishnamurthy Nooyihas been the CEO of PepsiCo since 2006, as of 2013, the company
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had employed approximately 274,000 people globally. The company's beverage distribution and
bottling is conducted by PepsiCo as well as by licensed bottlers in certain regions.








In the Beverage market, The Coca-Cola Company has historically been considered PepsiCo's
primary competitor. In December 2005, PepsiCo surpassed The Coca-Cola Company in market
value for the first time in 112 years since both companies began to compete. PepsiCos edge is
that it moved to form mergers, acquisitions and partnerships in the 1990s and 2000s, as a result
shifting its business to include a broader product base, including foods, snacks and beverages.
The majority of PepsiCo's revenues no longer come from the production and sale of carbonated
soft drinks. Beverages accounted for less than 50 percent of its total revenue in 2009. In the same
year, slightly more than 60 percent of PepsiCo's beverage sales came from its primary non-
carbonated brands, namely Gatorade and Tropicana. One of PepsiCo's primary competitors in the
snack food market overall is Kraft Foods. PepsiCos different brands are- Pepsi, Mountain Dew,
Diet Pepsi, Lay's, Gatorade, Tropicana, 7 Up, Doritos, Lipton Teas, Quaker Foods, Cheetos,
Mirinda, Ruffles, Aquafina, Pepsi Max, Tostitos, Sierra Mist, Fritos, and Walkers.








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2.0 The Ansoff model
The Ansoff model, also known as the Ansoff matrix, is a marketing planning tool that helps a
business determine its product and market growth strategy. This matrix links a firm's marketing
strategy with its general strategic direction and presents four alternative growth strategies as a
table (matrix), all these strategies seek growth. The purpose of this matrix is to help managers
consider how to grow their business through existing or new products or in existing or new
markets. In this way the matrix helps managers to assess the differing degrees of risk associated
with moving their organization forward.
Ansoffs matrix suggests four alternative marketing strategies which hinge on whether products
are new or existing. They also focus on whether a market is new or existing. Within each
strategy there is a differing level of risk. The four strategies are:
1. Market penetration This involves increasing market share within existing market
segments. This can be achieved by selling more products/services to established
customers or by finding new customers within existing markets.
2. Product development This involves developing new products for existing markets.
Product development involves thinking about how new products can meet customer
needs more closely and outperform the products of competitors.
3. Market development This strategy entails finding new markets for existing products.
Market research and further segmentation of markets helps to identify new groups of
customers.
4. Diversification This involves moving new products into new markets at the same time.
It is the most risky strategy. The more an organization moves away from what it has done
in the past the more uncertainties are created. However, if existing activities are
threatened, diversification helps to spread risk.
Below is a diagram of the matrix-







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2.1 Application:
PepsiCo is good example of a company that used its strength and knowledge of its consumers
wants to expand the company and become a competitor of the number ones soft drinks
company. Pepsi has diversified its products globally building global business units to serve its
consumers with the best. From soft beverages to breakfast meals and good fun snacks. Pepsi is
the best definition of a company that uses the best in the business units through mergers and
acquisitions. A strategy which they have lived by, spending over $40 million to acquire or merge
with the best companies in the different business units. This is Pepsis way of market penetration
into its existing markets and new markets both local and globally. The global business units of
PepsiCo best describe its Ansoff model.
2.1.1 Global Business Units
PepsiCo Americas Beverages
PepsiCo Americas Beverages (PAB) makes, markets, sells and distributes beverage concentrates,
fountain syrups and finished goods under various beverage brands. Through strategic
acquisitions, partnerships and new product development, PAB has expanded its beverage line up
over the past 20 years to offer top-selling choices for every occasion and lifestyle. As a result,
Pepsi-Cola today is the flagship brand in a portfolio of liquid refreshment beverages that includes
14 billion-dollar brands and spans carbonated soft drinks, juices and juice drinks, ready-to-drink
teas and coffees, sports drinks and bottled waters.
Related diversification/product development for PepsiCo
Its brands include Pepsi-Cola, Mountain Dew, Gatorade, Sierra Mist, Aquafina, Tropicana Pure
Premium, AMP Energy, Propel, Mug, SoBe, IZZE and Naked Juice. PAB also distributes and
sells in the United States a leading portfolio of ready-to-drink teas and coffees through strategic
joint ventures with Unilever and Starbucks, with brands that include Lipton Iced Tea, Pure Leaf
and Brisk, Tazo Iced Tea, Starbucks Frappuccino, Starbucks Iced Coffee, Seattle's Best Iced
Lattes and Starbucks Refreshers. In 2012, PepsiCo announced that Starbuck's ready-to-drink
beverages and Lipton Brisk had grown to more than $1 billion in estimated annual retail sales,
expanding PepsiCo's portfolio of billion-dollar brand.
Gatorade: Acquired in 2001
In 2001, Gatorade, one of the world's leading sport's drinks, was acquired by PepsiCo. Created
by researchers at the University of Florida for the school's football team, "the Gators,"" the drink
is backed by 45 years of science.
Mountain Dew: Acquired in 1964, today, Mountain Dew is the number 1 flavoured carbonated
soft drink in the United States. With its one-of-a-kind citrus taste, Mountain Dew exhilarates and
quenches with every sip. In addition to original Mountain Dew and Diet Mountain Dew, the
DEW product line includes Mountain Dew Code Red, Mountain Dew LiveWire, Mountain Dew
Throwback, Mountain Dew Voltage, Mountain Dew White Out and Mountain Dew KickStart.
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Pepsi-Lipton Partnership
In 1991 PepsiCo entered into The Pepsi Lipton Tea partnership, a joint venture with Unilever
that manufactures markets and sells ready-to-drink iced teas in the United States. The partnership
includes a complete portfolio of iced teas for every occasion, including Lipton Iced Tea, Pure
Leaf Iced Tea.
Unrelated diversification.
PepsiCo Americas Food
PepsiCo Americas Foods is the provider of many of the most popular food and snacks
throughout North and Latin America. Its portfolio of businesses includes Frito-Lay North
America, Quaker Foods North America, and all of our Latin American food and snack
businesses.
Today, Frito-Lay North America makes some of the most popular snacks in the United States,
including LAY'S and RUFFLES potato chips and dips, DORITOS tortilla chips,
TOSTITOS tortilla chips and dips, CHEETOS cheese flavoured snacks, FRITOS corn
chips and dips, ROLD GOLD pretzels, SUNCHIPS multigrain snacks, and CRACKER
JACK candy coated popcorn.
Gamesa is a global leader in the cookies market and from Mexico it exports its products to more
than 16 countries. Gamesa offers consumers a wide variety of high-quality products for every
lifestyle, producing pastries, oats, cereals and other related products. Among its most successful
brands are Marias Gamesa, Emperador, Arcoiris, Mamut, Chokis and Maizoro. Headquartered in
Monterrey, Mexico, it has nine production facilities across Mexico. It was acquired by PepsiCo
in 1990.
Quaker Foods North America
For more than 135 years, Quaker has provided consumers with innovative products that fit their
ever-changing daily lifestyles. It all began on September 1877, when Henry D. Seymour and
William Heston, founders of the Quaker Mill Company, registered with the U.S. Patent Office
the first breakfast cereal trademark, "a figure of a man in 'Quaker garb.'"
Today, Quaker Foods North America makes, markets, sells and distributes products spanning
several categories such as hot and ready-to-eat cereals, rice, pasta and other branded products.
Some of its best known and beloved brands include Quaker oatmeal, Quaker Chewy granola
bars, Life cereal, and Rice-A-Roni and Pasta Roni.
Sabritas is the most loved snack brand in Mexico. Founded in 1943, it is renowned for the
quality, variety and flavours of its products, and serves as the umbrella brand under which
PepsiCo markets Frito-Lay products in Mexico. Sabritas is also the name brand for its own line
of potato chips, and manufactures and markets several local brands such as Doritos, Cheetos,
Tostitos, Fritos, Crujitos, Poffets, Rancheritos and Sabritones. Sabritas is headquartered in
Mexico City and has ten production plants. PepsiCo acquired Sabritas in 1966.
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Latin Americas Foods
The Latin Americas Foods business,either independently or in conjunction with third-party
partners, makes, markets, sells and distributes a number of snack food brands, including Marias
Gamesa, Cheetos, Doritos, Ruffles, Emperador, Saladitas, Elma Chips, Rosquinhas Mabel,
Sabritas and Tostitos, as well as many Quaker-branded cereals and snacks. These branded
products are sold to independent distributors and retailers.
PepsiCo Europe (market development)
PepsiCo Europe includes all beverage, food and snack businesses in Europe and South Africa. It
sells Lay's, Walkers, Doritos, Cheetos and Ruffles, many Quaker-branded cereals and snacks,
beverage concentrates, fountain syrups and finished goods under various beverage brands,
including Pepsi, Pepsi Max, 7UP, Diet Pepsi and Tropicana. These branded products are sold to
authorized bottlers, independent distributors and retailers. In certain markets, PepsiCo Europe
operates its own bottling plants and distribution facilities. PepsiCo Europe also, either
independently or in conjunction with third-party partners, makes, markets and sells ready-to-
drink tea products through an international joint venture with Unilever (under the Lipton brand
name), and sells and distributes a number of leading dairy products, including Domik v Derevne,
Chudo and Agusha.
PepsiCo Asia, Middle East & Africa (market development)
PepsiCo Asia, Middle East and Africa (AMEA), includes all beverage, food and snack
businesses in Asia, the Middle East and Africa, excluding South Africa.PepsiCo AMEA makes,
markets, sells and distributes a number of iconic PepsiCo brands, including Lay's, Chipsy,
Kurkure, Doritos, Cheetos and Smith's, many Quaker-branded cereals and snacks, beverage
concentrates, fountain syrups and finished goods under various beverage brands, including Pepsi,
Mirinda, 7UP, Mountain Dew, Aquafina and Tropicana. These branded products are sold to
authorized bottlers, independent distributors and retailers. In certain markets, PepsiCo AMEA
operates its own bottling plants and distribution facilities. PepsiCo AMEA also, either
independently or in conjunction with third-party partners, makes, markets and sells ready-to-
drink tea products through an international joint venture with Unilever (under the Lipton brand
name) and licenses juice products to third-party partners through a strategic alliance with Tingyi
under the House of Tropicana brand name.
Pepsis diversification goes hand in hand with its product development. We believe Pepsi is yet
to grow and increase its market share. They may not have big market share in their soft drinks
but they have the greatest market share in America for good fun snacks.

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3.0 Porters Diamond
When a company seeks to go global, this desire/choice to go global needs to be backed by the
companys possession of some sustainable competitive advantage. This competitive advantage
has usually to be substantial. After all, a competitor entering a market from overseas typically
starts with considerable disadvantages relative to existing home competitors, which will usually
have superior market knowledge, established relationships with local customers, strong supply
chains and the like. A foreign entrant must have significant competitive advantages to overcome
such disadvantages. Michael Porters Diamond helps explain why some nations tend to produce
firms with sustained competitive advantages in some industries more than others. The degree of
national advantage varies from industry to industry. Porters Diamond suggests there are four
interacting determinants of national, or home base, advantage in particular industries (these four
determinants together make up a diamond-shaped figure). The home base determinants are:
a) Factor conditions- These refer to the factors of production that go into making a
product or service (that is, raw materials, land and labour). Some of these factors can be
obtained by any company (like unskilled labour and raw materials) and, hence, do not
generate sustained competitive advantage. Even though, we have to take into account
that specialized factors involve a heavy and sustained investment, we have to know that
if we are able to achieve them, we could generate a competitive advantage.
Factor condition advantages at a national level can translate into general competitive
advantages for national firms in international markets.
b) Home demand conditions- The nature of the domestic customers can become a source
of competitive advantage. Dealing with sophisticated and demanding customers at home
helps train a company to be effective overseas. For example if in one country there
exists a sophisticated type of demand, the customers pressure firms to be competitive.
Firms that face a sophisticated domestic market are likely to sell superior products
because the market at home demands high quality and a close proximity to such
customers enables the firm to better understand the needs of the customers, in the same
way.
c) Related and supporting industries- Local clusters of related and mutually supporting
industries can be an important source of competitive advantage. These are often
regionally based, making personal interaction easier.
d) Firm strategy, industry structure and rivalry- The characteristic strategies, industry
structures and rivalries in different countries can also be bases of advantage. German
companies strategy of investing in technical excellence gives them a characteristic
advantage in engineering industries and creates large pools of expertise. A competitive
local industry structure is also helpful: if too dominant in their home territory, local
organizations can become complacent and lose advantage overseas. Some domestic
rivalry can actually be an advantage, therefore.
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For individual organizations, the value of Porters Diamond is to identify the extent to which
they can build on home-based advantages to create competitive advantage in relation to others on
a global front.
Alongside, is a diagram of
the Diamond-











3.1 Application:
Some of the factor conditions PepsiCo has to take into account when evaluating a chance, in
each country where they want to move to are
1. Unemployment.
2. Interest rate. (Short term or, long term).
3. Labour legislation.
PepsiCo has its headquarters in New York, USA. The US has one of the strongest economies,
this has been beneficial to PepsiCo in its bid to expand globally in that they have access to Plenty
of Raw materials like, Water, Steel and Corn. They also have adequate land to carry out their
activities, and The US government has financial policies that support and encourage the growth
of its home companies.
PepsiCo are a consumer products company operating in highly competitive markets in the US
and rely on continued demand for their products. Their success depends on their ability to
respond to consumer trends, including concerns of consumers regarding health and wellness,
obesity, product attributes and ingredients, and to expand into adjacent categories. The demand
in the US market is very volatile, and successful operation in this market has given PepsiCo an
edge.
The industries that PepsiCo is involved in are highly competitive and developed, the presence of
technological hubs like The Silicon Valley in the US has provided the food and beverage
industry with unique and innovative practices that have benefited PepsiCo. For example
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production processes have been smoothened with the development of high-tech harvesting
machines that shorten the harvesting period for some of the raw materials like corn.
PepsiCo has to study the different styles of management, for acting in the best way in each
country it seeks to expand to, and see if they are in line with its own. In relation to rivalry for
PepsiCo, it is advisable that when they are expanding into an overseas market, its main rival
(Coca-Cola) should not already be positioned or be an absolute leader in that market.
PepsiCo apply the Five Forces model in the analysis of their three core markets: the soft drink
market, the snacks market and the chilled orange juice market. They treat the three markets as
the same industry, with some exceptions.
4.0 Generic Strategies.
This is another model, developed by Michael Porter, it describes how a company pursues
competitive advantage across its chosen market scope. There are three core approaches, and they
are examples of "generic strategies," because they can be applied to products or services in all
industries, and to organizations of all sizes. They are-
4.1.1 Cost Leadership-
It involves being the leader in terms of cost in your industry or market. The firm wins market
share by appealing to cost-conscious or price-sensitive customers.
This strategy emphasizes efficiency. By producing volumes of standardized products, the firm
hopes to take advantage of economies of scale and experience curve effects. The product is often
a basic product produced at a relatively low cost and made available at a large consumer base.
Maintaining this strategy requires a continuous search for cost reductions in all aspects of the
business.
Cost leadership is obtained when a firm has cost advantages over its competitors. Sources of
competitive advantage could be derived from-
1. Access to the capital needed to invest in technology that will bring costs down.
2. Very efficient logistics.
3. A low-cost base (labor, materials, facilities), and a way of sustainably cutting costs
below those of other competitors.
There are two main ways of achieving Cost Leadership:
1. Increasing profits by reducing internal costs, while charging industry-average prices.
2. Increasing market share through charging lower prices, while still making a
reasonable profit on each sale because you've reduced costs.

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4.1.2 Differentiation-
Differentiation involves making products or services different and more attractive in comparison
to those of competitors. How this is done this depends on the exact nature of the industry and of
the products and services themselves. Differentiation involves doing something that is hard for
competitors to copy.
A differentiation strategy is appropriate where the target customer segment is not price-sensitive,
the market is competitive or saturated, customers have very specific needs which are possibly
under-served, and the firm has unique resources and capabilities which enable it to satisfy these
needs in ways that are difficult to copy, These could include patents or other Intellectual
Property, unique technical expertise, talented personnel or innovative processes. Successful
differentiation is displayed when a company accomplishes either a premium price for the product
or service, increased revenue per unit, or the consumers' loyalty to purchase the company's
product or service (brand loyalty).
4.1.3 Focus-
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.
Companies that use Focus strategies concentrate on particular niche markets and, by
understanding the dynamics of that market and the unique needs of customers within it, develop
uniquely low-cost or well-specified products for the market. Because they serve customers in
their market uniquely well, they tend to build strong brand loyalty amongst their customers. This
makes their particular market segment less attractive to competitors.
As with broad market strategies, it is still
essential to decide whether you will pursue
Cost Leadership or Differentiation. The
essence of focus is the application of either
Cost Leadership or Differentiation but on a
narrow scale, targeting a niche market
rather than the industry as a whole.
A focus strategy is often appropriate for
small, aggressive businesses that do not
have the ability or resources to engage in a
nationwide marketing effort. Such a
strategy may also be appropriate if the
target market is too small to support a
large-scale operation.
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4.2 Application:
PepsiCo has applied each of these strategies in one way or the other, it being a multinational
company means it is involved in different markets, and different markets have different
dynamics, hence different strategies are applied. But the notable strategies it has applied are
Differentiation and Focus.
4.2.1 Differentiation.
Pepsi has attempted to differentiate its products from Cokes as they are viewed as very similar,
it shifted its focus to the growing American teenage market in the 1990s, while Coke continued
to target baby boomers. Pepsi targeted the teen market by forming exclusive contracts with
American schools and developing advertising campaigns such as The Next Generation and
Joy of Pepsi, featuring Britney Spears.
Both Coke and Pepsi have moved to the middle in recent years, however, as evidenced by the
Pepsi campaign, For Those Who Think Young, to attract an older consumer, and by Cokes
moves to modernize its packaging, in order to appeal more to younger consumers. Pepsi focused
on varietal differentiation by introducing a string of niche products, although product innovation
has been quickly copied by Coke. To increase volume in order to counter flat cola sales, Pepsi
introduced Sierra Mist in 2002-2003 to take the place of 7-Up and go head-to-head with Sprite.
Pepsi has also tried to boost volume by introducing products that appeal to specific target market
segments that it currently is not reaching. Pepsi has introduced Code Red and Live Wire,
extensions of Mountain Dew, Pepsi One, and Pepsi Blue. This is a form of focus differentiation.
Finally, Pepsi is countering declining sales of carbonated drinks through the marketing and
distribution of Starbucks ready to drink products, and the acquisition of SOBE and Gatorade.
The success of Pepsis Mountain Dew Code Red launched in 2001 was the most successful soft
drink innovation in 20 years and has spurred even more niche product introductions between
Coke and Pepsi.
4.2.2 Focus.
In its efforts to sharpen focus on its core beverage (Pepsi-Cola), and snack food businesses
(Frito-Lay), PepsiCo underwent a major restructuring by spinning-off its restaurant businesses as
an independent publicly traded company. The spin-off was completed in October 1997. One of
the major initiatives undertaken to focus on its core businesses was hiving-off its bottling
operations into a separate new company called Pepsi Bottling Group (PBG), in September 1998.
PepsiCo decided to separate its bottling operations from the company. PepsiCo's Pepsi-Cola
business included two units - a bottling company and a concentrate company. The bottling
operations, which were called Pepsi Bottling Group (PBG) after the spin-off, consisted of certain
North American, Canadian, Russian, and other selected overseas bottling operations. With sales
of more than $7 billion, PBG was the world's largest Pepsi Cola bottler accounting for more than
half of Pepsi Cola's North American volume.
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The concentrate company focused on product innovations and marketing Pepsi Cola's brands. It
manufactured and sold beverage concentrate syrup to PBG and other Pepsi-Cola bottlers. The
company also supported PBG and other bottlers in advertising, marketing, sales, and promotion
programs. Analysts felt that PepsiCo's decision to spin-off its bottling operations would help the
company compete more effectively in the beverage business and serve its retail customers better.
PepsiCo was also expected to improve margins on its beverage operations, as bottling operations
were less profitable than the supplying of beverage concentrate.
Following management's efforts to make PepsiCo a focused packaged foods company, to
compete with its archrival Coca-Cola. PepsiCo decided to sell-off its food distribution company.
With enough cash, quality people, and the ability to build restaurant brands. When PepsiCo
bought them, the brands like Pizza Hut and Taco Bell were very small businesses. The company
allocated its resources to them and soon became the leader in the restaurant business. According
to the executives of PepsiCo, the restaurant business had sufficient cash and quality personnel
working for it. However, the restaurant culture and processes did not align with PepsiCo's
organizational culture.
5.0 References:
1. Brand Family | PepsiCo.com. (2014, April 19). Retrieved from
http://www.pepsico.com/Company/Global-Brands
2. Competitive Strategies for Coca-Cola and PepsiCo Companies. (n.d.). Retrieved from
http://qualitycustomessays.com/blog/competitive-strategies-for-coca-cola-and-pepsico-
companies/
3. Pepsico's Strategy |Business Strategy Case Studies|Business Strategy Articles. (2013,
February23).Retrievedfrom
http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy2/BSTR118.htm
4. http://iosrjournals.org/iosr-jbm/papers/Vol15-issue1/B01511117.pdf?id=7380
5. http://www.pepsico.com/Company