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Copy of PepsiCo’s Diversification Strategy in 2008

Submitted by: De Rama, Grazel Eugenio,Chris Evangelista,Kevin Garcia, April Anne Genito, Deosa Gonzales,Leah Ho, Eve
by

Jocelyn Delgado

on 12 August 2013

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Transcript of Copy of PepsiCo’s Diversification Strategy in 2008

Problem
Thank you for your attention!
ANALYSIS OF THE MACRO-ENVIRONMENT
Mission
Our mission is to be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

Vision
"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today."
Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.

Mission and Vision

Company Background
PepsiCo’s
Diversification
Strategy in
2008
Pepsi is a carbonated soft drink that is popular the world over. First made in the 1890s, by pharmacist Caleb Bradham in New Bern, North Carolina, the soft drink has wooed millions of people with its flavor.
Pepsi made its first appearance in the world in 1890s. Pharmacist CalrbBradham of New Bern, North California, is the man to be credited with the production of this drink. He introduced the drink in the name of “Brad’s Drink”. Later, it came to be known as ‘Pepsi’, probably due to the use of digestive enzymes, such as peps and kola nuts in its preparation. The product got its trademark on June 16, 1903.
Bradham shifted the bottling of the drink from his drugstore
to a rented warehouse in the year 1903. Since then, the product
has never looked back. It got its first official logo in 1905,
which was eventually changed in 1926 and then again in 1929.
In 1909, Pepsi was introduced to the whole world through its first
celebrity endorser, Barney Oldfield.
In the year 1931, due to the disastrous effect of World War I, there was sudden fluctuation in the price of sugar, which led Pepsi-Cola Company into bankruptcy. Pepsi managed to stand once again, against the pressures of the Great Depression. In 1936, 12-ounce bottles of the soft drink were re-introduced, which were originally priced at 10 cents each. This found fewer sales for itself and then the producers thought of bringing the rate down to 5 cents. This brought a boost to the company, which it badly required at this point of time. They aired an advertising campaign on the radio as well, with a beautiful jingle. This campaign did wonders for the drowning Pepsi Company and eventually doubled the Pepsi-Cola’s profit.
Pepsi started growing as a world brand
due to the well-planned and systematically
organized marketing and campaigns.
The year 1975 saw open challenge between Pepsi-Cola and the rival Coca-Cola. The public voted in favor of Pepsi, which was telecasted through the media. This further encouraged the growth and popularity of the drink. Several marketing campaigns were followed through the years, which boosted the sale of Pepsi to unimaginable heights. The company kept on redesigning the Pepsi cans and in the year 2007, the can was changed for the fourteenth time. Pepsi sponsored many international cricket games, which certainly gave another platform for the company to reach globally. Today, it uses such slogans that make it recognizable in every part of the world. Slogans like “YehDil Mange More” and “My Pepsi My Way” keep the brand rocking everywhere.
ANALYSIS OF PRESENT
TASK ENVIRONMENT
ECONOMIC ENVIRONMENT
Threat of New Entrants
Through Analyzing the strength or level of the barriers that the snack food and beverage industry possesses, it is concluded that the Threat of new entrants is low.
Despite established brands’ strength on production capacity, one disadvantage about this industry is that there have been many players that already acquired a spot in consumers’ minds that products seems to be comparable at all.
Bargaining Power of Supplier is Low
It is concluded that suppliers have low bargaining power over the industry because the supplier group is not dominated by few companies, there are several other farms that are more than willing to supply products in the industry specially that it poses high profitability in the market. Second is that the supplier group doesn’t have built up switching cost. And lastly, it has a relatively low credibility on forward integration.
Bargaining power of consumers is high
Buyers have a high level of bargaining power in this industry because, first, buyers are concentrated and purchases large volumes relative to seller sales, second, the products (snacks and beverage) represent a significant fraction of the buyers’ costs of purchases, third, the products in the industry are undifferentiated, and lastly, it faces few switching costs.
Threat of Substitutes is high
Many of the substitutes are attractively priced, readily available, and have comparable performance as long as these products satisfy starvation and cravings, its already an effective substitute, and thus bringing us to the conclusion that the threat on substitute products are high.
Intensity of Competitive Rivalry
Rivalry in the snack and beverage industry is strong since participants are competing head to head on acquiring larger market shares over other competitors. There are numerous and equally balanced number of competitors, that makes it even difficult for each other to distinguish which is which since characteristics, taste, attributes are almost the same. Products also have low differentiation, and the companies are under the threat on high exit barriers.

POTENTIAL CHANGE: Global Economic Crisis
IMPLICATION: Countries all over the world are experiencing economic fluctuation due to instability of global economy
EFFECT ON THE INDUSTRY: Possible threat on the industry since purchasing power of consumers is most likely decreasing

POTENTIAL CHANGE: Increasing number of Free Trade areas among neighboring countries
IMPLICATION: It is easier to enter into international markets for certain products
EFFECT ON THE INDUSTRY: Opportunity for international expansion

POTENTIAL CHANGE: Increase in inflation rate from 4.2% at the end of 2010 to 5.2% last October 2011 2010 to 5.2% last October 2011
(Philippines data)
IMPLICATION: Increase in raw material prices
EFFECT ON THE INDUSTRY: Possible increase in prices due to unstable economic changes

POLITICO-LEGAL ENVIRONMENT
POTENTIAL CHANGE: Trade Barriers
IMPLICATION: Availability of some ingredients will be unpredictable, specifically internationally acquired ingredients
EFFECT ON THE INDUSTRY: Industry will be somewhat threatened for those who acquire raw materials abroad

POTENTIAL CHANGE: U.S. Federal Trade Commission’s Decision on not allowing two very strong brands to be distributed jointly
IMPLICATION: The chance on complementing two strong brand’s image is eradicated
EFFECT ON THE INDUSTRY: Threat for Companies with large portfolios since strong brands cannot help each gain higher leverage

SOCIO-CULTURAL ENVIRONMENT

POTENTIAL CHANGE: Increasing portion on consumer spending for food
IMPLICATION: Consumer spends more on food than before
EFFECT ON THE INDUSTRY: Opportunity for the industry since it is its very nature

POTENTIAL CHANGE: Varying Flavor trends
IMPLICATION: New flavors are sought after by consumers
EFFECT ON THE INDUSTRY: Opportunity for new product development


POTENTIAL CHANGE: Increasing preferences of Healthy food snacks
IMPLICATION: Healthy products are becoming more popular and poses a reverse implication on unhealthy ones
EFFECT ON THE INDUSTRY: Opportunity for health-benefited foods, but threat on those who poses harm to bodily health and wellness


POTENTIAL CHANGE: Customers’ preference for indulgent snacking
IMPLICATION: Delicious snacks that feels rewarding are preferred by consumers
EFFECT ON THE INDUSTRY: Opportunity for product innovation and quality enhancement

TECHNOLOGICAL ENVIRONMENT
POTENTIAL CHANGE: E-Commerce
IMPLICATION: Increasing need for online business and promotions
EFFECT ON THE INDUSTRY: Opportunity for introducing and promoting products as well as informing consumers about it

POTENTIAL CHANGE: Globalization
IMPLICATION: Opportunity for easier gathering of relevant information about consumers but can be a threat to the companies because globalization can easily spread news that can be fatal to a company’s being
EFFECT ON THE INDUSTRY: Information are accessible to almost everybody through means of new technology


TOWS Analysis
STRENGTHS
1. Strategies made are fit for profit generalization
2. The company has the capability of conducting new product innovations
3. The company is keen on strategic acquisition
4. The major portfolio of the company also involved international expansion
WEAKNESS
The company has the capability to increase the market share consistently however; its international operations had been less profitable brought about the company’s lack of opportunity to further analyze their customer’s preferences in terms of distributing their products.
OPPORTUNITIES
1. Consumers nowadays are likely health conscious
2. Consumers change their taste preferences nowadays
3. Retailers and wholesalers will purchase their products
4. Legal regulations related to a commercial merger can be well applied
THREATS
PepsiCo’s external environment has this threat of being overshadowed by their number one rival, Coca-Cola, but through an intense rivalry, they should not be wasting time on over pouring their shares by selling diet cokes, diet cola, teas, flavored or unflavored hydrogen hydroxide, sweetened, salted foods or not, because, people around the world choose these for the sake of satisfying their physiological needs, to add it up, people has their own schedule of eating but still snacks and beverages industries are indispensable throughout the universe to improve the economy.

How will PepsiCo maintain their position as the leading and largest snack and Beverage Company in the world despite the rampant changes that is currently occurring in the said industry.
Objective
To come up with a strategy that will enable PepsiCo to maintain their position in the global industry despite the varying differences among nations that affect the profitability of the company.
ALTERNATIVE COURSES OF ACTIONS
Action 1: Continue to develop the Power of One retailer alliance strategy
PepsiCo can expand their offerings through alliances acquisitions.
Advantage: Introducing the product into a new market can be complicated and costly. It may expose the enterprise to several obstacles such as entrench competition. Choosing retailer alliance strategy as the entry mode will overcome some of these problems.
Disadvantage: Some retailer strategic alliances, may establish a poor and loosing result if the partners objectives are not properly aligned.

Action 2: Strategic Realignment
By integrating more of PepsiCo’s forces into one location, they can build innovation, go-to-market strength and have many more opportunities for cross-fertilization.
Advantage: PepsiCo can concentrate on their target market better. It will allow the company to manage better and develop their market opportunities.
Disadvantage: A new realignment means that there will be a change in the management of the company. They have to cope up with these changes to become a better company.

Recommendation
PepsiCo is already known as one of the largest company who contribute snacks and beverage. They manage to maintain their line of business over decades. They also prolong the development of their existing products.

Knowing that most of the people now are sensitive in the type of food or drinks they want to consume, PepsiCo can make their existing product healthier. They can also make new product that is healthy to our body.

Our group also wants to recommend pursuing their acquisition and expanding further their business internationally since their strategic diversification had given the company much proof increasing their market share and leads to the growth of the company. However it need to conduct a number of offsite summits annually for them to examine clearly on how they will able to implement better distribution channel system uniformly sell and distribute their products accordingly from their consumer’s lifestyle and preferences.
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