Pepsi Case Study 19

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PepsiCo Inc. was created in 1965 as a result of the merger of Pepsi Cola, created in 1898 and Frito Lay, created in 1932. Both companies agreed that by merging they would gain access to a wider market. Diversification was part of the company’s strategy from the beginning, and we can say that because Frito-Lay was the result of a merger between two different producers of salty snacks. PepsiCo Inc. was clear as to what type of diversification strategy to use, and when to diversify. Their first strategy was to developed similar products, such as Doritos, and to enter new markets, such as Japan, and Europe. After this the next strategy was to acquire existing related business. They saw the relationship between snacks food, soft drinks and fast food. They acquired Pizza Hutt, KFC and Taco Bell. PepsiCo also acquire Quaker, and other drinking products. Because they were becoming such a fast growing organization, they restructure the company into four different divisions; Frito Lay North America, PepsiCo Beverages North America, Quaker Oats North America, and PepsiCo International. They also enter international market by acquiring or via partnering with already established making it easier and less costly for them to enter the international market. It is evident that PepsiCo is a company with a visionary strategic plan and a clear understanding on what direction to take. If we analyze the company’s diversification strategy we can conclude that PepsiCo carefully looked at the industries they wanted to diversify into and how to do it, found a way to improve the overall performance of tall the products they acquired, and established clear priorities an effective use of resources. By diversifying into related business PepsiCo Inc. transferred skills, capabilities, facilities, and resources between the different divisions. Their strategy for entering new businesses was by acquiring existing businesses, and through joint ventures. Acquiring existing businesses is one common...
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