Pepsi Co Transformational Strategy

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Pepsi Co Study
Individual assignment

Executive Summary

The case study will examine the strategy implemented by PepsiCo to exploit rapidly growing markets opportunities by acquiring the organisations Tropicana, Gatorade and Quaker. The case study will highlight that it was imperative for the PepsiCo organisation to embark on a radical restructuring strategy to optimise their return on investments. The paper will discuss the rationale behind the critical restructuring .The benefits of the acquisitions and restructuring strategy will be discussed and motivated in detail. The strong existing competitive resources that PepsiCo and the new acquired brands in the North America region possess will be emphasised. The modifications to PepsiCo structure in 2001 and 2004 will be scrutinised to motivate and justify the decisions of the PepsiCo leadership. In addition the case study will evaluate the execution of the radical change and the tasks that should be performed by key resources. The emotional impact on employees due to the radical transformation and the key role employees should perform will be described. The focus of the paper will be on the function; the leadership of PepsiCo must perform and the potential roles the employees of PepsiCo could execute. Ultimately, the case study will discuss the complex relationship between structure and strategy. The paper will establish that PepsiCo had to regular acclimatise their strategy and structure to accomplish their organisational goals.

Introduction

Over a three year period from 1998-2001, PepsiCo made 2 major acquisitions. Each acquisition was made for a price premium that could only be repaid by finding new synergies and economies of scale. This required PepsiCo to develop new organisational structures designed to deliver these major benefits. PepsiCo is the world’s largest snack and crisp manufacturer with annual sales of US$29 Billion dollars, although PepsiCo is better known for its carbonated drinks. The table below lists some of their top brands, which includes those that arrived through its acquisitions strategy in the 6 years leading to 2004. Brand| Worldwide sales (US$ bn)|

Regular Pepsi| 17.0|
Diet Pepsi| 6.0|
Mountain Dew| 5.5|
Gatorade Sports Drink| 5.2 Acquired 2001|
Lays Potato Chips| 5.0|
Doritos Tortilla Chips| 3.0|
Tropicana Juice Drink| 2.9 Acquired 1998|
7Up Drink (Outside the USA)| 2.4|
Aquafina bottled water| 2.3|
Cheetos Cheese Flavoured Snacks| 2.0|
Quaker Cereals| 1.5 Acquired 2001|
Table 1: PepsiCo leading brands. Lynch (2009:451)
The acquisitions of Quaker cereals, Tropicana and Gatorade left PepsiCo with new strategy and structural challenges to optimise the benefits from their newly acquired brands. The obvious benefits from acquiring these brands would not be suffient, to constitute the premium price paid for these brands. The new challenges and opportunities brought on an exciting era for PepsiCo. It was of the utmost importance that they discover and implement new synergies between their existing brands and newly acquired brands. PepsiCo embarked on a restructuring strategy between the years the 2001-2004 to optimise the benefits for the acquisitions. Figure 1 – How PepsiCo reorganised in 2004. Lynch (2009:451)

Question 1
“Why was PepsiCo essentially organised into North American and international divisions? Why were there some variations in this structure? Examining the organisation structures outlined in this chapter, in which category would you put PepsiCo? The multidivisional structure created in 2001 by the PepsiCo leadership was essentially organised into North America and international divisions for the following reasons. * PepsiCo strong competitive resources in North America.

* The existing network of contacts with supermarkets across North America and to a lesser extent, other countries. This included also their brands franchises names Pepsi; Tropicana;...
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