Pepsico Alliances in Mexico

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Q.1: Joint Venture organization
1. From the bottler’s perspective
A)Corporate governance • I would require the concentrate producer to purchase a minority share in the company that would ideally be 49% . This is because the more shares the producer buys, the more growth and profit margins I expect to have. This was seen with the Gallardo-PepsiCo joint venture expectations. Plus, I would like to name more directors than the producer. • As we have seen in the text, concentrate producers and bottlers may have opposite interests: when the first wants to increase sales disregarding the size of bottles on which the second’s margins depends. • The bottler needs therefore to maintain an equity advantage when these disagreements take place

B) Organization and Financing • Continuing on the same path as for corporate governance, the bottler needs to hire the CFO who is in charge of the key financing decisions. Because the bottler has the expertise and knows very well the region in which he is implanted, he should know better when it comes to blue oceans to invest in. • Management should be handed in to the concentrate producer. Operating decisions would be best in the hands of experts who already know the business very well.

2. From the producer’s perspective
A) Corporate Governance • Ideally, the producer would prefer to become a controlling shareholder in the joint venture. Not only would he oversee the management of the company, but he would take any financing decision that increases its margins disregarding the bottler’s expected profits. However, when the costs of buying shares is too high ( i.e. Deltex), then he has to reconsider.

B) Organization and Financing • The producer would prefer to name the CEO of the venture. As we saw in the text for the Deltex case, Suarez needs to address Sanchez’s desire to expand into new territory. This if seen as dangerous for the company, makes it easier to be shut down when holding the CEO position. • Continuing with...
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