Pepsico Case Study

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1. What is PepsiCo’s corporate strategy? Briefly identify the business strategies that PepsiCo is using in each of its consumer business segments in 2008.

PepsiCo’s corporate strategy had diversified, in 2008, the company into salty and sweet snacks, soft drinks, orange juice, bottled water, and ready-to-eat drink teas and coffees, purified and functional waters, isotonic beverages, hot and ready-to-eat breakfast cereals, grain-based products, and breakfast condiments. Strategies that kept their brands at the top were tied to new product innovation, close relationships with distribution allies, international expansion, and strategic acquisitions. A new element of PepsiCo’s corporate strategy was product reformulations to make snack foods and beverages less unhealthy. Their belief that its efforts to develop “good-for-you” or “better-for-you” products would create growth opportunities from the intersection of business and public interests. The company was organized into four business divisions which all followed the corporation’s general strategic approach. Frito-Lay North America manufactured, marketed, and distributed such snack foods as Lay potato chips, Doritos tortilla chips, Cheetos cheese snacks, Fritos corn chips, Quaker Chewy granola bars, Grandma’s cookies, and Smartfood popcorn. The PepsiCo Beverages North America beverage manufactured, marketed, and sold beverage concentrates, fountain syrups, and finished goods under such brands as Pepsi, Gatorade, Tropicana, Lipton, Dole, and SoBe. PepsiCo International manufactured, marketed, and sold snacks and beverages in approximately 200 countries outside the United States. Quaker Foods North America manufactured and marketed cereals, rice, pasta dishes, and other food items that were sold in super markets. 2. What is your assessment of the long-term attractiveness of the industries represented in PepsiCo’s business portfolio? What is your assessment of the competitive strength of PepsiCo’s different business units? What does a 9-cell industry attractiveness/business strength matrix displaying PepsiCo’s business units look like?

Now I will discuss my assessment of the long-term attractiveness of the industries represented in PepsiCo’s business portfolio, starting off with Frito-Lay North America. Three key trends that were shaping the industry were convenience, a growing awareness of nutritional content of snack foods, and indulgent snacking. Many consumers want to reward themselves with great-tasting flavors. Snacks are packaged in smaller portions so they can address healthier eating. They are also using healthier oils in their products when processing snacks. For example, they introduced Lay’s Classic potato chips cooked in sunflower oil and retained Lay’s traditional flavor but contained 50 percent less saturated fat.

In 2006, they also introduced Flat Earth fruit and vegetable snacks for the consumers with a desire for something healthier with great taste. This was introduced because they researched that Americans consumed an average of 50 percent of the U.S. Department of Agriculture’s recommendation.

Next, PepsiCo Beverages North America is one of the largest sellers of liquid refreshments and Coca-Cola was the second largest seller of non-alcoholic beverages. PepsiCo and Coca-Cola have been in competition for years trying to dominate the soft drink industry. PepsiCo’s management team engineered a comeback in the late 1990s and early 2000s and launched new brands like Sierra Mist and focusing on strategies to improve local distribution. Now PepsiCo is in numerous countries with local distribution centers to preserve the freshness quality of their products so they are not distributed too far. Also, PepsiCo implemented the Power of One strategy for supermarkets to place Pepsi-Cola and Frito-Lay products next to each other.

Another innovation that PepsiCo worked on was to focus on improving the nutritional properties of soft drinks....
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