Strategy Class: Pepsi Case
Strategy Class: Pepsi Case
11/5/2012 6:09:00 PM
Pepsi currently has four divisions: - Frito-Lay North America - PepsiCo Beverages North America - Pepsi International - Quaker Foods North America Part 1 - Identify the vision, mission, and objectives for the overall company and for the international division - For the industry analysis, take a look at the main driving forces affecting the future of the beverage and snack food categories in which Pepsi competes - Identify the main Key Success Factors for these two categories - Are there similarities? Are there differences? - Identify the strategy Pepsi is pursuing - Does it make sense? - Have a very close look at the financial statements in Exhibit 1 through 4 - You know the drill in terms of what to look at and what to calculate Pepsi has described some of their plans in terms of what they want to accomplish with their strategic realignment (see the description at the end of the case). Excel spreadsheet on the course website that we can use to help examine some of the financial results. It is important that you work through the numbers and be ready to talk about the implications and whether or not Pepsi is in a financial position to move ahead with their plans.
11/5/2012 6:09:00 PM Objectives 1. Buy more stuff – p of one 2. financial performances – sustain, increase 3. Products diversification innovation 1. distribution relationships 2. grow international markets 3. restructuring a. pr America b. pf afic c. p int i. 5. Cash Objective dividends PB stock performance Aquisications Re-invest on core business International profitability Skills Transfer SMART? Yes probably attainable and relevant, but prob need to be more detailed ----------------------Industry Driving Forces + opportunities on trends - salty snacks, beverages low growth, negative growth areas particular to US + tremendous global oppt Economic Traits - high fixed costs - low margins/unit
Key Success Factors product innovation Brand reputation Volume The KSFs in Beverages & Food are similar. Which is good because the skills are very transferrable ---------------------------------------Main Advantage COST ADVANTAGE B
DIFF YES
F Brands is good in this low margin business because we can charge people to pay more. The nature of the business asks for diversification, changing consumer preferences Differentiation is a good strategy, more sustainable Exhibit 1 Are they doing well with their numbers then? Is the strategy working? 2007 there are a lot of acquisitions in that year. Revenue is growing Revenue = 10.9% Income = 9.95% CAGR over 3 years We haven’t gotten the AC integrated into our business yet, operations is not at most efficient Exhibit 2 The industry is going down and we are following the industry. The industry has lost confidence. Implication: shareholders want results, maybe we
should buy back some stocks, stock prices ->, we will pay lower dividends for overall people Exhibit 4 We’ don’t have enough cto get ou. re using the
NEXT WEEK”S HOMEWORK Boston Consulting Matrix - we are going to look at the overall market growth for each beverage category and plot their positions on the chart - repeat procedure for 3 other divisions -
carbonated soft drink industry – 31% o we have a big market share o but it’s a declining market - KSF from BCG good portfolio
what do we do about the energy drink business lots of support for our super stars to expand our market share
Commitment : grow international market We don’t have the cash to do everything we want, but we have a good portfolio SWOT Analysis Strengths – volume, brand, cash, deregulations, power of one strategy, bundle products, we can buy market leaders Weakness – profit and operational problems in international markets Opportunities – carbonated international market we only have 1 billion in 70 billion. We have tons of room for growth, healthy food trends Threats – healthy food trends
Implications: yess S > WOT , can we grow internationally? We want to address trends? Yes we can. Value Chain – for PBNA, FLNA, QNA Raw materials -> Manufacturing -> Dist -> Retail -> Marketing -> FC Pepsi International – the same value chains (distributing, best practices, share strategy, use a combined strategy)
Recommendations - losing a lot of cash in pepsi international. :( okay or not? Yeah its okay because the goal is not to generate cash, it is to grow market share We are doingt hat with the carbonated drinks marketing right now, and it is generated 15789 revenue - we can rebrand the energy drink? It is a huge market but is it worth it?
Redbull and coke owns most of the market We can either keep investing, or pull out and put cash into other areas (for example buy back stocks) We have very little market share anyways FINAL DECISION: DIVEST ENGERGY DRINK In the exam, make sure you list out all of the alternatives before you make a decision
11/5/2012 6:09:00 PM
Pepsi currently has four divisions: - Frito-Lay North America - PepsiCo Beverages North America - Pepsi International - Quaker Foods North America Part 1 - Identify the vision, mission, and objectives for the overall company and for the international division - For the industry analysis, take a look at the main driving forces affecting the future of the beverage and snack food categories in which Pepsi competes - Identify the main Key Success Factors for these two categories - Are there similarities? Are there differences? - Identify the strategy Pepsi is pursuing - Does it make sense? - Have a very close look at the financial statements in Exhibit 1 through 4 - You know the drill in terms of what to look at and what to calculate Pepsi has described some of their plans in terms of what they want to accomplish with their strategic realignment (see the description at the end of the case). Excel spreadsheet on the course website that we can use to help examine some of the financial results. It is important that you work through the numbers and be ready to talk about the implications and whether or not Pepsi is in a financial position to move ahead with their plans.
11/5/2012 6:09:00 PM Objectives 1. Buy more stuff – p of one 2. financial performances – sustain, increase 3. Products diversification innovation 1. distribution relationships 2. grow international markets 3. restructuring a. pr America b. pf afic c. p int i. 5. Cash Objective dividends PB stock performance Aquisications Re-invest on core business International profitability Skills Transfer SMART? Yes probably attainable and relevant, but prob need to be more detailed ----------------------Industry Driving Forces + opportunities on trends - salty snacks, beverages low growth, negative growth areas particular to US + tremendous global oppt Economic Traits - high fixed costs - low margins/unit
Key Success Factors product innovation Brand reputation Volume The KSFs in Beverages & Food are similar. Which is good because the skills are very transferrable ---------------------------------------Main Advantage COST ADVANTAGE B
DIFF YES
F Brands is good in this low margin business because we can charge people to pay more. The nature of the business asks for diversification, changing consumer preferences Differentiation is a good strategy, more sustainable Exhibit 1 Are they doing well with their numbers then? Is the strategy working? 2007 there are a lot of acquisitions in that year. Revenue is growing Revenue = 10.9% Income = 9.95% CAGR over 3 years We haven’t gotten the AC integrated into our business yet, operations is not at most efficient Exhibit 2 The industry is going down and we are following the industry. The industry has lost confidence. Implication: shareholders want results, maybe we
should buy back some stocks, stock prices ->, we will pay lower dividends for overall people Exhibit 4 We’ don’t have enough cto get ou. re using the
NEXT WEEK”S HOMEWORK Boston Consulting Matrix - we are going to look at the overall market growth for each beverage category and plot their positions on the chart - repeat procedure for 3 other divisions -
carbonated soft drink industry – 31% o we have a big market share o but it’s a declining market - KSF from BCG good portfolio
what do we do about the energy drink business lots of support for our super stars to expand our market share
Commitment : grow international market We don’t have the cash to do everything we want, but we have a good portfolio SWOT Analysis Strengths – volume, brand, cash, deregulations, power of one strategy, bundle products, we can buy market leaders Weakness – profit and operational problems in international markets Opportunities – carbonated international market we only have 1 billion in 70 billion. We have tons of room for growth, healthy food trends Threats – healthy food trends
Implications: yess S > WOT , can we grow internationally? We want to address trends? Yes we can. Value Chain – for PBNA, FLNA, QNA Raw materials -> Manufacturing -> Dist -> Retail -> Marketing -> FC Pepsi International – the same value chains (distributing, best practices, share strategy, use a combined strategy)
Recommendations - losing a lot of cash in pepsi international. :( okay or not? Yeah its okay because the goal is not to generate cash, it is to grow market share We are doingt hat with the carbonated drinks marketing right now, and it is generated 15789 revenue - we can rebrand the energy drink? It is a huge market but is it worth it?
Redbull and coke owns most of the market We can either keep investing, or pull out and put cash into other areas (for example buy back stocks) We have very little market share anyways FINAL DECISION: DIVEST ENGERGY DRINK In the exam, make sure you list out all of the alternatives before you make a decision
