Pepsico corporation strategic mnt report

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STRATEGIC MANAGEMENT

A REPORT

OF

PEPSI CORPORATION

Presented to:

Professor: Vahid Victor Keyhani

Presented by: group 3

Name Keuka ID

1. Nguyen Ngoc Tuyen 332907

2. Le Ngoc Hoang Nhat 332896

3. Dinh Cong Tai 332887

4. Nguyen Huu Tung 332944

5. Nguyen Cong Duy 295900

6. Ho Thi Da Thao 332891

7. Truong My Ngoc 332926

International Business Management

Keuka College

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TABLE OF CONTENTS

1- EXECUTIVE SUMMARY………………………………………………………………… 3 2- HISTORY OF PEPSI COLA INTERNATIONAL…………………………………… 3 3- ETHICAL AND UNETHICAL ISSUES OF PEPSICO…………………………….. 4 4- VISION STATEMENT……………………………………………………………………. 5 5- MISSION STATEMENT…………………………………………………………………. 5 6- OBJECTIVES…………………………………………………………………………………. 5 7- COMPANY STRATEGIES………………………………………………………………… 6 8- IMPROVED MISSION STATEMENT………………………………………………. 7 9- COMPANY’S PRODUCTS & SERVICES……………………………………………. 7 10- COMPETITION & MARKET CONDITION…………………………………………. 7

STAGE 1 (INPUT STAGE)

11- SWOT ANALYSIS………………………………………………………………………… 9 12- KEY EXTERNAL FACTOR ANALYSIS .…………………………………………… 10 13- KEY INTERNAL FACTOR ANALYSIS …….………………………………………. 11 14- STOCK PRICE and FINANCIAL FORECAST……………………………………. 11 15- ANALYSIS OF COMPETITORS PROFILE……………………................... 11

STAGE 2 (MATCHING STAGE)

16- SPACE MATRIX…………………………………………………………………………. 11 17- GRAND MATRIX……………………………………………………………………….. 12 18- QSPM OF PEPSICO…………………………………………………………………… 12

STAGE 3 (DECISION STAGE)

19- STRATEGY BUSINESS RECOMMENDATIONS……………………………….. 12 20- PROPOSED METHODS & TIMETABLE FOR THE IMPLEMENTATION

OF THE LONG TERM OBJECTIVES………………………………………………. 14 21- CONCLUSION…………………………………………………………………………….. 15 22- APPENDIX…………………………………………………………………………………. 16

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1- EXECUTIVE SUMMARY

The project will be discuss about the Pepsi Cola Corporation in term of strategic management in

order to understand how this firm is formulating, implementing, and evaluating their objectives

to reach their goal. This project will be also discussed about the analysis of competition, market

growth and trend, opportunity analysis and strategies for creating competitive advantage by

Pepsi Cola in its industry.

The purpose of doing this project is to study the strategic management which Pepsi is operating

their organization in the whole market for its products.

In order to analyze Pepsi Cola Corporation, we will divide the process into three stages:

The first stage will be analyzed PepsiCo’s SWOT, the internal and external factor evaluations that

are aggressive, responses as well as strong competitive position compared to its competitors,

Coca Cola and Gourmet Cola and also indicated that Pepsi Cola is the market leader.

The second stage will be figured out the TOWS Matrix, Space Matrix, and Grand Matrix that also

have an aggressive, responses which helps the firm identifies and alternates the strategies in

order to choose which one is the most benefit strategy to implement.

The third stage will be discussed about Quantitative Strategic Planning Matrix (QSPM) that

concludes the internal factor evaluation, external factor evaluation, and Space strategic Matrix

to carry out the best strategy that brings the most benefits for Pepsi Cola and represent how that

strategy works on.

2- HISTORY OF PEPSI COLA INTERNATIONAL:

Back in 1880’s, the recipe for Pepsi was developed by Caleb Bradham in New Bern, North

Carolina who had renamed it “Pepsi-Cola” in 1898. As the Cola industry developed in popularity,

Caleb created Pepsi-Cola Company in 1902 and registered a patent for his recipe in 1903.

As Pepsi-Cola Company went bankrupt in 1931, Charles Guft who owned a syrup manufacturing

in Baltimore Maryland acquires the trademark and recipe to Loft Inc. In the year 1941, Pepsi was

formally absorbed to Loft, and Loft Inc. rebrands its company name to Pepsi Cola Company.

Up until today, Pepsi Cola Company further will be mentioned as PepsiCo has successfully

expanded it area of products through mergers and acquisition of other companies, such as Frito-

Lay Company, Quaker Oat Company and other companies.

PepsiCo has developed its divisions into 5, PepsiCo Americas Foods (PAF), PepsiCo Americas

Beverages (PAB), PepsiCo Europe, and PepsiCo Asia, Middle East and Africa (AMEA).

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3- ETHICAL AND UNETHICAL ISSUES OF PEPSICO

Code of Conduct

Your Personal Responsibilities:

All of your work must comply with our Code, our policies, and the law. Each of us, especially

leaders and managers, must act with integrity and inspire trust.

Respect in Our Workplace:

You can contact Speak Up by phone or by web. You will not be retaliated against for raising

concerns. Each of us must respect the diversity, talents and abilities of others. Always be alert to

possible human rights violations. You should never discriminate or deny equal opportunity. You

must not harass others in our workplace.

Integrity in Our Marketplace:

You must never threaten anyone or display violent behavior in our workplace. If you are involved

in marketing, always market our products responsibly. We must treat our customers fairly. All

interactions with our suppliers must meet our high ethical standards.

Ethics in Our Business Activities:

You should avoid a conflict, or an appearance of a conflict, between your personal interests and

our company’s interests.

Your business decisions should never be influenced by corruption. If you suspect your customer

or supplier is engaged in an illegal activity, report it. You are prohibited from using company

resources for personal political activities.

Administering Our Code:

Always use our trademarks and other intellectual property properly. PepsiCo takes seriously all

reports of misconduct. If you violate our Code, the Company will take appropriate disciplinary

action.

Unethical Issue

Pepsi was involved with false advertising. Pepsi was selling its Aquafina brand of bottled water

under the assumption that Aquafina is sourced from mountain spring water. Although the bottle

itself did not have the words “spring water”, Pepsi used a great marketing gimmick to deceive

consumers. Aquafina brand was sold in a bottle with a clean, blue label showing images of snow-

capped mountains and the claim, "Pure water, perfect taste". That's the image created by

PepsiCo Aquafina brand of water, and many consumers leaped to the incorrect conclusion that

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Aquafina is sourced from mountain spring water. In reality, Aquafina comes from tap water, the

same water we get when we turn on our kitchen faucet. Of course, Aquafina is filtered, purified

and perhaps even enhanced with trace amounts of added minerals, but it's certainly not

mountain spring water, it's just processed tap water.

4-VISION STATEMENT

“PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate -

environment, social, economic - creating a better tomorrow than today.”

Pepsi cola international vision is put into action through programs and a focus on environmental

stewardship, activities to benefit society, and a commitment to build shareholder value by

making PepsiCo a truly sustainable company.

5-MISSION STATEMENT

Our mission is to be the world’s premier consumer product company focused on convenient

foods and beverages. We seek to produce financial rewards to investors as we provide

opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate. And in everything we do, we strive for honesty, fairness and

integrity.

6- OBJECTIVES

Performance

Strive to deliver superior long-term financial performance and sustained shareholder value.

Human Sustainability

Continue to refine our food and beverage choices to meet changing consumer needs by reducing sodium,

added sugars and saturated fat, and developing a broader portfolio of product choices.

Continue to provide clear nutrition information on our products, and sell and market them appropriately

to our consumers, including children, in line with our global policies and accepted global standards.

Environmental Sustainability

Help protect and conserve global water supplies, especially in water-stressed areas, and provide access

to safe water. Innovate our packaging to make it increasingly sustainable, minimizing our impact on the

environment. Work to eliminate solid waste to landfills from our production facilities. Work to achieve an

absolute reduction in greenhouse gas (GHG) emissions across our global businesses. Continue to support

sustainable agriculture by expanding best practices with our growers and suppliers.

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Talent Sustainability

Create a safe, healthy, diverse and inclusive workplace that reflects the global communities in which we

operate. Respect human rights in the workplace and across the supply chain.

7- COMPANY STRATEGIES

PepsiCo uses Differentiations to gain a competitive advantage

Develop Brand Equity

Sell in Most Markets

Win Customers through Brand image

Developing Cooperation Strategy

In 1965 Pepsi-Cola merged with Frito-Lay to form PepsiCo

In 1968 PepsiCo purchased North American Van Lines

In 1970 PepsiCo bought Wilson Sporting Goods PepsiCo acquires Pizza Hut, Inc.

In 1977, Taco Bell in 1978 and Kentucky Fried Chicken in 1986

International Strategy

Four Sectors of Operation

PepsiCo Americas Beverages

PepsiCo Americas Foods

PepsiCo Europe

PepsiCo Asia, Middle East and Africa

Alliances & Cooperative Strategies

Tingyi- Beverage operations in China

Suntory- Beverage operations in Japan and Vietnam

Calbee - Snack food operations in Japan

Ocean Spray- Beverage operations in Latin America

Lipton- Beverage operations in India

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Mergers & Acquisitions

In 1998 PepsiCo purchased Tropicana Products. This brought in an expanded product line in the

form of juice.

In 2001 PepsiCo merged with Quaker Oats. This brought in the Quaker brands and Gatorade.

8-IMPROVED MISSION STATEMENT

Recommendation for PepsiCo mission statement:

“To be the world’s premier consumer products company focused on selling high quality food and

beverage products, to our customers all across the globe. We are triggered to use the most efficient

processes using the best of machinery. By doing so, we seek to produce healthy financial rewards to

investors as we provide opportunities for growth and enrichment to our employees, our business

partners, and the communities in which we operate. And everything we do, we strive for honesty,

fairness and integrity”

Recommendation for PepsiCo vision statement:

“To become the first choice of the consumers all over the world. Try to maximize our profit and

minimize our operating cost.”

9-COMPANY’S PRODUCTS & SERVICES

PepsiCo has 5 major brands offering. They have Pepsi products which include: Pepsi, Mountain

Dew, Energy Drinks and Aquafina water. They have Frito-Lay which include of Lay’s Chip, Totitos,

Sun Chip. They have Quaker Oats which includes Breakfast cereal, Oat meal and Syrup. They also

have Gatorade and Tropicana brand which include orange juice.

10-COMPETITION & MARKET CONDITIONS

The macro environment consists of the larger social forces that affect the micro environment.

The external factors are not under the control of the strategists, they can just observe them and

make strategies in light of these factors. Some of these factors are given below:

Demographic Factors:

Age: The requirements of different age groups are different. PepsiCo should target that group

that consumes it the most and make promotional strategies according to their behavior. So their

main target is the young generation.

Education: A company has to make promotional strategies keeping in view the customer level. If

the percentage of education is high in a country then through advertisements people can be

made well aware of their product and can convey their message easily. Promotion and education

has a direct relationship.

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Population Distribution: It means how much population lives in urban areas and rural areas.

PepsiCo is focusing on urban areas as people there are more inclined towards such beverage.

Economic Factors:

Income: If the income level of the people increases, it will have a positive effect on the

consumption of Pepsi

Inflation: If the country faces inflationary trend in the market, the price of the Pepsi will ultimately

increase which will lower its demand

Employment opportunities: As employment opportunities increase the living standard of the

people increase and the people consume more.

Economic Policies: Some of the economic policies which can affect the market of Pepsi are

discussed below:

Fiscal Policy: It is the policy of taxes. If heavy tax is levied on Pepsi then its price will rise having

negative affect on its consumption.

Monetary Policy: Monetary policy is made to restrict or increase the supply of money in the

market. If policies are made to restrict the flow of money in the market, inflation can be

controlled hence increasing the real income of the people which will ultimately affect the

consumption of Pepsi.

Price Policy: If price of Pepsi is increased its demand will decrease and vice versa.

Income Policy: If income of the people will increase their purchasing power will increase and

hence increasing the market share of Pepsi.

Physical Factors:

City size: The more city size, the more consumption of Pepsi

Climate: Pepsi is more suitable for humid or hot weathered countries

Infrastructures: Roads are the basic need for transportation of Pepsi from one place to another.

Pepsi cannot open factories in every city of each country so it has to transport it to other cities

where Pepsi is demanded.

Technological Factors:

Research and Development: Through research and development quality of the product can be

improved or better techniques or machinery can be developed which can increase the

production. When technology is advance the supply of the product increase hence the company

experiences growth in their business

Political and Legal Factors:

Political stability: Whenever the government is considered to be stable, the business will flourish.

If there is political stability in the country the policies and strategies made by Pepsi can be

consistent to be implemented. Foreign companies are also keen to invest in those countries

which are politically stable where they have no fear of decline in their market share or shut down

due to sudden change of government.

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Laws Formulation: Government has given copy rights to Pepsi so that another company cannot

sell their product by the name of Pepsi. The countries where laws are formulated, the strategies

and activities of the company are different.

Social Responsibility: Pepsi’s social responsibility is to provide its customers with clean and

hygienic product so to do this they have increased the use of disposable bottles.

Social and Cultural Factors:

Psychographic:

It is a combination of demographic and psychological factors. Psychological attributes mean how

you perceive things. The company will focus on the behavior of consumers and make different

changes in their product quantity or quality and in promoting their product so that they can

attract the customers. Keeping in view that the behavior of different consumers is not alike they

have to make their marketing strategies in accordance with their requirements so that they are

convinced to buy the product.

Media:

It is a very important factor for marketing. Media these days is a very effective way of inspiring

people to buy a specific product. A good promotion can boast up sales to a great extent.

11- SWOT ANALYSIS OF PEPSICO COLA

Strengths

Strong brand name is one of the greatest strengths for PepsiCo. It is one of the largest brands

that could be recognized be the people in the world. In all around the world the company use the

name “PepsiCo” in every country in the world. The strong brand presence makes it easier for the

company to market its products around the world. PepsiCo did not provide only the cola product

but also provide various numbers of products. All these brands have rode on the success of the

company brand and have found it easy to sell since the company brand in largely accepted in the

market. The popularity of PepsiCo corporate brand has also made it easier for the company to

introduce new products in the market. All PepsiCo has to do in order to make a new product

success is to attach it with the company’s corporate brand which has already attained a

significant level of brand loyalty in the beverage market.

PepsiCo is a large distribution network; this is the one of the core elements that define the

company success. The firm has managed to do this through creation of a massive distribution

system. The organization runs bottling units in diverse geographical region, which enables the

company to produce its products near the consumers. By doing this, it reduces the transportation

cost and storage cost of the company, which leads to the higher profit as it reduces the expense.

Moreover, the company also has established good connection with small and mega retailers who

sell PepsiCo products to the final customers. Forming partnership with large retailers such as

Wall- Mart has enabled the company to expand its reach to the market. Also, partnership with

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small retail business has helps the firm to take it products to even the remotest parts of the

world. Apart from retail chains, the company has also corporate with fast food restaurants

around the world such as KFC, which have also provided the company with a wide network of

outlets.

Weaknesses

The company’s reliant on franchised bottling company to distribute its products; this is one of

the internal weaknesses found in PepsiCo. This strategy has seen the company create very

powerful bottlers that it cannot exert control over. Occasionally, the franchises oppose

introduction of new products by PepsiCo while other refuse to produce some of the products.

Sometimes, the franchises also create their own product lines that are not part of the PepsiCo’s

brands. Moreover, this franchise system also limited the ability of the company to expand its

operations. On the other hand, the company main competitor like Coca Cola is being able to

invest in its bottling companies but the company cannot invest in its bottling companies since it

does not own them. This has hampered the growth and expansion of the firm since most of the

individual investors have limited capacity to make such investments.

Opportunities

Opportunities of PepsiCo are easy new products penetration in the market, it operates in fast

growing industry, changing social trends, and new media promotion opportunities. In addition, it has

the opportunity to make a partnership with well-known brand such as Starbucks, and more sport

tournaments that PepsiCo can support.

Threats

PepsiCo has to face with strong competition in every division it has, such as competition from

Coca-Cola and Kraft, it operates in the mature beverage/food industry, and aggressive top

management strategy by its competitors. There is also growth in the carbonated drink sector

which will bring new substitute products to entry. And also, some health issues are concerned

regarding the products of PepsiCo.

12- KEY EXTERNAL FACTOR ANALYSIS

According to the table 1’s calculations, it has been concluded that the company’s Total Weighted Score

is 3.2 which shows that the company is hugely successful in utilizing its opportunities and minimizing the

threats around it.

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13- KEY INTERNAL FACTOR ANALYSIS

According to the table 2’s calculations, it has been concluded that the company’s Total Weighted

Score is 3.55 which shows that the company is hugely successful in utilizing its strength and

minimizing the weakness around it.

14- STOCK PRICE and FINANCIAL FORECAST

According to the figure 1 in the appendix, the stock price would be increased significantly in the

year going on because of the trend line is positive and the slop is 6.4614.

The financial of PepsiCo is forecasted to increase since the sales can increase in 2016 and 2017.

The operating profit also increases in the following years according to the table 3 and 4 in the

appendix.

15- ANALYSIS OF COMPETITORS’ PROFILE

According to the table 3 in the appendix part that gives the general evaluation on some critical

success factors between PepsiCo, Coca Cola, and Gourmet. It showed the total weight score of

PepsiCo is the highest number by 3.29 points which means that PepsiCo has the most effective

internal strategies. It also means that PepsiCo has strongest strengths and less weaknesses than

their competitors, Coca Cola and Gourmet. In contrast, Gourmet has the lowest weight score by

1.49, which means that they have worst internal strategic information compare to PepsiCo and

Coca Cola. The Coca Cola Company has the total weight score at 2.5. It represents Coca Cola has

less effective internal strategic information than PepsiCo and more effective internal strategic

information than Gourmet. However, the total weight score of Coca Cola is still higher than the

average score which means they have very good internal strategic information as well.

Therefore, it can be said that PepsiCo has more potential opportunities in order to enlarge their

market share and take advantages implementing their business objective strategies. The

advertising really helps PepsiCo to capture consumer’s attention which is their target and makes

PepsiCo more valuable than its competitor

16- SPACE MATRIX

The SPACE Matrix tells us that PepsiCo should continue to pursue aggressive strategy. Our

company has a strong competitive position in the market with rapid growth. It needs to use its

internal strengths to develop market penetration and market development strategy. This can

include product development, integration with other companies, and acquisition of competitors.

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17- GRAND MATRIX

According to the figure 3 in Appendix PepsiCo comes in the first quadrant. The company must

focus on the current market and achieve growth by adopting product development and market

penetration strategies. The company has abundant resources and competitive advantage

through which it can achieve growth by adopting the backward and forward integration

strategies. PepsiCo can also adopt the related diversification strategy to reduce its risk with broad

portfolio or product line. PepsiCo can afford to take benefits of external opportunities in many

areas. It can take risk being aggressive when necessary.

18- QSPM OF PEPSICO

According to the QSPM, (shown in the Appendix), we have two alternative strategies for the

company and the after analyze the total attractiveness of two alternatives, we can conclude that

the strategy of introducing new product line is more attractive and suitable for the company.

19- STRATEGY BUSINESS RECOMMENDATIONS

Based on the analysis of space matrix that PepsiCo is on the first quadrant so they should still use

differentiations to gain a competitive advantage by developing brand equity, selling in most

markets, and winning customers through brand image. Especially, PepsiCo should develop

corporate strategic diversifications. In order to do market penetration, market development,

PepsiCo should corporate with:

Highland Coffee in Vietnam

Popeyes- fast-food restaurant in Vietnam

Campina- Beverage operations in Thailand


Popi- Beverage operations in France

Phuc Long- Beverage operations in Vietnam

In addition, according to the analysis of grand matrix that PepsiCo is also located on the first

quadrant so they should do mergers and acquisitions. Especially, PepsiCo should do international

strategies by direct exports, joint ventures, licensing or franchising, and acquisitions in the Middle

East, Asia, and Africa.

In 2016 PepsiCo should buy Rockstar Inc. This would bring in an expanded product line in the

form of energy drinks. Furthermore, PepsiCo could merge with Vinamilk Inc. This would bring in

the Vinamilk brands in Vietnamese market.

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In order to implement our strategy, here are our objectives for the project.

Research and development

Firstly, PepsiCo has to do the research on the consumer preferences in Middle East, Asia, and

Africa. The R&D department have to find out the consumers taste, price that they are willing to

pay and which category they prefer in energy drinks. The research can include both:

• Secondary research

• Primary research

After conducting the research, the company has to know which product should be produced that

adapts the changing of customers’ wants and needs. Firstly, it will be produced a sampling in

order to send to different markets for testation purpose. Then PepsiCo can send a team for

collecting customers’ feedbacks of this product. Finally, they can make decision whether or not

working on this project or they can make an adjustment to improve it and make mass production

for being ready to providing this product to their customers.

Matrix structure

Matrix structure is said to be the best structure as it has less disadvantages compare to the other

structures. Here PepsiCo can bring together the creative heads to work on this project. People

from different department such finance department, marketing department, and production

department can together to further proceed with this project.

After the team have put together, we will develop certain objectives which each department has

to follow to achieve long term goal.

Long term goal

To successfully launch the energy drinks into market and gain a market share 9% at the end of

financial year. Company will further divide this goal into small chunks for each department.

Finance department objectives

To generate finance to support this project and to carry on successfully

Production department

To produce to that limit where they can generate the revenues to gain share in the market

Marketing department

It is responsibility of the marketing department to sale those product which are produced by the

production department.

Resource allocation

Recourses are to be allocated according to priorities established by annual objective.

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There are four types of recourses

• Financial resources

• Physical resources

• Human resources

• Technology resources

Example

For production department, it is understood that for production department they will need new

technology in the form of new machinery as they are moving into new line of energy drinks.

20- PROPOSED METHODS & TIMETABLE FOR THE IMPLEMENTATION OF THE LONG TERM OBJECTIVES

Activities 1st Quarter 2nd Quarter 3rd Quarter

Month 1

Month2

Month3

Month4

Month5

Month6

Month7

Month8

Month9

Highland Coffee in Vietnam

Popeyes- fast-food restaurant in Vietnam

Campina- Beverage operations in Thailand


Popi- Beverage operations in France

Phuc Long- Beverage operations in Vietnam

PepsiCo should buy Rockstar Inc.

PepsiCo could merge with Vinamilk Inc.

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21- CONCLUSION

The PepsiCo is a very effective company that maintains the loyalty to their customers, while

consecutive growth the ultimate goals to maximize their profits. PepsiCo could do a very good

business with the marketing techniques. Furthermore, it can easily improve its products to meet

the aggregate demands of more consumers, especially in the unexploited market where have

various tastes. The marketing strategy and strategic management group could work on

diversifying customer segmentations to satisfy more races, age groups, cultures, and people that

are in less developed areas. Every company always has to improve their business day by day to

keep up with the changes of customers’ expectations, but the Pepsi Cola Company is getting close

to perfection. This success of PepsiCo is continuing to be prosperous as they always put their

customers is on the top of their priorities list.

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22- APPENDIX

KEY EXTERNAL FACTOR ANALYSIS

Table 1

Opportunities Weight Rate Total Score

PepsiCo New Products Can Easily Penetrate In The Market. 0.09 4 0.36

Noncarbonated Drinks Are The Fastest-Growing Industry 0.11 3 0.33

Demand Of Pepsi Is More Than Of Competitor 0.07 3 0.21

Changing Social Trends (Fast Foods) 0.09 3 0.27

Internet Promotion And Ordering Processes 0.06 1 0.06 May Tie Up or Liaison With Major Computer Centers &Restaurant 0.07 2 0.14

Threats

Non-Carbonated Substitutes (The Mango Season) 0.14 3 0.42

Beverage Industry Is Mature 0.12 4 0.48

Fake Products (Imitators) 0.1 2 0.2

Competitor’s Schemes 0.05 2 0.1

Strong Competition With Coca-Cola Company 0.1 2 0.2

Total 1 2.77 Scoring Method:

List The Key External Factor

Assign Weight To Each (0 To 1.0)

Weight In Response To Importance Of A Factor For A Particular Industry

Sum Of All Weights = 1.0

Assign 1-4 Rating To Each Factor

Firm’s Current Strategies Response to The Factor: How Well Firms Response To

These Factors (Effectiveness Of The Firm).

Poor Response 1

Average Response 2

Above Average Response 3

Superior Response 4

Multiply Each Factor’s Weight By Its Rating

Produces A Weighted Score

Sum The Weighted Scores For Each

Determines The Total Weighted Score For The Organization

Result: Above Average Response 2.77 (Aggressive)

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KEY INTERNAL FACTOR ANALYSIS Table 2

Strengths Weight Rate Total Score

Strong Multinational (Brand Equity) 0.11 3 0.33 Strong & Vast Distribution Channels 0.09 4 0.36 Lack Of Capital Constraints 0.07 3 0.21

Record Market Share 0.1 4 0.4

Strong Brand Portfolio 0.06 3 0.18 Aggressiveness In The Market (Market Leader) 0.07 3 0.21 Brand Promotion & Sponsorship 0.12 4 0.48

Weaknesses Targeting Only Young Customers 0.09 2 0.18 Political Franchises 0.06 2 0.12 Centralized Decision Making 0.05 2 0.1 Decline In Taste 0.09 1 0.09

Motivational Factor 0.05 1 0.05 Not All Products Bear The Company Name 0.04 2 0.08

Total 1 2.79 Scoring Method:

List Key Internal Factors (Strengths & Weaknesses)

Assign Weight To Each (0 To 1.0)

Weight In Response To Importance Of A Factor For A Particular Industry

Sum Of All Weights = 1.0


Firm’s Current Strategies Response to The Factor: How Well Firms Response to

These Factors (Effectiveness of The Firm).

Major Weakness 1

Minor Weakness 2

Minor Strength 3

Major Strength 4

Multiply Each Factor’s Weight By Its Rating

Produces A Weighted Score

Sum The Weighted Scores For Each

Determines The Total Weighted Score For The Organization

Result: 2.79 (Aggressive)

Score ≥ 2.5 Aggressive Score ≤ 2.5 Defensive

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STOCK & FINANCIAL FORCAST

PepsiCo 2010 2011 2012 2013 2014 2015

Stock Price 61.21 66.2 65.22 70.16 83.07 95.33

Figure 1

y = 6.4614x - 12930

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014 2015 2016

PEPSICO'S STOCK PRICE

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FINANCIAL FORECAST

Income Statement

Table 3

Actual in M$ Estimate in M$

Fiscal Period December 2012 2013 2014 2015 2016 2017

Sales 65 492 66 415 66 683 63 656 66 072 68 623

Operating income(EBITDA) 12 371 12 724 12 938 12 544 13 236 13 888

Operating profit (EBIT) 9 682 10 061 10 313 9 980 10 540 11 126

Pre-Tax Profit (EBT) 8 304 8 891 - - - -

Net income 6 178 6 740 6 513 6 711 7 111 7 523

EPS ( $) 3,92 4,32 4,27 4,51 4,90 5,26

Dividend per Share ( $) 2,13 2,24 2,53 2,76 2,95 3,19

Yield 2,37% 2,50% 2,83% 3,08% 3,30% 3,56%

Announcement Date 02/14/2013

12:00pm 02/13/2014

12:00pm 02/11/2015

12:03pm - - -

Balance Sheet

Table 4

Actual in M$ Estimate in M$

Fiscal Period December 2012 2013 2014 2015 2016 2017

Debt 21 740 20 264 20 171 23 015 23 304 23 751

Finance - - - - - -

Operating income (EBITDA) 12 371 12 724 12 938 12 544 13 236 13 888

Leverage (Debt/EBITDA)

1,76x 1,59x 1,56x 1,83x 1,76x 1,71x

Capital Expenditure 2 714 2 795 2 859 2 840 2 892 3 005

Book Value Per Share (BVPS) 14,5 $ 16,0 $ 11,7 $ 11,0 $ 11,3 $ 12,7 $

Cash Flow per Share 5,38 $ 6,21 $ 6,88 $ 6,55 $ 7,26 $ 7,56 $

Announcement Date 02/14/2013

12:00pm 02/13/2014

12:00pm 02/11/2015

12:03pm - - -

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ANALYSIS OF COMPETITIVE PROFILE MATRIX Table 5

CRITICAL SUCCESS FACTORS Weight Rate Total Score Rate

Total Score Rate

Total Score

Plant Location 0.07 3 0.21 2 0.14 1 0.07

Strong Brand Image 0.11 4 0.44 4 0.44 3 0.33 Large Marketing Resource Budget 0.09 3 0.27 3 0.27 2 0.18 Market Share 0.12 4 0.48 2 0.24 1 0.12 Product Taste 0.09 3 0.27 4 0.36 3 0.27

Production Capacity 0.07 4 0.28 3 0.21 1 0.07 Innovation 0.11 3 0.33 3 0.33 2 0.22 Control over Supply Chain 0.06 3 0.18 3 0.18 2 0.12

Availability 0.11 4 0.44 3 0.33 1 0.11

Advertising 0.1 3 0.3 3 0.3 1 0.1 Bottling Investment & Empty Mgt 0.03 3 0.09 3 0.09 1 0.03 Personnel 0.04 3 0.12 3 0.12 2 0.08

Total 1 3.29 2.5 1.49 Scoring Method:

List Key Internal and External Critical Success Factors

Assign Weight to Each (0 To 1.0)

Weight in Response to Importance of a Factor for A Particular Industry

Sum of All Weights = 1.0


Firm’s Current Strategies Response to the Factor: How Well Firms Response to These

Factors (Effectiveness of The Firms).

Major Weakness 1

Minor Weakness 2

Minor Strength 3

Major Strength 4

Multiply Each Factor’s Weight by Its Rating

Produces a Weighted Score

Sum the Weighted Scores for Each

Determines the Total Weighted Score for the Organization

Result:

PepsiCo. Is More Aggressive Policy As Compare To Other Competitor

21


SPACE MATRIX Figure 2

Steps for the preparation of SPACE Matrix:

a. Select a set of variables to relating to financial strength, competitive advantage, environmental

Stability and industry strength.

b. Assign a numerical value ranging from +1 (worst) to +6 (best) to each of the variables that make

up the financial strength and industry strength dimensions. Assign a numerical value ranging from

- 1 (best) to -6 (worst) to each of the variables that make up the environmental stability and

Competitive advantage dimensions.

c. Compute an average score and dividing by the number of variables

d. Plot the average scores in the space matrix.

e. Add the two scores on the x-axis and plot the resultant point on x. Add the two scores on the

y-axis and plot the resultant point on y. Plot the intersection of the new (x;y) point.

22


f. Draw a directional vector from the origin of the space matrix through the new intersection

point. This vector reveals the type of strategies recommended for the organization: aggressive,

Competitive, defensive, or conservative.

Competitive position:

Brand Recognition -3 Mean= -2.75

Large Market Share -2

Wide Distribution Channel -2

Customer Loyalty -4

Financial position:

Inventory Turnover +5 Mean= +4

Return on Asset +4

Net Income +3

Industrial position:

High Industry Growth Rate +5 Mean = +3.75

Profit Potential +3

Financial Stability +4

Resource Utilization +3

Stability position:

Economic Stability -2 Mean = -2.33

Barrier to Entry -2

Competitive Pressure -3

CP + IP = +1.0

FP+SP = +1.67

23


GRAND MATRIX

Figure 3

QUANTITATIVE STRATEGIC PLANNING MATRIX

There are four main columns in QSPM, the left column list down the key internal and external

key factors which are same as in EFE and IFE matrix. Adjacent column to key factors is Weight

(relative importance of the factor) which holds the numeric value obtained from EFE and IFE

matrix weight column. The next to weight is AS stands for attractive score assign priority to key

factors using the numeric value 4 for most importance and 1 for least importance and the last

column TAS (Total attractive score) is the value calculated by multiplying weight by AS. One thing

important to note for each strategy separate AS and TAS value added in the table, weight remain

same for all set of strategies mentioned in QSPM.

Rapid Market Growth

Quadrant II Quadrant I

Strong

Competitive

Position

Slow Market Growth

Weak

Competitive

Position

Quadrant III Quadrant IV

24


Key Internal Factors Weight

Increasing the

advertisement /

Marketing Budget

Introducing the

energy drinks

Strengths AS TAS AS TAS

1: Strong Brand 0.09 2 0.18 2 0.18

2: Strong marketing and advertising of

products around globe

0.07 2 0.14 4 0.28

3: Products availability 0.08 --- --- --- ---

4: Revenue and profits 0.08 1 0.08 --- ---

5: Market share 0.07 --- --- --- ---

6: Working Environment 0.05 --- --- --- ---

7: Wide variety of products 0.05 --- --- --- ---

8: Earning per share 0.02 --- --- --- ---

Weaknesses

1: High debts 0.07 --- --- --- ---

2: Health Issues 0.08 --- --- 2 0.16

3: Low sales in some products 0.09 --- --- --- ---

4: Negative impact on brand image due to

product recall

0.10 --- --- 1 0.10

5: Lack of product focus 0.05 --- --- --- ---

6: High operating expense 0.10 2 0.2 2 0.2

SUBTOTAL 1.00 0.6 0.92

Key External Factors Weight

Increasing the

advertisement /

Marketing Budget

Introducing the

energy drinks

Opportunities AS TAS AS TAS

1: Easy new products penetration in markets 0.09 --- --- 4 0.36

25


2: Operate in the fastest growing industry

(noncarbonated drinks)

0.10 --- --- 2 0.3

3: Changing social trends (healthy foods) 0.10 --- --- 3 0.3

4: Media promotion and vending machines 0.10 4 0.4 2 0.2

5: Partnerships with well-known brands 0.07 --- --- --- ---

6:More sport tournaments are being held

worldwide

0.09 3 0.27 2 0.18

Threats

1: Strong competition in every division 0.10 --- --- --- ---

2: Growth of energy drinks in carbonated

drinks sector

0.08 --- --- 2 0.16

3: Mature industry 0.10 --- --- --- ---

4: A few Frito Lay products resulted in

abdominal cramps in consumers

0.07 --- --- --- ---

5:Aggresive top management strategy by

competitor

0.10 --- --- --- ---

SUB TOTAL 1.00 0.67 1.5

SUM TOTAL ATTRACTIVENESS SCORE 1.27 2.42

REFERENCES:

http://www.marketingteacher.com/pepsi-swot/

https://finance.yahoo.com/q/ae?s=PEP+Analyst+Estimates

http://www.reuters.com/article/2010/01/19/idUS116177+19-Jan-2010+BW20100119

http://www.authorstream.com/Presentation/crystalmcmahan-1865748-powerpoint-project-

pepsico/

http://www.pepsico.com/Investors/Stock-Information

http://www.strategicmanagementinsight.com/products/swot-analyses/coca-cola-swot-

analysis.html

http://balancedscorecard.org/Resources/Strategic-Planning-Basics

http://www.marketingteacher.com/pepsi-swot/

https://finance.yahoo.com/q/ae?s=PEP+Analyst+Estimates

http://www.reuters.com/article/2010/01/19/idUS116177+19-Jan-2010+BW20100119

http://www.authorstream.com/Presentation/crystalmcmahan-1865748-powerpoint-project-pepsico/

http://www.authorstream.com/Presentation/crystalmcmahan-1865748-powerpoint-project-pepsico/

http://www.pepsico.com/Investors/Stock-Information

http://www.strategicmanagementinsight.com/products/swot-analyses/coca-cola-swot-analysis.html

http://www.strategicmanagementinsight.com/products/swot-analyses/coca-cola-swot-analysis.html

http://balancedscorecard.org/Resources/Strategic-Planning-Basics

26


http://www.academia.edu/9365531/STRATEGIC_MANAGEMENT_FINAL_PAPER_PEPSICO_CASE

_STUDY_ANALYSIS_LECTURER

http://www.slideshare.net/saad216/strategic-management-project-report-finallllllllllllllllllll

http://www.academia.edu/9365531/STRATEGIC_MANAGEMENT_FINAL_PAPER_PEPSICO_CASE_STUDY_ANALYSIS_LECTURER

http://www.academia.edu/9365531/STRATEGIC_MANAGEMENT_FINAL_PAPER_PEPSICO_CASE_STUDY_ANALYSIS_LECTURER

http://www.slideshare.net/saad216/strategic-management-project-report-finallllllllllllllllllll

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