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By
Abdulgader Shukri
Amin Khayat
Amjad Ali
Saleh Alsaif
Dar Mir
Intro
History
Mission
Labib
2nd largest beverage company in the world.
Presence in 200 countries
Key International markets include Argentina, Brazil,
China, India, Mexico, Saudi Arabia, Spain, Thailand and
U.K.
Introduction
History
1890 – Founded by Caleb Bradham
1903 – Trademark
1923, 1931 – Bankrupt
1936- 1938 – Great Depression,
Profit Doubled , 10-5 cents.
1941 – Pepsi stock 1st time
1950 – Franchise outside U.S.
1960 – Target market – Young adults
1965 – Pepsi Cola Merger with Frito-Lay to form PepsiCo.
1970-1980 – Bought restaurant chains such as Pizza hut, Taco
bell, KFC
1980-1990 – Cola Wars
1994-1999 - International Growth and Diversification,
Tropicana $ 3 billion
2000 – Quaker Oats, Gatorade
Cont’d..
Soft drinks are not referred to as items of necessity.
Sodas stand between liquor and juice.
• Frito-Lay brands account for 59% of U.S. snack chip industry
Acquired Tropicana in 1998
Available in more than 63 countries.
Pure, fresh fruit juice in easy to handle package has
attracted the consumers
Gatorade is the first isotonic sports drink.
Created in 1965 by researchers at University of Florida for
the football team “The Gators”
Worlds leading Sports Drink
PepsiCo merged with Quaker Oats -2001
Wide range of healthy food
Three business units
1. PepsiCo Americas Foods which includes:
Frito-Lay North America ,
Quaker Foods North America,
all of its Latin American food and snack businesses.
2. PepsiCo Americas Beverages consisted of:
PepsiCo Beverages North America
all of its Latin American beverage businesses.
3. PepsiCo International.
all PepsiCo businesses in Europe, Asia, Middle East
and Africa (AMEA)
Mission Statement
“ Our mission is to be the world's premier consumer
Products 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.”
Mission Statement evaluationComponents Mentioned
Customers NO
Products/Service YES
Markets YES
Technology NO
Concern for Survival, Growth, Profitability
YES
Philosophy YES
Self-Concept NO
Concern for Public Image YES
Concern for Employees YES
Company Objectives
Capture larger market share through product
innovation and diversification.
To use synergy between product portfolios to cross sell
products.
Achieve higher growth from its international markets.
Company Objectives
Create a sustainable business for the communities and
environment.
To spot the shift in consumer preferences.
Supporting product initiatives with creative marketing
and sales initiatives.
Company Strategies
Marketing Developme
nt
Product Developme
nt
Conglomerate
Diversification
Forward Integration
Amjad
Financial Evaluations.
Internal strength &
Weakness.
Historical Financial Analysis
2007 2008 2009 Assessment
Liquidity Ratios
Current Ratio 1.31 1.23 1.44 P
Quick Ratio 1.01 0.94 1.14 P
Historical Financial Analysis
2007 2008 2009 Assessment
Asset Utilization Ratios
Inventory Turnover 17.24 17.14 16.51 N
DSI 21.17 21.28 22.10 P
AR Turnover 8.99 9.24 9.35 P
DSO (ACP) 40.58 39.52 39.04 N
Fixed Asset Turnover 3.52 3.71 3.41 N
Total Asset Turnover 1.14 1.20 1.08 N
Historical Financial Analysis
2007 2008 2009 Assessment
Debt Management Ratios
Debt Ratio 0.50 0.66 0.58 P
TIE 35.07 22.34 21.35 N
Historical Financial Analysis
2007 2008 2009 Assessment
Profitability Ratios
Gross Margin 0.54 0.53 0.54 P
Operating Margin 0.20 0.17 0.20 P
Profit Margin 0.14 0.12 0.14 P
BEP 0.23 0.20 0.21 P
ROA 0.16 0.14 0.15 P
ROE 0.33 0.42 0.35 N
Competitor Financial Analysis
Competitors Assessment
Pepsi KO Dr.
Pepper Industry KO Dr.
Pepper
Liquidity Ratios
Current Ratio 1.44 1.27 1.50 1.40 S W
Quick Ratio 1.14 1.10 1.19 1.20 S W
Asset Utilization Ratios
Competitors Assessment
Pepsi KO Dr.
Pepper Industry KO Dr.
Pepper
Asset Utilization Ratios
Inventory Turnover 16.51 13.16 21.11 6.00 S W
DSI 22.10 27.73 17.29 54.48 S W
AR Turnover 9.35 8.25 8.85 10.20 S S
DSO (ACP) 39.04 44.26 41.24 35.78 S S
Fixed Asset Turnover 3.41 3.24 4.99 - S W
Total Asset Turnover 1.08 0.64 0.63 0.80 S S
Debt Management Ratios
Competitors Assessment
Pepsi KO Dr.
Pepper Industry KO Dr.
Pepper
Debt Management Ratios
Debt Ratio
0.58
0.49 0.64 - S W
TIE
20.43
24.00 4.57 2.40 W S
Profitability Ratios
Competitors Assessment
Pepsi KO Dr.
Pepper
Industry KO Dr.
Pepper
Profitability Ratios
Gross Margin 0.54 0.64 0.60 0.59 W W
Operating Margin 0.19 0.27 0.20 - W W
Profit Margin 0.13 0.20 0.10 0.18 W S
BEP 0.20 0.18 0.13 - S S
ROA 0.14 0.13 0.06 0.13 S S
ROE 0.33 0.25 0.17 0.39 S S
Internal Strength & WeaknessWeights Rating Weighted
Scorekey external factor
Strength
0.40 4.00 0.10 Strong differentiation strategy
0.27 3.00 0.09 Strong product diversification strategy
0.30 3.00 0.10 strong focus on using product synergies
0.18 2.00 0.09 Due to the attractive regulation and relation AR. shows a good standing in company to their competitors
0.16 2.00 0.08 Access to global employee base
0.27 3.00 0.09 Decentralized operations
Weakness
0.40 4.00 0.10 High spend on promotional activities
0.40 4.00 0.10 Targeting contemporary consumers
0.08 1.00 0.08 Global organization slow to adopt to change
0.24 3.00 0.08 Many production facilities still on high energy and high waste system
0.18 2.00 0.09 Weak profit margin
2.88 1.00
Internal environment
RBV model
Resources Valuabl
e
Rare Inimitab
le
Non-
substituta
ble
Competitive
advantage
Expected
performance
Water Competitive
parityA Return
Decentraliz
ed
structure
Temporary
competitive
advantage
A to AA
Return
Brand Sustainable
Competitive
advantage
AA Return
Recipe Temporary
competitive
advantage
A to AA
Return
Abdulgader
External Opportunity &
Threats
SOWT Analysis.
External environment
Tools used:
General environment.
Competitive environment. (Five forces)
Strategic group.
External environment
General Environment
External environment
Porter’s five forces model
Strategic Groups
Strategic groups Coca-Cola Dr Pepper
1. Objectives different different
2. Strategies same same
3. Strengths Market share Product position
4. Weaknesses Undiversified product
Undiversified product
External environment
Weights Rating Weighted Score
key external factor
Opportunities
0.40 4.00 0.10 Business Internationalization
0.36 4.00 0.09 Changing consumer preferences
0.30 3.00 0.10 Energy efficient production techniques
0.16 2.00 0.08 high barrire to entry
0.10 2.00 0.05 low bargining power of supplier
0.45 3.00 0.15 large portfolio than competitors
Threats
0.40 4.00 0.10 political & community support
0.27 3.00 0.09 ecnomic factors
0.18 2.00 0.09 technological innovation
0.21 3.00 0.07 the intesity of rivalry among competitors in a industry is high
0.16 2.00 0.08 number two rank in market share
2.99 1.00
The Internal-External (IE) MatrixHold & maintain
1) MKT penetration 2) Product development
SWOT MATRIX
STRENGTH WEAKNESS
1. Strong differentiation strategy 2. Strong product diversification
strategy 3. Strong focus on using product
synergies 4. Due to the attractive regulation
and relation AR. Assets shows a good standing in company to their
competitors 5. Access to global employee base
6. Decentralized operations
1. High spend on promotional activities
2. Targeting contemporary consumers 3. Global organization slow to adopt
to change 4. Many production facilities still on
high energy and high waste system 5. Weak profit margin
OPPORTUNITY SO STRATEGIES WO STRATEGIES
1. Business internationalization 2. Changing consumer
preferences(healthy style) 3. Energy efficient production
techniques 4. Low barrier to entry
5. Low barging power of supplier
1. Using differentiated and diversified products enter into the
emerging markets (S1, S2, S6, O1)
2. Diversified products portfolio can be aligned to customer
preferences (S1,S2, O2) 3. Product synergies and innovation
can give it continued leadership position (S3, O6)
1. Business internationalization will allow top line growth for lower incremental promotional spend
(W1, O1) 2. Changing consumer preferences
will allow it to go beyond the contemporary segments (W2, O2)
3. Availability of energy efficient techniques can allow it to divest
from less efficient production sites (W4, O3)
THREATS ST STRATEGIES WT STRATEGIES
1. Political & community support 2. Economic factors
3. The intensity of rivalry among competitor in an industry is high
4. Technological Innovation 5. Number two rank in market share
1. Decentralized operations will allow the political and local
communities to be better engaged (S6, T1)
2. Differentiation and diversification with product synergies will allow it to rise above price competition
(S1, S2, S3, T2, T5)
1. Political and community support will help reduce the incremental promotional spend by creating
positivity around PepsiCo brand (W1, T1)
2. Technological innovation will help it divest the high energy and waste production sites and also improve
the social and environmental impacts (W4, T4)
SO STRATEGIES
Using differentiated and diversified products enter into the emerging markets • (S1, S2, S6, O1)
Diversified products portfolio can be aligned to customer preferences • (S1,S2, O2)
Product synergies and innovation can give it continued leadership position • (S3, O6)
WO STRATEGIES
Business internationalization will allow top line growth for lower incremental promotional spend • (W1, O1)
Changing consumer preferences will allow it to go beyond the contemporary segments • (W2, O2)
Availability of energy efficient techniques can allow it to divest from less efficient production sites • (W4, O3)
ST STRATEGIES
Decentralized operations will allow the political and local communities to be better engaged • (S6, T1)
Differentiation and diversification with product synergies will allow it to rise above price competition • (S1, S2, S3, T2, T5)
WT STRATEGIES
Political and community support will help reduce the incremental promotional spend by creating positivity around PepsiCo brand • (W1, T1)
Technological innovation will help it divest the high energy and waste production sites and also improve the social and environmental impacts • (W4, T4)
Amin
Mission Statement
Revision.
Alternative Strategies.
Strategy
Implementation.
Revised Mission Statement
‘Our mission is to be the world’s premier consumer
Products Company focused on new technologies to
produce diversified convenient foods and beverages that
delight all varieties of customers and bring value into
their lives. We seek to produce financial rewards to
investors as provide opportunities for growth and
enrichment to our employees, our business partners and
the communities in which we operate. We make sure
doing it the right way. And in everything we do, we strive
for honesty, fairness and integrity ’
Alternatives Strategies
Market Development
Product Development
Market Penetration
The Grand Strategy Matrix
MKT penetrations Product development MKT development key external & internal factorsTAS AS TAS AS TAS AS Weight Opportunities
0.3 3 0.4 4 0.4 4 0.1 Business Internationalization
0.27 3 0.36 4 0.27 3 0.09 Changing consumer preferences
0.3 3 0.4 4 0.3 3 0.1 Energy efficient production techniques
0.16 2 0.16 2 0.16 2 0.08 high barrire to entry
0.1 2 0.1 2 0.1 2 0.05 low bargining power of supplier
0.15 1 0.6 4 0.45 3 0.15 large portfolio than competitors
Threats
0.2 2 0.3 3 0.4 4 0.1 political & community support
0.18 2 0.27 3 0.18 2 0.09 ecnomic factors
0.18 2 0.27 3 0.27 3 0.09 technological innovation
0.07 1 0.14 2 0.07 1 0.07 the intesity of rivalry among competitors in a industry is high
0.08 1 0.16 2 0.08 1 0.08 number two rank in market share
1
Strengths0.3 3 0.4 4 0.3 3 0.1 Strong differentiation strategy
0.27 3 0.36 4 0.27 3 0.09 Strong product diversification strategy0.2 2 0.4 4 0.2 2 0.1 strong focus on using product synergies
0.09 1 0.27 3 0.09 1
0.09 Due to the attractive regulation and relation AR. Assets shows a good standing in company to their competitors
0.08 1 0.16 2 0.08 1 0.08 Access to global employee base0.27 3 0.18 2 0.18 2 0.09 Decentralized operations
Weaknesses0.2 2 0.4 4 0.1 1 0.1 High spend on promotional activities0.2 2 0.4 4 0.1 1 0.1 Targeting contemporary consumers
0.24 3 0.24 3 0.08 1 0.08 Global organization slow to adopt to change
0.16 2 0.16 2 0.16 2
0.08 Many production facilities still on high energy and high waste system
0.09 1 0.18 2 0.18 2 0.09 Weak profit margin
4.09 6.31 4.42 1.00
Product development
Marketing:
Long-Term Objective:
Delivering catered products to each region to match customer
preference and needs.
Annual Objective:
Introduce one new product every year.
Support developed products with creative marketing campaigns.
Policy:
All Marketing activity must be evaluated before execution to insure
success. In addition, the marketing activity of developed products should
cover wider spectrum of customers to utilize marketing budget effectively.
Strategy:
Conduct Market Survey and research to understand consumer preference
and needs.
Collect loyal consumers’ feedback and ideas for future product
development.
Product development
Operation:
Long-Term Objective:
To produce top quality products.
To be prepaid to adapt any new operational processes to develop new
product.
Eliminate supplies inventory.(JIT)
Annual Objective:
Hire skilled and experienced people.
Develop efficient (JIT) plan.
Product development
Product development
Policy:
Being very selective in hiring, by choosing skilled and
experienced employee.
Schedule semiannually meeting with suppliers.
Strategy:
Use latest technology in the manufacturing process.
Take an advantage of low supplier bargaining power and
empower JIT.
Management:
Long-Term Objective:
Reduce or eliminate resistance to change of process and
individual.
Annual Objective:
Increase the understanding about the advantage of change
Support and endorse creativity for all employees.
Product development
Policy:
Employees will be required to present at least two new ideas
to their superior every year.
Strategy:
Use rational or Self-interest change strategy to assure easy
and fast implementation of any changes required for
developing new product.
Product development
Finance:
Long-Term Objective:
Company must continue Aggressive financial planning
to support budgeting.
Annual Objective:
By developing new products every year the company
must maintain 20% increase in revenue yearly.
Product development
ImplementationProduct development
Policy:
The company must cover the rising costs by increasing
revenue proportionately.
Strategy:
Company will acquire a $500 million dollar loan financed
and paid over a 5 years period.
Research Development:
Long-Term Objective:
Develop at least fifteen ready to launch new products in the next 5
years.
Develop healthier snacks.
Annual Objective:
Develop 5 new products every year and pick the best one to launch.
Follow up and analyze food safety issues to develop the right product.
Product development
Policy:
All developed products should go through testing process and
evaluation before lunching to make sure targeted consumers will be
satisfied.
Strategy:
Innovate in heart-healthy oil, sodium reduction and more whole grains.
Appropriate incentive plans for employees who contribute to new
product development.
Product development
Pro-forma
Projected Financial
ratios
Balanced Scorecard
Saleh
PRO-FORMA : Income StatementPERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2010 Assessment
Total Revenue 39,474,000 43,251,000 43,232,000 51,878,400 20% increase
Cost of Revenue 18,038,000 20,351,000 20,099,000 23,706,302 Percentage of sales = 45.6%
Gross Profit 21,436,000 22,900,000 23,133,000 28,172,098
Operating Expenses
Research Development - - - -
Selling General and Administrative 14,208,000 15,901,000 15,026,000 19,233,280 Historical trend + 20%
Non Recurring - - - -
Others 58,000 64,000 63,000 63,000 As prior year
Total Operating Expenses 14,266,000 15,965,000 15,089,000 19,296,280
Operating Income or Loss 7,170,000 6,935,000 8,044,000 8,875,818
Income from Continuing Operations
Total Other Income/Expenses Net 685,000 41,000 67,000 67,000 As prior year
Earnings Before Interest And Taxes 7,855,000 7,350,000 8,476,000 8,942,818
Interest Expense 224,000 329,000 397,000 528,010 Historical trend
Income Before Tax 7,631,000 7,021,000 8,079,000 8,414,808
Income Tax Expense 1,973,000 1,879,000 2,100,000 2,204,987 Tax rate 26.2%
Minority Interest - - -33,000 -33,000 As prior year
Net Income From Continuing Ops 5,658,000 5,142,000 5,946,000 6,176,821
Net Income 5,658,000 5,142,000 5,946,000 6,176,821
PRO-FORMA : Balance SheetStockholders' Equity 2007 2008 2009 2010
Misc Stocks Options Warrants - - -104,000 -104,000 As prior year
Redeemable Preferred Stock - -97,000 - - As prior year
Preferred Stock 41,000 - - -
Common Stock 30,000 30,000 30,000 30,000 As prior year
Retained Earnings 28,184,000 30,638,000 33,805,000 39,981,821Ending Retained Earnings + Projected net
income
Treasury Stock -10,519,000 -14,122,000 -13,383,000 -13,383,000 As prior year
Capital Surplus 450,000 351,000 250,000 250,000 As prior year
Other Stockholder Equity -952,000 -4,694,000 -3,794,000 -3,794,000 As prior year
Total Stockholder Equity 17,234,000 12,106,000 16,804,000 22,980,821
Total liabilities and stock holder equity 34,628,000 35,994,000 39,848,000 40,628,821
PRO-FORMA : Balance SheetLiabilities 2007 2008 2009 2010
Current Liabilities
Accounts Payable 6,209,000 6,494,000 8,292,000 9,950,400 As sales
Short/Current Long Term Debt - 369,000 464,000 564,000 Prior year + 100M
Other Current Liabilities 1,544,000 1,924,000 - - As prior year
Total Current Liabilities 7,753,000 8,787,000 8,756,000 10,514,400
Long Term Debt 4,203,000 7,858,000 7,400,000 10,760,000 Historical trend + 400M
Other Liabilities 4,792,000 7,017,000 5,591,000 5,591,000 As prior year
Deferred Long Term Liability Charges 646,000 226,000 659,000 659,000 As prior year
Minority Interest - - 638,000 638,000 As prior year
Negative Goodwill - - - - As prior year
Total Liabilities 17,394,000 23,888,000 23,044,000 17,648,000
PRO-FORMA : Balance SheetPERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2,010 Assessment
Assets
Current Assets
Cash And Cash Equivalents 910,000 2,064,000 3,943,000 2,115,161 Plug figure
Short Term Investments 1,571,000 213,000 192,000 192,000 As prior year
Net Receivables 4,389,000 4,683,000 4,624,000 5,548,800 As sales
Inventory 2,290,000 2,522,000 2,618,000 3,141,600 As sales
Other Current Assets 991,000 1,324,000 1,194,000 1,194,000 As prior year
Total Current Assets 10,151,000 10,806,000 12,571,000 12,191,561
Long Term Investments 4,475,000 3,998,000 4,484,000 4,484,000 As prior year
Property Plant and Equipment 11,228,000 11,663,000 12,671,000 13,831,260 Historical trend + 400M
Goodwill 5,169,000 5,124,000 6,534,000 6,534,000 As prior year
Intangible Assets 2,044,000 1,860,000 2,623,000 2,623,000 As prior year
Accumulated Amortization - - - - As prior year
Other Assets 1,356,000 2,324,000 965,000 965,000 As prior year
Deferred Long Term Asset Charges 205,000 219,000 - - As prior year
Total Assets 34,628,000 35,994,000 39,848,000 40,628,821
Projected Financial Ratios 2007 2008 2009 2010 Assessment
Liquidity Ratios Current Ratio 1.31 1.23 1.44 1.16 Negative Quick Ratio 1.01 0.94 1.14 0.86 Negative
Asset Utilization Ratios
Inventory Turnover 17.24 17.15 16.51 16.51 Same DSI 21.17 21.28 22.10 22.10 Same
AR Turnover 8.99 9.24 9.35 9.35 Same DSO (ACP) 40.58 39.52 39.04 39.04 Same
Fixed Asset Turnover 3.52 3.71 3.41 3.75 Positive Total Asset Turnover 1.14 1.20 1.08 1.28 Positive
Debt Management Ratios
Debt Ratio 0.50 0.66 0.58 0.43 Positive TIE 35.07 22.34 21.35 16.94 Negative
Profitability Ratios
Gross Margin 0.54 0.53 0.54 0.54 Same Operating Margin 0.20 0.17 0.20 0.17 Negative
Profit Margin 0.14 0.12 0.14 0.12 Negative BEP 0.23 0.20 0.21 0.22 Positive ROA 0.16 0.14 0.15 0.15 Same ROE 0.33 0.42 0.35 0.27 Negative
Market Ratios
P/E N/A N/A N/A N/A P/CF N/A N/A N/A N/A M/B N/A N/A N/A N/A
Projected Financial Ratios
Ratio Category Projected
Liquidity Negative
Asset UtilizationFixed Asset turnover Total Asset Turnover
SamePositivePositive
Debt Management RatiosDebt Ratio
TIE
PositiveNegative
Profitability RatiosGross Margin
Op and Profit MarginROE
BEP and ROA
SameNegativeNegativePositive
Market N/A
Balanced ScorecardPerspective Goal Measurement
FinancialFirm growth and profitability Annual sales growth of at least 5%
every year and net profitability
improvements of 2-3%
CustomerValue creation, satisfaction
and support
Market leading position in all major
markets
Cost of sales dropping by 4-55 annually
Internal Business ProcessEfficiency & waste reduction Cost of production dropping by 4-5%
annually
Learning & GrowthInnovation and employee
satisfaction
Employee attrition drop by 10%
annually
At least 20% of annual sales from
products less than 2 years in the market
Rumelt’s Criteria
Conclusion
Labeeb
Rumelt’s Criteria
Consistency:
Strategy should not present inconsistent goals and
policies.
Introducing current segment products in new markets
will drive consistency of consumer expectations
regardless of the locations they are present in.
Consonance:
Need for strategies to examine set of trends.
Introduction of more health conscious products which
will cater to the growing market for health conscious
consumers, PepsiCo will be building momentum in
line with current trends.
Rumelt’s Criteria
feasibility:
Neither overtax resources or create unsolvable sub-problems
The new focus of regionalization or employee base diversification
will render to local market product development and idea
generation. The feasibility for such strategies should be in line with
research and development resources but will pay off eventually.
Rumelt’s Criteria
Advantage:
Creation or maintenance of competitive advantage.
The resources and skills within the company is notably
strong and defensive against future threats and with the
implementation of the new strategies it will be miles ahead
of its competition.
Rumelt’s Criteria
Conclusion
Serving consumers with premier convenient foods.
Environmental Sustainability.
Capture more of the aging population market share.
Consistency of innovative products.