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Pepsi Co’s Diversification strategy in 2015

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Table of Contents
Pepsi Co’s Diversification strategy in 2015...............................................................................1

Topic 1: Strategy and Competitive Advantage..........................................................................3

What business is the company in?.........................................................................................3

Has the company’s strategy resulted in a competitive advantage? How?.............................3

Has the company’s strategy resulted in good company performance?..................................4

Topic 2: Defining Vision & Mission.........................................................................................4

What do you think is the company’s vision or mission?.......................................................4

Are there any conflicts between the company’s actions and its vision or mission?..............5

Topic 3: Industry and Market Analysis......................................................................................5

Is there a particular segment of the market that you think is more attractive?......................5

What are the key success factors in this market?...................................................................6

What are the main changes in the company’s environment?.................................................6

Which of Porter’s Five Forces do you think is influencing the company the most?.............7
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Introduction

The case of diversification strategy of Pepsi Co. is an excellent example of the strategic

decisions of one of the leading global leading corporation in food and beverage industry,. The

company has opted aggressive growth strategy since the beginning and increased the global

market share of the company in last two decades through rapid acquisitions and mergers with

leading snacks and drinks brands. This paper addressed the important issues discussed in this

case study and briefly explains the argument raised about Pepsi diversification strategies.

Topic 1: Strategy and Competitive Advantage

What business is the company in?

Pespsi Co is one of the global leading beverage and the world biggest snack corny with a

large range of billion dollar brands in its portfolio. The company has over a century

experience of launching and collaborating food and beverage brands globally with North

America as the dominant market. The company diversified the product portfolio rapidly after

2000 and acquired some of the world largest selling brands including Frito-Lay, Quaker

Oatmeal and granola bars, Pepsi beverages, Tropicana juices, and Gatorade.

Has the company’s strategy resulted in a competitive advantage? How?

In all these snack and drink category, Pepsi succeeded number one of number two positions

globally with second highest market capitalization. On the other hand , besides the success of

Pepsi Co, in global branding and marketing for collaborating or acquired brands, large

employees base, high operational expenses, and last profit margins are some of the downsides

of this strategy. The strategy resulted in competitive advantage of Pepsi Co through

continuous innovation, better addressing large considerer base, and a friendly fun- filled

attitude. The business position of all brands of the company indicates the positioning of

Gatorade, Frito-Lay, Tropicana, and Aquafina are in strong position with respect to
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competitive advantage and industry attractiveness. However, Quaker Oats need further

assistance in business markets.

Has the company’s strategy resulted in good company performance?

The success of company strategy is indicated from two aspects. One is the financial gains and

the increase in profits and the other is the competitive advantage of the company as compared

to the other organizations in the same sector. In case of Pepsi Co. the diversification strategy

of the company, followed from the beginning of this millennium has proved to be successful,

the company gained second position after Coca Cola in food and beverage industry. Also, the

comely gained more coverage and large portfolio of leading brands in savory snacks, soft

drinks, water, and other food related categories. The company has entered in the areas of fruit

juices through Tropicana, cereal market thorough Quaker Oats and rice crispies, ready to eat

coffee and tea, and sweet and savory snacks of Fruita Lay. Moreover, strong financial

position allows Pepsi to increase the products portfolio and acquire more established brands.

Topic 2: Defining Vision & Mission

What do you think is the company’s vision or mission?

PepsiCo’s vision statement is based on the commitment to gain top tier performance in

financial and sustainable terms that leaves a positive impact on society. The important

element of this vision is regarded as “Performance with Purpose.” That considered that

strong financial performance, sustainable operations, and strong concept of Corporate social

responsibility. On the other hand, the corresponding mission statement of Pepsi Co is the

basic desire to satisfy customers is the core of this mission statement. PepsiCo has the highest

employees’ base in industry and the company is providing facilities and support to improve

customer services at every stage. Thus, the annual profit of the company decreases despite the
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highest revenue and strong performance in food and beverage sector globally (Gamble and

tarnispeed. 2015).

Are there any conflicts between the company’s actions and its vision or mission?

The important components of PepsiCo’s mission and vision are purposeful business ventures

that serve customers and employees. The focus is primarily on the products and consumers

satisfaction. Similarly, the company offered the products unanimously to all cultures, areas,

and backgrounds of customers. Thus, the actual delivery of the company products has very

less discrepancy with the statements. However, the company faces the allegations of high

sugar content and responsible for obesity in developed world. Similarly, the lack of water

resources is a threat to the beverage and mineral water business of the PepsiCo. The use of

underground water tables creates scarcity of water to the community needs. Also, the

company is criticized for using competitive approaches, heavy advertising to influence the

perception of youth in target populations. The mission statement needs addition of more

specific details of products and policies of the company in order to achieve the set vision

statement.

Topic 3: Industry and Market Analysis

Is there a particular segment of the market that you think is more attractive?

The company has a significant capacity to grow in emerging markets of Asia and Africa as

the growth in these regions increased from 24% in 2006 to 32%vin 2012 (Gamble and

tarnispeed. 2015). This segment of the market needs more attention is the actual target market

of Pepsi is Youth and young adults. In addition, the lifestyle of young executives and

housewives has the capacity of using diet products of Pepsi. The products segment of savory

snacks is growing rapidly as compared to the moderate and low growth of Quaker Oats. Thus
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company can promote healthy living campaigns with the help of Quaker Oats as a solution to

gaining weights and obesity. The market leadership in snack business in emerging countries

needs specific attention due to high growth rates of this sector.

What are the key success factors in this market?

Product Innovations are the major key success factor in emerging markets due to high

population of youth and attraction to new and improved brands in this market segment. Pepsi

can make healthier snack foods and beverage as the customers believed “good-for-you” or

“better-for-you” products.

The other important success factor for Pepsi Co is better Relationship with distribution

partners that contributed to the stronger retailer –wholesaler- and company relationship in the

countries of operations. More collaboration with final retailers affect positively in increasing

sales due to imperative placement on point of sales.

Another key success factor is rapid strategic acquisitions and international al expansion that

played an important part in company success. The company used restructuring and

development if new organizational structure in post 2008 recession to better controls the

international subsidiaries.

What are the main changes in the company’s environment?

The international environment possessed major changes in terms of increased Protectionism

in protected consumers of emerging countries and stricter legislation in developed countries

to protect against obesity. The emerging countries shown high growth rate but the increased

preference of health food and diet in customers is due to the increased information and access

to technology due to smartphones in customers. Moreover, a latest trend in major target

markets of Pepsi is the preference of non carbonated beverages increased in youth population.

Therefore, healthy substitute such as vitamin water, fruit juices, and non carbonated drinks
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gaining growth in youth target segments. Further, environmental protection and need of more

sustainable business practices are important for large businesses like that of Pepsi Co.

Which of Porter’s Five Forces do you think is influencing the company the most?

In view of the above performed analyses of Porter five forces, the rivalry in food and

beverage industry become very high due to penetration of new entrants as the threats to entry

are low. Also, the availability of large number of substitutes has increased the bargaining

powers of buyers. Therefore, Pepsi Co has to encounter the threats of competitors and high

bargaining powers of customers. The distribution channel members have close relationship

with suppliers and international expansion brought many chances for the company. Rapid

diversification and strong distribution network at minimal profit margins are some cost

leadership strategies of Pepsi Co. to meet the threat of substitutes and Competitors. The local

unbranded new entrants in the industry y also affect the performance of leading brands.