PepsiCo 2009

Case Notes Prepared by: EMAN QUTUB &

QAZI AMAD UD DIN
Case Author: John & Sherry Ross

Outline
Companys History
Vision
Mission
Competitive Profile Matrix
IFE & EFE Matrix
SWOT Analysis
SWOT Matrix
SPACE Matrix
Grand Strategy Matrix
The IE Matrix
QSP Matrix
BCG Matrix
Recommendation: Suggested Strategy

Company History:
world's
top
companies

consumer

product

21 percent market share

PepsiCo's product portfolio includes 16 brands that
generate more than $500 million in sales each year

The Frito-Lay Company division is by far the world

leader in salty snacks

Vision Statement
PepsiCos responsibility is to continually
improve all aspects of the world in which we
operate environment, social, economic
creating a better tomorrow than today. Our
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.

Vision Statement (Proposed)

To become the leading producer and marketer of
food and beverage products in the world

Mission Statement
Our mission is to be the worlds 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 (Proposed)

To be the worlds (3) premier consumer products company
focused on convenient foods and beverages (2). We strive for
healthy financial rewards to investors (5) as we provide
opportunities for growth and enrichment to our employees
(9), business partners, and the communities (8) in which we
operate. We have outstanding technological (4) and marketing
(7) systems to continually innovate and create differentiated
products for our customers (1) worldwide. And in everything
we do, we strive for honesty, fairness, and integrity (6).

1.
2.
3.
4.
5.
6.
7.
8.
9.

Customer
Products or services
Markets
Technology
Concern for survival,
growth
Philosophy
Self-concept
Concern for public image
Concern for employees

profitability,

Opportunities
1. Increase in international market demand for
colas, chips and breakfast foods
2. In 2013, the United States savory snacks
market is forecast to have a value of US$28
billion, an increase of 27.8 percent since 2008
and the compound annual growth rate of the
market in the period 20082013 is predicted
to be 5 percent
3. Purchase smaller, successful developers of
competing products
4. Healthy food snack is on the rise as
consumers are shifting to healthy food
5. Teens are less conscious of health issues and
still like sweet drinks

THREATS
1.
2.
3.
4.
5.

Regulation FDA, Clean Water Act, etc.

Foreign exchange rates in current economy
Raw materials supplies clean water
Changes in consumer taste
Health issues more consumers are shifting
to healthy food
6. Consumers switching to lower cost house
brands for both snacks and beverages
7. Substitute products other snacks, water,
tap water, ready-to-drink, sports drinks, etc.
8. Decrease in U.S. cola market
9. Reduction in buying power of large retailers
10.Strong direct (Coke) and indirect (Kraft)
competition

External Factor Evaluation (EFE) Matrix

Key External Factors

Weight

Rating

Weighted
Score

1. Increase in international market demand for

colas, chips and breakfast foods

0.08

0.32

2. In 2013, the United States savory snacks market

is forecast to have a value of US$28 billion, an
increase of 27.8 percent since 2008 and the
compound annual growth rate of the market in
the period 2008-2013 is predicted to be 5
percent
3. Purchase smaller, successful developers of
competing products

0.08

0.24

0.06

0.18

4. Healthy food snack is on the rise as consumers

are shifting to healthy food

0.08

0.24

5. Teens are less conscious of health issues and still

like sweet drinks

0.08

0.24

1. Regulation - FDA. Clean Water Act, etc.

0.06

0.06

2. Foreign exchange rates in current economy

0.05

0.1

3. Raw materials supplies - clean water

0.07

0.14

Opportunities

Threats

1. Changes in consumer taste

0.09

0.18

2. Health issues more consumers are shifting to

healthy food

0.08

0.16

3. Consumers switching to lower cost house brands

for both snacks and beverages

0.04

0.08

4. Substitute products other snacks, water, tap

water, ready-to-drink, sports drinks, etc.

0.07

0.21

5. Decrease in U.S. cola market

0.06

0.12

6. Reduction in buying power of large retailers

0.04

0.08

7. Strong direct
competition

0.06

0.18

Total

(Coke)

and

indirect

(Kraft)

1.00

2.53

Internal Audit
Strengths
1. Name
recognition
both
domestically
and
internationally
2. Stronger than industry average in price to cash
flow ratio
3. Strong marketing and promotion advertising
campaigns
4. Reliable and established distribution channel
management
5. Has diverse business units which reduces overall
business risks
6. Recent reorganization
7. Owns more bottling companies than 10 years ago
8. Sales increased by approximately US$3.5 billion
from 2007 to 2008
9. Increase in net profit for the last consecutive years

Weaknesses
1. Short term liability of US$369 due in 2009
2. Increasing long term debt by US$3.6 billion
from 2007 to 2008
3. Increase in other liabilities by US$2.3 billion
from 2007 to 2008
4. Decline in carbonated beverages from 2006 to
2008
5. Recent acquisition of companies could cost the
company additional acquisition cost along with
some internal negative synergies

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Weight

Rating

Weighted
Score

and

0.09

0.36

2. Stronger than industry average in price to

cash flow ratio

0.06

0.24

3. Strong marketing and promotion advertising

campaigns

0.08

0.32

4. Reliable and established distribution channel

management

0.07

0.21

5. Has diverse business units which reduces

overall business risks

0.08

0.32

6. Recent reorganization

0.08

0.32

7. Owns more bottling companies than 10 years

ago

0.07

0.28

8. Sales increased by approximately

billion from 2007 to 2008

US$3.5

0.07

0.28

9. Increase in net profit for the last consecutive

years

0.06

0.18

Strengths
1. Name recognition
internationally

both

domestically

Weaknesses
1. Short term liability of US$369 due in 2009

0.07

0.07

2. Increasing long term debt by US$3.6 billion

from 2007 to 2008

0.09

0.09

3. Increase in other liabilities by US$2.3 billion

from 2007 to 2008

0.06

0.12

4. Decline in carbonated beverages from 2006 to

2008

0.05

0.05

5. Recent acquisition of companies could cost the

company additional acquisition cost along with
some internal negative synergies
Total

0.07

0.07

1.00

2.91

F.

SWOT Strategies
Strengths
1. Name recognition both
domestically
and
internationally
2. Stronger than industry
average in price to cash
flow ratio
3. Strong
marketing
and
promotion
advertising
campaigns
4. Reliable and established
distribution
channel
management
5. Has
diverse
business
units
which
reduces
overall business risks
6. Recent reorganization
7. Owns
more
bottling
companies than 10 years
ago
8. Sales
increased
by
approximately
US$3.5
billion from 2007 to 2008
9. Increase in net profit for
the
last
consecutive
years

Weaknesses
1. Short term liability of
US$369 due in 2009
2. Increasing long term debt
by US$3.6 billion from
2007 to 2008
3. Increase
in
other
liabilities
by
US$2.3
billion from 2007 to 2008
4. Decline
in
carbonated
beverages from 2006 to
2008
5. Recent
acquisition
of
companies could cost the
company
additional
acquisition
cost
along
with
some
internal
negative synergies

Opportunities

S-O Strategies

W-O Strategies

1.

1.

1. Promote healthy snacks

2.

3.
4.
5.

Increase in international
market demand for colas,
chips
and
breakfast
foods.
In
2013,
the
United
States
savory
snacks
market
is
forecast
to
have a value of US$28
billion, an increase of
27.8 percent since 2008
and
the
compound
annual growth rate of the
market
in
the
period
2008-2013 is predicted to
be 5 percent
Purchase
smaller,
successful developers of
competing products
Healthy food snack is on
the rise as consumers are
shifting to healthy food
Teens are less conscious

2.

3.

Continue
international
expansion (S1, S3, S7,
O1)
Purchase
smaller
companies
offering
healthy products (S2, S4,
S5, O3, O4)
Consolidate
bottling
operations (S4, S6, O3)

and drinks (W4, O4)

1.

2.

3.
4.
5.

Increase in international
market demand for colas,
chips
and
breakfast
foods.
In
2013,
the
United
States
savory
snacks
market
is
forecast
to
have a value of US$28
billion, an increase of
27.8 percent since 2008
and
the
compound
annual growth rate of the
market
in
the
period
2008-2013 is predicted to
be 5 percent
Purchase
smaller,
successful developers of
competing products
Healthy food snack is on
the rise as consumers are
shifting to healthy food
Teens are less conscious
of health issues and still
like sweet drinks

1.
2.

3.

Continue
international
expansion (S1, S3, S7,
O1)
Purchase
smaller
companies
offering
healthy products (S2, S4,
S5, O3, O4)
Consolidate
bottling
operations (S4, S6, O3)

1. Promote healthy snacks

and drinks (W4, O4)

Threats

S-T Strategies

W-T Strategies

1.

1.

1.

Regulation FDA, Clean

Water Act, etc.
2. Foreign exchange rates in
current economy
3. Raw materials supplies
clean water
4. Changes
in
consumer
taste
5. Health issues more
consumers are shifting to
healthy food
6. Consumers switching to
lower cost house brands
for
both
snacks
and
beverages
7. Substitute
products

other snacks, water, tap

water,
ready-to-drink,
sports drinks, etc.
8. Decrease in U.S. cola
market
9. Reduction
in
buying
power of large retailers
10. Strong direct (Coke) and
indirect
(Kraft)
competition

Sponsor
programs
to
teens
and
younger
generation
to
through
virtual Facebook, Twitter,
and such (S1, S2, S3,
O5)

2.

Sell
off
non-producing
product lines and then
pay off the long term
debt (W1, W2, W3, T8,
T9)
Reorganize further and
use the excess cash to
buy
companies
with
healthier products (W4,
W5, T5, T6, T7)

SPACE Matrix

FS
Conservative

Aggressive

7
6
5
4
3
2
1

CS

IS
-7

-6

-5

-4

-3

-2

-1

-1
-2
-3
-4
-5
-6

Defensive

-7

Competitive

ES
Financial Stability (FS)
Return on Investment
Leverage
Liquidity
Working Capital
Cash Flow

5
5
5
5
4

Environmental Stability (ES)

Unemployment
Technological Changes
Price Elasticity of Demand
Competitive Pressure
Barriers to Entry

-4
-3
-4
-5
-4

Financial Stability (FS) Average

4.8

Environmental Stability (ES) Average

-4

Competitive Stability (CS)

Market Share
Product Quality
Customer Loyalty
Competitions Capacity Utilization
Technological Know-How

-2
-2
-2
-1
-3

Industry Stability (IS)

Growth Potential
Financial Stability
Ease of Market Entry
Resource Utilization
Profit Potential

5
4
3
3
3

Competitive Stability (CS) Average

-2

Industry Stability (IS) Average

3.6

Suggested Strategies
After analyzing the SPACE Matrix, we can clearly see that
PepsiCo exists in the aggressive quadrant. This means that it is
in an excellent position to use its internal strengths, to take
advantage of external opportunities, to overcome internal
weaknesses and avoid external threats.

Different strategies can be conducted upon this analysis, such as

market penetration, market development, product development,
diversification and backward, forward, horizontal integration.
In this case we are going to suggest two intensive strategies,
product development and market penetration.

Grand Strategy Matrix

Rapid Market Growth
Quadrant I

Quadrant II

Strong
Competitive
Position

Weak
Competitive
Position

Quadrant III

1.
2.
3.
4.
5.
6.
7.

Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Related diversification

Slow Market Growth

Quadrant IV

The Internal-External (IE) Matrix

The IFE Total Weighted Score
Strong
3.0 to 4.0
I

Average
2.0 to 2.99
II

Weak
1.0 to 1.99
III

PepsiCo Beverages

High
3.0 to
3.99

The EFE
Total
Weighted
Score

IV

IV

PepsiCo International

PepsiCo

VII

VIII

VI

Medium
2.0 to
2.99

Low
1.0 to
1.99

IX

QSPM

Key Factors
Opportunities
1. Increase in international market demand
for colas, chips and breakfast foods
2. In 2013, the United States savory snacks
market is forecast to have a value of
US$28 billion, an increase of 27.8 percent
since 2008 and the compound annual
growth rate of the market in the period
2008-2013 is predicted to be 5 percent
3. Purchase smaller, successful developers
of competing products
4. Healthy food snack is on the rise as
consumers are shifting to healthy food
5. Teens are less conscious of health issues
and still like sweet drinks
Threats
1. Regulation FDA, Clean Water Act, etc.
2. Foreign
exchange
rates
in
current
economy
3. Raw materials supplies clean water
4. Changes in consumer taste
5. Health issues more consumers are
shifting to healthy food
6. Consumers switching to lower cost house
brands for both snacks and beverages
7. Substitute products other snacks,
water, tap water, ready-to-drink, sports
drinks, etc.
8. Decrease in U.S. cola market
9. Reduction in buying power of large
retailers
10. Strong direct (Coke) and indirect (Kraft)
competition
TOTAL

Weight

Continue
international
expansion
AS
TAS

Purchase
smaller
companies
offering
healthy
products
AS
TAS

0.08

0.32

0.08

0.08

0.32

0.16

0.06

0.06

0.18

0.08

0.08

0.32

0.08

0.08

0.24

0.06
0.05

--3

--0.15

--1

--0.05

0.07
0.09
0.08

1
1
1

0.07
0.09
0.08

3
3
3

0.21
0.27
0.24

0.04

---

---

---

---

0.07

0.07

0.28

0.06
0.04

4
---

0.24
---

2
---

0.12
---

0.06

0.06

0.24

1.00

1.62

2.39

Strengths
1. Name recognition both domestically and
internationally
2. Stronger than industry average in price to
cash flow ratio
3. Strong
marketing
and
promotion
advertising campaigns
4. Reliable and established distribution
channel management
5. Has diverse business units which reduces
overall business risks
6. Recent reorganization
7. Owns more bottling companies than 10
years ago
8. Sales increased by approximately US$3.5
billion from 2007 to 2008
9. Increase in net profit for the last
consecutive years
Weaknesses
1. Short term liability of US$369 due in 2009
2. Increasing long term debt by US$3.6
billion from 2007 to 2008
3. Increase in other liabilities by US$2.3
billion from 2007 to 2008
4. Decline in carbonated beverages from
2006 to 2008
5. Recent acquisition of companies could
cost the company additional acquisition
cost along with some internal negative
synergies
SUBTOTAL
SUM TOTAL ATTRACTIVENESS SCORE

0.09

0.36

0.09

0.06

---

---

---

---

0.08

---

---

---

---

0.07

0.14

0.28

0.08

---

---

---

---

0.08
0.07

--1

--0.07

--3

--0.21

0.07

---

---

---

---

0.06

0.06

0.18

0.07
0.09

-----

-----

-----

-----

0.06

0.18

0.06

0.05

0.05

0.15

0.07

---

---

---

---

1.00

0.86
2.48

0.97
3.36

Recommendations
Purchase smaller companies that offer healthier
drinks and snacks. Utilize the existing distribution
channel for promoting the new line and use
penetration pricing strategies to gain market share
rapidly and against the competitors.

BCG Matrix
Net revenues, profits and percentages by Divisions (2008)
Net Revenue& Percent: Operating Profit and percent:
$43,251
100% $7,942
100%

Pepsico total
Division
1.Frito-Lay North Amrica(FLNA)
2.Quaker Foods North America
(QFNA)
3.Latin American Foods (LAF)
4.Pepsico Americas Beverages (PAB)
5.United Kingdom & Europe (UKEU)
6.Middle East, Africa, & Asia (MEAA)

$12,507
$ 1,902

28.9
4.3

$2,959
$582

37
7.32

$5,895
$10,937
$6,435
$5,575

13.6
25.2
14.8
12.8

$897
$2,026
$811
$667

11.29
25.5
10.2
8.3

Relative Market Share

High

Medium

1.0

0.5

Low
0.0

High

+20
Industry
Sales Growth
Rate

STARS (quadrant II)

1

QUESTION MARK (quadrantI)

2
3
5
6

Medium 0

CASH COWS (quadrant III)

Low

-20

DOGS (quadrant IV)

Intensive Strategies:
1-Product development
2-Market Penetration