Buy Existing Paper - PepsiCo’s Diversification Strategy

PepsiCo’s Diversification Strategy

Category:

Description

PepsiCo’s Diversification Strategy

Executive Summary

PepsiCo, Incorporation came into existence in 1965 following the decision by shareholders of Frito-Lay and Pepsi Cola to merge the soft-drink giant and the salty-snack icon. Started in 1898, Pepsi Cola grew to become the first soft drink to be branded globally. PepsiCo is the second biggest company across the globe after Coca-Cola Company. Financially, the company recorded substantial growth in 2005 of 5.5%. Its net revenues in that years amounted to nearly USD 4 billion. The recorded return on investment during that period was 20%. The figures indicate that the company performed better than its competitors although its main competitor remained Coca-Cola Company. Presently, most of the brands associated with PepsiCo have performed well in the market having achieved the top two positions.  Over the past few years, the company has had impressive stock performance that reached a value of $100 in 2015. Presently, the main challenge facing the company is finding the best strategies that will help it sustain the impressive performance that it has recorded over this period. The analysis carried out indicates that the company should give more attention to achieving increased international expansion through strategic acquisitions. Additionally, it was established that the present impressive performance could be sustained through product innovation and investing in markets that the company is yet to explore such as the aging population market share.PepsiCo’s Diversification Strategy

Pepsico’s Strategic Profile

PepsiCo, Incorporation came into existence in 1965 following the decision by shareholders of Frito-Lay and Pepsi Cola to merge the soft-drink giant and the salty-snack icon. Started in 1898, Pepsi Cola grew to become the first soft drink to be branded globally. PepsiCo is the second biggest company across the globe after Coca-Cola Company. Its strategic profile can be explained as shown below:

  • It is the largest company in the world to deal in snack and beverage. In 2015, its business lineup included more than 22 one billion dollar global brands with profits that exceeded $39.5 billion.
  • Since 1997, the company has been restructuring its major product portfolio. In addition, it has made numerous company acquisitions.
  • By 2015, the portfolio of its business included Quaker Oats that was acquired in 2001, Tropicana Orange Juice, Russia’s Wimm-Bill-Dann Foods, Gatorade, and Frito-Lay salty snacks.

Most of the brands associated with PepsiCo have performed well in the market having achieved the top two positions.  Over the past few years, the company has had impressive stock performance that reached a value of $100 in 2015. Presently, the main challenge facing the company is finding the best strategies that will help it sustain the impressive performance that it has recorded over this period.

Analysis of PepsiCo’s Strategic Success Factors

It is evident that for the past decades, PepsiCo has been achieving most of its set objectives and missions. Over the years, the company has constantly offered valuable beverages and products to its customers. Based on the organization’s 2015 strategic situation, its main focus is on providing healthy financial rewards to its shareholders. For instance, it planned to increase the investor’s cash dividends by 7.3%. Moreover, PepsiCo planned to establish a $4.5 to$5 billion funds to support its share buyback strategy.  Additionally, the company has been pursuing a wide range of acquisitions with the hope that earning attractive returns.

Review of the PepsiCo’s 2015 Mission and Objectives

The intended objectives by the company will make it to remain as one of the leading giants in the beverage sector. The set strategies will help the company to achieve health financial rewards. The company has been working had to boost its sales growth through acquisition. From the case study, it is evident that the company has identified critical factors that will help it achieve the desired commercial success. Apart from ensuring that its customers are offered the best value and quality, the management has been keen to ensure that investors get a fair return on their investments. In 2015, the company had directed most of its resources to grow its business, which was to be achieved through both carefully selected acquisitions as well as internal growth. The adopted plan will be effective in helping PepsiCo tackle the risks brought about by changes in global markets.

The strategic objectives of the company have been effective in helping the company talked some of the strategic problems it used to face several years ago. For instance, the decision by the company to expand its market as well as market segments that it had not been exploited before has helped not only to expand its global market share but to increase the overall revenue as well.

Recommended Strategy from Strategic Alternatives-PepsiCo’s Diversification Strategy

Presently, PepsiCo is one of the strongest leaders that define the food and beverage industry. The rise of the company could be explained as a result of its adherence to its mission and objectives. Over the years, it has managed to become one of the dominant forces not only within the US market but also abroad. Although its strategies have been found to be highly effective over the years, it is recommended that the company make some crucial changes in its strategic plans to increase its market share with ease.

First, the trend of healthy living in America has forced the company to turn to other markets, especially those in developing countries.  Although carbonated drinks have been the most popular beverages in the US for many years, the non-carbonated drinks have also been gaining popularity. The company had recognized that it was important for it to broaden its portfolio and therefore ventured in non-carbonated beverages as well. However, it is recommended that the company continues to make changes to achieve human sustainability. It is expected that the demographics of healthy eating habits will continue to grow in the coming years. If the company would succeed in obtaining a large share of this market, it could make substantial profits in return.

Second, the company should consider increasing its investments into the social benefits, more so in the developing countries. Coca-Cola, for instance, has initiated a water purification program that targets remote villages in different African countries. Apart from meeting an existing need, the initiative has played a role in building the company’s brand in places where it was previously unknown. PepsiCo could borrow this ideology. This would help to establish its brand recognition, especially in the emerging markets.

In conclusion, PepsiCo has remained as one of the most successful companies in the food and beverage industry as a result of its enormous footprint in the market in addition to the substantial revenue it has been making in the past decades. For the company to continue to grow, it should constantly to take advantage of every opportunity that presents itself. This would require it to carry out regular evaluations to decide areas that may need improvement in the markets where the company has already invested, at the corporate level, and at new markets where it hopes to invest in future.

From the case study, it became evident that PepsiCo targets the younger market where it hopes to replicate the successes achieved by Coca-Cola. Over the years, the company has depended on brand loyalty especially among people born during the 1980s. Although the company could still capitalize on a large percentage of Baby boomer demographic, it is suggested that the company develops the right strategies to capture more of the market share formed by the aging population.  The number of aging people across China and Japan has been on the rise. With improved standards of living, the percentage of aging people in other developing countries has also been increasing.  PepsiCo’s Diversification Strategy