Pepsico
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Pepsico Presentation Transcript

  • 1. INTERNATIONAL STRATEGIC MANAGEMENTClémentine BABONNEAUAlice BEZIRARDLéna BITTONCarole GUIMBARTMaxime HUBIN
  • 2. How can PEPSICO improve its diversification strategy in 2008? Strategic Diagnosis • External analysis • Internal company analysis Alternatives Recommendations
  • 3. EXTERNAL ANALYSIS-MARKET TRENDS-PESTEL-OPPORTUNITIES & THREATS-PORTER’S 5 FORCES-KEY SUCCESS FACTORS
  • 4. •Diet and reduced •Great-tasting calories food •Gourmet flavor•Non-carbonated •Styles beverages Consumer health Consumers want and wellness to reward concern themselves Consumer desire to escape from Ready to eat and the norm and ready to drink taste snacks consumption from a wider, often global palate
  • 5.  Political  Protectionism in emerging markets  Economic  High growth potential of emerging markets  But…strong competition to enter  Social  Healthier lifestyles promote different patterns of consumption and represent new product opportunities  But…less interest in sodas with high sugar content  Technological  Strong R&D departments to develop new products  Ecological  Environment friendly packaging solutions  Legal  More and more protected consumers  Stricter legislation to defend against obesitySource: Xerfi, and case study
  • 6. Consumer lifestyle:• “Better for you” – “Good for you” opportunities• Changing lifestyles of consumers• Taste preferences from country to country: adaptation to the local tastesInternational Expansion• Emerging markets: developing countries China, India, Russia, Mexico, Brazil• Developed countries: growing markets in healthy snacks outside US : new consumers needs and expectations: reduce saturated fats, cholesterols, trans fats, simple carbohydrates “China and Brazil would be the 2 largest international markets for snacks”Potential growth of markets:• Increasing consumption of water bottles in US• Increasing consumption of savory snacks like Cheetos cheese (expectation: +27% by 2013)• Broadening the products: Avoid the dependence on US markets by going abroad
  • 7. Awareness for healthy, sugar and salt free meals Decline in Carbonated Drink SalesPotential Negative Impact of GovernmentRegulations• Legal barriers to enter new markets : protectionism• Legislation involving environmental, health, and safety may force a reorganization in the industryIntense Competition• Fast-food industry: fierce price competition and low profit margins• High rivalry between powerful global companies (The Coca-Cola Company, Nestlé, Danone, Kraft Foods...). Risk of influence on pricing pricing, advertising, sales promotion initiativesPotential Disruption Due to Labor Unrest• In 2008 a strike in India shut down production for nearly an entire month
  • 8. -- Low power of new entrants Few multinational groups own the largest part of the market share Threat of Possible entrants for niche new entrants markets or local markets ++ Very high bargaining power +/- (retailers) Medium Rivalry -Power of brandbargaining power Bargaining among Bargaining power of power of recognition as an -Dependence on existing suppliers buyers argument to attract raw materials competitors the final customer -But…a lot of who is loyalsuppliers available -Depends on the size of the retailer + Threat of ++ substitute High products Very high rivalry -All kind of food depending on -High diversification from each the taste competitor -Pay attention to healthy and -Few strong groups control the wellness categories market
  • 9.  Share information and be transparent regarding the stakeholders Be able to forecast the trends at a local and global level Adapt to customer lifestyle and needs Product innovation and diversification Be visible everywhere Good control over the manufacturing process to achieve economies of scale
  • 10. INTERNAL ANALYSIS-ORGANIZATIONALSTRUCTURE-CORE COMPETENCIES-COMPETITIVE ADVANTAGES-STRENGHTS & WEAKNESSES
  • 11.  PepsiCo’s organizational structure & Net Revenues for each Business Segment (in $ millions) in 2007: $11,586 $15,798 $10,230 $1,860 PepsiCo Frito-Lay North Quaker Foods Pepsi Beverages America North America International North America Salty Snacks brands Oat Food and Cereals brands Non Alcoolics Beverages brands Organizational profile: Diversification strategy = multi products & multi markets
  • 12. • PepsiCo constantly improved its knowledge on the consumer behaviour by identifying trends such as healthier products: Market Research • New brand value: PepsiCo’s better-for-you & good-for-you products • Launch of less saturated fat and less salted products answering to R&D: Product the trends found it by « Consumer Insight dept » Innovation • Introduction of Lay’s traditional flavour with 50% less saturated fat Efficient • Close relationships with suppliers & customers under the Power of One program that allow PepsiCo to have direct information fromInformation System both retailers & customers International • PepsiCo has succeed in creating an international exposure expansion especially with Beverages & Salty snacks (increase of 22% in 2007) Strategic • Those acquisitions allowed PepsiCo to gain synergy in its whole acquisitions business
  • 13. Brand equity: -Awareness Brand equity -Recognition -Perception Differentation Differentiation:-High value products -Strong positioning Product diversity Product diversity: - 3 Business Units - A wide and deep range of products Competitive Advantages
  • 14. Wide range of productsEfficient identification of trends  Proactive instead ofReactiveInternational ExposureHigh profit marginsTotal control on the several steps of the supply chains (allowthem to control & reduce the production and delivery costs)
  • 15. Relatively unsuccessful in increasingthe worldwide awareness of QuakerFoods WideIn 2006, only 6 countries represented75% of Quaker Foods Internationalsales out of USDifficulties to find a synergy betweentheir restaurants & beverages theysold
  • 16. Total Net revenues of PepsiCo Inc. from 1998 to 2007: increased by approximately 77% Net revenues by activity (2004-2007):Frito-Lay North PepsiCo beverages Pepsi Quaker Foods North America=21% North America=23% International=60% America=22%Price in the stock exchange was about $33 in 1999 & about $64 in 2008 (+ 120%)GOOD FINANCIAL HEALTH WHICH ALLOWS THEM TO SELF FINANCE THEIR GLOBAL EXPANSION
  • 17. -MAIN STRATEGIC CHOICES-ACTUAL STRATEGY-PEPSICO DIVERSIFICATION-PEPSICO CHALLENGES-PEPSICO DIFFICULTIES
  • 18. 1997 Result 2008 Since 1997 StrategicRestructuration Diversification realignment in of PepsiCo and acquisition order to improveFocus on snacks strategies the PepsiCo and beverages Profits
  • 19. Strategic International acquisitions Strong Large Focus onpresence in diversificationmature and of PepsiCo’s emerging products snacks markets and beverages Make healthy Relevant and wellness innovations in products R&D
  • 20.  Product differentiation to respond to health concerns (use of healthier oils, natural salty snacks) Research on new flavors and new recipes: in order to attract more customers With International acquisitions, PepsiCo offers a different kind of food and beverages A GREAT SUCCESS
  • 21. •China and Brazil would •Understand local taste be the two largest international markets for snack To increase the market share in developing To succeed in countries and adapting to the continue the strong customer tastes of development in customers emerging countries worldwide To innovate in order to improve the To manage quality of their efficiently the new products while six reporting keeping going segments through the large diversification•Frito lay North America, •new flavors, health and Quaker Foods North wellness products America, Latin American Foods, PepsiCo Americas Beverages, UK and Europe, Middle East, Africa & Asia
  • 22.  Stock Price: in 2008 PepsiCo Drops his stock price in order to improve overall profitability Quaker brand: under distributed in international market Gatorade: only one brand in growing market, it‟s not enough! Operating margin are not maximized
  • 23. Industry Attractiveness Factor Weight Attractiveness Weighted Rating Industry RatingMarket size and projected growth 0.15 7 1.5Intensity of competition 0.20 8 1.6Strategic fits and resource fits with other 0.15 5 0.75industries in portfolioResource requirement 0.15 6 0.90Emerging industry opportunities and threats 0.10 4 0.4Seasonal and cyclical influences 0.05 2 0.1Social, political ,regulatory, and environmental 0.15 3 0.45factorsIndustry uncertainty and business risk 0.05 4 0.20 Sum of weights 1.00Industry attractiveness rating 5.9According to the rating scale, a result of 5.9 industry attractiveness rating is abit more than the average (all SBUs has been taken together).
  • 24.  We have defined 3 SBUs:• Frito Lays• Beverages• Quaker We considered both american and international markets
  • 25. high Frito lays Question marks AMERICA BeverLEGEND Market Growth Rate ages Frito IntGREY : lays Int Quaker IntAMERICA StarsBUSINESSPink: Quaker AMERICAINTERNATIONAL Beverages AMERICABUSINESS Garbage can dogs Low Cash cows 1 Relative Market Share
  • 26. -OBJECTIVES-OUR ALTERNATIVES
  • 27. Increase ImproveInternational operating Sales margin Reinforce the Manage theinternational stock price presence
  • 28. Choice • Adapt their productsnumber to the local 1: customers Choice • International number acquisitions 2: • Forecast newChoice trends: • Improve thenumber healthy products 3: or make ecological packaging for egs
  • 29.  Adapt their products to local customers Understand the consumer taste preferenceKey to expand into international marketTaste are different in function of each countryFollow the customer „s taste in order to attract them, in Mexico : spicy food, in Europe: healthy food with less saturated fat
  • 30.  International acquisitions Increase PepsiCo presenceReinforce their presence on new markets = InternationalizationIncrease the relationship with local companies in order implement easierNew target: emerging countries
  • 31.  Forecast the trends: Rely on marketing intelligence and research & development New customers expectations  Nowadays, the customer‟s taste is changing:  PepsiCo has to focus on healthy products in order to respond to consumer health and wellness (reduce the consumption of statured fats, cholesterol, trans fat, and simple carbohydrates).  Improve the packaging in order to follow more and more environmental criteria  Communication more about the sustainable efforts
  • 32. Criteria Weight Alternative 1 Alternative 2 Alternative 3COST 0,20 4 1 5CONTROL 0,10 6 7 8RISK 0,15 3 2 4TIME 0,10 5 2 3INTERNATIONALIZATION 0,20 9 10 5BRAND EQUITY 0,05 8 9 10FOLLOW CUSTOMERS‟ 0,20 5 4 9NEW NEEDS TOTAL 1 5,55/10 4,65/10 6,2/10
  • 33. ALTERNATIVE 1. ALTERNATIVE 3. ALTERNATIVE 2.Adaptation to local Forecast the International customers trends acquisitions
  • 34. According to our analysis, the best choice for the company would be:To try to forecast customer‟s trends andto anticipate by providing new products through innovation How to do it ? Rely on Rely on R&D to marketing create newresearch in order products suiting to detect new the needscustomer‟s needs