Pepsi.Ochoa Llamas

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Pepsi.Ochoa Llamas

  1. 1. Ochoa-Llamas, Vanessa Bus 491 PepsiCo Case PepsiCo needs to continue to build shareholder value through strategic acquisitions. • Product innovation • Close relationships with distribution retailers • International expansion The case mentions three key trends that are shaping the industry; convenience, growing awareness of nutritional content of snack foods, and indulgent snacking. PepsiCo’s new reformulation of Good-For-You and Better-For-You products is a great opportunity in which they need to increase research and development because more consumers are focusing on health concerns. Also, it can manufacture more convenient packages, such as smaller bags or containers for on-the-go consumers. Another opportunity is indulgent snacking. It can be beneficial for PepsiCo to invest money on R&D to cater to evolving palates. However, the downside is that there are a lot of small regional company’s that already cater to these evolving palates. Another opportunity is continuing to expand the product line up of snacks and beverages that cater to the growing Hispanic population. Personally when I go shopping I look for the chips I used to buy as a kid in Mexico as well as the beverages. For me the product line up of Gamesa and Sabritas is great because I don’t have to bring these treats back from Mexico, I can find them at my local grocery store. Close relationships with distribution retailers is the only way to maintain its competitive advantage over other rivals. PepsiCo’s Power of One strategy is important because its goal is to have consumers purchase more PepsiCo products that are generally consumed at the same time. PepsiCo’s is trying to build on this strength because when its products are placed near each other they are most likely to be purchased together. The time
  2. 2. Ochoa-Llamas, Vanessa Bus 491 PepsiCo Case it has invested in studying consumer purchases within supermarket stores is paying off because it lets supermarket owners understand the potential monetary value, such as the possibility of increasing profit margins in super markets. The future opportunity and strength that PepsiCo will have in 2011 is the end of the FTC stipulation of jointly distributing Gatorade and PepsiCo soft drinks in convenience stores, which will bring in more revenue for PepsiCo. International expansion is a great opportunity for PepsiCo, especially during the economic recession we are experiencing. Currently Frito Lay North America accounts for 31% of PepsiCo’s total revenues and about 69.5% of its total revenue came from Canada and Mexico, which means it depends on North America for a lot of its revenue. According to DataMonitor, “High dependence on a few consumers reduces the bargaining power of the company.” However, the upside is that PepsiCo’s International sales have proven valuable with a 14% increase in 2006 and 15% between 2004 and 2005. The opportunity to expand abroad has proven successful and need to continue doing so. The best opportunities with international expansion are made through strategic acquisitions such as the PepsiCo’s acquisition of Mexico’s largest Pepsi bottler which was also the number one producer of purified water. In order for PepsiCo to remain the category leader for its many brands it will need to continue product innovation, maintain close relationships with retailers, expand internationally by means of diversification through strategic acquisitions in order to increase shareholder value.

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