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Pepsico Final project

This document provides an overview of PepsiCo, including its history, mission, business units, objectives, strategies, and financial performance. Some key points: - PepsiCo was founded in 1890 and is now the 2nd largest beverage company in the world, operating in over 200 countries. - It has three main business units: PepsiCo Americas Foods, PepsiCo Americas Beverages, and PepsiCo International. Major brands include Frito-Lay, Gatorade, Quaker, and Tropicana. - The company's mission is to be the world's premier consumer products company focused on convenient foods and beverages, seeking to produce financial rewards for investors while providing

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By Abdulgader Shukri Amin Khayat Amjad Ali Saleh Alsaif Dar Mir
Labib Intro History Mission
Introduction  2nd largest beverage company in the world.  Presence in 200 countries  Key International markets include Argentina, Brazil, China, India, Mexico, Saudi Arabia, Spain, Thailand and U.K.
History  1890 – Founded by Caleb Bradham  1903 – Trademark  1923, 1931 – Bankrupt  1936- 1938 – Great Depression, Profit Doubled , 10-5 cents.  1941 – Pepsi stock 1st time  1950 – Franchise outside U.S.
Cont’d..  1960 – Target market – Young adults  1965 – Pepsi Cola Merger with Frito-Lay to form PepsiCo.  1970-1980 – Bought restaurant chains such as Pizza hut, Taco bell, KFC  1980-1990 – Cola Wars  1994-1999 - International Growth and Diversification, Tropicana $ 3 billion  2000 – Quaker Oats, Gatorade
 Soft drinks are not referred to as items of necessity.  Sodas stand between liquor and juice.
• Frito-Lay brands account for 59% of U.S. snack chip industry
 Acquired Tropicana in 1998  Available in more than 63 countries.  Pure, fresh fruit juice in easy to handle package has attracted the consumers
 Gatorade is the first isotonic sports drink.  Created in 1965 by researchers at University of Florida for the football team “The Gators”  Worlds leading Sports Drink
 PepsiCo merged with Quaker Oats -2001  Wide range of healthy food
Three business units 1. PepsiCo Americas Foods which includes:  Frito-Lay North America ,  Quaker Foods North America,  all of its Latin American food and snack businesses. 2. PepsiCo Americas Beverages consisted of:  PepsiCo Beverages North America  all of its Latin American beverage businesses. 3. PepsiCo International.  all PepsiCo businesses in Europe, Asia, Middle East and Africa (AMEA)
Mission Statement “ Our mission is to be the world's 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
Mission Statement evaluation Components Mentioned Customers NO Products/Service YES Markets YES Technology NO Concern for Survival, Growth, YES Profitability Philosophy YES Self-Concept NO Concern for Public Image YES Concern for Employees YES
Company Objectives  Capture larger market share through product innovation and diversification.  To use synergy between product portfolios to cross sell products.  Achieve higher growth from its international markets.
Company Objectives  Create a sustainable business for the communities and environment.  To spot the shift in consumer preferences.  Supporting product initiatives with creative marketing and sales initiatives.
Company Strategies Marketing Product Conglomerate Forward Development Development Diversification Integration
Amjad Financial Evaluations.  Internal strength & Weakness.
Historical Financial Analysis 2007 2008 2009 Assessment Liquidity Ratios Current Ratio 1.31 1.23 1.44 P Quick Ratio 1.01 0.94 1.14 P
Historical Financial Analysis 2007 2008 2009 Assessment Asset Utilization Ratios Inventory Turnover 17.24 17.14 16.51 N DSI 21.17 21.28 22.10 P AR Turnover 8.99 9.24 9.35 P DSO (ACP) 40.58 39.52 39.04 N Fixed Asset Turnover 3.52 3.71 3.41 N Total Asset Turnover 1.14 1.20 1.08 N
Historical Financial Analysis 2007 2008 2009 Assessment Debt Management Ratios Debt Ratio 0.50 0.66 0.58 P TIE 35.07 22.34 21.35 N
Historical Financial Analysis 2007 2008 2009 Assessment Profitability Ratios Gross Margin 0.54 0.53 0.54 P Operating Margin 0.20 0.17 0.20 P Profit Margin 0.14 0.12 0.14 P BEP 0.23 0.20 0.21 P ROA 0.16 0.14 0.15 P ROE 0.33 0.42 0.35 N
Competitor Financial Analysis Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Liquidity Ratios Current Ratio 1.44 1.27 1.50 1.40 S W Quick Ratio 1.14 1.10 1.19 1.20 S W
Asset Utilization Ratios Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Asset Utilization Ratios Inventory Turnover 16.51 13.16 21.11 6.00 S W DSI 22.10 27.73 17.29 54.48 S W AR Turnover 9.35 8.25 8.85 10.20 S S DSO (ACP) 39.04 44.26 41.24 35.78 S S Fixed Asset Turnover 3.41 3.24 4.99 - S W Total Asset Turnover 1.08 0.64 0.63 0.80 S S
Debt Management Ratios Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Debt Management Ratios Debt Ratio 0.58 0.49 0.64 - S W TIE 20.43 24.00 4.57 2.40 W S
Profitability Ratios Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Profitability Ratios Gross Margin 0.54 0.64 0.60 0.59 W W Operating Margin 0.19 0.27 0.20 - W W Profit Margin 0.13 0.20 0.10 0.18 W S BEP 0.20 0.18 0.13 - S S ROA 0.14 0.13 0.06 0.13 S S ROE 0.33 0.25 0.17 0.39 S S
Internal Strength & Weakness key external factor Weighted Rating Weights Score Strength Strong differentiation strategy Strong product diversification strategy strong focus on using product synergies Due to the attractive regulation and relation AR. shows a good standing in company to their competitors Access to global employee base Decentralized operations Weakness High spend on promotional activities Targeting contemporary consumers Global organization slow to adopt to change Many production facilities still on high energy and high waste system Weak profit margin
Internal environment RBV model Resources Valuable Rare Inimitable Non- Competitive Expected substitutable advantage performance Water Competitive A Return parity Decentralized Temporary A to AA structure competitive Return advantage Brand Sustainable AA Return Competitive advantage Recipe Temporary A to AA competitive Return advantage
Abdulgader External Opportunity & Threats  SOWT Analysis.
External environment Tools used:  General environment.  Competitive environment. (Five forces)  Strategic group.
External environment General Environment
External environment Porter’s five forces model
Strategic Groups Strategic groups Coca-Cola Dr Pepper 1. Objectives different different 2. Strategies same same 3. Strengths Market share Product position 4. Weaknesses Undiversified Undiversified product product
External environment key external factor Weighted Rating Weights Score Opportunities Business Internationalization Changing consumer preferences Energy efficient production techniques high barrire to entry low bargining power of supplier large portfolio than competitors Threats political & community support ecnomic factors technological innovation the intesity of rivalry among competitors in a industry is high number two rank in market share
The Internal-External (IE) Matrix Hold & maintain 1) MKT penetration 2) Product development
STRENGTH WEAKNESS 1. Strong differentiation strategy 1. High spend on promotional 2. Strong product diversification activities strategy 2. Targeting contemporary consumers 3. Strong focus on using product 3. Global organization slow to adopt synergies to change 4. Due to the attractive regulation 4. Many production facilities still on SWOT MATRIX and relation AR. Assets shows a high energy and high waste system good standing in company to their 5. Weak profit margin competitors 5. Access to global employee base 6. Decentralized operations OPPORTUNITY SO STRATEGIES WO STRATEGIES 1. Business internationalization 1. Using differentiated and 1. Business internationalization will 2. Changing consumer diversified products enter into the allow top line growth for lower preferences(healthy style) emerging markets (S1, S2, S6, incremental promotional spend 3. Energy efficient production O1) (W1, O1) techniques 2. Diversified products portfolio can 2. Changing consumer preferences 4. Low barrier to entry be aligned to customer will allow it to go beyond the 5. Low barging power of supplier preferences (S1,S2, O2) contemporary segments (W2, O2) 3. Product synergies and innovation 3. Availability of energy efficient can give it continued leadership techniques can allow it to divest position (S3, O6) from less efficient production sites (W4, O3) THREATS ST STRATEGIES WT STRATEGIES 1. Political & community support 1. Decentralized operations will 1. Political and community support 2. Economic factors allow the political and local will help reduce the incremental 3. The intensity of rivalry among communities to be better engaged promotional spend by creating competitor in an industry is high (S6, T1) positivity around PepsiCo brand 4. Technological Innovation 2. Differentiation and diversification (W1, T1) 5. Number two rank in market share with product synergies will allow 2. Technological innovation will help it to rise above price competition it divest the high energy and waste (S1, S2, S3, T2, T5) production sites and also improve the social and environmental impacts (W4, T4)
SO STRATEGIES Using differentiated and diversified products enter into the emerging markets • (S1, S2, S6, O1) Diversified products portfolio can be aligned to customer preferences • (S1,S2, O2) Product synergies and innovation can give it continued leadership position • (S3, O6)
WO STRATEGIES Business internationalization will allow top line growth for lower incremental promotional spend • (W1, O1) Changing consumer preferences will allow it to go beyond the contemporary segments • (W2, O2) Availability of energy efficient techniques can allow it to divest from less efficient production sites • (W4, O3)
ST STRATEGIES Decentralized operations will allow the political and local communities to be better engaged • (S6, T1) Differentiation and diversification with product synergies will allow it to rise above price competition • (S1, S2, S3, T2, T5)
WT STRATEGIES Political and community support will help reduce the incremental promotional spend by creating positivity around PepsiCo brand • (W1, T1) Technological innovation will help it divest the high energy and waste production sites and also improve the social and environmental impacts • (W4, T4)
Amin  Mission Statement Revision.  Alternative Strategies. Strategy Implementation.
Revised Mission Statement „Our mission is to be the world‟s premier consumer Products Company focused on new technologies to produce diversified convenient foods and beverages that delight all varieties of customers and bring value into their lives. We seek to produce financial rewards to investors as provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. We make sure
Alternatives Strategies Market Development Product Development Market Penetration
The Grand Strategy Matrix
key external & internal factors MKT development Product development MKT penetrations Opportunities Weight AS TAS AS TAS AS TAS Business Internationalization 4 0.4 4 0.4 3 0.3 Changing consumer preferences 3 0.27 4 0.36 3 0.27 Energy efficient production techniques 3 0.3 4 0.4 3 0.3 high barrire to entry 2 0.16 2 0.16 2 0.16 low bargining power of supplier 2 0.1 2 0.1 2 0.1 large portfolio than competitors 3 0.45 4 0.6 1 0.15 Threats political & community support 4 0.4 3 0.3 2 0.2 ecnomic factors 2 0.18 3 0.27 2 0.18 technological innovation 3 0.27 3 0.27 2 0.18 the intesity of rivalry among competitors in a industry is high 1 0.07 2 0.14 1 0.07 number two rank in market share 1 0.08 2 0.16 1 0.08 Strengths Strong differentiation strategy 3 0.3 4 0.4 3 0.3 Strong product diversification strategy 3 0.27 4 0.36 3 0.27 strong focus on using product synergies 2 0.2 4 0.4 2 0.2 Due to the attractive regulation and relation AR. Assets shows a good standing in company to their competitors 1 0.09 3 0.27 1 0.09 Access to global employee base 1 0.08 2 0.16 1 0.08 Decentralized operations 2 0.18 2 0.18 3 0.27 Weaknesses High spend on promotional activities 1 0.1 4 0.4 2 0.2 Targeting contemporary consumers 1 0.1 4 0.4 2 0.2 Global organization slow to adopt to change 1 0.08 3 0.24 3 0.24 Many production facilities still on high energy and high waste system 2 0.16 2 0.16 2 0.16 Weak profit margin 2 0.18 2 0.18 1 0.09 1.00 4.42 6.31 4.09
Product development Marketing: Long-Term Objective:  Delivering catered products to each region to match customer preference and needs. Annual Objective:  Introduce one new product every year.  Support developed products with creative marketing campaigns.
Product development Policy:  All Marketing activity must be evaluated before execution to insure success. In addition, the marketing activity of developed products should cover wider spectrum of customers to utilize marketing budget effectively. Strategy:  Conduct Market Survey and research to understand consumer preference and needs.  Collect loyal consumers’ feedback and ideas for future product development.
Product development Operation: Long-Term Objective:  To produce top quality products.  To be prepaid to adapt any new operational processes to develop new product.  Eliminate supplies inventory.(JIT) Annual Objective:  Hire skilled and experienced people.  Develop efficient (JIT) plan.
Product development Policy:  Being very selective in hiring, by choosing skilled and experienced employee.  Schedule semiannually meeting with suppliers. Strategy:  Use latest technology in the manufacturing process.  Take an advantage of low supplier bargaining power and empower JIT.
Product development Management: Long-Term Objective:  Reduce or eliminate resistance to change of process and individual. Annual Objective:  Increase the understanding about the advantage of change  Support and endorse creativity for all employees.
Product development Policy:  Employees will be required to present at least two new ideas to their superior every year. Strategy:  Use rational or Self-interest change strategy to assure easy and fast implementation of any changes required for developing new product.
Product development Finance: Long-Term Objective:  Company must continue Aggressive financial planning to support budgeting. Annual Objective:  By developing new products every year the company must maintain 20% increase in revenue yearly.
Implementation Product development Policy:  The company must cover the rising costs by increasing revenue proportionately. Strategy:  Company will acquire a $500 million dollar loan financed and paid over a 5 years period.
Product development Research Development: Long-Term Objective:  Develop at least fifteen ready to launch new products in the next 5 years.  Develop healthier snacks. Annual Objective:  Develop 5 new products every year and pick the best one to launch.  Follow up and analyze food safety issues to develop the right product.
Product development Policy:  All developed products should go through testing process and evaluation before lunching to make sure targeted consumers will be satisfied. Strategy:  Innovate in heart-healthy oil, sodium reduction and more whole grains.  Appropriate incentive plans for employees who contribute to new product development.
Saleh Pro-forma Projected Financial ratios Balanced Scorecard
PRO-FORMA : Income Statement PERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2010 Assessment Total Revenue 39,474,000 43,251,000 43,232,000 51,878,400 20% increase Cost of Revenue 18,038,000 20,351,000 20,099,000 23,706,302 Percentage of sales = 45.6% Gross Profit 21,436,000 22,900,000 23,133,000 28,172,098 Operating Expenses Research Development - - - - Selling General and Administrative 14,208,000 15,901,000 15,026,000 19,233,280 Historical trend + 20% Non Recurring - - - - Others 58,000 64,000 63,000 63,000 As prior year Total Operating Expenses 14,266,000 15,965,000 15,089,000 19,296,280 Operating Income or Loss 7,170,000 6,935,000 8,044,000 8,875,818 Income from Continuing Operations Total Other Income/Expenses Net 685,000 41,000 67,000 67,000 As prior year Earnings Before Interest And Taxes 7,855,000 7,350,000 8,476,000 8,942,818 Interest Expense 224,000 329,000 397,000 528,010 Historical trend Income Before Tax 7,631,000 7,021,000 8,079,000 8,414,808 Income Tax Expense 1,973,000 1,879,000 2,100,000 2,204,987 Tax rate 26.2% Minority Interest - - -33,000 -33,000 As prior year Net Income From Continuing Ops 5,658,000 5,142,000 5,946,000 6,176,821 Net Income 5,658,000 5,142,000 5,946,000 6,176,821
PRO-FORMA : Balance Sheet Stockholders' Equity 2007 2008 2009 2010 Misc Stocks Options Warrants - - -104,000 -104,000 As prior year Redeemable Preferred Stock - -97,000 - - As prior year Preferred Stock 41,000 - - - Common Stock 30,000 30,000 30,000 30,000 As prior year Ending Retained Earnings + Projected net Retained Earnings 28,184,000 30,638,000 33,805,000 39,981,821 income Treasury Stock -10,519,000 -14,122,000 -13,383,000 -13,383,000 As prior year Capital Surplus 450,000 351,000 250,000 250,000 As prior year Other Stockholder Equity -952,000 -4,694,000 -3,794,000 -3,794,000 As prior year Total Stockholder Equity 17,234,000 12,106,000 16,804,000 22,980,821 Total liabilities and stock holder equity 34,628,000 35,994,000 39,848,000 40,628,821
PRO-FORMA : Balance Sheet Liabilities 2007 2008 2009 2010 Current Liabilities Accounts Payable 6,209,000 6,494,000 8,292,000 9,950,400 As sales Short/Current Long Term Debt - 369,000 464,000 564,000 Prior year + 100M Other Current Liabilities 1,544,000 1,924,000 - - As prior year Total Current Liabilities 7,753,000 8,787,000 8,756,000 10,514,400 Long Term Debt 4,203,000 7,858,000 7,400,000 10,760,000 Historical trend + 400M Other Liabilities 4,792,000 7,017,000 5,591,000 5,591,000 As prior year Deferred Long Term Liability Charges 646,000 226,000 659,000 659,000 As prior year Minority Interest - - 638,000 638,000 As prior year Negative Goodwill - - - - As prior year Total Liabilities 17,394,000 23,888,000 23,044,000 17,648,000
PRO-FORMA : Balance Sheet PERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2,010 Assessment Assets Current Assets Cash And Cash Equivalents 910,000 2,064,000 3,943,000 2,115,161 Plug figure Short Term Investments 1,571,000 213,000 192,000 192,000 As prior year Net Receivables 4,389,000 4,683,000 4,624,000 5,548,800 As sales Inventory 2,290,000 2,522,000 2,618,000 3,141,600 As sales Other Current Assets 991,000 1,324,000 1,194,000 1,194,000 As prior year Total Current Assets 10,151,000 10,806,000 12,571,000 12,191,561 Long Term Investments 4,475,000 3,998,000 4,484,000 4,484,000 As prior year Property Plant and Equipment 11,228,000 11,663,000 12,671,000 13,831,260 Historical trend + 400M Goodwill 5,169,000 5,124,000 6,534,000 6,534,000 As prior year Intangible Assets 2,044,000 1,860,000 2,623,000 2,623,000 As prior year Accumulated Amortization - - - - As prior year Other Assets 1,356,000 2,324,000 965,000 965,000 As prior year Deferred Long Term Asset Charges 205,000 219,000 - - As prior year Total Assets 34,628,000 35,994,000 39,848,000 40,628,821
Projected Financial Ratios 2007 2008 2009 2010 Assessment Liquidity Ratios Current Ratio 1.31 1.23 1.44 1.16 Negative Quick Ratio 1.01 0.94 1.14 0.86 Negative Asset Utilization Ratios Inventory Turnover 17.24 17.15 16.51 16.51 Same DSI 21.17 21.28 22.10 22.10 Same AR Turnover 8.99 9.24 9.35 9.35 Same DSO (ACP) 40.58 39.52 39.04 39.04 Same Fixed Asset Turnover 3.52 3.71 3.41 3.75 Positive Total Asset Turnover 1.14 1.20 1.08 1.28 Positive Debt Management Ratios Debt Ratio 0.50 0.66 0.58 0.43 Positive TIE 35.07 22.34 21.35 16.94 Negative Profitability Ratios Gross Margin 0.54 0.53 0.54 0.54 Same Operating Margin 0.20 0.17 0.20 0.17 Negative Profit Margin 0.14 0.12 0.14 0.12 Negative BEP 0.23 0.20 0.21 0.22 Positive ROA 0.16 0.14 0.15 0.15 Same ROE 0.33 0.42 0.35 0.27 Negative Market Ratios P/E N/A N/A N/A N/A P/CF N/A N/A N/A N/A M/B N/A N/A N/A N/A
Projected Financial Ratios Ratio Category Projected Liquidity Negative Asset Utilization Same Fixed Asset turnover Positive Total Asset Turnover Positive Debt Management Ratios Debt Ratio Positive TIE Negative Profitability Ratios Gross Margin Same Op and Profit Margin Negative ROE Negative BEP and ROA Positive Market N/A
Balanced Scorecard Perspective Goal Measurement Firm growth and profitability Annual sales growth of at least 5% Financial every year and net profitability improvements of 2-3% Value creation, satisfaction Market leading position in all major Customer markets and support Cost of sales dropping by 4-55 annually Efficiency & waste reduction Cost of production dropping by 4-5% Internal Business Process annually Innovation and employee Employee attrition drop by 10% Learning & Growth annually satisfaction At least 20% of annual sales from products less than 2 years in the market
Labeeb Rumelt’s Criteria Conclusion
Rumelt’s Criteria Consistency:  Strategy should not present inconsistent goals and policies.  Introducing current segment products in new markets will drive consistency of consumer expectations regardless of the locations they are present in.
Rumelt’s Criteria Consonance:  Need for strategies to examine set of trends.  Introduction of more health conscious products which will cater to the growing market for health conscious consumers, PepsiCo will be building momentum in line with current trends.
Rumelt’s Criteria feasibility:  Neither overtax resources or create unsolvable sub-problems  The new focus of regionalization or employee base diversification will render to local market product development and idea generation. The feasibility for such strategies should be in line with research and development resources but will pay off eventually.
Rumelt’s Criteria Advantage:  Creation or maintenance of competitive advantage.  The resources and skills within the company is notably strong and defensive against future threats and with the implementation of the new strategies it will be miles ahead of its competition.
Conclusion  Serving consumers with premier convenient foods.  Environmental Sustainability.  Capture more of the aging population market share.  Consistency of innovative products.
Pepsico Final project

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Pepsico Final project

  • 2.
    By Abdulgader Shukri Amin Khayat Amjad Ali Saleh Alsaif Dar Mir
  • 3.
  • 4.
    Introduction  2nd largestbeverage company in the world.  Presence in 200 countries  Key International markets include Argentina, Brazil, China, India, Mexico, Saudi Arabia, Spain, Thailand and U.K.
  • 5.
    History  1890 –Founded by Caleb Bradham  1903 – Trademark  1923, 1931 – Bankrupt  1936- 1938 – Great Depression, Profit Doubled , 10-5 cents.  1941 – Pepsi stock 1st time  1950 – Franchise outside U.S.
  • 6.
    Cont’d..  1960 –Target market – Young adults  1965 – Pepsi Cola Merger with Frito-Lay to form PepsiCo.  1970-1980 – Bought restaurant chains such as Pizza hut, Taco bell, KFC  1980-1990 – Cola Wars  1994-1999 - International Growth and Diversification, Tropicana $ 3 billion  2000 – Quaker Oats, Gatorade
  • 8.
     Soft drinksare not referred to as items of necessity.  Sodas stand between liquor and juice.
  • 9.
    • Frito-Lay brandsaccount for 59% of U.S. snack chip industry
  • 10.
     Acquired Tropicanain 1998  Available in more than 63 countries.  Pure, fresh fruit juice in easy to handle package has attracted the consumers
  • 11.
     Gatorade isthe first isotonic sports drink.  Created in 1965 by researchers at University of Florida for the football team “The Gators”  Worlds leading Sports Drink
  • 12.
     PepsiCo mergedwith Quaker Oats -2001  Wide range of healthy food
  • 13.
    Three business units 1. PepsiCo Americas Foods which includes:  Frito-Lay North America ,  Quaker Foods North America,  all of its Latin American food and snack businesses. 2. PepsiCo Americas Beverages consisted of:  PepsiCo Beverages North America  all of its Latin American beverage businesses. 3. PepsiCo International.  all PepsiCo businesses in Europe, Asia, Middle East and Africa (AMEA)
  • 14.
    Mission Statement “ Ourmission is to be the world's 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
  • 15.
    Mission Statement evaluation Components Mentioned Customers NO Products/Service YES Markets YES Technology NO Concern for Survival, Growth, YES Profitability Philosophy YES Self-Concept NO Concern for Public Image YES Concern for Employees YES
  • 16.
    Company Objectives  Capturelarger market share through product innovation and diversification.  To use synergy between product portfolios to cross sell products.  Achieve higher growth from its international markets.
  • 17.
    Company Objectives  Createa sustainable business for the communities and environment.  To spot the shift in consumer preferences.  Supporting product initiatives with creative marketing and sales initiatives.
  • 18.
    Company Strategies Marketing Product Conglomerate Forward Development Development Diversification Integration
  • 19.
  • 20.
    Historical Financial Analysis 2007 2008 2009 Assessment Liquidity Ratios Current Ratio 1.31 1.23 1.44 P Quick Ratio 1.01 0.94 1.14 P
  • 21.
    Historical Financial Analysis 2007 2008 2009 Assessment Asset Utilization Ratios Inventory Turnover 17.24 17.14 16.51 N DSI 21.17 21.28 22.10 P AR Turnover 8.99 9.24 9.35 P DSO (ACP) 40.58 39.52 39.04 N Fixed Asset Turnover 3.52 3.71 3.41 N Total Asset Turnover 1.14 1.20 1.08 N
  • 22.
    Historical Financial Analysis 2007 2008 2009 Assessment Debt Management Ratios Debt Ratio 0.50 0.66 0.58 P TIE 35.07 22.34 21.35 N
  • 23.
    Historical Financial Analysis 2007 2008 2009 Assessment Profitability Ratios Gross Margin 0.54 0.53 0.54 P Operating Margin 0.20 0.17 0.20 P Profit Margin 0.14 0.12 0.14 P BEP 0.23 0.20 0.21 P ROA 0.16 0.14 0.15 P ROE 0.33 0.42 0.35 N
  • 24.
    Competitor Financial Analysis Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Liquidity Ratios Current Ratio 1.44 1.27 1.50 1.40 S W Quick Ratio 1.14 1.10 1.19 1.20 S W
  • 25.
    Asset Utilization Ratios Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Asset Utilization Ratios Inventory Turnover 16.51 13.16 21.11 6.00 S W DSI 22.10 27.73 17.29 54.48 S W AR Turnover 9.35 8.25 8.85 10.20 S S DSO (ACP) 39.04 44.26 41.24 35.78 S S Fixed Asset Turnover 3.41 3.24 4.99 - S W Total Asset Turnover 1.08 0.64 0.63 0.80 S S
  • 26.
    Debt Management Ratios Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Debt Management Ratios Debt Ratio 0.58 0.49 0.64 - S W TIE 20.43 24.00 4.57 2.40 W S
  • 27.
    Profitability Ratios Competitors Assessment Dr. Dr. Pepsi KO Pepper Industry KO Pepper Profitability Ratios Gross Margin 0.54 0.64 0.60 0.59 W W Operating Margin 0.19 0.27 0.20 - W W Profit Margin 0.13 0.20 0.10 0.18 W S BEP 0.20 0.18 0.13 - S S ROA 0.14 0.13 0.06 0.13 S S ROE 0.33 0.25 0.17 0.39 S S
  • 28.
    Internal Strength &Weakness key external factor Weighted Rating Weights Score Strength Strong differentiation strategy Strong product diversification strategy strong focus on using product synergies Due to the attractive regulation and relation AR. shows a good standing in company to their competitors Access to global employee base Decentralized operations Weakness High spend on promotional activities Targeting contemporary consumers Global organization slow to adopt to change Many production facilities still on high energy and high waste system Weak profit margin
  • 29.
    Internal environment RBV model Resources Valuable Rare Inimitable Non- Competitive Expected substitutable advantage performance Water Competitive A Return parity Decentralized Temporary A to AA structure competitive Return advantage Brand Sustainable AA Return Competitive advantage Recipe Temporary A to AA competitive Return advantage
  • 30.
  • 31.
    External environment Tools used: General environment.  Competitive environment. (Five forces)  Strategic group.
  • 32.
    External environment General Environment
  • 33.
  • 34.
    Strategic Groups Strategic groups Coca-Cola Dr Pepper 1. Objectives different different 2. Strategies same same 3. Strengths Market share Product position 4. Weaknesses Undiversified Undiversified product product
  • 35.
    External environment key external factor Weighted Rating Weights Score Opportunities Business Internationalization Changing consumer preferences Energy efficient production techniques high barrire to entry low bargining power of supplier large portfolio than competitors Threats political & community support ecnomic factors technological innovation the intesity of rivalry among competitors in a industry is high number two rank in market share
  • 36.
    The Internal-External (IE)Matrix Hold & maintain 1) MKT penetration 2) Product development
  • 37.
    STRENGTH WEAKNESS 1. Strong differentiation strategy 1. High spend on promotional 2. Strong product diversification activities strategy 2. Targeting contemporary consumers 3. Strong focus on using product 3. Global organization slow to adopt synergies to change 4. Due to the attractive regulation 4. Many production facilities still on SWOT MATRIX and relation AR. Assets shows a high energy and high waste system good standing in company to their 5. Weak profit margin competitors 5. Access to global employee base 6. Decentralized operations OPPORTUNITY SO STRATEGIES WO STRATEGIES 1. Business internationalization 1. Using differentiated and 1. Business internationalization will 2. Changing consumer diversified products enter into the allow top line growth for lower preferences(healthy style) emerging markets (S1, S2, S6, incremental promotional spend 3. Energy efficient production O1) (W1, O1) techniques 2. Diversified products portfolio can 2. Changing consumer preferences 4. Low barrier to entry be aligned to customer will allow it to go beyond the 5. Low barging power of supplier preferences (S1,S2, O2) contemporary segments (W2, O2) 3. Product synergies and innovation 3. Availability of energy efficient can give it continued leadership techniques can allow it to divest position (S3, O6) from less efficient production sites (W4, O3) THREATS ST STRATEGIES WT STRATEGIES 1. Political & community support 1. Decentralized operations will 1. Political and community support 2. Economic factors allow the political and local will help reduce the incremental 3. The intensity of rivalry among communities to be better engaged promotional spend by creating competitor in an industry is high (S6, T1) positivity around PepsiCo brand 4. Technological Innovation 2. Differentiation and diversification (W1, T1) 5. Number two rank in market share with product synergies will allow 2. Technological innovation will help it to rise above price competition it divest the high energy and waste (S1, S2, S3, T2, T5) production sites and also improve the social and environmental impacts (W4, T4)
  • 38.
    SO STRATEGIES Using differentiatedand diversified products enter into the emerging markets • (S1, S2, S6, O1) Diversified products portfolio can be aligned to customer preferences • (S1,S2, O2) Product synergies and innovation can give it continued leadership position • (S3, O6)
  • 39.
    WO STRATEGIES Business internationalizationwill allow top line growth for lower incremental promotional spend • (W1, O1) Changing consumer preferences will allow it to go beyond the contemporary segments • (W2, O2) Availability of energy efficient techniques can allow it to divest from less efficient production sites • (W4, O3)
  • 40.
    ST STRATEGIES Decentralized operationswill allow the political and local communities to be better engaged • (S6, T1) Differentiation and diversification with product synergies will allow it to rise above price competition • (S1, S2, S3, T2, T5)
  • 41.
    WT STRATEGIES Political andcommunity support will help reduce the incremental promotional spend by creating positivity around PepsiCo brand • (W1, T1) Technological innovation will help it divest the high energy and waste production sites and also improve the social and environmental impacts • (W4, T4)
  • 42.
    Amin  Mission Statement Revision. Alternative Strategies. Strategy Implementation.
  • 43.
    Revised Mission Statement „Ourmission is to be the world‟s premier consumer Products Company focused on new technologies to produce diversified convenient foods and beverages that delight all varieties of customers and bring value into their lives. We seek to produce financial rewards to investors as provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. We make sure
  • 44.
  • 45.
  • 46.
    key external &internal factors MKT development Product development MKT penetrations Opportunities Weight AS TAS AS TAS AS TAS Business Internationalization 4 0.4 4 0.4 3 0.3 Changing consumer preferences 3 0.27 4 0.36 3 0.27 Energy efficient production techniques 3 0.3 4 0.4 3 0.3 high barrire to entry 2 0.16 2 0.16 2 0.16 low bargining power of supplier 2 0.1 2 0.1 2 0.1 large portfolio than competitors 3 0.45 4 0.6 1 0.15 Threats political & community support 4 0.4 3 0.3 2 0.2 ecnomic factors 2 0.18 3 0.27 2 0.18 technological innovation 3 0.27 3 0.27 2 0.18 the intesity of rivalry among competitors in a industry is high 1 0.07 2 0.14 1 0.07 number two rank in market share 1 0.08 2 0.16 1 0.08 Strengths Strong differentiation strategy 3 0.3 4 0.4 3 0.3 Strong product diversification strategy 3 0.27 4 0.36 3 0.27 strong focus on using product synergies 2 0.2 4 0.4 2 0.2 Due to the attractive regulation and relation AR. Assets shows a good standing in company to their competitors 1 0.09 3 0.27 1 0.09 Access to global employee base 1 0.08 2 0.16 1 0.08 Decentralized operations 2 0.18 2 0.18 3 0.27 Weaknesses High spend on promotional activities 1 0.1 4 0.4 2 0.2 Targeting contemporary consumers 1 0.1 4 0.4 2 0.2 Global organization slow to adopt to change 1 0.08 3 0.24 3 0.24 Many production facilities still on high energy and high waste system 2 0.16 2 0.16 2 0.16 Weak profit margin 2 0.18 2 0.18 1 0.09 1.00 4.42 6.31 4.09
  • 47.
    Product development Marketing: Long-Term Objective: Delivering catered products to each region to match customer preference and needs. Annual Objective:  Introduce one new product every year.  Support developed products with creative marketing campaigns.
  • 48.
    Product development Policy:  AllMarketing activity must be evaluated before execution to insure success. In addition, the marketing activity of developed products should cover wider spectrum of customers to utilize marketing budget effectively. Strategy:  Conduct Market Survey and research to understand consumer preference and needs.  Collect loyal consumers’ feedback and ideas for future product development.
  • 49.
    Product development Operation: Long-Term Objective: To produce top quality products.  To be prepaid to adapt any new operational processes to develop new product.  Eliminate supplies inventory.(JIT) Annual Objective:  Hire skilled and experienced people.  Develop efficient (JIT) plan.
  • 50.
    Product development Policy:  Beingvery selective in hiring, by choosing skilled and experienced employee.  Schedule semiannually meeting with suppliers. Strategy:  Use latest technology in the manufacturing process.  Take an advantage of low supplier bargaining power and empower JIT.
  • 51.
    Product development Management: Long-Term Objective: Reduce or eliminate resistance to change of process and individual. Annual Objective:  Increase the understanding about the advantage of change  Support and endorse creativity for all employees.
  • 52.
    Product development Policy:  Employeeswill be required to present at least two new ideas to their superior every year. Strategy:  Use rational or Self-interest change strategy to assure easy and fast implementation of any changes required for developing new product.
  • 53.
    Product development Finance: Long-Term Objective: Company must continue Aggressive financial planning to support budgeting. Annual Objective:  By developing new products every year the company must maintain 20% increase in revenue yearly.
  • 54.
    Implementation Product development Policy:  The company must cover the rising costs by increasing revenue proportionately. Strategy:  Company will acquire a $500 million dollar loan financed and paid over a 5 years period.
  • 55.
    Product development Research Development: Long-TermObjective:  Develop at least fifteen ready to launch new products in the next 5 years.  Develop healthier snacks. Annual Objective:  Develop 5 new products every year and pick the best one to launch.  Follow up and analyze food safety issues to develop the right product.
  • 56.
    Product development Policy:  Alldeveloped products should go through testing process and evaluation before lunching to make sure targeted consumers will be satisfied. Strategy:  Innovate in heart-healthy oil, sodium reduction and more whole grains.  Appropriate incentive plans for employees who contribute to new product development.
  • 57.
  • 58.
    PRO-FORMA : IncomeStatement PERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2010 Assessment Total Revenue 39,474,000 43,251,000 43,232,000 51,878,400 20% increase Cost of Revenue 18,038,000 20,351,000 20,099,000 23,706,302 Percentage of sales = 45.6% Gross Profit 21,436,000 22,900,000 23,133,000 28,172,098 Operating Expenses Research Development - - - - Selling General and Administrative 14,208,000 15,901,000 15,026,000 19,233,280 Historical trend + 20% Non Recurring - - - - Others 58,000 64,000 63,000 63,000 As prior year Total Operating Expenses 14,266,000 15,965,000 15,089,000 19,296,280 Operating Income or Loss 7,170,000 6,935,000 8,044,000 8,875,818 Income from Continuing Operations Total Other Income/Expenses Net 685,000 41,000 67,000 67,000 As prior year Earnings Before Interest And Taxes 7,855,000 7,350,000 8,476,000 8,942,818 Interest Expense 224,000 329,000 397,000 528,010 Historical trend Income Before Tax 7,631,000 7,021,000 8,079,000 8,414,808 Income Tax Expense 1,973,000 1,879,000 2,100,000 2,204,987 Tax rate 26.2% Minority Interest - - -33,000 -33,000 As prior year Net Income From Continuing Ops 5,658,000 5,142,000 5,946,000 6,176,821 Net Income 5,658,000 5,142,000 5,946,000 6,176,821
  • 59.
    PRO-FORMA : BalanceSheet Stockholders' Equity 2007 2008 2009 2010 Misc Stocks Options Warrants - - -104,000 -104,000 As prior year Redeemable Preferred Stock - -97,000 - - As prior year Preferred Stock 41,000 - - - Common Stock 30,000 30,000 30,000 30,000 As prior year Ending Retained Earnings + Projected net Retained Earnings 28,184,000 30,638,000 33,805,000 39,981,821 income Treasury Stock -10,519,000 -14,122,000 -13,383,000 -13,383,000 As prior year Capital Surplus 450,000 351,000 250,000 250,000 As prior year Other Stockholder Equity -952,000 -4,694,000 -3,794,000 -3,794,000 As prior year Total Stockholder Equity 17,234,000 12,106,000 16,804,000 22,980,821 Total liabilities and stock holder equity 34,628,000 35,994,000 39,848,000 40,628,821
  • 60.
    PRO-FORMA : BalanceSheet Liabilities 2007 2008 2009 2010 Current Liabilities Accounts Payable 6,209,000 6,494,000 8,292,000 9,950,400 As sales Short/Current Long Term Debt - 369,000 464,000 564,000 Prior year + 100M Other Current Liabilities 1,544,000 1,924,000 - - As prior year Total Current Liabilities 7,753,000 8,787,000 8,756,000 10,514,400 Long Term Debt 4,203,000 7,858,000 7,400,000 10,760,000 Historical trend + 400M Other Liabilities 4,792,000 7,017,000 5,591,000 5,591,000 As prior year Deferred Long Term Liability Charges 646,000 226,000 659,000 659,000 As prior year Minority Interest - - 638,000 638,000 As prior year Negative Goodwill - - - - As prior year Total Liabilities 17,394,000 23,888,000 23,044,000 17,648,000
  • 61.
    PRO-FORMA : BalanceSheet PERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2,010 Assessment Assets Current Assets Cash And Cash Equivalents 910,000 2,064,000 3,943,000 2,115,161 Plug figure Short Term Investments 1,571,000 213,000 192,000 192,000 As prior year Net Receivables 4,389,000 4,683,000 4,624,000 5,548,800 As sales Inventory 2,290,000 2,522,000 2,618,000 3,141,600 As sales Other Current Assets 991,000 1,324,000 1,194,000 1,194,000 As prior year Total Current Assets 10,151,000 10,806,000 12,571,000 12,191,561 Long Term Investments 4,475,000 3,998,000 4,484,000 4,484,000 As prior year Property Plant and Equipment 11,228,000 11,663,000 12,671,000 13,831,260 Historical trend + 400M Goodwill 5,169,000 5,124,000 6,534,000 6,534,000 As prior year Intangible Assets 2,044,000 1,860,000 2,623,000 2,623,000 As prior year Accumulated Amortization - - - - As prior year Other Assets 1,356,000 2,324,000 965,000 965,000 As prior year Deferred Long Term Asset Charges 205,000 219,000 - - As prior year Total Assets 34,628,000 35,994,000 39,848,000 40,628,821
  • 62.
    Projected Financial Ratios 2007 2008 2009 2010 Assessment Liquidity Ratios Current Ratio 1.31 1.23 1.44 1.16 Negative Quick Ratio 1.01 0.94 1.14 0.86 Negative Asset Utilization Ratios Inventory Turnover 17.24 17.15 16.51 16.51 Same DSI 21.17 21.28 22.10 22.10 Same AR Turnover 8.99 9.24 9.35 9.35 Same DSO (ACP) 40.58 39.52 39.04 39.04 Same Fixed Asset Turnover 3.52 3.71 3.41 3.75 Positive Total Asset Turnover 1.14 1.20 1.08 1.28 Positive Debt Management Ratios Debt Ratio 0.50 0.66 0.58 0.43 Positive TIE 35.07 22.34 21.35 16.94 Negative Profitability Ratios Gross Margin 0.54 0.53 0.54 0.54 Same Operating Margin 0.20 0.17 0.20 0.17 Negative Profit Margin 0.14 0.12 0.14 0.12 Negative BEP 0.23 0.20 0.21 0.22 Positive ROA 0.16 0.14 0.15 0.15 Same ROE 0.33 0.42 0.35 0.27 Negative Market Ratios P/E N/A N/A N/A N/A P/CF N/A N/A N/A N/A M/B N/A N/A N/A N/A
  • 63.
    Projected Financial Ratios Ratio Category Projected Liquidity Negative Asset Utilization Same Fixed Asset turnover Positive Total Asset Turnover Positive Debt Management Ratios Debt Ratio Positive TIE Negative Profitability Ratios Gross Margin Same Op and Profit Margin Negative ROE Negative BEP and ROA Positive Market N/A
  • 64.
    Balanced Scorecard Perspective Goal Measurement Firm growth and profitability Annual sales growth of at least 5% Financial every year and net profitability improvements of 2-3% Value creation, satisfaction Market leading position in all major Customer markets and support Cost of sales dropping by 4-55 annually Efficiency & waste reduction Cost of production dropping by 4-5% Internal Business Process annually Innovation and employee Employee attrition drop by 10% Learning & Growth annually satisfaction At least 20% of annual sales from products less than 2 years in the market
  • 65.
  • 66.
    Rumelt’s Criteria Consistency:  Strategyshould not present inconsistent goals and policies.  Introducing current segment products in new markets will drive consistency of consumer expectations regardless of the locations they are present in.
  • 67.
    Rumelt’s Criteria Consonance:  Needfor strategies to examine set of trends.  Introduction of more health conscious products which will cater to the growing market for health conscious consumers, PepsiCo will be building momentum in line with current trends.
  • 68.
    Rumelt’s Criteria feasibility:  Neitherovertax resources or create unsolvable sub-problems  The new focus of regionalization or employee base diversification will render to local market product development and idea generation. The feasibility for such strategies should be in line with research and development resources but will pay off eventually.
  • 69.
    Rumelt’s Criteria Advantage:  Creationor maintenance of competitive advantage.  The resources and skills within the company is notably strong and defensive against future threats and with the implementation of the new strategies it will be miles ahead of its competition.
  • 70.
    Conclusion  Serving consumerswith premier convenient foods.  Environmental Sustainability.  Capture more of the aging population market share.  Consistency of innovative products.