Pepsico

Pepsico

PepsiCo’s Diversification Strategy in 2008

PepsiCo. has some important internal strengths. First of all, there is a tight control on the different levels of the supply chain and this has led to great efficiency. Second, there is a huge international exposure, a wide range of products and financially speaking there are impressive revenues. Last but not least, the company has a clever management. As for the opportunities there are many: one example is the potential growth of markets (especially international) or the changing in the customer’s preferences. Threats are represented by intense competition, potential negative government regulations and the decline in carbonated drink sales due to the growth of health-conscious consumers.

If we look at the environment in general, PepsiCo operates in a very difficult one: there are high levels of rivalry, threats of substitutes and bargaining power of buyers. However, the company can count on some very important success factors like the ability to forecast trends at both local and global level, the adaptation to consumers’ lifestyle, a great brand image and product innovation and diversification.

The first key issue of this case is the low profitability in the international businesses, so a new organizational structure was needed. The recommendation to PepsiCo. is to keep on expanding into the international market and focus on understanding the different consumer taste preferences. In particular, the firm should try to compete in emerging countries and reinforce the relationships with local companies. By this restructure it would also be possible to improve overall profitability and solve two other strategic issues: the downturn in stock price that began in 2008 and the dependence on US market revenues.
Another important recommendation (linked to the previous one) pertains to rely on marketing and research and development in order to meet consumers’ expectations. For example, concentrate on healthy products since...

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