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This answer is structured by firstly, providing the definitions of corporate and business strategy. Thereafter, the corporate strategy for PepsiCo will be discussed and lastly, the business strategies for PepsiCo’s divisions will be identified.
Corporate strategy involves a clearly defined vision that organisations develop to create corporate value and motivate employees to implement appropriate actions to promote customer satisfaction (Rumelt 2012). Business Strategy is the corporate strategy elements framed by the business managers into a business unit specific strategy to strengthen the overall performance of the company (Rumelt 2012).
PepsiCo’s corporate strategy in 2014 was to diversify their product portfolio into broader categories within the food, snack and beverage industries, for example, salty and sweet snacks, water, soft drinks, juices, and ready to drink tea and coffees. The main challenge of diversification for PepsiCo was the selection of new categories and the entrance method into the categories. The corporate strategy was geared towards good relationships with distribution partners, product innovation, international expansion and strategic acquisitions (Gamble 2014). The national and global expansion was achieved through external acquisitions and mergers, and reformulating products to be healthier and more convenient. Most PepsiCo products complement each other and are advertised together. For example, the 2014 Superbowl advert depicted the new spicy Doritos consumed with Mountain Dew. PepsiCo’s strategy was related diversification using mergers and acquisitions to launch new operations, acquiring technology expertise, establishing supplier relationships and matching competitor efficiency to build a strong market position.
PepsiCo was organised into six business divisions that developed business strategies from the overarching corporate strategy.
The PepsiCo Beverages North America business strategy was to improve volume, profitability and market share in soft drinks through the application of the “Power of One” strategy, which concentrates on synergistic benefits by positioning Pepsi and Frito-Lay products alongside each other on shelves. This promotes participation with local distribution centres. PepsiCo also drove soft-drink innovation to sustain sales and market share through the calorie reduction of non-diet drinks. They also offered healthier noncarbonated beverage brands like flavoured water.
The Frito-Lay North America business strategy was product innovation through the development of ‘good-for-you’ and ‘better-for-you’ products. These products are healthier snacks and provide numerous flavours to consumers thereby creating growth opportunities. Frito Lay also provided convenience to customers, for example, producing snacks in smaller bags to address overeating concerns also provided convenience to customers as they can now take along snacks on outings.
The Quaker Food North America business strategy was to escalate market share using the “good-for-you” and “better-for-you” strategy in hot and ready-to-eat cereals, rice and pasta side dishes, and pancake mixes and syrups in North America. Quaker foods enhanced the quality of the product while diversifying the product categories.
The business strategy of PepsiCo’s Latin American Foods was to create growth and understand consumer taste preferences to expand in the international market. The Latin American Foods also adopted the ‘good-for-you’ and ‘better-for-you’ strategy.
The business strategy of PepsiCo Europe was to be the leading vender of snacks and beverages in the United Kingdom and to increase the market shares in other international markets.
The business strategy of PepsiCo Asia, Middle East and Africa was to build up market shares in the midst of the recent decline in beverage and snacks sales.
The PepsiCo Europe and PepsiCo Asia, Middle East and Africa can be grouped into an International unit whose main aim is to expand the volume of beverages, snacks and food outside North America by exploring new opportunities in different markets and understanding the resident customer taste preferences. The PepsiCo International unit utilises the Power of One strategy with tailor made changes in different countries.
This answer is structured by providing a context on the long-term attractiveness in the industries, thereafter the synthesis on the attractiveness of PepsiCo’s business portfolio will be provided and discussed.
Industry attractiveness refers to the potential profits that may be generated by investing in a given industry (Marx 2017). When deciding on new markets or expanding existing markets, businesses consider factors like the market size (who is likely to buy and how many people would buy), projected growth rate, intensity of competition, emerging opportunities and threats, resource requirements, Societal Political and Regulatory factors, industry profitability and industry uncertainty and business risk (Marx 2017).
PepsiCo’s beverage industry is the most attractive industry in the portfolio, followed by snack food and cereal. All of the PepsiCo industries are attractive as each industry scored higher than five in the total weighted average section; therefore, all industries pass the attractive test and have a long-term future.
The table below depicts the long-term attractiveness of the industries calculation
Table 1: Table depicting the long-term attractiveness
Measure Weight Beverage Weighted Average Cereal Weighted Average Snack Weighted Average
Market size and projected growth rate 0.2 8 1.60 6 1.20 7 1.40
Intensity of competition 0.15 9 1.35 8 1.20 7 1.05
Emerging opportunities and threats 0.15 6 0.90 6 0.90 6 0.90
Resource Requirements 0.15 9 1.35 7 1.05 7 1.05
Societal Political, Regulatory &Environmental factors 0.05 8 0.40 8 0.40 8 0.40
Industry Profitability 0.25 8 2.00 6 1.50 7 1.75
Industry uncertainty and business risk 0.05 8 0.40 7 0.35 7 0.35
Total 1 8 6.6 6.9
Richard P. Rumelt, (2012) “Good Strategy/Bad Strategy: The Difference and Why It Matters”, Strategic Direction, Vol. 28 Issue: 8, https://doi.org/10.1108/sd.2012.05628haa.002