PepsiCo has achieved great business performance internationally through its aggressive expansion programme, which includes the acquisition of other performing brands. Getorade has the highest long-term industry attractiveness in terms of competitive strength. The flagship brand Pepsi-Cola, however, faces a bleak future in terms of market-share performance because of increased competition from Coca Cola. PepsiCo has a good strategic portfolio fit, given that the firm has pursued an acquisition strategy that targets companies with specific strong elements regarding their production, distribution, as well as marketing. The firm should consider an aggressive expansion in the international market using its established Pepsi brand. The strategy should focus on competing with Coca Cola within the US market by adopting a vertical integration strategy to achieve economies of scale advantages.
PepsiCo’s Business Units on a Business Attractiveness Matrix
Comparatively, PepsiCo’s businesses are attractive, although some new businesses appear more attractive than the others. However, the carbonated soft drink may, in the long-term, witness a significant loss in relation to the overall market share of the beverage industry. Pepsi Cola’s performance in major markets remains comparatively weaker than that of its major competitor, the Coca Cola. The company could register poor sales in the bottled water sector because environmental issues raised by bottling water are still rife.
According to the analysis of the above 9-cell business strength matrix, the star units of the PepsiCo overall business include Frito-Lay, Gatorade, as well as Tropicana. Another standout performer among the units is the Quaker Oatmeal, whose competitive position lies in the average, while the long term industry attractiveness is medium. These business units enjoy strong performance, mainly due to their strong research and development (R&D) dedication, as well as their exceptional brand names. Additionally, PepsiCo also offers appealing products to its consumers, who seek healthier snacks and drinks option.
PepsiCo’s Portfolio Strategic Fit
PepsiCo’s strategic portfolio fit is good for business, given that the firm has pursued an acquisition strategy that targets companies with specific strong elements regarding their production, distribution, as well as marketing. The most significant and observable value-chain matchups include its highly efficient purchasing portrayed by the great cost-sharing benefits of Aquafina and Pepsi-Cola. In the operations section, Tropicana and the Dole and SoBe brands have achieved hot fill operations. In distribution, both cost-sharing and skill transfer are achievable among brands like Gatorade, which are highly established (Vu, Shi, & Hanby, 2009).
In terms of its sales and marketing activities, it is possible to cross-market Frito-Lay products together with the other convenience products using brand sharing. The company should keep on finding novel opportunities in skill transfer to make it more competitive. This should go hand in hand with the search for new opportunities in brand sharing as a component of the diversification strategy.
Strategic Actions to Sustain the Papsico’s Financial Market Performance
Indra Nooyi’s probable strategic actions should mainly consider an aggressive expansion into the international scene of the Pepsi brand. More importantly, Noyi, together with her management team, should aim to achieve significant market dominance as far as sodas are concerned. The strategy should focus on competing with Coca Cola within the US market, especially by adopting a vertical integration strategy to achieve economies of scale advantages. The company should further consider strengthening its relationship with the retailers to ensure better results in business performance.
PepsiCo should invest more in R&D to boost innovation and ensure it attains industry leadership. Increased R&D activities imply increasing expenditure on this aspect (Damoiseau, Black & Raggio, 2011). PepsiCo’s current aggressive diversification is a significant advantage for its performance, as it enables it to offer unique and highly competitive products. An acquisition strategy would also help PepsiCo achieve the objective of realizing efficiency in the value chain. The table below depicts the strategic fit potentials that PepsiCo can achieve between its numerous business units. Plans for international growth and increase in profits should equally remain as PepsiCo’s leading strategy, especially through the changed organisational structure to focus on other different markets than North America (Damoiseau, Black & Raggio, 2011).
|Purchasing||Operations||Distribution||Sales & Marketing||Advertising/Promotion|
|Cost-sharing with Aquafina||Cost-sharing and skills transfer opportunities with other carbonated beverages||Cost-sharing with carbonated beverages and skills transfer with Frito Lay snacks||Cross-selling with the Frito-Lay brand and skills transfer with other convenience products||Potential brand-sharing with Frito Lay|
|Some potential cost-sharing with the Quaker brand of products||Potential cost-sharing and skill transfer with Quaker brand||Skill transfer with Pepsi-Cola, as well as other carbonated drinks, cost-sharing with Quaker||Cross-selling with Frito-Lay, skill transfer with convenient products and brand sharing||Potential brand sharing with carbonated drinks, skill transfer or cost-sharing among Frito Lay products.|
|Some potential cost-sharing with the hot fill drinks||Cost-sharing among the hot fill operations||Cost-sharing with convenience beverages, and/or skills transfer with convenience snacks.||Cross-selling among non-carbonated healthy drinks/potential skills transfer with healthy snacks||Potential cost-sharing/skills transfer among healthy drinks and fruit juices.|
|Cost-sharing with Pepsi-Cola||Potential cost-sharing with other drinks||Cost-sharing/skills transfer with healthy snacks||None|
|Some potential cost-sharing with hot fill drinks||Potential cost-sharing/skills transfer with other drinks, except Pepsi-Cola.||Cost-sharing/skills transfer with healthy snacks||Potential cost-sharing with other drinks|
|Cost-sharing with Quaker snacks||Cost-sharing/skills transfer with other Quaker brands||Skills transfer with other PepsiCo brands, cost-sharing/skills transfer with Frito-Lay||None||Skills transfer/cost-sharing with Quaker|
In the above value chain diagram, each of the six business units represented from top to down includes Pepsi Cola, Frito-Lay, Tropicana/DoleSoBe, Aquafina, Gatorade, and Quaker Hot Cereals.
Damoiseau, Y., Black, W. C., & Raggio, R. D. (2011). Brand creation vs acquisition in portfolio expansion strategy. The Journal of Product and Brand Management, 20(4), 268-281.
Vu, D. A., Shi, Y., & Hanby, T. (2009). Strategic framework for brand integration in horizontal mergers and acquisitions. Journal of Technology Management in China, 4(1), 26-52.