Management and Organizational Studies 4410A/B - Pepsi Case .docx

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Management and Organizational Studies
Management and Organizational Studies 4410A/B
Raymond Leduc

PepsiCo Overall Company Vision: Make snack and food beverages healthier Mission: Consumer packaged snack and beverage company International Division Vision: Expand internationally through its Power of One Strategy Mission: Overall Company Objectives Financial: improve overall profitability and reverse the downturn in its stock price that began in 2008  Sustain performance  Generate operating cash flows sufficient to reinvest in its core business  Provide cash dividends to shareholders  Fund an $8 billion share buyback plan  Pursue acquisitions that would provide active returns Non-financial:  Maintain performance through product innovation  Close relationships with distribution allies  Strategic acquisitions  Synergies between divisions (look at value chain)  Use power of one to expand internationally “Brand portfolio”  Increase Quaker international sales  Underlying all objectives  CASH Are these SMART objectives?  Need to improve them 5 Forces: Rivalry Within Companies: only a few dominant companies, however, competition among them is intense Power of Suppliers: not very strong because their supplies are not rare to find Power of Buyers: high – there are many alternatives that they can choose from and although they may be brand loyal, they are not high involvement decisions which can make them easily switch (also low switching costs which makes it easier) Substitutes: High – there are a lot of substitutes available  Food – high; restaurants,  Beverage: o Coffee Potential new entrants: Low – because there are well established companies already that dominate the industry  Hard for them to get consumers because of brand loyalty that consumers have with existing companies  There are high start up costs Driving Forces General environment:  Socio-cultural  Demographic o People are more health conscious o People are more educated and understand the importance of healthy eating o People want healthier snack options  greater demand for healthy snacks o People are looking to reduce their consumption of trans fats, saturated fats, cholesterol, and simple carbohydrates o People are looking for convenience  Political-Legal o Companies must list what exactly products are made of (nutrition facts must be stated on packages)  Technological: easier ways to advertise to target markets  Economic  Global Key Success Factors: Product innovation, quality, processing, etc. Brand reputation Volume Cash 1. Beverage: a. New container sizes and designs b. New multipacks c. World-class advertising d. Added points of distribution e. Efficiency f. Marketing  understand consumers, government regulations, etc. g. Distribution network h. Volume 2. Snack Food a. Convenience b. Growing awareness of nutritional content c. Indulgent snacking d. Efficiency e. Marketing f. Distribution network g. Volume  Are there similarities? Are there differences? Economic Traits:  High fixed costs  Low margins Implications: A lot of similarities between the two companies so we can create synergies  feel good about the industry because we also have a lot of the key success factors Strategy Differentiation: they have come up with 4 brands that complement each other and give their customers a range of choices to choose from  Broad customer appeal  They cant ignore costs because costs are already low in the industry Does it make sense?  Broad makes sense because company needs a lot of volume  Differentiation makes sense because you can charge a bit more (increase margins) o By having a good brand portfolio you can push products with one another Financial Statements Exhibit 1:  Net revenue is growing at a faster rate than net income  Over the 4 year period o Net revenue: 10.9%  Sales have gone up o Net Income: 9.95%  Income has gone down  Become less efficient o Selling more but becoming less efficient  acquisitions can increase sales but may not have integrated them properly yet  How to get the benefits of synergies from all the acquisitions Exhibit 2:  Pepsi has been outperforming everybody  Overall stock market is declining which could be a reason for our declining stock price  Bad for Pepsi: we might be acquired if our stock price continues to drop Exhibit 3:  Net Revenue: 10.17%  Cost of sales: 12.8% o Cost of sales is growing faster than revenue  Selling, General & Admin o Growing at a slower rate of increase  7.42%  may eliminate certain departments during acquisitions  Operating profit: 10% Exhibit 4:  Everything we need to do revolves around cash  Balance sheet  doesn’t have much cash  it has decreased  Calculate age of receivables Exhibit 5:  Net cash provided by operating activities  Capital spending  seems to be growing because of our acquisitions which is okay Exhibit 6: brand portfolio Exhibit 7:  Net revenues o Frito Lay: 6.6% o PepsiCo Beverage: 7.2% o Pepsi International: 17%
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