Essay on Pepsico's Diversification Strategy

Words: 1223
Pages: 5

PepsiCo has built a strong empire that has given it dominance throughout much of the world as a provider or snack foods and beverages. As it has worked to build its market share, PepsiCo has made many key decisions – some positive and some negative. It has also gone through a number of changes including the acquisition and subsequent divestiture of several fast food chains.
This paper focuses on the process that all companies should follow to help determine whether the industry they are in demonstrates sufficient attractiveness and whether their current business units have sufficient competitive advantage.

In 1965, Pepsi-Cola and Frito-Lay combined forces to create a new company that could capitalize on the combined
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In addition, the industry has expanded greatly as new international markets are introduced to snack foods and beverages. Other factors which increased the attractiveness of these industries are the economies of scale that are often achieved which help to boost the profitability of market participants and the unlikelihood of disintegration of the industry. Although seasonality exists to some extent in the beverage industry, the 2008 10K for PepsiCo states that this only affects which beverages are purchased as consumer preference changes between cooler and warmer months. Although a similar variance is noted in the snack food industry, general snack food sales increase during major holiday months. The CEO states that “taken as a whole, seasonality does not have a material impact…” Other items on the matrix were assessed based on information gained from various sources including the websites of Coca-Cola (felt to be the closest competitor) and PepsiCo as well as their respective SEC 10K filings. Based on the information gained, PepsiCo has now focused its business on two synergistic industries with strong potential.
In order to assess the attractive degrees of competitive strength and good long-term earnings potential of PepsiCo’s business units in these industries, a similar matrix is utilized. Of the more important factors in this matrix are the relative market share held by each of the business