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UNIVERSITY OF WALES INSTITUTE CARDIFF

Master of Business Administration

MBA 402

Strategic Management

(Assignment 1)

Lecturer : David Goh

Student’s Name : Mohammed Atik

Student ID Number : 0912/6094

Submission Date

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Content

1 Summary 3

2 Introduction of PepsiCo 4

3 About PepsiCo in India 4

4 Market analysis of soft drink 4

5 Product in India 5

6 Mission and vision 5

7 Strategic management 6

8 Situational analysis 6

9 External environment 7

10 Pest frame work 8

11 Porter five forces 13

12 Competitive profile matrix 15

13 Internal environment 17

14 SWOT Analysis 17

15 TWOS Matrix 19

16 The BCG Growth Matrix 20

17 Financial Analysis 21

18 Ratio Analysis 21

19 Strategy Formulation 23

20 Grand Strategy Matrix 24

21 Conclusion 25

22 References 26

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Executive Summary

Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand. Coke’s basic

strength is its brand name. But Pepsi with its aggressive marketing planning and quick diversification in

creating and promoting new ideas and product packaging, is successfully maintaining is No.1 position in

India. Pepsi is operating in India, through its 36 bottlers all over India. These bottlers are Pepsi's

strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting

the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.”

Purpose of this project is to study the strategies which Pepsi is doing in India market for its product

Pepsi cola. Pepsi International is a world renowned brand. It is a very well organized multinational com-

pany, which operates almost all over the world. In India It also has proved itself to be the No.1 soft

drink.

We also did analysis of the soft dink industry in India and world wide. The soft drinks set to become

world's leading beverage sector. Global consumption of soft drinks is rising by 7 -9%a year.(Block

2007) and soft drink consumption increased by almost 500% during last 50 year (Putnam and

allshouse 1999

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Introduction of PepsiCo.Pepsi international is world renowned brand .it is very well organized multinational company which op-erate almost all over the world. The produces one of the beast carbonated drink in the world. Pepsi sym-bol of hygiene, quality and serving all over the world. Pepsi is producing cola for more than 100 year and it has dominated the world market for long time, it has head offices in NEW YORK

About PepsiCo India

PepsiCo entered India in 1989 and has grown to become the country’s largest selling food and Beverage Company. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India. Soft drinks witnesses’ healthy growth in India The group has built an expansive beverage and foods business. To support its opera-tions, PepsiCo has 36 bottling plants in India, of which 13 are company owned and 23 are franchisee owned. In addition to this, PepsiCo’s Frito Lay foods division has 3 state-of-the-art plants. PepsiCo’s business is based on its sustainability vision of making tomorrow better than today. PepsiCo’s commit-ment to living by this vision every day is visible in its contribution to the country, consumers and far-mers. (http://pepsicoindia.co.in)

MARKET ANALYSIS OF SOFT DRINKSSoft drinks recorded robust double digit off-trade value growth in 2009, which was higher than that wit-nessed in 2008. Bottled water and fruit/vegetable juice continued to grow strongly as more consumers turned to these products in the search of healthier options. Carbonates also witnessed good sales growth as the long summer helped to fuel sales. Energy drinks has witnessed a slowdown in sales growth as its is a premium priced product type and therefore not considered a necessity. Importantly, more consumers refrained from spending on non-essential items in the wake of the economic downturn

Coca-Cola India and PepsiCo India continued to invest in soft drinks in India. However, domestic players such as Parle Agro, Parle Bisleri Ltd and Dabur India Ltd continued to provide tough competition to the leading multinationals. One competitive edge that domestic players hold is that unlike Coca-Cola India and PepsiCo India the bulk of their business does not come from carbonates, but instead from fruit/vegetable juice and bottled water, which are recording much more dynamic volume and value growth. Thus, while the leading multinationals retained their leading positions in off-trade value terms, they continued to record slight off-trade value share reductions in 2009, while these leading domestic players grew their shares

(http://www.euromonitor.com/Soft_Drinks_in_India#toc)

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Product in India

Pepsi Cola, Miranda, Teem, 7UP, Mountain Dew, Diet 7UP, Diet Pepsi, Lays, Kurkure, Aquafina,Pepsi Twist and Tropicana Juices. Oats, uncle chips Leharnankeen Cheetos and many more

Mission and vision Definition of mission statement

A mission statement is a formal, short, written statement of the purpose of a company or organization. The mission statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making. It provides "the framework or context within which the company's strategies are formulated (Hughes K. et al. (2005).

According to the company’s official website, PepsiCo Incorporated’s mission is to make this company: “the world’s premier consumer products company, focused on convenient foods and beverages. PepsiCo strives to produce healthy financial rewards to investors as it provides opportunities for growth and enrichment to its employees, “So the overall mission of PepsiCo is to increase the value of shareholder's investments. This is achieved through sales growth, cost controls and wise investment of resources. Pep-siCo believes that their commercial success depends upon offering quality and value to their consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to their investors whiled hearing to the highest standards of integrity

Vision

PepsiCo is among the world’s largest consumer products companies. In fact, it is one of the largest com-panies in the world. PepsiCo is focused on various strategic initiatives that it believes will drive growth and ensure the company’s success. When considering whether to change the mission and objectives, it is important consider their impact of such a change on the company’s long-term strategies. Whatever Pep-siCo is doing, it seems to be doing well. The biggest risk associated with a change in mission and objec-tives would be a loss of focus and a loss of momentum (PepsiCo Vision and Strategy).

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Strategic management The system relate to strategy as patterns of action. at the business level, even in absence of formal plans and goals , manager who use these system are able to impose consistency and guide creative search processes tactical day to day life action and creative experiments can be welded into a cohesive pattern that responds to strategic uncertainties and may over time become realized strategy’s (strategy safari. M.A.Lampel pg. 63)

Situational analysisIndia with a population of more than 10 million is potentially one of the largest consumer markets in the world. With urbanization and development of economy, tastes and interests of the people are changing according to the developed nation. Marketing is about winning this new environment. It is about under-standing what consumer's wants and how the product, services and ideas are supplied to them more effi-ciency and conveniently... The Consumer market may be identified as the market for product and services that are purchased by individuals as household for their personal consumption. Soft drinks are a typical consumer product purchased by individual primarily to quench their thirst and also for refreshment. Different types of soft drinks are available in the market and more or less content of all soft drinks are same. The market of soft drink is facing a cut throat competition and many companies are floating in the market with their products with different brand names. In such a situation different factors which influence the people choice for soft drinks are taste, quality images, easy availability and the product cost of advertisement. The Govt. of India has considered the soft drinks industry as "Non-essential" As a result the excise duty levied by govt. on better soft drinks is very high. Thus in a country like India where more than 50% of the total population exists below poverty line, the consumer cannot afford such high price for soft drinks. As a result the trading activities of the soft drinks industry are concentrated in and around big cities and town where the purchasing power of population is considered comparatively high.( Sources of information is article on research methodology by Kothari C.R 2edu.2004 pg.1-20. Kotler by marketing management 11edu ,pg 5,182,215 )

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External environment A business does not function in a vacuum. It has to act and react to what happens outside the factory and office walls. These factors that happen outside the business are known as external factors or influences. These will affect the main internal functions of the business and possibly the objectives of the business and its strategies. The main factor that affects most business is the degree of competition – how fiercely other businesses compete with the products that another business makes. Markets are changing all the time. It does depend on the type of product the business produces, however a business needs to react or lose customers.

Some of the main reasons why markets change rapidly:

1. Customers develop new needs and wants.2. New competitors enter a market.3. New technologies mean that new products can be made.4. A world or countrywide event happens e.g. Gulf War or foot and mouth disease.5. Government introduces new legislation e.g. increases minimum wage.(sources

from;http://tutor2u.net/business/gcse/downloads/external_environment_introduction.pdf)

Sources : created by self study

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PEST FRAME WORK(Political / Economical / Social / Technological)

The PEST framework is designed to provide managers with an analytical tool to identify different ma-cro- environmental factors that may affect business strategies, and to assess how different environmental factors may influence business performance now and in the future.

The PESTEL Framework includes six types of important environmental influences: political, economic, social, technological, environmental and legal. These factors should not be seen as independent factors. Factors such as technological advances may probably affect the social and economic conditions in dif-ferent markets. (Environments and operation by John D.Daniels Lee H.Radebaugh 17nt edition)

Kotlor (2005) claimed the PEST analysis is a useful strategic tool for understand market growth or de-cline business position and direction for operation. the heading the Pest are framework reviewing a situ-ation and can in addition to SWOT and Poster five forces model be applied by company to review stra-tegic direction including model proposition

Pest facors

All the countries operates that are characterized by different political, legal and economic frame works, verse level of economic development, and verity of economics condition. For the company to be suc-cessful, its management must carefully analyze the interaction between corporate policies and political, legal and economics environment in order to maximize efficiency.

India’s economic freedom score is 53.8, making its economy the 124th freest in the 2010 Index. Its score is 0.6 point lower than last year as a result of declines in freedom from corruption, business freedom, and monetary freedom. India is ranked 24th out of 41 countries in the Asia–Pacific region, and its over-all score is below the world average.

The state still plays a major role in over 200 public-sector enterprises. Public debt is 80 percent of GDP, leaving little fiscal room to react to the global downturn. India’s overly restrictive regulatory environ-ment does not facilitate entrepreneurship or realization of the economy’s full potential. Corruption is pervasive, and the judicial system remains inefficient and clogged by a large backlog of cases. Labor freedom is especially weak, with rigid regulations a costly impediment to further economic growth and job creation. Sources of information is (http://www.heritage.org/Index/Country/India)

Political factorGovernment type: Total government expenditures, including consumption and transfer payments, are relatively low. In the most recent year, government spending equaled 28.2 percent of GDP. Non-alco-holic beverages fall with in food category under the FDA (food and drug and admiration). The govern-

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ment play a role with in the operation of manufacturing the product in terms of regulation .these are potential fines set by the government on companies fi they don not meet a standard law. “We’re actively engaged with policy and thought leaders, as well as food and beverage industry leaders, to reach deci-sions on steps we cantake to support consumers in their quest for healthier lifestyles” (Annual Report, 5)

Monetary factor

Inflation has been relatively high, averaging 7.7 percent between 2006 and 2008. The government subsi-dizes agricultural, gas, and kerosene production; applies factory, wholesale, and retail price controls on “essential” commodities, 25 crops, services, electricity, water, some petroleum products, and certain types of coal; and controls the prices of 74 bulk drugs that cover 40 percent of the market. Another 354 drugs are to be brought under controls by a new pharmaceutical policy. Domestic price and marketing arrangements apply to commodities like sugar and certain cereals. Fifteen points were deducted from India’s monetary freedom score to account for policies that distort domestic price “In every policy re-view, we try to manage the balance between growth and inflation and some numbers have been worri-some as we pointed out in the previous policy review paper. The challenge is going to be not so much to bring policy rates to neutral level... but inflation will decide,”developing countries and the emerging economies . Where there is political instability, Unilever has adopted its company strategy to ensure that its profitability drive is sustained. Some Pepsi bottle is packed in small size for low or regular in-come earner, for affordability .because of inflation rate goes high because of people are ready to buy .(September 21. 2010 The Time of India , The Economic Time newspaper article )

Some of issues

Union Health minister SushmaSwaraj issues statement that only three samples out of the 12 in the con-tention meet the EEC norms; while the other samples have residue levels above the acceptable limits, they are only 2 to 6 times more than the acceptable level unlike 30 to 35 times as claimed by the CSE; This has been the result of tests conducted by two laboratories, the Mysore-based Central Food Tech-nological Research Institute (CFTRI) and the Kolkata-based Central Food Laboratory (CFL)( 22 August 2003 Hindustan Times, newspaper article.)

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ECONOMIC ENVIRONMENTSoft drink is not expensive and it is used by most of the people. So soft drink industry is not much tithed

to word the economic influences. But the raw materials they use their soft drink, juices and snacks like

sugar, vegetable, fruit and potato may slightly affect the production cost and profit. The distribution

channel and transportation also affect the product cost slightly.

Another factor is the role of government like increased in taxes Among other food items, milk prices

soared by 24.88 per cent during the week compared to the same period last year, while fruit rates rose

by 15.65 per cent. Vegetables also became dearer by 7.65 per cent on annual basis. Onion prices went

up by 9.85 per cent year-on- year, but potato prices declined by 50.81 per cent . Food inflation fell mar-

ginally to 16.24 per cent for the week ended September 25, on slight easing of supply side pressures,

even as prices of cereals, fruits, select vegetables and milk remained high. Due to high and low of infla -

tion rate government may increased in taxes on commodity price very year (sources of information is

from 09 Oct. 2010 Hindustan Time news paper economy section.)

Social factorPeople today are very trendy sensitive toward the advertisement. It means people drink Dew on fashion-

able and trendy. Taking this into account PepsiCo targeted new generation people, and they are able to

differentiated between them .some people are conscious about caffeine so they mighty have negative

anticipation about soft drink. Also some people thing that soft drink companies spreading the pollution

in manufacturing process.

Religion: -Religion is one of most important sources of society’s beliefs, attitudes and values. And may

a large group of people from Muslim community have problem forging company like Pepsi and Coke

Cole Company who support USA to for war.(It is all about combating "America's imperialism and

Zionism by providing a substitute for American goods and increasing the blockade of countries boycot-

ting American goods," MrMathlouthi told BBC News Online) religions issues have been at the heart of

dispute about whether references to god.

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TECHNOLOGICAL FACTORTechnological for manufacturing and packing of the product, transportation of raw material or delivery

of product in changing time to time and thus it also affects the production cost , transportation cost and

unskilledlabor . Technically also play important role in packing of product.Market need to study several

important topics to make the most of modern information technology, and marketing information system

as strategic asset. (Pepsi appeals to phrases “yeh hi hai Pepsi” (literally “this only is”) to global “right

choices Baby” tag line. Coke brought its strategy more in line with Pepsi now both companies use local

film stars in their advertising and sponsor spots music and religious event) (Global information edu 4

pg,191) . One of the most dramatic forces shaping peoples lives is technology. Technology has released.

Every new technology is forces for “creative destruction”.

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Porter Five Forces

Michael Porter developed a framework, which identified 5 forces that act to either increase or reduce the

competitive forces within an industry.

In general terms, the greater the competitive forces in your industry the more pressure you are likely to

find on your prices. Whereas, the weaker the competitive forces in your industry the less pressure you

are likely to have on your prices. (Global marketing strategic element of competitive advantage 4 thedu,

pg. 504)

Sources;http://www.whatmakesagoodleader.com/Porters-five-forces.html

The Bargaining Power of BuyersThe power of buyers is the impact that customers have on a producing industry. In general, when buyer

power is strong, the relationship to the producing industry is near to what an economist terms among op

son y - a market in which there are many suppliers and one buyer. Under such market conditions, the

buyer sets the price. In reality few pure monopolies exist, but frequently there is some asymmetry be-

tween a producing industry and buyers. The bargaining power of the buyers is low in the country. Be-

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cause what so ever is producing by the companies it is accepted by the consumers. There is no involve -

ment of the consumer in deciding the taste of the soft drink.

The Bargaining Power of Suppliers

A producing industry requires raw materials - labor, components, and other supplies. This requirement

leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials

used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as

selling raw materials at a high price to capture some of the industry's profits.

All the sellers of the raw material are in India and other part of world. If any of the suppliers raises its

prices, we can shift to another supplier.

Barriers to Entry / Threat of Entry

It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms

may enter the industry also affects competition. In theory, any firm should be able to enter and exit a

market, and if free entry and exit exists, then profits always should be nominal. In reality, however, in-

dustries possess characteristics that protect the high profit levels of firms in the market and inhibit addi-

tional rivals from entering the market. These are barriers to entry.

There are no barriers to entry in the soft drink processing industry, because the machinery, labor and raw

material is readily and easily available in the country. The retaliation level of the companies in the in-

dustry is very low. Because the companies have generations of the loyal customers

New entrant to a an industry bring new capacity a desire to gain market share and position and quite of-

ten , new approaches to serving customer .new player means price will pushed down ward and margins

squeeze’s . Its resulting means profitability will be low in long run. (This decisions was.by Michel E

porter, completive strategy 1980 pp7-33)

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Rivalry

Rivalry among firms refers to all the actions taken by firms in the industry to improve their position and

gain advantage over each other. The market structure of the soft drink industry is oligopolistic. All the

companies in the industry are charging the same prices against there products. If any of the company en-

hanced the prices of the soft drink, all the companies followed the same path. The firm with high stra -

tegic stakes in achieving success in industry genially are destabilizing because they may be willing to

accept below average profit margins. There are few firms in the industry like coke cola, thump up, Zaire

masala, etc. and all the firms are competing on the basis of the huge marketing campaigns in the media

to established themselves hold position or expand . (Our goal is to shrink the profit pool and take the

biggest slice .by Kevin Rollins, president and COO, dell Inc. The magazine THE MARKETE Feb.

2010).(global marketing warren &mark2005 4thedu pg.505)

Threat of Substitutes

In Porter's model, substitute products refer to products in other industries. A threat of substitutes exists

when a product's demand is affected by the price change of a substitute product. A product's price elas-

ticity is affected by substitute products - as more substitutes become available, the demand becomes

more elastic since customers have more alternatives. A close substitute product constrains the ability of

firms in an industry to raise prices. (Michel E porter, completive strategy 1980 pp7-33)

The direct competitor of the Pepsi drink and indirect competitors are fresh juice tea coffees but it is

costly in the country, so we can say that there is threat from the substitute product

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Competitive profile matrix

The Competitive Profile Matrix (CPM) identifies soft drink company major competitors and their par-

ticular strengths and weaknesses in relation to a sample company’ strategic position. Assign to each

factor a weight that ranges from 0.0 (not important) to 1.0 (very important). The weight indicates the

relative importance of that factor to being successful in the firm's industry. However, the factors in a

CPM include both internal and external issues; therefore, the ratings refer to strengths and weaknesses,

where 4 = major strength, 3 = minor strength, 2 = minor weakness, and 1 = major weakness. In a CPM,

the ratings and total weighted scores for focus Pepsi Company, in this case, can be compared to the soft

drink company. This comparative analysis provides important internal strategic information. (Sources of

article by Taylor, Linda (2006, Nov 1). “2007 And Beyond - Supply Chain Strategies.)

Critical Success Factors

As used in forming of Competitive Matrix, values per observation in CPM are also obtained from the

rankings and literature of Global Outsourcing Guide – 2006 published by CIO magazine. Factors

namely, market share, advertisement, brand image, availability in market, and market rescue of budget-

ing are assumed to be of high importance and hence they are weighed below 0.15 while the others are

weighed below 0.10.

The result below mentions that still Pepsi is ahead in overall performance but it is now being chased

other competitor company’s like Coca cola and gourmet. If this not taken seriously, there is a threat that

India might face some stronger challenges in future resulting in loosing the ‘monopoly’ enjoyed in the

past decade. To protect itself for this, Pepsi might have to recognize and overcome the current chal-

lenges it faces.

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  Pepsi Co. Coca cola Co. Gourmet

CRITICAL SUCCESS FACTORS

WEIGHT RATINGSCORE

RATING SCORE RATING SCORE

Market Share 0.12 4 0.48 2 0.24 1 0.12

Advertising 0.10 3 0.30 3 0.30 1 0.10

Product Taste 0.09 3 0.27 4 0.36 3 0.27

Brand Image 0.11 4 0.44 4 0.44 3 0.33

Plants Location 0.07 3 0.21 2 0.14 1 0.07

Marketing Resource Budget

0.09 3 0.27 3 0.27 2 0.18

Production Capacity 0.07 4 0.28 3 0.21 1 0.07

Innovation 0.07 3 0.33 3 0.33 2 0.22

Availability 0.11 4 0.44 3 0.33 1 0.11

ControlOver Supply Chain

0.06 3 0.18 3 0.18 2 0.12

Bottling Investment 0.04 3 0.09 3 0.09 1 0.11

Personnel 0.04 3 0.12 3 0.12 2 0.08

TOTAL 1.00 3.41 3.01 1.70

Note: (1) The ratings values are as follows: 1 = major weakness, 2 = minor weakness, 3 = minor strength, 4 = major strength. (2) As indicated by the total weighted score of 1.70, Gourmet are weakest. (3) Only 12 critical success factors are included for simplicity; this is too few in actuality

\

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Internal environment

It one thing to discern attractive opportunities and another to be able to take advantage of these oppor -tunities. Each business need to evaluated its internal strengths and weakness .it can do so by using a form like one show in the “Marketing Memo”: .cheek list performing strength /weakness analysis (kot-ler,2005 pg.104)

SWOT ANALYSIS

The overall evolution of the company s strengths, weakness, opportunities and threats is called SWOT analysis (kotler, 2005pg102) SWOT analysis is a historical popular technique through which manger create a quick overviews of the company strategic situation (john.A .richard .B strategic management by 2011 edu.ch6)

STRENGTHS WEAKNESS

Strong Multinational Strong & Vast Distribution Channels Lack of Capital Constraints Record Market Share Strong Brand Portfolio Aggressiveness In The Market (Market

Leader) Brand Promotion & Sponsorship

Targeting Only Young Customers Political Franchises Centralized Decision Making Decline In Taste Motivational Factors Not AllProducts Bear The Company Name

Opportunities threats

NewProducts Can EasilyPenetrate In the Market.

Non-carbonated Drinks IsFast Growing Industry

DemandOfPepsi Is MoreThen Competitor

Changing Social Trends(Fast Foods) InternetPromotion & OrderingProcess Can Tie Up With MajorShowrooms &

restaurants

Non-Carbonated Substitutes(Mango Season)

Beverage Industry Is mature FakeProducts Competitors Schemes Strong Competition With Coca-Cola

company

Sources created by self to study

Twos matrix

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Strengths weakness1. Brand Promotion &

Sponsorship 2. Strong Multinational

(Brand Equity) 3. Record Market Share 4. Strong & Vast Distribu-

tion Channels 5. Lack Of Capital Con-

straints 6. Aggressiveness In The

Market (Market Leader) 7. Strong Brand Portfolio

1. Decline In Taste 2. Targeting Only

Young Customers

3. Not All Products Bear The Com-pany Name

4. Motivational Fac-tor

5. Political Fran-chises

6. Centralized Deci-sion Making

Opportunities S-O strategies W-O strategies1. .PepsiCo New Products Can Easily2. Penetrate In The Mar-ket. 3. Noncarbonated Drinks

Are The 4. Fastest-Growing Indus-

try5. Changing Social Trends

(Fast Foods)6. Demand Of Pepsi Is

More Than Of Compet-itor

7. May Tie Up Or Liaison With Major Sho-wrooms, Computer Centers &Restaurant

S1,S2,S3,O2,O3,O4 Company Can Introduce NewProduct Or Non-CarbonatedDrinks Because It Have GoodBrand Equity, Large Resources

S4,O5,O3 By Having Good DistributionChannel Co. Can Focus EasilyFast Food Restaurants, Clubs

W2,O2 By Introducing Non-Car-bonated Drinks Pepsi Can Capture Different Age Groups

Threats S-T strategies W-T strategies1. Non-Carbonated

Substitutes (The Mango Season)

2. Fake Products (Imita-tors)

3. Beverage Industry Is Mature

4. Strong Competition With Coca-Cola Company

S4,S5,T1,T3 Because Co. Has FinancialRecourses And DistributionChannel Therefore It CanProduce Non-Carbonated Drink

W1 ,T3 By improving the taste & qualitycompany can reposition itsproducts can take long termposition on maturity stage

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Sources created by self to studyTwos matrix is conceptual framework for systematic analysis that facilities matching the external threat and opperituatiy with the internal weakness and strength the organization (David, 2005, pg., 507)

The BCG growth –Share Matrix

Boston Consulting Group (BGC) pioneered an approach called portfolio techniques that attempted to help managers. “Balance” the flow of cash resources among their various businesses while identifying their basic strategic purpose within the overall portfolio. The market growth rate on the vertical axis in-dicate the annual growth rate of the market in which the business operate (kotler 2005,pg.94.john.A .richard .B strategic management by 2011 edu.ch 8.)

(Sources of information www. ayushveda.com)

As mentioned above, this study aims on analyzing the products and services offered by PepsiCo. The BCG matrix approach is based on the product life cycle concepts which can be utilized to identify what priorities should be given in the product portfolio of a business level. The product portfolio analysis of the PepsiCo using BCG Matrix analysis. Accordingly, PepsiCo is consisted of 5 major brands: Gatorade, Quaker, Pepsi products, Frito-Lay and Tropicana

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Question mark With this, it shows that the products that belong to the question mark are Gatorade, Pepsi cola and also Tropicana. Because of the emergence of different healthy drinks and beverages in the global market, the market share of Tropicana and Gatorade are being threatened. Accordingly, question mark category means that these products have a low share of a possible high growth market and may become a star product because of the positive response of the customers. (Annul reports 2009)

Star categoryAs can be seen in the figure, the services that fall in star category are is the pay-is Pepsi brands. The star category shows the products with a high share of a gradual growth of market and these products have a tendency to produce high amount of profits.(annual report2009)Cash cow The next category that can be seen in the figure is the cash cows. Herein, the products are consi-dered to have a high share of a slow growth market (Annul report 2009)The PepsiCo, services that can be considered in the cash cows are the Quaker

DogLastly, it can be seen that walker potato crisp, diet Pepsi and Frito-Lay are products that can be considered in the dogs’ category. It can be said that PepsiCo has been able to market their prod-ucts and increase their market share and market growth by using different strategies and ap-proaches. The company enhances the market share of their brands by considering different mar-keting entry modes.

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Financial analyses Financial statement analysis is the process of identifying of financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit &loss account," and it is done through ratio analysis. (Higgins, Roberts.C.2005)

Raito AnalysisRatio means “one number expressed in term of another a ratio is statistical yardstick by mean of which relationship between two or various figures can be compared or measured. Here we are going to explain the ratio analysis of PepsiCo Inc, and Subsidiaries which is little bit different from other organizations(Higgins, Roberts.C.2005)

PepsiCo 3 years finical ratio analysis

Finical Ratio 0f Pepsi 2007 2008 2009 comment

liquidity Ratio

Current Ratio 1.39 1.56 1.77 good

Quick Ratio 1.13 1.42 1.66 good

Activity Ratio

Inventory Ratio 13.3time 13.7time 13.9time good

Average Receivable Ratio

38.50days 39.52days 39.01days good

Profitability Ratio

Gross Profit Margin 0.45% 0.47% 0.46% Poor

Net Profit Margin 0.14% 0.11% 0.13%

Solvency Ratio

Debt ratio 0.19 0.24 0.06

Solvency Ratio 3.20times 0.81times 9.67times

Market Ratio

Prices/ earning ratio 16.25times 15.40times 16.38times

Dividend yield 2.80% 2.76% 2.90%

Ratio analysis

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Liquidity AnalysisThe current ratio is increased that’s means the total liabilities against the total assets has been in-creased. The quick ratio also increased its mean our inventory is converting quickly become the part of production or on the other hand the goods are sold on credit basis which decrease the quick ratio. The absolute quick ratio increase to some extend it means we can easily pay our debts.

Activity RatioThe inventory turn over ratio increase by some points and it’s favorable for our operation of business. Its mean the inventory more rapidly become the part of production. As the average collection period is decreased. As the company policy is changed that company is poor to collect the money from the account receivables.

Solvency Ratio The solvency is increased which shows that our external obligations increases which is not fa-vorable for the business. Over all the Solvency condition of the Pepsi Co is good with the com-parison to the previous year

Profitability RatioThe Gross Profit Margin with respect to the previous year is decreased and poor in the ratio anal-ysis its means our production cost increases which is not earn favorable profit. PepsiCo trying to minting his net profit after taxes. Overall all the analysis of profitability ratios interpret ate the poor conditions.

Market RatioPrice Earning Ratio and the dividend yield ratio are increased and decrease with respect to the previous year. Price earning ratio increase its shows the company performs better in secondary market. Dividends yield ratio increase because our equity or retained earning decrease so auto-matically its effects the dividend ratio.(sources of information to study is from James C, finan-cial management policy. 2002) Overall reviews The overall performance of PepsiCo is getting on a good track. The total turnover of the com-pany has registered a growth of 5.6 Billion where as the operating profits for the year were lower by 4.2 million mainly on the accounts of increase in the volume or sales, higher realization and effective cost control measures taken by the company. With the increase in capacity on account of expansion projects being undertaken by the company, it is expected that the company would be in a position to maintain the growth in future years(annual report 2009)

Strategy Formulation

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An organization typically bases on its capacity strategy on assumption and prediction about long term demand, technological change and the behavior of its competitors. Phase of planning &decision making that lead to establish of origination goal through a strategy plan knows as formulation. (W.J.Stevenson 8th edu.2005, pg174)

Grand Strategic Matrix The model defines the situation of business through the market growth and their competitive po-sition in the market. There are four quadrants that the business can be categorized into.

Competitive Strategy (often called Business Level Strategy):

This involves deciding how the company will compete within each line of business (LOB)

Growth Strategies

All growth strategies can be classified into one of two fundamental categories: concentration within existing industries or diversification into other lines of business or industries this article disuse on strategy formulation by Rex C Mitchell

Overall view of Pepsi on strategic matrix As below quadrant diagram Pepsi fall in Quadrant I indicate that the firm is in rapid market growth and strong competitive position. PepsiCo can continue concentrating on their current business. However, PepsiCo with excess resources may consider vertical integration .PepsiCo must focus on current market and appropriate to follow market penetration, market developmentAnd products development are appropriate strategies.

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Grand strategy Matrix

RAPID MARKET GROWTH

Quadrant IMarket developmentMarket penetrationProduct developmentForward integrationBackward integrationHorizontal integrationRelated diversification

Quadrant IVRelated diversificationUnrelated diversificationJoint ventures

Quadrant IIIRetrenchmentRelated diversificationUnrelated diversificationDivestitureLiquidation

Copyright © 2011 Pearson Education

Quadrant IIMarket developmentMarket penetrationProduct developmentHorizontal integrationDivestitureLiquidation

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ConclusionFrom all the above discussion it is concluded that PepsiCo. Should go for market penetrationthat is to increase its market share through tie up with different restaurants & clubs as well as continue or go with its already adopted strategies such as increase its share through hugeadvertisement and through sponsoring different events such as PepsiCo. Continuously sponsor-ing cricket matches at national and international level. From above the score of bothstrategies are very close to each other so PepsiCo. May also take both of the strategies as well. It was also found that the schemes that are brought up in the market by Pepsi & Coke after every couple of day is not making any net effect on the sale of Cola, whereas one is cannibalizing oth-ers market onlyIt was also seen that Pepsi brand is lagging the Coke especially in Muslim dominated area, which makes a major difference in the market

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