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STRATEGICMANAGEMENT_PEPSI

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STRATEGIC MANAGEMENT

CASE: 3

PEPSI CO AND QUAKER OATS

Determine the present strategy (related, unrelated diversification, scope domestic or globalfor each division, what moves have been made recently to add new business, rationaleunderlying recent divestures, the nature of any efforts to capture strategic fits and createcompetitive advantage based on economies of scope and other resources)

Present Strategy

Roger Enrico the CEO of PepsiCo (1996-2001) got involved in restructuring PepsiCosbusiness portfolio. Company had 3 business segments restaurants, beverages and snack foods.

Enrico found that there are number of fairly serious problems at PepsiCo. The companysbeverage business began to fall behind Coca Cola (competitor) by a growing margin in bothdomestic and international markets. The restaurants business was declining and profitmargins were narrowing.

Amid of all these problems Enrico developed a restructuring strategy, which is as follows:

Related Diversification:The restaurants limited investment in the companys snack food and beverage business and

severely impaired the corporations overall operating and profit margins. Considering these

facts the restaurants which included Pizza Hut, KFC and Taco Bell were eliminated from thecompanys portfolio of business and the three main restaurants were spun off as an
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independent publicly traded company , the divestitures was completed with a creation ofTricon Global Restaurants. Company was focusing on related diversification and spun offbusiness unit which were unrelated to the core business of beverages and snacks.

Maintenance of one Culture: PepsiCo s new strategy was to maintain a singleculture which is dominant and which was Frito-Pepsi culture.

Acquisitions for Related Diversification: PepsiCo as part of its new restructuringstrategy acquired Borden foods snack mix of candy coated popcorn and peanutsCracker Jack, Tropicana from Seagram Company (orange juices) and Quaker Oatmealthe number one brand of hot cereals. Company had its own distribution network topromote these products and to increase the availability of these products.

Outsourcing of Bottling Operations: company spun off more than 50% of its bottlingoperations around the world and gained a 1million$ gain on the initial public offering. Thiswas done so that the company could be more focused and specialized in the development ofnew products and marketing programs to support them.

Value Chain alignment between PepsiCo Brands and Products to maintaineconomies of scope and to gain competitive advantage:

The recent strategy was to achieve annual cost savings by reorganization of activities in thevalue chain of the companys snack and beverage businesses. This included combined

corporate worldwide procurement, combination of Gatorade and Tropicana hot fills, jointdistribution of Quaker snacks and Frito Lays products and synergies between Frito Laysinternational and PepsiCo beverages.

All this resulted in tremendous growth of PepsiCo, as it became the second largest foodproducts company inUnited States. Company was diversified into salty and sweet snacks, softdrinks, orange juice, bottled water, ready to drink teas and coffees, nutraceutical and isotonicbeverages, hot and ready to eat breakfast cereals. All these brands held number one or towpositions in their respective food and beverage categories. PepsiCo is operational globallyand all the divisions are competing in domestic and international markets.

Thus these are the above-mentioned steps, which are undertaken by the current managementto exploit the opportunities and to restructure the company.

Rationale underlying recent divestures1.Divesting of Restaurant business:

PepsiCos competitive success in its 3 industries was due to its ability to create a distinctive

image and to develop innovative and tasty new products. The inclusion of quick servicerestaurants was the most distinctive characteristic of PepsiCo s business portfolio. Company

formed the largest restaurant conglomerate in the world, KFC, Pizza Hut and Taco Bell,

collectively had worldwide sales of $11.5 billion in 1995. Company had the strategy of


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acquiring established market leaders but later it also acquired small, relatively unknowncompanies.

This industry was appealing because the changing demographic factors like two incomefamilies increase in the number of households made up of singles mad eating out an attractive

alternative. US fast food sales grew at an annual rate of 6% between 1990-1996 but this alsolead to increased competition and price wars.

PepsiCo decided to spin off the restaurant business for the following reasons:

External Factors:

Increased price competition and market saturation. There was growing numbers offast food restaurants with an increased reliance on value meals to increase the volume

at the expense of margins. There was scope in the international market but there were number of risks associated

with entering international markets. Local government restrictions, international tastepreferences, site development costs and unavailability of qualified suppliers all posedentry barriers in the international market.

In 1996 attractiveness in global fast food industry declined.Internal Factors:

Restaurant business severely impaired investment and overall operating and profitmargins in the companys snack and beverage business

Restaurant business required expertise in the operating side of the business likecustomer service, quality of product and value equation. PepsiCo lacked this culture.

2.Spinning of Bottling Plant: :Company spun off more than 50% of its bottling operations around the world and gained a

1million$ gain on the initial public offering. This was done so that the company could bemore focused and specialized in the development of new products and marketing programs tosupport them.

Determine the competitive advantage potential of any value chain relationship and

strategic fits among existing business:

1.Firms infrastructure:

General Management: Enrico 56 year old CEO of the company retired in 2001 , he wassucceeded by Steve Reinemund who joined PepsiCo in 1984 as a Chief of the Pizza Hutbusiness.

Finance: PepsiCo was the fifth largest food and beverage company in the world. Value of its

shares improved from about 30$ annually in 1997 to over 45$ in late 2001.


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Strategic planning: PepsiCo was operating in three businesses, beverages, snacks andrestaurants. Enrico the CEO of PepsiCo (1996-2001) proposed to spin-off the restaurantbusiness, as it had nothing to do with the snack and beverage business of the company. Therestructuring of the company laid emphasis on related diversification in cereals and juiceindustry.

2.Human resource development: The best managers of the company were rotated frompositions in one business unit to assignments in the other two business segments to promotethe transfer of skills, practices, know-how and innovative ideas from one business to another.It kept the managers thinking fresh and innovative and developed the skills of the

employees.

3.Technological development: PepsiCo is restructuring its value chain activities bycombining the snacks and beverages manufacturing process. This would result in achievingeconomies of scope and will give the company competitive advantage. It had its ownagriculturists who helped guide the farmers / suppliers of potatoes about the agricultural

techniques . It had its own proprietary agro technology.

4.Procurement: PepsiCo has also developed a sophisticated value chain alignment trackingprocess that utilizes online scorecards. These cards are updated monthly to track over 130individual projects designed to capture synergistic benefits and to record the supplies of eachproduct. Company was starting off with combined procurement of all its business productsfor ingredients and packaging materials which would result in an estimated $160 million incost savings by 2005.

It created a North American hot fill manufacturing unit and formed a world wideprocurement unit.

SUPPORT ACTIVITIE

1. Inbound Logistics: Frito-Lay, snack business of the company formed joint venturesand acquired chips manufacturing companies , it had its own agricultural experts whoworked with the farmers to ensure the supply of consistent and high quality potatoes

for its snacks business. Company had its own proprietary agro technology andmaintained strict standards of quality while choosing a supplier.

1. Operations: PepsiCo was starting off with the reorganization of its operational activities by

combining its snacks and beverages units production. It was also combining Gatorade(isotonic drink) and Tropicana (juices) hot fill

operations to save 120$million savings .Thus the company was finding synergies inits business operations to achieve economies of scope which would give a competitiveadvantage to PepsiCo in the industry.

1. Outbound Logistics:


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Joint distribution of Quaker snacks and Frito-Lay products would result in thereduction of distribution expenses by $40 million by 2005

Synergies between Frito Lays and PepsiCo beverages international were anotherstrategy to reduce the cost and increase revenue by2005.

: PepsiCo had a very good marketing strategy; it used celebrities endorsers in its softdrinks advertisement to entice the viewers.

The administrative and advertising expertise was used to promote and sell QuakerOats and Tropicana. Sales force of Tropicana and Gatorade were combined to achieveeconomies of scope and cost savings.

4. Marketing and SalesPRIMARY ACTIVITES

Key Success Factors for Each SBU

Frito Lays Brands

Increasing Growth RateThe industry for Frito Lays is in growing stage and there is a high potential for the companiesto grow well in the region.

Acquisition And International Joint VenturesThe acquisition and the joint ventures is helping the company to do well, acquiring the smallfirms and developing joint ventures will increases the opportunity for the Frito Lays tobecome the market leader.

Agro technology / high quality potatoesFor the chips industry it is necessary to have a high quality of potatoes available in the marketbecause to have a good quality chips the high quality of potatoes should be required andcompanies which have good agro technology can succeed in this industry.

Innovative And New Tasty Products

Innovative new tasty products are required to sustain in this industry and is the key successfactors of the major companies.


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Product DifferentiationThe product differentiation is one of the most important success factors because it gives a

competitive edge.

Economies of scope:Companies, which can merge their manufacturing activities of various product lines into oneto acquire low cost leadership, are successful in this industry.

AdvertisingIntroducing renowned celebrities in the advertisements of snack food is one of the leading

factors for the companies.

Global ExpansionAs there are more chances for the snack food manufacturers to sell their products in new

markets likeEast Asia,North AmericaandEurope, companies have a big market to cater

Key Success Factors for PEPSI

Global ExpansionThere are more chances for the companies to sell their products in new markets likeEastAsia,North AmericaandEurope, and also inNorth Africacompanies have a big market to cater.

Control Over Distribution And ProductionThe distribution channels and the production should be optimized in such an efficient waythat whenever there is a required demand, it should be fulfilled on time basis.

Advertising


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Introducing renowned celebrities in the advertisements of beverage ads is one of the leadingfactors for the companies to succeed in the market.

Health ConsciousnessMost of the people are health consciousness about their health and light beverages is agrowing market for this segment.

Key Success Factors For Gatorade Brands \

Quaker Oats

q Advertising

Introducing renowned celebrities in the advertisements of cereals ads is one of the leadingfactors for the companies to succeed in the market.

q Distribution:

Companies which have a wide distribution network are more successful in this industry ,making their brand easily available to the consumers.

q Brand loyalty

The brand loyalty is an important factor for the companies because most of the people onlythose brands which they were consuming ever since they were kids.

q Health consciousness

Most of the people are health consciousness with their health and like to have healthy snacksand breakfasts which include rice and wheat products.

q Global expansion

There are more chances for the companies to sell their products in new markets likeEastAsia,North AmericaandEurope, and also inNorth Africacompanies have a big market to cater.


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FINANCIAL ANALYSIS OF PEPSI CO:

PepsiCo.Inc.s ||| Quaker Oats2000 1999 1998 2000 1999 1998

Net Sales $20,438 $20,367 $22,348 $5,041 $4,725 $4,843

Operating Profits $3,225 $2,818 $2,584 $2,753 $2,588 $2,468Net Income $2,183 $2,050 $1,993 $361 $455 $284

Total Current Asset $4,604 $4,179 $1,014 $997Total Current Liabilities $3,935 $3,788 $860 $938

Total Debt $2,346 $2,812 $4,028 $664 $715 $795Total Equity $7,249 $6,881 $355 $197Total Assets $18,339 $17,551 $22,660 $2,419 $2,396 $2,510Inventories $905 $899 $287 $266

Gross Profit Margin 15.78% 13.84% 12% 54.61% 55% 50.97%Net Profit Margin 10.68% 10.07% 9% 7.15% 10% 5.86%

Current Ratio 1.17 1.10 1.18 1.06

Quick Ratio 0.94 0.87 0.84 0.78Debt To Equity Ratio 0.324 0.409 1.872 3.624

Return On Assets 11.90% 11.68% 8.80% 14.91% 18.99% 11.31%Return On Equity 30.11% 29.79% 101.66% 230.61%

Analysis

The PEPSI Co 3years analysis is concluded as:

P Sales of the company are increasing because new products (isotonic drinks, juices, lightPepsi etc) are coming and performing well in the market.

P Net income of the Pepsi Co. is increasing by 10 % from last three years.

P Current ratio is steady at 1.17; their current assets are slightly higher then currentliabilities. The major portion of current assets is the accounts and notes receivables, whereasthe major portion in current liabilities is the account payables.

P Quick ratio; the inventory level is not so much high, theCO. having the appropriate level

of inventory on hand.

P The gross profit margin is low, it should be higher.

P The net income is increasing which is a good sign for the company and their shareholderand its mainly because of the increasing sales and the reduction in the operating expenses.

P Return on assets is around 12% which is a positive sign.

P The return on equity is increasing and it is around 30% and its mainly because of theincrease of the net income of the company


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The Quaker Oats 3 years analysis is concluded as:

P Sales of the Quaker Oats are increasing

P Net income of the Quaker Oats of the company has been going down over the years

showing decline in the overall industry.

P Current ratio is steady at 1.18,and the current ratio is increasing because of the increasingin other current assets

P Quick ratio; the inventory level is not so much high, theCO. having the appropriate levelof inventory on hand.

P The gross profit margin is high, and they are trying hard to maintain.

P The net profit margins is decreasing which is because of the increase of operating

expenses.

P Return on assets; the Quaker Oats are earning good return on assets

Evaluate the relative competitive position and business strength of each companycompanys business unit

There are 6 business units of the company and the performance is as follows:

Frito-Lay North America

In 2000 Frito-Lay brands accounted for 58% of the sales of snack chips in the $20.6billionU.S.salty snack industry. The volume growth rate was around 4% and revenue growth

was around 7%. The total industry growth rate inU.S.was around 6.4%. it shows that Frito-Lay brands have high related competitive position, as compare to their competitors. Theirdistribution network and advertising are the key strengths.

Frito-Lay International

Frito-Lay was the largest snack chip company in the world, with sales of more than $5.9

billion outside theUSAand a 28% share of the international snack chip industry in 2000.Frito-Lays volume growth rate was around 13%, 14% revenue growth rate, and 19% growth


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in operating profits in 2000. Frito-Lay not only marketed only its own products ininternational markets but also entered into international joint ventures and acquiredestablished chip companies outside theUSAto future increase sales and market shares withinvary country markets. Their distribution network, acquisitions and advertising are the keystrengths.

Pepsi-ColaNorth America

Pepsi-Cola holds second best position in soft drink industry, after Coca-Cola. Pepsis mostsuccessful strategies to build volume and share in soft drinks was its power of One Strategy,which attempted to achieve the synergistic benefits of a combined Pepsi-Cola and Frito-Layenvisioned. Pepsi-Cola found that chips and soft drinks were consumed together much of thetime. Pepsi-Cola and Frito-Lay products were consumed together 58%of the time, they werepurchased together only 22% of time. The Power of One Strategy called for supermarkets to

place Pepsi and Frito-Lay products side-by-side on shelves in the stores.

PepsiCo Beverages International

After using the Power of One Strategy inUSA, Pepsi found that they can grow international

sales through the same strategy. A Pepsi-Cola executive explained how the companys soft-drink business could gain shelf space through the strength of Frito-Lay brands: You gotoChile, where Frito-Lay has over 90% of the market, but Pepsi is in lousy shape. Frito-Laycan help Pepsi change that.

Along with this strategy, Pepsi-Cola also focused on its international bottling operations andmaking successful local business owners franchisees to distribute soft drinks in sometimesnontraditional manners. Their distribution network and advertising are the key strengths.

Gatorade/Tropicana

Tropicana is a number one brand in orange juice. It achieved double-digit volume growthduring 2000. Although the growth rate was only 1.4% in 2000, Tropicana continuouslyintroduce new products featuring, such as, no-pulp, low-acid, and calcium-fortifiedformulations.

Gatorade surpassed the $2 billion global sales mark in 2000, when its sales grew by 15%.This brand had grown by more than $500 million since 1998 and had recorded 16consecutive years of growth with the introduction of new flavors, new containers sizes anddesigns, new multipacks, and world-class advertising and added points of distribution.

Pepsi-Cola management is looking for new retail locations for Tropicana, because theyfigured out that this step will increase 10% volume of Tropicana.


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Quaker FoodsNorth America

Quaker Oats was the leading producer in breakfast industry, with new products innovationsthat included new flavor, microwavable cups, and vitamin-fortified formulations,inUSAandCanada, with 2000 sales of $2.9 billion. Quaker held a 10% share of the $7.5billionUSAcereal market and relied heavily on price promotions to increase sales.

Evaluate the long term effectiveness of each industry the company is in.

SNACK FOOD INDUSTRY:

Frito Lay North America:

Frito lay was a highly successful business inNorth Americawith 58% of sale and 6.4%industry growth rate in the salty snack industry. The salty snack industry was flourishedindustry in theNorth America, which was flourishing with the passage of time.

Frito Lay was rapidly growing in the snack business with the introduction of new snack kit,snack mix product and natural beef jerky snacks.

The new products of Frito Lay were very popular among the preteen and teen age groupbecause of their bold flavor and with dieting adults since they were low in fats andcarbohydrates.

According to current performance it is expected that industry will grow more, the companyshould focus on the same strategies to promote the business in arena.

Frito Lay International:


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Frito Lay international was also successfully operating in many countries around the globe.Frito Lay was the largest chip company in the world with 28% share of the internationalsnacks industry. Market share of Frito Lay was increasing gradually and it was expanding itsbusiness in many countries through acquisitions joint ventures.

With the current performance of the business its predicted that Frito lays business will grow

more and will expand in the new areas of the world. To increase the business in the rest of theworld its suggested that the company should foucs on joint venture and acquisitions to enter

in new markets.

BEVERAGES INDUSTRY:

Pepsi-Cola North America:

Pepsi-Cola was the runner up to soft-drink leader Coca-Cola, but during the mid 1990s Pepsifell behind its chief rival in the industry at a disturbing rate. The main reason for fallingbehind its rival was improper strategy to fight its rival Coca-Cola.

To get back from ill situation of the company, Pepsis management engineered a dramaticplan i.e. power of one strategy and stressed for rapid implementation rather than spending

years developing and testing new products. This strategy attempted to achieve the synergiesbenefits of a combined Pepsi-cola and Frito lays products side by side on shelves. Thisstrategy proved successful to come back from the bad situation of the company. Beside thisstrategy the company decided to capture market share from other areas of the business likebottled water, tea and coffee. Bottled water was particularly attractive segment for Pepsi Cosince U.S bottled water consumption had increased from 2.2 billion gallon in 1990 to 6.8billion gallon in 1999. Pepsi had also beat Coca cola into beverage category i.e. Furappucinoand Lipton tea that had become category leader.

Pepsi as runner up in soft drink industry should avoid head on strategy; it is difficult to faceaggressive strategy of market leader which had a plan to achieve to capture 50% of themarket. Pepsi can compete its rival through focusing on the other areas of the business likebottled water, tea, and coffee.

PepsiCo Beverages International:

PepsiCo found that it could grow international sale through its Power of One strategy. Byadopting Power of One strategy Pepsi colas sale increased by 26% inMexicoas 8000 retail


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adopted Power of One strategy. To capture the untapped market Pepsi also shifted theinternational beverage divisions growth strategy from a broad global span to picking

emerging markets where leader was yet to be decided. In 2000 Pepsi colas greatest

international growth was inRussia,China,India,ThailandandMexico, where it recordeddouble-digit growth.

By adopting Power of One strategy Pepsi recovered its losing position.

Tropicana/Gatorade:Tropicana was the number one brand and fastest growing major brand of orange juice, andachieved double digit volume growth during 2000 to become the third largest brand amongall juice products sold in U.S supermarkets.

The Gatorade ( isotonic drink) was an outpaced product of Pepsi which helped to increase itssale. Gatorade surpassed the $2 billion global sales marked in 2000 when its sales grew by15%. Some analysts were skeptical that Gatorades inclusion in Pepsi would bring the

expected growth in revenues and profits

CEREALS FOOD INDUSTRY:

Quaker Foods North America:

Quaker oats was the leading producer of hot and ready to eat cereals, grain-based snacks, andrice and pasta side dishes in theUnited statesandCanada. Quaker dominated the oatmealcategory of the breakfast food industry with new product innovation that included newflavors, microwave able cups and vitamin-fortified formulation.

Determine whether the firm resources strengths matches the resource requirements itspresent business lineup.

SNACK FOODFrito Lay North America:

Frito lay has sufficient resources to meet the requirements of the industry i.e. Frito Lay

owned top selling chip brand in each U.S salty snack category as it has claimed that it hasnine of the ten top selling brands.


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Frito Lay International:

To meet the requirements and fulfill the demand of international customers it has affluentresources as it entered into joint ventures and had acquired established chip companiesoutside the U.S i.e. Frito lay increased market share in Columbia from 21% to 50% with theacquisition of Margarita snacks, became snack leader in India with the purchase of Unclechips, built state of the art manufacturing facility in Russia support distribution system toreach over 70% of the country. The companys joint ventures and acquisitions made it

number snack company in over 30 countries.

BEVERAGES: Pepsi-Cola North America:

Pepsi had not affluent resources to compete it rival thats why it was losing its market share,

but its ability to fight or survive in the industry is not ending in the near future. To survive inthe industry Pepsi decided to utilize those resources where it was affluent enough, like Pepsiwas considered the complimentary product with chips and snacks. The company decided tointroduce power of one strategy which helped to increase the company sale and market share.Pepsi also entered bottled water, coffee and tea beverage segment in which it was effluentenough to meet the requirements of its industry.

PepsiCo Beverages International:

Pepsi was emerging successfully in the untapped markets (internationally), as Pepsis g reatestinternational growth was inRussia, China India,ThailandandMexico. Pepsi also benefitedfrom its reorganization of its international bottling operations, it also gained market share indeveloping markets by making successful local business owners franchisees to distribute softdrinks in nontraditional manners.

Pepsis international beverages business had grown faster than coca-cola in internationalmarkets for 9 of the 10 most recent quarters.

Tropicana/Gatorade:


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Tropicana was the number one brand and fastest growing major brand of orange juice, andachieved double digit volume growth during 2000 to become the third largest brand amongall products sold in U.S supermarkets.

The Gatorade was an outpaced product of Pepsi which helped to increase its sale. Gatoradesurpassed the $2 billion global sales marked in 2000 when its sales grew by 15%. Someanalysts were skeptical that Gatorades inclusion in Pepsi would bring the expected growth in

revenues and profits and profits.

SNACK FOODS:Quaker Foods North America:

Quaker oats was the leading producer of hot and ready to eat cereals, grain-based snacks, andrice and pasta side dishes in theUnited StatesandCanada. Quaker dominated the oatmealcategory of the breakfast food industry with new product innovation that included newflavors, microwaveable cups and vitamin-fortified formulation.

BCG Matrix

The BCG Matrix for the following SBUs

are as follow

SNACK FOOD:

Profits and Revenues are in terms of million of dollars

Frito lays lmarket share 58%Growth Rate 10.00%

Revenue 4319Profits 493


CEREALS:


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Quaker OatsNorth Americamarket share 10%Growth Rate 3.00%



BEVERAGES:

Pepsi Co.North Americamarket share 31%Growth Rate 0.50%



B C G GROWTH-SHARE MATRIX


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20%

15%

10%

5%

0%


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0%

High

MARKET

GROWTH

RATE


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Low

10 4X 2X 1.5 x 0.5 0.4X 0.3X 0.2X 0.1X

High Low

RELATIVE MARKET SHARE

SNACK FOOD:

Frito Lay is the leader in snack food industry and its at the peak of the product life cycle. Itsa star. It has generated cash to maintain high share in the market. Investment in advertisingand new products, packaging is required to sustain and maintain the position in the industry.

CEREALS:


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Quaker Oats division is a dog. It has a low market share as compared to the top 3 brands andas the sales are declining company should carefully manage the small amount of cash thisunit can generate in theNorth AmericaandCanadamarket.

BEVERAGES:

Pepsi is in a industry which is declining, market share is also less as compared to Coca Colawhich has gained about 50$ of the market. Company has developed Power of One Strategy tocombine the consumption of snack foods and Pepsi Cola. Thus the company has selectivelymanaged the resources for the small amount of cash it can generate.

1

GE MODEL for PEPSI BEVERAGES:

The Factors Counted for GE Model

Business Strengths Weight Rating ValueQuality 0.15 3 0.45

Vertical integration 0.15 3 0.45

Product innovation 0.10 2.5 0.25

Distribution channel 0.20 4 0.80

Outsourcing 0.10 3 0.30Financial position 0.15 2 0.30


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Global Positioning 0.15 3 0.45

1.00 3.00

Market Attractiveness Weight Rating Value

Economic development in internationalmarket.

0.20 3 0.60

Synergies ( Economies of Scope) 0.15 4 0.60

Joint Ventures 0.15 3 0.45

Increase competition 0.25 1 0.25

Saturated Market 0.25 1 0.25

1.00 2.15

Snack foods:

GE MODEL forFrito Lay N.A/International


Business Strengths Weight Rating ValueAcquisitions & Mergers 0.15 4 0.60

Distribution channel 0.15 4 0.60

Quality 0.20 4 0.80

Vertical Integration 0.15 3 0.45Financial Position 0.15 3 0.525

Global Position 0.15 4 0.80

1.00 3.77



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New Emerging Segment 0.25 4 1.00

Product Innovation 0.25 3 0.75

Market Growth 0.15 4 0.60

Govt. Interference 0.10 3 0.30

Competition 0.25 3 0.75

1.00 3.40

GE MODEL for Quaker Oats

CEREALS:


Business Strengths Weight Rating ValueBrand loyalty 0.20 4 0.80

Demographic Change 0.20 3 0.60

Advertising 0.25 3.5 0.875Vertical Integration 0.15 3 0.45

International Orientation 0.20 3 0.60

1.00 3.32


Growth Rate 0.20 3 0.60Shift in Demographics 0.15 3 0.45

Health Consciousness 0.15 3 0.45

Competition 0.15 2 0.30

Product innovation 0.10 3 0.30

Price promotion 0.20 3 0.60

Capital Investment 0.05 2 0.10

1.00 2.80


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THE GENERAL ELECTRIC MODEL

= PEPSI

= Frito Lay

= Quaker Oats

Rank the business units in terms of priority for resource allocation and decide whether

strategic postures of each business unit should follow aggressive expansion,fortify or

defend , overhaul and reposition or harvest?

Through G.E and BCG model , we have identified the companys portfolio i.e. Frito Lay is

winner business and Pepsi & Quaker Oats are average businesses. Frito Lays businessstrength is strong but it is in the medium attractive market segment. Pepsi and Quaker oatsboth are in medium attractive markets, the business strengths of both are also medium thanFrito lay. According to our analysis, the company shouldBuild Selectively forFrito Lay, andshould :


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Invest heavily in most attractive segments : acquire and merge with foreigncompanies to reach new markets and invest on the agro technology.

The company should Selectivity manage for earnings forPepsi and Quaker Oats, andshould follow these steps:

1) Protect existing program. Company should remain in the current market and protect it byusing its strong advertising and distribution network.

2) Concentrate in segments where profitability is good and risks are relatively low.

COMPETITIVE PROFILE MARTIX OF THE COMPANY FOR THE FOLLOWINGINDUSTRIES:

Snack food industry Cereal food industry Beverages industry.

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