Strategic Management Pepsico 2008 Case Study

2436 Words Aug 21st, 2012 10 Pages
Strategic Management PepsiCo 2008 Case Study

Introduction
This project aims to analyse the diversification strategy of PepsiCo in 2008. PepsiCo is the second largest food and beverage business in the world. The benefits of PepsiCo’s diversification strategies are identified. The business strategy is analysed to determine its efficacy across PepsiCo’s consumer business segments and product portfolio. The value chain match ups are determined and analysed to ascertain their relevance to the success of PepsiCo’s strategy. The competitive strengths of PepsiCo’s three structural divisions and six reporting segments are assessed and related to relevant theories and strategy tools.

Question 1
The diversification path utilised by PepsiCo
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Increased volumes can enable the manufacturer to negotiate discounts to decrease production costs.

Benefit 4 Supply chain & distribution:
PepsiCo has related product lines, enabling the sharing of supply chain resources and through acquisitions the increase in volume can assist in negotiating discounts when procuring manufacturing materials. The combining of supply chain requirements enables the ability to negotiate common supply chain costs such as logistics costs, material costs, warehousing costs to negotiate strategic partnerships to become more efficient and cost effective. The combining of distribution resources offers significant cost savings to PepsiCo’s businesses. For example “…an estimated $40 million in cost savings attributed to the joint distribution of Quaker snacks and Frito-Lay products” (Thompson et.al 2010, p.C-360).

Figure 1.1 Strategy Alternative for a Company Looking to Diversify

Thompson, A, Strickland, AJ & Gamble, JE 2010

Question 2
The overall business strategy of PepsiCo is to achieve global market leadership through acquisitions and alliances whilst maintaining core competencies. The focus was based on “…sustaining the impressive performance… through strategies keyed to product innovation, close relationships with distribution allies, international expansion, and strategic acquisitions” (Thompson et.al 2010, p. C-346).

The 2008 PepsiCo’s corporate strategy also involved further diversification