BPS 4305 Strategic Management

Professor Jun Xia

Han Lin
May 5th 2014

PepsiCo
Strategic Management Analysis
Executive Summary
PepsiCo is an American multinational food and beverage corporation that located
in Purchase, New York, United States. It was created in 1965 through the merger of
Pepsi-Cola and Frito-Lay. Back in 1898, Pepsi Cola was the first branded soft drink in the
world, the huge business is all over the world and generated sales over $100 billion last
year.
Financial Analysis
The chart below is PepsiCo's income statement in these several years.

The " Net Revenue" item includes investment and interest income, and sales and
trading gains. From the chart, we can see that PepsiCo Inc.'s net revenue declined from
2011 to 2012 but then increased from 2012 to 2013 not reaching 2011 level.
The" Operating profit" item is the net result for the period of deducting operating
expenses from operating revenues. And its operating profit declined from 2011 to 2012
but increased from 2012 to 2013 exceeding 2011 level.
The "Income before income taxed" item is the sum of operating profit and nonoperating income (expense) before income (loss) from equity method investments,
income taxes, extraordinary items, cumulative effects of changes in accounting
principles, and non-controlling interest. It declined from 2011 to 2012 but increased from
2012 to 2013 exceeding 2011 level.
The "Net income" item is the consolidated profit or loss for the period, net of
income taxes, including the portion attributable to the non-controlling interest. It declined
from 2011 to 2012 but then increased from 2012 to 2013 exceeding 2011 level.

The "Net income attributable to PepsiCo" item is the portion of consolidated

profit or loss for the period, net of income taxes, which is attributable to the parent. If the
entity does not present consolidated financial statements, the amount of profit or loss for
the period, net of income taxes. It declined from 2011 to 2012 but then increased from
2012 to 2013 exceeding 2011 level.
After study the figures in the PepsiCo' income statement, I found out that even
though the revenue started with a small drop but eventually it went up and I believe it
will keep going up. So the business is healthy. As PepsiCo's biggest competitor, CocaCola's revenue is at the same level these years, so PepsiCo is doing job in term of
competing with its rivals.
Internal and External Analysis
Internal
PepsiCos corporate culture is based on performance and quality of
their products, services, and social responsibility. The guiding principles and
commitment consist of:

Empowered People
Responsibility & Trust
Sustained Growth
Their Guiding Principles includes:

Care for customers, consumers and the world we live in

Sell only products we can be proud of
Speak with truth and candor
Balance short term and long term

Win with diversity and inclusion

Respect others and succeed together
The culture is clearly communicated throughout the company and is very strong

in consumer and social responsibility. In fact, many efforts have been made to be
environmentally conscious by heavily investing in recycling, and also extensive efforts
have been made to better the lives of impoverished people in regions such as Africa.
One of the main lacking components of PepsiCos values is their employees. Of
the many concerns they have about the consumer and clients, little is said about the way
employees are treated and what expectations and responsibilities are towards them.
Programs exist that help employees take part in the community, and also future
employees by offering school programs and scholarships. However, little effort is
directed towards the responsibility of the company to employees. Coinciding with
their values, objectives, and commitment, employees are left out of the grand scheme
and may even be considered a means to an end. The limited focus on employees may be
a problem in the long-run due to retention issues and resulting lack of quality.
External
As a beverage and food producer and distributor developed in the late 19th
century, Pepsi Co is in a dominant market position that has little qualms about emerging
competitors in the market. Its current concerns remain its top competitor, Coca-Cola who
maintains a similar stance in the beverage market as well as Cadbury-Schweppes who
controls the international market share of beverages and confectionary goods.

In addition, acquisitions and mergers of current mid-size beverage

companies could prove to be an external threat to Pepsi Co, while not in the near
future. In the following section of the strategic management audit, Coca-Cola and
Cadbury Schweppes will be detailed according to their financial statements, management
schemes, marketing campaigns and recent acquisitions.

Identification of the firm's strategy and its competitors' strategies

Pepsi Co has been consistently living up to its mission and objectives, as they
offer the most valuable products and beverages to their clients. The main areas they need
to focus on for improvement is continuing of recycling of containers. Due to the liquid
nature of Pepsis product, it is necessary that a solid and non-porous container be used to
store the products. In way to the recover, their position in the minds of the public
externally, and with employee satisfaction internally.
In light of the various discrimination lawsuits brought on in 2001 and 2004, the
company has been faced with the task of how to improve from within themselves, thus
portraying a more positive external image. Their mission clearly their dedication to client
satisfaction through the integration of all employees on an equal opportunity playing
field. This mission has to be carried out more effectively in the future for them to be able
to progress forward in the most opportune manner possible.

Due to the liquid nature of Pepsis product, it is necessary that a solid and
non- porous container be used to store the product. This fact leads to the use of plastics,
aluminum, and glass as materials for the containers that Pepsi is stored in. These
materials work very well for the purpose of their use, however these materials do
not biodegrade easily. Every day, 93 million empty soft drink bottles and cans are thrown
away, rather than recycled. In November 2000, the boards of Pepsi and Coke passed
resolutions for future container recycling targets.
The resolutions call upon management to establish recycling targets and prepare
a plan to achieve them by January 1, 2005.There are two goals: (1) achieving an 80
percent national recycling rate for bottles and cans; and (2) making plastic bottles with
an average of 25 percent recycled plastic. The implementation of these resolutions will
have a future effect on the cost basis of Pepsis product, and a positive environmental
impact if the recycling targets are met.
Coca-Colas is now the market supremacy. The dominance of Coca Cola in the
soft drink market has always been considered a major factor for Pepsi management. As
long as Coca Cola continues to retain a dominant market share, Pepsi should continue to
aggressively acquire Coca Cola market share.
The excessive work pressure results in evacuation of Pepsi management. The
creative tension which is constantly being placed on Pepsi management has resulted in
a number of management leaving the company for Coca Cola. Coca Cola has
consistently been able to acquire the Pepsi Tigers, or very good managers, away from
Pepsi.

Strategic Alternatives and Recommended Strategy

Pepsi Co is currently a strong worldwide leader in the food and beverage industry.
Throughout its growth, it has stayed true to its mission and objectives, while becoming a
dominant force within the United States as well as abroad. Known throughout the world
for quality products and customer care, Pepsi Co should make no major strategic changes
to its plan. However, like in any business situation there are areas that Pepsi Co can
improve upon. Some of the recommendations are as follows:

Continue to expand with their " Human Sustainability". The healthy eating market
is a demographic that will continue to grow in the future, and will provide

generous profits if PepsiCo is able to obtain in a large market share.

Capture more of the aging population's market share. Pepsi is a company focused
on a younger market hoping to repeat the worldwide success of Coca-Cola in
regards to brand loyalty with the generations born after 1980; however, there is

still a large market with the baby boomer demographic that they could break into.
A minor yet still important change that needs to be made is to their website. After
comparing it to Coca-Cola, it needs to be simplified.
Conclusion
Overall PepsiCo is a successful company with substantial revenue, and a large

footprint in the marketplace. PepsiCo should continue to expand their growth and take
advantage of potential opportunities by continuing to improve on areas at the corporate
top level, in the markets that they currently are in, and in new markets and market
segments that they wish to expand into.

References
http://www.pepsico.com/
http://www.stock-analysis-on.net/NYSE/Company/PepsiCo-Inc/FinancialStatement/Income-Statement
http://quotes.wsj.com/PEP
http://finance.yahoo.com/q?s=PEP
http://www.bloomberg.com/quote/PEP:US
https://www.pepsicorecycling.com/