Examining the Strategic Plans for Growth PepsiCo

PepsiCo, Incorporated is a Fortune 500, American multinational corporation headquartered in Purchase, New York, with interests in manufacturing and marketing a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and cereal-based snacks, and other foods. Besides the Pepsi brands, the company owns the brands Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked, Tropicana, Copella, Mountain Dew, Mirinda and 7 Up (outside the USA).

The various strategic plans for managing and developing the growth of PepsiCo are as follows:-

INTENSIVE GROWTH (Identifying the opportunities to achieve further growth within the current business) “Product -market expansion grid” is useful framework for detecting new intensive growth opportunities

Market penetration strategy(The company first considers whether it could gain more market share with its current products in the current markets): Headquartered in Purchase, New York, with Research and Development Headquarters in Valhalla, The Pepsi Cola Company began in 1898 by a NC Pharmacist and Industrialist Caleb Brad ham, but it only became known as PepsiCo when it merged with Frito Lay in 1965.Major products of both the companies were before they got merged were-

Pepsi-Cola Company – Pepsi-Cola was formulated in 1898, Diet Pepsi (1964) and Mountain Dew (introduced by Tip Corporation in 1948).

Frito-Lay, Inc. – Fritos brand corn chips (created by Elmer Doolin in 1932), Lay’s brand potato chips (created by Herman W. Lay in 1938), Cheetos brand cheese flavored snacks (1948), Ruffles brand potato chips (1958) and Rold Gold brand pretzels (acquired 1961).

So, the Pepsi -cola and Frito-Lay both were amongst the renowned and best sellers till they got merged.

Market development strategy (next it considers whether it can find or develop new markets for its current products)-Pepsi-Cola was considered a takeover target not only because it ran a distant second in the soft drink sector to industry giant Coca-Cola Company, but also because little of the company’s stock was in the hands of management. Following the creation of PepsiCo, however, the new company’s directors held a much larger proportion of shares, with Lay holding a 2.5 percent stake himself. A second force behind the merger was Frito-Lay’s desire to more aggressively pursue overseas markets. The company’s sales had largely been restricted to the United States and Canada, but it could now take advantage of Pepsi’s strong international operations, through which Pepsi products were sold in 108 countries.

Product development strategy

A third force was the perceived synergy between salty snacks and soft drinks. As Kendall succinctly related to Forbes in 1968, “Potato chips make you thirsty; Pepsi satisfies thirst.” The plan was to jointly market PepsiCo’s snacks and soft drinks, thereby giving Pepsi a potential advantage in its ongoing battle with Coke. Unfortunately, these plans were eventually scuttled by the resolution of a Federal Trade Commission antitrust suit brought against Frito-Lay in 1963. The FTC ruled in late 1968 that PepsiCo could not create tie-ins between Frito-Lay and Pepsi-Cola products in most of its advertising. PepsiCo was also barred from acquiring any snack or soft drink maker for a period of ten years.

integrative growth

INTEGRATIVE GROWTH (Identifying opportunities to build or acquire business that are related to current business) – Each company faces challenge of selection between different marketing strategies of growth. PepsiCo has a bunch of strategies called integrated growth strategies to:

‘Expand Global Leadership Position of the Snacks Business’. PepsiCo is global snacks leader of the world, with No. 1 savory category of the share position in the virtually each key region around the globe. They have advantaged position for entire value chain in over more than 40 developing and developed regions in which they operate as the capitalization on the local manufacturing and the optimized go-to-the-market capabilities in every region, thus also the ability to have introduced the relevant products locally by using the global capabilities.

‘Ensure Sustainable, Profitable Growth in Global Beverages’. When combined with actions they are taking to refresh their brands across the entire beverage category, they believe this game-changing transaction will enable them to accelerate their top-line growth and also improve their profitability. They continue to view the significant areas of the global beverage growth, specifically in the developing markets or in the evolving categories. They will thus invest in the attractive opportunities and concentrating in the geographies and the categories in which they the leader or the close second and where competitive game thus remains widely open.

‘Unleash the Power of “Power of One”‘. Combination of the snacks and the beverages-with the global high-demand and the local brands thus makes the company an essential and needful partner for the small-format as well as the large-format retailers.

‘Rapidly Expand Our “Good-for-You” Portfolio’. By investing to thus accelerate growth of the platforms, and they are using the knowledge from the initiatives to improve their beverage offerings and the core snack and thus also developing high nutritious products for the undernourished people around the world.

‘Continue to deliver the commitments and the Environmental Sustainability Goals. They actively work with their farmers to promote sustainable agriculture and thus developing the packaging alternatives in both the beverages and snacks to thus reduce impact on environment.

‘Cherish the Associates and Developing Leadership to thus sustain the Growth’. By implementing tailored training programs to provide managers and the senior executives with leadership and strategic capabilities that are required in the rapidly changing environment.

diversification growth

DIVERSIFICATION GROWTH (identifying opportunities to add attractive business unrelated to current business) – the US based company thus conducted the restructuring exercise in the year 1997-98 by thus spinning-off the restaurants and the bottling businesses. Restructuring was thus aimed to achieve the improved and increased focus on company’s snack food operations (Frito-Lay) and core beverage (Pepsi-Cola). By thus successfully adopting new ‘focus’ strategy since the year 1997, the company has thus emerged as second largest packaged consumer goods company (terms of the revenues) in world. By thus acquiring the leading beverages’ companies like the Tropicana (July 1998), the South Beach Beverage (October 2000) and the Quaker Oats company (December 2000), company has thus significantly strengthened the competitive position in beverages segment.