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PepsiCo

Noor El-Moussaoui

BAM 479: Strategic Management

Professor Deborah Harvel-Jenkins

April 5, 2018
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TABLE OF CONTENT
Mission and Vision Statement………………………………….…….3
Milestone for PEPSICO………………………………………..…...4-5
External Assessment………………………………………………….6
Opportunity …………………………………………………..…….7-8
Threats………………………………………………………..……..8-9
Internal Factors ……………………………………………..……..9-12
SWOT………………………………………………………….…….12
PepsiCo Analysis …………. ……………………………….……….13
Overview: Porter’s Five Forces Analysis…………………………13-15
PepsiCo’s Strengths…………………………………………….…….16
PepsiCo’s Weaknesses -Internal Strategic Factors……………….16-17
Opportunities for PepsiCo- External Strategic Factors……………....18
Threats Facing PepsiCo - External Strategic Factors...........................18
IFE MATRIX FOR PEPSI CO………………………………...18-20
BCG for PepsiCo……………………………………………………...20
Industry Analysis………………………………………………..…20-21
Case Statement……………………………………………………..…21
Financial Analysis ……………………………………………...…21-22
Question and Answer ………………………………………….….22-25
QSPM………………………………………………………...……26-29
Implementation Plan for PepsiCo……………………………………..30
Purpose…………………………………………………………..……30
Contact Information…………………………………………………..30
Management Overview…………………………………………….…31
Description of Implementation………………………………….….…31
Implementation Schedule…………………………………………….32
EPS/EBIT Analysis…………………………………………..………33
Reference……………………………………………………………..34-3
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PepsiCo is one of the world's leading food and beverage companies with over $63 billion in net revenue in 2016 and a

global portfolio of diverse and beloved brands.

Mission and Vision Statement

As one of the most copious foods and beverage companies in the world, our mission is to provide consumers around the

world with delicious, affordable, convenient and complementary foods and beverages from wholesome breakfasts to healthy

and fun daytime snacks and drinks to evening treats. We are committed to investing in our people, our company and the

communities where we operate to help position the company for long-term, sustainable growth.

Mission

The mission lists different points in various areas, which is critical for customers. Providing good tasty food is essential

for a business to grow and succeed, having wholesome breakfast would encourage more customers to shop at Pepsi, and

building trust with a customer by supplying healthy and tasty food will guarantee them to come back. PepsiCo mission has

been specified to deliver admirable food, investing in the people, community, and look at long-term growth. It is very

openhearted knowing a company cares about a customers happiness.

Vision

At PepsiCo, we're committed to achieving business and financial success while leaving a positive imprint on society –

delivering what we call Performance with Purpose. The vision statement is well written because it explains to the consumers
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that you are performing for a meaning. Which in return will encourage a consumer to consume more Pepsi products to achieve

their goal.

Milestone for PEPSICO

According to vault.com, the concise profile for Pepsi is PepsiCo butts heads with its eternal rival The Coca-Cola

Company for the title of world's biggest soft drinks maker. PepsiCo's soft drink brands include Pepsi, Mountain Dew,

Tropicana, Gatorade, and Aquafina water. The company also owns Frito-Lay, the world's #1 snack maker with offerings such

as Lay's, Ruffles, Doritos, and Cheetos. The Quaker Foods unit makes breakfast cereals (Quaker oatmeal, Life), Rice-A-Roni

rice, and near East side dishes. Pepsi products are available in 200-plus countries. The company operates its bottling plants and

distribution facilities.

 1890’s:Established through the merger of Pepsi-Cola and Frito-Lay. Pepsi-Cola was created by Caleb Bradham, a

pharmacist.

 1966: Doritos brand tortilla chips are introduced. They are destined to become the most popular snack chip in

the United States. Pepsi enters Japan and Eastern Europe.

 1970: Pepsi is the first company to respond to consumer preference with lightweight, recyclable, plastic bottles,

and introduces the industry's first two-liter bottle.

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 1974: Pepsi-Cola becomes the first American consumer product to be produced, marketed and sold in the former Soviet

Union.

 1977: PepsiCo acquires Pizza Hut, Inc.

 1978: PepsiCo acquires Taco Bell.

 1981: Frito-Lay begins nutritional labeling on a national basis.

 1985: PepsiCo is now the largest company in the beverage industry and its products are available in nearly 150

countries and territories.

 1989: PepsiCo enters the top 25 of the Fortune 500 ranking.

 1996: Filming of the world's first commercial in space, Cosmonauts shoot a large blue Pepsi can in orbit outside the

MIR space station.

 1998: The Pepsi-Cola Company celebrates its 100th anniversary of the creation of Pepsi

 2003: Frito-Lay removed trans fat from nearly its entire snack chips portfolio, including Lay's potato chips, Tostitos

tortilla chips and Cheetos cheese flavored snacks.

 2012: Pepsi launches reduced-calorie cola innovation Pepsi Next.

 2013: Frito-Lay unveils its first compressed natural gas (CNG) fueling station.

 2014: Pepsi introduces Pepsi Spire, a portfolio of innovative fountain beverage dispensers.
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Milestones have to be specific, observable, realistic, and transparent. Accurate in a way where you have to choose

events that take place on a particular date, and that marks the completion of a particular activity. And Pepsi has set up these

goals for the year and achieved them. For years, thousands of milestones have been accomplished because of great strategic

management, employees, and customers for their business. They are observable by being able to see these realistic dreams

become a reality. And know this company grew to where it is supposed to be. Pepsi is transparent by projecting outcomes and

goals where everyone connected to the project can see. This is crucial for a business to succeed because if everyone cannot

know the result of business, mission, vision, goals, and satisfaction, it will not succeed. It takes a team. The points listed above

are beyond the excellent representation of how successful this company is; it not only provides donations to another part of the

world by purchasing their product. Pepsi milestone is certainly well worth the achievement and goals at had set up when it first

started.

External Assessment

Key External Factors Weight Rating Weighted

Score
Opportunities
1. Increase online presence 0.10 2 0.20
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2. Endorse big name celebrities to increase 0.09 1 0.09

sales and traffic.
3. Increase presence globally 0.15 2 0.30
4. More environmentally responsible 0.12 1 0.12
5. Supporting communities to increase 0.09 2 0.18
advertising opportunities
Threats
1. The increases in labor costs for 0.10 3 0.30
minimum wage workers
2. Lower Prices 0.09 2 0.18
3. Other competitors in area 0.08 3 0.24
4. Focus more on younger adults 0.10 3 0.30
5. Less American products are being made 0.08 2 0.16
TOTAL 1.00 2.07

Opportunities

Online and Global presence received more weight and rating because it is critical in today’s world. When everything is

dependent on technology and being globally available, it impacts customers thought process and thinking. Increasing online

presence and increasing presence globally will increase profits demographically and overall. When you grow shareholder
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profits, you have the probable to bring in more investors, which in turn will allow Pepsi to expand their product line. A heavy

weight was also placed on endorsing Pepsi with celebrity names because big celebrities name will intensification other young

adults to come to Pepsi to be more active, healthier, and more fit. Lucrative endorsement deals of music celebrities —

including Britney Spears, Maroon 5, Timberlake and other stars popular with teens and young adults were used to endorse

Pepsi (Halford,2016). This must continue for sales to increase and bring in new stock investors.

These logos with the proper celebrities could trigger consumer to thinking they will be just like them if they shop more

Pepsi products. Being more environmentally responsible is very important to the newer generation because ether is all about

helping the environment and “saving the planet” (PSC, 2014). Pepsi needs to find different ideas to start going eco-friendly to

the environment when it comes to many items, first one being chips bags. Lastly, supporting communities MORE will

definably warm other consumer’s hearts and bring them through the door. Knowing business is helping a local community in a

desperate time in need will encourage shoppers to want to be part of changes and support that business.

Threats

Threats is heavy weights were placed on an increase in labor cost for minimum wage workers because that are essential

in any business drive and to continue tremendous customer service. When a consumer finds out that an employee is not

making enough money, they will be discouraged to come back and feel guilty. This is a noteworthy point for Pepsi because

they pay just a little over the minimum wage, which is still not enough to make ends meet. This is a significant threat to the
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company because other companies will try to gain Pepsi's best employees by merely offering the more (Miller, 2016). Also

lowering prices is a threat because there are many competitors with lower costs than Pepsi products. Despite the advertisement

about driving to have low prices for consumers, they still struggle to lower their prices what are other companies such as Coco-

Cola. Other competitors in the area are also the critical threat of the company because the more competitors in the area, the

more Pepsi has to do to step up their game in the industry to obtain consumers and their business. Focusing on more young

adults has placed heavy weights because more young adults are focused on being healthy, active, fit. Targeting more young

adults will purchase Pepsi and obtain that with vision will undoubtedly increase their business. This is seen as a threat because

other companies can bring in younger adults to their establishment and build a customer relationship bond. Lastly, more Pepsi

needs to be made in America rather than other parts of the world because it is cheaper. A heavy weight was placed on this

threat because more people want to purchase American made products to support America rather than a foreign product.

Internal Factors

Key Internal Factors Weight Rating Weighted

Score
Strengths
1.Branding 0.10 4 0.40
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2.Online Presence 0.10 4 0.40

3.Strong Corporate vision 0.10 4 0.40
4.Private Label/Trademark 0.10 3 0.30
5.Marketing Strategy 0.08 3 0.24
Weaknesses
1. Limited Clothes offering 0.11 2 0.22
2. Keeping Up with Customer Needs 0.10 2 0.20
3. Strategic Planning 0.07 1 0.07
4. Dropping Revenue 0.08 2 0.16
5. Consistency 0.12 1 0.12
TOTAL 1.00 2.51

Branding is strength for Pepsi and is weighted heavily because there is an immense competition, which is known and

beloved for the quality of the products they provide. Online presence represents a highest ranking regarding internal strengths.

Pepsi takes its online experience seriously, and they strive to create an interactive experience for their shoppers. This matters

because online shopping is becoming a preferable way to purchase products. “Eight in 10 Americans are now shopping online,

according to a new study from Pew Research out this morning. That’s 79% of U.S. consumers who shop on the web or their

phones, up from just 22 percent back in 2000. This strength carries substantial weight and rating because if a company is
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treating their employees and consumers right, the customers will return, and employees will try to do their best to achieve

goals set forth by management. It is vital to align the morals of your company with the morals of your customers and

employees to achieve and maintain the success the company and its shareholders.

While private-label and trademark advantages are related to branding, it is an individual strength because it is unique to

Pepsi and sets them apart from competitors who do not have private-label initiatives. Marketing factors is strength for Pepsi

because they have their places in every state in the world, which give them more opportunities and businesses comparing to

other companies. This is vital because it allows a company to strive for excellence and know its weakness.

Pepsi clothing (yes, clothing) is in demand especially de to their low prices and durability. Increasing/Adding the

clothing style will defiantly bring more customers through the door. It will then become a play where you can shop for

clothing, which will be more pumped for younger adults. Keeping up with customers needs was weighed heavily because;

many customers are still walking out of Pepsi not being able to find what they need. This should be adjusted as soon as

possible because Pepsi needs more customers not happy. This point profoundly impacts Pepsi future business with consumers.

Strategic planning is crucial to all businesses, and Pepsi is no exception. A reasonable weight was placed because of the

strategies they employ. The company has built a productive and profitable online presence/purchasing system with double-

digit sales growth and rising capabilities. Dropping revenue is fundamental for a company, consumers, and shareholders.

Falling revenue could lead to doors closing forever. This was heavily weighed as its prominence cannot be emphasized
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enough. Pepsi has a continuing problem of not being consistent in every store. This not only drives customers away but also

encourages online shopping. This will only encourage shoppers to shop elsewhere and not revisit the store. According to

venveo.com, there are three main reasons why consistency is remarkable. First, it's marketing on a higher level; consistency

makes your brand feel more dependable meaning customers feel better about the product and the company, consumers trust

brands they recognize.

SWOT

Overall, every company has its strengths weaknesses opportunities and threats. In this particular paper, Pepsi should

work on its weaknesses and turn them into restraints. It should also work on its opportunities and threats to continue to strive in

the market. It’s very critical for Pepsi to continue to do well in the market to be able to enhance the performance with the

purpose statement. A strength that Pepsi needs to continue is to keep advertising with celebrities and find different ways to

increase revenues. Its weakness is that it has other competitors that offer lower prices that can I’ll be its product. Several

opportunities include being eco-friendly increasing online persistence and supporting communities by advertising for

opportunities threats can consist of to knock increase labor costs lower prices and focus more on young adults. Also, inclusion

would be to make more American products because that’s what consumers look for.
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PepsiCo Analysis

PepsiCo began back in 1965; today it's a global food and beverage leader. Discover many of the most significant

moments in the story of PepsiCo. Porter's Five Forces is a model created by Michael E. Porter that categorizes and evaluates

five competitive forces that shape an industry, and determines an industry's strengths and weaknesses. Porter's model can be

pertained to any part of the industry’s economy to obtain maximum profitability. PepsiCo to uphold its market position as the

most prominent food and beverage company in the world, it must use a Five Forces analysis. PepsiCo must continually adjust

its strategies to meritoriously react to external factors momentous in the food and beverage industry.

Overview: Porter’s Five Forces Analysis

Porter’s Five Forces analysis is competition in the industry, potential of new entrants into the industry, power of

suppliers, power of customers, and threat of substitute products. Understanding Porter's Five Forces and how they apply to an

industry, can enable a company adjust its business strategy to better use its resources to generate higher earnings for its

investors. The Competition in the Industry is the importance of this force is the number of competitors and their ability to

threaten a company. Essentially, the larger the number of competitors the lesser the power of a company. When competitive

rivalry is low, a company has greater power to do what it wants to do to achieve greater sales and profits. Potential of New

Entrants Into an Industry this is where the force of new entrants into its market also affects a company’s power. Power of

Suppliers is where the force addresses how easily suppliers can drive up the price of goods and services. The Power of
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Customers deals with the ability customers have to drive prices down. This is based on buyers and sellers. Threat of Substitutes

is where a competitor substitutes that can be used in place of a company's products or services pose a threat.

Bargaining Power of PepsiCo’s Customers

The Five Forces analysis allows a company to identify external forces that impact the industry and that could affect

customers. The external factors that lead to the reliable bargaining power of its consumers are trading costs elevated access to

product information and high availability of substitutes. Consumers smoothly shift preferences for many reasons, one being the

price of the product (USI, 2014). Consumers have the wide-range knowledge to make accurate choices between different

products. Lastly, substitutes give buyers more reasons to reconsider PepsiCo products (Piana, 2005).

Bargaining Power of PepsiCo’s Suppliers

PepsiCo must sustain excellent relationships with customers and suppliers. This component of the Five Forces analyzes

the impact of suppliers on the industry and its environment. The weak bargaining power its suppliers are found on external

factors: high overall supply and low forward integration of suppliers. Moderate strength is the average size of individual

suppliers. High overall supply upsurges PepsiCo’s options in procuring new materials. Small details are applied to these

components because of the small integration that plays a role in suppliers’ control of the supply chain. These external factors

play a significant role in the suppliers’ influence on the company despite their size.
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Threat of Substitutes or Substitution - Strong Force

PepsiCo’s products could be replaced, based on many variables. The influence of substitution on the firm’s business is

scrutinized in this component. External factors contribute to the substantial threat against PepsiCo include a high performance

of substitutes, low substituting costs, and availability of alternatives, which are active forces. There are plenty of substitutes for

PepsiCo products are pleasing and even cheaper. An example we see every day is a customer has access to drink any cheaper

and substitute drink beside a PepsiCo product is Star and Stripes. This brand is well known at Dollar Tree and many other

grocery shops. They offer six flavors in 2.5 liters, which is a better and cheaper deal, that majority of Pepsi drinks. Another

example is Cheetos cheese puffs that cost around $3.79 a bag, can be substituted Brim’s cheese puffs for $1.00 at the Dollar

Tree (Dollar Tree, 2018). Consumers can quickly shift to other substitutes that are usually affordable. Most of the substitutes

are easily accessible to all customers. Based on this vital component of the Five Forces analysis, which makes a definite threat

of substitution with PepsiCo.

Threat of New Entrants or New Entry- Moderate Force

Despite the possibility of new completion against PepsiCo, it should remain strong at all times. Panicking would scare

consumers and shareholders. This component of the Five Forces analysis overlooks at the new entrants in the food and

beverage industry. External factors that uphold moderate new threat to the company include low switching costs, average

customer loyalty, and a high cost of brand development.

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A firm sometimes can easily threaten PepsiCo consumers, because of their willingness to switch for money savings. Some

customer loyalty to PepsiCo has protection the company from a new company. The high cost of brand development entangles

new companies to directly compete with a massive company like Pepsi. SWOT analysis PepsiCo to help it to identifies the

strengths and opportunities that the firm can tap to address its weaknesses and business threats.

PepsiCo’s Strengths

PepsiCo has been striving for many years now and has expanded its business to purchase other business to become

more dominant. The following are the most significant strengths of PepsiCo are a brand image, product mix, and extensive

global production network (Purdue, 2015). PepsiCo has one of the most influential brands in the market, which is not a shock

because it has worked years on its logo and products. Throughout the years the logo, taste, and commitment have continued to

win consumers heart and attract new ones. The product mix represents PepsiCo’s accumulative ability to reach numerous

markets and segments, through products like Frito-Lay and Doritos. PepsiCo’s global production and distribution networks

support the company’s growth and development strategies.

PepsiCo’s Weaknesses -Internal Strategic Factors

Like many companies, PepsiCo has many weaknesses that come in the way of its international growth. PepsiCo’s main

inadequacies include low penetration outside the America, limited business portfolio, and weak marketing to health-conscious

consumers. PepsiCo originates more than 50% of revenues from North America and South America. Such weakness signifies
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that the company has not maximized probable revenues outside of America. PepsiCo is primarily dependent on food and

beverages. This serves as a weakness because it amplifies its liability to risks in the food and beverage industry. Another point

is that PepsiCo fails to meritoriously market other products to health-conscious consumers.

Opportunities for PepsiCo- External Strategic Factors

PepsiCo has many opportunities for continuous growth. PepsiCo’s opportunities are business diversification, market

penetration, and global alliances with other businesses. Acquiring a complementary firm that is not in the food and beverage

industry will give PepsiCo the opportunity to diversify its businesses. Other opportunity for PepsiCo includes increasing its

penetration outside America, which will generate more revenues. Creating alliances with other business would defiantly

expand its presence. There are plenty of opportunities for PepsiCo to grow.

Threats Facing PepsiCo - External Strategic Factors

All companies are exposed to a range amount of threats. External strategic factors that play a role in the business’s

performance are key to future growth and success. Significant risks PepsiCo’s faces are antagonistic competition, healthy

lifestyles trends, and the environment. Hostile competition is a major threat to the company. Furthermore, the healthy lifestyles

trend is a threat against Pepsi’s products, which are seen and some are harmful because of the sugar, salt, or fat content in the

food. Lastly, environment threatens the company by how consumers respond to lifecycle issues. This aspect of the threats

analysis indicates that PepsiCo must improve its strategies to overcome the threats.
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IFE MATRIX FOR PEPSI CO.

IFE matrix stands for internal factors evaluation matrix is a strategic tools used to evaluate the internal strengths and

weaknesses of a company. IFE has been used for internal evaluation of company, business unit or corporation functional areas

which includes marketing, human resource, finance, information technology, corporate affairs, legal and compliance, business

development procurement and operations.

Strengths Weight Rating Weighted Score

Strong brand 0.09 (8%) 4 0.36

Strong marketing and advertising of 0.07 (7%) 3 0.28

products around globe

Products availability 0.08 (8%) 3 0.24

Profits and Revenue 0.08 (8%) 3 0.24

Market Share 0.07 (7%) 3 0.21

Competent workforce 0.05 (5%) 3 0.15

Wide variety of products 0.05 (5%) 3 0.15

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Earning per share 0.02 (2%) 3 0.06

Weaknesses

Debts 0.07 (7%) 1 0.07

Health Issues 0.08 (10%) 2 0.16

Low sales products 0.09 (9%) 2 0.18

Negative impact due to product 0.10 (10%) 1 0.10

recall

Taste differentiation 0.05 (5%) 1 0.05

High Operating Expense 0.10 (5%) 2 0.20

Total Weighted Score 1.0(100%) 2.36

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BCG for PepsiCo

Quadrant 2
Quadrant 1
Market development
Market development
Product development
Market Penetration
Liquidation
Integration
Market Penetration
Diversification

Quadrant 4
Quadrant 3
Joint Ventures
Retrenchment
Strategic alliances
Unrelated diversification
Merger
Horizontal integration
Acquisition
Liquidation
Unrelated diversification

Industry Analysis

PepsiCo faces different external factors in its industry environment. The overall impact of various factors and

corresponding five forces are competition, bargaining power of buyers, and a threat of substitutes. Weak forces include

bargaining power of suppliers. And lastly, moderate forces include a threat of new entrants or a new entry.
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The recommendations for PepsiCo’s Five Forces examination indicates that competition, negotiating power of customers, and

a threat of substitution are the issues that are vital to the company. The company should consider market trends that the new

population is up to date with, such as eating cleaner. Other components of the Five Forces include other notable external

factors that create a force of competition against PepsiCo: high aggressiveness of firms and low switching costs. Competitive

rivalry is also a point because consumers can change based on the prices. PepsiCo competes with many other firms and must

be able to develop different strategies to keep winning customers hearts and wallets.

Case Statement

PepsiCo focus should be to reduce the company’s debt and increase it’s revenues to attract more customers, stocker holders,

and investors through persistently making a profit in the company. It also need to be able to grow and compete in the food and

beverage industry by collaboratively working with others.

Financial Analysis

PepsiCo Coca Cola

Debt/Equity Ratio 3.56 2.80

Current Ratio 1.51 1.34

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Quick Ratio 1.37 0.90

Interest Coverage 9.34 10.19

Leverage Ratio 6.28 3.79

P/E Ratio 21.41 20.89

Plus P/E Five year high 18.21 25.90

P/E Five Year Low 35.48 34.18

Price/Sales ratio 2.71 5.31

Price/Book value 15.42 10.96

Equity 3.56 5.82

Return on Assets 9.89 1.42

Return on Capital 11.32 12.36

Income/Employee 18.5K 21.1K

Inventory Turnover 8.79 13.01

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Looking at PepsiCo competitor Coca-Cola, a precise determination can be made that Pepsi overall is financially doing

better than Coca-Cola except for interest coverage, Plus P/E five-year high, price/sales ratio, equity, return on capital,

income/employee, and inventory turnover indicated the companies sales are improving, and there are more sales. Another

indicator is of PepsiCo Income/Employment is 18.5K comparing to Coca-Cola is 21.1K, is seen to be a few thousand dollars

lower which could mean the company can have the difference put in equity and debt. Coca-Cola has return on equity that stand

sat 5.82 compared to 3.56, that indicates That Coca-Cola is at a better stand with easing investors. Improving the profit

margins and returns on sales along with assist turnover could increase PepsiCo equity. PepsiCo needs to increase the

price/sales ratio, Equity, inventory turnover, and return on capital. Stock prices Play an essential role to consumers, and

shareholders because it permits for a profit. PepsiCo needs to develop additional strategies to be able to out eat Coca-Cola in

every aspect and not just a few. The case statement cannot be met if PepsiCo is not able to upsurge its revenues and stocks

(B&D Hoovers, 2017).

1.) Where is the firm financially strong and weak as indicated by financial ratio analyses?

The firm is financially stable; lately, it has been making a headline on its stock prices slowly dropping. Stockholders

have become frustrated and worried at the same time with PepsiCo. More leadership work needs to be put to sell more of its

products and do it’s best for stock prices to increase. If not, the stockholder will panic and start selling their shares.

2.) Can the firm raise needed short-term capital?

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The firm can raise short needed capital by applying for a new loan or opening a line of credit. Another way is taking on

more debt is not financially feasible; a company can increase capital by selling further shares. These can be either common

shares or preferred shares (B&D Hoovers, 2017).

3.) Can the firm raise needed long-term capital through debt and equity?

PepsiCo can raise needed long-term capital through debt and equity by another f taking on more debt is not financially

viable, a company can raise capital by selling additional shares. These can be either common shares or preferred shares. The

primary benefit of equity capital is that the company is not obligatory to repay shareholder investment. In its place, the cost of

equity capital insinuates to the amount of return on investment shareholders expect based on the performance of the more

significant market. The returns will emanate from payments of dividends and healthy stock valuation.

4.) Does the firm have sufficient working capital?

According to the CSImarket.com PepsiCo, “current asset grew by 2.75% in IV”. Current liabilities decrease will lead to

developments in the PepsiCo working capital ratio to 1.51. In conclusion, the PepsiCo does have satisfactory working capital

(CSImarket, 2016).

5.) Are capital budgeting procedures effective?

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Businesses should pursue all projects and opportunities that augment shareholder to buy more shares of the company.

Well-organized capital budgeting procedures result in higher stock prices, which is not where PepsiCo stands at this time. The

stock is lower than expected and has stockholders head turning and mind thinking.

6.) Are dividend-payout policies reasonable?

The dividend payout policies are realistic and are increase at least once a year. The divided payout is critical for

investor and stockholders to be able to continue their contribution and business with PepsiCo.

7.) Does the firm have good relations with its investors and stockholders?

PepsiCo has a good relationship with investor and stockholders in generals. They are well known in the market, fair

prices, and an honest trust with the public. This is crucial for any firm to be able to succeed and make money. Stock tends to

decrease once every quarter, but that does not entirely turn investor and stockholders away. Of course, if it is managed in a

proper period.

8.) Are the firms financial managers experienced and well trained?

PepsiCo has been around since 1893 and is still around. That speaks a lot about its financial managers, employees, and

adequate contribution to the company. Plenty of companies since 1893 have opened and closed, but PepsiCo has remained

strong and continued to grow and succeed. The company has phenomenal financial managers to where it has become more

than just a favorite drink. It has expanded to various food snacks and everyday products.
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Evaluating an alternative strategy for PepsiCo

QSPM

Alternative 1- Horizontal Integration Alternative 2- Market Penetration Alternative 3-Backward Integration

( Purcahsing Coca-Cola) (Develop new line of chips product) (Purchase a bottling Plant Company)

Key factors Weight Alternative Total Weight Alternative Total Weight Alternative Score Total Alternative
Score Alternative Score Alternative Score
Score Score
Strengths

1. Well known 0.12 4 0.48 0.10 2 0.20 0.04 2 0.08

product
2. Strong 0.10 4 0.40 0.08 2 0.16 0.08 2 0.16
corporate vision
3. Marketing 0.08 2 0.16 0.12 2 0.24 0.12 1 0.12
Strategy
Weakness

1. Customers 0.11 3 0.33 0.11 2 0.22 0.05 1 0.05

Service
2. Poor Strategic 0.06 4 0.24 0.09 3 0.27 0.09 4 0.36
Planning
3. Healthier 0.13 1 0.13 0.05 2 0.10 0.11 2 0.22
Options
Opportunities

1. Developing 0.06 2 0.12 0.11 3 0.33 0.08 3 0.24

Markets
2. Endorse big 0.10 3 0.30 0.08 1 0.08 0.06 2 0.12
celebrities to
increase sales
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3. Increase 0.07 3 0.21 0.10 1 0.10 0.09 1 0.09

presence globally
Threats

1. Increase labor 0.07 3 0.21 0.06 2 0.12 0.03 3 0.09

costs
2. Lower Prices 0.04 2 0.08 0.06 3 0.18 0.5 2 0.10

3. Other 0.06 1 0.06 0.04 1 0.04 0.09 1 0.09

competitors
Total 100% 2.72 100% > 2.04 100% > 1.72

The general strategies that were presented to the QSPM are Backward Integration, Horizontal Integration, and Market

Penetrator. These alternative strategies were best that fit PepsiCo and permit the company to contribute to the company to

reach its case statement. These three alternatives will allow the company be able to grow, excel, and increase their stocks.

After completing the QSPM model, I was able to accurately determine an alternative solution that will improve PepsiCo

profit and have it dominant in the Stock Market. Horizontal Integrations are seeking ownership or increased control of over

competitors. There are many competitors in the Food and Drink industry, and for PepsiCo to continue to grow and stay

dominant; they should purchase other competitors ownership. Years from today, PepsiCo will be the primary company in

the Food and Beverage industry and will allow them to grow dramatically throughout the years.
Running head: PEPSICO 28

Horizontal Integrations will satisfy case statement by increasing the profits for the company. An idea of Horizontal

integration is purchasing Coca-Cola. Coca-Cola is PepsiCo biggest competitor and has been competing against it for years.

Overall Coca-Cola is financially doing well and succeeding. Purchasing the company will defiantly not be easy, but it will

defiantly reduce competition and have more control over the market. Many PepsiCo and Coca-Cola lovers would the idea

because stocks will have higher credibility, which could lead to higher selling of stocks. Marketing Penetration can be

accomplished by increasing profits by develop new line of chips product. This will allows many chips lovers to experience

other flavors and invest more in their companies. Chips are a very hot product and consumers are always looking for new

flavors to satisfy their salty and flavorful cravings. Consumers are constantly looking for new products and with PepsiCo

introducing new chips flavor they will win many hearts and fill their pockets. Lastly, a great idea for backward integration

is to purchase a bottling plant company. PepsiCo and Coca-Cola have let go of the bottling company they owned because

the companies wanted to only focus on their product. They made both companies a little less dominant and spend more

over the years., The bottling company cost 10 millions dollars annually. Purchasing a bottling company would allow they

to increasing the profits of the company will put the company in a better financial state. Horizontal Integration will not

only improve revenues by stock prices, which will welcome more customers to purchase their shares. This point is critical

for a company to keep in debt low, revenues and profit higher. Meeting the case statement, key internal and external

factors are a significant point maximize strength and opportunity and minimize weaknesses and threats that can be reached
Running head: PEPSICO 29

with horizontal integration. This strategy will maximize strength by having a strong corporate vision and marketing

strategy will allow them to have various leaders working on projects to take over the industry. PepsiCo carries an

extraordinary strength of strong strategic managers, which will lead the company on the right track to reach their case

statement. Opportunities such as endorsing its company globally and endorsing celebrities are points where the company

will grow remarkably if those celebrities of competitors work with PepsiCo. Margining other companies to PepsiCo will

continue to maximize strength and opportunities. To minimize weaknesses by using a horizontal integration of customer

service and reduced strategic planning by giving unsatisfied customers more options when purchasing other companies.

Improving the customer service will bring in more customers, and that crucial point will be turned into a strength. Poor

strategic planning is a weakness that horizontal integration will eliminate distractions in the company and will allow them

to focus on the case statement. Lastly, the primary strategy will minimize threats because after taking over competitors

businesses. Lower prices and labor cost will not be considered a threat anymore because the company will take over

competitors. Horizontal integration is the best solution to assist in reaching the case statement along with the internal and

external factors. This implantation plan will allow PepsiCo to increase stock prices and revenues because the companies

mission and vision are what allow business to flow correctly.

Running head: PEPSICO 30

Implementation Plan for PepsiCo

PepsiCo is a global industry of food and beverages. With 22 different brands that generate more than $1 billion each an

annual retail sales their mission is to create hundreds of enjoyable food and beverages throughout the world. PepsiCo is

growing and thriving for excellence around the planet. Pepsi coast promises to provide a wide range of food and beverages,

innovative ways to minimize our impact on the environment, reducing packing volume, and support local communities.

Purpose

The purpose of the plan is to reduce the company’s debt and increase its revenues to attract more customers, stocker

holders, and investors through persistently making a profit in the company. It also needs to be able to grow and compete in the

food and beverage industry by collaboratively working with others.

Contact Information

For general PepsiCo questions or other PepsiCo brand questions: call 1-800-433-2652

CEO: Indra Nooyi - call 1-800-433-2652

Vice President: Albert P. Carey- call 1-800-433-2652

Planner: Noor El-moussaoui – call 1-800-123-4567

Running head: PEPSICO 31

Management Overview

The plan to increase advertising and marketing support behind its brands by $82 million in 2022. Focusing mainly on

North America. This will increase that rate of aid as a percentage of revenues. A multi-year productivity program is estimated

to generate about $82 million of cost savings by 2022 through operating practices and organization structure, including a

reduction in wage for all employees.

Description of Implementation

With 16,000 employees and minimum wage starting at $13.00 an hour this will be changed to $8.50 an hour. This will

save the company about $104,000 a year. For 4 years, at least $416,000-$750,000. Human Resource would be in charge of

making these changes. They are responsible for employee information, pay, and raise.

Second implement is to invest in more advertisement using celebrities, this will cost the company roughly $2 million

per performance, however, in the past have known to bring in $20 million. The advertisement management and development at

PepsiCo handle this. Since young adults resemble and follow celebrities, PepsiCo will see an increase in sales. If there is one

celebrity that performs a year to advertise their product, the company could estimate $80 million.

The last implement that will allow PepsiCo to increase profit is to decrease sale stocks; this will encourage much more

people to invest in the want to be part of the change. This will allow an investor to purchase more Pepsi products. The stock

price is at 110.73 as of April 3, 2018, decreasing the price to 100.73, will be a $10.00 loss per stock. This is estimated to bring
Running head: PEPSICO 32

in $700,000 in new purchases and new players into the market. Management and the control department play a role in the

change of stock prices. The stock market should be contacted to explain

Implementation Schedule

1- Pay Implementation to 8.50 to be implemented by Dec.31.2018, inform employees of the change June 1,2018. This allows

employees to make their ultimate decision before wages are altered. And this allows Human Resource to look for alternative

employees.

2- May 1, 2018, the company will achieve the search for a celebrity to advertise by July 30, 2018. $20 million is expected

alone from 2018.

3- Implement the changes in the stock prices as of May 31, 2018.

According to PepsiCo.com

Fiscal year is January-December. All 2013 2014 2015 2016 2017

values USD millions.
Sales/Revenue 66.42B 66.68B 63.05B 62.8B 63.53B
Cost of Goods Sold (COGS) incl. D&A 31.18B 30.99B 28.53B 28.32B 28.77B
COGS excluding D&A 28.52B 28.37B 26.11B 25.95B 26.4B
Depreciation & Amortization Expense 2.66B 2.63B 2.42B 2.37B 2.37B
Depreciation 2.55B 2.53B 2.34B 2.3B 2.3B
Amortization of Intangibles 110M 92M 75M 70M 68M
Gross Income 35.23B 35.69B 34.53B 34.48B 34.75B
Running head: PEPSICO 33

EPS/EBIT Analysis

RECESSION NORMAL BOOM RECESSION NORMAL BOOM RECESSION NORMAL BOOM

EBIT 2.0B 5.2B 8.3B 2.0B 5.1B 8.30B 2.09B 5.19B 8.30B

INTEREST 0 0 0 0.03 0.03 0.03 0.015 0.015 0.015

EBT 2.01 5.93 8.3 2.6 5.7 8.27 2.75 5.82 8.09

TAX 0.54 1.30 2.1 0.53 1.30 2.00 0.52 1.31 2.02

EAT 1.56 3.88 6.24 1.54 3.87 6.18 1.55 3.87 6.00

NO. OF
SHARES 1.55 1.55 1.55 1.54 1.54 1.54 1.55 1.55 1.55

EPS 1.00 2.49 3.99 0.99 2.50 4.00 1.00 2.49 3.87

With the three implements listed above the company could bring in an additional $1 million dollars in the course of 4

years. It is important for PepsiCo to follow these implantations to increase their revenues and stock prices. PepsiCo must

continue to make improvement to maintain stockholders, decrease debt, and increase equity ratio.