INTERNATIONAL STRATEGIC
INTERNATIONAL STRATEGIC
MANAGEMENT
MANAGEMENT
Clémentine BABONNEAU
Clémentine BABONNEAU
Alice BEZIRARD
Alice BEZIRARD
Léna BITTON
Léna BITTON
Carole GUIMBART
Carole GUIMBART
•
•
External analysis
External analysis
•
•
Internal company analysis
Internal company analysis
Strategic Diagnosis
Strategic Diagnosis
Alternatives
Alternatives
Recommendations
Recommendations
How can PEPSICO improve its diversification strategy in 2008?
How can PEPSICO improve its diversification strategy in 2008?
EXTE
EXTE
RNAL ANAL
RNAL ANAL
YSIS
YSIS
-MARKET TRENDS -MARKET TRENDS -PESTEL
-PESTEL
-OPPORTUNITIES & THREATS -OPPORTUNITIES & THREATS --PORTER’S 5 FORCESPORTER’S 5 FORCES
•Great-tasting
•Gourmet flavor
•Styles
•Diet and reduced calories food •Non-carbonated beverages Consumer health and wellness concern Consumers want to reward themselves Consumer desire to escape from
the norm and taste snacks from a wider,
often global palate Ready to eat and
ready to drink consumption
Political
Protectionism in emerging markets
Economic
High growth potential of emerging markets
But…strong competition to enter
Social
Healthier lifestyles promote different patterns of
consumption and represent new product opportunities
But…less interest in sodas with high sugar content
Technological
Strong R&D departments to develop new products
Ecological
Environment friendly packaging solutions
Legal
More and more protected consumers
• “Better for you” – “Good for you” opportunities •Changing lifestyles of consumers
•Taste preferences from country to country: adaptation to the local tastes Consumer lifestyle:
•Emerging markets: developing countries China, India, Russia, Mexico, Brazil
•Developed countries: growing markets in healthy snacks outside US : new consumers needs and expectations: reduce saturated fats, cholesterols,
trans fats, simple carbohydrates “China and Brazil would be the 2 largest international markets for snacks”
International Expansion
•Increasing consumption of water bottles in US
•Increasing consumption of savory snacks like Cheetos cheese (expectation: +27% by 2013)
•Broadening the products: Avoid the dependence on US markets by going abroad
Awareness for healthy, sugar and salt free meals
Decline in Carbonated Drink Sales
•
Legal barriers to enter new markets : protectionism
•
Legislation involving environmental, health, and safety may force a
reorganization in the industry
Potential Negative Impact of Government
Regulations
•
Fast-food industry: fierce price competition and low profit margins
•
High rivalry between powerful global companies (The Coca-Cola
Company, Nestlé, Danone, Kraft Foods...). Risk of influence on
pricing pricing, advertising, sales promotion initiatives
Intense Competition
•
In 2008 a strike in India shut down production for nearly an entire
month
Rivalry
among
existing
competitors
Threat of new entrants Bargaining power of buyers Threat of substitute products Bargaining power of suppliers--Low power of new entrants Few multinational groups own the largest part of the market
share
Possible entrants for niche markets or local markets
++ Very high bargaining power (retailers) -Power of brand recognition as an argument to attract
the final customer who is loyal -Depends on the size
of the retailer +
High
-All kind of food depending on the taste
-Pay attention to healthy and wellness categories +/-Medium bargaining power -Dependence on raw materials -But…alot of suppliers available ++
Very high rivalry
-High diversification from each competitor
-Few strong groups control the market
Share information and be transparent
regarding the stakeholders
Be able to forecast the trends at a local and
global level
Adapt to customer lifestyle and needs
Product innovation and diversification
Be visible everywhere
Good control over the manufacturing process
INTERNAL ANALYSIS
-ORGANIZATIONAL STRUCTURE
-CORE COMPETENCIES
Frito-Lay North America PepsiCo Beverages North America Pepsi International Quaker Foods North America
$11,586
$15,798
$10,230
$1,860
Non Alcoolics Beverages brands Salty Snacks brands Oat Food and Cereals brands
PepsiCo’s organizational structure & Net Revenues for each Business Segment
(in $ millions) in 2007:
Organizational profile:
•PepsiCo constantly improved its knowledge on the consumer behaviour by identifying trends such as healthier products:
• New brand value: PepsiCo’s better -for-you & good-for-you products
Market Research
•Launch of less saturated fat and less salted products answering to the trends found it by « Consumer Insight dept »
• Introduction of Lay’s traditional flavour with 50% less saturated fat
R&D: Product
Innovation
•Close relationships with suppliers & customers under the Power of One program that allow PepsiCo to have direct information from both retailers & customers
Efficient
Information System
•PepsiCo has succeed in creating an international exposure
especially with Beverages & Salty snacks (increase of 22% in 2007)
International
expansion
•Those acquisitions allowed PepsiCo to gain synergy in its whole business
Strategic
acquisitions
Competitive Advantages
Product diversity Differentation Brand equity Product diversity: - 3 Business Units- A wide and deep range of products Brand equity: -Awareness -Recognition -Perception Differentiation:
-High value products -Strong positioning
Wide range of products
Efficient identification of trends
Proactive instead of
Reactive
International Exposure
High profit margins
Total control on the several steps of the supply chains (allow
them to control & reduce the production and delivery costs)
Relatively unsuccessful in increasing
the worldwide awareness of Quaker
Foods Wide
In 2006, only 6 countries represented
75% of Quaker Foods International
sales out of US
Difficulties to find a synergy between
their restaurants & beverages they
GOOD FINANCIAL HEALTH WHICH ALLOWS THEM TO SELF
FINANCE THEIR GLOBAL EXPANSION
Price in the stock exchange was about $33 in 1999 & about $64 in
2008 (+ 120%)
Net revenues by activity (2004-2007):
Frito-Lay North
America=21% North America=23%PepsiCo beverages International=60%Pepsi Quaker Foods NorthAmerica=22%
Total Net revenues of PepsiCo Inc. from 1998 to 2007: increased by
approximately 77%
-MAIN STRATEGIC CHOICES -ACTUAL STRATEGY
-PEPSICO DIVERSIFICATION -PEPSICO CHALLENGES
1997
Restructuration
of PepsiCo
Focus on snacks
and beverages
Since 1997
Diversification
and acquisition
strategies
Result 2008
Strategic
realignment in
order to improve
the PepsiCo
Profits
Focus on
snacks
and
beverages
Strategic International acquisitions Large diversification of PepsiCo’s products Make healthy and wellness products Relevant innovations in R&D Strong presence in mature and emerging markets
Product differentiation to respond to health
concerns (use of healthier oils, natural salty
snacks)
Research on new flavors and new recipes: in
order to attract more customers
With International acquisitions, PepsiCo offers a
different kind of food and beverages
•new flavors, health and wellness products
•Frito lay North America, Quaker Foods North America, Latin American Foods, PepsiCo Americas Beverages, UK and Europe, Middle East, Africa & Asia
•Understand local taste
•China and Brazil would be the two largest
international markets for snack
To increase the market share in developing countries and continue the strong development in emerging countries
To succeed in adapting to the customer tastes of customers worldwide To innovate in order to improve the quality of their products while keeping going through the large diversification To manage
efficiently the new six reporting segments
Stock Price: in 2008 PepsiCo Drops his stock
price in order to improve overall profitability
Quaker brand: under distributed in
international market
Gatorade: only one brand in growing market,
it‟s not enough!
Industry Attractiveness Factor Weight Attractiveness Rating
Weighted Industry Rating
Market size and projected growth 0.15 7 1.5
Intensity of competition 0.20 8 1.6
Strategic fits and resource fits with other industries in portfolio
0.15 5 0.75
Resource requirement 0.15 6 0.90
Emerging industry opportunities and threats 0.10 4 0.4
Seasonal and cyclical influences 0.05 2 0.1
Social, political ,regulatory, and environmental factors
0.15 3 0.45
Industry uncertainty and business risk 0.05 4 0.20
Sum of weights 1.00
Industry attractiveness
rating
5.9
We have defined 3 SBUs:
•
Frito Lays
•Beverages
•Quaker
We considered both american and
M a r k e t G r o w t h R a t e
high
Low
1
Frito lays Int Frito lays AMERICAStars
Cash cows
Question marks
Garbage can dogs
Bever ages Int LEGEND GREY : AMERICA BUSINESS Pink: INTERNATIONAL BUSINESS
Relative Market Share
Quaker AMERICA
Quaker Int
Beverages AMERICA
Increase
International
Sales
Improve
operating
margin
Reinforce
the
international
presence
Manage the
stock price
Choice
number
1:
•
Adapt their products
to the local
customers
Choice
number
2:
•
International
acquisitions
Choice
number
3:
•
Forecast new
trends:
•
Improve the
healthy products
or make ecological
Adapt their products to local customers
Understand the consumer taste preference
Key to expand into international market
Taste are different in function of each
country
F
ollow the customer „s taste in order to
attract them, in Mexico : spicy food, in
International acquisitions
Increase PepsiCo presence
Reinforce their presence on new markets =
Internationalization
Increase the relationship with local
companies in order implement easier
Forecast the trends:
Rely on marketing intelligence and
research & development
New customers expectations
Nowadays, the
customer‟s taste is changing:
PepsiCo has to focus on healthy products in order to
respond to consumer health and wellness (reduce the
consumption of statured fats, cholesterol, trans fat,
and simple carbohydrates).
