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Strategic Management Analysis of PepsiCo

Strategic Management Analysis of PepsiCo

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PEPSI
Growth, Balance, and a World of Fun
Strategic Management Audit Conducted By:Provided To:May 16, 2007TABLE OF CONTENTS
 
Executive Summary
Created in 1965 through the merger of Pepsi-Cola and Frito-Lay, PepsiCo is oneof the strongest beverage and convenient food companies in the world. Originally startedin 1898, Pepsi Cola became the first branded soft drink in the world. Its brand isavailable in over 200 countries around the world and generated sales in excess of $92 billion last year. Headquartered in Purchase, New York, PepsiCo is the number two beverage company in the world behind the Coca-Cola Company.Financially, 2006 was a year of progress with an overall growth of 5.5%, revenueof nearly 36 billion USD and a return on investment of 26%. These numbers are all wellabove the industry average, with their main competitor still being the Coca-ColaCompany. PepsiCo has continued their brand image by appealing to Generation Y and becoming synonymous with music, entertainment and sports. In addition to their financial success, PepsiCo is also dedicated to ethics and social responsibility in thecommunity. They have invested heavily in recycling programs and in developing nationsin Africa. PepsiCo even has a sustainability mission that states “PepsiCo’s responsibilityis to continually improve all aspects of the world in which we operate- environmental,social, economic- creating a better tomorrow than today.”They believe that they have the competitive, sustainable advantage in the industry because of three things: big brands, proven innovation and differentiated products, and powerful go-to markets. With their strong brand, socially responsible employees andcorporate beliefs and focus on the younger generation, PepsiCo will continue its stance asone of the most powerful companies in the world.
Current SituationCurrent Performance
 
Pepsi Co is a worldwide corporation that has been in existence since the late 19
th
century when Caleb Bradham, a pharmacist from New Bern, North Carolina first startedexperimenting with different soft drink concoctions. It was in 1898 that Pepsi Cola first became a branded soft drink and from that point forward their product and the companyhave grown to be the most recognized brand in the world.
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This past financial year, PepsiCo continued it three-year positive growth strategy by maintaining an aggressive presence in the United States and worldwide, boasting healthy profits and market share.The company is broken into four major branches: Frito-lay North America,PepsiCo Beverages North America, PepsiCo International, and Quaker Foods NorthAmerica. Pepsi Co has one of the largest footholds in each of these markets compared torelative competition, holding the following rankings worldwide: #2 in Carbonated SoftDrinks. #1 in Sports Drink #1 in PET Water Brand (non-jug) #1 in chilled Juices andJuice Drinks #1 Enhanced Water Brand #1 In ready to-Drink Coffee #1 in Ready-to-Drink Teas #1 in Potato Chips #1 in Tortilla Chips #1 in Corn Chips #1 in ExtrudedSnack #1 Multigrain Snacks #2 in Pretzels #1 in Hot Cereal #1 In Grits #1 Rice Side Dish#1 Brand Pancake Syrup #2 Pancake Mix.
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Financially “PepsiCo delivered a very strong 2006: Volume grew 5.5%; netrevenue grew 8% to 35,137 in millions; total operating profit increased 9% to 6,439 (inmillions); return on investment was 26%; total return to shareholders was 8%; cash flowfrom operations was 6.1 billion USD, and earnings per share increased 13%.”
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Much of the strong financial performance can be attributed to the intense marketing, productdiversification, and strong market presence in the United States. In addition, Pepsi Co“Has a solid share of snacks in major markets such as Mexico, the United Kingdom,Brazil, Australia, India and Russia, and are developing markets such as China,” of whichoffers additional revenue from emerging markets. As will be discussed later, Pepsi Costill remains second in the international beverage industry, with Coca-Cola maintainingits strong market share.
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PepsiCo Rankings Worldwide. Hoover’s. http://0-premium.hoovers.com.bianca.penlib.du.edu/subscribe/co/ops.xhtml?ID=ffffrfyhsffytsjrkh. Last updated January 2007. Accessed May 5, 2007.
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Financial Releases of PepsiCo. Phoenix Corporate.

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