This PPT was our Group Project in class Business Strategy (capstone class in MBA program)

2. By
Abdulgader Shukri
Amin Khayat
Amjad Ali
Saleh Alsaif
Dar Mir

3. Labib
Intro
History
Mission

4. Introduction
 2nd largest beverage company in the world.
 Presence in 200 countries
 Key International markets include Argentina, Brazil,
China, India, Mexico, Saudi Arabia, Spain, Thailand and
U.K.

5. History
 1890 – Founded by Caleb Bradham
 1903 – Trademark
 1923, 1931 – Bankrupt
 1936- 1938 – Great Depression,
Profit Doubled , 10-5 cents.
 1941 – Pepsi stock 1st time
 1950 – Franchise outside U.S.

6. Cont’d..
 1960 – Target market – Young adults
 1965 – Pepsi Cola Merger with Frito-Lay to form PepsiCo.
 1970-1980 – Bought restaurant chains such as Pizza hut, Taco
bell, KFC
 1980-1990 – Cola Wars
 1994-1999 - International Growth and
Diversification, Tropicana $ 3 billion
 2000 – Quaker Oats, Gatorade

8.  Soft drinks are not referred to as items of necessity.
 Sodas stand between liquor and juice.

9. • Frito-Lay brands account for 59% of U.S.
snack chip industry

10.  Acquired Tropicana in 1998
 Available in more than 63 countries.
 Pure, fresh fruit juice in easy to handle package has
attracted the consumers

11.  Gatorade is the first isotonic sports drink.
 Created in 1965 by researchers at University of Florida for
the football team “The Gators”
 Worlds leading Sports Drink

12.  PepsiCo merged with Quaker Oats -2001
 Wide range of healthy food

13. Three business units
1. PepsiCo Americas Foods which includes:
 Frito-Lay North America ,
 Quaker Foods North America,
 all of its Latin American food and snack businesses.
2. PepsiCo Americas Beverages consisted of:
 PepsiCo Beverages North America
 all of its Latin American beverage businesses.
3. PepsiCo International.
 all PepsiCo businesses in Europe, Asia, Middle East
and Africa (AMEA)

14. Mission Statement
“ Our mission is to be the world's premier
consumer Products Company focused on
convenient foods and beverages. We seek to
produce financial rewards to investors as we
provide opportunities for growth and
enrichment to our employees, our business
partners and the communities in which we
operate. And in everything we do, we strive for

15. Mission Statement evaluation
Components Mentioned
Customers NO
Products/Service YES
Markets YES
Technology NO
Concern for Survival, Growth, YES
Profitability
Philosophy YES
Self-Concept NO
Concern for Public Image YES
Concern for Employees YES

16. Company Objectives
 Capture larger market share through product
innovation and diversification.
 To use synergy between product portfolios to cross sell
products.
 Achieve higher growth from its international markets.

17. Company Objectives
 Create a sustainable business for the communities and
environment.
 To spot the shift in consumer preferences.
 Supporting product initiatives with creative marketing
and sales initiatives.

18. Company Strategies
Marketing Product Conglomerate Forward
Development Development Diversification Integration

19. Amjad
Financial Evaluations.
 Internal strength &
Weakness.

20. Historical Financial Analysis
2007 2008 2009 Assessment
Liquidity Ratios
Current Ratio 1.31 1.23 1.44 P
Quick Ratio 1.01 0.94 1.14 P

21. Historical Financial Analysis
2007 2008 2009 Assessment
Asset Utilization Ratios
Inventory Turnover 17.24 17.14 16.51 N
DSI 21.17 21.28 22.10 P
AR Turnover 8.99 9.24 9.35 P
DSO (ACP) 40.58 39.52 39.04 N
Fixed Asset Turnover 3.52 3.71 3.41 N
Total Asset Turnover 1.14 1.20 1.08 N

22. Historical Financial Analysis
2007 2008 2009 Assessment
Debt Management Ratios
Debt Ratio 0.50 0.66 0.58 P
TIE 35.07 22.34 21.35 N

23. Historical Financial Analysis
2007 2008 2009 Assessment
Profitability Ratios
Gross Margin 0.54 0.53 0.54 P
Operating Margin 0.20 0.17 0.20 P
Profit Margin 0.14 0.12 0.14 P
BEP 0.23 0.20 0.21 P
ROA 0.16 0.14 0.15 P
ROE 0.33 0.42 0.35 N

24. Competitor Financial Analysis
Competitors Assessment
Dr. Dr.
Pepsi KO Pepper Industry KO Pepper
Liquidity Ratios
Current Ratio 1.44 1.27 1.50 1.40 S W
Quick Ratio 1.14 1.10 1.19 1.20 S W

25. Asset Utilization Ratios
Competitors Assessment
Dr. Dr.
Pepsi KO Pepper Industry KO Pepper
Asset Utilization Ratios
Inventory Turnover 16.51 13.16 21.11 6.00 S W
DSI 22.10 27.73 17.29 54.48 S W
AR Turnover 9.35 8.25 8.85 10.20 S S
DSO (ACP) 39.04 44.26 41.24 35.78 S S
Fixed Asset Turnover 3.41 3.24 4.99 - S W
Total Asset Turnover 1.08 0.64 0.63 0.80 S S

26. Debt Management Ratios
Competitors Assessment
Dr. Dr.
Pepsi KO Pepper Industry KO Pepper
Debt Management
Ratios
Debt Ratio 0.58 0.49 0.64 - S W
TIE 20.43 24.00 4.57 2.40 W S

27. Profitability Ratios
Competitors Assessment
Dr. Dr.
Pepsi KO Pepper Industry KO Pepper
Profitability Ratios
Gross Margin 0.54 0.64 0.60 0.59 W W
Operating Margin 0.19 0.27 0.20 - W W
Profit Margin 0.13 0.20 0.10 0.18 W S
BEP 0.20 0.18 0.13 - S S
ROA 0.14 0.13 0.06 0.13 S S
ROE 0.33 0.25 0.17 0.39 S S

28. Internal Strength & Weakness
key external factor Weighted Rating Weights
Score
Strength
Strong differentiation strategy
Strong product diversification strategy
strong focus on using product synergies
Due to the attractive regulation and relation AR. shows a good
standing in company to their competitors
Access to global employee base
Decentralized operations
Weakness
High spend on promotional activities
Targeting contemporary consumers
Global organization slow to adopt to change
Many production facilities still on high energy and high
waste system
Weak profit margin

29. Internal environment
RBV model
Resources Valuable Rare Inimitable Non- Competitive Expected
substitutable advantage performance
Water Competitive A Return
parity
Decentralized Temporary A to AA
structure competitive
Return
advantage
Brand Sustainable AA Return
Competitive
advantage
Recipe Temporary A to AA
competitive
Return
advantage

30. Abdulgader
External Opportunity &
Threats
 SOWT Analysis.

31. External environment
Tools used:
 General environment.
 Competitive environment. (Five forces)
 Strategic group.

32. External environment
General Environment

33. External environment
Porter’s five forces model

34. Strategic Groups
Strategic groups Coca-Cola Dr Pepper
1. Objectives different different
2. Strategies same same
3. Strengths Market share Product position
4. Weaknesses Undiversified Undiversified
product product

35. External environment
key external factor Weighted Rating Weights
Score
Opportunities
Business Internationalization
Changing consumer preferences
Energy efficient production techniques
high barrire to entry
low bargining power of supplier
large portfolio than competitors
Threats
political & community support
ecnomic factors
technological innovation
the intesity of rivalry among competitors in a industry is
high
number two rank in market share

36. The Internal-External (IE) Matrix
Hold & maintain
1) MKT penetration 2) Product development

37. STRENGTH WEAKNESS
1. Strong differentiation strategy 1. High spend on promotional
2. Strong product diversification activities
strategy 2. Targeting contemporary consumers
3. Strong focus on using product 3. Global organization slow to adopt
synergies to change
4. Due to the attractive regulation 4. Many production facilities still on
SWOT MATRIX and relation AR. Assets shows a high energy and high waste system
good standing in company to their 5. Weak profit margin
competitors
5. Access to global employee base
6. Decentralized operations
OPPORTUNITY SO STRATEGIES WO STRATEGIES
1. Business internationalization 1. Using differentiated and 1. Business internationalization will
2. Changing consumer diversified products enter into the allow top line growth for lower
preferences(healthy style) emerging markets (S1, S2, S6, incremental promotional spend
3. Energy efficient production O1) (W1, O1)
techniques 2. Diversified products portfolio can 2. Changing consumer preferences
4. Low barrier to entry be aligned to customer will allow it to go beyond the
5. Low barging power of supplier preferences (S1,S2, O2) contemporary segments (W2, O2)
3. Product synergies and innovation 3. Availability of energy efficient
can give it continued leadership techniques can allow it to divest
position (S3, O6) from less efficient production sites
(W4, O3)
THREATS ST STRATEGIES WT STRATEGIES
1. Political & community support 1. Decentralized operations will 1. Political and community support
2. Economic factors allow the political and local will help reduce the incremental
3. The intensity of rivalry among communities to be better engaged promotional spend by creating
competitor in an industry is high (S6, T1) positivity around PepsiCo brand
4. Technological Innovation 2. Differentiation and diversification (W1, T1)
5. Number two rank in market share with product synergies will allow 2. Technological innovation will help
it to rise above price competition it divest the high energy and waste
(S1, S2, S3, T2, T5) production sites and also improve
the social and environmental
impacts (W4, T4)

38. SO STRATEGIES
Using differentiated and diversified products enter into
the emerging markets
• (S1, S2, S6, O1)
Diversified products portfolio can be aligned to
customer preferences
• (S1,S2, O2)
Product synergies and innovation can give it continued
leadership position
• (S3, O6)

39. WO STRATEGIES
Business internationalization will allow top line
growth for lower incremental promotional spend
• (W1, O1)
Changing consumer preferences will allow it to go
beyond the contemporary segments
• (W2, O2)
Availability of energy efficient techniques can allow
it to divest from less efficient production sites
• (W4, O3)

40. ST STRATEGIES
Decentralized operations will allow
the political and local communities to
be better engaged
• (S6, T1)
Differentiation and diversification with
product synergies will allow it to rise
above price competition
• (S1, S2, S3, T2, T5)

41. WT STRATEGIES
Political and community support will help
reduce the incremental promotional spend by
creating positivity around PepsiCo brand
• (W1, T1)
Technological innovation will help it divest the
high energy and waste production sites and
also improve the social and environmental
impacts
• (W4, T4)

42. Amin
 Mission Statement
Revision.
 Alternative Strategies.
Strategy Implementation.

43. Revised Mission Statement
„Our mission is to be the world‟s premier consumer
Products Company focused on new technologies
to produce diversified convenient foods and
beverages that delight all varieties of customers
and bring value into their lives. We seek to
produce financial rewards to investors as provide
opportunities for growth and enrichment to our
employees, our business partners and the
communities in which we operate. We make sure

44. Alternatives Strategies
Market Development
Product Development
Market Penetration

45. The Grand Strategy Matrix

46. key external & internal factors MKT development Product development MKT penetrations
Opportunities Weight AS TAS AS TAS AS TAS
Business Internationalization 4 0.4 4 0.4 3 0.3
Changing consumer preferences 3 0.27 4 0.36 3 0.27
Energy efficient production techniques 3 0.3 4 0.4 3 0.3
high barrire to entry 2 0.16 2 0.16 2 0.16
low bargining power of supplier 2 0.1 2 0.1 2 0.1
large portfolio than competitors 3 0.45 4 0.6 1 0.15
Threats
political & community support 4 0.4 3 0.3 2 0.2
ecnomic factors 2 0.18 3 0.27 2 0.18
technological innovation 3 0.27 3 0.27 2 0.18
the intesity of rivalry among competitors in a industry is high 1 0.07 2 0.14 1 0.07
number two rank in market share 1 0.08 2 0.16 1 0.08
Strengths
Strong differentiation strategy 3 0.3 4 0.4 3 0.3
Strong product diversification strategy 3 0.27 4 0.36 3 0.27
strong focus on using product synergies 2 0.2 4 0.4 2 0.2
Due to the attractive regulation and relation AR. Assets shows a
good standing in company to their competitors 1 0.09 3 0.27 1 0.09
Access to global employee base 1 0.08 2 0.16 1 0.08
Decentralized operations 2 0.18 2 0.18 3 0.27
Weaknesses
High spend on promotional activities 1 0.1 4 0.4 2 0.2
Targeting contemporary consumers 1 0.1 4 0.4 2 0.2
Global organization slow to adopt to change 1 0.08 3 0.24 3 0.24
Many production facilities still on high energy and high
waste system 2 0.16 2 0.16 2 0.16
Weak profit margin 2 0.18 2 0.18 1 0.09
1.00 4.42 6.31 4.09

47. Product development
Marketing:
Long-Term Objective:
 Delivering catered products to each region to match customer
preference and needs.
Annual Objective:
 Introduce one new product every year.
 Support developed products with creative marketing campaigns.

48. Product development
Policy:
 All Marketing activity must be evaluated before execution to insure
success. In addition, the marketing activity of developed products
should cover wider spectrum of customers to utilize marketing budget
effectively.
Strategy:
 Conduct Market Survey and research to understand consumer
preference and needs.
 Collect loyal consumers’ feedback and ideas for future product
development.

49. Product development
Operation:
Long-Term Objective:
 To produce top quality products.
 To be prepaid to adapt any new operational processes to develop
new product.
 Eliminate supplies inventory.(JIT)
Annual Objective:
 Hire skilled and experienced people.
 Develop efficient (JIT) plan.

50. Product development
Policy:
 Being very selective in hiring, by choosing skilled and
experienced employee.
 Schedule semiannually meeting with suppliers.
Strategy:
 Use latest technology in the manufacturing process.
 Take an advantage of low supplier bargaining power and
empower JIT.

51. Product development
Management:
Long-Term Objective:
 Reduce or eliminate resistance to change of process and
individual.
Annual Objective:
 Increase the understanding about the advantage of change
 Support and endorse creativity for all employees.

52. Product development
Policy:
 Employees will be required to present at least two new
ideas to their superior every year.
Strategy:
 Use rational or Self-interest change strategy to assure easy
and fast implementation of any changes required for
developing new product.

53. Product development
Finance:
Long-Term Objective:
 Company must continue Aggressive financial planning
to support budgeting.
Annual Objective:
 By developing new products every year the company
must maintain 20% increase in revenue yearly.

54. Implementation
Product development
Policy:
 The company must cover the rising costs by increasing
revenue proportionately.
Strategy:
 Company will acquire a $500 million dollar loan financed
and paid over a 5 years period.

55. Product development
Research Development:
Long-Term Objective:
 Develop at least fifteen ready to launch new products in the next 5
years.
 Develop healthier snacks.
Annual Objective:
 Develop 5 new products every year and pick the best one to launch.
 Follow up and analyze food safety issues to develop the right product.

56. Product development
Policy:
 All developed products should go through testing process and
evaluation before lunching to make sure targeted consumers will be
satisfied.
Strategy:
 Innovate in heart-healthy oil, sodium reduction and more whole grains.
 Appropriate incentive plans for employees who contribute to new
product development.

57. Saleh
Pro-forma
Projected Financial
ratios
Balanced Scorecard

58. PRO-FORMA : Income Statement
PERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2010 Assessment
Total Revenue 39,474,000 43,251,000 43,232,000 51,878,400 20% increase
Cost of Revenue 18,038,000 20,351,000 20,099,000 23,706,302 Percentage of sales = 45.6%
Gross Profit 21,436,000 22,900,000 23,133,000 28,172,098
Operating Expenses
Research Development - - - -
Selling General and Administrative 14,208,000 15,901,000 15,026,000 19,233,280 Historical trend + 20%
Non Recurring - - - -
Others 58,000 64,000 63,000 63,000 As prior year
Total Operating Expenses 14,266,000 15,965,000 15,089,000 19,296,280
Operating Income or Loss 7,170,000 6,935,000 8,044,000 8,875,818
Income from Continuing Operations
Total Other Income/Expenses Net 685,000 41,000 67,000 67,000 As prior year
Earnings Before Interest And Taxes 7,855,000 7,350,000 8,476,000 8,942,818
Interest Expense 224,000 329,000 397,000 528,010 Historical trend
Income Before Tax 7,631,000 7,021,000 8,079,000 8,414,808
Income Tax Expense 1,973,000 1,879,000 2,100,000 2,204,987 Tax rate 26.2%
Minority Interest - - -33,000 -33,000 As prior year
Net Income From Continuing Ops 5,658,000 5,142,000 5,946,000 6,176,821
Net Income 5,658,000 5,142,000 5,946,000 6,176,821

59. PRO-FORMA : Balance Sheet
Stockholders' Equity 2007 2008 2009 2010
Misc Stocks Options
Warrants - - -104,000 -104,000 As prior year
Redeemable Preferred Stock - -97,000 - - As prior year
Preferred Stock 41,000 - - -
Common Stock 30,000 30,000 30,000 30,000 As prior year
Ending Retained Earnings + Projected net
Retained Earnings 28,184,000 30,638,000 33,805,000 39,981,821 income
Treasury Stock -10,519,000 -14,122,000 -13,383,000 -13,383,000 As prior year
Capital Surplus 450,000 351,000 250,000 250,000 As prior year
Other Stockholder Equity -952,000 -4,694,000 -3,794,000 -3,794,000 As prior year
Total Stockholder Equity 17,234,000 12,106,000 16,804,000 22,980,821
Total liabilities and stock
holder equity 34,628,000 35,994,000 39,848,000 40,628,821

60. PRO-FORMA : Balance Sheet
Liabilities 2007 2008 2009 2010
Current Liabilities
Accounts Payable 6,209,000 6,494,000 8,292,000 9,950,400 As sales
Short/Current Long Term
Debt - 369,000 464,000 564,000 Prior year + 100M
Other Current Liabilities 1,544,000 1,924,000 - - As prior year
Total Current Liabilities 7,753,000 8,787,000 8,756,000 10,514,400
Long Term Debt 4,203,000 7,858,000 7,400,000 10,760,000 Historical trend + 400M
Other Liabilities 4,792,000 7,017,000 5,591,000 5,591,000 As prior year
Deferred Long Term
Liability Charges 646,000 226,000 659,000 659,000 As prior year
Minority Interest - - 638,000 638,000 As prior year
Negative Goodwill - - - - As prior year
Total Liabilities 17,394,000 23,888,000 23,044,000 17,648,000

61. PRO-FORMA : Balance Sheet
PERIOD ENDING 31-Dec-07 31-Dec-08 31-Dec-09 2,010 Assessment
Assets
Current Assets
Cash And Cash Equivalents 910,000 2,064,000 3,943,000 2,115,161 Plug figure
Short Term Investments 1,571,000 213,000 192,000 192,000 As prior year
Net Receivables 4,389,000 4,683,000 4,624,000 5,548,800 As sales
Inventory 2,290,000 2,522,000 2,618,000 3,141,600 As sales
Other Current Assets 991,000 1,324,000 1,194,000 1,194,000 As prior year
Total Current Assets 10,151,000 10,806,000 12,571,000 12,191,561
Long Term Investments 4,475,000 3,998,000 4,484,000 4,484,000 As prior year
Property Plant and Equipment 11,228,000 11,663,000 12,671,000 13,831,260 Historical trend + 400M
Goodwill 5,169,000 5,124,000 6,534,000 6,534,000 As prior year
Intangible Assets 2,044,000 1,860,000 2,623,000 2,623,000 As prior year
Accumulated Amortization - - - - As prior year
Other Assets 1,356,000 2,324,000 965,000 965,000 As prior year
Deferred Long Term Asset
Charges 205,000 219,000 - - As prior year
Total Assets 34,628,000 35,994,000 39,848,000 40,628,821

62. Projected Financial Ratios
2007 2008 2009 2010 Assessment
Liquidity Ratios
Current Ratio 1.31 1.23 1.44 1.16 Negative
Quick Ratio 1.01 0.94 1.14 0.86 Negative
Asset Utilization Ratios
Inventory Turnover 17.24 17.15 16.51 16.51 Same
DSI 21.17 21.28 22.10 22.10 Same
AR Turnover 8.99 9.24 9.35 9.35 Same
DSO (ACP) 40.58 39.52 39.04 39.04 Same
Fixed Asset Turnover 3.52 3.71 3.41 3.75 Positive
Total Asset Turnover 1.14 1.20 1.08 1.28 Positive
Debt Management Ratios
Debt Ratio 0.50 0.66 0.58 0.43 Positive
TIE 35.07 22.34 21.35 16.94 Negative
Profitability Ratios
Gross Margin 0.54 0.53 0.54 0.54 Same
Operating Margin 0.20 0.17 0.20 0.17 Negative
Profit Margin 0.14 0.12 0.14 0.12 Negative
BEP 0.23 0.20 0.21 0.22 Positive
ROA 0.16 0.14 0.15 0.15 Same
ROE 0.33 0.42 0.35 0.27 Negative
Market Ratios
P/E N/A N/A N/A N/A
P/CF N/A N/A N/A N/A
M/B N/A N/A N/A N/A

63. Projected Financial Ratios
Ratio Category Projected
Liquidity Negative
Asset Utilization Same
Fixed Asset turnover Positive
Total Asset Turnover Positive
Debt Management Ratios
Debt Ratio Positive
TIE Negative
Profitability Ratios
Gross Margin Same
Op and Profit Margin Negative
ROE Negative
BEP and ROA Positive
Market N/A

64. Balanced Scorecard
Perspective Goal Measurement
Firm growth and profitability Annual sales growth of at least 5%
Financial
every year and net profitability
improvements of 2-3%
Value creation, satisfaction Market leading position in all major
Customer
markets
and support
Cost of sales dropping by 4-55 annually
Efficiency & waste reduction Cost of production dropping by 4-5%
Internal Business Process
annually
Innovation and employee Employee attrition drop by 10%
Learning & Growth
annually
satisfaction
At least 20% of annual sales from
products less than 2 years in the market

65. Labeeb
Rumelt’s Criteria
Conclusion

66. Rumelt’s Criteria
Consistency:
 Strategy should not present inconsistent goals and
policies.
 Introducing current segment products in new markets
will drive consistency of consumer expectations
regardless of the locations they are present in.

67. Rumelt’s Criteria
Consonance:
 Need for strategies to examine set of trends.
 Introduction of more health conscious products which
will cater to the growing market for health conscious
consumers, PepsiCo will be building momentum in
line with current trends.

68. Rumelt’s Criteria
feasibility:
 Neither overtax resources or create unsolvable sub-problems
 The new focus of regionalization or employee base
diversification will render to local market product development
and idea generation. The feasibility for such strategies should be
in line with research and development resources but will pay off
eventually.

69. Rumelt’s Criteria
Advantage:
 Creation or maintenance of competitive advantage.
 The resources and skills within the company is notably
strong and defensive against future threats and with the
implementation of the new strategies it will be miles ahead
of its competition.

70. Conclusion
 Serving consumers with premier convenient foods.
 Environmental Sustainability.
 Capture more of the aging population market share.
 Consistency of innovative products.