Pepsi Co and Quaker Oats Strategic Management

STRATEGIC MANAGEMENT

CASE: 3

PEPSI CO AND QUAKER OATS

Determine the present strategy (related, unrelated diversification, scope domestic or global for each division, what moves have been made recently to add new business, rationale underlying recent divestures, the nature of any efforts to capture strategic fits and create competitive advantage based on economies of scope and other resources)

Present Strategy

Roger Enrico the CEO of PepsiCo (1996-2001) got involved in restructuring PepsiCo's business portfolio. Company had 3 business segments restaurants, beverages and snack foods. Enrico found that there are number of fairly serious problems at PepsiCo. The company's beverage business began to fall behind Coca Cola (competitor) by a growing margin in both domestic and international markets. The restaurant's business was declining and profit margins were narrowing.

Amid of all these problems Enrico developed a restructuring strategy, which is as follows:

Related Diversification:

The restaurants limited investment in the company's snack food and beverage business and severely impaired the corporation's overall operating and profit margins. Considering these facts the restaurants which included Pizza Hut, KFC and Taco Bell were eliminated from the company's portfolio of business and the three main restaurants were spun off as an independent publicly traded company , the divestitures was completed with a creation of Tricon Global Restaurants. Company was focusing on related diversification and spun off business unit which were unrelated to the core business of beverages and snacks.

Maintenance of one Culture: PepsiCo ‘s new strategy was to maintain a single culture which is dominant and which was Frito-Pepsi culture.

Acquisitions for Related Diversification: PepsiCo as part of its new restructuring strategy acquired Borden food's snack mix of candy coated popcorn and peanuts Cracker Jack, Tropicana from Seagram Company (orange juices) and Quaker Oatmeal the number one brand of hot cereals. Company had its own distribution network to promote these products and to increase the availability of these products.

Outsourcing of Bottling Operations: company spun off more than 50% of its bottling operations around the world and gained a 1million$ gain on the initial public offering. This was done so that the company could be more focused and specialized in the development of new products and marketing programs to support them.

Value Chain alignment between PepsiCo Brands and Products to maintain economies of scope and to gain competitive advantage: