Pepsico Preperartion Questions.

PEPSICO PREPERARTION QUESTIONS

Should PepsiCo acquire Carts of Colorado (CoC) and California Pizza Kitchens (CPK)?

California Pizza Kitchens

In order to tackle this question, we must first establish California Pizza´s position in the market and where this specific restaurant competes. Although CPK is not a traditional fast food restaurant such as KFC or Pizza Hut, it does have various similarities that might determine it´s position in the market as a fast food chain. The food is set at affordable prices and the average customer doesn´t spend much of their time at the restaurant once the purchase of food has concluded.

Furthermore, even though the quality of the product is higher than your typical fast food restaurant, the offerings are not upscale. In this sense, the acquisition of California Pizza Kitchens by PepsiCo would be a form of related diversification as CPK produces foods that are in many aspects similar to those offered by other fast food restaurants in the market but with significant differences with service. This could offer economies of scope advantage. If we take a look at PepsiCo´s portfolio, many of it´s restaurants have other advantages such as drive through service or reduced costs, while CPK´s core competency consists on adding of new items in the menu and the high level of service delivering superior service. This combination of core competencies and the potential for activity sharing between the different brands can lead to lower costs across all the restaurants.

In addition, CPK has positive revenue streams and high growth which indicates that the higher end pizza restaurants are becoming more popular among consumers, as the trend towards healthier food options strengthens. Finally, through the acquisition of CPK, PepsiCo would be able to increase its market share. All in all, the acquisition of CPK seems like a sensible and viable option that PepsiCo should consider adding to its portfolio.

Carts of Colorado

Regarding the question of whether PepsiCo should acquire Carts of Colorado, this would be a form of unrelated diversification since CoC produces carts that allow for food distribution and sells them to end users throughout the US. This acquisition makes sense from a business perspective for various reasons.

First of all, since CoC has clients ranging from Burger King, Coca-Cola Company, Dunkin’ Donuts, Mrs. Fields, and Disney, the acquisition would enable PepsiCo to tap into a new market and become a supplier to these companies.

Secondly, CoC had a potential to grow into a bigger and more efficient company, as the founders were willing to invest for the technological advancement of the carts, such as computers and radio telecommunications, which made the carts have an advantage in the market due to technological superiority.