PEPSI

NAME: RABEKA NAZIM

CLASS: BBA –IV
SUBJECT: RESEARCH .REPORT.
WRITTING
SUBMITTED BY:SIR.SAMAD
DATE: 11-07-2006

Indus Institute of Higher Education (IIHE)

Plot No. ST-2D, Block-17 Opp. Mashriq Centre,
Gulshan-e-Iqbal Karachi, Tel. 4801430-35
 ACKNOWLEGEMENT

11-JULY- 2006

I hereby submit my research report on the PEPSI.

In preparing this report, I wish to extend our gratitude towards the management of Indus
institute who have provided us the opportunity to attend your research course. Further I
am highly indebted to my teacher, as without his guidance, cooperation and patience, I
would have not be able to effectively apply my skills to this project.

I am certain that this report will provide you with feedback on our
understanding of this research report course.

Sincerely,

RABEKA NAZIN
 TABLE OF CONTENTS

SNO TOPICE PAGE NO

1. SUMMARY 4

2. INTRODUCTION 5

3. HISTORY OF PEPSI CO
 1893 – 2000
6 - 17
4. ABOUT PEPSI CO 18
 SHARE HOLDERS

5. S.W.O.T ANALYSIS 19
 INTERNA FACTOR 19 – 20
 EXTERNAL FACTOR 21

6. G.ES 9 CELL MATRIX FOR PEPSI

 INDUSTRY ATTRACTIVENESS 22 - 23
 BUSINESS STRENGHTS
 G.E (9)CELL MATRIX

7. CORPORATE MISSION OF PEPSICO 24

8. OBJECTIVES OF PEPSI CO 25

9. G.E NINE CELL MATRIX 26

10. PEPSI PRODUCT LIFE CYCLE 27

11. DEVELOPING THE CORPORATE 28 - 30

STRATEGIES

12. BUSINESS COMPOSITION 31 - 36

13. STRATEGIC FIT OF PEPSI CO’S BUSINESS 37

14. DEVELOPING MARKETING STRATEGIES 38 - 43

15. TARGET MARKET 43

16. POSITIONING STRATEGY 44 - 45

17. MARKETING SAGMENTATION 46

18. PRICING STRATEGY 47

19. RECOMMENDATION 48
 SUMMARY

PepsiCo owns and operates numerous established brand names. Although

there has been considerable focus on maintaining high brand name visibility, this has not
been sufficient to produce desired results. It should be noted that brand name promotion
is important and should continue. The corporate strategy (related diversification) of
PepsiCo is sound and should be maintained. The individual business strategies require
some focusing.
PepsiCo beverages has developed a strong brand name using various marketing
techniques. It is now necessary for this division to focus on production and distribution
techniques in order to refine their value chain and offer a better “package” to consumers.
PepsiCo restaurants have strayed from focusing on well-known brands. The purchase of
the smaller chains was a strategic mistake and the results indicate this.
The focus on constant product innovation is a good one however one must
question how many times a new chicken, pizza or Mexican product can be introduced.
Although product innovation should continue, PepsiCo restaurants should also invest
some energy in developing better productions and human resource processes in their
restaurants. PepsiCo snack foods seem to have the strongest business strategy, this
appears to be the legacy of the innovative management of Roger Enrico (now CEO). The
constant focus on process improvement and distribution improvement is positive and can
only yield further positive results. International expansion using worldwide brands to
give local brands credibility should be commended. This should be adopted within all
business divisions of PepsiCo. PepsiCo as a whole does not seem to be utilizing value
chain overlaps to their greatest extent. Although cross-fertilization of management and
brand awareness is undertaken, there is much more scope for utilization of value chain
overlaps.
 INTRODUCTION

The leading cola manufacturers Pepsi and Coke Coca-Cola have always been
competing fiercely in their home market – the US and the UK.

In Atlanta 1884 John Pemberton, a pharmacist, medicine inventor and cocaine addict
launched Coca-Cola. While in North Carolina Caleb Bradham was inventing Pepsi. After
little success the name was changed to Pepsi-Cola in 1898 and so the battle with Coca-
Cola began. Coke continued to be successful and Pepsi appeared to be living in its
shadow, always second to best. In 1922 Bradham facing bankruptcy attempted to sell
Pepsi to Coke, Coke rejected. Eventually it was sold to a Wall Street investor.

Then it seemed that Pepsi struggled to compete with Coca-Cola. Until in the 1970’s when
Pepsi’s marketing became rejuvenated by John Scully. He focused Pepsi’s image as
"young" and targeted the youthful market in comparison with Coke’s "faddy daddy"
drink.

Since this time Pepsi and Coke has continued to compete by implementing expensive and
extensive marketing communications strategies. Some of which are similar, others
completely different, some extremely successful and others complete disasters. What is
clear is that whilst these two companies have been fighting over market share, spending
millions of pounds on advertising and promotion other cola drinks have emerged into the
market
 HISTORY OF PESPSI CO

1893: Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins
experimenting with many different soft drink concoctions; patrons and friends sample
them at his drug store fountain.

1898: One of Bradham's formulations, known as "Brad's Drink," a combination of

carbonated water, sugar, vanilla, rare oils and kola nuts, is renamed "Pepsi-Cola" on Aug.
28.

1902: The instant popularity of this new drink leads Bradham to devote all of his
energy to developing Pepsi-Cola into a full-fledged business and he applies for a
trademark with the U.S. Patent Office in Washington, D.C. The first Pepsi-Cola
Company is formed.

1903: "Doc" Braham moves the bottling of Pepsi-Cola from his drugstore into a
rented warehouse. In keeping with its origin as a pharmacist's concoction, Bradham's
advertising praises his drink as "Exhilarating, Invigorating, Aids Digestion." And he sells
7,968 gallons of syrup in his first year of operation.

1904: Braham purchases a building in New Bern known as the Bishop factory for
$5,000 and moves all bottling and syrup operations to this location. Sales increase to
19,848 gallons.
1905: A new logo appears, the first change from the original created in 1898.
Pepsi-Cola's first bottling franchises are established in Charlotte and Durham, North
Carolina.

1906: The logo is redesigned and a new slogan is added: "The Original Pure Food
Drink." The Pepsi-Cola trademark is registered in Canada. There are 15 Pepsi bottling
plants in the U.S., and syrup sales reach 38,605 gallons.

1907: Pepsi-Cola Company continues to expand. The bottling network reaches 40

franchises; the trademark is registered in Mexico and syrup sales top 100,000 gallons.

1908: Pepsi-Cola becomes one of the first companies to modernize delivery from
horse-drawn carts to motor vehicles. A total of 250 bottlers are now under contract in 24
states.

1909: Automobile racing pioneer Barney Oldfield becomes the first celebrity to
endorse Pepsi when he appears in newspaper ads describing Pepsi as "A bully drink…
refreshing, invigorating, a fine bracer before a race." The theme, "Delicious and
Healthful" appears, and will be used intermittently over the next two decades.

1910: The first Pepsi-Cola bottlers' convention is held in New Bern, North
Carolina

1917-18: Price controls hold sugar at 5-1/2 cents per pound during WWI. When
the war ends, so do the price controls. And the price of sugar begins an upward spiral.
1920: Pepsi appeals to consumers with, "Drink Pepsi-Cola. It will satisfy you." The
price of sugar on the New York Exchange reaches 26 cents per pound. Bradham gambles
on the price going higher, and buys large stocks of sugar. By the end of the year, sugar
demand slows on the open market, and the price drops to a catastrophic low of two cents
per pound.

1921: The collapse of the sugar market results in enormous financial losses for
Pepsi-Cola Company. Bradham attempts to put the company back on its feet by
borrowing cash and selling assets and additional shares of stock. But by the end of the
year, the company is insolvent, and the bottling network collapses. Only two plants
remain open.

1922: An attempt at reorganization fails as few shares of stock are sold and
investor interest in the new company wanes.

1923: Pepsi-Cola Company is declared bankrupt, and its assets are sold to a North

Carolina concern, Craven Holding Corporation, for $30,000.

1928: After five continuous losing years, the company is reorganized as the
National Pepsi-Cola Company.

1931: U.S. District Court for Eastern District Virginia declares the National Pepsi-
Cola Company bankrupt. Loft, Inc., the giant Candy Company, buys Pepsi-Cola
Company.

1932: The trademark is registered in Argentina

1934: A landmark year for Pepsi-Cola. The drink is a hit, and to attract
even more sales, Pepsi begins selling a 12-ounce bottle for five cents, the same price
charged by its competitors for six ounces. The 12-ounce bottle debuts in Baltimore,
where it is an instant success. The cost savings prove irresistible to depression-worn
Americans and sales skyrocket nationally. Pepsi-Cola Company of Canada Limited is
formed. Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink” dies.

1935: Pepsi-Cola operations are moved to Long Island City, New York. The
company sets up national territorial boundaries for the Pepsi bottler franchise system.
Compania Pepsi-Cola de Cuba is formed.

1936: Pepsi-Cola Limited of London is established. 94 new U.S. franchises are

granted. Year-end profits reach $2,100,000.

1938: The trademark is registered in the Soviet Union. There are 85 Pepsi-Cola
bottlers operating under franchise agreements across Canada.

1939: Having survived the Great Depression and a handful of ownership changes,
Pepsi is still being sold in a 12-ounce bottle for just a nickel -- twice as much refreshment
as other soft drinks for the same price. A newspaper cartoon strip, "Pepsi & Pete,"
introduces the theme "Twice as much for a Nickel" to increase consumer awareness of
the Pepsi value advantage. Walter S. Mack Jr. is elected President of Pepsi-Cola
Company.

1940: Pepsi makes advertising history with the first advertising jingle ever
broadcast nationwide. "Nickel, Nickel," will eventually become a hit record and will be
translated into 55 languages. A new, more modern logo is adapted.

1941: In support of America's war effort, Pepsi changes the color of its bottle
crowns to red, white and blue. A Pepsi canteen in Times Square, New York, operates
throughout the war, enabling more than a million families to record messages for armed
services personnel overseas. Pepsi-Cola Company, until now a subsidiary of Loft
Incorporate, is merged with Loft. Since the Pepsi brand name has become more famous
than that of its owner, the parent company's name is changed to Pepsi-Cola Company.
Pepsi's stock is traded on the New York Stock Exchange for the first time.

1943: The "Twice as Much" advertising strategy expands to include the theme,
"Bigger Drink, Better Taste." Sugar is again rationed during World War II. To counter
the effects of rationing, Mack purchases a sugar plantation in Cuba, which proves to be a
highly profitable venture.

1947: International profits reach $6,769,000. Pepsi moves into the Philippines and
Middle East.

1948: Pepsi-Cola's corporate headquarters moves from Long Island City, New
York, to Midtown Manhattan. Pepsi is produced in cans for the first time.

1949: "Why Take Less When Pepsi's Best?" is added to "Twice as Much"
advertising.

1950: "More Bounce to the Ounce" becomes the new Pepsi theme as
changing soft drink economics force Pepsi to raise prices to competitive levels. Alfred N.
Steele becomes President and CEO of Pepsi-Cola. His wife, Hollywood movie star Joan
Crawford, is instrumental in promoting the company's product line.

1953: Americans become more weight conscious, and a new strategy based on
lower caloric content of Pepsi is implemented with "The Light Refreshment" campaign.

1954: "The Light Refreshment" evolves to incorporate "Refreshing without

Filling."
1956: 149 Pepsi-Cola bottling plants are operating in 61 countries outside the U.S.

1958: Pepsi struggles to enhance its brand image. Sometimes referred to as "the
kitchen cola," as a consequence of its long-time positioning as a bargain brand, Pepsi
now identifies itself with young, fashionable consumers with the "Be Sociable, Have a
Pepsi" theme. A distinctive "swirl" bottle replaces the earlier straight-sided bottle

1959: Soviet Premier Nikita Krushchev and U.S. Vice President Richard Nixon
meet in the soon-to-be-famous "kitchen debate" at an international trade fair in Moscow.
The meeting, over cups of Pepsi, is photo-captioned in the U.S. as "Krushchev Gets
Sociable."

1961: Pepsi further refines its target audiences, recognizing the increasing
importance of the younger, post-war generation. "Now it's Pepsi, For Those Who Think
Young" defines youth as a state of mind as much as a chronological age, maintaining the
brand's appeal to all market segments.

1963: In one of the most significant demographic events in commercial history, the
post-war baby boom emerges as a social and marketplace phenomenon. Pepsi recognizes
the change, and positions Pepsi as the brand belonging to the new generation -- The Pepsi
Generation. "Come Alive! You're in the Pepsi Generation" makes advertising history. It
is the first time a product is identified, not so much by its attributes, as by its consumers'
lifestyles and attitudes.

1964: A new product, Diet Pepsi, is introduced into Pepsi-Cola advertising .

1966: The first independent Diet Pepsi campaign, "Girlwatchers," focuses on the
cosmetic benefits of the low-calorie cola. The ad's musical theme becomes a Top 40 hit.
Advertising for another new product, Mountain Dew, a regional brand acquired in 1964,
airs for the first time, built around the instantly recognizable tag line, "Ya-Hoo, Mountain
Dew!"

1967: When research indicates that consumers place a premium on the superior
taste of Pepsi when chilled ("Taste That Beats the Others Cold. Pepsi Pours It On.")
emphasizes the brand's product superiority. The campaign, while product-oriented,

adheres closely to the energetic, youthful lifestyle imagery established in the initial Pepsi
Generation campaign.

1969: "You've got a Lot to Live. Pepsi's got a Lot to Give" marks a shift in Pepsi
Generation advertising strategy. Youth and lifestyle are still the campaign's driving
forces, but with "Life/Give," a new awareness and a reflection of contemporary events
and mood become integral parts of the advertising's texture.

1973: Pepsi Generation advertising continues to evolve. "Join the Pepsi People,
Feelin' Free" captures the mood of a nation involved in massive social and political
change. It pictures us the way we are -- one people, but with many personalities.

1975: The Pepsi Challenge, a landmark marketing strategy, convinces millions of

consumers that more people prefer the taste of Pepsi.

1976: "Have a Pepsi Day" is the Pepsi Generation's upbeat reflection of an

improving national mood. "Puppies," a 30-second snapshot of an encounter between a
very small boy and some even smaller dogs, becomes an instant commercial classic.

1979: With the end of the '70s comes the end of a national malaise. Patriotism has
been restored by an exuberant celebration of the U.S. bicentennial, and Americans are
looking forward to the future with renewed optimism. "Catch that Pepsi Spirit!" catches
the mood and the Pepsi Generation carries it forward into the '80s.
1982: With all the evidence showing that more people prefer the taste of Pepsi, the
only question remaining is how to add that message to Pepsi Generation advertising. The
answer? "Pepsi's Got Your Taste for Life!" -- a celebration of great times and great taste.

1983: The soft drink market grows more competitive, but for Pepsi drinkers, the
battle is won. The time is right and so is their soft drink. It's got to be "Pepsi Now!"

1984: A new generation has emerged -- in the United States, around the world and
in Pepsi advertising, too. "Pepsi. The Choice of a New Generation" announces the
change, and the most popular entertainer of the time, Michael Jackson, stars in the first
two commercials of the new campaign. The two spots quickly become "the most eagerly
anticipated advertising of all time."

1985: Lionel Ritchie leads a star-studded parade into "New Generation"

advertising followed by pop music icons Tina Turner and Gloria Estefan. Sports heroes
Joe Montana and Dan Marino are part of it, as are film and television stars Teri Garr and
Billy Crystal. Geraldine Ferraro, the first woman nominated to be vice president of the
U.S., stars in a Diet Pepsi spot. And the irrepressible Michael J. Fox brings special talent,
style and spirit to a series of Pepsi and Diet Pepsi commercials, including a classic
"Apartment 10G."

1987: After an absence of 27 years, Pepsi returns New York's famed Times Square
with a spectacular 850-square-foot electronic display billboard declaring Pepsi to be
"America's Choice."

1988: Michael Jackson returns to "New Generation" advertising to start in a four-

part "episodic" commercial named "Chase." The ad airs during the Grammy Awards
program and is hailed by the media as "the most-watched commercial in advertising
history."

1989: "The Choice of A New Generation" theme expands to categorize Pepsi users
as "A Generation Ahead."
1990: Teen stars Fred Savage and Kirk Cameron join the "New Generation"
campaign, and football legend Joe Montana returns in a spot challenging other celebrities
to taste their colas against Pepsi. Music legend Ray Charles stars in a new Diet Pepsi
campaign, "You Got the Right One Baby."

1991: "You Got the Right One Baby" is modified to "You Got the Right
One Baby, Uh-Huh!" The "Uh-Huh Girls" join Ray Charles as back-up singers and a
campaign soon to become the most popular advertising in America is on its way.
Supermodel Cindy Crawford stars in an award-winning commercial made to introduce
the updated Pepsi logo and package graphics.

1992: Celebrities join consumers, declaring that they "Gotta Have It." The interim
campaign supplants "Choice of a New Generation" as work proceeds on new Pepsi
advertising for the '90s. Mountain Dew growth continues, supported by the antics of an
outrageous new Dew Crew whose claim to fame is that, except for the unique great taste
of Dew, they've "Been There, Done That, Tried That."

1993: "Be Young, Have Fun, Drink Pepsi" advertising starring basketball superstar
Shaquille O'Neal is rated as best in the U.S.

1994: Pepsi teaches consumers the importance of product expiration dates by

adding "Freshness" information to each and every package sold.

1995: America raves over the new "Nothing Else Is a Pepsi" advertising campaign.
The commercials achieve the highest popularity ratings ever and win top honors at the
prestigious Cannes Advertising Festival. Pepsi is now the "Choice of a New Generation"
in 195 countries around the world.
1996: The "Nothing Else is a Pepsi" campaign makes its point in a memorable way
when "Security Camera" catches a competitor's salesman preferring Pepsi. Lucasfilm and
Pepsi agree to a long-term partnership for the Star Wars films and sequels.

1997: "Generation Next" signals a return to the long-running "generation"

theme, and pop stars The Spice Girls build on the excitement of Pepsi advertising. A
group of disco dancing bears high-step their way into national popularity when they feel
the pull of Pepsi and the beat of the Village People.

1998: Pepsi celebrates its centennial year with a birthday party attended by Pepsi-
Cola bottlers from all over the world. Joining the festivities are Pepsi stars and friends,
including Ray Charles, Kool and the Gang and the Rolling Stones. President and Mrs.
George Bush, Lady Thatcher and Walter Cronkite also help to commemorate the
occasion where the legacy of Pepsi is honored and a new look for the millennium is
unveiled. The three-dimensional symbol for one Pepsi family -- poised for innovation and
world leadership as it enters the new century.

1999: "The Joy of Cola" new advertising campaign for brand Pepsi features the
voices of actors Marlon Brando, Issac Hayes and "Queen of Soul" Aretha Franklin. Pepsi
and Lucasfilm team up again as "Star Wars Episode 1, The Phantom Menace" hits movie
theaters. Consumer excitement is heightened as special Pepsi bottles and cans offer 24
different Star Wars characters. The collection series includes an all-gold Yoda can. In
addition, Pepsi introduces animated character "Marfalump," Star Wars' biggest fan, in its
ads supporting the film. In a dramatic restructuring of this business, Pepsi announces one
of the largest IPOs in history. On March 31, 1999, the Pepsi Bottling Group, Inc. (PBG)
becomes a publicly traded company and the largest Pepsi bottler.
2000: The popular Pepsi Challenge makes its return, and consumers across the
country let their taste decide the best cola and one-calorie cola. Helping launch the
Challenge is two of baseball's top sluggers -- Sammy Sosa and Ken Griffey Jr. On the
airwaves, the "Joy of Cola" campaign is a hit, as "Pepsi Girl" Hallie Eisenberg rocks with
pop star Faith Hill and perennial rockers KISS. Among those doing the 'Dew is hip-hop
artist Busta Rhymes, and Aquafina launches its first-ever television advertising
campaign.
 HYPOTHESIS

 Consumers prefer the high quality products

 Availability of Pepsi products is a aspect of promoting ,advertising and

maintaining our product

 Our product success is the result of superior products, high standards of

performance, distinctive competitive strategies and the high integrity of
people.
 REASEARCH METHODOLOGY

My primary research objective is to determine PEPSI is popular or

Coke Coca-Cola is popular in people’s and why Pepsi is preferable coke is not and why
the demand of Pepsi is high or coke is low and why the most of
people are prefer Pepsi .
In order to answer these question I conduct the primary research and
collect data by using the questionnaires by conducting interviews by
gathering information from news paper ,collecting information from
magazines, by searching on internet, by visiting the company of Pepsi
 ABOUT PEPSI CO

PepsiCo is a world leader in convenient foods and beverages, with revenues of about $27
billion and over 143,000 employees. The company consists of the snack businesses of
Frito-Lay North America and Frito-Lay International; the beverage businesses of Pepsi-
Cola North America, Gatorade/Tropicana North America and PepsiCo Beverages
International; and Quaker Foods North America, manufacturer and marketer of ready-to-
eat cereals and other food products. PepsiCo brands are available in nearly 200 countries
and territories.

Many of PepsiCo's brand names are over 100-years-old, but the corporation is relatively
young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay.
Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company,
including Gatorade, in 2001.

PepsiCo’s success is the result of superior products, high standards of performance,

distinctive competitive strategies and the high integrity of people.

SHAREHOLDERS
PepsiCo shares are traded principally on the New York Stock Exchange in the United
States. The company is also listed on the Amsterdam, Chicago, Swiss and Tokyo stock
exchanges. PepsiCo has consistently paid cash dividends since the corporation was
founded.
 S.W.O.T ANALYSIS

INTHERNAL FACTORS

STRENGTHS:

 Pepsi has a strong brand name.

 Customers are brand loyal and also go for lower prices.

 Competition is intense but due to distinctive capabilities of Pepsi i.e. better sales
force, better management, strong advertising and promotional strategies Pepsi has
better position in the market.

 Pepsi has good relationship with supplier and distributors

 Corporate aspects of Pepsi like mission, objective and goals are well defined

 Market superiority in Asia-Pacific region

WEAKNESS:

 Price follower, rather than price setter

 Low Backward integration i.e. Pepsi co owns a few bottling companies; most of
its bottlers are independent.

 Buyers are more prices conscious and go for impulse nature of buying decisions.
 EXTERNAL FACTORS

OPPORTUNITIES:

 Social environment of soft drink industry is favorable.

 Political polices were in favorer of soft drink industry and Pepsi got global excess
in soviet union and become first US company in Russia

 Technological advancement was also in favor of Pepsi.

THREATS:

 Emergence of “new age” beverages and private labels

(e.g.- Wal-Mart)

 Legal aspects are also not favorable due to antitrust issues.

 Economic conditions were not favorable due to First World War and Second
World War and due to this price of sugar increased
 G.ES 9 CELL MATRIX FOR
PEPSI

INDUSTRY ATTRACTIVENESS:

WEIGHT RATING(1-5) VALUE

INDUSTRY ATTRACTIVENESS
Overall market size 0.20 5 1
Annual market growth rate 0.15 5 0.75
Historical profit margin 0.15 4 0.60
Competitive intensity 0.15 4 0.60
Technological requirement 0.05 2 0.1
Inflationary vulnerability 0.05 5 0.25
Energy requirement 0.05 3 0.15
Environmental impact 0.10 3 0.3
Social/political/legal 0.10 1 0.1
Total 1.00 - 3.85
BUSINESS STRENGHTS:

BUSINESS STRENGTHS WEIGHT RATING(1-5) VALUE

Market share 0.15 4 0.6
Share growth 0.10 4 0.4
Product quality 0.10 4 0.4
Brand reputation 0.10 5 0.5
Distribution network 0.05 4 0.2
Promotional effectiveness 0.10 5 0.5
Productive capacity 0.05 4 0.2
Productive efficiency 0.05 4 0.2
Unit cost 0.10 4 0.4
Material supplies 0.05 3 0.15
R & D performance 0.05 5 0.25
Managerial personal 0.10 5 0.5
Total 1.00 - 4.30

G.E (9) CELL MATRIX:

HIGH MEDIUM LOW

5 4 3 2 1
 CORPORATE MISSION OF PEPSI CO

PepsiCo's overall mission is to increase the value of our shareholder's investment. We do

this through sales growth, cost controls and wise investment of resources. We believe our
commercial success depends upon offering quality and value to our consumers and
customers; providing products that are safe, wholesome, economically efficient and
environmentally sound; and providing a fair return to our investors while adhering to the
highest standards of integrity.
 OBJECTIVES of PEPSI CO

Pepsi co. is committed to celebrating and supporting diversity in co:

 X-AXIS: BUSINESS STRENGTS

 Y-AXIS INDUSTRY ATTRACTIVENESS

 GE NINE (9) CELL MATRIX

In accordance with the GE nine-cell matrix, we would recommend the following

strategies for Pepsi cola products in each category:

 INVEST/GROWTH:
Either invest to earn market share or consider disinvesting.

 SELECTIVE:
Invest profits for future growth and this investment should be in selective manner
means if the need of cash in other areas then company should invest in that area
not this.

 HARVEST/DIVEST:
Either invest heavily in order to push the products to star status, or divest in order
to avoid it becoming a Dog.
 PEPSI PRODUCT LIFE CYCLE

To be able to market its product properly, a firm must be aware of the product life cycle
of its product. The standard product life cycle tends to have five phases: Introduction,
Development, Growth, Maturity and Decline. Pepsi cola is currently in the maturity
stage, which is evidenced primarily by the fact that they have a large, loyal group of
stable customers.

Furthermore, cost management, product differentiation and marketing have become

more important as growth slows and market share becomes the key determinant of
profitability. In foreign markets the product life cycle is in more of a growth trend Pepsi
advantage in this area is mainly due to its establishment strong branding and it is now
able to use this area of stable profitability to subsidize the domestic "Cola Wars".

DEVELOPING THE CORPORATE

 STRATEGIES

The cola market is fast growing and dynamic. The leading brands Pepsi and Coca-Cola
now face competition not only from each other but new emerging brands. Companies
now focus on their marketing communication strategies in order to maintain and gain
market share. The way companies engage in marketing and the plans that they use will
determine their success or failure. Therefore they need to ensure that their projects are
well designed and meet the requirements of their aim.

Industrial attractiveness and business strength both are high. So we decide that PepsiCo
should go for the growth strategies. PepsiCo owns a few bottling companies but most of
its bottlers are independent. The company provides the syrup to the bottlers, who are
responsible for producing the soft drinks and distributing them to the retailers.

So we suggest that in order to control over the business and increase the profits.
Following are the components of Corporate Strategies.

1) PepsiCo should engage with backward and forward integration, PepsiCo should
acquire the bottling companies to manufacture the bottles and also introduce
retailers to be closer to the customer.

E.g. As Shezan did few years back.

2) To increase the size, sales, profits and potential market share. PepsiCo should go
for HORIZONTAL INTEGRATION.

E.g. Buy the most of 7.up company’s shares. PepsiCo is already a diversified and
the diversification strategy is the most successful strategy. PepsiCo
should carry on their diversification strategy.
Community through the corporate giving and
community programs:
PepsiCo gives to its community through The PepsiCo Foundation, the PepsiCo
Community Affairs Department and PepsiCo divisions. In 2001, The PepsiCo Foundation
and our operating divisions gave grants totaling $21 million to more than 1,000
community organizations, of which a significant portion were organizations championing
diversity efforts.

Customers:
Pepsi Co. is committed to marketing its products to all groups, treating all customers with
respect, sensitivity and fairness, while providing some of the greatest products on earth.

Early in its history - as far back as the 1940s - Pepsi-Cola recognized the importance of
diversity. Pepsi pioneered targeted marketing and national lifestyle advertising featuring
minorities. Pepsi developed education and sports programs spotlighting minorities and
partnered with many groups to create programs that contribute to minority communities.
Pepsi co. sponsored major music tours by entertainers such as Michael Jackson and Tina
Turner and support minority media and interests. Over the years success has been
recognized with numerous awards. Most importantly, Pepsi’s products are purchased and
enjoyed by all groups of consumers.

Suppliers:
Pepsi Co. committed to welcoming business partners who represent all people and
purchasing quality products and services from a diverse supplier base.

PepsiCo is a leader in seeking out and working with minority and women suppliers. In
2001 we spent $526 million with minority and women vendors. Since company began
tracking information in 1982, we have spent over $4 billion with women and minority
businesses

Employees and careers:

We are committed to hiring and retaining the best people on earth to fill each and every
job in the corporation and to treat each other with respect and fostering an atmosphere of
caring, open communication and candor among our employees.

PepsiCo has been nationally recognized as one of the tops places for women and
minorities to work. We were one of the first companies to begin hiring minorities in
professional positions, as far back as the 1940s. We were the first Fortune 500 Company
to have an African-American vice president. That commitment to diversity continues
today.

BUSINESS COMPOSITION
Defining the composition of the of the business is helpful in both corporate and
marketing strategy design, While developing the corporate strategies we consider the line
of business and analyzed the diversification of Pepsi Co. in the different business which
is shown diagrammatically as follows:
While analyzing the diversification and the composition of the Pepsi Co. We analyzed the
each of the category in brief manner.

If the name is Frito-Lay, lots. We've been your snack pals for over 60 years and are still
going strong. Check out this section to learn about our company, from community
programs to Frito-Lay's timeline to frequently asked questions. We're big but we're
friendly, traditional but innovative. And make no mistake about it...we take our fun foods
seriously

Frito-Lay North America and Frito-Lay

International:
PepsiCo's snack food operations had their start in 1932 when two separate events took
place. In San Antonio, Texas, Elmer Doolin bought the recipe for an unknown food
product – a corn chip – and started an entirely new industry. The product was Fritos
brand corn chips, and his firm became the Frito Company.

That same year in Nashville, Tennessee, Herman W. Lay started his own business
distributing potato chips. Mr. Lay later bought the company that supplied him with
product and changed its name to H.W. Lay Company. The Frito Company and H.W. Lay
Company merged in 1961 to become Frito-Lay, Inc.

Today, Frito-Lay brands account more than half of the U.S. snack chip industry. PepsiCo
began its international snack food operations in 1966. Today, with operations in more
than 40 countries, it is the leading multinational snack Chip Company, accounting for
more than one quarter of international retail snack chip sales. Products are available in
some 120 countries. Frito-Lay North America includes Canada and the United States.
Major Frito-Lay International markets include Australia, Brazil, Mexico, the Netherlands,
South Africa, the United Kingdom and Spain.

Often Frito-Lay products are known by local names. These names include Matutano in
Spain, Sabritas and Gamesa in Mexico, Elma Chips in Brazil, Walkers in the United
Kingdom and others. The company markets Frito-Lay brands on a global level, and
introduces unique products for local tastes.

Major Frito-Lay products include Ruffles, Lay's and Doritos brands snack chips. Other
major brands include Cheetos cheese flavored snacks, Tostitos tortilla chips, Santitas
tortilla chips, Rold Gold pretzels and SunChips multigrain snacks. Frito-Lay also sells a
variety of snack dips and cookies, nuts and crackers.

Pepsi-Cola North America and

PepsiCo Beverages International:
PepsiCo’s beverage business was founded at the turn of the century by Caleb Bradham, a
New Bern, North Carolina druggist, who first formulated Pepsi-Cola. Today consumers
spend about $33 billion on Pepsi-Cola beverages. Brand Pepsi and other Pepsi-Cola
products – including Diet Pepsi, Pepsi-One, Mountain Dew, Slice, Sierra Mist and Mug
brands – account for nearly one-third of total soft drink sales in the United States, a
consumer market totaling about $60 billion.

Pepsi-Cola also offers a variety of non-carbonated beverages, including Aquafina bottled

water, Fruitworks and All Sport.

In 1992 Pepsi-Cola formed a partnership with Thomas J. Lipton Co. Today Lipton is the
biggest selling ready-to-drink tea brand in the United States. Pepsi-Cola also markets
Frappuccino ready-to-drink coffee through a partnership with Starbucks.

In 2001 SoBe became a part of Pepsi-Cola. SoBe manufactures and markets an

innovative line of beverages including fruit blends, energy drinks, dairy-based drinks,
exotic teas and other beverages with herbal ingredients. Outside the United States, Pepsi-
Cola soft drink operations include the business of Seven-Up International. Pepsi-Cola
beverages are available in about 160 countries and territories. Pepsi-Cola began selling its
products internationally in 1934 with its operations in Canada. Operations grew rapidly
beginning in the 1950s. In addition to brands marketed in the United States, major
products include Mirinda and Pepsi Max. Pepsi-Cola North America includes the United
States and Canada. Key international markets include Argentina, Brazil, China, India,
Mexico, Philippines, Saudi Arabia, Spain, Thailand and the United Kingdom. PepsiCo
Beverages International also produces, sells and distributes Gatorade sports drinks as well
as Tropicana and other juices internationally.
Pepsi-Cola provides advertising, marketing, sales and promotional support to Pepsi-Cola
bottlers and food service customers. This includes some of the world's best-loved and
most-recognized advertising. New advertising and exciting promotions keep Pepsi-Cola
brands young.

The company manufactures and sells soft drink concentrate to Pepsi-Cola bottlers. The
company also provides fountain beverage products.

PepsiCo’s approach in the restaurant industry has shifted in the early1990’s. Prior to this,
PepsiCo’s investment in the restaurant industry was in traditional and established outlets
(Pizza Hut, KFC and Taco Bell). In the early 1990’s PepsiCo began to acquire (or found)
smaller, more focused players (Hot-n-Now, D’Angelo’s etc). This could be as a result of
the maturity of the industry and the lack of large established outlets available as
investment opportunities. This shows a strategy of further diversification into established
markets where PepsiCo already has related and successful offerings aimed at
different market sectors.

In the 1990’s PepsiCo is beginning to take advantage of its large restaurant holdings (e.g.
dual-branded restaurants - a KFC and a Taco Bell under one roof) and cost-sharing
activities such as centralized administration. This shows a synergistic approach to use of
diversified holdings. PepsiCo seems to have been slow to take opportunities of its
investment in smaller restaurants. One would have expected there to be management and
product crossover however this does not seem to be the case. Both Hot-n-Now and
Chevy’s ran at operating losses during 1995.
The strategic focus of this division is to use (and build) credible brand names (KFC,
Taco-Bell & Pizza Hut) to introduce new product lines. PepsiCo undertook to promote
and enhance the already established brand names (e.g. the overhaul of Kentucky Fried
Chicken into KFC). Product innovation has also been part of the strategic focus of this
division. This was highlighted by the incorporation of D’Angelo’s into Pizza Hut.
Additions to menus are another example of this. A lesser element of the strategy of any
chain restaurant is the provision of familiar products, at known prices, in known
environments at every location. Customers can go into an “x” restaurant anywhere and
know exactly what to expect. Kotler (1997) would consider this mastery of the “place”
element of a marketing strategy. The acquisition of smaller, lesser-known chains does not
correlate with the overall strategy of this business unit. The results of these smaller
restaurants indicate that they are not aligned with the greater strategic focus of the
restaurant division.

STRATEGIC FIT OF PEPSICO’S

BUSINESS DIVISIONS
The related diversification of PepsiCo’s business divisions would instantly
Suggest that there is considerable overlap between value chain activities of said divisions.
This is undoubtedly the case.
One can identify the value chain overlaps within the business units of
PepsiCo.

Snack Food:
1. Opportunity to achieve economies of scale by buying raw materials, consumables (e.g.
stationery) and capital equipment (e.g. computers) together.
2. Opportunity to transfer technology (e.g. fryers, ovens or generic technology such as
integrated workflow).
3. Opportunity to transfer knowledge and skills about mass production on the factory
floor.
4. Opportunity to combine/share sales and marketing activities, utilize Common
distribution channels (e.g. convenience store), leverage a Common brand name (e.g.
Taco Bell crisps), combine after-sales Service (e.g. an integrated call-center) as well as
overlap distribution (E.g. sell only Pepsi in PepsiCo restaurants). As, PepsiCo has
recognized and taken advantage of some of these opportunities (e.g. selling only Pepsi in
PepsiCo restaurants and moving staff between divisions); none-the-less, there remain
numerous Opportunities for further exploitment. Cost cutting and rationalization area
prime candidate as administrative and support functions are (expensively) repeated in
each business unit.

DEVELOPING MARKETING
STRATEGIES
SITUATION ANALYSIS:
Situation analysis is crucial for the development of marketing programme, and it is
conducted on regular basis after the strategy is under the way to guide strategy changes,

The current market situation and the analysis of competitors are given
below:
In 2001, CSD industry volume in U.S. grew +0.6%, slightly better than 2000's growth
rate of +0.2%. Total volume passes 10 bil 192-oz cases, according to BD/Maxwell all-
channel data. Among top-three companies, gaining volume and share were PepsiCo and
Cadbury's Dr Pepper/Seven Up unit. PepsiCo registers top core performance. Cadbury's
late 2000 acquisition of Royal Crown boosted its market share in 2001.

New entry:
Joining ranks of top-10 companies last year was Red Bull; Austria-based company makes
well-known energy drink sold in 8.3-oz cans. Red Bull's U.S. volume last year was 10.5
mil cases, up from about 5 mil cases in 2000.

Retail value:
 It is estimated that retail value of CSD business in U.S. last year was up +2.5% to $61.7
bill.

Rankings:
Rankings of brands unchanged for 2001 Vs 2000; for companies, Red Bull enters list, and
RC disappears .

Cadbury:
Strong growth for Cadbury came from company's acquisition of Royal Crown. BD
estimates excluding Royal Crown.

Strongest performers:
Diet Pepsi was best performer among top-10 brands with +2% volume growth. Diet
Pepsi's stable mate, Pepsi One, posted volume decline of -20%. However, combined
volume of Diet Pepsi and Pepsi One -- 585.8 mil cases – far exceeds Diet Pepsi's volume
of 524.5 mil cases in 1997, year before Pepsi One was introduced. Close behind in
growth was Diet Coke with volume up +1.7%. Diet Coke's share was up +0.1. In
addition, Diet Coke with Lemon's volume in 2001 totaled 24 mil cases.

Flavor big-three:
Regular Mt. Dew suffered volume loss of -3.9% or about 28 mil cases. However, its
new line extension -- Mt. Dew Code Red -- posted volume in 2001 of about 72 mil cases.
Plus Diet Mt. Dew posted +4% growth. Accordingly, trademark Mt. Dew had strong
growth year.

Sprite and Pepper:

Two brands that grew strongly throughout most of 1990's have slowed: Sprite and Dr
Pepper. Each lost volume last year. However, Diet Sprite was up +2.5% and Diet Dr
Pepper was up +2.8%.

Flagship colas:
2001 was also dismal year for both Coke's and Pepsi's big flagship cola brands. Coke
Classic and brand Pepsi lost volume and share.

Coke:
Beyond top-10 brands: Fanta was up +73%; Mello Yello posted volume increase of
+19.5%; and Mr. Pibb was up +3.5%.

Pepsi:
Posting growth for Pepsi were: Wild Cherry Pepsi, up +9%; Sierra Mist, up +245.3% to
48 mil cases for regular and 3 mil cases for diet; and Pepsi Twist regular/diet at 20 mil
cases.

Cadbury:
Sunkist grew strongly, with cases increasing +10.7%. And regular A&W Root Beer was
up +6.1%. Cherry 7UP grew +8.4%.

Table:
Shows rankings, actual market shares, share changes, volume in 192-oz cases and percent
volume change Vs 2000 for beverage companies and brands

Top-10 CSD Companies and Brands

2001 2001 2000 Share 01 Cases 00 Cases Vol

Mkt
Rank Companies Mkt Share Share change (mil) (mil) % change
Coca-Cola
1 Co. 43.7 44.1 -0.4 4376.7 4383.8 -0.20%
Pepsi-Cola
2 Co. 31.6 31.4 0.2 3164.7 3124.1 1.30%

Dr
3 epper/Seven 15.6 14.7 0.9 1559.9 1466.5 6.40%
 Up (Cadbury)

4 Cott Corp. 3.8 3.3 0.5 376 328 14.60%

National
5 Beverage. 2.2 2.1 0.1 224.5 213.6 5.10%
6 Big Red 0.4 0.4 flat 41.7 40.5 3.00%
7 Seagram 0.3 0.3 flat 30.4 28.5 6.70%
8 Red Bull 0.1 <0.1 0.1 10.5 4.8 118.80%

9 Monarch Co. 0.1 0.1 flat 8.6 7.9 8.90%

Private
10 label/other 2.2 3.6 -1.4 216.9 353.3 -38.60%
Total
Industry 100 100 10010 9951 0.60%

2001 2000 Share 01 Cases 00 Cases Vol

Brands Mkt Share Mkt Share change (mil) (mil) % change

1 Coke Classic 19.9 20.4 -0.5 1987.5 2028.1 -2.00%

2 Pepsi-Cola 13.2 13.6 -0.4 1320.1 1358.1 -2.80%

3 Diet Coke 8.8 8.7 0.1 878.8 864.1 1.70%
4 Mt. Dew 6.9 7.2 -0.3 687.7 715.6 -3.90%
5 Sprite 6.5 6.6 -0.1 646.2 658 -1.80%

6 Dr Pepper 6.2 6.3 -0.1 617 627.7 -1.70%

7 Diet Pepsi 5.3 5.3 flat 533.6 523.1 2.00%

8 7UP 1.9 2 -0.1 189.2 203.4 -7.00%

9 CF Diet Coke 1.7 1.7 flat 171.7 173.4 -1.00%

Barq's root
10 beer 1.1 1.1 flat 114.2 112.5 1.50%

It is clear that the type of marketing strategy a company adopts greatly affects the
message about the product and brand that is delivered to the consumer. When a company
devises its marketing communication strategy it needs to give careful consideration to the
target market
 TARGET MARKETING

Pepsi is more popular in young generation and that’s why they target the young active
market, so we suggest that it should keeping target existing market. Because of that they
use music stars such as the BRITNEY SPEARS (the current popular personality or the
personality which is popular in that region) to promote their product. Pepsi’s aim is to
target a market that will guarantee future sales, as the young generations become loyal to
the brand. This "next generation" initiative was developed in response to the failure of
their Project Blue campaign.

POSITIONING STRATEGY

Pepsi in comparison have used a more practical strategy that is in stark contrast to Coca-
cola. Pepsi are trying to differentiate the product not by brand image – as Coke does but
by taste. The Pepsi challenge identified that Pepsi cola was actually better tasting than
Coca-Cola – as my research also revealed. It can be argued that had this challenge been
manipulated and promoted in a more successful manner then it could have dislodged
Coca-Cola from its position as brand leader. However as Pepsi did not use the results
effectively in fact they lost out. Pepsi do identify good marketing communications
strategy such as the Project Blue, in theory they appear successful however in practice are
a disaster.

BRAND IMAGE:
it can be ascertained that the marketing communications strategies that the cola drinks
companies engage in are vital at securing market share. By simply relying on brand
image and ignoring traditional marketing a cola product would not be able to survive in
the market place. As Branson realized after 1998 marketing Virgin Cola was essential in
order to make an impact in the industry. Supermarkets own brands can afford not to
participate in long lasting marketing communications strategies as their product has its
own market – cheap and cheerful, whereas the other three major cola companies are
competing in a more hostile ‘quality cola’ market. Pepsi and Coke have identified their
own individual focus on marketing communications whereas Virgin appear to be
engaging in a mixture of strategies or even could be argued to ‘copy’ strategies
of their competitors.

LIMITATIONS FOR MARKETING STRATEGY

Lack of time and resources:

  The taste test and questionnaire data could have been a better representation of the
population if the sample was bigger. Sample limited to friends and family, large-
scale implementation would provide information rich data.

 Access to data. Writing to the companies may have provided useful and more
accurate data about their marketing communications strategies in the past and
future. Much of my data was obtained from newspaper articles and journal
reports; these may have contained writer bias.

 A limiting word count. Difficult to go into detail and explain strategies and
theories.

MARKET SEGMENTATION

Market segmentation looks at the nature and extent of diversity of buyer’s needs and
wants in a market. It offers an opportunity for an organization to focus its business
capabilities on the requirements of one or more groups of buyers. The objective of the
segmentation is to examine differences in needs and wants and to identify the
segmentation (subgroups) within the product market of interest.

SEX AGE PREFERED BRAND PREFERRED TASTE

F 41+ Coca-Cola Coca-Cola
M 14-18 Coca-Cola Coca-Cola
F 19-24 Coca-Cola Pepsi
M 25-30 Coca-Cola Pepsi
F 14-18 Coca-Cola Pepsi
M 10 to 13 Coca-Cola Coca-Cola
F 41+ Pepsi Pepsi
F 19-24 Coca-Cola Virgin
M 19-24 Coca-Cola Virgin
M 19-24 Coca-Cola Coca-Cola
M 19-24 Coca-Cola Pepsi
M 19-24 Pepsi Pepsi
F 19-24 Pepsi Virgin

PRICING STRATEGY

By slashing the price, it not only makes reduction in profit margin of Pepsi and coke but
also affect the secondary competitor (such as 7UP and Dr. pepper) so then we fix the
price in such a way that we can achieve desired profit margin and make no affect on
secondary competitor. Pricing also affect the declining in the brand loyalty, many
consumers now buy the soft drink with the lowest price so it is not necessary that we
reduce the price at such level that people think that the product is low quality.
To determine the price we use the method of break even.

BREAK EVEN = TOTAL FIXED COST/UNIT PRICE – UNIT VARIABLE COST

QUESTIONNAIRS

 Would you consider PESI or COKE ?

70%say Pepsi
15 % say coke
 If you consider Pepsi why?

 Why you not consider coke?

 If it is open after 15-20 minutes what drink can change the

taste?

 Pepsi become a part of your family.

YES
NO

I am thankful to you to fill this questionnaire.

CONCLUSION
While the results of my interview sessions could not be quantified, the
results of my questionnaire were recorded in a database, upon which I
am able to determine answers to respondent’s questions.

Results were positive with more than 70% of consumers drink Pepsi
On the other hand the reason why consumers were not drink Coke
Coca-Cola because the taste is not good and the market growth is very
low.

With interview sessions I am able to gain significant insight into the

minds of consumers. Offhand, customers perceived the Pepsi as one of
quality and value; however some interesting opinions that came up
were that taste should be better as compared to the Coke It is famous
all the age group ideal and advertising and media should be improved
the market growth.

The overall results of this research suggest positive growth .And the
people are drink Pepsi 70% and coke 15% and the other ones are
drink 7up,dew,team etc. But the Pepsi is competing all the drinks in
the market . Taking into account that the company would initially gain
a small market share, and with the passing of time, the would most
certainly convert this product in to a “star” with continuous growth
and huge market shares.
 RECOMMENDATIONS

PepsiCo should continue to ensure that its brands are constantly placed in the consumers
eyes using creative marketing techniques such as those already employed. Any further
investment in additional business units should take into account PepsiCo’s current
strategy of related diversification and fit into it.
An example would be purchasing of fruit juice brands. There are however, numerous
internal problems that should be focused on before further external investments are made.
PepsiCo beverages should take more control of its bottling and distribution. One way of
achieving this would be to create a separate bottling company which is managed as a
profit-center (rather than let bottling exist as a cost-center within the current structures).
PepsiCo restaurants should divest of its smaller restaurants. This could be achieved by
incorporating them into one of the big three (KFC, Pizza Hut or Taco Bell) as a product
innovation, by selling them or by simply closing them.
Existing restaurants should continue to focus on product innovation. Over and above that,
PepsiCo restaurants should follow Frito-Lay’s example and undertake a process
improvement project that eventually results in a TQM like program.
Strategically speaking, there is currently little need for change in the strategy of Frito-Lay
as a business unit. The new management (Eric’s successors) should be aware of the
uniqueness of existing business policies and strive to maintain them as well as adapt them
to a changing world.
The PepsiCo Corporation needs to look at ways of levering competitive advantage using
their value chain overlaps. Wherever this already exists it should be continued (e.g.
selling Lay’s and Pepsi in restaurant outlets). Centralized administration and service
centers would represent a major reduction in costs whilst the allied introduction of an
Enterprise Resource Planning [ERP] package (such as SAP R/3 or Baan) could refine
these processes and make them manageable, even though they are large.