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Chapter 9. Diversification. Beverages. Foods. Snack Foods. Frito-Lay North America Frito-Lay International. Quaker North America. Pepsi-Cola North America Gatorade/Tropicana North America PepsiCo Beverages International. Snack Foods. Frito-Lay North America. Funyuns Sunchips
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Chapter 9 Diversification
Beverages Foods Snack Foods Frito-Lay North America Frito-Lay International Quaker North America Pepsi-Cola North America Gatorade/Tropicana North America PepsiCo Beverages International
Snack Foods Frito-Lay North America Funyuns Sunchips Cracker Jack Chester’s popcorn Grandma’s cookies Munchos Smartfood Baken-ets fried pork skins Oberto meat snacks Lay’s Ruffles Doritos Santitas Fritos Cheetos Rold Gold
Snack Foods Frito-Lay International Bocabits wheat snacks Crujitos corn snacks Fandangos corn snacks Hamkas snacks Niknaks cheese sticks Quavers potato snacks Sabritas potato chips Twisties cheese snacks Walkers potato crisps Walkers Square potato snacks Walkers Monster Munch Corn snacks Miss Vickie’s potato chips Gamesa cookies Dippas Sonric’s sweet snacks
Snack Foods Frito-Lay International Bocabits wheat snacks Crujitos corn snacks Fandangos corn snacks Hamkas snacks Niknaks cheese sticks Quavers potato snacks Sabritas potato chips Twisties cheese snacks Walkers potato crisps Walkers Square potato snacks Walkers Monster Munch Corn snacks Miss Vickie’s potato chips Gamesa cookies Dippas Sonric’s sweet snacks
Beverages Pepsi-Cola North America Pepsi-Cola Mountain Dew Slice Mug Sierra Mist FruitWorks Lipton Dole Aquafina Frappuccino SoBe AMP
Beverages Gatorade/Tropicana North America Gatorade Propel Tropicana Dole juices
Beverages PepsiCo Beverages International Loóza juices and nectars Copella juices Frui’Vita juices Tropicana 100 juices
Foods Quaker North America Quaker rice cakes and granola bars Rice-A-Roni side dishes Near East couscous/pilafs Aunt Jemima mixes & syrups Quaker grits Quaker Oats Cap’n Crunch cereal Life cereal Quisp cereal King Vitaman cereal Mother’s cereal
How are we going to compete and gain a competitive advantage in each of our businesses? Foods Business Level Strategies Quaker North America Quaker rice cakes and granola bars Rice-A-Roni side dishes Near East couscous/pilafs Aunt Jemima mixes & syrups Quaker grits Quaker Oats Cap’n Crunch cereal Life cereal Quisp cereal King Vitaman cereal Mother’s cereal
Snack Foods Beverages Foods Corporate Level Strategy 1) What businesses do we want to compete in? 2) How do manage effectively across businesses
Goals of Corporate Strategy Moves to enter new businesses Boosting combined performance of the businesses Capturing synergies and turning them into competitive advantages Establishing investment priorities and steering resources into business units
4 Conditions of Successful Diversification • 1) Growing industries with complementary products and technologies • Apple IPhone • 2) Leverage existing capabilities which match the KSFs in other arenas • Disney Cruise Lines • 3) Closely related moves which reduce costs • Kroger & Fred Meyer • 4) Powerful brand and reputation • Marguerittaville, NASCAR Café, or Emril’s
When/Why to Diversify? To create shareholder value Porter’s Three Point Test 1) Attractiveness Test 2) Cost of Entry Test 3) Better off Test Should pass all 3
Levels of Diversification Related Diversification - entering product markets that share some resource or capability requirements with the current business – horizontal relationships across businesses – synergies. Overlap in value chain activities. Advantages of related diversification include: • Leveraging Core Competencies • Sharing Activities • Market Power
Levels of Diversification (cont.) Unrelated Diversification - few similarities in the resources and capabilities required among the firm’s businesses Conglomerate Diversification - no relatedness between businesses
Drawbacks for Unrelated • Demanding requirements • Limited to no opportunities to share advantages
Portfolio analysis • BCG Growth-Share Matrix • question marks, dogs, cash cows, stars • GE- Nine Cell Matrix
Boston Consulting Group Matrix Relative Market Share Question Marks Stars Growth Rate Cash Cows Dogs
BCG Matrix for PepsiCo - Early 1990s Relative Market Share High Taco Bell Growth Rate Pizza Hut 10% Frito Lay Low Soft Drinks KFC Low High 1.0
BCG Matrix for PepsiCo - Early 1990s Relative Market Share Pizza Hut Taco Bell High Growth Rate Frito Lay 5% KFC Soft Drinks Low Low High .75
GE 9 Cell Matrix Competitive Strengths High Low High Invest Grow Hold Attractiveness Harvest Divest Low
GE 9 Cell Matrix for Pepsico Competitive Strengths High Low High Snack Foods Attractiveness Soft Drinks Low