Business overview
PepsiCo is among the largest foods and beverages companies in the world offering its 22 product lines to more than 200 markets worldwide. It is has four main business units i.e. PepsiCo Americas Beverages (PAB), Middle East &Africa(AMEA), PepsiCo Europe, PepsiCo Americas Foods (PAF) and PepsiCo Asia. The company’s headquarters are in New York, USA. It has annual capital revenue of $60b divided as follows; 51% beverages, 49% foods and snacks and nearly 300,000 employees worldwide.
Star business units
Among the four business units of the PepsiCo, PAF is the most profitable unit since they constitute 37 percent of the net revenue in 2012. PAB is ranked in the second with almost the same revenue contribution of 37 percent of the net revenue. Europe comes third with 20 percent of 2012’s net revenue while AMEA is the last with 10 percent of the net revenue in 2012. All the units have attained almost the same revenue in 2013 but with a slower growth rate of approximately 2 percent. According to the revenue raised by the four units, PAF and PAB are the stars of the business.
How to prevent these stars from losing their status
PepsiCo should focus on the following opportunities in order to prevent PAF and PAB as its stars from losing their status; firstly it should focus on the growing demand for its products in developing markets and tap it to increase its revenues. Second, it can look into the changing preferences in developing and developed markets to develop and produce products suited for each market respectively. This helps in growth of each individual segment leading to reduced risks in larger segments. Thirdly it can localize its raw materials used in the production process, which reduces the cost of production making it easier to produce in the different localities because different countries have their own regulations.
Cash cow business unit
The business unit that can be referred as a cash cow is the PAB because from 2012 it had been experiencing a revenue growth of -2percent and operating of 5%. However, Pepsi Europe has the least operating profit growth of -6% but it has more revenue growth of 1%. Therefore, PAB is the cash cow since it has less revenue growth from 2012 to 2013.
PAB is seen to maintain the cash cow status because the company in the region is associated with bad media allegations against their beverages. Therefore, to increase their revenue the unit must consider factors such as advertising and promotional strategies, improved qualities of their beverages and localization of raw material to minimize cost.
Business Units that are “Question Marks”
In order for a business unit to qualify as a “question mark,” it should have a high market growth and low market share. In PepsiCo business units AMEA can be identified as a question mark because between the period of 16th June 2012 and 15th June 2013 it had a percentage growth of 14% and 6% reflecting high market growth but a small revenue of $ 1765 and $ 1869 which reflected low market share respectively.
For AMEA to be turned into a star, the unit needs to concentrate on the strategies that would increase their revenue. These strategies include market effectiveness, selling overseas, chose the right channels and sell more to the existing customers.
“Dog” Business Unit
The Pepsi Europe can be referred to as a dog since it has the lowest market growth and the lowest market share. This is because its growth is as low as 1% increase while it growth in the profitability is -6%. In order to increase the market share and market growth, the company is concentrating on marketing efforts, increasing sales to existing customers and expanding the customer base in Europe. For those units that are becoming dogs, the company should focus on the customer services, sell through new channels, and open new markets in the regions.
