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Homework Help: Solved 191508

Abstract The story of global expansion of Pepsi smells as sweet as rose who don’t know how difficult job is to get a tremendous success in the global beverage market; therefore, this study has scrutinized the strategy of this brand in the international market and identified that Pepsi has brought its success with a variety of global entry strategies. The purpose of this research paper is to analyze background of Pepsi, provide theoretical framework in the literature review, design a research methodology, and find out the effectiveness of Pepsi’s strategy to overcome the effect of global financial crisis ensure customer value, maintain quality considering customer demand. Introduction According to PepsiCo (2012), the company was founded in 1898; Caleb Bradham, a pharmacist and drugstore-owner of North Carolina had discovered it while testing with mixtures of seasonings and fluids trying to create an energizing drink for patrons; however, he achieved a target more than anticipation, as his innovation is now considered one of the best-selling brands around the world. Pepsi Cola has gradually developed over years in order to gain its current position, for example, in 1902, Caleb introduced the Pepsi-Cola-Company in his pharmacy; moreover, in 1903, it was authoritatively listed in the Patent Office and by 1910, it owned franchises in 24 states around the country; later, in 1964, Diet-Pepsi emerged in the market and gained great success. Next table shows main financial indicators of PepsiCo for years 2009 to 2012- Financial indicators of Pepsi 2012 2011 2010 2009 Financial Indicators (All Figures in USD Millions) Total Revenues $65,492.0 $66,504.0 $57,838.0 $43,232.0 Cost of Goods-Sold $31,291.0 $31,593.0 $26,575.0 $15,053.0 Gross-Profit $34,201.0 $34,911.0 $31,263.0 $23,133.0 Total Other Operating-Expenses $25,089.0 $25,278.0 $22,931.0 $15,053.0 Operating-Income $9,112.0 $9,633.0 $8,332.0 $8,080.0 Net Interest-Expense $899.0 $856.0 $903.0 $-330.0 Net-Income $6,178.0 $6,443.0 $7,055.0 $5,946.0 Table 1: Financial Performance of the PepsiCo. Source: Self-generated from Yahoo finance (2013). Global strategies of Pepsi According to the annual report 2011 of PepsiCo, it has strategic plan to expand business worldwide with its wide product lines particularly macro snacks with beverages (Lay’s, Doritos, Cheetos and SunChips); therefore, it is initiating to offer new flavors in tune considering the choice of the consumers of local market and the capability of the company. At the same time, the purpose of the company is to develop strong logistics to reach global consumers and make available in this brand (PepsiCo 2011, p.6). However, this company focuses on the beverage sector more attentively in order to maximize profits and experience sustainable growth since more than 50% of the total revenues come from this segment. On the other hand, the marketers of this company invests researched on the global market position to assess the perception of the consumers to meet the demand of the local consumers; as a result, the researchers suggest the company to invest more for the development of beverage segment specially Pepsi, 7up, Mirinda (PepsiCo 2011, p.7). However, the brand expansion plan of Pepsi is not limited for the beverage segment, but it diversifies its business in the nutrition segment with the product line of Quaker, Tropicana and Gatorade; it addition, it has goal to be one of the major players in this segment. As part of the global expansion strategy, Pepsi has already strengthen the position of core brands along with innovation power, focused on shareholder value creation, maintained its strong value shares, and diversified product range for the customers (PepsiCo 2011, p.7). However, the following figure shows the net revenue of Pepsi from different segments – Figure 1: 2011 Portfolio Net Revenue Mix. Source: PepsiCo (2011, p. 13) Literature of Global Expansion Strategy: Yesilyurt (2012, p.1) pointed out that the global expansion strategies of MNCs1 through export entry or investment entry are influenced by several prospect and challenges in the overseas markets while the selection of entry modes are subjective to the factors like market volume, production capacity, environmental hazards, transportation facilities, availability of raw materials, and cost of labor and so on. Due to high risk of investment entry mode in the foreign market, the MNCs prefer to engage themselves for export entry mode, but the sustainable market response and escalating connection in that markets lead them for merger and acquisition taking into account of further risks and complexities aligned with socioeconomic, political, culture, legislative and accounting system of the target market. On the other hand, some MNCs prefer to engage with overseas market through the contractual entry mode, which is a long-standing non-equity collaboration among the global companies in the target market by transferring technology and know how through licensing arrangement for a certain period in exchange of royalty and other handsome compensation package those are agreed mutually. Under the post financial crisis, the global economy is still vulnerable and going through a vicious circle of recessionary impact that leads the MNCs to take more cautioned step to in the entry in the overseas market, where they need to ensure elevated positive rate of return for their investment in relation to the pre-crisis period. Agarwal

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