Jerry Mae P.

Balaquiot Business Policy (Tue –

CASE - PepsiCo’s Acquisition of Quaker Oats

What are PepsiCo’s capabilities in the context of their identified resources?

A. Functional Areas:
Manufacturing

Pepsi Cola scores big on product design. The label of the Pepsi Cola bottle is much more
colorful and attractive then the label on the Coca Cola bottles. Product design is important because
it really grabs your attention. If the product has a poor design you are less likely to reach for it on
the shelf for an impulse buy. Throughout the years PepsiCo was able to change their product
design that is more appealing to the eyes of the consumers. Even the design and shape of its bottle
comes in different ways. There are plastic bottle and in can with different colors and flavors. Even
their subsidiaries brands improved. Although not on the packaging design but on the quality of the
product itself.
When it comes to manufacturing its product, PepsiCo was able to strengthen its relationship
with their supplier that’s why PepsiCo has a great access to its raw materials and produce volumes
of its product.

Marketing

Promotion is a key element of marketing program and is concerned with effectively and
efficiently communicating the decisions of marketing strategy, to favorably influence target
customers’ perceptions to facilitate exchange between the marketer and the customer that may
satisfy the objective of both customer and the company. A company’s promotional efforts are the
only controllable means to create awareness among publics about itself, the products and services
it offers, their features and influence their attitudes favorably.
Advertising is any paid form of non-personal mass communication through various media
to present and promote product, services and ideas by an identified sponsor.
PepsiCo has advertised its products through many different ways and media. Through TV
we have seen different advertisements of its products such as Pepsi, Mountain Dew, Tropicana,
Gatorade and many others with different well known celebrities. PepsiCo also advertise its
products by targeting those favorable television programs, like sports, series and also PepsiCo uses
some events to promote its product. Their advertising and packaging changes, along with their new
slogan, whichever is more appealing to their consumer’s mind.
With respect to distribution of products PepsiCo focus on making the product available in
adequate quantities at places where customers are normally expected to shop for them to satisfy
their needs. Depending on the nature of the product, marketing management decides to put into
place an executive, selective or intensive network of distribution while selecting the appropriate
dealers or wholesalers. The key accounts are different wholesalers, restaurant and hotels like Pizza
Hut, KFC, and Metro which serve as a place for key sale, through Base market distributors and
through Outstation distributors.

Human Resource Management

Pepsi is so well known for training hard-charging human resources executives that it even
has something akin to a brand identity. PepsiCo made it a regular practice to move its best mangers
from positions in one business unit to assignments in the other two business segments to promote
the transfer of skills, practices know-how, and innovative ideas from one business to another.
PepsiCo CEO Wayne Calloway challenged the company's HR function to develop an
ownership culture within the organization in an effort to make the giant conglomerate act like a
small company. He authorized the personnel department to offer every member of the
organization, which comprises of subsidiaries Pepsi-Cola Inc., Taco Bell Worldwide, Frito-Lay
Inc., Kentucky Fried Chicken Corp. and Pizza Hut Worldwide, an equity position in PepsiCo to
encourage employees to behave and think as if they own the company. The HR department
responded to Calloway's challenge by creating 'SharePower,' a stock-option program intended to
develop the ownership mindset among the conglomerate's hundreds of thousands of employees.
PepsiCo is the first major corporation to offer such a broad-based stock-option program in the US.
The program is a success, motivating PepsiCo employees to 'go the extra mile' and stimulating
their interest in the company's financial performance.

B.
Valuable Capabilities

PepsiCo was able to acquire different brands that aim to neutralize threats and exploit
opportunities. Through acquisition PepsiCo was able to strengthen the value for customers and to
reach out more for their needs. Its growth became a success as it acquire different high quality
brands and create customer value. PepsiCo’s corporate strategy had diversified, from salty and
sweet snacks, soft drinks, orange juice, bottled water, and ready-to-eat drink teas and coffees,
purified and functional waters, isotonic beverages, hot and ready-to-eat breakfast cereals, grain-
based products, and breakfast condiments. Strategies that kept their brands at the top were tied to
new product innovation, close relationships with distribution allies, international expansion, and
strategic acquisitions. A new element of PepsiCo’s corporate strategy was product reformulations
to make snack foods and beverages less unhealthy. Their belief that its efforts to develop “good-
for-you” or “better-for-you” products would create growth opportunities from the intersection of
business and public interests.

Rare Capabilities

With the continuing intense competition, the cola giants are facing new challenges. The
Coca-Cola Company is the world's biggest beverage manufacturer, distributor and marketer in the
beverage market. Its most famous product is the Coca-Cola, besides, the company provides with
about 400 brands in over 200 countries. But the power of PepsiCo can not be neglected. PepsiCo
operates in a mature market, and all of its product lines are faced with stiff competition. To be a
large conglomerate, PepsiCo is with great interest in the manufacture, marketing and sale of
beverages and its products varieties in beverages, salty, sweet and grain based snacks as well as
other foods. There was a time that PepsiCo surpassed Coca-Cola for the first time. Throughout the
years their rivalry consistently increase as they change their existing products or create a product to
remain in consumer's mind and try to be ahead of each other. It was indeed that PepsiCo has a
unique or rare resource that makes its competitors hard to exploit the resource in the same way.

Costly to imitate capabilities

PepsiCo has established a great relationship between their employees, managers, suppliers
and customers. Within its organization PepsiCo was able to create a strong executive team, shifting
of key personnel helped PepsiCo capture strategic fit relationships among its different business
segments, build stronger competitive capabilities, and keep manager’s thinking fresh and
innovative. When it comes to their customers PepsiCo was able to provide different choices to
choose with. Example of it was their acquisition of Quaker Oat. Quaker Oat's food products can
give Pepsi a well-balance portfolio of products that can target all different age groups of
consumers. Currently PepsiCo only covers the domain of unhealthy and salty snacks such as
Doritos, Tostitos and Fritos corn chips through the merger of its Frito-Lays division. The products
of nutritional snack that Quaker Oats manufactures can complement PepsiCo's salty snacks and
help PepsiCo to establish a presence in the nutritional snack industry. Therefore PepsiCo can be
able to extend its reach into the categories of grain-based snacks and the morning on-go-foods.
These foods are especially good for the kids. Consumers consider PepsiCo's Quaker and Tropicana
brands the healthiest among all brands. PepsiCo's success is the results of superior products, high
standards of performance, distinctive competitive strategies and the high integrity of its people.
Consumers consider PepsiCo's Quaker and Tropicana brands the healthiest among all brands.
PepsiCo's success is the results of superior products, high standards of performance, distinctive
competitive strategies and the high integrity of its people. They obtain their strong reputation
through the years that’s hard for other firm to easily develop.

Non-substitutable Capabilities

Non-substitutability is significantly related to new product introduction. PepsiCo was able to