BCG ANALYSIS OF PEPSICO COMPANY

BCG ANALYSIS OF PEPSICO COMPANY

Overview of the Company

PepsiCo Inc. is one of the world’s leading food and Beverage Company.  PepsiCo started on 1965, during that time Pepsi-Cola’s CEO and President  approached ,  Chairman and CEO with a proposition of merging the two company in providing food and beverage with complementary products that would give a lesser opportunity for cost sharing, joint merchandising and knowledge and skill transfer. Its expertise is to create different food and beverage products that would soothe the taste of its consumer.  The new company was founded with annual revenues of $510 million and such well-known brands as Pepsi-Cola, Mountain Dew, Fritos, Lay’s, Chee-tos, Ruffles, and Rold Gold. PepsiCo’s roots can be traced to 1898, when , a pharmacist in New Bern, North Carolina, created the formula for a carbonated beverage he named Pepsi-Cola. The reinvention of different products, the introduction of new product, expansion into international markets and clever advertising campaigns are the primary focus of PepsiCo Inc.  PepsiCo’s considerable marketing expertise could be leveraged in the marketing of fried chicken, pizza, and Mexican fast foods.

  In 2001, PepsiCo was the second-largest food products company in the United States (behind Kraft Foods) and was diversified into salty and sweet snacks, soft drinks, orange juice, bottled water, ready-to-drink teas and coffees, nutraceutical and isotonic beverages, hot and ready-to-eat breakfast cereals, grain-based products, and breakfast condiments. Many PepsiCo brands held number one or number two positions in their respective food and beverage categories ( 2008).

BCG Growth Matrix Analysis

            As mentioned above, this study aims on analyzing the products and services offered by PepsiCo. The BCG matrix approach is based on the product life cycle concepts which can be utilized to identify what priorities should be given in the product portfolio of a business level. To make sure that the company is creating long-term value, an industry should have a portfolio of products which contains both high-growth products in need of cash inputs as well as low-growth products which establishes a lot of profit or cash.

BCG matrix relies on 2 dimensions: market growth and market share. The basic notion behind it is that the higher the market share of a specific product has or the faster the product’s marketability grows, the better it is for the industry.  Placing appropriate products in the BCG matrix, results in 4 categories, in the business portfolio of an industry. The four categories include the Stars, cash cows, dogs, question marks. Each of these categories has their own measurement. First, the stars are considered as those products which have high market growth and market share. The stars products use large amounts of cash and considered to have competitive position in the business which results in generating more profit. The stars products are frequently noted as rough in balance on net cash flow. But if needed, any attempt should be created to hold market share to avoid becoming cash cow. 

The second category is Cash cows which are commonly considered to have low growth with high market share. Herein, the profits and generation of cash are considered high but because of the low market growth, the investment required should be low. It is said that cash cows should keep the profit high and is noted to be the foundation of the company. The next category is Dogs which is low market growth and share. It is noted that an industry should avoid or reduce the number of dog’s products in the industry. In addition, the company is also recommended to beware of the expensive turn around plans. The last category is question markets which is high growth with low market share. Question marks products are considered to be the worst cash features of all, because high demands make it to have low returns due to low market share. Herein, if the company would not be able to solve the issue of question market products, these may be able to absorb great amount of cash and may result from stopping dogs to grow.        

Accordingly, BCG matrix approach can help the business companies to understand a frequently made approach mistake. Boston Consulting Group Matrix is a tool used for product portfolio planning  2005). This tool has two controlling elements which includes market growth relative market share. In this manner, the current situation PepsiCo in the standpoint of the market environment will be analyzed using this marketing tool. This analysis will give emphasis on the product and service portfolio of PepsiCo.  Thus, the product and services that the company offers will be analyzed using the following figure. 

It can be said that PepsiCo products and business portfolio can be divided in four major products or services; each service operates in accordance with its functions along with the products and services in different areas especially made as a distinction of each division. The PepsiCo analysis will be based in assessment of the services offered by the company.  

THE END