Transcript Chapter 9 Diversification

Chapter 9
Diversification
Snack Foods
Frito-Lay North America
Frito-Lay International
Beverages
Foods
Quaker North America
Pepsi-Cola North America
Gatorade/Tropicana North America
PepsiCo Beverages International
Snack Foods
Frito-Lay North America
Lay’s
Ruffles
Doritos
Santitas
Fritos
Cheetos
Rold Gold
Funyuns
Sunchips
Cracker Jack
Chester’s popcorn
Grandma’s cookies
Munchos
Smartfood
Baken-ets fried pork skins
Oberto meat 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
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 Oats
Cap’n Crunch cereal
Life cereal
Quisp cereal
King Vitaman cereal
Mother’s cereal
Quaker rice cakes and granola bars
Rice-A-Roni side dishes
Near East couscous/pilafs
Aunt Jemima mixes & syrups
Quaker grits
Foods
Business Level
Strategies
How are we going
to compete and
gain a competitive
advantage in
each of our
businesses?
Quaker North America
Quaker Oats
Cap’n Crunch cereal
Life cereal
Quisp cereal
King Vitaman cereal
Mother’s cereal
Quaker rice cakes and granola bars
Rice-A-Roni side dishes
Near East couscous/pilafs
Aunt Jemima mixes & syrups
Quaker grits
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
Cash
Cows
Dogs
Growth
Rate
Stars
Question
Marks
BCG Matrix for PepsiCo - Early 1990s
Relative Market Share
Growth
Rate
High
Taco
Bell
Pizza
Hut
10%
Frito
Lay
Low
KFC
High
Soft
Drinks
1.0
Low
BCG Matrix for PepsiCo - Early 1990s
Relative Market Share
Growth
Rate
High
Pizza
Hut
Taco
Bell
Frito
Lay
5%
KFC
Soft
Drinks
Low
High
.75
Low
GE 9 Cell Matrix
High
Attractiveness
High
Competitive Strengths
Low
Invest
Grow
Hold
Harvest
Divest
Low
GE 9 Cell Matrix for Pepsico
High
Competitive Strengths
High
Attractiveness
Snack Foods
Low
Soft Drinks
Low