Question

How would you characterize Pepsico’s diversification strategy? Is it Related? Unrelated? Mixed? Describe one strength that supports Pepsico’s diversification strategy. What is keeping Pepsico from continuing to grow?

Answer 1

Pepsico deals in wide variety of products related to beverage and other categories . Product line of Pepsico includes Pepsi, Tropicana, Gatorade, Aquafina in beverage industry only. Whereas outside beverage industry it also manufactures Frito lays and Quaker oats. It is following mixed diversification strategy as it is dealing both in related and unrelated products. Tropicana aims at targeting juice loving customers, Aquafina targets bottled drinking water segment, Gatorade targets sport drink segment, Pepsi target beverage lovers, Frito lays target chips eating segment and Quaker as light breakfast lovers.

Broad product mix is one of the biggest strength of Pepsico's diversification strategy. It can reach different markets and segments through its diversified wide variety of products.Target audience includes juice lovers, beverage lovers, packaged water lovers, healthy breakfast lovers and snacks like potato wafers lovers. Pepsico's extensive global production and distribution network coupled with diversified product mix helps it to gain successful global recognition.

Pepsico's weakness which is hampering its growth is as follows:

• Its penetration outside United States is low. No doubt it is a famous brand all over world but still it has to adopt aggressive sales and marketing campaigns outside United States to boost its sales.
• It deals mainly into food and beverage product lines. So, its product portfolio has limited target audience. The company is prone to risk of food and beverage industry and should enter some other industry also.
• Pepsico is not an attractive choice for health conscious customers. It has started selling Quaker Oats which are considered very healthy for diet conscious people. Still it should introduce more juices, beverages and diet snacks for health conscious people.
• It has some questionable practices. It uses tap water but sells it under the name of mountain spring water.
• Its too much dependence on Wal-Mart is another major weakness.