Case Analysis Of Pepsico

Introduction

This project is a group compilation of an assessment of PepsiCo, a multinational company (MNC). According to Investopedia, a multinational corporation has factories and other assets in at least one other country other than its home country. Such companies have offices and or factories in different countries and usually have a centralized head office where they coordinate global management.

This project seeks to take an in-depth look at the international operations of PepsiCo.

Company Overview

PepsiCo was first Incorporated in 1990 in Delaware and later reincorporated in North Carolina 1986. They are the leading global food and beverage distributor and manufacturer. Their portfolio includes brands such as Frito-Lay, Gatorade,

Describe the international business methods used by the MNC (examples – exporting, importing, international joint ventures, development of foreign subsidiaries). Which methods are more popular for the MNC and why?

Direct Foreign Investment

PepsiCo is able to penetrate new markets in different countries and territories through direct foreign investment (DFI). Some DFI strategies it implements include franchising, entering into joint ventures, foreign subsidiaries and mergers and acquisitions.

Exporting

Exporting is the development of final products locally to be sent into and sold in foreign markets. Foreign exchange risk is the most prominent issue in this method. Using this as a method, PepsiCo is able to enter a foreign market through established distribution channels and initial investment is low.

Acquisitions

PepsiCo has used this method in order to penetrate the restaurant and manufacturing sector of various foreign markets. It is the buying of the firm itself or controlling interest shares. This strategy allows for them to gain control of said business while quickly gaining market share in the territory it occupies. An example of this is their acquisition of The Quaker Oates Company which was already the owner of Gatorade, the leading sport energy drink in the

Which theories best explain why the MNC conducts international business? Given the specific countries where the MNC does its business, describe the agency problems and constraints that the MNC experiences in seeking to achieve their objectives, and how they attempt to overcome them.

Theories that answer why PepsiCo conducts international business:

Theory of Comparative Advantage

Certain countries specialize in the production of certain goods and services. Also, labour or materials in the home country of the MNC may be more expensive than if they were to operate in another country to produce the same good or service. Specialization by countries can therefore increase efficiency in both how quickly a product is produced and the use of capital. For this reason PepsiCo benefits by saving money in production which means they stand to earn a higher profit margin when goods are sold.

Imperfect Markets Theory

When factors of production such as labour and other resources are immobile in a foreign country, firms such as PepsiCo can take advantage of this. As a large firm with more information and resources, they are able to enter these markets and exploit them.

Product Cycle