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Chapter 9 Diversification.

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Presentation on theme: "Chapter 9 Diversification."— Presentation transcript:

1 Chapter 9 Diversification

2 Snack Foods Beverages Foods
Frito-Lay North America Frito-Lay International Quaker North America Pepsi-Cola North America Gatorade/Tropicana North America PepsiCo Beverages International

3 Snack Foods Frito-Lay North America Lay’s Funyuns Ruffles Sunchips
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

4 Frito-Lay International
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

5 Frito-Lay International
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

6 Beverages Pepsi-Cola North America Pepsi-Cola Mountain Dew Slice Mug
Sierra Mist FruitWorks Lipton Dole Aquafina Frappuccino SoBe AMP

7 Beverages Gatorade/Tropicana North America Gatorade Propel Tropicana
Dole juices

8 Beverages PepsiCo Beverages International Loóza juices and nectars
Copella juices Frui’Vita juices Tropicana 100 juices

9 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

10 Foods Business Level Strategies
How are we going to compete and gain a competitive advantage in each of our businesses? Foods Business Level Strategies 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

11 Snack Foods Beverages Foods
Corporate Level Strategy 1) What businesses do we want to compete in? 2) How do manage effectively across businesses

12 Where did they go?

13 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

14 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

15 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

16

17

18 Related Diversification at Disney
Entertainment/Production Theme Parks Resorts Entertainment/Broadcasting Retailing Cruise Lines

19 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

20

21 Tyco Telecommunications Tyco Fire and Security Tyco Safety Products
Tyco Electronics Tyco Telecommunications Tyco Fire and Security Tyco Safety Products Tyco Healthcare Tyco Plastics Tyco Adhesives Tyco Flow Control Tyco Electrical and Metal Products Tyco Fire and Building Products Tyco Infrastructure Services

22 GE Advanced materials Commercial loans Appliances Insurance
Jet engines Electric power generation Medical imaging NBU Universal Chemical Treatment Equipment services and rentals

23 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

24 Drawbacks for Unrelated
Demanding requirements Limited to no opportunities to share advantages

25 Portfolio analysis BCG Growth-Share Matrix GE- Nine Cell Matrix
question marks, dogs, cash cows, stars GE- Nine Cell Matrix

26 Boston Consulting Group Matrix
Relative Market Share Question Marks Stars Growth Rate Cash Cows Dogs 16

27 BCG Matrix for PepsiCo - Early 1990s
Relative Market Share High Taco Bell Growth Rate 10% Pizza Hut Frito Lay Low Soft Drinks KFC Low High 1.0 17

28 BCG Matrix for PepsiCo - Early 1990s
Relative Market Share Pizza Hut Taco Bell High Growth Rate Frito Lay 5% KFC Soft Drinks Low Low High .75 18

29 Competitive Strengths
GE 9 Cell Matrix Competitive Strengths High Low High Invest Grow Attractiveness Hold Harvest Divest Low 19

30 GE 9 Cell Matrix for Pepsico Competitive Strengths
High Low High Snack Foods Attractiveness Soft Drinks Low 20

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