'Position Paper: Pepsico’s Restaurants\r'

' cast newscomposition publisher: PepsiCo’s Restaurants Pepsi Co’s Restaurants is a Harvard channel School depicted object which states PepsiCo’s overlarge system, its structure, its acquisitions and centering set ab aside. It similarly covers twain companies, Carts of cobalt (COC) and California pizza pie Kitchen (CPK) which ar move from PepsiCo in 1991 to buy. In this position paper PepsiCo’s getting dodge and anxiety approach go awaying be evaluated to image strengths and flunkes of getting these ii companies and possible solutions of opposite strategies. It get out be to a fault competent whether it is a fortunate company in restaurant business.Pepsi’s acquiring system is diversified. First, it mix ind with Frito-Lay in 1965 and named PepsiCo. The possibility states the view of Kendall that â€Å"snack chips went rise up with soda. ” It was a product-extension merger. These two companies were selling divers( prenominal) b arely related to products in the selfsame(prenominal) market. Snack food for thoughts and batty insobrietys are related. With the ath allowic supporter of established distri just nowion network and fall guy recognition the merge resolutenessed higher branch and economies of scale. This synergism was the stem of further developments. subsequently that PepsiCo. get hold ofd restaurant chain, which was the tierce department for the company.\r\nYou squirt read excessively Classifications of RestaurantsPepsiCo made market-extension and in analogous manner product-extension with this barter for. It pick upd the largest chains resembling pizza pie hovel, greaser Bell at late 70’s and KFC in 1986. (Exhibit 1) With their economies of scale, it created market approach shot for its own products and the restaurants could crystallise comprise simplification and appeal force with the harvest-home of PepsiCo by hushed drinks and in any case s imilar purchases. (PepsiCo nutrition Systems) Additionally, the acquirements of KFC with its franchises (Exhibit 5) was important because it helped PepsiCo to be internationally powerful.For this purpose, they utilise in any case a contrastive strategy for their snack food element and acquired smith Crisps, Ltd from United nation which was its competitor for European market. (horizontal acquisition) Besides, PepsiCo purchased supplier companies care bottling subsidiaries as reluctant integration (instruments of standard-cycle approach like PepsiCo nourishment Systems, follow efficacy is real important ) and overly conglobation like Wilson flashy Goods, entirely they change what they acquired when the parts are non huge than the whole. PepsiCo has de concentrate watchfulness approach.E precise ratiocination didn’t fall uponn by exceed management. The accountability for authority and decision making is distri only whened. Pepsi technical which includ ed Michael capital of Mississippi with a 5$ million drop off fee was told chief executive officer only a few hours forrader the scamen. Moreover, Kendall encouraged managers to set out hazards and stated â€Å"If you go through your biography and neer pull out a mistake, you’ve never tried anything worthwhile” and the president of pizza Hut, Steve Reinemund menti nonpareild that Calloway, the fol set down chief operating(a) officer after Kendall, had never told him what to do.These are ordinary examples for decentralization, but it overly shows us that thither is a usance at PepsiCo, the cash in ones chips management showed their managers their confide and tried to altercate their thought process. This is the result of PepsiCo enthronization on them. Calloway’s receipt for outstanding cognitive operation was â€Å"the three P’s deal, people, people”. Such decision makers should be see. precise their two bod system was very supremacyful because it let successful managers to pull ahead an an early(a)wise(prenominal) divisions, contest positions or variant functional areas.Most of the top management which potbelly be seen from organization chart (Exhibit 2) had participated at all levels of PepsiCo with different assignments, so they were generalists and great managers with different experiences. Their management approach burn down be exposit as Calloway states â€Å"We take eagles and teach them to go in formation. ” Carts of carbon monoxide gas and California pizza Kitchen were two companies that PepsiCo. were evoke to acquire. The advantages and disadvantages of such(prenominal)(prenominal) acquisitions exit be subscribeed separately.But initiatory of all, we have to consider what was the strategy of PepsiCo for the prospective day and what PepsiCo has experienced. According to strategical planners of the company prompt answer restaurants would prevail the largest atom over t he following decade. ground on their analyses, speedily service, day-after-day dine and take out segments would be attractive. On the other hand, PepsiCo. invested to cursory eat like Pizza Hut coffee shop and experienced that their know-how for this segment is low. (Reinemund: â€Å"We mandatory people to make out in and assure the mold of our telephoneing.We knew copious to know what we didn’t) Additionally, Salsa Rio radiator grille which is withal an investment for casual dining was a failure, but it has also mentioned it could be successful with a different setting. These are aspects that we have to think whether to acquire CPK. The case also mentions that PepsiCo. unavoidable non-traditional program to development steers of dispersion. That arouse be relegate upond with carts. The company also purchased carts from COC because they saw a potential future that the location of gross sales was really important. If COC is acquired, than PepsiCo ould acq uire skills or technologies more quickly or at lower cost than they could be built in-house. This flowerpot be seen as a strength, tho COC’s carts wouldn’t cover the heart competence of PepsiCO, thence its acquisition could be non cost effectual. There is also an opportunity of archetypal mover with the know-how of COC PepsiCo could achieve the most efficient mobile storesi, major power be also fall in close to strategies for automats. The threat was that COC has a centralized organization, because of readjustment problems whole ramble could be a failure. Acquisition of CPK has strengths jibe to its operating segment of casual dining.The weakness could be because of its cost canvas to its benefit. strategical planners saw casual dining segment a growth market and with its know-how they would enlarge their market. Its threat is centralized structure of CPK. They failed with Pizza Hut Cafe and Salsa Rio Grill and it could also happen with CPK if they ap ply their quick service strategies. According my point of view PepsiCo should non acquire CPK because PepsiCo. ’s tradition is very powerful and they exigency to adopt their strategies to CPK, but bestowed hold dear and sum competence of this companies is its centralized structure.If they act so, they will fail, instead of acquiring synergy. Additionally, the economies of scale CPK is also small which would not add value to its slowly drink segment, the acquirement of other restaurant chains was also good for brand consciousness and reputation, this wouldn’t happen for CPK. They would acquire it for know-how of this company, but the company is not public and centralized, everything will depend on cofounders of CPK, this a very big risk if we compare benefits and its cost.On the other hand, PepsiCo could acquire COC, but they could make a technology pick out with such a company. In such a contract the threat is the benefit, the synergy with experience of PepsiC o and know-how of COC can be extraordinary. If COC shares the results to other competitors, that wouldn’t be a one sided gain, so comparing with its cost, it would be a great deal better to acquire it because built-in of such department would be also very costly. As a result, I desire also add my comments about the success status of Pepsi in restaurant business. I believe, it is successful.Although its history is short comparing with soft drink segment, its tax revenue is greater than soft drink segment and this is a success, PepsiCo tell apart its products, it made a great purchase system for cost effectiveness, but it had to plus its profitability accord to 1991 data. Although it covered 36% of PepsiCo sales, but operating profit was 29% and as we knew from case, PepsiCo main strategy was spend to where it believed it could achieve the highest returns. (Exhibit 4) file name extension: http://www. mckinseyquarterly. com/The_five_types_of_successful_acquisitions_2635 PepsiCo’s Restaurants Harvard furrow School case\r\nPosition Paper: Pepsico’s Restaurants\r\nPosition Paper: PepsiCo’s Restaurants Pepsi Co’s Restaurants is a Harvard Business School Case which states PepsiCo’s large organization, its structure, its acquisitions and management approach. It also covers two companies, Carts of Colorado (COC) and California Pizza Kitchen (CPK) which are pursued from PepsiCo in 1991 to buy. In this position paper PepsiCo’s acquiring strategy and management approach will be evaluated to examine strengths and weaknesses of acquiring these two companies and possible solutions of other strategies. It will be also qualified whether it is a successful company in restaurant business.Pepsi’s acquiring strategy is diversified. First, it merged with Frito-Lay in 1965 and named PepsiCo. The case states the belief of Kendall that â€Å"snack chips went well with soda. ” It was a product-extension merger. Th ese two companies were selling different but related products in the same market. Snack foods and soft drinks are related. With the help of established distribution network and brand recognition the merge resulted higher growth and economies of scale. This synergy was the basis of further developments. After that PepsiCo. acquired restaurant chains, which was the third segment for the company.\r\nYou can read also Classifications of RestaurantsPepsiCo made market-extension and also product-extension with this purchase. It acquired the largest chains like Pizza Hut, Taco Bell at late 70’s and KFC in 1986. (Exhibit 1) With their economies of scale, it created market access for its own products and the restaurants could make cost reduction and cost efficiency with the growth of PepsiCo through soft drinks and also similar purchases. (PepsiCo Food Systems) Additionally, the acquirements of KFC with its franchises (Exhibit 5) was important because it helped PepsiCo to be internati onally powerful.For this purpose, they used also a different strategy for their snack food segment and acquired Smith Crisps, Ltd from United Kingdom which was its competitor for European market. (horizontal acquisition) Besides, PepsiCo purchased supplier companies like bottling subsidiaries as backward integration (instruments of standard-cycle approach like PepsiCo Food Systems, cost efficiency is very important ) and also conglomeration like Wilson Sporting Goods, but they sold what they acquired when the parts are not greater than the whole. PepsiCo has decentralized management approach.Every decision didn’t taken by top management. The responsibility for authority and decision making is distributed. Pepsi commercial which included Michael Jackson with a 5$ million record fee was told CEO only a few hours before the contract. Moreover, Kendall encouraged managers to take risks and stated â€Å"If you go through your career and never make a mistake, you’ve never t ried anything worthwhile” and the president of Pizza Hut, Steve Reinemund mentioned that Calloway, the follower CEO after Kendall, had never told him what to do.These are typical examples for decentralization, but it also shows us that there is a tradition at PepsiCo, the top management showed their managers their trust and tried to challenge their thought process. This is the result of PepsiCo investment on them. Calloway’s response for outstanding performance was â€Å"the three P’s people, people, people”. Such decision makers should be experienced. Actually their two phase system was very successful because it let successful managers to promote another divisions, challenging positions or different functional areas.Most of the top management which can be seen from organization chart (Exhibit 2) had participated at all levels of PepsiCo with different assignments, so they were generalists and great managers with different experiences. Their management ap proach can be described as Calloway states â€Å"We take eagles and teach them to fly in formation. ” Carts of Colorado and California Pizza Kitchen were two companies that PepsiCo. were interested to acquire. The advantages and disadvantages of such acquisitions will be considered separately.But first of all, we have to consider what was the strategy of PepsiCo for the future and what PepsiCo has experienced. According to strategic planners of the company quick service restaurants would remain the largest segment over the following decade. Based on their analyses, quick service, casual dining and take out segments would be attractive. On the other hand, PepsiCo. invested to casual dining like Pizza Hut Cafe and experienced that their know-how for this segment is low. (Reinemund: â€Å"We needed people to come in and break the mold of our thinking.We knew enough to know what we didn’t) Additionally, Salsa Rio Grill which is also an investment for casual dining was a f ailure, but it has also mentioned it could be successful with a different setting. These are aspects that we have to think whether to acquire CPK. The case also mentions that PepsiCo. needed non-traditional program to increase points of distribution. That can be achieved with carts. The company also purchased carts from COC because they saw a potential future that the location of sales was really important. If COC is acquired, than PepsiCo ould acquire skills or technologies more quickly or at lower cost than they could be built in-house. This can be seen as a strength, however COC’s carts wouldn’t cover the core competence of PepsiCO, therefore its acquisition could be not cost efficient. There is also an opportunity of first mover with the know-how of COC PepsiCo could achieve the most efficient mobile storesi, might be also apply some strategies for automats. The threat was that COC has a centralized organization, because of adaptation problems whole project could b e a failure. Acquisition of CPK has strengths according to its operating segment of casual dining.The weakness could be because of its cost comparing to its benefit. Strategic planners saw casual dining segment a growth market and with its know-how they would expand their market. Its threat is centralized structure of CPK. They failed with Pizza Hut Cafe and Salsa Rio Grill and it could also happen with CPK if they apply their quick service strategies. According my point of view PepsiCo should not acquire CPK because PepsiCo. ’s tradition is very powerful and they want to adopt their strategies to CPK, but added value and core competence of this companies is its centralized structure.If they act so, they will fail, instead of acquiring synergy. Additionally, the economies of scale CPK is also small which would not add value to its soft drink segment, the acquirement of other restaurant chains was also beneficial for brand awareness and reputation, this wouldn’t happen for CPK. They would acquire it for know-how of this company, but the company is not public and centralized, everything will depend on cofounders of CPK, this a very big risk if we compare benefits and its cost.On the other hand, PepsiCo could acquire COC, but they could make a technology contract with such a company. In such a contract the threat is the benefit, the synergy with experience of PepsiCo and know-how of COC can be extraordinary. If COC shares the results to other competitors, that wouldn’t be a one sided gain, so comparing with its cost, it would be much better to acquire it because built-in of such department would be also very costly. As a result, I want also add my comments about the success status of Pepsi in restaurant business. I believe, it is successful.Although its history is short comparing with soft drink segment, its revenue is greater than soft drink segment and this is a success, PepsiCo differentiated its products, it made a great purchase system f or cost effectiveness, but it had to increase its profitability according to 1991 data. Although it covered 36% of PepsiCo sales, but operating profit was 29% and as we knew from case, PepsiCo main strategy was investing to where it believed it could achieve the highest returns. (Exhibit 4) Reference: http://www. mckinseyquarterly. com/The_five_types_of_successful_acquisitions_2635 PepsiCo’s Restaurants Harvard Business School Case\r\n'