Strategic management

SUBMITTED BY:

 AYESHA ALTAF
 HUMA RANA
 SYEDA NARJIS HAIDER NAQVI
 YUSRA NASEEM

SUBMITTED TO: Sir Farrukh aslam

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 EXECUTIVE SUMMARY
Purpose of this project is to study the strategies which Pepsi is doing in Pakistani
market for its product Pepsi cola. Pepsi International is a world renowned
brand. It is a very well organized multinational company, which operates almost all
over the world. In Pakistan It also has proved itself to be the No.1 soft drink. Now
days Pepsi is recognized as Pakistanis National drink Pepsi's greatest rival is Coca
Cola. Coca Cola has an international recognized brand. Coke’s basic strength is its
brand name. But Pepsi with its aggressive marketing planning and quick
diversification in creating and promoting new ideas and product packaging is
successfully maintaining is No.1 position in Pakistan. Pepsi is operating in Pakistan,
through its 12 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi
has given franchise to these bottlers. Bottlers, produce, distribute and help in
promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky
Fried Chicken.”

PepsiCo is an American multinational corporation dealing with snack and

beverages. The company is the world’s largest in the snack and beverage
industry. In terms of revenues for example, the company’s revenue hit a high of
$66.4 billion. The company has a wide range of subsidiaries in its portfolio.
These subsidiaries include Frito-Lays salty snacks, Quaker Chewy, granola
bars, Pepsi soft drink products, Tropicana orange juice, Lipton Brisk tea,
Gatorade, Propel, SoBe, Quaker Oatmeal, Cap’n Crunch, Aquafina, Rice-A-
Roni and Aunt Jemima pancake mix. The products produced by PepsiCo and
its subsidiaries in most cases as regarded as complements as they are

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 consumed together. PepsiCo’s business lineup was 22 $1billion in the financial
year 2014.

ACKNOWLEDGEMENT
First of all we are thankful to Almighty ALLAH for giving
u s m u c h c o o p e r a t i o n a n d supporting parents who has given us this
opportunity to study here. I would like to thank SIR FARUKH for giving
us the confidence and
opportunity to prove ourselves.

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S.NO PARTICULARS PAGE NO.
1. Introduction. 5-7
1.1 Beverage Industry-Overview
1.2 Comprehensive Introduction:
Awards and Achievements
2. Company Profile. 8-9
2.1 Company’s Vision
2.2 Company’s Mission
2.3 Core Values
3. SWOT Analysis of Pepsi Co. 10-13
4. PepsiCo Porter’s Five Forces 14-17
Analysis.

5. Ratio Analysis and Observation. 17-24

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 6. Balance Score Card 25-27

7.

8.

TABLE OF CONTENTS:

INTRODUCTION:
PepsiCo Inc. is a beverage and food multinational which
i t ’s h e a d q u a r t e r e d i s in Purchase, New York, United States.
PepsiCo is one of the well known world’s leading beverage and
food corporate. PepsiCo was officially established in the year 1965 with the
merger of the Pepsi-Cola Company which being established in 1890s and
Frito-Lay, Inc. PepsiCo product has been expanded from its Pepsi-Cola
(namesake product) to a broader range of beverage and food brands.
PepsiCo have a complementary beverage and food portfolio that includes
22 PepsiCo flagship beverage and food brands which each of the
brands had generated more than USD 1 billion of annual retail sales in
2014. The 22 brands include Pepsi-Cola, Mountain Dew, Lay’s,
Gatorade, Diet Pepsi, Tropicana, 7UP, Quaker Oats, Cheetos, Doritos,
Miranda, Lipton and much more. Today PepsiCo is one of the world’s
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 leading beverage and food corporate and also one of the most iconic and
recognized consumer brands globally. PepsiCo products can be found
across the globe in more than 200 country and territories. PepsiCo chief
Executive Officer (CEO) and chairman is Mrs. Indra K. Nooyi,
Mrs.Nooyi was first being named CEO and President in the year 2006
and later being assumed the role of Chairman in the year 2007. As of
27 December 2014, PepsiCo approximately have 271,000 employees
worldwide, including about 107,000 employees within United State. In
PepsiCo history, as a result of international expansion the global operation
structure of PepsiCo's had been shifted for multiple times. Finally it is
separated into four main divisions which are PepsiCo Americas Foods,
PepsiCo Americas Beverages, PepsiCo Europe, and PepsiCo Asia, Middle
East and African 2010. In 1993, PepsiCo Foods entered the China market with
the introduction of Lay's potato chips.

AWARDS AND ACHEIVEMENTS:

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PepsiCo's Supplier Diversity Program has been recognized over the years by multiple
organizations for its ongoing efforts
NMSDC – National Minority Supplier Development Council
PepsiCo was recognized four times for its exemplary achievements in minority
business development. NMSDC’s Corporation of the Year award is regarded as the
most significant honor to a major corporation for the utilization of Asian, Black,
Hispanic and Native American suppliers. In winning the award, PepsiCo
demonstrated exceptional strength in areas critical to continuously improving a
minority supplier development process.
1989 – Corporation of the Year
2004 – Corporation of the Year
2009 – Corporation of the Year
2015 – Corporation of the Year, Category Top Performers Best Tier 2 Program
NMBC – National Minority Business Council
2013/2014 - Corporate Diversity Award for Excellence in MWBE Procurement
NGLCC – National Gay and Lesbian Chamber of Commerce
2009 – Corporation of the Year
WBENC – Women’s Business Enterprise National Council
PepsiCo was named one of America's Top Corporations for Women's Business
Enterprises in 2015. This award, given by the Women's Business Enterprise National
Council (WBENC), honors corporations that have leading supplier diversity programs
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that proactively integrate businesses owned and operated by women into their supply
chains. PepsiCo has won 17 times in the 19 years this award has been given – a
record number of wins by any food and beverage company.
2000, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013,
2014, 2015, 2016, 2017
2014 - Applause Award to PepsiCo’s Larry Caldwell for his work to expand
opportunities for Women’s Business Enterprises (WBEs) on a national or
international level.
WPEO - Women’s Presidents Education Organization
2014 - New York Region’s Outstanding Corporation Award for the winners
accomplishments in support of women business owners and women’s business
community, innovation, Done Deal TM participation, and overall commitment to the
mission of the WPEO.
USPAACC – United States Pan Asian-American Chamber of Commerce
2018 – Most Valuable Corporation
The Award recognizes a company that has done an exceptional job of supporting
USPAACC by enabling it to achieve its mission; seeking out qualified Asian
American suppliers; and contributing to USPAACC’s college scholarship program

COMPANY PROFILE:

OUR VISSION:

“BE THE GLOBAL LEADER IN CONVENIENT FOODS AND

BEVERAGES BY WINNING WITH PURPOSE”

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Winning with Purpose is an evolution of Performance with Purpose. It is
the next step on PepsiCo’s journey, building on everything we’ve
achieved over the last 12 years with Performance with Purpose, while
propelling our company forward into a new era of growth and prosperity.
It reflects our ambition to Win sustainably in the marketplace and
accelerate our top line growth, whilst keeping our commitment to do
good for the planet and our communities. To help us achieve this vision,
we’ve defined a clear set of strategies: Faster, Stronger, and Better.

OUR MISSION:

“CREATE MORE SMILES WITH EVERY SIP AND EVERY BITE”

 FOR OUR CONSUMERS:

We will create smiles for our Consumers by offering them unique

moments, delighting them with our products, entertaining them

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 with our brands, making their lives more enjoyable—we create 1.5
billion smiles a day, and we aspire to reach 2 billion.

 FOR OUR CUSTOMERS:

We will create smiles for our Customers by being the best possible
partner, driving game-changing innovation, and delivering a level
of growth unmatched in our industry.

 FOR OUR ASSOCIATES AND OUR COMMUNITIES:

We will create smiles for you, our Associates and our

Communities, by creating meaningful opportunities to work, gain
new skills, and build successful careers, and a diverse and
inclusive workplace where people are committed to ethically
delivering top-tier performance.

 FOR OUR SHAREHOLDERS:

Smiles for our Shareholders by delivering sustainable, top-tier

Total Shareholder Return.

CORE VALUES:

We seek to produce financial rewards to investors as we provide

opportunities for growth and enrichment to our employees, our business
partners and the communities in which we operate. And in everything we
do, we strive for honesty, fairness and integrity.
“PepsiCo’s responsibility is to continually improve all aspects of the
world in which we operate – environment, social, economic – creating a
better tomorrow than today.

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PEPSICO LOGO:

The most famous visual representation is the Pepsi Globe logo’s representation of The
Earth. The swirling horizontal stripe running through the center of the globe is claimed to
provide a visual representation of the earth’s constant movement around its own axis and
around the sun. The stripe also represents a naturally occurring electric generator in fluid
motion generating and sustaining the magnetic field of the Earth. This marketing has
resulted in an extremely recognizable logo and an aid to a profitable venture.

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SWOT ANALYSIS OF PEPSI CO:

SWOT analysis is a term used to analyze the strengths, weaknesses,

opportunities and threats of a business or a project. Identifying the
SWOT is necessary to derive the following steps for achieving the
objectives of the company. SWOT analysis of PEPSI Co. is done below:

Strengths:- (INTERNAL FACTORS)

 Brand equity: it is one of the most prominent and famous

brands in the world in the food and beverage sector. It is also
known as the brand of youth. It has a high brand recognition

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 and reputation. It has a brand valuation of $19.4 billion and it
is ranked 29 in the Forbes most valuable brands list.

 Product portfolio performance: 2015 saw a decrease in the

sale of soft drinks. India as a country is evolving and
becoming more health conscious. This can be noted from the
2015 analysis of top selling brands (in India) that the top 5
beverages are only juices and sweet syrups. There is no soft
drink in the top 5.Pepsi has two products in the top 5
beverages sold in the country.

 So, even if Pepsi is second to Coca cola in terms of

distribution of its Cola, there are other footprints which Pepsi
has because of its product portfolio.

 Strong Leadership: Under the leadership of Indra

Nooyi PepsiCo has been doing really well. It has managed to
stay at number two position in the complete food and
beverage sector only behind Nestle in that field.

 Customer Loyalty: PepsiCo has an extremely

loyal customer base. In its beverage category all its soft
drinks have an iconic taste and that’s why their customers do
not prefer to shift brands. They have emerged as a
very strong brand when it comes to juices and bottled water
category. Frito-Lay has been one of the top-selling brands in
the world with brands under it such as Doritos, Lay’s,
Funyuns, Uncle Chips, Cheetos, Tostitos and Walkers. They
had managed to grab 6 slots in the top 10 global snack
brands with topping the charts (all 3 spots) as well.

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  Strong distribution: Pepsi has a global presence in
more than 200 countries providing them with a very good
distribution network.

 Supply Chain: It has one of the best supply chain

networks in the world, making the products available
throughout the world. Apart from this they also have a very
efficient reverse logistics associated with it.

 Tie-Ups: They have tie-ups with sports events and

music concerts which keeps them in the lime light and
thereby increasing the brand recall. They have sponsorships
to major sports teams thereby standing with what the brand
are known for, youth and energy.

 Clear target audience: Pepsi, online Coca Cola has

always had a clear target audience – the young crowd. It
always targets youngsters through its ads and generally the
youngsters are shown to be smarter then the old ones. The
message is clear – Pepsi is the in thing.

 Effective distribution strategy effective distribution strategy which

lets the company to deliver timely services to customers and clients.

 Diverse product range diverse product range ranging from

soft drinks, juice, and bottled water to cereals and cake mixes

Weaknesses:- (INTERNAL FACTORS)

 Competition: It has heavy competition from Coca-Cola in their

soft drinks category. They are always neck to neck with each other.

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 This competition thereby provides a room for not so loyal customer
base to switch brands quickly.

 Products perceived as unhealthy: Most of the soft drinks of the

PepsiCo is perceived as unhealthy.

 Product Dependence: They are only present in the food and

beverage industry which may be harmful in the longer run. They
need to diversify their business to other product segments to become
a global leader.

 FailedProducts: Many failed products such as ‘Crystal Pepsi’

which hurts the brand image of the PepsiCo and thereby giving
room to the competitors to grow.

 Brand Ambassadors: Wrong remarks or ill performance by the

famous personalities/celebrities, in turn, might damage the brand
image of PepsiCo as they are the face of the organization. Over
dependence on celebrities for endorsements is a huge risk.

 Value addition: Pepsi is known to have advertisements which are

targeted towards youngsters. However, it is not known to display
Value advertising which is a characteristic of Coca cola. Coca cola
has time and again focused on the positive values of life, something
which Pepsi can learn from them.

 The company is over dependent on wall-mart, as it accounts for 12%

of total revenue in net sales.
 Besides being present internationally, co. generates 52% of
total revenue in US. So at times of depression or any calamity in US,
the sales of the company are bound to affect
 Last year Co. Had approx 200,000 employees and they
accounted for $235,460 per
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 Employee, which is low as compared to its competitors
 The incidences of pulling waffle mix from the market in 2008 and of
explosion of Diet Pepsi cans in 2007 have damaged the company image and
confidence.
Opportunities:- (EXTERNAL FACTORS)

 Healthy Options: It should work more on improving the health

implications of their products and make the customer aware of the
same. Diet Pepsi is a positive move towards that direction.

 Diversification:
Business diversification into different market
segments is a huge opportunity. They have the talent, resources and
financial backing to do the same. This can also be done by
acquisitions.

 CSR: They can do more CSR activities to tackle the negative

remarks that hurt the brand image of the organization and benefit
the local people.

 R&D: Recently PepsiCo came out with healthier options in a soft

drink. To make 7Up by using the substitute of sugar called Stevie.
This can prove to be a game changer. More such research needs to
be done. Focus more on the diet drinks category. They have recently
released a variant of their cola sweetened with Stevie and sugar
called Pepsi Next.

 Flavors:A brand which has risen strongly in the recent years is

Paper boat. Paper boat is known for its various flavors such as
watermelon, raw mango etc. Bringing in such flavors even in
carbonated beverage form can help Pepsi attract a larger market.

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  Bottled water market is expected to be of $24 million by 2012. In this
sphere, PepsiCo has positioned itself well.
 Also by introducing new savory snacks, it has set itself up for
growing market, which is expected to be worth $28 million by 2013.
 PepsiCo is on verge of making investment worth $1,000 million in
republic of china and $500million in India, apart from Mexico and
Brazil in order to decrease its dependence on US.

Threats:- (EXTERNAL FACTORS)

 Competitors: PepsiCo’s main threats are Coca-Cola, Kraft

foods, Nestle, Dr Peppers Snapple Group and Mondelez.

 Health Factor: The unhealthy factor associated with its

products can take a toll on the health conscious customers
and might lose them. This can be clearly seen by the fall of
soft drinks sale.

 Economic Slowdown: With the recent reforms in the

country PepsiCo might see a drop in its sales due to a cash
crunch in the economy. Other factors such as recession and
inflation may also impact sales of the company.

 Government Norms: Different norms of different countries

might prove difficult to handle and compliance with it as well.

 The soft drink market in US is expected to decline by

2.7% in 2012 that accounts for $
 64,475 million, which would affect PepsiCo as well.
 The federal government’s concerns related to
health, environment and safety may lead to adverse affect
on PepsiCo’s image
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  Being a labor dependent company, it is vulnerable to
labor lockouts and strikes. As we saw in 2008, in India when
the production was shut down for a whole month, creating
problems for manufacturing and distribution as well.

PepsiCo Porter’s Five Forces Analysis:

Threats of New Entrants:

New entrants in Beverages - Soft Drinks brings innovation, new ways of

doing things and put pressure on PepsiCo, Inc. through lower pricing
strategy, reducing costs, and providing new value propositions to the
customers. PepsiCo, Inc. has to manage all these challenges and build
effective barriers to safeguard its competitive edge.
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How PepsiCo, Inc. can tackle the Threats of New Entrants:

 By innovating new products and services. New products not only

brings new customers to the fold but also give old customer a reason to
buy PepsiCo, Inc. ‘s products.
 By building economies of scale so that it can lower the fixed cost
per unit.
 Building capacities and spending money on research and
development. New entrants are less likely to enter a dynamic industry
where the established players such as PepsiCo, Inc. keep defining the
standards regularly. It significantly reduces the window of extraordinary
profits for the new firms thus discourage new players in the industry

Bargaining Power of Suppliers:

All most all the companies in the Beverages - Soft Drinks industry buy
their raw material from numerous suppliers. Suppliers in dominant
position can decrease the margins PepsiCo, Inc. can earn in the market.
Powerful suppliers in Consumer Goods sector use their negotiating power
to extract higher prices from the firms in Beverages - Soft Drinks field.
The overall impact of higher supplier bargaining power is that it lowers
the overall profitability of Beverages - Soft Drinks.

How PepsiCo, Inc. can tackle Bargaining Power of the Suppliers:

 By building efficient supply chain with multiple suppliers.

 By experimenting with product designs using different materials so
that if the prices go up of one raw material then company can shift to
another.
 Developing dedicated suppliers whose business depends upon the
firm. One of the lessons PepsiCo, Inc. can learn from Wal-Mart and Nike
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is how these companies developed third party manufacturers whose
business solely depends on them thus creating a scenario where these
third party manufacturers have significantly less bargaining power
compare to Wal-Mart and Nike.

Bargaining Power of Buyers:

Buyers are often a demanding lot. They want to buy the best offerings
available by paying the minimum price as possible. This put pressure on
PepsiCo, Inc. profitability in the long run. The smaller and more powerful
the customer base is of PepsiCo, Inc. the higher the bargaining power of
the customers and higher their ability to seek increasing discounts and
offers.

How PepsiCo, Inc. can tackle the Bargaining Power of Buyers:

 By building a large base of customers. This will be helpful in two

ways. It will reduce the bargaining power of the buyers plus it will
provide an opportunity to the firm to streamline its sales and production
process.
 By rapidly innovating new products. Customers often seek
discounts and offerings on established products so if PepsiCo, Inc. keeps
on coming up with new products then it can limit the bargaining power of
buyers.
 New products will also reduce the defection of existing customers
of Pepsico, Inc. to its competitors.

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Threats of Substitute Products or Services:

When a new product or service meets a similar customer needs in

different ways, industry profitability suffers. For example services like
Drop box and Google Drive are substitute to storage hardware drives.
The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the
industry.

How PepsiCo, Inc. can tackle the Treat of Substitute Products /

Services:

 By being service oriented rather than just product oriented.

 By understanding the core need of the customer rather than what
the customer is buying.
 By increasing the switching cost for the customers.

Rivalry among the Existing Competitors:

If the rivalry among the existing players in an industry is intense then it

will drive down prices and decrease the overall profitability of the
industry. PepsiCo, Inc. operates in very competitive Beverages - Soft
Drinks industry. This competition does take toll on the overall long term
profitability of the organization.

How PepsiCo, Inc. can tackle Intense Rivalry among the Existing
Competitors in Beverages - Soft Drinks industry:

 By building a sustainable differentiation

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 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather
than just competing for small market.

Implications of Porter Five Forces on PepsiCo, Inc.

By analyzing all the five competitive forces PepsiCo, Inc. strategists can
gain a complete picture of what impacts the profitability of the
organization in Beverages - Soft Drinks industry? They can identify game
changing trends early on and can swiftly respond to exploit the emerging
opportunity. By understanding the Porter Five Forces in great detail
PepsiCo, Inc.’s managers can shape those forces in their favor.

RATIO ANALYSIS AND

OBSERVATION

Liquidity Ratios
 Current ratios

Years 2018 2017 2016 2015 2014

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 Current ratio 0.98 1.51 1.25 1.31 1.14

“Current Ratio = Current assets / Current Liabilities.”

The current ratio analyzed on the liquidity position is to evaluate the current working
capital situation by obtaining the fraction of current assets to current liabilities. The
company's short-term assets should be readily accessible to reimburse off the
current liabilities. However, the ratio termed to be better if it is 2:1. However, as
analyzed in the case of the recent positioning of PepsiCo, as seen as in 2018, PepsiCo
Inc current ratio improved from 2016 to 2017 but then deteriorated significantly
from 2017 to 2018.

 Quick Ratios

Years 2018 2017 2016 2015 2014

Quick ratio 0.82 1.29 1.08 1.05 0.85

“Quick Ratio = Current Assets – Inventory – Prepaid Expenses / Current Liabilities.”

The quick ratio filters the current ratio by measuring the quantity of the fluid assets
that are easily converted into cash to cover the current liabilities easily and promptly.
However, the nature of quick ratio is more conventional than the current ratio as
excludes not only inventory but also prepaid expenses that are unnecessary
expenses to the company. As more the quick ratio, the better the short-term
positioning would be. In this case, PepsiCo is performing better.

 Cash Ratio
Years 2018 2017 2016 2015 2014

Cash ratio 0.50 0.95 0.76 0.68 0.48

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 “cash ratio =cash equivalent /current liabilities”

The cash ratio is another measurement of a company’s liquidity and their

ability to meet their short-term obligations . PepsiCo Inc.’s cash ratio improved
from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Capital Structure Ratios

 Debt-to-Equity Ratio

Years 2018 2017 2016 2015 2014

Debt to equity 1.94 3.04 2.65 2.40 1.35

“Debt-to-Equity Ratio = Total Liabilities / Shareholder’s Equity.”

Debt to equity ratio is to calculate the solvency position for the long term investment
such that it highlights that whether the company can mean its long-term obligations
or not. As defined, the debt-equity ratio should be 1:1 to define the nature of good
solvency position to the firm. As shown in the table, the debt to equity ratio is quite
high in the company. PepsiCo is not performing better in meeting its long-term
obligations.

Interest Coverage Ratio

Years 2018 2017 2016 2015 2014

Interest 7.03 9.34 7.37 8.67 10.63

coverage

“Interest Coverage Ratio = Net Income before Interest and Tax / Interest Expenses.”

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 The interest coverage ratio major objective is to examine whether the company can
meet its interest payments. The interest coverage ratio is an evaluation that defines
the amount of time a corporation could make the interest payments with its EBIT on
the debt accumulated. It establishes how effortlessly a business can pay interest
expenses on debt that stand to be outstanding. However if an interest coverage ratio
is less than 1or 1.5, then the company is questionable as it is not producing enough
capital to hand out its interest obligations. However, in this case PepsiCo is even
meeting its interest obligations.

Debt Ratio
Years 2018 2017 2016 2015 2014

0.34 0.33 0.32 0.32 0.33

Debt Ratio = total liablities / total assets

Company's debt coverage sequentially increased to 0.34, below company average. Due to
repayement of debt by -7.96%.

Efficiency/Turnover Ratios
 Asset Turnover Ratios

Years 2018 2017 2016 2015 2014

Assets turnover 0.83 0.79 0.85 0.905 0.945
ratio

“Asset Turnover Ratio = Sales / Average Total Assets.”

Current and historical asset turnover for PepsiCo (PEP) from 2014 to 2018. Asset
turnover can be defined as the amount of sales or revenues generated assets. The asset
turnover ratio is an indicator of the efficiency with which a company is deploying its
assets. In 2016, asset turnover ratio improved but then deteriorated significantly in 2017
but then recovered their assets in 2018.
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 Inventory Turnover Ratio

Years 2018 2017 2016 2015 2014

Inventory 9.67 10.15 10.37 9.68 9.43

turnover

“Inventory Turnover Ratio = Costs of Goods Sold / Average Inventory.”

Inventory Turnover ratio is to meet the inventory into sales. On the other hand, as
projected according to company more inventory turnover ratios across the years
which are not good for the business.

Profitability ratios

All profitability ratios are generated in percentage.

 Return on Assets

Years 2018 2017 2016 2015 2014

ROA 16.17% 6.15% 8.61% 7.8% 9.24%

“Return on Assets = (Net Income / Total Assets) * 100”

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 ROA shows how efficiently a company can convert the money used to
purchase assets into net income or profits. ... A positive ROA ratio usually
indicates an upward profit trend as well. PepsiCo Inc.’s ROA deteriorated from
2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

 Return on Equity

Years 2018 2017 2016 2015 2014

ROE 86.00 44.06 56.20 45.18 37.07

“Return on Equity = (Net Income / Stockholder’s Equity) * 100”

Return on equity can be defined as the amount of net income returned as a percentage
of shareholders equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders
have invested. PepsiCo Inc.’s ROE deteriorated from 2016 to 2017 but then
improved from 2017 to 2018 exceeding 2016 level.

 Gross Profit Ratio

Years 2018 2017 2016 2015 2014

Gross profit 54.56 54.66 55.05 54.43 53.15

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“Gross Profit Margin Percentage = (Net Income / Sales) * 100”

Gross margin ratio only considers the cost of goods sold in its
calculation because it measures the profitability of selling inventory.
Profit margin ratio on the other hand considers other expenses.
PepsiCo Inc.’s gross profit margin deteriorated from 2016 to 2017 and from
2017 to 2018.

 Operating Profit Margin

Years 2018 2017 2016 2015 2014

Operating profit 15.63 16.17 15.61 13.24 14.36

The operating profit margin ratio indicates how

much profit a company makes after paying for variable costs of
production such as wages, raw materials, etc. PepsiCo Inc.’s
operating profit margin improved from 2016 to 2017 but then
slightly deteriorated from 2017 to 2018 not reaching 2016 level.

 Net profit margin

Years 2018 2017 2016 2015 2014

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 Net profit margin 19.35 7.64 10.07 8.64 9.7

Net Profit margin = Net Profit ⁄ Total revenue x 100

Net Profit Margin (also known as “Profit Margin” or “Net Profit

Margin Ratio”) is a financial ratio used to calculate the percentage
of profit a company produces from its total revenue. It measures
the amount of net profit a company obtains per dollar of revenue
gained. PepsiCo Inc.’s net profit margin deteriorated from 2016 to 2017 but
then improved from 2017 to 2018 exceeding 2016 level.

Evaluation Ratio

 Price-to-Earnings Ratio

Years 2018 2017 2016 2015 2014

9.16 -1.08 16.01 -16.09 3.84

“Price-to-Earnings ratio = Price per share / Earnings per Share.”

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  Price-to-Earnings Ratio is calculated according to the reserve’s
reasonable market value by not only forecasting the future earnings per share
but also considering the future earnings that are expected to issue higher
dividends. Despite shareprice increase of 9.16 %, from beginning of IV. QuarterPepsico
Inc's current Price to earnings ratio has contracted due to eps growth of 0 %, to Pe
of 13.84, from average Price to earnings ratio in III. Quarter of 32.19.

 Dividend Yield

Year 2018 2017 2016 2015 2014

Dividend 20 40 30 30 20
yield

“Dividend Yield = Dividend / Price per Share.”

The dividend yield is a financial ratio that measures the amount of cash
dividends distributed to common shareholders relative to the market value
per share. The dividend yield is used by investors to show how their
investment in stock is generating either cash flows in the form of dividends
or increases in asset value by stock appreciation. Dividend Yield is generated
to calculate the investment's productivity. In 2016 better then they improved in 2017
but then deteriorate in 2018 due to loss.

 Dividend Payout Ratio

Years 2018 2017 2016 2015 2014
39.41 92.01 66.77 75.27 57.14

“Dividend Payout Ratio = Dividend / Net Income”

Dividend payout ratio deals the proportion of distribution given to shareholders from
the net income in the type of dividends through the year. As seen in the dividend

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payout ratio, the investor will invest in PepsiCo as the dividend payout is more and
consistent. However, if studied across the year, PepsiCo would be a good investment.

CASH CONVERSION CYCLE

Receivable turnover
Years 2018 2017 2016 2015 2014

Rec turnover 10.75 10.89 11.21 11.15 11.12

Receivable turnover = Net credit sales/ avg sales

Accounts receivable turnover ratio measures the effectiveness of a company in

extending credit and collecting debts. It is an activity ratio that measures how
efficiently a firm uses its asset. In 2017 to 2018 decreasing level .

Fixed assets turnover

Years 2018 2017 2016 2015 2014

Fixed asset 3.71 3.76 3.82 3.76 3.72

Fixed asset turnover= Net sales/Avg net fixed assets

The fixed asset balance is used as a net of accumulated depreciation. In general, a
higher fixed asset turnover ratio indicates that a company has more effectively
utilized investment in fixed assets to generate revenue. PepsiCo would be a better
utilization of fixed assets. Pepsico fixed asset turnover ratio improved in 2016 as
compare to next two years.

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 BALANCE SCORE CARD
EXTERNAL FACTOR EVALUATION
(EFE) MATRIX

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Total 0.45 0.72
Grand total 1.00 2.38

External Factor Evaluation (EFE) Matrix holds the information of two lists
which are important to the company. These lists are identified as
Opportunities and Threats. These factors inside this matrix are rated
from 1 to 4, where 1 is the lowest and 4 is the highest. The total score of
2.38 is below average of 2.50. This means that PepsiCo is currently not
responding very well to existing Opportunities and Threats. It also shows

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that PepsiCo should improve their response towards the environment in
a more positive way.

INTERNAL FACTORS EVALUATION (IFE)

MATRIX

Internal Factor Evaluation (IFE) Matrix holds the information about the
internal position of a company. This internal position consists of
Strengths and Weaknesses. These factors inside this matrix are rated
from 1 to 4, where 1 is the lowest and 4 is the highest. Like its IFE matrix,
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 PepsiCo is also below average with the score of 2.36. This means that
PepsiCo doesn’t really know their current strengths and weaknesses,
although they know, they didn’t use them effectively.

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