PepsiCo's Restaurants Case Analysis

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PepsiCo Case Analysis
Introduction
The case depicts a scenario where PepsiCo evaluates its options concerning whether or not to acquire Carts of Colorado (CoC) and California Pizza Kitchen (CPK).
Main Problem Analysis
Pepsi comprises three primary segments: restaurants (36 percent of PepsiCo’s sales and 26 percent of its operating revenues), snack foods (29 percent of PepsiCo’s sales and 35 percent of its operating revenues), and soft drinks (35 percent of PepsiCo’s sales and 39 percent of its operative revenues in 1991) (PepsiCo Restaurant Case, pg. 4). The company seeks to exploit its competitive advantages by incorporating CPK and CoC into its portfolio. That said, the primary problem entails deciding whether it could buy and manage the two firms successfully.
Recommendations
PepsiCo is highly diversified as nearly 30 percent of its revenues are split between its three primary industrial categories. PepsiCo’s business-level strategy and positioning are anchored on shared managerial competencies and resources. In this way, market diversification by acquiring CoC and CPK appears an excellent strategic option on the surface as it would improve the firm’s economies of scale. However, the evidence does not support PepsiCo's decision to acquire CPK and CoC, as depicted in the arguments delineated below.
Recommendation Justification
Business-level strategy decisions are coordinated, and integrated commitment and actions tailored to create value and gain competitive advantage by utilizing the individual firm’s products markets (Rothaermel 195). This triggers the rationale that PepsiCo is a lucrative and competitive company that does not need to acquire CPK to remain profitable. From 1987 to 1991, PepsiCo’s sales revenues doubled, incomes from business operations increased at a compound rate of over 20 percent, and its stock market value tripled (PepsiCo Resta...