1. Section 5 Corporate Level Strategy: Creating Value through Diversification

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

6. Snack Foods Frito-Lay North America Lay’s Ruffles 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

7. 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

8. 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

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

10. Beverages Gatorade/Tropicana North America Gatorade Propel Tropicana Dole juices

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

12. 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

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

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

15. Where did they go?

29. Acquisitions Reasons of Acquisitions Increase Market Power Overcome Entry Barriers Increased Speed Lower Risk Avoid Competition

30. Acquisitions Reasons of Acquisitions Increase Market Power Overcome Entry Barriers Increased Speed Lower Risk Avoid Competition Problems with Acquisitions Integration of two firms Overpayment/Debt Overestimation of Synergy Overdiversification Managerial energy absorption Become too large Substitute for innovation

31. Acquisitions Reasons of Acquisitions Increase Market Power Overcome Entry Barriers Increased Speed Lower Risk Avoid Competition Problems with Acquisitions Integration of two firms Overpayment/Debt Overestimation of Synergy Overdiversification Managerial energy absorption Become too large Substitute for innovation Results Poor Performance Who Wins? Acquired Firm Shareholders

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

42. 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

44. 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

49. Growth Rate Relative Market Share Stars Question Marks Cash Cows Dogs Boston Consulting Group Matrix

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

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

52. Competitive Strengths Attractiveness Invest Grow Low High Low High Harvest Divest Hold GE 9 Cell Matrix

53. Competitive Strengths Attractiveness Low High Low High GE 9 Cell Matrix for Pepsico Soft Drinks Snack Foods

54. GM provides health care for 1.1 million workers and retirees, which adds about $1,500 to the average cost of every vehicle it sells in the U.S. For 2005, GM has forecast $5.6 billion in health-care costs, up about $1 billion from 2004. It has blamed its recent fall in profit on the rising cost of providing medical care for workers and retirees.

55. United does offer more space in its Economy Plus seats. But only travelers who pay full fare or who are elite members of the miles program can get them. Its regular economy-class seats measure in at 31 inches of seat pitch.

61. -74.7% 31.7M Scott McNealy, Sun Microsystems -75.4% 38.2M Pat Russo, Lucent -27.7 54.8M John Chamber, Cisco -27.3% 68.5M David Cote, Honeywell -34.6 78.1M Steve Jobs, Apple