International Finance Paper

1329 words - 6 pages

International Finance Paper
FIN/419
International Finance Paper
Pepsico is one of the truly global organizations in the world with presence in many countries and offering products which are not only unique but carry a great brand value . Since Pepsi Co works in a global environment therefore its strategy is also global and focuses on achieving the strategic objectives of the firm with great greater emphasis on creating
a unique set of strategies which are as applicable as they are in one country . Pepsico universally acknowledged as one of the world’s most successful companies of consumer products. Enormous awards have gone in the worlds. In 2009, Pepsico is ranked 175 in the Fortune’s. ...view middle of the document...

The goal for both companies was to gain market share and by the end of 1996, Coca-Cola had clearly won the Latin America cola war. In 1993 PepsiCo enjoyed a 42% market share in Venezuela thanks to the success of its bottling partner, the Cisneros Group but by the end of 1996, PepsiCo held less than 1% of the Venezuelan cola market. Following PepsiCo's anchor bottler in Mexico, Gemex, the case details the strategies employed by PepsiCo's senior management beginning in 1993 to expand its market share versus Coca-Cola. The various dimensions of PepsiCo's strategy -- marketing, management, financial, strategic - seemed to have deteriorated in the aftermath of the unexpected fall in the Mexican peso in December 1994. Focusing on the financial implications of the peso devaluation, the case then describes PepsiCo's response, which only seemed to increase the financial burdens imposed on the faltering Pepsi PepsiCo entered the Latin American market with a similar strategy to that of Coca-Cola which was to increase control over local and regional bottlers and create a "super bottler". By investing in technology and infrastructure, both felt these investments would lower costs and thereby increase price competitiveness. However, by the end of 1996 it was very clear that PepsiCo and its super bottler affiliate Gemex had made a series of poor decisions that allowed them to lose a substantial share of the Latin American market to Coke.
PepsiCo intended to simultaneously infuse a substantial amount of capital into each super bottler operation but that was not successfully executed in Mexico. PepsiCo did not take equity interest in Gemex in 1993, which was one of the main points in their strategy to take market share away from Coca-Cola in Mexico. They had seriously underestimated the role of Enrique Molina and the Molina Families business relationships within the Mexican market and their very strong and growing position on the Mexico soft-drink market. After several proposal negotiations, Mr. Molina had very strong feelings against giving PepsiCo a look at his family's business and therefore rejected PepsiCo's proposal. The objective of gaining a strong super bottler in the Mexican soft-drink market had failed.
In addition, another mistake PepsiCo made was not taking more than a 10% to 20% stake in the main PepsiCo bottler, the Cisneros Group in Venezuela. Coca-Cola took advantage of this mistake and offered and then bought 50% stake in the Venezuelan bottler for $500 million United States Dollars (USD) (Moffett, M., & Soto, T., 1996). Turned out to be the right decision for Coca-Cola.
The regulatory bodies greatly affect the financial decision-making of Pepsico.  For example, in 2010, the Board of Directors and the CEO worked together to decide on increasing their dividend by seven percent.  This is because from 2005 to 2008, the company sold over $28 billion dollars of Pepsi products to the world.  However, when it comes to finances, corporate...

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