Chapter 9Chapter 9

DiversificationDiversification

Snack Foods Beverages

Foods

Frito-Lay North AmericaFrito-Lay International

Pepsi-Cola North AmericaGatorade/Tropicana North AmericaPepsiCo Beverages International

Quaker North America

Snack Foods

Frito-Lay North America

Lay’sRuffles DoritosSantitasFritos CheetosRold Gold

Funyuns Sunchips Cracker Jack Chester’s popcornGrandma’s cookiesMunchos Smartfood Baken-ets fried pork skinsOberto meat snacks

Snack Foods

Frito-Lay International

Bocabits wheat snacksCrujitos corn snacksFandangos corn snacksHamkas snacksNiknaks cheese sticksQuavers potato snacksSabritas potato chips Twisties cheese snacks

Walkers potato crispsWalkers Square potato snacksWalkers Monster Munch Corn snacks Miss Vickie’s potato chipsGamesa cookiesDippasSonric’s sweet snacks

Snack Foods

Frito-Lay International

Bocabits wheat snacksCrujitos corn snacksFandangos corn snacksHamkas snacksNiknaks cheese sticksQuavers potato snacksSabritas potato chips Twisties cheese snacks

Walkers potato crispsWalkers Square potato snacksWalkers Monster Munch Corn snacks Miss Vickie’s potato chipsGamesa cookiesDippasSonric’s sweet snacks

Beverages

Pepsi-Cola North America

Pepsi-ColaMountain DewSliceMugSierra MistFruitWorks

Lipton Dole Aquafina Frappuccino SoBe AMP

Beverages

Gatorade/Tropicana North America

GatoradePropelTropicanaDole juices

Beverages

PepsiCo Beverages International

Loóza juices and nectarsCopella juicesFrui’Vita juicesTropicana 100 juices

Foods

Quaker North America

Quaker OatsCap’n Crunch cerealLife cerealQuisp cerealKing Vitaman cerealMother’s cereal

Quaker rice cakes and granola barsRice-A-Roni side dishesNear East couscous/pilafsAunt Jemima mixes & syrupsQuaker grits

Foods

Quaker North America

Quaker OatsCap’n Crunch cerealLife cerealQuisp cerealKing Vitaman cerealMother’s cereal

Quaker rice cakes and granola barsRice-A-Roni side dishesNear East couscous/pilafsAunt Jemima mixes & syrupsQuaker grits

Business Level Strategies

How are we going to compete and gain a competitive advantage in each of our businesses?

Snack Foods Beverages

Foods

Corporate Level Strategy1) What businesses do we want to compete in?2) How do manage effectively across businesses

Where did they go?Where did they go?

Goals of Corporate StrategyGoals of Corporate Strategy

Moves to enter new businessesMoves to enter new businesses

Boosting combined performance of the Boosting combined performance of the businessesbusinesses

Capturing Capturing synergiessynergies and turning them and turning them into competitive advantagesinto competitive advantages

Establishing investment priorities and Establishing investment priorities and steering resources into business unitssteering resources into business units

4 Conditions of Successful 4 Conditions of Successful DiversificationDiversification

• 1) Growing industries with complementary 1) Growing industries with complementary products and technologiesproducts and technologies• Apple IPhoneApple IPhone

• 2) Leverage existing capabilities which 2) Leverage existing capabilities which match the KSFs in other arenasmatch the KSFs in other arenas• Disney Cruise LinesDisney Cruise Lines

• 3) Closely related moves which reduce costs3) Closely related moves which reduce costs• Kroger & Fred MeyerKroger & Fred Meyer

• 4) Powerful brand and reputation4) Powerful brand and reputation• Marguerittaville, NASCAR Café, or Emril’sMarguerittaville, NASCAR Café, or Emril’s

When/Why to Diversify?When/Why to Diversify?

To create shareholder valueTo create shareholder value

Porter’s Three Point TestPorter’s Three Point Test

1) Attractiveness Test1) Attractiveness Test

2) Cost of Entry Test2) Cost of Entry Test

3) Better off Test3) Better off Test

Should pass all 3Should pass all 3

Related Diversification at Related Diversification at DisneyDisney

Entertainment/Production

Theme Parks

Resorts

Entertainment/Broadcasting

Cruise Lines

Retailing

Levels of Diversification

Related Diversification - entering product markets that share some resource or capability requirements with the current business – horizontal relationships across businesses – synergies. Overlap in value chain activities.

Advantages of related diversification include: Leveraging Core Competencies Sharing Activities Market Power