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Essay on Pepsico in Mexico
Problem
This case describes the complexity of PepsiCo's competitive position in the Mexican softdrink market in late 1996. 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 its traditional "red nemesis," Coca-Cola. The various dimensions of PepsiCo's strategy -- marketing, management, financial, strategic -- are all seen 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 market share. The continuing battles or wars between Coca-Cola and Pepsi show how financing cash flows can threaten even healthy operating cash flows, and how a troublesome capital structure can threaten the ability of a global firm to implement a corporate strategy for increased market penetration.
Potential Solutions
In March 1993, concurrent with the adoption process of NAFTA, PepsiCo undertook a $750 million investment initiative in Mexico. The $750 million would be used over the next five years to bolster bottling and marketing efforts, recapitalize operations, and update bottlers with the latest technology. This would cut into Coca-Cola’s dominant Mexican market share. PepsiCo believed the key to taking market share from Coke was in packaging. The returnable package was the cheaper delivery vehicle for the product. But if Mexico was industrializing rapidly, and more of its high soft drink consuming populace grew increasingly affluent, the desire of the affluent for convenience would grow. The convenient package was the slightly higher cost, nonreturnable package, the nonreturnable plastic bottle that Pepsi was thinking of.
Problem Solving
The fall of the Mexican peso brought great losses to Pepsico and a quick strategy was needed.....
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Total words: 947
Total reference: 4
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