Pepsi Strategic and Competitive Analysis - 3201 Words

Pepsi (PEP) Symbol: PEP Exchange: NYSE Industry: Processed Packaged Goods Sector: Consumer Goods Purchase Price: $43.12 Purchase Date: December 2002 52week High $78.09 52week Low $61.89 Initial Floor 2 $74.26 Trailing Floor 3 $77.87 Beta N/A Market Cap $123.11 billion Shares Outstanding 1.61 billion Dividend Yield 1.50% P/E Ratio 20.49 Competitor #1 Coca-Cola (KO) Competitor #2 Cadbury Schweppes (CSG) Type of Security: Large Cap Growth Predicted Shareholder Return 1 year: 14.1% Past 5 years: 34.53% Past 10 years: 128% Predicted Annual Return: 14.9% Strategic and Competitive Analysis The first point of analysis which should be examined when using Porter’s five forces is the competition within the industry. Pepsi has varying†¦show more content†¦The company developed the S.M.A.R.T lifestyle program, involving five steps to a healthier living, and plans to build 12 Smart Spot playgrounds in inner city locations across the country. Pepsi’s broad strategy of meeting customer’s changing wants and desires will be successful. However, each specific new product or product development depends on Pepsi’s ability to identify, gauge, and properly assess changing environments. Pepsi appears to be going in the right direction by shifting their focus from carbonated to noncarbonated beverages as well as by focusing on healthier alternatives. Pepsi’s second main strategy is to grow and expand internationally. There is more room for growth internationally due to emerging foreign markets, including Asia and India. Pepsi has proven a success in the international arena and should continue to develop. International sales have greatly increased the value of Pepsi, as a decline in US currency brings higher exchange rates for international business. Pepsi’s focus on their international businesses has paid them well during a market correction, which has stemmed from massive deferrals on adjustable-rate mortgages. Pepsi’s main competitor in the drink business is Coca Cola and in the snack market the major competitors are Proctor and Gamble and General Mills. The nonalcoholic beverage industry is maturing but is deep in stiff competition. It has a history of price wars. Pricing,Show MoreRelatedEnviromental Scanning1269 Words   |  6 PagesFritch Environmental scanning Coco-Cola and Pepsi are two major competitors in the beverage industry but each company is working on being different even though each company has similar products. Both companies are very popular and each company needs to develop and maintain a competitive edge that will help one or the other stay above the other. To gain a competitive edge, measurement guidelines need to be implemented to make sure that strategic planning is effective and to confirm that the planRead MoreCoca Cola And The Carbonated Soft Drink1674 Words   |  7 Pagesyears. The new industry environment created intense competition among CSD businesses which required the need for new strategies to be formulated and implemented to be a top competitor in the environment. Strategic Issue How can Coke gain competitive advantage over Pepsi? In order to gain competitive advantage, some underlying issues need to be addressed, such as, what should be done to support sales as the consumption of CSDs is declining due to the increasing trend in the availability of substituteRead MoreCase Study Coke vs Pepsi Essays1332 Words   |  6 Pagesdy Managerial Economics Coke vs. Pepsi: An Economic Analysis Rebecca Simmons Managerial Economics Dr Sol Drescher December 4, 2012 Executive Summary In this case study we will do an economic analysis of two major competitors; Coke ® and Pepsi ®. We will look at the history of these to competitive giants and discuss how they have evolved over the years to become rivals in the 21st Century. In this case study weRead MorePepsico: Alternative Beverage Market Case962 Words   |  4 PagesStrategic Management E-Case: Alternative Beverage Market Analysis of the Global Specialty Beverage Industry The industry in which PepsiCo produces and distributes its specialty beverages is vast and ever changing. With sales of carbonated soft drinks declining the past five years in a row, PepsiCo needed to look elsewhere to stimulate growth in its core business. PepsiCo thought it had found this growth in the alternative beverage industry. Pepsi expanded its line of beverage to includeRead MoreEssay about Pepsi Cola Marketing Strategy506 Words   |  3 PagesPepsi Cola Marketing Strategy PEPSI COLA For Pepsi Cola Ltd, marketing opportunity analysis is a continual and ongoing process. Pepsi have used the new- product strategy to realise their ambitions to both defend their current market position, and reinstate their position as a product innovator. 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SBU are usually a completely independent small business entity having higher functional as well as decision autonomy. Depending on the level of autonomy SBUs may sometimes need to work closely with parent company. SBUs can use as

Essay about Solutions to Valuation Questions - 1712 Words

Solutions to Valuation Questions 1. Assume you expect a company’s net income to remain stable at $1,100 for all future years, and you expect all earnings to be distributed to stockholders at the end of each year, so that common equity also remains stable for all future years (assumes clean surplus). Also, assume the company’s ÃŽ ² = 1.5, the market risk premium is 4% and the 20-30 year yield on risk free treasury bonds is 5%. Finally, assume the company has 1,000 shares of common stock outstanding. a. Use the CAPM to estimate the company’s equity cost of capital. †¢ re = RF + ÃŽ ² * (RM – RF) = 0.05 + 1.5 * 0.04 = 11% b. Compute the expected net distributions to stockholders for each future year. †¢ D = NI – ΔCE = $1,100 – 0 = $1,100 c. Use the†¦show more content†¦Ã¢â‚¬ ¢ Pe = D1/(re – g) = 700 / (0.11 – 0.05) = $11,667 †¢ price per share = $11,667 / 1,000 = $11.67 3. Same facts as (2) above, except the 5% income growth rate (and beginning of year common equity to support it) are only expected for years 2 and 3. Then growth is expected to be zero and all income is expected to be distributed to shareholders for all future years. a. Compute D1, D2, D3, and Dt for all future years. †¢ Keeping in mind that income is $1,100 in year 1, increases by 5% in years 2 and 3, and then remains constant for all future years; and keeping in mind that beginning of year 1 common equity is $8,000, increases by 5% at the beginning of year 2 and at the beginning of year 3, but does not increase at the beginning of year 4 and remains constant from that point forward, you should be able to compute: D1 = $700, D2 = $735, and Dt = 1,212.75 for D3 and all future years. b. Use the dividend discount (i.e., free cash flow to equity investors) valuation model to estimate the company’s current stock price. Pe = 700/(1+ 0.11) + 735/(1+ 0.11)2 + [1,212.75/0.11]/(1+ 0.11)2 = $10,175.31 and the price per share of common stock = $10,175.31 / 1,000 = $10.18. 4. Same facts as (3) above, except the growth rates are 5% for years 2 and 3 and then 3% perpetually for all future years. a. Compute D1, D2, D3 and the growth in D for all future years. †¢ Keeping in mind that income is $1,100 in year 1, increases by 5% in years 2Show MoreRelatedAnalysis of Intel and Ebay1159 Words   |  5 PagesJames Stewart’s assessment of eBay reflects any biases (3 marks). 3. In what ways are the events described at Intel and eBay similar and in what ways are they different (4 marks)? Question # 1 Brandt Cornell’s paper â€Å"Is the response of analyst to information consistent with fundamental valuation?† reveals that analyst recommendations are pro cyclical. 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Assume you expect a company’s net income to remain stable at $1,100 for all future years, and you expect all earnings to be distributed to stockholders at the end of each year, so that common equity also remains stable for all future years (assumes clean surplus). Also, assume the company’s ÃŽ ² = 1.5, the market risk premium is 4% and the 20-30 year yield on risk free treasury bonds is 5%. Finally, assume the company h as 1,000 shares of common stock outstanding.

Bowles-Simpson Essay Free Essays

Bowles-Simpson Proposal Essay By the year 2012, the American economy has crossed through large paths of downfall and unsustainability. Many aspects of such inconsistency surround this issue; foreign debt, public spending, and real state price drops are some facts that indicate an unstable economy. Furthermore, current president of the United States Barack Obama has approved a plan that will help stabilize the economy in the long run; this plan has targeted to reduce the federal deficit by cutting spending and raising taxes. We will write a custom essay sample on Bowles-Simpson Essay or any similar topic only for you Order Now Moreover, this plan was introduced in 2010 by co chairs Alan Simpson and Erskine Bowles of President Barack Obama’s deficit commission as stated above, to raise the economy in the long run. As of now, revenue isn’t much of a problem, but spending is. Since debt is rising due to spending (taking only this example), the private sector is put in risk of being put out of the market. This would affect small businesses, which are a strength in the American economy since they will not be able to grow and create more jobs, which simultaneously helps the economy. Indeed, the goal of this plan is to reduce deficit to 2. 2% of the gross domestic product by 2015, reduce deficit growth between now and 2020 by 3. 8 trillion dollars, and reduce debt as percentage of GDP to 40% by 2037. All this is being linked with the reduction of spending and tax rises. Accordingly, this plan induces a huge tax reform due to the fact that the current tax rates would be modified. In addition, the alternative minimum tax would be eliminated, as well as the child tax credit and the mortgage interest deduction. It is calculated that if this is taken in mind, there would be a deduction of $ 1. 1 of tax expenditures and in should increase tax revenues. Consequently, it seems that eliminating the mortgage interest deduction would mark a difference positively since it is one of the key elements funding an overemphasis on homeownership in the United States. On the other hand, eliminating the health insurance deduction would cause a healthcare reform. That deduction is actually a pillar of the current employer-based health insurance system. Thus, removing this deduction will orce families move on into the individual health insurance market, if no other adjustments are done. Meanwhile, the proposal expects to raise the cap on taxable wages through 2050 to cover 90 % of all national wages. This would simultaneously increase the program’s revenues and would also increase the total payments going out. Moreover, one thing that the Bowles-Simpson plan aims for revenues to be capped at 21 % of GD P and spending to be brought down to the same level. Such target is actually a redundant number. In order to achieve these cuts, some tactics have been put in the table. One item that increases the revenues in the plan is its provision to include newly hired state and local workers after 2020. This would in the near term tap more tax revenue for the system and in the long run would obligate additional benefit payments. Also, this provision does not contribute to long-term Social Security sustainability. If it were dropped, then the plan would tilt in the direction of cost containment over almost any time period measured. Medicare takes a big part in the proposal since the idea is to hold growth of federal health spending to growth of GDP by 1 %. Such cuts are proposed by paying less to doctors, as well as drug companies, and health care providers. Nevertheless, a reform on social security has put in place as well, and it is to add minimum benefits for minimum wage workers to ensure that they are above the poverty level. In other words, the plan aims to ensure that no one retires into poverty after a full working career. On the other hand, this does not reduce cost but it actually increases them. The plan to reduce costs is to make a balance under the benefits by offering fewer benefits for the more wealthy being. Such action will change the current social security; savings plans will no longer be at a long term for individuals, but a more or less direct welfare program. Hence, the Bowles-Simpson proposal is indeed a fairly tax increase and highly progressive, not to forget that the main goal of this proposal is to eliminate almost all tax expenditures. Putting the numbers on the table, in 2015, the lowest earners would face an average cut in their after-tax income of 3. 4 percent or about $ 400. For middle-income households, there would be a cut of 4 percent on their after-tax income. And on the top of the mountain, while will be cataloged as the highest earners, they would lose about 5. 3 % or about $ 70,000. It seems that the numbers do not lie; the low-income households and the top income households would be hit by a tax increase, while the upper middle class would have a small tax cut of 1 percent. In conclusion, this plan is a step forward with a few points, which I disagree. First, the measurements on tax rates seem fairly reasonable but it does not seem to mark a tax reform. The tax code is still under its same complexity. It looks like it would bring revenue, but there are still politics to be discussed. Additionally, it does not seem to specify that tax cuts be used to eliminate national debt. On the other hand, it proposes to cut on health care spending since health care costs are pretty high, which simultaneously brings more national debt. As well, I think the proposal have some kind of gaps, but there is also a debate between republicans and democrats, to see if there is a balance in between both sides since republicans do not really like the idea of tax increases, and democrats are unhappy about the spending caps. How to cite Bowles-Simpson Essay, Essay examples

Bowles-Simpson Essay Free Essays

Bowles-Simpson Proposal Essay By the year 2012, the American economy has crossed through large paths of downfall and unsustainability. Many aspects of such inconsistency surround this issue; foreign debt, public spending, and real state price drops are some facts that indicate an unstable economy. Furthermore, current president of the United States Barack Obama has approved a plan that will help stabilize the economy in the long run; this plan has targeted to reduce the federal deficit by cutting spending and raising taxes. We will write a custom essay sample on Bowles-Simpson Essay or any similar topic only for you Order Now Moreover, this plan was introduced in 2010 by co chairs Alan Simpson and Erskine Bowles of President Barack Obama’s deficit commission as stated above, to raise the economy in the long run. As of now, revenue isn’t much of a problem, but spending is. Since debt is rising due to spending (taking only this example), the private sector is put in risk of being put out of the market. This would affect small businesses, which are a strength in the American economy since they will not be able to grow and create more jobs, which simultaneously helps the economy. Indeed, the goal of this plan is to reduce deficit to 2. 2% of the gross domestic product by 2015, reduce deficit growth between now and 2020 by 3. 8 trillion dollars, and reduce debt as percentage of GDP to 40% by 2037. All this is being linked with the reduction of spending and tax rises. Accordingly, this plan induces a huge tax reform due to the fact that the current tax rates would be modified. In addition, the alternative minimum tax would be eliminated, as well as the child tax credit and the mortgage interest deduction. It is calculated that if this is taken in mind, there would be a deduction of $ 1. 1 of tax expenditures and in should increase tax revenues. Consequently, it seems that eliminating the mortgage interest deduction would mark a difference positively since it is one of the key elements funding an overemphasis on homeownership in the United States. On the other hand, eliminating the health insurance deduction would cause a healthcare reform. That deduction is actually a pillar of the current employer-based health insurance system. Thus, removing this deduction will orce families move on into the individual health insurance market, if no other adjustments are done. Meanwhile, the proposal expects to raise the cap on taxable wages through 2050 to cover 90 % of all national wages. This would simultaneously increase the program’s revenues and would also increase the total payments going out. Moreover, one thing that the Bowles-Simpson plan aims for revenues to be capped at 21 % of GD P and spending to be brought down to the same level. Such target is actually a redundant number. In order to achieve these cuts, some tactics have been put in the table. One item that increases the revenues in the plan is its provision to include newly hired state and local workers after 2020. This would in the near term tap more tax revenue for the system and in the long run would obligate additional benefit payments. Also, this provision does not contribute to long-term Social Security sustainability. If it were dropped, then the plan would tilt in the direction of cost containment over almost any time period measured. Medicare takes a big part in the proposal since the idea is to hold growth of federal health spending to growth of GDP by 1 %. Such cuts are proposed by paying less to doctors, as well as drug companies, and health care providers. Nevertheless, a reform on social security has put in place as well, and it is to add minimum benefits for minimum wage workers to ensure that they are above the poverty level. In other words, the plan aims to ensure that no one retires into poverty after a full working career. On the other hand, this does not reduce cost but it actually increases them. The plan to reduce costs is to make a balance under the benefits by offering fewer benefits for the more wealthy being. Such action will change the current social security; savings plans will no longer be at a long term for individuals, but a more or less direct welfare program. Hence, the Bowles-Simpson proposal is indeed a fairly tax increase and highly progressive, not to forget that the main goal of this proposal is to eliminate almost all tax expenditures. Putting the numbers on the table, in 2015, the lowest earners would face an average cut in their after-tax income of 3. 4 percent or about $ 400. For middle-income households, there would be a cut of 4 percent on their after-tax income. And on the top of the mountain, while will be cataloged as the highest earners, they would lose about 5. 3 % or about $ 70,000. It seems that the numbers do not lie; the low-income households and the top income households would be hit by a tax increase, while the upper middle class would have a small tax cut of 1 percent. In conclusion, this plan is a step forward with a few points, which I disagree. First, the measurements on tax rates seem fairly reasonable but it does not seem to mark a tax reform. The tax code is still under its same complexity. It looks like it would bring revenue, but there are still politics to be discussed. Additionally, it does not seem to specify that tax cuts be used to eliminate national debt. On the other hand, it proposes to cut on health care spending since health care costs are pretty high, which simultaneously brings more national debt. As well, I think the proposal have some kind of gaps, but there is also a debate between republicans and democrats, to see if there is a balance in between both sides since republicans do not really like the idea of tax increases, and democrats are unhappy about the spending caps. How to cite Bowles-Simpson Essay, Essay examples