In the case study, PepsiCo is considering in Carts of Colorado and/or California Pizza Kitchen. Senior Management is faced with the question of whether the necessary capital investment in order to purchase one or both of the businesses can be profitable for each of the acquired businesses, but must also take into consideration that the additional business units will not hinder the profitability PepsiCo itself. Would investing in other companies be the best way to expand PepsiCo? This question is important because it could affect the success of the company. By investing in a company PepsiCo started from Pepsi-Cola and then moved into a more diversified business with mainly soft drinks, snack foods and restaurants.
In early 1990s, PepsiCo’s restaurant business is composed of Pizza Hut, Taco Bell and KFC, all of them are business leaders in their segment. 1By investing in C1a1r1t1s1 1o1f1 1C1o1l1o1r1a1d1o1, it1 1w1o1u1l1d1 1e1n1a1b1l1e1 1P1e1p1s1i1C1o1 1t1o1 1e1n1t1e1r1 1n1e1w1 1m1a1r1k1e1t1 1a1n1d1 1n1e1w1 1c1u1s1t1o1m1e1r1s1 1a1n1d1 1h1e1l1p1 1t1o1 1a1c1c1e1l1e1r1a1t1e1 1t1h1e1 1s1a1l1e1s1 1g1r1o1w1t1h1 1b1e1s1i1d1e1s1 1o1f1 1o1r1g1a1n1i1c1 1g1r1o1w1t1h. The Cart of Colorado’s (COC) industry is subject to strict government regulations and the uncertain demand for carts and kiosks, so the attractiveness to enter this industry is between low and medium. COC had succeeded in purchasing their largest competitor that generated sales of $2.5 million in 1990, which gives them potential to grow in the manufacturing and merchandising of mobile food carts and kiosks industry.
PepsiCo will gain competitive advantage for its link with COC because it will be able to customize the carts and kiosk for its fast food chain; it is more aligned with PepsiCo’s current strategies of quick service. However, the tradeoff will be PepsiCo may focus on too many different strategies and product markets. Focusing on the same customer targets can minimize this tradeoff. It will be an advantage for PepsiCo should go and form a strategic alliance with COC. PepsiCo can use the carts to expand their KFC, Taco Bell, and Pizza Hut businesses. In my opinion, I think it would be in PepsiCo’s best interest to invest in the two companies because in this case they are both successful and would help boost PepsiCo sales.