Trident University Module 3 PepsiCo Strategic Choices Paper

Module 3 – Background
STRATEGIC CHOICES
In Module 3, we will concentrate our efforts on strategic alternatives at the corporate, business, and functional levels. Companies follow strategies at each of these levels, as well as at the global level.
At the functional level, strategies are short term in nature, and refer to company functions such as marketing, manufacturing, materials management, customer service, and R&D.
At the business level, strategies are of medium range. They include the company’s market positioning, geographic locations, and distribution channels.
At the corporate level, strategies are long term, and include options such as horizontal and vertical integration, diversification, strategic alliances, and mergers and acquisitions (M&A).
Click on the link for a presentation on Strategic Choices by Professor Anastasia Luca.
COMPETITIVE ADVANTAGE
In this module, we will focus on the strategic options available to companies at the business level. Companies select business strategies to obtain Sustained Competitive Advantage (SCA) against competitors. Read about SCA here:
Competitive advantage (2007). Quick MBA. Retrieved on August 29, 2014, from http://www.quickmba.com/strategy/competitive-advantage/
SCAs are advantages that cannot be easily copied or imitated by competitors. A few years ago, strategists talked in terms of Porter’s generic strategies (basically cost and differentiation). Read about Porter’s generic strategies here:
Porter’s generic strategies. (2007). Quick MBA. Retrieved on August 29, 2014, from http://www.quickmba.com/strategy/generic.shtml
Today, we have four distinct strategies we use to analyze strategic options, although there are various approaches to achieving these strategies. They are:
Cost Leadership
Differentiation
Niche/Focus
Preemptive Move (or first-mover advantage)
COST LEADERSHIP
Most people think of economies of scale when they think of low-cost strategies. McDonald’s and Wal-Mart notwithstanding, high volume is not the only way to achieve low prices. Here are some other approaches to implementing a low-cost strategy:
No frills: Southwest Airlines eschewed big airports and cut costs by flying to smaller airports. Competitors such as Delta and American were too heavily invested in the hub business model to change.
Product design: Masonite developed an alternative to expensive wood products by using sawdust and woodchips. Telecommunications companies now “bundle” their products, offering cable/satellite TV, high-speed Internet and telephone service for one low price. Hershey’s shrank the chocolate bar to keep from raising its low price.
Operational economies: Companies can save money by eliminating high costs in the value chain. For example, a company such as Amazon can reduce its costs by reducing the rate of customer returns. Clearly, mass sales or mass production serve to increase economies of scale as the company’s operations become increasingly efficient.
Economies of Scale: With higher sales, fixed costs such as R&D, overhead, advertising, and even legal support can be spread over a larger revenue base.
Experience: Costs decline at a predictable rate with a firm’s accumulated experience. Such declines are attributed to the learning curve, technological improvements, and product redesign resulting in product and process efficiencies.
Here is another way of looking at low-cost strategies:
Scilly, M. (2015). Examples of cost leadership and strategy marketing. Small Business Chron. Retrieved from http://smallbusiness.chron.com/examples-cost-leadership-strategy-marketing-12259.html
DIFFERENTIATION STRATEGIES
If a company positions itself as offering a product or service that is different from its competitors in a way that customers value, it is following a differentiation strategy.
A successful differentiation strategy will create customer value that is perceived as such by the customer. Many so-called “new-and-improved” products have fallen flat because the customer simply didn’t care. In addition, a successful differentiation strategy will only build Sustained Competitive Advantage to the degree that it is difficult to copy.
There are many ways to add value to any aspect of a business through differentiation:
Ingredients/components: Healthier, “greener,” longer-lasting ingredients/materials (e.g., Maytag appliances, Healthy Choice frozen dinners).
Product offering: Better-designed products (new generation products).
Combining products: Two is better than one (e.g., Colgate 2 in 1 toothpaste and mouthwash).
Added services: Extra services beyond the basic purpose of the product or service (e.g., concierge service with American Express cards).
Breadth of Product Line: Extra convenience in dealing with fewer vendors (e.g., Wal-Mart offers one-stop shopping, eliminating the need to go to multiple stores).
Channel: Offering items or services through a me