Expanding PepsiCo in Australia through FDI: Business Research Report

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Business Research Report
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1BUSINESS RESEARCH REPORT
Table of Contents
1. Introduction..................................................................................................................................2
2. Background information of PepsiCo...........................................................................................2
3. Background information on the business environment in Australia...........................................5
4. Business Scenario........................................................................................................................9
5. Conclusions................................................................................................................................11
Reference List................................................................................................................................13

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1. Introduction
This report highlights the scope of PepsiCo to expand in Australia through foreign direct
investment (FDI). Australia is one of the open countries for the FDI among the OECD member
states which represents the FDI representing over the third of Australia’s GDP. Australia
provides the economic liberalism, transparency in the legal system and stability and strengths of
economic growth for the last 10 years that compensate for the narrowness of the market and its
geographic isolation. PepsiCo is a multinational company and it distributes the products in more
than 200 countries. This report is going to explore the opportunity of PepsiCo in Australia
through conducting the external business environmental analysis. In the next section, business
opportunity analysis is done conducting Porter's Five Forces. In the final section, a summary of
the main issues is discussed.
2. Background information of PepsiCo
PepsiCo is a multinational snack, food and beverage manufacturer and it is headquartered
in New York. PepsiCo was founded in the year 1989 and it serves on a worldwide basis. Indra
Nooyi is the CEO of PepsiCo and the product mix consists of 47% of the beverage and 53% of
the foods. The product line of PepsiCo is associated with Pepsi, Mountain Dew, Lay's potato
chips, Diet Pepsi, Tropicana beverage, Lipton Pepsi, Mirinda, Cheetos, Aquafina, Mist Twist and
Walkers Potato crisps. On the world basis, PepsiCo has more than 264,000 employees as of
2016. In the year 1965, Pepsi-Cola made its merge with Frito-Lay in order to become PepsiCo.
PepsiCo has its competition with Coca-Cola and in the year 2005, PepsiCo crossed Coca-Cola in
market value and in the year 2009, Coca-Cola became first in the carbonated soft drink sales
(Pepsico.com 2018). In the case of Asia, PepsiCo has created recently and this segment of

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PepsiCo's business markets is based on Kurkure, Mirinda and Red Rock Deli. PepsiCo owns its
distribution and manufacturing facilities in some of the regions and in some scenario; PepsiCo
holds licensing, joint venture and contract manufacturing for the production. From the Asian
section, PepsiCo gained 10% of the total revenue in 2016 (Pepsicom.com 2018). The Board of
Directors of PepsiCo is composed of 11 outside directors. PepsiCo has shifted the structure of the
business and in the year 2016; PepsiCo separated its business in six different domains; Frito-Lay
North America (FLNA), North America Beverage (NAB), Quacker Foods North America
(QFNA), Latin America (LA), Europe Sub-Saharan African (ESSA) and Asia, Middle East and
North America (AMENA). Maximum percentage of the business came from North America in
case of PepsiCo beverage.
Figure 1: Net revenue and contributions in six different segments
(Source: Pepsico.com 2018, Financial Statement of PepsiCo)
In the year 2017, PepsiCo returned $6.6 billion to its shareholders in the form of share
repurchases and dividends. PepsiCo got 22.9% of the core net return on invested capital.
Revenue of PepsiCo in the year 2017 was US$ 63.525 billion and operating income of PepsiCo
was US$ 10.509 billion (Pepsico.com 2018).