South-Western - Management  
A Thousand and One Noshes
Topic Technology, Innovation and Change
Key Words Innovation, change, demographics
News Story

Every year PepsiCo adds more than 200 product variations to its global portfolio. The chairman and CEO, Steven Reinemund, believes that constant quest for change, more than even quality and value, is why the company consistently earns double-digit growth.

PepsiCo is not sentimental about its principle brands. The company prefers to understand and cater to changing tastes than try to shape them. For example, the company's Frito-Lay division achieved a 4% volume growth last year amid the low-carb craze by introducing new flavors and healthier ingredients. It also caters to ethnic and geographic markets - it introduced a Taste of Canada chip with flavors like pizza and sea salt to sell north of the border.

This strategy has kept PepsiCo from losing earnings as its core products age. The company has been early to see trends and aggressive in targeting them. By defining its mission as serving the customer rather than protecting its brands, PepsiCo has managed to survive in a competitive marketplace.

Questions
1.

According to this article, what is PepsiCo's main strategy for driving earnings growth?

2.

Why is it important for companies to change in order to be competitive? Why are many companies resistant to change?

Source "A Thousand and One Noshes," Business Week, June 14, 2004, p. 54.
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