Case Analysis

Executive summary

Of the three growth strategies that were being considered by the New Ventures Division at the Frito Lay Company , the most viable was acquisition of Cracker Jack based on findings from the four different areas mentioned in the case . According to the studies conducted in the area of brand management , market awareness of Cracker Jack was universal . Therefore the management at the Frito Lay Company could capitalize on the advertising and promotion programs that had already been undertaken by Borden Foods Corporation . The universal brand awareness represented strong brand

equity which was still untapped primarily because of the limited sales and distribution infrastructure at Borden Foods Corporation . However , according to the findings in this area , the Frito Lay Company did have the sales and distribution network which would translate the strong brand equity into a robust source of revenue

The other two growth strategies , extension of an existing brand and venturing into an unrelated product category , would not be as capital intensive as the strategy of acquiring the Cracker Jack brand . However only one in ten new products achieved success . Additionally , the process of new product development took two to three years to complete Therefore , these growth strategies should not be considered when the company already had an opportunity to buy the well-established Cracker Jack brand . The brand was the market leader in the RTE caramel popcorn product category . However the most important argument in favor of acquiring this brand was that the processes required to rejuvenate sales of Cracker Jack were in operational fit with the Frito Lay Company . For example , the management at Borden Foods Corporation had estimated substantial capital expenditures in to expand sales . Yet , the existing manufacturing facilities at the Frito Lay Company could accommodate the increased production volume without incurring additional costs . The operational fit with Frito Lay 's existing operations justifies acquisition of Cracker Jack

Problem statement and statement of alternatives

The objective of New Ventures Division was to explore the viability of different strategies aimed at product diversification . According to the Division 's findings , Frito Lay could either grow internally by extending the existing product lines into related categories or it could expand externally by acquiring an unrelated brand . In this case the unrelated brand was Cracker Jack marketed by Borden Foods Corporation . It was unrelated because Frito Lay 's product line had been limited to the salty snack category so far . Acquisition of Cracker Jack would mean entry into the sweet snack category . The unrelated diversification could present problems in terms of Frito Lay not having the necessary resource base to capitalize on the untapped potential . Therefore the problem that faced the management at Frito Lay was to conduct cost benefit analyses of growing from within and of acquiring Cracker Jack and select the alternative that had more favorable findings

The alternatives of internal growth entailed enhancing the number of eating occasions and venturing into new product categories . Both these strategies would be implemented through internal research and development...