While looking at a number of countries, the consensus for PepsiCo was to begin
operations in Brazil.
Now that PepsiCo has made the decision to select Brazil, the
implementation of a direct investment strategy will help define the procedures of successful
entrance and the policies that should be followed.
For weeks, a broad analysis with regard to
risk factors and the state of the Brazilian economy was completed, and PepsiCo can now begin
the process of moving forward and beginning operations.
A number of factors, scenarios,
analysis, and calculations must be completed to ensure a positive outcome, which will include
detailed information ranging from the decision to enter Brazil through contingency plans if the
primary financing decisions need to be amended.
This information can be broken down into four
main categories, which include information gathering, conducting a sensitivity analysis,
perspective valuation, and alternative investment procedures.
The decision to enter Brazil was
based on a thorough examination of foreign exchange rate data, determining appropriate capital
sources, the affects on the parent company of block funds, the subsidiary providing the funds, the
affect on the parent company and subsidiary with regard to capital sources, defining which
capital sources will minimize the cost of capital to the subsidiary, Brazil providing incentives to
invest, the expiration of project life, possible buyout options, economic impact on changing
locations, nationalization or confiscation of organization, identifying all available alternative
investments and financing decisions, making a final finance recommendation, using the capital
budgeting technique to justify this conclusion, develop a contingency plan based on the
sensitivity analysis, and changing the investment and finance strategy within the contingency
plan will all work together to ensure the proper implementation of PepsiCo into the Brazilian