Write an introductory report on the activities of your chosen companies and their position in the industry.

Assignment Brief

Module title: Financial Management and Entrepreneurship (FME)

Tasks

Task 1

Choose any two competing companies that are listed on a stock exchange around the world (example, the London Stock Exchange) and compare their financial performance for the past five years. Your chosen companies must be comparable in size and operate in one of the following industries:  Food & Beverages, Hotel & Hospitality, Oil & Gas, Pharmaceuticals & Biotech, Telecommunications and Utilities.

Note: Agree on your choice of companies with your Lecturer at least four (4) weeks before the Assignment submission date.

Obtain the annual reports for your chosen companies, for the last FIVE years, from their websites or other credible sources.

1. Write an introductory report on the activities of your chosen companies and their position in the industry.
2. Critically compare and analyse the financial performance of the two companies over the last FIVE years. Relating to each category of ratios, which company has performed better? Overall, which company is better managed. Explain the reasons for those assertions.
3. Based on your analysis, identify any strategic and operational issues that need to be addressed by the companies and make appropriate recommendations with justifications.
4. Explain clearly any problems, limitations and assumptions that you need to make to address the above tasks

Task 2

Critically evaluate the potential risks for the proposed business idea and how those could be managed.

Sample Answer

Financial Management and Entrepreneurship Report

Task 1: Comparative Financial Performance of Coca-Cola and PepsiCo

The food and beverages sector is highly competitive and dominated by multinational corporations with long histories and global reach. Two of the leading firms in this industry are The Coca-Cola Company and PepsiCo. Both are listed on the New York Stock Exchange, operate across more than 200 countries, and maintain strong brand recognition. Their rivalry extends across product portfolios including soft drinks, bottled water, juices, snacks, and sports beverages. Analysing their performance over the last five years allows an understanding of how financial management practices and strategic choices influence long-term competitiveness.

One of the most important measures of performance is profitability. Both companies have reported consistent revenues, though PepsiCo benefits from a diversified portfolio that includes food products such as Frito-Lay, while Coca-Cola remains heavily beverage-focused. Coca-Cola has historically achieved higher net profit margins, averaging around 22 per cent in the last five years, compared with PepsiCo’s 11–12 per cent. This indicates stronger efficiency in cost management and a focus on higher-margin products. Return on equity (ROE) also shows Coca-Cola performing better, reflecting effective use of shareholder funds.

Liquidity ratios provide another perspective. PepsiCo has maintained a current ratio slightly above 1.0, whereas Coca-Cola has often been below 1.0. This suggests PepsiCo is in a stronger position to cover its short-term obligations. Investors and analysts often view this as a sign of prudent working capital management.

In terms of leverage, Coca-Cola is more highly geared, with a debt-to-equity ratio consistently higher than PepsiCo’s. Although debt financing can enhance returns, it also increases financial risk, particularly in periods of economic uncertainty. PepsiCo’s more balanced capital structure is generally considered more stable, though Coca-Cola’s higher profitability partly offsets this concern.

Market ratios highlight investor perception. PepsiCo’s price-to-earnings (P/E) ratio has been slightly higher, reflecting stronger investor confidence in its growth prospects due to product diversification. Dividend yields, however, have been attractive for both firms, with Coca-Cola traditionally regarded as a reliable dividend stock for long-term investors.

Overall, the comparison indicates that Coca-Cola outperforms in profitability, while PepsiCo demonstrates stronger liquidity and capital stability. Strategically, Coca-Cola faces the challenge of overreliance on beverages, particularly carbonated drinks, which are declining in demand due to health concerns. PepsiCo benefits from its snack division, which provides resilience in changing markets. Both companies must continue to invest in healthier product lines and sustainability initiatives to address consumer trends and regulatory pressures.

In conclusion, Coca-Cola appears more efficient and profitable, but PepsiCo is better balanced financially. Each company demonstrates strengths and weaknesses, and effective management will depend on their ability to adapt product offerings and manage capital in a changing global environment.

Task 2: Internationalisation Strategy for Starbucks

Starbucks Corporation is a global coffeehouse chain founded in 1971 in Seattle, United States. It has grown into one of the most recognised brands in the world, with more than 36,000 stores in over 80 markets. Starbucks’ success has been built on product quality, customer experience, and strong brand identity. However, international growth remains essential for maintaining competitiveness, particularly as the North American market matures. For this task, the company’s potential internationalisation strategy is considered, focusing on entering a new emerging market.

When analysing international expansion, it is necessary to consider the external environment. Using a PESTEL framework, political and legal stability is crucial, particularly regarding food safety and foreign investment regulations. Economic factors such as GDP growth and disposable income influence demand for premium coffee products. Social and cultural dimensions also play an important role, as coffee culture varies significantly between regions. For example, in markets with strong tea traditions, Starbucks must adapt its menu to include local preferences. Technology and digital platforms support customer engagement through mobile ordering and loyalty programmes, while environmental considerations emphasise the need for sustainable sourcing and packaging.

Continued...