PepsiCos Management Strategy - Case Study Example

PEPSICO COMPANY Problem Solving Student’s Name Instructor’s Name Course Title Date Company Overview PepsiCo is an American based beverage and company which specialises in the manufacturing and distribution of food snacks, cereals and beverages. The company was formed in the year 1902 a Pharmacist from North Carolina who later invented the drink that is popularly called Pepsi. The company was declared bankrupt twice before the year 1931 and ten years later it was sold to Loft Inc. after which the name Pepsi-Cola Company was adopted. Pepsi-Cola later merged with Frito-Lay in the year 1965 forming the PepsiCo company which is a giant in the food and beverages market[Dav04]. In 1998, PepsiCo went ahead to purchase Tropicana and the later Quaker in the year 2001. The company has a clientele in about 160 different countries. The company has established consolidated business together with other non consolidated affiliates in the different countries, through which they are able to manufacture, market and also distribute their products effectively. The company has a system in all countries that it operates in which includes bottlers, independent distributors and other retailers [Pau11]. In markets that are larger the company operates some bottling plants and its own distribution systems since it may prove challenging for other companies to raise enough capital to set up an elaborate system that ensure proper distribution of the goods. Pepsi is in the business of snacks and beverages. Some of the brands that are associated with Pepsi include the Pepsi-Cola brand that is the Pepsi, Mountain Dew, Diet Pepsi and Aquafina. The Frito-Lay brands, Tropicana brands, Quaker brands and the Gatorade brand are also sold under the same company[Pau11]. Management Style According to Block (2009), management is the act of offering guidance to both human and material resources to achieve an organisation’s objective and satisfy those served as well as instilling a sense of attainment on the persons that render services. The management of the PepsiCo Company is based on the American style of management, which has a top-down approach. The initial efforts originate from the board of directors and other company executives. These are responsible for developing a master plan which the company and its strategic business partners follow in order to achieve the objectives of the company[Lau]. The system uses different managers at unitary levels who make sure that the unit carries out its assigned roles and duties in an effective manner to allow support for the master plan. Since decision making is left for the top managers, PepsiCo enjoys the advantage of the quick decision making process. This style of management allows the top managers to be in charge of the development plan which is advantageous as they are more knowledgeable about the organizations operations[Hol93]. The PepsiCo embraces individual performance which is one of the principles that is outlined in the American style of management. Each job hob that is available has a clear description and the person employed in that position is made to understand the roles to play, making it easy to evaluate employees. Here the employee is paid on the basis of work that they have completed[Sch99]. Short term employment on a contract basis is a common feature of this type of companies. The system has mutual benefit to the parties, on the side of the company there is increased production which eventually translates into more sales while on the side of an employee, they are able to enjoy higher pay. Companies that apply this model are known to produce high quality goods. This model is of importance to PepsiCo given that it operates in a very dynamic and competitive market. Companies using this model of management are faced with some specific types of challenges. The most common feature is the ‘hire and fire’ policy as the organization seeks to reach its maximum potential[Iba93]. This brings with it the risk of employees having reduced loyalty to the organisation since they are convinced that the employers are less committed in keeping their employees employed. Many companies that employ this model are also affected by the desire to acquire fast profits and hence they may fall into the trap of having short sighted goals. The organisation structure of these companies also tends to be very complex with several agencies and departments, which may translate to more expenses in the running of the organisation. SWOT Analysis SWOT is an acronym that describes a method of analysis of the strengths, weaknesses, opportunities and threats that any business faces during its operation. According to Sonnenberg (1992), the analysis is aimed to develop a strategic plan which lay the objectives of the business and comes up with the internal and external factors that are bound to influence the achievement of the business objective and possible measure to be taken. The analysis gives a clear view of the impact of variables on the business operations and goals and at the same time giving an indication of the level of effect these variables are likely to have on the business[Phi01]. Strengths PepsiCo Company has a well establish corporate strategy that enables it to remain competitive. The Company uses a model of sustainable growth that has been labeled as “performance with purpose.” This is a corporate strategy that enables the company to be able to balance commendable returns and giving back to the community in which it operates. The company provides a range of wholesome foods that are enjoyable[Pri08]. The PepsiCo Company offers a range of products that are meant for different occasions such as when one wants to have a good time. The company also offers healthier snacks for the consumers who are health-conscious. The company has a good and visionary group of leaders that are able to easily spot an opportunity and move to seize it. Having seen the potential of more growth by increasing its market outside North America, the company developed a strategy of aggressively pushing to enter the emerging markets such as the Middle East, Russia, Turkey and China. This stems from the company’s adoption of a strategy that encourages the production of goods that are tailor made for the different markets and that suit local tastes at the same time promoting their global brands[Sei99]. The company has a strategy that enables it to work together with revered local chefs who help tailor the products to the local market taste. This is also highly dependent on the company’s strategy of continued introduction of new brands that suit the different needs of the people. Motivated by the economic environment in which it operates, the company has a corporate management policy that is meant to ensure that all its products are of good value and remain affordable. This because most people in many of the markets that the company operates have very little disposable income that doesn’t allow them to purchase costly products[Pau11]. The strategy also applies a mode of retail that offers the PepsiCo products in a range of packages that offer the customers great value. Like in the case of Brazil, the company has introduced the ‘Lucky snacks’ which is a product that targets consumers who have a low income. The company also favours the use of local supply chains and has also adopted the go-to-market strategies. The company engages technology in the development of their products such as the growth of potatoes using superior technologies giving the company’s products a superior taste. To ensure the success of this program, the company works with the local farmers to grow the potatoes. The company uses a system of direct store delivery and at the same time leveraging on the go-to-market technique to ensure that they deliver goods to a wider range of the market. The company has the ‘Power of One’ strategy when it comes to matters of product display in the retail stores and other outlets, a strategy that helps to boost its sales in the competitive market that it operates in. Weaknesses Given the use of a management model that does not foster employee loyalty towards the company, there numerous court battles between the company and its employees seeking to fight for their rights. When this occurs frequently, it is bound to impact negatively on the image of the organization and loss of employee morale leading to the production of poor quality products that end up ruining the image of the company[Dav04]. Recent research has placed the company under a tight position as regards its waste management systems. The company has had to ward off resistance from environmental organisations which believe that some of the beverage products of the organisation tend to contain some higher levels of harmful chemicals than the acceptable standards. This has a negative impact on the company’s image and may result in a decrease in sales. Opportunities PepsiCo has opportunities for growth since the beverage and food market is not fully saturated. The company has been able to realise growth through the establishment of partners located in the emerging markets. These markets have not been saturated yet and setting up more bottlers and distribution systems to ensure continuous supply of their products, will go a long way in fostering growth of the company[Lav00]. The innovation of new products that are made for the people of low income is one of the things that company has recently set out to do. This has earned the company some more market share. The production of economic friendly products should be rolled out to other markets since low income individuals are found even in the developed markets[Kon94]. Opportunities do exist in the utilization of modern farming technologies in order to provide more and better quality raw materials for the use in the production of products for the PepsiCo Co. this will enhance the company image. Threats On of the major threat to the PepsiCo Company is the fierce competition it faces from the industry main rival, the Coca Cola Company[Kon06]. The two companies have been in the battle for control of the beverages market for more than a century. Coca Cola has been the dominant player. This competition has resulted in the decrease in the revenues that PepsiCo obtains from the sale of soft drinks. The company also faces negative impact due to government regulations regarding environment, safety and health. The many strikes that the company has witnessed in the recent past pose potential cause for the disruption of the goods production and distribution system for the company. Competitive Advantage PepsiCo has several major advantages that can enable it prevails over other companies in the beverage industry. One of the major advantages is the wide range of products that the company offers. Unlike its competitors in the beverage market, PepsiCo Company moved to expand its products to include cereals and snacks. The products are available in different sizes and packages which make it easier and more convenient for the buyers. The company also has an elaborate mechanism of distributing and marketing its products which has been one of the major reasons for remaining competitive in the market. PepsiCo has good relations with its business affiliates and other stakeholder’s something that comes in handy in fostering growth of the company. The company also enjoys a wealth of experience in the beverages market that spans for a period of over one century, a factor that gives the company a competitive advantage over other players in the industry. Corporate Structure PepsiCo Company has three main units the PepsiCo Americas Beverages, PepsiCo Americas Foods and PepsiCo International. Under the PepsiCo Americas Foods there is the Quaker, Frito-Lay North America and other Latin American food businesses. Pepsi-Cola North America, Tropicana, Gatorade, and other Latin American beverage businesses, fall under the banner of the PepsiCo Americas[Pau11]. The PepsiCo International controls the operations of the PepsiCo Company in overseas markets such as Asia, Europe and Africa. PepsiCo Americas Foods contributes high amounts of revenue to the PepsiCo Company; the figure is estimated to be about 47% of the annual revenue. PepsiCo Americas Beverages contributes about 24% of the annual revenue. The European market for the PepsiCo International has the largest market share in the international market for the PepsiCo products. The PepsiCo headquarters is located in New York. Management Processes Planning and Decision Making PepsiCo Company plans to increase the advertising and other marketing support for its global brands focusing mainly on North America from which it will then move towards other markets. This is in an attempt to keep up with growth of eight percent per annum that it has been registered in the past. The company seeks to use this move to ensure that there are increased sales that will further ensure that there is more value for the shareholders. The company will also reduce the number of agencies and partners in order to improve efficiencies. This will enable the brands to move to top line growth enabling better prize realisation. The company also wants to reorganize its organisational structures to allow for a wider control span and reduction of the layers of the management team. This will see the company reduce it’s with a headcount of about 8,700 employees. This will make the company be more cost competitive and be able to have reserve funds for other innovations that will take place in the future. After offsetting these major extra costs, the company expects that there will be an increase in the productivity initiative. Organising Organisational structure PepsiCo Company has a top-down approach. Here the top management plans for the company’s activities and try to make sure that these are in line with the company's objectives[Wre94]. The company therefore enjoys having a master plan developed by the people who are well versed in the operations of the company. This allows for quicker decision making and hence in case of an unforeseen occurrence, the company is able to resolve it faster as opposed to a situation where there is more democracy and staff are allowed to rule themselves. The company also enjoys a better image as it is seen to possess a more elaborate form which is efficient. Organisational Design and Leadership The organisation of the company is based on the American management model that emphases on the importance of having a higher ranking management team that offers direction for the implementation of the company’s policies. At the top most of the hierarchy there are the shareholders followed by the board of directors. The most visible high ranking manager is the President or the Chief Executive Officer. The CEO offers direction and chairs most of the top management meetings[Wil99]. There are many layers of management in this model of business management. Control For the PepsiCo Company to remain competitive in the business of soft drinks there is a need for the continued control of the quality of the products that the company releases in the market. PepsiCo has a good reputation as regards the quality of the products that it produces. The company has specialists in the field of beverages and foods who help to ensure that the quality of the products is maintained[Phi01]. In addition to this, when PepsiCo enters a market, it engages the services of the local chefs so as to make sure that the products that the company produces are tailored to the particular market. Conclusion PepsiCo has established itself in the beverages and foods market. This has been achieved through various measures such as establishing a management strategy that fits the market in which it operates. The company has continuously embraced new technologies which has made its products stand out in the market. The ability of the company’s management team to spot and identify new market that the company can expand to, has been essential in enabling it to expand and increases its sales. The company also has various competitive advantages over the other players in the beverage industry. These factors have worked in harmony allowing the company to remain competitive in the beverages market for over one century, an achievement that is totally outstanding. Bibliography Dav04: , (Davis, 2004), Pau11: , (Nazario, Saka, & Clark, 2011), Pau11: , (Nazario, Saka, & Clark, 2011), Lau: , (Lau, 1998), Hol93: , (Holoviak, 1993), Sch99: , (Scholl, 1999), Iba93: , (Ibarra, 1993), Phi01: , (Phillips, 2001), Pri08: , (Prince, 2008), Sei99: , (Seiling, 1999), Lav00: , (Laverie, 2000), Kon94: , (Konovsky, 1994), Kon06: , (Konrad, 2006), Wre94: , (Wren, 1994), Wil99: , (Williams, 1999), Read More