Operational Management at Pepsi Cola Company Commerce Essay

At present new product decision is taken by the top management. Demand for new product is
investigated by production manager- terms of raw material, machinery operations, and
quality. Fro this purpose he can get guidance from constructions. Finance department
evaluates financial viability. Sample production is conducted. Response from buyer in terms
of satisfaction and company's ability to meet the requirement helps in deciding to produce
new product.

Process Design:

In the company process is continuous supply of concentrate is critical but process can be
automated. Process is flexible and production on plant can be changed within one hour.
Production on plant can be changed within one hour. Production is of large scale and covers a
wide area for the distribution of the product.

Facility Design and Layout:

Facility design and physical layout of plant, supporting facilities and building is provided by
the parent company that is PEPSI COLA International. Transportation costs with the plant is
minimum. Physical layout provides maximum utilization of available space by optimizing
costs.

Inventory:

Company is not using the quantitative methods for calculating economic order quantity,
reorder point, safety stock and annual inventory cost. The company does not give importance
to control inventory cost. Lead time is usually 2 days an in an exceptional case it can be up to
4-5 days. this also one reason that EOQ, ROP, lead time are calculated using qualitative
techniques, by estimates of experienced managers.

Martial Requirement Planning:

Company produces beverages and uses Sugar, Carbon Dioxide, Ammonia and concentrate as
raw material. Soft drink is a seasonal product. Most of the sale is done during summer season.
Concentrate is bought from the franchiser PepsiCo. Sugar is bought directly from the sugar
manufacturers of the area. CO2 is prepared within the premises, which is enough for the full
capacity of two plants. When during samara 4 plants are in working, CO2 is purchased from
the outside suppliers.

Company Profile:

Pepsi co. is infect a corporation listed in the New York Stock Exchange USA. It is the owner
of globe products like Pepsi Cola, Team, Marinda etc. Being owner of the products they give
the rights of manufactures of its products to different countries. All over the world, the
products are standard. If you buy a Pepsi from a remote area like Talamba and from
Washington D.C., you will find absolutely same taste and color. Because Pepsi Co. has strict
quality standards. And the franchisees have to follow these standards. Otherwise they have to
face penalties from the real owners of the product. In Pakistan there are 10 units of Pepsi cola
are working. Each unit has its own license of production. And each unit has its own territory
in which it can sell its products. No unit can interfere in the area of other unit.

Brief History:

The company was introduced in 1967 as a (Pvt.) Limited company. It started its production in
1968. In the early stages it was famous with the name of 7-up factory. Because 7-up was its
first product. The other brands were introduced after 7-up. Pepsi Cola, Marinda and Green
Marinda have been different products of Shamim and Co. Since its introduction. At present 7-
up, Pepsi Cola and Marinda are being produced.

Company Characteristics:

Shamim & Co. is the biggest soft drink manufacturing unit in Pakistan with its four plants
having full capacity of 50,000 crates per day. Company covers area of Southern Punjab
including Sahiwal, Mianwali, Rajan Pur, Bahawalnagar and Khan Pur.

Departmentalization:

There are six departments in the company, which are production, Marketing, Finance, Sales,
Shipping administration and personnel.

In each deptt. there is a manger which is responsible for the working of his department to the
general manager. A manager has an assistant manager. After Ass. A manager their are Shift
Incharge in production and supervisors in sales. They control the activities of operatives.
Product Planning:

Shamim and company works under licensee of Pepsi Co., as explained earlier. At present
Shamim and Company does not possess the ownership of any product. All of its products are
originally owned by Pepsi Co. New York. Franchiser gives concentrate and sets quality
standards for it products. Company just follows these standards and produces beverages.

Uptill now the company has not produced any product of its own and there is no concept of
product planning in future as well, because the management considers it a very theme to
introduce a new brand of their own. In the brand like Pepsi Cola and 7-up are selling in the
market like hot cackes. Meanwhile the people in Pakistan are reluctant to purchase Pakistan
branded beverages and we don't find any successful domestic brands of soft drinks in
Pakistan. That's why the management does not have any motivation to do product planning.

In a dynamic market the company may expand, add or relocate new facilities, which means
that location decisions are made the life of a company.

Location decisions are important due to following reasons.

- Competition.

- Cost.

- Hidden effects.

Factors that effect the location decisions are

- Market related factors.

- Tangible Cost factors.

ï‚· Transportation.

Labor availability and costs.

ï‚· Energy availability and costs.

ï‚· Water availability and costs.

ï‚· Site and construction cost.

ï‚· Taxes.

- Intangible Factors.

ï‚· Legal regulation.

ï‚· Community attitude.

ï‚· Expansion potential.

ï‚· Living conditions.

Operations Planning:

Product Planning:

Shamim and company works under licensee of Pepsi Co., as explained earlier. At present
Shamim and Company does not possess the ownership of any product. All of its products are
originally owned by Pepsi Co. New York. Franchiser gives concentrate and sets quality
standards for it products. Company just follows these standards and produces beverages.

Up till now the company has not produced any product of its own and there is no concept of
product planning in future as well, because the management considers it a very theme to
introduce a new brand of their own. In the brand like Pepsi Cola and 7-up are selling in the
market like hot cackes. Meanwhile the people in Pakistan are reluctant to purchase Pakistan
branded beverages and we don't find any successful domestic brands of soft drinks in
Pakistan. That's why the management does not have any motivation to do product planning.

In a dynamic market the company may expand, add or relocate new facilities, which mean
that location decisions are made over the life of a company.

Location decisions are important due to following reasons.

- Competition.

- Cost.

- Hidden effects.

Factors that effect the location decisions are

- Market related factors.

- Tangible Cost factors.

ï‚· Transportation.

ï‚· Labor availability and costs.

ï‚· Energy availability and costs.

ï‚· Water availability and costs.

ï‚· Site and construction cost.

ï‚· Taxes.

- Intangible Factors.

ï‚· Legal regulation.

ï‚· Community attitude.

ï‚· Expansion potential.

ï‚· Living conditions.

Location Design

Location of manufacturing operations can have a graet impact on operating cost, profit and
price at which products are offered. As far allocation is concerned the company's strategy
consists of selecting the location from which the potential market will be served. The location
of facility involves the commitment of resources to long range plan.. Location of industry is
selected on the basis of

 Availability of raw material on cheap prices and maximization of profits.

 Proximity to potential customers.

 In plant location objective is to minimize the sum of all costs, not only today's but long
term cotsts.

There may arise four questions for facility aspects.

1. Types of facilities needed.

2. Location of facilities.

3. Design / Layout of facilities.

4. Capacity planning.

Company Location:

Shamim and company is located near MDA chowk Multan in province of Punjab. The site of
company is not of some strategic value. Because Shamim and Co. covers a large area of
Southern Punjab. So there is no importance of site with reference to the other cities of this
area. Any way; site of the company is considerable for Multan.
Process Design and Facility Layout

Having done the location selection company design a building, select the appropriate process
technology and equipment and arranges it in away so that it has greatest potential to meet the
strategic demand of organization. The type of operations to be performed in a facility,
influence the facility's needs and layouts. Equipment involved effects the layout. Facilities
must be designed for the efficient operations in the organization.

Layout for Operations:

Facility is designed in numerous ways to support this work to be done within each facility
numerous factors must be considered. Amount of available space and its shape. Design
objective is very imprint. some of layouts are:

ï‚· Retail layout.

ï‚· Office layout.

ï‚· Distribution and ware house layout.

ï‚· Manufacturing layout.

Manufactering Process:

In Shamim & Co. manufactering process is as follows;

Water Extraction:

Raw water is extracted from the sources. It is treated to remove its hardness. Here water is
tested in lab to check it harness. If water has some Co3 or Hco3 it is drained and again soft
water is used in the preperation of syrup.

Preperation of Syrup:

Syrup is prepared with sugar, concentrate and water. this syurup is heated upto 90 C to get it
pasturized. this hot syrup is collled down and stored in the tanks. Here lab testing of syrup is
done to check its quality standard.

Production:

Syrup is sent to Carbo Cooler. During flow of syrup from tanks to Carbo Coolers, Ammonia
and Carbon Dioxide are mixed in the syrup.
In production process empty is feeded from on side. This emplty is washed and light check is
done to see quality of washing.

From Carbo Cooler syrup goes to the Filler. At filler syrup is filled in the empty bottles, and
Cap Crown is fixed on the bottols. Here and operater looks after the filling process. He can
increase, derease or even stop production speed accordingly.

Filled bottols are tested in lab. by taking samples. Light check is done to check the level of
syrup in bottles and chek some solid partieals. The overfilled or underfilled bottols are
separated. If some partical is found in some bottlol it is also separated.

After light check bottols passed under a printer and code is printed on the bottoles, with this
code the date of manufactering and shift time can be identified.

When all checking process is done the bottlols are cased in the crates.

The whole process of manufactaring is automatic. It required a little supervision. Raw

material is put from one side and filled bottles come out of the process.

Support Facilities:

Support facilities are carried out in such a way that the direct operations can function
smoothely. support facilities are essential for operations. Some of departments to be
considered in layour are

ï‚· Inventories, material and suppliers.

ï‚· Tool room.

ï‚· Inspection and quality control.

ï‚· First aid.

ï‚· Maintenance.

ï‚· Safety and security.

ï‚· Clerical and bookkeeping.

ï‚· Tube well.

ï‚· Airconditioning plant.

ï‚· Transformer.

ï‚· Equipment for work shop.

ï‚· Bailing press.

ï‚· Parking facility.

ï‚· Canteen.

ï‚· Emergency situation analysis.

Issuance of Different Items:

When production department requires a particular item from inventory, they fill the
requisition slip. One copy is kept at the store and a carbon copy is kept by the production
deptt.

This slip includes the quantity issued, stock register page number, iteem code, This slip is
signed by the production manager. Inventory items are issued on these slip.

Control of Inventory:

At the end of each month, store prepares a monthly consumption report. This report includes
the detail of all the inventory items which were consumed by the production deptt. of Shamim
& Co. during the month.

In this way the inventory is controlled in the Shamim & Company.

Quality Control:

The quality control should

1. Define specific product and service quality level requirements.

2. Determine the relationship of design and process characteristric to output quality and
related process requirement.

3. Dewtermine methods, personnel and equipment for measuring quality.

4. Measure and record the quality achieved.

5. Trigger corrective processess when actual quality varies from the acceptable quality.

Specification of quality requirements begins in market research continue as part of the product
design activity, and culminates in the quality specification and design subsystem output. That
output defineates the specific product or service attribute that effect the quality and must be
assured.
The Quality Specification And Design Subsystem

The activities of this subsysten are integral part of the product design activities, its objectives
are to be determine that the new design output

1. Will meet the customer need.

2. Will operate under end use conditions.

3. Can be produced or provided given the organizions capabilities.

4. Will function with the specified level of reliability interms of minimum means time
between failure.

5. Will require less than a specified amount of maintaince hours and material costs operating
hour.

6. Can be required within a certain time frame.

Quality Assurance:

Quality assurance is the title given to those management activities and systems required to
provide assurance that the over all quality controlled task is being carried out. The quality
asssurance system is the aggregate quality management system. It interfaces with other
general management system performong similar functions relative to the organizations
financial personnel facilities and marketing policies and capability.

a) Proper use of the product and the conditions under which use is dangerous and
unadviceable.

b) Document the product liability planning and procedures as well as the result of all tests and
inspections.

Process Quality Planning & Control Subsystem:

This subsystem concerns the what, where, when, who of quality control during operations. It
frequently involves major expenditure for personnel, equipment, inspection and testing
activity.

The objectives of this subsystem are to be......

1. Determine the process attribute and characteristic to be measured.

2. Determine the methods of measurement and develope detalied instructions describing the
measurement process.
3. Determine, select and train the personnel required to implement the quality control
procedures.

4. Measure and record operational quality interms of the number of defects and seriousness of
defects and causes of defect.

Measurement And Documentation

Product quality must be measured on both quantitative and qualitative basis, and the
measurements must be recorder. Quantification of the qualitative aspects occurs whe defects
are classified into categories such as critical major, and minor, which were describe earlier. A
classification such as this one of the inputs to the organization's as greater measure of quality.

Product or services that do not meet the desired quality standards generate two types of
required corrective actions

1. The disposition of the defective product or service.

2. An analysis of the cause of the defeciencies.

MAJOR COMPETITOR :

COCA COLA:

QUALITY CONTROL PROCESS  (COCA COLA)

A Tour through Our Scientific Manufacturing Processes

The Coca-Cola Company ensures the supreme quality of its beverages by employing globally
accepted and validated manufacturing processes and Quality Management Systems. Let us
now take you through the processes and Quality Assurance Programs followed by our world-
class manufacturing facilities in India

Testing Source Water For Plant Site Selection

The site for our manufacturing plants are finalized only after the source water has been tested
for all requirements of potable water. The analysis is always conducted by independent third
party accredited laboratories. The source water is then properly protected and re-tested
periodically to ensure that it conforms to international standards.
The water is then drawn through sealed pipelines into the storage tanks placed in secured
water treatment areas of the manufacturing plant.

Water Treatment - Know the Chemistry Of Purity

The first step in the process of manufacturing soft drinks is to disinfect the water using
globally approved chlorination procedures. This ensures that all micro-organisms including
pathogens are destroyed. It also removes organic and inorganic impurities caused by
oxidation of heavy metal ions.

The second step is the filtration at the molecular level, which is achieved either by
coagulation/flocculation or reverse osmosis. Contaminants commonly removed by this
process include:

Dirt, clay and any other suspended matter in the water.

Microbial matter (including bacteria, yeast, moulds, virus, protozoa).

Heavy metals and compounds which may cause an off-taste.

The third step to stop potential contaminants is water purification using granular activated
carbon filters. The granular activated carbon, with its large and porous surface area, ensures
effective removal of trace levels of organic compounds (including pesticides and herbicides),
colour, off-taste and odour-causing compounds using the principle of absorption.

The last step is polishing filtration, which is passing water through high efficiency 5-micron
filters to ensure every drop of treated water is free from any activated carbon fines and is safe
for use in beverages.

The Purity Of Our Sugar Is Crystal Clear

Our sugar selection process is as stringent as our water purification process. The sugar,
bought from high-grade authorized mills, is cleaned with a globally acclaimed carbon
treatment process. A purified sugar syrup is created which is then blended with the soft drink
concentrate.

Carbon Dioxide Meeting International Purity Standards

We procure carbon-dioxide, meeting international purity standards, from authorized suppliers.

The gas then goes through stringent quality control checks before it used in the beverage.
All the three primary ingredients used in beverage, the syrup, treated water and carbon-
dioxide, are blended as per The Coca-Cola Company's specifications.

The Automated Bottling Process

We use a fully automated process to recycle the glass bottles returned from the market. These
bottles are sanitized at high temperatures with specially formulated cleaning agents. They are
then transported to the filler after a thorough visual inspection. After they are filled, in a high-
speed automated filling machine, the bottles are capped/crowned, date coded and packed into
crates/cartons.

The complete manufacturing process has a well defined and structured Quality Control and
Assurance Program.

All the manufacturing facilities employ qualified, experienced and trained professionals for
manufacturing and testing of our products.

All the bottling facilities follow the Good Manufacturing Practices requirements as applicable
to the food industry. All manufacturing equipment fulfil the stringent requirements of GMP
and sanitary design.

The entire Quality Management system of each plant is documented, managed and
continually improved through aworld-wide accepted system of TCCQS (The Coca-Cola
Quality System).

BACK TO PEPSI :

The latter units are approved on a variance basis:

Many organizations establish a material review board, consisting of engineering,

manufacturing quality control, marketing and a customer reprentative to review proposed
rework of defective parts that are out side the standards of blueprints qualifications. Approval
by all the members must be received before rework can proceed.

Purchase Of Raw Material:

Direct raw material for the products include the following items.

i) Sugar
ii) Concentrate

iii) Treated water

iv) Empty bottle

v) Amonia and Carbon Dioxide.

From above items only concentrate is provided by the franchiser. All other raw material is
purchased by the company itself.

Sugar Quality Testing:

Purchase of sugar is a critical step in the purchase of raw material. When sugar bags are
arrived at the plant that time it has to pass through a strict quality check. In fact sugar quality
is very very important in the production of the beverages.

Water Treatment Tests:

The company has installed four tubewells to meet the requirement of water. The extracted
water is then treated for the use in the final processing. At different staged of treatment tests
include:

1 Upper tap tests.

2 Sand filter and carbon purifier test.

3 Water softness test.

For this purpose the company has prepared forms for the record of these tests which are
signed by the shift incharge after each shift. If he observed some abnormality he stops supply
from one container and provides the required water through other container. The company has
two containers for the supply and storage of trated water. The closed container is then
sanitized and washed back. The sanitation and washing back of containers is also done at
regular basis, after ten days.

Syrup Testing:

After mixing water, sugar and concentrate it is treated at 900 C and then it is stored in the
tanks. This is called simple syrup. This syrup is tested in the lab. This syrup goes into carbo
cooler. Here Ammonia and Carbon Dioxide are mixed in the syrup. This is called finished
syrup. The finished syrup is also tested in the lab. If chemist finds any deviation from the
standards, the syrup is drained before any further processing.

Finished Bottle Tests

When the bottles are filled at filler, the chemist take sample after every half hour. If any
deviation from the standard is found the whole batch is drained before going in market.

A microbiological test is also taken by the chemist after a week of production. If any kind of
germs growth is found the stored bottles are declared rejected.

Forecasting:

Planning and control for operations require an estimate of the demand for the product for the
service that an organization expects to provide in the future. Numerous methods for the aart
and science of forecasting have been develop and reported in the literature. The field of
forecasting is full of instances at both government and individual firm levels. For short term
decisions, we need forecasting methods that are relatively inexpensive to install and maintain
and that can be adapted to situaations involving a large number of items to be forecast.

For immidiate range plans, useful forcasts will probably be aggregated by product types.
Detailed forecasts for each individual item may not be necessary. Since the relaative
frequency of forecasts is lower and the number of different product types for which forecasts
are made is smaller than in the case for the short term decisions, forecasting methods that
require modest cost and effort could be employed.

Demand Forecasting By Shamim & Company:-

In fact Shamim & Company is a product focused company which highly emphasize on the
production of the products. Due to the environment of the market and continuously changing
demand, the management relies on qualitative methods. As the company has a seasonal
business so the demand is high in the months of April, May, June, July and August. This is
the peak season for the company. So for the forecast of the next demand the company sees the
data of sales of the same month and the trend is observed.

MATERIAL REQUIREMENT PLANNING

Materials related decisions must be coordinated to make efficient use of resources. Both ther
necessary material inputs and the necessary capacity must be available before
transformationcan be performed to know when materials will be available before it can
accurately sshedule use of capacity. It has to have some idea what capacity will be available
before it can know when materials will be needed. Large companies that buy large quantities
of items over extendedperiod can sometime exert enough pressure on suppliers to ontain
material almost when they want them. Companies that do not make large purchases may have
to fit their schedules to the dates on which material can be obtained, or purchase with
sufficient lead time so that material will be available when the companies need them.

Continous manufacturing operations usually involve all aspects of materials management.

Regardless of the way a company may be organised , several material functions probably are
performed by some organizational structure of a company and assignments of resposibilities
depend on the capabilities of employee and the need of the organization as percieved by its
decision maker.

MATERIAL REQUIREMENT PLANNING OF SHAMIM & COMPANY

There are two major raw materials for products of Shamim & Company. These are
concentrate and sugar. Other raw material include raw water, empty bottles, Ammonia gas,
Carbon Dioxide gas, caustic soda, chemicals for laboratories, and stationary items.

RECOMMENDATIONS

Formula the Pepsi should adopt is three way of telling customers

= Tell them you are cool.

= Tell them in a big way.

= Keep telling this to them.

Pepsi forgot that people don't drink cola they drink can, so they have to make innovations for
their cans and promotional marketing.

They also failed to adhere to its commitment to export 50% of its production in india, so they
should concentrate on what they said.

Pepsi began exporting products such as tea rice and shrimp.

An agricultural research center should be establish.

PepsiCo’s Operations Management, 10 Decisions, Productivity
UPDATED DEC 12, 2015 LAWRENCE GREGORY
An old machine that vends 7 Up, which PepsiCo manufactures outside the United States.
PepsiCo’s 10 strategic decisions of operations management address productivity concerns
about business areas and products, such as Pepsi. (Photo: Public Domain)
PepsiCo is the second biggest player in the global food and beverage industry. To maintain
this position, PepsiCo’s operations management (OM) practices must effectively address
business needs in the 10 strategic decision areas. These decision areas refer to the aspects of
business that need to be streamlined together to achieve optimal performance. PepsiCo’s
continuing international growth and expansion also warrants continuing reforms in such
operations management practices. However, PepsiCo’s operations management approaches
are generally appropriate for the global organization. Thus, PepsiCo’s policies and approaches
effectively address the main issues and concerns linked to the 10 strategic decisions of
operations management.

PepsiCo has an integrated approach to the 10 strategic decisions of operations management

(OM). This approach considers variations in PepsiCo’s business areas and markets, as well
as different productivity requirements based on product, market conditions, and other
variables.

PepsiCo’s Operations Management, 10 Strategic Decision Areas

1. Design of Goods and Services. The objective in this strategic decision area of operations
management is to match goods and services, organizational capacity and market demand and
preferences. PepsiCo’s operations management does so through market-based research and
development and product innovation. For example, PepsiCo conducts market research about
current trends, such as consumer lifestyles. The results of such research are used to determine
future directions of PepsiCo’s products, such as future variants of Pepsi.
2. Quality Management. This strategic decision area has the objective of optimizing quality
based on business and consumer expectations. PepsiCo’s operations management aims to
provide the highest quality products under the company’s “Human Sustainability” goals. For
example, new PepsiCo products are usually improved variants, such as low-calorie Pepsi
products and less-salt Frito-Lay products.
3. Process and Capacity Design. Capacity utilization and process efficiency are the
emphases in this strategic decision area of operations management. PepsiCo aims to maximize
its productivity-cost ratio in this area. For example, the company’s manufacturing facilities
are designed with high-output assembly lines. Also, many of PepsiCo’s production processes
are automated for optimal efficiency.
4. Location Strategy. PepsiCo has many company-owned facilities and partner-owned
facilities in strategic locations. Such an operations management approach is based on this
strategic decision area’s objective of maximal reach to target markets. In PepsiCo’s case, such
facilities are located in key areas near most retailers. PepsiCo is especially interested in large
retail outlets and food service establishments with high sales volume.
5. Layout Design and Strategy. Efficient movement of people, materials and information is
the operations management concern in this strategic decision area. In PepsiCo’s case, spaces
are designed with efficiency and productivity in mind. For example, layout design in PepsiCo
production facilities is centered on the principles of assembly line production and total quality
management (TQM).
6. Job Design and Human Resources. PepsiCo’s human resource management addresses
this strategic decision area through a combination of global corporate HR practices and
divisional HR practices. The main operations management objective in this area is to ensure
the adequacy of PepsiCo’s workforce. For example, PepsiCo has an HR policy and job design
process for Frito-Lay, and separate HR policy and job design process for Quaker Foods.
However, all of these policies and processes comply with PepsiCo’s corporate standards and
“Talent Sustainability” policy.
7. Supply Chain Management. This strategic decision area focuses on operations
management practices that optimize the supply chain to match demand for materials and
intermediary products. PepsiCo’s approach is to diversify and distribute its supply chain hubs.
For example, the company operates supply chain hubs for each regional market. In this way,
PepsiCo optimizes response times to fluctuations in demand.
8. Inventory Management. PepsiCo’s inventory management emphasizes automation.
Adequacy, scheduling, and cost minimization are the key objectives in this strategic area of
operations management. PepsiCo does so through computerized monitoring of inventory.
Inventory managers can access real-time data to help them make decisions.
9. Scheduling. Facility and human resource schedules are the primary concern in this
strategic decision area of operations management. PepsiCo facility managers implement
human resource schedules based on local data. However, automated scheduling is also used
for some of PepsiCo’s production space schedules.
10. Maintenance. PepsiCo’s maintenance concerns are widely varied, considering the
company’s wide array of products and markets. This strategic decision area of operations
management focuses on adequate workforce and other resources that grow with the business.
PepsiCo continues to hire individuals and promotes from within the organization to grow its
workforce. Facilities are expanded, constructed or acquired to support PepsiCo’s growth.

Productivity at PepsiCo

PepsiCo’s operations management practices ensure high performance and productivity. The
company uses different measures or criteria to evaluate actual productivity. The following are
some of the productivity measures used at PepsiCo:

1. Batches per facility per day (PepsiCo production facility productivity)

2. New product ideas per year (product R&D productivity, such as for Pepsi)
3. New accounts per year (marketing productivity)

References

 Kachwala, T. T., & Mukherjee, P. N. (2009). Operations management and productivity

techniques. PHI Learning.
 Lawrence, K. D., & Weindling, J. I. (1980). Multiple goal operations management
planning and decision making in a quality control department. In Multiple Criteria
Decision Making Theory and Application (pp. 203-217). Springer.
 Liu, S., & Jiang, M. (2011). Providing Efficient Decision Support for Green Operations
Management: An Integrated Perspective. INTECH.
 Najdawi, M. K., Chung, Q. B., & Salaheldin, S. I. (2008). Expert systems for strategic
planning in operations management: a framework for executive decisions. International
Journal of Management and Decision Making, 9(3), 310-327.
 PepsiCo 2014 Annual Report.
 PepsiCo Inc. (2012). PepsiCo Announces Strategic Investments to Drive Growth.
 Schrunder, C. P., Galletly, J. E., & Bicheno, J. R. (1994). A fuzzy, knowledge‐based
decision support tool for production operations management. Expert Systems, 11(1), 3-11.
 Verdaasdonk, P. (1999). Defining an information structure to analyse resource spending
changes of operations management decisions. Production Planning & Control, 10(2), 162-
174.
 Verdaasdonk, P., & Wouters, M. (2001). A generic accounting model to support
operations management decisions. Production Planning & Control, 12(6), 605-620.
 Wild, R. (1983). Decision-making in operations management. Management
Decision, 21(1), 9-21.

Our Mission and Vision

At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do,
but the right thing to do for our business.

Our Mission
Our mission is to be the world's premier consumer products company focused on convenient
foods and beverages. We seek to produce financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do, we strive for honesty, fairness
and integrity.

Our Vision
At PepsiCo, Performance with Purpose means delivering sustainable growth by investing in
healthier future for people and our planet.

"PepsiCo's responsibility is to continually improve all aspects of the world in which we

operate - environment, social, economic - creating a better tomorrow than today."

Our vision is put into action through programs and a focus on environmental stewardship,
activities to benefit society, and a commitment to build shareholder value by making PepsiCo
a truly sustainable company.

Performance with Purpose

At PepsiCo, we're committed to achieving business and financial success while leaving a
positive imprint on society - delivering what we call Performance with Purpose.

Our approach to superior financial performance is straightforward - drive shareholder value.

By addressing social and environmental issues, we also deliver on our purpose agenda, which
consists of human, environmental, and talent sustainability.
 Our Operations

 We are organized into three business units, as follows:

1. PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North
America (QFNA) and all of our Latin American food and snack businesses (LAF), including our Sabritas and
Gamesa businesses in Mexico;
2. PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages North America and all of our Latin
American beverage businesses; and
3. PepsiCo International (PI), which includes all PepsiCo businesses in Europe and all PepsiCo businesses in
Asia, Middle East and Africa (AMEA).
Our three business units are comprised of six reportable segments (referred to as divisions), as follows:

 FLNA,
 QFNA,
 LAF,
 PAB,
 Europe, and
 AMEA.
Frito-Lay North America
Either independently or through contract manufacturers, FLNA makes, markets, sells and distributes branded
snack foods. These foods include Lay's potato chips, Doritos tortilla chips, Cheetos cheese flavored snacks,
Tostitos tortilla chips, branded dips, Fritos corn chips, Ruffles potato chips, Quaker Chewy granola bars and Sun
Chips multigrain snacks. FLNA branded products are sold to independent distributors and retailers. In addition,
FLNA's joint venture with Strauss Group makes, markets, sells and distributes Sabra refrigerated dips.

Quaker Foods North America

Either independently or through contract manufacturers, QFNA makes, markets and sells cereals, rice, pasta and
other branded products. QFNA's products include Quaker oatmeal, Aunt Jemima mixes and syrups, Cap'n
Crunch cereal, Quaker grits, Life cereal, Rice-A-Roni, Pasta Roni and Near East side dishes. These branded
products are sold to independent distributors and retailers.

Latin America Foods

Either independently or through contract manufacturers, LAF makes, markets and sells a number of snack food
brands including Gamesa, Doritos, Cheetos, Ruffles, Lay's and Sabritas, as well as many Quaker-brand cereals
and snacks. These branded products are sold to independent distributors and retailers.

PepsiCo Americas Beverages

Either independently or through contract manufacturers, PAB makes, markets and sells beverage concentrates,
fountain syrups and finished goods, under various beverage brands including Pepsi, Mountain Dew, Gatorade,
7UP (outside the U.S.), Tropicana Pure Premium, Sierra Mist, Mirinda, Mug, Propel, Manzanita Sol, Tropicana
juice drinks, SoBe Lifewater, Dole, Amp Energy, Paso de los Toros, Naked juice and Izze. PAB also, either
independently or through contract manufacturers, makes, markets and sells ready-to-drink tea, coffee and water
products through joint ventures with Unilever (under the Lipton brand name) and Starbucks. In addition, PAB
licenses the Aquafina water brand to its bottlers and markets this brand. PAB sells concentrate and finished
goods for some of these brands to authorized bottlers, and some of these branded finished goods are sold
directly by us to independent distributors and retailers. The bottlers sell our brands as finished goods to
independent distributors and retailers. PAB's volume reflects sales to its independent distributors and retailers, as
well as the sales of beverages bearing our trademarks that bottlers have reported as sold to independent
distributors and retailers. Bottler case sales (BCS) and concentrate shipments and equivalents (CSE) are not
necessarily equal during any given period due to seasonality, timing of product launches, product mix, bottler
inventory practices and other factors. While our revenues are not based on BCS volume, we believe that BCS is a
valuable measure as it quantifies the sell-through of our products at the consumer level.
See also "Acquisition of Common Stock of PBG and PAS" below.

Europe
Either independently or through contract manufacturers, Europe makes, markets and sells a number of leading
snack foods including Lay's, Walkers, Doritos, Cheetos and Ruffles, as well as many Quaker-brand cereals and
snacks, through consolidated businesses as well as through non-controlled affiliates. Europe also, either
independently or through contract manufacturers, makes, markets or sells beverage concentrates, fountain
syrups and finished goods under various beverage brands including Pepsi, 7UP and Tropicana. These brands are
sold to authorized bottlers, independent distributors and retailers. In certain markets, however, Europe operates
its own bottling plants and distribution facilities. In addition, Europe licenses the Aquafina water brand to certain of
its authorized bottlers. Europe also, either independently or through contract manufacturers, makes, markets and
sells ready-to drink tea products through an international joint venture with Unilever (under the Lipton brand
name).

Europe reports two measures of volume. Snacks volume is reported on a system-wide basis, which includes our
own sales and the sales by our non-controlled affiliates of snacks bearing Company-owned or licensed
trademarks. Beverage volume reflects Company-owned or authorized bottler sales of beverages bearing
Company-owned or licensed trademarks to independent distributors and retailers (see PepsiCo Americas
Beverages above).

See also "Acquisition of Common Stock of PBG and PAS" below.

Asia, Middle East & Africa

AMEA makes, markets and sells a number of leading snack food brands including Lay's, Kurkure, Chipsy,
Doritos, Smith's, Cheetos, Red Rock Deli and Ruffles, through consolidated businesses as well as through non
controlled affiliates. Further, either independently or through contract manufacturers, AMEA makes, markets and
sells many Quaker-brand cereals and snacks. AMEA also makes, markets and sells beverage concentrates,
fountain syrups and finished goods, under various beverage brands including Pepsi, Mirinda, 7UP and Mountain
Dew. These brands are sold to authorized bottlers, independent distributors and retailers. However, in certain
markets, AMEA operates its own bottling plants and distribution facilities. In addition, AMEA licenses the Aquafina
water brand to certain of its authorized bottlers. AMEA also, either independently or through contract
manufacturers, makes, markets and sells ready-to-drink tea products through an international joint venture with
Unilever (under the Lipton brand name). AMEA reports two measures of volume (see Europe above).

Supply Chain Management

 Supply chain management (SCM) is the management of a network of interconnected
businesses involved in the ultimate provision of product and service packages required
by end customers.

 Supply Chain Management spans all movement and storage of raw materials, work-in-
process inventory, and finished goods from point of origin to point of consumption.

 Definition an American professional association put forward: ³Supply Chain

Management encompasses the planning and management of all activities involved in
sourcing, procurement, conversion, and logistics management activities.´

 It also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third-party service providers, and customers.
  In essence, Supply Chain Management integrates supply and demand management
within and across companies.

EXTERNAL ENVIRONMENT
External environment of Pepsi
Pepsi is a well-known company. It has distributor all around the world. Are there any factors that make Pepsi
successful? First, we will discuss the external environment of Pepsi. . Then, we will discuss how the factors of
general environment and specific environment influence each other. External environment is divided into general
environment and specific environment. General environment includes economic, socio-cultural, technological,
and political/legal aspects while specific environment includes industry regulatory bodies, advocacy group,
customers, competitors and suppliers.
Socio-cultural factor
First, socio-cultural factor influences its customers and competitors. The health issue brought by drinking soft
drinks is one of the issues of socio-cultural factor. Since more and more diseases are caused by unhealthy food,
such as obesity and heart diseases, more people are concerned about their health. As a result, in 1964, Pepsi
produced “Diet Pepsi” which 0 calorie was added while normal coke contained 100 calories. It attracted more
customers who were concerned about their health would rather prefer Diet Pepsi instead of other high calories
soft-drinks because Pepsi promoted a healthier lifestyle. It directly reduced the profit of other soft-drinks
company. In order to compete with Pepsi, Coca-cola followed what Pepsi did before, it produced “Cokezero” to
increase profits. On the other hand, because of the awareness of healthy lifestyle increase, people are willing to
spend more time on exercising and doing sports. Hence, Pepsi made some contribution to push this socio-culture
forward, for example, it sponsored the United States’ National Football League from 2002 to 2011. Also Pepsi
invited David Beckham and Lionel Messi for advertising its products. After customers realized Pepsis’
contributions, they will have a good impression for Pepsi and continue to support this company.

Diet Pepsi bonafidesteph.blogspot.com
Technological factor
Secondly, Pepsi’s technological factor influences its suppliers. Since the market of soft drink is competitive,
Pepsi has to maximize the quantity of its products to enhance its market size. Nowadays, the technology is well-
developed that we can produce products mechanically instead of manually. In 2008, Pepsi decided to install four
new filling lines to replace the old one (Gatorade Plant, Pepsi Co, Oklahoma, United States of America). The
new equipment can fill 1200 bottles per minute, which is much faster than the old one that could only fill 800
bottles per minutes. The technological factor of a well-developed filling equipment means that the quantity of
raw material have changed. Due to the implementation of new filling lines, Pepsi can produce more efficiently
and the demand for the ingredients such as carbonated water and sugar to produce drinks increases at the same
time. As a result, the suppliers of Pepsi provide more ingredients to Pepsi.

New filling lines of Pepsi http://www.harrydavis.net

Economic factor
 Source: Google Image
Thirdly, economic factor influences its customers and competitors. Due to the economic cycle, inflation, changes
the demand of Pepsi’s product from the customers. Let’s take the Great Depression in 1931 as an example.
Because of the expensive price of sugar at that time, Pepsi made a huge financial loss and entered into
bankruptcy. Pepsi had to lower the price of the coke at 5 cents (a nickel) per 12 ounces bottle which was the
same price as Coca-cola’s 6 ounces bottle. As a result, the demand of Pepsi increased and it expanded the market
shares of Pepsi. The Great Depression changed the type of Pepsi’s customers and the market power of its
competitors. Pepsi lowered the price of its products, on one hand, had increased the willingness of poor people to
try its coke. On the other hand, it encouraged regular customers of Coca-cola switched their favourite coke
suppliers to Pepsi because the price of Pepsi’s coke was cheaper than Coca-cola’s coke. Hence, Pepsi had
attracted two types of potential customers. Due to more customers preferred Pepsi instead of Coca-cola, the
market power of Pepsi became stronger while the market share of Coca-cola shrank.
Political factor
Fourthly, political factor influences the soft-drink industry regulatory bodies and customers. Inarguable, coke is
an unhealthy drink, many toxic ingredients are added in the coke which increase the chance of developing
cancer. Therefore, government has to set up laws to monitor the ingredients of all kinds of drinks. In the United
States, the government set up a maximum standard of 5 ppb level of benzene for all drinking products (Ahmed,
2007).. In July 2007, the Food and Drugs Administration, the United State’s industry regulatory body, examined
the products of Pepsi and found that the products contained more than 5 ppb level of benzene (Ahmed, 2007).
Pepsi had to remove their products from stores and offered refunds to the customers. Therefore, the incident
made the customers lose confidence on Pepsi’s products, especially adult customers because they are more
aware of their health than teenagers.
Environmental factor
 Source: Google Image
Fifth, environmental factor influences its advocacy groups. Nowadays, the problem of energy shortagebecomes
more and more serious. One of the reasons of energy shortage is that industrialization consumes lots of fuels for
manufacturing goods that leads to energy crisis. Advocates of environmental protection persuade companies to
enhance energy efficiency in order to help sustain the environment. For example, in 2009 the United States’
Environmental Protection Agency held a programme called” Climate Leaders Program” to persuade companies
to protect environment (”Pepsi and the environment.”) 2010. Pepsi participated in this program and the managers
stated that they would decrease its fuel use by 25 percent per bottle by 2015. In 2010, Pepsi was awarded
“Sustained Excellence Award” by Environmental Protection Agency due to their contributions of protecting
environment (”Pepsi and the environment.” 2010).
To conclude, we have discussed the general and specific environment of Pepsi and explained the relationship
between two environments. To set an intelligent goal, Pepsi should understand not only its external environment
but also its organizational culture to have more information for formulating strategies. For example, managers
should understand its customers’ needs in order to maintain its profit margin. Having an intelligent goal can help
the company to succeed. Hence, understanding the external environment of a company is an important step to let
it to have further development.
References
1.  Ahmed. E. (2007). Pepsi and other settle benzene lawsuit. Retrieved January 2, 2014,
from http://www.foodproductiondaily.com/Safety-Regulation/Pepsi-and-others-settle-benzene-lawsuit
2.  MNN. (2010). Pepsi and the environment. Retrieved January 2, 2014,
from http://www.mnn.com/money/sustainable-business-practices/stories/pepsi-and-the-environment#
3.  foodprocessing-technology. (n.d.). PrGatorade Plant, Pepsi Co, Oklahoma, United States of
America. Retrieved January 2, 2014, from http://www.foodprocessing-technology.com/projects/gatorade/
4. PepsiUSA. (n.d.). Pepsi- FAQs. Retrieved January 2, 2014, from http://www.pepsiusa.com/faqs.php?
section=highlights
Company Background

Name PepsiCo Inc.

Logo

Industries served Beverages, Food

Geographic areas served Worldwide

Headquarters U.S.

Current CEO Indra Nooyi

Revenue $ 65.492 billion (2012)

Profit $ 6.178 billion (2012)

Employees 297,000 (2012)

The Coca-Cola Company, Dr Pepper Snapple Group, Inc., Mondele

International, Inc., Hansen Natural Corporation, National Beverage C
Main Competitors
Kraft Foods Inc., The Kellogg Company, ConAgra Foods, Inc., Nestl
and others.

SWOT Analysis of PepsiCo with USP, Competition, STP (Segmentation, Targeting, Positioning) -
Marketing Analysis

PepsiCo

Parent Company PepsiCo Ltd

Category Beverages and foods

Sector Food and Beverages

Live for Now; Every Generation Refreshes The World; Something for
Tagline/ Slogan Everyone;Yeh dil mangey more

One of the most popular global brands in the foods and beverages sector
USP targeting the youth

STP

Segment Middle and upper middle class people

Target Group The younger generation (15 to 35 years of age)

Positioning As a food and beverage brand with multiple products catering to the youth

Product Portfolio

1. Pepsi                                  2. Nimbooz
3. Diet Pepsi                          4. 7UP
5. Mirinda                               6. Slice
7. Aquafina Water                 8. Tropicana
Brands 9. Lays                                   10.Gatorade

SWOT Analysis

1.One of the most popular and globally recognised brands in foods and
beverages

2. One of the most diversified product portfolio

3. Popular subsidiary brands like Frito Lay, Gatorade, Pepsi, Quaker, Tropican
Yum! Brands, etc.
4. Global reach with presence in over 200 countries
5.An employee strength of around 300,000 people

6. CSR through PepsiCo Foundation, which works in the sector of education,

health, water conservation, education etc.

7. Pepsi Refresh Project that funds new ideas or ventures that have the poten
to benefit the society

8.Strong and efficient supply chain network, ensuring that all the products ar
available even in the most remote places
9. Excellent branding and advertising with global celebrity as brand
ambassadors
Strength 10. Tie-ups, sponsorships with global sports events, music concerts, etc

1.Strong competition in the aerated drinks segment from Coca Cola means h
brand switching
2. Cases against products have been blown out of proportion, thereby affecti
Weakness brand image

1.Increase penetration into developing countries and capture their market

2.Increase its product portfolio by acquisition of other brands
3.To expand the Yum! Brands eatery in untapped countries and regions like t
2 cities

4.To improve its brand image by involving in more CSR activities to benefit th
Opportunity locals
 1.Health consciousness amongst people can take a toll on its aerated drinks
snacks food markets
2.Compliance with different government regulations and norms in different
countries
3.Inlation, economic slowdown and instability causes decline in the purchasin
power of consumers

Threats 4.Strong competition from other brands in each segment of its operation

Competition

1.Coca-Cola Company
2.Kraft Foods 
Competitors 3.Dr. Pepper Snapple

PepsiCo SWOT Analysis &

Recommendations
UPDATED DEC 2, 2015 JUSTIN YOUNG
PepsiCo and other products in a Woolworths supermarket in Australia. PepsiCo’s SWOT
analysis emphasizes international growth and a number of strategic reforms. (Photo: Public
Domain)
PepsiCo’s current position as the second biggest firm in the global food and beverage market
is based on the company’s ability to wield its strengths to continue growing. The company
grows despite an increasing level of market saturation. This SWOT analysis shows that
PepsiCo is positioned to grow and potentially reach the top position in the global food and
beverage industry. The SWOT analysis framework identifies the strengths and opportunities
that the firm can tap to address its weaknesses and business threats. As a global company,
PepsiCo must address the issues shown in this SWOT analysis to minimize barriers to its
global performance.

PepsiCo’s SWOT analysis presents major challenges in the areas of competition, changing
consumer behaviors, and product development.

PepsiCo’s Strengths (Internal Strategic Factors)

PepsiCo’s continued global growth and prominence reflects the company’s strengths. This
aspect of the SWOT analysis framework outlines internal strategic factors that enable firms to
fulfill their business goals. The following are the most significant strengths of PepsiCo:

1. Strong brand image

2. Broad product mix
3. Extensive global production network
4. Extensive global distribution network
As a successful global company, PepsiCo has one of the strongest brands in the market. This
strength enables the firm to attract consumers to its new products. In addition, the broad
product mix represents PepsiCo’s increasing ability to reach various markets and segments,
such as through Frito-Lay products, Quaker products, and Pepsi products. PepsiCo’s
extensive global production and distribution networks are strengths that support the
company’s international growth and expansion strategies. In this aspect of the SWOT
analysis, PepsiCo’s strengths are sufficient to support its global growth strategy.

PepsiCo’s Weaknesses (Internal Strategic Factors)

PepsiCo suffers from a number of weaknesses that act as barriers to international growth. The
internal strategic factors that limit organizational development are considered in this aspect of
the SWOT analysis framework. The following are PepsiCo’s main weaknesses:

1. Low penetration outside the Americas

2. Limited business portfolio
3. Weak marketing to health-conscious consumers
PepsiCo derives about 70% of its revenues from markets in North America and South
America. This weakness indicates that the company has not yet maximized potential revenues
outside the Americas. In addition, PepsiCo operates primarily in the food and beverage
industry. This is a weakness because it maximizes the company’s vulnerability to risks in the
food-and-beverage market. Also, PepsiCo fails to effectively market many of its products to
health-conscious consumers. This aspect of the SWOT analysis highlights weaknesses that
PepsiCo must address through changes in its growth strategy.

Opportunities for PepsiCo (External Strategic Factors)

PepsiCo has opportunities for continued global growth. In this aspect of the SWOT analysis
framework, external strategic factors that provide options for business improvement are
identified. PepsiCo’s opportunities are as follows:

1. Business diversification
2. Market penetration in developing countries
3. Global alliances with complementary businesses
PepsiCo has the opportunity to diversify its businesses, such as by acquiring a complementary
firm that is not in the food and beverage industry. Another opportunity is for PepsiCo to
increase its penetration in developing countries to generate more revenues from markets
outside the Americas. In addition, PepsiCo can create alliances with complementary business
to increase its market presence. Based on this aspect of the SWOT analysis, PepsiCo has
significant opportunities to strengthen its business resilience.

Threats Facing PepsiCo (External Strategic Factors)

The food and beverage industry experiences a variety of threats. External strategic factors that
could reduce business performance are considered in this aspect of the SWOT analysis
framework. In PepsiCo’s case, the following are the most significant threats:

1. Aggressive competition
2. Healthy lifestyles trend
3. Environmentalism
Aggressive competition is a major threat against the company. The influence of the Coca-
Cola Company is especially significant against PepsiCo. In addition, the healthy lifestyles
trend is a threat against PepsiCo’s products, many of which are seen as unhealthful because of
their sugar, salt, or fat content. Also, environmentalism threatens the company in how
consumers negatively respond to product waste and lifecycle issues. This aspect of the SWOT
analysis indicates that PepsiCo must reform its strategies to overcome the threats to business.

PepsiCo’s SWOT Analysis – Recommendations

PepsiCo can use its strengths to effectively respond to the issues identified in this SWOT
analysis, especially those considered as threats. The realistic actions that PepsiCo could take
to improve its competitiveness and international growth are as follows:

1. Diversify businesses to minimize market risk exposure

2. Further penetrate developing markets to grow revenues
3. Improve product healthfulness to attract more consumers
4. Enhance recycling efforts to address environmentalism

References
 Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and
organizational diversity: SWOT analysis and implications. Journal of Management, 29(6),
801-830.
 Leigh, D., & Pershing, A. J. (2006). SWOT analysis. The Handbook of Human
Performance Technology, 1089-1108.
 PepsiCo 2014 Annual Report.
 PepsiCo Inc. (2012). PepsiCo Announces Strategic Investments to Drive Growth.
 Pickton, D. W., & Wright, S. (1998). What’s SWOT in strategic analysis? Strategic
Change, 7(2), 101-109.
 Piercy, N., & Giles, W. (1989). Making SWOT analysis work. Marketing Intelligence &
Planning, 7(5/6), 5-7.
 Valentin, E. K. (2001). SWOT analysis from a resource-based view. Journal of Marketing
Theory and Practice, 54-69.
 NEW PepsiCo SWOT Analysis2015

Opportunities Threats
Growing beverages and snacks consumption in emerging Changes in consumer tastes
markets (especially BRIC) Water scarcity
Increasing demand for healthy food and beverages Decreasing gross profit margin
Further expansion through acquisitions Legal requirements to disclose negative informatio
Bottled water consumption growth product labels
Savory snacks consumption growth Strong dollar
Increased competition from Snyder’s

Strengths
1. Product diversity. PepsiCo has several hundreds of brands, which include: carbonated and
noncarbonated drinks, water, savory and whole grain-based snacks. Product diversification
strengthens PepsiCo because it doesn’t have to rely on few key products or seasonal sales and
isn’t significantly affected by changes in customer tastes.
2. Extensive distribution channel. PepsiCo products are served to more than 10 million stores
per week in more than 200 countries.
3. CSR. The firm recognizes its role in a society and engages in education, recycling, water
usage reduction, obesity fighting and other projects through PepsiCo Foundation, thus
increasing its brand awareness and customer loyalty.
4. Competency in mergers and acquisitions. The key to PepsiCo business growth is its
successful mergers and acquisitions of beverage, bottling and snacks companies. PepsiCo
acquired such brands as Gatorade, Tropicana, Doritos, Quaker Oats and many others.
5. 22 brands earning more than $1 billion a year. The company doesn’t have to rely on one or
two of its product to bring most of the revenues. Instead, Pepsi has 22 brands that contribute
significantly to its income, serving different industries and satisfying various consumer tastes.
6. Successful marketing and advertising campaigns. More than $2 billion spent on
advertising over 2012 resulted in PepsiCo’s growing market share over its main competitors,
including Coca Cola Company, which spent even more on advertising.
7. Complementary product sales. In its annual financial report, PepsiCo revealed one of its
studies' results that about 30% of customers who buy its snacks also buy its beverages.
PepsiCo’s decision to diversify its product range is firm’s competitive advantage too.
8. Proactive and progressive. According to New York Times food industry writer Melanie
Warner, PepsiCo, by many critics, is considered to be most proactive and progressive food
company.

Weaknesses
1. Over-dependence on Wal-Mart. More than 13% of PepsiCo business revenues come from
Wal-Mart store chain. Wal-Mart has a significant buyer power and can easily dictate prices
over PepsiCo leaving it with very small margins. In addition, if PepsiCo would lose Wal-Mart
it would lose 13% of its revenue and competitive advantage.
2. Low pricing. PepsiCo usually prices its products lower than its competitors. Low price is
associated with low quality and PepsiCo products are usually perceived as ones.
3. Questionable practices. PepsiCo is using and selling tap water but places view of mountains
on its water bottle labels, thus deceiving people that it is mountain spring water when it is not.
PepsiCo has also been criticized for using water in India with higher than allowed amount of
pesticides in it.
4. Weak brand awareness. The Coca Cola Company has the largest share market of beverages
in the world and much stronger brand awareness than Pepsi, placing it at competitive
disadvantage.
5. Too low net profit margin. PepsiCo’s net profit margin is 9.7% compared to Coca Cola’s
18.55% and Nestlé’s 11%.

Opportunities
1. Growing beverages and snacks consumption in emerging markets. PepsiCo has made
large investments in BRIC countries to expand its market share as these countries represent
the fastest growing food and beverages markets in the world. If PepsiCo is successful it will
increase its revenues and global market share significantly. In addition, it will be able to rely
less on US market.
2. Increasing demand for healthy food and beverages. Due to many programs to fight
obesity, demand for healthy food and beverages has increased drastically. PepsiCo has an
opportunity to further expand its product range with beverages and snacks that have low
amount of sugar and calories.
3. Further expansion through acquisitions. So far, PepsiCo has been successful in acquiring
other companies and adding new growing brands to its portfolio.
4. Bottled water consumption growth. Consumption of bottled water is expected to grow both
in US (PepsiCo’s largest bottled water market) and the rest of the world.
5. Savory snacks consumption growth. The same opportunity PepsiCo has in growing its
revenue selling snacks as this market is also expected to grow.

Threats
1. Changes in consumer tastes. Consumers around the world become more health conscious
and reduce their consumption of carbonated drinks, drinks that have large amounts of sugar,
calories and fat.
2. Water scarcity. Water is becoming scarcer around the world and increases in both cost and
criticism for PepsiCo over the large amounts of water used for production.
3. Decreasing gross profit margin. PepsiCo’s gross profit margin was decreasing over the past
few years and may continue to decrease due to higher water and other raw material costs.
4. Legal requirements to disclose negative information on product labels. Some researches
show that particular ingredients, consumed in extra large quantities, in some of PepsiCo
products could cause cancer. For this reason, many governments consider to pass legislation
that requires disclosing such information on product labels. Products containing such
information may be perceived negatively and lose its customers.
5. Strong dollar. More than 50% of PepsiCo’s income is from outside US. Due to strong dollar
performance against other currencies PepsiCo’s income should fall.
6. Increased competition from Snyder’s. Snyder’s increase its US savory snacks market share
by 1.6% and almost all of it was taken from PepsiCo.

Sources
1. PepsiCo (2013). Brands. Available at: http://www.pepsico.com/Brands.html
2. United States Securities and Exchange Commission (2012). 10-K Annual report of
PepsiCo, Inc. Available at:
http://www.sec.gov/Archives/edgar/data/77476/000119312512081822/d269581d10k.
htm
3. Warner, Melanie (2010). Good News! PepsiCo’s Indra Nooyi Solves the Obesity
Crisis. Available at: http://www.cbsnews.com/8301-505123_162-44040677/good-
news-pepsicos-indra-nooyi-solves-the-obesity-crisis/?tag=bnetdomain

PepsiCo Internal Analysis

Introduction
Internal analysis is the process of evaluating an organizations strength and weaknesses. It is
important to conduct an internal analysis to find the strengths and weaknesses of the
company. This paper presents an internal analysis of the PepsiCo Company.

Strengths
One of the greatest strengths for PepsiCo is its brand. PepsiCo is one of the companies with
the largest brand recognition in the world (PepsiCo, 2010). The brand name Pepsi is known in
virtually every country in the world. The strong brand presence makes it easier for the
company to market its products around the world. Under the Pepsi company brand, PepsiCo
has numerous other product brands. All these brands have rode on the success of the company
brand and have found it easy to sell since the company brand in largely accepted in the
market. The popularity of PepsiCo corporate brand has also made it easier for the company to
introduce new products in the market. All PepsiCo has to do in order to make a new product
success is to attach it with the company’s corporate brand which has already attained a
significant level of brand loyalty in the beverage market.

Another key strong point for PepsiCo is a large distribution network. One of the core elements
that define an organization’s success is the organization’s ability to take it product near the
consumer (PepsiCo, 2010). PepsiCo has managed to do this through establishment of a
massive distribution network. PepsiCo runs bottling units in diverse geographical region
which enables the company to produce its products near the consumers. This reduces the cost
of transportation and storage.

In addition, PepsiCo has established relationship with small and mega retailers who sell
PepsiCo products to the final consumers. Forming partnership with large retailers such as
Wal- Mart has enabled the company to expand its reach to the market. Similarly, partnership
with small retail business has enabled the company to take it products to even the remotest
parts of the world. Apart from retail chains, PepsiCo has also teamed up with fast food
restaurants around the world which have also provided the company with a wide network of
outlets (PepsiCo, 2010).

Competitive Advantage
The beverage industry is one of the most competitive industries in the world because it is
filled by numerous products competing against each other. In order to remain in business, any
company needs features that gives it an edge over it competitors (Olsen, 2011). One of the
PepsiCo’s competitive advantages is its innovative lines of products. PepsiCo has been on
fore front in the development of innovative beverage products for different segments of the
market. Core has over 20 lines of products with each targeted to different groups of people.
The ability of the company to come up with new and innovative products has enabled the
company to change as consumer’s needs evolve and thereby remain relevant in the market.

Another competitive advantage of PepsiCo is the ability to respond quickly to market

opportunity and threats. PepsiCo innovativeness gives it the ability to respond quickly to
changes in the market. The company convenient size also gives it the ability to move quickly.
The company is neither to small like most of its competitors neither is to large like its main
competitor, Coca Cola. The relatively large size of the organization gives the organization
access to resources that also make it easier for the company to move quickly.

Internal Weaknesses
One of the internal weaknesses found in PepsiCo is the company’s reliant on franchised
bottling company to distribute its products (PepsiCo, 2010). This strategy has seen the
company create very powerful bottlers that it cannot exert control over. Sometimes, the
franchises oppose introduction of new products by PepsiCo while other refuse to manufacture
some of the products. Sometimes, the franchises develop their own product lines that are not
part of the PepsiCo’s brands. The franchise system has also limited the ability of the company
to expand its operations (PepsiCo, 2010). Unlike Coca Cola, which is able to invest in its
bottling companies, PepsiCo cannot invest in its bottling companies since it does not own
them. This has hindered the growth and expansion of the company since most of the
individual investors have limited capacity to make such investments.