PAN AFRICAN CHRISTIAN UNIVERSITY COLLEGE,
NEFA ESI AKWAA-MENSAH
MANAGEMENT INFORMATION SYSTEM
Select an organization of your choice and outline how the introduction of
manage ment information systems has improve upon their daily activities.
Follow the outline below:
This chapter should capture the background/profile of the company, some basic
facts of the company, that is history, vision, mission statement, corporate values,
describe its markets, product or services, brief pe rformance of the past five years.
Strength and Weakness
What they do to gain competitive advantage? How efficient and effective are they?
Identify the core competences and strategic capabilities of the organization
Describe each of the IT sources used to improve their business
Recommended decision: Tell what you think the company should do
Conclusions and Recommendation
Pepsi is a carbonated soft drink that is produced and manufactured by PepsiCo.
Invented in 1898 and introduced as "Brad's Drink", it was later renamed as Pepsi -
Cola on June 16, 1903. Pepsi was first introduced as "Brad's Drink" in New Bern,
North Carolina in 1898 by Caleb Bradham, who made it at his home where the
drink was sold. It was later named Pepsi Cola, possibly due to the digestive
enzyme pepsin and kola nuts used in the recipe. Bradham sought to create a
fountain drink that was delicious and would aid in digestion and boost energy.
In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore to a rented
warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year,
Pepsi was sold in six-ounce bottles, and sales increased to 19,848 gallons. In
1909, automobile race pioneer Barney Oldfield was the first celebrity to endorse
Pepsi-Cola, describing it as "A bully drink...refreshing, invigorating, a fine bracer
before a race." The advertising theme "Delicious and Healthful" was then used
over the next two decades. In 1926, Pepsi received its first logo redesign since
the original design of 1905. In 1929, the logo was changed again.
In 1931, at the depth of the Great Depression, the Pepsi-Cola Company entered
bankruptcy - in large part due to financial losses incurred by speculating on wildly
fluctuating sugar prices as a result of World War I. Assets were sold and Roy C.
Megargel bought the Pepsi trademark. Eight years later, the company went
bankrupt again. Pepsi's assets were then purchased by Charles Guth, the
President of Loft Inc. Loft was a candy manufacturer with retail stores that
contained soda fountains. He sought to replace Coca-Cola at his stores' fountains
after Coke refused to give him a discount on syrup. Guth then had Loft's chemists
reformulate the Pepsi-Cola syrup formula. On three separate occasions between
1922 and 1933, the Coca-Cola Company was offered the opportunity to purchase
the Pepsi-Cola company and it declined on each occasion.
The original trademark application for Pepsi-Cola was filed on September 23,
1902 with registration approved on June 16, 1903. In the application's statement,
Caleb Bradham describes the trademark as an, "arbitrary hyphenated word
"PEPSI-COLA," and indicated that the mark was in continuous use for his
business since August 1, 1901. The Pepsi-Cola's description is a flavoring-syrup
for soda water. The trademark expired on April 15, 1994.
A second Pepsi-Cola trademark is on record with the USPTO. The application
date submitted by Caleb Bradham for the second trademark is Saturday, April 15,
1905 with the successful registration date of April 15, 1906, over three years after
the original date. Curiously, in this application, Caleb Bradham states that the
trademark had been continuously used in his business and those from whom title
is derived since in the 1905 application the description submitted to the USPTO
was for a tonic beverage. The federal status for the 1905 trademark is registered
and renewed and is owned by Pepsico, Inc. of Purchase, New York.
During the Great Depression, Pepsi gained popularity following the introduction in
1936 of a 12-ounce bottle. Initially priced at 10 cents, sales were slow, but when
the price was slashed to five cents, sales increased substantially. With a radio
advertising campaign featuring the jingle "Pepsi-Cola hits the spot / Twelve full
ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for
you," arranged in such a way that the jingle never ends. Pepsi encouraged price-
watching consumers to switch, obliquely referring to the Coca-Cola standard of
six ounces per bottle for the price of five cents (a nickel), instead of the 12 ounces
Pepsi sold at the same price. Coming at a time of economic crisis, the campaign
succeeded in boosting Pepsi's status. From 1936 to 1938, Pepsi-Cola's profits
Pepsi's success under Guth came while the Loft Candy business was faltering.
Since he had initially used Loft's finances and facilities to establish the new Pepsi
success, the near-bankrupt Loft Company sued Guth for possession of the Pepsi-
Cola company. A long legal battle, Guth v. Loft, then ensued, with the case
reaching the Delaware Supreme Court and ultimately ending in a loss for Guth.
Walter Mack was named the new President of Pepsi-Cola and guided the
company through the 1940s. Mack, who supported progressive causes, noticed
that the company's strategy of using advertising for a general audience either
ignored African Americans or used ethnic stereotypes in portraying blacks. He
realized African Americans were an untapped niche market and that Pepsi stood
to gain market share by targeting its advertising directly towards them To this
end, he hired Hennan Smith, an advertising executive "from the Negro
newspaper field" to lead an all-black sales team, which had to be cut due to the
onset of World War II. In 1947, Mack resumed his efforts, hiring Edward F. Boyd
to lead a twelve-man team. They came up with advertising portraying black
Americans in a positive light, such as one with a smiling mother holding a six
pack of Pepsi while her son (a young Ron Brown, who grew up to be Secretary of
Commerce) reaches up for one. Another ad campaign, titled "Leaders in Their
Fields", profiled twenty prominent African Americans such as Nobel Peace Prize
winner Ralph Bunche and photographer Gordon Parks.
Boyd also led a sales team composed entirely of blacks around the country to
promote Pepsi. Racial segregation and Jim Crow laws were still in place
throughout much of the U.S.; Boyd's team faced a great deal of discrimination as
a result, from insults by Pepsi co-workers to threats by the Ku Klux Klan. On
the other hand, they were able to use racism as a selling point, attacking Coke's
reluctance to hire blacks and support by the chairman of Coke for segregationist
Governor of Georgia Herman Talmadge. As a result, Pepsi's market share as
compared to Coke's shot up dramatically. After the sales team visited Chicago,
Pepsi's share in the city overtook that of Coke for the first time.
This focus on the market for black people caused some consternation within the
company and among its affiliates. They did not want to seem focused on black
customers for fear white customers would be pushed away. In a meeting at the
Waldorf-Astoria Hotel, Mack tried to assuage the 500 bottlers in attendance by
pandering to them, saying, "We don't want it to become known as a nigger drink."
After Mack left the company in 1950, support for the black sales team faded and
it was cut.
From the 1930s through the late 1950s, "Pepsi-Cola Hits the Spot" was the most
commonly used slogan in the days of old radio, classic motion pictures, and later
television. Its jingle (conceived in the days when Pepsi cost only five cents) was
used in many different forms with different lyrics.
With the rise of television, Pepsi utilized the services of a young, up-and-coming
actress named Polly Bergen to promote products, oftentimes lending her singing
talents to the classic "...Hits The Spot" jingle. Through the intervening decades,
there have been many different Pepsi theme songs sung on television by a
variety of artists, from Joanie Summers to The Jacksons to Britney Spears.
In 1975, Pepsi introduced the Pepsi Challenge marketing campaign where
PepsiCo set up a blind tasting between Pepsi-Cola and rival Coca-Cola. During
these blind taste tests the majority of participants picked Pepsi as the better
tasting of the two soft drinks. PepsiCo took great advantage of the campaign with
television commercials reporting the results to the public. In 1976 Pepsi, RKO
Bottlers in Toledo, Ohio hired the first female Pepsi salesperson, Denise Muck, to
coincide with the United States bicentennial celebration. In 1996, PepsiCo
launched the highly successful Pepsi Stuff marketing strategy. By 2002, the
strategy was cited by Promo Magazine as one of 16 "Ageless Wonders" that
"helped redefine promotion marketing."
In 2007, PepsiCo redesigned their cans for the fourteenth time, and for the first
time, included more than thirty different backgrounds on each can, introducing a
new background every three weeks. One of their background designs includes a
string of repetitive numbers, "73774". This is a numerical expression from a
telephone keypad of the word "Pepsi." In late 2008, Pepsi overhauled their entire
brand, simultaneously introducing a new logo and a minimalist label design. The
redesign was comparable to Coca-Cola's earlier simplification of their can and
bottle designs. Also in 2008 Pepsi teamed up with Google/YouTube to produce
the first daily entertainment show on Youtube, Poptub. This daily show deals with
pop culture, internet viral videos, and celebrity gossip. Poptub is updated daily
In 2009, "Bring Home the Cup," changed to "Team Up and Bring Home the Cup."
The new installment of the campaign asks for team involvement and an advocate
to submit content on behalf of their team for the chance to have the Stanley Cup
delivered to the team's hometown by Mark Messier.
Pepsi has official sponsorship deals with three of the four major North American
professional sports leagues: the National Football League, National Hockey
League and Major League Baseball. Pepsi also sponsors Major League Soccer.
It also has the naming rights to the Pepsi Center, an indoor sports facility in
Denver, Colorado. Pepsi also has sponsorship deals in international cricket
teams. The Pakistan cricket team is one of the teams that the brand sponsors.
The team wears the Pepsi logo on the front of their test and ODI test match
On July 6, 2009, Pepsi announced it would make a $1 billion investment in
Russia over three years, bringing the total Pepsi investment in the country to $4
billion. In July 2009, Pepsi started marketing itself as Pecsi in Argentina in
response to its name being mispronounced by 25% of the population and as a
way to connect more with all of the population.
In October 2008, Pepsi announced that it would be redesigning its logo and re-
branding many of its products by early 2009. In 2009, Pepsi, Diet Pepsi and
Pepsi Max began using all lower-case fonts for name brands, and Diet Pepsi Max
was re-branded as Pepsi Max. The brand's blue and red globe trademark
became a series of "smiles," with the central white band arcing at different angles
depending on the product until 2010. Pepsi released this logo in U.S. in late
2008, and later it was released in 2009 in Canada (the first country outside of the
United States for Pepsi's new logo), Brazil, Bolivia, Guatemala, Nicaragua,
Honduras, El Salvador, Colombia, Argentina, Puerto Rico, Costa Rica, Panama,
Chile, Dominican Republic, the Philippines and Australia. In the rest of the world
the new logo has been released in 2010. India now is the only country where
Pepsi is still using its old logo. The old logo has been phased out most recently in
France and Mexico. The UK started to use the new Pepsi logo on cans in an
order different from the US can. In mid-2010, all Pepsi variants, regular, diet, and
Pepsi Max, have started using only the medium-sized "smile" Pepsi Globe.
Pepsi and Pepsi Max cans and bottles in Australia now carry the localized version
of the new Pepsi Logo. The word Pepsi and the logo are in the new style, while
the word "Max" is still in the previous style. Pepsi Wild Cherry finally received the
2008 Pepsi design in March 2010. In 2011, for New York Fashion Week, Diet
Pepsi introduced a "skinny" can that is taller and has been described as a
"sassier" version of the traditional can that Pepsi says was made in "celebration
of beautiful, confident women." The company's equating of "skinny" and
"beautiful" and "confident" is drawing criticism from brand critics, consumers who
do not back the "skinny is better" ethos, and the Nationa l Eating Disorders
Association, which said that it takes offense to the can and the company's
"thoughtless and irresponsible" comments. PepsiCo Inc. is a Fashion Week
sponsor. This new can will be available to consumers nationwide in March.
MISSION AND VISION PEPSI CO.
At PepsiCo, they believe being a responsible corporate citizen is not only the right
thing to do, but the right thing to do for their business.
Their mission is to be the world's premier consumer Products Company focused
on convenient foods and beverages. Pepsi also seek to produce financial
rewards to investors as they provide opportunities for growth and enrichment to
their employees, their business partners and the communities in which they
operate. And in everything Pepsi do, they strive for honesty, fairness and
"PepsiCo's responsibility is to continually improve all aspects of the world in
which we operate - environment, social, economic - creating a better tomorrow
Their 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, they are committed to achieving business and financial success
while they are leaving a positive imprint on society - delivering what they call
Performance with Purpose. They approach to superior financial performance is
straightforward - drive shareholder value. When addressing social and
environmental issues, Pepsi also deliver on their purpose agenda, which consists
of human, environmental, and talent sustainability.
Pepsi Max Cease Fire
Pepsi Wild Cherry
Caffeine Free Pepsi
Diet Pepsi Wild Cherry
Caffeine Free Diet Pepsi
PEPSICO VALUES & PHILOSOPHY
Their Values & Philosophy are a reflection of the socially and environmentally
responsible company Pepsi aspire to be. They are the foundation for every
business decision we make.
They are committed to delivering sustained growth through empowered people
acting responsibly and building trust.
WHAT IT MEANS
Sustained Growth is fundamental to motivating and measuring our success. Our
quest for sustained growth stimulates innovation, places a value on results, and
helps us understand whether today's actions will contribute to our future. It is
about the growth of people and company performance. It prioritizes both making
a difference and getting things done.
Empowered People means we have the freedom to act and think in ways that
we feel will get the job done, while adhering to processes that ensure proper
governance and being mindful of company needs beyond our own.
Responsibility and Trust form the foundation for healthy growth. We hold
ourselves both personally and corporately accountable for everything we do. We
must earn the confidence others place in us as individuals and as a company. By
acting as good stewards of the resources entrusted to us, we strengthen that trust
by walking the talk and following through on our commitment to succeeding
We uphold our commitment with six guiding principles.
We must always strive to:
1. Care for our customers, our consumers and the world we live in.
Pepsi are driven by the intense, competitive spirit of the marketplace, but
we direct this spirit toward solutions that benefit both our company and our
constituents. Our success depends on a thorough understanding of our
customers, consumers and communities. To foster this spirit of generosity,
we go the extra mile to show we care.
2. Sell only products we can be proud of
The true test of our standards is our own ability to consume and personally
endorse the products we sell. Without reservation. Our confidence helps
ensure the quality of our products, from the moment we purchase
ingredients to the moment it reaches the consumer's hand.
3. Speak with truth and candor
Pepsi tell the whole story, not just what's convenient to our individual
goals. In addition to being clear, honest and accurate, we are responsible
for ensuring our communications are understood.
4. Balance short term and long term
In every decision, we weigh both short-term and long-term risks and
benefits. Maintaining this balance helps sustain our growth and ensures
our ideas and solutions are relevant both now and in the future.
5. Win with diversity and inclusion
We embrace people with diverse backgrounds, traits and ways of thinking.
Our diversity brings new perspectives into the workplace and encourages
innovation, as well as the ability to identify new market opportunities.
6. Respect others and succeed together.
The mutual success depends on mutual respect, inside and outside the
company. It requires people who are capable of working together as part
of a team or informal collaboration. While our company is built on
individual excellence, we also recognize the importance and value of
teamwork in turning our goals into accomplishments.
A. CORPORATE OVERVIEW AND FINANCIAL PERFORMANCE:
PepsiCo, Inc. is one of the most successful consumer products companies in the
world, with 2000 revenues of over $20 billion and 125,000 employees. The
company consists of: Frito-Lay Company, the largest manufacturer and distributor
of snack chips; Pepsi-Cola Company, the second largest soft drink business and
Tropicana Products, the largest marketer and producer of branded juice. PepsiCo
brands are among the best known and most respected in the world and are
available in about 190 countries and territories.
In 2000, PepsiCo has a reported net sale of $20,348 and a comparable net sale
of $20,144 in comparison to its 1999’s net sales of $20,367 and $18,666
respectively. PepsiCo has increased its comparable net sale of 8% in 2000 while
it had an increase of 15% in 1999. This reflects the increasing rate is going
slower. On the other hand, PepsiCo’s interest expense declines 39% showing
that the company is significantly lower the average debt level. Back to 1999, the
report shows that the company’s interest expense dropped 8%, which indicates
that the company is performing well in managing its financial strategies. More
details about the financial performance of the company will be discussed in the
later part of this paper.
B. STRATEGIC POSTURE:
PepsiCo’s overall mission is to increase the value of shareholder’s investment.
They do this through sales growth, cost controls and wise investment of
resources. They believe their commercial success depends upon offering quality
and value to their consumers and customers; providing products that are safe,
wholesome, economically efficient and environmentally sound; and providing a
fair return to their investors while adhering to the highest standards of integrity.
PepsiCo’s overriding objective is to increase the value of our shareholders’
investment through integrated operating, investing and financing activities. Their
strategy is to concentrate their resources on growing their businesses, both
through internal growth and carefully selected acquisitions. Their strategy is
continually fine-tuned to address the opportunities and risks of the global
marketplace. The corporation’s success reflects their continuing commitment to
growth and a focus on those businesses where they can drive their own growth
and create opportunities.
PepsiCo believes that as a corporate citizen, it has a responsibility to contribute
to the quality of life in our communities. This philosophy is put into action through
support of social agencies, projects and programs. The scope of this support is
extensive — ranging from sponsorship of local programs and support of
employee volunteer activities, to contributions of time, talent and funds to
programs of national impact. Each division is responsible for its own giving
program. Corporate giving is focused on giving where PepsiCo employees
As a consumer products company, PepsiCo does not have the major
environmental problems of heavy industry. Their biggest environ-mental
challenge is packaging generated by their products. Packaging is important to
public health and a critical component of the distribution system that delivers
products to consumers and commercial establishments. To meet both consumer
demand and safeguard the environment, they recycle, reuse and reduce
packaging wherever possible. Each business is also committed to responsible
use of resources required in manufacturing their products.
Continually fine-tuned to address the opportunities and risks of the global
marketplace. Concentrate our resources on growing our businesses, both
through internal growth and carefully selected acquisitions. Company developed
its traditional products and expanded into low-fat and no-fat snacks as well as
salsas and dips.
Employee networks to mentor and support minority & female employees.
Actively and diligently seek out qualified M/WBEs for all possible company
Make every reasonable effort to help qualified M/WBEs to meet company
Respect the privacy of all visitors who access and use the company’s
corporate Web site
Treating all customers with respect, sensitivity and fairness, while
providing some of the greatest products on earth.
We respect individual differences in culture, ethnicity and color. PepsiCo is
committed to equal opportunity for all employees and applicants.
Corporate program for training employees how to work and manage in an
II. STRATEGIC MANAGERS
Roger A. Enrico, 56, is chairman of the Board and CEO. Mr. Enrico was elected
as PepsiCo’s CEO in April 1996 and as Chairman of the Board in November
1996, after service as Vice Chairman since 1993. Enrico, who once wanted to be
an actor, understands that great marketing is pure theater. In his 29 years at
PepsiCo (PEP), he has staged some of marketing’s most spectacular
productions. ”Coke’s leadership tried to put us out of business,” he says flatly.
”But we did not look for a temporary boost or a short-term gain despite the self-
destructive busi ness philosophy by our major competitor. We’ve been honed by
fire.” He spun off Pepsi’s capital-intensive bottling operations into an independent
public company. He spent $3.3 billion to acquire Tropicana, the leading orange
Indra K. Nooyi, 45, is a Senior Vice President and CFO. She joined PepsiCo in
1994 as Senior Vice President, Corporate Strategy and Development. Prior to
joining PepsiCo, she was Senior Vice President of Strategy, Planning and
Strategic Markets for Asea Brown Boveri. Nooyi is responsible for corporate staff
functions, including legal, human resources and corporate communications, in
addition to her current CFO duties overseeing finance, strategic planning,
mergers and acquisitions, information technology, advanced technologies and
procurement. She is also known in company circles for her analytical abilities, a
key component behind her rise. Nooyi, whose remuneration for fiscal 1999
totaled more than $1 million, is also believed to be the chief strategist behind
PepsiCo’s competition with rival Coca-Cola.
Steven S. Reinemund, 52, is President and Chief Operating Officer. Mr.
Reinemund was elected President and COO in September 1999. He began his
career with Pepsi as Senior Operating Officer of Pizza Hut, Inc.
Peter A, Bridgman, 48, is Senior Vice President and Controller. Prior to assuming
his current position, Mr. Bridgman was Senior Vice President and Controller of
The Pepsi Bottling Group and he was the Senior Vice President and Controller for
Pepsi-Cola North America from 1992 until 1999.
Matthew M. Mckenna, 50, is Senior Vice President and Treasurer. Previously, he
was Senior Vice President, Taxes. Prior to joining PepsiCo in 1993 as Vice
President, Taxes, he was a partner with law firm Winthrop, Stimson, Putnam &
Roberts in New York.
B. TOP MANAGEMENT:
The top one of fifty most talented executives of the company, Roger A. Enrico,
demonstrates his excellent ability of leadership as representing the company to
show the Wall Street that PepsiCo can deliver superior performance quarter after
quarter. One of Enrico’s top priorities is to attract more investors into the stock.
In international markets, Enrico still faces several obstacles in building Pepsi’s
soda business; however, he builds up his strategy to place his biggest bets on
developing markets, such as India, China, and Russia. ”The key thing is not to
merely plant flags,” says Peter M. Thompson, CEO of Pepsi-Cola International.
”It’s to make sure you build a business, customer by customer, block by block,
day by day.” In India, where per capita soft drink consumption is seven servings a
year, vs. more than 700 in the U.S., and where deliveries are often done on
three-wheel bicycles, Pepsi finds the most prominent businessman in each town
and gives them exclusive distribution rights, tapping their connections to drive
growth. Over the past five years, volume has risen at a 26% annual clip. Pepsi
has stolen 19 points of market share from Coca-Cola, bringing Pepsi’s share to
47%, close to Coke’s 52%.
III. EXTERNAL ENVIRONMENT
A. SOCIETAL ENVIRONMENT:
1. ECONOMIC FACTOR:
The key elements taken into consideration are the principal market risks, which
PepsiCo is exposed to interest rate, foreign exchange rate and commodity prices.
These are specified as :
Interest rate on PepsiCo’s debt as well as it short-term investment
portfolio: PepsiCo can manage its overall financing strategies in term of
balancing investment opportunities and risks. The company is using
interest rate and currency swaps to effectively modify the interest rate in
order to reduce the overall borrowing costs.
Foreign exchange rate and other international economic conditions:
Operating in international markets involve exposure to movements in
currency exchange rates, which typically affect the economic growth,
inflation, interest rate, government actions and other factors. Once these
changes occur, they will cause PepsiCo to adjust its financing and
operating strategies. Changes in currency exchange rates that would have
the largest impact on translating PepsiCo’s international operating profit
include Mexican peso, British pound, Canadian dollar and Brazilian real.
Through years, macro-economic conditions in Brazil, Mexico, Russia and
across Asia Pacific have adversely impacted on PepsiCo’s operations.
Especially, the economic turmoil in Russia which accordingly resulted in
the devaluation of the ruble in 1998 caused the significant drop in the soft-
Commodity prices that affect the cost of raw materials: PepsiCo is subject
to market risk with respect to commodities because its ability to recover
increased costs through higher pricing will be limited by the competitive
environment in which it is operating.
2. TECHNOLOGICAL FACTOR:
Development of additives such as sugarless sweeteners, caffeine free products,
and new flavorings enables PepsiCo to provide products that meet changing
customer tastes and preferences. In addition, computerized manufacturing
technologies are great contributions to higher efficiency and quality in bottling
operations. For Pepsi, a critical business challenge is ensuring that the
distribution processes can deliver the right products to the right place at the right
time. According to Jerry Gregoire, Vice President, Information Services, “The
competitive advantage will go to the company that can apply technology to areas
such as logistics, getting costs out of the distribution pipeline and getting products
into the stores less expensively while increasing the availability of sales
information.” Pepsi NA’s data communication network is an important element in
the company’s efforts to address sales and distribution challenges with
technology. Connecting nearly 330 manufacturing, distribution, and sale sites
around the U.S. and Canada, the Pepsi NA network transports data help
management in controlling inventory. For instance, sales data helps managers
identify regions where certain products are not selling well, and move any excess
inventory to areas where those products are in demand. Sales data also helps
Pepsi’s managers make decisions about products before they reach the
freshness date and must be pulled from the shelf and discarded.
3. POLITICAL/LEGAL FACTORS:
The Human Right Issue: Few years ago, PepsiCo did business in Burma
(Myanmar) under the brutal SLORC regime, the State Law and Order
Restoration Council. As the SLORC moved to attract international
investment, two millions people have been forced to work for no pay under
brutal conditions to rebuild Burma’s long neglected infrastructure. What
PepsiCo did at the time was patronizing the SLORC regime in what they
called “rebuild the country’s infrastructure”. PepsiCo also said it helps the
economy by buying “products such as mung beans, sesame seeds and
rattan from small, local farmers.” The issue addressed is whether these
products were made by forced labors. In fact, PepsiCo must export their
products for hard currency because it cannot use Burma’s nearly worthless
currency to buy imports of supplies for its bottling plants. As the result,
PepsiCo had lost contracts at Harvard, Stanford, Colgate and other
universities because it refuses to name the sources of these farm
FDA Regulation: As a food product manufacturer, PepsiCo is under the
control of the Food and Drug Administration. For example, the FDA tests
and certifies new ingredients such as high-intensity sweeteners before
they are allowed to be used in soft drink production.
Waste Management and Public Concerns: Growing environmental
awareness is leading to increasing legislation. The company’s operation i s
affected by federal legislative proposals that address the four objectives:
Minimize the quantity of packaging material entering the nation’s
solid waste system
Minimize the consumption of scarce natural resources
Maximize the recycling and reuse of packaging materials
Protect human health and the natural environment from adverse
effects associated with the disposal of packaging materials. For
example, Connecticut has already passed a law that regulates
packaging to increase its recyclability.
4. SOCIO-CULTURAL FACTOR:
Consumers today are not as much joyous to cola products as they were before.
Age and ethnicity are two main characteristics that affect consumer preference
for soft drinks and alternative beverages. With age, health concerns become
more of a factor when choosing a beverage. To illustrate, some studies show that
cola products or soft drink in general may cause kidney stones and other related
diseases. In contrast to older consumers, younger consumers—particularly teens
and those in their twenties—have less attention spans for products and are more
likely to prefer products that seems to be fun and different . Although PepsiCo is
the number one seller in carbonated beverages, it lost is market share in 2000 as
consumers seek for alternative beverages. As the matter of fact, PepsiCo
switches to non-cola products such as bottle-water, ready-to-drink tea and sports
drinks. In turn, bottled water gained the market share up to 12.8% in unit sales.
B. TASK ENVIRONMENT:
1. NEW ENTRANTS:
It is important when PepsiCo can identify what costs potential entrants to enter
the soft drink industry. The production technologies required for manufacturing
soft drinks is widely available for the potential entrants. However, competing on a
national or global scale requires the ability to manufacture and distribute a well-
recognized brand. Therefore, not only PepsiCo is the one who have to spend a
tremendous fund on advertising campaigns, other companies such as Coca-Cola
and Cadbury Schweppes have to go on the same path. According to the
Beverage Industry, PepsiCo had a great number of commercials during the
super-bowl. Coca-Cola Co., PepsiCo, and Cadbury Schweppes spent a total of
$469.1 million on media advertising in the U.S. market between January and
September 1996. Will new entrants be able to spend a tremendous amount to
advertise themselves, or in other words, to create their “big names” in order to
deprive the market shares from PepsiCo or Coca-Cola.
Another aspect is the distribution challenging in some Asian countries such as
China, Indonesia and India, where poor road conditions and other infrastructure
problems may prevent the effective delivery by trucks. The question is whether
PepsiCo can have a competitive advantage to overcome these difficulties, then it
will be difficult for the new companies who want to distribute their products.
2. EXISTING COMPANIES:
The U.S. and global soft drink industries are quite concentrated. Long dominated
by two companies, Coca-Cola Co. and PepsiCo, the industry saw the emergence
of a third significant player when Cadbury Schweppes acquired the Dr. Pepper
and 7UP brands in 1995. Table below shows that the top three firms accounted
for 90% of the U.S. soft drink market in 1998 vs. 2000. The top one is still Coca-
Cola with market share of 44% in 2000, next would be PepsiCo with 30.9%
share. Dr.Pepper & 7UP goes down slightly in 2000 at 14.4%. There are some
changes on market shares to other companies but the changes are not
As discussed in Social-cultural Factor part, consumers’ tastes change over the
time. Instead of drinking cola products, consumers switch to water or fruit juices.
Competitors may take this advantage to market their products. One example is
the agreement between Ocean Spray Cranberries Inc. and Beijing Huiyuan
Beverage Group, which is the largest juice company in China. Ocean Spray
grants a ten-year license to Huiyuan manufacture, market and distribute its
The market for soft drink is expected to grow at a slower rate in the next four
years, according to a series of new global soft drink reports published by
Beverage Marketing Corporation. The industry had a five-year compound annual
growth rate (CAGR) of 5.0% between 1993 and 1998. But for the five-year period
from 1998-2003, the CAGR is estimated to drop to about 4%. Although colas are
the most important soda flavor on the market, the strongest growth in the industry
is in the non-cola segment.
IV. INTERNAL ENVIRONMENT
PepsiCo owns its corporate headquarters buildings in Purchase, New York. The
company is engaged in the snack food, soft drink and juice businesses. Each
product category is further divided into North America segment—US and
Canada—and international segment. (PepsiCo 2000 Annual Report)
Frito-Lay North America (FLNA)
Frito-Lay North America manufactures, markets, sells and distributes salty and
sweet snacks. Products manufactured and sold in North America include Lay’s
and Ruffles brand potato chips, Doritos and Tostitos brand tortilla chips, Cheetos
brand cheese-flavored snacks, Fritos brand corn chips, a variety of branded dips
and salsas and Rold Gold brand pretzels. Low-fat and no-fat versions of several
brands are also manufactured and sold in North America.
Frito-Lay International (FLI)
Frito-Lay International manufactures, markets, sells and distributes salty and
sweet snacks. Products include Walkers brand snack foods in the United
Kingdom, Smith’s brand snack foods in Australia, Sabritas brand snack foods and
Alegro and Gamesa brand sweet snacks in Mexico. Many of our U.S. brands
have been introduced internationally such as Lay’s and Ruffles brand potato
chips, Doritos and Tostitos brand tortilla chips, Fritos brand corn chips and
Cheetos brand cheese-flavored snacks.
Principal international snack markets include Mexico, the United Kingdom, Brazil,
Spain, the Netherlands, Australia and South Africa.
Pepsi-Cola North America (PCNA)
Pepsi-Cola North America manufactures concentrates of brand Pepsi, Mountain
Dew, Mug, Slice, Fruitworks, Sierra Mist and other brands for sale to franchised
bottlers. PCNA also sells syrups to national fountain accounts. PCNA markets
and promotes its brands. PCNA also manufactures, markets and distributes
ready-to-drink tea and coffee products through joint ventures with Lipton and
Starbucks and licenses the processing, distribution and sale of Aquafina bottled
water. In addition, PCNA manufactures and sells Dole juice drinks for distribution
and sale by Pepsi-Cola bottlers.
Pepsi-Cola International (PCI)
Pepsi-Cola International manufactures concentrates of brand Pepsi, 7UP,
Mirinda, KAS, Mountain Dew and other brands internationally for sale to
franchised bottlers and company-owned bottlers. PCI operates bottling plants and
distribution facilities in various international markets for the production,
distribution and sale of company-owned and licensed brands. PCI markets and
promotes its brands internationally. Principal international markets include
Mexico, China, Saudi Arabia, India, Argentina, Thailand, the United Kingdom,
Spain, the Philippines and Brazil.
Tropicana produces, markets, sells and distributes its juices in the United States
and internationally. Products primarily sold in the United States include Tropicana
Pure Premium, Season’s Best, Tropicana Twister and Dole brand juices. Many of
these products are distributed and sold in Canada and brands such as Fruvita,
Looza and Copella are also available in Europe.
C. CORPORATE RESOURCES
Pepsi has now beaten Coke in the domestic take-home market, and it is
mounting a challenge to Coca Cola overseas. Pepsi has been making inroads:
Besides monopolizing the Soviet market, it has dominated the Arab Middle East
ever since Coke was ousted in 1967, when it granted a bottling franchise i n
The company’s products are transported from manufacturing plants to its
major distribution centers, principally by company-owned trucks. The
company utilizes a direct store delivery system, whereby its sales force
delivers the products directly from distribution centers to the store shelf.
This system permits the company to work closely with retail trade locations
and to be responsive to their needs. The company believes this form of
distribution allows it to have a marketing advantage and is essential for the
proper distribution of products with a short shelf life.
PepsiCo has developed the national marketing, promotion and advertising
programs that support the its many brands and brand image, oversee the
quality of the products; develop new products and packaging, and
coordinates selling efforts. (PepsiCo 2000 Annual Report)
PepsiCo, Inc. manufactures, markets and sells soft drinks and concentrates
(Pepsi-Cola, Mountain Dew, Slice, etc.), snack foods (Frito-Lay) and Tropicana
branded juices. For the 12 weeks ended 3/24/01, net sales increased 8% to
$4.54 billion. Net income increased 18% ($498 million). Revenues benefited from
volume gains across all divisions. Net income also reflects an increased gross
profit due to higher effective net pricing. Even though sales of PepsiCo were
going down slightly on the last three years but they still have very high profits on
that years. On the Ratio PepsiCo just only 33% on debt/equity ratio and profit
margin is 10.9 compare with industry just only 8.10%. On the first quarter of this
year net sales advance 8% to over $4.5 billion with earnings per share increasing
17% to $.34. PepsiCo is very strong revenue growth.
EPS grows 15% in the 16-week quarter to 38 cents, and 17% for the 52-
week year to $1.45
Each division boosts Q4 volume, and gains market share for the year
Net sales advance 8% to over $6 billion for the quarter, annual sales grow
8% and exceed $20 billion
Every division posts double-digit operating profit growth in the quarter,
annual operating profits advance 13% to $3.5 billion
Operating cash flow grows 33% to $2.7 billion
Return on invested capital (ROIC) improves to 23% — a 250 basis point
2001 outlook for continued double -digit earnings growth
Most of the sales are through the company’s own direct store distribution
(DSD) systems, where they actually take the products to stores and put
them on the shelf. These systems reach hundreds of thousands of outlets,
from the tiniest liquor stores to the mightiest club store. The DSD systems
give the company the ability to merchandise its products for maximum
appeal to consumers.
PepsiCo has been adding new platforms for growth, which strengthen the
company’s portfolio and enhance its vitally important innovation
capabilities. For example, in January 2001 the company acquired a
majority of the South Beach Beverage Company, whose SoBe line of
drinks adds to the Pepsi-Cola portfolio some of the fastest-growing brands
in the fastest-growing segment of the industry, non-carbonated beverages.
Another example is the planned merger with the Quaker Oats Company,
which is expect to complete in the second quarter of 2001. This is without
question the biggest step to ensure a bright future of growth for PepsiCo.
The merger will make PepsiCo an even more effective competitor in the
expanding market for convenient foods and beverages. It will add two very
powerful brands to its portfolio, Gatorade and Quaker, and create new
opportunities for every PepsiCo division. The combined enterprise will rank
among the world’s five largest consumer product companies.
PepsiCo bought $383 million worth of goods and services from minority-
owned and women-owned suppliers in the year of 2000. The Women’s
Business Enterprise National Council named the company among
America’s Top Corporations for Women’s Business Enterprise. PepsiCo
minority and women business development programs were rated among
the top-10 nationally by the National Minority Supplier Development
We were named by Fortune magazine to its list of America’s “50 Best
Companies for Minorities,” by Hispanic magazine to its list of “The
Hundred Companies Providing the Most Opportunities to Hispanics,” by
Latina Style magazine to its list of “The 50 Best Companies for Latinas,”
and by Minority MBA magazine to its list of “Ten Top Companies for
The company encourages conservation, recycling and energy use
programs that promote clean air and water and reduce landfill. Last year,
the Occupational Health and Safety Administration named two more
PepsiCo facilities to its top “STAR” status as part of the agency’s Voluntary
4. HUMAN RESOURCES:
The company has a wealth of talent across the corporation. It starts with its
exceptional frontline team, the people out there serving the customers 365
days a year, and it extends to our corporate staff. The company not only
has great opportunities, but the skills, experience, dedication and
intellectual horsepower to make the most of them.
The company’s continued growth has created outstanding career
opportunities for talented professionals in a variety of specialized fields,
such as information technology, treasury, tax, human resources, law,
accounting, public affairs, audit. All successful applicants share a
commitment to PepsiCo’s goals and an ability to thrive in a fast-paced,
results-oriented environment. In exchange, the company offers a highly
competitive compensation and benefits package.
Pepsi executives are expected to be physically fit as well as mentally alert:
Pepsi employees four physical-fitness instructors at its headquarters. It is
an unwritten rule that to get ahead in the company a manager must stay in
shape. The company encourages one-on-one sports as well as
interdepartmental competition in such games a soccer and basketball.
V. ANALYSIS OF STRATEGIC FACTORS
A. KEY STRATEGIC FACTORS ARE:
1. RECYCLABILITY OF CONTAINERS
Due to the liquid nature of Pepsi’s product, it is necessary that a solid and non-
porous container be used to store the product. This fact leads to the use of
plastics, aluminum, and glass as materials for the containers that Pepsi is stored
in. These materials work very well for the purpose of their use, however these
materials do not biodegrade easily. Every day, 93 million empty soft drink bottles
and cans are thrown away, rather than recycled. In November 2000, the boards
of Pepsi and Coke passed resolutions for future container recycling targets. The
resolutions call upon management to establish recycling targets and prepare a
plan to achieve them by January 1, 2005. There are two goals: (1) achieving an
80 percent national recycling rate for bottles and cans; and (2) making plastic
bottles with an average of 25 percent recycled plastic. The implementation of
these resolutions will have a future effect on the cost basis of Pepsi’s product,
and a positive environmental impact if the recycling targets are met.
2. CONTINUED GROWTH TO OTHER SEGMENTS, DECLINE OF COLA
The beverage industry is moving towards the alternative drinks sector. Although
in recent times, mainstream beverages have been making a revival, it is obvious
that alternative drinks will continue to grow. Pepsi can utilize its excellent brand
recognition and reputation to invest in and capitalize on growth in this area, and
increase it market share against Coca-Cola at the same time.
3. INCREASED USE OF EXCLUSIVITY AGREEMENTS WITH RESTAURANT
CHAINS AND COLLEGE CAMPUSES
Coca-Cola has a majority of exclusivity with restaurant chains including
McDonalds and other major fast food chains. The benefits of exclusivity
agreements give Coca-Cola a major advantage in channel distribution. The major
reason Taco Bell was purchased by Pepsi was to create a new channel for Pepsi
to be sold in restaurants. In addition to restaurants , soft drink manufacturers are
willing to engage in “cola wars” to win the rights to supply all the machines in a
given school in return for a commission. The funds go to support financially
starved school programs that could range from buying new library books to
beefing up the computer lab.
4. COCA-COLA’S MARKET DOMINANCE
The dominance of Coca Cola in the soft drink market has always been
considered a major factor for Pepsi management. As long as Coca Cola
continues to retain a dominant market share, Pepsi should continue to
aggressively acquire Coca Cola market share.
5. EXCESSIVE WORK PRESSURE RESULTING IN EXODUS OF PEPSI
The “creative tension” which is constantly being placed on Pepsi management
has resulted in a number of management leaving the company for Coca Cola.
Coca Cola has consistently been able to acquire the “Pepsi Tigers”, or very good
managers, away from Pepsi.
B. EVALUATION OF THE CURRENT MISSION AND OBJECTIVES
The overall mission of PepsiCo is to increase the value of shareholder’s
investments. This is achieved through sales growth, cost controls and wise
investment of resources. PepsiCo believes that their commercial success
depends upon offering quality and value to their consumers and customers;
providing products that are safe, wholesome, economically efficient and
environmentally sound; and providing a fair return to their investors while
adhering to the highest standards of integrity.
a. Concentration of resources on growth of businesses through internal growth
and carefully selected acquisitions
PepsiCo has adopted a plan for growth by continually addressing the
opportunities and risks associated with the global marketplace. The corporation’s
success reflects their continuing commitment to growth and a focus on those
businesses where they can drive their own growth and create opportunities.
B. CONTRIBUTE TO THE QUALITY OF LIFE IN COMMUNITIES
PepsiCo believes that as a corporate citizen, it is responsible to contribute to the
quality of life in the communities it serves. This policy is implemented through
support of social agencies, projects, and programs. The company also supports
employee volunteer activities through contributions of time, talent, and funds.
Each PepsiCo division is responsible for its own giving program with corporate
giving focused on supporting employee volunteer activities.
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY
Out of the many strategic alternatives that PepsiCo could choose to follow, we
have chosen to endorse one that fosters continued growth and diversification.
Although their over-diversified portfolio has hindered their International Growth,
these strategies strengthen their overall corporate worth and market presence
The following analysis deals only with strengths, opportunities, and
Knowledge: Our Competitors are retailers, pushing boxes. We know systems,
networks, connectivity, programming, all the VARs, and data management.
Relationship selling: We get to know our customers, one by one. Our direct
sales force maintains a relationship.
History: We've been in our town forever. We have loyalty of customers and
vendors. We are local.
Coca-Cola has been a complex part of American culture for over a century. The
product's image is loaded with over-romanticizing, and this is an image many
people have taken deeply to heart. The Coca-Cola image is displayed on T-shirts,
hats, and collectible memorabilia. This extremely recognizable branding is one of
Coca-Cola's greatest strengths. "Enjoyed more than 685 million times a day
around the world Coca-Cola stands as a simple, yet powerful symbol of quality
and enjoyment" (Allen, 1995).
Additionally, according to Bettman, et. al, (1998) Coca-Cola's bottling system is
one of their greatest strengths. It allows them to conduct business on a global
scale while at the same time maintain a local approach. The bottling companies
are locally owned and operated by independent business people who are
authorized to sell products of the Coca-Cola Company. Because Coke does not
have outright ownership of its bottling network, its main source of revenue is the
sale of concentrate to its bottlers (Bettman, et. al, 1998).
Costs: The chain stores have better economics. Their per-unit costs of selling
are quite low. They aren't offering what we offer in terms of knowledgeable
selling, but their cost per square foot and per dollar of sales are much lower.
Price and volume: The major stores pushing boxes can afford to sell for less.
Their component costs are less and they have volume buying with the main
Brand power: Take one look at their full page advertising, in color, in the Sunday
paper. We can't match that. We don't have the national name that flows into
Although domestic business as well as many international markets are thriving
(volumes in Latin America were up 12%), Coca-Cola has recently reported some
"declines in unit case volumes in Indonesia and Thailand due to reduced
consumer purchasing power."
According to an article in Fortune magazine, "In Japan, unit case sales fell 3% in
the second quarter [of 1998]...scary because while Japan generates around 5%
of worldwide volume, it contributes three times as much to profits. Latin America,
Southeast Asia, and Japan account for about 35% of Coke's volume and none of
these markets are performing to expectation (Mclean, 1998).
Coca-Cola on the other side has effects on the teeth's which is an issue for health
care. It also has got sugar by which continuous drinking of Coca-Cola may cause
health problems. Being addicted to Coca-Cola also is a health problem, because
drinking of Coca-Cola daily has an effect on your body after few years.
Local area networks: LANs are becoming commonplace in small business, and
even in home offices. Businesses today assume LANs as part of normal office
work. This is an opportunity for us because LANs are much more knowledge and
service intensive than the standard off-the-shelf PC.
The Internet: The increasing opportunities of the Internet offer us another area of
strength in comparison to the box-on-the-shelf major chain stores. Our customers
want more help with the Internet, and we are in a better position to give it to them.
Training: The major stores don't provide training, but as systems become more
complicated, with LAN and Internet usage, training is more in demand. This is
particularly true of our main target markets.
Service: As our target market needs more service, our competitors are less likely
than ever to provide it. Their business model doesn't include service, just selling
Brand recognition is the significant factor affecting Coke's competitive position.
Coca-Cola's brand name is known well throughout 94% of the world today. The
primary concern over the past few years has been to get this name brand to be
even better known. Packaging changes have also affected sales and industry
positioning, but in general, the public has tended not to be affected by new
products (Allen, 1995).
Coca-Cola's bottling system also allows the company to take advantage of infinite
growth opportunities around the world. This strategy gives Coke the opportunity
to service a large geographic, diverse, area (Bettman, et. al, 1998).
Currently, the threat of new viable competitors in the carbonated soft drink
industry is not very substantial. The threat of substitutes, however, is a very real
threat. The soft drink industry is very strong, but consumers are not necessarily
married to it. Possible substitutes that continuously put pressure on both Pepsi
and Coke include tea, coffee, juices, milk, and hot chocolate ("Cola Wars", 1991).
Even though Coca-
Cola and Pepsi control nearly 40% of the entire beverage market, the changing
health-consciousness of the market could have a serious affect. Of course, both
Coke and Pepsi have already diversified into these markets, allowing them to
have further significant market shares and offset any losses incurred due to
fluctuations in the market ("Cola Wars", 1991).
Consumer buying power also represents a key threat in the industry. The rivalry
between Pepsi and Coke has produce a very slow moving industry in which
management must continuously respond to the changing attitudes and demands
of their consumers or face losing market share to the competition. Furthermore,
consumers can easily switch to other beverages with little cost or consequence
("Cola Wars", 1991).
IT SOURCES USE BY PEPSI COMPANY
The microcomputers are linked up to Pepsi’s central computer system daily to
update inventory information system. Management estimates that over $25000
per year may be saved because of the system.
In Pepsi co. it helps to recognize market trends: MIS helps managers to
recognize market trends, in respect of price, designs of products, fashions
etc. timely information of the market trend enables the firm to follow the
right course of action.
It facilitates marketing planning control: Effective marketing planning is
required in terms of product planning, pricing, promotion and distribution.
Such planning will be possible only if the company is possessing adequate
and relevant information. This is also possible through MIS.
Quick supply of information in Pepsi co: today a firm has to take quick
decisions for this purpose it requires fast flow of information which is
facilitated by a properly designed MIS.
Improves quality of decision making: a properly designed MIS supplies
reliable and relevant information. With the help of computers and other
processing equipments, the marketing managers of Pepsi Co. cam make
the right decisions at the right time.
In responding to market demands for efficient 24-hour “order-to-delivery”
process for customer orders, PepsiCo has installed a computer system
that links an effective wide area network that allows immediate
transmission of customer orders.
The outcome has been to integrate with a wide area network, transmit
accurate, complete customer order data, allowing the company to more
efficiently load trucks, schedule deliveries and save man-hours.
I am making the following recommendations:
Pepsi should focus on increasing sales globally to compete effectively with
Coke. They have been beaten badly in some markets, and need to focus
more on “un-tapped” areas.
Continue to diversify their beverage selection through acquisitions. This
will enable PepsiCo to combat the decreased interest in cola. Going along
with this, PepsiCo needs to ensure that they can properly manage all of
these acquired companies and should divest those that show limited
Increase the use of exclusivity agreements to boost their sales in key
markets. This may make it harder to keep costs low but will ensure added
revenues. Another reason why Coke has continued to beat Pepsi is
through its exclusivity agreements with restaurant chains, sports and
entertainment complexes, and college campuses. More attention in this
area will help to battle Coke’s dominance.
Capitalize on their aggressive corporate culture in overseas dealings. This
can help to combat the weakness of their current international strategies.
Pepsi should recognize their responsibility to help make a positive
contribution in a world that continues to experience unprecedented
economic, environmental and social challenges.
Encouraging people to live healthier by offering a portfolio of both
enjoyable and wholesome foods and beverages.
Protecting the Earth’s natural resources through innovation and more
efficient use of land, energy, water and packaging in our operations.
Investing in our associates to help them succeed and develop the skills
needed to drive the company’s growth, while creating employment
opportunities in the communities we serve.
As almost in all over the world growth rate is increasing which in turn increases
the demand of products and necessities and especially in Asia the market is
growing at a faster rate as compare to other continents. So they have to attract
As in all over the world people are rushing towards fast food and beverage
because of life which has become much faster, it provide the company a favor to
capture this fast moving market with its take away product.
They may enter in garments business in order to promote their brand mane, by
making sports cloths fro players which represent their name by wearing their
"Coke Versus Pepsi, Santa Versus Moroz", The Moscow Times, December
Israel braces for new conflict: The soda war; Chicago Tribune, January 3,
Pepsi Nutritional Info.
http://www.pepsi.ca/default.aspx?bhcp=1#/en/products . Retrieved March
PepsiCo Company History (1972)". PepsiCo, Inc.
http://www.pepsico.com/PEP_Company/History/index.cfm# . Retrieved 2011-
The History of the Birthplace of Pepsi-Cola