essay about pepsi company

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Pepsi Company Advantages and Disadvantages Essay

1. introduction.

Pepsi is one of the leading consumer products companies in the world. Recently, it has been known for its marketing and distribution of concentrated soft drinks and syrup. Pepsi is a worldwide food and beverage company. The company is a major competitor to Coca Cola. The company was founded in 1898 as Brad's drink and in 1898 it was renamed to Pepsi Cola after the digestive enzyme pepsin and kola nuts used in the recipe. Pepsi Cola merged with Frito Lay in 1965 and thus became a division of the salty and sweet snacks industry. It merged with Tropicana in 1998 and with Quaker Oats Company in 2001. These mergers allowed Pepsi to expand its brands into markets not available to the beverage industry. The main purpose of this essay is to detail and analyze the advantages and disadvantages of PepsiCo in relation to the product it manufactures and the services it provides. This will be done using a SWOT analysis. A detailed analysis of Pepsi Cola is conducted because the dynamics of the carbonated soft drinks (CSD) industry is extremely dynamic and an in-depth analysis of one of the players offers an unusual set of circumstances to evaluate. A SWOT analysis can be used to provide an understanding of the attributes and dynamics that contribute to the success of the company in this industry. This will allow a determination of the relative potential of this type of capital investment and allow evaluation of the company's ability to realize the competitive advantage.

1.1. Background of Pepsi Company

PepsiCo is a large global food and beverage retailer, with twenty-two fully owned brands, including Pepsi, Tropicana, and Gatorade. Pepsi is the world's second most popular carbonated drink, after Coke, with a large market in North America and Europe. The first Pepsi was created in 1898 by a pharmacist named Caleb Bradham. He created the drink to help digestion and named it 'Pepsi-Cola' because he heard it to be a healthy digestive aid. The business began to grow, and on June 16, 1903, 'Pepsi-Cola' became an official trademark. In 1931, after bankrupting and reviving the business with help from a successful lawyer, the Pepsi Company was declared a corporation. After that, the company evolved into a powerful multi-million dollar empire, which it still is today. A large beverage war between Pepsi and Coca-Cola has arisen from the similarities and differences between the two products. This battle has been fought through television, product advertising, and event sponsorship. Now the soda industry has become a multifaceted industry that includes many different products, and Pepsi as well as Coca Cola are fighting for dominance beyond soda in the health food drink and sports drink industries. Today, PepsiCo has more than $35 billion in annual revenues and 168,000 employees in the world. With its mergers and acquisitions of companies like Tropicana and Quaker Oats, the company continues to exceed its expectations.

1.2. Purpose of the Essay

The purpose of this essay is to expose the advantages and disadvantages of PepsiCo as a multinational company. Actually, PepsiCo is one of the leading multinational companies in New York. It has a great deal of market and stands in strong competition. PepsiCo is a company that has drinks as its major product and hosts many snack food products. This company has spread over 200 countries worldwide and has about 185 types of products. Due to its vastness in products and market, we are choosing PepsiCo to examine the goods and bads when handling a multinational company. One of the primary objectives of this study is to identify the impact of globalization on the international expansion of companies. This objective was met by examining the company's history in terms of expansion, which in turn provided knowledge on the methods utilized to enter foreign markets. This information has also provided an overall idea of the company's development and the general changes in strategy to meet the needs of the ever-changing global market. Another aspect of globalization that was analyzed was the effect that the international ventures have on the company and its domestic market. The essay will provide a greater understanding of the concepts, ideas, and theories of globalization by different scholars, as the impact of the international ventures will be analyzed with reference to these literature. This analysis will encompass both the positive and negative effects. The second objective of this study is to attain a comprehensive understanding of the concepts and theories of globalization, apply these concepts to the company, and compare these findings with the actual situation of the company to identify if the theories hold true. This will provide an assessment of the relevancy and accuracy of the theories.

2. Advantages of Pepsi Company

PepsiCo has a strong market position which gives it several competitive advantages. The company has a strong brand image and wide product range, enabling it to attract a large consumer base. Many of PepsiCo's brands are over 100 years old but the corporation is relatively young. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has determined international markets to be a primary source of long-term growth and thus has been very successful in its efforts to expand its international business. The company has established a strong presence globally, with its products available in over 200 countries. This wide reach has allowed PepsiCo to generate high revenues in countries beside the US, and to capture a large share of the overseas markets. This strong global presence is a valuable resource and provides a competitive advantage over many other companies. The ability to satisfy global consumers' food and beverage preferences is a critical success factor for any food company. Many of these consumers are turning away from carbonated soft drinks and salty snacks, which are two of PepsiCo's most profitable product categories. Economic health across the world, particularly in developing countries, is also very important as PepsiCo has historically done well in times of economic expansion.

2.1. Strong Brand Recognition

PepsiCo has the advantage of having a very well-known brand in the market. It has a very high brand recall and recognition. The company's strong brand is a result of its careful planning and management. Everything the company does, it does for a specific reason and for a specific cause - this is the understanding anyone would get after looking at PepsiCo's marketing strategy. Each promotional theme is always related to causing something more than just increasing sales of its product. May it be to support football in schools and colleges by their Trophy campaign or to promote peace and understanding between countries by the famous Pepsi ad in which a boy tries to exchange his Pepsi bottle with a Russian with the help of a smile and is arrested and all smiles seeing that the Russian soldier has a Pepsi too in his cooler. Given that Pepsi is ubiquitous throughout the world, the Pepsi logo is recognized in many different languages in many different countries. Pepsi has triumphed over the years at advertising the brand and the product together. And many would agree that their advertising is undoubtedly one of the company's strengths, using celebrity endorsements and catchy jingles to captivate the audience and stick in their minds. Using such methods as focusing ads on the youth of the generation, the aim is to gain a lifelong customer. With such a diverse audience, it could be very difficult to accomplish, but through the years Pepsi has been very successful.

2.2. Wide Product Range

PepsiCo offers the broadest, tastiest range of cola and related beverages, foods, and snacks. No other company sells such a diverse product line. From breakfast to dinner, PepsiCo has a food or beverage product that can satisfy your needs. PepsiCo's beverage and snack food businesses are extremely competitive and successful because of the high level of commitment to their products. This high level of commitment is evident through the amount of marketing and advertising dollars spent, the direct investment in the product through manufacturing and infrastructure costs, and the degree of customer orientation exhibited in retail stores. The company's success in the beverage and snack industry is backed by a strong and consistent pattern of growth in sales, profits, and return to the shareholders. High sales growth is attributed to product innovation, the expansion of the Frito-Lay product line to include a healthier combination of fats and carbohydrates, and the international growth of snack products in Europe. PepsiCo's success and growth in developing countries can be attributed to offering "grassroots" marketing and sales initiatives. PepsiCo began its acquisition binge in the 1960s and 1970s. Formerly known as a soft drinks company, PepsiCo expanded its business to an all-around food and beverage company through the acquisition of Tropicana and Quaker Oats. Tropicana was a natural extension of PepsiCo's beverage business and Quaker provided a healthier line of products that has continued to help with PepsiCo's diversification. The acquisition of Gatorade in 2001 increased its beverage and sports drink line. The ability to integrate Gatorade's worldwide operations and growth in markets such as Spain, Germany, and France will certainly be an asset for PepsiCo's North American introduction of the product. With the recent acquisition of Wimm-Bill-Dann, the largest international acquisition in Russian history, PepsiCo has made a clear commitment to be the leading food and beverage business in Russia and the surrounding regions.

2.3. Global Market Presence

The reputation of PepsiCo is no longer restricted to the borders of the United States, but has now become well-known and well-respected in many foreign markets. With its prevalent position as merely the second beverage and snack company in North America, PepsiCo has taken great strides to expand into a more global market in recent years. This is evident through the company's 2006 annual report in which they state that "International business grew 2 times faster than North America." Since then, this trend has continued with global revenue reaching new heights in 2014 according to PepsiCo's Fact Sheet. A major advantage for PepsiCo in its globalization quest is its aggressive attitude towards foreign markets. In 2010 alone, PepsiCo made investments in joint ventures to boost its businesses in Russia and China. PepsiCo looks to continue creating market presence in foreign nations and promoting its company as a high producer of quality beverages and snacks. A great example of PepsiCo's intentions to expand globally can be seen in the company's deal with Tingyi Holding, a leading food and beverage company in China. PepsiCo is currently looking to terminate its 30-year-old joint venture with the Calbee Snack and Soup Company in Japan, to form a new alliance with Japanese beverage company Suntory. Through these initiatives, PepsiCo looks to provide and promote healthy snacks and beverages to a wider range of customers and solidify its position as a leading food and beverage provider in Japan.

3. Disadvantages of Pepsi Company

It is poor performance in the advertising arena, regardless of how wonderful the results of a study may look. Battling amongst competitor firms is a common factor in today's societal marketing. Competitors engage in marketing warfare, taking turns in offense and defense. These strategies may take place either directly or indirectly. Direct attack strategies are used in areas such as advertising, where the goal is to influence the product choice. For example, Coke often tries to influence consumers to change brands via comparative advertising. This is when two or more differing brands are compared in an advertisement. However, Pepsi has been known to adopt a similar strategy. When Coca Cola introduced a change in the taste of their product, Pepsi launched a commercial where a young boy purchases a can of coke, leaving the shop assistant puzzled when the boy runs away without taking his change. The boy blurts out, "You're supposed to say keep the change." This was a dig at Coca Cola's change being a bad move. Indirect attack strategies often take place on the consumer's turf. This is usually a more costly exercise and may not achieve results in the long run. Companies such as Coca Cola and Pepsi may involve themselves in price wars to make their product a more appealing choice at the supermarket. In today's declining economic circumstances, this is becoming more and more common. This may also take place in sales promotions. For example, both companies have used the power of the tool "consumer sweepstakes" involving tactics such as travel prizes and trips. However, this may have adverse effects on their sales promotion budget and profits. This is an area where Pepsi has engaged in a battle against Coca Cola using the Michael Jackson phenomenon, a worldwide consumer promotion campaign which took place in the early 1990s. These campaigns often come back to bite, as Pepsi found out with the passing of the late Michael Jackson in 2009.

3.1. Intense Competition

Intense competition is a principal disadvantage to the Pepsi Company. The Coca-Cola Company is the main competitor to PepsiCo and is well known for its strong and aggressive marketing techniques. This has caused Pepsi to continually keep its prices competitive in order to fend off competition. This constant price war can reduce profit margins for both Pepsi and Coca-Cola. The major cause for the decline in margin occurs when one of the companies runs a sales promotion. Studies have shown that 70% of soft drink purchases on promotion were unplanned and substitutes for purchases of the same brand. This results in retailers de-stocking existing brand to purchase the promo product. Answering these promotions with more promotions or discounting only furthers the impulsive buying trend. The net effect of these actions has caused about half of all soft drink sales to be on some kind of price deal. This means that the remaining full priced sales are put under that much more scrutiny between the retailer and the consumer. This has caused private label product to increase sales and market share in the industry due to their habits of following or matching soft drink pricing strategies. The result of this is that either company cannot risk loss of distribution for fear of the competitor gaining an upper hand. This has made retailers more powerful and has created a grip of control for the Walmart and Tesco type retailers who are responsible for 25% transnational company net revenue. These retailers reduce margins with threats of pushing private label, reduce shelf space, and beverage exclusivity contracts. This has caused the companies to offer more high rate incentives for display and price execution and created an environment of hasty decisions and quick changes within the industry.

3.2. Negative Health Perception

Health consciousness is a major contributing factor to the decline in sales. Increased public awareness about the potential health hazards of obesity led consumers to avoid Pepsi's high sugar, high calorie products. Public concern about obesity and its related health risks has created an environment where consumers are looking for ways to cut calories and improve their overall health. People are switching over to other drinks such as sodas with sugar substitutes and even flavored water. Pepsi is unable to tap into this market as it is moving more towards healthier drinks like flavored water. Increased consumer knowledge and the sharing of information have led to growing awareness about the relationship between soft drink consumption and health conditions such as diabetes and osteoporosis. Consumers are considering the potential health risks of consuming Pepsi products and what the negative effects are on their children's health. Education about the negative effects of soft drinks is increasing in schools and parents are being urged not to provide their children with soft drinks as it is a major contributor to childhood obesity and health problems. This negative health perception of soft drinks and increased concern about the health of children has led many consumers to choose to completely avoid soft drinks in their household. With many countries now having a public stance on reducing obesity and promoting healthier lifestyle choices, it is expected that the public health perception of soft drinks will only further decline. This will result in a continually shrinking market for Pepsi.

3.3. Environmental Concerns

The environmental concerns which PepsiCo faces are a result of the company's direct involvement in agronomy, procurement of raw materials, and food processing. Most criticism has focused on unsustainable water usage, but there is also the issue of pesticide use and the promotion of intensive farming. All of these have adverse effects on the environment. The negative effects occur as a result of the increase in demand for agricultural products. In an attempt to fulfill this demand, improved seeds, modern agro-chemicals, and advanced irrigation have been introduced. These technologies rely on the unsustainable use of natural resources. Step one in the sequence involves the sale of "high quality" seeds to farmers. The term "high quality" can be quite misleading. Usually, these seeds are hybrids, which means that the crop produced will not generate seeds for future planting. Thus, farmers must repeat the process and purchase seeds from the provider. These seeds require large amounts of fertilizers and pesticides to achieve a successful yield. The increase in production of these agrichemicals results in more water pollution through runoff and decreasing levels of groundwater. Unsustainable water usage is apparent through the rapid growth of the production of several crops. High water-use crops tend to be profitable for PepsiCo suppliers. This has led to certain crops being "overproduced". For example, there is currently a large glut of potatoes on the market. This has led to the promotion of water-efficient irrigation systems for potato farmers, and the best method to achieve this for PepsiCo is through the contract farming of potatoes.

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A Strategic Case Study on PepsiCo

30 Pages Posted: 27 Apr 2021

Assan Jallow

College of Business and Economics, University of Wisconsin - Whitewater

Date Written: April 17, 2021

The purpose of this paper is to provide a strategic report analysis and evaluation of PepsiCo in the beverage industry. This includes the methods of analysis of PepsiCo’s external and internal analysis, its marketing strategies, and SWOT analysis from the perspectives of value-chain, resource-based, and 3-circa analysis. The research draws attention to details on the competition of PepsiCo as a strategic competitor against Coca-Cola in the beverage-cum-snacks industry. Despite being a competitive brand that is being overshadowed by Coca-Cola regarding global marketing shares and growth, Pepsi has become one of the world’s largest selling soft drinks across national boundaries as it is liked and being patronized by people of all ages, across the globe. Dozens of resources were cited to produce this strategic report. In sum, the paper analyses PepsiCo’s strategic competitiveness against its rival – Coca-Cola in the beverage and smacks industry. The paper concludes with a summary of recommendations for consideration by PepsiCo’s corporate and business level decision-makers on how well PepsiCo should manage its strategic intent of its marketing and product diversification programs across the boundaries of the global market to reposition itself as a global giant beverage and snack business player.

Keywords: PepsiCo, SWOT analysis, External and Internal Analysis, Competitive advantage and analysis

Suggested Citation: Suggested Citation

Assan Jallow (Contact Author)

College of business and economics, university of wisconsin - whitewater ( email ).

Whitewater, WI 53190 United States 6084179508 (Phone) 53704 (Fax)

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Internal and External Environment of PepsiCo: Company Analysis

PPepsiCo is a large multinational company that operates across the globe, mostly in the US and other developed nations. Its main products are soda drinks, which are known to be linked with certain chronic diseases. The latter manifests itself in the major social changes among customers, who are becoming more aware of their health and well-being. The company’s largest competitor is Coca Cola Company, which also takes the biggest market share in the soda drinks market. However, PepsiCo can effectively respond to political and social changes by investing in the research and development of healthier alternatives. The latter process can be enhanced by the company’s strong marketing team and leadership.

The given report will apply some effective tools to analyze the external and internal environment of PepsiCo. The main goal of any industrial enterprise is to obtain a stable income through the sale of manufactured products to consumers. Important factors contributing to the achievement of this goal are the sustainable development and stable functioning of the enterprise, achievement of the planned production, financial and other results, timely fulfillment of social and economic obligations of the enterprise to the labor collective, owners, and the state as a whole. For effective enterprise management, analysts use financial, managerial, as well as integrated economic analysis tools, which include the strategic analysis tool among other things.

The purpose of the strategic analysis is to study the state of the external and internal environment of the enterprise in the interests of identifying critical factors for strategic success in general and an informed choice of the development strategy of the enterprise in particular. The economy has developed a variety of strategic analysis models, the most common matrices being such as Porter’s model, SWOT, and PEST.

Strategic planning in the soft drink industry is long-term, due to the long production cycle. In this regard, it is safe to consider that it is appropriate to take the thesetools of analysis as the basis of this report, since it is a flexible and highly informative instrument for strategic planning, which allows obtaining an objective eventual picture of current processes, identifying strategic risks based on an assessment of political, economic, social and technological aspects of the external environment and the major elements of the internal environment of the enterprise.

Porter’s Five Forces

In order to thoroughly analyze PepsiCo, it is important to apply a number of framework models. The Porter’s Five Forces model consists of five major components, such as supplier power, threat of new entrants, buyer power, threat of substitutes, and degree of rivalry (“Porter’s five forces: A model for industry analysis,” 2010). PepsiCo’s supplier power is highly accessible, which means that one cannot monopolize the supply chain to the company, because the product itself uses simple and non-scarce raw materials. The latter statement can be supported by the operational and financial data from 10K report (“Form 10-K,” 2018). Threat of new entrants is low due to the fact that PepsiCo possesses a strong brand image and most of the market share alongside its main competitors, such as Coca Cola Company.

Buyer power is strong mainly due to the fact that a vast majority of population can purchase PepsiCo’s products, because its cost is not large. There is a major threat of substitutes coming from its few largest competitors, and soda drinks are under threat from healthier liquid products. The degree of rivalry also comes from its largest competitor, such as Coca Cola Company. However, there is a low level of threat from new entrants, because the latter lack a strong brand image. PepsiCo spend significant sums of money on marketing, which means that new companies can find it difficult to compete with it (“Form 10-K,” 2018). Porter’s model is an outstanding tool, which can increase a firm’s overall profitability (“Porter’s five forces: Understanding competitive forces to maximize profitability.”). Therefore, it is clear that PepsiCo’s main concern is its competition.

PEST Analysis

Furthermore, the critical part of evaluating a company’s macro environment is applying PEST analysis. PEST approach consists of four main components, which are political, economic, social, and technological factors (“PEST analysis,” 2010). The main political element for PepsiCo is the economic stability of its nation of origin. New changes in the political arena can bring heavy tax policies, which can decrease the company’s profitability. Economic factors are political aspect, where a nation’s economic growth and inflation rate can influence PepsiCo’s finances. There is an expected rate of salary increases of 3.2%, which can raise the operational expenses (“Form 10-K,” 2018). In addition, wage control can be a major determining factor in this regard (“Carrying out a PEST analysis,” 2020).

Social aspect is primarily manifested in the changes of social awareness about health and well-being. More people might consider the health-related ramifications of soda drinks, which can decrease the demand. Technological factors can both boost and hinder PepsiCo’s performance figures. The development of new technologies can lower the barrier of entry, but it can also reduce the production costs.

External Analysis

According to Porter’s model mentioned above, the supplier power is low, threat of new entrants is low, buyer power is high, threat of substitutes is moderate, and degree of rivalry is moderate. By combing the results of PEST and Porter’s model analysis, it can be concluded that the primary threat is manifested in the current political and social changes, which can reduce the profitability and demand for the products. However, the main opportunity for PepsiCo is to use its size and economies of scale to further reduce the production costs through technological innovations, and aggressively introduce healthier alternatives with proper marketing.

Internal Analysis

PepsiCo is a multinational corporation with market interests spreading across the globe, and it would not be possible with an effective internal structure. The main threat, according to the 10K report, is the fact that some ingredients in the products contain elements, which can damage a person’s health (“Form 10-K,” 2018). This means, the main internal weakness is that new investments are needed to adjust to the social changes. This can result in restructuring its organizational structure and setting up new divisions. In addition, another internal weakness is an increase of medical and retirement expenses (“Form 10-K,” 2018).

It can have an influence on PepsiCo’s financial statements, such as operation costs. However, the primary internal strength is its strong and effective marketing team, which has already achieved significant results in appealing to the younger part of population. PepsiCo also possesses a strong management with an outstanding leadership, which can be a determining factor in responding to external changes.

Strategic management is an active transformation of the enterprise from the actual situation to the desired state. The desired state of the enterprise is determined by the strategic vision of the management and the goals emanating from it. The actual situation is determined by the current state of the internal and external environment of the enterprise (“External environment analysis,” 2019).

The internal environment contains the strategic strengths and weaknesses of the company, and the external environment offers the business strategic opportunities or exposes the company to strategic threats, and the campaign strategy depends on the balance of these conditions (“The internal environment: A resources-based review of strategy.”). Strategy is the way of the enterprise from the actual state to the desired. In order to choose the shortest path, it is necessary to understand where the company is now and in what environmental conditions it has to move towards its goals.

Strategic analysis is a systematic process of gaining knowledge about internal and external conditions that can affect the choice and implementation of a strategy, as well as the market position of an enterprise. Strategic analysis tools include formal models, quantitative methods, and analysis that takes into account the specifics of the enterprise. One of such tools may be the method of SWOT analysis used to analyze the environment of the enterprise (“SWOT analysis,” 2019). This method is quite widely recognized and allows for a joint study of the external and internal environment of the enterprise. It can also be applied for small firms, which means the approach is universally useful (Zahorsky,2017).

Therefore, it is safe to conclude that there is a tight relationship between PepsiCo’s internal and external environment. The strength of the company is its management and leadership alongside with its marketing team. Other strengths are the company’s economies of scale, reduced production costs, resources, and an established brand identity. However, the weaknesses are social and political changes, and the lack of adjustability to customers’ new demands, and health effects of the product.

SWOT Analysis

Complete SWOT table can be seen in the Appendix section of the given report. The main strength of PepsiCo is its resources and size, brand image, leadership, and marketing. Due to its large scale, the company can safely invest in big research and development projects in order to adjust to social changes. Strong brand image can be capitalized, especially among younger segment of the population. Marketing can significantly boost PepsiCo’s ability to introduce new products and promote the existing ones.

PepsiCo’s leadership and management are outstanding, which is determining factor of its success. However, the company’s weaknesses are inflexibility, which is a common attribute of large corporations, and thus, the company might find it difficult to quickly respond to drastic changes. Soda drinks’ health ramification will inevitably lead to the reduction of demand, because the customers are becoming more concerned about their health. Competition with its main competitor puts a pressure on PepsiCo, because it also needs to allocate resources in order to maintain its market share.

It is important to note that there is a number of opportunities for PepsiCo. The company can use its resources to introduce healthier alternatives, which will partially eliminate its weakness. It also possesses a strong marketing team, which will make the overall introduction more effective. Its large size and investment in technological advancements can reduce the production costs. In addition, it is important to consider the economies of scale, which can further increase efficiency of production.

The primary threats are manifested in political and social changes alongside operation expenses. A major shift in the political arena can affect the taxation rates, which will influence the company’s profitability. Social changes can reduce the demand for the products due to its health ramifications. In addition, an increase in the rate of medical and retirement expenses can increase operational expenses.

Recommendations

The main recommendation for PepsiCo is to allocate a sufficient amount of resources for research and development of healthier products. In addition, it should also invest in technology to reduce its production costs and further capitalize on its economies of scale. The company should gradually restructure itself by creating separate divisions for its new products. It should preserve its brand image by not resisting to an increase of operational expenses. The marketing team should aggressively market its new products in order to outcompete the rivals, which can also introduce new alternatives. Lastly, a company should address health ramifications of soda drinks and actively work with its customers to assist the development process.

In conclusion, PepsiCo is a multinational corporation with a number of advantages, which can be used to partially eliminate its weaknesses and threats. Porter’s model and PEST analysis provide an effective framework to establish major components for further SWOT analysis. It is clear that PepsiCo’s size and influence can be both hindrance and boost for the company depending on its strategic approach. By properly utilizing its assets, PepsiCo can both increase its current market share and invade new markets. However, the company needs to be aware of potential social and political changes, which can directly impact its overall performance.

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PEST analysis . (2010). Web.

Porter’s five forces: A model for industry analysis . (2010). Web.

Porter’s five forces: Understanding competitive forces to maximize profitability . Web.

SWOT analysis . (2019). Web.

The internal environment: A resources-based review of strategy . Web.

Zahorsky, D. (2017). SWOT analysis: A small business owner’s secret weapon. The Balance Small Business . Web.

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Pepsi Company, Essay Example

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Executive Summary

Pepsi Company is a globally recognized multinational soft drink company with a presence across the globe. Incorporated in Delaware in 1919 an later reincorporated in North Carolina in 1986, its presence spans across the globe and it has ventured into soft drinks, mineral water and foods. The company is has had to contend with the stiff competition from the tough rival in the form of coca cola. The Chief executive officer Indra K Nooyi is also the chairman and he has earned more than 9 million Dollars per annum in the last the years. The CEO is backed by a team of twelve directors several of who also hold high profile positions in various other institutions of reputable financial worth.

In the year 2009 the employees met in a general meeting and voted on four items among which was a review of the companies progress. The company has many shareholders among who are corporate bodies as well as private individuals among who is the CEO. The company has been involved in several corporate social responsibility events including sponsoring the Chinese Red Cross society. These activities have been used in giving back to the society as well as promoting the brand.

The company’s ratios are quite impressive with a good return on Equity specifically has been quite impressive in the last three years. The year 2008 return on equity for example was 34% as compared to that of Coca Cola at 29% implying ability to pay share holders high dividends for their investment into the company. The return on assets as is also quite impressive with the highest being 2007 at 16.88%. The company has also an enviable average collection period more so their current ration point towards a high degree of credit worthiness. The company has a high level of stability demonstrated by its high liquidity ratio of 1.23 as opposed to that of Coke at 0.95. This implies that their ability to service their debts is higher than that of their main competitor- Coke

The competitor’s ratios however do not paint such a good picture meaning the company is well placed to take over market leadership. The company is faced by the risk of the volatile market outlook as well as their competition trying to win over its chunk of the market shares. The major challenge that the company faces as far as business is concerned is that since they deal with consumer products, they need to ride on the customer demand to make profits. They must therefore ensure that they have products that are attractive to the consumer. Any sudden changes in the market would therefore mean a fall in demand and this could have serious impact on the market. To ensure that they remain a force in the market, Pepsi has dedicated sufficient resources to marketing and advertisement campaigns to ensure that they attract a sufficient number of customers and also ensure that they keep relevant in the market. However such investments call for a cautious approach since the changes in the market can not be accurately forecasted. The market Beta of the Pepsi share is at a quite stable level of less than one which indicates that it is a quite safe investment for the external investors as well as a clear sign of market stability.

Considering that no company is perfect, Pepsi also needs to diversify its product range to reach a more diverse market and make inroads in an effort to ensure that they can ward off any stiff challenges from the competition since their varied products will mean increased source of revenue. Despite all this the company is low risk and its equity is quite an attractive buy for most market speculators.

Describe the primary business of the company, including its products, customers and competitors.

The PepsiCo, Inc. was incorporated in Delaware in 1919 and was reincorporated in North Carolina in 1986. Pepsi Company is a global beverage, snack and food company. They manufacture and/or use contract manufacturers, market and sell a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods in roughly 200 countries.

Pepsi Company has organized the company into three business units, they are as follows:

Pepsi Company is well known for their other brands as well which includes and limited to offering to the world below is table lists products;

They hold long-term licenses to use valuable trademarks in connection with other products, including Lipton, Starbucks, Dole and Ocean Spray. In order to hold these licenses Pepsi Company must comply with the trademarks rules and regulations.

Their customers include authorized bottlers and independent distributors, including food service distributors and retailers.  Pepsi Company competitively in extremely competitive markets is up against global, regional, local and private label manufacturers based on price, quality, product variety and distribution. One of their major beverage competitors is the Coca-Cola Company.

Give the name and background of the CEO. What was the CEO’s compensation over the last three years and in what form was it (salary, stock, stock options, etc.)?

Indra K. Nooyi, 53 is the CEO of Pepsi Company, holds the positions as Chief executive Officer and Chairman of PepsiCo’s Board of Directors. Below is a table of Indra Nooyi’s Compensation package per yahoo.finace.com 2009 Annual Proxy report of her last three years.

  List the names and affiliations of the Board of Directors and discuss any individuals who stand out.

Below are listing of Pepsi Company Board of Directors and their membership.

Shona L. Brown, Senior Vice President, Business Operations of Google

Ian M. Cook, Chief Executive Officer and was elected to the board of Colgate-Palmolive Company

Dina Dublon, Director of Microsoft Corp. and Accenture, Director of the Global Fund for Women, co-chairs the Women are Refugee Commission, and a trustee of Carnegie Mellon University

Victor J Dzau, MD, Chancellor for Health Affairs at Duke University and President and CEO of the Duke University Health System

Ray L. Hunt, Chairman and Chief Executive Officer of Hunt Oil Company and Chairman, Chief Executive Officer and President, Hunt Consolidated, Inc.

Alberto Ibarguen, President and Chief Executive Officer of the John S. and James L. Knight Foundation

Indra K. Nooyi, PepsiCo’s Chief Executive Officer

Sharon Percy Rockfeller, President and Chief Executive Officer of WETA public stations

James J. Schiro, Chief Executive Officer of  Zurich Financial Services.

Lloyd G. Trotter, Managing Partner at GenNx360 Capital Partners

Daniel Vasella, Chairman of the Board and Chief Executive Officer

Michael D. White, Vice Chairman of PepsiCo

The one individual that stand out are Lloyd G. Trotter, he is the only African American that served on the Pepsi Company Board of Directors

Describe the items that were voted upon by shareholders at the last annual meeting.

Pepsi Company Annual Meeting of Shareholders they were asked to vote on these items as follows (Nooyi, 2009):

• To elect the Board of Directors, to ratify the appointment of the independent registered public accountants, to approve the PepsiCo, Inc.
• Executive Incentive Compensation Plan
• Four shareholder proposals.
• Review the progress of the Company during the past year and answer your questions.

Analyze the makeup of the company’s shareholders (pension funds, individuals, institutions, mutual funds, etc.). http://finance.yahoo.com/q/mh?s=PEP

The makeup of shareholders is broken down per yahoo. Finance; gives a detail breakdown of the shareholders. They are major holders, top institutions and top mutual funds holders.

Breakdown explains how the shares are divided up among the shareholders such as 0% is held by all insiders and the 5% owners, 68% is held by institutional and mutual fund. As well as float institutional and mutual funds hold 68%. They continue to show an additional breakdown on how shares is divided among the major direct holders, which are the CEO Indra Nooyi has 393, 545, Michael White 263,664, John Compton 204,364 and Albert Carey 107,900, Hugh Johnston 90, 434. The report goes on to further show the top institutions and top mutual funds holders.

How does this firm view its social obligations and manage its image in society?

Pepsi Company has pride and committed themselves of ways of giving back to society in varies the way such as through their humanitarian aid foundation has donated millions of funds to aid victims of Pakistan’s earthquake, central America’s ad Mexico Hurricane victims. Furthermore, what I have found amazing how Pepsi is continuing to give back to community such as providing assisting to the Red Cross Society of China. Pepsi Company goes along with the corporate contributions’ ways of giving back to the community in through providing programs for educations, health and wellness making donations to charitable organizations.

Ratio Analysis

I will be discussing six financial ratios for Pepsi Company and The Coca Cola Company are provided below. In evaluating years 2006 through 2008 for two companies my finding are as following. This information was found through yahoo.com/finance, Pepsi Company and The Coca Coke Company Income Statement and Balance Sheet and investopedia.com

• Return on Assets (ROA)

According to these numbers above Pepsi’s ROAs for 2008, 2007 and 2006 were 15.34%, 16.88% and 16.83% this explains that the positive returns on assets for those periods that Pepsi had generated earnings from the invested capital (assets). Pepsi is successfully converting assets at it disposal into net income.

Coke’s ROAs for 2008, 2007 and 2006 were 15.32%, 15.77% and 13.40% details to these numbers say Coke also has positive returns on assets for those years they are able to generate net income that is invested in their capital, which is consisting of both debt and equity.

For both companies after looking at the ROA they demonstrate can perform similarly in generating net income from invested capital.

• Return on Equity (ROE)

Pepsi’s ROEs for 2008, 2007 and 2006 were 34.37%, 37.82% and 37.71% explain their positive returns indicate that Pepsi generated positive net income from funds that were invested by their shareholders. Coke’s ROEs for 2008, 2007 and 2006 were 29.46%, 30.34% and 25.77% also show they had generated positive net income from shareholders’ funds’ investment.

The different between Pepsi and Coke the number shows that Pepsi could pay more earnings from the shareholders’ investment.

• Receivables Turnover

Pepsi’s receivable turnover ratios for 2008, 2007 and 2006 were as following 10.14, 9.25 and 8.24. These high ratios say Pepsi implies that their extension of credit and collections of the account receivable is very efficient.  In other words, if Pepsi shows a low ratio it will point toward perhaps Pepsi should review their current procedure on it’s credit policies in order to ensure the timely collection of extended credit that is not earning interest for the company. However, Coke’s receivable turnover ratios for 2008, 2007 and 2006 were 10.52, 9.5 and 7.93 states Coke has high ratios,’ which imply their credit policies are working efficiently.

• Average Collection Period

Pepsi’s having an average collection period for 2008, 2007 and 2006 were 36 days, such as 39 days and 44 days, tell you Pepsi could convert their receivables into cash at a short – term period if needed, in other words, Pepsi has access to cash for daily operation and can meet short-term obligations if necessary.

Coke’s having average collection period for 2008, 2007 and 2006 were 34 days, 38 days and 46 days. Coke has the same experience as Pepsi does that they are effective in turning their receivables into cash on a short-term period of time because their collections had not exceeded sixty days. Based on the information Pepsi and Coke performed in the same way in as far as collection of their receivables is concerned.

• Current Ratio

Current Ratio means: A liquidity ratio that measures a company’s ability to pay short-term obligations (www.investopedia.com/terms/c/currentratio.asp)

In essence, when a current ratio is greater than 1 this states that the company does currently have the ability to pay its expected financial obligations that will mature over the next year operation cycle.

Pepsi Company

Based on the ratios number they indicate that Pepsi’s liquidity (current ratio) for 2008, 2007 and 2006 was 1.23, 1.31 and 1.33. In, 2008 Pepsi current ratio of 1.23 stated that every dollar of current liabilities, Pepsi has only. $1.23 of current assets. This illustrates the 2008 current ratio is consistent with the ratios for 2007 and 2006.

Since for 2008 there was only $1.23 of current assets foe every dollar of current liabilities, Pepsi may have trouble in the following year, if unexpected needs for cash occur or if some current assets such as inventory become illiquid due to unexpected emergency. For instance Pepsi may have to look into additional financing in 2009, to meet its maturing obligations since its current ratio for 2008 are so close to 1.

The Coca Cola Company

Based on the ratios’ number they indicate that Coke’s liquidity (current ratio) for 2008, 2007 and 2006 was 0.94, 0.92 and 0.95. Coke’s ratio states they were less than 1, shows that the company does not currently have the ability to pay it expected financial obligations that will become due during 2009.

Coke’s current ratio of 0.94 shows that for every dollar of their current liabilities, Coke has only $0.92 of current assets. This show Coke will have difficulty paying its short-term maturing obligations and unexpected needs for cash, which explain Coke may needs some additional financing in 2009.

Pepsi vs. Coke

After carefully examining current ratios for Pepsi and Coke, I think Pepsi Company is in a better position to meet their short-term maturing obligations during 2009 than Coke. As stated in Coke portion they probable will need to obtain additional financing or perhaps look into selling some assets to meet its short-term obligations.

• Profit Margin Ratio (PMR)

Pepsi’s PMR ratios for 2008, 2007 and 2006 were as following 11.89%, 14.33% and 16.06%. For 2008, Pepsi for each dollar of sales was approximately $0.12, and 2007 was $0.14 and 2006 $0.16 each dollars of sales.

Pepsi’s receivable turnover ratios for 2008, 2007 and 2006 were as following 10.14, 9.25 and 8.24. These high ratios say Pepsi implies that their

Risk and Return Analysis

Describe the risk profile of the business.

PepsiCo’s (“Pepsi”) business involves inherent risks and uncertainties that could cause actual results to differ materially from those predicted. Following is a discussion of Pepsi’s risks partially excerpted from its 10K filed with the SEC on 2/19/2009.

Pepsi is a consumer products company operating in highly competitive markets and relies on continued demand for its products. To generate revenues and profits, Pepsi must sell products that appeal to its customers and to consumers. Any major changes in consumer preferences or any failure on its part to anticipate or react to such changes could result in reduced demand for its products and slow destruction of its competitive and financial position. Pepsi’s success depends on its ability to respond to consumer trends, including concerns of consumers regarding obesity, product quality and ingredients. In addition, changes in product category consumption or consumer demographics could result in reduced demand for its products. Consumer preferences could take a turn due to a combination of factors, these changes can include the aging of the general population, social trends, and changes in the way consumers commute, as well as how often consumers take vacations or leisure activity patterns, weather. It could be affected by negative publicity.

The economic, conditions or taxes specifically targeting the consumption of its products. Any of these changes may reduce the consumer’s’ willingness to purchase its products. Changes in the legal and regulatory environment could limit its business activities, increase its operating costs, and reduce demand for its products. Demand for Pepsi’s products may be badly affected by changes in consumer preferences and tastes, and perhaps Pepsi might not market their products effectively.

Pepsi’s continued success is also dependent maintaining a strong line of new products, and the effectiveness of its advertising campaigns and marketing programs. Although Pepsi devotes significant resources to meet these goals, they also want to keep in mind; there is no assurance as to its continued ability either to develop and embark on successful new products or departure of existing products, and be able to effectively execute advertising campaigns and marketing plans.

However, with the ongoing success of new products and advertising campaigns are basically insecure, especially as to how they appeal to consumers. If Pepsi’s failed to successfully promote new products could decrease demand for its existing products by negatively affecting consumer perception of existing brands, as well as the result in inventory write-offs and other costs.

Where do the company risks come from (market, firm, industry, currency, etc.)?

Pepsi uses several of raw materials and other supplies in their supplies, these supplies include aspartame, cocoa, corn, corn sweeteners, flavorings, flour, grapefruits and other fruits, juice and juice concentrate, oats, oranges, potatoes, rice, seasonings, sucrose, sugar, vegetable and essential oils, and wheat. Pepsi’s key packaging materials include PET resin used for plastic bottles, film packaging used for snack foods, aluminum used for cans, glass bottles and cardboard. Fuel and natural gas are also important commodities due to their use in the plants and in the trucks delivering products to their distributors.

The global economic crisis has resulted in unfavorable economic conditions in many of the countries in which Pepsi operates. Pepsi’s business or financial results may be highly impacted by how critical economic conditions. With the impact of how much interest rates or tax rates increase. As well as how unforeseeable commodity markets; contraction in the availability of credit in the marketplace probable impairing its ability to access the capital markets on terms commercially acceptable and the effects of the government plan to manage economic conditions; reduced demand for its products resulting from a slow-down in the general global economy.

Pepsi also; has assets and incurs liabilities, earns revenues, for instance, pays expenses in a variety of currencies other than the U.S. dollar. The financial statements of its foreign subsidiaries are translated into U.S. dollars. As a consequence, Pepsi’s profitability may be are impacted by an adverse change in foreign currency exchange rates. Pepsi also will want to maintain their key employees as well as their highly skilled and diverse staff. This allows Pepsi to continue to require it to hire and retain and develop good leadership within skilled diverse staffs. This will allow Pepsi to develop their skills and competencies.

Pepsi’s are prepared for any unplanned turnover, because they have a backfill of current leadership positions that could handle unexpected emergencies to be able to hire and train them and retain diverse work staffs, to continue to have the competitive advantage. Lastly; Pepsi will have been operating results that would be critically affected due to increased cost due to the increase their competition for employees because of their high employee turnover and due to increased employees benefit costs.

Pepsi Company Beta meaning to investors’

The concept of beta is a practical measure of individual stock risk in relation to the stock market risk as a whole.  It’s sometimes referred to as financial elasticity.  It is a tool common among stock market analysts that they use to establish market volatility.  The beta value is calculated using price movements of the stock that is under analysis and comparing those movements to an overall market indicator – as such the market index – over a given period of time. If the stock’s price experiences movements that are greater – more volatile – than the stock market, then the beta value will be greater than 1.  If a stock’s price movements, or swings, are less than those of the market then the beta value will be less than 1. The beta of Pepsi’s common shares is 0.51. In the chart above explains Pepsi’s having a beta of 0.51 points, the results imply that Pepsis common market share is stable and is not risky. It’s not subject to sudden changes.

Coca cola has a beta of 0.55 implying that its also a stable share hence a safe investment for any shareholders. However its beta is slightly higher that the Pepsi one implying that Pepsi share is slightly more stable.

What has been the performance of the company stock over the past two years compared with a key competitor and with the S&P 500?

Pepsi Market share price has increased albeit just slightly in the recent past while that of Coca-Cola has risen rapidly over the same period of time. This points towards the higher volatility of the coca cola share due to the fact that its beta is higher that that of Pepsi .

Capital Structure and Cost of Capital

Describe the various types of financing used by the company .

In the year 2008 pepsi spent a total of $3.0 billion for financing activities, mainly reflecting the return of operating cash flow to their shareholders through common share as a resolve of repurchasing $4.7 billion and dividend payments of $2.5 billion. To some extent using the cash proceeds to offset issuances of long-term debt, net of payments, of $3.1 billion, stock option proceeds of $620 million and net proceeds from short-term borrowings of $445 million.

They annually review of the capital structure with the Board, includes dividend policy and share repurchase activity.  The results of the 2008 second quarter meeting the Board of Director approved 13% dividend increase of $0.20 per share.

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6428069-75349-369919&type=sect&dcn=0001193125-09-033126  page 66, retrieved oct 20,09

Compare the debt ratio of the company against the competitor you analyzed in Modules 2 & 3.

Describe the risks and advantages of the company’s debt level and indicate whether you believe it could/should be higher or lower.

Pepsi Company:

PepsiCo’s Debt to Total Asset Ratio of 22.86% shows that its creditors required. $0.2286 of every dollar invested in assets. The ratio displays that PepsiCo has the long-term capability to pay interest as it comes due and to repay the principal balance of debt due at its maturity.

Coca Cola Company:

Coke’s Debt to Total Asset Ratio of 22.98% shows that its creditors provided. $0.2298 of every dollar invested in assets. The ratio displays that Coke has the long-term ability to pay interest as it comes due and to repay the principal balance of debt due at its maturity.

Pepsi Company vs. Coca Cola

Both companies have similar prospects of long-term survival.  As well as both companies have similar degrees of riskiness indicated by related Debt to Total Asset Ratio.

Financial Leverage/ROE – Both companies have a considerable cushion to obtain more debt financing to improve ROE. This approach is good when sales are expanding but can set declining pressure on ROE during times of slow or declining sales because the higher fixed interest payments will be incurred, regardless, of economic activity.

Determine the approximate yield to maturity of company debt and the after-tax cost of debt

Based on finance.yahoo.com Pepsi bond rating is Aa2. Based on Fitch rating according to AA between five to seven years their yield to maturity of are 4.52% Pepsi after tax cost of debt calculation by taking income tax expense divided by income before taxes

1,879.000,0000/7021000000=26.76 or 27%

Determine the approximate cost (required rate of return) of equity .

According to finance.yahoo.com Pepsi Beta is .57. Using the formula Re = Rf + B(Rm – Rf) risk free is 2% and return of the market is 11% Based on the calculating the required rate of equity is

Re= 2% + .57(11% -2%)

Re= 2% + 5.2 = 5.22%

Determine the market values of the company debt and equity

Market value: stock price is $60.59 and shares outstanding is 1.56 billions

$60.59 (x) 1.56 billion = $94,520,400,000

Debt: Book value 9.04 (x) shares outstanding 1.56 billions = $14,102,400,000

Total asset of the company is $94,520,400,000 + $14,102,400,000 =  $108,622, 800,000

The proportion of company debt: $14,102,400,000 / $108,622, 800,000 = 12.98%

The proportion of company equity: $94,520,400,000 /$108,622, 800,000 = 87.02%

Calculate the weighted average cost of capital .

To calculate the Pepsi’s WACC calculation according to the Pepsi’s required rate of

return is 5.22%, equity 87% and debt13%.

Explain the significance of the company’s WACC to its management. The cost of debt and the required rate of return are measures of the riskiness of the cash flows to the bondholders and shareholders, respectively. The cost of capital is a measure of the riskiness of the cash flows generated by the company’s assets (in other words the risks of the business the company is in). Relate these numbers to your discussion of risk from Module 3.

WACC (extracted from Investopedia.com)- Generally speaking, a company’s assets are financed by either debt or equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, this displays a picture how much interest the company has to pay for every dollar it finances .A firm’s WACC is the overall required return on the firm as a whole and, as such, time after time are used for the sole purpose for a company director to determine the economic feasibility of growth opportunities and mergers. It is the appropriate discount rate to use for cash flows with risk that is similar to that of the overall firm.

Businesses often discount cash flows at WACC to determine the Net Present Value (NPV) of a project, using the formula.

Pepsi Company has a bright future since they are backed by stable history and a strong financial background. The prospects for the company are good especially for their soft drink products and more with the oncoming international events such as the FIFA world cup. These events present opportunities for brand marketing and eventually strengthening sales.

The firm is doing well and the return on equity is quite impressive. To this end the firm is therefore not faced by any share holder activism and they are therefore not facing a restructuring or a takeover. They are also not faced with financial distress considering that the have a good current ratio which implies that they are not adversely affected by the credit crunch. They are therefore in a quite stable financial form.

The company needs to make no specific acquisitions to achieve strength however they need to diversify their product range. First and most convenient is investing in energy drinks. Since these are quite a rave with the current market, they need to invest in this quite well. The second investment that they need to undertake is fresh fruit juices. This will be quite a relevant investment since they already have a well established market as well as a good distribution network. The only other change that would be viable is the restructuring he only other compensation packages. This is by reducing the CEO pay and ensuring that the CEO earns his pay through bonuses for profits earned. By doing so they are able to ensure that the management does the best they can to earn high profits and hence get good bonuses for their efforts.

www.yahoo.finance.com

http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?dcn=0001193125-09-033126

www.Pepsico.com

http://www.pepsico.com/Purpose/Corporate-Contributions/Humanitarian-Aid.html

http://finance.yahoo.com/q/mh?s=PEP

www.investopedia.com

www.valueline.com/freedemo/productsamples.html

www.finance.yahoo.com

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Goals And Objectives Of Pepsi Company (Essay Sample)

Objectives of pepsi company.

PepsiCo is among the largest Fortune 500 multinational companies in the world. The company begun in 1898, with the invention of the Pepsi-cola drink by chemist Caleb Bradham. The company has interests in the manufacturing, promotion, and supply of grain-based snacks and drinks in America, Europe, Latin America, Asia, and Africa. The company is estimated to have generated a revenue of 67 billion dollars by 2013, making it a success all over the world. With such statistics, it is undoubted that the company implements carefully thought out business strategies that work commendably with their goals and objectives.

The company’s primary goal is to refine the choices of beverages and foods they sell to their customers by creating healthy options that meets the needs of the customers. The company aims to achieve this by first, reducing the quantity of sugar added to the beverages significantly to 12-oz per serving hence, reducing calories intake. Second, is by producing healthier snacks through the reduction of amounts of saturated fats and volume of salts contained in them. Thirdly, it seeks to increase positive nutrition by expanding their ingredients to include fruits, vegetables, proteins and whole grains. Moreover, is by making available balanced foods and beverages to poor communities all over the world.

The company seeks to meet the goal of sustaining the value of shareholders and delivering extended financial performance. As the second biggest food and beverage industry player, the company adopted two strategies that have and continually makes them competitive and facilitates the achieving of high financial performance leading to profits. First, through the cost leadership strategy, the management adopts cost reduction strategy, which results in the company selling their products at low prices, offering promotional offers and discounts on purchases. Moreover, the company has adopted differentiation strategy. Here, the company gets to acquire more customers by creating unique products, for instance, healthy snacks such as potato chips with less amount of fat. Moreover, the company acquires more market shares by entering into new markets such as different countries and schools where they offer a variety of beverages that provide hydration options.

PepsiCo has the objective of protecting water supplies. The company argues that water is essential to the production of their products, as well as, helping to meet the food and resources needs of the world. The company first adopted the strategy of efficiency water use. Here, they aim at persistently decreasing the quantity of water used by their agricultural suppliers and during manufacturing and maximizing the process of water re-use to reduce pollution. Secondly, in a bid to protect the environment, the company supports the climate change agenda and aims at reducing their emission of greenhouse gases by 20 percent by 2030. Thirdly, the company strives to minimize their waste discharge to landfills, reduce food waste produced by the company and continually recycles and re-uses their packaging to prevent environment and water pollution.

The company also seeks to meet the objective of creating a safe and healthy environment. Being a company that employs, 264,000 employees, the company strives to meet the people goal. It does so through first, observing and respecting human rights through applying a code of conducts when dealing with employees, providing appropriate remuneration packages, providing protective gear and ensuring a safe work environment. Second, the company works towards expanding their sustainable farming initiative through increasing crop yields that result in increased livelihood for the farmers and workers. Third, the company supports diversity through the hiring of an inclusive and gender sensitive workforce that reflect the different societies all over the world. Moreover, it supports caregivers.

Essay on Pepsi Company Business Operations

Introduction

Operations management is concerned with the processes involved in the production and distribution of goods and services (Slack, Chambers and Johnston, 2010, pp 34-60). Operations management entails all the steps involved in the creation of the products and services until they reach to the consumer. The goal of any operation manager is to make this process effective and efficient (Hill and Hill, 2017, pp 18-54). Besides operations, management encompasses other related disciplines such as inventory control, procurement and supplies, quality analysis and stock keeping. The operations management process employed by a company depends on the nature and type of good the company is producing (Heizer, 2016). Thus, operations management covers the entire production system. It is present in banking systems, hospitals, and automobile industries among others. Operations management includes both the daily operations of a firm and the strategic operations of the firm (long-term). A company’s operations manager is tasked with oversight of the production and distribution process of the goods and services of a firm.

Pepsi Company is an American multinational company that specializes in the production of beverage products. It is the primary competitor for Coca-Cola Company. Pepsi is renowned for its beverage products  Pepsi Cola ,  Mirinda ,  Tropicana  among others. Caleb Braham pioneered the company’s operations when he invented Pepsi Cola. Caleb hoped his product would replicate the success of the rival product coca-cola. The product quickly gained popularity, which led to Caleb branding it in 1898 and incorporating the Pepsi Cola Company in 1902. However, the world war one proved detrimental to the operations of the company. During the world war one, Pepsi Cola Company was repeatedly reincorporated in a bid to ensure it became profitable (Thain and Bradley, 2014, pp 18-22). At the beginning of 1931, the company was bought by Charles G. Guth. He merchandised the operations of Pepsi Company. He employed the knowledge and skills of qualified chemists to come up with new and better drinks. Guth also held leadership positions in Loft Inc, a company that specialized in the production of candies. Several legal battles ensued which led to Guth losing the leadership position of Pepsi company. In 1941 loft, Inc and Pepsi Company formed a merger and adopted the name Pepsi Cola Company. During the 1950’s Alfred Steele, a former C.E.O of Coca-Cola Company assumed the leadership position in Pepsi Company. Alfred emphasized on sales promotions and market expansions. Alfred’s effort led to significant growth in Pepsi Company revenues and assets. In subsequent years, the company embarked on mergers and acquisitions, for instance, the merger with Frito Lay in 1965. Currently, Pepsi Company has productions departments in over two hundred countries. The tremendous growth of Pepsi Company is attributable to the uniform standards of its products.Pepsi Company has revolutionalized the operations of beverage industries in the World. The company has various investments ranging from beverage industries and cereal industries. Thus, the work of an operations manager in Pepsi Company cannot be underestimated.

Operations of Pepsi Company

The operations of Pepsi Company are broken down into six subdivisions. These are Frito Lay North America (FLNA), Quaker Foods North America (QFNA), North America Beverages (NAB), Latin America, Europe Sub-Saharan Africa (ESSA), Asia Middle East and North Africa (AMENA).

Frito Lay North America

The Frito Lay North America is made up of the various branded snacks and beverages entities owned by Pepsi Co in North America and Canada. FLNA was initially known as Rocket Inc, and it was not until 2004 that it changed its name to FLNA.FLNA produces salted snacks made from potatoes and corns. FLNA does its business either on its own or with the partnership with other players in the industry. FLNA is primarily involved in the processes of production, marketing, and selling of the snack products. FLNA sells its product through retailing and online shopping. In 2017 and 2016, FLNA accounted for at least 25 % of the company’s total revenue. This can be explained by the decrease in the soda industry in the USA. Moreover, FLNA has been experiencing a constant growth in profit of 3 % in the last three years. FLNA share of the total operating profit of Pepsi Company was about 43 %.According to estimations by Forbes FLNA accounts for at least 37% of Pepsi Co total valuation. Some of the branded products under FLNA include  Doritos Tortilla Chips, Cheetos Snacks, Santitas tortilla chips, Fritos Corn Chips  among others. Besides FLNA has a joint operating venture with Strauss Group. The joint venture is involved in the making, distribution, and selling of refrigerated dips and spreads.

Quaker Foods North America (QFNA)

QFNA is Pepsi Co smallest section and accounts for only five percent of its total revenues and ten % of the operating profits. The formation of the QFNA can be traced back to the oatmeal battles that were predominant in the 19th century. John Stuart, Henry Parsons, George Douglas and Ferdinand Schumacher are the pioneers of QFNA. QFNA was formed in 1901. QFNA entered into a merger with Pepsi Company in 2001. QFNA centered its operations on the production of oatmeals and snacks; however, QFNA beverage product, Gatorade Sports drink is what pushed Pepsi Company into the merger as it was considered profitable by many businesses in the turn of the 19th Century.

QFNA on its capacity and in cooperation with other stakeholders engages in the creation, marketing and distribution of branded Pasta, rice and cereal products. QFNA sells its product to various distributors and retailers in the USA and Canada. Some of the brands under QFNA include  Quaker Oat Squares, Quaker oatmeal, Quaker grits  among others.

North America Beverages

NAB is the unit that is tasked with the creation, distribution, and selling of Pepsi Company beverage products in the USA and Canada. NAB operates either independently or in cooperation with other players in the industry. For instance, the joint ventures with Unilever and Star bucks allow NAB to sell ready to drink tea and coffee drinks in the USA. NAB sells its final branded products to both distributors and consumers. Besides, it also sells some of its beverage products to various bottlers spread out in the USA.

Latin America

The Latin America department is involved in the production, marketing, distribution and selling of beverage products, cereals, rice, pasta, salted snacks and ready to drink tea in Latin America. The department does this on its own and with joint ventures with companies such as Unilever. Some of the branded products offered by the Latin America department include  7UP, Gatorade, Pepsi, Cheetos, and Crunchy  among others.

Europe-Sub Saharan Africa

The ESSA is involved in the production, marketing, distribution and selling of beverage products, cereals, snacks in Europe and Sub-Saharan Africa. The department operates on its own and cooperation with other players such as Unilever. However, in some parts of Europe Pepsi Company runs its private bottling companies. Some of the branded products offered by ESSA include  Pepsi Cola, Mirinda, Cheetos, and Doritos  among others.

Asia, Middle East, and North Africa

The AMENA department is involved in the production, distribution, marketing, and selling of beverage products in Asia, Middle East, and North Africa. The department does this in its capacity and cooperation with other entities such as the Unilever. Some of the branded products offered by AMENA include  7UP ,  Pepsi Cola ,  Aquafina ,  Crunchy , and  Cheetos  among others.

Pepsi Company Distribution network

Pepsi company employs three forms of distribution networks namely distributor networks, customer warehouses and Direct-Store-delivery (DSD).

Role of Pepsi Company Operations Manager

An operations manager provides an oversight role to the daily operational and strategic activities of an organization (Hill, Jones, and Schilling, 2014, p 60-65). The operation manager is tasked with ensuring that goods are created and transported to the consumer efficiently. In Pepsi Company the operations managers are designed to perform a plethora of tasks all of which are geared towards increasing overall productivity of the company (Johnson, Clark and Sulver, 2012, pp 20-60). The operations manager performs a strategic role in designing new goods and services. The operations manager with the help of other members in the company conducts extensive market research to establish market trends and consumer preferences. The information on the market trends and consumer preferences is essential in that it is used in the creation of new products. The new products created are improved versions of the existing product variants.

An operations manager ensures the Company’s products are of the required standard and quality. Pepsi branded products have a uniform standard irrespective of the location in which one buys them. The operation manager ensures that the employees adhere to the stipulated production technique so as not to compromise on the quality. The operations manager is also involved in the Job designing and human resources process. Since employees from a vital part of the company’s operations, thus considerable attention is given to the employees to ensure the company can meet its goals and objectives. Pepsi Company has a talent sustainability policy, which all the operations managers are required to follow (Bernstein et al, 2016, p 13). Pepsi Company operates different job designs for the FLNA and QFNA divisions. Despite these differences, the operations manager in the two divisions is in charge of ensuring adequacy of the workforce.

Pepsi company operations manager is also in charge of the supply management process. The operations managers ensure that the manufacturing departments of the company are strategically located. Through this, the company can match the products with demand and that the company can easily access its intermediary products. Over time, Pepsi Company has adopted the approach of diversifying its supply chain channels. The operation manager in Pepsi Company is also tasked with the management of the inventory. The operation manager initiates the automation process, scheduling of the production process and the minimization of the production costs. The operations manager is also in charge of maintenance of the company’s overall operations. The operation manager in Pepsi Company comes up with the strategic locations of the Company. An operations manager is the one who is tasked with deciding on either Pepsi company adopts Company-owned facilities or partnership owned facilities.

Through the Mergers and Acquisitions, Pepsi Company has been able to acquire a considerable share of the market. Consequently, this has ensured that the company portfolios are diversified. A diversified portfolio ensures the returns are maximized and the risks minimized. For instance, in recent years the beverage industry has had slow growth. The slow growth of the beverage industries has hampered the earnings of the firms involved in beverage production. For example Pepsi Company and The Coca-Cola, company. However, the effects of the slow growth have been buffed by FLNA in Pepsi Company, which has not been affected by the slow growth experienced in the beverage industry. Overall, this has ensured the continued profitability of the Company. Second, the extensive research process used by Pepsi Company has ensured that the company remains competitive in the long run. The company takes into account different customers preferences and market trends. Through this, the company can ensure a ready market for its products. Moreover, Pepsi Company has a worldwide distribution network ensures the company saves on the costs and that the company obtains immediate from its consumers.

Disadvantages

Pepsi Company mergers and acquisitions are the principal causes of the Company’s operation problems. The mergers and acquisitions bring about bureaucracy problems. These acquisitions bring about problems in the management and distribution processes of the company (Venkataraman, Summers and Venkataraman, 2017, pp 1-22). Although Pepsi has been able to manage them, in future with its continued expansion, it is likely that these mergers and acquisitions will bring about problems to Pepsi Company in the future.

Conclusions

Through Pepsi Company six divisions, we observe that Pepsi Company engages in the production, distribution, marketing and selling of beverage products, cereals, and salted snacks among others. Evidently, this forms a vital part of the company’s operation process. The operations managers are involved in ensuring the company’s products are of the required quality. They are also tasked with ensuring the products move from the manufacturing departments to the consumer efficiently and efficiently. The close-knit system of Pepsi company production process has ensured the company remains profitable.

Bernstein, E., Bunch, J., Canner, N. and Lee, M., 2016. Beyond the holacracy hype.  Harvard business review ,  94 (7), pp.13.

Hill, A. and Hill, T., 2017.  Essential operations management . Macmillan International Higher Education,pp 18-54

Johnson, R, Clark, Sulver, M., 2012 Service Operations Management Harlow Pearson Education Limited, pp 20-60

Heizer, J., 2016.  Operations Management, 11/e . Pearson Education India.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014.  Strategic management: theory: an integrated approach . Cengage Learning,pp 60-65

Slack, N., Chambers, S. and Johnston, R., 2010.  Operations management . Pearson education,pp 34-60

Thain, G. and Bradley, J., 2014.  FMCG: The power of fast-moving consumer goods . First Edition Design Pub.,pp 18-22

Venkataraman, S., Summers, M. and Venkataraman, S., 2017. PepsiCo: The Challenge of Growth through Innovation.  Darden Business Publishing Cases , pp.1-22

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Is That Drink Worth It to You?

Alcohol is riskier than previously thought, but weighing the trade-offs of health risks can be deeply personal.

Credit... Photo illustration by Ricardo Tomás

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By Susan Dominus

Susan Dominus is a staff writer for the magazine.

• Published June 15, 2024 Updated June 18, 2024

About a year ago, a friend of mine started evading my invitations to grab a drink. It was only when we caught up for a walk that she explained she wasn’t putting me off for any personal reason — it was just that she had stopped drinking. She wasn’t a heavy drinker — she had a glass of wine with dinner, the occasional Aperol spritz — but she’d been hearing on podcasts and reading in the news that even a small amount of alcohol was much worse for her health than had previously been understood.

Listen to this article, read by Kirsten Potter

My friend was picking up on a swing in the public-health messaging around alcohol. For many years, she might have felt that she was making a healthy choice in having a glass of wine or a beer with dinner. Right around the time when she came of legal age to drink, the early 1990s, some prominent researchers were promoting, and the media helped popularize, the idea that moderate drinking — for women, a drink a night; for men, two — was linked to greater longevity. The cause of that association was not clear, but red wine, researchers theorized, might have anti-inflammatory properties that extended life and protected cardiovascular health. Major health organizations and some doctors always warned that alcohol consumption was linked to higher cancer risk, but the dominant message moderate drinkers heard was one of not just reassurance but encouragement.

More recently, though, research has piled up debunking the idea that moderate drinking is good for you. Last year, a major meta-analysis that re-examined 107 studies over 40 years came to the conclusion that no amount of alcohol improves health; and in 2022, a well-designed study found that consuming even a small amount brought some risk to heart health. That same year, Nature published research stating that consuming as little as one or two drinks a day (even less for women) was associated with shrinkage in the brain — a phenomenon normally associated with aging.

Drinking increased during the pandemic, which may be why news of any kind about alcohol seems to have found a receptive audience in recent years. In 2022, an episode of the podcast “Huberman Lab” that was devoted to elaborating alcohol’s various risks to body and brain was one of the show’s most popular of that year. Nonalcoholic spirits have gained such traction that they’ve started forming the basis for entire nightlife guides; and more people are now reporting that they consume cannabis than alcohol on a daily basis.

Some governments are responding to the new research by overhauling their messaging. Last year, Ireland became the first country to pass legislation requiring a cancer warning on all alcohol products sold there, similar to those found on cigarettes: “There is a direct link between alcohol and fatal cancers,” the language will read. And in Canada, a government-funded organization recently proposed revised alcohol guidelines, announcing, “We now know that even a small amount of alcohol can be damaging to health.” The proposed guidelines characterize one to two drinks a week as carrying “low risk” and three to six drinks as carrying “moderate risk.” (The current guidelines suggest that women limit themselves to no more than two standard drinks most days, and that men place that limit at three.)

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Pepsi and Coca Cola Companies Vision Statement Essay

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

The most important aspect of a vision statement is its ability to explain the company’s goals or desired status. Thus, it should be not only convincing but also inspiring or inspired. On the other hand, a mission statement is a short but comprehensive definition of what an organization does or is doing to achieve the desired status. It tells the people the business that it carries out or the industry of its specialization. In this paper, an inspiring vision is chosen from Pepsi Inc. It seeks to explain the contents of the vision statement and why it is inspiring. In addition, the paper will make a comparison between an inspiring vision statement and a non-inspiring vision statement from another company (Coca Cola Company) to show the need for an inspiring or inspired statement.

The vision statement developed by Pepsi, one of the largest soft drink and beverage conglomerates in the world, is an example of the most inspiring statements in the corporate world. It states that the responsibility of the company is to ensure that it continually improves all the aspects of the world. It states that the company has a major responsibility in improving the social, economic and environmental aspects of the world. It says that the reason for doing this is to “create a better tomorrow than today” (The Pepsi Inc., 2014). It also aims at building shareholder value by making the company a sustainable organization.

There are three aspects that make this vision statement both inspiring and inspired. First, it is worth noting that the statement informs the public that the company is concerned with social welfare- it wants to improve the world. It mentions the environment, social and economic aspects of the world. In fact, these are some of the major issues facing the modern world. For instance, environmental concerns and global warming are some of the major issues that are facing society.

Various societies believe that the corporate world should be the most actively involved in the process of resolving environmental problems. Secondly, the statement argues that the company seeks to benefit society in general through its business culture. In fact, this is an indication that the company is committed to involving itself in corporate social responsibility. The statement ends with the recognition of the importance of its shareholders (the owners). The arrangement of this statement is inspiring because it starts with an assurance of the society that the company is part of their society. It also indicates that it is a part of the solution to the social, economic and environmental problems. It ends with by recognizing its business. Although the company aims at making profits, it also seeks to improve the social welfare of the people.

On the other hand, the vision statement developed and used by Coca Cola Company, Pepsi’s major business rival, is less inspired and less inspiring. Unlike Pepsi’s statement that starts with recognizing the society and the world, Coca Cola’s vision statement begins with an explanation of its business intention “our vision describes what we need to accomplish … in order to achieve growth and sustainability”. It then proceeds to recognize the major factors that contribute to organizational business achievement. Here, it starts with “the people”, arguing that it wants to achieve a good place to inspire more workers (The Coca Cola Company, 2014).

Thirdly, it recognizes its partners, where it mentions customers and suppliers. Then, the statement recognizes the social and environmental problems facing the modern world. It argues that the organization wants to be a responsible citizen by providing support to the global society. The statement also states its major aim of making profits, which says that the need of the company is to ensure that it achieves long-term returns to its shareholders. It ends with a statement on productivity, which says that the company wants to be effective, lean and fast-moving towards achieving productivity.

I find this mission, not inspiring or inspired. This is not because of its meaning, but because of its arrangement. The statement starts by recognizing its needs instead of the needs of the people or society. It fails to convince the readers and the world in general that it is part of society. It goes directly to show the world that it is only interested in making profits rather than being part of society. It should inform the public that it is an active member of the society and an employer of an effective strategy for corporate social responsibility. In the beginning, it fails to show the public that it is part of the solution to the major social, cultural and environmental problems facing its customers. These issues are only mentioned after the company has expressed its interest to make profits.

The Coca Cola Company. (2014). Our company: Our vision, mission and values . Web.

The Pepsi Inc. (2014). Our mission and vision . Web.

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1. IvyPanda . "Pepsi and Coca Cola Companies Vision Statement." May 22, 2020. https://ivypanda.com/essays/pepsi-and-coca-cola-companies-vision-statement/.

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IvyPanda . "Pepsi and Coca Cola Companies Vision Statement." May 22, 2020. https://ivypanda.com/essays/pepsi-and-coca-cola-companies-vision-statement/.

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