Thesis: Pepsico Global Supply Chain

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Pepsico Global Supply Chain

Corporate Issues in the PepsiCo Global Supply Chain

Company Background

Identification of Issues

PepsiCo's Competition

Environmental and Safety Issues

Association to Junk

In today's dynamic context, organizations strive to improve and maintain a highly competitive edge. They engage in operations to increase the quality of their products and services, they strive to increase customer satisfaction and employees' on the job satisfaction, and they also engage in corporate operations destined to lead to the development of the communities where the entities operate. All these actions have the ultimate scope of increasing and consolidating the market share and consequently the corporate revenues.

The specialized literature and the actual practice are filled with numerous examples of entities that have become the epitome of organizational success. The one thing these companies have in common is the immense desire to achieve the established SMART goals. And in support of this desire, they developed and implemented various strategies. But the courses of action taken by each and every one of these entities are no guarantee for success. In other words, Nike's success with outsourcing to Indonesia might turn into a failure if wrongfully implemented by Microsoft. Otherwise put, the strategies must be developed and implemented with strict consideration to an organization's unique features, characteristics, capabilities and demands, but also those of the environment and industry where the company activates.

A multinational which has managed to develop the most suitable and diversified strategies, all to ensure its international success is the Pepsi Cola Corporation, or PepsiCo. The present paper succinctly presents the basic information on the company, to then identify and analyze several value chain issues. It ends with personal and impersonal conclusions and recommendations.

2. Company Background

PepsiCo was founded in 1965 in New York, where it is still headquartered. They activate in the food and drinks industry and they operate worldwide. "PepsiCo is a world leader in convenient snacks, foods, and beverages, with revenues of more than $39 billion and over 185,000 employees. PepsiCo owns some of the world's most popular brands, including Pepsi-Cola, Mountain Dew, Diet Pepsi, Lay's, Doritos, Tropicana, Gatorade, and Quaker. Our brands are available worldwide through a variety of go-to-market systems, including direct store delivery (DSD), broker-warehouse, and food service."

There are a total of eighteen PepsiCo brands, each generating more than one $1 billion per annum. However, the star of the New York-based organization remains its soft drink caffeine beverage - the Pepsi Cola. The chart below reveals the estimated sales of each PepsiCo product line for the previous fiscal year:

The officials at PepsiCo have soon understood the need for diversification and have implemented it in various fields. For instance, they emphasize on the cultural and educational diversity of their staff members; also, they diversified the risks of their operations by simultaneously working with numerous business partners (all purveyors, intermediaries and franchisees) and ultimately, they have diversified their operations to sell numerous other items, in order to maximize the earnings and reduce the loses.

The corporate success was also due to the development of a highly efficient managerial system, based on four primary concepts: people satisfaction and employee motivation, strong brands, innovative products and powerful market approaches. The actual chart best revealing the business model at PepsiCo is presented below:

But in following their personal financial agenda, the organization has also listened to the needs of their shareholders and has made increased efforts to support the development of individuals and communities. PepsiCo's mission is "to be the world's premier consumer-products company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. In everything we do, we strive for honesty, fairness and integrity."

3. Identification of Issues

However PepsiCo is generally perceived as a highly successful organization, which in fact they are, just like with every entity operating at international levels, criticisms has aroused. The most relevant issues facing the global chain of PepsiCo refer to the following:

the corporate actions have sometimes failed to protect the natural environment and have resulted in pollution and contamination; the most relevant case in this instance is India, where the PepsiCo products were even banned for a while the long standing competition with Coca Cola has dragged the company through corporate lawsuits and commercial espionage cases, all to affect the organizational reputation the diversification of their product palette, however an efficient approach, has made consumers associate the company with the highly unhealthy junk food industry; this was a significant problem moreover in the general context of a fight against unhealthy aliments the association with junk food has also been damaging in the immediate surrounding of schools, where parents have clearly stated their need and desire for their children to have access to healthy and rich in nutrients products finally, the association with junk has cost them a potential merger with giant Nestle, which then resulted in the creation of a negative PepsiCo image

PepsiCo was not well received in Israel, and the corporate officials did little to change the public perception; as a result, the primary market share within the country is still possessed by Coca Cola, to still attract the criticism of the American PepsiCo officials however there are large numbers of PepsiCo children customers, the parents are sometimes dissatisfied with the caffeine contained in the beverages and blame their children's sleeping disorders on the cola consumption the food and beverage company emphasizes on the strong corporate culture and on their ability to respect and integrate the staff members; however, in late 1990s, the plant in Burma was found guilty of some of the most severe breakings of human rights

The list of events with negative implications for the New York-based company is unfortunately longer than the current paper would allow. However, some of the most important issues affecting PepsiCo's global supply chain are detailed in the following section.

4. Analysis of Issues

4.1 PepsiCo's Competition

PepsiCo's competitive environment is an important issue affecting its international capabilities for numerous reasons, such as:

the company must invest large sums of money into product development and improvement in order to maintain a competitive edge

PepsiCo must always conduct market research and identify the strategies implemented by the competition in order to top these strategies and consolidate their position however watching and 'beating' the competition is a continuous action, it must not exceed in importance the primary goal of the company, that of satisfying their clientele and registering profits; the reason why this specification was made is that the decades-long fight against Coca Cola has sometimes resulted in negative impacts upon PepsiCo

The competitive landscape of the foods and drinks industry is highly dynamic and mostly determined by the various needs, wants and taste preferences of buyers. In 2007, the industry accounted for about 5% of the entire aggregate economic revenues, but is expected to decrease to 4% during the current year; the trend will maintain its course until 2012. The primary reason for the decline of the industry, however its risks are quite low, is given by an increasing inflation and a general price increase, which will ultimately result in reduced sales.

PepsiCo is currently struggling to defeat three primary actors in the industry: the Coca-Cola Company (the undisputed leader and PepsiCo's 'sworn enemy'), Dr. Pepper Snapple Group Company and finally, the Kraft Foods Company. The Coca-Cola Company produces over 400 beverage items in more than 200 countries and out of the five best sold soft drinks, four belong to Coca Cola (Coca-Cola, Diet Coke, Fanta, and Sprite). At the end of fiscal year 2007, the Coca Cola Company was employing an estimative 90,500 individuals and was retrieving an annual revenue of more than $28 billion.

Dr. Pepper Snapple Group is the second most important competitor of PepsiCo, and the third important player in the U.S. industry, after Coca Cola and PepsiCo. But what differentiates the two is the area they operate. In this order of ideas, whereas PepsiCo operates worldwide, Dr. Pepper only activates in North America, namely Canada, Mexico and the United States. Dr. Pepper Snapple Group ended fiscal year 2006-2006 with 20,000 employees and sales worth next to $6 billion.

A third PepsiCo competitor and a fourth important industrial presence within the United States is the Kraft Foods Company. "Kraft Foods is the U.S.'s #1 food company and #2 in the world (behind Nestle). Its North America unit makes the world's largest cheese brand (Kraft), owns the cookie and cracker business (Nabisco) and makes that slam-dunk favorite, Oreos. Its international business unit offers most of its U.S. brands, plus national favorites. The Oscar Mayer, Kraft, Philadelphia, Maxwell House, Nabisco, Oreo, Jacobs, Milka, and LU brands have revenues of at least $1 billion; more than 50 hit the $100 million mark. Kraft extricated itself from the haze of second-hand tobacco smoke when it was spun off from Altria in 2007; later the… [END OF PREVIEW]

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