Assignment #2

Individual but single

(Midterm industry pepsi.co)

MUHAMMAD AREEB SHAHID
F2016054059
SECTION – A
SIR USMAN SATTAR
ERP FINANCIAL-1
Pepsi Cola
Pepsi-Cola is one of the best soft drink in the world. The company has operated continuously for
over 40 years offering a range of quality products Pepsi, Diet Pepsi, Miranda, 7UP, Diet 7UP,
Mountain Dew.

Analysts believe Pakistan to be an enormously growing potential market as per capita

consumption there is as low as 14 bottles per year.
Pepsi is very popular in Pakistan and it holds about 70% in the soft-drink market. Pepsi Cola
International, a remarkable name in the cola industry is running its business in Pakistan through
different distributors.

These distributors are!

1. Riaz Bottler Lahore

2. Pakistan Beverage Karachi
3. Punjab Beverage Faisalabad
4. Naubahar Bottler Gujranwala
5. Haidri Beverages Islamabad
6. Northern Bottlers Peshawar
7. Sakhar Beverages

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 Organizational Structure:

Nature of Business:
Pepsi is a FMCGS (Fast Moving Consuming Goods) produced in bulks. Pepsi is consumed
regularly that’s why Plants work continuously 24 hours.

Type of Ownership:
Ownership of Pepsi is franchise in Pakistan, because Mother Company of Pepsi is located in USA.
In Pakistan Pepsi is working as a franchiser. There are seven franchisers who operate Pepsi Co in
different cities of Pakistan include

1. Riaz Bottler Lahore

2. Pakistan Beverage Karachi
3. Punjab Beverage Faisalabad
4. Naubahar Bottler Gujranwala
5. Haidri Beverages Islamabad
6. Northern Bottlers Peshawar
7. Sakhar Beverages

Key Players of Pepsi:

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 Pepsi international is working in Pakistan with just 18 employees of its own which are controlling
and facilitating its bottlers. The key player who is controlling the entire system of Pepsi Beverages
in Pakistan is the Regional Head. Under the supervision of Regional Head there is a Country Head
who is facilitating the other main Four Designations:

 Franchise Directors
 Marketing Director
 Operations Director
 Chief Finance Officer

Vision:

To be the premier convenient food and beverages company with brands that are known and
respected in every corner of the world.

Mission:

We aspire to make PepsiCo the world’s premier consumer Products Company, focused on
convenient foods and beverages. We seek to produce healthy financial rewards for investors as we
provide opportunities for growth and enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do, we strive to act with honesty,
openness, fairness and integrity.

Objective:

The major objective of the company is to produce and supply highest quality products, which
confirms to both the national and international quality stands. The company is committed to
provide maximum level of customer satisfaction.

Values:

 Passion for Growth

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  Uncompromising Principles and Pride in Doing Things the Right Way
 Laser Focus On Results
 Collaboration Is Critical
 Inclusion Is More Than a Fairness Issue; It’s A Core Business Imperative
 Innovation Driven Growth
 Operational Excellence

Technological Analysis:

 Fast production line.

 Less input required from humans
 Automated Plant produces 110 bottles washing to filling in 1 min.
 Main Plant location (which mixes the concentrate with water and send it to its franchise in
seal pack drums)
 110% standardized fulfillment

Economic Analysis:

 As the main ingredient (concentrate) required making the beverage is imported from main
office in America, frequent changes in the Dollar price can affect the company
economically.
 As the company is bound to the agreement with government, its keeping the price of Pepsi
(250ml) at Rs 12, while according to the high cost of production, price should be 16 Rs.

Environmental Analysis:

 If the International Standards change rapidly then it can affect the company internally and
externally because the Pepsi is always ready to have updated fulfillment of international
standards.
 Company claims that produces no Wastage, but any negligence can badly affect the
environment.
 Use wastage in recycle process (glass bottles
 Non-recyclable plastic bottles are a source of environmental pollution.

Key Success factor:

Following are the key success factors of Pepsi cola that are playing important role in the success
of Pepsi cola in Pakistan.

Strong marketing:

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Pepsi cola have strong marketing campaign in Pakistan. They are doing 360’ marketing campaign
for the awareness of each product. They have different promotional campaigns for different
products. They are also using brand ambassadors in their advertisement that creates positive image
and strong loyalty with the product.

Strong committed employees:

Pepsi cola have committed employees who gave them the best output and loyal with the company
and this is because of motivation from the company. One of the main reasons of the loyalty with
the company is incentives and benefits given by the Pepsi cola to its employees for their
betterment. And due to these benefits the employee can’t switch to any other company.
Empowerment is also the main reason for commitment with the company.

Decentralized in decision making:

Decision making system in Pepsi cola is decentralized the decisions are made on top level
management but management also involved the middle line and front line management as well in
their decision.

Financially strong:
Pepsi cola is financially strong company they have the potential for more growth and they can
enhance their product line.

Dominant market share:

Pepsi cola have 72% dominant market share in the Pakistan as compare to its direct competitors
like coca cola. And still the company is working for capturing the more market share.

Target market:
This is also one of the reasons in the success of the Pepsi cola. Pepsi cola is doing mass marketing
in the Pakistan they are hitting all types of customers and filling the demand of every type of
customer.

Business Portfolio
Strategic Business Unit:
 Pepsi
 Mountain dew
 7up
 Marinda

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Business level Strategies

Target Market of Pepsi Beverages

Pepsi beverages have different products in the form of carbonated drinks, and each product has
different target market. According to Pepsi beverages, they hit different market groups by different
product such as Pepsi and 7up is for families, Miranda is for teenagers, Mountain dew is for
aggressive people on the other hand Pepsi max & 7up free are for diet alert and health conscious
people. They promote their products according to the target market through different types of
advertising campaigns and have special marketing strategies for each product.

Market of PEPSI:
Children:

Pepsi is heavily consumed and extensively enjoyed by children. They often make their parents buy
them Pepsi as a compulsion.

Youth students:

Many students and adolescence regard Pepsi as a youthful drink and have fun consuming it. Youth
make major target group of Pepsi, so all their advertisement campaigns especially focus upon the
young and spotlight on youthful entertaining Pepsi filled moments.

Professional and technical:

Highly educated Professionals and technical experts consider Pepsi as a high quality
mouthwatering drink and have a major share in target market.

Families:

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Pepsi has become an integral part of table laid down for family lunch and dinner, everybody at
home from young to elderly love to augment their meals with exciting taste of Pepsi.

Segmentation of PEPSI Company

Geographic:

World region or country Asia

Country region Pakistan

City or metro size More than 100,00,000

Climate Urban , Suburban, rural

Demographic:

Age Above 6 years

Gender Male , female

Family size 1-2,3-4, 5+

Young, Single, married, married with children

Family life style
older, under 18 , and others

Income Under 10,000 and above

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 Professional and technical, managers, officers,
Occupation
retired, students, unemployed

Grade school or less, some high school, and

Education
above

Religion Any

Race Asian, black , white

Nationality Pakistani

Psycho-graphic:

Lower lowers, upper lowers, working class,

Social Class middle class, upper middle, lower upper,
upper

Life style Achievers, strivers,

Compulsive, gregarious, authoritarian,

Personality
ambitious

Behavioral:

Occasions Regular occasion, special occasion

Benefits Quality, economy, convenience

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 Non user, potential user, first time user,
User status
regular user

User Rates Light user, medium user, heavy user

Loyalty Status Strong , absolute

Unaware, aware, informed, interested,

Readiness stage
desirous, intending to buy

Attitude toward product Enthusiastic, positive, hostile

Price:

The products mentioned in product head are sold in market in different sizes and prices that are as
follows!

 250ml
 500ml
 300ml
 1.5 liter
 2 liter
According to our survey company is using competitor based pricing. Main competitor is Coca-
Cola. Both companies have similar pricing in beverages. They based on each other in setting the
prices.

Place:
 Pepsi products are very convenient and available easily in the consumer’s range. In Pakistan
where ever you go you can easily find Pepsi from different stores.
 For Pepsi key account are different wholesalers, restaurants and hotels like pizza hut and KFC
and also Metro, Macro which serve as a place for key sale. These are known as national key
accounts and are very important in term of competition.
Distribution channel of Pepsi is;

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Market Share of Pepsi in PAKISTAN
Pepsi 72%

Coca cola 23%

Other 5%

Pepsi Unique Selling Points (UPS)

 Strong brand name
 Quality
 Economy

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  Convenience
 Taste
 Addiction

Pepsi Marketing Strategies:

PepsiCo has developed the national marketing, promotion and advertising programs that support
its many brands and brand image; oversees the quality of the products; develops new products and
packaging, and coordinates selling efforts.

As we know that making a strategy in large firms is not only the job of top executives, all the large
organization or firms involves the everyone, same as it is the following strategies are the basic
strategies which a company can apply to its
 Backward Integration
 Market Penetration
 Market development
 Product Development
 Related Diversification:
 Unrelated Diversification:

Costs / Expenditures:
Distribution Costs:
Distribution costs, including the costs of shipping and handling activities, are reported as selling,
general and administrative expenses. Shipping and handling expenses were $5.1 billion in 2007.

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Sales Incentives and Other Marketplace Spending:
We offer sales incentives and discounts through various programs to our customers and consumers.
Sales incentives and discounts are accounted for as a reduction of revenue and totaled $11.3 billion
in 2007

Software Costs:
We capitalize certain computer software and software development costs incurred in connection
with developing or obtaining computer software for internal use when both the preliminary project
stage is completed and it is probable that the software will be used as intended. Capitalized
software costs include only (I) external direct costs of materials and services utilized in developing
or obtaining computer software, (ii) compensation and related benefits for employees who are
directly associated with the software project and (iii) interest costs incurred while developing
internal-use computer software. Capitalized software costs are included in property, plant and
equipment on our balance sheet and amortized on a straight-line basis when placed into service
over the estimated useful lives of the software, which approximate five to seven years. Net
capitalized software and development costs were $652 million at December 29, 2007

Research and Development:

We engage in a variety of research and development activities. These activities principally involve
the development of new products, improvement in the quality of existing products, improvement
and modernization of production processes, and the development and implementation of new
technologies to enhance the quality and value of both current and proposed product lines.
Consumer research is excluded from research and development costs and included in other
marketing costs. Research and development costs were $364 million in 2007, and are reported as
selling, general and administrative expenses.

2007 Restructuring and Impairment Charge:

In 2007, we incurred a charge of $102 million ($70 million after-tax or $0.04 per share)

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 Problem Section
 Main problem according to the management
 Main problem according to our analysis

Major problems According to the management for Pepsi

 Distributors are the main problem for the company; because some distributors have political
influence that is why they do not act on the policies and procedures convey by the company.

Major problems of Pepsi According to our analysis

 Company is unable to maximize its profit because of the high production cost
 Company is unable to hamper the distributors according to the legal contract.
 TQM procedures are not properly implementing in the production process.
 HRM related issues like biasness in hiring LUMS students
 In house productions of duplicate Pepsi products couldn’t stop by the company.

Strategic Alternatives
Solution to solve the problems
 The management should act aggressively to control the production cost. Check & balance
system must be improve regarding production.
 Trained and energetic staff must be hired to implement the TQM procedure properly in
production. So that the quality can be improve.
 Company is under pressure by some distributors because of their political influence. Company
should develop some plans to control the distributors.
 HRM department gives extra priority to LUMS students while hiring the employees. This
biasness must be eliminated by giving equal opportunity to all university graduates.

5 Years Plan
Five Years plan for Pepsi:

(2010)
 Redefine Vision and Mission for Pakistan only

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 To define Proper Goals, Objectives and Customer Promises.
 Make the company’s Employees well aware and informed of company policies and objectives
through different seminars and orientation sessions.
 Plan to get registered with Pakistan Stock Exchange.
 To fulfill the requirements for registration.
 To launch aggressive marketing campaigns.

(2011) - (2012)
 Go for Product Development & Related Diversification
 Pepsi to Pepsi in different flavors
 Launch Energy Drinks, Flavored Milk or Juices

(2013)
 To increase its spending for promotional activities to enhance their market share
 Unrelated Diversification
 Production capacity must be enhanced to meet the future demands.
 To open Pepsi outlets (where only Pepsi Products will be made available)
 Fast Food Restaurants (under another Brand Name)

(2014)
 Take the feedback and review of the last 3 years performance regarding planning
 Co-Branding or Strategic Alliances with different brands.
 Pepsi must focus on TALENT MANAGEMENT to hire and retain the best talent.

Conclusion:
After a brief analysis of Pepsi by using different tools and techniques we have come to know that
Pepsi international is very organized and successful in the world in terms of strategies and their
implementation plans. Pepsi international has a vast range of products as compared to Pepsi
Pakistan.

Pepsi has enough resources and finance to enhance the product line aggressively in Pakistan as
well. But in-stable economic, political and security conditions is Pakistan are a big hurdle in
making bigger investments in Pakistan.

To overcome these problems government of Pakistan should take some initiatives to boost up the
industrial sector.

Another internal factor which is an obstacle to enhancement of the business is high operating cost
of production which makes company bound to minimize its profit margin.

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 Recommendations:
 Train local employees instead of foreigners to work in production Department
 Update TQM Standards for betterment of Continuous Processes
 Improve Packing Process to Maintain the quality in different Packing (250ml and cans)
 Stop In-house Production
 Implementation of Rules within the Territory of All the Franchises
 Install vending machines in different public places to promote product and brand name.
 Mobile Vans must be introduced to attract the consumers towards Pepsi brands


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