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Pepsi

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Amna Iftikhar

on 26 November 2014

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Transcript of Pepsi

PEPSICO

Group Members:
Waleed Zafar
Saad Saleem
Ahmed Butt
Mujtaba Watto
Ali Raza
Ahmad Tashfeen
Shazain Amir
Umair Javeed

Introduction
Introduction
Products
Markets
Mission Statement
Mission Statement Evaluation Matrix
Revised Mission Statement
Our mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.
Our mission is to be the world's premier consumer Products Company focused on convenient foods and beverages.
(1) We plan on using the most innovative methods to ‘go-green’ to reduce our impact on the environment and further benefit our shareholders.
We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate.
(2) Our goal is to deliver outstanding quality to our customers and add them to the expanding PepsiCo family.
And in everything we do, we strive for honesty, fairness and integrity.
Products divided into
Pepsi Cola Products
Tropicana Juice Products
Frito-Lays
Gatorade
Quaker Oats

PepsiCo was established in 1965 after the merger of Pepsi and Frito Lays
American multinational head quartered in NY
2nd largest beverage producer in the world.
Main products like Pepsi Cola, Mirinda, 7up, Frito-Lay, Mountain Dew, Quaker Oats etc.
Owns more than 22 billion dollar brands.

Operates all around the world in more than 200 countries
Governed by Indra Nooyi-CEO of PepsiCo.
Divided into 4 main division:
1. PepsiCo Asia, Middle East and Africa
2. PepsiCo Americas Foods
3. PepsiCo Europe
4. PepsiCo Americas Beverages.
Came to Pakistan in 1967
13% of the PepsiCo’s net revenues were generated in Asia,Middle East and Africa
16% in Europe
71% from North and South America.
Highly Dependent on American Markets thus plan to now increase share to developing markets
Strengths
Weakness
Opportunities
Threats
Low Productivity
- In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower than that its competitors.
Low Profit Margin

- PepsiCo’s net profit margin is 9.7% compared to Coca Cola’s 18.55% and Nestlé’s 11%.
Lack of Corporate Branding

- No corporate branding of Quaker Oat products and Tropicana Juices.
Image Damage Due to Product Recall
- Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007.
Lack of Survival Strategy
- In international markets, PepsiCo is far behind from Coca-Cola in sales and its product demand is highly elastic. It has adopted Coca-Cola’s strategy

Overdependence on US Markets
- Despite its international presence, 52% of PepsiCo’s revenues originate in the US.
Questionable practices
– PepsiCo is under scrutiny for practices and allegations such as; PepsiCo using and selling tap water
Brand Switching
- A high number of substitutes and strong competition in the aerated drinks segment from Coca Cola leads to high brand switching.
Failed Products
– PepsiCo has previously sent products into the market without extensive Market Research and with no knowledge of their target demographic. E.g. Pepsi Max
High Advertising Spending
- Spends very heavily on endorsements, sponsorships and associations with large brands such as the Pakistan Cricket Team and most recently with Pakistan Idol.

Increasing Demand for Healthy Food and Beverages
- PepsiCo has an opportunity to further expand its product range with beverages and snacks that have low amount of sugar and calories.
Broadening of Product Base
- Going towards other markets like Russia (Lebedyansky) and UK (V Wwater) to avoid over dependance on U.S. markets.
Growing Consumption in Emerging Markets
-PepsiCo has made large investments in developing countries to expand its market share.
Further Expansion through Acquisitions
- PepsiCo has been successful in acquiring other companies and growing even further.
Bottled Water Consumption Growth
- Consumption of bottled water is expected to grow all around the world.

Industry Barriers
- Barriers to entry such as brand-image, customer loyalty, access to bottling networks, high advertising.
Shift in Focus
- A differentiation focus supported by adequate advertisement is crucial to deliver value.
Sustainability in Production
- PepsiCo’s brand image is evolving by involvement in CSR activities in order to benefit the environment.
Savory Snacks Consumption Growth
- The same opportunity PepsiCo has in growing its revenue selling snacks as this market is also expected to grow to $560 billion in the next three years.
Population Growth
– Low pricing strategy is a benefit for a 99% growing population.

• Large number of diverse businesses

- PepsiCo has diversity in many businesses such as
1) Pepsi beverages
2) Pepsi foods
3) Pepsi Restaurants.
• CSR

- The firm recognizes its role in a society and engages in education, recycling, water usage reduction, obesity fighting.
• Good Relation with Franchise
- Good relation with franchisers working in different areas of the world.


Production Capacity
- It has the highest production capacity i.e. 60,000 cases per day.
• Market Share
- It has a highest market share i.e. 62% in Pakistan and leading a far step head from its competitors.



High Tech Culture
- The whole culture and business operating environment at Pepsi-Cola-West Asia has quick access to a centralized database.


Sponsorships
- They mainly use celebrities in their advertising campaigning like Imran Khan, Wasim Akram, and Waqar Younas.
• Competency in mergers and acquisitions
- The key to PepsiCo business growth is its successful mergers and acquisitions of beverage, bottling and snacks companies. PepsiCo acquired such brands as Gatorade, Tropicana, Doritos, Quaker Oats and many others.
• Company Image
- It is a reputable org. and is well known all over the world.
• Quality Conscious
- They maintain a high quality as Pepsi Cola collect samples from its different production facilities and send them for lab test in Tokyo.
SO Stratergy
1.
Increase Production to Target Emerging Markets


2.
‘Go-Green’ to reduce wastage


ST Strategy:
1)
Increase corporate branding and heavily advertise the Gatorade and Tropicana products as PepsiCo to promote a healthier PepsiCo.


2)
Limit carbon emissions and green house gasses to set an example in the corporate world.


WO Strategy:
1)
Add sustainability to production to reduce water consumption and plastic waste.


2)
Shift focus from the saturated markets in the US to other countries with more prospects of sales such as Russia. o

WT Strategy:
1)
Launch a ‘Save the Resources’ campaign.


2)
Give shareholders such as employees and suppliers added perks and benefits to increase their cooperation and motivation to maintain productivity and quality.


Increasing local competition
- Gourmet Cola has cut 5% share of the multinationals CocaCola and PepsiCo. This growth of Gourmet Cola adversely effects PepsiCo sales more than CocaCola as they have a 65% share, hence out of the 5%, 3.25% is of PepsiCo.
Problems in quality check
- PepsiCo has 8 different bottling plants. Due to this outsourcing of their production any quality issue is directly transferred onto PepsiCo.
Soft drinks sales falling due to health food promotions
- Multiple advertisements showing how important healthy drinks/juices are and how unhealthy soft drinks are. People start cutting off on soft drinks and fast food.
High tax policies
- GST tax has gone upto 17% and a new capacity tax is implemented by the Pakistani Government.
Recession
- Real income of the general population of Pakistan is decreasing heavily. PepsiCo having an elastic demand is losing its sales

Water scarcity
- Increases the criticism for PepsiCo for using a lot of water in its production whereas these water resources can be used in making of a more healthier product.
Labor strike
- In 2003 PepsiCo faced a strong labor strike which stopped their production for 2 weeks making a huge negative impact on their sales and availability of PepsiCo products.
Strong Dollar
- Currencies of developing countries are very weak, therefore when the sales from weak currencies, such as Rupees, are converted into Dollars the overall revenue is small.
Legal Requirements
- Laws have been passed to show exactly what ingredients are used. This is a threat to PepsiCo as they use a few unhealthy ingredients in their product, to keep up with large productions.
Carbon Emission Limits
- The new government of Pakistan has issued a higher strict carbon emission limits on factories.

Competitive Profile Matrix
Financial Ratios
Financial Ratios
• External value evaluation
• Tool to visualize and prioritize
• Assessment of current business conditions
• External factors: Opportunities and Threats
• EFE Matrix of PepsiCo
• Weights?
• Ratings in EFE 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior
• Weighted score?

EFE
• Total weighted score of PepsiCo 3.07
• Gaining from opportunities
• Room for improvement

EFE
IFE
• IFE total weighted score for PepsiCo is 2.67
• Above 2.5 which is fair
• A lot to improve
• Need to apply better strategies

IFE
IE Matrix
• Internal – External Matrix
• Tool to analyze working conditions and strategic position of a business
• Internal and External factors into one model
• IFE total weighted score on x-axis
• EFE total weighted score on y-axis
• 9 cells, 9 different strategies

• Pepsi is positioned in cell# 2
• With EFE score between 3 to 4 and IFE score between 2 to 2.99
• Apply Grow and Build stratergies

• Should include market penetration, market development, product development
• Forward integration and horizontal integration can also be done

IE Matrix
IE Matrix
The Organizational Structure at PepsiCo
Vision Statement
“Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.”
Strategy Evaluation
BCG Matrix
BCG Matrix
Space Matrix
Total X Axis Score= 3.25
Total Y Axis Score= 2.25

Space Graph
References
1. Daniyal Lashari- Regional Brand Manager(Pakistan and Afghaistan): Doritos and Cheetos c/o Frito-Lay, PepsiCo.
2. "Key financial ratios: Financial results - MSN Money ." Money: Personal finance, investing news & advice - MSN Money. N.p., n.d. Web. 25 Apr. 2012. <http://investing.money.msn.com/investments/key-ratios?symbol=PEP&page=TenYearSummary>.
3. "PEP: Summary for Pepsico, Inc. Common Stock- Yahoo! Finance." Yahoo! Finance - Business Finance, Stock Market, Quotes, News. N.p., n.d. Web. 25 Apr. 2012. <http://finance.yahoo.com/q?s=PEP>.
4. "Pepsi History." Sirpepsi. N.p., n.d. Web. 25 Apr. 2012. <http://www.sirpepsi.com/pepsi11.htm>.
5. "PepsiCo 2009 annual report." PepsiCo. N.p., n.d. Web. 19 Apr. 2012. <www.pepsico.com/Download/PEPSICO_AR.pdf>.
6. "PepsiCo Brands | PepsiCo.com." PepsiCo Home | PepsiCo.com. N.p., n.d. Web. 24 Apr. 2012. <http://www.pepsico.com/Brands.html>.
7. "PepsiCo Investors | PepsiCo.com." PepsiCo Home | PepsiCo.com. N.p., n.d. Web. 25 Apr. 2012. <http://www.pepsico.com/Investors.html>.
8. "PepsiCo MORE | PepsiCo.com." PepsiCo Home | PepsiCo.com. N.p., n.d. Web. 25 Apr. 2012. <http://www.pepsico.com/Global-Sites/More.html>.
9. Reppo, Ilya, and Michelle Yan. "PepsiCo Valuation." Leeds-faculty Colorado. N.p., n.d. Web. 14 Apr. 2012. <leeds-faculty.colorado.edu/Valuation." Google. N.p., n.d. Web. 23 Apr. 2012. <http://webcache.googleusercontent.com/search?q=cache:egHCTRx43AYJ:leeds-faculty.colorado.edu/madigan/4820/Presentations%25202010/PepsiCo%2520Report.pdf+PepsiCo+net+revenue+comparative+2007-2009&hl=en&gl=us>
10. Steve. " Global Cola: 10 Pepsi-Cola Flavors You Can’t Get Here | WebUrbanist ." WebUrbanist | From Urban Art & 3D Graffiti to Abandoned Cities . N.p., n.d. Web. 25 Apr. 2012. <http://weburbanist.com/2010/05/02/global-cola-10-pepsi-cola-flavors-you-cant-get-here/>.
11. http://www.stock-analysis-on.net/NYSE/Company/Coca-Cola-Co/Ratios/Long-term-Debt-and-Solvency
12. http://financials.morningstar.com/ratios/r.html?t=KO
13. http://finance.yahoo.com/q/ks?s=PEP+Key+Statistics
14. http://finance.yahoo.com/q/ks?s=KO+Key+Statistics

QSPM
THANK
YOU!!!
Recommendations
1) They should focus on the markets that were not paid much attention previously, such as Africa and Asia.
2) They should merge, acquire or start producing some healthy foods and snacks.

They should imply the functional structure in their divisional organizational structure;
Communication easier between departments
Managers will be able to be updated about the activities going on in the division
CPM
PepsiCo uses a Divisional structure, which is typically used in larger companies
The Whole Pakistan Region is divided into 8 bottlers each covering each division of the country
The other division operating in Pakistan is PepsiCo international
This division basically operates to work out all the strategies within the country such as allotting budgets, marketing strategies, and other promotional campaigns.
Few Known Bottlers are Riaz Bottlers,Naubhaar Bottlers and etc
Internal Factor Evaluation
Tools to evaluate the internal factors of a company
Total aggregate score equal 4
Internal Strategic Position:
Financial strengths:
-High liquidity due to employee cuts and mass layoffs.
-Stable cash flow.
-High return on investment, for every dollar invested 35 cents are returned.
-Earning per share is 3.36 which is positive as shareholders receive consistent profit.
-High market share, customer loyalty, high product quality and control over suppliers and distributors all give a competitive advantage
External Strategic Position
Industry strength:
Ease of entry because PepsiCo is a multibillion dollar brand corporation. No barriers to entry in most food and beverage industry.
Growth potential of beverage and snack industry due to constant innovation in its products e.g. flavored Pepsi Colas.
Financial stability.
A high profit potential.
Environmental stability due to low demand variability, no threat from price range from other competing products, price elasticity of demand which for snacks and beverages is inelastic.
Strengths
Company Image
-
Pepsi is a reputable organization and is well
known all over the world
Quality Consciousness-
They maintain a high quality as Pepsi Cola International collect sample from its different production facilities and send them for lab test in Tokyo

Good Relation with Franchisee’s-
Throughout its history it has a good relation with franchisers working in different areas of the world where they have the production facilities.

Production
Capacity- PepsiCo is currently selling more than one billion products a day all over the world.

Market Share -
Pepsi has a 63% market share in Pakistan as it leads with a big margin from Coca-cola
Weaknesses
Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower than that its competitors
Brand Switching – A high number of substitutes and strong competition in the aerated drinks segment from Coca Cola leads to high brand switching.
Low Profit Margin - PepsiCo’s net profit margin is 9.7% compared to Coca Cola’s 18.55% and Nestlé’s 11%.
Opportunities
Growing Consumption in Emerging Markets
-PepsiCo has made large investments in developing countries to expand its market share as these countries represent the fastest growing food and beverages markets in the world.
Increasing Demand for Healthy Food and Beverages
-Due to many programs to fight obesity, demand for healthy food and beverages has increased drastically.
Savory Snacks Consumption Growth
- The same opportunity PepsiCo has in growing its revenue selling snacks as this market is also expected to grow

Sustainability in Production
- An improvement in PepsiCo’s brand image is evolving by involvement in CSR activities in order to benefit the environment in which PepsiCo is operating

Threats
Increasing local competition-
In the local market, Gourmet Cola has cut the share of the multinationals CocaCola and PepsiCo.
High tax policies-
Pakistan's GST tax rate has been changed from 16% to 17%.
Problems in quality check
– Pepsi not using its own bottling plants
Water scarcity
- Water scarcity is increasing the cost of drinking water
Full transcript