Research Korner: Softdrink Industry

PEPSI CO INC

PEPSI CO INC. INTRODUCTION          In 1772,, the British scientist invented a method of "pushing" carbon dioxide into water by dissolving it under pressure, thus creating fairly long-lasting bubbles. The technique led to development of the soft-drink industry. Companies that manufacture nonalcoholic beverages and carbonated mineral waters or concentrates and syrups for the manufacture of carbonated beverages comprise the soft drink industry. By the beginning of the 19th century, carbonated water was being made commercially in France and North America; shortly thereafter, flavors (normally fruit concentrates) were added to enliven the taste. In the 1820s, small carbonated bottling operations were established in Canada, producing carbonated drinks in refillable bottles that were merchandised as medicinal elixirs or tonics. Most soft drinks are still carbonated to give drinks a "tangy bite" and to stimulate the tongue. Furthermore, because scent is an important part of taste, the flavors carried as vapors in the bubbles enhance taste.          Soft drink industry is probably the widest and the deepest base in the world that flooded with so many categories. The costumer base for soft drinks is a whopping 95% of regular users in the United State. Today, the two largest players the Coca-Cola and the Pepsi-Cola dominate soft drink industry.   PepsiCo Inc.          In early 1890s,  a pharmacist founded the Pepsi-Cola business beverage in New Bern, North Carolina in the United States. Pepsi-Cola was originally called “Brad’s drink”. On August 28, 1898, Brad’s drink was changed to “Pepsi Cola”. Pepsi was initially intended to cure stomach pains. Bradham coined the name Pepsi from dyspepsia (stomachache or indigestion) ( 2005). PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Currently, PepsiCo consists of major segments of products: the snack food of Frito-Lay North America and Frito-Lay International; the beverage of Pepsi-Cola North America, Gatorade/Tropicana North America and PepsiCo Beverages International; and Quaker Foods North America, manufacturer and marketer of ready-to-eat cereals and other food products.           Through its subsidiaries and markets, PepsiCo sells and distributes salty and sweet snacks in the United States and international. Its manufactures concentrates of brand Pepsi, Mountain Dew and other brands for sale too. PepsiCo is a world leader in convenient foods and beverages industry, with annual revenues of about $27 billion and over 143,000 employees all over the world.  PepsiCo brands are available in nearly 200 countries and territories. During the year 1995 to 2000, PepsiCo have conducted several acquisitions and merger.  One of them in 1998, acquiring Tropicana Products from Seagram Company Ltd., was the biggest acquisition ever undertaken by PepsiCo.  This resulted in a large amount of cash outflow and a new segmentation of the business structure, which ultimately led to a fluctuated financial report. ECONOMIC BACKGROUND Demand and Supply          Pepsi has four soft drinks in the top ten beverages in the world. These brands are Pepsi, Mountain Dew, Diet Pepsi, and Caffeine Free Diet Pepsi. Pepsi also has the #1 tea in the United States, Lipton Tea. Some other strong brands are All Sport, Slice, Tropicana, Starbucks, Aquafina and a license agreement with Ocean Spray juices .Pepsi Cola Company now produces and markets nearly 200 refreshment beverages to retail, restaurants and food service customers in more then 190 countries and territories around the world and generates revenue of over 18 billion dollars. According to company statistics, more than half of all soft-drink buyers purchase six or more different brands, and more than 80 percent of soft-drink buyers purchase three or more brands. Price         Prices of Pepsi brands in BD's top-10 declined at slightly greater rate than prices of Coke's brands. Coke Classic was down -3.5%; Pepsi down -3.6%. Diet Coke down -3.8%; Diet Pepsi down -3.9%. Sprite down -2.1%; Mt Dew down -4.9%. CF Diet Coke down -3%; CF Diet Pepsi -3.7%. Pepsi's view. At PepsiCo's 6/4/97 meeting with Wall Street analysts, PepsiCo CEO Roger Enrico, according to analysts, says Pepsi won't "allow its market position to be threatened by Coke's aggressive pricing." Enrico declares: "If Coke goes to zero, we go to zero. Our nuclear bomb is as big as theirs." Pepsi CEO  reportedly calls Coke system's CSD pricing "irrational." (1999). The table is shown below. Average Price Per 288-oz Price $ +/- % +/- Classic $ 5.47 -0.20 -3.5% Pepsi $ 5.43 -0.20 -3.6% Diet Coke $ 5.61 -0.22 -3.8% Sprite $ 5.50 -0.12 -2.1% Dr Pepper $ 5.57 -0.21 -3.6% Mt Dew $ 5.63 -0.29 -4.9% Diet Pepsi $ 5.64 -0.23 -3.9% 7UP $ 5.53 -0.17 -3.0% CF Diet Coke $ 5.47 -0.17 -3.0% CF Diet Pepsi $ 5.54 -0.21 -3.7% PL cola $ 3.76 -0.12 -3.1%               Production Costs          Pepsi-Cola International (PCI) recorded an unusual charge of $218 million or 14 cents per share for the fourth quarter of 1998 to reflect asset impairment and the cost of restructuring of its operations there. However, in this first quarter of 1999, Pepsi-Cola International showed improvements. Their bottler case sales advanced by 2%, the seventh consecutive quarter of growth and operating profits increased by $6, totaling to $16 million.          Production costs are reported in selling, general and administrative expenses and include costs of advertising and other marketing activities. Advertising expenses were $1.9 billion in 1998 and $1.8 billion in both 1997 and 1996. (PepsiCo Inc., Annual Report). Deferred advertising expense, classified as prepaid expenses in the Consolidated Balance Sheet, was $34 million in 1998 and $53 million in 1997. Deferred advertising costs are expensed in the year first used and consist of: <ul type="disc" style="margin-bottom: 0in"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> media and personal service prepayments, </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> promotional materials in inventory, and </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> production costs of future media advertising.</li> </ul> Property, Plant and Equipment, net   1998 . 1997         Land $ 460 . $ 365   Buildings and improvements 3,114 . 2,623   Machinery and equipment 8,806 . 7,513   Construction in progress 730 . 793           $ 13,110 . $ 11,294   Accumulated depreciation (5,792 ) (5,033 )         $ 7,318 . $ 6,261           Elasticity and Profitability   1995 1996 1997 1998 1999 2000 Profit Margin 8% 6% 10% 9% 10% 11%   The profit margin of the PepsiCo grows steadily almost every year except the 2% decrease in 1996 and 4% increase in 1997.   In 1996, the company’s sales rose 5% to nearly $32 billion, but earnings fell 28% down to $1.1 billion.  If one-time charge was excluded, earnings declined 6% to $1.9 billion.  The reason is that Pepsi-Cola International had dramatic losses.  A big bottler in Brazil and Argentina in which the company had an ownership interest ran into major financial difficulties.  Also in 1996, Pizza Hut and Taco Bell, the subsidiary companies of Pepsi-Cola, suffered volume declines, resulting in lower sales and profits in U.S. restaurant business.  All of the above reasons lead to the decreasing of net income.  However, in 1997, PepsiCo installed over 150,000 beverage vending machines and coolers in North America.  They also formed a team to expand fountain beverage business in restaurants and foodservice, where historically their bottling contracts made it hard to serve the thousands of accounts requiring delivery to a central commissary.  Changing the contracts created a long-term growth opportunity.  Moreover, Pepsi-Cola also began their national rollout of Aquafina bottle water.  All of these marketing strategies increased its sales in 1997 dramatically, and lead to the increase of its net income.   Earnings Estimates Qtr(12/05) Qtr(3/06) FY(12/05) FY(12/06) Average Estimate 0.65 0.60 2.65 2.94 Number of Analysts 12 3 12 14 High Estimate 0.71 0.60 2.71 3.02 Low Estimate 0.63 0.59 2.61 2.85 Year Ago EPS 0.56 0.53 2.24 2.65 Growth Rate 16.07% 12.58% 18.53% 10.71%   ECONOMIC PROBLEM FACING PEPSI   Franchise System                   The former strength that has been credited for most of  PepsiCo success in the past has now become a weakness for Pepsi. This is the franchise system. The franchise system in Pepsi Corporate view has become a liability. Pepsi in today’s market must be able to act as one instead of several separate units. The franchise system has become a hindrance to Pepsi because many of these franchises have become very strong and will not be dictated by PepsiCo on how to handle their operations. Some of these franchises are unwilling to support certain Pepsi products and at times produce their own private label products that are in direct competition with Pepsi products. Furthermore, the franchisees are not willing to make capital expenditures to keep up with Coca-Cola who is a firm believer in reinvesting into their infrastructure (Coca Cola at present time does not operate a franchise bottling system). International Competition          Pepsi versus Coke has been one of the highest-profile, highest-stakes marketing confrontations witnessed in any industry: "the cola-wars"- the only war where no one gets hurt. Coke has been winning the overall battle, but Pepsi does have its victories. Internationally Coke's market share increased to 49.2% last year compared to Pepsi's rate, flat at 15.7%. Coke sold $12.7 billion worth of products internationally, while Pepsi's totaled $3.2 billion. From this Coke pockets $.30 for every dollar, compared to Pepsi of less than $.07 per dollar Unfortunately, for Pepsi they were a “Johnny Come Lately” into this arena. Pepsi has tried to enter this market by trying to do in three years what took Coke 50 years to do. This area will take years for Pepsi to mature simply due to Coke’s dominance in the international market and the strong ties that Coke has developed with these markets and their governments.    Supply of Raw Materials             Pepsi is also facing the problem concerning environmental issues like the supply of raw materials to produce their products. If Pepsi fails to help in environmental issues, the situation it had been during World War might happen again  when they almost went out of business because of the shortage of sugar.        SOLUTION   Franchising System            First the franchise system is should be dismantled and be replaced with one bottling unit across North America. Pepsi Chairmen and chief executive Craig Weathrup will run this. North American President will head up the concentrate (fountain) end for Pepsi, Philip Marineau. This restructuring will allow Pepsi to act as one unit and eliminate competition with private labels and uncooperative franchise bottlers.   International Market          Pepsi should start to make strides in developing foreign markets. Pepsi must begin to sell in up and coming foreign markets where Coke is not dominating like India and China. As mentioned earlier the restaurant spin off will also give Pepsi a better chance to get in larger fountain accounts. They also need to be financially strong to keep up with a powerhouse like Coca-Cola and be able to strike back in the long running cola war. Supply of Raw Materials     Pepsi also has to deal with such environmental issues like the supply of raw materials to produce their products. If the environment will provide them a good raw material they might have a more profit. PepsiCo's dedication and commitment to the environment is stated in their "Worldwide Code of Conduct". The "Worldwide Code of Conduct" defines PepsiCo's commitment based on the following environmental principles. 1. Developing programs that promote clean air and water, energy conservation, and reduce land fill waste. 2. By supporting programs that educate, train and motivate employees to help the environment 3. Business is conducted by complying with all applicable laws and regulations and provide a safe and healthy environment. 4. Minimizing the impact of our businesses on the environment through methods that are socially responsible, scientifically based and economically sound, such as recycling and conservation. 5. By cooperating with different organizations and governments to find solutions that reduces pollution and by supporting environmental policies. CONCLUSION          Pepsi has built a reputation around the world as a major player in the soft drink market as well as the leader in the snack food industry. This has been done by creating a wholesome environment for their customers all the while maintaining its integrity. Currently they are facing stiff competition from Coca-Cola, but with their various marketing ventures as well as the selling of their restaurant franchises, Pepsi is poised to give Coke a definite battle in the future as to which cola consumers want. Through its subsidiaries and markets, PepsiCo sells and distributes salty and sweet snacks in the United States and international.  Its manufactures concentrates of brand Pepsi, Mountain Dew and other brands for sale to franchised bottlers in the United States and international markets.  It produces, markets, sells and distributes juices under several Tropicana trademarks in the United States and internationally.

PEPSI CO INC

PEPSI CO INC. INTRODUCTION In 1772,, the British scientist invented a method of "pushing" carbon dioxide into water...

Use a global company :Coca-Cola

Coca-Cola is a global manufacturer, distributor, and marketer of non-alcoholic beverages. Coca-Cola sells syrups and concentrates to authorized bottling and canning operators. Coca-Cola has equity stakes in 20 percent of these operators. In addition, Coca-Cola sells fountain syrups directly to restaurants. The company also sells bottled and canned products directly to retailers. The company’s products include sparkling beverages, juices, and bottled water. Roughly 75 percent of the company’s revenue is international, and 53 percent comes from concentrate and syrup sales of Coke. Fundamental to Coke’s investment and long-term growth strategy are its marketing expertise, brands and bottling system. To support its brands and increase consumer awareness of its products, Coke makes significant investments in sales and marketing. To develop its brand strategy Coke’s global marketing force heavily invests in product and packaging research, developing targeted consumer advertisements and promotions and soliciting customer feedback. Coca-Cola also leverages its relationships with bottlers and local vendors, to create and implement local marketing campaigns. A strong force behind Coke’s global success is its ownership interest in and partnering with bottling and canning operations worldwide. The company maintains business relationships with three types of bottlers: ·         Independently owned bottlers, in which the company has no ownership interest ·         Anchor bottlers, in which the company has invested and has a non-controlling ownership interest ·         Bottlers in which the company has invested and has a controlling ownership interest Coke’s bottling companies /partners are large, geographically diverse, with strong financial resources for long-term investment – providing Coke with strong strategic business partners and local access on every major continent. Coca-cola in combination with its bottling partners has an extraordinary global distribution network that through economies of scale creates a formidable barrier to competition. Coca-Cola also has a large economy of scale in advertising expense, and the company’s strong brands provide a barrier to competition. The industry is very concentrated, with Coca-Cola being one of the largest companies. The barriers to entry are lower for generic products sold in grocery stores under private labels. Here the stores will be willing to allocate some shelf space to its private label products, and it is possible that if these are sold at a low profit margin and are well-received by consumers, then Coca-Cola’s bottlers may need to price its products cheaper, with the eventual result that Coca-Cola will need to drop its concentrate prices so that the bottlers can stay in business. On the other hand, even if consumer develops a taste for the private label product, it will likely only be available at that particular grocery chain, and the consumer will stick with Coke elsewhere. Another source of competitive advantage for Coca-Cola is its brand image. The Coca-Cola brand is known as authentic, optimistic, and part of the American lifestyle.             The Coca-Cola company has long been recognized as an organization with significant brand equity with over four hundred brands available in virtually every nook and cranny of the world. The flagship brand Coca-Cola soft drink has stood the test of time – over 120 years. In fact, Coca-Cola alone is recognized as the most valuable brand in the world by respected Inter-brand Corporation. Valued at over US $67 billion, the Coca-Cola brand has effectively become a part of modern world culture. Though its advertising campaigns have changed over the years, Coca-Cola has always stood for a “real” cola drink with authenticity. This identity has been built over the decades with consistent values and differentiated elements. Many competitors have taken aim at Coke, but the brand continues to command number-one position globally in ranking of brand equity. Benefiting from the pioneer advantage, throughout more than a century the Coca-Cola brand has pursued one single objective, now on a worldwide scale: to continue to grow the cola category. It was in the competition first with sodas in America, then with other soft drinks, and now with virtually all other types of drink, including water in Europe or tea in Asia. Coke’s brand essence is the refreshing bond between people everywhere. IN making its brand the number one drink in the world, it benefited from being made from a syrup that is easy to transport at low cost, with high efficiency. To grow the business through the expansion of the category, the strategy rests on three facets, which are always the same: availability, accessibility, attractiveness.

Use a global company :Coca-Cola

Coca-Cola is a global manufacturer, distributor, and marketer of non-alcoholic beverages. Coca-Cola sells syrups and concentrates to auth...

Policies and Practices of Employee Engagement in Multinational Cooperation – A Case Study of Hindustan Coca-Cola Beverages Pvt. Ltd.

Policies and Practices of Employee Engagement in Multinational Cooperation – A Case Study of Hindustan Coca-Cola Beverages Pvt. Ltd.   The Hindustan Coca-Cola Beverages Pvt. Ltd. company developed with roots firmly planted in local communities in India. This heritage favors the firm today as consumers prefer brands that recognize local identity and markets, and company growth is anchored on the solid relationships between Coca-Cola bottlers, customers and communities.[1]   The Hindustan Coca-Cola company has 7,000 local employees, 500 managers, over 60 manufacturing locations, 44 bottling operations and 29 contract packers. The company’s thrust of thinking and acting local has resulted in 37% and 24% growth rates in rural and urban India respectively. The Coca-cola values that employees are expected to uphold include leadership and initiative in driving the team, innovation in the continuous striving for progress and thinking and acting like owners at all levels.[2]   The Coca-Cola Company’s Workplace Rights Policy derived from international human rights standards ensures that all employees are valued and inspired to be the best they can be. Coca-Cola respects the employees’ right to form and join a labor union without fear of reprisal and is committed to constructive dialogue and bargaining with its representatives. The company forbids the use of all forms of forced labor and follows minimum age laws including the disallowing of child labor and of persons under 18 years of age to work under hazardous conditions. The firm is committed to equal opportunity and maintenance of workplaces that are free from discrimination based on race, sex, color, national or social origin, religion, age, disability, sexual orientation, and political opinion. The criteria for acceptance into the company are skills, performance and experience. Company compensation is based on industry and local labor market rates, and complies with applicable work hours and benefits laws. Coca- Cola is likewise committed to providing a safe, healthy and secure workplace for employees.[3]   Hindustan Coca-Cola is committed to engaging with stakeholders in communities in  which it operates to address business-related issues within its sphere of influence because such matters are best dealt with at the local level. It also believes in initiating  measures that will create economic opportunity and goodwill in these communities. Employees are also encouraged to communicate with local Management, Human  Resources, Legal Department or Strategic Security with regards to any company- related questions, issues, conflicts or violations.[4]   Coca-Cola improves the quality of life in the communities it operates in by addressing water, climate change and waste management issues. It also employed The Coca-Cola Africa Foundation to fight the spread of HIV/AIDS in partnership with other groups, and  pushed for higher education as a vehicle for individual and community development. The company believes that for every direct job it provided for its 7,000 employees, 30- 40 more were generated in the supply chain. Hindustan Coca-Cola’s Corporate Social Responsibility (CSR) initiatives include environmental surveys and impact assessment before acquiring land and starting operations, compliance with environmental regulations, providing of waste water treatment facilities at bottling plants and conserving energy.[5]   India reportedly has the fastest-growing market for Coca-Cola in all of the 200 countries where it is sold. However, issues have been raised on the adverse environmental impacts of Coca-Cola’s operations in the country in 2004. It is claimed that its production practices are siphoning huge amounts of public groundwater and causing water shortage and turning farming land into virtual deserts. The company’s indiscriminate dumping of waste water has reportedly also polluted the scarce ground water that remains.[6]   Coca-Cola has responded to the issues by constructive engagement with an Ethical and Environmental Committee, wherein dialogue will be maintained on issues in question, shareholders will be briefed on developments and guidelines will be prepared on the company’s next contract. Coca-Cola has since been proactive in providing new information, consulting on crucial areas of work and negotiating on solutions.[7]     	   	 		 		 		 		 		[1] Anuradha Nayak, “Hindustan 		Coca-Cola Beverages Private Limited – An Internship Report”, Scribd., 		 		pdf, April 2007, <http://www.scribd.com/doc/21878345/Hindustan-Coca-cola-Beverages-Private-Limited> 		 		[accessed 9 June 2011] 		  	 		 		 		 		 		[2] ibid 	 		 		 		 		 		[3] “Corporate Governance”, 		Coca-Cola India, 2008, <http://www.coca-colaindia.com/aboutus/aboutus_cgovernance_hrs.aspx>  		[accessed 9 June 2011] 		  		  	 		 		 		 		 		[4] ibid 	 		 		 		 		 		[5] Jennifer Kaye, “Coca-Cola 		India”, Tuck School of Business at Dartmouth, pdf, 2004, <http://mba.tuck.dartmouth.edu/pdf/2004-1-0085.pdf>  		[accessed 9 June 2011] 	 		 		 		 		 		[6] “Coke’s Crimes in India”, 		KillerCoke.org, 2010, <http://killercoke.org/crimes_india.php> 		 		[accessed 9 June 2011] 	 		 		 		 		 		[7] “Frequently Asked Questions 		About Coca-Cola”, nus services limited, pdf, 14 January 		2008, 		<http://www.nus.org.uk/PageFiles/491/CocaCola_FAQs.pdf>  		[accessed 9 June 2011]

Policies and Practices of Employee Engagement in Multinational Cooperation – A Case Study of Hindustan Coca-Cola Beverages Pvt. Ltd.

Policies and Practices of Employee Engagement in Multinational Cooperation – A Case Study of Hindustan Coca-Cola Beverages Pvt. Ltd. ...

International Business: Identifies and Appraises the International Strategy of PepsiCo, Inc.

Contents 1.      Introduction 2.      The soft drink industry 3.      Background of the organization 4.      Main Body of the Report ·        International business and expansion ·        Entry strategies in new markets ·        Different Markets ·        Entry strategies in China ·        Entry strategies to the Philippines ·        Entry strategies to Europe ·        Appraisal of the different strategies in different markets ·        Advantage and disadvantage against competitors ·        Development method 5.      Conclusion                           Introduction Business management is the term used to describe the techniques and expertise of efficient organization, planning, direction, and control of the operations of a business. In the theory of business management, organization has two principal aspects. One relates to the establishment of so-called lines of responsibility, drawn usually in the form of an organization chart that designates the executives of the business, from the president to the foreperson or department head, and specifies the functions for which they are responsible. The other principal aspect relates to the development of a staff of qualified executives (2005). Planning in business management has three principal aspects. One is the establishment of broad basic policies with respect to production; sales; the purchase of equipment, materials, and supplies; and accounting. The second aspect relates to the implementation of these policies by departments. The third relates to the establishment of standards of work in all departments.   Direction is concerned primarily with supervision and guidance by the executive in authority; in this connection a distinction is generally made between top management, which is essentially administrative in nature, and operative management, which is concerned with the direct execution of policy. Control involves the use of records and reports to compare performance with the established standards for work (2005). The term strategic management originates from the Greek language, where the word means the art of a general. The person who makes strategies is the strategist who is the leader of an army ( 1991). Management of a firm needs strategy, to make sure that everything goes well in the company, through the use of strategic management everything done in the company is well organized and no detail is being left out. The company needs strategic management to make sure that the company is doing well internally. The term strategic management originates from the Greek language, where the word means the art of a general. The person who makes strategies is the strategist who is the leader of an army (1991).   Strategic management decisions have multi-functional and multi-business consequences, this kind of decision require broad consideration of the firm's external and internal environments, and it may affect the firm’s chance of prosperity. The strategic management paradigm is built on the notion that strategic decision making results from intentional actions in the name of individual or collective purpose. The paradigm accords central importance to the cognitive elements of understanding and intention as basic drivers of strategic choice. Managerial thought is critical to processes of strategy formulation, for example, which require managers to envision and prioritize future states that are appropriate and proper. Similarly, managerial thought is critical to environmental analysis, which requires managers to forecast and make predictions. These tasks all depend on individual cognitive capabilities and on cognitive processes such as attention, perception, reflection, and understanding ( 1992). For some, strategic management is just another commercial technique being foisted on an unwilling sector which is losing its soul. For others, however, strategic management has provided a useful set of tools and techniques to draw on and adapt to enable them to be more focused, to create a stronger sense of unity and direction, to understand the external environment better and to manage more effectively the development of the organization (2002). The paper will discuss the soft drink industry and the background of PepsiCo, Inc. The paper will also discuss different things that include the method if international expansion it made; the development method used by the company and if it is the most appropriate; other development method that can be suitable for the company; should different methods be used in different markets; should the development mode be combined with other expansion methods.  The information acquired will be used for creating the conclusion.   The Soft drink Industry Just three decades ago, the competitive environment of the carbonated soft drink (CSD) industry was based on a recognition of and implicit acquiescence to the dominance of The Coca-Cola Company. Beginning in the 1960s, however, Coca-Cola's dominance has been increasingly challenged, particularly by Pepsi-Cola. The new competitive environment is well publicized and intense. The Cola Wars were declared and the battle continues. Pepsi-Cola and Coca-Cola are widely recognized as being two of the premier marketing companies in the world. A great variety of new products and package types have been introduced. Celebrity advertising has been raised to a new level. Coca-Cola even changed the formula for Coke. These and other developments in the CSD industry came about from major changes in strategy by Pepsi-Cola and Coca-Cola. To some extent these strategic changes arose from Pepsi's challenge to Coke's dominance of the industry. In addition, several factors external and internal to the industry have been important catalysts for these changes. Rather than simply reacting to a changing competitive environment, PepsiCo and The Coca-Cola Company have created and implemented strategies that turned the new environment to their advantage (1993).   Although Pepsi Cola attacked Coca-Cola's dominance and achieved near parity with Coke in bottled soft drinks, both Coke and Pepsi have benefited from fighting the Cola Wars because the battle between them has stimulated continuing growth in an industry regularly pronounced by the experts for many years to be on the verge of maturity (1993). As the industry existed in the early 1970s, the reasons for predictions of impending maturity were not difficult to see. The apparent limits of the human stomach argued strongly against further significant growth of per capita consumption of soft drinks. Certainly, substantial growth in sales of the limited number of products offered by Pepsi and Coke appeared unlikely (1993). The competitive advantages of the two industry leaders were built on delivering a few unchanging, high-quality products through a distribution system that, although complicated, was effective. In the face of the predicted maturation of their domestic market, the prudent course appeared to be a holding action in the United States, with attention and resources shifted to offshore markets and diversification a classic cash cow strategy.   New strategies, such as joining the parade of product modifications and introductions of other food manufacturers, and bringing what had long been a very effective independent distribution system in-house, required basic major modifications of the competitive advantages of Pepsi-Cola and Coca-Cola (1993).  Such strategies appeared to be bet-the-ranch propositions. Nonetheless, Pepsi-Cola and Coca-Cola took the bets. Each escalated the Cola Wars to new forms of pricing and promotion, and each launched a great number of new products, including new versions of their flagship brands. Finally, each company undertook a fundamental change in its distribution system from networks of independent bottlers to company-owned bottling systems. The result of these and other new strategies has been a continued, rapid expansion of Pepsi's and Coke's domestic sales. The limits of the human stomach have not yet been found, and all other liquids, from coffee to water, face continued competitive pressure from Pepsi and Coke (1993).   PepsiCo Inc. PepsiCo Inc. is a major producer of carbonated soft drinks, other beverages, and snack foods. Its beverage division, Pepsi-Cola Company, bottles and markets several popular brands of soft drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay Company, the leading snack-food maker in the United States. PepsiCo is based in Purchase, New York. PepsiCo’s soft drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other beverages include Lipton Brisk and Lipton’s Brew iced teas, All Sport athletic drink, and Aquafina bottled water. Frito-Lay products include Lay’s and Ruffles Potato Chips, Fritos and Doritos Corn Chips, Chee-tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels, and Grandma’s Cookies (2001).   PepsiCo’s leading soft drink, Pepsi-Cola, and its chief rival, Coke, have dominated the soft-drink market for decades, although Pepsi has traditionally remained behind Coke. In 1950 Coke outsold Pepsi by 500 percent worldwide. But Pepsi’s aggressive advertising campaigns aimed at young consumers and major bottling and marketing deals made Pepsi a close rival to Coke by the 1980s. PepsiCo has also enjoyed great success with its canned and bottled Lipton brand iced teas, earning higher sales than the Coca-Cola Company’s Nestea products. Also, in the United States, Pepsi had virtually an even market share with Coke in the mid-1980s, when the Coca-Cola Company changed the formula for Coke. However, as Coke regained popularity worldwide in the late 1980s and into the 1990s, it again became the global soft-drink leader. In 1996 Pepsi-Cola International, PepsiCo’s international beverage production and marketing division, suffered difficulties in Latin America, one of its most important markets. The company was particularly hurt by the loss of a bottling plant to the Coca-Cola Company in Venezuela (2001).   Main Body of the report International Business and expansion The degree to which business is internationalized is a function of changes and developments in the world economy. Central to these developments in recent years is the process of globalization or increased global interdependence which many think allegedly took place in the closing decades of the twentieth century. Globalization has also thrown up new challenges for the world's international economic institutions like the World Trade Organization (WTO), the World Bank and the International Monetary Fund (IMF). The establishment of the WTO in 1995 represented a more extensive and legally grounded international trading system (2003).The pressures of globalization imply a need for an even greater shift of regulation and powers to international institutions. Anti-globalization protestors singled out international institutions as the servants of international business and the cause of many of the world's ills.   Many of these ills are said to reside in the developing world which, according to globalization critics, is excluded from any benefits of greater international integration and, at worst, exploited for the benefit of wealthier countries ( 2003). International business activity does not just happen. It is the result of conscious decisions made by public and private businessmen in various countries whose usual major interest is in profiting from activities in various other countries. While virtually any firm can take part in international activities in almost any country, it is typically true that certain basic pressures and economic-political characteristics plus the desire for profitable operations on the part of the firms have led to most international business occurring under a rather narrow set of conditions. It is usually true that if the environment of the firm does not follow these conditions, relatively little international activity, particularly that requiring foreign management, will take place. However, the mere existence of these basic conditions does not automatically insure that international business firms will enter the given country. The actual decision of a firm to enter a nation will depend on the more detailed structure of the environment which directly affects the firm ( 1966).   It is typically true that doing business locally is much simpler than performing international business functions. The local firm only has to worry about its own country's law, economics, labor problems, financial constraints, and so on, while an international firm faces all of these complexities at home and in the host country, and in addition must struggle with complex international problems arising out of the present nationalistic organization of the world. One would expect that, unless compelling pressures arose at home, most firms would choose to remain local in orientation, confining their international business activities to import and export and possibly to the relatively simple patterns such as licensing of patents and processes. One major reason for considering international business activities might be that opportunities at home are getting thin. Profit rates in the sector the firm is in may be declining, even though the firm is still quite profitable. Incremental investments are likely to yield lower returns than the company finds acceptable (1966).  The company is continuously reaching places it has not reached before. It is conducting expansions to reach new territories and increase its profitability and clients. The company uses new branches and subsidiaries in different countries to have more territories and reach more people more. These branches have been oriented and trained regarding company policies and procedures.   Entry Strategies in new markets The most common methods of entering new markets are through independent sale and distribution networks or through a captive field sales organization. If the product is to be assembled or manufactured in the new market area, companies will usually form an alliance that involves basic production techniques and imported components. These entry strategies will normally generate very little risk of possible loss through counterfeiting or technical theft. A range of entry approaches is available to an internationally oriented organization. Each requires a different level of resources for its implementation (1998). The cost element is often the most crucial to the final selection of the specific strategy. In many firms the cost/risk ratio is as compelling as the risk/reward equation. A number of marketing vehicles can provide a firm with a lowered amount of costs and a limited degree of risk. These forms of entry are especially appropriate for smaller companies with an interest in new market development but only limited resources and little export experience (1998).   `           One of the less demanding approaches is the use of an export marketing company ( EMC), a type of firm often referred to as a trade intermediary. A full-service EMC can handle anything for its customer, from sales and distribution to shipping and documentation. In performing these responsibilities, the intermediary functions as the exporting organization for a group of smaller companies that have non competing products. An EMC will usually operate in a single market or in a group of markets consisting of neighboring countries with similar characteristics. Another inexpensive approach to emerging market development is the use of an export trading company. This type of firm is similar in function to the EMC, but most trading companies typically take title to the product and pay the principal directly. Not all new markets, however, permit the entry of foreign-made goods ( 1998).   Some governments in developing economies are antipathetic toward imported products. In many of these countries it is the practice to restrict entry to admit only products essential to the development of the country's infrastructure or its national defense. Nonessential imports are discouraged by tariffs or other regulatory barriers to protect indigenous industries or to contain the outflow of convertible currency. Since most consumer and many industrial products fall into the nonessential category, a company may need to develop non-product oriented entry strategies to gain access to the latent demand in this type of restrictive market environment. The most common approach to entering a restricted market is through an alliance, based on technology, with an existing enterprise in the local market (1998).   In entering new markets it is best for any company to scout or get a feel of the new market. This can be done by collaborating with EMC’s. The EMC can get initial look and feel of the new market. They can have the initial knowledge of the problems that can be encountered in that market. Companies acting as EMC’s gain a better understanding of the new market. They tend to relate to the company things they discovered and learned in the new territory.  The company uses this kind of entry strategy. They made use of different EMC’s to give them ideas what the new environment looks like. Another entry strategy that the company uses is putting up branches in new markets. By doing this the company gets to know better the new environment and make necessary adjustments towards it.  In new branches the company acquires an understanding of the clients and what to do in certain events in the new market. Lastly an entry strategy that the company uses is licensing. Through Licensing the company gets another person/entity to use the company’s brand name, products, and services but they have to pay a certain amount for them to be allowed to do so. Licensing removes some of the company’s concern on conducting their operations but it creates other concerns relating to what the people /company will do to the name of PepsiCo. A concern maybe whether or not the name of the company is destroyed or not.   Different markets Market is any established operating means or exchange for business dealings between buyers and sellers. As opposed to simple selling, a market implies trade that is transacted with some regularity and regulation, and in which a certain amount of competition is involved. The earliest markets in history conducted bartering. After the introduction of money, commercial codes were developed that ultimately led to modern national and international enterprise. As production expanded and became less practical, communications and so-called middlemen came to play an ever growing role in markets. Types of markets include retail, wholesale or distributors', producers', raw material, and stock (1998).    A competitive market system creates incentives for firms to vie for large market shares. Sometimes one firm is so successful in this fight, it acquires a dominant position in a market. From the firm's point of view, a large market share is good. After all, dominance implies power and control. It creates a real potential to increase profits. From society's point of view, however, dominance may not be quite so desirable. For the power that goes with dominance can be acquired and used in a number of ways. While some of these ways may promote economic welfare, others might reduce it. If the reductions are large and long-lived, people may want to reconsider whether dominance should be affirmed in all cases (1998).The company is expanding its markets on countries it has not yet completely conquered like some parts of Asia. Some parts of Asia is currently controlled by coca cola their rival company. Pepsi Co is continuously doing the best it can to match or exceed their competitors reach.  The company is using everything available to reach more markets and outdo their rival. By having different markets more options can be used by the company.   Entry Strategy to China The company has used Licensing strategies in China. In Licensing people/ businessmen from china can be involved in the sale of Pepsi Co’s products. They acquire the permission to sell Pepsi Co’s products in their own way. They are provided the company’s products and some of its promotional materials. In this situation the company and the licensee shares the earnings of the sale of the products. The income acquired from selling the products is divided between the company and the licensee. By using Licensing in China the company gets to have an idea of how the market works in this specific country.   Entry Strategy to the Philippines In the Philippines an entry strategy that is used by Pepsi Co is it conniving with convenience stores. The company provides their products, promotional materials, and related equipment to the different convenience stores found in the country. By doing this the company and its products are known to more people. More products become more available to more people. The company gets to have a more positive identity to the people at the same time the income of the company increases.   Entry Strategy to Europe In Europe the entry strategy used by the company is putting certain branches in there. Since Europe is a large place the company has to put branches in the said market to ensure that its products reach more people. The said market is known for its passion for football and because of that the company has to take advantage of this by using promotional materials related to that sport in this market.   Appraisal of the different strategies in different markets Advantages The different strategies in different markets helped the company have an initial feel of the different markets. The different strategies also helped the company have a better understanding of how the market works. The different markets help in introducing to the company the cultures and characteristics of the markets thus it became educated with how to adjust in the different setting. Lastly the different strategies helped in making sure that the company encounters lesser problems while starting up a new market. By using different strategies the company has not committed anything that will give it more problems. Disadvantages The different strategies on the other hand caused some confusion within the company. Having different strategies in different markets sometimes confuses the policy and strategy makers of the company.  This lead to some misuse of strategy that cause some problems for the company. Another disadvantage of so many strategies used is too much focus on it and losing focus on other markets. With too much focus on other markets and what strategy to use on them; some markets are neglected causing the company to lose its control over markets thus losing their chance to gain advantage against rivals.   Advantage and disadvantage against competitors The main advantage of Pepsi Co against its competitors is its growing popularity and being more known throughout the world. The different entry strategies help the company be known to more people. This people relates about the products to people they know then this spreads to more people and the company gains a higher degree of popularity, it then gains more clients  and more income. The main disadvantage of the company against its competitors is it not having a tested brand name. It may be becoming popular among other people but for traditional soft-drink consumers they would rather have the rivals’ products. The company has not yet has a strong brand name that when people talk about soft drinks people still will mention coca cola. The company has not yet established and created a deeper niche in the industry. This event can still happen in the future if the company focuses well on its products. Development Method A primary factor affecting the management of an organization is the specific strategy development method employed by the management team. Strategy development methods vary from analytical to social. Analytical strategy development methods provide for very little employee involvement in strategy development. These methods tend to rely heavily on strategic planning staffs to determine conclusions to each step in their planning processes. The advantage to analytical strategy development methods is the level of control the management team can assert over strategic conclusions. The drawback is that the level of intellectual and emotional ownership among team members is low because of their lack of involvement in the process (1995).  Analytical strategy development methods provide for very little employee involvement in strategy development. These methods tend to rely heavily on strategic planning staffs to determine conclusions to each step in their planning processes. Many times, the conclusions are the result of numerous interviews, reviews, and statistical analyses.   The advantage to analytical strategy development methods is the level of control the management team can exert over strategic conclusions. The drawback is that the level of intellectual and emotional ownership among team members is low because of their lack of involvement in the process. Social strategy development methods provide for a high of employee involvement in strategy development. These methods tend to rely heavily on the social and political processes to determine conclusions to each step in their planning processes. The processes tend to involve workshops, interviews, and other forms of interpersonal reaction to determine strategy. The drawback to social strategy development methods is that the low level of absolute control the management team can exert over strategic conclusions can lead to an unfocused organization. The advantage is that the level of intellectual and emotional ownership among team members is very high because of their involvement in the process. This high level of buy-in can significantly increase the organization's resolve to implement the strategies (1995).    The company uses social strategy development method. It makes use of the ideas and knowledge their employees have in creating changes and strategy development. The company values the ideas and capabilities of their employees. Through the cooperation of the management and the employees needed changes are made for the achievement of the company’s goals.  The said development method is appropriate for the company. It helps them achieve their goal. The company can also use the analytical strategy development method and disregard some idea of the employee they believe are not suitable and cannot help the company achieve its goals. Since the company has different markets it is possible that the social strategy development method is used in other markets. This is done to ensure that the different markets produce well, gain more clients, raise its income and achieve the company’s goals. The development method can be used together with the company’s expansion. It can make the expansion more successful and with lesser problems.  The development method can ease the difficulties the company encounters in expanding.             Conclusion PepsiCo’s leading soft drink, Pepsi-Cola, and its chief rival, Coke, have dominated the soft-drink market for decades, although Pepsi has traditionally remained behind Coke. In 1950 Coke outsold Pepsi by 500 percent worldwide. But Pepsi’s aggressive advertising campaigns aimed at young consumers and major bottling and marketing deals made Pepsi a close rival to Coke by the 1980s. The company is continuously reaching places it has not reached before. It is conducting expansions to reach new territories and increase its profitability and clients.  It also uses different expansion techniques so that no problem occurs.

International Business: Identifies and Appraises the International Strategy of PepsiCo, Inc.

Contents 1. Introduction 2. The soft drink industry 3. Background of the organization 4. Main Body of the ...