Functional Strategy of Pertaining to PepsiCo - Case Study Example

PepsiCo Functional Strategy – Pertaining to PepsiCo. Before we jump on the basic questions that needed to be answered, we shall have an insight at the company in the question and have a look on its current condition and success. PepsiCo, a rather huge name with numerous brands to offer to the world and the second largest company in the world in terms of revenue, can be probed as much as possible, but can no default can be extracted within the organization. PepsiCo offering include 22 different brand that include beverages and snacks, which initiate $ 1 billion each in yearly retail sales. Not only have this, but their core businesses have been known to generate more than $ 65 billion annually. Their main aim is to provide the world with nutritious offering and make the world healthier and fun to live in. In relation to this, their recent innovative technique involves reduction in packaging volumes, safeguarding energy and water and respecting and supporting the local communities in which they function through philanthropy. Furthermore, PepsiCo is divided into main four functional divisions known as PepsiCo Americas Foods, PepsiCo Americans Beverages, PepsiCo Europe and PepsiCo Asia, Middle East & Africa. Moving to our main concern, the burning issue faced by PepsiCo currently is the sustainability risk, as the rapid growth of its competitor in the market and the environmental issues that seems to threaten the world regularly and is increasing on a daily routine. These challenges include sustaining the global market and rebooting the innovations of the products. Hence, in order to withstand the threats and stand robust in the face of the challenges, PepsiCo has engaged its functional strategies such as marketing, operational and financial, which in turn have an impact on its overall corporate and business strategy. Starting with these functional areas playing and their effects, we shall start with the augmentation of the international market through mergers and acquisitions, which will undoubtedly handle the competition challenges and gaining advantages over less large firms, this will further lead to reduction in overheads and variable cost and attaining organic growth. For instance, the crucial amalgamation includes PepsiCo merging with Wimm-Bill-Dann in Russia or Lucky snacks and Mabel cookies in Brazil. Moreover, the functional strategies lead to the significant entente at a global scale, an example of this is the strategic formation with Tingyi in China, so that the ever increasing market of beverages in China is not lost. Not only this, the partnership with the Indian groups of Tata industries helped them in evolving drinking water prefabricating potential. In addition to this, the corporate strategy of focusing on the emerging market was successful because of the potent and powerful implementation of operational and marketing strategies, hence the achieving of 35% share of net revenues in Russia, China and India. One of the PepsiCo operation strategies was to increase the ‘bottling’ so that they can compete with their arch rival Coca-Cola, which in turn was fully incorporated with their marketing strategies that included celebrity endorsement, gaming packages (Lipton Brisk Star Wars), ‘Do Us a Flavor’ campaign accompanying 17 countries, who proposed their idea of flavor and indulging the cross culture by adding different taglines for each regions, for instance “Yalla Now” in Middle east and “ Dil Mange Abhi” (Hear desires now) for India, Pakistan and Bangladesh. Moreover these ideas were easily and equally funded. Thus, boost their overall strategy of innovation in marketing initiatives. Moving forward to the next criteria, that is the company’s essential goal in 2014 for marketing and finance. The former area crucial objective is not different than what they had been trying and efficiently achieving in the past, which leads us to the points that include more mergers, renovation in packaging and employing celebrity to do work for them. Coming up to the latter area, its significant target is to increase their cash returns on the shareholders to $8.7 billion. Now, to tackle with how to achieve the aforesaid goals, PepsiCo is not far lagging behind, but have already formed the strategy required to attain these goals. The resources that must be utilized for getting marketing objective is to have a market examination so that it is crystal clear that which marketing strategies have to be applied where. Furthermore, signing of celebrity and selecting brand ambassador for different region will have to be carried out successfully, as personality of the product should match that of the person portraying it. Similarly, the financial goals will be attained with the help of higher dividends and repurchasing the shares. The most basic and obvious measure that will be used is Balanced Scorecard Model. 2. Strategy Implementation For Jack Welch Six Sigma is like a contradictory woman, who seems like a challenging kind and difficult to read and understand on the exterior, but is just as marshmallow and easy to comprehend if you know her better. He starts off with the description of people who are interested in this lady or Six Sigma, but always seems to get the idea or main component of this concept jumble up. TO ease their hardship, Welch very candidly explains that Six Sigma is a procedure that aims to reduce wastage, increase quality and productivity, produce good leaders and give you loyal customers. He further describes that this concept can be freely used under two circumstances and those are reduction of wastage and doing a complicated, but worthy task right the first time. He also expand this concept in a chain of events which initiate with upgraded and advanced designing, moving to allocation of resources effectively and efficiently, going over to wasting resource as less as possible and finally producing product with little or no fault and reaching customer in their desired form with no late deliveries tagging along. However, this concept should not be taken lightly and should be treated with caution and dedication, if a desirable outcome is required (Welch, 2005). Moving to the next criterion, which is how GE Company uses this concept in their organization. Well, this concept helped them in making jet engines and turbines successfully. Moreover, the GE performance boosted when they executed this concept while training their staff and doing statistical analysis (Welch, 2005) Moving to the philosophy’s strength and weakness, is that helps to give the company ‘sticky’ customer as Welch puts it, which is generated from good output and low costs. However it can result in failure of the project and distortion of the organization, if it is not handled with care as it is difficult to understand because of its complexity. Good strategy can be defined as those techniques and methods adopt by the company that have a maximum and strong focus and are unshakably associated with firm and executable actions. According to my thinking, that one issue which is acting as a barrier to executing good strategy is the need to produce more nutritious beverages and food, since there is a high demand for it in the market. This one aspect of PepsiCo is still a little bit lagging behind and is acting as a barrier to employ good strategy. 3. Evaluation and Control To move on to the next topic that is Balanced Scorecard of PepsiCo. Balance Scorecard is a strategic planning and management system, which is used to assimilate the business ventures and their vision, it tells about how to improve the external as well as internal angles of the firm and scrutinize the firm’s performance against their set strategic aims. The four major components are customer perspective, internal process perspective, learning growth perspective and financial perspective. Before describing these four categories, the one objective that I will measure is to produce healthier products. Now, going to the first component PepsiCo Foundation, who is also into philanthropic activities have aided numerous campaigns that stimulate and encourage safe and healthier life style, educating the public about having nutritious intake and prevention of diseases. Moving to the second part, one of the major reasons behind the popularity of the PepsiCo is because they have customer loyalty and brand recognition; however the reason behind this achievement is that they adhere to the code of offering the public. They strive to provide people with healthy snack and beverages. Thus, they started producing healthy juices and dietary foods such as Quacker Oats or baked Lays. This feat was achieved by adopting technologies and methods of making aforementioned products. Approaching the third component, learning growth perspective; here PepsiCo is determined to have high employee engagement that will ultimately lead to a satisfied workforce, which in turn will ensure efficient working and neat and good products. Furthermore, the organization likes to indulge in leadership training for the existent leaders as well as the potential one. Since, PepsiCo believes in continuous improvement, training is eligible for all people including the leaders too to make them more effective and efficient. The last component that is the financial perspective, PepsiCo has now recognized the need for nutritious food and is also striving to carter that need, they are liable to have much higher profits. Furthermore, seeing that the company is actually updating itself with the newest demand and is also being rewarded, the numbers of shareholders are likely to rise; hence they are needed to be paid dividends Balanced Scorecard for PepsiCo 4. Good Strategy/Bad Strategy and the Strategist Kernel is defined to be as a structure, which includes strong and appropriate actions along with imaginative thoughts that are needed to generate good strategy. The three main elements of kernel are diagnosis – this helps describe the features of the challenge, guiding policy – the approach needed to dissolve hindrance and deal with the challenge, and coherent actions – that are formatted to execute guiding policies (Rumelt, 2011). PepsiCo can use SWOT analysis to fabricate a strategy and find out the obstacle which is needed to be eliminated immediately to access the most important advantage. For instance, after a SWOT analysis, it is found that the need for marketing strategy has arisen to market the nutritious foods and beverages in order to have greater benefit. Now to discuss the three element of the kernel of this strategy; Diagnosis: here PepsiCo will see the challenge that they are facing, which in this case is providing the people with healthy dietary and educating them about the nutritious diet. Guiding policy: Now policies regarding how to overcome these challenges will be needed. So a market research can be carried out, which will tell the firm about the areas requiring immediate nutrition. After this, the company will proceed to mix economic, technologic and cultural guidelines. Coherent actions: This last step will actually include the production of nutritious solid and liquid diet, respective of the certain regions and areas. Likewise, certain marketing, financial and sales departments need to combine their work and make these products available in the more beneficial markets and cities. Moving to the next point that is the difference between good and bad strategy, the former strategy can said to be coherent with powerful thinking and adequate and proper actions. Furthermore, it helps to eradicate the weaknesses and give birth to strengths with the help of different viewpoints. On the other hand, the latter strategy is said to be a bungle, which is unable to confront the challenge, let alone generate new strengths and are impracticable (Rumelt, 2011). One good strategy by PepsiCo was to let the public be in possession of healthy foods by introducing some of its brand as ‘better for you’. This helped them increase sales of those particular brands and in return gin high profits. Nevertheless, one of their bad strategy, according to my evaluation, was ‘power of one’ where the people intake included beverage with a snack, but a top investor thought that this strategy made the less popular soft drink drag down popular snacks with them, such as Frito lay. At last, coming to Cynthia Montgomery book and the four questions asked by her; the answer to those include: PepsiCo has bring into this world the taste of different types of beverages along with several kind of snacks. To answer the next question, the difference matters because it is also offering people healthy food and drinks to make sure that each and every one is able to taste their offering without any compromise on their health. Regarding the third question, the offerings of PepsiCo are not difficult to imitate, but the quality can only be offered by this organization. To answer the last question, PepsiCo is trying their hard to be able to face the new changes in the environment and the world in general. They are determined and are striving to achieve more, even at present to remain leaders in the future. Bibliography Montgomery, Cynthia A. The Strategist: Be the leaderyour business needs. Harper Business, 2012. Rumelt, Richard P. Good Strategy/Bad Strategy: The Difference and Why it Matters. Crown Business, 2011. 9-79. Welch, Jack & Suzy. Winning. Harper Collins, 2005. 245-251. Read More