Assignment:
Using the organization overview (illustrated below) prepare a 500 word paper on the following:
Question 1) Should the organization/industry continue, expand, or reduce current operations in order to maximize profits? Explain your reasoning.
a) If your answer is to expand: Should the organization/industry invest in new plants, equipment, or technologies? Should the organization/industry consider a merger with another organization? Explain your reasoning and explain global competition implications.
b) If your answer is to reduce: Should the organization/industry reduce production or shutdown their operations? Explain your reasoning.
Question 2) Analyze the effects of government policy, social diversity, and business ethics on your recommendation.
Organization/industry Overview:
Pepsi has a very rich history and a product that is hard to beat. They started out with an idea at an old soda fountain and have increased to an international and a multi-billion dollar corporation. People all over the world know of the Pepsi brand and many of its products. In fact due to a jingle from a commercial back dating back to the 1960’s, Pepsi is a household name. Pepsi is now a very large corporation that was started with just a simple idea to quench the consumers thirst.
History of Pepsico
Indeed, one would be hard-pressed to walk into any convenience or grocery store and not see a PepsiCo product in their snack aisle. PepsiCo was founded in 1965 by the CEO of Pepsi-Cola and the CEO of Frito-Lay. Some of the brand names PepsiCo distributes are Pepsi-Cola, Frito-Lay products, Gatorade, Quaker Oats products, and ready to drink Tropicana juices. The company reports average revenues of over $39 billion a year and employee more than 185,000 employees according to pepsico.com.
There are three main divisions within the PepsiCo family. PepsiCo Americas Beverages which produces the beverages that people are so familiar with. PepsiCo Americas Foods is their food and snack business which include not only products manufactured here in the United States, but also in Latin America and Mexico. Finally, PepsiCo International is the division which sells its products worldwide in Europe, Asia, Africa and Australia.
One of the key factors leading to PepsiCo’s financial success is what they call Performance with Purpose. One of their main missions is to remain financially healthy while being environmentally and socially responsible to the communities they serve. Some of their key missions are revitalizing their North American presence, broadening their global products and expanding internationally, and maintaining their commitment to help be more environmentally sound. In addition to maintaining their global mission, they strive to keep a diverse workforce by recruiting employees on a global scale and striving to hire “world-class
The Market Pepsi Operates
PepsiCo operates in two principal areas the beverage segment and the snack foods segment. PepsiCo has attained a leadership standing in each of these business segments. PepsiCo is the world leader in beverage bottling and the company is the world's largest producer of snack chips.
According to Beverages Industry Profile (2009), “PepsiCo Beverages North America (PBNA) sells beverage concentrates, fountain syrups and finished goods under various beverage brands including Pepsi, Mountain Dew, Gatorade, Tropicana Pure Premium, Lipton, Sierra Mist, Tropicana, Propel, Dole and SoBe” (P.24).
In the beverage segment, due to increasing health concerns bottled water is fast growing. Pepsi Bottling Group launched its flavored water brand, Aquafina Flavor Splash, in 2005. The group’s Aquafina brand water is the bestselling bottled water in the US and could leverage its leadership position in the bottled water segment to capitalize on growing demand for packaged water.
Consumers, particularly in the US are becoming more health conscious. This trend has led to a decrease in the consumption of carbonated and other sweetened beverages in the US. Moreover in the recent years, beverage companies such as Pepsi Bottling Group has been criticized for selling carbonated beverages with high amounts of sugar, and has been implicated for facilitating poor diet and increasing childhood obesity.
Pepsi’s packaged food division includes an extensive range of products including condiments, ice cream, sauces, noodles, frozen processed food, confectionery, dressings and soup. However, Pepsi is known for its snacks like the very popular Doritos tortilla chips and Lay’s potato chips. The savory snack market includes salty snacks (including potato, tortilla, corn, pita, bagel and veggie chips; pretzels; fruit crisps, and cheese puffs), snacks, nuts, seeds, corn nuts, meat snacks, crackers (excluding graham), popcorn, dips, trail mixes, rice cakes and soy crisps.
Industry regulations
Pepsi is in the food and beverage industry and the federal government has numerous rules and regulations that govern the food and beverage industry. The list of regulations is too long to cover every rule or regulation so a couple of regulations pertaining to Pepsi will be highlighted. The food and beverage industry has been divided into nine sectors: alcohol beverages, baby food, concessions, food additives, food processing, food safety, labeling and packaging, restaurants, and retail and distribution. An important category for Pepsi is the food safety category. According to the Business.gov (2009), “the United States maintains one of the world’s safest food supplies”. The U.S. maintains such high standards with constant scrutiny by food inspectors, microbiologists, epidemiologists, and food scientists working for city and county health departments (Business.gov, 2009). Another important category that has been thrust into national attention is the category of food labeling. With consumers now interested in living a healthy lifestyle labels on foods that show the ingredients and nutritional value is very important. The label has to include any additives, product date, label terms, flavoring used, and nutritional value. These two categories highlight the amount of work involved in producing a food or beverage in accordance with federal regulations in the United States.
Opportunities That Pepsico Face
The biggest opportunities that Pepsico face are the ability to continue to meet the demands of the every changing public. When you look into what Pepsico has done already, the Gatorade, vitamin and mineral filed water, Pepsico has done a great job of keeping up with the changing demands of the consumer. However there is always room for improvement. For example with all the snacks that the Pepsico has produced the company is still trying to turn the snacks into more healthily products and this is problem that plagues Pepsico. With the Food and Drug Administration cracking down more and more on unhealthy food products companies likes Pepsico have been attempting to make their products more full of vitamins and minerals that are needed to promote good health.
Pepsico is also attempting to make more nutritional products for the young people while still catering to their need for something sweet and bubbly. With parents being more and more focus on their children being healthy, Pepsico is attempting to keep the same great taste while packing the products that the young ones crave with the same great taste.
Another opportunity for Pepsico is to reach more of a global market, although the company is around the globe there is still markets that are untouched that Pepsico can crack into, if Pepsico can market their product to these markets at a price that is either under or exactly the same as the price of that areas current cola then they can gain ground in these segments of the world to.
Conclusion
Over the years Pepsi has made a name for themselves. They went bankrupt in the early days and were almost bought out a couple of times by competitors but in the end they have lived through hard times and are now a company that gives Coca-Cola a run for their money. Through many mergers and company acquisitions, they have become a formidable force in today’s snack and beverage economy. They have made a tried and true business model that has lived through many economic down turns and Pepsi is persevering because of it.
References
About the Company and Financial Information. Retrieved April 10, 2009 from www.pepsico.com
Beverages Industry Profile:Global. (2009, March). Beverages Industry Profile: global, Retrieved April 7, 2009, from Business Source Complete database.
Business.gov. (2009). Food and Beverage Industry.