Organizational Design and Analysis PEPSI Cola. Riaz bottler, Lahore and haidri beverages, Islamabad

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Organizational Design And Analysis

Pepsi Cola (Riaz Bottler, Lahore and Haidri Beverages, Islamabad) Resource Person; Col. Imtiaz Ahmed Mohar

Muhammad Mubeen Bahoo MBAPage 3A |1 5/31/2010

Executive summary Pepsi Cola is managing its operations in different cities of Pakistan. Pepsi Riaz Bottler and Haidri beverages are analyzed for their organizational design and change. The value creation, hierarchal structures, mission and vision and decision making were subjected to the study. Centralized decision making and tall hierarchy has created some problems in operation. Innovation, technology and market capture are the core competencies of the Pepsi. Stake holders according to its internal and external environment are analyzed. The process of Pepsi cola and their quality control mechanism was analyzed. The roles and differentiation has been analyzed.

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Table of Contents Executive summary....................................................................................................2 Table of Contents....................................................................................................... 3 Introduction................................................................................................................ 6 Pepsi Pakistan......................................................................................................... 6 Pakistani soft drink industry.......................................................................................6 Haidiri Beverages Private Limited, Pakistan...............................................................7 Our Mission and Vision...............................................................................................7 The promise of PEPSICO..........................................................................................8 Performance with Purpose......................................................................................8 Our Commitment.................................................................................................... 8 Guiding Principles....................................................................................................9 Value Creation.......................................................................................................10 Culture of Pepsi.....................................................................................................11 The Top Management Hierarchy..............................................................................12 Chain of Command................................................................................................12 At Managerial Level...........................................................................................13 Basic Challenges regarding organizational design...................................................15 Roles and Duties................................................................................................15 Complexity......................................................................................................... 15 Centralization.....................................................................................................16 Mixed type of structure......................................................................................16 Formalization: written rules...............................................................................16 Multi division Structure......................................................................................16 Span of Control.................................................................................................. 17 Some problems regarding tall hierarchy............................................................17 Departments............................................................................................................ 17 Environment............................................................................................................. 17 The Specific Environment......................................................................................18 3

The General Environment.....................................................................................18 Resource dependence theory...................................................................................19 Symbiotic interdependencies...................................................................................19 Technology............................................................................................................... 19 Quality Control ..................................................................................................... 21 Pepsi Processing Model............................................................................................22 Ethical Stance.......................................................................................................... 23 Encourage Healthier Choices...................................................................................24 Internal stakeholders.........................................................................................24 External stakeholders........................................................................................24 Competitive Advantage............................................................................................25 Annexure 1............................................................................................................... 25 Specific Environment ( Annexure).........................................................................25 Customer.............................................................................................................. 25 Competitor:........................................................................................................... 25 Local competitor................................................................................................25 National Competitors.........................................................................................26 International Competitors..................................................................................26 Supplier:................................................................................................................ 27 Distributor:............................................................................................................ 27 Incentives................................................................................................................. 28 Product outflow........................................................................................................ 29 Channels of distribution...........................................................................................30 General environment (Annexure)..........................................................................30 Economic Forces................................................................................................30 Technological forces..........................................................................................31 Political Forces...................................................................................................31 Social and cultural factors..................................................................................32 ANNEXURE 2............................................................................................................ 33 Our Goals and Commitments...................................................................................33 Career:.................................................................................................................. 34 Community:...........................................................................................................34 Facts about the company.........................................................................................34 4

Executives............................................................................................................. 35 HEAD OFFICE.........................................................................................................35 Founders of the company......................................................................................35 Executives............................................................................................................. 35 Registered office...................................................................................................37 Various products in Pakistani market.......................................................................37 Product in spotlight: Pepsi........................................................................................37 Interview of manager at Pepsi Riaz Bottles........................................................37 Important Questions which were asked.............................................................38 References............................................................................................................... 39

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Introduction Pepsi is a carbonated soft drink produced and manufactured by PepsiCo. The drink was first made in the 1890s by pharmacist Caleb Bradham in New Bern, North Carolina. The brand was trademarked on June 16, 1903. There have been many Pepsi variants produced over the years since 1898. It was first introduced as "Brad's Drink" in New Bern, North Carolina in 1898 by Caleb Bradham, who made it at his pharmacy where the drink was sold. It was later named Pepsi Cola, possibly due to the digestive enzyme pepsin and kola nuts used in the recipe. Bradham sought to create a fountain drink that was delicious and would aid in digestion and boost energy.i

Pepsi Pakistan The market in Pakistan is surely dominated by Pepsi. It has proven itself to be the No.1 soft drink in Pakistan. Now days Pepsi is recognized as Pakistanis National drink. In 1971, first plant of Pepsi was constructed in Multan, and from there after Pepsi is going higher and higher. Pepsi is the choice soft drink of every one. It is consumed by all age groups because of its distinctive taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all. Consumer’s survey results explain the same outcome and Pepsi has been declared as the most wanted soft drink of Pakistan. Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand. Coke’s basic strength is its brand name. But Pepsi with its aggressive marketing planning and quick diversification in creating and promoting new ideas and product packaging, is successfully maintaining is No.1 position in Pakistan. In coming future Pepsi is also planning to enter into the field of fruit drinks. For this purpose it has test marketed its mango juice in Karachi for the first time. When Pepsi was introduced in Pakistan, it faced fierce competition with 7up, lemon and lime drinks, which was established during 1968, in Multan. Pepsi introduced its lemon and lime, "Teem" to compete with 7up. It successfully, after some years, took over 7up, and this enhanced Pepsi's profits and market share. In Pakistan, Pepsi with 7up enjoys 70% of the market share where as the coke just has 20% markets share. Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.”ii

Pakistani soft drink industry “About 75 million cases a year for Pepsi alone; the total beverage market is about 120 million cases of which 65% per cent are Pepsi products; about 20 to 22 per cent are Coca-Cola products and Zum Zum cola and Mecca Cola, Amrit Cola and Muslim Cola... there are so many colas; there is RC and Double Cola which are franchised 6

products. Altogether they have around 5 per cent of the market. Due to the Afghan and Iraq wars, they did get a little footing especially in the frontier and Islamabad area but still they are not hugely popular. Total annual sale of soft drink in Pakistan 120 million cases Pepsi annual sales in Pakistan 75 million Market share of Pepsi 65% Consumption growth 1.7 % per year”iii

Haidiri Beverages Private Limited, Pakistan The Haidiri Beverages Group was set up in 1979 and is Pepsi's sole selling agent for District Rawalpindi and Islamabad. It is based in the CDA Industrial Triangle, Kahuta Road, Islamabad. It manages the supply for several wholesalers, retailers, restaurants, hotels and other such food outlets. In order to achieve the projected sales targets effectively, the organization ensures a comprehensive strategic alignment with the overall Pepsi Cola’s business strategy. Haidiri Beverages’ primary functions are to conduct a systematic manufacturing and supply of the product without any tactical flaws. Backed by a powerful competitive strategy and empowered by some effective supply chain strategies, the group has been managing an effective supply chain throughout the region. It has set up a sophisticated manufacturing and storage plant in Rawalpindi with multiple production units and huge production capacity. Haidiri Beverages has different management departments dealing with specialized Marketing, Human Resource, Information Technology and Supply Chain Processes. In this section we conduct a brief analysis of the basic supply chain management functions of Haidri beverages.

Our Mission and Vision At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to do for our business. Our Mission 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 Vision "PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today."

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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.

The promise of PEPSICO At PepsiCo, Performance with Purpose means delivering sustainable growth by investing in a healthier future for people and our planet. As a global food and beverage company with brands that stand for quality and are respected household names—Quaker Oats, Tropicana, Gatorade, Lay’s and Pepsi-Cola, to name a few— we will continue to build a portfolio of enjoyable and wholesome foods and beverages, find innovative ways to reduce the use of energy, water and packaging, and provide a great workplace for our associates. Additionally, we will respect, support and invest in the local communities where we operate, by hiring local people, creating products designed for local tastes and partnering with local farmers, governments and community groups. Because a healthier future for all people and our planet means a more successful future for PepsiCo. This is our promise.

Performance with Purpose At PepsiCo, we're committed to achieving business and financial success while leaving a positive imprint on society - delivering what we call Performance with Purpose. Our approach to superior financial performance is straightforward - drive shareholder value. By addressing social and environmental issues, we also deliver on our purpose agenda, which consists of human, environmental, and talent sustainability.

Our Commitment We are committed to delivering sustained growth through empowered people acting responsibly and building trust. What It Means Sustained Growth is fundamental to motivating and measuring our success. Our quest for sustained growth stimulates innovation, places a value on results, and helps us understand whether today's actions will contribute to our future. It is about the growth of people and company performance. It prioritizes both making a difference and getting things done. Empowered People means we have the freedom to act and think in ways that we feel will get the job done, while adhering to processes that ensure proper governance and being mindful of company needs beyond our own. Responsibility and Trust form the foundation for healthy growth. We hold ourselves both personally and corporately accountable for everything we do. We must earn the confidence others place in us as individuals and as a company. By acting as good stewards of the resources entrusted to us, we strengthen that trust by walking the talk and following through on our commitment to succeeding together.

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Guiding Principles We uphold our commitment with six guiding principles. We must always strive to: 1. Care for our customers, our consumers and the world we live in. We are driven by the intense, competitive spirit of the marketplace, but we direct this spirit toward solutions that benefit both our company and our constituents. Our success depends on a thorough understanding of our customers, consumers and communities. To foster this spirit of generosity, we go the extra mile to show we care. 2. Sell only products we can be proud of. The true test of our standards is our own ability to consume and personally endorse the products we sell. Without reservation. Our confidence helps ensure the quality of our products, from the moment we purchase ingredients to the moment it reaches the consumer's hand. 3. Speak with truth and candor. We tell the whole story, not just what's convenient to our individual goals. In addition to being clear, honest and accurate, we are responsible for ensuring our communications are understood. 4. Balance short term and long term. In every decision, we weigh both short-term and long-term risks and benefits. Maintaining this balance helps sustain our growth and ensures our ideas and solutions are relevant both now and in the future. 5. Win with diversity and inclusion. We embrace people with diverse backgrounds, traits and ways of thinking. Our diversity brings new perspectives into the workplace and encourages innovation, as well as the ability to identify new market opportunities. 6. Respect others and succeed together. Our mutual success depends on mutual respect, inside and outside the company. It requires people who are capable of working together as part of a team or informal collaboration. While our company is built on individual excellence, we also recognize the importance and value of teamwork in turning our goals into accomplishments.

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Value Creation Our Values & Philosophy are a reflection of the socially and environmentally responsible company we aspire to be. They are the foundation for every business decision we make. Organizational Inputs (Obtained from its environment) • Raw Material(water, flavor, soda, oxides and other ingredients) • Skilled Staff • Human Force • Managers for all functions of organization Organization’s • Market Environment research(R&D) • Feed Back of (Sales of outputs allow Customers organization to obtain new supplies of inputs.) • Customers • Suppliers • Government • Competitors • Employees • Trainees • Health regulations • Certifications • Taxations

Organization’s Conversion Process (Organization transforms inputs and adds value to them) • Plant processing • Conversion through machinery • Computers and electronics • System and sub system • Coordination of different Output Organization’s departments (Organization • Quality releases assurance outputs to its environment.) • Qualified • Products of Pepsi • Profits • Dividends • Working Environment • Problem resolution • Salaries of employees • Good will • Health Assurance 10 •

Availability of products on time

Culture of Pepsi The culture at Pepsi cola is very competitive. Decision are made from the top which are to be followed downward the hierarchy. The competitive culture enables people to work for their targets and they work hard to achieve them. When the targets are met they feel empowered. The purpose of the teams is to make interaction with each other for attainment of common objective. Employees are in a linking chain, each employee works in a system which satisfies the needs of its internal and external customers. Pepsi focuses on departmental interaction for satisfying their stake holder’s expectations. The top management has devised a system of direct feedback from its customers and suppliers. They value their culture as they say that our culture focuses to; •

Enable our people to thrive by providing a supportive and empowering workplace.

•

Ensure high levels of associate engagement and satisfaction as compared with other Fortune 500 companies.

•

Foster diversity and inclusion by developing a workforce that reflects local communities.

•

Encourage our associates to lead healthier lives by offering workplace wellness programs globally.

•

Ensure a safe workplace by continuing to reduce lost time injury rates, whiles thriving to improve other occupational health and safety metrics through best practices.

•

Support ethical and legal compliance through annual training in our code of conduct, which outlines PepsiCo’s unwavering commitment to its human rights policy, including treating every associate with dignity and respect.

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The Top Management Hierarchy

Chain of Command The main authority of the company is the share holders of the Pepsi. They are the actual owner of the company who own it. Share holders of the Pepsi appoint the directors as responsible for company operations. The directors of the company have to report to the share holders, as they are the representative of the company. The Directors are responsible for creating value for the organization and other stake holders of the company. 12

Board of directors and their chair person manages the corporate management of the Pepsi cola. The control of corporate management is held by the board of the directors. The position of the directors is as trusteeship in the organization. Corporate level management is the ultimate responsible for setting up company’s goals and objectives. They are the inside stake holders of the company and they are responsible for organizational structure.

At Managerial Level One divisional hierarchy is describing all functions regarding that division. NSM is national Sales Manager and he reports to CEO directly, he is managing Non Carbonated Soft Drinks (Aqua fina, slice, Caprison, rave) at national level while GM Marketing, finance, IT directly report to Chief operating officer. Hierarchal level is very tall.

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Basic Challenges regarding organizational design Roles and Duties All the roles are defined by the CEO. Centralized decision making is followed. Every employee is given targets on daily basis and they have to meet up with those targets. CEO focuses of FMGS concept and that’s why they say that we want to move according to the technology and changing pace of the corporate world. The employees have very competitive environment so they totally focus on fulfilling their goals and objective.

Complexity Pepsi is very complex organization at local level. Targets are made on adhoc basis. FMCG (fast Moving consumer goods) concept is used here. In whole organization there is thought cut competition. 2000 employees are there in Lahore division of Pepsi which have targets on daily basis and they have to accomplish them.

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Centralization Pepsi cola is very centralized organization. The entire decision making is done from top level. General Managers of each department looks after the operations of concerning departments and reporting is done according to the hierarchal level. Although some of the short term decisions are made at different levels of the top management, but it is observed to be the most centralized organization. Mixed type of structure Mechanistic and organic structure both are observed in the Pepsi cola, the organization is organic at the top level and some of the decisions are made at different levels of top management. It is mechanistic at bottom level especially in assembly lines. The employees have to follow the rules and SOP’s of the company. Formalization: written rules Written rules are there for all departments and the roles and functions are defined. Multi division Structure According to the divisions, the structure is multi division structure where some of the divisions are product based and some are the operation based. The non carbonated soft drinks are under one NSM and the carbonated soft drinks are 16

directly assigned to each departmental level of management. Procurement and production departments comes under the head of finance and the Research and development comes under the head of IT deprtmant. So it is the multi division structure. Span of Control Span of control of CEO’s maximum and the divisional mangers are responsible at each divisional level of the organization. On all six levels of hierarchy CEO has its control. Although there is no direct interaction of lower management with CEO but the rules and control is of CEO in all divisions. Short term decisions are made on Quarterly basis. GM marketing controls 1 sales manager operation, 5 business unit managers, 17 territory development managers and 54 ADR sales. They all work according to hierarchy. Some problems regarding tall hierarchy Work load is maximum on all territory development managers. The strategies and planning takes lot of time to take active form. Agreements with shopkeepers are very tough and divisional manager approves the shopkeeper agreement.

Departments Pepsi has divided in two main categories, these are carbonated soft drink and non carbonated soft drink departments. Except marketing and production department the other departments are same for both the products. NSM ( National Sales Manager) of the non carbonated soft drinks like aqua fina and other products while the Carbonated soft drinks which are Pepsi, 7up, dew etc. •

Marketing

•

Finance

•

Production

•

Information technology

•

Human Resource

The operation of research and development is done under the head of IT.

Environment All the forces which are affecting the Pepsi in terms of its operation and its access to its resources are counted in the environment.

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The environment of the Pepsi has been analyzed in terms of Specific and general Environment.

The Specific Environment Specific environment relates to the force which directly affects the resources of the company. These are customers, distributors, unions, competitors, suppliers, and the government. Pepsi is engage in transaction with all its outside stake holders to have resources and by obtaining those resources keep on surviving. For details of specific environment forces see Annexure 1

(details in annexure 1)

The General Environment These are the forces which shape the specific environment and affect the ability of all organizations in a particular environment to obtain resources. The other organizations could be the competitors as well. So these are almost same forces.

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Resource dependence theory It is the theory which states that; the goal of an organization is to minimize its dependence on other organizations for the supply of scare resources and to find ways of influencing them to make resources available. According to the aspects of this theory the Pepsi cola has a great influence on the other organizations which are related to its operations, first to its suppliers and distributors and then to the other companies. e.g. it could be the regulation authority and competitors of its suppliers and distributors.

Symbiotic interdependencies These are the interdependencies that exist between an organization and its suppliers and distributors. So the relationship between them exists. It is because of the supplier and the distributor is the main factor for the smooth operation of the Pepsi cola. So the interdependencies exist. (The supplier and distributors are explained at the end of report) The strategy to manage the symbiotic interdependencies is the reputation for its supplier and distributors.

Technology The technology which is used at Pepsi is mass production technology and the technical complexity is maximum. The cola is made through following process;iv

Filtering, sterilizing, and dechlorinating the water First the water is purified in a floc containing tank, which separates the undesired particles from water, often come from air and with the container. After the floc has absorbed the particles it moves from container to the downside where a it again is processed for further purification. The neutralizing PH valued water is ready for further process. Secondly, Sterilization is necessary to destroy bacteria and organic compounds that might spoil the water's taste or color. The water is pumped into a storage tank and is dosed with a small amount of free chlorine. The chlorinated water remains in the storage. The clarified water is poured through a sand filter to remove fine particles of floc. The water passes through a layer of sand and courser beds of gravel to capture the particles tank for about two hours until the reaction is complete. Next, an activated carbon filter dechlorinates the water and removes residual organic matter, much like the sand filter. A vacuum pump de-aerates the water before it passes into a dosing station.

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(Source: http://www.madehow.com/Volume-2/Soft-Drink.html )

Mixing the ingredients The dissolved sugar and flavor concentrates are pumped into the dosing station in a predetermined sequence according to their compatibility. The ingredients are conveyed into batch tanks where they are carefully mixed; too much agitation can cause unwanted aeration. The water and syrup are carefully combined by sophisticated machines, called proportioners, which regulate the flow rates and ratios of the liquids. The vessels are pressurized with carbon dioxide to prevent aeration of the mixture.

Carbonating the beverage Carbonation is generally added to the finished product, though it may be mixed into the water at an earlier stage. The temperature of the liquid must be carefully controlled since carbon dioxide solubility increases as the liquid temperature decreases. Many carbonators are equipped with their own cooling systems. The amount of carbon dioxide pressure used depends on the type of soft drink.

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(Source: http://www.madehow.com/Volume-2/Soft-Drink.html )

Filling and packaging The finished product is transferred into bottles or cans at extremely high flow rates. The containers are immediately sealed with pressure-resistant closures, either tinplate or steel crowns with corrugated edges, twist off, or pull tabs. Because soft drinks are generally cooled during the manufacturing process, they must be brought to room temperature before labeling to prevent condensation from ruining the labels. This is usually achieved by spraying the containers with warm water and drying them. Labels are then affixed to bottles to provide information about the brand, ingredients, shelf life, and safe use of the product. Most labels are made of paper though some are made of a plastic film. Cans are generally pre-printed with product information before the filling stage. Finally, containers are packed into cartons or trays which are then shipped in larger pallets or crates to distributors.

Quality Control Soft drink manufacturers adhere to strict water quality standards for allowable dissolved solids, alkalinity, chlorides, sulfates, iron, and aluminum. Not only is it in the interest of public health, but clean water also facilitates the production process and maintains consistency in flavor, color, and body. Microbiological and other testing occur regularly. The National Soft Drink Association and other agencies set standards for regulating the quality of sugar and other ingredients. If soft drinks are produced with low-quality sugar, particles in the beverage will spoil it, creating floc. To prevent such spoilage, sugar must be carefully handled in dry, sanitized environments. 21

It is crucial for soft drink manufacturers to inspect raw materials before they are mixed with other ingredients, because preservatives may not kill all bacteria. All tanks, pumps, and containers are thoroughly sterilized and continuously monitored. Cans, made of aluminum alloy or tin-coated low-carbon steel, are lacquered internally to seal the metal and prevent corrosion from contact with the beverage. Soft drink manufacturers also recommend specific storage conditions to retailers to insure that the beverages do not spoil. The shelf life of soft drinks is generally at least one year.

Pepsi Processing Model “Input – Processing – Output Model

Input Supply i. Manage supply ingredients to ensure availability to produce products. ii. Maintain purified water supply for quality and availability to produce products. Manufacturing

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i. Ensure best technology is available to produce products and mix ingredients. ii. Ensure quick storage and inventory processes to maintain freshness and quality. Sales i. Determine demand by past sales and future marketing. ii. Adjust quantities produced in real time to meet appropriate demand. Output Supply i. Determine inventory of ingredients to order new supplies. ii. Maintain purified water supply so ensure continuance of production. Manufacturing i. Ensure proper packaging to ensure quality and freshness in products. ii. Maintain quick local distribution to ensure freshness and quality products. Sales i. Keep positive distribution levels to all sales outlets to maintain positive sales. ii. Meet any new demand or competition with products and consumer needs.”v

Ethical Stance Pepsi Cola has very strong ethical stance. From top management to lower level there is very high degree of ethical stance. The inside and outside of the organization it is strictly followed. Rules and sop’s are designed to make Pepsi ethical. Top management strongly believes that if we are ethical then our employees will be ethical. From CEO to downward line managers, everyone has its own ethical stance. 23

It is because of high standard of organization and image in the minds of stakeholders that Pepsi is better, creates the ethical environment. The employees who are working there feel proud to work in Pepsi. The morale of people is high enough that they don’t even bother to do any personal interest oriented thing. The cheating factor and other unethical things all are controlled by developing the high morale of the employees. There is monthly package for employees for Pepsi products available to them. They are trained for not committing any unethical conduct. Although there is chance of whistle blowing in every organization but Pepsi employees consider it their own organization so they have very strong ethical stance about their organization.

　　

Encourage Healthier Choices “In a world where people are both undernourished and overweight, we continue to expand our portfolio to better align with health and wellness wants and needs. In addition, we are investing in our products and rethinking how they are made—increasing the use of whole grains, fiber, fruits and select vitamins and minerals, while reducing saturated fat, sodium and added sugar. By doing so, we believe we will increase our global growth and enable customers and consumers to choose the nutritional benefits of healthier foods and beverages. Our increased commitments to nutrition education, more transparent labeling, responsible marketing, and partnerships advocating basic facts about nutrition and exercise help people and communities make healthier, more informed choices. And that will make for healthier people and healthier communities.”vi

The Stakeholder The stakeholders involved in taking Pepsi (local) to china are Internal stakeholders • The Shareholders of Pepsi •

Management at Pepsi

External stakeholders • The customers •

Suppliers of raw material

•

The government 24

•

Beverages Industry

•

Franchisers

•

Trade unions

•

Banks

•

Media

•

Competitors

Competitive Advantage Pepsi can only have competitive advantage due to innovation and technology. The brand name and logo are very important factors in this advantage. Moreover customer acceptance is also the key for competitive advantage. The strategy to improve technology and brand innovation are the drivers for competitive advantage. Pepsi has wide product range for its customers. Pepsi has its own juices(currently in Karachi and Lahore). More over the chips and other products also contribute to competitive advantage. “Innovation leads to competitive advantage”

Annexure 1 Specific Environment ( Annexure) Customer These are the stake holders who have expectation for the products and quality in those products. Customers are directly influencing the company by their response towards company and its products

Competitor: He is the person who is selling the same type of product in the market. The marketing concept states that to be successful, a company must provide greater customer value and satisfaction than its competitors do. Pepsi has a tough competition with Coca Cola while it faces a little competition with the local producers like RC Cola, Shandi Cola etc. The local producers hardly affect the sales of Pepsi in the market. Local competitor The local compactors of Pepsi in terms of cola products in Pakistan are as follow; 1. Mecca cola 25

2. Amrat cola 3. RC cola 4. Wezi Cola 5. Future cola 6. Gourmet cola 7. Double cola 8. Muslim cola 9. Shandi cola But in terms of mineral water the competitors are 1. 2. 3. 4.

Sufi water Dew drop Morning Mist Gourmet water

National Competitors 1. Coca Cola 2. Nestle International Competitors International competitors are competing Pepsi in whole world. The main competitor is Coca Cola. Although Pepsi came very late after the Coca Cola but it has captured a big share in the market. Following are the International Competitors of Pepsi, taken from Wikipedia encyclopedia.vii Major Competitor is Coca-Cola at international Level. In South and Central America Kola Real is the main competitor (known as Big Cola in Mexico). On the French island of Corsica, Corsica Cola, made by brewers of the local Pietra beer. In the French region of Brittany, Breizh Cola is available. In Peru, Inca Kola In Sweden, Julmust In Scotland, the locally produced Irn-Bru was more till 2005,viii In India, Coca-Cola ranked third behind the leader, Pepsi-Cola, and local drink Thums Up. Tropicola, a domestic drink, is served in Cuba due to a United States embargo. French brand Mecca Cola and British brand Qibla Cola, popular in the Middle East. In Turkey, Cola Turka is a major competitor. In Iran and many countries of Middle East, Zam Zam Cola and Parsi Cola are major competitors. In some parts of China Future cola is a competitor. 26

In Slovenia, the locally produced Cockta is a major competitor, as is the inexpensive Mercator Cola, which is sold only in the country's biggest supermarket chain, Mercator. In Israel, RC Cola is an inexpensive competitor. Classiko Cola, made by Tiko Group, the largest manufacturing company in Madagascar , is a serious competitor in many regions. Laranjada is the top-selling soft drink on the Portuguese island of Madeira.

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Supplier: He is the person who provides raw materials to the producers or sellers. Suppliers form an important link in the company’s overall customer value delivery system. They provide the resources needed by the company to produce its goods and services. PepsiCo International provides raw materials to Pepsi franchises in Pakistan. Supplier problems can seriously affect marketing. Marketing managers must watch supply availability i.e. supply shortages or delays, labor strikes and other events can cost sales in the short run and damage customer satisfaction in the long run. The company should monitor the price trends of their key inputs. Rising supply costs may force price increases that can harm the company’s sales volume. No.

Material

Manufacturer/ Supplier(s)

Approved from

1.

Pepsi Concentrate

PepsiCo Inc. Ireland & PepsiCo Factory in Hattar Estate.

Approval at the factory

2.

Caps & Closures

Gatron Pakistan Limited

Approved form PepsiCo China.

3.

Plastic Bottles

Galtron Pakistan Limited

Approved from PepsiCo China.

4.

Glass Bottles

5.

Carbonated Water

Baluchistan Glass Mills Tariq Glass Limited

Pakistan Bottlers (Pvt) Ltd.

Approved by PepsiCo China.

Approved from PepsiCo U.A.E, Dubai.

Distributor: Distributor maintains the image of the product and the sales in the market. If items are not properly placed by the distributor, it will disperse the market. CHANNELS OF DISTRIBUTION 27

The Pepsi uses the following two channels for the distribution of their products. Indirect Distribution Indirect distribution involves agency holders e.g. Riaz Bottlers Pvt. Ltd. Lahore franchise has divided its region i.e. Lahore and Kasur districts in two categories. Local Zone These are 62 agencies distributing Pepsi Products (250ml Sd) only around Lahore in their respective allocated sub zones. Out Station Zone 17 dealers have been appointed by the bottlers for far distant places and in out skirts of Lahore and Kasur the dealers involved in direct distribution are only authorized to sell 250 ml (STD) bottle of Pepsi, Team and Marinda. Direct Distribution The factory vehicles operate on 45 direct routes in Lahore selling non-returnable bottles Litter, Pet and Can.

Incentives Mainly two types of incentives are given by the Pepsi Cola: Incentive to Retailers Pepsi Cola provide various incentives to retailers on the best sales and achieving the predetermined sales targets. These incentives are in the shape of: Deep Freezers Return Tickets Free Transportation Services. Incentive to Dealers The best dealer of the year is awarded with a brand new Suzuki Pickup. The second best is awarded with Motor Cycle. The third best is awarded with Return Ticket to Middle East. Credit There is no credit system in the beverage industry. Every single bottle is sold on the cash basis. Special Offers Pepsi Cola gives special offers to consumers on special occasions like Ramadan and Eid days instead of decreasing the price of the products, some special packs like Pakkora Mix, Chat Massala, or Free Drinks with Liter Bottles are offered. 28

Product outflow Pepsi Cola International has given franchises all over Pakistan. These companies have installed their plants in different parts of Pakistan with these specified areas and names e.g. City

Name of Franchise

Karachi

Pakistan Bottlers

Lahore

Riaz Bottlers

Faisalabad

Punjab Beverage

Pepsi Cola provides consumers place utility which is, where ever and when ever you want it, you get it! Pepsi’s channel of distribution is very aggressive according to the consumers, manufacturers and distributors. Pepsi has 12 different units in different areas of Pakistan, which make the Pepsi easily available all over the country. The cities in which the Pepsi units are: Lahore Sukkur Karachi Multan Dera Ghazi Khan Islamabad Faisalabad Quetta Hyderabad Sahiwal Hattar Pepsi is an international brand so it also has other units in other countries of the world like America, Europe, Afghanistan, Middle East and Central Asia. The big advantage for Pepsi in Pakistan is that it distributes the product through bottlers. So bottlers’ effort also contributes in the promotion of Pepsi.

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Channels of distribution Direct Distribution　 Indirect Distribution Local Zone Outside Zone Direct Routs – 45 Authorized Dealers - 17 Agencies – 62

The Pepsi uses the following two channels for the distribution of their products. 1. Indirect Distribution Indirect distribution involves agency holders e.g. Riaz Bottlers Pvt. Ltd. Lahore franchise has divided its region i.e. Lahore and Kasur districts in two categories. Local Zone These are 62 agencies distributing Pepsi Products (250ml STD) only around Lahore in their respective allocated sub zones. Out Station Zone 17 dealers have been appointed by the bottlers for far distant places and in out skirts of Lahore and Kasur the dealers involved in direct distribution are only authorized to sell 250 ml (STD) bottle of Pepsi, Team and Marinda. 2. Direct Distribution The factory vehicles operate on 45 direct routes in Lahore selling non-returnable bottles Litter, Pet and Can.

General environment (Annexure) Economic Forces Inflation If the country faces inflationary trend in the market, the price of the Pepsi will ultimately increase which will lower its demand. Consumption Behavior Pakistan is a consumption oriented society. Due to demonstration effect the people are more inclined towards consumption than saving. So the people of

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Pakistan spent heavily on food items. Hence Pepsi has a good market share in the present circumstances. Income Distribution It means how much is in the hands of rich and poor class. In Pakistan 10% rich people posses 93% of wealth and 90% people posses 7% of wealth. If there is balanced distribution of income in the country, the consumption of the people will increase hence increasing the sales of beverages as well. Employment Opportunities As employment opportunities increase the living standard of the people increase and the people consume more. Aggregate Demand In case of Pepsi, aggregate demand of the product increases in the season of summer as the hot weather makes the consumers want to drink more. Aggregate Supply In summer season to cope up with the increasing demand they have to increase the aggregate supply of their product. Fiscal Policy It is the policy of taxes. If heavy tax is levied on Pepsi then its price will rise having negative effect on its consumption. Monetary Policy Monetary policy is made to restrict or increase the supply of money in the market. If policies are made to restrict the flow of money in the market, inflation can be controlled hence increasing the real income of the people which will ultimately affect the consumption of Pepsi. Technological forces These are the forces which are affecting the technological processes of Pepsi cola. These forces are often said to be affecting the production cycle of the company. The complete process of Pepsi manufacturing i.e. from filler tank to bottle filling and bottle filling to packing in all these processes there are forces e.g. energy providing for the operation. If the forces will affect largely (electricity shortage) then the resources will cost expensive to the company, and if they are not affecting a lot then resources will be cheaper. Political Forces POLITICAL STABILITY: 31

Whenever the government is considered to be stable, the business will flourish. If there is political stability in the country the policies and strategies made by Pepsi can be consistent to be implemented. Foreign companies are also keen to invest in those countries which are politically stable where they have no fear of decline in their market share or shut down due to sudden change of government. Mixed Economy In mixed economy government and private sector both plays their role in developing the economy of the country. Investment by foreign companies like Pepsi is more likely to flourish in mixed economy. Laws Formulation Government has given copy rights to Pepsi so that another company cannot sell their product by the name of Pepsi. The countries where laws are formulated, the strategies and activities of the company are different. Social Responsibility Pepsi’s social responsibility is to provide its customers with clean and hygienic product so to do this they have increased the use of disposable bottles. Social and cultural factors Psychographic It is a combination of demographic and psychological factors. Psychological attributes mean how you perceive things. The company will focus on the behavior of consumers and make different changes in their product quantity or quality and in promoting their product so that they can attract the customers. Keeping in view that the behavior of different consumers is not alike they have to make their marketing strategies in accordance with their requirements so that they are convinced to buy the product. Religious Religious factors can influence the market sales of Pepsi as it happened in 2003 when the U.S-led attack on Iraq, wide sections of society in Pakistan have banned American multinationals Coke and Pepsi Social Status Pepsi is a well renowned brand. People who are brand conscious will not drink beverages of lesser known brands such as Amrat cola. They will try to show their status by drinking Pepsi which is known to all as a quality drink. 32

Media It is a very important factor for marketing. Media these days is a very effective way of inspiring people to buy a specific product. A good promotion can boast up sales to a great extent.

ANNEXURE 2 Our Goals and Commitments Top line: • Grow international revenues at two times real global GDP growth rate. • Grow savory snack and liquid refreshment beverage market share in the top 20 markets. • Sustain or improve brand equity scores for Pepsico’s 19 billion-dollar brands in top 10 markets. • rank among the top two suppliers in customer (retail partner) surveys where third-party measures exist. Bottom line: • continue to expand division operating margins. • increase cash flow in proportion to net income growth over three-year windows. 33

• deliver total shareholder returns in the top quartile of our industry group. corporate Governance and values: • utilize a robust corporate Governance structure to consistently score in the top quartile of corporate Governance metrics. • ensure our Pepsico value commitment to deliver sustained growth through empowered people acting with responsibility and building trust.

Career: Provide opportunities that strengthen our associates’ skills and capabilities to drive sustainable growth. • become universally recognized through top rankings as one of the best companies in the world for leadership development. • create a work environment in which associates know that their skills, talents and interests can fully develop. • conduct training for associates from the frontline to senior management, to ensure that associates have the knowledge and skills required to achieve performance goals.

Community: Contribute to better living standards in the communities we serve. • Create local jobs by expanding operations in developing countries. • Support education through Pepsico Foundation grants. • Support associate volunteerism and community involvement throughcompanysponsored programs and initiatives. • Match eligible associate charitable contributions globally, dollar fordollar, through the Pepsico Foundation.

Facts about the company 　 1. Pepsi is a USA based public company whose stocks are available in New York. 2. Mountain Dew, acquired by Pepsi-Cola in 1964, switches its advertising and package graphics room hillbillies to action-oriented scenes. 3. The third Mountain Dew slogan appeared in 1973 "Put A Little Yahoo in Your Life." 4. PepsiCo acquired Pizza Hut, Inc. Pizza Hut was founded in 1958 by Dan and Frank Carney.

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5. Taco Bell is was acquired by Pepsi. Taco Bell was established in the mid 1960s by Glen Bell. 6. PepsiCo purchased Kentucky Fried Chicken, the leader in the quick service chicken market. KFC was founded by Colonel Harland Sanders. Colonel Sanders began franchising the company in 1952. KFC was spun off along with Pizza Hut and Taco Bell businesses as Tricon Global Restaurants, Inc. in 1997. 7. PepsiCo purchases Seven-Up International, the third largest franchise soft drink operation outside the United States

Executives Ms.Indra K.Nooyi Chairwoman, Chief Exec. Officer and Pres Mr. Richard Goodman Chief Financial Officer Mr. John Compton Chief Exec. Officer of North America and Member of Liquid Refreshment Beverage Oversight Council Ms. Cynthia M. Trudell Chief Personnel Officer and Sr. VP Mr. Donald M. Kendall Co-Founder 　

HEAD OFFICE PepsiCo, Inc. 700 Anderson Hill Road Purchase, NY 10577 United States. Phone: 914-253-2000 Fax: 914-253-2070 Web Site: http://www.Pepsico.com

Founders of the company The company was initially owned by late Nawab Saddiq Hussain Qureshi & family till 1989. The Pepsi International franchise declared the management incompetent, thus, the company was handed over to a new set of personnel. The factory set up was reorganized & re-established with expansion in various sectors. The Pepsi International did this by offering it to Mr. Jehangir Tareen, who formed up his new team. Mr. Jehangir Tareen is Nephew of General (late) Akhtar Abd-ur-Rehman.x

Executives Board of Directors:

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Mr. Akbar Akhtar Khan (Chairman) Mr. Haroon Akhtar Khan (Chief Executive) Mr. Gazi Akhtar Khan Mst. Rasheeda Begum Mrs. Mudina Akbar Khar Mr. Saifullah Khan Paracha Mr. Saeedullah Khan Paracha 　 Company Secretary Mr. Amjad Jhanzeb Khan Bankers Allied Bank of Pakistan Ltd. Citibank N.A. MCB NDFC The Bank of Punjab UBL Legal Advisor Cornehus, Lane & Mufti, Nawa-i-Waqat Building, 4-Shahrah-e-Fatima Jinnah, LHR.

Auditor Taseer Hadi Khalid & Co. Chartered Accountants. Mill Kanjawani, Tehsil Samundri, District Faisalabad.

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Registered office 31 – N, Gulberg II, Lahore, Pakistan. UAN: 111-724-725

Various products in Pakistani market PEPSI COLA, MIRINDA, TEEM, 7UP, MOUNTAIN DEW, DIET 7UP, DIET PEPSI, LAYS, KURKURE, AQUAFINA, PEPSI TWIST AND TROPICANA JUICES(introduced in Karachi only).

Product in spotlight: Pepsi Type: Pepsi Cola Manufacturer: PepsiCo Country of origin: USA Introduced: 1902 Ingredients: Amount per 100mL Energy 196.5 kJ Fat 0 g Sodium 0.98 mg Carbohydrates 11.74 g Sugar 11.04 g Protein 0 g Caffeine 10 mg

Interview of manager at Pepsi Riaz Bottles CH. ZAFAR SLAM SEYAN MANAGER PEPSI RIAZ BOTTLING, LAHORE, PAKISTAN 37

CELL # 0333-4454254 Important Questions which were asked 1. What is the name of organization? Give a short account of history of the company. Describe the way it has grown and developed. 2. Define organization’s mission and vision; also state its departments and functions, goods and services, and the type of value it creates. 3. Analyze the targets and goals according to the company’s annual report 4. Draw a stakeholder map that identifies your organization’s major stake holder groups. 5. Using company’s website draw picture of its hierarchy of authority. 6. Does the company have its divisional manager? What functional managers seem to be most important to the organization in achieving a competitive advantage? 7. What your organization tells you about ethical stance? 8. Draw the chart of your organization’s domain. List the organizations products and customers and the forces in the specific and general environments that have an effect on it. Which are the most important forces that the organization has to deal with? 9. How differentiated is your organization? Is it simple or complex? 10. List the major roles, functions, or departments? 11.What core competences make your organization unique or different from other organizations? 12.How do you know is it organization centralized or decentralized? 13.What can you tell about the level of formulization by looking at the number and kind of rules the organization uses? 14.How many people does the organization employ? 15.How many levels are there in the organization hierarchy? 16.How important is socialization in your organization? 17.Is the organization is tall or flat? 18.What is the span of control of CEO? 19.Is the span appropriate, or is it too wide or too narrow? 20.What beliefs and values seem to be characterizing the way people behave in the organization? How do they affect people’s behavior?

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21.Can you find a written statement of the organization on social responsibility? 22.What roles does technology play in the production of organization goods and services? 23.What is the organization level of technical complexity? 24.Does your organization uses a small batch, mass production or continues process technology? 25.What form of task interdependency between people and between department characterize your?

References

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i

Interview of CH. ZAFAR SALAM SEYAN, MANAGER AT PEPSI RIAZ BOTTLER,LAHORE,PAKISTAN Soda Museum - The History of Pepsi Cola, Saint Charles, Missouri (http://en.wikipedia.org/wiki/Pepsi) ii

From Hassan and Saima’s report Pepsi strategic Marketing, 2008 From Hassan and Saima’s report Pepsi strategic Marketing, 2008 iv http://www.madehow.com/Volume-2/Soft-Drink.html v Jim Danenberg, Pepsi processing,2008, Western Michigan University vi Pepsi Annual Report 2009 vii http://en.wikipedia.org viii Murden, Terry (January 30, 2005). Coke adds life to health drinks sector. Scotland on Sunday. Retrieved February 14, 2006 ix Wikipedia.org x From Hassan and Saima’s report Pepsi strategic Marketing, 2008 iii