Final report

On

Introduction to Business
Course Facilitator
ain Shah

Ms. Qurat-ul-

Group Members

Reg. No.

M.Maaz Ali Siddique

5689

Asif Nawaz
Waqar Uddin

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Table of Content

Topic
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.

Page no.

Introduction
Product and Services
Internal and External environment
11
Operations/departments
13
Organization Structure

3-4
5

SWOT Analysis
Managerial Function
Competitive Advantage
Conclusion & Recommendation
20

15-17
18
19

61214

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I.

Introduction

PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay. Pepsi-Cola
was created in the late 1890s by Caleb Bradham, a New Bern, N.C. pharmacist. FritoLay, Inc. was formed by the 1961 merger of the Frito Company, founded by Elmer Doolin
in 1932, and the H. W. Lay Company, founded by Herman W. Lay, also in 1932. Herman
Lay, former chairman and CEO of Frito-Lay, was chairman of the board of directors of the
new company; Donald M. Kendall, former president and CEO of Pepsi-Cola, was president
and chief executive officer. The new company reports sales of $510 million and has
19,000 employees. Major products of the new companies are:
Pepsi-Cola Company: Pepsi-Cola (formulated in 1898), Diet Pepsi (1964) and Mountain
Dew (introduced by Tip Corporation in 1948).
Frito-Lay, Inc.: Fritos brand corn chips (created by Elmer Doolin in 1932), Lay's brand
potato chips (created by Herman W. Lay in 1938), Cheetos brand cheese flavored snacks
(1948), Ruffles brand potato chips (1958) and Rold Gold brand pretzels (acquired 1961).
Pepsi in Pakistan
Pepsi 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. It is consumed by all age groups because of its unique taste. Compared with other Cola in the
market, it is a bit sweeter. Consumers survey results explain the same outcome and Pepsi has been declared as
the most wanted soft drink of Pakistan.
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, 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.
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
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However they have produced pepsi cola, mirinda, 7up, mountain dew, diet 7up, diet pepsi,
lays, kurkure, aquafina, and pepsi twist and tropicana juices.
Pepsi has 12 different units in different areas of Pakistan, which make the Pepsi easily available all over the
country i.e. Lahore, Sukkur, Karachi, Multan, Dera Ghazi Khan, Islamabad, Faisalabad, Quetta, Hyderabad,
Sahiwal, Hattar.

Mission Statement
Our mission is to be the world's premier consumer Products Company focused on
convenient foods and beverages. We seek to produce financial rewards to investors as
we provide opportunities for growth and enrichment to our employees, our business
partners and the communities in which we operate. And in everything we do, we strive
for honesty, fairness and integrity.
Vision Statement
Our vision is put into action through programs and a focus on environmental
stewardship, activities to benefit society, and a commitment to build shareholder value
by making PepsiCo a truly sustainable company. 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.

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II.

Products and Services

Pepsi Co is a global food and its products are found in nearly 200 countries around the
world. PepsiCo's soft drinks (including Pepsi, Mountain Dew, and Slice) make up about
one-quarter of its sales. (Bottling operations are run independently). Pepsi Co also owns
Frito-Lay, the world's number 1 maker of snacks such as corn chips (Doritos, Fritos) and
potato chips (Lay's, Ruffles, WOW!). PepsiCo sells its Gatorade sports drink and Tropicana
orange juice brands through other divisions. The company also sells Aquafina bottled
water, Dole juices (licensed), Lipton ready-to-drink tea, and Rold Gold pretzels. Pepsi's
mission is to be the world's premier consumer products company focused on convenient
foods and beverages. They seek to produce healthy financial rewards to investors as we
provide opportunities for growth and enrichment to our employees.
As of January 2012, 22 of PepsiCo's product lines generated retail sales of more than $1
billion each, and the company's products were distributed across more than 200
countries, resulting in annual net revenues of $43.3 billion. Based on net revenue,
PepsiCo is the second largest food & beverage business in the world. Within North
America, PepsiCo is ranked (by net revenue) as the largest food and beverage business.
The most recently created operating division of PepsiCo covers Asia, the Middle East and
Africa. In addition to the production and sales of several worldwide Pepsi-Cola, Quaker
Foods and Frito-Lay beverage and food product lines (including Pepsi and Doritos), this
segment of PepsiCo's business markets regional brands such as Mirinda, Kurkure and Red
Rock Deli, among others. While PepsiCo owns its own manufacturing and distribution
facilities in certain parts of these regions, more of this production is conducted via
alternate means such as licensing (which it does with Aquafina), contract manufacturing,
joint ventures and affiliate operations.
In Pakistan It also has proved itself to be the No.1 soft drink. Now days Pepsi is
recognized as Pakistanis National drink 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
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promoting new ideas and product packaging, is successfully maintaining is No.1 position
in Pakistan. 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."

III. External and Internal Environment

External Environment:

I.

The macro environment consists of the larger common forces that affect the
microenvironment. The external factors are not under the control of the marketers; they
can just observe them and make strategies in light of these factors. Some of these
factors are given below:
DEMOGRAPHIC FACTORS

Aging

People in the majority of countries still appear to favor carbonated drinks due to health
conscious such as fruit juice and mineral water; where as in the above figure it shows
how aging factors contribute towards drinks.

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Education

Education is a factor that affects the company / product so company has to make
promotional strategies keeping in view the customer level. If the percentage of education
is high in a country then through advertisements people can be made well aware of their
product and can convey their message easily. Promotion and education has a direct
relationship.

Population Distribution

Population distribution means how much population lives in urban areas and rural areas.
In Pakistan 35 % population resides in urban areas and 65% population lives in rural
areas. Pepsi is focusing on urban areas as people there are more inclined towards such
beverage while people in rural areas are more inclined drinking lassi and desi drinks.

Population Density

It means number of people in one square km per area. Karachi has the largest population
density and Islamabad has less population density in Pakistan. Pepsi sales are more in
Karachi as compared to the sales in Islamabad.

ECONOMIC FACTORS:

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 Pakistan spent heavily
on food items. Hence Pepsi has a good market share in the present circumstances.
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Aggregate Demand

In case of Pepsi, collective 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.

Economic Policies

Some of the economic policies which can affect the market of Pepsi are discussed below:
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.
PHYSICAL FACTOR:

Region

Pakistan is divided into different geographical regions. Marketing and sales of Pepsi is
different in different geographical regions. In hot areas its demand is more.

City Size

The cities which are heavily populated the consumption of Pepsi is more.

Infrastructure

Roads are the basic need for transportation of Pepsi from one place to another. Pepsi
cannot open factories in every city of Pakistan so it has to transport it to other cities
where Pepsi is demanded.
Technological Factors:

Research and Development

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Through research and development quality of the product can be improved or better
techniques or machinery can be developed which can increase the production. When
technology is advance the supply of the product increase hence the company
experiences growth in their business.
Political and Legal Factors:

Political Stability:

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

Pepsis 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
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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.
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

II.

Internal Environment

Customers:

There are three types of customers

1. Consumer
2. Business
3. Government

Pepsi main focus is the consumers which are the end users. Pepsi has to make its
marketing strategies keeping in view the consumer buying behavior. To forecast the
behavior of the consumer is a business problem. Consumer buying behavior is affected
by certain factors like Cultural factors, Social factors, Personal factors and Psychological
factors. So the producer should keep these factors in Mind while promoting their product
so that they can acquire the customer and increase their market share.

Consumer buying behavior process:

Consumer buying behavior process is explained in some steps which are discussed
below:
1. Need Identification
The consumer is thirsty and he wants to quench his thirst.
2. Information Search
He will search as to what will satisfy his thirst the most.
3. Evaluation of Alternatives
He will now evaluate from the wide range of beverages available to him that which one
of them is suitable to him in terms of quality, taste and is pocket friendly.
4. Selection
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After evaluating the product he will select a product.

5. Purchase
The consumer will buy the selected product.
6. Post-Purchase Experience:
It is the experience that the consumer gets after using the product. He will use the
product again if he feels that his satisfaction after use is more or equal to the price of the
product.

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
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.

Balochistan Glass Mills

4.

Glass Bottles
Tariq Glass Limited

5.

Carbonated
Water

Pakistan Bottlers (Pvt) Ltd.

Approved by PepsiCo
China.
Approved from PepsiCo
U.A.E, Dubai.

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.

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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.
There are different types of competitor in the market. Some of them in which our product
lies
are
discussed
below:
Close Vs Distant Competitor
Pepsi and Coke are close competitors. It means that both have direct competition in the
market, their products are close substitutes for one another. Both the products can
influence the market share of one another through effective strategies made to cope up
with their competitors.
Pepsi cola and Nestle juice are distant competitors of one another. It means that their
products satisfy the same want but they are in indirect competition with one another.
Strong Vs Weak:
Coca Cola and Pepsi are strong competitors. In Pakistan Pepsi is the market leader and
Coca Cola is its competitor. The Pepsi makes defense strategies so that it can maintain
its position in the market. While Coca Cola is a challenger and it makes attack strategies
so that it can become the market leader.
Pepsi and Shandi Cola are weak competitors. Pepsi is the market leader and Shandi Cola
is the follower. Pepsi is not in direct competition with the Shandi Cola. It means that
Shandi Cola has little effect on the sales of Pepsi.

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
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.
a) Local Zone
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These are 62 agencies distributing Pepsi Products (250ml Std) only around Lahore in
their respective allocated sub zones.
b) 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 and Marinda.
2. Direct Distribution
The factory vehicles operate on 45 direct routes in Lahore selling non-returnable bottles
Litter, Pet and Can.

IV.

Operations/Departments

1. Production Department
Production department is producing the product in various processes. The production
team is deciding production plan. The production team is responsible for planning the
production & maintaining the resource availability i.e. (Men & Material).The various
activities in production are planning, water treatment syrup preparation bottles
inspection, filling, crowning, coding, filled bottle inspection and casings.
2. Marketing Department

Finding the marketing demand

Satisfying customers needs
Maintaining proper relation between company and dealers
Fulfilling the gap between the finished goods and sales

3. Human Resource Department

Human Resource department plays a role in maintaining the industry and its people to
stay in peace & unity. This department has to take up the responsibility of keeping the
W.R. in a warm comfort, for which they have to look after all the work, is starting from
industrial relation to housekeeping. Human Resources department is very essential & as
to be handled with care since it is a very sensitive area.
4. Finance Department
The finance department has to make payment whenever it is needed. The purchase
department purchase materials in consultation. The PepsiCo Company is automated and
follows the procedure in SAP (System Application Product).
Functions of finance department are:Page | 13

a.
b.
c.
d.
e.
f.
g.

Purchase Accounting.
Material issue.
Distribution and selling
Branch
Auditing
Sales tax
Quality Control Department

5. PURCHASE DEPARTMENT
Purchasing refers to a business or organization attempting to acquire goods or Services
to accomplish the goals of the enterprise. Though there are several organizations
that attempt to set standards in the purchasing process, processes can vary greatly
between organizations
6. Shipping Department

To
To
To
To
To

receive order
maintain the record of glass bottles
appoint the fork lift operator
maintain the stock status report
prepare a production plan

7. QUALITY CONTROL DEPARTMENT

PepsiCo follows one quality standard across the globe. PepsiCos soft drinks meet
the Pakistan Standard Test.

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V.

Organization Structure

Pepsi adopted a divisional organization. Operations were departmentalized by product,

by location and by location.
It is organized into three business units, as follows:

P
A

PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA),
Quaker Foods North America (QFNA) and all of our Latin American food and snack
businesses (LAF), including our Sabritas and Gamesa businesses in Mexico;
PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages North
America and all of our Latin American beverage businesses; and
PepsiCo International (PI), which includes all PepsiCo businesses in the United
Kingdom, Europe, Asia, Middle East and Africa.

e
m

s
e

O
i C

r i c

o
a

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VI.
i.

SWOT Analysis

Strengths:

Product diversity

PepsiCo has several hundreds of brands, which include: carbonated and noncarbonated drinks, water, savory
and whole grain-based snacks. Product diversification strengthens PepsiCo because it doesnt have to rely on
few key products or seasonal sales and isnt significantly affected by changes in customer tastes.

Extensive distribution channel

PepsiCo products are served to more than 10 million stores per week in more than 200 countries.

CSR

The firm recognizes its role in a society and engages in education, recycling, water usage reduction, obesity
fighting and other projects through PepsiCo Foundation, thus increasing its brand awareness and customer
loyalty.

Competency in mergers and acquisitions

The key to PepsiCo business growth is its successful mergers and acquisitions of beverage, bottling and snacks
companies. PepsiCo acquired such brands as Gatorade, Tropicana, Doritos, Quaker Oats and many others.

22 brands earning more than $1 billion a year

The company doesnt have to rely on one or two of its product to bring most of the revenues. Instead, Pepsi has
22 brands that contribute significantly to its income, serving different industries and satisfying various
consumer tastes.

Successful marketing and advertising campaigns

More than $2 billion spent on advertising over 2012 resulted in PepsiCos growing market share over its main
competitors, including Coca Cola Company, which spent even more on advertising.

Complementary product sales

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In its annual financial report, PepsiCo revealed one of its studies' results that about 30% of customers who buy
its snacks also buy its beverages. PepsiCos decision to diversify its product range is firms competitive
advantage too.

Proactive and progressive

According to New York Times food industry writer Melanie Warner, PepsiCo, by many critics, is considered to
be most proactive and progressive food company.

ii.

Weakness:

Overdependence on Wal-Mart

More than 13% of PepsiCo business revenues come from Wal-Mart store chain. Wal-Mart has a significant
buyer power and can easily dictate prices over PepsiCo leaving it with very small margins. In addition, if
PepsiCo would lose Wal-Mart it would lose 13% of its revenue and competitive advantage.

Low pricing

PepsiCo usually prices its products lower than its competitors. Low price is associated with low quality and
PepsiCo products are usually perceived as ones.

Questionable practices

PepsiCo is using and selling tap water but places view of mountains on its water bottle labels, thus deceiving
people that it is mountain spring water when it is not.

Weak brand awareness

The Coca Cola Company has the largest share market of beverages in the world and much stronger brand
awareness than Pepsi, placing it at competitive disadvantage.

iii.

Opportunities:

Growing beverages and snacks consumption in emerging markets

PepsiCo has made large investments in BRIC countries to expand its market share as these countries represent
the fastest growing food and beverages markets in the world. If PepsiCo is successful it will increase its
revenues and global market share significantly. In addition, it will be able to rely less on US market.

Increasing demand for healthy food and beverages

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Due to many programs to fight obesity, demand for healthy food and beverages has increased drastically.
PepsiCo has an opportunity to further expand its product range with beverages and snacks that have low amount
of sugar and calories.

Further expansion through acquisitions

So far, PepsiCo has been successful in acquiring other companies and adding new growing brands to its
portfolio.

Savory snacks consumption growth

The same opportunity PepsiCo has in growing its revenue selling snacks as this market is also expected to grow.

iv.

Threats:Changes in consumer tastes

Consumers around the world become more health conscious and reduce their consumption of carbonated drinks,
drinks that have large amounts of sugar, calories and fat.

Water scarcity

Water is becoming scarcer around the world and increases in both cost and criticism for PepsiCo over the large
amounts of water used for production.

Decreasing gross profit margin

PepsiCos gross profit margin was decreasing over the past few years and may continue to decrease due to
higher water and other raw material costs.

Legal requirements to disclose negative information on product labels

Some researches show that particular ingredients, consumed in extra large quantities, in some of PepsiCo
products could cause cancer. For this reason, many governments consider to pass legislation that requires
disclosing such information on product labels. Products containing such information may be perceived
negatively and lose its customers.

Strong dollar

More than 50% of PepsiCos income is from outside US. Due to strong dollar performance against other
currencies PepsiCos income should fall.

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vii.

Managerial Function

Managerial Functions of PepsiCo:

a)

Planning
Organizing
Leading
Controlling
Planning

GOAL to beat competitors and to improve quality

Centralized decisions
Traditional goal setting technique
Formal Planning
Handle unusual situations by conducting special meetings with employees
b) Organizing
Work specialization
Team work
Low managerial levels
Training of employees
c) Leading
High level of motivation
Bonus and salary packages
5Kg sugar on Eid-ain
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Profit Allowance
Travelling allowance and daily allowance
d) Controlling
Audit of accounts
Top level management has proper check and balance on lower level management
Each manager has one assistant manager to check the performance of staff employees
How to solve conflicts between employees?

viii.

Competitive Advantage

Core Competency and Sustainable Competitive Advantage

In terms of competitive advantage PepsiCo seeks to achieve against its competitors are:
1) Provide a distinctive, high-quality one-calorie soft drink and to provide a highquality citrus soft drink using Pepsi Companys distinct ingredients to appeal and to
excite contemporary tastes for these products.
2) Deliver these soft drinks to the customer using effective manufacturing and
distribution systems that maintain PepsiCos quality standards. To translate these
core competencies into a sustainable competitive advantage PepsiCo. Will work
closely with key suppliers and distributors to build the relationships and alliances
necessary to satisfy the high taste standards of our customers.

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ix.

Conclusion & Recommendation

Today we live in a fast moving world where innovation and newness count a lot. One
cannot rest on ones success. And companies are doing a lot of promotional activities to
let the product remain in the market. It holds a large share of the market and whenever
the sales state declining, the company can improve it by different promotional activities.
However marketers of Pepsi should improve sales by improving marketing strategies e.g.
they can cut prices to attract more users and competitors customers, can also launch a
better advertising campaign or use more aggressive sales promotion to improve the
sales.
The requirements of different age groups are different. Pepsi should target that age
group that consumes it the most and make promotional strategies according to their
behavior. As consumer view a brand name as an important part of the product. Branding
can add value to the product. A name, term, sign, symbol or design or a combination of
these intended to identify the goods and services of one seller or group of seller and to
differentiate them from their competitors.
In the end we conclude that Pepsi Co. is almost covering all essential parts of being a
strong Organization by having a strong Management System but still it is not Completely
Decentralized MNC in Pakistan as final Decision power is with Pepsi Cola International
and they are still facing some serious problems Issues regarding H.R.M.

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