Discuss about the Organizational Policy and Strategic Management.
PepsiCo organization is one of the most effective organizations operating in the drinks and beverage industry. The organization has managed to achieve its current level of effectiveness through effective management strategies that its management has instituted throughout its operation since its establishment in the year 1965. Like all other organizations, therefore, PepsiCo’s success is associated with good management and leadership throughout the organization, which enables it to expand its operations beyond local boundaries and still manage to have success in its operations. Over time, a large number of organizations have made attempts to join the industry, but it has become extremely difficult for them to manage to compete with this organization in the industry and obtain a share of its already fully established market. An assessment of the many management aspects that have helped this organization achieve its level of effectiveness that it has achieved so far can help in determining the importance of effectiveness in organizational management. This assessment is carried out in this paper, which helps in understanding how effectively management strategies theories can be applied in practice.
PepsiCo, Inc. is one of the most popular and highly ranked food and beverage companies in the world. It is based in the United States and was established in the year 1965 after two organizations, Pepsi-Cola Company and Frito-Lay, Inc. merged. Since this establishment, the organization has been developing significantly through expansion and acquisition of much other existing organization to the current level that it is today. The organization’s main acquisition that significantly increased its revenue and general rank is the acquisition of Tropicana Products a fully known and popular organization which took place in the year 1998.
An important aspect of this organization is the products that it stocks and sells to a large number of individuals over time. The first main brand which provides the organization with a large amount of revenue is the Pepsi Brand. This brand has a large number of drinks like the Pepsi drink among other products, and it provides more than 15 billion dollars in revenue for the organization. The Pepsi Brand is thus the main product that the organization offers to its customers. Other brands that are also important and contributes significantly to the gains of the organization is the Mountain Dew brand, Gatorade products obtained from the Tropicana acquisition and the Lay’s Potato chips products. These brands of the organization are the other brands that also provides a significantly large number of revenue for the organization. Having a significantly large number of products that it offers for purchase to its customers makes PepsiCo stores centers for attraction to all customers that seek refreshments or fast foods and thus due to this strategy the organization manage to achieve significantly high gains and loyal customers that only prefer its products to those of competitors.
PepsiCo Company had managed to expand its operations to more than 200 countries by the year 2012. Its brand products in this year managed to generate revenue of more than one billion dollars per piece, an aspect that of significant success to the organization considered that it has a large number of brand pieces. The organization managed to obtain a general annual net revenue of 43.3 billion dollars. Considering the aspects of net revenues, therefore, this organization is the second largest food and Beverage Company in the world after the Coca-Cola Company. The organization distributes its products but also hires other licensed bottlers which help in distributing some of its products to ensure that time deadlines of company product deliveries are met. The organization had managed to employ about 274, 000 employees by the year 2013 (Bailey, 2014).
In PepsiCo, governance is one of the most important aspects that all individuals significantly value. Like all other organizations, it is headed by the CEO of the organization, Indra Nooyi, who has been its Board’s chairperson and also the leader of the organization since the year 2006. After the CEO, the other important management body of the organization is the board of directors. The board makes significant contributions towards the making of important decisions of the organization. Although the organization selects the best and most qualified individual to become its leader, there is the belief that any leader requires guidance and that giving an absolute power of an organization to a single individual may not be the most appropriate action that any organization should take. Due to this reason, the main decisions of the PepsiCo organization are made by the board of directors, which is chaired by the CEO of the organization. This aspect makes the CEO of the organization the main organizational decision maker, whose power is also controlled by the board of directors (Steiss, 2003).
The board of directors of PepsiCo organization, therefore, must consent for any major decision to be made in the organization. This aspect makes the management of the organization effective and easy since the burden of making decisions is not on only a single individual. Apart from the board of directors, there is also the immediate organizational management which consists of the organizational employees that are highly ranked in the organization. This is the section of the management that is tasked with the responsibility of establishing effective operational strategies of the organization since the strategies help the organization maintain its market share and competitiveness. The CEO of the organization also heads this section of the management. After this management obtains an appropriate opportunity that the organization should take, it then provides an explanation of that decision to the board of directors who vote towards the establishment and making of this effective decision in an appropriate manner. PepsiCo. The organization has been utilizing this form of management strategies to manage to achieve the success that it has achieved in its industry (Sherman, Rowley, & Armandi, 2006).
Cost and differentiation enable any organization to obtain a competitive advantage over its competitors. When the organization manages to differentiate its products to the extent that all individuals attain the ability to define an organizational product and differentiate it from the products of its competitors, that organization provides an opportunity for customers to prefer its products over those of the competitors. The other important step to consider, however, is ensuring that the newly obtained tastes and form of the differentiated products are preferred over those of the competitors. Pepsi utilizes its manufacturing and branding capabilities to differentiate its products from those of the competitors and also ensure that those products are preferred to those of the competitors (Choo, & Bontis, 2002).
The first main source of differentiation advantage for the PepsiCo organization is the fact that the organization manufactures some of its products. With the choice of manufacturing in place, the organization attains the ability to manufacture products according to its designs and ideas, which can be significantly different from what is offered in the market. Since the organization also embrace the use of technology for data analysis among other customer preference determining purposes, it can determine the tastes and preferences of customers and the rationale behind those decisions. This aspect makes the organization completely effective in the operations of providing to the market the products that majority of the customers are interested in purchasing compared to the products offered by its competitors. With this regard, the organization attains the ability to have a large number of loyal customers that only purchase its products (Sadler, 2003).
The other main source of differentiation and cost advantage for the organization is its large revenue and number of investors, which gives it the ability to manufacture and handle products in bulk. Like the case of all other organizations, PepsiCo organization enjoys the advantage of making product products in bulk and thus it obtains the ability to offer significantly low prices compared to most of its competitors. The aspect of having products that are easily manufactured and those that can be offered to the market at significantly low prices attract both customers and organizational investors. With this regard, this advantage helps the organization to increase its effective operation and improve significantly.
The foods and beverage industry is one of the most competitive industries that are in existence. Even being the second largest company operating in this industry in the world, Pepsi still faces stiff competition from its main competitor, The Coca-Cola Company, and other local organizations in the countries where it operates. The Coca-Cola Company is currently the leading organization in this industry by revenue. This provides the organization with more resources and capability to implement many strategies of operation, which makes it a significant competitor for the organization. One of the main ways through which Pepsi utilizes in competing with Coca-Cola is through differentiation of operations and improvement of service delivery. This strategy is highly effective because customers prefer the organizations that provide them with high-quality services and also provides them with their tastes and preferences in the tastes offered (DB Hoovers, 2017).
Apart from Coca-Cola Company, Pepsi also face competition from many other organizations in some of the regions where it operates, with majority of these other competitors being local companies of different regions. The aspect of being a local company makes the organizations have more advantages of operation, thus increasing their competitiveness towards PepsiCo. A strength that Pepsi have over these other competitors, however, is its large revenue and financial capabilities and effective operational strategies that are considered much better compared to the local companies. The brand name of the organization is also the other major aspect that majority of the organizations aim to have nut it becomes extremely difficult for them to manage to achieve a similar level of effectiveness like the organization. With these two main aspects, Pepsi still manages to remain significantly competitive even in these other regions where a large number of organizations operate. (CSIMarket, 2017).
From this diagram, it is clear that the organization has managed to achieve a significantly large market share which enables it to be considered among the best organizations operating in this industry. The Coca-Cola Company has the largest market share thus making it the largest competitor of the organization. To increase profitability and gains, therefore, PepsiCo requires formulating operational strategies that will enable it to manage to implement effectiveness of operation and improve its competitiveness over that of the Coca-Cola Company. The organization should also aim to attain improvements to remain significantly ahead of the rest of the competitors in this industry, an aspect that will help in ensuring that it remains completely effective and capable of operating in an appropriate manner (Heracleous, 2003).
The value chain of an organization refers to the process of analyzing the means through which an organization manage to deliver value to its customers. For PepsiCo organization, the value chain is significantly large since it is to it that the organization has managed to implement effectiveness in an appropriate manner. To begin with, the organization begins its value provision process by the manufacturing of majority of the products that it offers. The manufacturing process is first determined by the management, which defines the product to be manufactured and the means through which it will be manufactured. This manufacturing aspect provides the organization with an opportunity to obtain a competitive advantage since it is in this section that it defines the tastes and preferences of the products in production. Tastes and preference of the product significantly define the number of customers who will willingly purchase the products at hand and the means through which they will initiate this purchase.
After the management initiates this process, the next main process is the activity of packaging and branding the manufactured products. The process of packaging and branding simply ensures that the products obtain the brand of the organization thus giving them the opportunity to be associated with the strong brand of the organization. The other important value chain aspect is product distribution. PepsiCo utilizes organizational resources for the process of transportation and also considers hiring other transportation methods to meet its transportation and distribution objectives. An improvement in this area has the potential of giving the organization a cost competitive advantage. Distribution is one of the areas that the organization spends a large sum of money in. With this regard, an assessment of whether the organizational transportation or the hired transportation is more cost effective should be made, and then the organization should adopt one method that is considered to be much better. By so doing, this value aspect could help in ensuring that the organization obtains another competitive advantage (Durand, 2006).
After the products have been transported to the organization’s storage units and market stores, the other important step is sales and marketing of the products. In this section, the organization also managed to obtain a competitive advantage. When there is effective marketing of products and sales are carried out effectively, all organizations manage to make effective sales. When a group of organizations is competing, therefore, the organization with the most effective marketing and sales strategies, therefore, manage to make the most sales. From the strong brand that PepsiCo has already managed to establish, it is clear that it has been utilizing effective marketing strategies which makes it among the best in its operations. The other important aspect of consideration with this organization is its ability to have loyal customers. This group of customers helps organizations manage to have a regular amount of income since they only purchase from its products on a regular basis. With this regard, therefore, the organization can obtain a competitive advantage in almost all its value chain aspects.
A VIRO analysis seeks to answer four main questions regarding the organizational resources. The first question is whether the organizational resources are valuable. The other question is whether these resources are rare and the other whether they are costly to imitate. The last question is whether the setting and organizing of the organization are capture the value of these resources. For the aspect of valuableness of the resources, to begin with, it is clear from the high ranking and revenue of PepsiCo that its resources are significantly valuable. It is extremely difficult for any starting firm to obtain such highly valued resources. For the question of whether the resources are rare, PepsiCo resources and strategies are extremely difficult for any other organization to obtain easily. The organization began as a significantly small store, which utilized these aspects of development for improvement. Currently, a large number of organizations begin with even more resources but still do not manage to achieve the level of effectiveness that PepsiCo has already achieved. With this regard, therefore, the organization’s resources are rare for any organization to obtain easily.
Imitation is another aspect that is extremely difficult for other organization to manage. To imitate the products that Pepsi manufactures, these other organizations require having equal or more resources for the manufacturing process and strategies which the organization utilizes to successfully manufacture its products. While the strategies may easily be obtained, it is extremely difficult to obtain similar resources and financial capability to imitate the operations of the organization. The setting of the organization, being the last main query of the VIRO analysis is an important aspect to consider. To begin with, the organization’s setting has been shaped by the operations that it involves in and the current level of operation that is associated with. With this understanding, therefore, it is clear that the setting of the organization is organized in a manner through which it can fully capture the value of its resources (Morning Star, 2017).
Like all other organizations, the establishment of a certain number of improvement strategies could help PepsiCo improve its competitiveness and market share, an aspect that is considered beneficial to both the organization and its investors. The first recommendation of improvement is to establish a brainstorming and innovation program in the organization for its employees through which they will provide their improvement ideas on how the organization can increase its competitiveness. This program will encourage employees to provide the organization with their ideas, and thus as their motivation of work increases, the organization will also increase chances of increasing effectiveness from ideas by its employees. The other important recommendation for the organization to expand further and penetrate other markets, to increase its market share and customers targeted, an aspect that will significantly increase the number of sales that it manages to make over time. This aspect will be significantly beneficial and appropriate for a large number of individuals (Higgins, 1979).
Conclusion
PepsiCo is one of the most effective organizations operating in the food and beverage industry. This organization can retain the effectiveness of operation and ensure that all individuals remain completely capable of operating effectively over time. The organization, however still faces a large number of challenges in its operations, which makes it limited in the gains that it obtains and still maintains it as the second largest organization in its industry. Implementation of some management strategies can, however, help this organization to manage improving its position and even become the leading organization revenue and market share in this region. An example of such a recommendation is a further expansion to many other unpenetrated markets which will increase its sales and gains. An improvement of management strategies is thus the main goal that the organization has, which can help in its general improvement (Cattani, 2011).
References
Forbes, (2012). Earnings Preview: PepsiCo: Forbes. Retrieved from https://www.forbes.com/sites/narrativescience/2012/04/23/forbes-earnings-preview-pepsico-2/#7b81d5e72377
Morning Star, (2017). PepsiCo Inc PEP Morningstar Rating: Morning Star. Retrieved from https://financials.morningstar.com/competitors/industry-peer.action?t=PEP
DB Hoovers, (2017). PEPSICO, INC. Competition: D&B Hoovers. Retrieved from https://www.hoovers.com/company-information/cs/competition.PEPSICO_INC.181bc9ec322b6dc0.html
Bailey, S. (2014). PepsiCo: A company overview: Market Realist. Retrieved from https://marketrealist.com/2014/12/pepsico-company-overview/
CSIMarket, (2017). Pepsico Inc’s Comment on Competitors and Industry Peers: CSIMarket. Retrieved from https://csimarket.com/stocks/compet_glance.php?code=PEP
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