While operating their business in international markets, enterprises have to comply with appropriate legal structure in order to ensure that they did not breach their legal duties imposed by the country. The regulatory framework which is established by a country is necessary to comply by multinational organisations while operating their business in the respected field which include government treaties, relevant legislation, conventions and legal agreements. In this report, the legal framework which is complying with PepsiCo while operating its business in Australia will be discussed. Various agreements, treaties and conventions which affect the business of PepsiCo in Australia will be evaluated in the report as well.
PepsiCo is an American multinational enterprise which operates in food processing and beverages industry. The company was founded in 1898, and it offers its services worldwide (PepsiCo, 2018a). The corporation is known for its cold beverages which are globally recognised, and it is the main competitor of Coca-Cola. The corporation has gained success across the globe due to its effective manufacturing, marketing and distributing techniques. In the 2017 financial year, the corporation reported revenue of US$63.53 billion (Statista, 2018a). The company own some of the most popular companies and products such as Lay’s potato chips, Cheetos, Mirinda, 7 Up, Mountain Dew, Gatorade and others. Currently, the CEO of the company is Indra Nooyi who has been managing its operations since 2006. In Australia, PepsiCo is popular as it is the main rival of Coca-Cola. The company offers its products throughout Australia which can be purchased by customers in their nearest shops, cafes and supermarkets (PepsiCo, 2018b). The company has been operating in Australia for several decades, and its business in Australia and New Zealand is categorised into four main units which include Bluebird Foods, the Smith’s Snackfood Company, PepsiCo Beverages and the Quaker Oats Company (PepsiCo, 2018c).
PepsiCo operates in food processing and beverages industry and globally it is made up of many segments which include functional foods and beverages, health and natural foods, oils and fats, groceries, soft drinks, energy drinks, packaging and others. In 2017, the industry has reported revenue of $5650 billion globally (Cision, 2018). In previous few years, the popularity of natural foods and ingredients has increased substantially which covers a substantial part of the overall revenue of the industry. In the case of Australia, the food and beverage industry has reported revenue of US$279 million in 2018, and it is expected to grow up to US$460 million by 2022. The penetration is 17.5 percent is 2018 which is expected to grow up to 20.4 percent by 2022 (Statista, 2018b).
Globally, PepsiCo has over 264,000 employees working in different facilities of the company situated across the globe. In Australia and New Zealand, the company has employed over 2500 employees in four of its business units (PepsiCo, 2018d).
The headquarters of the company is situated in Purchase, New York (PepsiCo, 2018a). The corporation manages all its operations from its headquarters and forms future policies to expand its operations in more locations.
While operating their business in Australia, international organisations have to comply with local rules and regulations. The senior level executives of the corporation have to focus on implementing policies to ensure that they did not violate any local laws while ensuring the compliance with relevant legislation. PepsiCo is one of the biggest beverage companies in Australia, and it provides its services across the nation. The main objective of the corporation is to implement policies to bring diversity to the workforce. Avoiding discrimination in the workplace is a key focus for the senior level executives of the company (PepsiCo, 2018e). PepsiCo is known for providing equal growth opportunities to its employees operating in Australia, and it results in improving the products and services of the company. Health is another focus on PepsiCo since it deals with food processing and beverages which are given to customers across the nation. Firstly, the company has to get an Australian Business Number (ABN) which is mandatory for every corporation which operates their business in Australia; the ABN of PepsiCo Australia holdings is ABN 25 079 719 743 (PepsiCo, 2018d).
Furthermore, the tax rate which applies to the company is 30 percent as per the taxation law in Australia. This tax rate applies to the revenue generated by the company from its operations in Australia. Furthermore, since the company offers its goods and services in the country, it is subject to Goods and Services Tax as well. Currently, in Australia, the rate of GST is 10 percent which applies to most of the goods and services consumed in Australia (ATO, 2018). These taxes contribute to the overall economy of Australia, and large number of tax is favourable for the Australian government. PepsiCo is a major taxpayer in the country, thus, the government focuses on fulfilling its requirements as well. Furthermore, PepsiCo has to comply with the regulations imposed by the Fair Trading Act in Australia. The act provides that the corporations operating in Australia must not misuse their power or position to gain an unfair advantage in the country (Business, 2018). PepsiCo has to comply with these regulations based on which it cannot form a monopoly by joining ventures with its biggest rival Coca-Cola.
In 2014, a suit between PepsiCo versus Coca-Cola was filed in the Australian court regarding breaching of Fair Trading Act regulations (Ladas, 2014). Although in this case, the court rejected the infringement claims made by Coca-Cola, however, it shows that companies can face legal consequences if they did not comply with their legal framework. Moreover, the Australian Competition and Consumer Commission have imposed various regulations in PepsiCo regarding ensuring the safety of customers who purchase its beverages. It also has to ensure that its products meet safety standards as issued by the Product Liability Regulations. Safety of consumer is the priority o the Australian government based on which PepsiCo has to comply with various regulations to ensure that it mains a high standard of safety while offers its products to customers. Another key legal framework imposed on PepsiCo is the Food Safety Regulations. Since PepsiCo offers a large number of food and beverages products to its customers, it has to ensure that they are saving to consume by the public (AIFS, 2018). In case the company breached these regulations than it could have serious negative consequences based on which the company can lose its licence to operate its business in Australia.
Thus, it has to check its products on a safety standard to ensure that they are safe to consume by its customers. The Employment & Labour Law 2018 is also included in the regulatory framework of PepsiCo while operating in Australia. The company has a positive reputation in Australia regarding the working condition of its employees. The company provides equal growth opportunities to its workers and fulfil their basic needs. For example, the PepsiCo Australia CEO, Danny Celoni, has provided that all the employees in Australia can choose their public holiday dates based on their culture (Morgan, 2018). It shows that the corporation focuses on providing effective services to its employees while ensuring appropriate cultural and ethical factors. Lastly, the Australian government focuses on improving the environment of Australia and corporations have to comply with certain requirements as well to reduce their carbon footprint. Thus, PepsiCo has to comply with the Environmental Protection and Biodiversity Conservation Act 1999 based on which focus on reducing its impact on the environment of the country (Legislation, 2018). Since the company offers most of its products in plastic packaging, thus, it has to continuously focus on reducing its carbon footprint and finding alternative ways to package its products in order to protect the environment.
Many countries sign treaties with each other to enter into agreements regarding trade or services. These agreements are focused towards promoting social, political and trade relationships between the enterprises. One of the key agreements which affect the business of PepsiCo is the Food Standards Australia and New Zealand Act 1991 (FSANZ). This agreement has constructed between the Australian and New Zealand government to promote the trading of food products while maintaining their safety standards. Since PepsiCo provides its products in both Australia and New Zealand, it has to comply with the regulations imposed by this act. Based on these safety standards, the company cannot use chemicals in their products which can negatively affect the health of customers (FSANZ, 2002). Furthermore, the corporation also has to ensure that most of its products are properly packaged to avoid using materials which could harm the environment or the health of the public. Another key treaty is formed between different countries including Malaysia, Australia, United States, Singapore, Indonesia, Japan and China. The treaty is called ‘Fair Trade Agreement’ based on which PepsiCo is able to offer its products and services in these countries without facing legal issues.
All these countries are developing markets, and they provide new business expansion and growth opportunities to PepsiCo. Due to this treaty, the corporation also has to ensure that it did not adversely affect the small organisations operating in the industry. Fair training ensures that the company is not entering into any unfair trading practices due to which it can cause detriment to small businesses operating in these countries. Furthermore, the company also have to maintain safety standards regarding its goods and services to ensure that offers effective services to its customers. The company is able to provide its products across these countries without hassling with strict legal compliance due to this treaty, thus, it positively benefits the business of PepsiCo. Another key treaty is between Australia and Chine which is called ‘China and Australia Free Trade Agreement (ChAFTA). The objective of this treaty is to promote the expansion of business across these two nations by reducing the number of legal requirements which corporations have to meet while operating their business in these two nations (Austrade, 2018).
Since PepsiCo offers its products in both of these countries, it is able to reach a wider audience since Australia and China are two of its main markets. The treaty enables the enterprise in covering the two biggest markets and establishes its operations in such markets. For Coca-Cola, Australia and China are also two of the biggest markets due to which PepsiCo is able to provide it a substantial competition. Based on this treaty, the company is able to expand its business and increase its profitability which benefits it in the long run. Since PepsiCo is an America based organisation, the tax treaty formed between Australia and the United States is beneficial for the company. Based on such treaty, the corporation is able to avoid double tax on its products and services which benefit it by reducing its tax costs. Due to protection from double tax, the corporation is able to expand its operations without worrying about paying double tax in different areas of Australia. The protection from double tax saves the value capital of the enterprise along with increasing the investment in Australia and the United States. It positively influences the economy of both the countries which is beneficial for their development. These treaties have both positive and negative impact on the business of PepsiCo since it creates both opportunities and threats for its business. Thus, treaties such as FSANZ, ChAFTA and Fair Trade Agreement assist PepsiCo in easily operating its business across different nations while saving taxes along with maintaining the safety of its products.
References:
AIFS. (2018) Mars and PepsiCo Lead with Junk Food Advertising Breaches. [Online] Available from: https://www.foodsafety.com.au/news/mars-and-pepsico-lead-with-junk-food-advertising-breaches [Accessed on, 9th August 2018].
ATO. (2018) GST. [Online] Available from: https://www.ato.gov.au/Business/GST/ [Accessed on, 9th August 2018].
Austrade. (2018) Free Trade Agreements. [Online] Available from: https://www.austrade.gov.au/Australian/Export/Free-Trade-Agreements/chafta [Accessed on, 9th August 2018].
Business. (2018) Fair Trading laws. [Online] Available from: https://www.business.gov.au/products-and-services/fair-trading/fair-trading-laws [Accessed on, 9th August 2018].
Cision. (2018) Food And Beverages Global Market Report 2018. [Online] Available from: https://www.prnewswire.com/news-releases/food-and-beverages-global-market-report-2018-300602932.html [Accessed on, 9th August 2018].
FSANZ. (2002) Financial Assessment Report. [PDF] Available from: https://www.foodstandards.gov.au/code/proposals/documents/P269CaffeineFAR.pdf [Accessed on, 9th August 2018].
Ladas, B. (2014) Coca-Cola v PepsiCo in New Zealand – infringement action based on contour bottle mark registrations fails. [Online] Available from: https://ipwhiteboard.com.au/coca-cola-v-pepsico-in-new-zealand-infringement-action-based-on-contour-bottle-mark-registrations-fails/ [Accessed on, 9th August 2018].
Legislation. (2018) Environment Protection and Biodiversity Conservation Act 1999. [Online] Available from: https://www.legislation.gov.au/Details/C2016C00521 [Accessed on, 9th August 2018].
Morgan, M. (2018) Why this company lets its employees choose their public holiday dates. [Online] Available from: https://www.sbs.com.au/news/why-this-company-lets-its-employees-choose-their-public-holiday-dates [Accessed on, 9th August 2018].
PepsiCo. (2018a) Our History. [Online] Available from: https://www.pepsico.com/About/Our-History [Accessed on, 9th August 2018].
PepsiCo. (2018b) About. [Online] Available from: https://www.pepsico.com/About [Accessed on, 9th August 2018].
PepsiCo. (2018c) Our History. [Online] Available from: https://www.pepsico.com.au/company/history/ [Accessed on, 9th August 2018].
PepsiCo. (2018d) Company. [Online] Available from: https://www.pepsico.com.au/company/ [Accessed on, 9th August 2018].
PepsiCo. (2018e) Diversity. [Online] Available from: https://www.pepsico.com.au/careers/why/diversity.php [Accessed on, 9th August 2018].
Statista. (2018a) PepsiCo’s net revenue worldwide from 2007 to 2017 (in billion U.S. dollars). [Online] Available from: https://www.statista.com/statistics/233378/net-revenue-of-pepsico-worldwide/ [Accessed on, 9th August 2018].
Statista. (2018b) Food & Beverages. [Online] Available from: https://www.statista.com/outlook/253/107/food-beverages/australia [Accessed on, 9th August 2018].
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