Pepsi - An Introduction

Introduction
PepsiCo, Inc., major producer oI carbonated soIt drinks, other beverages, and snack Ioods. Its
beverage division, Pepsi-Cola Company, bottles and markets several popular brands oI soIt
drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay Company, the
leading snack-Iood maker in the United States. PepsiCo is based in Purchase, New York.
PepsiCo`s soIt drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other beverages
include Lipton Brisk and Lipton`s Brew iced teas, All Sport athletic drink, and AquaIina bottled
water. Frito-Lay products include Lay`s and RuIIles Potato Chips, Fritos and Doritos Corn
Chips, Chee-tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels, and Grandma`s
Cookies.
Early History
PepsiCo traces its origins to 1898 when Caleb Bradham, a pharmacist in New Bern, North
Carolina, created a curative drink Ior dyspepsia called Pepsi-Cola. Pepsi-Cola, later reIerred to
simply as Pepsi, was a mixture oI carbonated water, cane-sugar syrup, and an extract Irom
tropical kola nuts. To sell his product, Bradham Iormed the Pepsi-Cola Company in 1903. In
addition to selling the drink at drugstore counters, Bradham bottled Pepsi Ior sale on store
shelves. At this time, bottling was a new innovation in Iood packaging.
However, due to major increases in the price oI sugar, Bradham began to lose money on Pepsi,
and in 1923 he Iiled Ior bankruptcy. The Craven Holding Company oI Craven County, North
Carolina, purchased the company`s assets. In 1931 Charles G. Guth oI the LoIt Candy Company
in New York City purchased Pepsi-Cola Irom the holding company. Guth had diIIiculty getting
the business going again, but he increased sales by selling larger bottles at an unchanged price.
By 1933 Pepsi-Cola was sold by 313 Iranchised U.S. dealers; bottled in the United States, Cuba,
and England; and sold in 83 countries.
PepsiCo`s snack-Iood business dates Irom 1932 when ice-cream seller Elmer Doolin oI San
Antonio, Texas, developed a business idea aIter eating a package oI Mexican-made Iried corn
chips. He purchased a recipe Ior the chips and established the Frito Company in 1932.
Originally, Doolin produced Frito`s corn chips in his mother`s kitchen. He later mechanized
production and moved operations to Dallas, Texas, in 1933. Around the same time, Herman Lay
oI Nashville, Tennessee, developed a business distributing potato chips made by an Atlanta
manuIacturer. In 1938 Lay bought the manuIacturing company, renaming it H. W. Lay &
Company. The company prospered, becoming one oI the largest producers and distributors oI
snack Ioods in the southeastern United States. The company made and sold many snack Ioods,
but its best-seller was its brand oI potato chips, known as Lay`s. In 1945 the Frito Company gave
H. W. Lay & Company exclusive Southeast distribution rights Ior Frito`s corn chips, a market
both companies hoped to expand nationwide. AIter continuing their close business association
Ior over 15 years, the two companies merged in 1961 to become Frito-Lay, Inc., with
headquarters in Texas.
rowth
The Pepsi-Cola Company, meanwhile, had changed hands several times and grown greatly since
1933. The LoIt Candy Company merged with the company in 1941, keeping the Pepsi-Cola
name. About this time, Pepsi became the second-best selling soIt drink in America behind its
chieI market rival, Coca-Cola (popularly known as Coke). In 1948 the Pepsi-Cola Company
began canning drinks in addition to selling them in bottles. AlIred Steele, Iormerly an executive
with the Coca-Cola Company, became president oI the Pepsi-Cola Company in 1950. Former
amateur boxer Donald Kendall took over as company president and chieI executive oIIicer
(CEO) in 1963 and began marketing Pepsi to young people in an advertising campaign called
'The Pepsi Generation. The company acquired another popular soIt drink, Mountain Dew, in
1964. In 1965 the Pepsi-Cola Company merged with Frito-Lay, Inc., to become PepsiCo, Inc.,
based in New York City. As president and CEO oI the newly merged company, Kendall later
moved the corporate headquarters to its current home in Purchase, New York.
In 1972 PepsiCo struck a deal with the Union oI Soviet Socialist Republics (USSR), allowing the
company to distribute Stolichnaya vodka in the United States and to build soIt-drink bottling
Iacilities in the USSR. Pepsi thus became one oI the Iirst American products to be made and sold
in the Soviet Union. In the late 1970s the company began to purchase Iast-Iood chains. It
acquired Pizza Hut in 1977, Taco Bell in 1978, and Kentucky Fried Chicken (later named KFC)
in 1986.
The Cola wars
PepsiCo`s leading soIt drink, Pepsi-Cola, and its chieI rival, Coke, have dominated the soIt-drink
market Ior decades, although Pepsi has traditionally remained behind Coke. In 1950 Coke
outsold Pepsi by 500 percent worldwide. But Pepsi`s aggressive advertising campaigns aimed at
young consumers and major bottling and marketing deals made Pepsi a close rival to Coke by the
1980s. PepsiCo has also enjoyed great success with its canned and bottled Lipton brand iced
teas, earning higher sales than the Coca-Cola Company`s Nestea products. Also, in the United
States, Pepsi had virtually an even market share with Coke in the mid-1980s, when the Coca-
Cola Company changed the Iormula Ior Coke. (It later reintroduced the original Iormula under a
new name, Coke Classic.) However, as Coke regained popularity worldwide in the late 1980s
and into the 1990s, it again became the global soIt-drink leader. In 1996 Pepsi-Cola
International, PepsiCo`s international beverage production and marketing division, suIIered
diIIiculties in Latin America, one oI its most important markets. The company was particularly
hurt by the loss oI a bottling plant to the Coca-Cola Company in Venezuela.
Snack food Market Dominance
Many oI PepsiCo`s other products continued to dominate their markets in the 1990s. Sales oI
Frito-Lay products accounted Ior about 40 percent oI PepsiCo`s total proIits. By the mid-1990s
Frito-Lay products made up more than halI oI the U.S. market Ior snack chips, and the company
owned eight oI the top ten chip brands. In 1995 U.S. consumers bought the company`s original
potato chip brand, Lay`s, at a rate oI 4.5 kg (10 lb) a second. The company`s leading product,
Dorito`s tortilla chips, was the best-selling salty snack (packaged) Iood in America in the mid-
1990s. Salty snack Ioods include chips, pretzels, and nuts, as opposed to nonsalty snack Ioods
such as cookies and cakes. In 1994 Frito-Lay began producing several baked and low-Iat
versions oI some oI their snack Ioodssuch as Baked Lays potato chips and Baked Tostitos
tortilla chipswhich soon dominated the company`s sales growth.
#ecent Developments
By the mid-1990s PepsiCo`s restaurant business consisted oI 28,000 outlets worldwide, more
than were owned by any other company. The company also supplied its own restaurants through
a separate division, PepsiCo Food Systems (PFS). In 1997 PepsiCo sold PFS. Also that year,
PepsiCo spun oII its restaurant chains to Iorm a new company. The move enabled PepsiCo to
Iocus on its beverages and snack Ioods. In 2001 PepsiCo acquired The Quaker Oats Company, a
Iood and Beverage Company.
Pepsi cola in Pakistan
In Pakistan, there have been consumed diIIerent types oI soIt drinks but Pepsi is the most
Irequently consumed soIt drink. It is very much popular in the consumer; it has got big target
market and is competing with the other companies oI soIt drinks. 10 units oI Pepsi cola have
been installed, in the diIIerent places oI Pakistan i.e., Lahore, Multan, Gujranwala, etc., and
working with the best utilization oI their resources in the optimum way. Each oI these units is
owned by the diIIerent parties, which are strictly Iollowing the rules oI the parent company. The
company to made production has licensed each unit. These units have their own areas oI selling
and have diIIerent target markets. All these units are considered as separate Iirms, which are the
Iranchisees oI Pepsi cola international.
Pepsi in Multan
Shamim & Company
History
SHAMIM & Co. was established in 1967 as a private limited company. It started its business in
1968. Allah Nawaz Khan Tareen (Ret. DIG) got license oI 7-up Iranchise and was producing
only one product, 7-up. But in 1973, it became Pepsi Cola Iranchise. Now a day MD oI
SHAMIM & Co. is Alamgeer Khan Tareen son oI Allah Nawaz Khan Tareen.
Total production oI that plant was 600 crates per 24 hours. Now Factory has 5 plants, which can
produce 110,000 crates per 24 hours.
In start Pepsi in Multan imported the material Irom USA & Ireland but due the problems oI
shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they
import the material Irom USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate Irom
the HariPur plant.
Along with the concentrate, Pepsi in Multan also imports the Sugar Irom Sheikho Sugar mill &
Irom Shaker Kunj. The bottles are manuIactured by Tariq Glass in Lahore under licensed by
PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory itselI but in
case oI shortage Factory buys it Irom Supreme Gas & Pak Gas. The caps and crowns are
imported Irom Imran Cork, Mehran Karachi and Wincloa Lahore.
Introduction
In Pakistan, at present SHAMIM & Co. is the largest production unit out oI 11 Iranchisees.
SHAMIM & Co. covers the area oI Southern Punjab which consists oI Multan, Bahawalpur,
Bahwalnagar, Dera Ghazi Khan, Sahiwal, Khanewal, Rajan Pur, Taunsa, Okara, Rahimyar Khan
and Layyah. The company is properly serving all these areas with quality products.
Honors
In Pakistan, SHAMIM & Co. is in the list oI top three out oI eleven showing Iinancial and sales
growth according to their relative volume size basis. When Iranchise cross a certain volume,
plant is classiIied as, 'Mega Plant Status. SHAMIM & Co. has achieved this status in 2000 and
2001. Also it has ISO 9002 CertiIication and Ior year 2005 Shamim and Company won the
award oI best quality unit among the eleven 11 units in Pakistan.
Mission Statement
'To earn proIit by meeting the customers needs with quality products.
Organization
Managing Director
He is the owner oI this company and Iinal operational authority to manage all departments oI the
company. All departments` heads are responsible to report him all about their perIormances and
matters.
eneral Manager Sales
G. Manager Sales is responsible Ior the perIormance oI his department and to achieve the
objectives assigned to him such as marketing, sales, distribution. To carry out his duties more
eIIiciently he has Iour Regional Managers, 15 Area Sales Managers.
eneral Manager Operation
He is responsible Ior the whole administrative, shipping, workshop related activities to smooth
on the Iactory operations without any hindrances.
eneral Manager Technical
He is unlike Sales department perIorms key role as to manage Production Department producing
quality Products as per need oI the sales department. Quality Control Department also works
under him.
Manager Finance
Finance, Accounts and MIS departments work under his control. He is responsible to make
major company Iinancial policies to meet the needs oI the each and every department regarding
budgets etc.
Organizational Chart
lobal strategy
Pepsi has divided the total international market on the basis oI taste constituting into three zones.
O Asian zone
O European zone
O AIrican zone
Pepsi is using the licensing strategy to go abroad. SHAMIM & Co. is also a Licensee.
Competitive priorities
'The competitive priorities are the operating advantages that Iirm`s processes must possess to
outperIorm its competitors.
Shamim & Co. has the competitive priorities oI high-perIormance design and consistent quality.
High-Performance design
Actually Pepsi is getting the competitive edge in our region on the basis oI its quality and the
quality is its taste. Through a complete marketing research they Iound that sweet taste is liked
more by this region. That`s why in Pakistan Pepsi is dominant soIt drink and it has almost 75
shares in this market. On the other hand when we look internationality then Coca Cola is the
leading company. So Pakistan is a big market Ior the Pepsi, where Pepsi is generating a lot oI
revenues.
Consistent Quality
Another major and the strong aspect oI the Pepsi in Multan is that they are producing a
consistent quality according to the PCI standards. The low quality bottles and the damaged
bottles are not dispatched towards the market. Pepsi has a lot oI checks and balances on its
output level.
MANUFACTU#IN AND SE#'ICES ST#ATEIES
Make-To-Stock Strategy
In Pepsi, Make-To-Stock manuIacturing strategy is used. Bottles are produced in a standardized
process because the competitive priority is consistent quality. Firstly, marketing department
Iorecasts the demand then according to this Iorecasting MPS is made and aIter making bottles
Pepsi distribute these bottles to the market.
DEPA#TMENTALIZATION
As it is a Iormalized company thereIore there is a hierarchy oI employees and the division oI
departments in the organization. Following are the departments working in the organization.
O Production Department
O Administration and Personnel department
O Sales/ marketing Department
O Finance Department
O Shipping Department
O Purchase Department
O Excise Department
O Computer Department
Each manager oI a department is responsible Ior overall working oI the department. A manager
has an assistant manager and aIter this there are shiIt in charge in production and supervisors in
sales. They control the activities oI operatives.
BrieI introduction oI the working oI these major departments
Production department
As we can see with the name oI the department the working oI this department is to control the
production process i.e., to get raw material and process them and convert them into Iinished
goods.
Administration department
The major Iunction oI this department is to manage the employees and to made recruitment oI
new employees. Assign them their according jobs. And government aIIairs iI employees are
working eIIectively or not and what are the government recent policies
And what is the impact oI these policies on the organization. These are the Iew matters where
administration plays its role.
Publicity problems
Some government policies directly aIIect organizational expenses like the tax on diIIerent
campaigns that is tax on cap, banners, shirts, and as many taxes on diIIerent publicity methods
about which organization come tow know at the end oI the year.
Sales/marketing department
The marketing department oI this organization is assigned to make public dealing. The marketing
department is responsible to make advertisements oI the company products and get them sold.
Advertise through road site Painting, Wall Chalking, Billboard, TV adds etc. They are given
yearly sales targets and they are liable to achieve that. They use diIIerent schemes and oIIer
diIIerent discounts etc. to achieve those targets. Schemes like:
O Prize Winning Schemes
O Pepsi Ramzan OIIer
O Haj scheme
O Omera scheme
O And many more schemes
Finance department
This is one oI the most important departments oI this organization. This department makes the
Iinancial plans oI the organization; they analyze their resources and then compile other reports
and give the whole budget the organization can aIIord. Another job oI this department is to make
the complete record all Iinancial and non-Iinancial transactions made inside as well as outside
the organization.
Purchase department
The whole processing oI production department is based on the availability oI raw material and
all the dealing regarding raw material is under purchase department. They made purchases Irom
their contractors i.e., bottles, caps ingredients etc.
Computer department
Pepsi-Cola uses a soItware package (Road Net) to Iacilitate the design oI eIIicient routes and
schedules Ior the delivery oI bottled and canned products to customers assigned to a given
location. In order Ior automated routing and scheduling to achieve maximum beneIit, however,
the set oI customers assigned to each warehouse and bottling Iacility must be appropriate. During
the course oI this project the students developed a procedure based on cluster analysis to assign
customers to bottling Iacilities and integrated this analysis into a Geographic InIormation
System.
P#ODUCTION P#OCESS
Water Treatment Plant
PEPSI Bottles Filling Process
Purchasing and washing of bottles
First step regarding the production is the purchasing and washing oI bottles. Mainly company
use the bottles returned Irom the market but iI it needed more bottles, then these are purchased
Irom the glass company, Lahore.
These bottles are placed on conveyer and washed through an automatic plant. Caustic Soda and
boiled water is used Ior washing oI bottles.
Water Traeatment
Raw water is treated to remove its hardness. Here raw water with the Lime, Feso4, and Chlorine
comes to the Coagulation Tank where the initial sludge is removed then this water is moved to
BuIIer Tank where it is kept Ior a certain period in order to stable it. Then this water comes to
the Sand Filter and passes through the Sand and Gravel bed, and then this halI treated water
comes to the Carbon Filter and passed through the Carbon and Gravel bed Ior more puriIication.
AIter that it is moved to the PuriIix Carbon Filter and then to the Spool Polisher where the Iilter
papers are used to remove the sludge and then to Water Polisher and then to Ultra Violet Filter
where Ultra Violet rays passes through the water in order to eliminate the Iuture growth oI
bacteria and lastly this treated water passed through the Thread Type Filter. AIter passing
through this complex process water is completely Iree Irom sludge and bacteria and other
hazardous waste.
AIter that this water comes to the Water SoIter Tank and passed thorough the Gravel Bed and
this soIt water is used Ior the syrup making.
Preparation of Simple Syrup
In the sugar weight room sugar is weighted Ior diIIerent brands, because each brand requires
diIIerent quantity oI sugar, then this weighted sugar is passed to the syrup storage room, where
the sugar and water in equal quantity processed in Pasteurizer Tanks, and heated up to 85 C
where Activated Carbon is used to remove the bacteria, and Chlorine and TSP (Tri Sodium
Phosphate) used to remove the smell and color oI the sugar. Chlorine and TSP is also stored in
diIIerent tanks. AIter that this mixture oI water and sugar is cooled down up to 20C in order to
prevent Irom the Iurther growth oI bacteria, aIter that in this mixture Concentrate oI each brand
is added as per requirement.
Washing of Bottles
The empty bottles that come Irom the market are brought into the washing room oI bottles where
diIIerent employees Iirst check the initial damages to the bottles. Damaged bottles are screened
out Irom the lot. Only the acceptable lot is allowed going towards the bottle washer machine.
The bottles remain 45 minute in this washer machine so that only the good quality bottles that
are Iree Irom sludge and breakage can be passed to the Iilling room.
Filling of Bottles
Mixing of CO2 as in Syrup
Syrup is sent to carbon coolers, Ammonia, Carbon Powder and Carbon Granular are mixed in the
syrup.
In the Iilling room the syrup and CO2 comes Irom syrup and CO2 room. From Carbon cooler
syrup goes to the Iiller and Irom other side empty bottles and then crown cock or cap cocks are
Iixed on the bottles. Here operator looks aIter the production process.
Filled bottles are then passed thorough light room where quality oI bottles is checked. Here
under Iilled or, over Iilled bottles or dirty bottles are separated. There are two light rooms and in
each room one employee is placed to trace out the dirty bottles.
AIter passing through light room the code is printed on the bottles, which contain the
manuIacturing date, machine number and time oI manuIacturing and the batch number.
AIter all this checking process bottles are placed in the crates. The whole process oI production
is automatic. Only supervision is required. Then these crates are sent to the output warehouse.
QUALITY CONT#OL
It has become crystal clear that high quality products have a distinct advantage in the market
place, that market share can be gained or lost over the quality issue. ThereIore quality is a
competitive priority.
Quality is important due to the Iollowing reasons:
Cost and market share
Company`s reputation
Product liability
International implications
SHAMIM & COMPANY (PVT) LTD takes eIIective measures Ior the quality control.
Production oI the company is according to the standards set by PCI. So the company is very
much concerned about quality. Quality oI raw material as well as oI end product is checked.
Following are the main steps taken by the company Ior quality control.
Testing of #aw Material
Raw material used in production, comprises oI the Iollowing items.
Concentrate
Sugar
Treated Water
Empty Bottles
Carbon Dioxide
Crown
From the above items, previously the Iranchiser Irom USA provided concentrate. Now it has
plant at Haripur and SHAMIM & COMPANY (PVT) LTD purchase the concentrate Irom there.
Because the Iranchiser provides concentrate, so there is no question about its quality. All other
raw material purchased by the company itselI.
Sugar Testing
The company Irom sugar mills purchases sugar. AIter the arrival oI sugar at the plant, it has to
pass through a strict quality check. It should be Iree Irom moisture.
First oI all supervisor checks the quality oI sugar. AIter this checking, a randomly selected
sample Irom sugar bag is sent to laboratory Ior testing. AIter this testing, iI the quality oI sugar is
according to the standards, then this sugar is stored Ior Iurther processing. II the sugar quality is
not up to the mark, then it is sent back to the sugar mill.
Water Treatment Testing
The company has Iour containers to meet the requirement oI water. The water is treated Ior the
use in Iinal processing. At diIIerent stages, diIIerent treatment tests are done.
These tests include:
Upper top test
Sand Iilter and carbon puriIier test
Water soItness test
Company also keeps the record oI these tests. II some abnormality is observed by the shiIt in
charge, then he stops the supply oI water Irom the container. The supply oI water is made Irom
other container. These containers are also washed at regular basis.
Syrup Testing
Mixing oI sugar and water into concentrate produces syrup. This mixture is treated at 90oc and
then it is stored in the tanks. This is called simple syrup. This syrup is also tested in the lab. Then
carbon dioxide and ammonia are mixed into the syrup. Now this is Iinal syrup this is also tested
in the lab. II this syrup is not according to standards, then new syrup is prepared Ior production.
Finished Product Testing
When bottles are Iilled, a chemist also takes the sample and checks the quality. Here preservation
and ingredients ratios are also checked. II any deviation Irom the standard is Iound, the whole
batch is drained beIore going in market.
These Iinished bottles are also passed through light room to control the quality. Here iI the bottle
is low Iilled or dirty, then it is sorted out. The quality oI glass, size oI neck and size oI bottom
should be according to the given standards.
Internal Audit
The Iirm has hired an internal audit team. And the purpose oI this audit team is to make periodic
inspection oI output aIter every 30 minuets. And iI they Iind any laziness Irom the employee`s
side they immediately inIorm to the operation manager, so that right action can be taken.
External Audit
Similarly there are some external auditors Irom Dubai, they take the random sample oI bottle
Irom market and check the quality oI beverages according to their standards. In the past 4 to 5
years the Pepsi Multan has proved good quality and got a lot oI reward Irom international
auditors.
Pepsi cola international also plays an important role in maintaining the quality. Sample Irom
diIIerent markets at diIIerent selling points at diIIerent times, are collected and quality oI these
samples are checked.
Coding is also done on the caps oI the bottles. In this coding manuIacturing date, machine
number and time is printed. So Irom the above testing, we can conclude that the company has
very rigid quality control system.
Capacity
'Capacity is the limiting capability oI a productive unit to produce within a stated time period,
normally expressed in terms oI out put units per unit oI time.
This is actually the intensity with which a Iacility is used. This intensity is increased through
overtime. Other way oI increasing the capacity is to engage in subcontracting when it is Ieasible.
In Pepsi, the capacity measure in out put Iorm is the number oI crates produced. There are two
production units having diIIerent lines. The Iirst unit contains 3 lines and allocated Ior 250 ml.
Pepsi, 7UP, Dew & Marinda. The second unit contains 2 lines and produces 1 & 1.5 litre bottles.
These lines are Ilexible in a sense that through one line you can produce multiple brands having
a set-up time oI 2 hrs. They are not Iully utilized. The capacity oI one line is 1100 bottles per
minute but it is being operated at 800 to 900 bottles per minute. The reason is that, the bottles
move very Iast that may cause serious accidents by breaking into small pieces. There are 3 shiIts
working in Pepsi cola. The total capacity oI 5 lines is 160,000 crates per day. But the average
utilization oI 5 lines is 100,000 crates per day in peek season.
Planning Strategies
Chase Strategy
A chase strategy matches demand during the planning horizon by varying either (1) the
workIorce level or (2) the output rate.
Pepsi is also Iollowing the Chase policy. When higher production is required in the peak season,
company hires the new workers, and during low production the workers are Iired Irom the
company to prevent Irom unnecessary cost. Company also tries to increase demand through
advertising, price cuts and by giving diIIerent incentives.]
FO#ECASTIN
Planning and control Ior operations requires an estimate oI the demand Ior the product or the
service that an organization expects to provide in the Iuture. Since Iorecasting should be an
integral part oI planning and decision making, the choice oI a Iorecasting horizon (a week or a
month, Ior example), a Iorecasting method with desired accuracy, and the unit oI Iorecasting
(dollar sales, individual product demand.) should be based on a clear understanding oI how the
output oI the Iorecast will be used in the decision process.
SHAMIM & COMPANY (PVT) LTD uses the historical data Ior Iorecasting demand. As the
company has seasonal business so the demand is high in the month oI March, April, May, June,
July, August and September. Sixty percent sale oI the company takes place in these months. This
is the peak season Ior the company.
Company makes the sales Iorecast on the basis oI historical data. For example, iI a company
wants to Iorecast the sale Ior June 2005. They will take the data oI last Iive year in order to
Iorecast the sale Ior June 2005. They also take into account the current trend Iactor.
Level of Forecast
The Pepsi cola Iorecast the demand Ior their products on aggregate level. Then they Iorecast
demand Ior Pepsi, 7up, Mountain Dew and Miranda individually.
Unit of measurement
They Iorecast the demand in crates instead oI bottles. Pepsi normally Iorecast the demand in
250ml.
Forecasting error
It is diIIicult to reduce the error oI Iorecast demand. They say that the six to eight months are
required to install a new plant. And they lose the market Ior this particular period.
Inventory Management
Inventory is very important to every company because it helps the company to respond quickly
to customer demand, which is an important element oI competitive strategy. The more eIIective a
company`s inventory system is helped Iull in manage the company`s resources.
In SHAMIM & COMPANY the inventory is divided in to two main categories:
O Critical material
O Non-critical material
Critical Material
Critical material is that which is directly related to the production so management gives Iull
concentration to critical material to avoid irregularity in operation. The critical materials include:
O CONCENTRATE
O SUGAR
O CO2 GAS
O EMPTY BOTTLES
O CROWN CORK
O CAUSTIC SODA
The store provides a daily stock report oI critical material with balance. II that material is reach
at reorder point then they write that material in the daily stock in the column oI urgent. II any
material is going to be reordered, it is highlight with red pen. The procurement manager
physically checks the stock and place order. They are managing high inventory in which order
Ior concentrate is placed Ior 3 months and the order Ior the rest oI the material is placed Ior 1
month.
The reason Ior maintaining high inventory is;
O Customer satisIaction, to prevent Irom stock-outs and back-order situation
O Low ordering cost
O Labor and equipment utilization
O Low transportation cost
Non-Critical Material
In Pepsi cola the non-critical material are those material which is not directly related to the
production. The storekeepers inIorm the procurement manager. When there is need. The non-
critical material consists oI stationery, Greece, and supplies etc.
Selection of Supplier
The co. purchase material Irom those suppliers, which provide the material at least cost, on time
delivery and meets the speciIication oI the quality control department
In start Pepsi in Multan imported the material Irom USA & Ireland but due the problems oI
shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they
import the material Irom USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate Irom
the HariPur plant.
Along with the concentrate, Pepsi in Multan also imports the Sugar Irom Sheikho Sugar mill &
Irom Shaker Kunj. The bottles are manuIactured by Tariq Glass, Toynasic and BGL under
licensed oI PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory
itselI but in case oI shortage Factory buys it Irom Supreme Gas & Pak Gas. The caps and crowns
are imported Irom Imran Cork, Mehran Karachi and Wincloa Lahore.
Distribution
In Shamim & company, major item oI inventory is Iinished product. There are two ways to
distribute that Iinish inventory, the Iirst method is direct and second is indirect method. In direct
method they provide crates oI bottles to their dealers at the required destination through their
own transport, in indirect method the dealers have their own transport Ior distribution.
PEPSI is just one link in a customer value delivery system that includes thousands oI dealers. It
is a winner in this part oI the world because they have superior dealer networks. Also the
wholesalers and retailers involved are doing well because PEPSI supplies superior beverages.
PEPSI also Iocuses on placement oI their product such that the consumer can buy a PEPSI Irom
nearby location. PEPSI also takes immediate action in delivering its products to market. Overall
PEPSI is Iocusing on Iastest delivery and great assortment.
PEPSI Multan is obtaining strong trade cooperation and support Irom resellers. The marketing
department commands unusual cooperation Irom resellers regarding displays, shelI space,
promotions and price policies.
Benchmarking
' The bench marking is a continuous process oI comparing a company`s strategy, products and
processes with those oI world leaders and in best-in-class organizations in order to learn how
they achieve excellence and then setting out to match and even surpass it.
Comparative analysis of Pepsi & Coca-Cola
We will compare these two companies in regard oI shares. The shares can be described in two
ways:
O Market shares
O Volume shares
Market Shares
The market share oI a company represents the portion oI accounts that the company holds Irom
the 100 accounts oI the market. The market share distribution oI Pepsi and Coca-Cola is more
than 80 and remaining respectively. For Instance iI the total market comprises oI 100
consuming accounts then 80 accounts are being served by Pepsi and rest are being server by
Coca-Cola and others. Pepsi has been Iocusing to increase its market share, which represents the
long-term approach oI organization because majority oI the customers oI the Pepsi are low
volume purchase and iI someone will switch towards the other brand then it would not be a big
loss Ior the Iirm. But on the other hand Coca cola is Iocusing on the short-run approach, it is
dealing with the institutional customers, which are high volume purchaser. But the major
disadvantage oI this approach is that iI Coca-Cola will lose any one customer among these 20
then it would be a great loss Ior the Iirm but in case Ior it.
'olume Shares
The volume share oI a company represents the portion oI sales volume that the company holds
Iorm the 100 sales volume oI the market. The volume share distribution oI Pepsi and Coca
Cola is 65 and 34 respectively. For instance iI total market demand is 100 units then Pepsi is
supplying 65 units while Coca-Cola is supplying 34 units and remaining 1 unit is supplied by
other beverages companies oI Pakistan.
Benchmarking in Pepsi
In 1970s Pepsi was the Iollower and Coca-Cola was the leader here in Pakistan as well. At that
time Pepsi used to benchmark the Coca-Cola in order to prosper and progress. But aIter 1970s
Pepsi stopped benchmarking strategies and procedures oI Coca-Cola and adopted an idea oI
Out-of Box thinking
Thinking Outside The Box
Thinking Outside the Box means thinking beyond the parameters oI human consciousness and
experience - to see beyond the norm - to be a visionary - to activate your DNA. We exist inside
the box - the physical plane - but we soon evolve our conscious awareness back to its source oI
creation - outside the box.
Are you trapped inside the box - the emotions oI the game?
Thinking 'outside the box' means balancing lower Irequency emotions - Iear, anger, etc.
With higher Irequency emotions and thereIore not being controlled by your emotions.
Let it all go ... it's just an illusion in time.

Humanity is evolving out of the box and into the light of creation
What PEPSI found out from out-of-box thinking?
Pepsi got Iollowing Iindings Irom this idea:
O Cricket is the most Popular game in Pakistan.
O Pakistan is an immature market.
The tactics that Pepsi derived Irom above ideas are:
1 Contract with PCB
It is an admitted Iact that there is a craze oI cricket in Pakistani Nation irrespective oI age Iactor.
So the Pepsi thought to take the beneIit Irom it and made a contract with PCB in mid 70s. This
created a Iantasy in the minds oI people and market shares oI Pepsi Cola started increasing. It
gave real boost up to repute oI Pepsi in world-cup 1992 and in very short span oI time; Pepsi was
able to double its sales.
2 Extensive advertisement and Penetration
In view oI the lack oI knowledge and immature market oI Pakistan Pepsi adopted the aggressive
strategies oI distribution and advertisement. This also was proved to be an eIIective move
towards the growth oI the company. They are using almost all modes oI advertisement and are
using them extensively right now such as:
O Electronic Media
O Print Media
O Display Media
It is the task oI the sales and marketing oIIicer oI Pepsi Cola that whenever and wherever a
departmental store will open they have to capture it and have to convince the shopkeeper to make
an agreement by meeting his requirements.
Benchmarking PCI
As we already mentioned that in sub-continent Pepsi is the leader so here in Pakistan Pepsi is not
benchmarking Cola-Cola`s standards rather Coca-Cola is benchmarking Pepsi here such as in
pricing, advertisement (Celebrity Hiring) and aggressive distribution. Pepsi benchmark its parent
company Ior technical, quality and Ior human resource considerations.
Quality issues
Shamim & Company inIect adopt the standards oI PCI such as about the proportion oI
ingredients. Such as the standard Ior CO2 in 7`up was set 3.5 to 3.9 but to become more eIIicient
in quality issues the Shamim and Company redeIined it as 3.6 to 3.8. However the ideal standard
Ior CO2 is 3.7. Similarly Ior the Marinda they reIined the standard Ior getting much and much
closer to the ideal standard.
Technology
Pepsi in Pakistan always benchmarks its parent Company Ior the sake oI technology
improvement. For instance they are going to start a new plant in Lahore, which would have the
capacity to IulIill the total demand oI Lahore district. And it would require only 3 operatives to
operate this plant.
Celebrity Hiring:
In our culture cricketers and Iilm stars have much inIluence on people. Pepsi is using both the
vehicles to advertise its brands. It has established the contract with prominent Iilm star Reema as
a brand representative Ior Pepsi. Similarly contracts have been established with Inzamam-ul-Haq
and other cricketers.
Employee policies
Earlier Pepsi was not Iocusing too much on employee`s beneIits and Iacilities. Then it adopted
the idea that 'result and rewards have a positive co-relation. Shamim & Company took this idea
Irom PCI that iI employees and satisIied and motivated towards the achievement oI the Goals
only then organization can better grow. In early 90s Pepsi adopted a new beneIit plan Ior its
employees and management. Now in employee in the marketing department has a car, having the
medical Iacilities, insurance and a good compensation. So these policies regarding the employees
helped the organization to achieve its target related to sales, growth and image oI highly
committed organization.
Collecting Feedback Irom customers
Actually, Pepsi is using two ways to collect the Ieedback Irom its customers.
O Direct Method
O Indirect Method
Direct Method
In direct method they collect Ieedback Irom its distributors, business customers and retailers
about demand, market situation, consumer behavior and on other issues through its Sales
InIormation System (SIS). For example they take vehicle plan Irom the distributors.
And Pepsi measures the perIormance oI its distributors and other customers through collecting
the data about
O Targets
O Inventory Level
O Repute
O Daily, monthly and yearly sales Report
Indirect Method
This method is speciIically used to judge the consumer behavior. In this method Pepsi uses the
services oI ACNELSON Company, which is basically a biggest and authentic most research
organization in Pakistan.
'ehicle to change organizational culture
They use two vehicles Iocus and employees policies to incorporate the quality culture. For the
urgent and most important issues they make employee`s policies and make sure these policies are
being Iollowed with considerate supervision. And Ior less urgent issues they use Iocus strategy
and arrange lectures, presentations, conIerences and excessive training programs.
Agreement with the Competitors
Pepsi has NO agreement with Coca-Cola on pricing and other strategic issues. And the major
reason oI recent increase in prices has been reported to be the revision oI tax policy oI the
Government.
ISO 9000
Now the situation has been changed. Products oI low standards are not acceptable in
international markets. These standards are ISO-9000 i.e., International Standard Organization.
Now as the world has become a global village, thereIore, there is a very tough competition
among the companies. Especially Ior the companies oI developing countries, they have to do
much more smart work than the companies oI developed countries because they have strong
economy and their products are widely acceptable in the international market. For this purpose
almost all organizations are doing struggle Ior getting ISO-9000 certiIicate. Shamim & Company
(PVT) Ltd is one oI those Pakistani organizations that struggled Ior ISO-9000 and awarded.
They have been awarded ISO-9002 certiIicate.
The management and labor oI Pepsi is committed with their responsibilities. The evidence oI this
the company has certiIied as international standard organization. They had to IulIill the 20
clauses oI ISO 9000. In this way they got ISO 9002 certiIicate. The company is Iranchisee so;
they have no authority to design a product.
They up date their records on daily basis. In Pakistan no one have authority Ior inspection Ior
ISO 9000. The company has selected SGS Malaysia Ior inspection oI their records. This is a
continuous process the auditors come aIter six month and check the records.
SWOT Analysis
1- Strength
Activities the Iirm does well or resources it controls are called strength. Resources that a
company contains, size oI organization, size oI market, loyalty oI the organization`s products,
sales point oI product oI the company shows the company strength.
The strength oI PEPSI lies in the loyalty oI the product, their market share, size oI market,
having numerous sales points and eIIicient delivery system.
2- Weaknesses
Activities the Iirm does not do well or resources it needs but does not possess. Such activities
that a Iirm does not perIorm or not have some resources those other competitors have.
Locally, PEPSI is enjoying its position in the market. Internationally, PEPSI Iaces some tough
competition Irom Coca-Cola. Their weakness is the lack oI relationship marketing in some parts
oI the world. And also in Pakistan they are Iacing some serious problems in building the
relationship with institutional customers.
3- Opportunities
A combination oI Iavorable circumstances or situations Ior organization`s product/s such as
loyalty oI customer about your products, social environment, size oI target market, size oI
organization, advantages over other competitors etc.
Opportunities are coming in the market day by day in the shape oI new retailers. PEPSI has a big
research department; they try to capture each new retailer who comes in the market. Pakistan
population size is rapidly increasing with the passage oI time so opportunities are there Ior Pepsi
to enhance its sales volume more than others.
4- Threats
UnIavorable circumstances that a company Iaces time by time to achieve its goals are called
threats. Some times small companies introduce the same products with low quality and low price
that the company did not produce.
Locally, PEPSI stands second to none. Internationally, Pepsi is Iacing heavy competition Irom its
rival Coca-Cola. Coca-Cola is Iocusing global market while PEPSI is somehow lagging behind.
The situation can become a serious threat to PEPSI globally