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CASE Study Analyis ON Pepsi COLA

BSBA MARKETING (University of Eastern Philippines)

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CASE STUDY ANALYIS

ON
“Pepsi Cola Products Philippine Incorporated (PCPPI)
the Number Fever in 1992”

BY: ANN BEATRIZ C. VALENZUELA

About Pepsi-Cola Products Philippines, Inc.

Pepsi-Cola Products Philippines, Inc. engages in manufacture, sale, and distribution of

carbonated soft-drinks and noncarbonated beverages in the Philippines. The company offers
carbonated soft-drinks under Pepsi-Cola, 7Up, Mountain Dew, and Mirinda brand names;
noncarbonated beverages under Gatorade, Tropicana/Twister, and Lipton brands; Sting
energy drink; and Propel fitness water. Pepsi-Cola Products Philippines offers its products
through retail outlets, including direct sales, distributors, and wholesalers; small retailers
comprising sari-sari stores and carinderias; and supermarkets, restaurants, and convenience
store chains. The company is based in Muntinlupa City, the Philippines. Pepsi-Cola Products
Philippines, Inc. is a subsidiary of PCD Nominee Corporation.

I. TIME CONTEXT : 1992

II. VIEWPOINT : Pepsi President Christopher Sinclair and the PCPPI Top Management

III. V-M-V STATEMENT

VISSION: Be the premier Food and Beverage Company in the Philippines

MISSION: Continue to market portfolio of international and home-grown branded

quality product at prices that provide good value to the consumers in key Food and
Beverage categories. Committed to expand the business and provide healthy financial
returns to the stakeholders, opportunities for growth and enrichment to their
employees, business partners and the communities where they operate.

VALUES: Passion, Excellence, Professionalism, Service and Integrity

IV. CURRENT OPERATIONAL PLANS

1. Design of Goods and Services. The objective in this strategic decision area of
operations management is to match goods and services, organizational capacity
and market demand and preferences. PepsiCo’s operations management does so
through market-based research and development and product innovation. For
example, PepsiCo conducts market research about current trends, such as
consumer lifestyles. The results of such research are used to determine future
directions of PepsiCo’s products, such as future variants of Pepsi.

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2. Quality Management. This strategic decision area has the objective of

optimizing quality based on business and consumer expectations. PepsiCo’s
operations management aims to provide the highest quality products under the
company’s “Human Sustainability” goals. For example, new PepsiCo products are
usually improved variants, such as low-calorie Pepsi products and less-salt Frito-Lay
products.
3. Process and Capacity Design. Capacity utilization and process efficiency are
the emphases in this strategic decision area of operations management. PepsiCo
aims to maximize its productivity-cost ratio in this area. For example, the company’s
manufacturing facilities are designed with high-output assembly lines. Also, many of
PepsiCo’s production processes are automated for optimal efficiency.
4. Location Strategy. PepsiCo has many company-owned facilities and partner-
owned facilities in strategic locations. Such an operations management approach is
based on this strategic decision area’s objective of maximal reach to target markets.
In PepsiCo’s case, such facilities are located in key areas near most retailers. PepsiCo
is especially interested in large retail outlets and food service establishments with
high sales volume.
5. Layout Design and Strategy. Efficient movement of people, materials and
information is the operations management concern in this strategic decision area.
In PepsiCo’s case, spaces are designed with efficiency and productivity in mind. For
example, layout design in PepsiCo production facilities is centered on the principles
of assembly line production and total quality management (TQM).
6. Job Design and Human Resources. PepsiCo’s human resource management
addresses this strategic decision area through a combination of global corporate HR
practices and divisional HR practices. The main operations management objective
in this area is to ensure the adequacy of PepsiCo’s workforce. For example, PepsiCo
has an HR policy and job design process for Frito-Lay, and separate HR policy and
job design process. However, all of these policies and processes comply with
PepsiCo’s corporate standards and “Talent Sustainability” policy.
7. Supply Chain Management. This strategic decision area focuses on operations
management practices that optimize the supply chain to match demand for
materials and intermediary products. PepsiCo’s approach is to diversify and
distribute its supply chain hubs. For example, the company operates supply chain
hubs for each regional market. In this way, PepsiCo optimizes response times to
fluctuations in demand.
8. Inventory Management. PepsiCo’s inventory management emphasizes
automation. Adequacy, scheduling, and cost minimization are the key objectives in
this strategic area of operations management. PepsiCo does so through
computerized monitoring of inventory. Inventory managers can access real-time
data to help them make decisions.
9. Scheduling. Facility and human resource schedules are the primary concern in
this strategic decision area of operations management. PepsiCo facility managers
implement human resource schedules based on local data. However, automated
scheduling is also used for some of PepsiCo’s production space schedules.
10. Maintenance. PepsiCo’s maintenance concerns are widely varied, considering
the company’s wide array of products and markets. This strategic decision area of

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operations management focuses on adequate workforce and other resources that

grow with the business. PepsiCo continues to hire individuals and promotes from
within the organization to grow its workforce. Facilities are expanded, constructed
or acquired to support PepsiCo’s growth.

Productivity at PepsiCo
PepsiCo’s operations management practices ensure high performance and
productivity. The company uses different measures or criteria to evaluate actual
productivity. The following are some of the productivity measures used at PepsiCo:
1. Batches per facility per day (PepsiCo production facility productivity)
2. New product ideas per year (product R&D productivity, such as for Pepsi)
3. New accounts per year (marketing productivity)

V. SOCIAL RESPONSIBILITY APPLICATIONS

TAYO NA! PCPPI’s call to action to engage in programs that make a significant impact
on the community.

With focus areas on education, entrepreneurship, environment and volunteerism, we

commit to the fulfilment of our role not only as a corporate citizen but as stewards for
sustainable development.

T stands for talino - knowledge. They empower children by ensuring that they will be
healthy enough to go to school and get the education they deserve.
This is the flagship program of PCPPI for the commitment to education, health and
nutrition. Under the Talino CSR Commitment, the PEPSIGLA program is their battle cry
to bring back vitality to undernourished Filipino kids.

A is for asenso, or progress. By providing access to livelihood, PCPPI helps start-up

entrepreneurs who want to improve their lives and succeed.

The main program under the CSR Commitment of Asenso is the Entrepreneurial
Distribution System (EDS)

EDS helps individual entrepreneurs to buy Pepsi products and sell these at small sari-
sari stores, giving them a source of livelihood.

Y stands for yaman, or wealth.

With the environment as a vast source of natural wealth and resources, the PCPPI
responsibility is to ensure sustainable practices in water, land, and energy
management.
Pepsi has been engaging in business practices with minimal impact on the
environment – such as rainwater harvesting, waste water treatment, watershed
reforestation and biomass or steam generation.

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This is a big help in ensuring that the business continues to contribute to the
preservation of our natural resources.

O is for oras, or time.

At Pepsi, they encourage employees to dedicate time for volunteer work to become
stewards for the community.
Through the Bukluran Council, employees are empowered to extend a helping hand to
the community for projects the Council deems relevant and urgent.

VI. STATEMENT OF THE PROBLEM

Determine the Marketing and Management Strategy that will help “Pepsi Cola
Products Philippine Incorporated (PCPPI) regain its sales after the number fever
promotional disaster back in 1992.

VII. SWOT ANALYSIS

STRENGTH WEAKNESS

1. Strong brand image 1. Low penetration in Asia

2. Broad product mix 2. Limited business portfolio
3. Extensive global production 3. Weak marketing to health-
network conscious consumers
4. Extensive global distribution
network

OPPORTUNITIES TREATHS

1. Business diversification 1. Aggressive competition

2. Market penetration in developing 2. Healthy lifestyles trend
countries 3. Environmentalism
3. Global alliances with
complementary businesses

Internal Strategic Factors

Pepsi-Cola’s continued global growth and prominence reflects the company’s strengths.
This aspect of the SWOT analysis framework outlines internal strategic factors that
enable firms to fulfill their business goals. The following are the most significant
strengths of PepsiCo:
1. Strong brand image
2. Broad product mix
3. Extensive global production network
4. Extensive global distribution network

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As a successful global company has one of the strongest brands in the market. This
strength enables the firm to attract consumers to its new products. In addition, the
broad product mix represents Pepsi-Cola’s increasing ability to reach various markets
and segments, such as through Frito-Lay products, Quaker products, and Pepsi
products. Pepsi Cola’s extensive global production and distribution networks are
strengths that support the company’s international growth and expansion strategies.
In this aspect of the SWOT analysis, Pepsi Cola’s strengths are sufficient to support its
global growth strategy.

Pepsi-Cola’s Weaknesses (Internal Strategic Factors)

Pepsi-Cola suffers from a number of weaknesses that act as barriers to international
growth. The internal strategic factors that limit organizational development are
considered in this aspect of the SWOT analysis framework.
1. Low penetration in Asia
2. Limited business portfolio
3. Weak marketing to health-conscious consumers

Pepsi Cola derives about 70% of its revenues from markets in North America and South
America. This weakness indicates that the company has not yet maximized potential
revenues outside the Americas. In addition, PepsiCo operates primarily in the food and
beverage industry. This is a weakness because it maximizes the company’s
vulnerability to risks in the food-and-beverage market. Also, PepsiCo fails to effectively
market many of its products to health-conscious consumers. This aspect of the SWOT
analysis highlights weaknesses that PepsiCo must address through changes in its
growth strategy.

Opportunities for Pepsi Cola (External Strategic Factors)

Pepsi-Cola has opportunities for continued global growth. In this aspect of the SWOT
analysis framework, external strategic factors that provide options for business
improvement are identified. Pepsi-Cola opportunities are as follows:
1. Business diversification
2. Market penetration in developing countries
3. Global alliances with complementary businesses

Pepsi-Cola has the opportunity to diversify its businesses, such as by acquiring a

complementary firm that is not in the food and beverage industry. Another opportunity
is for PepsiCo to increase its penetration in developing countries to generate more
revenues from markets outside the Americas. In addition, PepsiCo can create alliances
with complementary business to increase its market presence. Based on this aspect of
the SWOT analysis, PepsiCo has significant opportunities to strengthen its business
resilience.

Threats Facing Pepsi-Cola (External Strategic Factors)

The food and beverage industry experiences a variety of threats. External strategic
factors that could reduce business performance are considered in this aspect of the

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SWOT analysis framework. In Pepsi-Cola’s case, the following are the most significant
threats:
1. Aggressive competition
2. Healthy lifestyles trend
3. Environmentalism

Aggressive competition is a major threat against the company. The influence of the
Coca-Cola Company is especially significant against Pepsi-Cola. In addition, the healthy
lifestyles trend is a threat against Pepsi-Cola’s products, many of which are seen as
unhealthful because of their sugar, salt, or fat content. Also, environmentalism
threatens the company in how consumers negatively respond to product waste and
lifecycle issues. This aspect of the SWOT analysis indicates that Pepsi-Cola must reform
its strategies to overcome the threats to business.

Pepsi-Cola’s SWOT Analysis – Recommendations

Pepsi-Cola can use its strengths to effectively respond to the issues identified in this
SWOT analysis, especially those considered as threats. The realistic actions that Pepsi-
Cola could take to improve its competitiveness and international growth are as follows:
1. Diversify businesses to minimize market risk exposure
2. Further penetrate developing markets to grow revenues
3. Improve product healthfulness to attract more consumers
4. Enhance recycling efforts to address environmentalism

VIII. ALTERNATIVE COURSES OF ACTION

Mitigation Strategy
The individual success positioning can turn back, on the other hand PCPPI positioning
is "we" the family and get together, if positioning can is not handled properly its can be
a disaster. Another risky elements is the increasing power of retailers at the same time
exploiting the retailer power but on the other hand giving more power to them by
adopting push strategy, if more and more power is given to retailer then in the end
they will be able to blackmail the company on their own conditions. To handle this risk
brand should be build so strong that it can generate pull.

Plan's Relation with Strategic Objective

Business strategy is cost leadership, since PEPSI is a market leader is has to maintain
its position and at the same time they want to reduce costs. Now if we look at the
marketing plan it focuses on the push strategy, building relationships with retailers,
giving them incentives for push and winning exclusivity on the retail outlets, if this
plan is executed well we can reduce out marketing cost without compromising or even
increasing on sales and market share. This plan also suggest that PEPSI should get
exclusivity on the large cash and carry retail stores where customers buy in large
quantities, if they are able to do so their marketing cost will decrease and sales will
increase noticeably. One can argue that plan also supports the brand building which is
an expensive thing to do, brand building and getting mindshare is something

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unavoidable, this is not a luxury spending of marketing budgets but it is in return

creates the pull for the brand and pays in the longer run.

Agreement and Plan Tracking

The success of the plan depends on the total consolidated effort by the entire company
that is why management's approval and consent will be required to get whole
organization on board. This plan will be presented to all stake holder and if
management approves then all other departments will be working on the same
direction, for example if management want to cut cost then they are do so with a
better management of supply chain, similarly other departments will have their roles
to play in achievement of strategic objectives.

Success of the plan will be tracked at every execution step with continuously
monitoring, on the brand side studies will be conducted to monitor the achievement of
brand related targets like top of the mind brand recall, retailer relationship
management will be monitored that ho successful we have been bringing retailers on
boards and winning exclusivity. A relationship of these tracking studies with overall
market share and sales will be established that will determine the success of this plan,
if problem found and targets are not achieved then strategy will be review and
necessary actions will be taken to improve the performance

IX. IMPLEMENTATION PROGRAM

Overall PepsiCo is a successful company with substantial revenue, and a large
footprint in the marketplace. PepsiCo should continue to expand their growth and take
advantage of potential opportunities by continuing to improve on areas at the
corporate top level, in the markets that they currently are in, and in new markets and
market segments that they wish to expand into.
 PepsiCo should expand into markets and market segments in order to expand
their market share at the global level and to increase their overall revenue.
 PepsiCo should improve their employee relations in order to create employees
all over the world that will promote the product both during their work day
and in their personal life in order to create “word of mouth marketing”.
 PepsiCo needs to continue to expand their market share in the markets where
they currently have a strong presence in order to maintain their market share
and their footprint in the marketplace.

 PepsiCo should become more proactive in the health food/product marketplace

rather than being reactive to the market trends. They need to improve their
responsiveness and future projections to market trends and changes that can
therefore allude to different product segments and target markets.

 Prioritize having aggressive promotion on the market.

 to obtain more target customers and distribution networks
 develop the advertisements and making it trendier can be a better start

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 Create a feasibility study if making new product lines can be profitable for the
company.
 Focus on how to maximize sales and reduce cost.
 Locate more strategic location for distribution.

X. PROPOSED OPERATIONAL PLANS

Pepsi Co is currently one of the strong worldwide leader in the food and beverage
industry. Throughout its growth, it has stayed true to its mission and objectives, known
throughout the world for quality products and customer care, Pepsi Co should make no
major strategic changes to its plan. However, like in any business situation there are
areas that Pepsi Co can improve upon. Some of the recommendations are as follows:
- Continue to expand with their “Human Sustainability”. The healthy eating market is
a demographic that will continue to grow in the future, and will provide generous
profits if Pepsi Co is able to obtain a large market share.
- Expand more into social benefits, especially for those in developing nations. Pepsi’s
main competitor Coca Cola has implemented a water purification program for
African Villages, which provides a valuable need and at the same time introducing
their brand name where it was before unknown. If Pepsi followed this same
ideology with food products and water purification it too would significantly
increase brand recognition
- Capture more of the aging population’s market share. Pepsi is a company focused
on a younger market hoping to repeat the worldwide success of Coca Cola in
regards to brand loyalty with the generations born after 1980; however, there is
still a large market with the Baby boomer demographic that they could break into.
- A minor yet still important change that needs to be made is to their website. After
comparing it to competitors we feel that it needs to be simplified.

XI. OTHER PROBLEMS AND RECOMMENDATIONS

Continue addressing the opportunities and risks of the global marketplace and
concentrate the resources on growing the business, both through internal growth
and carefully selected acquisitions.

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