201

Organizational Design And Analysis

Pepsi Cola (Riaz Bottler, Lahore and
Haidri Beverages, Islamabad)
Resource Person; Col. Imtiaz Ahmed Mohar

Muhammad Mubeen Bahoo

MBAPage
3A |1
5/31/2010
Executive summary

Pepsi Cola is managing its operations in different cities of Pakistan. Pepsi Riaz
Bottler and Haidri beverages are analyzed for their organizational design and
change. The value creation, hierarchal structures, mission and vision and decision
making were subjected to the study. Centralized decision making and tall hierarchy
has created some problems in operation. Innovation, technology and market
capture are the core competencies of the Pepsi. Stake holders according to its
internal and external environment are analyzed. The process of Pepsi cola and their
quality control mechanism was analyzed. The roles and differentiation has been
analyzed.

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Table of Contents
Executive summary....................................................................................................2
Table of Contents....................................................................................................... 3
Introduction................................................................................................................ 6
Pepsi Pakistan......................................................................................................... 6
Pakistani soft drink industry.......................................................................................6
Haidiri Beverages Private Limited, Pakistan...............................................................7
Our Mission and Vision...............................................................................................7
The promise of PEPSICO..........................................................................................8
Performance with Purpose......................................................................................8
Our Commitment.................................................................................................... 8
Guiding Principles....................................................................................................9
Value Creation.......................................................................................................10
Culture of Pepsi.....................................................................................................11
The Top Management Hierarchy..............................................................................12
Chain of Command................................................................................................12
At Managerial Level...........................................................................................13
Basic Challenges regarding organizational design...................................................15
Roles and Duties................................................................................................15
Complexity......................................................................................................... 15
Centralization.....................................................................................................16
Mixed type of structure......................................................................................16
Formalization: written rules...............................................................................16
Multi division Structure......................................................................................16
Span of Control.................................................................................................. 17
Some problems regarding tall hierarchy............................................................17
Departments............................................................................................................ 17
Environment............................................................................................................. 17
The Specific Environment......................................................................................18

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 The General Environment.....................................................................................18
Resource dependence theory...................................................................................19
Symbiotic interdependencies...................................................................................19
Technology............................................................................................................... 19
Quality Control ..................................................................................................... 21
Pepsi Processing Model............................................................................................22
Ethical Stance.......................................................................................................... 23
Encourage Healthier Choices...................................................................................24
Internal stakeholders.........................................................................................24
External stakeholders........................................................................................24
Competitive Advantage............................................................................................25
Annexure 1............................................................................................................... 25
Specific Environment ( Annexure).........................................................................25
Customer.............................................................................................................. 25
Competitor:........................................................................................................... 25
Local competitor................................................................................................25
National Competitors.........................................................................................26
International Competitors..................................................................................26
Supplier:................................................................................................................ 27
Distributor:............................................................................................................ 27
Incentives................................................................................................................. 28
Product outflow........................................................................................................ 29
Channels of distribution...........................................................................................30
General environment (Annexure)..........................................................................30
Economic Forces................................................................................................30
Technological forces..........................................................................................31
Political Forces...................................................................................................31
Social and cultural factors..................................................................................32
ANNEXURE 2............................................................................................................ 33
Our Goals and Commitments...................................................................................33
Career:.................................................................................................................. 34
Community:...........................................................................................................34
Facts about the company.........................................................................................34

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 Executives............................................................................................................. 35
HEAD OFFICE.........................................................................................................35
Founders of the company......................................................................................35
Executives............................................................................................................. 35
Registered office...................................................................................................37
Various products in Pakistani market.......................................................................37
Product in spotlight: Pepsi........................................................................................37
Interview of manager at Pepsi Riaz Bottles........................................................37
Important Questions which were asked.............................................................38
References............................................................................................................... 39

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Introduction
Pepsi is a carbonated soft drink produced and manufactured by PepsiCo. The drink
was first made in the 1890s by pharmacist Caleb Bradham in New Bern, North
Carolina. The brand was trademarked on June 16, 1903. There have been many
Pepsi variants produced over the years since 1898.

It was first introduced as "Brad's Drink" in New Bern, North Carolina in 1898 by
Caleb Bradham, who made it at his pharmacy where the drink was sold. It was later
named Pepsi Cola, possibly due to the digestive enzyme pepsin and kola nuts used
in the recipe. Bradham sought to create a fountain drink that was delicious and
would aid in digestion and boost energy.i

Pepsi Pakistan
The market in Pakistan is surely dominated by Pepsi. It has proven itself to be the
No.1 soft drink in Pakistan. Now days Pepsi is recognized as Pakistanis National
drink. In 1971, first plant of Pepsi was constructed in Multan, and from there after
Pepsi is going higher and higher. Pepsi is the choice soft drink of every one. It is
consumed by all age groups because of its distinctive taste. Compared with other
Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all.
Consumer’s survey results explain the same outcome and Pepsi has been declared
as the most wanted soft drink of Pakistan.

Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand.
Coke’s basic strength is its brand name. But Pepsi with its aggressive marketing
planning and quick diversification in creating and promoting new ideas and product
packaging, is successfully maintaining is No.1 position in Pakistan. In coming future
Pepsi is also planning to enter into the field of fruit drinks. For this purpose it has
test marketed its mango juice in Karachi for the first time.

When Pepsi was introduced in Pakistan, it faced fierce competition with 7up, lemon
and lime drinks, which was established during 1968, in Multan. Pepsi introduced its
lemon and lime, "Teem" to compete with 7up. It successfully, after some years,
took over 7up, and this enhanced Pepsi's profits and market share. In Pakistan,
Pepsi with 7up enjoys 70% of the market share where as the coke just has 20%
markets share.

Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These
bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers,
produce, distribute and help in promoting the brand. Pepsi also launched its fast
food chain KFC i.e. "Kentucky Fried Chicken.”ii

Pakistani soft drink industry

“About 75 million cases a year for Pepsi alone; the total beverage market is about
120 million cases of which 65% per cent are Pepsi products; about 20 to 22 per cent
are Coca-Cola products and Zum Zum cola and Mecca Cola, Amrit Cola and Muslim
Cola... there are so many colas; there is RC and Double Cola which are franchised

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products. Altogether they have around 5 per cent of the market. Due to the Afghan
and Iraq wars, they did get a little footing especially in the frontier and Islamabad
area but still they are not hugely popular.

Total annual sale of soft drink in Pakistan 120 million cases

Pepsi annual sales in Pakistan 75 million

Market share of Pepsi 65%

Consumption growth 1.7 % per year”iii

Haidiri Beverages Private Limited, Pakistan

The Haidiri Beverages Group was set up in 1979 and is Pepsi's sole selling agent for
District Rawalpindi and Islamabad. It is based in the CDA Industrial Triangle, Kahuta
Road, Islamabad. It manages the supply for several wholesalers, retailers,
restaurants, hotels and other such food outlets. In order to achieve the projected
sales targets effectively, the organization ensures a comprehensive strategic
alignment with the overall Pepsi Cola’s business strategy. Haidiri Beverages’
primary functions are to conduct a systematic manufacturing and supply of the
product without any tactical flaws. Backed by a powerful competitive strategy and
empowered by some effective supply chain strategies, the group has been
managing an effective supply chain throughout the region. It has set up a
sophisticated manufacturing and storage plant in Rawalpindi with multiple
production units and huge production capacity. Haidiri Beverages has different
management departments dealing with specialized Marketing, Human Resource,
Information Technology and Supply Chain Processes. In this section we conduct a
brief analysis of the basic supply chain management functions of Haidri beverages.

Our Mission and Vision

At PepsiCo, we believe being a responsible corporate citizen is not only the right
thing to do, but the right thing to do for our business.

Our Mission

Our mission is to be the world's premier consumer products company focused on

convenient foods and beverages. We seek to produce financial rewards to investors
as we provide opportunities for growth and enrichment to our employees, our
business partners and the communities in which we operate. And in everything we
do, we strive for honesty, fairness and integrity.

Our Vision

"PepsiCo's responsibility is to continually improve all aspects of the world in which

we operate - environment, social, economic - creating a better tomorrow than
today."

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Our vision is put into action through programs and a focus on environmental
stewardship, activities to benefit society, and a commitment to build shareholder
value by making PepsiCo a truly sustainable company.

The promise of PEPSICO

At PepsiCo, Performance with Purpose means delivering sustainable growth by
investing in a healthier future for people and our planet. As a global food and
beverage company with brands that stand for quality and are respected household
names—Quaker Oats, Tropicana, Gatorade, Lay’s and Pepsi-Cola, to name a few—
we will continue to build a portfolio of enjoyable and wholesome foods and
beverages, find innovative ways to reduce the use of energy, water and packaging,
and provide a great workplace for our associates. Additionally, we will respect,
support and invest in the local communities where we operate, by hiring local
people, creating products designed for local tastes and partnering with local
farmers, governments and community groups. Because a healthier future for all
people and our planet means a more successful future for PepsiCo. This is our
promise.

Performance with Purpose

At PepsiCo, we're committed to achieving business and financial success while
leaving a positive imprint on society - delivering what we call Performance with
Purpose. Our approach to superior financial performance is straightforward - drive
shareholder value. By addressing social and environmental issues, we also deliver
on our purpose agenda, which consists of human, environmental, and talent
sustainability.

Our Commitment
We are committed to delivering sustained growth through empowered people
acting responsibly and building trust.

What It Means

Sustained Growth is fundamental to motivating and measuring our success. Our

quest for sustained growth stimulates innovation, places a value on results, and
helps us understand whether today's actions will contribute to our future. It is about
the growth of people and company performance. It prioritizes both making a
difference and getting things done.

Empowered People means we have the freedom to act and think in ways that we
feel will get the job done, while adhering to processes that ensure proper
governance and being mindful of company needs beyond our own.

Responsibility and Trust form the foundation for healthy growth. We hold
ourselves both personally and corporately accountable for everything we do. We
must earn the confidence others place in us as individuals and as a company. By
acting as good stewards of the resources entrusted to us, we strengthen that trust
by walking the talk and following through on our commitment to succeeding
together.

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Guiding Principles
We uphold our commitment with six guiding principles.

We must always strive to:

1. Care for our customers, our consumers and the world we live in.

We are driven by the intense, competitive spirit of the marketplace, but we direct
this spirit toward solutions that benefit both our company and our constituents. Our
success depends on a thorough understanding of our customers, consumers and
communities. To foster this spirit of generosity, we go the extra mile to show we
care.

2. Sell only products we can be proud of.

The true test of our standards is our own ability to consume and personally endorse
the products we sell. Without reservation. Our confidence helps ensure the quality
of our products, from the moment we purchase ingredients to the moment it
reaches the consumer's hand.

3. Speak with truth and candor.

We tell the whole story, not just what's convenient to our individual goals. In
addition to being clear, honest and accurate, we are responsible for ensuring our
communications are understood.

4. Balance short term and long term.

In every decision, we weigh both short-term and long-term risks and benefits.
Maintaining this balance helps sustain our growth and ensures our ideas and
solutions are relevant both now and in the future.

5. Win with diversity and inclusion.

We embrace people with diverse backgrounds, traits and ways of thinking. Our
diversity brings new perspectives into the workplace and encourages innovation, as
well as the ability to identify new market opportunities.

6. Respect others and succeed together.

Our mutual success depends on mutual respect, inside and outside the company. It
requires people who are capable of working together as part of a team or informal
collaboration. While our company is built on individual excellence, we also
recognize the importance and value of teamwork in turning our goals into
accomplishments.

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Value Creation
Our Values & Philosophy are a reflection of the socially and environmentally
responsible company we aspire to be. They are the foundation for every business
decision we make.

Organizational Inputs Organization’s

Conversion Process
(Obtained from its
environment) (Organization transforms
• Raw Material(water, inputs and adds value to
them)
flavor, soda, oxides
• Plant processing
and other
• Conversion through
ingredients) machinery
• Skilled Staff • Computers and
• Human Force electronics
• Managers for all • System and sub
functions of system
organization • Coordination of
Organization’s different Output
Organization’s
• Market departments
Environment
research(R&D) • Quality releases
(Organization assurance
• Feed
(Sales Back of
of outputs allow outputs to its
• Qualified environment.)
Customers
organization to obtain new • Products of Pepsi
supplies of inputs.) • Profits
• Customers • Dividends
• Working
• Suppliers
Environment
• Government • Problem resolution
• Competitors • Salaries of
• Employees employees
• Trainees • Good will
• Health regulations • Health Assurance 10
• Availability of
• Certifications
products on time
• Taxations
Culture of Pepsi
The culture at Pepsi cola is very competitive. Decision are made from the top which
are to be followed downward the hierarchy. The competitive culture enables people
to work for their targets and they work hard to achieve them. When the targets are
met they feel empowered. The purpose of the teams is to make interaction with
each other for attainment of common objective. Employees are in a linking chain,
each employee works in a system which satisfies the needs of its internal and
external customers. Pepsi focuses on departmental interaction for satisfying their
stake holder’s expectations. The top management has devised a system of direct
feedback from its customers and suppliers. They value their culture as they say that
our culture focuses to;

• Enable our people to thrive by providing a supportive and empowering

workplace.

• Ensure high levels of associate engagement and satisfaction as compared

with other Fortune 500 companies.

• Foster diversity and inclusion by developing a workforce that reflects local

communities.

• Encourage our associates to lead healthier lives by offering workplace

wellness programs globally.

• Ensure a safe workplace by continuing to reduce lost time injury rates, whiles
thriving to improve other occupational health and safety metrics through
best practices.

• Support ethical and legal compliance through annual training in our code of
conduct, which outlines PepsiCo’s unwavering commitment to its human
rights policy, including treating every associate with dignity and respect.

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The Top Management Hierarchy

Chain of Command
The main authority of the company is the share holders of the Pepsi. They are the
actual owner of the company who own it. Share holders of the Pepsi appoint the
directors as responsible for company operations. The directors of the company have
to report to the share holders, as they are the representative of the company. The
Directors are responsible for creating value for the organization and other stake
holders of the company.

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Board of directors and their chair person manages the corporate management of
the Pepsi cola. The control of corporate management is held by the board of the
directors. The position of the directors is as trusteeship in the organization.

Corporate level management is the ultimate responsible for setting up

company’s goals and objectives. They are the inside stake holders of the company
and they are responsible for organizational structure.

At Managerial Level
One divisional hierarchy is describing all functions regarding that division. NSM is
national Sales Manager and he reports to CEO directly, he is managing Non
Carbonated Soft Drinks (Aqua fina, slice, Caprison, rave) at national level while GM
Marketing, finance, IT directly report to Chief operating officer. Hierarchal level is
very tall.

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14
Basic Challenges regarding organizational design
Roles and Duties
All the roles are defined by the CEO. Centralized decision making is followed. Every
employee is given targets on daily basis and they have to meet up with those
targets. CEO focuses of FMGS concept and that’s why they say that we want to
move according to the technology and changing pace of the corporate world. The
employees have very competitive environment so they totally focus on fulfilling
their goals and objective.

Complexity
Pepsi is very complex organization at local level. Targets are made on adhoc basis.
FMCG (fast Moving consumer goods) concept is used here. In whole organization
there is thought cut competition. 2000 employees are there in Lahore division of
Pepsi which have targets on daily basis and they have to accomplish them.

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Centralization
Pepsi cola is very centralized organization. The entire decision making is done from
top level. General Managers of each department looks after the operations of
concerning departments and reporting is done according to the hierarchal level.
Although some of the short term decisions are made at different levels of the top
management, but it is observed to be the most centralized organization.

Mixed type of structure

Mechanistic and organic structure both are observed in the Pepsi cola, the
organization is organic at the top level and some of the decisions are made at
different levels of top management. It is mechanistic at bottom level especially in
assembly lines. The employees have to follow the rules and SOP’s of the company.

Formalization: written rules

Written rules are there for all departments and the roles and functions are defined.

Multi division Structure

According to the divisions, the structure is multi division structure where some of
the divisions are product based and some are the operation based. The non
carbonated soft drinks are under one NSM and the carbonated soft drinks are

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directly assigned to each departmental level of management. Procurement and
production departments comes under the head of finance and the Research and
development comes under the head of IT deprtmant. So it is the multi division
structure.

Span of Control
Span of control of CEO’s maximum and the divisional mangers are responsible at
each divisional level of the organization. On all six levels of hierarchy CEO has its
control. Although there is no direct interaction of lower management with CEO but
the rules and control is of CEO in all divisions. Short term decisions are made on
Quarterly basis. GM marketing controls 1 sales manager operation, 5 business unit
managers, 17 territory development managers and 54 ADR sales. They all work
according to hierarchy.

Some problems regarding tall hierarchy

Work load is maximum on all territory development managers. The strategies and
planning takes lot of time to take active form. Agreements with shopkeepers are
very tough and divisional manager approves the shopkeeper agreement.

Departments
Pepsi has divided in two main categories, these are carbonated soft drink and non
carbonated soft drink departments. Except marketing and production department
the other departments are same for both the products.

NSM ( National Sales Manager) of the non carbonated soft drinks like aqua fina and
other products while the Carbonated soft drinks which are Pepsi, 7up, dew etc.

• Marketing

• Finance

• Production

• Information technology

• Human Resource

The operation of research and development is done under the head of IT.

Environment
All the forces which are affecting the Pepsi in terms of its operation and its access
to its resources are counted in the environment.

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The environment of the Pepsi has been analyzed in terms of Specific and general
Environment.

The Specific Environment

Specific environment relates to the force which directly affects the resources of the
company. These are customers, distributors, unions, competitors, suppliers, and the
government. Pepsi is engage in transaction with all its outside stake holders to have
resources and by obtaining those resources keep on surviving.

For details of specific environment forces see Annexure 1

(details in annexure 1)

The General Environment

These are the forces which shape the specific environment and affect the ability of
all organizations in a particular environment to obtain resources. The other
organizations could be the competitors as well. So these are almost same forces.

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Resource dependence theory
It is the theory which states that; the goal of an organization is to minimize its
dependence on other organizations for the supply of scare resources and to find
ways of influencing them to make resources available. According to the aspects of
this theory the Pepsi cola has a great influence on the other organizations which are
related to its operations, first to its suppliers and distributors and then to the other
companies. e.g. it could be the regulation authority and competitors of its suppliers
and distributors.

Symbiotic interdependencies
These are the interdependencies that exist between an organization and its
suppliers and distributors. So the relationship between them exists. It is because of
the supplier and the distributor is the main factor for the smooth operation of the
Pepsi cola. So the interdependencies exist. (The supplier and distributors are
explained at the end of report)

The strategy to manage the symbiotic interdependencies is the reputation for its
supplier and distributors.

Technology
The technology which is used at Pepsi is mass production technology and the
technical complexity is maximum. The cola is made through following process;iv

Filtering, sterilizing, and dechlorinating the water

First the water is purified in a floc containing tank, which separates the undesired
particles from water, often come from air and with the container. After the floc has
absorbed the particles it moves from container to the downside where a it again is
processed for further purification. The neutralizing PH valued water is ready for
further process.

Secondly, Sterilization is necessary to destroy bacteria and organic compounds that

might spoil the water's taste or color. The water is pumped into a storage tank and
is dosed with a small amount of free chlorine. The chlorinated water remains in the
storage. The clarified water is poured through a sand filter to remove fine particles
of floc. The water passes through a layer of sand and courser beds of gravel to
capture the particles tank for about two hours until the reaction is complete. Next,
an activated carbon filter dechlorinates the water and removes residual organic
matter, much like the sand filter. A vacuum pump de-aerates the water before it
passes into a dosing station.

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 (Source: http://www.madehow.com/Volume-2/Soft-Drink.html )

Mixing the ingredients

The dissolved sugar and flavor concentrates are pumped into the dosing station in a
predetermined sequence according to their compatibility. The ingredients are
conveyed into batch tanks where they are carefully mixed; too much agitation can
cause unwanted aeration. The water and syrup are carefully combined by
sophisticated machines, called proportioners, which regulate the flow rates and
ratios of the liquids. The vessels are pressurized with carbon dioxide to prevent
aeration of the mixture.

Carbonating the beverage

Carbonation is generally added to the finished product, though it may be mixed into
the water at an earlier stage. The temperature of the liquid must be carefully
controlled since carbon dioxide solubility increases as the liquid temperature
decreases. Many carbonators are equipped with their own cooling systems. The
amount of carbon dioxide pressure used depends on the type of soft drink.

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 (Source: http://www.madehow.com/Volume-2/Soft-Drink.html )

Filling and packaging

The finished product is transferred into bottles or cans at extremely high flow rates.
The containers are immediately sealed with pressure-resistant closures, either
tinplate or steel crowns with corrugated edges, twist off, or pull tabs. Because soft
drinks are generally cooled during the manufacturing process, they must be
brought to room temperature before labeling to prevent condensation from ruining
the labels. This is usually achieved by spraying the containers with warm water and
drying them. Labels are then affixed to bottles to provide information about the
brand, ingredients, shelf life, and safe use of the product. Most labels are made of
paper though some are made of a plastic film. Cans are generally pre-printed with
product information before the filling stage. Finally, containers are packed into
cartons or trays which are then shipped in larger pallets or crates to distributors.

Quality Control
Soft drink manufacturers adhere to strict water quality standards for allowable
dissolved solids, alkalinity, chlorides, sulfates, iron, and aluminum. Not only is it in
the interest of public health, but clean water also facilitates the production process
and maintains consistency in flavor, color, and body. Microbiological and other
testing occur regularly. The National Soft Drink Association and other agencies set
standards for regulating the quality of sugar and other ingredients. If soft drinks are
produced with low-quality sugar, particles in the beverage will spoil it, creating floc.
To prevent such spoilage, sugar must be carefully handled in dry, sanitized
environments.

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It is crucial for soft drink manufacturers to inspect raw materials before they are
mixed with other ingredients, because preservatives may not kill all bacteria. All
tanks, pumps, and containers are thoroughly sterilized and continuously monitored.
Cans, made of aluminum alloy or tin-coated low-carbon steel, are lacquered
internally to seal the metal and prevent corrosion from contact with the beverage.
Soft drink manufacturers also recommend specific storage conditions to retailers to
insure that the beverages do not spoil. The shelf life of soft drinks is generally at
least one year.

Pepsi Processing Model

“Input – Processing – Output Model

Input

Supply

i. Manage supply ingredients to ensure availability to produce

products.

ii. Maintain purified water supply for quality and availability to

produce products.

Manufacturing

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 i. Ensure best technology is available to produce products and mix
ingredients.

ii. Ensure quick storage and inventory processes to maintain

freshness and quality.

Sales

i. Determine demand by past sales and future marketing.

ii. Adjust quantities produced in real time to meet appropriate

demand.

Output

Supply

i. Determine inventory of ingredients to order new supplies.

ii. Maintain purified water supply so ensure continuance of

production.

Manufacturing

i. Ensure proper packaging to ensure quality and freshness in

products.

ii. Maintain quick local distribution to ensure freshness and quality

products.

Sales

i. Keep positive distribution levels to all sales outlets to maintain

positive sales.

ii. Meet any new demand or competition with products and

consumer needs.”v

Ethical Stance
Pepsi Cola has very strong ethical stance. From top management to lower level
there is very high degree of ethical stance. The inside and outside of the
organization it is strictly followed. Rules and sop’s are designed to make Pepsi
ethical.

Top management strongly believes that if we are ethical then our employees will be
ethical. From CEO to downward line managers, everyone has its own ethical stance.

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It is because of high standard of organization and image in the minds of
stakeholders that Pepsi is better, creates the ethical environment. The employees
who are working there feel proud to work in Pepsi. The morale of people is high
enough that they don’t even bother to do any personal interest oriented thing. The
cheating factor and other unethical things all are controlled by developing the high
morale of the employees. There is monthly package for employees for Pepsi
products available to them. They are trained for not committing any unethical
conduct.

Although there is chance of whistle blowing in every organization but Pepsi

employees consider it their own organization so they have very strong ethical
stance about their organization.

　　

Encourage Healthier Choices

“In a world where people are both undernourished and overweight, we
continue to expand our portfolio to better align with health and wellness
wants and needs. In addition, we are investing in our products and rethinking
how they are made—increasing the use of whole grains, fiber, fruits and
select vitamins and minerals, while reducing saturated fat, sodium and added
sugar. By doing so, we believe we will increase our global growth and enable
customers and consumers to choose the nutritional benefits of healthier
foods and beverages. Our increased commitments to nutrition education,
more transparent labeling, responsible marketing, and partnerships
advocating basic facts about nutrition and exercise help people and
communities make healthier, more informed choices. And that will make for
healthier people and healthier communities.”vi

The Stakeholder
The stakeholders involved in taking Pepsi (local) to china are

Internal stakeholders
• The Shareholders of Pepsi

• Management at Pepsi

External stakeholders
• The customers

• Suppliers of raw material

• The government

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 • Beverages Industry

• Franchisers

• Trade unions

• Banks

• Media

• Competitors

Competitive Advantage
Pepsi can only have competitive advantage due to innovation and technology. The
brand name and logo are very important factors in this advantage. Moreover
customer acceptance is also the key for competitive advantage. The strategy to
improve technology and brand innovation are the drivers for competitive
advantage. Pepsi has wide product range for its customers. Pepsi has its own
juices(currently in Karachi and Lahore). More over the chips and other products also
contribute to competitive advantage.

“Innovation leads to competitive advantage”

Annexure 1
Specific Environment ( Annexure)

Customer
These are the stake holders who have expectation for the products and quality in
those products. Customers are directly influencing the company by their response
towards company and its products

Competitor:
He is the person who is selling the same type of product in the market.

The marketing concept states that to be successful, a company must provide

greater customer value and satisfaction than its competitors do.

Pepsi has a tough competition with Coca Cola while it faces a little competition with
the local producers like RC Cola, Shandi Cola etc. The local producers hardly affect
the sales of Pepsi in the market.

Local competitor
The local compactors of Pepsi in terms of cola products in Pakistan are as follow;

1. Mecca cola

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 2. Amrat cola

3. RC cola

4. Wezi Cola

5. Future cola

6. Gourmet cola

7. Double cola

8. Muslim cola

9. Shandi cola

But in terms of mineral water the competitors are

1. Sufi water
2. Dew drop
3. Morning Mist
4. Gourmet water

National Competitors
1. Coca Cola
2. Nestle

International Competitors
International competitors are competing Pepsi in whole world. The main competitor
is Coca Cola. Although Pepsi came very late after the Coca Cola but it has captured
a big share in the market. Following are the International Competitors of Pepsi,
taken from Wikipedia encyclopedia.vii
Major Competitor is Coca-Cola at international Level.
In South and Central America Kola Real is the main competitor (known as Big
Cola in Mexico).
On the French island of Corsica, Corsica Cola, made by brewers of the local
Pietra beer.
In the French region of Brittany, Breizh Cola is available.
In Peru, Inca Kola
In Sweden, Julmust
In Scotland, the locally produced Irn-Bru was more till 2005,viii
In India, Coca-Cola ranked third behind the leader, Pepsi-Cola, and local drink
Thums Up. Tropicola, a domestic drink, is served in Cuba due to a United
States embargo.
French brand Mecca Cola and British brand Qibla Cola, popular in the Middle
East.
In Turkey, Cola Turka is a major competitor.
In Iran and many countries of Middle East, Zam Zam Cola and Parsi Cola are
major competitors. In some parts of China Future cola is a competitor.

26
 In Slovenia, the locally produced Cockta is a major competitor, as is the
inexpensive Mercator Cola, which is sold only in the country's biggest
supermarket chain, Mercator.
In Israel, RC Cola is an inexpensive competitor.
Classiko Cola, made by Tiko Group, the largest manufacturing company in
Madagascar , is a serious competitor in many regions.
ix
Laranjada is the top-selling soft drink on the Portuguese island of Madeira.

Supplier:
He is the person who provides raw materials to the producers or sellers. Suppliers
form an important link in the company’s overall customer value delivery system.
They provide the resources needed by the company to produce its goods and
services. PepsiCo International provides raw materials to Pepsi franchises in
Pakistan. Supplier problems can seriously affect marketing. Marketing managers
must watch supply availability i.e. supply shortages or delays, labor strikes and
other events can cost sales in the short run and damage customer satisfaction in
the long run. The company should monitor the price trends of their key inputs.
Rising supply costs may force price increases that can harm the company’s sales
volume.

No. Material Manufacturer/ Supplier(s) Approved from

Pepsi PepsiCo Inc. Ireland & PepsiCo Approval at the

1.
Concentrate Factory in Hattar Estate. factory

Caps & Approved form

2. Gatron Pakistan Limited
Closures PepsiCo China.

Approved from
3. Plastic Bottles Galtron Pakistan Limited
PepsiCo China.

Baluchistan Glass Mills Approved by PepsiCo

4. Glass Bottles
Tariq Glass Limited China.

Carbonated Approved from

5. Pakistan Bottlers (Pvt) Ltd.
Water PepsiCo U.A.E, Dubai.

Distributor:
Distributor maintains the image of the product and the sales in the market. If items
are not properly placed by the distributor, it will disperse the market.

CHANNELS OF DISTRIBUTION

27
The Pepsi uses the following two channels for the distribution of their products.

Indirect Distribution

Indirect distribution involves agency holders e.g. Riaz Bottlers Pvt. Ltd. Lahore
franchise has divided its region i.e. Lahore and Kasur districts in two categories.

Local Zone

These are 62 agencies distributing Pepsi Products (250ml Sd) only around Lahore in
their respective allocated sub zones.

Out Station Zone

17 dealers have been appointed by the bottlers for far distant places and in out
skirts of Lahore and Kasur the dealers involved in direct distribution are only
authorized to sell 250 ml (STD) bottle of Pepsi, Team and Marinda.

Direct Distribution

The factory vehicles operate on 45 direct routes in Lahore selling non-returnable

bottles Litter, Pet and Can.

Incentives
Mainly two types of incentives are given by the Pepsi Cola:

Incentive to Retailers

Pepsi Cola provide various incentives to retailers on the best sales and achieving
the predetermined sales targets. These incentives are in the shape of:

Deep Freezers

Return Tickets

Free Transportation Services.

Incentive to Dealers

The best dealer of the year is awarded with a brand new Suzuki Pickup. The second
best is awarded with Motor Cycle. The third best is awarded with Return Ticket to
Middle East.

Credit

There is no credit system in the beverage industry. Every single bottle is sold on the
cash basis.

Special Offers

Pepsi Cola gives special offers to consumers on special occasions like Ramadan and
Eid days instead of decreasing the price of the products, some special packs like
Pakkora Mix, Chat Massala, or Free Drinks with Liter Bottles are offered.

28
Product outflow
Pepsi Cola International has given franchises all over Pakistan. These companies
have installed their plants in different parts of Pakistan with these specified areas
and names e.g.

City Name of Franchise

Karachi Pakistan Bottlers

Lahore Riaz Bottlers

Faisalabad Punjab Beverage

Pepsi Cola provides consumers place utility which is, where ever and when ever you
want it, you get it! Pepsi’s channel of distribution is very aggressive according to
the consumers, manufacturers and distributors. Pepsi has 12 different units in
different areas of Pakistan, which make the Pepsi easily available all over the
country.

The cities in which the Pepsi units are:

Lahore

Sukkur

Karachi

Multan

Dera Ghazi Khan

Islamabad

Faisalabad

Quetta

Hyderabad

Sahiwal

Hattar

Pepsi is an international brand so it also has other units in other countries of the
world like America, Europe, Afghanistan, Middle East and Central Asia. The big
advantage for Pepsi in Pakistan is that it distributes the product through bottlers. So
bottlers’ effort also contributes in the promotion of Pepsi.

29
Channels of distribution
Direct Distribution　

Indirect Distribution

Local Zone

Outside Zone

Direct Routs – 45

Authorized Dealers - 17

Agencies – 62

The Pepsi uses the following two channels for the distribution of their products.

1. Indirect Distribution

Indirect distribution involves agency holders e.g. Riaz Bottlers Pvt. Ltd. Lahore
franchise has divided its region i.e. Lahore and Kasur districts in two categories.

Local Zone

These are 62 agencies distributing Pepsi Products (250ml STD) only around Lahore
in their respective allocated sub zones.

Out Station Zone

17 dealers have been appointed by the bottlers for far distant places and in out
skirts of Lahore and Kasur the dealers involved in direct distribution are only
authorized to sell 250 ml (STD) bottle of Pepsi, Team and Marinda.

2. Direct Distribution

The factory vehicles operate on 45 direct routes in Lahore selling non-returnable

bottles Litter, Pet and Can.

General environment (Annexure)

Economic Forces

Inflation

If the country faces inflationary trend in the market, the price of the Pepsi will
ultimately increase which will lower its demand.

Consumption Behavior

Pakistan is a consumption oriented society. Due to demonstration effect the

people are more inclined towards consumption than saving. So the people of

30
 Pakistan spent heavily on food items. Hence Pepsi has a good market share
in the present circumstances.

Income Distribution

It means how much is in the hands of rich and poor class. In Pakistan 10%
rich people posses 93% of wealth and 90% people posses 7% of wealth. If
there is balanced distribution of income in the country, the consumption of
the people will increase hence increasing the sales of beverages as well.

Employment Opportunities

As employment opportunities increase the living standard of the people

increase and the people consume more.

Aggregate Demand

In case of Pepsi, aggregate demand of the product increases in the season of

summer as the hot weather makes the consumers want to drink more.

Aggregate Supply

In summer season to cope up with the increasing demand they have to

increase the aggregate supply of their product.

Fiscal Policy

It is the policy of taxes. If heavy tax is levied on Pepsi then its price will rise
having negative effect on its consumption.

Monetary Policy

Monetary policy is made to restrict or increase the supply of money in the

market. If policies are made to restrict the flow of money in the market,
inflation can be controlled hence increasing the real income of the people
which will ultimately affect the consumption of Pepsi.

Technological forces
These are the forces which are affecting the technological processes of Pepsi
cola. These forces are often said to be affecting the production cycle of the
company. The complete process of Pepsi manufacturing i.e. from filler tank to
bottle filling and bottle filling to packing in all these processes there are
forces e.g. energy providing for the operation. If the forces will affect largely
(electricity shortage) then the resources will cost expensive to the company,
and if they are not affecting a lot then resources will be cheaper.

Political Forces

POLITICAL STABILITY:

31
 Whenever the government is considered to be stable, the business will
flourish. If there is political stability in the country the policies and strategies
made by Pepsi can be consistent to be implemented. Foreign companies are
also keen to invest in those countries which are politically stable where they
have no fear of decline in their market share or shut down due to sudden
change of government.

Mixed Economy

In mixed economy government and private sector both plays their role in
developing the economy of the country. Investment by foreign companies
like Pepsi is more likely to flourish in mixed economy.

Laws Formulation

Government has given copy rights to Pepsi so that another company cannot
sell their product by the name of Pepsi. The countries where laws are
formulated, the strategies and activities of the company are different.

Social Responsibility

Pepsi’s social responsibility is to provide its customers with clean and

hygienic product so to do this they have increased the use of disposable
bottles.

Social and cultural factors

Psychographic

It is a combination of demographic and psychological factors. Psychological

attributes mean how you perceive things. The company will focus on the
behavior of consumers and make different changes in their product quantity
or quality and in promoting their product so that they can attract the
customers. Keeping in view that the behavior of different consumers is not
alike they have to make their marketing strategies in accordance with their
requirements so that they are convinced to buy the product.

Religious

Religious factors can influence the market sales of Pepsi as it happened in

2003 when the U.S-led attack on Iraq, wide sections of society in Pakistan
have banned American multinationals Coke and Pepsi

Social Status

Pepsi is a well renowned brand. People who are brand conscious will not drink
beverages of lesser known brands such as Amrat cola. They will try to show
their status by drinking Pepsi which is known to all as a quality drink.

32
 Media

It is a very important factor for marketing. Media these days is a very

effective way of inspiring people to buy a specific product. A good promotion
can boast up sales to a great extent.

ANNEXURE 2
Our Goals and Commitments
Top line:

• Grow international revenues at two times real global GDP growth rate.

• Grow savory snack and liquid refreshment beverage market share in the top 20
markets.

• Sustain or improve brand equity scores for Pepsico’s 19 billion-dollar brands in top
10 markets.

• rank among the top two suppliers in customer (retail partner) surveys where
third-party measures exist.

Bottom line:

• continue to expand division operating margins.

• increase cash flow in proportion to net income growth over three-year windows.

33
• deliver total shareholder returns in the top quartile of our industry group.
corporate Governance and values:

• utilize a robust corporate Governance structure to consistently score in the top

quartile of corporate Governance metrics.

• ensure our Pepsico value commitment to deliver sustained growth through

empowered people acting with responsibility and building trust.

Career:
Provide opportunities that strengthen our associates’ skills and capabilities to drive
sustainable growth.

• become universally recognized through top rankings as one of the best

companies in the world for leadership development.

• create a work environment in which associates know that their skills, talents and
interests can fully develop.

• conduct training for associates from the frontline to senior management, to

ensure that associates have the knowledge and skills required to achieve
performance goals.

Community:
Contribute to better living standards in the communities we serve.

• Create local jobs by expanding operations in developing countries.

• Support education through Pepsico Foundation grants.

• Support associate volunteerism and community involvement throughcompany-

sponsored programs and initiatives.

• Match eligible associate charitable contributions globally, dollar fordollar, through

the Pepsico Foundation.

Facts about the company

　

1. Pepsi is a USA based public company whose stocks are available in New York.

2. Mountain Dew, acquired by Pepsi-Cola in 1964, switches its advertising and

package graphics room hillbillies to action-oriented scenes.

3. The third Mountain Dew slogan appeared in 1973 "Put A Little Yahoo in Your
Life."

4. PepsiCo acquired Pizza Hut, Inc. Pizza Hut was founded in 1958 by Dan and Frank
Carney.

34
5. Taco Bell is was acquired by Pepsi. Taco Bell was established in the mid 1960s by
Glen Bell.

6. PepsiCo purchased Kentucky Fried Chicken, the leader in the quick service
chicken market. KFC was founded by Colonel Harland Sanders. Colonel Sanders
began franchising the company in 1952. KFC was spun off along with Pizza Hut and
Taco Bell businesses as Tricon Global Restaurants, Inc. in 1997.

7. PepsiCo purchases Seven-Up International, the third largest franchise soft drink
operation outside the United States

Executives
Ms.Indra K.Nooyi
Chairwoman, Chief Exec. Officer and Pres

Mr. Richard Goodman

Chief Financial Officer

Mr. John Compton

Chief Exec. Officer of North America and Member of Liquid Refreshment Beverage
Oversight Council

Ms. Cynthia M. Trudell

Chief Personnel Officer and Sr. VP

Mr. Donald M. Kendall

Co-Founder

HEAD OFFICE
PepsiCo, Inc.
700 Anderson Hill Road
Purchase, NY 10577
United States.
Phone: 914-253-2000
Fax: 914-253-2070
Web Site: http://www.Pepsico.com

Founders of the company

The company was initially owned by late Nawab Saddiq Hussain Qureshi & family till
1989. The Pepsi International franchise declared the management incompetent,
thus, the company was handed over to a new set of personnel. The factory set up
was reorganized & re-established with expansion in various sectors. The Pepsi
International did this by offering it to Mr. Jehangir Tareen, who formed up his new
team. Mr. Jehangir Tareen is Nephew of General (late) Akhtar Abd-ur-Rehman.x

Executives
Board of Directors:

35
Mr. Akbar Akhtar Khan (Chairman)

Mr. Haroon Akhtar Khan (Chief Executive)

Mr. Gazi Akhtar Khan

Mst. Rasheeda Begum

Mrs. Mudina Akbar Khar

Mr. Saifullah Khan Paracha

Mr. Saeedullah Khan Paracha

Company Secretary

Mr. Amjad Jhanzeb Khan

Bankers

Allied Bank of Pakistan Ltd.

Citibank N.A.

MCB

NDFC

The Bank of Punjab

UBL

Legal Advisor

Cornehus, Lane & Mufti,

Nawa-i-Waqat Building,

4-Shahrah-e-Fatima Jinnah, LHR.

Auditor

Taseer Hadi Khalid & Co.

Chartered Accountants.

Mill

Kanjawani, Tehsil Samundri, District Faisalabad.

36
Registered office
31 – N,

Gulberg II,

Lahore,

Pakistan.

UAN: 111-724-725

Various products in Pakistani market

PEPSI COLA, MIRINDA, TEEM, 7UP, MOUNTAIN DEW, DIET 7UP, DIET PEPSI, LAYS,
KURKURE, AQUAFINA, PEPSI TWIST AND TROPICANA JUICES(introduced in Karachi
only).

Product in spotlight: Pepsi

Type:

Pepsi Cola

Manufacturer:

PepsiCo

Country of origin:

USA

Introduced:

1902

Ingredients:
Amount per 100mL
Energy 196.5 kJ
Fat 0 g
Sodium 0.98 mg
Carbohydrates 11.74 g
Sugar 11.04 g
Protein 0 g
Caffeine 10 mg

Interview of manager at Pepsi Riaz Bottles

CH. ZAFAR SLAM SEYAN

MANAGER

PEPSI RIAZ BOTTLING, LAHORE, PAKISTAN

37
CELL # 0333-4454254

Important Questions which were asked

1. What is the name of organization? Give a short account of history of the
company. Describe the way it has grown and developed.

2. Define organization’s mission and vision; also state its departments and
functions, goods and services, and the type of value it creates.

3. Analyze the targets and goals according to the company’s annual report

4. Draw a stakeholder map that identifies your organization’s major stake

holder groups.

5. Using company’s website draw picture of its hierarchy of authority.

6. Does the company have its divisional manager? What functional managers
seem to be most important to the organization in achieving a competitive
advantage?

7. What your organization tells you about ethical stance?

8. Draw the chart of your organization’s domain. List the organizations products
and customers and the forces in the specific and general environments that
have an effect on it. Which are the most important forces that the
organization has to deal with?

9. How differentiated is your organization? Is it simple or complex?

10. List the major roles, functions, or departments?

11.What core competences make your organization unique or different from

other organizations?

12.How do you know is it organization centralized or decentralized?

13.What can you tell about the level of formulization by looking at the number
and kind of rules the organization uses?

14.How many people does the organization employ?

15.How many levels are there in the organization hierarchy?

16.How important is socialization in your organization?

17.Is the organization is tall or flat?

18.What is the span of control of CEO?

19.Is the span appropriate, or is it too wide or too narrow?

20.What beliefs and values seem to be characterizing the way people behave in
the organization? How do they affect people’s behavior?

38
 21.Can you find a written statement of the organization on social responsibility?

22.What roles does technology play in the production of organization goods and
services?

23.What is the organization level of technical complexity?

24.Does your organization uses a small batch, mass production or continues

process technology?

25.What form of task interdependency between people and between

department characterize your?

References

39
i

Interview of CH. ZAFAR SALAM SEYAN, MANAGER AT PEPSI RIAZ BOTTLER,LAHORE,PAKISTAN

Soda Museum - The History of Pepsi Cola, Saint Charles, Missouri
(http://en.wikipedia.org/wiki/Pepsi)
ii
From Hassan and Saima’s report Pepsi strategic Marketing, 2008
iii
From Hassan and Saima’s report Pepsi strategic Marketing, 2008
iv
http://www.madehow.com/Volume-2/Soft-Drink.html
v
Jim Danenberg, Pepsi processing,2008, Western Michigan University
vi
Pepsi Annual Report 2009
vii
http://en.wikipedia.org
viii
Murden, Terry (January 30, 2005). Coke adds life to health drinks sector. Scotland on Sunday.
Retrieved February 14, 2006
ix
Wikipedia.org
x
From Hassan and Saima’s report Pepsi strategic Marketing, 2008