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7/30/2019 Pepsico Os

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The four pillars to build stronger characteristics in internal and external context are

strategic orientation, organisational design, top management and corporate culture.

The strategic orientation is planning and subliming the attitudes and beliefs of an

organisation. In case of PepsiCo, the belief is to come closer to the customers and

extend or diversify their reach to other markets yet not covered. The organisational

design is guided by hierarchy headed by the CEO with definite number of

departments as discussed earlier in the input and output model of an organisation.

The supply, manufacture and sales department along with the finance section and

HRM Department form the set of major departments which are unique for every

division set up by the organisation. These categorizations help establish better

understanding and bring order within the system. The corporate culture is a

noteworthy factor related to the issues of job satisfaction, cultural practices by

organisations, communication. However, it is difficult for an organisation likePepsiCo to keep the interests of all its community or workforce in consideration,

PepsiCo has done well enough. It went on to receive a 100 percent rating on

Corporate Equality Index carried out by Human Rights Campaign which is used as a

tool that reflects the unbiased attitude shown by the organisation towards its

employees, investors and customers.

Organisational structure

It was in 2007 that PepsiCo revealed a newer organisational structure. According to

the CEO and chairman Indra Noori, the success and resources in terms of manpower

the company has generated are growing at a faster pace which is difficult to bemanaged by only two units. The company had explored major developed and

developing markets and hence the company diversified to three units named

PepsiCo American Food (PAF) covering the American and Latin American Markets

with Frito Lay being the major brand. PepsiCo American Beverages (PAB) is the

second unit covering Gatorade, Tropicana and other Latin products. The third unit is

the PepsiCo International covering the UK, Asia, Europe, Africa and Middle East. Out

of the three units PAF generates the maximum revenues accounting to about half of

the total, while the other two add the other half with equal share. However, the

international market is the least contributor. An average American per capita is 600

bottles per day whereas an average Middle East capita is 3 bottles per day whichshows how small share the PI holds for the PepsiCo but still it is important as the

markets are growing at a faster rate. PepsiCo is a large organisation and has been

improving and adapting to the various changing scenarios. (Food Industry News)

PepsiCo Vertical and Horizontal Organisation

Vertical organisation


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Its sole aim is to ease the communication between the top management people and

workforce. The various structural ideas followed to keep alive the vertical setup of

organisation by Pepsi are

To follow a hierarchical structure governed by predetermined rules.

A report system is incorporated to provide summary of the various information

systems.

There are fewer teams, workforce and integrators.

Horizontal organisation

It focuses onto establishing and improving the communication between the various

departmental structures and hence initiates a healthy coordination among them.

The hierarchy is not dominant guarded by fewer rules.

Teams are many with increased level of coordination.

The communication is direct and flexibility is more than vertical organisation.

It is a decentralised organization since it has a fewer levels in the organisational

structure. The appearance of such an organization appears flat because of the

reduced tiers or levels. Such a system of work provides opportunities to every level

as the decision making is not limited to the top officials but follows a bottom to top

flow of ideas and decisions. The organisation is more flexible in its policies towards

its employees, offers greater opportunities to its employees at all levels. The job

satisfaction also is higher as the various officials take part in the decision making

process of the organisation.

Integration - The business strategies and decisions made by PepsiCo are made by

the board of directors of the organisation. There is one executive director and other

eleven directors are independent outside directors who form the three departments

or committee's namely Nominating and Corporate Governance, Audit and

Compensation. These three departments take care of the various aspects such as

nominating newer members, formulating policies, the audit committee takes care of

the finance and accounting, the compensation committee is responsible for

communicating with the shareholders and investors and the definite code of

conduct for the officials and the various working staff of the organisation. It also

keeps track of the various transactions made by the organisation in the day. All

these departments are integrated in as one unit. The various departments work in

unison to help establish the growth and dominance of the organisation.

Specialization refers to the various levels in which the activities of the organisation

are divided i.e. the jobs created in an organisation thus covering or managing the

various activities. Specialization further breaks a sector into sub groups and further


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into individual person jobs called specialized jobs. In PepsiCo there are abundant job

specializations in the various sectors such as HR, Executives, Sales department,

finance section, manufacturing unit, supply chain etc. These sectors offer versatile

job opportunities.

Formalization is the degree to which there are rules and regulations, proceduresbeing followed in the organisation. PepsiCo also follows a set of rules called the

code of conduct to be followed by every member working for the organisation or

related to the organisation in one way or other. They lie in the areas concerning

regular routine, business dealings, information protection, accounts, health, whistle

blowing etc.

Standardization refers to the norms and standards set for a product or commodity

by a sound body such as ISO so that the product is reliable and meets the

expectation of the consumers. The PepsiCo is a certified organisation in terms of

safety of its products. Its passes the standards and follows the various norms

required and specified by the governing body. The organisation is committed tooffer best services and greater nutritive value to its products.

Mechanistic and organic structures

According to the contingency theory, the organic structure followed by an

organisation implies the flexible approach incorporated by an organisation under

which the employees are promoted to work efficiently. It thus builds the

organisation from a group into a team which functions in unison with everyone while

the mechanistic structure is guided by a set of predefined rules and the employees

are required to do the duties assigned to them.

The structure of control lies with the hierarchy in mechanistic structures while the

control is circulated to the whole team in organic structure which takes the decision

based on interactive study of situation.

The communication in mechanistic is vertical i.e., the different levels of hierarchy

are involved as per their level of freedom to decide. But in the organic structure the

various levels interact and all are free to express their views if they add to the

discussion.

The superiors are powerful and their decision has to be followed and adhered by a

subordinate in mechanistic whereas in organic structures the superiors and sub

ordinate personnel i.e., different level of hierarchy interact as a team and provide

full support to a right solution provided by any member.

The PepsiCo follows ideologies and views from both structures. Since the

organisation is quite huge, it follows the both level of setup as in vertical as well as

horizontal. The decisions are taken by the top management but the decision is

made by consulting with the various officials involved with the management. Also,


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the working process is from bottom to top i.e., the information and decision making

if from lower level to a higher level of hierarchy.

Objectives and Strategies

The past story

Pepsi was a soft drink first invented in 1898, and since then has been advancing to

higher levels with the policy of adaptation to the current requirements and deliver

which could revolutionaries the current market.

The company also went bankrupt in the year 1931.

After the end of World War II the company began exploring the seas and many other

outside markets. The time of 1960's marked the beginning of the new era when the

slogans on low calorie became popular. Sociable's was the first youth campaign

launched by the company.

After 1964, the company understood the need to add newer products to the market

and hence introduced diet coke for the first time. It also invested a huge amount in

the emerging markets of Asia, Africa and Europe. Now Pepsi owns 6 of the world's

most popular brands in the top sixteen. The advancements continued and so did the

adaptations made by the organisation.

The Future Plans

Pepsi is to invest in 'breakthrough' drinks. Also the company is looking forward to

develop artificial sweeteners and zero calorie beverages. They are also interested in

mergers abroad so as to acquire the emerging markets.

PepsiCo is looking forward to cut off the amount of salt content in the various

products it provides. There are rising health issues in major markets and such a step

would benefit the organization in terms of profitability.

The company is also aiming at reducing the plastic used by them per bottle as they

have already made the bottles recyclable. The reduction in size, plastic and thin

wrap sheets are some of the proposed plans to adapt to the green technology.

The main aim is to explore emerging markets and gain maximum market share in

these markets. They are also planning to invest another 500 million dollars in

countries like India which have grown 5 times in the last few years.

Technological Advancements

The advertisements are becoming increasingly popular as the aims at developing

games for mobiles related to soccer, and other games to promote their brand. The

use of QR contents and newest technologies are the best way to improve the profit

margin.


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They are also looking to reduce the size of bottles by the use of Green technology;

this would help ensure better health benefits and being recognized for

environmental safety.

The food processing sector is bound to use advanced machinery in agriculture

sector of Pepsi adding to its further growth.

The use of MySAP software developed by a leading software company is being used

by PepsiCo so as to increase the efficiency in the various sectors of work.

Organisational Culture

The work culture in PepsiCo is quite healthy promoting strong inter-personal

relationships. The various sectors work in unison to help the organisation excel.

Every department is headed by a manger that takes care of the various members

working under him. The manger evaluates and takes part in the decision making

process of an organisation by providing solutions to the problem. The various

sectors individually work as a team. The diversity is the greatest prestige for the

company. It has been recognised as one of the most beneficial organisation for

women and minority. Pepsi is great place to work but the work hours are quite high

which pose problem to many people. The environment is friendly and extremely

competitive. The employees of such organisations are highly qualified and

specialise in their area of expertise. The decentralized structure of the organisation

promote the information carry from bottom to top managerial positions who take

decisions after consulting it with the workforce. There are three levels in which the

total hierarchy is divided. Level 1 aims at building diversity and skills. Level 2

focuses on developing better communication and level 3 focuses on

institutionalizing the comprehensive environment.

Analysis

Pepsi has a number of brands which cover the various tastes people posses in a

population. Thus, it serves the needs and desires of the whole population by its

various brands and products. The company has had a number of mergers and

acquisitions (M & R approach) in the past adding to its resources such as sprite and

7 up which have added to a newer taste earlier not so predominant. They are in

partnerships with a number of firms such as

Starbucks Double Shot

Starbucks Iced Coffee

Mandarin (license)

D&G (license)

Lipton Brisk


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Lipton Original Iced Tea

Lipton Iced Tea

Ben & Jerry's Milkshakes

Dole juices & juice drinks (license)

Sunny Delight (produced by PepsiCo for Sunny Delight Beverages)

This helps build a strong network of alliances and support for the organisation.

Since, it is a huge multinational organisation these associations help it collaborate

and setup its bases in other countries and places and explore possible market

situations.

Conclusion

PepsiCo is a leading organisation which provides a wide variety of products to its

customers. The average consumption of Pepsi Cola is about 600 bottles per capita

which is a huge and thus its demand needs to meet with the supply.

The organisation aims at introducing a new product every six months. The sole idea

of introducing a newer product in the market is to entice greater customer and keep

the existing customers. This also helps in establishing one in the market and

provides an advantage to it in comparison to its competitors. The company started

with only soda and now has products that sell for billions of dollars. This is the main

reason why it surpassed coca cola in the first instance.

There are various divisions in an organisation for example one taking care of plant,

other resources, other utilisation, demand, supply and analysis. Thus the supply

chain needs to be monitored. Pepsi has such divisions which look into these matters

and have headquarter keeping track of the various aspects disused above. These

divisions are called the inter-organisational structure.


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McKenzie 7S framework

The organization is not just the

structure; rather it is made up of seven elements, shown above. These are divided into two

types: Hard and Soft. Elements in green are hard; they are easy to identify and feasible.

They can be found in strategy elements, corporate plans, organizational structures and


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other documentations. The soft elements are hard to describe. They are sort of intangible.

Hence it is more difficult to plan or influence these elements.

Effective organizations achieve a fit between all these seven elements. If one element

changes then this will affect all the others. For example, a change in HR-systems like

internal career plans and management training will have an impact on organizational culture(management style) and thus will affect structures, processes, and finally characteristic

competences of the organization.

In any change process in an organization, more focus is given on hard Ss and often soft Ss

are ignored. This is not a good strategy. It is difficult to build new structures and strategies

upon inappropriate cultures and values. Many M&A fail because of the clash of culture, value

and style.

Hence 7S model is an effective tool in initiating change process in the organization. One

should look at the current status of these seven elements in the organization and compare

with the ideal state. Then make and plan and implement them.

Let us describe these elements one by one:

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