Total Quality Management Benchmarking at Pepsi Cola


Pepsi – An Introduction

Introduction

PepsiCo, Inc., major producer of carbonated soft drinks, other beverages, and snack foods. Its beverage division, Pepsi-Cola Company, bottles and markets several popular brands of soft drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay Company, the leading snack-food maker in the United States. PepsiCo is based in Purchase, New York.

PepsiCo’s soft drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other beverages include Lipton Brisk and Lipton’s Brew iced teas, All Sport athletic drink, and Aquafina bottled water. Frito-Lay products include Lay’s and Ruffles Potato Chips, Fritos and Doritos Corn Chips, Chee-tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels, and Grandma’s Cookies.

Early History

PepsiCo traces its origins to 1898 when Caleb Bradham, a pharmacist in New Bern, North Carolina, created a curative drink for dyspepsia called Pepsi-Cola. Pepsi-Cola, later referred to simply as Pepsi, was a mixture of carbonated water, cane-sugar syrup, and an extract from tropical kola nuts. To sell his product, Bradham formed the Pepsi-Cola Company in 1903. In addition to selling the drink at drugstore counters, Bradham bottled Pepsi for sale on store shelves. At this time, bottling was a new innovation in food packaging.

However, due to major increases in the price of sugar, Bradham began to lose money on Pepsi, and in 1923 he filed for bankruptcy. The Craven Holding Company of Craven County, North Carolina, purchased the company’s assets. In 1931 Charles G. Guth of the Loft Candy Company in New York City purchased Pepsi-Cola from the holding company. Guth had difficulty getting the business going again, but he increased sales by selling larger bottles at an unchanged price. By 1933 Pepsi-Cola was sold by 313 franchised U.S. dealers; bottled in the United States, Cuba, and England; and sold in 83 countries.

PepsiCo’s snack-food business dates from 1932 when ice-cream seller Elmer Doolin of San Antonio, Texas, developed a business idea after eating a package of Mexican-made fried corn chips. He purchased a recipe for the chips and established the Frito Company in 1932. Originally, Doolin produced Frito’s corn chips in his mother’s kitchen. He later mechanized production and moved operations to Dallas, Texas, in 1933. Around the same time, Herman Lay of Nashville, Tennessee, developed a business distributing potato chips made by an Atlanta manufacturer. In 1938 Lay bought the manufacturing company, renaming it H. W. Lay & Company. The company prospered, becoming one of the largest producers and distributors of snack foods in the southeastern United States. The company made and sold many snack foods, but its best-seller was its brand of potato chips, known as Lay’s. In 1945 the Frito Company gave H. W. Lay & Company exclusive Southeast distribution rights for Frito’s corn chips, a market both companies hoped to expand nationwide. After continuing their close business association for over 15 years, the two companies merged in 1961 to become Frito-Lay, Inc., with headquarters in Texas.

Growth

The Pepsi-Cola Company, meanwhile, had changed hands several times and grown greatly since 1933. The Loft Candy Company merged with the company in 1941, keeping the Pepsi-Cola name. About this time, Pepsi became the second-best selling soft drink in America behind its chief market rival, Coca-Cola (popularly known as Coke). In 1948 the Pepsi-Cola Company began canning drinks in addition to selling them in bottles. Alfred Steele, formerly an executive with the Coca-Cola Company, became president of the Pepsi-Cola Company in 1950. Former amateur boxer Donald Kendall took over as company president and chief executive officer (CEO) in 1963 and began marketing Pepsi to young people in an advertising campaign called “The Pepsi Generation.” The company acquired another popular soft drink, Mountain Dew, in 1964. In 1965 the Pepsi-Cola Company merged with Frito-Lay, Inc., to become PepsiCo, Inc., based in New York City. As president and CEO of the newly merged company, Kendall later moved the corporate headquarters to its current home in Purchase, New York.

In 1972 PepsiCo struck a deal with the Union of Soviet Socialist Republics (USSR), allowing the company to distribute Stolichnaya vodka in the United States and to build soft-drink bottling facilities in the USSR. Pepsi thus became one of the first American products to be made and sold in the Soviet Union. In the late 1970s the company began to purchase fast-food chains. It acquired Pizza Hut in 1977, Taco Bell in 1978, and Kentucky Fried Chicken (later named KFC) in 1986.

The Cola wars

PepsiCo’s leading soft drink, Pepsi-Cola, and its chief rival, Coke, have dominated the soft-drink market for decades, although Pepsi has traditionally remained behind Coke. In 1950 Coke outsold Pepsi by 500 percent worldwide. But Pepsi’s aggressive advertising campaigns aimed at young consumers and major bottling and marketing deals made Pepsi a close rival to Coke by the 1980s. PepsiCo has also enjoyed great success with its canned and bottled Lipton brand iced teas, earning higher sales than the Coca-Cola Company’s Nestea products. Also, in the United States, Pepsi had virtually an even market share with Coke in the mid-1980s, when the Coca-Cola Company changed the formula for Coke. (It later reintroduced the original formula under a new name, Coke Classic.) However, as Coke regained popularity worldwide in the late 1980s and into the 1990s, it again became the global soft-drink leader. In 1996 Pepsi-Cola International, PepsiCo’s international beverage production and marketing division, suffered difficulties in Latin America, one of its most important markets. The company was particularly hurt by the loss of a bottling plant to the Coca-Cola Company in Venezuela.

Snack food Market Dominance

Many of PepsiCo’s other products continued to dominate their markets in the 1990s. Sales of Frito-Lay products accounted for about 40 percent of PepsiCo’s total profits. By the mid-1990s Frito-Lay products made up more than half of the U.S. market for snack chips, and the company owned eight of the top ten chip brands. In 1995 U.S. consumers bought the company’s original potato chip brand, Lay’s, at a rate of 4.5 kg (10 lb) a second. The company’s leading product, Dorito’s tortilla chips, was the best-selling salty snack (packaged) food in America in the mid-1990s. Salty snack foods include chips, pretzels, and nuts, as opposed to nonsalty snack foods such as cookies and cakes. In 1994 Frito-Lay began producing several baked and low-fat versions of some of their snack foods—such as Baked Lays potato chips and Baked Tostitos tortilla chips—which soon dominated the company’s sales growth.

Recent Developments

By the mid-1990s PepsiCo’s restaurant business consisted of 28,000 outlets worldwide, more than were owned by any other company. The company also supplied its own restaurants through a separate division, PepsiCo Food Systems (PFS). In 1997 PepsiCo sold PFS. Also that year, PepsiCo spun off its restaurant chains to form a new company. The move enabled PepsiCo to focus on its beverages and snack foods. In 2001 PepsiCo acquired The Quaker Oats Company, a food and Beverage Company.

In Pakistan, there have been consumed different types of soft drinks but Pepsi is the most frequently consumed soft drink. It is very much popular in the consumer; it has got big target market and is competing with the other companies of soft drinks. 10 units of Pepsi cola have been installed, in the different places of Pakistan i.e., Lahore, Multan, Gujranwala, etc., and working with the best utilization of their resources in the optimum way. Each of these units is owned by the different parties, which are strictly following the rules of the parent company. The company to made production has licensed each unit. These units have their own areas of selling and have different target markets. All these units are considered as separate firms, which are the franchisees of Pepsi cola international.

Pepsi in Multan

Shamim & Company

History

SHAMIM & Co. was established in 1967 as a private limited company. It started its business in 1968. Allah Nawaz Khan Tareen (Ret. DIG) got license of 7-up franchise and was producing only one product, 7-up. But in 1973, it became Pepsi Cola franchise. Now a day MD of SHAMIM & Co. is Alamgeer Khan Tareen son of Allah Nawaz Khan Tareen.

Total production of that plant was 600 crates per 24 hours. Now Factory has 5 plants, which can produce 110,000 crates per 24 hours.

In start Pepsi in Multan imported the material from USA & Ireland but due the problems of shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they import the material from USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate from the HariPur plant.

Along with the concentrate, Pepsi in Multan also imports the Sugar from Sheikho Sugar mill & from Shaker Kunj. The bottles are manufactured by Tariq Glass in Lahore under licensed by PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory itself but in case of shortage Factory buys it from Supreme Gas & Pak Gas. The caps and crowns are imported from Imran Cork, Mehran – Karachi and Wincloa – Lahore.

Introduction

In Pakistan, at present SHAMIM & Co. is the largest production unit out of 11 franchisees. SHAMIM & Co. covers the area of Southern Punjab which consists of Multan, Bahawalpur, Bahwalnagar, Dera Ghazi Khan, Sahiwal, Khanewal, Rajan Pur, Taunsa, Okara, Rahimyar Khan and Layyah. The company is properly serving all these areas with quality products.

Honors

In Pakistan, SHAMIM & Co. is in the list of top three out of eleven showing financial and sales growth according to their relative volume size basis. When franchise cross a certain volume, plant is classified as, “Mega Plant Status”. SHAMIM & Co. has achieved this status in 2000 and 2001. Also it has ISO 9002 Certification and for year 2005 Shamim and Company won the award of best quality unit among the eleven 11 units in Pakistan.

Mission Statement

“To earn profit by meeting the customers needs with quality products”.

Organization

Managing Director

He is the owner of this company and final operational authority to manage all departments of the company. All departments’ heads are responsible to report him all about their performances and matters.

General Manager Sales

G. Manager Sales is responsible for the performance of his department and to achieve the objectives assigned to him such as marketing, sales, distribution. To carry out his duties more efficiently he has four Regional Managers, 15 Area Sales Managers.

General Manager Operation

He is responsible for the whole administrative, shipping, workshop related activities to smooth on the factory operations without any hindrances.

General Manager Technical

He is unlike Sales department performs key role as to manage Production Department producing quality Products as per need of the sales department. Quality Control Department also works under him.

G. Manager Finance

Finance, Accounts and MIS departments work under his control. He is responsible to make major company financial policies to meet the needs of the each and every department regarding budgets etc.

Organizational Chart

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Global strategy

Pepsi has divided the total international market on the basis of taste constituting into three zones.

Asian zone European zone African zone

Pepsi is using the licensing strategy to go abroad. SHAMIM & Co. is also a Licensee.

Competitive priorities

“The competitive priorities are the operating advantages that firm’s processes must possess to outperform its competitors.”

Shamim & Co. has the competitive priorities of high-performance design and consistent quality.

High-Performance design

Actually Pepsi is getting the competitive edge in our region on the basis of its quality and the quality is its taste. Through a complete marketing research they found that sweet taste is liked more by this region. That’s why in Pakistan Pepsi is dominant soft drink and it has almost 75% shares in this market. On the other hand when we look internationality then Coca Cola is the leading company. So Pakistan is a big market for the Pepsi, where Pepsi is generating a lot of revenues.

Consistent Quality

Another major and the strong aspect of the Pepsi in Multan is that they are producing a consistent quality according to the PCI standards. The low quality bottles and the damaged bottles are not dispatched towards the market. Pepsi has a lot of checks and balances on its output level.

MANUFACTURING AND SERVICES STRATEGIES

Make-To-Stock Strategy

In Pepsi, Make-To-Stock manufacturing strategy is used. Bottles are produced in a standardized process because the competitive priority is consistent quality. Firstly, marketing department forecasts the demand then according to this forecasting MPS is made and after making bottles Pepsi distribute these bottles to the market.

DEPARTMENTALIZATION

As it is a formalized company therefore there is a hierarchy of employees and the division of departments in the organization. Following are the departments working in the organization.

Production Department Administration and Personnel department Sales/ marketing Department Finance Department Shipping Department Purchase Department Excise Department Computer Department

Each manager of a department is responsible for overall working of the department. A manager has an assistant manager and after this there are shift in charge in production and supervisors in sales. They control the activities of operatives.

Brief introduction of the working of these major departments

Production department

As we can see with the name of the department the working of this department is to control the production process i.e., to get raw material and process them and convert them into finished goods.

Administration department

The major function of this department is to manage the employees and to made recruitment of new employees. Assign them their according jobs. And government affairs if employees are working effectively or not and what are the government recent policies

And what is the impact of these policies on the organization. These are the few matters where administration plays its role.

Publicity problems

Some government policies directly affect organizational expenses like the tax on different campaigns that is tax on cap, banners, shirts, and as many taxes on different publicity methods about which organization come tow know at the end of the year.

Sales/marketing department

The marketing department of this organization is assigned to make public dealing. The marketing department is responsible to make advertisements of the company products and get them sold. Advertise through road site Painting, Wall Chalking, Billboard, TV adds etc. They are given yearly sales targets and they are liable to achieve that. They use different schemes and offer different discounts etc. to achieve those targets. Schemes like:

Ø Prize Winning Schemes

Ø Pepsi Ramzan Offer

Ø Haj scheme

Ø Omera scheme

Ø And many more schemes

Finance department

This is one of the most important departments of this organization. This department makes the financial plans of the organization; they analyze their resources and then compile other reports and give the whole budget the organization can afford. Another job of this department is to make the complete record all financial and non-financial transactions made inside as well as outside the organization.

Purchase department

The whole processing of production department is based on the availability of raw material and all the dealing regarding raw material is under purchase department. They made purchases from their contractors i.e., bottles, caps ingredients etc.

Computer department

Pepsi-Cola uses a software package (Road Net) to facilitate the design of efficient routes and schedules for the delivery of bottled and canned products to customers assigned to a given location. In order for automated routing and scheduling to achieve maximum benefit, however, the set of customers assigned to each warehouse and bottling facility must be appropriate. During the course of this project the students developed a procedure based on cluster analysis to assign customers to bottling facilities and integrated this analysis into a Geographic Information System.

PRODUCTION PROCESS

Water Treatment Plant

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PEPSI Bottles Filling Process

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Purchasing and washing of bottles

First step regarding the production is the purchasing and washing of bottles. Mainly company use the bottles returned from the market but if it needed more bottles, then these are purchased from the glass company, Lahore.

These bottles are placed on conveyer and washed through an automatic plant. Caustic Soda and boiled water is used for washing of bottles.

Water Traeatment

Raw water is treated to remove its hardness. Here raw water with the Lime, Feso4, and Chlorine comes to the Coagulation Tank where the initial sludge is removed then this water is moved to Buffer Tank where it is kept for a certain period in order to stable it. Then this water comes to the Sand Filter and passes through the Sand and Gravel bed, and then this half treated water comes to the Carbon Filter and passed through the Carbon and Gravel bed for more purification. After that it is moved to the Purifix Carbon Filter and then to the Spool Polisher where the filter papers are used to remove the sludge and then to Water Polisher and then to Ultra Violet Filter where Ultra Violet rays passes through the water in order to eliminate the future growth of bacteria and lastly this treated water passed through the Thread Type Filter. After passing through this complex process water is completely free from sludge and bacteria and other hazardous waste.

After that this water comes to the Water Softer Tank and passed thorough the Gravel Bed and this soft water is used for the syrup making.

Preparation of Simple Syrup

In the sugar weight room sugar is weighted for different brands, because each brand requires different quantity of sugar, then this weighted sugar is passed to the syrup storage room, where the sugar and water in equal quantity processed in Pasteurizer Tanks, and heated up to 85 C where Activated Carbon is used to remove the bacteria, and Chlorine and TSP (Tri Sodium Phosphate) used to remove the smell and color of the sugar. Chlorine and TSP is also stored in different tanks. After that this mixture of water and sugar is cooled down up to 20C in order to prevent from the further growth of bacteria, after that in this mixture Concentrate of each brand is added as per requirement.

Washing of Bottles

The empty bottles that come from the market are brought into the washing room of bottles where different employees first check the initial damages to the bottles. Damaged bottles are screened out from the lot. Only the acceptable lot is allowed going towards the bottle washer machine. The bottles remain 45 minute in this washer machine so that only the good quality bottles that are free from sludge and breakage can be passed to the filling room.

Filling of Bottles

Mixing of CO2 Gas in Syrup

Syrup is sent to carbon coolers, Ammonia, Carbon Powder and Carbon Granular are mixed in the syrup.

In the filling room the syrup and CO2 comes from syrup and CO2 room. From Carbon cooler syrup goes to the filler and from other side empty bottles and then crown cock or cap cocks are fixed on the bottles. Here operator looks after the production process.

Filled bottles are then passed thorough light room where quality of bottles is checked. Here under filled or, over filled bottles or dirty bottles are separated. There are two light rooms and in each room one employee is placed to trace out the dirty bottles.

After passing through light room the code is printed on the bottles, which contain the manufacturing date, machine number and time of manufacturing and the batch number.

After all this checking process bottles are placed in the crates. The whole process of production is automatic. Only supervision is required. Then these crates are sent to the output warehouse.

QUALITY CONTROL

It has become crystal clear that high quality products have a distinct advantage in the market place, that market share can be gained or lost over the quality issue. Therefore quality is a competitive priority.

Quality is important due to the following reasons:

• Cost and market share

• Company’s reputation

• Product liability

• International implications

SHAMIM & COMPANY (PVT) LTD takes effective measures for the quality control. Production of the company is according to the standards set by PCI. So the company is very much concerned about quality. Quality of raw material as well as of end product is checked.

Following are the main steps taken by the company for quality control.

Testing of Raw Material

Raw material used in production, comprises of the following items.

• Concentrate

• Sugar

• Treated Water

• Empty Bottles

• Carbon Dioxide

• Crown

From the above items, previously the franchiser from USA provided concentrate. Now it has plant at Haripur and SHAMIM & COMPANY (PVT) LTD purchase the concentrate from there. Because the franchiser provides concentrate, so there is no question about its quality. All other raw material purchased by the company itself.

Sugar Testing

The company from sugar mills purchases sugar. After the arrival of sugar at the plant, it has to pass through a strict quality check. It should be free from moisture.

First of all supervisor checks the quality of sugar. After this checking, a randomly selected sample from sugar bag is sent to laboratory for testing. After this testing, if the quality of sugar is according to the standards, then this sugar is stored for further processing. If the sugar quality is not up to the mark, then it is sent back to the sugar mill.

Water Treatment Testing

The company has four containers to meet the requirement of water. The water is treated for the use in final processing. At different stages, different treatment tests are done.

These tests include:

• Upper top test

• Sand filter and carbon purifier test

• Water softness test

Company also keeps the record of these tests. If some abnormality is observed by the shift in charge, then he stops the supply of water from the container. The supply of water is made from other container. These containers are also washed at regular basis.

Syrup Testing

Mixing of sugar and water into concentrate produces syrup. This mixture is treated at 90oc and then it is stored in the tanks. This is called simple syrup. This syrup is also tested in the lab. Then carbon dioxide and ammonia are mixed into the syrup. Now this is final syrup this is also tested in the lab. If this syrup is not according to standards, then new syrup is prepared for production.

Finished Product Testing

When bottles are filled, a chemist also takes the sample and checks the quality. Here preservation and ingredients ratios are also checked. If any deviation from the standard is found, the whole batch is drained before going in market.

These finished bottles are also passed through light room to control the quality. Here if the bottle is low filled or dirty, then it is sorted out. The quality of glass, size of neck and size of bottom should be according to the given standards.

Internal Audit

The firm has hired an internal audit team. And the purpose of this audit team is to make periodic inspection of output after every 30 minuets. And if they find any laziness from the employee’s side they immediately inform to the operation manager, so that right action can be taken.

External Audit

Similarly there are some external auditors from Dubai, they take the random sample of bottle from market and check the quality of beverages according to their standards. In the past 4 to 5 years the Pepsi Multan has proved good quality and got a lot of reward from international auditors.

Pepsi cola international also plays an important role in maintaining the quality. Sample from different markets at different selling points at different times, are collected and quality of these samples are checked.

Coding is also done on the caps of the bottles. In this coding manufacturing date, machine number and time is printed. So from the above testing, we can conclude that the company has very rigid quality control system.

Capacity

“Capacity is the limiting capability of a productive unit to produce within a stated time period, normally expressed in terms of out put units per unit of time.”

This is actually the intensity with which a facility is used. This intensity is increased through overtime. Other way of increasing the capacity is to engage in subcontracting when it is feasible.

In Pepsi, the capacity measure in out put form is the number of crates produced. There are two production units having different lines. The first unit contains 3 lines and allocated for 250 ml. Pepsi, 7UP, Dew & Marinda. The second unit contains 2 lines and produces 1 & 1.5 litre bottles. These lines are flexible in a sense that through one line you can produce multiple brands having a set-up time of 2 hrs. They are not fully utilized. The capacity of one line is 1100 bottles per minute but it is being operated at 800 to 900 bottles per minute. The reason is that, the bottles move very fast that may cause serious accidents by breaking into small pieces. There are 3 shifts working in Pepsi cola. The total capacity of 5 lines is 160,000 crates per day. But the average utilization of 5 lines is 100,000 crates per day in peek season.

Planning Strategies

Chase Strategy

A chase strategy matches demand during the planning horizon by varying either (1) the workforce level or (2) the output rate.

Pepsi is also following the Chase policy. When higher production is required in the peak season, company hires the new workers, and during low production the workers are fired from the company to prevent from unnecessary cost. Company also tries to increase demand through advertising, price cuts and by giving different incentives.]

FORECASTING

Planning and control for operations requires an estimate of the demand for the product or the service that an organization expects to provide in the future. Since forecasting should be an integral part of planning and decision making, the choice of a forecasting horizon (a week or a month, for example), a forecasting method with desired accuracy, and the unit of forecasting (dollar sales, individual product demand.) should be based on a clear understanding of how the output of the forecast will be used in the decision process.

SHAMIM & COMPANY (PVT) LTD uses the historical data for forecasting demand. As the company has seasonal business so the demand is high in the month of March, April, May, June, July, August and September. Sixty percent sale of the company takes place in these months. This is the peak season for the company.

Company makes the sales forecast on the basis of historical data. For example, if a company wants to forecast the sale for June 2005. They will take the data of last five year in order to forecast the sale for June 2005. They also take into account the current trend factor.

Level of Forecast

The Pepsi cola forecast the demand for their products on aggregate level. Then they forecast demand for Pepsi, 7up, Mountain Dew and Miranda individually.

Unit of measurement

They forecast the demand in crates instead of bottles. Pepsi normally forecast the demand in 250ml.

Forecasting error

It is difficult to reduce the error of forecast demand. They say that the six to eight months are required to install a new plant. And they lose the market for this particular period.

Inventory Management

Inventory is very important to every company because it helps the company to respond quickly to customer demand, which is an important element of competitive strategy. The more effective a company’s inventory system is helped full in manage the company’s resources.

In SHAMIM & COMPANY the inventory is divided in to two main categories:

Critical material Non-critical material

Critical Material

Critical material is that which is directly related to the production so management gives full concentration to critical material to avoid irregularity in operation. The critical materials include:

CONCENTRATE SUGAR CO2 GAS EMPTY BOTTLES CROWN CORK CAUSTIC SODA

The store provides a daily stock report of critical material with balance. If that material is reach at reorder point then they write that material in the daily stock in the column of urgent. If any material is going to be reordered, it is highlight with red pen. The procurement manager physically checks the stock and place order. They are managing high inventory in which order for concentrate is placed for 3 months and the order for the rest of the material is placed for 1 month.

The reason for maintaining high inventory is;

Customer satisfaction, to prevent from stock-outs and back-order situation Low ordering cost Labor and equipment utilization Low transportation cost

Non-Critical Material

In Pepsi cola the non-critical material are those material which is not directly related to the production. The storekeepers inform the procurement manager. When there is need. The non-critical material consists of stationery, Greece, and supplies etc.

Selection of Supplier

The co. purchase material from those suppliers, which provide the material at least cost, on time delivery and meets the specification of the quality control department

In start Pepsi in Multan imported the material from USA & Ireland but due the problems of shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they import the material from USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate from the HariPur plant.

Along with the concentrate, Pepsi in Multan also imports the Sugar from Sheikho Sugar mill & from Shaker Kunj. The bottles are manufactured by Tariq Glass, Toynasic and BGL under licensed of PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory itself but in case of shortage Factory buys it from Supreme Gas & Pak Gas. The caps and crowns are imported from Imran Cork, Mehran – Karachi and Wincloa – Lahore.

Distribution

In Shamim & company, major item of inventory is finished product. There are two ways to distribute that finish inventory, the first method is direct and second is indirect method. In direct method they provide crates of bottles to their dealers at the required destination through their own transport, in indirect method the dealers have their own transport for distribution.

PEPSI is just one link in a customer value delivery system that includes thousands of dealers. It is a winner in this part of the world because they have superior dealer networks. Also the wholesalers and retailers involved are doing well because PEPSI supplies superior beverages. PEPSI also focuses on placement of their product such that the consumer can buy a PEPSI from nearby location. PEPSI also takes immediate action in delivering its products to market. Overall PEPSI is focusing on fastest delivery and great assortment.

PEPSI Multan is obtaining strong trade cooperation and support from resellers. The marketing department commands unusual cooperation from resellers regarding displays, shelf space, promotions and price policies.

“ The bench marking is a continuous process of comparing a company’s strategy, products and processes with those of world leaders and in best-in-class organizations in order to learn how they achieve excellence and then setting out to match and even surpass it.”

We will compare these two companies in regard of shares. The shares can be described in two ways:

Ø Market shares

Ø Volume shares

The market share of a company represents the portion of accounts that the company holds from the 100% accounts of the market. The market share distribution of Pepsi and Coca-Cola is more than 80% and remaining respectively. For Instance if the total market comprises of 100 consuming accounts then 80 accounts are being served by Pepsi and rest are being server by Coca-Cola and others. Pepsi has been focusing to increase its market share, which represents the long-term approach of organization because majority of the customers of the Pepsi are low volume purchase and if someone will switch towards the other brand then it would not be a big loss for the firm. But on the other hand Coca cola is focusing on the short-run approach, it is dealing with the institutional customers, which are high volume purchaser. But the major disadvantage of this approach is that if Coca-Cola will lose any one customer among these 20 then it would be a great loss for the firm but in case for it.

The volume share of a company represents the portion of sales volume that the company holds form the 100% sales volume of the market. The volume share distribution of Pepsi and Coca –Cola is 65% and 34% respectively. For instance if total market demand is 100 units then Pepsi is supplying 65 units while Coca-Cola is supplying 34 units and remaining 1 unit is supplied by other beverages companies of Pakistan.

In 1970s Pepsi was the follower and Coca-Cola was the leader here in Pakistan as well. At that time Pepsi used to benchmark the Coca-Cola in order to prosper and progress. But after 1970s Pepsi stopped benchmarking strategies and procedures of Coca-Cola and adopted an idea of Out-of Box thinking.

Thinking Outside the Box means thinking beyond the parameters of human consciousness and experience - to see beyond the norm - to be a visionary - to activate your DNA. We exist inside the box - the physical plane - but we soon evolve our conscious awareness back to its source of creation - outside the box.

Are you trapped inside the box - the emotions of the game?
Thinking 'outside the box' means balancing lower frequency emotions - fear, anger, etc.
With higher frequency emotions and therefore not being controlled by your emotions.
Let it all go ... it's just an illusion in time.

………

Humanity is evolving out of the box and into the light of creation.

What PEPSI found out from out-of-box thinking?

Pepsi got following findings from this idea:

Ø Cricket is the most Popular game in Pakistan.

Ø Pakistan is an immature market.

The tactics that Pepsi derived from above ideas are:

It is an admitted fact that there is a craze of cricket in Pakistani Nation irrespective of age factor. So the Pepsi thought to take the benefit from it and made a contract with PCB in mid 70s. This created a fantasy in the minds of people and market shares of Pepsi Cola started increasing. It gave real boost up to repute of Pepsi in world-cup 1992 and in very short span of time; Pepsi was able to double its sales.

In view of the lack of knowledge and immature market of Pakistan Pepsi adopted the aggressive strategies of distribution and advertisement. This also was proved to be an effective move towards the growth of the company. They are using almost all modes of advertisement and are using them extensively right now such as:

Ø Electronic Media

Ø Print Media

Ø Display Media

It is the task of the sales and marketing officer of Pepsi Cola that whenever and wherever a departmental store will open they have to capture it and have to convince the shopkeeper to make an agreement by meeting his requirements.

Benchmarking PCI

As we already mentioned that in sub-continent Pepsi is the leader so here in Pakistan Pepsi is not benchmarking Cola-Cola’s standards rather Coca-Cola is benchmarking Pepsi here such as in pricing, advertisement (Celebrity Hiring) and aggressive distribution. Pepsi benchmark its parent company for technical, quality and for human resource considerations.

Quality issues

Shamim & Company infect adopt the standards of PCI such as about the proportion of ingredients. Such as the standard for CO2 in 7’up was set 3.5 to 3.9 but to become more efficient in quality issues the Shamim and Company redefined it as 3.6 to 3.8. However the ideal standard for CO2 is 3.7. Similarly for the Marinda they refined the standard for getting much and much closer to the ideal standard.

Technology

Pepsi in Pakistan always benchmarks its parent Company for the sake of technology improvement. For instance they are going to start a new plant in Lahore, which would have the capacity to fulfill the total demand of Lahore district. And it would require only 3 operatives to operate this plant.

Celebrity Hiring:

In our culture cricketers and film stars have much influence on people. Pepsi is using both the vehicles to advertise its brands. It has established the contract with prominent film star Reema as a brand representative for Pepsi. Similarly contracts have been established with Inzamam-ul-Haq and other cricketers.

Employee policies

Earlier Pepsi was not focusing too much on employee’s benefits and facilities. Then it adopted the idea that “result and rewards have a positive co-relation.” Shamim & Company took this idea from PCI that if employees and satisfied and motivated towards the achievement of the Goals only then organization can better grow. In early 90s Pepsi adopted a new benefit plan for its employees and management. Now in employee in the marketing department has a car, having the medical facilities, insurance and a good compensation. So these policies regarding the employees helped the organization to achieve its target related to sales, growth and image of highly committed organization.

Collecting Feedback from customers

Actually, Pepsi is using two ways to collect the feedback from its customers.

Ø Direct Method

Ø Indirect Method

In direct method they collect feedback from its distributors, business customers and retailers about demand, market situation, consumer behavior and on other issues through its Sales Information System (SIS). For example they take vehicle plan from the distributors.

And Pepsi measures the performance of its distributors and other customers through collecting the data about

Targets Inventory Level Repute Daily, monthly and yearly sales Report

This method is specifically used to judge the consumer behavior. In this method Pepsi uses the services of ACNELSON Company, which is basically a biggest and authentic most research organization in Pakistan.

They use two vehicles focus and employees policies to incorporate the quality culture. For the urgent and most important issues they make employee’s policies and make sure these policies are being followed with considerate supervision. And for less urgent issues they use focus strategy and arrange lectures, presentations, conferences and excessive training programs.

Pepsi has NO agreement with Coca-Cola on pricing and other strategic issues. And the major reason of recent increase in prices has been reported to be the revision of tax policy of the Government.

ISO 9000

Now the situation has been changed. Products of low standards are not acceptable in international markets. These standards are ISO-9000 i.e., International Standard Organization. Now as the world has become a global village, therefore, there is a very tough competition among the companies. Especially for the companies of developing countries, they have to do much more smart work than the companies of developed countries because they have strong economy and their products are widely acceptable in the international market. For this purpose almost all organizations are doing struggle for getting ISO-9000 certificate. Shamim & Company (PVT) Ltd is one of those Pakistani organizations that struggled for ISO-9000 and awarded. They have been awarded ISO-9002 certificate.

The management and labor of Pepsi is committed with their responsibilities. The evidence of this the company has certified as international standard organization. They had to fulfill the 20 clauses of ISO 9000. In this way they got ISO 9002 certificate. The company is franchisee so; they have no authority to design a product.

They up date their records on daily basis. In Pakistan no one have authority for inspection for ISO 9000. The company has selected SGS Malaysia for inspection of their records. This is a continuous process the auditors come after six month and check the records.

SWOT Analysis

1- Strength

Activities the firm does well or resources it controls are called strength. Resources that a company contains, size of organization, size of market, loyalty of the organization’s products, sales point of product of the company shows the company strength.

The strength of PEPSI lies in the loyalty of the product, their market share, size of market, having numerous sales points and efficient delivery system.

2- Weaknesses

Activities the firm does not do well or resources it needs but does not possess. Such activities that a firm does not perform or not have some resources those other competitors have.

Locally, PEPSI is enjoying its position in the market. Internationally, PEPSI faces some tough competition from Coca-Cola. Their weakness is the lack of relationship marketing in some parts of the world. And also in Pakistan they are facing some serious problems in building the relationship with institutional customers.

3- Opportunities

A combination of favorable circumstances or situations for organization’s product/s such as loyalty of customer about your products, social environment, size of target market, size of organization, advantages over other competitors etc.

Opportunities are coming in the market day by day in the shape of new retailers. PEPSI has a big research department; they try to capture each new retailer who comes in the market. Pakistan population size is rapidly increasing with the passage of time so opportunities are there for Pepsi to enhance its sales volume more than others.

4- Threats

Unfavorable circumstances that a company faces time by time to achieve its goals are called threats. Some times small companies introduce the same products with low quality and low price that the company did not produce.

Locally, PEPSI stands second to none. Internationally, Pepsi is facing heavy competition from its rival Coca-Cola. Coca-Cola is focusing global market while PEPSI is somehow lagging behind. The situation can become a serious threat to PEPSI globally.


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