Pepsico Global Supply Chain Corporate Thesis

Excerpt from Thesis :

" Fiscal year 2007 was ended with sales worth more than $37 billion and with a total staff number of 103,000 employees.

The Ongoing Battle against Coca Cola

PepsiCo and Coca Cola's endless disputes have been organized by the specialized literature under the syntax 'cola wars'. They generally received this name due to their intensity and their continuous occurrence, but also for the not always positive effects they had upon the two players. "Intense competition between Pepsi and Coca-Cola has characterized the soft-drink industry for decades. In this chess game of giant firms, Coca-Cola ruled the soft-drink market throughout the 1950s, 1960s, and early 1970s. It outsold Pepsi two to one. But this was to change. Then the chess game, or "war," switched to the international arena, and it became a 'world war'." concise presentation of the PepsiCo - Coca-Cola relationships along the times could be organized under the following mentions:

up until 1975, the Coca-Cola company was the undisputed leader, with a growth rate of 13% since 1976 up to 1978, Coca-Cola's growth rate had decreased to 2%; meanwhile, the Pepsi drink was becoming more and more popular the Pepsi advertising strategy aimed the baby boomers, and its association with youth and vitality ensured its success; this was the "Pepsi Generation" the "Pepsi Challenge" saw that consumers would test the Pepsi and Coke products and grade them based on taste; Pepsi was chosen as favorite and the corporate sales drastically increased;

in 1984, Pepsi's market share had increased to 18.8% (from 6%), and Coke's market share had decreased to 21.7% (from 24.2 in 1975) the Coca-Cola Company changed its chef executive officer, and the new CEO (Roberto Goizueta) implemented visionary ideas; he introduced the first change in taste - after 99 years of using the same recipe the strategy did not have the desired outcome, as the new taste was disliked by the consumers; but they rushed to the stores to purchase the older version, the classic coke, and thus the corporate sales increased significantly in 1988, PepsiCo owned a market share of 31% whereas Coca-Cola's market share had risen to 40%; this was within the United States by mid 1990s, the competition had taken an international turn, when Pepsi entered the Brazilian market, where Coca-Cola was already present the results of the venture were however disappointing as Pepsi failed to consolidate an international share; Coca-Cola on the other hand was doing extremely well worldwide; "The contrast with Coca-Cola was significant. Pepsi still generated more than 70% of its beverage profits from the United States; Coca-Cola got 80% from overseas" in late 1990s, the Coca-Cola Company encountered serious issues as some of their European operations were ceased, after the governments of France and Belgium had banned the products on contamination beliefs

Coca-Cola regained its status when they implemented an aggressive campaign; during the course of Coca-Cola's problems, Pepsi should have strengthened their position and would have as such been able to increase their market share; they however did not and no apparent gains were seen for PepsiCo as a result of Coca-Cola's difficulties soon after the banns in Europe had been lifted, PepsiCo accused the Coca-Cola Company of having "used its dominant market position to shut out competitors" the Italian authorities concluded their investigation by saying that the Coca-Cola Company had indeed engaged in antitrust actions in order to remove PepsiCo from the market; the response came quick and said that Pepsi was only looking for an escape goat for their poor performance

The competition between the two giants took up a lot of energy from both organizations, energy which could have been better invested in product development and improvement. And the actions implemented were not always friendly nor respectful and even more so, the situation created was often exploited. For instance, employees from both Coca-Cola and PepsiCo were reprimanded for consuming competing products during work; authorities were sometimes tired of the fiasco and ruled in overzealous manners; also, in search for more money, employees were caught trying to sell the secret recipes to the competition. "Stealing secrets and selling them to the highest bidder; informants giving information to the rival company; money transfers and arrests...sounds like a movie right? Wrong! This was the foiled plan involving Coca-Cola Company secrets being sold to Pepsi."

Another reason why the ongoing disputes between PepsiCo and the Coca-Cola Company represent an important corporate issue for the New York-based organization is given by the way the public perceives the two brands. Numerous studies have been conducted to capture the public response to Pepsi and Coke. A most relevant study in this sense is presented by Helen Fields in the U.S. News and World Report. "The researchers carried out several taste tests. Each subject tasted drinks in cups, then was loaded into an MRI machine [...] Sometimes the drinks were both anonymous, and sometimes only one of the two drinks was labeled -- but the other, secretly, was always the same soda as the labeled drink. They ran the "semianonymous" trial for both Coke and Pepsi, with different people. [...] When people didn't know what either drink was, they were equally likely to pick Coke or Pepsi as the favorite. But when one cup or one tube-squirt was labeled as Coke, participants preferred it to the other, unlabeled drink (even though both contained Coke). Oddly, the same was not true for Pepsi." As such, there is a general preference for Coke products, mostly because of previous experience with the Coca-Cola items and the strong corporate culture.

The strategies implemented by the two organizations also vary and to best understand this statement, take the case of the advertisements aired by each giant. The Coca-Cola Company chose to use regular people in their ads, whereas PepsiCo invested large sums of money into hiring international superstars, appealing to and attracting large numbers of customers. All in all, the historical disputes between the Coca-Cola Company and PepsiCo can be summarized in that the first was more classic, traditional and had an increased resistance to change; the latter on the other hand, had to continuously struggle for a better consolidated market share and implemented change and diversification as an ongoing process - this helped PepsiCo better adapt to the market requirements and ensured a leading position within the industry. However, the Coca-Cola Company remains the primary player and PepsiCo's number one competitor, threat and arch-rival.

4.2 Environmental and Safety Issues

The manufacturing and bottling institutions used by PepsiCo to deliver their final products have often been accused of polluting the air and water through their increased elimination of waste. The problems have gone so far as to generate severe crisis in countries which closed the PepsiCo plants. The issues pose threats to the global supply chain for various reasons, including:

the general tendency in the contemporaneous society is to preserve the environment; in a world where 40% of the initial water resources are now undrinkable, and in a country where only 4% of the initial forests still exists, the large corporations which break environmental rules are not well perceived by the population numerous organizations have become oriented towards the preservation of the natural habitat and governments have invested large sums of money into the development of more efficient and less damaging technologies the American organizations have generally placed reduced emphasis on these new requirements, the most eloquent case in this sense being automobile manufacturer Ford Motor Corp., which was quickly over-throned by Japanese maker Toyota the usage of pesticides, and more importantly, their identification in aliments, is highly frowned upon as the society is turning towards naturally and organically grown products

All in all, the contemporaneous society does no longer agree with the corporations that promote large revenues in the detriment of the environment's well-being. And just like Ford, PepsiCo will soon lose supremacy if they continue with their polluting operations.

The first accusations of Pepsi's pesticide use and contamination were present in the Indian newspapers in 2003. The local politicians soon launched a campaign to ban the products and even made efforts to close the corporate plants. Due to the incapability of the PepsiCo officials to control the situation, the crisis had turned into the ambition of Indian locals to overturn the corporate brands. Both PepsiCo and the Coca-Cola Company were targeted by environmentalist groups and local media and they both underestimated the magnitude of the scandal that was to emerge. "Coke and Pepsi stumbled badly in their response to the pesticide allegations: they underestimated how quickly this would spiral into a nationwide scandal, misjudged the speed with which local politicians would seize on an Indian environmental group's report to attack a powerful global brand and failed to respond swiftly to quell the anxieties of their customers."

And the problem was made even worse by the fact that the residual pesticides were also found in the drinks manufactured within India. The public was scandalized and…

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