PepsiCo organizational change caused by Aquafina water

Bottled portable water was not a significant product in the beverage industry in the US two decades ago. The industry was dominated and controlled by such giants as Groupe Danone SA’s Evian and Nestle SA’s Perrier. By 2002, the industry was worth $3.5 billion. In 1997, Pepsi made attempts to join the bottled water market. Some of the efforts included buying a spring water company and a shot at selling a brand that was sparkling. However, these efforts did not yield fruit. The management came to the conclusion that the best method to create a successful water brand was to exploit a resource that was already in existence, i.e. the water treatment equipment already at the bottling plant locations. These were being used to purify water for the soft drinks that the company produced (McKay, 2002).

The then Pepsi beverage main CEO along with his team figured out that there was a need for Pepsi to set itself apart by filtering out all it could from tap water. Pepsi figured out that it could transform a resource that was already available into a product with a taste and quality that could stand its market ground against the already popular spring water products including Evian. Large scale bottling of tap water would also allow Pepsi to compete on price basis (McKay, 2002).

The company installed reverse osmosis equipment for filtration worth $3 million, a plant for bottling in Wichita, Kan in 1994. The tap water that had already passed through the filtration process to make soft drinks was pumped through fiber glass membranes, at high pressure so as to remove the smallest mineral particles. Chlorine and other particles were stripped out using carbon filters. Since the water had been cleaned of even particles that destroy bacteria, ozone was added to stop bacteria from multiplying. Pepsi earned profits through licensing the right to use its Aquafina market name to bottlers. These bottlers bought and installed the equipment for filtration (McKay, 2002).

The advantage of water is that it is consumed any time. About a third of American households have yet to taste bottled water. In the past, bottled water targeted women and the consumers on the high end, Pepsi intended that Aquafina should be viewed and priced as unisex and mainstream water. At the onset, it was sufficient to just get the Aquafina brand onto the shelves. With time, the company began to increase its marketing campaigns to stave off competition that was growing. The advertisement budget by Pepsi increased to $40 million in 2002. Unlike the Coca Cola Company, the cola promoting company with Britney Spears is of the view that advertising soft drinks should be done by soft drink companies. They say that since water is not carbonated, it is so pure that they have no promise to make (McKay, 2002).

CQ, cultural intelligence, cultural quotient is a common term used in academic and government circles can be viewed as the capability to work and relate effectively across diverse cultures. Van Dyne, Ang and Koh (2008) say that CQ is a complementary intelligence form that demonstrates being adaptable to cross cultural interactions and diversity; which is different from other intelligence forms including EQ and IQ. CQ focuses on interactions and settings marked with cultural diversity. Thomas and Inkson (2003), point out that people who are culturally intelligent people own three main facets, and knowledge is one of them. They exhibit mindful behavior and adaptiveness. Cultural intelligence involves all these aspects. What the authors are saying is that there is a need for people to be knowledgeable so as to understand the cross cultural points of departure, the mind to understand such situations and the ability to adapt appropriate behavior in cross cultural settings. Thus, people who exhibit the three traits possess a high level of Cultural Quotient (Thomas and Inkson 2003).

The greatest asset that PepsiCo have is people. The company believes in creating a workforce that represents the diverse consumer base it serves. Engagement and diversity is a central to the values of the company and the way it operates as a corporate citizen, globally. Performance entangled with engagement, diversity and purpose is an essential driver of the vision of the company. This approach is critical in creating sustainability as an advantage in the company. PepsiCo comes with a strong legacy in diversity practices. They adopted the approach in the 1940s by being the first to break the color barrier in major conglomerates. They started employing African American Sales people. The company was also the first one to have a woman in its management board. It started multicultural marketing in the 80s. it is clear that PepsiCo is building on their legacy and paving a brighter future for its outlets across the globe(PepsiCo, n.d).

Pepsi aims at creating a work environment that is diverse and inclusive; one that encourages each associate to give their best at the place of work. Through diversity, the PepsiCo team is empowered to exude creativity and innovation.. PepsiCo has a global presence in over 200 countries. Therefore, it has an obligation to make deliberate effort to understand its consumers’ needs. The company entered the Indian market in 1989. After the company discovered from several studies that the purchasing decisions were largely made by women, it decided to direct its attention to women in senior corporate positions so as to understand the nature of its consumers. Still, in terms of diversity there was a lot of work begging to be done. The company made a deliberate step to increase the workforce diversity; mostly in functions that were seen traditionally as males’ roles including finance, sales operations and IT(People Matters, 2014).

The company has so far come a long way since then. It won the award in the best Diversity category at the People Matters Talent Acquisition Leadership League Awards. When the company management was faced with issues relating to diversity, they set up hiring targets in which business managers would point out specific roles that required diversity of candidates. Indeed, diversity is a central performance metric that is constantly monitored by the managers. The company has implemented a policy to accelerate talent acquisition internally and externally. It has implemented an increase of 20% in the ERP bonus payments given to employees that referred female candidates. They are also giving incentives and rewarding their partners and consultants who assisted the organization through the D & I consultant of the year award. Management and sales trainee programs drawing staff from campuses was pointed out as a great opportunity to hire women who are talented, particularly among the sales team and to initiate them into the system from the onset. Efforts such as linking with local universities to seek guarantee for constant access to diversity of talent are proving invaluable (People Matters, 2014).

The organizational structure of PepsiCo has been changed severally in an effort to confront market decisions at the global level. The current corporate structure of the company demonstrates the business goals of the global leadership and expansion. The strategies at PepsiCo are also demonstrated in how its organizational plan supports growth at international level. The organizational structure of a firm explains the design and system of components of business and how such components mix to realize the mission and vision of the firm. In the structure adopted by PepsiCo, control over the wide reach of the organization across the globe; cognizant of the significant market differences, is achieved. The company’s organizational structure has the advantage of maintaining a strong focus on the market needs regionally. Market divisions have made it possible to maintain such focus. The structure of the organization also helps PepsiCo to maintain corporate control at global level (Thompson, 2017). Pepsi came up with a strengthened management group and a fresh global structure in 2012. These were important moves to place PepsiCo at the helm of becoming a fully integrated food and beverage conglomerate. While the regions still retain ownership. The global groups working under PepsiCo will operate across the various regions so as to leverage the scale and power of the company fully.

Both cultural transformation and diverse hiring policy assisted PepsiCo to achieve the right workforce blend. Hiring is not the only solution to increasing diversity. There is a need to strive constantly to develop and inclusive and diverse culture in the company. For instance PepsiCo’s D&I council sets up discussions with the target groups to understand the practical life problems that working women experience. They have consequently initiated both structural and cultural changes(People Matters, 2014).