University of Central Punjab

Pepsi Cola & Pakola

Assigned by : Mr. Toheed Alam

Submitted By: Mohammed Rehan (36),

Usman Maqsood (40), Umer Hassan (61)

& Usman Hassan (62)

Class : MBA-1b

Strategic Management

1|Page
In the name of Allah, Most Gracious, Most Merciful.

2|Page
 ACKNOWLEDGEMENT

First off all we want to express all our humble thanks to ALLAH who is very sensitive about each
and every activity of all his men and without whose help; we are unable to accomplish any
objective of our life.

Secondly, we are grateful to our prestigious institute that made this learning opportunity a part
of our education. We are also thankful to all the teachers as the knowledge imparted by them
enables us to gain the knowledge of the organization in the best way,

Especially Mr. Toheed Alam

We are also thankful to our parents who were always there by our side to guide us and gave us
the courage that we can do the best in our life and taught us the different between the good
and the evil, for this is our guide in our life.

We would also like to thank our class mates for their support.

3|Page
 PREFACE

The practical training is always essential along with academic qualification. Feeling the
importance of practical exposure, The University of central Punjab (UCP) has made for every
student to go through training for practical purpose as trainee.

The Project program is to broaden the vision of practical experiences with theoretical
knowledge as it increases ones capabilities to handle problems at various stages and the ability
of decision.

Since we have been involved in this Project, we have tried our best to elaborate information and
relevant facts about the Soft-drink Industry with respect to Pepsi-Cola and Pakola.

4|Page
 Table of Contents

Pepsi 6

Introduction 6

History & Background 6

General Environment 7

Industry Analysis 9

Current Situation 10

Five Forces Analysis (Porters Model) 13

SWOT Analysis 17

PESTLE Analysis 18

Functional level strategy 22

Business Level Strategy 28

Corporate Level Strategy 31

Pakola 36

Introduction 36

Production 37

SWOT Analysis 39

Five Forces Analysis (Porters Model) 40

PESTLE Analysis 43

Value chain 44

Recommendations 45

5|Page
Introduction

Pepsi (stylized in lowercase as Pepsi, formerly stylized in uppercase as PEPSI) is

a carbonated soft drink that is produced and manufactured by PepsiCo. Created and developed
in 1893 and introduced as Brad's Drink, it was renamed as Pepsi-Cola on August 28, 1898, then
to Pepsi in 1961, and in select areas of North America, "Pepsi-Cola Made with Real Sugar" as of
2014.

PepsiCo Inc. is an American multinational food, snack and beverage corporation headquartered
in Purchase, New York, United States, with interests in the manufacturing, marketing, and
distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in
1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded
from its namesake product Pepsi to a broader range of food and beverage brands, the largest of
which includes an acquisition of Tropicana in 1998 and of Quaker Oats in 2001, which added the
Gatorade brand to its portfolio.

History & Background:

PepsiCo, Inc. (PepsiCo) was established through the merger of Pepsi-Cola and Frito-Lay in 1965.
Pepsi-Cola was created in the late 1890s by Caleb Bradham, a New Bern, N.C. pharmacist. Frito-
Lay, Inc. was formed by the 1961 merger of the Frito Company, founded by Elmer Doolin in
1932; and the H. W. Lay Company, founded by Herman W. Lay, also in 1932. Herman Lay, former
chairman and CEO of Frito-Lay, was chairman of the board of directors of PepsiCo; Donald M.
Kendall, former president and CEO of Pepsi-Cola, was president and chief executive officer
(PepsiCo, 2014).

During 1970s - 1990s, PepsiCo had developed a wide variety of brands such as
Mountain Dew, Ruffles and Cheetos. These brands were greatly welcomed by customers and
brought PepsiCo to early success.

6|Page
Since then, PepsiCo had grown globally by acquiring multiple reputable brands in the snack and
beverage industry. For instance, Walkers Crisp and Mug Root Beer are two of the companies
acquired by PepsiCo in the early stage. The acquisitions allowed PepsiCo to establish and market
snack foods around the world rapidly. Besides merely expanding horizontally, PepsiCo
purchased numerous famous restaurants (including KFC, Pizza Hut, and Taco Bell) for
Investments and product distributors. Others in the fast-food industry avoided Pepsis products
because buying them would effectively support their competition, so Pepsi spun off the three
brands in 1997. At such rapid growth rate, in 1984, PepsiCo had become the largest company in
the beverage industry and its products were available in more than 150 countries (PepsiCo,
2014).

In the 2000s, PepsiCo concentrated on exploring undeveloped second world countries

markets and continued to expand by merging with and acquiring big brands. In 2008, PepsiCo
announced plans to invest US $1 billion in China over the next four years as part of the strategy
to expand in emerging markets and broaden the portfolio of locally relevant products. In 2009,
PepsiCo acquired Wimm-Bill-Dann, Russia's leading branded food-and-beverage company, and
further enhance its market share in Russia (PepsiCo, 2014). In 2002, in order to maximize
PepsiCos efficiency, the firm underwent restructure, planning to cut about 3% off PepsiCo's
global workforce and boost marketing spending for its brands by USD$600 million.

The CEO of PepsiCo, Indra K. Nooyi claimed the action could save about USD$1.5 billion
by 2014 (Bloomberg, 2012). Other than downsizing, in 2009, PepsiCo attempted to boost
efficiency by acquiring Pepsi Bottling Group, Inc. and Pepsi Americas, Inc., two anchor bottlers.
By completing the acquisitions, PepsiCo took further control of its value chain and strengthened
the leading position in the beverage industry (PepsiCo, 2014).

General Environment:

The beverage industry is a maturing, dynamic and fragmented industry. The industry greatly
depends on movements of the external environment. The external environmental factors
affecting the industry are illustrated below. Global demographic plays a vital role in the
beverage industry. The global population is expected to rise by 2.2 billion to 9 billion by 2050.
With the growing demand on food and beverage, it is predicted the food and beverage supply
will increase by 70% (IMAP, 2010).

7|Page
In terms of the economy, most of the countries are suffering from the global recession since
2008. Yet, the beverage industry had grown at an incredibly fast rate even in such a harsh
environment for the past years.
From 2008 to 2013, the annual global consumer expenditure beverages went from USD
$327,436 million to USD $425,570 million (Euromonitor, 2014). With the slowly recovering
economy, the industry is likely to bloom in the close future. Other than economic factors,
government policies also greatly affect the beverage industry. Beverage manufacturing must
abide by the regulatory guidelines everywhere they do business (Epstein, 2008). In addition, in
light of the health issues in most first world countries, numerous governments had raised
concern regarding obesity of their citizens. Various policies against sugar-sweetened beverages
have been implemented. In United States, 33 states had imposed a sales tax on soft drinks in
2009 (Kelly D. Brownell, 2009). In 2012, France followed and introduced a tax on soft drinks
(Sparks, 2011). With this trend, countries are likely to enact various constraints to reduce the
demand of sweetened beverages in the close future.

Although health policies may lower beverage demand, the other advances in technology may
aid the industry. With advances in technology and research, companies in the beverage industry
developed and marketed sugarless beverages in the past decade and became a hit since they
were released. Apart from creating sugar-less beverages, technology has allowed beverage
manufacturers to develop drinks with distinct flavors and explore undeveloped markets. The
advancement of technology also includes wide spread Internet use in the last decade. In one
hand, the World Wide Web allows potential customers to conveniently reach beverage
distributors. In the other hand, companies within the beverage industry can interact with
customers via an extra channel and gather valuable sales information for future development.

8|Page
Industry Analysis:

The competition within the beverage industry is great and vigorous, mostly because of the race
between PepsiCo and its nemesis, Coca-Cola Company (Coca-Cola). PepsiCo has been
competing with Coca-Cola over prices, suppliers, spokespeople, retail space and customers
changing needs over years (BHASIN, 2011). The attacks and responses between the two leading
firms have created a great tension and high standards on products within the industry. This has
forced other rivals to follow, differentiate their products, or exits the industry.

Subject to the competition between the Coca-Cola and PepsiCo, the two companies
have created great entry barriers. New entrants require tremendous capital investments and
explicit research on beverages customer demands to begin their business. Yet, the two
companies have developed tremendous beverages and patented most of their existing
products. Despite the entry barriers, the production, distribution, and sales of beverages are
also subject to environmental laws and governmental regulations in most countries, making the
new entrants difficult to enter the beverage industry (Vulpala, 2007).

The level of threats posed by suppliers, buyers and substitutes are near to the ground.
Common ingredients of most beverages are usually sugar, water and common chemicals such as
caffeine and carbonic acid. These materials are sold by plentiful of suppliers. Furthermore,
products from different suppliers have minimal differentiation. Firms in the beverage industry
can easily change suppliers. Buyers in the soft drink industry are mainly wholesalers or
distributors. Their bargaining power was supposed to be higher than the suppliers. However,
the rapid development and differentiation of products in the beverage industry has attracted
more buyers and thus, lowered their bargaining power.

Lastly, the beverage industry has almost no substitutes since it covers most edible
liquids. Products such as soup or congee can hardly be classified as substitutes because those
products have different functionality and are usually recognized as meal alternatives, rather
than drinks.

9|Page
Current Situation:

As of 2013, PepsiCo Inc. is the second largest food and beverage multinational company in the
world (MarketLine, 2013). PepsiCo manufactures and sells twenty-two major brands of
Beverages and snack foods in more than 200 countries and territories (PepsiCo, 2013), each
Generating over $1 billion in sales each year (MarketLine, 2013). Brands under PepsiCo such as
Pepsi-Cola, Lays Chips, Mountain Dew and Gatorade allow the firm to dominate a decent
Portion of the food and beverage industry.

However, PepsiCo is in fact slowly losing its market share and competitiveness to its
rivals in the industry every year. In 2012, the PepsiCos sales amounted to $65,492 million
Worldwide (PepsiCo, 2012). Although PepsiCo was performing exceptionally, it recorded a fall of
1% in net revenue compared to its performance in 2011. PepsiCos market share in the soft
drink industry had also dropped from 10.3% to 9.9% in 2012 (Euromonitor, 2014).

PepsiCo is also facing pressure from its stock price. PepsiCos stock had gone nowhere
since Nooyi became CEO, while Coca-Colas stock price had increased by about 40% (Colvin,
2012). The fall on stock price began the day PepsiCo announced not to spin off its drink business
in spite of the market share problems in North America; PepsiCo Inc.s share price fell by 2.21%
that day (Abrams. 2014).

10 | P a g e
Pepsi Mission:

As one of the largest food and beverage companies in the world, our mission is to provide
consumers around the world with delicious, affordable, convenient and complementary foods
and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to
evening treats. We are committed to investing in our people, our company and the communities
where we operate to help position the company for long-term, sustainable growth.

Pepsi Vision:

At PepsiCo, we aim to deliver top-tier financial performance over the long term by integrating
sustainability into our business strategy, leaving a positive imprint on society and the
environment. We call this Performance with Purpose.

This vision means creating products that our consumers are eager to buy and our employees are
proud to sell.

11 | P a g e
PEPSICO Organizational Structure:

12 | P a g e
PepsiCo Five Forces Analysis (Porters Model):

A 1950s steel sign for Pepsi-Cola in Huntsville, Alabama. A Porters Five Forces analysis of
PepsiCo shows that the business is under the major influences of competitors, consumers, and
substitutes. (Photo: Public Domain)

PepsiCos global success is linked to its business capabilities, especially in overcoming

the challenges shown in this Five Forces analysis. Michael Porter developed the Five Forces
analysis model to determine the most significant external factors that influence firms. For
PepsiCo to maintain its market position as the second biggest food-and-beverage company in
the world, it must address the potential problems identified in this Five Forces analysis. PepsiCo
also needs to continually adjust its strategies to effectively respond to the external factors
significant in the food and beverage industry environment.

A Five Forces analysis of PepsiCo reveals that the company must prioritize the impacts of
competition and the influences of consumers and substitutes. These forces shape PepsiCos
strategies.

Overview: PepsiCos Five Forces Analysis:

Because of the global nature of its business, PepsiCo faces varying external factors in its industry
environment. However, the overall impact of these factors and the corresponding five forces are
summarized as follows, with indicators of the strengths of their forces on PepsiCo:

1. Competitive rivalry or competition (strong force)

2. Bargaining power of buyers or customers (strong force)

3. Bargaining power of suppliers (weak force)

4. Threat of substitutes or substitution (strong force)

5. Threat of new entrants or new entry (moderate force)

13 | P a g e
 Competitive Rivalry or Competition with PepsiCo (Strong Force):

The Coca-Cola Company is one of PepsiCos biggest competitors. However, this component of
the Five Forces analysis shows that there are other factors that determine the influence of
competitive rivalry. The following are the most notable external factors that create the strong
force of competition against PepsiCo:

High aggressiveness of firms (strong force)

Low switching costs (strong force)

High number of firms (moderate force)

Most firms in the food and beverage industry are aggressive, such as in product innovation and
marketing, thereby exerting a strong force on PepsiCo. Competitive rivalry is also strengthened
because consumers can easily shift from one provider to another (low switching costs). In
addition, PepsiCo competes with many other firms, including big ones like the Coca-Cola
Company and a multitude of small and medium ones. This component of the Five Forces
analysis shows that PepsiCo faces strong competitive rivalry as one of its most pressing
concerns.

Bargaining Power of PepsiCos Customers/Buyers (Strong Force):

Consumers are among the top priorities in PepsiCos mission statement. The effects of
customers on the firms industry environment are determined in this component of the Five
Forces analysis. The external factors that lead to the strong bargaining power of PepsiCos
consumers/buyers are as follows:

Low switching costs (strong force)

High access to product information (strong force)

High availability of substitutes (strong force)

As noted, consumers can easily shift from one firm to another. This condition strengthens
customers ability to influence PepsiCo. In addition, consumers have extensive information for

14 | P a g e
them to easily make choices between PepsiCo products and competing products. Also,
substitutes give buyers even more reasons to stay away from PepsiCo products. Based on this
component of the Five Forces analysis, PepsiCo must ensure customer satisfaction to maximize
its revenues.

Bargaining Power of PepsiCos Suppliers (Weak Force):

PepsiCo must maintain profitable relationships with suppliers. This component of the Five
Forces analysis covers the impact of suppliers on the companys industry environment. The
weak bargaining power of PepsiCos suppliers is based on the following external factors:

High overall supply (weak force)

Low forward integration of suppliers (weak force)

Moderate size of individual suppliers (moderate force)

The high overall supply increases PepsiCos options in acquiring raw materials, thereby reducing
the bargaining power of suppliers. This power is also weakened because of the low forward
integration, which limits suppliers control of PepsiCos supply chain. These external factors
weaken suppliers influence on the company even though some of them are moderately sized or
large firms. This component of the Five Forces analysis indicates that suppliers bargaining
power is a low priority for PepsiCo.

Threat of Substitutes or Substitution (Strong Force):

PepsiCos products could be substituted, based on consumer preferences and other variables.
The influence of substitution on the firms business and industry environment are examined in
this component of the Five Forces analysis. The following external factors contribute to the
strong threat of substitutes against PepsiCo:

High performance of substitutes (strong force)

Low switching costs (strong force)

High availability of substitutes (strong force)

15 | P a g e
Most substitutes to PepsiCos products are satisfactory. For example, consumers easily enjoy
real fruit juices and brewed coffee products instead of drinking Pepsi or Tropicana products. In
addition, PepsiCo consumers can easily shift to these substitutes, which are generally
affordable. Also, most of these substitutes are widely available in grocery stores and other
providers. Based on this component of the Five Forces analysis, the external factors make the
strong threat of substitution a priority issue facing PepsiCo.

Threat of New Entrants or New Entry (Moderate Force)

PepsiCo must remain strong despite the possibility of new firms competing against it. This
component of the Five Forces analysis covers the influence of new entrants or new firms on the
food and beverage industry environment. The external factors that maintain the moderate
threat of new entry against PepsiCo are as follows:

Low switching costs (strong force)

Moderate customer loyalty (moderate force)

High cost of brand development (weak force)

New firms threaten PepsiCo because consumers can easily shift from one company to another
(low switching costs). However, through moderate customer loyalty, PepsiCo has a
corresponding level of protection from new entrants. Also, the high cost of brand development
makes it difficult for new entrants to directly compete against PepsiCo, which has one of the
strongest brands in the industry. In this component of the Five Forces analysis, external factors
make the threat of new entrants a secondary concern for PepsiCos management.

16 | P a g e
SWOT Analysis:

Weakness:
Targeting Only Young Customers
Strengths:
Political Franchises
Strong Multinational (Brand Equity) Centralized Decision Making
Strong & Vast Distribution Channels Decline In Taste
Lack Of Capital Constraints Motivational Factor
Record Market Share Not All Products Bear The Company
Strong Brand Portfolio Name
Aggressiveness In The Market
(Market Leader)
Brand Promotion & Sponsorship

Opportunity:
PepsiCo New Products Can Easily
Penetrate In The Market.
Noncarbonated Drinks Are The
Fastest-Growing Industry
17 | P a g e
 Demand Of Pepsi Is More Than Of
Competitor
Changing Social Trends (Fast Foods)
Internet Promotion And Ordering
Processes
May Tie Up or Liaison With Major
Showrooms, Computer Centers
&Restaurant
Threats:
Non-Carbonated Substitutes (The
Mango Season)
Beverage Industry Is Mature
Fake Products (Imitators)
Competitors Schemes
Strong Competition With Coca-Cola
Company
18 | P a g e
PESTLE Analysis:

PepsiCo is the second biggest company in the global food and beverage industry. To keep this
position, PepsiCos strategic decision-making processes must account for the issues outlined in
this PESTEL/PESTLE analysis:

Political Factors Affecting PepsiCos Business:

Governments are external factors that impose requirements on PepsiCo. This element of the
PESTEL/PESTLE analysis considers the effects of governmental action on companies remote or
macro-environment. PepsiCo must address the following political factors:

1. Political stability in major economies (opportunity)

2. Improved intergovernmental cooperation (opportunity)

3. Government initiatives against carbonated drinks (threat)

Major economies like the United States and Canada are politically stable, thereby presenting
growth opportunities for PepsiCo. In addition, the trend of intergovernmental cooperation
improves opportunities for global expansion. However, government initiatives against
sweetened carbonated drinks are a threat that could reduce PepsiCos revenues from affected
segments. In this element of the PESTEL/PESTLE analysis, PepsiCo must consider changing its
products to overcome the identified threat about carbonated drinks.

19 | P a g e
 Economic Factors Important to PepsiCo:

PepsiCos performance is directly linked to the economy. The influence of economic conditions
on the remote or macro-environment of businesses is covered in this element of the
PESTEL/PESTLE analysis. The political external factors that relate to PepsiCo are as follows:

1. Economic stability of most major markets (opportunity)

2. Rapid growth of developing economies (opportunity)

3. Slowdown of the Chinese economy (threat)

PepsiCo has opportunities for growth and expansion based on the economic stability of
developed countries like the United States, as well as the high growth rates of developing
economies, such as those in Asia. However, the current slowdown of the Chinese economy
threatens PepsiCos potential international growth, considering that China is among the biggest
economies in the world. This element of the PESTEL/PESTLE analysis shows that PepsiCo must
ensure market diversification to achieve stable international growth.

Social/Sociocultural Factors Influencing PepsiCos Business Environment:

Many of PepsiCos consumers follow sociocultural trends. This element of the PESTEL/PESTLE
analysis identifies the impact of social conditions and changes on companies remote or macro-
environment. The following are notable sociocultural external factors relevant to PepsiCos
business:

1. Higher health consciousness (threat & opportunity)

2. Increasing busy lifestyles (opportunity)

3. More discriminating attitudes about product quality (opportunity)

Higher health consciousness is a threat to PepsiCo because of concerns about the sugar, salt,
and fat content of its products. However, this external factor also presents the opportunity for
the company to improve its products to address such concerns. PepsiCo can also take advantage
of the busy lifestyles of consumers, especially in urbanized and industrializing markets around
the world. People with these lifestyles are more likely to purchase ready-to-eat food products

20 | P a g e
like those of PepsiCo. The company has the opportunity to continue enhancing product quality
to maximize revenues, with regard to consumers increasingly discriminating attitudes about
product quality. Based on this element of the PESTEL/PESTLE analysis, PepsiCo must align its
products and marketing strategies to changes in consumer behaviors.

Technological Factors in PepsiCos Business:

PepsiCos business is partly dependent on technologies. The link between technological change
and companies remote/macro-environment is examined in this element of the PESTEL/PESTLE
analysis. The technological external factors significant to PepsiCo are as follows:

1. Moderate R&D investments in the food and beverage industry (opportunity)

2. Improving knowledge management systems (opportunity)

3. Increasing automation in business (opportunity)

Based on moderate research and development (R&D) investments in the industry, PepsiCo
can boost its own R&D investments to improve its competency in this business aspect. Also,
PepsiCo can exploit the benefits of knowledge management systems to support its various
business processes, such as product innovation and strategic decision-making. In addition, an
increase in the number of automated processes in the company can enhance business
performance. This element of the PESTEL/PESTLE analysis indicates that PepsiCo must include
new technologies as tools to improve business competitiveness.

Ecological/Environmental Factors:

PepsiCos supply chain and brand image are linked to environmental concerns. This element of
the PESTEL/PESTLE analysis considers the ecological trends and issues that affect consumers,
employees, and companies remote or macro-environment. The following ecological external
factors are significant to PepsiCo:

1. High focus on business sustainability (opportunity)

2. More complex expectations and standards on waste disposal (opportunity)

3. Climate change (threat & opportunity)

21 | P a g e
Consumers are now pushing companies like PepsiCo to improve their sustainability standing. In
relation, PepsiCo can improve its waste disposal strategies, such as recycling, to gain more
support from customers. On the other hand, climate change poses a threat to PepsiCos supply
chain. However, the company can further diversify its global supply chain to minimize risk
exposure to climate change. Based on this element of the PESTEL/PESTLE analysis, PepsiCo must
improve its environmental impact to attract and retain customers, and to stabilize its supply
chain.

Legal Factors in PepsiCos Industry:

PepsiCo and its competitors are subject to legal requirements. Such requirements and
regulations are evaluated in this element of the PESTEL/PESTLE analysis in terms of their effect
on the industrys remote or macro-environment. The legal external factors relevant to PepsiCos
business are as follows:

1. Regulation on GMO ingredients (opportunity)

2. Health and product safety regulations (opportunity)

3. Moderate rate of regulatory change (opportunity)

Genetically modified organisms (GMOs) are now increasingly regulated worldwide, particularly
in Europe. PepsiCo has the opportunity to reduce its use of GMO ingredients to satisfy these
regulations. Similarly, the company can improve products to address regulations about product
safety and health effects. The moderate rate of regulatory change gives opportunity for PepsiCo
to grow with the expectation that its current strategic decisions will satisfy regulatory
requirements in the long term. In this element of the PESTEL/PESTLE analysis, it is shown that
PepsiCo can focus on product innovation to comply with regulations.

22 | P a g e
STRATEGIES

1. Functional level strategy:

A functional-level strategy focuses on the major functional areas of the company and is
formulated primarily to support business level strategy. The functional-level strategy is narrower
in scope than a business-level strategy because each strategy deals with each of the major
functions of business such as marketing, finance, operations, human resources, research and
development and information systems. These are some strategies listed below.

Human Resource: Functional expertise involves the development of business teams,

administration of HR management systems and the identification of staffing needs.
Execution of processes and the handling of daily HR-based transactions provide direct
and technical support to the business. Business partnership allows HR professionals to
actively participate in the business and learn our ongoing challenges. This allows our HR
team to match the right solutions, ideas, skills, people and processes to the specific

23 | P a g e
 needs of their business units. You will be able to leverage your functional knowledge and
skills with the needs of the business in ways that create measurable results. Creating
valuable change in line with the business agenda defines our overall contribution to the
results of the business unit. At PepsiCo, we reserve a spot for you at the leadership table,
but its up to you to earn your voice and make an impact.

Information System: PepsiCos BIS program provides intern and new hires with the
opportunity to leverage their academic understanding in a real-world, business-driven
environment. Students are afforded opportunities for beneficial, meaningful work
experience in one of several project groups: Business Analytics, Project Management,
Business Process Transformation, Data Driven Technology, Infrastructure and Software
Development.

Opportunities are available in the following locations: Somers, NY, Chicago, IL, and Plano,
TX.

Finance: PepsiCo Finance professionals have a seat at a table, and a voice in the
conversation, across the company. Successful employees gain a foundation of the
functional and organizational skills needed to contribute to these conversations as they
rotate through different teams over the course of their career. PepsiCos MBA campus
recruiting program is a critical feeder for future Finance leadership. New finance team
members must learn to take the risks and ask the questions required of the companys
rising stars. There are several strategic groups in finance that professionals have an
opportunity to rotate through: A&M, Brand & Innovation, Financial Planning, Mergers &
Acquisitions, National Accounts, Revenue Management, Sales, Strategy, Supply Chain
and Treasury.

Supply Chain: Opportunities are provided through varying assignments in Production,

Warehouse, Maintenance, Quality, and Fleet Operations. Assignments are based on
functional knowledge vs. defined time periods. Based on performance, candidates will
have the unique opportunity to move rapidly to increasing levels of responsibility

24 | P a g e
 leading to managerial positions. Keep in mind, when you work for PepsiCo, you will have
access to a variety of operating environments within the Beverage, Foods and Corporate
environments. Just think, you can work for power brands such as Pepsi, Tropicana,
Gatorade, Quaker & Frito-Lay and still work within the same company.

Research and Development: At PepsiCo, R&D Associate Engineers translate strategic

market objectives into new products and processes. Our Engineers participate in and
lead accelerated product development life cycles that include new idea generation,
prototype development, product optimization, process development, process scale-up,
and production startup for test market and national launching of new products. As a
R&D Associate Food Scientist with PepsiCo, you will have unique opportunities to
increase technical knowledge by participating in the development of a diverse portfolio
of beverage and snack product categories. The teams translate strategic market
objectives into new products and processes, optimize designs per consumer response
and select winning ideas for commercialization.

Marketing: As a member of the Marketing team, you will have an opportunity to provide
marketing and analytical support to senior managers regarding the development of
various marketing initiatives and assist PepsiCo in achieving their short and long-term
business strategy. Additionally, you will support projects including new product
launches, consumer promotions, and graphics development. The position requires
significant interaction with various marketing agencies and partners to help bring the
brand strategy to life.

In addition to the creative side, this position requires a highly quantitative skill set and
comfort with analyzing data to develop detailed and thought provoking strategic
analyses and recommendations. The goal of the marketing strategy is to establish
customer loyalty and to reach out to new markets. No matter how good the product is,
people have to know about it before they buy and in that respect marketing strategy
may be the most important functional strategy. For example, when Pepsi decided to
expand in its Japanese market, it developed a wide range of marketing strategies,
including establishing a distribution sales force, installing a number of vending machines

25 | P a g e
 at strategic locations and investing heavily into promotion of the product. As a result,
they captured nearly 60 percent of Japanese market for soft drinks.

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 in 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.

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
companys reputation
product liability
international implications

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.

26 | P a g e
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.

They use 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.

Distribution: In Pepsi, 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

27 | P a g e
 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.

Distribution Network: Our products are brought to market through DSD, customer
warehouse and foodservice and vending distribution networks. The distribution system
used depends on customer needs, product characteristics and local trade practices.

Direct-Store-Delivery: We, our bottlers and our distributors operate DSD systems that
deliver snacks and beverages directly to retail stores where the products are
merchandised by our employees or our bottlers. DSD enables us to merchandise with
maximum visibility and appeal. DSD is especially well-suited to products that are
restocked often and respond to in-store promotion and merchandising.

Customer Warehouse: Some of our products are delivered from our manufacturing
plants and warehouses to customer warehouses and retail stores. These less costly
systems generally work best for products that are less fragile and perishable, have lower
turnover, and are less likely to be impulse purchases.

Foodservice and Vending: Our foodservice and vending sales force distributes snacks,
foods and beverages to third-party foodservice and vending distributors and operators.
Our foodservice and vending sales force also distributes certain beverages through our
bottlers. This distribution system supplies our products to restaurants, businesses,
schools, stadiums and similar locations.

Core Competencies: PepsiCo has several core competencies. One of PepsiCos premier
attributes is its Smart Spot campaign. In an obesity epidemic which America is facing
right now, healthy convenient foods and beverages are a positive means to substitute for
unhealthy ones. PepsiCo has placed the green Smart Spot emblem on all of it products

28 | P a g e
 that meet specific nutritional guidelines. In a world of growing concerns with health and
wellness PepsiCo has become a front-running company because of this campaign.

Another core competency is PepsiCos diversity of employees. This is something that the
company as a whole prides themselves on. PepsiCo offers a working environment where
diversity is valued. It aids them in building a top of the line workforce. This has been proven to
be crucial to their success. PepsiCo attracts and retains great employees from a wide spectrum
of backgrounds. PepsiCo also is committed to marketing all of their brands to groups of various
backgrounds. They produce products that are attractive to a wide range of international
markets. The third and most important competency is the five billion-dollar brands that PepsiCo
employs. These brands include Pepsi, Frito-Lay, Quaker Oats and Gatorade. By having these
five brands, it allows for PepsiCos annual revenue to increase tremendously. Also, these brands
have created an image for PepsiCo.

In terms of core competency, Pepsi seeks to achieve a unique ability to:

1. Provide a distinctive, equality one-calorie soft drink and to provide a high-quality citrus
soft drink using Pepsi Company's distinct ingredients to appeal and to excite
contemporary tastes for these products and;

2. deliver these soft drinks to the customer using effective manufacturing and distribution
systems that maintain PepsiCo's quality standards. To translate these core competencies
into a sustainable competitive advantage, Pepsi Co. will work closely with key suppliers
and distributors to build the relationships and alliances necessary to satisfy the high
taste standards of our customers.

29 | P a g e
 2. Business Level Strategy:

PepsiCo has followed a differentiation strategy at the business level due to the following reasons

The wide portfolio of products including carbonated beverages and snack foods help it
reach out to a vast demography among the customer base. The assortment of choices
enables various customers to meet their refreshment demands through PepsiCo
products of their preference.

PepsiCo is a global company with operations in several countries. In order to obtain a

share of wallet of consumers in different regions, it must provide products that are
tuned to the tastes and preferences, prevalent in those local regions. This also explains
the rationale behind having variety of products so that buyers perceive value for money
through their preferred brands.

PepsiCo operates in a duopoly market competing with Coke only. It need not adopt a
cost leadership strategy as both the cola majors take price signals from each other and
adjust markup prices accordingly, to retain market share and revenue. There has rarely
been an all-out price war between the two which would have ultimately bled both to
huge losses. This allows both players to compete on the basis of differentiated products
targeted at a wider and more diverse customer base

Current Strategy:

Business Strategy-Integrated Cost Leadership/differentiated Strategy

Integrated cost leadership/differentiated strategy allow PepsiCo to minimize production budgets
and seize market share at low cost. PepsiCo is currently implementing the Hybrid Every Day
Value strategy. By simply cutting down the discount on holidays but lower prices all through
the year, the strategy aims to eliminate customers habit on buying soda only when its on sale
(Reuters, 2013).

30 | P a g e
Competitive Advantages: PepsiCo is in the beverage industry and it is one of the most
competitive industries in the world as there are numerous of products competing against one
other. In order to survive in the market, any company needs features that gives it an edge over it
competitors. Innovative line of products is one of the PepsiCo competitor advantage. The
organization has been on fore front in the development of innovative beverage products for
different segments of the market. The company has different groups of target market over 20-
different product.

The ability of the company to come up with new and innovative products has be enabled the
company to change as consumers needs evolve and thereby remain relevant in the market.
PepsiCo capability to respond quickly to market opportunity and threats is the other competitor
advantage. The organization Innovativeness provides it the capability to respond quickly to
changes in the market. The company convenient size also gives it the ability to change quickly.
The firm structure is neither to small like most of its competitors neither too large like its main
competitor, Coca Cola. The relatively large size of the company gives the organization access to
resources that also make it easier for the company to move quickly.

PepsiCos Generic and Intensive Growth Strategies: PepsiCo is the second biggest player in the
global food and beverage industry. The company offers a diverse array of products. PepsiCos
generic competitive strategy is based on the need to address market pressure coming from its
biggest rivals, including the Coca-Cola Company. A firms generic strategy (based on Porters
model) defines the basic strategy used to maintain competitive advantage. On the other hand,
PepsiCos intensive growth strategies are a response to the evolving global food and beverage
market conditions. Intensive growth strategies outline how firms support their growth.
PepsiCos generic strategy for competitive advantage matches its intensive strategy to ensure
long-term growth.

PepsiCos intensive growth strategies enable the company to effectively use its generic strategy
to maintain strong competitive advantage. PepsiCos success is an indicator of the
appropriateness of these strategic directions, especially how its generic strategy supports
competitiveness.

31 | P a g e
PepsiCos Generic Strategy: PepsiCo applies different generic competitive strategies,
considering the companys wide array of products. However, the main generic strategies that
contribute to PepsiCos competitive advantage are as follows:

1. Cost leadership

2. Broad differentiation

PepsiCo uses cost leadership as its primary generic competitive strategy. This generic strategy
focuses on cost minimization as a way to improve PepsiCos financial performance and overall
competitiveness. For example, to compete against Coca-Cola products, PepsiCo offers low prices
based on low operating costs.

The company also sometimes has special promotional offers with discounted prices. On the
other hand, PepsiCo uses broad differentiation as its secondary generic competitive strategy.
This generic strategy enables business competitive advantage by attracting consumers to some
unique features of the firms products. For example, PepsiCos Lays potato chips are marketed
as a healthful snack product because of reduced saturated fat content. A strategic objective for
the cost leadership generic strategy is to automate production processes to minimize PepsiCos
operating costs. In relation, PepsiCos strategic objective for the broad differentiation generic
strategy is to innovate products to address concerns about their health effects.

PepsiCos Intensive Strategies (Intensive Growth Strategies):

Market Penetration: PepsiCo implements market penetration as its primary intensive

growth strategy. This intensive strategy supports business growth through increased
sales, such as from a bigger market share. For example, PepsiCo uses aggressive
marketing to attract more consumers. A strategic objective linked to this intensive
growth strategy is to minimize costs and prices to attract more consumers despite
market saturation. As such, PepsiCos generic competitive strategy of cost leadership
supports this intensive strategy for growth.

32 | P a g e
 Product Development: PepsiCos secondary intensive growth strategy is product
development. This intensive strategy requires offering new products to capture more
consumers. For example, PepsiCo continues to develop products or variants of existing
ones, such as low-calorie, reduced-salt, or low-saturated-fat variants of its food and
beverage products. A strategic objective linked to this intensive growth strategy is to
boost R&D investments for product innovation. PepsiCos generic competitive strategy of
broad differentiation supports this intensive strategy by offering unique or novel
products to attract more consumers and grow the business.

Market Development: PepsiCo applies market development as its supporting intensive

growth strategy. This intensive strategy supports business growth by capturing new
markets or market segments. For example, PepsiCo continues to expand its distribution
network to reach the last remaining markets or segments, especially in developing
regions. However, market development is only a supporting intensive growth strategy
because PepsiCo already has significant presence in all regional markets worldwide. A
strategic objective for this intensive strategy is to expand PepsiCos supply chain to
support the growth of its distribution network. The cost leadership generic competitive
strategy enables PepsiCo to effectively use this intensive growth strategy through cost
minimization despite additional investments used for expansion to new markets or
market segments.

3. Corporate Level Strategy:

PepsiCo has been trying to adopt a corporate level strategy of related linked diversification due
to the following reasons -

The cola and the snack food business would lead to synergy in the corporate activities.
While beverages could be mass produced in bottling plants, separate and dedicated
manufacturing facilities for snack foods would be required. The raw materials would also
be procured through different routes. The ingredients of cola would primarily be water,
sugar and chemicals and plastic or glass bottles. These could be obtained freely or from
institutional suppliers like sugar mills, bottle manufacturers etc. The inputs for snack
foods would be farmed vegetables sourced through the contract farming route.

33 | P a g e
 In spite of the diverse operational requirements of both the business, there exists ample
opportunity to leverage the core competencies of PepsiCo for both type of products -
marketing muscle and wide distribution network. Both the products could be marketed
by sharing the expertise within the divisions and the reach could be extended using the
superior supply chain and logistics arrangements of PepsiCo.

Such a synergy would not benefit the restaurant business. It not only has operational
divergence with the soft drinks and snack foods business, but also the core
competencies of PepsiCo in marketing and distribution cannot be meaningfully
transferred. More of a service orientation is required for the restaurant division apart
from managing disparate supply chain, large base of fixed assets especially real estate.
The human resource

Perspective would also be different as in managing workers who are service providers
rather than working in production lines.

PepsiCo is using brand portfolio strategy to achieve synergistic benefit through economies of
Scope and market power. PepsiCo categorizes its products into three different portfolios: the
Fun-for- You brands, the Better-for-You brands, and the Good-for-You brands.

The Fun-for-You brands cater to global and regional flavors, such as Lays, Doritos,
Cheetos, and Pepsi, etc. The Better-for-You brands include snacks with lower fat content and
whole grains, and beverages with fewer or zero calories and less sugar. Good-for-You brands are
comprised of nutritious foods and beverages that include fruits, vegetables, whole grains, and
low-fat dairy like Tropicana, Quaker; and also healthy products with functional benefit, like
Gatorade (PepsiCo Inc., 2014). Creation of a new Global Nutrition Group Complementing the
Corporate Level strategy, PepsiCo launched Global Nutrition Group (GNG) in 2010 as a long term
strategy growing the Good-For-You portfolio, the GNGs work focuses on innovation and brand
development on the products within the portfolio. PepsiCo dedicates itself to offer consumers
with a wide range of healthy products with the reduction of sodium, sugar, and saturated fat
content (Kanter et. al, 2012).

PepsiCo is a global food and beverage corporation based in New York. PepsiCo
generated net revenues of more than USD 65.4 billion for 2012 and its main competitors include
The Coca-Cola Company in beverage industry, whereas a set of firms such as Nestle S.A.,
Danone, and Kellogg compete with PepsiCo in food and beverage industries.

PepsiCo brand portfolio includes a range of globally famous brand names such as Pepsi,
Lays, Lipton, Doritos, Tropicana, Walkers, Mirinda, Cheetos and others. In total PepsiCo portfolio

34 | P a g e
comprises 22 brands and each of these brands have generated at least one billion USD in retail
sales during 2012 (Annual Report, 2012).

During 2012 alone PepsiCo paid USD 6.5 billion to shareholders through share purchases
and dividends, increased management operating cash flow to USD 7.4 billion, and achieved 28%
core return on capital employed (ROE) (Annual Report, 2012). The company maintains several
research and development centres in the USA, as well as, globally in Shanghai, Hamburg, and
Monterrey.

Strategic planning can be defined as the process of determining an organizations

primary objectives and adopting courses of action that will achieve these objectives (Boone
and Kurtz, 2013, p.39) and it plays a critical role in ensuring long-term growth of a business
entity.

PepsiCo mission statement has been worded by CEO Indra Nooyi as Performance with
Purpose and this principle is closely integrated with the strategic direction chosen for the
company.

The most prominent aspects of PepsiCo strategy forwarded by Ms Nooyi are based on the
following seven principles.

First, international market expansion strategy through mergers and acquisitions.

Mergers and acquisitions can offer the advantages of gaining access to competencies and
infrastructure, reducing direct costs and overheads and achieving organic growth.

Recently, PepsiCo has engaged in important mergers and acquisitions such as acquisition of
juice and diary businesses Lebedyansky and Wimm-Bill-Dann in Russia, Lucky snacks and Mabel
cookies in Brazil, and Dilexis cookies in Argentina.

Second, formation of strategic alliances in global scale.

35 | P a g e
Specifically, strategic partnerships have been formed with Tingyi in China in order to claim a
share in growing beverage market in China. Moreover, formation of a joint-venture with Tata in
India to enhance drinking water manufacturing capabilities, and initiation of strategic
partnership with Almarai in Saudi Arabia can be mentioned to illustrate PepsiCos adoption of
strategic alliances as an integral part of the corporate strategy.

Important strategic alliances are formed by PepsiCo at home markets as well. Specifically, by
forming a strategic alliance with Starbucks.

Third, focus on emerging markets

The share of net revenues from developing and emerging markets such as China, India, and
Russia have been increased from 24% in 2006 to 35% in 2012 (Annual Report, 2012) through
mergers and acquisitions as discussed above, as well as, on the basis of formation of direct
subsidiaries. Moreover, PepsiCo CEO Indra Nooyi has publicly expressed commitments to
further increase the level of presence of the company in emerging markets.

Fourth, focus on organizational culture.

Organizational culture can be defined as the collection of words, actions, thoughts, and stuff
that clarifies and reinforces what a company truly values and the nature of organizational
culture directly impacts its performance in short-term and long-term perspectives.

PepsiCo CEO Indra Nooyi is widely believed to be an unconventional corporate leader for a good
reason. It has been noted that shes been known to walk the halls at Pepsi barefoot, sometimes
even singing along the way (Sheetz-Runkle, 2010, p.112) and this fact communicates her
willingness to embrace her differences with positive implications on employee morale and
organizational culture.

The same message is effectively communicated to organisational stakeholders and integrated

into Pepsi Brand as well in a way that the brand marketing message is associated with making
the most of the moment, and embracing own individuality.

36 | P a g e
Being listed among the top 25 Worlds Best Multinational Workplaces by the Great Place to
Work Institute in 2012 can be interpreted as an indication of effective working culture within
PepsiCo.

Fifth, developing and promoting the idea of One PepsiCo.

Specifically, Indra Nooyi has been striving to increase the level of association of individual
brands with PepsiCo company values and philosophy through promoting the idea of One
PepsiCo. This is meant to be facilitated through sharing supply-chain management and
infrastructure, operational costs for many brands within PepsiCo portfolio have been decreased.

Sixth, innovation in marketing initiatives.

A wide range of innovative marketing initiatives developed by PepsiCo marketing team include
Do Us a Flavor campaign that involved consumers in 17 countries submitting flavour ideas,
development of Lipton Brisk Star Wars game application for mobile phones, and using celebrity
endorsement in an innovative manner.

Importantly, cross-cultural differences in various markets are taken into account when
developing and delivering PepsiCo marketing messages. For example, the marketing tagline of
Live for Now associated with Pepsi brand has been modified as Yalla Now and Oh Yes Abhi
for Middle East and Indian markets respectively taking into account cross-cultural differences
associated with these markets.

Seventh, focus on increasing core organic revenue.

Core organic revenue can be explained as a type of revenue that is achieved through increasing
the volume of production and sales. PepsiCo core organic revenues were increased by 5%
during 2012 (Annual Report, 2012) and the company strategic level management is committed
to further increase the levels of core organic revenues through maintaining high quality
standards and applying effective marketing strategy.

37 | P a g e
Moreover, organic revenues can be further increased by concentrating on core competencies of
the business. It can be specified that a competence is an attribute or collection of attributes
possessed by all or most of the companies in an industry (Campbell et al., 2012, p.34).

Introduction:

Pakola is a line of flavoured carbonated soft drinks originating from Pakistan, the product name
is derived from "Pakistan Cola". Pakola was launched in Pakistan on 14 August 1950, by Haji Ali
Muhammad. The Pakola brand name is owned by Teli family. Although the green drink, "Pakola
Cream Soda", became the company's trademark product, several variants have since been

38 | P a g e
introduced, namely, Pakola Lychee, Pakola Orange, Pakola Raspberry, and Pakola Fresh Lime.
Pakola has also launched a milk range produced by Pakola Products Limited.

Pakola the brand

Pakola is one of the most popular brands in Pakistan. The brand was created on 14th August,
1950. As per our slogan, DIL BOLA . Pakola, we believe that Pakola is the heart beat of the
nation and with its amazing taste holds the potential to ride the taste buds of the consumers at
home and abroad. Although the green drink Pakola Ice Cream Soda is anonyms with the name
Pakola, but thats not all, Pakola gives sensation by bottling other fruity flavors namely Pakola
Orange, Pakola Lychee, Pakola Raspberry, Pakola Fresh Lime and Pakola Vino.

Our Quality Food Safety and Environment Standards:

Mehran bottlers are the 1st bottling plant is South Asia. Which has been certified to integrated
management system based on (ISO 9001: 2000), (ISO 14001: 1996) and (RVA HACCP) standard.
Our quality and food safety system follows the FDA GMP requirements and codex. Our products
are manufactured under strict CGMP and Hygiene controls.

Our Technical Team:

Mehran bottlers have well experienced people in technical side. Their experiences and ongoing
trainings make them more confident and prepare to face all challenges.

Painting the Globe Green:

Pakola is Pakistan's national drink but its might is spread all over globe. Its the only Pakistani
soft drink which is available in America, Africa, Australia, Afghanistan, Canada, Middle East, New
Zealand and The United Kingdom.

Production:

39 | P a g e
Mehran bottlers operate one of the most modern can filling plants in Pakistan with a filling
capacity of 200 cans per minute. The plant is fully computerized and conforms to the highest
international quality standards. Apart from the above, Mehran Bottlers also operate a bottle
filling plant with a capacity of 240 bottles per minute. The plant can fill both glass and pet
bottles of various sizes.

Distribution:

Pakola is distributed nationwide through our network of vehicles and distributors. The company
maintains a fleet of trucks for operations in the Karachi base market.

Human Resource:

The company employees 150 personnel at its Karachi plant. Constant efforts are initiated by the
management to train and upgrade the employees and to provide better training and working
environment.

Mission:

The company mission is to provide its consumer all over the globe with premium quality beverages with
a vast variety that guarantees consumer satisfaction an also provide opportunities for growth to its
employees and the communities in which they operate.

Vision:

Pakola has and will fulfill its promise to provide international quality beverages made with the finest
ingredients to its consumers and come up to their expectations at all costs.

40 | P a g e
Brands/Flavors:

Pakola Ice Cream Soda Pakola Vino

Pakola Raspberry
Pakola Fresh Lime Apple Sidra
Pakola Orange Bubble Up
Pakola Lychee Pakola Double Cola

SWOT Analysis:

Strengths:
National level brand
Weakness:
Halal ingredients
Inefficient marketing
55 years established presence Weak distribution
No financial resources like others
Good Brand Portfolio No presence in full country
Online order booking system

41 | P a g e
Opportunity:
New products can easily penetrate
in the market.
Noncarbonated drinks are the
fastest-growing industry
Increased demand in rural areas
Changing social trends
Internet promotion and ordering
processes
Threats:
Engro entry in beverage industry
Beverage Industry Is Mature
Shortage of energy
Political instability
Strong Competition With Coca-Cola and
Pepsi
42 | P a g e
Porters five forces:

Applying Porters five forces to the Pakistani beverage industry allows us to garner a respective
view of the potential attractiveness in terms of profitability of the industry. We first must
analyze the industry through the five- force template, which will allow us to more accurately
gauge the industry in terms of its potential. When discussing the beverage industry, we are
referring to not only the concentrate manufacturing concern, but because Pakola is a wholly
owned subsidiary of Mehran Bottlers, Ltd. we are also including the bottling industry. Therefore,
all our analytical studies will follow that both the concentrate and bottling industries, from the
perspective of Pakola, are in fact just one industry: the beverage industry.
Threat of new entrants:
In this industry, It is considerably difficult and costly to set up the factories and bottling plants
required. Also, for a new entrant, it would be extremely difficult if not impractical to infiltrate
the established distribution network of the current players like Pepsi and Coke. Furthermore, It
would be quite a daunting task to change the hard and fast perception of millions of consumers,
making it a favorable point for this industry.

Big firms have an advantage related to cost.

To enter the beverage industry, a lot of capital is required
Many licenses are needed which are quite difficult to acquire.
Bargaining power of buyers:

There are an extremely large number of buyers as compared to companies in the industry, and
these buyers often purchase this Industry's relatively low priced products on a habitual,
impulse, or convenience basis, thus making It favorable for the Industry.

Pakola has a large number of customers.

Pakolas products like Ice cream soda and Raspberry are quite unique in flavor; this has
led to brand loyalty.

Threat of substitutes:

The threat of substitutes, although mediocre, still poses a considerable threat to the overall
profitability of the industry, and that is because in recent times a health craze has taken over all
respects of life, worldwide, Therefore; it would signify a heavy reduction in the consumption of
sugary And carbonated cola based beverages, and instead prompt consumers to opt far
healthier drinks such as fruit juices, and energy drinks.

Pakolas customers are not likely to switch to other substitutes, however, customer will
not have to pay extra or more to switch.
The threat of substitutes poses a considerable threat to the overall profitability of the
industry. Examples include Pepsi and coke.

Bargaining power of suppliers:

Many suppliers in the beverage industry so it is not a problem for firms to switch their
suppliers.

Rivalry among existing players:

The players in the beverage industry have one of the moat competitive rivalries in any industry.
In Pakistan the market is dominated by the two international giants. Pepsi and Coke, with
market shares leaving little room for others to grow. Yet even with approximately 5% of the total
market share, Pakola can still manage to be profitable in a cut-throat Industry, and hive plan to
position it strategically in order to do so. The beverage Industry is a reasonably attractive
industry to be in, and with Its 55 years of established presence, Pakola well positioned to
leverage that history so as to attain a competitive edge. Mehran Bottlers' current focus is one of
a lackluster "if it isnt brake, then don't fix it" attitude, that stems from its history of centralized
power base and tall and unprofessional organizational structure.

Yet even with approximately 5% of the total market share, Pakola can still manage to be
profitable in a cut-throat Industry, if it develops a proper strategic plan because the
beverage Industry is a reasonably attractive industry to be in,
Its 55 years of established presence makes it a very established firm which gives it an
edge over others

Pest analysis:

Political:

There is significant political pressure on the beverage industry in Pakistan. This pressure mostly
arises from a high levy of taxes, 15% central excise duty, as well as 18% sales tax, which totals up
to about 36K. of retail prices. This extremely high double taxation rate greatly deters the players
in the industry from charging premium prices for perceived value addition
Another political factor that impacts the beverage industry, however this time positively, is the
government's policy of banning the serving of food at wedding receptions. This has prompted
an increase in the consumption rates of soft drinks and carbonated beverages.

Economic:

There are several implications of the economic situation of Pakistan upon the beverage industry.
For one, there have been complaints from several quarters regarding the excess wastage of
water in the production of aerated beverages, which for a population compounded with
astounding poverty levels raises points for concern. Recently, there has been a crisis in the
production of sugar in Pakistan, with prices skyrocketing. Such economic factors have a
resounding Impact on related Industries; and although most companies In this Industry have
switched from sugar to high-fructose corn syrup, some were affected by the agri-based crisis.

Social:

A major social trend in the rural areas of Pakistan has been a shift from presenting guests with
drinks such as lassi red sherbet, and fruit juices, towards cold drinks. This trend has spumed
more from impressive distribution networks and less from increased advertising, yet the result
is positively in favor of beverage companies.

Technological:

Technology plays a secondary role In this Industry, as It is not heavily dependent on

technological advancements like the consumer electronics industry, or the software industry.
Because beverage products are non-tech based in nature, technology in this industry is
therefore limited to function as a catalyst to improve production capacities, speed of product
manufacturing cycles, Inventory management, and e-commerce applications.

Value chain:
 Distinctive competency:

The distinctive competence of Pakola is its ability to create unique tasting flavors which none of
its competitors arable to do. This core competence leads to its competitive advantage of being,
a beverage manufacturer of unique flavored drinks. Presently Pakola has three unique tastes
which is currently absent in the other beverage companies. Such unique flavored soft drinks
such as Ice-cream Soda, Apple Sidra, Lychee, and Raspberry are all examples of Pakola's internal
ability to create different and previously unheard-of drinks successfully. It is through this that
they have managed to build brand loyalty with consumers, because it is a unique taste that
consumers demand for when they choose a drink, and oftentimes when Pakola's ice-cream soda
is not available, brand loyal consumers will settle for anything.

Recommendations:

We recommend different strategies to Pakola for their improvement in future; these strategies
may help them to improve their services.

We saw some drawbacks in their system. According to our analysis, we have found that
the major flaw in Mehran Bottlers' value chain is its distribution network. The product's quality,
advertising and marketing efforts all become insignificant when the product is not available in a
wide number of retail outlets. Therefore this is a major point of concern for the company
because it will dictate its success in the short run. Pakola's stagnant market share figures are in
part a result of its poor distribution setup. From a logistics standpoint, the company has at Its
disposal 56 vans from Where It serves both the rural and urban markets in Karachi and its
surrounding feeder markets. Yet although a major focus is placed on serving the rural markets,
the company has foregone on the huge urban markets.

Another pothole in Pakola's distribution is that they have not been able to infiltrate the
restaurant Industry with their beverages like Pepsi and Coke have done. This 'fountain' business
segment makes up a large and highly profitable part of cola companies businesses. By failing to
act on serving this potential goldmine, Pakola is forced to suffer with a low market share. It has
missed such big markets like Pizza Hut, McDonalds, KFC and other fast food restaurants. One
saving grace is that even with such poor distribution; their product's quality is commendable in
that it has maintained a steady base of loyal customers. Pakola should concentrate on driving its
core competencies to create differentiation in product research and development, distribution,
and marketing.

Business level Strategies:

Currently the Pakola would focus on low cost operator in their field, but we recommend that to
choose differentiation strategy. This will allow Pakola to do three things like;

Charge a premium price

Increase unit sales
Buyer loyalty

It is necessary that the company communicate its differentiation to its customers, otherwise
these three advantages will not avail themselves.

Market penetration strategy:

A strategy for company growth by increasing sales of current product to current market without
changing the products or service through greater marketing efforts. We recommend them to
focus on market penetration strategy to target more customers in their city.

Market development strategy:

In this strategy we offer our current products in the new markets. Pakola would focus on new
cities rather than only focus in Karachi and some other areas.

Functional level strategies:

All basic functions of the business, namely the marketing, production, Human Resources, R&D,
Finance, Engineering must adopt and enact operational modes that reinforce the ultimate goal;
of the organization and reinforce the corporate level strategy.

They would be much focused on these departments which lacks in the company.

The marketing department will carry out extensive, accurate and decisive market research
laying strategic importance to market intelligence, consumer insight and modern
techniques of marketing based on scientific research, and putting these to strategic use
through effective communication of these decisive elements with the strategic level
management.
They would be focused on their distribution department, if they will not well managed
them then they will outsourced this department for the betterment of their system
which they have lacked.
A creditable and capable Human Resource Department will be induced, which will then
assist in the inducement of the Marketing department, which will align itself to carry out
extensive, accurate market research and identify the appropriate target markets and will
then exert itself to marketing the product to these already brand loyal consumers in
order to consolidate.

Organizational structure:

The firm needs to tear-down and restructure an organizational hierarchy. Therefore, to allow such
flexibility, Pakola must restructure its inflexible and highly disorganized organizational structure,
into a meticulously planned, well-coordinated, supportive more flatter hierarchy with lesser
hierarchical levels and comparatively greater span of control, encouraging more delegation of
authority, leading to greater job satisfaction, enrichment and career development, paving the
way to a Learning Organization.
 Intrapersonal communication system:

The major issue that has been observed and needs to be highlighted is the lack of intra personal
communication at Pakola. Pakola has ineffective one way communication where no feedback
from workers is taken into consideration. There are significant communication barriers in Pakola
which hampers its smooth progress. The manager and the CEO do not form formal
communication channels to take in input idea, innovation and feedback from their workers OR
their customers.

So, Pakola need to establish proper, formal monitored communication channel to listen to what
their subordinates have to say. Without this they cannot hope to be worker oriented. They are
only task oriented and that can be very harmful in certain situations. Establishing such a channel
would help Pakola improve its self accordingly and thus excel as a premier beverage industry.

Focus on distribution:

Mehran Bottlers has 56 vans with which it supplies its products, whereas FMCG companies like
Unilever have a significantly lesser number of vans even though they have much better market
reach. Pakola needs to reduce this unnecessary expense; along with costs that arise in a
bureaucratic organization with little formal structure. In Punjab they only supply to wholesalers
(Hyper star, Metro). They would be much focus on their delivery system.

Increase market share:

They must be focused on their market share. The Pakola has a market share of only 4% in
Pakistani beverage industry, while Pepsi has a market share of 60% and Coca Cola Contains 35%
to 40% percent of whole share. This trend can be immensely improved by focusing on weak
areas like distribution and marketing.

Corporate Level Strategy:

We recommended that they will focus on diversification strategy.

 Unrelated Diversification:

Acquiring or established new businesses that is totally different from the company current
product and markets.

They would introduce snacks just like Lays of brand Pepsi.

Strategic Alliances:

They must be focused on making strategic alliances with national level companies to boost up
their sales.

Motivational factor:

We face the issue that Pakola faces is that do not provide intrinsic or extrinsic motivational
factors to their workers. They dont provide job enrichment or rotation. This proves to be very
frustrating for the workers and they revolt by wasting precious resources of the company and
proving to be inefficient.

So that providing their employees with monetary as well as perk incentives to keep them
motivated and to encourage them to work harder. Without these they will lack the commitment
required form their employees and it will only prove harmful for the organization