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PepsiCo. Strategic Plan Design
Citation preview
314235540
Design Strategic Plan Individual Case Analysis (PepsiCo-2009)
NAZIFA BTE ABD. GHANI (MR111037)
Assoc. Prof. Dr. Mas Bambang Baroto
International Business School
University Technology Malaysia
April, 2013
[DESIGN STRATEGIC PLAN/SEM II/2012/2013] PepsiCo - 2009
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Contents 1.0 Company background ....................................................................................................................... 3
2.0 Description of Industry ..................................................................................................................... 4
3.0 External Assessment ......................................................................................................................... 5
3.1 Positioning Diagram Strategic Group Identification ..................................................................... 5
3.2 Opportunities & Threats ............................................................................................................... 7
3.3 EFE matrix................................................................................................................................... 10
4.0 Internal Assessment ........................................................................................................................ 11
4.1. Strengths & weaknesses ............................................................................................................ 11
4.2 IFE Matrix .................................................................................................................................... 12
4.3 Value Chain Analysis (Non-Alcoholic beverages Segment) ......................................................... 13
5.0 Strategy Formulation ...................................................................................................................... 16
5.1. SWOT Matrix .............................................................................................................................. 16
5.2 IE Matrix ...................................................................................................................................... 18
5.3 Strategy Formulation Conclusion ................................................................................................ 18
6.0 Strategy Implementation ............................................................................................................ 19
6.1 Operation Management Process.................................................................................................. 19
6.1.1 Supply Management Process .............................................................................................. 19
6.1.2 Production Management Process ........................................................................................ 25
6.1.3 Distribution Process ............................................................................................................. 30
6.1.4 Risk Management Process ................................................................................................... 33
6.2 Customer Management Process .................................................................................................. 47
6.2.1 Customer Selection Process ................................................................................................ 47
6.2.2 Customer Acquisition Process ............................................................................................. 52
6.2.3 Customer Retention Process ............................................................................................... 57
6.2.4 Customer Growth Process .................................................................................................. 61
[DESIGN STRATEGIC PLAN/SEM II/2012/2013] PepsiCo - 2009
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1.0 Company background
Founder Caleb Bradham in New Bern, North Carolina, 1898
Division Non-alcoholic Beverage Industry
The salty or Savory Snack Food Industry Breakfast Food Industry * PepsiCo is organized into three business units.
However, its three business units are comprised of six divisions: FLNA, QFNA, LAF,
PAB, EKEU, and MEAA
Net revenue
2006 $
(million)
2007 $
(million)
2008 $
(million)
35,137 39,474 43,251 Net revenue by division
2,615 2,845 2,959 FLNA
554 568 582 QFNA 655 714 897 LAF 2,315 2,487 2,026 PAB 700 774 811 UKEU
401 535 667 MEAA Mission &
vision Mission statement: Our mission is to be the worlds premier consumer products company focused on convenient food and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in we operate. And in everything we do, we strive for honesty, fairness and integrity.
Vision statement: PepsiCos responsibility is to continually improve all aspects of the world in which we operate-environment, social, economic-creating a better tomorrow than today. Our vision is put into action through programs and a focus on environmental stewardship, activities to benefits society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.
[DESIGN STRATEGIC PLAN/SEM II/2012/2013] PepsiCo - 2009
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2.0 Description of Industry
* Because of the lack information given in the case study and time limitation, the whole
analysis for this report will be only focused on Non-alcoholic beverages segment.
Name of the industry
Non-Alcoholic Beverage Industry
Industry Market Cap
Make up a $395billion world market with carbonated drinks the largest share of the market at $150 billion.
Industry Net Income
Main competitors in the industry
1. Coca-Cola 2. PepsiCo
Industry products and services
PepsiCo: PepsiCo of late has a more focused strategy in the snack, breakfast food and non-alcoholic beverage markets. The company produces Mountain
Dew, Mug Root Beer, Sierra Mist, Slice, Aquafina, Dola Juices and SoBe.
Coca Cola: Coca Cola has continued to strengthen their juice, ready-to-drink tea and coffee products, water and sport drinks along with the introduction of Truvia as a sweetener. *The industry composed of carbonated soft drinks, fruit and vegetables juices, bottled water, sports and energy drinks, concentrates and ready-to-drink coffee and teas.
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3.0 External Assessment
3.1 Positioning Diagram Strategic Group Identification
*Because of lack of information on Non-alcoholic beverages segments competitors, the
analysis is only focused on PepsiCo and Coca Cola Company since it is clear mentioned in
the case study that both of them are the major player in the industry.
Case facts of X axis - Market Share
Coca Cola and PepsiCo holding the largest share of the U.S market at 23 percent and
25percent respectively .Coca Cola however holds the largest share of the U.S cola market
at 41 percent with Pepsi second at 36.7 percent (Pg 74, Para 5).
Pepsi and Coke have fought the cola wars for decades and has generally beaten out Pepsi
for market share (Pg. 78, Para 3)
Case facts of Y axis Financial Position
The financial for Coca Cola shows a strong cash position of $4,979 billion and long term
debt only $2,781 billion. Coca Cola net profits of $5,807 billion in 2008 (See Exhibit 8) (Pg.
76, Para 1). Coca Cola shows a strong financial position and smaller long term debt
compare to PepsiCo.
Cost of sales for PepsiCo has increased as would be expected. These costs have increased
from 41.32 percent of sales to 43.43 percent of sales net income has decreased from $5.6
billion to $ 5.1 billion , return on assets has dropped from 18.81 percent to 15.17 percent ,
inventory turnover has decreased from 8.02 times to 7.81 times and long term debt has
increased from $4,203 billion in 2007 to $7.858 in 2008 (Pg.73, Para1).
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Size of circle Product Diversification
Pepsi as bottlers of soft drinks. The company produces alsoMountain Dew, Mug Root Beer,
Sierra Mist, Slice, Aquafina, Dola Juices and SoBe (Pg.69, Para 4). In addition, Pepsi Co
includes the brands of Tropicana and Gatorade and this is just a partial list of the branded
products sold by Pepsi (Pg. 69, Para 4). PepsiCo has developed liquid refreshment products
that are light, calorie free, sugar free, caffeine free, sport and energy directed and flavoured
(Pepsi, Aquafina, Voltage). (Pg.70, Para1). Pepsi has ventured into conglomerate
diversification from van moving lines to sporting goods to fast foods. PepsiCo of late has a
more focused strategy in the snack, breakfast food and non-alcoholic beverage markets (Pg.
69, Para3). Today PepsiCo is a larger and more diversifies company than Coca Cola (Pg. 78,
Para 3).
Coca Cola has kept a fairly narrow focus. Coca-Cola seems to be following a very
concentrated strategy by focusing almost exclusively on non-alcoholic beverages with little
tendency to diversify. Additional as the demand for dark colas has diminished, Coca Cola has
continued to strengthen their juice, ready to drink tea and coffee products, water and sports
drinks along with the introduction of Truvia as a sweetener (Pg.76, Para 2).
U.s
Market Share
Fin
an
cial P
ositio
n
Coca Cola
(25%)
PepsiCo
(23%)
10%
Strong
20%
Weak
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3.2 Opportunities & Threats To choose opportunities and threats I tried to find those that were critical for company and
able to give greatest impact to PepsiCo.
No. Opportunities
1. Steady overall growth for the last five years of around 9 percent with sports drinks, bottled water, and energy drinks showing the largest growth (Pg.74, Para 4).
2. A recent environmental campaign against plastic containers has impacted the sales of bottled water and forced manufacturers to develop more environmentally friendly
containers (Pg74, Para 6).
3. The market for these products requires manufactures to constantly develop new products to meet those changing demands (Pg74, Para 6)
Opportunities Probability Impact Justification
O1: Steady overall growth for the last five years of
around 9 percent with
sports drinks, bottled
water, and energy drinks
showing the largest growth
(Pg.74, Para 4).
Almost certain
Extraordinary
Perform highest impact to PepsiCo in conjunction to reduction demand on
carbonated drinks. Consumers start to concern more on their healthy lifestyle.
O2: Growth in the carbonated drink market
was largest in Asia and
Europe (Pg74, Para 4).
Possible
Moderate
Expanding business on these countries might help increase PepsiCo revenues
and sales.
O3: The market for these products requires manufactures to constantly develop new products to meet those changing demands (Pg74, Para 6)
Likely
Major
Able to give impact on PepsiCo
revenues and profits since the taste of consumers always change.
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Probability
Insignificant Minor Moderate Major Extraordinary
Almost certain
Low
Medium High
High
High
Likely Low
Medium Medium High High
Possible Low Low Medium High High
Unlikely Low Low Low Medium Medium
Rare Low Low Low Medium Medium
No. Threats
1. The downturn in the economy has also affected the sales of colas and water as some consumers have switched to store brands and tap water as cheaper alternatives to the national brands (Pg.74, Para 6).
2. Consumer taste continues to change, and Pepsi must also continue to change (Pg 69, Para 3). In United States, the carbonated soft drinks market has shown a decline of 0.4 percent as consumers shifted from soft drinks to bottled water and sports drinks (Pg. 74, Para).
3. Fought the Cola wars, Coca Cola holds the largest share of the U.S cola market at 41 percent (Pg74, Para 5). Coca Cola is the largest producer and distributor in the world and is PepsiCos major competitor (Pg. 76, Para 1).
Threats Probability Impact
T1: The downturn in the economy has also affected the sales of colas and water as some consumers have switched to store brands and tap water as cheaper alternatives to the national brands (Pg.74, Para 6).
Likely
Major
Able to reduce PepsiCo sales and
revenues since the consumers have an ability to switch to their national brands as well as interested more on cheaper
price.
T2: Consumer taste continues to change, and Pepsi must also continue to change (Pg 69, Para 3). In United States, the carbonated soft drinks market has shown a decline of 0.4 percent as consumers shifted from soft drinks to bottled water and sports drinks (Pg. 74, Para).
Almost certain
Extraordinary
In order to avoid competition from other rivals and as to retain loyal
consumer, the company should fast responsive to the consumer
preferences.
T3: Fought the Cola wars,
O2
O3
1
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Coca Cola holds the largest share of the U.S cola market at 41 percent (Pg74, Para 5). Coca Cola is the largest producer and distributor in the world and is PepsiCos major competitor (Pg. 76, Para 1).
Likely Major Able to give major impact towards PepsiCos business, growth and
position in the industry since Coca Cola is the closest competitor. Coca Cola has
a strong brand reputation and even posses strong financial position if
compare to PepsiCo.
Probability Consequences
Insignificant Minor Moderate Major Extraordinary
Almost certain
Low
Medium High
High
High
Likely Low
Medium Medium High High
Possible Low Low Medium High High
Unlikely Low Low Low Medium Medium
Rare Low Low Low Medium Medium
T2
1
T1 T3
1
[DESIGN STRATEGIC PLAN/SEM II/2012/2013] PepsiCo - 2009
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3.3 EFE matrix
EFE Weight Ratings Weighted score
No. Opportunities
1.
Steady overall growth for the last five years of
around 9 percent with sports drinks, bottled
water, and energy drinks showing the largest
growth (Pg.74, Para 4).
0.18 4 0.72
2.
Growth in the carbonated drink market was largest
in Asia and Europe (Pg74, Para 4).
0.13 3 0.39
3.
The market for these products requires
manufactures to constantly develop new products
to meet those changing demands (Pg74, Para 6)
0.17 3 0.51
No Threats
1.
The downturn in the economy has also affected the
sales of colas and water as some consumers have
switched to store brands and tap water as
cheaper alternatives to the national brands (Pg.74,
Para 6).
0.16 3 0.48
2.
Consumer taste continues to change, and Pepsi
must also continue to change (Pg 69, Para 3). In
United States, the carbonated soft drinks market
has shown a decline of 0.4 percent as consumers
shifted from soft drinks to bottled water and
sports drinks (Pg. 74, Para).
0.20 4 0.80
3.
Fought the Cola wars, Coca Cola holds the largest
share of the U.S cola market at 41 percent (Pg74,
Para 5). Coca Cola is the largest producer and
distributor in the world and is PepsiCos major competitor (Pg. 76, Para 1).
0.16 3 0.48
Total
1
3.38
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4.0 Internal Assessment
4.1. Strengths & weaknesses
In order to choose the Strengths and weaknesses, I have classified the strength level into three
significant categories (Competence, Core Competence and Distinctive Competence). In this
case, Distinctive Competence will be chosen for further assessment as this category shows
that PepsiCo able to perform unique capabilities that distinguish the organisation from its
competitors .
No. Strengths
Competence
1. Pepsi has ventured into conglomerate diversification from van moving lines to sporting goods to fast foods (Pg. 69, Para3).
2. PepsiCo must appeal to the ultimate consumer through extensive advertising and promotional activities. This Pull marketing strategy is highly dependent on creative marketing and development of catchy slogans along with Pepsi Cola brands (Pg. 70, Para 1).
3. PepsiCo recently offered $6billion to retake ownership of its two largest bottlers, Pepsi Bottling Group (PBG) and Pepsi Americas(PAS) (Pg. 68, Para 5).
Core Competence
4. Bradham followed the example of Coca Cola and used the bottling franchise system in which he produced the syrup and others bottled and distributed. This business model allowed for quick expansion and market penetration (Pg.69, Para69).
5. Pepsi and Coke become the largest worldwide producer of non-alcoholic beverages (Pg. 69, Para3)
6. PepsiCo., Inc. is indeed a large company and is defined in the 10K as a leading global beverage.. in approximately 200 countries with largest operations in North America (Unites States and Canada) Mexico and United Kingdom (Pg. 69, Para5)
Distinctive Competence
7. Doubled the size of its bottle to 12 ounces, charging one nickel, when the standard was 6ounces. This low- cost differentiation strategy proved very successful and become a major
player in Cola industry (Pg.69, Para 2)
8. Pepsi seems to be developing synergy between product categories with breakfast foods, and non alcoholic beverage markets and at the same time moving into the water and sport
beverage market.(Pg69, Para3). These combinations and promotions allow PepsiCos bottlers enhanced ability to gain retail shelf space (Pg. 78, Para 4).
9. Pepsi continues to expand its markets in beverage through market penetration, mergers and acquisitions (Pg. 69, Para6). Acquired Amacoco Nordeste Ltda and Amacoco Sudeste Ltda, Brazil largest makers of packaged coconut water drinks and is expanding its presence in South Americas largest nation (Pg. 78, Para 6).
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No. Weaknesses Justification
1. Highly dependent on supplies of clean water (Pg.74, Para 6).
Most Incompetence Compare to PepsiCo closest competitor Coca Cola,
PepsiCo should be able to
establish its own water
sources as producing
contaminated carbonated
drink results to damage
PepsiCo brand reputation.
2. Cost of sales has increased as would be expected, net income has decreased, return on assets has dropped , inventory turnover has decreased and long term debt has increased. The trends might indicate future problem areas.(Pg.73, Para1).
Most Incompetence As Coca Cola posses strong
financial position, PepsiCo
encountered financial
problem that need to be
resolved. This financial
instability gives impact
towards PepsiCo performance
and profitability in future.
3. Force PepsiCo to innovate new products and at the same time re-evaluate current product offerings (Pg.78, Para4).
Most Incompetence As meeting consumer demands is critical in this
industry, innovation is the key
success for PepsiCo
4.2 IFE Matrix
IFE Weight Ratings Weighted score
No. Strengths
1.
Doubled the size of its bottle to 12 ounces,
charging one nickel, when the standard was
6ounces. This low- cost differentiation strategy
proved very successful and become a major player
in Cola industry (Pg.69, Para 2)
0.22 4 0.88
2.
Pepsi seems to be developing synergy between
product categories with breakfast foods, and non
alcoholic beverage markets and at the same time
moving into the water and sport beverage
market.(Pg69, Para3). These combinations and
promotions allow PepsiCos bottlers enhanced ability to gain retail shelf space (Pg. 78, Para 4).
0.16 3 0.48
3.
Pepsi continues to expand its markets in beverage
through market penetration, mergers and
acquisitions (Pg. 69, Para6). Acquired Amacoco
Nordeste Ltda and Amacoco Sudeste Ltda, Brazil
largest makers of packaged coconut water drinks
and is expanding its presence in South Americas largest nation (Pg. 78, Para 6).
0.20 4 0.80
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No. Weaknesses
1.
Highly dependent on supplies of clean water
(Pg.74, Para 6). 0.18 1 0.18
2.
Cost of sales has increased as would be expected,
net income has decreased, return on assets has
dropped , inventory turnover has decreased and
long term debt has increased. The trends might
indicate future problem areas.(Pg.73, Para1).
0.12 1 0.12
3.
Force PepsiCo to innovate new products and at the
same time re-evaluate current product offerings
(Pg.78, Para4).
0.12 2 0.24
Total 1 2.70
4.3 Value Chain Analysis (Non-Alcoholic beverages Segment) Value Chain provides a model of how PepsiCo, makes revenue and profit from the raw
materials. The facts in Value chain is the critical facts based on an internal assessment.
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Culture Pepsis desire to own its own bottlers is to spur its non-carbonated health and
wellness products, which are often smaller volume, slower moving products (Pg.
68, Para 5). And in everything we do, we strive for honesty, fairness and
integrity. At PepsiCo, were committed to achieving business and financial success
while leaving a positive imprint on society-delivering what we call Performance
with Purpose. (Pepsi Co Mission &Vision, March 2009).
Management
Finance
R&D/ MIS
Production
PepsiCo recently offered $6billion to retake ownership of its two largest bottlers,
Pepsi Bottling Group (PBG) and Pepsi Americas(PAS) (Pg. 68, Para 5). Pepsi has
ventured into conglomerate diversification from van moving lines to sporting
goods to fast foods (Pg. 69, Para3). PepsiCo is organised using three business units
of PepsiCo Americas Foods, PepsiCo America beverages and PepsiCo
International. (Pg. 69, Para7).
First quarter 2009 PepsiCos net revenue of $8,263 million were down $70 million
from the same quarter in 2008 (Pg.68,Para2). PepsiCo invest $1bilion in Russia
over the next three years, bringing its total investment to$4billion over a ten year
time span. PepsiCo will also invest over $1billion in China over the next 4 years
(Pg.68, Para4) .
PepsiCo opened a new factory in Shanghai in June 2009and plans to open another
five plants in China over the next two year. The new plant will manufacture Pepsi
Cola, Mountain Dew, Gatorade, Tropicana juices and bottled water. The new
Pepsi plant uses 22 percent less water and 23 percent less energy than the
average Pepsi plant in China (Pg.68, Para3). PepsiCo control costs by decreasing
cost of goods sold by $90million (Pg.68,Para2). Initiated projects to increase
recycled materials and reduce materials used in packaging (Pg.74,Para2).
Appealing Web pages with the latest ads and product-related games (Pg.70, Para2).
Raw
Material
Production/
Operation
Product/ Service Marketing Distribution
The principal
ingredient of
its primary
product is
waterdevel
oped countries
(Pg.74, Para2).
PepsiCo results
continued the down
ward trend with
beverage volume
down 6 percent.
However international
beverages volume was
up 6 percent (Pg.68,
Para2). Loft doubled
the size of its bottle
to 12 ounces,
charging one nickel,
when the standard was
6ounces. This low-
cost differentiation
strategy proved very
successful (Pg.69,
Para 2).
Pepsi manufacture the
concentrates and
syrups which are then
sold to bottlers (
Pg.74, Para 6).
Operates in Canada,
Latin America,
Europe, Middle East,
Asia, Northern Asia,
Australia and Asia
Pacific (Pg. 69,
Para5).
Bradham followed
the example of Coca
Cola and used the
bottling franchise
system in which he
produced the syrup
and others bottled
and distributed
(Pg.69, Para69). .
The company
produces Mountain
Dew, Mug Root
Beer, Sierra Mist,
Slice, Aquafina,
Dola Juices and
SoBe (Pg.69, Para4).
Developed liquid
refreshment products
that are light, calorie
free, sugar free,
caffeine free, sports
and energy directed
and flavoured
(Pepsi, Voltage,
Aquafina) (Pg. 70,
Para1)
Pepsi and Coke become
the largest worldwide
producer of non-
alcoholic beverages
(Pg. 69, Para3).
PepsiCo. in approximately 200
countries with largest
operations in North
America
Mexico and United
Kingdom (Pg. 69,
Para5). PepsiCo must
appeal to the ultimate
customer through
extensive advertising
and promotional
activities. This pull
marketing strategy
highly dependent on
creative marketing and
development of catchy
slogans(Pg70, Para1).
Uses all available media
to promote its products
and attempts to attract
younger consumers
through Web-related
media such as You tube
and have appealing
Web pages with the
latest ads and product
related games (Pg.70,
Para2).
PBG and PAS
distribute
nearly 75
percent of
Pepsi drinks in
the United
States,
excluding
Gatorade (Pg.
68, Para5).
PepsiCo works
closely with its
bottlers and
retailers
(Pg.70,Para2).
Distribute the
finished
products to
grocery stores,
convenience
stores,
restaurant and
vending
machines
(Pg.74, Para6).
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Value Chain Flowchart
(Non-Alcoholic beverages Segment):
Consumers
Received Raw materials from
Supplier (The principal ingredient is
water)
Manufacturing (concentrate and
syrups)
Products:
Serves non-alcoholic beverage markets: Pepsi-Cola,
Mountain Dew, Mug Root Beer, Sierra Mist, Slice, Aquafina,
Dola Juices and SoBe projectors, Gatorade, Tropicana juices
&bottled water
Marketing efforts: (Value Propositioning, brand development and management, market development, Channel management).
Spent heavily on sales incentives, discounts, advertising and promotions.
Works closely with bottlers and retailers in promoting and advertising its products.
Creates memorable and catchy slogans to attract and hold consumers.
Distribution (Value Delivery):
PBG and PAS distribute nearly 75
percent of Pepsi drinks in the United
States, excluding Gatorade (Pg. 68,
Para5). Bottlers Distribute the finished
products to grocery stores, convenience
stores, restaurant and vending machines
(Pg.74, Para6).
Reference:
Process Flow :
Information and Money :
Flow
Customers/ Retailers
(Its major customers are large
retailers Wall Mart)
Service: Customer liaison
Distributor liaison Product and service liability
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5.0 Strategy Formulation
5.1. SWOT Matrix
SWOT Matrix Opportunities Threats
1. Steady overall growth for
the last five years of around 9
percent with sports drinks,
bottled water, and energy
drinks showing the largest
growth (Pg.74, Para 4).
1. The downturn in the
economy has also affected the
sales of colas and water as
some consumers have
switched to store brands and
tap water as cheaper
alternatives to the national
brands (Pg.74, Para 6).
2. Growth in the carbonated
drink market was largest in
Asia and Europe (Pg74, Para
4).
2. Consumer taste continues
to change, and Pepsi must also
continue to change (Pg 69,
Para 3). In United States, the
carbonated soft drinks market
has shown a decline of 0.4
percent as consumers shifted
from soft drinks to bottled
water and sports drinks (Pg.
74, Para).
3. The market for these
products requires
manufactures to constantly
develop new products to meet
those changing demands (Pg74,
Para 6)
3. Fought the Cola wars, Coca
Cola holds the largest share of
the U.S cola market at 41
percent (Pg74, Para 5). Coca
Cola is the largest producer
and distributor in the world and is PepsiCos major competitor (Pg. 76, Para 1).
Strengths SO Matches ST Matches 1. Doubled the size of its bottle to 12
ounces, charging one nickel, when the
standard was 6ounces. This low- cost
differentiation strategy proved very
successful and become a major player in
Cola industry (Pg.69, Para 2)
SO1 : Utilize Total Quality
Management Practice aiming for
high quality of end products by
simultaneously driving down cost
(S1, O1,03)
ST1: Innovate product line by
offering healthier alternatives
in order to differentiate
PepsiCo from Coca Cola
(S1,T3)
2. Pepsi seems to be developing synergy
between product categories with breakfast
foods, and non alcoholic beverage
markets and at the same time moving into
the water and sport beverage
market.(Pg69, Para3). These
combinations and promotions allow
PepsiCos bottlers enhanced ability to gain retail shelf space (Pg. 78, Para 4).
SO2: Develop Innovative
Customer-Oriented Product by
relying on well-research
customer needs to respond
towards the growing demand of
sports drinks, bottled water
and energy drinks (S3,O1,03)
ST2: Satisfy the buyer's
requirements by offering more
promotions and discounts to
prevent sales from decreasing
(S2,T1)
3. Pepsi continues to expand its markets
in beverage through market penetration,
mergers and acquisitions (Pg. 69, Para6).
Acquired Amacoco Nordeste Ltda and
Amacoco Sudeste Ltda, Brazil largest
makers of packaged coconut water
drinks and is expanding its presence in
South Americas largest nation (Pg. 78, Para 6).
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Weaknesses WO Matches WT Matches
1. This company highly dependent on
supplies of clean water (Pg.74, Para 6).
Improve business sales by
responding towards increasing
demands for sports drinks,
bottled water and energy drinks
(W2,O1)
Forecast the trends by relying
on marketing intelligence and
Research & Development to
distinctively different from the
rest of the market.(W1,W3,T3)
2. Cost of sales has increased as would
be expected, net income has decreased,
return on assets has dropped , inventory
turnover has decreased and long term
debt has increased. The trends might
indicate future problem areas.(Pg.73,
Para1).
Increase presence in the
International market and
expand Pepsi Soda product in
Asia and Europe in order to
improve financial stability
(W2,O2)
Adjust production of bottlers
with downturn in economy by
utilising flexible manufacturing
system to create differentiated
products at low cost
(W2,W3,T1)
3. Force PepsiCo to innovate new
products and at the same time re-
evaluate current product offerings
(Pg.78, Para4).
SWOT conclusion:
Based on the SWOT analysis the corporate level and business level strategies are as follows:
Corporate Level Strategy
No Type of strategy
1. Cost Leadership (Type 2)
SO1 : Utilize Total Quality Management Practice aiming for
high quality of end products by simultaneously driving down cost
(S1, O1,03)
Business Level Strategy
No Type of strategy
1. Product
Development
SO2: Develop Innovative Customer-Oriented Product by relying
on well-research customer needs to respond towards the growing
demand of sports drinks, bottled water and energy drinks (S3,O1,03)
*IE matrix will be used in the analysis in order to support the company strategy chosen
from SWOT analysis.
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5.2 IE Matrix
The IFE Total Weighted Score
4.0
Strong
3.0
Average
2.0
Weak 1.0
High
3.0
Grow and Build
Medium
2.0
Low
1.0
EFE IFE
3.38
2.70
The division falls into cell II which can be described as grow and build. Intensive strategies
such as product development can be most appropriate for this division.
5.3 Strategy Formulation Conclusion
IE matrix results, shows that PepsiCo should Grow and Build its position. This means
intensive and aggressive tactical strategies should be done. Therefore, related strategies with
grow and build (market penetration, market development, and product development) will be
extracted from S/O strategies (SWOT Matrix). These alternative strategies:
The
EFE
Tota
l Wei
ghte
d S
core
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Original Sentences:
Business Level Strategy Cost Leadership (Type 2): SO1 : Utilize Total Quality Management Practice aiming for high quality of end products by simultaneously driving
down cost (S1, O1,03)
Corporate Level Strategy Product Development: SO2: Develop Innovative Customer-
Oriented Product by relying on well-research customer needs to respond towards the growing
demand of sports drinks, bottled water and energy drinks (S3,O1,03)
6.0 Strategy Implementation
6.1 Operation Management Process
The theme of Operational Management Processes:
Implement TQM practice for lowering the costs of production with better quality of
produced products
Produce new healthier drinks and sports drinks from well-research customer needs
6.1.1 Supply Management Process
Define the objectives in Supply Processes
Reduce the cost of ownership for raw materials of sports drinks, bottled water and
energy drinks
Achieve Just-In-Time supplier capability
Implement efficient supplier quality management
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Objective Balance Scorecard (BSC)
Measure Target
Reduce the cost of ownership
for raw materials of sports
drinks, bottled water and
energy drinks
Price/cost of product,
customer profitability
10% reduction target
5% Increase in terms of customer
profitability (compare to
competitor selling price)
Achieve Just-In-Time
supplier capability
Quick response time,
On-time delivery, correct quantity,
Percent of late orders
flexibility to respond to unexpected
demand changes, willingness to
participate in PepsiCo new product
development
5 % Increase in terms of speeding
up customer response while
minimizing inventories (compare
to year before)
Implement efficient supplier
quality management
Supplier feedback survey, supplier
performance survey, quality level,
presence of certification/ other
documentation
Percent of perfect order received,
percent of supplier qualified to
deliver without incoming
inspection
Zero defect production
Linkage to Production
Operation Management Processes (Supply) Production
Objectives
Reduce the cost of ownership for
raw materials of sports drinks,
bottled water and energy drinks
LPCSDBW&ED
Achieve Just-In-Time supplier
capability
LPCSDBW&ED
Implement efficient supplier
quality management
EQCNPL
Note:
1. LPCSDBW&ED = Lower Production Costs of Sports Drinks, Bottled Water & Energy Drinks
2. EQFNPL = Ensure Quality Control for New Production Line
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Linkage to Risk Management
Operation Management Processes (Supply) Risk Management
Objectives
Reduce the cost of ownership for raw
materials of sports drinks, bottled
water and energy drinks
Achieve Just-In-Time supplier
capability
MSR, MTR1
Implement efficient supplier quality
management
MQR1, MOR1
Note (Supply) MQR1 = Manage Quality Risk MTR1= Manage Technological Risk MOR1 = Manage Operational Risk MSR = Manage Supplier Risk
Linkage to Customer Perspective
Operation Management Processes (Supply)
Customer Perspective (Customer Value Proposition)
Price
Quality
Availability
Selection
Brand
Objectives
Reduce the cost of
ownership for raw
materials of sports
drinks, bottled water
and energy drinks
OLPV IPA FOPSC ICS
Achieve Just-In-Time
supplier capability
LPC EQ IPA FOQSC ERBI*
Implement efficient
supplier quality
EQ IPR FOQSC ERBI*
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management
Linkage to Financial Perspective
Operation Management Processes (Supply)
Financial Perspective
Improve Cost
Structure
Increase Assets
Utilization
Expand Revenue
Opportunities
Enhance Customer
Value Objectives
Reduce the cost of ownership
for raw materials of sports
drinks, bottled water and
energy drinks
LPC IBV DCC
Achieve Just-In-Time supplier
capability
MIC TD,MROI GHS, IOM
Implement efficient supplier
quality management
RDC,
RCSE
EQIM IRG LTR-
LT,
OCC,
PQP
Note: (CVP)
OLPV, IPA, FOPSC, ICS = Offer lower price with Value, Increase
Product Availability, Focus on Price Sensitive Customer, Increase
Customer Satisfaction
LPC = Lower Production Costs
FOQSC = Focus On Quality Sensitive Customer
ERBI* = Enhance Reputation on Brand Image
IPV = Increase Product Variety
IPR = Increase product Reliability
EQ = Enhance Quality
*indirect objective through Customer Management processes
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Linkage to Learning & Growth
Operation Management Processes (Supply) Learning & Growth
Objectives
Human
Capital
Information
Capital
Organizational
Capital
Reduce the cost of ownership for raw
materials of sports drinks, bottled
water and energy drinks
LPST,ACBMSC
DTFPI
IFS
Achieve Just-In-Time supplier
capability
LPST,ACBMSC DTFPI ECA , IFS,FQC
Implement efficient supplier quality
management
DSK,DSM DFC,DPC,QPC IQMS,IFS, FQC
Note (Supply)
LPC = Lower Production Costs
IBV = Increase Business Volume
DCC = Decrease Customer Costs
ISPSC = Increase Satisfaction Among Price Sensitive Customers
GHS, IOM = Generate Higher Sell, Increase Operating Margin
MIC = Minimum Inventory Cost
TD = Timely Delivery
OCC = Offer Customers Convenience
PQP = Provide Quality Product
MROI = Maximize Return on Investment
RDC, RCSE = Reduce Defect Cost, Reduce the Cost of Supplier Errors
LTR-LT = Long Term Relationship-Loyalty and Trust
MSCQ = Maximize supply Chain Quality
RWC= Reduce Waste Cost
IRG = Increase revenue Growth
Those objectives should later be carried out to the Financial Pers. accumulatively
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Note: LPST,ACBMSC =Learning the Principles, Skills and Technologies , Adequate Communications between the Members of Supply Chain ECA,IFS, FQC = Enhance Completive Advantage, Improve Finance Situation, Foster Quality Culture DTFPI = Develop Technology for Process Improvement ESCE,QPC = Enhance Supply chain Effectiveness, Quality Policies Conformity QFD,QPC = Quality Function Deployment, Quality Policy Conformity ECA = Enhance Completive Advantage DSK,DSM = Develop Self-Knowledge, Develop Self-Motion DFC,DPC,QPC= Develop Fishbone Chart, Develop Pareto Chart, Quality Policies & Conformity IQMS,IFS,FQC,ICS = Improve Quality Management System, Improve Finance Situation, Foster Quality Culture
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6.1.2 Production Management Process
Define the objectives in Production Processes
Lower Production Costs of Sports Drinks, Bottled Water & Energy Drinks (Linkage from Supply Process)
Ensure Quality of Finished Product (Linkage from Supply Process)
Produce Innovative products based on well-research customer needs (New
Objectives)
Objective Balance Scorecard (BSC)
Measure Target
Lower Production Costs of
Sports Drinks, Bottled
Water & Energy Drinks
Cost per unit of Output,
Percent of operating income,
Percent of cash flow improvement
Increase 15% of company
profitability (compared to
year before)
Ensure Quality of Finished
Product
Percent of defect reduction
Number of customer complains,
Survey of customer satisfaction,
Percent of shipments returned due
to poor quality
Zero defect
Produce Innovative
products based on well-
research customer needs
Percent of sales obtained from new
products,
Number of New Product Launches,
Measure of how well the company
identifies the customers future need
Increase sales from new
products,
customer needs met,
customer satisfaction
customer retention
Linkage to Distribution
Operation Management Processes (Production)
Distribution
Objectives
Lower Production Costs of Sports
Drinks, Bottled Water & Energy Drinks
LCS
Ensure Quality of Finished Product PSDBWEDMQE
Produce Innovative products based on
well-research customer needs
Note: LCS=lower Cost to Serve PSDBWEDMQE = Production of Sports Drinks, Bottled Water and Energy Drinks Meet Quality Expectation
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Linkage to Risk Management
Operation Management Processes (Production)
Risk Management
Objectives
Lower Production Costs of Sports
Drinks, Bottled Water & Energy Drinks
MOR2
Ensure Quality of Finished Product MQR2
Produce Innovative products based on
well-research customer needs
MFCR MTR2
Note (Production) MOR2 = Manage Operational Risk MTR2= Manage Technological Risk MFCR = Manage Forecast Cost Risk MQR2 = Manage Quality Risk
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Linkage to Customer Perspective
Operation Management Processes (Production)
Customer Perspective (Customer Value Proposition)
Objectives
Price Quality Availability Selection Brand
Lower Production Costs of
Sports Drinks, Bottled Water
& Energy Drinks
LCC HPA FOPSC EBV
Ensure Quality of Finished
Product
ORP EQP HPA,DOT FOQSC EBV, LTR-CL&T
Produce Innovative products
based on well-research
customer needs
ORP ICL RRCP FOCHL EBV, LTR-CL&T
Note: LCC =Lower customers cost ORP = Offer Reasonable Price FOPSC = Focus on Price Sensitive Customers FOQSC = Focus on Quality Sensitive Customers FOCHL = Focus on Consumers Healthy Lifestyle EQP = Excellence Quality Product EBV = Enhance Brand Value DOT = Deliver on Time HPA = High Product Availability ICL = Increase Customer Loyalty RRCP = Rapid Respond to consumer Preferences LTR-CL&T = Long Term Relationship Customer Loyalty & Trust
* Those objectives should later be carried out to Customer Pers. Accumulatively.
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Linkage to Financial Perspective
Operation Management Processes (Production)
Financial Perspective
Objectives
Improve Cost
Structure
Increase
Assets
Utilization
Expand
Revenue
Opportunities
Enhance
Customer
Value
Lower Production Costs of
Sports Drinks, Bottled
Water & Energy Drinks
DPC,RIC,
RWC, IOI
MROI,
IPE&P MFAU
ISG,
IRFNPS
ICP
Ensure Quality of Finished
Product
RD, RWC IRMCE ICP, ICS
Produce Innovative
products based on well-
research customer needs
IRRRCP,
IRCPI
ICS
*Those objectives should later be carried out to the Financial Pers. Accumulatively
Note DPC, RIC, RWC, IOI = Decrease Production Costs , Reduce Incurred Cost, Increase Operating
Income
RD, RWC = Reduce Defects, Reduce Waste Costs
MROI, IPE&P = Maximizing Return on Investment, Increase Process Efficiency
&Productivity
ISG = Increase Sales Growth
IRMCE = Increase Revenue for Meeting Customer Expectation
IRCPI = Increase Revenue for continual Product Improvement
IRRRCP = Increase Revenue for Rapidly Respond to Consumer Preferences
ICP = Increase Customer Profitability
ICS = Increase Customer Satisfaction
MFAU = Maximize fixed asset utilization
IRFNPS = Increase Revenue From Number of Product Sold
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Linkage to Learning & Growth Perspective
Operation Management Processes (Production)
Learning & Growth
Objectives
Human
Capital
Information
Capital
Organizational
Capital
Lower Production Costs of Sports
Drinks, Bottled Water & Energy Drinks
ISTQM,CEPI,
ETITQME
IABC DTQMC,IOE,
IFS
Ensure Quality of Finished Product ETIQA, DSK,DSM,
PHACCPTP,
PGMPTP
ICPI, ICSL,
GMP,HACCP
IQC,
IQMS,GCA
Produce Innovative products based on
well-research customer needs
DCS ICSL, ITFPI DP, FIC,
CCII&C,
DC-OC
Note:
ISTQM, CEPI, ETITQME= Improve Skills in Total Quality Management, Competence Employee in
Process Improvement, Employees Training in TQM Environment
IABC = Implement Activity-Based Costing
DTQMC, IOE, IFS = Improve Operational Efficiency, Improve Finance Situation, Develop TQM
Culture
ITFPI = Improve Technology that Facilitates Product Improvement
DP, FIC, CCII&C, DC-OC = Develop Patent, Foster Innovation Culture, Culture of Continuous
Improvement, Innovation and Creativity, Develop Customer-Oriented Culture
ETIQA, DSK, DSM = Employees Training in Quality Assurance, Develop Self-Knowledge, Develop Self-
Motion
ICPI, ICSL = Improve Customer Preferences Information , Improve Customer Satisfaction
Level
IQC, IQMS, GCA = Improve Quality Culture, Improve Quality Management System, Gain
Competitive Advantage
DCS = Develop Creativity Skills
ICSL, ITFPI = Improve Customer Satisfaction Level, Improve Technology that Facilitates
Product Improvement
PHACCPTP = Provide Hazards Analysis Critical Control Points Training Program
PGMPTP = Provide Good Manufacturing Practice Training Program
GMP = Good Manufacturing Practices
HACCP = Hazard Analysis Critical Control Points
*Those Objectives should be carried out to the Learning &Growth Perspective accumulatively
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6.1.3 Distribution Process
Define the objectives in Distribution Processes
Lower Cost to Serve (Linkage from Production)
Production of Sports Drinks, Bottled Water and Energy Drinks Meet Quality
Expectation (Linkage from Production)
Responsively Delivery Capability (New Objective)
Objective Balance Scorecard (BSC)
Measure Target
Lower Cost to Serve *ABC cost of storage and delivery
to customers,
Cycle Time
15 % Increase in Sales
Growth, Decrease Cycle
Time
Production of Sports Drinks,
Bottled Water and Energy
Drinks Meet Quality
Expectation
Percentage of shipments returned
Due to poor quality, Number of
items reworked
5 % decrease of shipment
returned, Increase quality
Responsively Delivery
Capability
Percent of Delivery On-Time
Number of overdue deliveries,
Customer Response Time
Increase On-Time Delivery
Linkage to Risk Management
Operation Management Processes
(Distribution)
Risk Management
Objectives
Lower Cost to Serve MOR3
Production of Sports Drinks, Bottled Water
and Energy Drinks Meet Quality
Expectation
MQR3
Responsively Delivery Capability MDR,MTR3
Those objectives should later be carried out to the Risk Management as
accumulative Objectives.
Note (Distribution) MTR3 = Manage Technology Risk MOR3= Manage Operational Risk MDR = Manage Distribution Risk MQR3 =Manage Quality Risk
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Linkage to Customer Perspective
Operation Management
Processes (Distribution)
Customer Perspective (Customer Value Proposition)
Price Quality Availability Selection Brand
Objectives
Lower Cost to Serve DPP HPA FOPSC EBI
Production of Sports Drinks, Bottled Water and Energy
Drinks Meet Quality Expectation
EQ HPA FOQSC, FOCHL
ILTBN
Responsively Delivery
Capability EQ DOT ILTBN
Those objectives should later be carried out to Customer Pers. Cumulatively.
Note:
HPA = High Product Availability
DOT = Deliver on Time
EQ = Excellence Quality
FOPSC = Focus on Price Sensitive Customers
FOQSC = Focus on Quality Sensitive Customers
FOCHL = Focus on Consumer Healthier Lifestyle
BPA = Broader Range of Products
ICT =Increase Customer Trust
EBI = Enhance Brand Image
ILTBN = Increase Loyalty to Brand Name
MPQ = Maintain Product Quality
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Linkage to Financial Perspective
Operation Management
Processes (Distribution)
Financial Perspective
Improve
Cost
Structure
Increase
Assets
Utilization
Expand
Revenue
Opportunities
Enhance
Customer
Value
Objectives
Lower Cost to Serve EVA, DCGS ICF,IRPSC,ISG ICP
Production of Sports Drinks, Bottled Water and Energy Drinks Meet
Quality Expectation
IRMCE, IRQSC
Responsively Delivery Capability
Those objectives should later be carried out to the Financial Pers. Cumulatively
Linkage to Learning & Growth Perspective
Operation Management Processes
(Distribution)
Learning & Growth
Human
Capital
Information
Capital Organizational
Capital
Objectives
Lower Cost to Serve MSC IFS
Production of Sports Drinks, Bottled Water
and Energy Drinks Meet Quality Expectation
CEIQC IQAP, SOCS, QPC
IQMS, FQC
Responsively Delivery Capability CEDPI DTFPI IQMS
Those Objectives should be carried out to the Learning &Growth Perspective cumulatively.
Note
EVA,DCGS = Economic Value Added, Decrease Cost of Goods Sold
ICF, IRPSC,DFG = Increase Cash Flow, Increase Revenue of Price Sensitive
Customers, Increase Sale Growth
IRQSC = Increase Revenue of Quality Sensitive Customers IRMCE = Increase Revenue for Meeting Customer Expectation IRQSC = Increase Revenue of Quality Sensitive Customers
ICP = Increase Customer Profitability
Note
CEDPI = Competence Employees in Distribution Process Improvement
IFS = Improve Finance Situation
MSC = Maintain Staff Competence
CEIQC = Competence Employees in Quality Control
IQAP, SOCS,QPC = Improvement on Quality Assurance Policies, Survey on
Customer Satisfaction, Quality Policy Conformity
DTFPI = Develop Technology for Process Improvement
IQMS, FQC = Improve Quality Management System, Foster Quality Culture
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6.1.4 Risk Management Process
Define the objectives in Risk Management Processes (Importing from previous
processes)
Define the objectives in Risk Management Processes (New)
MFR= Manage Financial Risk
Note: (Supply)
1. MQR1 = Manage Quality Risk 2. MOR1 = Manage Operational Risk 3. MTR1= Manage Technological Risk 4. MSR = Manage Supplier Risk
Note: (Production)
1. MOR2 = Manage Operational Risk 2. MTR2= Manage Technological Risk 3. MFCR = Manage Forecast Cost Risk 4. MQR2 = Manage Quality Risk
Note: (Distribution)
1. MTR3 = Manage Technology Risk 2. MOR3= Manage Operational Risk 3. MDR = Manage Distribution Risk 4. MQR3 = Manage Quality Risk
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Define the objectives in Risk Management Processes
1. MOR1 = Manage Operational Risk from Supply
2. MOR2 Manage Operational Risk from Production
3. MOR3= Manage Operational Risk from Distribution
4. MQR1 = Manage Quality Risk from Supply
5. MQR2 = Manage Quality Risk from Production
6. MQR3 = Manage Quality Risk from Distribution
7. MTR1= Manage Technological Risk from Supply
8. MTR2= Manage Technological Risk from Production
9. MTR3 = Manage Technology Risk from Distribution
10. MSR = Manage Supplier Risk from Supply
11. MDR = Manage Distribution Risk from Distribution
12. MFCR = Manage Forecast Cost Risk from Production
13. MFR = Manage Financial Risk
Linkages to Customer Perspective
Operation
management
process
Customer Perspective (Customer Value Proposition)
Objectives
Price Quality Availability Selection Service Partnership Brand
Manage
Operational
Risk from
Supply
RRO
P
FOPSDB
WED
JVP
EBI
Manage
Operational
Risk from
Production
RRO
P
FOPSDB
WED
EBI
Manage
Operational
Risk from
Distribution
RRO
P
EOTD FOPSDB
WED
EBI
Manage
Quality Risk
from Supply
EPQ FOHQ
SDBWED
ICTL
Manage
Quality Risk
EPQ FOHQ
SDBWED
ICTL
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from
Production
Manage
Quality Risk
from
Distribution
EPQ
FOHQ
SDBWED
ICTL
Manage
Technological
Risk from
Supply
FOMTRR
PSDBWE
D
EBI
Manage
Technological
Risk from
Production
FOMTRP
SDBWED
EBI
Manage
Technological
Risk from
Distribution
EOTD,
ESD
FOMTRP
SDBWED
EBI
Manage
Supplier Risk
from Supply
ASRMFPS
DBWED
JVP EBI
Manage
Distribution
Risk from
Distribution
EOTD,
ADR,
HPA
OTDSDB
WED
JVP ICTL
Manage
Forecast Cost
Risk from
Production
FOCHL
EBI,
ICTL
Manage
Financial Risk
RCC
FOPSC
EBI
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Those objectives should later be carried out to Customer Pers. Accumulatively.
Note
RROP =Reduce The Risk of Overpaying
FOHQSDBWED = Focus on High Quality Sports Drinks, Bottled
Water and Energy Drinks
FOPSDBWED = Focus on Production of Sports Drinks, Bottled Water
and Energy Drinks
FOMTRPSDBWED = Focus on Managing Technology Related to
Production of Sports Drinks, Bottled Water and
Energy Drinks
ASRMFPSDBWED = Adequate Supply of Raw Material for
Production of Sports Drinks, Bottled Water and
Energy Drinks
OTDSPBWED = On-Time Delivery of Sports Drinks, Bottled Water and
Energy Drinks
FOPSC = Focus on Price Sensitive Customers FOCHL = Focus on Consumer Healthier Lifestyle
ESD = Ensure Secure Delivery
EOTD = Ensure On-Time Delivery
EBI = Enhance Brand Image
EPQ= Excellence Product Quality
ICTL = Increase Customer Trust and Loyalty
RCC = Reduce Customer Cost
HPA = High Product Availability
ADR = Avoid Delay Risk
JVP = Joint Venture Partners
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Linkage to Financial Perspective
Operation management
process
Financial Perspective
Objectives
Improve Cost
Structure
Increase
Assets
Utilization
Expand
Revenue
Opportunities
Enhance
Customer Value
Manage Operational
Risk from Supply
LIC, RSCC DOCFPSDBWED
ICVTROC
Manage Operational
Risk from Production
LIC, ROC, DOCFPSDB,WED
MFAU IBV, ICP IMS
ICVTROC, SPSC
Manage Operational
Risk from
Distribution
LIC, DOCFPSDBWED
ICVTROC
Manage Quality Risk
from Supply
IRTHQP ICSL, SQSC
Manage Quality Risk
from Production
IRTHQP ICSL, SQSC
Manage Quality Risk
from Distribution
IRTHQP ICSL, SQSC
Manage
Technological
Risk from Supply
RSCC
Manage
Technological Risk
from Production
LIC
Manage
Technological Risk
from Distribution
LIC IRTHTD OCC
Manage Supplier
Risk from Supply
RSCC IRFNC
Manage Distribution
Risk from
Distribution
LIC OCC
Manage Forecast
Cost Risk from
Production
IRFMCD
ICLL
Manage Financial
Risk
LIC, IROI IBV, IMS, ICP SPSC
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Linkage to Learning &Growth Perspective
Operation management
process
Learning & Growth
Objectives
Human Capital Information Capital Organizational
Capital Manage
Operational Risk
from Supply
PETQMTR, DCE ESC, IKS, ISCS DTQMC ,IOE, IKM
Manage
Operational Risk
from Production
PETQMTR, DCE, PHACCPTP, PGMPTP
IKS, GMP, HACCP DTQMC,IOE, IKM
Manage
Operational Risk
from Distribution
PETQMTP ,DCE IKS DTQMC , IOE, IKM
Manage Quality
Risk from Supply
DEKOQMS, PETQMTP, PHACCPTP,
PGMPTP
ESC, IKS, GMP, HACCP DTQMC , IKM
Manage Quality
Risk from
Production
DEKOQMS, PETQMTP, PHACCPTP,
PGMPTP
IKS, GMP, HACCP DTQMC, IKM
Manage Quality
Risk from
DEKOQMS, PETQMTP, PHACCPTP,
IKS, IDP, GMP, HACCP DTQMC, IKM
Note:
LIC = Less Incurred Cost
ROC = Reduce Operating Costs
RSCC = Reduce Supply Chain Costs
MFAU = Maximize fixed asset utilization
ICP = Improve Company Profitability
IRTHTD = Increase Revenue through High Technology Distribution
ICVTROC = Improve Customer Value Through Reduction of Operational Cost
SPSC = Satisfy Price Sensitive Customers
SQSC = Satisfy Quality Sensitive Customers
IRTHQP = Increase Revenue Through High Quality Product
IRFMCD = Increase Revenue for Meeting Customer Demands
DOCFPSDBWED = Decrease Operational Costs from Production of Sports
Drinks, Bottled Water and Energy Drinks
IBV = Increase Business Volume
ICSL = Increase Customer Satisfaction Level
ICLL = Increase Customer Loyalty Level
OCC = Offer Customers Convenience
IMS = Increase Market Share
IROI = Increase Return On Investment
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Distribution PGMPTP
Manage
Technological
Risk from
Supply
PETTMT ESC, IKS IKM
Manage
Technological Risk
from Production
PETTMT IKS IKM
Manage
Technological Risk
from Distribution
PETTMT IKS, IDP IDP, IKM
Manage Supplier
Risk from Supply
IKS, ISCS IKM
Manage
Distribution Risk
from Distribution
IKS, IDP IKM
Manage
Forecast Cost
Risk from
Production
DCE RDTNP DC-OC, IKM
Manage Financial
Risk
RCE IKMS EPRBE
Note:
DEKOQMS = Develop Employees Knowledge on Quality Management System
PETQMTP = Provide Essential Total Quality Management Training Program
PETFTH = Provide Extensive Training to Manage Technology
PHACCPTP = Provide Hazards Analysis Critical Control Points Training Program
PGMPTP = Provide Good Manufacturing Practice Training Program
ESC = Enhance Supply Chain
DTQMC = Develop TQM Culture
DC-OC = Develop Customer Oriented Culture IKS = Increase Knowledge Sharing
IKM = Improve Knowledge Management
IOE = Improve Operation Efficiency
IDP = Improve Distribution Process
RDTNP = Reduce Development Time of New Products
RCE = Retain Competence Employees
ISCS = Improve Supply Chain System
EPRBE = Enhance Performance Retain Better Employees
IKMS = Improve Knowledge Management System
GMP = Good Manufacturing Practice
HACCP = Hazard Analysis Critical Control Points
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Summarizing the objectives Operation Management Processes
No Operation
Management
Processes
Objectives
Measure
Target
1
Supply
Reduce the cost of
ownership for raw
materials of sports
drinks, bottled water
and energy drinks
Price/cost of product,
Customer Profitability
10% reduction
target (ideal
standard)
5% Increase in
terms of
customer
profitability
(compare to
competitor selling
price)
2
Achieve Just-In-Time
supplier capability
Quick response time,
On-time delivery, correct
quantity,
Percent of late orders
flexibility to respond to
unexpected demand changes,
willingness to participate in
PepsiCo new product
development
5 % Increase in
terms of speeding
up customer
response while
minimizing
inventories
(compare to year
before)
3
Implement efficient
supplier quality
management
Supplier feedback survey,
supplier performance survey,
quality level, presence of
certification/ other documentation
Percent of perfect order received,
percent of supplier qualified to
deliver without incoming
inspection
Zero Defect
Production
5
Operation
and
Production
Lower Production Costs of
Sports Drinks, Bottled Water
& Energy Drinks
Cost per unit of Output,
Percent of operating income,
Percent of cash flow improvement
Increase 15% of
company
profitability
(compared to year
before)
7
Ensure Quality of Finished
Product
Percent of defect reduction
Number of customer complains,
Survey of customer satisfaction,
Percent of shipments returned due
to poor quality
Zero defect
8
Produce Innovative products
based on well-research
customer needs
Percent of sales obtained from
new products,
Number of New Product
Launches,
Measure of how well the
Increase sales from
new products,
customer needs
met,
customer
satisfaction
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company identifies the customers future need
customer retention
9
Distribution
Lower Cost to Serve *ABC cost of storage and
delivery to customers,
Cycle Time
15 % Increase in
Sales Growth,
Decrease Cycle
Time
10 Production of Sports Drinks,
Bottled Water and Energy
Drinks Meet Quality
Expectation
Percentage of shipments returned
Due to poor quality, Number of
items reworked
5 % decrease of
shipment returned,
Increase quality
11 Responsively Delivery
Capability
Percent of Delivery On-Time
Number of overdue deliveries,
Customer Response Time,
Customer loyalty level
Increase On-Time
Delivery ,
5 % Increase in
terms of customer
retention level
(compare to year
before
Summarizing the objectives Operation Management Processes Linkages
No Processes Objectives Measure Target
Financial
Perspective
SUPPLY:
1 Lower Production Costs Percent of supply chain target cost achieved
10% cost reduction
target (ideal
standard)
2 Increase Business Volume Company market share 15% increase in terms of
PepsiCo
market share
3 Decrease Customer Costs Customer cost ratio 5% Increase in terms of
customer
profitability (compare to
competitor
selling price)
4 Increase Satisfaction Among Price Sensitive Customers
Customer profitability 5% Increase in terms of
customer
profitability (compare to
competitor
selling price
5 Generate Higher Sell, Increase Operating Margin
Customer growth, Profitability
15% increase in terms of
PepsiCo
market share
6 Minimum Inventory Cost Ordering
7 Timely Delivery Relative Response Time, time-based measures
8 Offer Customers Convenience Customer feedback survey
19 Provide Quality Product Quality-oriented measure, defect rates
Met customers
Needs
PRODUCTION:
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10 Decrease Production Costs , Reduce Incurred Cost, Increase Operating Income
Cost per unit of sport drinks
production, Cost per unit of bottled water
production, cost per unit of
energy drinks production, Non value-added costs
Percent of target cost
achieved, Manufacturing cost,
warehousing cost,
10% cost
reduction
target (ideal
standard)
11 Reduce Defects, Reduce Waste Costs Number of defect produced, Supply Chain cost of
ownership
Zero defects
12 Maximize supply Chain Quality Quality-oriented measures
13 Maximizing Return on Investment, Increase Process Efficiency &Productivity
Profit margin, supply chain
cycle efficiency
Customer margins
earned should
increase as the length of the
relationship
increase
14 Increase Sales Growth Customer growth, Profitability
Sales growth
Increase to
15%, The sales for
any one
customer should steadily
increase each
year
15 Increase Revenue for Meeting Customer Expectation
Customer growth, Profitability
Increase 15% of company
profitability
(compared to year before)
16 Increase Revenue for continual Product Improvement
Customer growth,
Profitability
Increase 15%
of company
profitability (compared to
year before)
17 Increase Revenue for Rapidly Respond to Consumer Preferences
Customer growth,
Profitability
Increase 15%
of company profitability
(compared to
year before)
18 Increase Customer Profitability Customer profitability ratio 5 % Increase in terms of
speeding up
customer response while
minimizing
inventories (compare to
year before)
19 Increase Customer Satisfaction Customer satisfaction Level, CVR
5 % Increase
in terms of customer
satisfaction
level (compare to year before)
20 Maximize fixed asset utilization Return on supply chain assets 10 % increase in efficiently
use of its
assets
DISTRIBUTION:
21 Economic Value Added, Decrease Cost of Goods Sold
Customer Value
Ratio, transportation cost,
22 Increase Cash Flow, Increase Revenue of Profit margin
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Price Sensitive Customers
23 Increase Sales Growth Customer growth for sports drinks, bottled water and
energy drinks, Profitability
Sales growth
Increase to
15%, The sales for
any one
customer should steadily
increase each
year
24 Increase Revenue of Quality Sensitive Customers
Customer growth, Profitability
Each new customers
added should
be profitable
25 Increase Revenue for Meeting Customer Expectation
Customer growth, Profitability
Each new customers
added should
be profitable
26 Increase Revenue of Quality Sensitive Customers
Customer growth, Profitability
Each new customers
added should
be profitable
Customer Perspective
SUPPLY:
27 Offer lower price with Value, Increase Product Availability, Focus on Price Sensitive
Customer, Increase Customer Satisfaction
Customer Value Ratio,
5% Increase in terms of
customer
profitability (compare to
competitor
selling price)
28 Lower Production Costs Percent of target cost achieved
10% cost
reduction
target (ideal
standard)
29 Focus On Quality Sensitive Customer Measure of customer satisfaction level on product
quality
30 Enhance Reputation on Brand Image Measure of customer perception in terms of
31 Increase Product Variety
32 Increase product Reliability Number of defect Zero defects
33 Enhance Quality Quality-oriented measures
PRODUCTION:
34 Lower customers cost Non value-added costs, , cost per unit of production
5% Increase in terms of
customer
profitability (compare to
competitor
selling price)
35 Offer Reasonable Price Customer profitability ratio 5% Increase in terms of
customer
profitability (compare to
competitor
selling price)
36 Focus on Price Sensitive Customers Measure of consumer satisfaction in terms of selling
price of energy drinks, bottled
water and sports drinks
5% Increase in
terms of
customer
profitability (compare to
competitor
selling price
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37 Focus on Quality Sensitive Customers Measure of consumer acceptance on quality of sport
drinks, bottled water and energy drinks produced
38 Focus on Consumers Healthy Lifestyle Customer Perception of Flexible Response,
Measure of consumer acceptance on sports drinks,
bottled water and energy
drinks produced
Customer feels
free to make
customized choices
39 Excellence Quality Product Quality product checklist 5 % Increase in terms of
customer
satisfaction level (compare
to year before)
40 Enhance Brand Value Measure of customer perception on PepsiCo brand
image of healthier drinks
41 Deliver on Time Relative Customer Order Response Time
42 High Product Availability Number of product delayed
43 Increase Customer Loyalty Measure of customer loyalty level
44 Rapid Respond to consumer Preferences Customer Perception of Flexible Response
Customer feels free to make
customized
choices
45 Long Term Relationship Customer Loyalty & Trust
Measure of customer loyalty level
DISTRIBUTION :
46 High Product Availability Number of Customer Contact Points
47 Deliver on Time On-Time Delivery as defined by customers,
Relative Customer Order Response Time
48 Excellence Quality Quality survey , measure customer retention level
5 % Increase
in terms of
customer retention level
(compare to
year before
49 Focus on Price Sensitive Customers Measure of customer satisfaction level in terms of
selling price
5 % Increase in terms of
customer
satisfaction
level (compare
to year before)
50 Focus on Quality Sensitive Customers Measure of quality survey 5 % Increase in terms of customer
satisfaction
level (compare to year before)
51 Focus on Consumer Healthier Lifestyle Measure of consumer acceptance on sport drinks,
bottled water and energy drinks
5 % Increase
in terms of
customer satisfaction
level (compare
to year before
52 Broader Range of Products Measure of customer retention level,
Number of new products
produced
5 % Increase
in terms of
customer
retention level
(compare to
year before
53 Increase Customer Trust Measures for warranty, defects and returns
5 % Increase in terms of
customer
retention level
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(compare to
year before
54 Enhance Brand Image Measure on customer retention level for brand
image,
Measure of customer
perception on PepsiCo brand image of healthier drinks.
5 % Increase
in terms of customer
retention level
(compare to year before
55 Increase Loyalty to Brand Name
Measure of customer loyalty
level
5 % Increase
in terms of
customer retention level
(compare to
year before
Learning & Growth
perspective
SUPPLY:
56 Learning the Principles, Skills and Technologies ,Adequate Communications
between the Members of Supply Chain
Percent of employees trained
supply chain management
techniques, The number of
shared data sets relative to total data sets
Zero defect,
reduce waste,
cut cost
57 Enhance Completive Advantage, Improve Finance Situation, Foster Quality Culture
Measure of financial
improvement
10% cost
reduction
target (ideal
standard) ,
cost-centric
culture
58 Develop Technology for Process Improvement
Process improvement rate, Efficiency Rate
Continuous Innovation &
learning
59 Enhance Supply chain Effectiveness, Quality Policies Conformity
Quality-oriented measures Continuous
Innovation & learning
60 Quality Function Deployment, Quality Policy Conformity
Forecast errors Continuous
Innovation &
learning
61 Enhance Completive Advantage Quality Control & Assurance checklists, quality- Oriented
measure
Met Customers
Needs
62 Develop Self-Knowledge, Develop Self-Motion
Self-Assessments Continuous
Innovation & learning
63 Develop Fishbone Chart, Develop Pareto Chart, Quality Policies & Conformity
Forecast errors Met
Customers Needs
64 Improve Quality Management System, Improve Finance Situation, Foster Quality
Culture
Quality Control & Assurance
checklists, quality- Oriented
measure
Continuous
Innovation &
learning
65 PRODUCTION:
66 Improve Skills in Total Quality Management, Competence Employee in Process
Improvement, Employees Training in TQM
Environment
In house Training Hours, Percent of employees trained
quality management
techniques, process improvement rate
Continuous Innovation &
learning
67 Implement Activity-Based Costing Activity-base-cost 10% cost reduction
target (ideal standard),
cost-centric culture
68 Improve Operational Efficiency, Improve Finance Situation, Develop TQM Culture
Production Schedule
Continuous
Innovation &
learning
69 Improve Technology that Facilitates Product Improvement
Percentage of sales from new products, process
improvement rate
Continuous Innovation &
learning
70 Develop Patent, Foster Innovation Culture, Culture of Continuous Improvement,
Product Finalization Point,
Product Category Commitment Ratio, Demand
To push sports
drinks, bottled water and
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Innovation and Creativity, Develop
Customer-Oriented Culture
Forecast for Healthier drinks energy drinks
produced as
close to the final customer
in an effort to
reduce inventories
and minimize
the risk of unsold
product.
71 Employees Training in Quality Assurance, Develop Self-Knowledge, Develop Self-
Motion
In house Training Hours,
Percent of employees trained quality management
techniques
Continuous
Innovation & learning
72 Improve Customer Preferences Information , Improve Customer Satisfaction Level
Forecast Errors, customers
survey
Met
Customers Needs
73 Improve Quality Culture, Improve Quality Management System, Gain Competitive
Advantage
Human resource management
measure, quality- Oriented
measure
Continuous
Innovation &
learning
74 Develop Creativity Skills Self-Assessment Continuous Innovation &
learning
75 Improve Customer Satisfaction Level, Improve Technology that Facilitates Product
Improvement
Performance trajectories of
competing Technologies
Assess which
emerging
technologies may become a
threat to
PepsiCo Operation
76 Provide Hazards Analysis Critical Control Points Training Program
In house Training Hours,
Percent of employees trained
HACCP procedures
HACCP
Certification
for production of energy
drinks, bottled
water and sports drinks.
77 Provide Good Manufacturing Practice Training Program
In house Training Hours,
Percent of employees trained
GMP procedures
78 Good Manufacturing Practices Certification GMP Certification
for production
of energy drinks, bottled
water and
sports drinks
79 Hazard Analysis Critical Control Points
Certification
HACCP Certification
for production of energy
drinks, bottled
water and sports drinks
DISTRIBUTION:
80 Economic Value Added, Decrease Cost of
Goods Sold
Customer Value
Ratio , The number of shared
data sets relative to total data sets
Zero
duplication,
zero waste & respond
flexibly to
customers
81 Increase Cash Flow, Increase Revenue of Price Sensitive Customers, Increase Sale
Growth
Point-of-sale data for sports
drinks, bottled water and
energy drinks
Increase 15% of company
profitability
(compared to year before)
82 Increase Revenue of Quality Sensitive Customers
Customer growth,
Profitability
Each new
customers
added should be profitable
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83 Increase Revenue for Meeting Customer Expectation
Number of Advance shipping
Notices for sport drinks,
bottled water and energy drinks.
Met
Customers Needs
84 Increase Customer Profitability Customer Profitability Ratio
5% Increase in
terms of
customer
profitability (compare to
competitor selling price)
6.2 Customer Management Process
The Theme of Customer Management Processes:
Focus on Managing Customer Relationship with Continuous Product Innovation by relying
on Well-Research Customer
Providing High Quality and Low Price Product Offering to Respond towards the Growing
Demand of Sports Drinks, Bottled Water and Energy Drinks
6.2.1 Customer Selection Process
Define the objectives in Customer Selection Processes
Understand Customer Segments
Screen unprofitable customers
Target High-Value Customers
Objective Balance Scorecard (BSC)
Measure Target
Understand Customer
Segments
Profit contribution by segment
Increase 15% of company
profitability (compared to year
before)
Screen unprofitable
customers
Percent of unprofitable customers 20% reduce in screening
unprofitable customers
Target High-Value Customers Number of Strategic accounts 20% Increase in terms of strategic accounts number
Allocate 10 percent marketing resources to active sports minded and health Conscious customer segments
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Linkage to Customer Acquisition
Customer management processes (Selection)
Customer Acquisition
Objectives
U