The Management Of Pepsico

Published Date: 02 Nov 2017

PepsiCo

Number 4

Sue (Zhang Qi) 2025

Lyn (Dai Jialin) 2026

Cissie (Xi Wang) 2027

Jerry (Zhang Yu) 2028

Benjamin (Shi Jianghua) 2029

Winthrop University

Principles of Management - Nantong University

Instructor: Roger D. Weikle, PhD

Table of Contents

Executive Summary................................................................................................................ page 1

Section I (History of the PepsiCo)......................................................................................... page #

Section II (Why PepsiCo Came to China.............................................................................. page #

Section III (The Form PepsiCo Company Came Into China)................................................ page #

Section IV (The Organization Structure Taken by PepsiCo Company in Coming to China)..................................................................................................................................... page #

Conclusion.............................................................................................................................. page #

Works Cited............................................................................................................................ page #

Summary

During these weeks, we have done a deep research in PepsiCo. According to our research, we learn about the history, their reason came to China, the form they taken in China and the organization they have etc. Based on information, our group wrote a paper about the international expansion of PepsiCo especially in China. Our paper including the form or organization or entry vehicle; joint venture, distribution partners, expansion through new production facilities or shipping in products only to retailers, etc. We put our attention mostly on the management part of PepsiCo’s expansion in China.

Every group member has involved in this paper. Benjamin finished the part ‘History of PepsiCo’. Lyn and Jerry completed the part-Why PepsiCo came to China. The globalization strategy and the potential difficulties PepsiCo may meet are what they put major effort in. Cissie and Sue worked on the part-The form PepsiCo came into China. After communicating with our group members who did section 2, we decided to explain the form by 4 strategies PepsiCo has taken. About the part- the organization structure taken by in PepsiCo coming to China, our whole group did this part. The information is found from book. Then, we mix them with the situation PepsiCo faced. Lyn, Cissie, Sue and Jerry completed the last part-conclusion. We looked through all sections we written. Summary finished by Cissie and Lyn.

We choose PepsiCo to do some search. Many of the people around me like drinking Pepsi and eating foods which PepsiCo products. Recent years, PepsiCo really has great development in China. So we want to learn it more and better and we want to know the reasons.

We take five steps to learn more about PepsiCo. Firstly, we have learned about the history of the company. As we all know, to learn a company must learn its past. From its step-by-step development, we can see the corporate positioning and corporate culture. History likes a mirror, so then we can infer the future path of development in the enterprise.

Secondly, we study about why PepsiCo came to China. We think the problem is important. And it is one of the core problems in our research. Now, everyone favor that China has a huge potential market and companies should come to China to develop. But at that time, coming into China is a risky behavior. So we all think it is a wise decision and we want to know who decided and what measures did they take to overcome difficulties.

Thirdly, we learn about The Form PepsiCo Came Into China. This time, we focus on PepsiCo China market. So we want to learn how they enter into China and the different measures taken in China than other areas.

Last but not the least, we study PepsiCo's structure. We have learned the course of the Management. So we should use these knowledge into our research.

So finally we can draw some conclusions from our research. And now we have learned PepsiCo better and more.

Section I History of the PepsiCo

Born in the Carolinas in 1898, Pepsi-Cola has a long and rich history. The drink is the invention of Caleb Bradham (left), a pharmacist and drugstore owner in New Bern, North Carolina.

In the 1902, Caleb Bradham set up the Pepsi-Cola Company. After five years development, the new company can sell more than 100 thousand gallons of syrup every year. At the same year, the Pepsi trademark is registered in Mexico. In the 1966, Pepsi enter the consumer market of Japan and Eastern Europe. PepsiCo’s sale volume passes one billion dollars mark. And at the same time, there are 36 thousand employees working in PepsiCo in 1970. PepsiCo becomes the first American consumer product to be produced, marketed and sold in the former Soviet Union in the year of 1974. After two years, Pepsi become a best-selling soft drinks in the supermarket in the whole United States. In the 1981, PepsiCo's sale volume is over 7 million dollars. After 1984's restructuring, PepsiCo focus on its three core businesses: soft drinks, snack foods and restaurants. And the company selsl transportation and sporting goods businesses. In order to mark the opening of Pepsi's second bottling plant in China. PepsiCo's Board of Directors visits the People's Republic of China. In that year, PepsiCo achieve an agreement with the Chinese government. In that agreement, PepsiCo is allow to manufacture soft drinks. In the development of PepsiCo acquire Pizza Hut in 1977 and KFC in 1986.

In 1981, PepsiCo was one of the first American companies to enter China when it signed a contract with the local government to establish its first bottling plant in Shenzhen. In 1995, PepsiCo Investment (China) Limited established its headquarters in Shanghai, enabling PepsiCo's strategic expansion and growth in one of the world's most significant emerging

market. Today, PepsiCo has established 24 bottling plants and one concentrate plant with a distribution network spanning the entire Greater China Region. Since 1993, our foods presence has grown to five plants and seven farms in the Greater China Region. As of early 2010, PepsiCo Greater China has embraced our company's unique "Power of One" model, which leverages the combined sales strength of our food and beverage lines. To date, PepsiCo's total investment in China has exceeded RMB 10 billion, anchoring its position as a market leader in the fast-growing food and beverage sector in China. Across China, we currently employ more than 30,000 people and indirectly create thousands of other jobs. In five years' time, PepsiCo Greater China has paid over RMB 5.2 billion in taxes to the Chinese Government. In 2008 and 2010, PepsiCo committed to total additional investments of USD 3.5 billion by the end of 2013. The new investment will fund facilities expansion, research and development scale-up, and expansion of agricultural and brand-building initiatives.

(PepsiCo Our History. PepsiCo. Com

http://www.pepsico.com/Company/Our-History.html

November 5,2012)

Section II Why PepsiCo Came to China

Economic globalization is a development trend. PepsiCo realizes it. It is not only a challenge but also an opportunity for PepsiCo. If the company managers make the right decisions about the company development strategy, PepsiCo will develop better and better. And PepsiCo always has an ambition that PepsiCo can become a world's leading company which sells convenient foods and beverages. So Pepsi must constantly open up new markets and expand market shares. While once the United States, Australia, Japan, and Western Europe were the leading consumer markets, the growth has slowed down obviously. These markets have become saturated but they are still important markets for Pepsi. However, Eastern Europe, Mexico, China, Saudi Arabia, and India have become the new markets. PepsiCo devotes itself to developing these areas now because they all have large markets. It’s a tribute to globalization. So Pepsi sets up in many different countries. Overall, PepsiCo sells its productions in Asia, Europe, Africa, North Americ and South America PepsiCo has become a well-multinational company. Many people have experienced the delicious food.(PepsiCo Company | PepsiCo.com, http://www.pepsico.com/Company.html,November 5, 2012)

China has nearly one fifth of the world's population. Lots of Chinese people haven't taste the food which PepsiCo products. What's more,China's economy develops rapidly and strength the communication with other counties. Chinese people also change a lot. They are willing to accept new things and lifestyles. It is a very potential market. In China, it is easier to expand because of policies supporting. There are so many reasons that causes China has become part of a bigger globalization strategy.

(Pepsi Americas Beverages | PepsiCo.com

http://www.pepsico.com/Company/The-PepsiCo-Family/PepsiCo-Americas-Beverages.html

November 5, 2012)

Pepsi wanted to seek greater development. Of course, when Pepsi decided to entry into China, they considered a lot of differences. The United States is a capitalist country. The government maintains free competition. American government always cooperate with large companys to commit to develop better together. China is a socialist country. The government controls everything and decides the directions of development. But China was in a period of reform and opening up. China's leaders established opening up as a basic national policy. They took tax breaks to attract foreign investors and wanted to make the country strengthen.In fact, PepsiCo invested the majority but occupied little shares. But for Pepsi, China has a huge potential market. So PepsiCo and Chinese government reach an agreement. Chinese government expended staff and the land while PepsiCo invested fund to create a win-win situation.

(PepsiCo MORE | PepsiCo.com

http://www.pepsico.com/Global-Sites/More.html

November 5, 2012)

Of course, PepsiCo consider differences in business practices and customs.

In China, PepsiCo should create a believable human relationship that shows people's respect. Chinese feel obligated to do business with their friends first business relationships are often established on personal relationships in China. Building business relationships may take a considerable amount of time. PepsiCo has a connection with China, helping from local people, business partners or service agency specialized for foreigners. People are aware of all favors done for you and prepare to respond in kind. In Chinese communication style, people like sharing history, experience, nuances and implicit messages.

(Chinese business practise

http://www.jyschinabusiness.com/news/china-business-practices.html

November 5, 2012)

In the USA, Americans work long hours, have two weeks of vacation, and spend a lot of time doing work-related travel. They like enjoying life. In the United States, business relationships are based between companies, not between people. Americans provides good services and products in business deals. In every business trade, company should do every business trade under the helps of lawyers. Americans may not like silence. They like asking questions. In a talk, if you do not tell them, Americans will assume you understand something. Americans like direct communication in a talk. American's business conversation may take place during meals. It is the same as China. Business meetings may be arranged as breakfast meetings, lunch meetings, or dinner meetings depending on time schedules and necessity. If your stay time in the U.S. is short, however, your American business counterparts may arrange to do business on this day. As the saying goes, tomorrow never comes.

When you are doing business in the United States, you must be punctual and efficient. They like responsible people. In the business trade, China and The USA should consider about each other to get more something.

(US-United States American Business Etiquette, Vital Manners, Cross Cultural Communication, and Greet Hofstede Analysis for USA

http://www.cyborlink.com/besite/us.htm

November 5, 2012)

There were many personal differences within the company in deciding that China was a good market for them. Personal power can change economic development in PepsiCo. Li wenfu is an important people. He made PepsiCo enter China. In 1981, PepsiCo was one of the first American companies to enter China when it is the symbol of a contract with the local government to establish its first bottling plant in Shenzhen. In 1995, PepsiCo Investment (China) Limited established its headquarters in Shanghai, enabling PepsiCo's strategic expansion and growth in one of the world's most significant emerging market. Li Wenfu was honered that he made a great and right choice in 1981. Today, PepsiCo has established 24 bottling plants and one concentrate plant with a distribution network spanning the entire Greater China Region. He opened Pepsi in China.

(Company information. PepsiCo.com.cn

http://pepsico.com.cn/media/Fact-Sheets.html

November 5, 2012)

Section III The Form PepsiCo Came Into China

When Pepsi came to China, they took a four-step strategy. First step, from 1979 to the early 1980s, Pepsi brought its products into the mainland by train from Hong Kong. Pepsi took commissioned consignment. First, they entered the Beijing Friendship hotel and other hotels for foreign tourists. The consignment will not spend any money but earn some more, initially annual sales only about 200 tons. By this way, Pepsi has once again opened the door of the Chinese market.

The second step is donating equipment, promoting imports of puree. Pepsi headquarters in the United States has donated production equipment for bottling to Shanghai, Beijing and other places, since 1981. However, the local producers must be imported the PepsiCo recipe confidential puree, mixed with water and sugar, and then paste Pepsi logo on bottles made in China.

The third step is investments and expanding market. In 1988, Sino-US joint venture Shanghai Shen-Mei Beverage & Food Co., Ltd. was founded. This new founded company has established two manufacturing plants; one is to manage production formula confidential puree made in the United States, The other is to mix puree with sugar, then put into the China-made bottles. The China Productivity PepsiCo expanded the Chinese market. The annual sales have increased to 17 million tons.

The fourth step is to expand the social impact of the Pepsi-Cola. Mainly from the 1990s, Pepsi-Cola in China, actively involved in various social welfare and sports activities. This series of activities not only expanded the impact of the Pepsi and Pepsi's reputation in China, but also helped Pepsi-Cola to become best-selling drinks.

They are not forced to take these four steps. There are other options they can choose. Taking PepsiCo in other country. For the part of advertising, Pepsi-Cola can establish a partnership to develop international programming with channel like MTV, cross promotions, marketing tie-ins and special events. In this way, it is easier for them to appeal more costumers. However, it is not suitable for the Chinese marking, because MTV is not popular as it outside China in that period. Now，Pepsi-Cola in China three partners: the Swire Group, Kerry Beverages Group, China National Cereals, Oils & Foodstuffs Import & Export Corporation. For selling, PepsiCo run it in a Chinese way. For example, in Brazil, PepsiCo chose Brazilian’s preference-biscuit, into the market. However, PepsiCo chose to put the soft drink into China first. What should be mention is that Pepsi is no longer just focus on soda, but is committed to expanding its beverage varieties. From oolong tea to a new era of style-fruits mixed drinks, then high-calorie energy drinks, and even to the oldest drinking, all cover in its product.

PepsiCo made decision to take these four steps, for one reason, they are more suitable in China, for another reason, they are more reflect on the PepsiCo’s organization culture. Pepsi has the ‘3 P’ principles, that "everywhere", "value for money" and "preferred corporate image" (pervasiveness, price / value, preference). The goal, which Pepsi catching after is that when people think of the beverage, Pepsi will be the first choice in their mind. No matter where they are, Pepsi will be able to get. Pepsi is the world's first company came up with the idea-- localization thought, which means, "Think local, and Act local". The major point of this theory is to make related decisions based on local needs including the Chinese market. They made this decision because their principles and localization thought. Pepsi-Cola aims to enter all drinkable product areas, and try to transform itself into a ‘localized comprehensive beverage’ company. Asia is the base of its new strategy. Without any doubt, China is the center of this strategy.

（Our History - 1996

http://www.pepsico.com/company/our-history/1996.html

October 28, 2012

《百事可乐在中国的广告营销策略》 PepsiCo advertise strategy in China p1~8

October 28, 2012)

Section IV The Organization Structure Taken by PepsiCo in Coming to China

As far as we are concerned, human resource is the most important contingencies in an organization. The company would collapse without staffs. Therefore, human resources make a significant contribution to company running as they can do much work. What’s more, managers can have more time to think about the plan and management tactic in future. An excellent staff or a manager plays a key role in solving problems. In PepsiCo, it organized in the best way. It has done a great job for PepsiCo to employ the local people to enter the local market. What’s more, PepsiCo successfully made excellent products to satisfy the demands of local people.

According to the Job Characteristics Model, the job should be motivating since skill variety, task significance, task identity, autonomy and feedback are high. For many of PepsiCo team members, working in PepsiCo is often their first job. So PepsiCo strive to develop their life skills - foundational abilities such as teamwork spirit, responsibility, problem solving, positive energy, and a relentless drive to serve and satisfy customers - so they can grow to their full capability and achieve their dreams. Furthermore, All PepsiCo employees are expected to embrace the principles of code. PepsiCo holds the view that making measures and working responsibly and ethically is not only the right thing to do, but also an important factor leads to their success.

From our point of view, there are many ways for the employees of the PepsiCo to do to enlarge or enrich their jobs. Taking the seller as an example, first of all, they can consult the demands of the various customers such as different tastes of cola. Secondly, they can visit Nursing Home or Orphan asylum and provide PepsiCo’s products for free. This can not only development themselves, but also raise the PepsiCo’s social reputation. Last but not least, the employees of the PepsiCo can do a lot to promote others.

PepsiCo is an international company, using Hybrid structure. It is the structure of a large organization that has many divisions and simultaneously uses many different organizational structures. Most large organizations use product division structures and create self-contained divisions; then each division’s managers select the structure that best meets the needs of the particular environment, strategy, and so on. Divisional structure is an organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer. It has some advantages. Divisions create smaller, manageable, parts of firm. Divisions develop a business-level strategy to compete. Divisions have marketing, finance, and other functions. PepsiCo is an adaptive organization, as they are continuously seeking constant improvement and keeping new ideas in the marketplace while its products progress along their life cycles. PepsiCo has a decentralized organizational structure, with operational decisions made within the separate business units while being governed by policies at the corporate level.

There are 3 levels in the organization’s hierarchy including CEO, Top-managers, Middle-managers, First-line managers and employees. The authority is decentralized. This makes organization’s structure more flexible. Each person has his authority to decide the company’s action and the use of organizational resources. Through some successful cases of the management, PepsiCo browed the success experience as its management measures. In essence, it is the same as the organization’s hierarchy theory in the book. Certainly, the distribution of authority is appropriate for PepsiCo and its activities. Every employee has to perform his duties. From my perspective, it may be impossible to flatten the hierarchy by the way of decentralizing authority or empowering employees. Decentralizing authority makes it possible for an organization and its employees to solve problems in a more flexible way and that is the reason that managers have interests in empowering employees. However, decentralizing authority really has many obvious disadvantages. If divisions, functions, or teams are given too much decision-making authority, they may begin to pursue their own goals at the expense of organizational goals.

When it comes to the principal integrating mechanisms used in the organization. PepsiCo also take the measures of direct contact, liaison roles, task force, cross-functional teams, integrating roles and department and matrix structure. PepsiCo insists on six guiding principles all the time. First, caring for our customers, our consumers and the world we live in, this spirit directs PepsiCo to take measures benefits both company and social. Second, selling only products we can be proud of, PepsiCo’s success depends much on a thorough high quality of their products. Third, speaking with truth and candor, PepsiCo can promise that everything they assert should be not only clear but also honest and accurate. Fourth, balancing short term and long term, PepsiCo has made it a routine to maintain a balance between short-term and long-term benefits in every decision. Then, winning with diversity and inclusion, PepsiCo emphasizes the importance of thinking and innovation. The last but not least, respecting others and succeed together, although PepsiCo relies on individual excellence, they also emphasizes the value of teamwork spirit. ("PepsiCo Values & Philosophy PepsiCo. Com". pepsico.com. October 29, 2012. <http://www.pepsico.com/Company/PepsiCo-Values-and-Philosophy.html>)

Certainly, PepsiCo has done a great job in sufficient coordination between individuals and functions. PepsiCo can keep an organization responsive to changes in its task and general environment as the organization grows and becomes more complex. Since PepsiCo’s products are often criticized for their high calorie value and negative impact on health, the health and wellness trend would have material adverse impact on the company's sales.

Since we have analyzed the way the PepsiCo is organized, there are some advices we give its managers to help them improve the way it operates. To begin with, to coordinate the activities of people, functions, and divisions and to allow them to work together effectively, managers must develop a clear hierarchy of authority. Then, integrating mechanism is a useful tool that managers can use to strengthen the communication and coordination between functions and divisions. Therefore, company can improve the way it operates if an appropriate integrating mechanism is made. Last but not the least, it is also necessary for PepsiCo to change a little bit or strengthen its strategic alliance and network structure.

Conclusion

PepsiCo always has great ambitions and goals. What's more, all the employees try to their best and make a lot of efforts. So the company has become better and better. And I think PepsiCo is one of the best companies which sell convenient foods and beverages now. As far as I am concerned, the company operates successfully.

Leading to success is a very long way. And PepsiCo has done many things differently. When Pepsi came to China, they took a four-step strategy.

First step, from 1979 to the early 1980s, Pepsi brought its products into the mainland by train from Hong Kong. Pepsi took commissioned consignment. First, they entered the Beijing Friendship hotel and other hotels for foreign tourists. The consignment will not spend any money but earn some more, initially annual sales of only about 200 tons. By this way, Pepsi has once again opened the door of the Chinese market.

The second step is donating equipment, promoting imports of puree. Pepsi headquarters in the United States has donated production equipment for bottling to Shanghai, Beijing and other places, since 1981. However, the local producers must be imported the PepsiCo recipe confidential puree, mixed with water and sugar, and then paste Pepsi logo on bottles made in China.

The third step, investments and expanding market. In 1988, Sino-US joint venture Shanghai Shen-Mei Beverage & Food Co., Ltd. was founded. This new founded company has established two manufacturing plants; one is to manage production formula confidential puree made in the United States, The other is to mix puree with sugar, then put into the China-made bottles. The China Productivity PepsiCo expanded the Chinese market. The annual sales have increased to 17 million tons.

The fourth step is to expand the social impact of the Pepsi-Cola. Mainly from the 1990s, Pepsi-Cola in China, actively involved in various social welfare and sports activities. This series of activities not only expanded the impact of the Pepsi and Pepsi's reputation in China, but also helped Pepsi-Cola to become best-selling drinks.

Pepsi has the ‘3 P’ principles, that "everywhere", "value for money" and "preferred corporate image" (pervasiveness, price / value, preference). The goal, which Pepsi catching after is that when people think of the beverage, Pepsi will be the first choice in their mind. No matter where they are, Pepsi will be able to get. Pepsi is the world's first company came up with the idea-- localization thought, which means "Think local, Act local". The major point of this theory is to make related decisions based on local needs including the Chinese market. They made this decision because their principles and localization thought.

PepsiCo has proper promotional strategy. At different times, it has different advertisement and adverting slogans to adapt the development of the times. So PepsiCo and consumers establish a good communication bridge. People have to admit that Pepsi's adverting strategy is unique and help it successful.

When we come in a restaurant, we always face a dilemma that to choose Pepsi or Coca-Cola. This is what I found the most interesting problem Pepsi involved in. The competition between Pepsi and Coca-Cola has begun longtime ago. They both put every effort to trying to win. Advertising, the powers of brand, management are all they competed in. To make sure they can win the war, they want to persuade everybody in favor of Pepsi. However, they just have the market share in a small amount of people at first. It is possibly because Coca-Cola is older than Pepsi is. Pepsi marketed their soda of the new generation, even hired celebrity spokespeople like Michael Jackson. Pepsi cares about details. They even change their flavor, becoming a little bit sweeter than Coca-Cola to appeal customers. These all effort works. In 2011, according to the accuracy number, Pepsi has brought 38 percent more revenue than Coca-Cola did. However, the revenue is not only based on the Pepsi’s cola, it is also benefit from the diversification of PepsiCo’s business. PepsiCo is increasingly relying on the other brands it owns, like Frito Lay, Quaker, and Tropicana etc.

As far as I am concerned, the way that they handled the problem is wisdom and appropriate. Since China has nearly one fifth of the world's population, it is a very potential market. Therefore PepsiCo chose China as a part of a bigger globalization strategy. When PepsiCo decided to entry into China, they considered a lot of differences. The United States is a capitalist country, while China is a socialist country. But China was in a period of reform and opening up. China's leaders established opening up as a basic national policy and took tax breaks to attract foreign investors. So PepsiCo reached an agreement with the Chinese government and invested the majority but occupied little shares. Obviously, PepsiCo made an appropriate decision and successfully entered into Chinese market. When PepsiCo came to China, they took wisdom strategies that led to PepsiCo’s success. First, PepsiCo took the method that commissioning and consignment. They choose to enter the Beijing Friendship hotel and other hotels involving foreign tourists. The sellers would spend no money and gain the whole profits. However, initially annual sales were only about 200 tons. But we can’t deny the fact that, PepsiCo has once again opened the door of the Chinese market by this way. What’s more, in order to attract public attention, PepsiCo donated equipment, promoting imports of puree and actively involved in various social welfare and sports activities. This series of activities not only expanded the social impact and reputation of the PepsiCo in China, but also helped Pepsi-Cola to become best-selling drinks. Then, in order to look for broaden market and meet the various demands of the consumers, the two new companies were established to invest new products and expand market in 1988. One is to manage production formula confidential puree made in the United States. The other is to mix puree with sugar, then put into the China-made bottles. PepsiCo made great use of the China productivity to expand the Chinese market. In fact, it made a great success that the annual sales increased to 17 million tons. PepsiCo’s brilliant achievement should mainly attributed to the appropriate stratagies.

In PepsiCo, Fayol's principles of management has been reinforced by completing this assignment. In the class, there are four principles of scientific management. In the class, I know four principles of management. Study the ways jobs are performed now and determine new ways to do them. Codify the new methods into rules. Select workers whose skills match the rules. Establish fair levels of performance and pay a premium for higher performance. Fayol's principles of management pointed out that when organizations are split into different departments or functions, each with its own hierarchy, it is important to allow middle and first-line managers in each department to interact with managers at similar levels in other departments.

In PepsiCo, managers manage company through performance, human, environment, talent and sourcing. For example, for performance in PepsiCo, with faster population and GDP growth than in developed countries, emerging markets represent a significant opportunity for PepsiCo to continue to grow. Managers have many ways: distributing global brands while ensuring local relevance, Creating affordable products that meet consumer needs, Strengthening advantaged local supply chain and go-to-market capabilities and Encouraging people to live balanced and healthy lives.