Pepsi Total Reward

Business Ethics Business ethics is a topic that is often on the forefront of media and journalism reports in the United States of America today. To someone that doesn’t have a background in business, or a general understanding of the business world, these reports can be cumbersome and hard to follow. One must first understand what business ethics actually are. Dictionary. com defines business ethics as the study and examination of moral and social responsibility in relation to business practices and decision-making in business (dictionary. com).

Once one understands the meaning of business ethics, they often wonder what major companies do to stay ahead of the curve, and excel in the area of business ethics. Sadly, it seems as if the general media is only interested in companies with poor business ethics and practices. Media outfits are able to sell more papers, and gain more viewers, and honest companies such as PepsiCo never get the positive publicity that they deserve. Ethics and compliance are present in PepsiCo’s day to day operations. PepsiCo also has procedures in place to ensure ethical behavior for both their employees, and the company as a whole.

Next, one must take a look at processes within the organization PepsiCo employs to comply with SEC regulations. Finally, the financial statements of PepsiCo will be analyzed with the intent of looking into the trend for different ratios and what it tells investors, and the public alike about the organization’s financial health. In a world that is filled with unethical companies that are lying to their investors, employees, and the public, it is encouraging to still have companies like PepsiCo that are both ethical and compliant.

PepsiCo goes to great lengths to attain economic success while still complying to the unwritten laws of business ethics. PepsiCo does this based on three main elements of influence: environmental, talent, and human sustainability. PepsiCo offers consumers a wide array of products from health conscious foods, to comfort foods, to athletic drinks. PepsiCo’s financial stability is greatly influenced by the decision to offer so many products. By doing so, PepsiCo gets to appeal to a variety of consumers, as opposed to just one type.

When PepsiCo speaks of environmental sustainability, they are talking about their efforts to “go green” or lessen their environmental footprint. PepsiCo is planning on taking the necessary steps toward reducing their electrical consumption by 20% and reducing fuel consumption by 25% by the year 2015. In 2007, PepsiCo saved nearly five billion liters of water, and nearly five-hundred million kilowatt hours of energy worldwide in 2007 when compared to their use in years past (PepsiCo, 2009). PepsiCo is looking out for the best interests of the environment, an ethical and admirable decision made by the company.

PepsiCo is also an equal opportunity employer and they are often praised for the diverse workforce that they develop. When PepsiCo speaks of talent, they are talking about their diverse workforce. PepsiCo also believes in equality, they show this by offering employment to individuals without worrying about gender, race, ethnicity, or sexual orientation. PepsiCo was named one of Business Ethics Magazine’s “100 best corporate citizens”. PepsiCo shows loyalty to their employees by trying to promote from within. They also participate in various surveys to prevent any issues, and to address any problem areas.

The current CEO of PepsiCo is a woman by the name of Indra Nooyi; since she took over in 2006 she has promoted workplace diversity. PepsiCo’s workplace policies are available in thirty different languages to accommodate many ethnic groups. PepsiCo also does their best to try to spend as much as they could with minority owned businesses, while still looking out for the company’s best interests. (PepsiCo, 2009). PepsiCo is extremely ethical and compliant when looking at their hiring practices. Human sustainability at PepsiCo is their vow to offer more healthy choices for consumers.

PepsiCo is dedicated to their consumers, and is focused on creating and innovating new products that will offer less sugar and staying away from “empty calories”. PepsiCo has been partnering with the World Health Organization to find new ways to improve the diets of consumers while promoting physical activities. When looking at PepsiCo’s promotion of human sustainability, it is evident that PepsiCo values their consumers, which is valued and ethical. PepsiCo much like any other well respected company, complies with the regulations that are determined by the SEC (Securities and Exchange Commission).

PepsiCo demonstrates their SEC compliance through their hiring of an independent registered public accounting firm. PepsiCo utilizes the well-known and respected accounting firm Klynveld Peat Marwick Goerdeler which is more commonly referred to as KPMG. KPMG is one of the largest professional services firms in the world and one of the Big Four auditors. The Big Four auditors are KPMG along with PricewaterhouseCoopers, Deloitte, and finally Ernst and Young. KPMG’s global headquarters are located in the Netherlands .

By employing an outside source, PepsiCo allows the auditing firm KPMG to clearly analyze their numbers, ultimately making independent judgments for the soft drink company. KPMG complies with the laws and guidelines that are set up by the Securities and Exchange Commission through a published report to the SEC that is created quarterly and annually for PepsiCo. The reports that are then created by KPMG offer the Securities and Exchange Commission as well as shareholders, and anyone else interested detailed information on what and where the company is spending money as well as on what and where the company is receiving money.

Near the end of PepsiCo’s annual report, there is a statement that speaks of the honesty and integrity of the report. This statement reads: “Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted and evaluation of the effectiveness of our control over financial reporting based upon the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on that evaluation our management concluded that our internal control over financial reporting is effective as of December 26, 2009 (PepsiCo, 2009). ” Based on that quote, one must believe that PepsiCo is both ethical and compliant with respect to the Securities and Exchange Commission. Despite the worldwide economic turmoil that companies have been forced to deal with, PepsiCo has done their best to rise above the state of the economy, and still post good numbers. PepsiCo’s current ratio for 2008 came out to 1. 23 and the current ratio for 2009 was 1. 35. This means that PepsiCo can pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables) 1. 299 times in 2008 and 1. 435 times in 2009. To properly compute the current ratio for each year an individual would divide the current assets by the current liabilities. The 2008 current ratio for PepsiCo can be calculated by dividing 10,806 by 8,787. This comes out to 1. 23. The 2009 current ratio for Pepsi is calculated the same way dividing 12,571 by 8,756. This equates to 1. 435.

PepsiCo improved their current ratio year over year. A debt ratio is a ratio that indicates what proportion of debt a company has relative to its assets. Thus having a lower percentage would be ideal. PepsiCo’s debt ratio for 2008 was 23%. This can be computed by taking the total debt, which was $ 8,227 and dividing that by the total assets which were $ 35,994. In 2009 the total debt was $7,864 and the total assets were $ 39,848, giving PepsiCo a debt ratio of 19. 7%. Return on equity is known as the amount of net income returned as a percentage of shareholders equity.

It can be calculated as the net income divided by common equity, and a higher percentage is favorable. In 2008 the net income was $ 5,166, which is divided by the common equity $ 12,203, this comes out to 12%. In 2009 the net income was $ 5,979 and the common equity was $ 16,908, meaning that the return on equity was 35%. Again, PepsiCo shows improvement year over year. Finally, comes the days receivable. The days receivable are a measure of the average time a company’s customers take to pay for purchases.

The days receivable are equal to accounts receivable divided by annual sales on credit times 365. In 2008 PepsiCo’s accounts receivable came out to $ 4,683, annual sales on credit were $ 20,351, meaning that the days receivable in 2008 equated to 83. 99, or simply 84 days. In 2009 PepsiCo’s accounts receivable came out to $ 4,624, annual sales on credit were $ 20,099, meaning that the days receivable in 2008 equated to 83. 97 or 84 days as well. Year over year, it seems as if PepsiCo remained constant in the area of days receivable.

In closing, PepsiCo establishes itself on the forefront of ethics and compliance. PepsiCo also has procedures in place to ensure ethical behavior of employees and shareholders. Finally, PepsiCo has processes that they utilize to comply with SEC regulations. PepsiCo seems to have improved financially year over year between 2008 and 2009. In a world that is filled with unethical companies that are lying to their investors, employees, and the public, it is encouraging to still have companies like PepsiCo that are both ethical and compliant.

References Business ethics. (n. d. ). Dictionary. com’s 21st Century Lexicon. Retrieved September 27, 2010, from Dictionary. com website: http://dictionary. reference. com/browse/Business ethics PepsiCo. 2008 Annual Report. Purchase, NY: PepsiCo, 2008. Annual reports. September 27, 2010. http://www. pepsico. com/Investors/Annual-Reports. html PepsiCo. 2009 Annual Report. Purchase, NY: PepsiCo, 2009. Annual reports. September 27, 2010. http://www. pepsico. com/Investors/Annual-Reports

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Financial report on the PepsiCo

This is the financial report on the PepsiCo, Inc. In the following report we analyse the financial position of the company and its financial reporting standards. We elaborate on how clear, comprehensive, and helpful the financial statements are for its users and investors. We also tackle the critical appraisal of accounting policies used by the company and its market size and influence. In the report we reveal a detailed analysis of the company’s financial performance and its history and future value. In conclusion we verify that the company financial reporting procedures and accounting standards are in accordance with the generally accepted accounting principles (GAAP).

Chapter I – Introduction a. Objective Our objective is to present an analytical review of the financial position and reporting of PepsiCo, Inc. PepsiCo is a world leader in convenient snacks, foods, and beverages, with revenues of more than $35 billion and over 168,000 employees. PepsiCo owns some of the world’s most popular brands, including Pepsi-Cola, Mountain Dew, Diet Pepsi, Lay’s, Doritos, Tropicana, Gatorade, and Quaker. Brands are available worldwide through a variety of go-to-market systems, including direct store delivery (DSD), broker-warehouse, and food service and vending.

PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with the Quaker Oats Company, including Gatorade, in 2001. PepsiCo (symbol: PEP) shares are traded principally on the New York Stock Exchange in the United States. The company is also listed on the Amsterdam, Chicago and Swiss stock exchanges. PepsiCo has consistently paid cash dividends since the corporation was founded.

1PepsiCo’s mission is “To be the world’s premier consumer products company focused on convenient foods and beverages. They seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to employees, business partners and the communities in which we operate. And in everything what they do, they strive for honesty, fairness and integrity.” In our review we will present the financial picture of PepsiCo, Inc., market size and influence it has. We will critically analyze and compute necessary financial ratios of the company and present by numerical data and theoretical analysis to review a depth financial position of the company and its market share.

b. History

2Pepsi-Cola was first made in New Bern, North Carolina in the United States in the early 1890s by pharmacist Caleb Bradham. In 1898, “Brad’s drink” was changed to “Pepsi-Cola” and later trademarked on June 16, 1903. There are several theories on the origin of the word “pepsi”. The only two discussed within the current PepsiCo website are the following: (1) Caleb Badham bought the name “Pep Kola” from a local competitor and changed it to Pepsi-Cola. (2) “Pepsi-Cola” is an anagram for “Episcopal” – a large church across the street from Bradham’s drugstore. There is a plaque at the site of the original drugstore documenting this, though PepsiCo has denied this theory.

Another theory is that Caleb Badham and his customers simply thought the name sounded good or the fact that the drink had some kind of “pep” in it because it was a carbonated drink, they gave it the name “Pepsi”. As Pepsi was initially intended to cure stomach pains, many believe Bradham coined the name Pepsi from either the condition dyspepsia (stomach ache or indigestion) or the possible one-time use of pepsin root as an ingredient (often used to treat upset stomachs).[citation needed] It was made of carbonated water, sugar, vanilla, rare oils, and kola nuts. Whether the original recipe included the enzyme pepsin is disputed.

In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore into a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles and sales increased to 19,848 gallons. In 1924, Pepsi received its first logo redesign since the original design of 1905. In 1926, the logo was changed again. In 1929, automobile race pioneer Barney Oldfield endorsed Pepsi-Cola in newspaper ads as “A bully drink…refreshing, invigorating, a fine bracer before a race”.

In 1929, the Pepsi-Cola Company went bankrupt – in large part due financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Eight years later, the company went bankrupt again. Pepsi’s assets were then purchased by Charles Guth, the President of Loft Inc. Loft was a candy manfuacturer with retail stores that contained soda fountains. He sought to replace Coca-Cola at his stores’ fountains after Coke refused to give him a discount on syrup. Guth then had Loft’s chemists reformulate the Pepsi-Cola syrup formula.

Headquartered in Purchase, New York, The Pepsi Cola Company began in 1898 but it only became known as PepsiCo when it merged with Frito Lay in 1965. Until 1997, it also owned KFC, Pizza Hut, and Taco Bell, but these fast-food restaurants were spun off into Tricon Global Restaurants, now Yum! Brands, Inc. PepsiCo purchased Tropicana in 1998, and Quaker Oats in 2001. c. How we collected the information The source of information for our project is from the company’s web site, government web sites and other organizations, Wall Street Journal, SBF 250 quotes, Euronext 100 quotes, Dow Jones quotes, Business week, News week, New York Times and BBC News (Online) and other sources including competitor’s web sites and publications.

On the 5th of April we (Alexander Pazniak, Mikolai Lukashuk, Taras Tymtsias) decided to start working on our final report for the Principles of Accounting. It was very difficult to choose company with good access to annual reports and financial statements in the Internet. First we decided to write about Nestle, we found all necessary information about this company, but when we started search annual reports of competitors of Nestle, that’s become a big trouble, we didn’t find any information of main competitors. After few hours of discussion we decided write about PepsiCo, Inc. We also found quite complete information about Pepsi and its financial statements. That was Thursday and in the evening we were going home to week-long Easter holiday. And by the end of our meeting we divided our project into three parts for each member of our group.

After long break on the 16th of April we met in the library. Alexander was looking for all information concern the history of the chosen company, its market, production and strategy. Mikolai and Taras were collecting all useful financial statements and information about possible competitors. We used websites like www.pepsico.com, www.google.com, www.mail.ru, www.coke.com, www.yandex.ru, www.hoovers.com. We determined one main competitor of Pepsi: The Coca-Cola Company.

On the 20th of April we gathered in order to summarize all we already had. We also were looking for articles about PepsiCo on line. We found some on www.bbcnew.com, www.bizrate.com, www.newyorktimes.com, www.businessweek.com and Wall Street Journal. Mikolai and Alexander calculated financial ratios for the years 2004, 2005 and 2006 for PepsiCo, Inc. and The Coca-Cola Company.

Taras was also trying to find the price of shares for these four luxury companies. By the 7th of May we already had all required information. On the 10th of May we met at Sasha’s place and started working on the first page of our final report. In two days we finished doing history of the company and we determined our objective. The most difficult part took Taras and Mikolai two evenings – to analyze all data and make a conclusion. We finished our final project on the 21st of May. And today is 21st and we are doing this page. Now we are happy and satisfied with our magnificent work!

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Financial Performance of PepsiCo According to Distribution Channel

Table of contents

In comparison to its 1999’s net sales of $20,367 and $18,666 in the year 2000, PepsiCo had a reported net sale of $20,348 and a comparable net sale of $20,144. In 2000 PepsiCo has respectively increased its comparable net sale with 8% while in 1999 it had an increase of 15% in net sales, reflecting that the increase rate is going slower.

On the other hand, PepsiCo’s interest expense declines 39% showing that the company is significantly lower the average debt level. The report in 1999 shows that the company’s interest expense dropped by 8%, this indicates that the company is performing well in managing its financial strategies. Details about the financial performance of the company will be discussed later in this paper. The beverage business in 2001 brought in 39% of PepsiCo’s sales, and 35% of operating profits. Quaker Oats makes the Gatorade sports drink, Breakfast Cereals, Oatmeal’s, grits, pancakes, rice, and pasta.

Quaker Oats brought in 7% of PepsiCo total sales and 9% of operating profit. PepsiCo international business is 29% of sales. Since the corporation is relatively young, many of the brand names are over 100 years old. In 1965 PepsiCo was founded by the merging of Pepsi-Cola and Frito-Lay. In 1998 Tropicana was acquired and in 2001 they merged with the Quaker Oats Company, including Gatorade. The success of the company is the result of the superior products, the high standard of performance, distinctive competitive strategies and the high integrity of their people.

Corporate Overview and Financial Performance PepsiCo is a major consume product companies in the world, with a revenue base of over $20 billion as of the year 2000, and about 125,000 employees. PepsiCo consists of: , the largest manufacturer and distributor of snack chips; Pepsi-Cola Company, the second largest soft drink business and Tropicana Products, the largest marketer and producer of branded juice. PepsiCo brands are among the best known and most respected in the world and are available in about 190 countries and territories.

In the year 2000, the company reported a $20,348 net sale and comparable net sales of over $20,000, in comparison to net sales of $20,367 in 1999. This depicts how PepsiCo has been increasing its comparable net sale. For example, the company’s net sales rose by about 8% in 2000. This reflects the increasing rate is going slower. On the other hand, PepsiCo’s interest expense declines 39% showing that the company is significantly lower the average debt level. Back to 1999, the report shows that the company’s interest expense dropped 8%, which indicates that the company is performing well in managing its financial strategies.

Strategic Management Board

The CEO and Chairman of the PepsiCo Board is Roger A. Enrico. He was elected as the company’s CEO in April 1996, and after serving as the company’s Vice Chairman, he became the Chairman of the Board in November 1996. Enrico, once wanted to become an actor, and he understands that great marketing involves pure theater.

He has been with pepsico for about 29 years, during which he has staged some of the most spectacular productions in marketing. His opinion is that Coke’s leadership tried to put pepsico out of business, but the company refused to look for a temporary boost or short term gains, in the face of their major competitor’s antics. He was responsible for spinning off Pepsi’s bottling operations that were quite capital-intensive, into a separate, independent public company. He also spent about $3. 3 billion in the acquisition of the leading orange juice brand, Tropicana.

The top one of fifty most talented executives of the company, Roger A. Enrico, demonstrates his excellent ability of leadership as representing the company to show the Wall Street that PepsiCo can deliver superior performance quarter after quarter. One of Enrico’s top priorities is to attract more investors into the stock. In international markets, Enrico still faces several obstacles in building Pepsi’s soda business; however, he builds up his strategy to place his biggest bets on developing markets, such as India, China, and Russia. ”The key thing is not to merely plant flags,” says Peter M. Thompson, CEO of Pepsi-Cola International. ”It’s to make sure you build a business, customer by customer, block by block, day by day. ” In India, where per capita soft drink consumption is seven servings a year, vs. more than 700 in the U. S. , and where deliveries are often done on three-wheel bicycles, Pepsi finds the most prominent businessman in each town and gives them exclusive distribution rights, tapping their connections to drive growth. Over the past five years, volume has risen at a 26% annual clip. Pepsi has stolen 19 points of market share from Coca-Cola, bringing Pepsi’s share to 47%, close to Coke’s 52%.

External Environment

Economic Factors

Some key elements that have been considered are the foreign exchange rate, the principal market risks that PepsiCo is exposed to, the interest rate, and price of commodity. PepsiCo has been able to manage its overall financing strategies effectively by maintaining a balance between the company’s risks and investment opportunities. The company is also involved in modifying the interest rate through the use of interest rate and currency swaps, so as to reduce the company’s overall borrowing costs.

Operating in international markets involve exposure to movements in currency exchange rates, which typically affect the economic growth, inflation, interest rate, government actions and other factors. Once these changes occur, they will cause PepsiCo to adjust its financing and operating strategies. Changes in currency exchange rates that would have the largest impact on translating PepsiCo’s international operating profit include Mexican peso, British pound, Canadian dollar and Brazilian real.

Through years, macro-economic conditions in Brazil, Mexico, Russia and across Asia Pacific have adversely impacted on PepsiCo’s operations. Especially, the economic turmoil in Russia which accordingly resulted in the devaluation of the ruble in 1998 caused the significant drop in the soft-drink demand. Although PepsiCo is the number one seller in carbonated beverages, it lost is market share in 2000 as consumers seek for alternative beverages. As the matter of fact, PepsiCo switches to non-cola products such as bottle-water, ready-to-drink tea and sports drinks.

In turn, bottled water gained the market share up to 12. 8% in unit sales. Going by a reports published by Beverage Marketing Corporations, the soft drink industry is expected to grow at a slower rate within the next 4 years. The industry had a five-year compound annual growth rate (CAGR) of 5. 0% between 1993 and 1998. But for the five-year period from 1998-2003, the CAGR is estimated to drop to about 4%. Although colas are the most important soda flavor on the market, the strongest growth in the industry is in the non-cola segment.

Internal Environment

Corporate Structure

PepsiCo owns has its corporate headquarters buildings in Purchase, New York. The company is engaged in the snack food, soft drink and juice businesses. Each product category is further divided into North America segment US and Canada and international segment.

Corporate Culture

There has been an ongoing systematic change in PepsiCo over the past two decades, from passivity to aggressiveness, so as to adapt to changing threat from competitors, and to avoid stagnation in the corporation. At one time, the company was content to remain second to Coca-Cola, and be seen as an alternative to coke, but today, new employees find out very fast that beating the competition is very important to the company, and is the surest path to success. PepsiCo now has a culture that is based on one goal: to become the number one choice among soft drinks. This has lead to managers trying to acquire more market share, and to work harder to enable more profit. In marketing, PepsiCo is now ahead of Coke in the domestic take-home market.

There is also a lot of pressure and challenge on the competition’s hold on the market overseas. PepsiCo has also developed the national marketing, promotion and advertising programs that support the company’s many brands and brand image, oversee the quality of the products; develop new products and packaging, and coordinates selling efforts. (PepsiCo 2000 Annual Report) Finance In 2001, PepsiCo’s net sales went up by 8% to $4. 54 billion. The company’s Net income also rose by 18% ($498 million). Revenues benefited from gains in volume across every division.

PepsiCo’s net income also showed an increase in gross profit because of increased net pricing. In 2001, PepsiCo sales had been decreasing slightly during the previous 3 years but the company still turned out huge profits that year. PepsiCo recorded a 33% debt/equity ratio and 10. 9 profit margins, as compared to industry 8. 10%. In 2006, the company’s net sales advance rose 8% to over $4. 5 billion during the first quarter alone, and earnings per share increased by 17% to $. 34. This shows that PepsiCo has a very strong revenue growth.

EPS grows 15% in the 16-week quarter to 38 cents, and 17% for the 52-week year to $1. 45. Each division boosts Q4 volume, and gains market share for the year. Net sales advance 8% to over $6 billion for the quarter, annual sales grow 8% and exceed $20 billion. Every division posts double-digit operating profit growth in the quarter, annual operating profits advance 13% to $3. 5 billion. Operating cash flow grows 33% to $2. 7 billion. Return on invested capital (ROIC) improves to 23% a 250 basis point increase. 2001 outlook for continued double-digit earnings growth.

PepsiCo bought $383 million worth of goods and services from minority-owned and women-owned suppliers in the year of 2000. The Women’s Business Enterprise National Council named the company among America’s Top Corporations for Women’s Business Enterprise. PepsiCo minority and women business development programs were rated among the top-10 nationally by the National Minority Supplier Development Council.

Analysis of PepsiCo’s Strategic Factors

Recycling of Containers PepsiCo has the ability to recycle its containers, and this has also paid off financially. Due to the liquid nature of Pepsi’s product, it is necessary that a solid and non-porous container be used to store the product. This fact leads to the use of plastics, aluminum, and glass as materials for the containers that Pepsi is stored in. These materials work very well for the purpose of their use, however, these materials do not biodegrade easily.

Every day, 93 million empty soft drink bottles and cans are thrown away, rather than recycled. In November 2000, the boards of Pepsi and Coke passed resolutions for future container recycling targets. The resolutions call upon management to establish recycling targets and prepare a plan to achieve them by January 1, 2005.

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Coke and Pepsi in India

While Pepsico and Coca-Cola are both multinational corporations (MNCs) with extensive experience in international operations, their business dealings in India are not their most long held nor the least problematic. Pepsico has the most longevity in Indian operations having started there in 1988. This allowed Pepsico to establish a stronghold in the Indian market prior to Coca-Cola’s entry in 1993. Both of these MNCs experienced difficulty in establishing their companies, and while they have made some great headway they have also experienced some extreme business angst along the way.

Issue/Problem Identification

Facts and Assumptions India has the second largest population by country in the entire world. The population is estimated at 1.22 billion as of July of 2013 ( (The World Factbook, 2013). India, with its expanding economy, represents a great opportunity for foreign investors. However, there are numerous hurdles for any MNC to overcome if they want to succeed in India. India has difficult trade policies, rules, and regulations, and the use of a foreign brand name is prohibited in India (Ulitin, 2013). Additionally, because of Pepsico’s failure to live up to some of its promises to improve the economy as part of it being allowed to conduct business in India, Pepsico and other MNCs developed a reputation as organizations that cannot be trusted (Pepsi’s entry into India, 2009). Pepsico and Coca-Cola were well aware of the challenges present when attempting to enter emerging markets, and they enjoyed several years of increased market share and increased revenues prior to 2003.

Major Overriding Issues/Problems

Both companies experienced major problems, starting in 2003 and continuing through 2007, because of allegations of dangerously high levels of pesticide in the soft drinks they sold all over India. Such alleged high levels of pesticide can cause cancer and birth defects if the products were consumed over a long period of time. These allegations were initiated by a public interest group named India’s Center for Science and Environment (CSE). There were additional allegations by another special interest group, India Resource Center (IRC), accusing both companies of over consuming scarce water and polluting water sources while they conducted their operations. While there are some marketing executives who think that the special interest groups are “brand jacking;” hanging onto the coat tails of a major brand to draw attention to their own purposes (Meenakshi, 2006), these opinions did not sway the market place in either companies favor.

Sub-issues and Related Issues

A related issue that made the allegations more difficult to address was the director for CSE, Sunita Narain, who was a well-known activist with considerable influence. Sunita has used India’s general suspicion of MNCs to her advantage in garnering attention for many different environmental issues.

Another related concern is the significance that water carries in India. While India has considerable water pollution, water has extensive spiritual meaning to Indians throughout the country. Because of the population’s sensitivity to water issues, these allegations carry significant weight and influence the public’s reaction.

Lastly, as a result of these allegations by the CSE and the IRC, both companies suffered more than 20% losses almost immediately, and they continue to try to regain their former standing profit wise (Meenakshi, 2006). While the overall market share for Coca-Cola in India represents only about 1% of its world-wide market share and this seems like small potatoes, that percentage still represents hundreds of millions of dollars annually.

Analysis/Evaluation Stakeholder Analysis The stakeholders for this study are represented in Figure 1. Utilizing the stakeholder map and considering the secondary stakeholders first, I see several problem areas. CSE and IRC are secondary stakeholders, but they have had an incredible impact on both Coca-Cola and Pepsico’s ability to conduct business profitably in India. These two special interest groups have the ability to influence consumer decision making and affect government regulations concerning MNC businesses operating in India. Although they are secondary stakeholders they have legitimacy and power and their concerns, or the concerns they have created, must be dealt with swiftly if Coca-Cola and Pepsico want to conduct a successful business operation in India.

Figure 1 Another secondary stakeholder, the media, has provided both positive and negative coverage for the MNCs. The MNCs have tried to take advantage of the media by utilizing movie stars and sports figures, both who command a lot of influence in India, but their success has been limited. There are varied opinions as to how vigorously the MNCs fought the initial allegations, but “A strategic response is to communicate honestly, quickly and often, with the company’s message, so that some other entity doesn’t become the source of information about the company,” appears to be the best course of action (Meenakshi, 2006).

The primary stakeholders also offer several challenges. While the ongoing concerns in India will probably not affect the shareholders significantly, other stakeholders have the ability to impact the MNCs successful business operations negatively. Because of the significant number of jobs created by Coca-Cola and Pepsico the employees are not a major negative factor. Also, suppliers are not a major concern because they are guaranteed the MNCs business due to India’s Principle of “indigenous availability” and other government trade policies and regulations (Ulitin, 2013). However, the government as a primary stakeholder has the capability to impact both MNCs due to their legitimacy and power.

They have banned the sale of either MNC’s products at various locales and times over the course of the last several years. The government needs to be addressed with a significant level of urgency, and both MNCs need to remain engaged in open communication with all levels of Indian government. The last of the stakeholders I will address consists of the local communities. They are comprised of the more than one billion residents of India, and they are sensitive about the water used by the MNCs, the allegations of pollution and excessive pesticide content in the sodas, and they directly impact the MNCs bottom line daily. Both MNCs need to understand the power and legitimacy of the local communities, and they need to address their concerns immediately and continuously. CSR Analysis

Coca-Cola and Pepsico are obligated to their stakeholders to demonstrate profitability, social responsibility, environmental and other legal compliance, the enhancement of their respective brand, and support of local communities in which they engage in business operations. Although these issues/concerns dealing with both MNC’s have been ongoing for several years, both parties have been engaged continuously to improve both public opinion and government support of their business ventures. Both Coca-Cola and Pepsico have utilized various methods to achieve their goals. These include, but are not limited to, reduced water consumption in production processes, ongoing testing of their products for unwanted contaminants, changes in management, and improving water resources for local communities.

Evaluation

I believe both organizations did a poor job of investigating the ramifications of entry into the Indian market. They were not culturally or socially prepared for the “attack” by the CSE and IRC, and they made some promises they did not keep. All of these items impacted their initial entry into the market, hampered their efforts to improve their market share once they were in, and continue to follow them to this day.

While both MNCs could have done business better, I do not believe they exceeded any government standards as far as contaminants in their respective products. I feel the CSE and the IRC took advantage of both companies as MNCs to further their own ends, and they were relatively successful. While both MNCs were impacted financially initially, I feel they have learned from their mistakes and they have regained significant market share and an improved reputation. As long as they continue in a positive direction they will continue to see positive gains financially, and benefit from an enhanced positive reputation within India.

Recommendations

Recommendations and Implementation I think what Coca-Cola and Pepsico are experiencing in India is to be expected by any business that enters a new market without conducting appropriate research. Both companies are experienced in multinational operations, but I don’t believe they realized the differences they would encounter in India as opposed to other emerging markets.

Both companies are engaged in ongoing media campaigns utilizing well known public figures and movie stars to promote education, awareness of both MNC’s Corporate Social Responsibility (CSR) initiatives, and the safety and quality of their products. This is an ongoing campaign, and both MNCs need to remain engaged.

As the CEO of Coke stated, “It was very clear that we had not connected with the communities in the way we needed to.” In addition to maintaining their media campaign, both MNCs need to continue to develop CSR initiatives within India that take into account the significance of water within the Indian community. Considering the size of India, this is a campaign that will be never-ending. The benefits for all stakeholders will continue to multiply if Coca-Cola and Pepsico stay the course.

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Porters Five Forces – Pepsi

Since Pepsi is a well known product and has been so for decades, customers are hesitant in giving a new cola drink a chance. In recent years, a very small number of cola manufacturers have been able to establish themselves amidst the raging cola war between Pepsi and Coca Cola but none have been able to pose a threat to their duopoly. The Power of Buyers Even though cheaper consumables have always been a priority for the public, Pepsi has done well to fight keep the power of buyers to substitute Pepsi with immediate competition on a low (Kavilanz).

The aggressive marketing campaigns by tea and coffee manufacturers cannot change the fact that consumers of Pepsi have almost no bargaining power since Pepsi and Coke are the sole constituents of this rare duopoly. The Power of Suppliers For Pepsi, the power of suppliers ranges from low to as high as medium. Even though governments in many countries are making efforts to step in and reduce monopolistic behavior, yet Pepsi has the benefit of requiring nutrient and non-nutrient sweeteners from its suppliers.

The threat of Substitutes Even though more and more consumers are choosing to try and adapt to energy drinks and drinks such as tea and coffee, the threat of consumers leaving cola drinks altogether and opting for energy drinks and drinks such as tea and coffee is relatively low considering the fact that Pepsi and Coke are considered unparalleled in the cola segment.

Competitive Rivalry Prominent rivals of Pepsi include Coca Cola, Jolt Cola, Inca Kola and Royal Crown Cola also known as RC Cola. Competition is most severe between Pepsi and Coca Cola, with RC Cola often coming in third. Rivalry is severe with Coca Cola and Pepsi both on the lookout for niche markets throughout the year.

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Financial Analysis of Pepsi Inc

PepsiCo, based in New York, is a company founded in the late 19th century and is involved in the manufacturing and marketing of an assortment of carbonated and non-carbonated beverages in addition to a catalogue of snacks. The company has over 7 brands with the most popular one, Pepsi, averaging volumes of over 100 trillion cans a year. Recent efforts have been directed towards combating the impact of the environment in addition to providing healthier foods and advocacy for healthier lifestyles.

On a domestic and global scale, the company is involved in numerous activities geared at improving the livelihoods of its active and potential consumers. Financial ratio analysis As a company involved in trading activities, the company’s objectives converge to profitability. Since PepsiCo Inc. a publicly traded company listed in the New York Stock Exchange, its capital structure is comprised of equity and debt (Consolidated Statements, web 2010). As a result, the company’s activities are mirrored on satisfying the demands and wishes of all investors in order to sustain a reliable capital and funds flow.

Analysis of its financial ratios is a basic approach to gauging its attractiveness to investors. The financial ratios to be analyzed are based on the latest financial records released for the year 2009. Net profit margin According to Gibson (p 300), the net profit margin is a comparison between the net income from trading activities and the sales revenue. Since investors are entitled to returns emanating from the net income, it is necessary for them to appreciate the percentage of the sales revenues which will accrue to the company.

The net profit margin is calculated by comparing the net income with the total sales revenues. It is normally presented as a percentage. The higher the net profit margin, the more attractive the company to investors since the trading process is postulated as being efficient (Weihle, 99). PepsiCo’s Net profit margin for the year was 14. 2% as outlined on Pepsico Inc: Key Records (web, 2010). With the profit being higher than the company average of 11. 4%, the company ranks higher in the rational investor’s preference.

Debt equity ratio The most common sources of capital to companies are equity and debt. The in Read also Walmart Financial Analysis papertrinsic characteristics of each source necessitate a balance between the amounts of capital sourced from each avenue with an aim of striking a balance which is favorable for a company. Companies are constantly in the search for an optimal capital structure with the most appropriate mix of debt and equity. The comparison between the debt and equity composition of capital in a company is termed as the debt ratio, and is depicted as under:

A high debt ratio denotes that the company is at risk of illiquidity since most of the financing is sourced from creditors who may. The assets of the company are not sufficient to settle all claims by creditors and thus make the company less attractive to investors. PepsiCo’s debt ratio is 1. 1 showing that the company’s debt is slightly higher than equity. However, some companies can operate with such a level of debt owing to the characteristics of debt and still remain attractive to investors.

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Pepsi one case study

Pepsi is the second largest producer in cola sales next to Coke taking the lead while Coke was the first pop soda to take the market share. What Pepsi wanted was to create a diet soda “Pepsi One and Pepsi max” to introduce a soda that had no after taste but had little to no calories in each can. They wanted to stay away also from the world “diet” since this meant a strong after taste in most markets globally. Pepsi positioned themselves by targeting markets from men the ages of 18-30 who were highly athletic. In September 1995, PepsiCo stated that Pepsi Max would have more than $500 million in sales and projected a growth rate of 70 percent for that year. Pepsi introduced many athletic activities in there commercials when promoting Pepsi Max. The reason they had chosen to keep both names were to attract different consumers who were scared of the word diet. Consumer tests, Pepsi One reached very high scores. Nearly 70 percent of consumers who tried Pepsi One in an extensive home-use test stated that they would most likely purchase the product again. According to Pepsi-Cola North America, Pepsi One will be treated as a core brand.

This means that it will available everywhere Pepsi, Diet Pepsi, and Mountain Dew are available. Globally, Pepsi had met the required standards and has been becoming more successful in its market positions. Pepsi One will not take away market share from Diet Pepsi, but it will generate more revenues and increase sales within time. Pepsis main idea with Pepsi max was to create a drink that was diet without tasting like a diet drink. What Pepsi is doing is creating a wide variety of consumers to meet all ages and personalities around the world. Pepsi has been doing a good job at marketing there products as well. They give away plenty of free samples at super markets, convenient stores as well as food services to promote their products. Most users around the globe don’t use vending machines as much especially only to keep the main targeted products consumers consistently buy. Pepsi has marketed there product so that more people will buy Pepsi one or Pepsi max in super markets. Also read M ountain Dew case study

Pepsi Ones name was create to promote a diet drink without the after taste. What Coke has over Pepsi is the fact that it was invented first. What Pepsi was trying to accomplish was to get there new tasting drink out there first to compete with Coke, a diet drink they had not created till after Pepsi. Pepsi is smart to keep their main product as the original Pepsi so even though they are marketing a new product globally to compete with their diet sodas, they have still kept their core colors. In conclusion, Pepsi has done an excellent job at exploring many new products to meet all consumers’ needs nationally. With making over 21 billion dollars in sales every year, there increasing innovation and new products with various fountain sodas is still successful to date.

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