MGN433 HPO Case Study Analysis of Pepsi Co Assessment 1 Answer
HPO may be defined as organizations that have achieved extraordinarily in both financial and non-financial areas far better than their contemporary group within a time of five years or more (de Waal et al. 2017). High performance is significant for any organization to sustain in business for a longer-term maintaining its position firmly. This article will throw light on analyzing and assessing complex business issues, criteria for achieving high performance, and its implementation by Pepsi Co, a famous beverage company of US started its journey in 1965 with the hands of Donald Kendall, CEO of Pepsi Cola and Herman lay, CEO of Frito Lay (PepsiCo, 2020). The article will discuss the company’s origin, how it is making constant efforts to achieve high performance and sustainability in the global market, and how far it has successfully achieved its desired goals. In this connection, the problems faced by the company will also be considered as a part of the discussion.
Critical analysis of complex business issues faced by an organisation
An organization faces several internal and external factors that determine the performance level of the organization. This feature is responsible for organizational achievement in terms of high performance (Iedunote, 2017). The internal factors are mission, organizational structure, competitors, and customers, leadership while the external factors include political, economic, and social aspects. Pepsi co. being one of the leading food and beverage companies of the US has also faced complex issues of business operation. This criticism started from the middle of 2000 which are as follows;
The company has faced conflict regarding water usage to make beverages in both the countries of the US and India. Both the country people claimed to have to face a shortage of water due to the company’s water resource requirement. They were accused of utilizing a major portion of drinking water for their production purpose. Pepsi was accused of being responsible for drinking water shortage in countries where the population rate is increasing day by day. Moreover, the company’s excessive dependencies on groundwater created problems in US and Indian villages where groundwater is mainly consumed. The company was also held responsible for polluting groundwater. The company faced legal obstacles when one high court of India criticized them for possession of water and wastage of it. The court stated that the water belongs to the people, not the company. The company faced similar issues in the US.
The second criticism the company faced is the quality of the products. The company was accused in India of using pesticides in their soft drinks which can be harmful to health if consumed. The company denied the allegation by saying that the level of pesticide used in according to the standard of the regulatory body of that country. Moreover, the company explained that the quality of products maintained by the company is fixed in every country where the organization is operating. For a longer period, the sales of Pepsi products were banned in India in spite of being favored by the government. The banning of the products has not only reduced the sales but also hampered the reputation of the organization to a large extent.
Another problem the company faced is relating to its packaging and manufacturing of products. The company uses plastic bottles and tin cans for packaging which have been considered to harm the environment drastically. A survey by BBC found that the bottling plant of Kerala, India supplied its waste products to the local farmers as fertilizers. These products contained a high percentage of cadmium and lead which will cause health hazards. This survey was conducted based on complaints of local people on the company about lowering the groundwater level in areas near the plant. Thus all these issues are the external factors that the company faced over the years.
The mission of the company committed to creating smiles at every sip and with every bite which they have accomplished from its onset. The demand for the products has increased day by day proving customer’s satisfaction with the products. Their organizational structure is strongly rooted in three characteristics such as market division, Functional corporate teams, and offices, and global hierarchy. Besides near about 110000 employees are engaged with this organization only in the US creating a big platform for employment (Statista, 2020). All this denotes the internal factors of the organization.
Criteria for assessing HPO
High-performance organizations have to accomplish certain criteria to meet their desired objectives. These criteria are as follows:
- Non- financial.
This is the criteria related to economic aspects of the organization
- Revenue growth – the sales rate determines the revenue growth of an organization. Pepsi co having a high revenue growth considered to be a good performer. The revenue statement shows that the company has risen in matters of revenue generation which reflects there an increase in sales
- Profitability – the profit rate depends on the demand of the product made by the organization. In this respect, it can be found that PepsiCo has promised to place itself in the top 20 markets of the food and beverage industry and the top 10 markets of the brand name. Seeing the income statement it can be said that the company has a good amount of profit.
- PepsiCo has made the best possible efforts to deliver returns to its shareholders within the organization. The return of shareholders is one of the determining aspects of the organization. The company is well aware of the contributions of the shareholders and focuses on working for them.
- Apart from this ROE, ROI, ROS.ROA also determines organizational performance in the economical field. This all financial aspects depend on the rate of production, the flexibility of dispatching. Thus the financial performance of the company is seen rising and the company tries every possible way to maintain this ascend.
Several other criteria are associated with the performance of an organization. These aspects are equally significant in evaluating the performance level of a company.
- Customer satisfaction – production and sales both depend on the demand of the consumer. If an organization satisfy their consumer with the products then the demand for their product will naturally increase. In the case of the food and beverage industry, the taste quality and ingredients of the product determine customer satisfaction. In this respect, Pepsi co has achieved a considerable high customer base especially with its soft drinks (Schroeder, 2019).
- Customer faith – an organization needs to build a strong trust with its customer. Strong consumer faith over the company and the product is directly proportional to high performance. This faith depends upon not only the quality and quantity but price and availability. Pepsi co supplies its products through thousands of retail shops across the globe.
- Job satisfaction of employees - the performance of an organization depends on the performance of the employee. An employee’s performance is based mainly on job satisfaction. As per the feedback of the employee the company has provided a healthy workplace culture and handsome salary which has satisfied most of its employees (Glassdoor, 2020).
- Better service, product quality, and innovations - the organizational performance is determined by its efficient service quality of the product and innovation in product. Pepsi co when started sales a limited amount of beverage and snacks items. But as time passes it has changed its products according to the customer’s requirement. They now provide three types of product – fun products, better for you products, and good for you products. This innovative hierarchy has given them access to more and more customers. In respect of quality when there was an issue raised in India the CEO confidently states that they maintain uniform quality worldwide. Besides some of their innovations include fresh brewed iced tea, walking taco, stubborn soda, Pepsi spires (PepsiCo, 2020).
- Customer feedback – customer feedback is also very much valuable in assessing the performance of an organization. this feedback includes customer‘s liking and disliking aspects related to the product. There is mixed feedback as per the products of Pepsi co is concerned.
Analysis of the case study
Pepsi Co has faced a lot of criticism in the initial years but in 2009 the company started a new sustainable development program called the ‘Performance with purpose’. This program is a five year based plan in which the organization not only commits to fulfill its financial objectives but it also focuses on fulfilling certain responsibilities. In respect of responsibilities, Pepsi co has undertaken 49 commitments to society and its people. This commitment is divided into four broad groups – performance, human sustainability, talent sustainability, and environmental sustainability.
Performance - As per commitment, Pepsi co has fulfilled its objective of providing growth in international revenue rate which is twice the GDP growth globally. The company is committed to place itself among the top 20 companies in respect of market share and among 10 companies in respect of developing brand reputation. The company’s income statement of 2010 shows an increased revenue rate and all other financial aspects which prove that the company has achieved its financial objectives after introducing the program. The company is also committed to providing the best possible return to its shareholders.
Figure 1: Financial statement of Pepsi Co
(Source: Referred to the case study)
In this report, it can be seen that in nearly all areas of net income, revenue, profit, and interest incomes the company has accelerated its performance from 2006 to 2010.
Pepsi co. has also focused on the non-financial aspects related to performances. The company by its enormous range of products of varied taste it has been successful in creating a strong customer base. The company sale its products through thousands of retail stores across the globe which made it easily accessible to the consumers. The products are framed in three broad groups keeping in mind the requirement of the customer.
Figure 2: Food Ranges of Pepsi Co
Source: (Referred to the case study)
The company has also efficiently provided a comfortable healthy work environment with a handsome salary to its employees. Job satisfaction leads to provide a platform for employment for more and more potential individuals. The number of employees has increased considerably in 2018 by 1.52% though the rate has not increased in 2019. The company is now working with 267,000 employees shows the demand of the organization among workers which was nearly 110000 in 2011 (Macro trends, 2020).
Figure 3: Number of employees in 2010
Source: (Referred to the case study)
The organization provides onsite health and wellness services to many countries like China, Mexico to motivate employees and people to live a healthier way. This year the organization has funded near about US$7.6 million to promote the educational sector. In the year 2010, the company has started an innovative section called Global Nutrition group’ to promote and incorporate nutritional value in their products. Their several innovations include fresh brewed iced tea, waking taco, stubborn soda, Pepsi spires. The company has earned positive and negative feedback from its customers which helps the organization to develop itself for better performance (Trust pilot, 2020).
All these aspects of the performance of Pepsi co place it a leading food and beverage producing company in 2011 according to the Dow Jones Sustainability Index. (Csrwire, 2020).
Synthesis of the findings
Considering the analysis of the different criteria of performance of Pepsi Co strengths and weaknesses areas of the organization are discussed below.
- From the onset of its venture, the company has emerged as the second-largest food and Beverage Company in the world.
- The company has the most diversified range of brands and products than any other organization in this sector
- The company owns the market with some of its famous brands. In 2017 the company has earned recognition as the most famous US-based snacks brand (QTC Recruitment, 2020).
- The company has an extensive global network of production having its plants in multiple countries.
- The company also has one of the largest distributive networks around the globe. The company sold its product through thousands of retail stores around the globe.
- The company has been a grand platform providing employment. This shows employee satisfaction towards the company
- Product demand and customer satisfaction have provided the company financial stability by revenue growth, increase in profitability.
- The company has always targeted the youth generation for its products which proved beneficial for them.
- The company has earned an extremely loyal customer base for products like chips and soft drinks.
- The company has efficiently promoted its brands especially in the sports sector (Pratap, 2018).
- There are issues of shortage of water in the local areas where the plants are located. Water is an essential resource that has been utilized excessively in some areas of the US and India causing a lowering of groundwater level (Patil, 2017).
- The company has faced issues related to waste product disposal that has enhanced the pollution level. As the company uses plastic for the packaging process proper disposal of waste needs to be carried out.
- Some of its products are perceived as unhealthy by the customers due to the presence of certain ingredients that can harm health.
- The company has restricted its business to food and beverage industries which sometimes lead them to lose if unlike circumstances affecting this sector prevails.
- The company has suffered due to several failed products such as ‘crystal Pepsi’ (Eborn, 2017).
- The brand of Coca-Cola has proved a strong competitor for Pepsi.
Thus the strength and weaknesses of the companies show the performance growth of Pepsi Co. moreover it also marks out the lacking areas which the company needs to consider for development. Those areas can open new dimensions if the company deals with them strategically. Being an iconic brand the company must look for more scope of contributing to society. Their social work is appreciable and commendable.
Thus this article provided the concept of high-performance organization in respect of a Pepsi co. the article provides several internal and external factors that are responsible for organizational achievement and performances. To assess the performance level of Pepsi co certain criteria are discussed in detail in the articles. The analysis of the organization is carried out in the context of these criteria which provide the different aspects of the performance of the company. The analysis also enables to identify and recognize the strength and weaknesses of the company. This evaluation will help to nurture its positive areas and develop its lacking areas. The weaknesses need to be deal with more care and strategic way. The company can utilize this report for its performance assessment. Considering the weakness, the article is providing some recommendation which can be helpful for Pepsi co. the company must look for new dimensions of business without being confined to the food and beverage industry which will enhance its market growth. The company must adopt measures to minimize faults which lead a product to fail to cause wastage of time and money. The company must look into recycling its waste product to minimize the pollution problem in certain regions. The company should incorporate other age groups in targeted mass to be a more popular brand.