Pepsi_Co

PepsiCo FIN 370 July 22, 2010 PepsiCo PepsiCo's management monitors key indicators to evaluate the organization's business and financial conditions. The variety of indicators include market share, net revenue, volume, operating profit, management operating cash flow, return on invested capital and earnings per share. PepsiCo focuses on being the leading global food, beverage and snack Company. As PepsiCo launches new products, decrease on demand could be significantly impacted thus affecting costs. This would negatively affect consumer's perception of existing brands and would lead to inventory write-offs that would ultimately affect costs. Increased operating costs would be on the increase with demand on new suppliers to manufacture new brands. However, management takes into concern the risks from adverse changes in commodity prices, affecting the cost of raw materials and energy. Management takes into consideration that significant costs are expected to be incurred with mergers of other companies in connection to new product innovation. The Company anticipates a significant portion of such cost to be incurred during the first year after completion of the mergers. The anticipated cost savings will adversely affect the value of the organization's commons stock and securities. Product demand is driven by consumer preferences and tastes. Therefore, the Company operates in a highly competitive market that relies on continued demand for products. Company initiative focuses on changes that reduce demand on products and a decline in competitive and financial position. PepsiCo hopes to create game-changing transactions that will enable them to grow and improve profitability, particularly in developing markets and in evolving categories (PepsiCo, 2009). The organization's inability to compete effectively may have an adverse impact in revenues and profit margins. This will affect share of sales or gross margins in the global market. Effective sales initiative is in response to the incentives and marketing programs to customers who will secure adequate shelf space to PepsiCo's retailers. A reduction of revenue can be attributed to the offering of incentives and discounts through various programs to customers and consumers. Management uses contract terms and historical information to estimate expenses and incentive costs from customer participation and performance levels. In today’s competitive business environment, the company’s objectives have been clearly defined most often been to maintain success. It is important for any business to formulate a strategy for processes so that necessary evaluating processes and adjustments are in place for the company to stay on track. Strategic planning and financial planning are two different processes that a company may use to implement control. Strategic planning involves all aspects of defining an organization’s plan and allows them to make decisions on how properly to pursue different strategies for allocating resources. Strategic planning identifies a company’s strengths and weaknesses and allows them to recognize what’s important to pay attention to and what opportunities they need in place to succeed. This process involves everyone in the organization on how they are judged. The strategic planning process includes the organization’s mission. The mission is the company’s statement that guides the businesses vision. “The selected strategy is implemented by means of programs, budgets, and procedures” (The Strategic Planning Process, 2010). Strategic planning focuses on the management level and has a long-term affect that encompasses the organization. Internal and external sources are all taken in consideration with plans are important to use to make improvements to reduce waste. The financial planning process helps organizations achieve their financial goals. Different steps to this process that involves the business and focuses on their financial growth but planning properly. Unlike strategic planning, financial planning is a short-term process that mainly affects internal departments. This process strives to meet financial goals that include the organization’s budget, forecasting schedules, and the operational division of the company. The financial department uses this process as a tactic to meet the demands of the company financial with the strategic managements departments input. Pepsi’s strategic planning focused on how to shape the emergence of the opportunities, with an initiative to strengthen customer service and drive cost productivity. This new planning process will enhance the company’s ability to operate at a more efficient level across the world. This processing structure will help Pepsi Co’s product sell effectively, simplify decision-making regarding the organization, and rationalize the company’s supply chain. Pepsi Company continues to look for ways to improve the business and it is imperative that these changes to the organizational structure will enable an increase and provide better customer service. PepsiCo is in a defensive position, Coca-Cola is in an offensive position According to Ries and Trout (1987), each of the market players has a distinct advantage in understanding that their unique position calls for strategy of its own. Thompson and Strickland (1987) said that a firm's strategy can be classified mostly offensively or defensive depending on what market conditions warrants. The five determinants to Pepsi Cola’s industry profitability include 1) threat of new entrants, 2) bargaining power of suppliers, 3) rivalry among existing competitors, 4) bargaining power of buyers, and 5) threat of substitute products or services. Pepsi Cola’s defensive strategies can correct internal weaknesses and counter external threats found in competitive and cooperative activity as well as the political, economic, technological, and social/ cultural environments. Thus, creating sound defensive strategies will reduce the company's vulnerability to menacing factors, which are outside management's control. Pepsi Cola’s offensive strategies will build on strengths and utilize those strengths to seize external and internal opportunities. All strategies used correctly will empower the company's competitive advantages to its benefit. According to John Naisbitt and Patricia Aburdene (1990), what works well is a program to match organizational strengths with market needs and wants. Understanding the needs and wants of customers may present the biggest challenge. If these factors are not thought through when the planning team develops long-term vision, objectives, and strategies; a large factor to developing sustainable competitive advantage is overlooked. References PepsiCo. (2009). PepsiCo, Inc, 2009 Annual Report. Retrieved July 22, 2010 from www.pepsico.com Mercer, C., PepsiCo beats Coca-Cola in market value http://www.beveragedaily.com/news/ng.asp'id=64524-coca-cola-pepsico-health-trends