Business Strategy & Enterprise Modeling

PepsiCo’s Indra Nooyi: “Performance with a purpose”

Syndicate 4
 Syndicate 4

M. Ananda Rahmat F Putty Erwina

29320540 29320402

M. Satria Akbar
Sabila Syarafina
29320365
29320561

Roberto Bosta S Rizelfi Abdillah

29320491 29320425
TABLE OF CONTENTS
Question 1: Question 2:
01 About
PepsiCo
02 External and 03 Sustainable
Internal Competitive
Analysis Advantage

Question 3: Question 4:
04 Corporate 05 Indra Nooyi’s
Strategy of Leadership
PepsiCo
About The Company
About The Company
In 1965, Donald Kendall, the CEO of Pepsi-Cola, and Herman Lay, the CEO of
Frito-Lay, recognized what they called “a marriage made in heaven,” a single
company delivering perfectly-salty snacks served alongside the best cola on
earth. Their vision led to what quickly became one of the world's leading food
and beverage companies: PepsiCo.

PepsiCo products are enjoyed by consumers more than one billion times a day
in more than 200 countries and territories around the world. PepsiCo
generated more than $70 billion in net revenue in 2020, driven by a
complementary food and beverage portfolio that includes Frito-Lay, Gatorade,
Pepsi-Cola, Quaker, Tropicana and SodaStream. PepsiCo's product portfolio Source:
includes a wide range of enjoyable foods and beverages, including 23 brands https://www.pepsico.com/about/about-the-company
that generate more than $1 billion each in estimated annual retail sales.

Guiding PepsiCo is our vision to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose. "Winning with
Purpose" reflects our ambition to win sustainably in the marketplace and embed purpose into all aspects of our business strategy
and brands.
Question 1
 Question 1
Apply a pestel framework to analyze PepsiCo's external
environment. Then, conduct a SWOT analysis to see how
PepsiCo is addressing the opportunities and threats present in
the external environment.
PepsiCo’s Pestel Framework
Political
★ Political stability in major economies (opportunity)
★ Improved intergovernmental cooperation (opportunity)
★ Government initiatives against carbonated drinks (threat)

Economical
★ Economic stability of most major markets (opportunity)
★ Rapid growth of developing economies (opportunity)
★ Slowdown of the Chinese economy (threat)

Social
★ Higher health consciousness (threat & opportunity)
★ Increasing busy lifestyles (opportunity)
★ More discriminating attitudes about product quality (opportunity)

Technological
★ Moderate R&D investments in the food and beverage industry (opportunity)
★ Improving knowledge management systems (opportunity)
★ Increasing automation in business (opportunity)
Environmental
★ High focus on business sustainability (opportunity)
★ More complex expectations and standards on waste disposal (opportunity)
★ Climate change (threat & opportunity)

Legal
★ Regulation on GMO ingredients (opportunity)
★ Health and product safety regulations (opportunity)
★ Moderate rate of regulatory change (opportunity)
 SWOT Analysis
Strengths Weaknesses
1. Consistently strong financials and dividend 1. Largely Dependent on US Markets
payout 2. “Unhealthy” perception of consumers
2. Large, diversified and unique product portfolio
3. Innovative marketing campaigns
4. World class partnerships
5. Numerous initiatives for environmental
sustainability

Opportunities Threats
1. Pursue inorganic growth with focus on healthier 1. Intense Competition
offerings 2. Penalty from lawsuits
2. Winning the MSG contract 3. Frequent product recalls
3. Ramping up digital capabilities and
e-commerce
 Question 2
One of the measures to assess competitive advantage (discussed in
Chapter 5) is shareholder value creation. When comparing
Coca-Cola and PepsiCo along this dimension, one would come to
the conclusion that PepsiCo, under Ms. Nooyi’s leadership, has
sustained a competitive disadvantage when compared with
Coca-Cola.
Question 2 - Pepsi
a. Do you agree with this assessment? Why or why
not?

I don’t totally agree with this assessment because

there are limitations of shareholder value creation
such as:

● Stock prices can be highly volatile, making it

difficult to assess firm performance.
● Overall macroeconomic factors such as economic
growth or contraction, the unemployment rate,
and exchange rates all have a direct bearing on
stock prices.
● Stock prices frequently reflect the psychological
mood of investors, which an be irrational.
 Question 2 - Pepsi

b. If you were to apply triple-bottom-line approach to assessing

competitive advantage, would you come to a different conclusion? Why or
why not?

Triple bottom line approach is applied to assess competitive advantage of a

company which consists of not only economic performance (profit), but also
social (people) and environmental performance (planet). Here are the
differences between PepsiCo and Coca-Cola analyzed by triple-bottom-line
approach.
 Question 2 - Pepsi
★ Environmental sustainability
One of three dimensions of PepsiCo’s Performance with Purpose is about environmental
sustainability. PepsiCo ensures that their operations don’t harm the natural environment.
They also reduces water and energy use, increase recycling, and promote sustainable
agriculture.

★ Social sustainability
Two of the dimensions are human sustainability and the whole person at work. PepsiCo
makes their products healthier by reducing sugar, sodium, salt, and fat. They also include
healthy choices such as Quaker Oats and Tropicana juices.

★ Economic sustainability
Nooyi declared that true profits of an enterprise are not just “revenues minus cost” but
“revenues minus costs minus costs to society” including the pollution and healthcare cost.
Question 2 - Coca-Cola
 Question 2 - Coca-Cola
Environmental sustainability
Coca-Cola contributes in the environmental sustainability in their
sustainability principles, “Planet” by being responsible for the use
of water and having recycle packagings. They also care about
healthcare of the environment.

Social sustainability
In their principle, “People”, Coca-Cola is committed to give the
best treatment to their employees by providing healthcare and safe
environments. They also promotes the health living of the
community by providing health checkups and health education to
rural communities, and also blood donation and emergency
services.

Economic sustainability
As said in their principle, “Profit”, Coca-Cola seeks its maximum
value of its shareowners while generating environmental and
social value as the largest and most respected beverage company
in the world.
 Question 2 - Conclusion
Both PepsiCo and Coca-Cola’s principals meet the triple bottom line. However, there are some
differences in how each company meets the triple bottom line principles.

PepsiCo’s principals which consist of Human Sustainability, Environmental Sustainability, and The
People at Work perfectly fulfills the people and planet in triple bottom line with its detail. Nooyi
cares a lot about their employees, not only about their psychical health, but also mental health.
But, they lack of focus on the profit. They don’t have their economical principle stated as point of
principles, instead they explain about their profit as a supporting statement.

Coca Cola’s sustainability principles which consist of 5P: Planet, People, Profit, Partner, and
Portfolio obviously fulfills the 3P of three bottom line. However, they explained these principles
more in general, not as detailed as PepsiCo.
Question 2
c. If you were a board member at PepsiCo, would you be concerned? Why or
why not? If you were concerned, what actions would you recommend?

I would be concerned since we are trailing behind Coca-Cola. However, I

think the Nooyi’s visions and values are great ideas but some of them are
hindering profit income. PepsiCo’s principals are more focused on the
employees and their mental health.

I think PepsiCo can learn from their competitor, Coca Cola, from their stock
performance and sustainability principles. PepsiCo also needs to focus on
the triple bottom line better. They should be better at managing their
sustainability focuses and have the right balance. Instead of focusing too
much on the people, they should focus more on the profit. By managing the
economic better, the shareholder value creation of PepsiCo will rise and it
will also increase the company’s credibility. PepsiCo also can considerate
United Nations’17 points of Sustain Development Goals in keeping their
sustainability.
Question 3
 Question 3
As A senior executive at PepsiCo, Ms. Nooyi was
the driving force behind selling PepsiCo’s
restaurant business (Taco Bell, Pizza Hut, and KFC)
and acquiring Quaker Oats and Tropicana.
What type of corporate-level strategic initiatives
were these moves?
What do you think was the rationale behind
them? Using the BCG Matrix, how do you assess
their effectiveness.
 Corporate strategy
What is Corporate strategy?

The decisions that senior management makes and the goal-directed actions it takes
to gain and sustain competitive advantage in several industries and market
simultaneously.

Corporate strategy must be considered in these 3 things:

1. Vertical integration: stages of the industry value chain, the transformation of raw
material into finished goods and services distinct vertical stages
2. Diversification: What range of products and services should company offer?
3. Geographic Scope: where should the company compete geographically in terms of
regional, national or international markets?
 Corporate strategy
Pepsi in the case is expanding beyond a single market by using the Product
Diversification

The main reason behind this strategy is because Pepsi wants to competes
Coca Cola directly by selling wide variety of soft drinks and other beverages
rather than compete in a single product market.

NoNon diversified company vs Diversified company

Chick fill a Pepsi (KFC)

 Corporate strategy
● Corporate Diversification: Related diversification
Corporate strategy in which a firm derives less than 70% of its revenue from a
single business activity and obtains revenues from the other lines of business
that are linked to the primary business activity.

● Why Pepsi doing the diversification by entering the healthy food?

This has been the question on the logical thinking for us about the company
point of view regarding the decision to enter the healthy food industry.

Here is Why
Nooyi’s commitment to the world beyond
US borders has enabled Pepsi to catch up
with Coke (who previously dominated the
global beverage trade) and positioned them
for long-term growth and sustainability
worldwide.

By leading the focus on healthier options

early, Pepsi now dominates this
high-growth market. This decision in 2007
had resulted Pepsi’s stock price has more
than doubled since 2003 (about $70/share)

Source: https://hipinvestor.com/news/the-new-pepsi/
BCG MATRIX
BCG matrix was specially designed for corporations,
which operates in diverse industries. This framework
was designed by a private consulting agency located in
Boston, namely, Boston consulting group. This is a
four-dimensional framework which depict the multiple
segments position, with regard to its relative market
share and industry sale growth rate. BCG matrix has
four components namely, Dogs, Cash Cows, Stars and
Question mark. PepsiCo has 6 division; each segment
operates in distinct industry or geographical region.
Frito-Lay North America (FLNA), Quaker Foods North
America (QFNA), North America Beverages (NAB),
Latin America, Europe Sub-Saharan Africa (ESSA),
Asia, Middle East and North Africa (AMENA) are the
segments of PepsiCo at present. Following is the
detailed BCG Matrix analysis of PepsiCo
Question mark
According to BCG matrix; Question mark are those
segments which, operate in high sales growth industry and
have low relative market share. Quaker Foods North
America (QFNA) segment of PepsiCo comes in to the
category of Question mark. This segment particularly
manufacture, distribute, and sells breakfast bars and
cereal. PepsiCo should focus on horizontal integration to
increase QFNA market share and bring the segment into
the fold of stars.
Stars
Those segments fall into the category of stars, which
operates and compete in high sales growth industry and
have high relative market share. Fortunately, PepsiCo has
many star segments, which make sense because it is one of
the world largest beverage and food processing corporation.
North America Beverages (NAB), Latin America food and
Europe Sub-Saharan Africa (ESSA) are the stars segments
of PepsiCo. NAB segment products are soft drinks and
bottled water under different brands name following are
some eminent brand names; Aquafina, Pepsi, Mountain dew
and Sierra mist. Market development and product
development strategy is suggested for such segments.
Cash Cows
Cash cows are considered to be those segments which are
operating in low industry sales growth rate and have high
market share. Frito-Lay North America (FLNA) can be included
into cash cow’s category. Segments has witnessed growth in
the revenue compare to previous years despite the decline of
industry sales growth rate. 22% of revenue was generated by
FLNA of total revenue. This segment deals in snacks, some of
the prominent products are as follow; Tostitos tortilla chips,
branded dips, Lay’s potato chips, Doritos tortilla chips,
Cheetos, Ruffles potato, Tostitos tortilla chips, Fritos corn chips,
Ruffles potato chips and Santitas tortilla chips. FLNA can be
considered as the backbone of company because such
segment can, keep on generating good revenue for company
for long-term.
Dogs
Dogs are considered to be the futile segments of
company. Those segments embrace the category
which have low relative market share in low sales
growth industry. Fortunately, PepsiCo’s, none of
the segment can be included into this category.
BCG Matrix

High

growth-rate

Low

High Low

Relative Market Share

Quest
ion 4
 Question 4
What ‘grade’ would you give Mrs. Nooyi for her job performance as
strategic leader? What are her strengths and weakness? Where
would you place Mrs. Nooyi on the 5-level-pyramid of strategic
leadership, and why? What recommendation would you give her?
Support you answers.
Strength

Authentic vision Courageous conviction

Inclusive and caring leadership style

Weakness

Tight relations and deep emotion Employees feel pressured to catch

with her employees prolongs decision high standards and expectations
making process. from Indra Nooyi.
Indra Nooyi’s 5-level Pyramid
She had willpower but
misses the humility factor Grade: 4.5/5
(Kendall Jenner Case)

She leads ‘performance

with purpose’ vision of
PepsiCo
She manages to organizing
financial and human
resource sectors
Mrs. Nooyi had the charisma
and confidence to achieve
team objectives

Mrs. Nooyi always drive

herself first to contribute for
others
What can be improved?

Be more aware of social issues and

Promote not only healthy food but
avoid delivery methods that
also healthy lifestyle in order to
undermine social justice movements
strengthen PepsiCo’s human
sustainability principle
References

● Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford

University Press, USA.
● Housing Industry Association (2011). An Introduction to PESTLE Analysis. HIA Ltd.
● Murphey, M., & Gause, R. (1974). UCF Research Guides. Industry Analysis. PESTLE Analysis.
Business Horizons, 17(5), 27-38.
● PepsiCo 2014 Annual Report.
● PepsiCo Inc. (2012). PepsiCo Announces Strategic Investments to Drive Growth.
● Roper, K. (2012, November). BIM Implementation: PESTEL Drivers & Barriers (Cross-national Analysis).
In World Workplace 2012. IFMA.
● United States Small Business Administration (2015). Food and Beverage Industry.
● Yuksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International
Journal of Business and Management, 7(24), 52.
http://panmore.com/pepsico-pestel-pestle-analysis-recommendations
http://fernfortuniversity.com/term-papers/pestel/nyse4/784-pepsico--inc-.php
http://panmore.com/pepsico-pestel-pestle-analysis-recommendations
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T H AN