Sample Essay on Structure and Functions of PepsiCo Inc

PepsiCo Inc. is multinational company that manufactures, distributes and promotes a wide range of beverages, snacks and food products in the global market. The success of its global business activities is influenced by its organizational structure (Barrett, Haug, & Gaskins, 2013). In this paper, a detailed discussion of PepsiCo’s organizational structure is presented in the context of global governance. The organizational and functional structures of the company are also described in line with SWOT and PEST frameworks. The goal of the discussion is to demonstrate that a company’s organizational structure influences the efficiency of its international operations and business competitiveness.

History and Size of the Organization

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PepsiCo was established in 1993 by Caleb Bradham. It was originally called Brad’s Drink. In 1898, the company changed its name to PepsiCola. A merger between Frito-Lay and Pepsi-Cola led to the establishment of PepsiCo (Dhar, Chavas, Cotterill, & Gould, 2005). The headquarters building of the company is in Purchase, New York (Figure 1). PepsiCo has branches in over 200 countries. It has more than 274,000 employees (de Vries, 2015). PepsiCo is committed to diversity because over 50% of its employees are women (Gardner, McGowan, & Moeller, 2013). It offers a wide range beverage and food products. Notably, PepsiCo deals in hundreds of brands. Among its common products are Pepsi, Gatorade, Diet Pepsi, Tropicana, Mountain Dew, Fritos and Lipton Teas (Barrett et al., 2013).

Figure 1. PepsiCo’s headquarters building. It is located in Purchase, New York.

Organizational Structure

PepsiCo regularly changes its organization structure with a goal of aligning its business operations with the dynamic business environment in the global beverage and food industry. Its current organizational structure is hierarchical. Gardner et al. (2013) note that PepsiCo has a tall hierarchy composed of functional corporate groups and market divisions. It has six divisions: Latin America, North America Beverages, Quaker Foods North America, Frito-Lay North America, Asia, Middle East and North Africa and Europe Sub-Saharan Africa (Barrett et al., 2013). The organization of the company’s divisions is illustrated on Figure 2 below.

Figure 2. Organization of PepsiCo’s divisions. The company’s global operations are organized into six main divisions.

PepsiCo is headed by a President. Each of its divisions is headed by a regional head who answers to the President (Barrett et al., 2013). The company’s divisions are defined by their geographical location and business operations. Therefore, the President comes at the top of the company’s chain of command followed by regional heads, country managers, functional directors and functional managers, in that order (Figure 3).

Figure 3. PepsiCo’s management structure. There is one regional head in each of its six divisions.

Members of the top management team at PepsiCo play strategic decision making roles pertaining to the company’s international business models (de Vries, 2015). Regional heads and country managers seize opportunities for growth within regional and national markets across the world. Functional directors and managers play specific roles related to the company’s main functional areas: Talent Management, Training and Development, Human Resources, Communications, Global Categories and Operations, Finance and Global Research and Development (Gardner et al., 2013).

Ownership

PepsiCo is owned by institutions. Felin and Powell (2016) explain that institutional ownership involves large financial institutions holding stakes in a company. The top five institutions that own PepsiCo are the State Street Corp, Wellington Management Group LLP, Bank Of America Corp, Blackrock Institutional Trust Company and Vanguard Group Inc. (Barrett et al., 2013). According to Hansen and Porter (2017), institutional ownership is advantageous because large firms are able to invest adequately in market research and analyses, which make their stocks favorable. Felin and Powell (2016) add that large institutions that own a company are able to drive the prices of their shares through high-profile publications, investor conferences and television appearances. Acharya (2016) explains that it is the sophistication that institutional investors bring into corporate investing that makes their investments lucrative. However, institutional ownership can be disadvantageous to PepsiCo. Tiller (2012) explains that if large institutions dump their stake in a company due to market volatility, it will experience a significant drop in the value or performance of its stock.

PepsiCo has a board of directors who oversee its business affairs and strategy. The board is made of 14 independent directors and one executive director. The company has four board committees: Public Policy and Sustainability, Compensation, Audit and Nominating and Corporate Governance (Thakur, Job, Serrano, & Tussie, 2014). Shareholding within PepsiCo is split among its top institutional owners in line with the value of their stock. Gardner et al. (2013) indicate that PepsiCo has a certificate of incorporation that defines the legal aspects of its formation and ownership. The certificate also highlights the obligations of each of PepsiCo’s institutional owners. The company was formed under the business finance category. Therefore, its main goal is to maximize profits (Thakur et al., 2014). PepsiCo’s mission is to become the leading business enterprise in the global beverage, snacks and foods markets (Gardner et al., 2013). PepsiCo utilizes opportunities for growth in the global market with a goal of maximizing financial returns for its investors (de Vries, 2015).

Organizational Structures

SWOT Analysis

SWOT analysis is a strategic management tool that allows managers to understand internal strengths and weaknesses and external threats and opportunities that influence the strategic direction of their company (van Binsbergen, Graham & Yang, 2011). PepsiCo’s global divisions enable it to develop a strong brand image in regional markets across the world. Notably, each of its divisions has marketing functions that focus on promoting the company’s image in specific regional markets (de Vries, 2015). In addition, organization into regional divisions enables PepsiCo to penetrate into vast and highly concentrated markets in the developing world. Furthermore, the company has extensive global production and distribution networks through which it reaches out to a wide range of market segments (Gardner et al., 2013).

Barrett et al. (2013) note that the penetration of PepsiCo in the Americas is generally low. It is also vulnerable to volatilities in the beverage and food market. This is because it global business operations are limited to beverage and food industry. The company has opportunities of forming global alliances with a goal of reducing risks associated with relying on the beverage and food industry alone (de Vries, 2015). Additionally, the company has an opportunity of strengthening the resilience of its global businesses by implementing flexible and decentralized operations. Aggressive competition in the beverage and food industry is PepsiCo’s greatest threat. Changes in consumer preferences, such as healthy lifestyle trends also threaten the sales and profitability of PepsiCo. A summary of PepsiCo’s SWOT analysis is presented on Table 1 below.

Strengths Weaknesses
  • Strong brand image
  • Extensive global productions and distribution network
  • Broad product mix
  • Low market penetration in the Americas division
  • Marketing to segment of health conscious consumers is weak
Opportunities Threats
  • Diversification/expansion of product portfolio
  • Alignment of business strategy with healthy lifestyles trends
  • Penetration into emerging markets
  • Global alliances
  • High level of competitive rivalry (Coca-Cola)
  • Increasing health consciousness among consumers

Table 1 PepsiCo’s SWOT

PEST Analysis

PEST analysis is a strategic tool that allows companies to understand changes in the business environment that shape their business and strategies (Tiller, 2012). Political stability is an opportunity for investment in the global markets and expansion of PepsiCo’s supply chain into new regions. However, changes in legal frameworks affecting carbonated drinks threaten the success of the company’s international business (Barrett et al., 2013). Economic stability of PepsiCo’s target global markets is a notable opportunity of expanding its international network into new markets. For example, the rapid economic growth, which characterizes most developing economies, presents PepsiCo with opportunities of expanding its business further into the developing world. The increasingly busy lifestyles that characterize today’s consumers represent opportunities in the social environment that will promote PepsiCo’s future performance and competitiveness (de Vries, 2015). Alignment of business operations with changes in technology, such as adoption of knowledge management systems, will allow PepsiCo to run highly efficient global operations (Geer-Frazier, 2014).

Conclusion

PepsiCo’s hierarchical organizational structure is designed to support global operations within major regions in the global beverage and food markets. The company’s global operations are run through its functional corporate offices. Its six market divisions run operations that support its strategic goal and strategy of penetrating into more international markets. PepsiCo should expand into more market segments in the developing world to grow its revenue and gain competitive advantage over its top business rivals such as Coca-Cola. PepsiCo faces specific threats, such as high competitive rivalry market. These threats should be considered in the design and implementation of its global strategies for competitiveness.

 Sample Essay on Structure and Functions of PepsiCo Inc

References

Acharya, A. (2016). The future of global governance: fragmentation may be inevitable and creative. Global Governance, 22(4), 453-460.

Barrett, P. T., Haug, J. C., & Gaskins, J. N. (2013). An interview on leadership with Al Carey, CEO, PepsiCo Beverages. Southern Business Review, 37(3), 31-38.

de Vries, J. (2015). PepsiCo’s Chief Design Officer on creating an organization where design can thrive. Harvard Business Review Digital Articles, 2-7.

Dhar, T., Chavas, J., Cotterill, R. W., & Gould, B. W. (2005). An econometric analysis of brand-level strategic pricing between Coca-Cola company and PepsiCo. Journal Of Economics & Management Strategy, 14(4), 905-931. doi:10.1111/j.1530-9134.2005.00087.x

Felin, T., & Powell, T. C. (2016). Designing organizations for dynamic capabilities. California Management Review, 58(4), 78-96. doi:10.1525/cmr.2016.58.4.78

Gardner, J. C., McGowan, C. B., & Moeller, S. E. (2013). Using Coke-Cola and PepsiCo to demonstrate optimal capital structure theory. Journal of Finance and Accountancy, 14, 1.

Geer-Frazier, B. (2014). Complexity leadership generates innovation, learning, and adaptation of the organization. Emergence: Complexity & Organization, 16(3), 105-116.

Hansen, H. K., & Porter, T. (2017). What do big data do in global governance?. Global Governance, 23(1), 31-42.

Thakur, R., Job, B., Serrano, M., & Tussie, D. (2014). The next phase in the consolidation and expansion of global governance. Global Governance, 20(1), 1-4.

Tiller, S. R. (2012). Organizational structure and management systems. Leadership & Management In Engineering, 12(1), 20-23. doi:10.1061/(ASCE)LM.1943-5630.0000160

van Binsbergen, J. H., Graham, J. R., & Yang, J. (2011). An empirical model of optimal capital structure. Journal Of Applied Corporate Finance, 23(4), 34-59. doi:10.1111/j.1745-6622.2011.00351.x

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