The key motive of this report is to provide details about PepsiCo's dedication to environment, human and talent sustainability through healthy products, natural resource management and employee empowerment. This report also mentions about how Mrs. Nooyi, the former Chairman and Chief Executive Officer of PepsiCo focused on both financial performance and purpose for the companies' growth by implementing new strategies to overcome loss and maintained stability in market. Though PepsiCo has made significant progress by initiating this mission, the market still continues to be challenging between short term financial performance and long-term investments.
1. Introduction 4
2. Becoming a leader people are excited to follow
2.1. The Refresh Project 5
2.2. Performance and Purpose
2.3. Product Innovation 6
5. Reference 7
In the early 2006, Indra Nooyi implemented the concept “Performance with Purpose”, to reshape the corporate image of PepsiCo by following what's right for the business, being responsive to needs of people and attract new employees. The key idea was of being a good company rather than being a great company. During her period as CEO for almost 12 years she also faced many challenges to cope up with other competitors in market which is commendable. Her ideas and execution methods always proved to be interesting and effective. Nooyi also mentioned how effectively technology helped her in keeping track of the business in global sense. However, at the same time increasing pace of technology change also demands constant update on skills to stay on top emerging trends. Although revenues of company remained flat over the past few years, investors have mentioned better growth potential in the coming years. Recently PepsiCo outperformed Coca-Cola where stock appreciation was more than 32% higher than expected financial results. Though Mrs. Nooyi was critiqued for her work she stood up with her ideas and achieved good market for the company.
2.Becoming a leader people are excited to follow. During Nooyi's final day, quarterly earnings report for the company was calculated and proved more than expected. Revenue rose 1.5 per cent to $6.5 billion while earnings totaled $1.59 a share (Total shareholder return of 162 percent) beating the analyst estimates. On the whole contrary revenue of PepsiCo grew from $35 billion in 2006 to $63.5 billion in 2017. Nooyi is an inspiration to millions of the Indians who aspired to emulate the success she created, ‘Indian-born woman who received recognition in America'. She has the ability to cast right shadow of leadership. Apart from being a role model, Nooyi is one of the most influential business leaders' in the world. She always made her way into the top 500 power list of Forbes and Fortune (/topics/Fortune-511) magazines. During her ‘Performance with Purpose' project she was critiqued with comments to start selling more chips and soda rather than distressing more about nutrition. But she never considered what people were talking about her and continued implementing her idea. Later, it was due to her effort and encouragement PepsiCo removed 6.4 trillion calories from its food and beverage products and led the company three years ahead of schedule in market. Considering the fact that she always intended in following her vision to sustain benefit for a longer run and guided PepsiCo towards superior performance as seen in appendix (2). Whereas it is about grading Nooyi, she definitely deserves to be an Effective Leader in the 5-level pyramid strategic leaders. As mentioned by Kirk Barbera (2015), creating a vision and finding audacity in your conviction and unleashing the power of employees is that quality she implemented and succeeded.
2.1. The Refresh Project. As customers are switching nowadays from fizzy sugary drinks to healthier water, tea, juice and energy drinks even with such a good initiative PepsiCo lost its popularity position in just 6 years after it overtook Coca-Cola. Authorities were later planning resetting the brand level as Coca-Cola had done in back 2000. Based on The Economist (2015), it was eminent that Coca-Cola lost only 2% volume of fizzy drink in America for a year while PepsiCo had loss of 3% according to Sanford C. Bernstein, an investment bank. The idea nutrition over sales is catchy but did not prove to be immediate in market. Even though this brought PepsiCo back in peoples' recognition, it still remained underperformed when compared with Coca-Cola. Furthermore, PepsiCo skipped soda ads at Super Bowl and started an online voting which provided homeless shelter and orphanages. It turned out to be very viral, they received 80 million votes online but could not make much profit with the market soda sales. Even after putting in so much of effort and ideas, Nooyi invested abundant in production and marketing which did not help much with the revenue gained. Considering appendix (2.1), in the early stage of this project revenue still remained to be low. Instead Nooyi should have worked with employees' interest and investing less in production. In Moore (2017) how well an employee-boss relationship can be maintained to get connected to employees' mind and heart resulting in better performance. Though not immediate, the initiative taken by Indra Nooyi proved to help PepsiCo in the longer run.
2.2. Performance and Purpose. Big believers we are encouraged by interest. Yet we have noticed many organizations missing the full power of the kind of purpose that can transform them completely. Unlike other companies, PepsiCo turned out to be extremely innovative with ideas from Nooyi. Some companies use purpose statement that are so generic that it could be just applicable to any company. While other purposes are inauthentic, like political promotion of the company with no connection to company background. As shown in appendix (2.2), purpose will help organizations grow to be a part of something bigger which will parallelly improve the performance level as well. It also creates faith among the employees and leader. This indeed increases understanding among teams which is very effective for an organization to function stable in a longer run. Indeed, Nooyi looking more towards the future of company has proved to be operative in making decisions as clearly performance is based on purpose and interest of people.
2.3. Product Innovation. Developing new flavors and products would help PepsiCo to grow business in overseas market. In 2012, PepsiCo inaugurated a new innovation lab in China to create products that appeal regional taste. This helped company sell a record number of potato chips in 2013. Such innovative ideas can be implemented to improve revenue as mentioned by PepsiCo's investors in public meetings. Free cash flow was noticed in the year 2014 was estimated to be $7 billion which was more than sufficient for the company to justify its capex investment with very minimal return value to stake holders. Most recent dividend payout represented $6 billion in value YTD (Year to Date). This organic revenue growth was achievable with new product launching. PepsiCo also broadened their beverages portfolio to reduce reliance on coals and is positioned as a leasing noncarbonated portfolio in United States. This proved to be so effective that, 12% of the revenue was recorded form trademark Pepsi and less than 25% came from the carbonated soft drinks globally. With this success PepsiCo is now invested in R&D to create sweetness solution and lower calories products. While the extent of share repurchases might be astonishing, the capital that Pepsi is investing in its business this year looks to be money well spent.
3. Recommendation. Even after implementing a strategic leader's vision if the company couldn't make immediate competitive advantage, I would recommend for the company to identify the area of weakness where performance is low and try to recover performance as best as possible. The most favored products of PepsiCo can be strengthened to gain competitive advantage in short-term. Company can also work with R&D to differentiate PepsiCo from competitors such as Coca-Cola and increase competitive advantage.
Though the massive social media campaign tested in 2010 to check sales and revenue was a massive loss, PepsiCo reached out effectively to their target customers and the upgraded campaign will be massive change for better. Through a history of ups and downs, PepsiCo managed to reshape its image in market by integrating new products and marketing strategies. Recently Forbes and the Reputation Institute has mentioned PepsiCo's popularity level has increased from no. 16 to no. 5 among the social media. Overall with the ideas from previous mistakes and new CEO, Ramon Laguarta getting into action is going to be a new experience for PepsiCo.
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