Which Helps Enable An Oligopoly To Form Within A Market? Essay

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1. Introduction

Market is a particular products and services to be exchanged between a significant group of buyer and sellers for a price for market benefit. There are mainly two types of market.

1. Perfect or Pure Competition Market

2. Imperfect Competition Market

  • a) Monopoly Market
  • b) Oligopoly Market
  • c) Monopolistic market
  • d) Duopoly market
  • e) Monopsony Market

Among those markets we have chosen oligopoly market for our report. An oligopoly the domination of a market by a few firms & a duopoly is a simple form of oligopoly in which only two firms dominate a market.

Where an oligopoly exists, a few large suppliers dominate the market resulting in a high degree of market concentration; a large percentage of the market is taken by the few leading firms. An oligopoly usual depends on high barriers to entry. It often leads to a lack of price competition (although there may be fierce competition in terms of marketing etc) which is the problem from the point of view of consumers. Because an oligopoly consists of a few firms, they are usually very much aware of each others’ actions (e. g. changes to prices).

This can lead to informal collusion as firms match prices to avoid provoking a price war. This has a similar effect to deliberate collusion, but is harder for regulators to control. This also means that when price cuts do occur, the market tends to have to follow the lead of any one firm. This leads to each firm experiencing a peculiar demand curve, the so-called kinked demand curve. An oligopolist faces a downward sloping demand curve but its price elasticity may depend on the reaction of rivals to changes in price and output. Assuming that firms are attempting to maintain a high level of profits and their market shares. Competitors will not follow a price increase by one firm, so a firm that raises prices will lose market share and therefore profits.

Competitors have to match a price cut by one firm to avoid a loss of market share. That means that if one firm cuts prices, all will have lower profits. This means that the demand curve for the oligopolist is not straight. It is flatter above the current price, with a sudden change of slope at the current price. This means that an oligopolist usually has little incentive to change its prices. It may cut prices where there are prospects of market share gains (i. e. hen its rivals will not follow). It may increase prices if it feels sure that competitors will follow (or when the margin increase is sufficient to make up for the large loss in market share). Prices in an oligopoly therefore tend to be higher and change less than under perfect competition. Examples of oligopolies may include the markets for petrol in the UK (BP, Shell and a few other firms) and soft drinks (such as Coke, Pepsi, and Cadbury-Schweppes).

1. 2 Methodology and Source of Data

To report on PepsiCo Ltd. we have maintained some formalities. We visited the corporate office of PepsiCo Ltd. n October 23, 2011 to collect data about PepsiCo Ltd. They have provided some data about their functional management and business policy but that was not sufficient enough to prepare the report. We have collected other data about them from the corporate website of PepsiCo Ltd. and mainly prepared the report with our own effort.

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1. 3 Objective of the Study

Our objective of the study is to discuss the marketing objective and strategies of PepsiCo Limited in our country as an oligopoly product. We have also analyzed the position of Pepsi in the soft drink market of Bangladesh. This is done in order to minimize the gap between the textbook knowledge and real life practices.

1. 4 Limitations

We have prepared a report on PepsiCo Ltd. as an oligopoly product in Bangladeshi market. We have focused different sites of PepsiCo Ltd. and mainly the marketing process of PepsiCo ltd. But we have some limitations too. We think we failed to focus the pin point of PepsiCo ltd. Lack of information. They didn’t provide all of their information that we wanted.

2. 1 Historical background of PepsiCo Ltd.

Pepsi Co Ltd. is a U. S. A. based organization. But the market of Pepsi is spread all over the world. In 1974 Transcom Limited became the franchiser company of the Pepsi Co Inc. (U. S. A. ). In December, 1975 Transcom Limited initiated its Pepsi oriented activities as a separate strategic business unit. The name of the separated business unit was Transcom Beverage Ltd. PepsiCo Limited is the part of this Transcom Beverage Ltd. where only the transactions related to Pepsi is dealt. The head office of PepsiCo Limited is situated at Tejgaon Commercial Area on their own compound. In Bangladesh PepsiCo Limited is the responsible authority for marketing of Pepsi. It is making reasonable effort to maintain the position of Pepsi in the soft drink market of Bangladesh.

2. 2 Mission and Vision of PepsiCo Ltd.

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At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to do for our business. Mission Their mission is to be the world’s premier consumer Products Company focused on convenient foods and beverages. They seek to produce financial rewards to investors as they provide opportunities for growth and enrichment to their employees, their business partners and the communities in which they operate.

And in everything we do, they strive for honesty, fairness and integrity. Vision “PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. ” Their vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company. Performance with Purpose At PepsiCo, they’re committed to achieving business and financial success hile leaving a positive imprint on society – delivering what we call Performance with Purpose. Their approach to superior financial performance is straightforward – drive shareholder value. By addressing social and environmental issues, they also deliver on their purpose agenda, which consists of human, environmental, and talent sustainability.

2. 3 Commitment

Their commitment is to deliver sustained growth, through empowered people, acting with responsibility and building trust. Here’s what this means: Sustained Growth is fundamental to motivating and measuring their success.

Their quest for sustained growth stimulates innovation, places a value on results, and helps us understand whether today’s actions will contribute to their future. It is about growth of people and company performance. It prioritizes making a difference and getting things done. Empowered People means they have the freedom to act and think in ways that they feel will get the job done, while being consistent with the processes that ensure proper governance and being mindful of the rest of the company’s needs.

Responsibility and Trust form the foundation for healthy growth. It’s about earning the confidence that other people place in them as individuals and as a company. Their responsibility means they take personal and corporate ownership for all they do, to be good stewards of the restheirces entrusted to us. They build trust between themselves and others by walking the talk and being committed to succeeding together.

2. 4 Guiding Principles

This is how they carry out their commitment. They must always strive to: Care for customers, consumers and the world they live in. They are driven by an intense, competitive spirit in the marketplace, but they direct this spirit toward solutions that achieve a win for each of their constituents as well as a win for the corporation. Their success depends on a thorough understanding of their customers, consumers and communities. Caring means going the extra mile. Essentially, this is a spirit of growing rather than taking. Sell only products they can be proud of. The test of their standards is that they must be able to personally endorse their products without reservation and consume them their selves.

This principle extends to every part of the business, from the purchasing of ingredients to the point where their products reach the consumer’s hands. Speak with truth and candor. They speak up, telling the whole picture, not just what is convenient to achieving individual goals. In addition to being clear, honest and accurate, they take responsibility to ensure their communications are understood. Balance short term and long term. They make decisions that hold both short-term and long-term risks and benefits in balance over time.

Without this balance, they cannot achieve the goal of sustainable growth. Win with diversity and inclusion. They leverage a work environment that embraces people with diverse backgrounds, traits and different ways of thinking. This leads to innovation, the ability to identify new market opportunities, all of which helps develop new products and drives their ability to sustain their commitments to growth through empowered people. Respect others and succeed together. This company is built on individual excellence and personal accountability, but no one can achieve their goals by acting alone.

They need great people who also have the capability of working together, whether in structured teams or informal collaboration. Mutual success is absolutely dependent on treating everyone who touches the business with respect, inside and outside the company. A spirit of fun, their respect for others and the value we put on teamwork make us a company people enjoy being part of, and this enables us to deliver world-class performance.

2. 5 Functional Management of PepsiCo Ltd.

Just as no two organizations are alike, no two manager’s functions are alike. The functional management of PepsiCo Ltd. s different from other organizations too. In the early part of the twentieth century, a French industrialist named Henry Fayol first proposed that all managers perform five functions: planning, organizing, commanding, coordinating and controlling. PepsiCo Ltd. considered four basic and important ones planning, organizing, leading and controlling.

Planning: Planning is the management function that involves defining goals, establishing strategies for achieving those goals and developing plans to integrate and coordinate activities and PepsiCo Ltd. ’s planning department complete its planning process in two steps: Goals and Plans.

Goals are designed outcomes for individuals, groups, or entire organizations. Goals are objectives, and they use the two terms interchangeably. They provide the direction for all management decisions and form the criteria against which actual work accomplishments can be measured and it is formatted by the CEO of PepsiCo Ltd. Plans are documents that outline how goals are going to be met including resource allocations, schedules, and other necessary actions to accomplish the goals and it is formatted by the BOD. Types of Plans: PepsiCo Ltd. classified its plans in four ways: Breadth, Time Frame, Specificity and Frequency of Use.

The following figure shows the different types of plans:

Organizing: Organizing department of PepsiCo Ltd. consists of 12 members and it is separate from other department. It works as the process of creating an organization’s structure that will best support and facilitate employee’s doing the organization’s work- one that can achieve efficiency but also have the flexibility that’s necessary for success in today’s dynamic environment. Organizational Structure of PepsiCo Ltd. is the formal arrangement of jobs within the organization. Developing or changing an organization’s structure is its main task.

In response to marketplace demands for being lean, flexible and innovative managers of PepsiCo Ltd. finding creative concepts like Learning Organization Structure to structure and organize work and to make their organizations more responsive to the needs of customers, employees and other organizational constituents. Learning organization structure of PepsiCo Ltd. is as bellow

Leading: The leading department of PepsiCo Ltd. influence and oversee the behavior of the staff in achieving the company’s goals, as well as assisting them in accomplishing their own personal or career goals.

This influence can be gained through motivation, communication, department dynamics, and department leadership. Employees that are highly motivated generally go above and beyond in their job performance, thereby playing a vital role in the company achieving its goals. For this reason, managers tend to put a lot of focus on motivating their employees. They come up with reward and incentive programs based on job performance and geared toward the employees’ needs. Effective communication is vital in maintaining a productive working environment, building positive interpersonal relationships, and problem solving.

Understanding the communication process and working on areas that need improvement help managers to become more effective communicators. The best way to find areas that need improvement is to periodically ask themselves and others how well they are doing. In the relevant topic of leadership Motivation is the process that account for an individual’s willingness to exert high levels of effort to reach organizational goals, conditioned by the effort’s ability to satisfy some individual need. The contemporary theories of Motivation of PepsiCo Ltd. re: Three-Need Theory, Goal-Setting Theory, Job Design and Equity Theory.

Controlling: PepsiCo Ltd’s last functional department is Controlling department which involves establishing performance standards based on the company’s objectives, and evaluating and reporting actual job performance. Management should not lower standards in an effort to solve performance problems. Rather they should directly address the employee or department having the problem. Conversely, if limited resources or other external factors prohibit standards from being attained, management should lower standards as needed.

The controlling department, as with the other three departments, is ongoing. Through controlling, management is able to identify any potential problems and take the necessary preventative measures. Management is also able to identify any developing problems that need to be addressed through corrective action. In order for management to be considered successful, it must attain the goals and objectives of the organization. This requires creative problem solving in each of the four functions of management. More so, success requires that management be both effective and efficient.

Therefore, it needs to not only accomplish those goals and objectives, but do it in a way that the cost of accomplishment is viable for the company. A three step process including measuring actual performance, comparing actual performance against a standard and taking managerial action to correct deviations or inadequate standards is known as Control Process.

3. 0 Functional profiles of Departments and Offices

3. 1 Accounts Department Department Profile

The Department is headed by a Director and housed on the 4th Floor, Head Office, and Subsidiary House. After the formation of the subsidiary, the core functions performed by the Accounts Department are briefly as under: – Management of Currency.  Overseeing the affairs of banking issues securities, prize bonds, NSS, and cash divisions in the Field Offices. Overall monitoring/consolidation and reconciliation of financial data for the SBP/other stakeholders. Management of employees’ PF/GPF and other retirement’s benefits. ?? Stationery management. Preparation of budget of the SBP BSC and monitoring the expenditure. Supervising the Internal Monitoring Unit.

Current Working Strength of the Department Description of grade/post no. Of Employees

  • 1. DIRECTOR (O. G-6) 01
  • 2. JOINT DIRECTOR (O. G-5) 02
  • 3. JUNIOR JOINT DIRECTOR (O. G-4) 02
  • 4. ASSISTANT DIRECTOR (O. G-3) 09
  • 5. ACCOUNTS OFFICER (O. G-2) 20
  • 6. ASSISTANT ACCOUNTS OFFICER (O. G-1)39
  • 7. HEAD TYPIST 01
  • 8. SR. ASSISTANT 05
  • 9. HEAD MESSENGER 03
  • 10. MESSENGER 08

3. 2 Administration Department

This is a key Department of PepsiCo Ltd. Its impact and scope is to manage Human Resource and Administrative affairs as well as the 16-field offices located countrywide headed by a Director. In order to streamline its responsibilities, the Department has been divided into the following three

Divisions:

  • 1. Human Resource Division.
  • 2. Corporate & Policy Division.
  • 3. Staff Services Division.

The functions attached to these Divisions are clearly demarcated as under:- Human Resource Division A Joint Director presently heads this Division. It deals with all the issues pertaining to Human Resource Management i. e. Recruitment, Transfer & Rotation, Retirement/Early Retirement, Annual/Merit Increase, Management Information System & Litigation etc. Corporate & Policy Division

This Division is responsible for handling all the corporate affairs of the Bank. Its functions include arranging corporate meetings and meetings of sub-committees, the preparation of memoranda, preparation and issue of minutes and drafting/circulation of policy circulars as a follow up to decisions taken in various forums. Staff Services Division This Division has been entrusted with financial affairs of the corporate and field offices. It deals with salaries, TA/DA allowances, staff benefits as well as procurement. It also guides the field offices on various policy issues in financial matters and helps them eliminate redundancies.

This Division has been entrusted an additional responsibility of dealing with human resource development and recreational activities. Current Working Strength of Administration Department Designation no. Of Employees

  • 1. OFFICER GRADE-6 01
  • 2. OFFICER GRADE-5 01
  • 3. OFFICER GRADE-4 03
  • 4. OFFICER GRADE-3 12
  • 5. OFFICER GRADE-2 21
  • 6. OFFICER GRADE-1 41
  • 7. CLERICAL STAFF 23

3. 3 Internal Audit Department

Department profile The Department is housed on the first floor of the Head Office and headed by a Director. After the formation of the subsidiary, the core functions of the Internal Audit Department are briefly as under: – Implementation of the Charter of the Internal Audit Department issued by the Governor. Preparation of Audit Plan in consultation with Management & Audit Committee.  Carrying out annual inspection of Offices/Departments of the Bank in the following areas of operations: Banking & Accounts related matters. Currency management and Chest related matters. Export Refinance. Foreign Exchange Operations. Administrative matters. Engineering and Maintenance. Library. Establishment & co-ordination with Internal Audit Units in offices in respect of post-audit of offices all around the year.

Co-ordination with field offices and departments in finalization and submission of replies to the objections raised by Director, Commercial Audit. Committee. Implementation of Risk Based Audit.  Audit training of existing staff, employment of IT Auditors & strengthening of human resources. Independent assessment on the adequacy and effectiveness of the Bank’s processes for controlling its activities & managing its risks in all areas on an annual basis. Submission of Audit Briefs to the Audit Committee on significant issues & recommendations for improvement in the Bank’s control processes.

Coordination with external auditors & overview of other control & monitoring functions. Rationalization of manpower & cost of Internal Audit Department. Current Working Strength of Internal Audit Department Designation no. Of Employees

  • 1. OFFICER GRADE-6 01
  • 2. OFFICER GRADE-4 02
  • 3. OFFICER GRADE-3 06
  • 4. OFFICER GRADE-2 06
  • 5. OFFICER GRADE-1 03
  • 6. JWPO 03
  • 7. NON-CLERICAL 02

3. 4 Engineering Department

The Department is housed on the first and second floors of the corporate office and headed by a Director. General Division.?Ensure that matters relating to legal commitment and advertisement in newspapers are timely followed. Timely preparation of periodical reports.Issuance of tender documents to contractors. Physical verification of the store items on half yearly basis. Engineering Division Arranging construction/addition/alteration and other electrical/mechanical works of all the buildings according to the approved plans. ?? Processing of Tenders/Quotations of various works.

Maintaining sets of structural and architectural drawings/models of the projects. Proper scrutiny of tender documents. To ensure that payments of bills of contractors/consultants/suppliers are made according to the terms and conditions of the related agreements. Proper maintenance of Measurement Books. To pursue the cases of litigation and follow the suits filed by various contractors against the Bank.To look after and ensure proper maintenance of the SBP BSC properties. Issuance of tender documents and maintenance of Tender Register. Timely preparation of monthly Dead Stock Articles lists and calendar of returns. To ensure that cases relating to electrical/mechanical installations /telephone exchange are processed/dealt with properly. Making arrangements for proper maintenance of electrical installations, lifts and AC systems.

Execution of agreements with the successful contractors/firms as per laid down terms and conditions. Scrutiny of running bills/final bills received from the contractors/firms and making payment with the approval of competent authority. Building Payment Division Making payment of bills regarding constructions /additions/alterations and other electrical/mechanical works of all the buildings in accordance with the laid down instructions. To ensure that entries raised by field offices through General Accounts are timely responded. Processing the cases of security deposits/earnest money.

Arranging timely renewal of lease agreements of the PepsiCo Ltd. ’s property with the concerned quarters. ?? Maintaining the registers of (i) Projects in hand and (ii) completed Projects.

3. 5 Foreign Exchange Operations Department

Foreign Exchange Operations Department is headed by a Director. The Department is housed on the third and fourth floor of Head Office, Subsidiary House. After the formation of subsidiary, the core functions of the Foreign Exchange Operations Department are briefly as under: – Facilitating Importers and Exporters. Responding to the queries of the Field Offices and Authorized Dealers. Monitoring of Export Overdue Cases. Issuing show cause notices to the defaulting exporters and referring the cases to Adjudication Department. Allowance private remittances on various accounts. Current Working Strength of the Department Description of post no. Of Employees

  • 1. DIRECTOR (O. G-6) 01
  • 2. JOINT DIRECTOR (O. G-5)
  • 3. JUNIOR JOINT DIRECTOR (O. G-4) 03
  • 4. ASSISTANT DIRECTOR (O. G-3) 06
  • 5. FOREIGN EXCHANGE OFFICER (O. G-2) 20
  • 6. P. A. TO DIRECTOR (O. G-2 EX. CADRE) 01
  • 8. ASSISTANT FOREIGN EXCHANGE OFFICER (O. G-1)39
  • 9. SR. ASSISTANT 02
  • 10. ASSISTANT 01
  • 11. HEAD MESSENGER 02
  • 12. MESSENGER 09

4. Marketing objective

PepsiCo Limited’s basic objective is to attain maximum profit product wise by increasing distribution channel throughout the country and launching new product to meet the ever changing demand of the consumers. In the long run PepsiCo Limited wants to attain better market share and producing products that ensure satisfaction of customers which also fulfills the organizational goal

Source: Pepsi’s corporate website www. PepsiCo Ltd.

4. 2 Market Types

Consumer Market: Individuals & households. Business Market: Hotels, restaurants & cafeterias. Reseller Market: Departmental stores, groceries shop.

4. 3  Target market of Pepsi:

Now Pepsi Company will analyze different segmentation bases in relations to its products. Now management is in a position to select one or more segments as its target markets. However, thirst is a physiological need for every people & every people need something to drink. Here two or more different groups of potential customers are identified. Pepsi has identified five market segments for its target market- school going, teenagers, youth, couples, family & old people.

4. 4 Marketing Process:

In this segment the marketing process and product marketing mix of “PepsiCO Limited” will be discussed. A glance is given ahead about the compositing factors of these features. It may help the reader to gain idea, to some extent, about marketing process followed by “PepsiCo Limited” to market its basic and major product “Pepsi Cola”

4. 5 Market segmentation & target market selection:

In Bangladesh, PepsiCo Limited does not go for any particular type of marketing segmentation. But their marketing strategy is specifically targeted to a particular age group of 15-35 years. The main reason behind this strategy shown by the authority is that the people of this age group make the purchase of all the types of soft drinks throughout the year.

So it is profitable for the company to target them. Very recently PepsiCo has taken steps to introduce their new product “Diet Pepsi” for the more health conscious and elderly age groups.

5. 0 Marketing mix:

Marketing mix of any company consist of their (4) factors. They are product, price, place, promotion. Here the product of PepsiCo Limited “Pepsi Cola” is discussed.

5. 1 Product line:

PepsiCo Limited in Bangladesh works as strategic business unit of Transcom Beverage Limited which is the actual franchise organization of Pepsi Co. Inc. (USA). The products that PepsiCo offers are given below:

ProductCategoryFlavorGlass Bottle SizeCan Size Pepsi ColaSoft DrinkCola2000,1500,1000, 500,250 milliliters500 milliliters Seven UpDoLemonSame Miranda OrangeDoOrange Same  Miranda AppleDoApple250 milliliters  Slice JuiceMango250 milliliters, Tetra Pack

Classification of the product: Pepsi Cola is a consumer product, which is bought frequently for personal consumption. It can be classified as convenience product this is generally available to the nearest retailer shop and fast food. When a consumer attempt to purchase this type of product they have in their mind about the objective and price of the product.

Brand Name: Throughout the world PepsiCo Limited has created a brand value by its successive operation for over a centennial year. Especially it has become almost synonymous with health conscious soft drinks. But in their country Pepsi has not been able to create any type of brand loyalty. Their brand name has little effect in customers’ purchasing effort.

Quality Level: Since Pepsi can be categorized as a type of food element, its quality is judged directly by customers themselves. Pepsi’s commitment towards maintaining quality has provided them a better hand upon other competitive organizations.

To ensure the strict quality measures, a quality controller from the international head office visits the production process of the local office once a year. In the local sector their operational license is also dependent upon the quality certificate provided by the Government Organization named as Bangladesh Standard Testing Institution (BSTI). Packaging: Soft drinks products must be packaged properly for its proper distribution and selling. Internationally PepsiCo Limited has its own packaging organization named as ‘Pepsi Bottling Group’. In their country Pepsi serves only in the glass bottles. All these bottles come from a Saudi Arabia based company named ‘Ibn Qashem International’. The plastic cases that are used to carry these bottles are produced by ‘Uttara Plastic Limited’.

Labeling: In case of refreshment drinks labeling of the product plays a very vital role. Pepsi has a very distinctive labeling for its product. Its label contains information about the following things:

  • Ingredients used in the process of making.
  • Name of the local manufacturer and their address.
  • Manufacturing date and the maximum retail price.
  • Quality standards measured by BSTI with their own logo.
  • Net contents of the bottle.

Customer awareness information such as “Best before 3 months of manufacturing”, “Recycle the bottle” and “Put in the dump after use”. New or Existing product Development: There is very little or almost no chance for PepsiCo Limited to develop any new product locally. All the products here come from the central organization “Pepsi Co Inc. (U. S. A. )”. Pepsi has launched its newest product “Pepsi BLUE” in 7th May only after the supply reached their country in limited basis. There is a possibility that they introduce another product, the one calorie cola, “Pepsi ONE” by December this year.

Pepsi BLUE

 

Pepsi One Historically, price has been the major factor affecting buyer choice. This is more true in poorer nations, among poorer groups (like Bangladesh) and with commodity products. Price is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also one of the most flexible elements of the marketing mix. Unlike product features and channel communications, price can be changed quickly. At the same time, pricing and price competition is the number one problem facing many marketing mix. So, it is also most complex and critical problem to set price for all commodity based firm.

Here, we have sorted all information about pricing of PepsiCo Limited, Bangladesh according to their textbook to make easy their discussion. At first, we considered factors that PepsiCo Limited consider when setting price of their products. We classified PepsiCo Limited’s considering factors into 2 broad classes.

They are:

  • Internal factors.
  • External factors.

Now let’s look, what are the factors that affect PepsiCo Limited’s pricing decisions-

01. Internal factors: The factors that are considered as internal factors by PepsiCo Limited are as below:

  • (a) Their marketing objectives – PepsiCo Limited has some marketing objectives. These objectives have changed for several times due to market conditions and market trend. Their first objective is to survive in this present competitive market condition. Because, for last 5 years in Bangladesh, some potential firms have come into beverage industry with many new products and these new products make competition for PepsiCo Limited harder to survive in the beverage industry with their present market share. PepsiCo Limited now trying to keep their market share unchanged. That’s why PepsiCo Limited cannot change their current price. Second marketing objective of PepsiCo Limited is to maximize current profit. In Bangladesh, Tk. 10 to Tk. 15 per unit price is the trend for all beverage firms. For this reason PepsiCo Limited cannot increase their unit price. On the other hand, for increasing price of raw material, PepsiCo Limited cannot decrease their unit price. For this circumstance, PepsiCo Limited is trying to minimize their overhead cost and other cost which will result the maximization current profit with current capacity.
  • (b) Marketing mix strategy – We know there are 4 elements of marketing mix are- Product, Price, Place and Promotion. Price is only one of the marketing mix tools that a company uses to achieve its marketing objectives. We have earlier mentioned, Tk. 12 per unit is the trend in Bangladesh. Beside it, Tk. 50 for 1 liter and Tk. 80 for 2 liter are almost fixed for all firms. So, price and product are not always considered for marketing mix decisions. For this reason PepsiCo Limited always consider promotional advertisement and distributor to promote and place their product.
  • (c) Costs – Third element of internal factor is cost. We already mentioned PepsiCo Limited is trying to minimize their cist so that they can maximize their current profit. Management of PepsiCo Limited cannot reduce the price of their product due to the increase in per unit cost.

02. External factors: Now let’s go to know about external factors that affect pricing – The market and demand – Beverage market in Bangladesh is oligopoly competition market.

There is almost a uniformed price is used and the competitors are sensitive to each other’s price. So the market demands fluctuation depending on pricing decision. In the decade of 1980’s, the per unit price of per 250ml bottle was Tk. 7 and then increased to Tk. 8. After that, in 1990’s the price went to Tk. 10. his increase was due to increased price of chemical elements such as Total Carbohydrates, Potassium Benzoate and natural flavors etc. All beverage firms use these elements. For this reason the per unit price was also increased uninformed way. The competitor firms are not interested to increase price but they cannot decrease price for cost. This two-side pressure keeps price almost constant. These are all about the factors that PepsiCo Limited considers when they set price of their products.

5. 2 Pricing Strategy

Pricing Approach: Now the question is – which approach PepsiCo Limited follow to determine price? We have learnt from their textbook that there are 3 pricing approach – Cost-based pricing, Value-based pricing and Competition-based pricing. Burning question is which PepsiCo Limited follows or do they follow their customized way.

The answer is – PepsiCo Limited follow Competition-based pricing. From their above discussion about factors, it is easily understandable that price is very much sensitive and it is very competitive nature. Experiment on pricing may cause big loss for PepsiCo Limited. Because higher price reduce their market share and lower price is not supported by production cost.

So it is wise for PepsiCo Limited to follow going-rate price. This approach allows them to maintain their market share as well as they can compete with competitors by offering additional benefit. As existing in oligopoly competition market, PepsiCo Limited is bound to follow going-rate price. They have no other way.

New Product Pricing: Here we have another burning question in front us – How PepsiCo Limited set prices of new product? Some firm can follow Market-skimming pricing to make maximum revenue or some can follow Market-penetration pricing to take maximum market share and be a market leader.

But these two approaches are not supportable by present market condition in Bangladesh. PepsiCo Limited is following traditional approach. We know, PepsiCo Limited’s new product is ‘Pepsi blue’. Its price is same as all other products of PepsiCo Limited. If its demand increases then PepsiCo Limited will produce it largely. But they have no intention to change price of it.

Adjustment of Pricing Strategy: There is another discount for distributor and wholesaler; Up to this point what we have discussed is about how PepsiCo Limited set their product price. But sometimes PepsiCo Limited needs to adjust their pricing strategy.

Every competitor firm in every moment is trying to increase their sales as well as their market share by increasing promotional activities. PepsiCo Limited also needs to take some action. Price adjustment strategy is such kind of promotional activities. Here price adjustment strategy means offering some discount to consumer, retailer and distributor. PepsiCo Limited generally offers two types of discount. One is seasonal discount another is functional discount or trade discount.

Seasonal discount: In Bangladesh there are two big festivals – Eid-ul-fittre and Eid-ul-azha. In this two festival PepsiCo Limited offer Tk. 3 to Tk. price cut per unit. This discount is very important for PepsiCo Limited to increase revenue.

Functional discount: Which is called, trade discount? In this discount PepsiCo Limited offer 2 or 3 bottles free for each case (containing 24 bottles). This trade discount indirectly offer price discount. This two price adjusted strategy is very much important for PepsiCo Limited. Another thing to be noted that when one competitor offer some discount PepsiCo Limited does not react immediately. They wait and observe market condition and movement to offer some discount if there exist any scope to grab some extra market share.

But their immediate reaction result is increasing other marketing promotional activities other than price adjustment strategy. This is all about pricing decision of PepsiCo Limited Co. Bangladesh.

5. 3 Distribution channels and logistics management

Pepsi Co. is a world leader in convenient foods and beverages, with revenues of about $25 billion. Today consumers spend about $33 billion on Pepsi-Cola beverages. This type of huge sell is possible only through efficient and effective logistic support. PepsiCo Limited is a franchise organization; the franchiser is Transcom beverage BD. LTD. who links the several stages of production and distribution process in BD. Under Transcom Beverage Pepsi Co. BD. Ltd. works as an independent organization. Transcom beverage LTD. follows manufacturer- sponsored wholesaler franchise system. PepsiCo Limited firstly divides the whole Bangladesh into ftheir zones those are ?Dhaka, ?Chittagong, ?Rajshahi and ?Khulna. In each of these zones two or three zonal distributors are selected. They can also be mentioned as wholesalers. PepsiCo Limited supplies their soft drinks these distributors by their own transportation service.

It can be mentioned here that for transportation purpose they have twenty nine trucks. Retailers of each separate zone contact with the zonal distributor and ask them to supply according to their demand. To be a distributor of PepsiCo Limited an individual or organization must have some criteria that given bellow ?The person or company must have experience or to relate with dealership business. ?He or it must have to be financially solvent with TK. 1, 00, 0000 (10 Lakh). ?Must have auto vehicles and employees. ?Regular goods order must have to be maintained. ?A security of TK. , 000, 00 have to keep to Pepsi for six (6) months. Zonal distributors sometime appoint more distributors on a locality basis such as in Dhaka and Chittagong. These distributors supply the product according to the retailers demand. Mostly this transportation is done by the distributors’ own vehicles such as van, pickup etc. they visit each retailers shop usually twice a week. But in case of summer season suppliers can provide the product even seven days a week based on sales of the retailers. Pepsi applies some motivation system to motivate their distributors.

These includes if the distributors makes a good regular goods order and sale exceeds above target then Pepsi gives financial rewards to them and also some cases of goods are given free to them. But if there is any mismanagement there is also some punishment for the distributors such as if distributors fail to make minimum target of order or a least target of sale then Pepsi cancels their distributorship. Number of channels: Pepsi Co. BD. LTD. follows indirect marketing channel. That means a marketing channel that has two or more intermediaries as wholesaler and retailers.

Firstly the distributor collects the product from the franchise org. and then supplies it to the retailers. Channel behavior and organization: Pepsi Co. BD. LTD. binds by the channel behavior of Conventional vertical marketing system. Transcom beverage ltd. though the franchiser but under it Pepsi works as independently as conventional vertical marketing system Setting channel objectives: For setting channels Objectives by considering the factors of each zones Pepsi first determines the customer service that what targeted customer it wants from its channels. Then Pepsi sets objectives for each channel and the objective is to minimize total channel cost of meeting customer service requirements.

Number of marketing intermediaries: PepsiCo Limited follows intensive distribution. That is stocking the product as many outlet as possible.

Logistics management: Pepsi has a strong logistics management or marketing logistics that maintain the functions are order processing, it has a warehouse which is a distribution center and Pepsi stock their inventory in that center which is situated in Tejgaon Dhaka. It has its own transportation service as by trucks. Pepsi has 29 trucks in their own for transportation service.

Retailers: On behalf of Pepsi the distributor of Pepsi in each zone supplies to the retailers. The retailers of Pepsi Co. are the normal shopkeepers as departmental store, fast food shop etc. Pepsi motivate their retailers by providing them refrigerator, sign board, neon sign and repair of the refrigerators. There are also some punishment for retailers if for their fault Pepsi loose target customers, Pepsi resigned them as their retailer. All these are done by the local distributors on behalf of Pepsi.

5. 4 Promotional activities of PepsiCo Limited

Pepsi believes that it must do more than make good products and inform consumers about product benefits and carefully position products in consumers’ mind. To do this Pepsi like any other company uses the promotion tools of: ?Advertising ?Sales promotion ?Public relation ?Personal selling Advertising: For over 100 years, Pepsi-Cola has produced some of the finest soft drink ads available anywhere in the world. From today’s “Joy of Pepsi,” as sung by Britney Spears, to yesterday’s “Nickel, Nickel” (1939).

They believe that their ads are as memorable as the products they produce. In their country Pepsi-Cola is continuing to produce many local ads for promoting its products. While developing the advertising program Pepsi considers the following aspects: ?Objectives of the advertising: Pepsi does not give much attention for informative advertising because it believes that the consumers have basic knowledge about their products. So it uses basically persuasive and comparative types of advertising to persuade consumers and to get more competitive advantage. Budget for advertising:

Pepsi holds that the more it can spend in advertising purpose will result in high volume of sales. So it spends almost 12% of the total cost for advertising purposes. Here, the last few years’ actual budget of advertising expense of Pepsi is mentioned: YearAmount of Tk. (core) 199908. 00 200209. 00 200510. 00 200812. 00 201115. 00 ?

Advertising media uses by Pepsi: Pepsi uses different media for advertising like- on air advertisement, television, newspaper, magazines, radio & neon-sign etc. Everyday Channel-I telecast a program named “Pepsi Jukebox”. Sales promotion:

Every year Pepsi introduces short-term incentives to enctheirage the sales of its product.

These are:

  • Trade promotion: Pepsi offers its distributors two bottles of beverage free with each case of Pepsi irrespective of the size of the bottle.
  • Sales force promotion: Pepsi provides bonuses, contests, sales rallies etc. to motivate the sales force.
  • Public relation: Pepsi has great contribution in case of public relation.
  • Some of these are stated as below: Public affairs Pepsi is always involved in building and maintaining national or local community relations.

Every year it organizes several concert, sports and cultural activities in their country.

Press conference: When Pepsi wants to introduce any new product or flavor then it often maintains the press relation to create and place newsworthy information in the media to attend attention. Recently Pepsi have launched their new product named ‘Pepsi-Blue’ and have arranged press conference for the purpose of discussing its various features.

Product publicity: Pepsi always tries to maintain relationship to general and potential customers through publicity of its product through different types of publicity instruments.

Like T-Shirts attached with Pepsi logo, posters on the wall, etc. ?Development: It also maintains relations with donors or members of nonprofit organizations to gain financial or volunteer support. Personal Selling For the purpose of making sales and building customer relationship Pepsi follow:

  • Tele marketing: Pepsi co. do not sale on over telephone but now they are thinking about this.
  • Online marketing: They do not provide this service for the customer but they have web site named WWW. PepsiCO . COM
  • Credit sell: Pepsi co. doesn’t sell on credit. They sale their products on cash basis.

Tutorial sales force structure: Actually this co. doesn’t apply any sales person to sell its product.

Relationship marketing: The Pepsi co. follow the relationship marketing to maintain & enhancing strong value laden relationship with its customer & other stockholders.

Praline: It’s a separate wing. That engaged in communicating the officer, dealer, developer & architect.

6. 1 SWOT Analysis on PepsiCo Ltd.

Strengths

  • Branding – One of PepsiCo’s top brands is of cahiers Pepsi, one of the most recognized brands of the world, ranked according to Interbred. As of 2008 it ranked 26th amongst top 100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lay’s Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavored Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and Sierra Mist. The strength of these brands is evident in PepsiCo’s presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. Such brand dominance insures loyalty and repetitive sales which contributes to over $15 million in annual sales for the company
  • Diversification – PepsiCo’s diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCo’s arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes. This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates.
  • Distribution – The Company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.

Weaknesses

  • Overdependence on Wal-Mart – Sales to Wal-Mart represent approximately 12% of PepsiCo’s total net revenue.
  • Wal-Mart is PepsiCo’s largest customer. As a result PepsiCo’s fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Mart’s low price themes put pressure on PepsiCo to hold down prices.
  • Overdependence on US Markets – Despite its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labor strikes. Large US customers could exploit PepsiCo’s lack of bargaining power and negatively impact its revenues.
  • Low Productivity – In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower that its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees.
  • Image Damage Due to Product Recall – Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products.

Opportunities

Broadening of Product Base – PepsiCo is seeking to address one of its potential weaknesses; dependency on US markets by acquiring Russia’s leading Juice Company, Lebedyansky, and V Water in the United Kingdom. It continues to broaden its product base by introducing True North Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers.

International Expansion – PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico.

  • Growing Savory Snack and Bottled Water market in US – PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012.
  • Products such as Aquafina and Propel are well established products and in a position to ride the upward crest. PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million. Threats
  • Decline in Carbonated Drink Sales – Soft drink sales are projected to decline by as much as 2. 7% by 2012, down $ 63,459 million in value.

PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline.

  • Potential Negative Impact of Government Regulations – It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acryl amide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo.
  • Intense Competition – The Coca-Cola Company is PepsiCo’s primary competitors. But others include Nestle, Group DANONE and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Recently Coca-Cola passed PepsiCo in Juice sales.
  • Potential Disruption Due to Labor Unrest – Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes.In 2008 a strike in India shut down production for nearly an entire month. This disrupted both manufacturing and distribution.

6. 2 Sustainability

Report As one of the world’s largest food and beverage companies, we recognize their responsibility to help make a positive contribution in a world that continues to experience unprecedented economic, environmental and social challenges. On this website, we’re sharing their progress in addressing these challenges, identifying where we believe we can have the most impact and outlining opportunities for continued improvement.

We will continue to develop, improve and report metrics to measure their global performance. While this process will take time, we believe that it will help us both embed sustainability goals more fully into their operations and achieve demonstrable progress. Their Approach At PepsiCo, “Performance with Purpose” means delivering sustainable growth by investing in a healthier future for people and their planet. Specifically, we have defined three areas of influence: Human, Environmental and Talent Sustainability.

  • Human Sustainability: Enctheiraging people to live healthier by offering a portfolio of both enjoyable and wholesome foods and beverages.
  • Environmental Sustainability: Protecting the Earth’s natural restheirces through innovation and more efficient use of land, energy, water and packaging in their operations.
  • Talent Sustainability: Investing in their associates to help them succeed and develop the skills needed to drive the company’s growth, while creating employment opportunities in the communities we serve.

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