Essay on Pepsi Company Business Operations

Introduction

Operations management is concerned with the processes involved in the production and distribution of goods and services (Slack, Chambers and Johnston, 2010, pp 34-60). Operations management entails all the steps involved in the creation of the products and services until they reach to the consumer. The goal of any operation manager is to make this process effective and efficient (Hill and Hill, 2017, pp 18-54). Besides operations, management encompasses other related disciplines such as inventory control, procurement and supplies, quality analysis and stock keeping. The operations management process employed by a company depends on the nature and type of good the company is producing (Heizer, 2016). Thus, operations management covers the entire production system. It is present in banking systems, hospitals, and automobile industries among others. Operations management includes both the daily operations of a firm and the strategic operations of the firm (long-term). A company’s operations manager is tasked with oversight of the production and distribution process of the goods and services of a firm.

Pepsi Company is an American multinational company that specializes in the production of beverage products. It is the primary competitor for Coca-Cola Company. Pepsi is renowned for its beverage products Pepsi Cola, Mirinda, Tropicana among others. Caleb Braham pioneered the company’s operations when he invented Pepsi Cola. Caleb hoped his product would replicate the success of the rival product coca-cola. The product quickly gained popularity, which led to Caleb branding it in 1898 and incorporating the Pepsi Cola Company in 1902. However, the world war one proved detrimental to the operations of the company. During the world war one, Pepsi Cola Company was repeatedly reincorporated in a bid to ensure it became profitable (Thain and Bradley, 2014, pp 18-22). At the beginning of 1931, the company was bought by Charles G. Guth. He merchandised the operations of Pepsi Company. He employed the knowledge and skills of qualified chemists to come up with new and better drinks. Guth also held leadership positions in Loft Inc, a company that specialized in the production of candies. Several legal battles ensued which led to Guth losing the leadership position of Pepsi company. In 1941 loft, Inc and Pepsi Company formed a merger and adopted the name Pepsi Cola Company. During the 1950’s Alfred Steele, a former C.E.O of Coca-Cola Company assumed the leadership position in Pepsi Company. Alfred emphasized on sales promotions and market expansions. Alfred’s effort led to significant growth in Pepsi Company revenues and assets. In subsequent years, the company embarked on mergers and acquisitions, for instance, the merger with Frito Lay in 1965. Currently, Pepsi Company has productions departments in over two hundred countries. The tremendous growth of Pepsi Company is attributable to the uniform standards of its products.Pepsi Company has revolutionalized the operations of beverage industries in the World. The company has various investments ranging from beverage industries and cereal industries. Thus, the work of an operations manager in Pepsi Company cannot be underestimated.

Operations of Pepsi Company

The operations of Pepsi Company are broken down into six subdivisions. These are 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).

Frito Lay North America

The Frito Lay North America is made up of the various branded snacks and beverages entities owned by Pepsi Co in North America and Canada. FLNA was initially known as Rocket Inc, and it was not until 2004 that it changed its name to FLNA.FLNA produces salted snacks made from potatoes and corns. FLNA does its business either on its own or with the partnership with other players in the industry. FLNA is primarily involved in the processes of production, marketing, and selling of the snack products. FLNA sells its product through retailing and online shopping. In 2017 and 2016, FLNA accounted for at least 25 % of the company’s total revenue. This can be explained by the decrease in the soda industry in the USA. Moreover, FLNA has been experiencing a constant growth in profit of 3 % in the last three years. FLNA share of the total operating profit of Pepsi Company was about 43 %.According to estimations by Forbes FLNA accounts for at least 37% of Pepsi Co total valuation. Some of the branded products under FLNA include Doritos Tortilla Chips, Cheetos Snacks, Santitas tortilla chips, Fritos Corn Chips among others. Besides FLNA has a joint operating venture with Strauss Group. The joint venture is involved in the making, distribution, and selling of refrigerated dips and spreads.

Quaker Foods North America (QFNA)

QFNA is Pepsi Co smallest section and accounts for only five percent of its total revenues and ten % of the operating profits. The formation of the QFNA can be traced back to the oatmeal battles that were predominant in the 19th century. John Stuart, Henry Parsons, George Douglas and Ferdinand Schumacher are the pioneers of QFNA. QFNA was formed in 1901. QFNA entered into a merger with Pepsi Company in 2001. QFNA centered its operations on the production of oatmeals and snacks; however, QFNA beverage product, Gatorade Sports drink is what pushed Pepsi Company into the merger as it was considered profitable by many businesses in the turn of the 19th Century.

QFNA on its capacity and in cooperation with other stakeholders engages in the creation, marketing and distribution of branded Pasta, rice and cereal products. QFNA sells its product to various distributors and retailers in the USA and Canada. Some of the brands under QFNA include Quaker Oat Squares, Quaker oatmeal, Quaker grits among others.

North America Beverages

NAB is the unit that is tasked with the creation, distribution, and selling of Pepsi Company beverage products in the USA and Canada. NAB operates either independently or in cooperation with other players in the industry. For instance, the joint ventures with Unilever and Star bucks allow NAB to sell ready to drink tea and coffee drinks in the USA. NAB sells its final branded products to both distributors and consumers. Besides, it also sells some of its beverage products to various bottlers spread out in the USA.

Latin America

The Latin America department is involved in the production, marketing, distribution and selling of beverage products, cereals, rice, pasta, salted snacks and ready to drink tea in Latin America. The department does this on its own and with joint ventures with companies such as Unilever. Some of the branded products offered by the Latin America department include 7UP, Gatorade, Pepsi, Cheetos, and Crunchy among others.

Europe-Sub Saharan Africa

The ESSA is involved in the production, marketing, distribution and selling of beverage products, cereals, snacks in Europe and Sub-Saharan Africa. The department operates on its own and cooperation with other players such as Unilever. However, in some parts of Europe Pepsi Company runs its private bottling companies. Some of the branded products offered by ESSA include Pepsi Cola, Mirinda, Cheetos, and Doritos among others.

Asia, Middle East, and North Africa

The AMENA department is involved in the production, distribution, marketing, and selling of beverage products in Asia, Middle East, and North Africa. The department does this in its capacity and cooperation with other entities such as the Unilever. Some of the branded products offered by AMENA include 7UP, Pepsi Cola, Aquafina, Crunchy, and Cheetos among others.

Pepsi Company Distribution network

Pepsi company employs three forms of distribution networks namely distributor networks, customer warehouses and Direct-Store-delivery (DSD).

Role of Pepsi Company Operations Manager

An operations manager provides an oversight role to the daily operational and strategic activities of an organization (Hill, Jones, and Schilling, 2014, p 60-65). The operation manager is tasked with ensuring that goods are created and transported to the consumer efficiently. In Pepsi Company the operations managers are designed to perform a plethora of tasks all of which are geared towards increasing overall productivity of the company (Johnson, Clark and Sulver, 2012, pp 20-60). The operations manager performs a strategic role in designing new goods and services. The operations manager with the help of other members in the company conducts extensive market research to establish market trends and consumer preferences. The information on the market trends and consumer preferences is essential in that it is used in the creation of new products. The new products created are improved versions of the existing product variants.

An operations manager ensures the Company’s products are of the required standard and quality. Pepsi branded products have a uniform standard irrespective of the location in which one buys them. The operation manager ensures that the employees adhere to the stipulated production technique so as not to compromise on the quality. The operations manager is also involved in the Job designing and human resources process. Since employees from a vital part of the company’s operations, thus considerable attention is given to the employees to ensure the company can meet its goals and objectives. Pepsi Company has a talent sustainability policy, which all the operations managers are required to follow (Bernstein et al, 2016, p 13). Pepsi Company operates different job designs for the FLNA and QFNA divisions. Despite these differences, the operations manager in the two divisions is in charge of ensuring adequacy of the workforce.

Pepsi company operations manager is also in charge of the supply management process. The operations managers ensure that the manufacturing departments of the company are strategically located. Through this, the company can match the products with demand and that the company can easily access its intermediary products. Over time, Pepsi Company has adopted the approach of diversifying its supply chain channels. The operation manager in Pepsi Company is also tasked with the management of the inventory. The operation manager initiates the automation process, scheduling of the production process and the minimization of the production costs. The operations manager is also in charge of maintenance of the company’s overall operations. The operation manager in Pepsi Company comes up with the strategic locations of the Company. An operations manager is the one who is tasked with deciding on either Pepsi company adopts Company-owned facilities or partnership owned facilities.

Reflection

Advantages

Through the Mergers and Acquisitions, Pepsi Company has been able to acquire a considerable share of the market. Consequently, this has ensured that the company portfolios are diversified. A diversified portfolio ensures the returns are maximized and the risks minimized. For instance, in recent years the beverage industry has had slow growth. The slow growth of the beverage industries has hampered the earnings of the firms involved in beverage production. For example Pepsi Company and The Coca-Cola, company. However, the effects of the slow growth have been buffed by FLNA in Pepsi Company, which has not been affected by the slow growth experienced in the beverage industry. Overall, this has ensured the continued profitability of the Company. Second, the extensive research process used by Pepsi Company has ensured that the company remains competitive in the long run. The company takes into account different customers preferences and market trends. Through this, the company can ensure a ready market for its products. Moreover, Pepsi Company has a worldwide distribution network ensures the company saves on the costs and that the company obtains immediate from its consumers.

Disadvantages

Pepsi Company mergers and acquisitions are the principal causes of the Company’s operation problems. The mergers and acquisitions bring about bureaucracy problems. These acquisitions bring about problems in the management and distribution processes of the company (Venkataraman, Summers and Venkataraman, 2017, pp 1-22). Although Pepsi has been able to manage them, in future with its continued expansion, it is likely that these mergers and acquisitions will bring about problems to Pepsi Company in the future.

Conclusions

Through Pepsi Company six divisions, we observe that Pepsi Company engages in the production, distribution, marketing and selling of beverage products, cereals, and salted snacks among others. Evidently, this forms a vital part of the company’s operation process. The operations managers are involved in ensuring the company’s products are of the required quality. They are also tasked with ensuring the products move from the manufacturing departments to the consumer efficiently and efficiently. The close-knit system of Pepsi company production process has ensured the company remains profitable.

References

Bernstein, E., Bunch, J., Canner, N. and Lee, M., 2016. Beyond the holacracy hype. Harvard business review, 94(7), pp.13.

Hill, A. and Hill, T., 2017. Essential operations management. Macmillan International Higher Education,pp 18-54

Johnson, R, Clark, Sulver, M., 2012 Service Operations Management Harlow Pearson Education Limited, pp 20-60

Heizer, J., 2016. Operations Management, 11/e. Pearson Education India.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning,pp 60-65

Slack, N., Chambers, S. and Johnston, R., 2010. Operations management. Pearson education,pp 34-60

Thain, G. and Bradley, J., 2014. FMCG: The power of fast-moving consumer goods. First Edition Design Pub.,pp 18-22

Venkataraman, S., Summers, M. and Venkataraman, S., 2017. PepsiCo: The Challenge of Growth through Innovation. Darden Business Publishing Cases, pp.1-22