314235540

Design Strategic Plan

Individual Case Analysis (PepsiCo-2009)

NAZIFA BTE ABD. GHANI (MR111037)

Assoc. Prof. Dr. Mas Bambang Baroto

International Business School

University Technology Malaysia
April, 2013
 [DESIGN STRATEGIC PLAN/SEM II/2012/2013] PepsiCo - 2009

Contents
1.0 Company background ....................................................................................................................... 3
2.0 Description of Industry ..................................................................................................................... 4
3.0 External Assessment ......................................................................................................................... 5
3.1 Positioning Diagram Strategic Group Identification ..................................................................... 5
3.2 Opportunities & Threats ............................................................................................................... 7
3.3 EFE matrix................................................................................................................................... 10
4.0 Internal Assessment ........................................................................................................................ 11
4.1. Strengths & weaknesses ............................................................................................................ 11
4.2 IFE Matrix .................................................................................................................................... 12
4.3 Value Chain Analysis (Non-Alcoholic beverages Segment)......................................................... 13
5.0 Strategy Formulation ...................................................................................................................... 16
5.1. SWOT Matrix .............................................................................................................................. 16
5.2 IE Matrix ...................................................................................................................................... 18
5.3 Strategy Formulation Conclusion................................................................................................ 18
6.0 Strategy Implementation ............................................................................................................ 19
6.1 Operation Management Process.................................................................................................. 19
6.1.1 Supply Management Process .............................................................................................. 19
6.1.2 Production Management Process ........................................................................................ 25
6.1.3 Distribution Process ............................................................................................................. 30
6.1.4 Risk Management Process ................................................................................................... 33
6.2 Customer Management Process .................................................................................................. 47
6.2.1 Customer Selection Process ................................................................................................ 47
6.2.2 Customer Acquisition Process ............................................................................................. 52
6.2.3 Customer Retention Process ............................................................................................... 57
6.2.4 Customer Growth Process .................................................................................................. 61

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1.0 Company background

Founder Caleb Bradham in New Bern, North Carolina, 1898

Division Non-alcoholic Beverage Industry
The salty or Savory Snack Food Industry
Breakfast Food Industry
* PepsiCo is organized into three business units.
However, its three business units are comprised of six divisions: FLNA, QFNA, LAF,
PAB, EKEU, and MEAA
Net 2006 2007 2008
revenue $ $ $
(million) (million) (million)
35,137 39,474 43,251
Net 2,615 2,845 2,959 FLNA
revenue by
division
554 568 582 QFNA
655 714 897 LAF
2,315 2,487 2,026 PAB
700 774 811 UKEU
401 535 667 MEAA
Mission & Mission statement:
vision Our mission is to be the world’s premier consumer products company focused on
convenient food and beverages. We seek to produce financial rewards to investors as
we provide opportunities for growth and enrichment to our employees, our business
partners and the communities in we operate. And in everything we do, we strive for
honesty, fairness and integrity.

Vision statement:
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. Our
vision is put into action through programs and a focus on environmental stewardship,
activities to benefits society, and a commitment to build shareholder value by making
PepsiCo a truly sustainable company.

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2.0 Description of Industry

* Because of the lack information given in the case study and time limitation, the whole
analysis for this report will be only focused on Non-alcoholic beverages segment.

Name of the Non-Alcoholic Beverage Industry

industry
Industry Market Make up a $395billion world market with carbonated drinks the largest share
Cap of the market at $150 billion.
Industry Net
Income
Main competitors in 1. Coca-Cola
the industry 2. PepsiCo

Industry products PepsiCo: PepsiCo of late has a more focused strategy in the snack, breakfast
and services food and non-alcoholic beverage markets. The company produces Mountain
Dew, Mug Root Beer, Sierra Mist, Slice, Aquafina, Dola Juices and SoBe.

Coca Cola: Coca Cola has continued to strengthen their juice, ready-to-drink
tea and coffee products, water and sport drinks along with the introduction
of Truvia as a sweetener.

*The industry composed of carbonated soft drinks, fruit and vegetables

juices, bottled water, sports and energy drinks, concentrates and ready-to-
drink coffee and teas.

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3.0 External Assessment

3.1 Positioning Diagram Strategic Group Identification

*Because of lack of information on Non-alcoholic beverages segment’s competitors, the

analysis is only focused on PepsiCo and Coca Cola Company since it is clear mentioned in
the case study that both of them are the major player in the industry.

Case facts of X axis - Market Share

Coca Cola and PepsiCo holding the largest share of the U.S market at 23 percent and
25percent respectively .Coca Cola however holds the largest share of the U.S cola market
at 41 percent with Pepsi second at 36.7 percent (Pg 74, Para 5).

Pepsi and Coke have fought the cola wars for decades and has generally beaten out Pepsi
for market share (Pg. 78, Para 3)

Case facts of Y axis – Financial Position

The financial for Coca Cola shows a strong cash position of $4,979 billion and long term
debt only $2,781 billion. Coca Cola net profits of $5,807 billion in 2008 (See Exhibit 8) (Pg.
76, Para 1). Coca Cola shows a strong financial position and smaller long term debt
compare to PepsiCo.

Cost of sales for PepsiCo has increased as would be expected. These costs have increased
from 41.32 percent of sales to 43.43 percent of sales net income has decreased from $5.6
billion to $ 5.1 billion , return on assets has dropped from 18.81 percent to 15.17 percent ,
inventory turnover has decreased from 8.02 times to 7.81 times and long term debt has
increased from $4,203 billion in 2007 to $7.858 in 2008 (Pg.73, Para1).

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Size of circle – Product Diversification

Pepsi as bottlers of soft drinks. The company produces alsoMountain Dew, Mug Root Beer,
Sierra Mist, Slice, Aquafina, Dola Juices and SoBe (Pg.69, Para 4). In addition, Pepsi Co
includes the brands of Tropicana and Gatorade and this is just a partial list of the branded
products sold by Pepsi (Pg. 69, Para 4). PepsiCo has developed liquid refreshment products
that are light, calorie free, sugar free, caffeine free, sport and energy directed and flavoured
(Pepsi, Aquafina, Voltage). (Pg.70, Para1). Pepsi has ventured into conglomerate
diversification from van moving lines to sporting goods to fast foods. PepsiCo of late has a
more focused strategy in the snack, breakfast food and non-alcoholic beverage markets (Pg.
69, Para3). Today PepsiCo is a larger and more diversifies company than Coca Cola (Pg. 78,
Para 3).

Coca Cola has kept a fairly narrow focus. Coca-Cola seems to be following a very
concentrated strategy by focusing almost exclusively on non-alcoholic beverages with little
tendency to diversify. Additional as the demand for dark colas has diminished, Coca Cola has
continued to strengthen their juice, ready to drink tea and coffee products, water and sports
drinks along with the introduction of Truvia as a sweetener (Pg.76, Para 2).

Strong
Coca Cola
(25%)
Financial Position

PepsiCo
(23%)

Weak

10% U.s 20%

Market Share

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3.2 Opportunities & Threats

To choose opportunities and threats I tried to find those that were critical for company and
able to give greatest impact to PepsiCo.

No. Opportunities
1. Steady overall growth for the last five years of around 9 percent with sports drinks, bottled
water, and energy drinks showing the largest growth (Pg.74, Para 4).
2. A recent environmental campaign against plastic containers has impacted the sales of
bottled water and forced manufacturers to develop more environmentally friendly
containers (Pg74, Para 6).
3. The market for these products requires manufactures to constantly develop new products to
meet those changing demands (Pg74, Para 6)

Opportunities Probability Impact Justification

O1: Steady overall growth
for the last five years of Almost Extraordinary Perform highest impact to PepsiCo in
around 9 percent with certain conjunction to reduction demand on
sports drinks, bottled carbonated drinks. Consumers start to
water, and energy drinks concern more on their healthy lifestyle.
showing the largest growth
(Pg.74, Para 4).

O2: Growth in the Expanding business on these countries

carbonated drink market Possible Moderate might help increase PepsiCo revenues
was largest in Asia and and sales.
Europe (Pg74, Para 4).
O3: The market for these
products requires Likely Major Able to give impact on PepsiCo
manufactures to constantly revenues and profits since the taste of
develop new products to consumers always change.
meet those changing
demands (Pg74, Para 6)

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Probability
Insignificant Minor Moderate Major Extraordinary
Almost Low Medium High High High
certain 1

Likely Low Medium Medium High High

O3

Possible Low Low Medium O2 High High

Unlikely Low Low Low Medium Medium

Rare Low Low Low Medium Medium

No. Threats
1. The downturn in the economy has also affected the sales of colas and water as some
consumers have switched to store brands and tap water as cheaper alternatives to the
national brands (Pg.74, Para 6).
2. Consumer taste continues to change, and Pepsi must also continue to change (Pg 69, Para 3).
In United States, the carbonated soft drinks market has shown a decline of 0.4 percent as
consumers shifted from soft drinks to bottled water and sports drinks (Pg. 74, Para).
3. Fought the Cola wars, Coca Cola holds the largest share of the U.S cola market at 41 percent
(Pg74, Para 5). Coca Cola is the largest producer and distributor in the world and is PepsiCo’s
major competitor (Pg. 76, Para 1).

Threats Probability Impact

T1: The downturn in the
economy has also affected Likely Major Able to reduce PepsiCo sales and
the sales of colas and water revenues since the consumers have an
as some consumers have ability to switch to their national brands
switched to store brands as well as interested more on cheaper
and tap water as cheaper price.
alternatives to the national
brands (Pg.74, Para 6).
T2: Consumer taste
continues to change, and Almost Extraordinary In order to avoid competition from
Pepsi must also continue to certain other rivals and as to retain loyal
change (Pg 69, Para 3). In consumer, the company should fast
United States, the responsive to the consumer
carbonated soft drinks preferences.
market has shown a
decline of 0.4 percent as
consumers shifted from soft
drinks to bottled water and
sports drinks (Pg. 74, Para).
T3: Fought the Cola wars,

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Coca Cola holds the largest Likely Major Able to give major impact towards
share of the U.S cola PepsiCo’s business, growth and
market at 41 percent (Pg74, position in the industry since Coca Cola
Para 5). Coca Cola is the is the closest competitor. Coca Cola has
largest producer and a strong brand reputation and even
distributor in the world and posses strong financial position if
is PepsiCo’s major compare to PepsiCo.
competitor (Pg. 76, Para 1).

Probability Consequences
Insignificant Minor Moderate Major Extraordinary
Almost Low Medium High High High
certain T2
1
Likely Low Medium Medium High High
T1 T3
1
Possible Low Low Medium High High

Unlikely Low Low Low Medium Medium

Rare Low Low Low Medium Medium

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3.3 EFE matrix

EFE Weight Ratings Weighted score

No. Opportunities
1. Steady overall growth for the last five years of 0.18 4 0.72
around 9 percent with sports drinks, bottled
water, and energy drinks showing the largest
growth (Pg.74, Para 4).
2. Growth in the carbonated drink market was largest 0.13 3 0.39
in Asia and Europe (Pg74, Para 4).
3. The market for these products requires 0.17 3 0.51
manufactures to constantly develop new products
to meet those changing demands (Pg74, Para 6)
No Threats
1. The downturn in the economy has also affected the 0.16 3 0.48
sales of colas and water as some consumers have
switched to store brands and tap water as
cheaper alternatives to the national brands (Pg.74,
Para 6).
2. Consumer taste continues to change, and Pepsi 0.20 4 0.80
must also continue to change (Pg 69, Para 3). In
United States, the carbonated soft drinks market
has shown a decline of 0.4 percent as consumers
shifted from soft drinks to bottled water and
sports drinks (Pg. 74, Para).
3. Fought the Cola wars, Coca Cola holds the largest 0.16 3 0.48
share of the U.S cola market at 41 percent (Pg74,
Para 5). Coca Cola is the largest producer and
distributor in the world and is PepsiCo’s major
competitor (Pg. 76, Para 1).

Total
1 3.38

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4.0 Internal Assessment

4.1. Strengths & weaknesses

In order to choose the Strengths and weaknesses, I have classified the strength level into three
significant categories (Competence, Core Competence and Distinctive Competence). In this
case, Distinctive Competence will be chosen for further assessment as this category shows
that PepsiCo able to perform unique capabilities that distinguish the organisation from its
competitors .

No. Strengths
Competence
1. Pepsi has ventured into conglomerate diversification from van moving lines to sporting goods
to fast foods (Pg. 69, Para3).
2. PepsiCo must appeal to the ultimate consumer through extensive advertising and promotional
activities. This Pull marketing strategy is highly dependent on creative marketing and
development of catchy slogans along with Pepsi Cola brands (Pg. 70, Para 1).
3. PepsiCo recently offered $6billion to retake ownership of its two largest bottlers, Pepsi
Bottling Group (PBG) and Pepsi Americas(PAS) (Pg. 68, Para 5).
Core Competence
4. Bradham followed the example of Coca Cola and used the bottling franchise system in which
he produced the syrup and others bottled and distributed. This business model allowed for
quick expansion and market penetration (Pg.69, Para69).
5. Pepsi and Coke become the largest worldwide producer of non-alcoholic beverages (Pg. 69,
Para3)
6. PepsiCo., Inc. is indeed a large company and is defined in the 10K as “a leading global
beverage………….. in approximately 200 countries with largest operations in North America
(Unites States and Canada) Mexico and United Kingdom (Pg. 69, Para5)
Distinctive Competence
7. Doubled the size of its bottle to 12 ounces, charging one nickel, when the standard was
6ounces. This low- cost differentiation strategy proved very successful and become a major
player in Cola industry (Pg.69, Para 2)

8. Pepsi seems to be developing synergy between product categories with breakfast foods, and
non alcoholic beverage markets and at the same time moving into the water and sport
beverage market.(Pg69, Para3). These combinations and promotions allow PepsiCo’s bottlers
enhanced ability to gain retail shelf space (Pg. 78, Para 4).

9. Pepsi continues to expand its markets in beverage through market penetration, mergers and
acquisitions (Pg. 69, Para6). Acquired Amacoco Nordeste Ltda and Amacoco Sudeste Ltda,
Brazil largest makers of packaged coconut water drinks and is expanding its presence in South
America’s largest nation (Pg. 78, Para 6).

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No. Weaknesses Justification

1. Highly dependent on supplies Most Incompetence Compare to PepsiCo closest
of clean water (Pg.74, Para 6). competitor Coca Cola,
PepsiCo should be able to
establish its own water
sources as producing
contaminated carbonated
drink results to damage
PepsiCo brand reputation.
2. Cost of sales has increased as Most Incompetence
would be expected, net As Coca Cola posses strong
income has decreased, return financial position, PepsiCo
on assets has dropped , encountered financial
inventory turnover has problem that need to be
decreased and long term resolved. This financial
debt has increased. The instability gives impact
towards PepsiCo performance
trends might indicate future
and profitability in future.
problem areas.(Pg.73, Para1).
3. Force PepsiCo to innovate Most Incompetence As meeting consumer
new products and at the demands is critical in this
same time re-evaluate industry, innovation is the key
current product offerings success for PepsiCo
(Pg.78, Para4).

4.2 IFE Matrix

IFE Weight Ratings Weighted score

No. Strengths
1. Doubled the size of its bottle to 12 ounces, 0.22 4 0.88
charging one nickel, when the standard was
6ounces. This low- cost differentiation strategy
proved very successful and become a major player
in Cola industry (Pg.69, Para 2)

2. Pepsi seems to be developing synergy between 0.16 3 0.48

product categories with breakfast foods, and non
alcoholic beverage markets and at the same time
moving into the water and sport beverage
market.(Pg69, Para3). These combinations and
promotions allow PepsiCo’s bottlers enhanced
ability to gain retail shelf space (Pg. 78, Para 4).

3. Pepsi continues to expand its markets in beverage 0.20 4 0.80

through market penetration, mergers and
acquisitions (Pg. 69, Para6). Acquired Amacoco
Nordeste Ltda and Amacoco Sudeste Ltda, Brazil
largest makers of packaged coconut water drinks
and is expanding its presence in South America’s
largest nation (Pg. 78, Para 6).

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No. Weaknesses
1. Highly dependent on supplies of clean water 0.18 1 0.18
(Pg.74, Para 6).
2. Cost of sales has increased as would be expected, 0.12 1 0.12
net income has decreased, return on assets has
dropped , inventory turnover has decreased and
long term debt has increased. The trends might
indicate future problem areas.(Pg.73, Para1).
3. Force PepsiCo to innovate new products and at the 0.12 2 0.24
same time re-evaluate current product offerings
(Pg.78, Para4).
Total 1 2.70

4.3 Value Chain Analysis (Non-Alcoholic beverages Segment)

Value Chain provides a model of how PepsiCo, makes revenue and profit from the raw
materials. The facts in Value chain is the critical facts based on an internal assessment.

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Culture Pepsi’s desire to own its own bottlers is to spur its non-carbonated health and
wellness products, which are often smaller volume, slower moving products (Pg.
68, Para 5). And in everything we do, we strive for honesty, fairness and
integrity. At PepsiCo, we’re committed to achieving business and financial success
while leaving a positive imprint on society-delivering what we call Performance
with Purpose. (Pepsi Co Mission &Vision, March 2009).

Management PepsiCo recently offered $6billion to retake ownership of its two largest bottlers,
Pepsi Bottling Group (PBG) and Pepsi Americas(PAS) (Pg. 68, Para 5). Pepsi has
ventured into conglomerate diversification from van moving lines to sporting
goods to fast foods (Pg. 69, Para3). PepsiCo is organised using three business units
of PepsiCo Americas Foods, PepsiCo America beverages and PepsiCo
International. (Pg. 69, Para7).

Finance First quarter 2009 PepsiCo’s net revenue of $8,263 million were down $70 million
from the same quarter in 2008 (Pg.68,Para2). PepsiCo invest $1bilion in Russia
over the next three years, bringing its total investment to$4billion over a ten year
time span. PepsiCo will also invest over $1billion in China over the next 4 years
(Pg.68, Para4) .

Production PepsiCo opened a new factory in Shanghai in June 2009and plans to open another
five plants in China over the next two year. The new plant will manufacture Pepsi
Cola, Mountain Dew, Gatorade, Tropicana juices and bottled water. The new
Pepsi plant uses 22 percent less water and 23 percent less energy than the
average Pepsi plant in China (Pg.68, Para3). PepsiCo control costs by decreasing
cost of goods sold by $90million (Pg.68,Para2). Initiated projects to increase
recycled materials and reduce materials used in packaging (Pg.74,Para2).

R&D/ MIS Appealing Web pages with the latest ads and product-related games (Pg.70, Para2).

Raw Production/ Product/ Service Marketing Distribution

Material Operation

The principal PepsiCo results Bradham followed Pepsi and Coke become PBG and PAS
continued the down the largest worldwide distribute
ingredient of the example of Coca
ward trend with producer of non- nearly 75
its primary beverage volume Cola and used the alcoholic beverages
percent of
product is down 6 percent. bottling franchise (Pg. 69, Para3).
However international PepsiCo…. in Pepsi drinks in
water…devel system in which he the United
beverages volume was approximately 200
oped countries up 6 percent (Pg.68, produced the syrup countries with largest States,
(Pg.74, Para2). Para2). Loft doubled and others bottled operations in North excluding
the size of its bottle and distributed America Gatorade (Pg.
to 12 ounces, Mexico and United 68, Para5).
charging one nickel, (Pg.69, Para69). . Kingdom (Pg. 69,
PepsiCo works
when the standard was The company Para5). PepsiCo must
6ounces. This low- appeal to the ultimate closely with its
produces Mountain
cost differentiation customer through bottlers and
strategy proved very Dew, Mug Root extensive advertising retailers
successful (Pg.69, Beer, Sierra Mist, and promotional (Pg.70,Para2).
Para 2). Slice, Aquafina, activities. This pull Distribute the
Pepsi manufacture the marketing strategy finished
concentrates and
Dola Juices and highly dependent on
SoBe (Pg.69, Para4). products to
syrups which are then creative marketing and
sold to bottlers ( development of catchy grocery stores,
Developed liquid
Pg.74, Para 6). slogans(Pg70, Para1). convenience
refreshment products
Operates in Canada, Uses all available media stores,
Latin America, that are light, calorie to promote its products restaurant and
Europe, Middle East, free, sugar free, and attempts to attract vending
Asia, Northern Asia, caffeine free, sports younger consumers
machines
Australia and Asia through Web-related
Pacific (Pg. 69, and energy directed media such as You tube (Pg.74, Para6).
Para5). and flavoured and have appealing
(Pepsi, Voltage, Web pages with the
latest ads and product
Aquafina) (Pg. 70, related games (Pg.70,
Para1) Para2).

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Value Chain Flowchart

(Non-Alcoholic beverages Segment):

Received Raw Products:

materials from Manufacturing
(concentrate and Serves non-alcoholic beverage markets: Pepsi-Cola,
Supplier Mountain Dew, Mug Root Beer, Sierra Mist, Slice, Aquafina,
(The principal syrups)
Dola Juices and SoBe projectors, Gatorade, Tropicana juices
ingredient is
water) &bottled water

Marketing efforts: (Value Propositioning, brand development and

management, market development, Channel management).
Spent heavily on sales incentives, discounts, advertising and promotions.
Works closely with bottlers and retailers in promoting and advertising its products.
Creates memorable and catchy slogans to attract and hold consumers.

Service:
 Customer liaison
 Distributor liaison
 Product and service liability

Customers/ Retailers Distribution (Value Delivery):

(Its major customers are large PBG and PAS distribute nearly 75
retailers Wall Mart) percent of Pepsi drinks in the United
States, excluding Gatorade (Pg. 68,
Para5). Bottlers Distribute the finished
Consumers products to grocery stores, convenience
stores, restaurant and vending machines
(Pg.74, Para6).

Reference:

Process Flow :
Information and Money :
Flow

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5.0 Strategy Formulation

5.1. SWOT Matrix
SWOT Matrix Opportunities Threats
1. Steady overall growth for 1. The downturn in the
the last five years of around 9 economy has also affected the
percent with sports drinks, sales of colas and water as
bottled water, and energy some consumers have
drinks showing the largest switched to store brands and
growth (Pg.74, Para 4). tap water as cheaper
alternatives to the national
brands (Pg.74, Para 6).
2. Growth in the carbonated 2. Consumer taste continues
drink market was largest in to change, and Pepsi must also
Asia and Europe (Pg74, Para continue to change (Pg 69,
4). Para 3). In United States, the
carbonated soft drinks market
has shown a decline of 0.4
percent as consumers shifted
from soft drinks to bottled
water and sports drinks (Pg.
74, Para).
3. The market for these 3. Fought the Cola wars, Coca
products requires Cola holds the largest share of
manufactures to constantly the U.S cola market at 41
develop new products to meet percent (Pg74, Para 5). Coca
those changing demands (Pg74, Cola is the largest producer
Para 6) and distributor in the world
and is PepsiCo’s major
competitor (Pg. 76, Para 1).
Strengths SO Matches ST Matches
1. Doubled the size of its bottle to 12 ST1: Innovate product line by
ounces, charging one nickel, when the offering healthier alternatives
standard was 6ounces. This low- cost SO1 : Utilize Total Quality in order to differentiate
differentiation strategy proved very Management Practice aiming for PepsiCo from Coca Cola
successful and become a major player in high quality of end products by (S1,T3)
Cola industry (Pg.69, Para 2) simultaneously driving down cost
(S1, O1,03)

2. Pepsi seems to be developing synergy

between product categories with breakfast SO2: Develop Innovative ST2: Satisfy the buyer's
foods, and non alcoholic beverage Customer-Oriented Product by requirements by offering more
markets and at the same time moving into relying on well-research promotions and discounts to
the water and sport beverage customer needs to respond prevent sales from decreasing
market.(Pg69, Para3). These towards the growing demand of (S2,T1)
combinations and promotions allow sports drinks, bottled water
PepsiCo’s bottlers enhanced ability to and energy drinks (S3,O1,03)
gain retail shelf space (Pg. 78, Para 4).
3. Pepsi continues to expand its markets
in beverage through market penetration,
mergers and acquisitions (Pg. 69, Para6).
Acquired Amacoco Nordeste Ltda and
Amacoco Sudeste Ltda, Brazil largest
makers of packaged coconut water
drinks and is expanding its presence in
South America’s largest nation (Pg. 78,
Para 6).

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Weaknesses WO Matches WT Matches

1. This company highly dependent on Improve business sales by Forecast the trends by relying
supplies of clean water (Pg.74, Para 6). responding towards increasing on marketing intelligence and
demands for sports drinks, Research & Development to
bottled water and energy drinks distinctively different from the
(W2,O1) rest of the market.(W1,W3,T3)
2. Cost of sales has increased as would Increase presence in the
be expected, net income has decreased, International market and Adjust production of bottlers
return on assets has dropped , inventory expand Pepsi Soda product in with downturn in economy by
turnover has decreased and long term Asia and Europe in order to utilising flexible manufacturing
debt has increased. The trends might improve financial stability system to create differentiated
indicate future problem areas.(Pg.73, (W2,O2) products at low cost
Para1). (W2,W3,T1)

3. Force PepsiCo to innovate new

products and at the same time re-
evaluate current product offerings
(Pg.78, Para4).

SWOT conclusion:

Based on the SWOT analysis the corporate level and business level strategies are as follows:

Corporate Level Strategy

No Type of strategy
1. Cost Leadership
(Type 2) SO1 : Utilize Total Quality Management Practice aiming for
high quality of end products by simultaneously driving down cost
(S1, O1,03)

Business Level Strategy

No Type of strategy
1. SO2: Develop Innovative Customer-Oriented Product by relying
Product on well-research customer needs to respond towards the growing
Development demand of sports drinks, bottled water and energy drinks
(S3,O1,03)

*IE matrix will be used in the analysis in order to support the company strategy chosen
from SWOT analysis.

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5.2 IE Matrix

The IFE Total Weighted Score

Strong Average Weak

1.0
4.0 3.0 2.0
The EFE Total Weighted Score

High Grow and Build

3.0
Medium

2.0
Low

1.0

EFE IFE

3.38 2.70

The division falls into cell II which can be described as grow and build. Intensive strategies
such as product development can be most appropriate for this division.

5.3 Strategy Formulation Conclusion

IE matrix results, shows that PepsiCo should Grow and Build its position. This means
intensive and aggressive tactical strategies should be done. Therefore, related strategies with
grow and build (market penetration, market development, and product development) will be
extracted from S/O strategies (SWOT Matrix). These alternative strategies:

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Original Sentences:

Business Level Strategy  Cost Leadership (Type 2): SO1 : Utilize Total Quality
Management Practice aiming for high quality of end products by simultaneously driving
down cost (S1, O1,03)

Corporate Level Strategy  Product Development: SO2: Develop Innovative Customer-

Oriented Product by relying on well-research customer needs to respond towards the growing
demand of sports drinks, bottled water and energy drinks (S3,O1,03)

6.0 Strategy Implementation

6.1 Operation Management Process

The theme of Operational Management Processes:

Implement TQM practice for lowering the costs of production with better quality of
produced products
Produce new healthier drinks and sports drinks from well-research customer needs

6.1.1 Supply Management Process

Define the objectives in Supply Processes

Reduce the cost of ownership for raw materials of sports drinks, bottled water and
energy drinks
Achieve Just-In-Time supplier capability
Implement efficient supplier quality management

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Objective Balance Scorecard (BSC)

Measure Target

Reduce the cost of ownership Price/cost of product, 10% reduction target

for raw materials of sports customer profitability
5% Increase in terms of customer
drinks, bottled water and
energy drinks profitability (compare to
competitor selling price)
Achieve Just-In-Time Quick response time, 5 % Increase in terms of speeding
supplier capability On-time delivery, correct quantity, up customer response while
Percent of late orders minimizing inventories (compare
flexibility to respond to unexpected to year before)
demand changes, willingness to
participate in PepsiCo new product
development

Implement efficient supplier Supplier feedback survey, supplier Zero defect production
quality management performance survey, quality level,
presence of certification/ other
documentation
Percent of perfect order received,
percent of supplier qualified to
deliver without incoming
inspection

Linkage to Production
Operation Management Processes (Supply) Production

Objectives

Reduce the cost of ownership for LPCSDBW&ED

raw materials of sports drinks,
bottled water and energy drinks

Achieve Just-In-Time supplier LPCSDBW&ED

capability

Implement efficient supplier EQCNPL

quality management

Note:
1. LPCSDBW&ED = Lower Production Costs of Sports Drinks, Bottled Water &
Energy Drinks
2. EQFNPL = Ensure Quality Control for New Production Line

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Linkage to Risk Management

Operation Management Processes (Supply) Risk Management

Objectives

Reduce the cost of ownership for raw

materials of sports drinks, bottled
water and energy drinks

Achieve Just-In-Time supplier MSR, MTR1

capability

Implement efficient supplier quality MQR1,

management MOR1

Note (Supply)
MQR1 = Manage Quality Risk
MTR1= Manage Technological Risk
MOR1 = Manage Operational Risk
MSR = Manage Supplier Risk

Linkage to Customer Perspective

Operation Management Customer Perspective

Processes (Supply) (Customer Value Proposition)
Price Quality Availability Selection Brand

Objectives
OLPV IPA FOPSC ICS
Reduce the cost of
ownership for raw
materials of sports
drinks, bottled water
and energy drinks

Achieve Just-In-Time LPC EQ IPA FOQSC ERBI*

supplier capability

Implement efficient EQ IPR FOQSC ERBI*

supplier quality

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management

Note: (CVP)

OLPV, IPA, FOPSC, ICS = Offer lower price with Value, Increase
Product Availability, Focus on Price Sensitive Customer, Increase
Customer Satisfaction
LPC = Lower Production Costs
FOQSC = Focus On Quality Sensitive Customer
ERBI* = Enhance Reputation on Brand Image
IPV = Increase Product Variety
IPR = Increase product Reliability
EQ = Enhance Quality

*indirect objective through Customer Management processes

Linkage to Financial Perspective

Operation Management Processes Financial Perspective

(Supply)

Improve Increase Expand Enhance

Cost Assets Revenue Customer
Objectives Structure Utilization Opportunities Value

LPC IBV DCC

Reduce the cost of ownership
for raw materials of sports
drinks, bottled water and
energy drinks

Achieve Just-In-Time supplier MIC TD,MROI GHS, IOM

capability

Implement efficient supplier RDC, EQIM IRG LTR-

quality management RCSE LT,
OCC,
PQP

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Note (Supply)
LPC = Lower Production Costs
IBV = Increase Business Volume
DCC = Decrease Customer Costs
ISPSC = Increase Satisfaction Among Price Sensitive Customers
GHS, IOM = Generate Higher Sell, Increase Operating Margin
MIC = Minimum Inventory Cost
TD = Timely Delivery
OCC = Offer Customers Convenience
PQP = Provide Quality Product
MROI = Maximize Return on Investment
RDC, RCSE = Reduce Defect Cost, Reduce the Cost of Supplier Errors
LTR-LT = Long Term Relationship-Loyalty and Trust
MSCQ = Maximize supply Chain Quality
RWC= Reduce Waste Cost
IRG = Increase revenue Growth

Those objectives should later be carried out to the Financial Pers. accumulatively

Linkage to Learning & Growth

Operation Management Processes (Supply) Learning & Growth

Objectives

Human Information Organizational

Capital Capital Capital

Reduce the cost of ownership for raw LPST,ACBMSC DTFPI IFS

materials of sports drinks, bottled
water and energy drinks

Achieve Just-In-Time supplier LPST,ACBMSC DTFPI ECA , IFS,FQC

capability

Implement efficient supplier quality DSK,DSM DFC,DPC,QPC IQMS,IFS, FQC

management

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Note:
LPST,ACBMSC =Learning the Principles, Skills and Technologies ,
Adequate Communications between the Members of Supply Chain
ECA,IFS, FQC = Enhance Completive Advantage, Improve Finance Situation, Foster
Quality Culture
DTFPI = Develop Technology for Process Improvement
ESCE,QPC = Enhance Supply chain Effectiveness, Quality Policies Conformity
QFD,QPC = Quality Function Deployment, Quality Policy Conformity
ECA = Enhance Completive Advantage
DSK,DSM = Develop Self-Knowledge, Develop Self-Motion
DFC,DPC,QPC= Develop Fishbone Chart, Develop Pareto Chart, Quality Policies &
Conformity
IQMS,IFS,FQC,ICS = Improve Quality Management System, Improve Finance Situation,
Foster Quality Culture

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6.1.2 Production Management Process

Define the objectives in Production Processes

Lower Production Costs of Sports Drinks, Bottled Water & Energy Drinks (Linkage
from Supply Process)
Ensure Quality of Finished Product (Linkage from Supply Process)
Produce Innovative products based on well-research customer needs (New
Objectives)

Objective Balance Scorecard (BSC)

Measure Target
Lower Production Costs of Cost per unit of Output, Increase 15% of company
Sports Drinks, Bottled Percent of operating income, profitability (compared to
Water & Energy Drinks Percent of cash flow improvement year before)
Ensure Quality of Finished Percent of defect reduction Zero defect
Product Number of customer complains,
Survey of customer satisfaction,
Percent of shipments returned due
to poor quality
Produce Innovative Percent of sales obtained from new Increase sales from new
products based on well- products, products,
research customer needs Number of New Product Launches, customer needs met,
Measure of how well the company customer satisfaction
identifies the customers’ future customer retention
need

Linkage to Distribution
Operation Management Processes Distribution
(Production)
Objectives

Lower Production Costs of Sports LCS

Drinks, Bottled Water & Energy Drinks
Ensure Quality of Finished Product PSDBWEDMQE

Produce Innovative products based on

well-research customer needs

Note:
LCS=lower Cost to Serve
PSDBWEDMQE = Production of Sports Drinks, Bottled Water and Energy Drinks Meet Quality
Expectation

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Linkage to Risk Management

Operation Management Processes Risk Management

(Production)
Objectives

Lower Production Costs of Sports MOR2

Drinks, Bottled Water & Energy Drinks
Ensure Quality of Finished Product MQR2

Produce Innovative products based on MFCR MTR2

well-research customer needs

Note (Production)
MOR2 = Manage Operational Risk
MTR2= Manage Technological Risk
MFCR = Manage Forecast Cost Risk
MQR2 = Manage Quality Risk

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Linkage to Customer Perspective

Operation Management Processes Customer Perspective

(Production) (Customer Value Proposition)
Objectives

Price Quality Availability Selection Brand

Lower Production Costs of LCC HPA FOPSC EBV
Sports Drinks, Bottled Water
& Energy Drinks
Ensure Quality of Finished ORP EQP HPA,DOT FOQSC EBV,
Product LTR-
CL&T
Produce Innovative products ORP ICL RRCP FOCHL EBV,
based on well-research LTR-
customer needs CL&T

Note:
LCC =Lower customer’s cost
ORP = Offer Reasonable Price
FOPSC = Focus on Price Sensitive Customers
FOQSC = Focus on Quality Sensitive Customers
FOCHL = Focus on Consumers Healthy Lifestyle
EQP = Excellence Quality Product
EBV = Enhance Brand Value
DOT = Deliver on Time
HPA = High Product Availability
ICL = Increase Customer Loyalty
RRCP = Rapid Respond to consumer Preferences
LTR-CL&T = Long Term Relationship –Customer Loyalty & Trust

* Those objectives should later be carried out to Customer Pers. Accumulatively.

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Linkage to Financial Perspective

Operation Management Financial Perspective

Processes (Production)
Objectives

Improve Cost Increase Expand Enhance

Structure Assets Revenue Customer
Utilization Opportunities Value
Lower Production Costs of DPC,RIC, MROI, ISG,
Sports Drinks, Bottled RWC, IOI IPE&P IRFNPS ICP
Water & Energy Drinks MFAU
Ensure Quality of Finished RD, RWC IRMCE ICP, ICS
Product
Produce Innovative IRRRCP,
products based on well- IRCPI ICS
research customer needs

Note
DPC, RIC, RWC, IOI = Decrease Production Costs , Reduce Incurred Cost, Increase Operating
Income
RD, RWC = Reduce Defects, Reduce Waste Costs
MROI, IPE&P = Maximizing Return on Investment, Increase Process Efficiency
&Productivity
ISG = Increase Sales Growth
IRMCE = Increase Revenue for Meeting Customer Expectation
IRCPI = Increase Revenue for continual Product Improvement
IRRRCP = Increase Revenue for Rapidly Respond to Consumer Preferences
ICP = Increase Customer Profitability
ICS = Increase Customer Satisfaction
MFAU = Maximize fixed asset utilization
IRFNPS = Increase Revenue From Number of Product Sold

*Those objectives should later be carried out to the Financial Pers. Accumulatively

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Linkage to Learning & Growth Perspective

Operation Management Processes Learning & Growth

(Production)
Objectives

Human Information Organizational

Capital Capital Capital
Lower Production Costs of Sports ISTQM,CEPI, IABC DTQMC,IOE,
Drinks, Bottled Water & Energy Drinks ETITQME IFS
Ensure Quality of Finished Product ETIQA, ICPI, ICSL, IQC,
DSK,DSM, GMP,HACCP IQMS,GCA
PHACCPTP,
PGMPTP
Produce Innovative products based on DCS ICSL, ITFPI DP, FIC,
well-research customer needs CCII&C,
DC-OC

Note:
ISTQM, CEPI, ETITQME= Improve Skills in Total Quality Management, Competence Employee in
Process Improvement, Employees Training in TQM Environment
IABC = Implement Activity-Based Costing
DTQMC, IOE, IFS = Improve Operational Efficiency, Improve Finance Situation, Develop TQM
Culture
ITFPI = Improve Technology that Facilitates Product Improvement
DP, FIC, CCII&C, DC-OC = Develop Patent, Foster Innovation Culture, Culture of Continuous
Improvement, Innovation and Creativity, Develop Customer-Oriented Culture
ETIQA, DSK, DSM = Employees Training in Quality Assurance, Develop Self-Knowledge, Develop Self-
Motion
ICPI, ICSL = Improve Customer Preferences Information , Improve Customer Satisfaction
Level
IQC, IQMS, GCA = Improve Quality Culture, Improve Quality Management System, Gain
Competitive Advantage
DCS = Develop Creativity Skills
ICSL, ITFPI = Improve Customer Satisfaction Level, Improve Technology that Facilitates
Product Improvement
PHACCPTP = Provide Hazards Analysis Critical Control Points Training Program
PGMPTP = Provide Good Manufacturing Practice Training Program
GMP = Good Manufacturing Practices
HACCP = Hazard Analysis Critical Control Points

*Those Objectives should be carried out to the Learning &Growth Perspective accumulatively

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6.1.3 Distribution Process

Define the objectives in Distribution Processes

Lower Cost to Serve (Linkage from Production)
Production of Sports Drinks, Bottled Water and Energy Drinks Meet Quality
Expectation (Linkage from Production)
Responsively Delivery Capability (New Objective)

Objective Balance Scorecard (BSC)

Measure Target
Lower Cost to Serve *ABC cost of storage and delivery 15 % Increase in Sales
to customers, Growth, Decrease Cycle
Cycle Time Time
Production of Sports Drinks, Percentage of shipments returned 5 % decrease of shipment
Bottled Water and Energy Due to poor quality, Number of returned, Increase quality
Drinks Meet Quality items reworked
Expectation
Responsively Delivery Percent of Delivery On-Time Increase On-Time Delivery
Capability Number of overdue deliveries,
Customer Response Time

Linkage to Risk Management

Operation Management Processes Risk Management
(Distribution)
Objectives
Lower Cost to Serve MOR3
Production of Sports Drinks, Bottled Water MQR3
and Energy Drinks Meet Quality
Expectation
Responsively Delivery Capability MDR,MTR3

Note (Distribution)
MTR3 = Manage Technology Risk
MOR3= Manage Operational Risk
MDR = Manage Distribution Risk
MQR3 =Manage Quality Risk

Those objectives should later be carried out to the Risk Management as

accumulative Objectives.

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Linkage to Customer Perspective

Operation Management Customer Perspective (Customer Value Proposition)

Processes (Distribution) Price Quality Availability Selection Brand
Objectives
Lower Cost to Serve DPP HPA FOPSC EBI
Production of Sports Drinks, EQ HPA FOQSC, ILTBN
Bottled Water and Energy FOCHL
Drinks Meet Quality
Expectation
Responsively Delivery EQ DOT ILTBN
Capability

Note:
HPA = High Product Availability
DOT = Deliver on Time
EQ = Excellence Quality
FOPSC = Focus on Price Sensitive Customers
FOQSC = Focus on Quality Sensitive Customers
FOCHL = Focus on Consumer Healthier Lifestyle
BPA = Broader Range of Products
ICT =Increase Customer Trust
EBI = Enhance Brand Image
ILTBN = Increase Loyalty to Brand Name
MPQ = Maintain Product Quality

Those objectives should later be carried out to Customer Pers. Cumulatively.

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Linkage to Financial Perspective

Operation Management Financial Perspective

Processes (Distribution) Improve Increase Expand Enhance
Cost Assets Revenue Customer
Structure Utilization Opportunities Value
Objectives
Lower Cost to Serve EVA, DCGS ICF,IRPSC,ISG ICP
Production of Sports Drinks, Bottled IRMCE, IRQSC
Water and Energy Drinks Meet
Quality Expectation
Responsively Delivery Capability

Note
EVA,DCGS = Economic Value Added, Decrease Cost of Goods Sold
ICF, IRPSC,DFG = Increase Cash Flow, Increase Revenue of Price Sensitive
Customers, Increase Sale Growth
IRQSC = Increase Revenue of Quality Sensitive Customers
IRMCE = Increase Revenue for Meeting Customer Expectation
IRQSC = Increase Revenue of Quality Sensitive Customers
ICP = Increase Customer Profitability

Those objectives should later be carried out to the Financial Pers. Cumulatively

Linkage to Learning & Growth Perspective

Operation Management Processes Learning & Growth
(Distribution) Human Information Organizational
Capital Capital Capital
Objectives
Lower Cost to Serve MSC IFS
Production of Sports Drinks, Bottled Water CEIQC IQAP, SOCS, IQMS, FQC
and Energy Drinks Meet Quality Expectation QPC
Responsively Delivery Capability CEDPI DTFPI IQMS

Note
CEDPI = Competence Employees in Distribution Process Improvement
IFS = Improve Finance Situation
MSC = Maintain Staff Competence
CEIQC = Competence Employees in Quality Control
IQAP, SOCS,QPC = Improvement on Quality Assurance Policies, Survey on
Customer Satisfaction, Quality Policy Conformity
DTFPI = Develop Technology for Process Improvement
IQMS, FQC = Improve Quality Management System, Foster Quality Culture

Those Objectives should be carried out to the Learning &Growth Perspective cumulatively.

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6.1.4 Risk Management Process

Define the objectives in Risk Management Processes (Importing from previous

processes)

Note: (Supply)
1. MQR1 = Manage Quality Risk
2. MOR1 = Manage Operational Risk
3. MTR1= Manage Technological Risk
4. MSR = Manage Supplier Risk

Note: (Production)
1. MOR2 = Manage Operational Risk
2. MTR2= Manage Technological Risk
3. MFCR = Manage Forecast Cost Risk
4. MQR2 = Manage Quality Risk

Note: (Distribution)
1. MTR3 = Manage Technology Risk
2. MOR3= Manage Operational Risk
3. MDR = Manage Distribution Risk
4. MQR3 = Manage Quality Risk

Define the objectives in Risk Management Processes (New)

MFR= Manage Financial Risk

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Define the objectives in Risk Management Processes

1. MOR1 = Manage Operational Risk from Supply

2. MOR2 Manage Operational Risk from Production
3. MOR3= Manage Operational Risk from Distribution
4. MQR1 = Manage Quality Risk from Supply
5. MQR2 = Manage Quality Risk from Production
6. MQR3 = Manage Quality Risk from Distribution
7. MTR1= Manage Technological Risk from Supply
8. MTR2= Manage Technological Risk from Production
9. MTR3 = Manage Technology Risk from Distribution
10. MSR = Manage Supplier Risk from Supply
11. MDR = Manage Distribution Risk from Distribution
12. MFCR = Manage Forecast Cost Risk from Production
13. MFR = Manage Financial Risk

Linkages to Customer Perspective

Operation Customer Perspective (Customer Value Proposition)
management
process
Objectives Price Quality Availability Selection Service Partnership Brand

Manage FOPSDB JVP

Operational RRO WED EBI
P
Risk from
Supply
Manage RRO FOPSDB
Operational P WED EBI
Risk from
Production
Manage RRO EOTD FOPSDB
Operational P WED EBI
Risk from
Distribution
Manage EPQ FOHQ
Quality Risk SDBWED ICTL
from Supply
Manage EPQ FOHQ ICTL
Quality Risk SDBWED

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from
Production
Manage FOHQ
Quality Risk EPQ SDBWED ICTL
from
Distribution
Manage FOMTRR EBI
Technological PSDBWE
D
Risk from
Supply
Manage FOMTRP EBI
Technological SDBWED
Risk from
Production
Manage EOTD, FOMTRP EBI
Technological ESD SDBWED
Risk from
Distribution
Manage ASRMFPS JVP EBI
Supplier Risk DBWED
from Supply
Manage EOTD, OTDSDB JVP ICTL
Distribution ADR, WED
HPA
Risk from
Distribution
Manage EBI,
Forecast Cost FOCHL ICTL
Risk from
Production
Manage
Financial Risk RCC FOPSC EBI

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Note
RROP =Reduce The Risk of Overpaying
FOHQSDBWED = Focus on High Quality Sports Drinks, Bottled
Water and Energy Drinks
FOPSDBWED = Focus on Production of Sports Drinks, Bottled Water
and Energy Drinks
FOMTRPSDBWED = Focus on Managing Technology Related to
Production of Sports Drinks, Bottled Water and
Energy Drinks
ASRMFPSDBWED = Adequate Supply of Raw Material for
Production of Sports Drinks, Bottled Water and
Energy Drinks
OTDSPBWED = On-Time Delivery of Sports Drinks, Bottled Water and
Energy Drinks
FOPSC = Focus on Price Sensitive Customers
FOCHL = Focus on Consumer Healthier Lifestyle
ESD = Ensure Secure Delivery
EOTD = Ensure On-Time Delivery
EBI = Enhance Brand Image
EPQ= Excellence Product Quality
ICTL = Increase Customer Trust and Loyalty
RCC = Reduce Customer Cost
HPA = High Product Availability
ADR = Avoid Delay Risk
JVP = Joint Venture Partners

Those objectives should later be carried out to Customer Pers. Accumulatively.

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Linkage to Financial Perspective

Operation Financial Perspective

management
process
Objectives Improve Cost Increase Expand Enhance
Structure Assets Revenue Customer Value
Utilization Opportunities
Manage Operational LIC, RSCC ICVTROC
Risk from Supply DOCFPSDBWED
Manage Operational LIC, ROC, MFAU IBV, ICP ICVTROC, SPSC
Risk from Production DOCFPSDB,WED IMS
Manage Operational LIC, ICVTROC
Risk from DOCFPSDBWED
Distribution
Manage Quality Risk IRTHQP ICSL, SQSC
from Supply
Manage Quality Risk IRTHQP ICSL, SQSC
from Production
Manage Quality Risk IRTHQP ICSL, SQSC
from Distribution
Manage RSCC
Technological
Risk from Supply
Manage LIC
Technological Risk
from Production
Manage LIC IRTHTD OCC
Technological Risk
from Distribution
Manage Supplier RSCC IRFNC
Risk from Supply
Manage Distribution LIC OCC
Risk from
Distribution
Manage Forecast IRFMCD ICLL
Cost Risk from
Production
Manage Financial LIC, IROI IBV, IMS, ICP SPSC
Risk

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Note:

LIC = Less Incurred Cost

ROC = Reduce Operating Costs
RSCC = Reduce Supply Chain Costs
MFAU = Maximize fixed asset utilization
ICP = Improve Company Profitability
IRTHTD = Increase Revenue through High Technology Distribution
ICVTROC = Improve Customer Value Through Reduction of Operational Cost
SPSC = Satisfy Price Sensitive Customers
SQSC = Satisfy Quality Sensitive Customers
IRTHQP = Increase Revenue Through High Quality Product
IRFMCD = Increase Revenue for Meeting Customer Demands
DOCFPSDBWED = Decrease Operational Costs from Production of Sports
Drinks, Bottled Water and Energy Drinks
IBV = Increase Business Volume
ICSL = Increase Customer Satisfaction Level
ICLL = Increase Customer Loyalty Level
OCC = Offer Customers Convenience
IMS = Increase Market Share
IROI = Increase Return On Investment

Linkage to Learning &Growth Perspective

Operation Learning & Growth
management
process
Objectives Human Capital Information Capital Organizational
Capital
Manage PETQMTR, DCE ESC, IKS, ISCS DTQMC ,IOE, IKM
Operational Risk
from Supply
Manage PETQMTR, DCE, IKS, GMP, HACCP DTQMC,IOE, IKM
Operational Risk PHACCPTP, PGMPTP
from Production
Manage PETQMTP ,DCE IKS DTQMC ,
Operational Risk IOE, IKM
from Distribution
Manage Quality DEKOQMS, ESC, IKS, GMP, HACCP DTQMC ,
Risk from Supply PETQMTP, PHACCPTP, IKM
PGMPTP
Manage Quality DEKOQMS, IKS, GMP, HACCP DTQMC,
Risk from PETQMTP, PHACCPTP, IKM
PGMPTP
Production
Manage Quality DEKOQMS, IKS, IDP, GMP, HACCP DTQMC,
Risk from PETQMTP, PHACCPTP, IKM

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Distribution PGMPTP
Manage PETTMT ESC, IKS IKM
Technological
Risk from
Supply
Manage PETTMT IKS IKM
Technological Risk
from Production
Manage PETTMT IKS, IDP IDP, IKM
Technological Risk
from Distribution
Manage Supplier IKS, ISCS IKM
Risk from Supply
Manage IKS, IDP IKM
Distribution Risk
from Distribution
Manage DCE RDTNP DC-OC, IKM
Forecast Cost
Risk from
Production
Manage Financial RCE IKMS EPRBE
Risk

Note:
DEKOQMS = Develop Employees Knowledge on Quality Management System
PETQMTP = Provide Essential Total Quality Management Training Program
PETFTH = Provide Extensive Training to Manage Technology
PHACCPTP = Provide Hazards Analysis Critical Control Points Training Program
PGMPTP = Provide Good Manufacturing Practice Training Program
ESC = Enhance Supply Chain
DTQMC = Develop TQM Culture
DC-OC = Develop Customer –Oriented Culture
IKS = Increase Knowledge Sharing
IKM = Improve Knowledge Management
IOE = Improve Operation Efficiency
IDP = Improve Distribution Process
RDTNP = Reduce Development Time of New Products
RCE = Retain Competence Employees
ISCS = Improve Supply Chain System
EPRBE = Enhance Performance Retain Better Employees
IKMS = Improve Knowledge Management System
GMP = Good Manufacturing Practice
HACCP = Hazard Analysis Critical Control Points

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Summarizing the objectives Operation Management Processes

No Operation
Management Objectives Measure Target
Processes
1
10% reduction
Reduce the cost of
target (ideal
ownership for raw Price/cost of product,
materials of sports Customer Profitability standard)
drinks, bottled water
5% Increase in
and energy drinks
terms of
customer
profitability
(compare to
competitor selling
Supply
price)
2
Quick response time, 5 % Increase in
On-time delivery, correct terms of speeding
quantity, up customer
Achieve Just-In-Time Percent of late orders response while
supplier capability flexibility to respond to minimizing
unexpected demand changes, inventories
willingness to participate in (compare to year
PepsiCo new product before)
development

3
Supplier feedback survey,
supplier performance survey,
quality level, presence of
certification/ other documentation Zero Defect
Percent of perfect order received, Production
Implement efficient percent of supplier qualified to
supplier quality deliver without incoming
management inspection

5 Cost per unit of Output, Increase 15% of

Lower Production Costs of Percent of operating income, company
Sports Drinks, Bottled Water Percent of cash flow improvement profitability
& Energy Drinks (compared to year
Operation before)
7 and Percent of defect reduction Zero defect
Production Ensure Quality of Finished Number of customer complains,
Product Survey of customer satisfaction,
Percent of shipments returned due
to poor quality
8 Increase sales from
Percent of sales obtained from new products,
Produce Innovative products new products, customer needs
based on well-research Number of New Product met,
customer needs Launches, customer
Measure of how well the satisfaction

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company identifies the customers’ customer retention

future need

9 Lower Cost to Serve *ABC cost of storage and 15 % Increase in

delivery to customers, Sales Growth,
Cycle Time Decrease Cycle
Distribution Time
10 Production of Sports Drinks, Percentage of shipments returned 5 % decrease of
Bottled Water and Energy Due to poor quality, Number of shipment returned,
Drinks Meet Quality items reworked Increase quality
Expectation
11 Responsively Delivery Percent of Delivery On-Time Increase On-Time
Capability Number of overdue deliveries, Delivery ,
Customer Response Time, 5 % Increase in
Customer loyalty level terms of customer
retention level
(compare to year
before

Summarizing the objectives Operation Management Processes Linkages

No Processes Objectives Measure Target

SUPPLY:
1 Lower Production Costs Percent of supply chain target 10% cost
cost achieved reduction
target (ideal
standard)
2 Increase Business Volume Company market share 15% increase
in terms of
PepsiCo
market share
3 Decrease Customer Costs Customer cost ratio 5% Increase in
terms of
customer
profitability
(compare to
competitor
selling price)
4 Increase Satisfaction Among Price Sensitive Customer profitability 5% Increase in
terms of
Customers
Financial customer
profitability
Perspective (compare to
competitor
selling price
5 Generate Higher Sell, Increase Operating Customer growth, 15% increase
Profitability in terms of
Margin
PepsiCo
market share
6 Minimum Inventory Cost Ordering

7 Timely Delivery Relative Response Time,

time-based measures
8 Offer Customers Convenience Customer feedback survey

19 Provide Quality Product Quality-oriented measure, Met

defect rates customers’
Needs

PRODUCTION:

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10 Decrease Production Costs , Reduce Incurred

Cost per unit of sport drinks 10% cost
Cost, Increase Operating Income
production,
reduction
Cost per unit of bottled water
production, cost per unit of target (ideal
energy drinks production,
standard)
Non value-added costs
Percent of target cost
achieved,
Manufacturing cost,
warehousing cost,

11 Reduce Defects, Reduce Waste Costs Number of defect produced, Zero defects
Supply Chain cost of
ownership
12 Maximize supply Chain Quality Quality-oriented measures

13 Maximizing Return on Investment, Increase Profit margin, supply chain

cycle efficiency Customer
Process Efficiency &Productivity
margins
earned should
increase as the
length of the
relationship
increase

14 Increase Sales Growth Customer growth, Sales growth

Profitability Increase to
15%,
The sales for
any one
customer
should steadily
increase each
year
15 Increase Revenue for Meeting Customer Customer growth, Increase 15%
Profitability of company
Expectation
profitability
(compared to
year before)
16 Increase Revenue for continual Product Customer growth, Increase 15%
Profitability of company
Improvement
profitability
(compared to
year before)
17 Increase Revenue for Rapidly Respond to Customer growth, Increase 15%
Profitability of company
Consumer Preferences
profitability
(compared to
year before)
18 Increase Customer Profitability Customer profitability ratio 5 % Increase
in terms of
speeding up
customer
response while
minimizing
inventories
(compare to
year before)
19 Increase Customer Satisfaction Customer satisfaction Level, 5 % Increase
CVR in terms of
customer
satisfaction
level (compare
to year before)
20 Maximize fixed asset utilization Return on supply chain assets 10 % increase
in efficiently
use of its
assets
DISTRIBUTION:
21 Economic Value Added, Decrease Cost of Customer Value
Ratio, transportation cost,
Goods Sold
22 Increase Cash Flow, Increase Revenue of Profit margin

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Price Sensitive Customers

23 Increase Sales Growth Customer growth for sports Sales growth
drinks, bottled water and Increase to
energy drinks, Profitability 15%,
The sales for
any one
customer
should steadily
increase each
year
24 Increase Revenue of Quality Sensitive Customer growth, Each new
Profitability customers
Customers
added should
be profitable
25 Increase Revenue for Meeting Customer Customer growth, Each new
Profitability customers
Expectation
added should
be profitable
26 Increase Revenue of Quality Sensitive Customer growth, Each new
Profitability customers
Customers
added should
be profitable

SUPPLY:
27 Offer lower price with Value, Increase Customer Value 5% Increase in
Ratio, terms of
Product Availability, Focus on Price Sensitive
customer
Customer, Increase Customer Satisfaction profitability
(compare to
competitor
selling price)
28 Lower Production Costs Percent of target cost
achieved 10% cost
reduction
target (ideal
standard)

29 Focus On Quality Sensitive Customer Measure of customer

satisfaction level on product
quality
30 Enhance Reputation on Brand Image Measure of customer
perception in terms of
31 Customer Increase Product Variety
32 Perspective Increase product Reliability Number of defect Zero defects

33 Enhance Quality Quality-oriented measures

PRODUCTION:
34 Lower customer’s cost Non value-added costs, 5% Increase in
, cost per unit of production terms of
customer
profitability
(compare to
competitor
selling price)
35 Offer Reasonable Price Customer profitability ratio 5% Increase in
terms of
customer
profitability
(compare to
competitor
selling price)
36 Focus on Price Sensitive Customers Measure of consumer 5% Increase in
satisfaction in terms of selling terms of
price of energy drinks, bottled customer
water and sports drinks profitability
(compare to
competitor
selling price

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37 Focus on Quality Sensitive Customers Measure of consumer

acceptance on quality of sport
drinks, bottled water and
energy drinks produced
38 Focus on Consumers Healthy Lifestyle Customer Perception of Customer feels
Flexible Response, free to make
Measure of consumer customized
acceptance on sports drinks, choices
bottled water and energy
drinks produced
39 Excellence Quality Product Quality product checklist 5 % Increase
in terms of
customer
satisfaction
level (compare
to year before)
40 Enhance Brand Value Measure of customer
perception on PepsiCo brand
image of healthier drinks
41 Deliver on Time Relative Customer Order
Response Time
42 High Product Availability Number of product delayed

43 Increase Customer Loyalty Measure of customer loyalty

level
44 Rapid Respond to consumer Preferences Customer Perception of Customer feels
Flexible Response free to make
customized
choices
45 Long Term Relationship –Customer Loyalty Measure of customer loyalty
level
& Trust

DISTRIBUTION :
46 High Product Availability Number of Customer Contact
Points
47 Deliver on Time On-Time Delivery as defined
by customers,
Relative Customer Order
Response Time
48 Excellence Quality Quality survey , measure 5 % Increase
customer retention level in terms of
customer
retention level
(compare to
year before
49 Focus on Price Sensitive Customers Measure of customer 5 % Increase
satisfaction level in terms of in terms of
selling price customer
satisfaction
level (compare
to year before)
50 Focus on Quality Sensitive Customers Measure of quality survey 5 % Increase
in terms of
customer
satisfaction
level (compare
to year before)
51 Focus on Consumer Healthier Lifestyle Measure of consumer 5 % Increase
acceptance on sport drinks, in terms of
bottled water and energy customer
drinks satisfaction
level (compare
to year before
52 Broader Range of Products Measure of customer 5 % Increase
retention level, in terms of
Number of new products customer
produced retention level
(compare to
year before
53 Increase Customer Trust Measures for warranty, 5 % Increase
defects and returns in terms of
customer
retention level

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(compare to
year before
54 Enhance Brand Image Measure on customer 5 % Increase
retention level for brand in terms of
image, customer
Measure of customer retention level
perception on PepsiCo brand (compare to
image of healthier drinks. year before
55 Increase Loyalty to Brand Name Measure of customer loyalty 5 % Increase
level in terms of
customer
retention level
(compare to
year before
SUPPLY:
56 Learning the Principles, Skills and Percent of employees trained
supply chain management Zero defect,
Technologies ,Adequate Communications
techniques, The number of reduce waste,
between the Members of Supply Chain shared data sets relative to cut cost
total data sets
57 Enhance Completive Advantage, Improve Measure of financial 10% cost
improvement
Finance Situation, Foster Quality Culture reduction
target (ideal
standard) ,
Learning &
cost-centric
Growth
culture
perspective
58 Develop Technology for Process Process improvement rate, Continuous
Efficiency Rate Innovation &
Improvement
learning
59 Enhance Supply chain Effectiveness, Quality Quality-oriented measures Continuous
Innovation &
Policies Conformity
learning
60 Quality Function Deployment, Quality Policy Forecast errors Continuous
Innovation &
Conformity
learning
61 Enhance Completive Advantage Quality Control & Assurance Met
checklists, quality- Oriented Customer’s
measure Needs
62 Develop Self-Knowledge, Develop Self- Self-Assessments Continuous
Innovation &
Motion
learning
63 Develop Fishbone Chart, Develop Pareto Forecast errors Met
Customer’s
Chart, Quality Policies & Conformity
Needs
64 Improve Quality Management System, Quality Control & Assurance Continuous
checklists, quality- Oriented Innovation &
Improve Finance Situation, Foster Quality
measure learning
Culture
65 PRODUCTION:
66 Improve Skills in Total Quality Management, In house Training Hours, Continuous
Percent of employees trained Innovation &
Competence Employee in Process
quality management learning
Improvement, Employees Training in TQM techniques, process
Environment improvement rate
67 Implement Activity-Based Costing Activity-base-cost 10% cost
reduction
target (ideal
standard),
cost-centric
culture
68 Improve Operational Efficiency, Improve Continuous
Production Schedule Innovation &
Finance Situation, Develop TQM Culture
learning
69 Improve Technology that Facilitates Product Percentage of sales from new Continuous
products, process Innovation &
Improvement
improvement rate learning
70 Develop Patent, Foster Innovation Culture, Product Finalization Point, To push sports
Product Category drinks, bottled
Culture of Continuous Improvement,
Commitment Ratio, Demand water and

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Innovation and Creativity, Develop Forecast for Healthier drinks energy drinks
produced as
Customer-Oriented Culture
close to the
final customer
in an effort to
reduce
inventories
and minimize
the risk of
unsold
product.
71 Employees Training in Quality Assurance, In house Training Hours, Continuous
Percent of employees trained Innovation &
Develop Self-Knowledge, Develop Self-
quality management learning
Motion techniques
72 Improve Customer Preferences Information , Forecast Errors, customers Met
survey Customer’s
Improve Customer Satisfaction Level
Needs
73 Improve Quality Culture, Improve Quality Human resource management Continuous
measure, quality- Oriented Innovation &
Management System, Gain Competitive
measure learning
Advantage
74 Develop Creativity Skills Self-Assessment Continuous
Innovation &
learning
75 Improve Customer Satisfaction Level, Assess which
Performance trajectories of emerging
Improve Technology that Facilitates Product
competing Technologies technologies
Improvement may become a
threat to
PepsiCo
Operation
76 Provide Hazards Analysis Critical Control In house Training Hours, HACCP
Percent of employees trained Certification
Points Training Program
HACCP procedures for production
of energy
drinks, bottled
water and
sports drinks.
77 Provide Good Manufacturing Practice In house Training Hours,
Percent of employees trained
Training Program
GMP procedures
78 Good Manufacturing Practices Certification GMP
Certification
for production
of energy
drinks, bottled
water and
sports drinks
79 HACCP
Certification Certification
Hazard Analysis Critical Control Points
for production
of energy
drinks, bottled
water and
sports drinks
DISTRIBUTION:
80
Customer Value Zero
Economic Value Added, Decrease Cost of
Ratio , The number of shared duplication,
Goods Sold data sets relative to total data zero waste &
sets respond
flexibly to
customers
81 Increase Cash Flow, Increase Revenue of Increase 15%
Point-of-sale data for sports of company
Price Sensitive Customers, Increase Sale
drinks, bottled water and profitability
Growth energy drinks (compared to
year before)
82 Increase Revenue of Quality Sensitive Customer growth, Each new
Profitability customers
Customers
added should
be profitable

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83 Increase Revenue for Meeting Customer Number of Advance shipping Met

Notices for sport drinks, Customer’s
Expectation
bottled water and energy Needs
drinks.
84 Increase Customer Profitability Customer Profitability 5% Increase in
Ratio terms of
customer
profitability
(compare to
competitor
selling price)

6.2 Customer Management Process

The Theme of Customer Management Processes:

Focus on Managing Customer Relationship with Continuous Product Innovation by relying

on Well-Research Customer

Providing High Quality and Low Price Product Offering to Respond towards the Growing
Demand of Sports Drinks, Bottled Water and Energy Drinks

6.2.1 Customer Selection Process

Define the objectives in Customer Selection Processes

Understand Customer Segments
Screen unprofitable customers
Target High-Value Customers

Objective Balance Scorecard (BSC)

Measure Target
Understand Customer
Segments Profit contribution by segment Increase 15% of company
profitability (compared to year
before)
Screen unprofitable Percent of unprofitable customers 20% reduce in screening
customers unprofitable customers
Target High-Value Customers Number of Strategic accounts 20% Increase in terms of strategic
accounts number

Allocate 10 percent marketing resources to active sports minded and health Conscious customer segments

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Linkage to Customer Acquisition

Customer management processes Customer Acquisition
(Selection)
Objectives
Understand Customer Segments CVPQSDBWEDP
Screen unprofitable customers CMMPSC,ASM&HCCS
Target High-Value Customers ANC

Note:
CVPSDBWED = Communicate Value Proposition for a quality Sport Drinks, Bottled Water and
Energy Drinks Products
CMMPSC,ASM&HCCS = Customize Mass Marketing to Price Sensitive customers, Active Sports
Minded and Health Conscious Customer Segment
ANC = Acquire New Customers

Linkage to Customer Retention

Customer management processes Customer Retention
(Selection)
Objectives
Understand Customer Segments
Screen unprofitable customers PSE
Target High-Value Customers CV-P

Note:
PPCS = Provide Excellence Service
CV-AP = Create value-added Partnership

Linkage to Customer Growth

Customer management processes Customer Growth
(Selection)
Objectives
Understand Customer Segments
Screen unprofitable customers C-SC
Target High-Value Customers PWC

Note:
1.C-SC = Cross-Sell Customers
2. PWC = Partner with customers

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Linkage to Financial Perspective

Customer management Financial Perspective
processes (Selection)
Objectives Improve Cost Increase Assets Expand Enhance
Structure Utilization Revenue Opp Cust Value
Understand Customer LCSPSC CNSRFNC ICP
Segments
Screen unprofitable IRFPC
customers IRPC
Target High-Value Customers IRPC IRFHVC

Note:
LCSPSC = Lower Cost Satisfying Price Sensitive Customer
CNSRFNC = Create New Source of Revenue from New Customers
ICP = Increase Customer Profitability
IRFPC = Increase Revenue from Profitable Customers
IRFHVC = Increase Revenue from High Value customers
IRPC = Increase Revenue Per Customer

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Linkage to Customer Perspective

Customer
management Customer Perspective
processes
(Selection)
Objectives Price Quality Availability Selection Functionality Service Partnership Brand

Understand LPCC EQ HASDBWED HPSC, EFH&ED BONOTG IBI

Customer FOQSC, C-OP
Segments FOASM,
HCC
Screen EQ HASDBWED HPSC, EFH&ED BONOTG
unprofitable FOQSC, C-OP
customers FOASM,
HCC
Target EQ HASDBWED HPSC, EFH&ED BONOTG DC-RP IBV
High-Value FOQSC, C-OP
Customers FOASM,
HCC

Note:
LPCC = Lower Price Compare to Competitor
HPSC, FOQSC, FOASM,HCC = Highlight Price Sensitive Customers, Focus on
Quality Sensitive Customers, Focus on Active Sports Minded, Health Conscious
Customers
HASDBWED = High Availability of Sports Drinks, Bottled Water and Energy
Drinks Products
BONOTG = Based on needs of Target Group
EQ = Enhance Quality
EFH&ED, C-OP = Essential for health & Energetic Drinks, Customer-Oriented
Products
DZPDTC= Deliver Zero Product Defect to Customers
PAVP = Perform Attractive Value Proposition
IBI = Increase Brand Image
IBV = Increase Brand Value
DC-RP = Develop Community Researcher Partnership

IBV = Increase Brand Value

*As Customer Management Process has direct linkage with service, partnership and brand;
however, considering defines customer segments and customer value proposition, the other
factors of customer perspective would also have indirect linkage while customer selection .

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Linkage to Learning and Growth

Customer management Learning and Growth

processes (Selection)
Objectives Human Capital Information Capital Organization Capital
Understand Customer SSICS, RCE&N MR, C-OC, PIC, CRM, RTIE
Segments DPCMI&DS
EECAM&CSATS
Screen unprofitable MR, IKS CRM
customers
Target High-Value Customers PGSPHVC RVC, IKS, DSCRMP PIC, CRM

Note:
SSICS, RCE&N = Strategic Skills In Customer Segmentation, Research
on Customer Expectation & Needs
MR, DPCMI&DS, EECAM&CSATS = Market Research, Develop Portfolio
of Customer Management Information & Data System, Establishing
Effective Communication among Marketing& Customer Service about the
Segmentation
CO-C, PIC,CRM, RTIE = Customer-Oriented Culture, Positive Internal
Culture , Customer Relationship Management, Respond to the Information
Effectively
MR, IKS, DSCRMP = Market Research, Increase Knowledge Sharing,
Develop Strategic CRM Portfolio
PGSPHVC = Particular Group Serve Particular High-Value Customers
RVC, IKS= Records of Valued Customers, Increase Knowledge Sharing,
PIC, CRM = Positive Internal Culture, Customer Relationship Management

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6.2.2 Customer Acquisition Process

Define the objectives in Customer Acquisition Processes

Communicate Value Proposition for a quality Sport Drinks, Bottled Water and
Energy Drinks Products (linkage from Selection Process)
Customize Mass Marketing to Price Sensitive customers, Active Sports Minded and
Health Conscious Customer Segment (linkage from Selection Process)
Acquire New Customers (linkage from Selection Process)
Develop Relationship with Dealer/distributor (New Objective)

Objective Balance Scorecard (BSC)

Measure Target
Communicate Value Brand awareness for sports drinks,
Proposition for a quality bottled water and energy drinks 15 percent Increase in terms of
Sport Drinks, Bottled Water (survey)
Brand awareness
and Energy Drinks Products
Customize Mass Marketing to Allocate 15 percent marketing
Price Sensitive customers, Customer respond rate to resources to active sports minded
Active Sports Minded and campaigns, number of customer and health Conscious customer
Health Conscious Customer using promotions to sample the segments
products
Segment
Acquire New Customers Market share, Cost per new 15% increase in terms of PepsiCo
customer acquired, measure of market share
customer lifetime value of new
customers acquired
Develop Relationship with Dealer feedback, dealer 5% Increase in terms of respond to
Dealer/distributor performance dealer feedback

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Linkage to Customer Retention

Customer management processes Customer Retention
(Acquisition)
Objectives

Communicate Value Proposition for a

quality Sport Drinks, Bottled Water
and Energy Drinks Products
Customize Mass Marketing to Price PPCSPCSDBWED
Sensitive customers, Active Sports
Minded and Health Conscious
Customer Segment
Acquire New Customers CHLC
Develop Relationship with CHLC
Dealer/distributor

Note:
PPCSPCSDBWED = Provide Premium Customer Service For Premium Customer of Sports
Drinks, Bottled Water and Energy Drinks
CHLC = Create Highly Loyal Customers

Linkage to Customer Growth

Customer management processes Customer Growth
(Acquisition)
Objectives
Communicate Value Proposition for a CI&H-IVP
quality Sport Drinks, Bottled Water
and Energy Drinks Products
Customize Mass Marketing to Price PPCS
Sensitive customers, Active Sports
Minded and Health Conscious
Customer Segment
Acquire New Customers
Develop Relationship with ICSL
Dealer/distributor

Note:
CHI&H-IVP = Creating Innovative & High-Impact Value Propositions
MSRB = Premium Price Customer Service
ICSL = Increase Customer Satisfaction Level

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Linkage to Financial Perspective

Customer management Financial Perspective
processes (Acquisition)
Objectives Improve Cost Structure Expand Enhance
Revenue Opp. Cust. Value
Communicate Value ISP CNSORFNP ICP
Proposition for a quality Sport
Drinks, Bottled Water and
Energy Drinks Products
Customize Mass Marketing to ISP CNSORFNP ICP
Price Sensitive customers,
Active Sports Minded and
Health Conscious Customer
Segment
Acquire New Customers ISP CNSORFNC
Develop Relationship with ISP IBV CLTSV
Dealer/distributor

Note:
CNSORFNC =Create New Sources Revenue from New Customer
CNSORFNP = Create New Sources of Revenue from New Products
ISP = Improve sales productivity
ICP = Increase Customer Profitability
IBV = Increased business volume
CLTSV = Creating Long Term Shareholder Value

*Customer management process (acquisition) is directly linked with expand revenue opportunity
and enhance customer value. However, considering communicating proposition value, customised
mass marketing, acquiring new customers , and developing relationship with dealer ; would also
have indirect link with Improve Cost Structure through reduction in operating costs.

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Linkage to Customer Perspective

Customer Customer Perspective

management
processes
(Acquisition)
Objectives Price Quality Availability Selection Service Partnership Brand
Communicate LPCC EQ HASDBWED HPSC, ICA IBA
Value Proposition FOQSC,
for a quality Sport FOASM,HCC
Drinks, Bottled
Water and Energy
Drinks Products
Customize Mass LPCC EQ HASDBWED HPSC, ICA IBA
Marketing to Price FOQSC,
Sensitive FOASM,HCC
customers, Active
Sports Minded and
Health Conscious
Customer
Segment
Acquire New EQ HASDBWED HPSC, DPM ICA IBA
Customers FOQSC,
FOASM,HCC
Develop EQ RRCF DGU&EC IBA
Relationship with
Dealer/distributor

Note:
LPCC = Lower Price Compare to Competitor
HASDBWED = High Availability of Sports Drinks, Bottled Water and Energy Drinks Products
EQ = Excellence Quality
HPSC, FOQSC, FOASM,HCC = Highlight Price Sensitive Customers, Focus on Quality
Sensitive Customers, Focus on Active Sports Minded, Health Conscious Customers
RRCF = Rapidly Response to Customer Feedbacks
DPM = Direct Purchasing Method
ICA = Increase Customer Awareness
IBA = Increase Brand Awareness
DGU&EC = Demonstrate Great Understanding and Efficient Communication

*Customer management process (acquisition) is directly linked with service, partnership and
brand. However, considering Communicating Value Proposition, Customising Mass Marketing,
Acquiring New Customers and Developing Relationship with Customer ; from customer
perspective would also have indirect link with price, quality, availability and selection.

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Linkage to Learning and Growth

Customer management Learning and Growth

processes (Acquisition)
Objectives Human Capital Information Capital Organization Capital
Communicate Value DSC CD&TK C-OC, PIC, CRM,
Proposition for a quality
Sport Drinks, Bottled Water
and Energy Drinks Products
Customize Mass Marketing DMEL&TD IKS IKMC
to Price Sensitive customers,
Active Sports Minded and
Health Conscious Customer
Segment
Acquire New Customers DEM&T DPCMI&DS CRM
Develop Relationship with ITPM&ST DPCMI&DS PIC, CRM
Dealer/distributor

Note:

DSC = Develop Strategi Competencies

DEL& TD= Develop Marketing Effective leader & Teamwork Depth

DEM&T =Develop Extensive Marketing & Sales Training

CD&TK = Continually Develop & Transfer Knowledge

C-OC, PIC,CRM = Customer-Oriented Culture, Positive Internal Culture, Customer

Relationship Management

DPCMI&DS = Develop Portfolio of Customer Management Information & Data System

ITPM&ST= Interactive training programs for Management and Sales Teams

IKS = Increase Knowledge Sharing

IKMC = Increase Knowledge Management Culture

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6.2.3 Customer Retention Process

Define the objectives in Customer Retention Processes

Provide Premium Customer Service For Premium Customer of Sports Drinks, Bottled
Water and Energy Drinks (Linkage from Customer Acquisition Process)
Create Highly Loyal Customers (Linkage from Customer Acquisition Process)
Create Lifetime Customers (New Objectives)

Objective Balance Scorecard (BSC)

Measure Target
Provide Premium Customer Number of Premium Customers,
Service For Premium Customer quality rating from premium 20 percent increase of premium
customers
of Sports Drinks, Bottled Water customers
and Energy Drinks
Create Highly Loyal Customers Percent captured of customers’ 20 percent Increase in creating
spending in sports drinks, Bottled Highly Loyal customers
water and Energy Drinks

Create Lifetime Customers Customer Lifetime Value Increase 15 percent of company

profitability (compared to year before)

Linkage to Customer Growth

Customer management processes Customer Growth
(Retention)
Objectives
Provide Premium Customer Service ROSP
For Premium Customer of Sports
Drinks, Bottled Water and Energy
Drinks
Create Highly Loyal Customers C-SC
Create Lifetime Customers PWC

Note:
ROSP = Retention-Oriented Sales Promotion
C-SC = Cross-Sell Customers
PWC = Partner with Customers

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Linkage to Financial Perspective

Customer management Financial Perspective
processes (Retention)
Objectives Improve Cost Increase Assets Expand Enhance
Structure Utilization Revenue Opp. Cust. Value
Provide Premium Customer ISP IASEC, MFAU LRTCOP ICP
Service For Premium
Customer of Sports Drinks,
Bottled Water and Energy
Drinks
Create Highly Loyal Customers LCMCOT MFAU IBV ICP
Create Lifetime Customers LCMCOT PLTVTPFNP

Note:
LCMCOT = Lower Customer Management Cost Over Time
ISP = Improve sales Productivity
IASEC, MFAU = Increase Account Share with Existing Customers, Maximize Fixed Assets Utilisation
IBV = Increase Business Volume
LRTCOP = Less Responsive To Competitors Offered Price
PLTVTPFNP =Prediction of Lifetime Value to predict Future Net Profit
ICP, LCC = Increase Customer Profitability

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Linkage to Customer Perspective

Customer Customer Perspective
management
processes
(Retention)
Objectives Price Quality Availability Selection Functionality Service Partnershi Brand
p
Provide
Premium
Customer
EQ HASDB PCO EFH&ED FSR ICS IBI&R
Service For WED SDBW
Premium EDP
Customer of
Sports Drinks,
Bottled Water
and Energy
Drinks
Create Highly LPCC EQ HASDB HPSC, EFH&ED ECPS, MER ICL
Loyal WED FOQS
Customers
ZDDTC
C,
FOAS
M,HCC
Create Lifetime LPCC EQ HASDB HPSC, EFH&ED ECPS, MER IBI&R
Customers WED FOQS ZDDTC
C,
FOAS
M,HCC

Note:

LPCC = Lower Price Compare to Competitor

EQ = Excellence Quality
MER = Maintain Excellence Relationship
ICLT= Increase Customer Loyalty
IBI&R = Increase Brand Image & Reputation
EFH&ED = Essential for health & Energetic Drinks
HASDBWED = High Availability of Sports Drinks, Bottled Water and Energy Drinks Products
EQ = Excellence Quality
ZDDTC = Zero Defects Delivery to Customers
PCO SDBWEDP = Premium Customers of Drinks, Bottled Water and Energy Drinks Products
HPSC, FOQSC, FOASM,HCC = Highlight Price Sensitive Customers, Focus on Quality
Sensitive Customers, Focus on Active Sports Minded, Health Conscious Customers
FSR = Fast Service Responsiveness
ICS = Increase Customer Satisfaction
ECPS = Ensure of Constant Product Supply

*Customer management process (retention) is directly linked with service, partnership and
brand. However, providing premium customer service, creating loyal customers and creating
lifetime customers; would also have indirect link with price, quality, functionality, availability
and selection.

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Linkage to Learning and Growth

Customer management Learning and Growth
processes (Retention)
Objectives Human Capital Information Capital Organization Capital
Provide Premium Customer PCE RPC CC-FC
Service For Premium Customer of
Sports Drinks, Bottled Water and
Energy Drinks
Create Highly Loyal Customers CPGA CFOPI, IKS CRM,CIC, KMS,QMS
Create Lifetime Customers ARTT CFIOI CC-FC

Note:

RVSC = Records of Premium Customers

CPGA = Create Personel Goal Alignment

PCE = Personnel Commitments and Efforts

ARTT = Attract and Retain Top Talent

CFOPI, IKS = Customer Feedback on Product Improvement, Increase Knowledge Sharing

CRM, CIC, KMS, QMS= Customer Relationship Management, Continuous Improvement Culture ,
Knowledge Management System, Quality Management System

CC-FC = Create Customer Focus - Culture

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6.2.4 Customer Growth Process

Define the objectives in Customer Growth Processes

Retention-Oriented Sales Promotion (Linkage from Retention Process)
Cross-Sell Customers (Linkage from Retention Process)
Partner with Customers (Linkage from Retention Process)
Customer Education for Healthier and Energetic drinks (New Objective )

Objective Balance Scorecard (BSC)

Measure Target
Retention-Oriented Sales Number of promotion sample of Over 95 percent of the population use the
sports drinks, bottled water and promotion sample
Promotion
energy drinks used by customer
Cross-Sell Customers Number of products per customer Target for sports drinks, bottled
water and energy drinks per
customer
Partner with Customers Number or gain sharing agreement Increase 15% of company profitability
(compared to year before)
Customer Education for Hours with customers Allocate 2 hours per each new customer to
educate them understand the nutritious
Healthier and Energetic drinks value of PepsiCo healthier drinks

Linkage to Financial Perspective

Customer management Financial Perspective
processes (Growth)
Objectives Improve Cost Increase Assets Expand Enhance
Structure Utilization Revenue Opp. Cust. Value
Retention-Oriented Sales ISP IASEC, MUEFA IRPC ICP
Promotion
Cross-Sell Customers LCMCOT IASEC, MUEFA IBV DCC
Partner with Customers LCMCOT IBV PLCSTCP
Customer Education for IASEC IRPC
Healthier and Energetic drinks

Note:
LCMCOT = Lower Customer Management Cost Over Time
IRPC = Increase Revenuer Per Customer
ISP = Improve Sales Productivity
IASEC, MUEFA = Increase Account Share with Existing Customers, Maximise Use of Existing Fixed
Assets
IBV = Increase Business Volume
ICP = Increase Customer Profitability
DCC =Decrease Customer Costs
PLCSTCP = Providing Lower Cost Solutions To Customers’ Problems

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Linkage to Customer Perspective

Customer
management
processes Customer Perspective
(Growth)
Objectives Price Quality Availability Selection Functionality Service Partnership Brand
Retention- LPCC EQ HASDBWED PCOSDBWEDP EFH&ED LCC RIIBV
Oriented Sales
Promotion
Cross-Sell LPCC EQ HASDBWED HPSC, EFH&ED HLCS RIIBV
Customers FOQSC,
FOASM,HCC
Partner with LPCC HASDBWED HPSC, EFH&ED HLCS RIIBV
Customers FOQSC, MEC&R,
FOASM,HCC ICL
Customer HPSC, EFH&ED HLCS MEC&R RIIBV
Education for FOQSC,
Healthier and FOASM,HCC
Energetic
drinks

Note:
LPCC = Lower Price Compare to Competitor
EQ = Excellence Quality
RIIBV = Rapid Increase In Brand Value
LCC = Loyalty Club Card
HASDBWED = High Availability of Sports Drinks, Bottled Water and Energy Drinks Products
MEC&R ,ICL= Maintain Excellence Communication and Relationship , Increase Customer Loyalty
ECPS = Ensure of Constant Product Supply
PCOSDBWEDP = Premium Customers of Drinks, Bottled Water and Energy Drinks Products
HLCS = High Level of Customer Service
HPSC, FOQSC, FOASM,HCC = Highlight Price Sensitive Customers, Focus on Quality
Sensitive Customers, Focus on Active Sports Minded, Health Conscious Customers
EFH&ED = Essential for health & Energetic Drinks

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Linkage to Learning and Growth

Customer management Learning and Growth
processes (Growth)
Objectives Human Capital Information Capital Organization Capital
Retention-Oriented Sales DSCSP RPCSDBWED CC-CC,
Promotion
Cross-Sell Customers DSCSP , PCE EUOKMS ICRBI, HQ&HC
Partner with Customers PCE EUKMS, CRMP CC-CC, CRM
Customer Education for A&RTT IKSFBP,EUKMS RSWP, KMS
Healthier and Energetic drinks

Note:

DSCSP = Develop Strategic Competencies in Sales and Promotion

PCE = Personnel Commitments and Efforts

RPCSDBWED = Record of Premium Customer for Sports Drinks, Bottled Water and Energy Drinks

IKSFBP, EUKMS = Increase Knowledge Sharing for Best Practices, Extent Usage of Knowledge
Management System

EUKMS, CRMP = Extent Usage of Knowledge Management System, Customer Relationship

Management Portfolio

CC-CC, CRM = Create a Customer Centric Culture, Customer Relationship Management

ICRBI, HQ&HC = Improve Company Reputation and Brand Image, High Quality & Healthy Culture

A&RTT = Attract & Retain Top Talent

RSWP, KMS = Rewarding Staff with Performance, Knowledge Management Systems

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Summarizing the objectives Customer Management Processes

No Customer
Management Objectives Measure Target
Processes
1
Profit contribution by segment Increase 15% of
Understand Customer
company
Segments
profitability
(compared to year
before)
2 Percent of unprofitable customers 20% reduce in
screening
unprofitable
customers
Screen unprofitable
customers
Selection
3 Number of Strategic accounts 20% Increase in
terms of strategic
Target High-Value accounts number
Customers
4 Communicate Value Brand awareness for sports
Proposition for a quality drinks, bottled water and energy 15 percent
Sport Drinks, Bottled Water drinks (survey)
Increase in terms
and Energy Drinks Products
of Brand
awareness
5 Customize Mass Marketing Allocate 15
to Price Sensitive customers, Customer respond rate to percent marketing
Active Sports Minded and campaigns, number of customer resources to active
Health Conscious Customer using promotions to sample the sports minded and
Acquisition Segment products health Conscious
customer segments

6 Acquire New Customers Market share, Cost per new 15% increase in
customer acquired, measure of terms of PepsiCo
customer lifetime value of new market share
customers acquired
Develop Relationship with Dealer feedback, dealer 5% Increase in
Dealer/distributor performance terms of respond
to dealer feedback
7 Provide Premium Customer Number of Premium Customers,
Service For Premium quality rating from premium 20 percent increase
Customer of Sports Drinks, customers
of premium
Retention Bottled Water and Energy
Drinks customers
8 Create Highly Loyal Percent captured of customers’ 20 percent
Customers spending in sports drinks, Bottled Increase in
water and Energy Drinks creating Highly
Loyal customers
9 Create Lifetime Customers Customer Lifetime Value Increase 15
percent of

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company
profitability
(compared to year
before)
10 Retention-Oriented Sales Number of promotion sample of Over 95 percent of
Promotion sports drinks, bottled water and the population use
energy drinks used by customer the promotion
sample
11 Cross-Sell Customers Number of products per customer Target for sports
drinks, bottled
Growth water and energy
drinks per
customer
12 Partner with Customers Number or gain sharing Increase 15% of
agreement company
profitability
(compared to year
before)
13 Customer Education for Hours with customers Allocate 2 hours
Healthier and Energetic per each new
drinks customer to
educate them
understand the
nutritious value of
PepsiCo healthier
drinks

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Summarizing the objectives Customer Management Processes Linkages

No Processes Objectives Measure Target

SELECTION :
1 Lower Cost Satisfying Price Sensitive Cost of sales per product 10% cost
reduction target
Customer
(ideal standard
3 Increase Customer Profitability Profits per customer 5% Increase
(activity-based costing) in terms of
customer
profitability
(compare to
competitor
selling
price)
4 Increase Revenue from Profitable Customers Revenue from profitable 15% increase in
Financial terms of
Perspective customers
PepsiCo market
share
5 Increase Revenue from High Value Revenue from high value 15% increase in
terms of
customers customers
PepsiCo market
share
6 Increase Revenue Per Customer Revenue per customer Sales growth
Increase to
15%,
The sales for
any one
customer
should steadily
increase each
year
7 ACQUISITION:
8 Create New Sources Revenue from New Revenue from new Sales growth
Increase to
Customer customers
15%,
The sales for
any one
customer
should steadily
increase each
year
9 Create New Sources of Revenue from New Revenue from new Sales growth
Increase to
Products products
15%,
The sales for
any one
customer
should steadily
increase each
year
Improve sales productivity Cost of sales per product 10% cost
reduction target
(ideal standard
10 Increase Customer Profitability Profits per customer 5% Increase
(activity-based costing) in terms of
customer
profitability
(compare to
competitor
selling
price)
11 Increased business volume revenue per product Sales growth
Increase to
15%,

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The sales for

any one
customer
should steadily
increase each
year
12 Creating Long Term Shareholder Value
RETENTION:
13 Lower Customer Management Cost Over
Time
14 Improve sales Productivity Cost of sales 10% cost
reduction target
(ideal standard
15 Increase Account Share with Existing
Customers, Maximize Fixed Assets
Utilisation
17 Increase Business Volume revenue per product Sales growth
Increase to
15%,
The sales for
any one
customer
should steadily
increase each
year
16 Less Responsive To Competitors Offered
Price
17 Prediction of Lifetime Value to predict
Future Net Profit

18 Increase Customer Profitability Profits per customer 5% Increase

(activity-based costing) in terms of
customer
profitability
(compare to
competitor
selling
price)
GROWTH
19 Lower Customer Management Cost Over
Time
20 Increase Revenue Per Customer
21 Improve Sales Productivity Cost of sales 10% cost
reduction target
(ideal standard
22 Maximise Use of Existing Fixed Assets, Sales/asset ratio
Increase Account Share with Existing
Customers,
23 Increase Business Volume revenue per product Sales growth
Increase to
15%,
The sales for
any one
customer
should steadily
increase each
year
24 Increase Customer Profitability Profits per customer 5% Increase
(activity-based costing) in terms of
customer
profitability
(compare to
competitor
selling
price)

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25 Decrease Customer Costs Cost per customer 5% Increase

in terms of
customer
profitability
(compare to
competitor
selling price
Providing Lower Cost Solutions To After sale service
Customers’ Problems
SELECTION:
26 Lower Price Compare to Competitor Cost per product
27 Highlight Price Sensitive Customers, Focus Increase 15%
Point-of-sale data for sports of company
on Quality Sensitive Customers, Focus on
drinks, bottled water and profitability
Active Sports Minded, Health Conscious energy drinks (compared to
Customers year before)
28 High Availability of Sports Drinks, Bottled Increase 15%
Point-of-sale data for sports of company
Water and Energy Drinks Products
drinks, bottled water and profitability
energy drinks (compared to
year before)
29 Based on needs of Target Group
30 Enhance Quality Quality survey
31 Essential for health & Energetic Drinks,
Customer-Oriented Products
32 Deliver Zero Product Defect to Customer Number of defect produced, Zero defects
Customer
33 Perspective Perform Attractive Value Proposition Percentage of highly 5 % Increase in
terms of
satisfied customers
customer
satisfaction
level (compare
to year before)
34 Increase Brand Image Market share 15% increase in
terms of
PepsiCo market
share
35 Increase Brand Value Market share 15% increase in
terms of
PepsiCo market
share
36 Develop Community Researcher Partnership
ACQUISITION:
37 Lower Price Compare to Competitor
38 High Availability of Sports Drinks, Bottled
Water and Energy Drinks Products
39 Excellence Quality Quality survey , measure 5 % Increase in
customer retention level terms of
customer
retention level
(compare to
year before)
40 Highlight Price Sensitive Customers, Focus Increase 15%
Point-of-sale data for sports of company
on Quality Sensitive Customers, Focus on
drinks, bottled water and profitability
Active Sports Minded, Health Conscious energy drinks (compared to
Customers year before)
41 Rapidly Response to Customer Feedbacks Response rate
42 Direct Purchasing Method
43 Increase Customer Awareness Market share 15% increase in
terms of
PepsiCo market
share
44 Increase Brand Awareness Market share 15% increase in
terms of
PepsiCo market
share

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Demonstrate Great Understanding and

Efficient Communication.
RETENTION:
45 Lower Price Compare to Competitor Cost per product produced 10% cost
reduction target
(ideal standard)
46 Excellence Quality Quality survey , measure 5 % Increase in
customer retention level terms of
customer
retention level
(compare to
year before
47 Maintain Excellence Relationship Percentage of highly 5 % Increase in
terms of
satisfied customers
customer
satisfaction
level (compare
to year before)
48 Increase Customer Loyalty Quality survey , measure 5 % Increase in
customer retention level terms of
customer
retention level
(compare to
year before
49 Increase Brand Image & Reputation Market share 15% increase in
terms of
PepsiCo market
share
50 Essential for health & Energetic Drinks
51 High Availability of Sports Drinks, Bottled
Water and Energy Drinks Products
52 Excellence Quality Quality survey , measure 5 % Increase in
customer retention level terms of
customer
retention level
(compare to
year before
53 Zero Defects Delivery to Customers Number of defect produced, Zero defects

54 Premium Customers of Drinks, Bottled Water and Number of premium customers

Energy Drinks Products

GROWTH:
55 Lower Price Compare to Competitor Cost per product produced 10% cost
reduction target
(ideal standard)
56 Excellence Quality Quality survey , measure 5 % Increase in
customer retention level terms of
customer
retention level
(compare to
year before
56 Rapid Increase In Brand Value Market share 15% increase in
terms of
PepsiCo market
share
58 Loyalty Club Card Number of loyalty club 20 %
member increase of
club
member
59 High Availability of Sports Drinks, Bottled
Water and Energy Drinks Products
60 Maintain Excellence Communication and Percentage of highly 5 % Increase in
terms of
Relationship , Increase Customer Loyalty satisfied customers
customer
satisfaction
level (compare
to year before)
61 Ensure of Constant Product Supply Number of late delivery
62 Premium Customers of Drinks, Bottled Number of premium

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Water and Energy Drinks Products customers

SELECTION :
63 Strategic Skills In Customer Segmentation, Human capital readiness
Research on Customer Expectation &
Needs

64 Market Research, Develop Portfolio of Application portfolio

Customer Management Information & Data readiness
System, Establishing Effective
Learning & Communication among Marketing&
Growth Customer Service about the Segmentation
perspective
65 Customer-Oriented Culture, Positive Internal Customer survey 5 % Increase in
terms of
Culture , Customer Relationship
customer
Management, Respond to the Information satisfaction
Effectively level (compare
to year before
66 Market Research, Increase Knowledge Number of customer hits 100 percent
Sharing, Develop Strategic CRM Portfolio to knowledge target
management system
67 Particular Group Serve Particular High- Human capital readiness
Value Customers
68 Records of Valued Customers, Increase Number of customer hits 100 percent
Knowledge Sharing, to knowledge target
management system
70 ACQUISITION:
71 Develop Strategic Competencies Human capital readiness
72 Develop Marketing Effective leader & Human capital readiness
Teamwork Depth
73 Develop Extensive Marketing & Sales Training hours
Training
74 Continually Develop & Transfer Knowledge Number of customer hits 100 percent
to knowledge target
management system
75 Customer-Oriented Culture, Positive Customer survey 5 % Increase in
terms of
Internal Culture, Customer Relationship
customer
Management satisfaction
level (compare
to year before
76 Develop Portfolio of Customer Management Application portfolio
Information & Data System readiness
77 Interactive training programs for Training hours
Management and Sales Teams
78 Increase Knowledge Sharing Number of customer hits 100 percent
to knowledge target
management system
79 Increase Knowledge Management Culture Number of customer hits 100 percent
to knowledge target
management system
80 RETENTION:

81 Records of Premium Customers Number of premium

customers
82 Create Personel Goal Alignment Employee objectives
linked to BSC
83 Personnel Commitments and Efforts Human capital readiness
84 Attract and Retain Top Talent

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85 Customer Feedback on Product

Improvement, Increase Knowledge Sharing Response rate
86 Create Customer Focus – Culture Customer survey 5 % Increase in
terms of
customer
satisfaction
level (compare
to year before
GROWTH:
87 Develop Strategic Competencies in Sales Human capital readiness
and Promotion from sales and
promotion department
88 Personnel Commitments and Efforts
89 Record of Premium Customer for Sports Number of premium
Drinks, Bottled Water and Energy Drinks customers
90 Increase Knowledge Sharing for Best Number of customer hits 100 percent
Practices, Extent Usage of Knowledge to knowledge target
Management System management system

91 Customer Relationship Management Application portfolio

Portfolio readiness

92 Create a Customer Centric Culture, Customer survey 5 % Increase in

terms of
Customer Relationship Management
customer
satisfaction
level (compare
to year before
93 Improve Company Reputation and Brand Market share 15% increase in
terms of
Image, High Quality & Healthy Culture
PepsiCo market
share
94 Attract & Retain Top Talent
95 Rewarding Staff with Performance, Mission, vision Mission
Knowledge Management Systems achieved

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