Strategic Management Paper Pepsi-Cola PR

Pepsi-Cola Products Philippines, Inc.
: Strategic Management Paper

TABLE OF CONTENTS
MODULE 1- BACKGROUND
Acknowledgement 2
Introduction 2
Significance of Topics 3
MODULE 2- EXTERNAL ENVIRONMENT ANALYSIS

Industry Definition 5
Present Task Environment Analysis 6
Potential Changes in Macro Environment Analysis 12
Threats and Opportunities 16
Industry and Competitive Analysis- Strategic Map 17
Broader Societal Expectations- CSR 23
MODULE 3- INTERNAL ENVIRONMENT ANALYSIS

Company Overview 25
Financial Analysis- Financial Ratios 27
Value Chain Analysis 31
Strengths and Weaknesses- description and basis of each 35
Personal Values 38
MODULE 4 – STRATEGIC PLAN

Vision & Mission, Statement of Financial & Strategic Objectives (smart & balanced) 39
Evaluation of Present Corporate Strategies (actual) 42
Proposed Corporate Strategies – strengths to be developed & weaknesses to be overcome) 46
Objectives to be attained by the proposed strategies & Foundational Basis for the strategies) 47
Competitive Advantage – Present Adv, Proposed Adv, - Wharton model, Value chain) 50
MODULE 5 – FUNCTIONAL AREA STRATEGIES

Relevance of each to the strategic plan and competitive advantages 52
Marketing Strategy – Identification of target mtkg segments, mktg objectives, mktg plan 54
Operations Strategy – Operations objectives, Operations plan 60
Finance Strategy – Financial Objectives, Finance plan 64
Info Technology Strategy – IT Objectives, IT functional Plan 67
Human Resources – HR Objectives, HR plan 73
Other Key Areas – Area Objectives, Area plan 77
MODULE 6- STRATEGIC IMPLEMENTATION

Analysis of company’s capabilities to implement Strategy- 7S Framework analysis 81
Managing Internal Organization for Strategy Execution- 8-SIT Framework, Action owners/timeline
Managing Strategic Change- Letter to CEO- explaining 8-steps framework for Leading change) 86
MODULE 7- FINANCIAL PROJECTIONS

Financial Ratios & Balanced Scorecard 87
Audited Financial Statements 90
References 103

Baylosis, 2017 MBA 218 1

Pepsi-Cola Products Philippines, Inc.: Strategic Management Paper

MODULE 1
Acknowledgements  Introduction  Significance of
Topics

Acknowledgements
This strategic management paper, though its bears my name, took a community’s efforts. I would
like to express my gratitude to the faculty of University of St. La Salle’s Graduate of School Business
for providing the theoretical backgrounds that you will be encountering as you go along the paper. I
would like to thank our Strategic Management professor, Engr. Gerald Poblador for his guidance and
reminders. His availability to answer questions has kept our motivation alive. I give my sincerest
gratitude to my classmates in the class, particularly to the graduating Class of 2017, for their spirit of
teamwork. This paper was formed in the week leading to Holy Week and finalized during Maundy
Thursday and Good Friday. Thank You, God for Your Spirit, wisdom, and intelligence. I will
continue, O my God, to do all my actions for the love of You. Animo!
Introduction
Michael Hitt defines strategic management process in his book titled Strategic Management:
Concepts and Cases as “the full set of commitments, decisions, and actions required for a firm to achieve
strategic competitiveness and earn above-average returns.” The process begins with strategic inputs,
which is a result of examining the internal and external environments of the business firm. This is
followed by the formulation and implementation of strategic actions and concluded by strategic outcomes.
The desired outcome is competitive advantage, measured by above-average returns.


This strategic management paper aims to apply the strategic management process to Pepsi-Cola
Products Philippines, Inc. PCPPI is the bottler and distributor of PepsiCo beverages and snacks in the
Philippines, with headquarters in Muntinlupa, Metro Manila. It is a public company, trading on the
Philippine Stock Exchange with the abbreviation PIP. The company is involved in the manufacturing and
sale of carbonated and non-carbonated drinks. In addition, it is also involved in the manufacturing and
sale of food and food products.
The strategic management process in this paper aims to target PCPPI’s operations, marketing,
financial, information technology, and human resource strategies. It also aims to provide frameworks in
the management of strategies in these areas.

Significance of the Topic

The cola war between Coca-Cola and PepsiCo is very much present in the Philippines, as it is
also present in other countries. Coca-Cola is locally bottled and distributed by Coca-Cola FEMSA
Philippines, Inc., founded in 1981. Pepsi-Cola Products Philippines, Inc. was founded eight years later in
1989. The cola war in the Philippines was not always in favour of Coca-Cola. The country used to be
dominated by Pepsi with 60% market share while the 30% was Coca-Cola’s and 10% belonged to Sarsi,
RC, and other brands (Gonzales, 2013). The turnaround was attributable to Edward Neville Isdell, who
saved the Philippines for Coca-Cola.
In addition to losing its former no. 1 spot in the Philippines, stakeholder issue is also another
issue to be tackled by its horns. Sugarcane producers in the Philippines, particularly in Negros Occidental
have accused beverage companies such as PCPPI for its overt dependence on high fructose corn syrup or
HFCS. The sugar producers said that these beverage companies imported 800,000 metric tons of HFCS
into the country, displacing them of potential income amounting to P35.2 billion. HFCS imports have


been reported to decrease sugar prices from P1,800 per bag to P1,300 per bag, which translates to
revenues losses of P20 billion (Simeon, 2017).
This strategic management paper is significant to the following sectors:
PCPPI – This strategic management paper aims to present strategies in operations, marketing, finance,
information technology, and human resources with accompanying frameworks in order to provide them
with ideas on how to achieve competitive advantage and above-average returns.
Stakeholders – This strategic management paper aims to provide stakeholders with issues and prospects
that may be deemed impactful to their stakes and interests in PCPPI as a business firm.
Researchers – This strategic management paper collates information, statistics, and news articles that
will help future researchers assess the status of PCPPI as of publication date. The sources cited in this
paper may also help future researchers in their own pursuit of relevant frameworks to be used for the
same or for similar business firm.
Academe – This strategic management paper may add theoretical knowledge to the vast body of
information made available for discussion, for case analysis, or for reference. This paper aims to help
professors in their lecture as material for discussion or analysis. This paper may also serve students who
are studying strategic management courses either in undergraduate or graduate school level.



MODULE 2
Industry definition  Present task environment analysis  Potential changes in
macroenvironment analysis Threats and opportunities Industry and
Competitive Analysis Broader Societal Expectations (CSR)

Industry Definition
Pepsi-Cola Products Philippines Inc. belongs to the “Food, beverage, and tobacco” (Bloomberg,
2017) industry.
The North American Industry Classification System defines the beverage and tobacco industry as
follows:
“Industries in the Beverage and Tobacco Product Manufacturing subsector manufacture beverages and
tobacco products. The industry group, Beverage Manufacturing, includes three types of establishments:
(1) those that manufacture nonalcoholic beverages; (2) those that manufacture alcoholic beverages
through the fermentation process; and (3) those that produce distilled alcoholic beverages. Ice
manufacturing, while not a beverage, is included with nonalcoholic beverage manufacturing because it
uses the same production process as water purification. The industry group, Tobacco Manufacturing,
includes two types of establishments: (1) those engaged in redrying and stemming tobacco and, (2) those
that manufacture tobacco products, such as cigarettes and cigars.”
The same classification system defines the food industry as follows:
“Industries in the Food Manufacturing subsector transform livestock and agricultural products into
products for intermediate or final consumption. The industry groups are distinguished by the raw


materials (generally of animal or vegetable origin) processed into food products. The food products
manufactured in these establishments are typically sold to wholesalers or retailers for distribution to
consumers, but establishments primarily engaged in retailing bakery and candy products made on the
premises not for immediate consumption are included.”
Present Task Environment Analysis

The business environment includes “all of the things that can affect how a business operates.” This
includes both internal and external forces. The task environment, however include those “events and
influences that come from outside of the company” (Aparicio, 2017).
Below is the task environment analysis of McDonald’s Corporation (Houghton Mifflin Company,
2016). The same model will be used to analyse the task environment of PCPPI.
Figure 1 Task Environment of McDonald's


a. Customers
Customers are defined as those who “create demand for products and are the source of income for
the business” (Aparicio, 2017).
The customers of PCPPI are authorized bottlers and independent distributors, including
foodservice distributors and retailers. PepsiCo granted PCPPI an exclusive contract to sell and
manufacture certain beverage products bearing their trademarks within a specific geographic area.
b. Suppliers
Suppliers are defined as “the ones that make the products that a company buys to produce their
parts” (Aparicio, 2017).
PepsiCo provides its own SCoC or Supplier Code of Conduct. Because of its wide operations,
suppliers of PepsiCo are extremely diverse. As a result, the formulation of the SCoC establishes a guiding
principle for their dealings with their suppliers. This Supplier Code of Conduct is “based on the
International Labor Organization, the United Nations Global Compact and other internationally
recognized standards” (PepsiCo, 2017). This code includes 13 standards, which encompasses human
rights and child labor.
What is commendable about PepsiCo’s relationship with its suppliers is its SCoC strategy, which
includes four levels of engagement, presented in Figure 2 below.

Figure 2 PepsiCo's Four Levels of Engagement


Locally, for PCPPI its suppliers include domestic sugar planters due to import restrictions in the
country. Beverage concentrates are supplied by PepsiCo and Pepsi Lipton through Pepsi Cola Far East
Trade Development Co., Inc. (PCFET) and seasoning are from The Concentrate Manufacturing of
Ireland. Its packaging materials are purchased from suppliers both in the Philippines and in other parts of
Asia.
c. Competition
Competition refers to “other companies may be offering similar (or better) products and
competing for the same customers” (Aparicio, 2017).
In the Philippines, the global competitor of PepsiCo is also its local competitor. Coca-Cola
FEMSA Philippines Inc. remains to be the biggest competitor of Pepsi locally. PCPPI also lists Asiawide
Refreshments Corporation as a competitor.
A report by Euromonitor International entitled “Soft Drinks in the Philippines” states:
“While domestic companies registered promising growth towards the end of the review period, The Coca-
Cola Export Corp maintained its leading position in the Philippine soft drinks industry in 2016. The
strong product mix and wide distribution network of the company has enabled it to maintain dominance
in carbonates and compete in other categories such as concentrates and juice.”
In addition, there are many other popular carbonated drinks in the Philippines, which include
Sarsi, Jaz Cola, Pop Cola, Cheers, Lemo-Lime, RC Cola, Sparkle and Lift.
Competition may also come from other non-carbonated drinks such as the popular Kopiko 78, and
bottled water such as Nature’s Spring. Major competitors in the non-carbonated beverages market include
Del Monte Pacific Limited, Universal Robina Corporation, Zesto Corporation, The Coca-Cola Company,
and Asia Brewery Incorporated


PCPPI’s food business sector also has competition from popular local brands such as the Jack n’ Jill and
Oishi products.
Figure 3 PCPPI competitors in NCB and snacks market
d. Strategic Partners
PCPPI is notable for some of its strategic partnerships in the Philippines. Before looking at these
local strategies, it is first worth noting that both Coca-Cola and Pepsi-Cola are in the business of forging
exclusive partnerships with certain restaurant chains. There is no comprehensive list of these partnerships
in the Philippines, but Business Insider was able to make a comparison of these partnerships in the United
States (Lutz and Nudelman, 2015). This is seen in Figure 4 below. Some of these brands are locally
recognisable. In addition to restaurant chains, PCPPI also has partnerships with convenience stores, sari-
sari stores, tiangges, among other retailers.


Figure 4 Coca-‐Cola and Pepsi-‐Cola restaurant partnerships
More recently, PCPPI and Philippine Seven Corp. have formed a partnership wherein 7-Eleven
consumers may get a taste of Pepsi-Flavoured Slurpees. Last year, PCPPI was able to form an exclusive
partnership with popular bakeshop chain, Julie’s bakeshop. Two years ago, PCPPI and its international
partners, PepsiCo Inc., formed a partnership to manufacture and distribute PepsiCo’s popular snack
products such as Cheetos. This marks the second PepsiCo snack franchise in the world, next to
Bangladesh.


Figure 5 PCPPI partnerships with 7-‐Eleven and Julie's Bakeshop

e. Regulators
There are many rules and regulations implemented by the Philippine government as part of the
regulatory system to ensure safety among consumers of food and beverage producers. This includes
Republic Act No. 10611 entitled “Food Safety Act of 2013.” This is in addition to other compliance
requirements by the Food and Drug Administration of the country.
What is worth noting in this paper however is the Sugar Order No. 3, which regulates the imports
of high-fructose corn syrup (HFCS) into the country.
As of this writing, both Coca-Cola FEMSA and PCPPI are seeking to accesses local sugar
classified as “D” because it is P200 cheaper than the sugar classified as “B.” Unfortunately, “D” sugar is
not within their access because this classification is for export (Lim, 2017).
PCPPI is subject to regulations by the Food and Drugs Administration (FDA) of the Philippines,
which grants the, License to Operate as a Food manufacturer of Non-Alcoholic Beverages. It is also being
regulated by the Department of Environment and Natural Resources (DENR) and the Laguna Lake
Development Authority (LLDA).


PCPPI complies with environmental laws such as the Environmental Impact Statement System,
the Pollution Control Law, the Laguna Lake Development Authority Act of 1966, the Clean Air Act, and
the Solid Waste Management Act.
Potential Changes in Macroenvironment Analysis
Macroenvironment analysis is the first step in strategy analysis, serving as the precursor for the
strategic management process. Microenvironment analysis may be termed as PEST analysis or PESTLE
analysis (What makes a good leader, 2017). In this paper, the PEST analysis template will be used.
Figure 6 Macroenvironment analysis framework
1. Political/Legal Factors
For a multinational like PepsiCo, its local distributors must address issues such as political
stability, intergovernmental cooperation, and government initiatives against carbonated drinks (Meyer,


2017). In the Philippines, PCPPI will continue to enjoy the stability of the political climate that is
conducive for business. The current administration seems to continue the past administration’s strong
foothold on its economic policies. Likewise, the Philippines is improving and realigning its
intergovernmental cooperation. What is definitely most important to keep watch on the political level
would be government initiatives on carbonated drinks, particularly sugar. As previously discussed, the
Sugar Board has issued Sugar Order No 3, which regulates the importation of HFCS into the country.
Recently, Agricultural secretary Emmanuel Piñol held the order in abeyance. Also, adjustment of
government regulations may finally grant PCPPI access to local sugar, which is currently allotted for
export only (Arcalas, 2017).
2. Economic factors
PCPPI will also continue to enjoy the healthy economy of the country. Last year, it was reported
that PCPPI earned net profit of P739.08 million, higher than the previous period. According to the
reports, this meant a growth on its nine-month net profit by 4.6 percent (Abadilla, 2016). This is fuelled
by the strong consumer behaviour of the Filipinos and their increasing disposable income. In the same
report, PCPPI president Furqan Ahmed Syed was quoted to have said, “We strongly believe in the future
potential of Philippines as a country and our bond with the Filipino people keeps getting stronger with
every passing day. We have evolved a compelling 10 year vision for the business and we will continue to
transform PCPPI into a world class food and beverage organization of the future.” Nonetheless, high
sugar prices and other raw materials still pose a challenge to the business firm (Camus, 2016).
3. Socio-cultural factors
The consumer behaviour of Pepsi products relies heavily on socio-cultural factors. This includes
higher health consciousness among consumers, busier lifestyles, and keenness towards product quality
(Meyer, 2017). As the consumers are more aware of the effects of consumption of carbonated drinks, they
would most probably be leaning towards consuming healthier choices. This would be true even if the


carbonated drinks are not directly affected. For example, healthier choice of living would also mean less
consumption of fast food products which are often paired with carbonated drinks. However, busier
lifestyles especially among urban consumers may compel them to eat fast food meals. As a result,
combining these two factors into consideration, Pepsi may opt to strategise on its product quality now that
consumers have a more discriminating taste.
4. Technological factors
The industry of PCPPI is known to have moderate investments in research and development
(Meyer, 2017). Although PCPPI may be limited with its R&D due to the decisions of their international
partner, this may still be an opportunity for the business firm to invest on researches for product
innovation and improved management systems, or efficient operations.
Michael Porter’s Five Forces is a tool that can be used to assess the external environment of
PCPPI.
Figure 7 Porter's Five Forces Model


Intensity of Rivalry: High
PCPPI faces strong competition from Coca-Cola FEMSA. From being the market leader in the
80’s, Coca-Cola has reversed the market share by dominating the Philippine beverage industry with a
market share of 60% against Pepsi Cola’s 30%. Factors in the competitive atmosphere of PCPPI include
“advertising and marketing programs that create brand awareness, pack/price promotions, new product
development, distribution and availability, packaging and customer goodwill (PCPPI SEC Report,
2017).”
Threat of Substitute Products: High
In addition to the intensive rivalry in the “cola wars,” PCPPI’s beverage products can be easily
substituted with drinks such as coffee, tea, milk, milk tea, among a multitude of other beverages. Its food
products can be easily substituted with other brands. It also faces strong substitution from healthier food
options. The consumer market is gaining more information about the products they consume and are
therefore more discerning. There are low costs for substituting PCPPI products.
Bargaining Power of Suppliers: Low
Suppliers do not have strong or significant influence in PCPPI because the raw materials used by
PCPPI are not that unique, and the cost of switching suppliers is low. Likewise, the suppliers themselves
vie for business with PCPPI. Proof is the strong opposition of sugar planters against the import of high
fructose corn syrup (HFCS), which will decrease the level of sugar used by the firm.


Threat of new entrants: Low
Although PCPPI products can be easily substituted with other products, the threat of new entrants
into the market remains low due to the high cost of brand development that PCPPI has already achieved
(Smithson, 2017). The capital requirements needed to match PCPPI’s economies of scale is extremely
high. Significant barriers to entry include large investments in plants, research and development required,
extensive distribution channels, and goodwill.
Threats, Opportunities, Competitive Analysis, and Strategic map
a. Threats
1. Government regulations on raw materials, particularly HFCS and sugar, as discussed
2. Increasing or unstable cost of raw materials
3. Consumer behaviour towards healthier lifestyle choices
4. Impact of climate change to its supply chain
5. Competitor’s aggressiveness
6. Beverage industry is considered already mature (Kunkaweeprad, Anisakusuma, Aninditya, and

Kamila, 2012)
b. Opportunities
1. Political and economic stability in the Philippines
2. Improved intergovernmental cooperation with other key economies
3. Positive consumer behaviour of Filipinos with their increasing disposable income
4. Low research and development investment by competitors in the industry (Meyer, 2017)
5. Industry is growing (Kunkaweeprad, Anisakusuma, Aninditya, and Kamila, 2012)



c.Competitor analysis

Table 1: Competitor analysis for PCPPI
Name Coca-Cola FEMSA Universal Robina Asiawide
Philippines Inc. Corporation Refreshments
Corporation
Brief background Coca-Cola FEMSA URC is one of the largest Asiawide Refreshments
Philippines is the bottler manufacturers of food Corporation has the
and distributor of Coca- and beverage products in exclusive license to
Cola products in the the Philippines. Its market manufacture and
Philippines. It boasts as presence has extended to distribute RC Cola
being one of the top 100 ASEAN markets as well. products in the
companies in the URC takes pride in being Philippines. Its strategy
Philippines. The one of the pioneers in the is to be the lowest cost
company will be local industry. producer of non-
investing $800 million alcoholic, ready-to-
into the country for a drink beverages.
period until 2020
(Bloomberg, 2017).
Year founded 1979 1954 Held by Macay
Holdings, founded 2014
Products offered Coca-Cola, Coca-Cola "Jack 'n Jill" for snack RC Cola, Zesto Fruid
Light, Coca-Cola Zero, foods, "C2" for ready to Soda, and Arcy’s
Lift, Powerade, Real drink tea, and "Great Rootbeer
Leaf, Royal Tru, Taste" for coffee
Samurai, Sprite, and the
bottled water brands
Viva and Wilkins



Name Asia Brewery Del Monte Pacific Zest-O Corporation
Incorporated Limited
Brief background The beverage company Del Monte is in the Zest-O Corporation is a
is owned by Lucio Tan’s business of producing, beverage company in
LT Group, Inc. It is one marketing, and the Philippines founded
of only two breweries in distributing premium- by Alfredo M. Yao.
operation in the branded food and
Philippines. It is beverage products. It is
licensed to brew well known for its
alcoholic beverages pineapple juice.
including Colt 45. It is
also the official bottler
of Virgin Cola and the
Philippine distributor of
Vitamilk.
Year founded 1982 n/a 1981
Products offered Includes Virgin Cola, Fruit juices in cans and Root Beer, Cola Classic,
Vitamilk, Cream tetra packs, Fit n’ right Twist, Squiz
Delight yogurt among
others



d. Strategy group maps
Below are three strategy group maps for PCPPI’s brands, with each map varying in variables
(Perceptual Maps, retrieved 2017). PCPPI products are positioned in the strategy map in comparison to
the products of its biggest competitor, Coca-Cola FEMSA.
The first strategy map looks closely at the competition between Pepsi-Cola and Coca-Cola, with
the repositioning illustrated within the map. The vertical axis pertains to customer demographics, that is
“Young” and “Old.” The horizontal axis pertains to taste, a critical factor in the food and beverage
industry that is “Poorer taste” and “Better taste.” Pepsi is positioned in the centre of the four quadrants,
which makes it difficult to ascertain exactly what it aims to do, or what it targets to achieve. Coca-Cola on
the other hand is positioned at “better taste” for the “younger demographic.” The repositioning of Pepsi
aims to target the “Young” with “Better taste.” The repositioning of Coca-Cola aims to target the “Old”
with “Poorer taste.” In the Philippine setting, “better taste” seems to be a disadvantage as customers in the
local setting are not comfortable with a sweet carbonated drink. This repositioning however does not
focus on Pepsi alone, but also other product brands such as Mountain Dew, Gatorade and Tropicana.
Figure 8 Strategy map with age a nd taste variables



The second strategy group map compares Pepsi-Cola and Coca-Cola brands with variables
“Modern vs. Traditional” and “High vs. Low sugar taste.” This strategy map is in consonance with the
previous strategy map as it can be seen that three out of four Pepsi Cola brands are oriented towards
“Modern/new” in contrast to Coca Cola’s two out of three products oriented towards the “traditional.”
Pepsi Cola products are equally divided between “High sugar taste” and “Low sugar taste.” Two out of
three Coca Cola products are geared towards “Low sugar taste.”
Figure 9 Strategy map with cultural and taste variables
The last strategy group map depicts product lines of both Pepsi Cola and Coca Cola with
variables “Caffeine vs. No caffeine” and “No vs. High sugar.” Most carbonated drinks are caffeinated,
with six out of ten brands having caffeine. However it can be noticed below that Pepsi Cola products
dominate “high sugar” carbonated drinks.


Figure 10 Strategy map with caffeine content and taste variables

Another strategy map is depicted in Figure 11. The framework was devised by Robert S. Kaplan
and David P. Norton in 2004. The framework is extremely helpful in showing the interrelationship of
different strategies in each perspective and how they all tie up to give the business firm its desired
competitive advantage. This means to say that all strategies harmonise in order to achieve competitive
advantage and above-average returns.



Figure 11 Kaplan and Norton's Strategy Map
The author of this paper suggest the following strategies to be included in the strategy map
above:
Financial perspective
1. Enhance workforce value
2. Ensure stable sources of financing
Customer perspective
1. Reputation
2. Loyalty
Internal perspective
1. Service delivery management


2. Compensation management
3. Stakeholder management
Learning & Growth
1. Employee motivation
Broader societal expectations (CSR)
PCPPI’s corporate social responsibility is embodied in its tagline “Tayo Na!” Tay would stand for
talino (knowledge), asenso (progress), yaman (wealth), oras (time). Focus areas, according to PCPPI
include education, entrepreneurship, environment, and volunteerism.
Table 2: Corporate social responsibility (CSR) at PCPPI
Talino T stands for talino - knowledge.
Empowers children by ensuring they are healthy enough to go to
school and get the education they deserve. Partnership with Kabisig
ng Kalahi, the National Competitiveness Council, and the
Department of Education, was formed for a feeding program
dubbed as PEPSIGL
Asenso A is for asenso, or progress.
Provides access to livelihood through the Entrepreneurial
Distribution System (EDS), which was started over 10 years ago.
EDS helps individual entrepreneurs buy Pepsi products for resell at


tiangges, becoming a source of livelihood.
Yaman Y stands for yaman, or wealth.
PCPPI ensures that its business practices have minimal impact on
the environment through “rainwater harvesting, waste water
treatment, watershed reforestation and biomass or steam
generation.”
Oras O is for oras, or time.
A council called the Bukluran Council empowers employees to
contribute in projects the Council deems relevant and urgent.
This volunteer tradition has been going on for over 20 years.



MODULE 3
Company overview  Financial ratios  Value chain analysis Strengths and
weaknesses Personal values

Company Overview
Even if this paper is the application of strategic management process on Pepsi Cola Products
Philippines Inc., it is important to note that this paper does not focus solely on Pepsi, the product. Neither
does it aim to target PepsiCo, the international parent. A distinction will be discussed for the benefit of
the reader.
Pepsi refer to the carbonated soft drink manufactured by PepsiCo. It was first created in 1893 and
called as Brad’s Drink, later named as Pepsi-Cola in 1898 and then simply as Pepsi in 1961 (Soda
Museum, 2017).
PepsiCo, Inc. is an American multinational food, snack, and beverage corporation. PepsiCo was
founded in 1965 after a merger between Pepsi-Cola Company and Frito-Lay, Inc. Since then, PepsiCo has
expanded its brand portfolio to include Tropicana, Quaker Oats, and Gatorade. These products are
distributed in more than 200 countries.
According to its Wikipedia page, PepsiCo is the second largest food and beverage business in the
world based on net revenue, and the largest in North America.
Pepsi-Cola Products Philppines Inc. is the manufacturer in charge of bottling and manufacturing
PepsiCo products in the Philippines. It was initially registered as beverage manufacturer in 1989 before
additionally registering as food manufacturer in 2014.


PCPPI manufactures brands such as "Pepsi-Cola","7Up", "Mountain Dew", "Mirinda", "Mug",
"Gatorade", "Tropicana/Twister", "Lipton", "Sting", "Propel", "Milkis", and "Let's Be.” It’s customers
include “supermarkets, convenience stores, bars, sari-sari stores and carinderias” (PSE EDGE, 2017). Its
bottling facilities are located in Muntinlupa City, Sto.Tomas, Rosario, Pampanga, Naga, Cebu, Iloilo,
Bacolod, Tanauan, Davao, Cagayan de Oro and Zamboanga and its snacks facilities are located in
Cabuyao.

Figure 12 Logo of Pepsi, the b rand

Figure 13 Logo of PepsiCo

Figure 14 Logo of PCPPI


Financial ratios
Ratios are used to help evaluate the financial statements of a business firm. Financial statements
include the statement of comprehensive income (or commonly called “income statement”), statement of
retained earnings, statement of financial position (or commonly called “balance sheet”), statement of cash
flows, and notes to financial statements. The statement of comprehensive income shows the financial
performance of a business firm as of a given period. The statement of financial position on the other hand
shows the financial position of a business firm at a given point in time.
Ratios can either be income statement ratios, balance sheet ratios, or a combination of both.
Ratios may be divided to the following categories: profitability ratios, activity or efficiency ratios,
liquidity ratios, capital structure ratios and market value ratios.
Profitability ratios show how profitably the business has been operating and how effective it was in
utilizing its assets to generate profits.
Activity or efficiency ratios show how efficiently the business firm utilized its assets.
Liquidity ratios show how able a business firm is to pay off current liabilities, or debts due within a year.
Capital structure ratios show how the business firm was financed.
When analyzing ratios, it is important to note that they should be analyzed in relation to other
ratios and not in isolation. A business firm’s ratios may also be compared to industry ratios to gain insight
on how well the firm performed relative to others in the same operations. Ratios may also be used to see
improvements or declines in performance across time.
PCPPI’s financial ratios are show in Table 3, sourced from The Wall Street Journal based on its
2016 financial statements.


Table 4 PCPPI financial ratios for audited financial statements for the year 2016


Analysis of PCPPI’s financial ratios reveals the following:
As for its per share data, the positive earnings per share show that investors in PCPPI are earning
positive returns on their per share investment in the corporation. The goal of management is to increase
earnings per share through the years, although this does not necessarily mean increasing shareholders’
wealth. Working capital pertains to current assets, including cash and current liabilities. The decline in
working capital may be a result of PCPPI’s capital expenditures. The 1.11 ratio means that PCPPI has
made a significant capital expenditure last year. A capital expenditure is different from operating
expenses, such that capital expenditures are usually in vary large amounts. Their purpose is to invest cash
into long-term assets that will leverage the bottom-line of the firm.
As for its valuation data, PCPPI’s high P/E ratio means that investors are willing to pay high
amounts per reported earnings of the firm. P/E ratio is derived by dividing the market price of a share by
its earnings per share. A high value for P/E ratio means that an investor is willing to pay higher amounts
for each peso earnings of PCPPI. Valuation ratios may be helpful to compare two firms, especially
against Coca-Cola FEMSA in this case. Unfortunately, Coca-Cola FEMSA has pulled out of the
Philippine Stock Exchange in 2013. As a result, we don’t have comparable data for that kind of analysis.
As for its efficiency, the high receivable turnover of PCPPI means that it was able to collect its
receivables for almost 12 times this year. This is a good ratio, which indicates that sales of PCPPI are not
invested in receivables. Too much receivables means a poor collection system. As a result, even if sales
figures are high, the cash amount is not enough for expenditures or for distribution to shareholders as


dividends. Total asset turnover means that PCPPI’s assets are able to generate income for PCPPI 1.37
times.
As for liquidity, the ratios show that PCPPI is liquid enough to be able to pay its current debts.
However, it may be beneficial for PCPPI and its finance team to increase the current and quick ratios. A
small disparity between current and quick ratios means that PCPPI has no large investments on inventory,
which is a positive sign. Too much inventory increases the cost of storage for the firm and increases the
likelihood of losses especially in an industry of perishable items.
As for capital structure, the ratios show that PCPPI has abundant sources of financing whether
debt or equity. Its high interest coverage ratio means that PCPPI is able to use its long-term debt as
leverage for its operations.
Ratios may also be compared across time, and across industries if these data are available.



Value chain analysis
Sharon Bailey of Market Realist presented a value chain analysis of the soft drink analysis, depicted
in the figure below. In the figure, it can be seen that sugar and syrup producers as well as bottlers play a
crucial role in the industry.
Figure 15 Value chain of the soft drink industry
According to Bailey (2016), products manufactured by the soft drink industry reach their
consumers in two ways. First is by manufacturing the products in their own facilities then selling these to
distributors, who in turn sell them to retailers.
Another way is by selling concentrates to bottling partners, who combine these concentrates with
other ingredients, bottle them, then sell them to distributors or directly to retailers. Likewise, they also sell
“fountain syrups” to “fountain retailers” which include restaurants and convenience stores. This is what
transpires between PepsiCo and PCPPI.
The wide distribution of both PepsiCo and Coca-Cola gives them pricing power, which is
maintained at low prices because of very stiff competition.
John Dudovskiy (2016) presented a more detailed value chain analysis specifically for PepsiCo
this time, with presentation of both primary and secondary activities.



Figure 16 Value chain of PepsiCo

The primary activities of PepsiCo are as follows: inbound logistics, operations, outbound
logistics, marketing and sales, and service. Below is a tabular discussion of these activities (Dudovskiy,
2016).
Table 3: Value chain analysis for PepsiCo and PCPPI
Inbound logistics Inbound logistics provide PepsiCo and PCPPI with economies of
scale. Inbound logistics refer to the quality and quantity of raw
materials used. It also refers to the proximity of manufacturing plants
to suppliers in order to minimise transportation costs. Raw materials
of PCPPI include domestic sugar, beverage concentrates from PepsiCo
and Pepsi Cola Far East Trade Development Co., Inc., seasoning from
The Concentrate Manufacturing of Ireland, and PET resins. The plants
of PCPPI are strategically located to be closer to its suppliers.
PepsiCo’s geographic segments across the globe, including Asia, are


also positioned such that they can service each other in this function.
Operations PCPPI has bottling facilities located in Muntinlupa City, Sto.Tomas,
Rosario, Pampanga, Naga, Cebu, Iloilo, Bacolod, Tanauan, Davao,
Cagayan de Oro and Zamboanga and snacks facilities in Cabuyao.
PCPPI’s operations are in congruence with PepsiCo’s operational
systems and technologies, both of which are complex and top-notch.
PCPPI describes itself as “infrastructure-intensive.” This means that
PCPPI has invested aggressively. Its expansion of its manufacturing
facilities ensure that not only can they manufacture multiple products
in huge volumes, but also operate with efficiency, high cost savings,
and perceived quality.
Outbound logistics As explained in the previous value chain, both PepsiCo and PCPPI use
distribution networks to their advantage in order to maximise presence
and their reach. This includes selling directly to stores, to customer
warehouses, to fountain sellers, or to other distributors. PCPPI utilises
a system called “Entrepreneurial Distribution System” which is
composed of independent contractors who service one or several sales
routes by trucks. These pertain to those who sell PCPPI products to
retailers and collect empty bottles. To further expand its distribution,
PCPPI has invested in additional trucks, refrigerators, and warehouse
space.


Marketing and sales PCPPI maintains intensive marketing strategies in various platforms
including print ads, social media, celebrity endorsements, and product
placements. Local celebrities that are considered leaders of the pack
are endorsers of the brand (Daniel Padilla, Julia Barretto). Foreign
celebrities have also served as endorsers to attract local customers (F4,
Beyonce, Britney Spears). Pepsi and its products are associated with
youth and energy. PCPPI’s marketing promotions include competitive
pricing, discounts, and capitalizing on its expansive brand portfolio.
Service PCPPI does not sell to individual consumers but to retailers such as
supermarkets, fast food chains, restaurants, bars, sari-sari stores, and
carinderias. Nonetheless, customer complaints can still be addressed
by making their website, social media platforms, and contact numbers
visible to consumers.



Strengths and weaknesses
Strengths
1. Strong brand name
It was identified by websites such as Interbrand and Forbes that Pepsi brand is 23h and 29th most
valuable brand in the world, and Frito-Lay as the 40th. PepsiCo shares this with Coca-Cola and Sprite as
the only non-alcoholic beverage belonging in top 100 most valuable brands in the world (Jurivicius,
2017).
2. Impressive portfolio of products and brand names
PCPPI represents the company which ranks second in terms of revenue in the food and beverage industry,
second to Nestle. This was achieved by PepsiCo’s impressive portfolio of brands, numbering more than
100. 22 of these brands have generated revenue of more than $1 billion in 2016. (Jurevicius, 2017)
Below is a graphical presentation of the brand portfolios of key players in the food, beverage, and tobacco
industry (Jurevicius, 2017)
Figure 17 Brand portfolios per food and beverage manufacturer


Below are some of PepsiCo’s most popular brands, recognised the world all over.
Figure 18 Selected PepsiCo brands
3. Large distribution networks
One of PCPPI’s greatest strengths is its vast distribution network with bottling facilities are
located in Muntinlupa City, Sto.Tomas, Rosario, Pampanga, Naga, Cebu, Iloilo, Bacolod, Tanauan,
Davao, Cagayan de Oro and Zamboanga and its snacks facilities are located in Cabuyao. This does not
take into account the distribution networks of its international company, PepsiCo, from which it may also
benefit.
4. Partnerships with retailers, fast-food chains, and restaurants
See “Present Task Environment Analysis.”


5. Aggressive marketing campaigns
PCPPI benefits from PepsiCo’s aggressive marketing campaigns. Globally, PepsiCo is known for
sponsoring the large sporting event, Super Bowl. Locally, PCPPI has employed large names as its brand
ambassadors including Daniel Padilla and Julia Baretto.
Figure 19 PCPPI's foreign and local advertising campaigns
Weaknesses
1. International partner, PepsiCo overtly focuses on North American market to the detriment of
emerging markets. PepsiCo derives 70% of its revenues from both North and South America out of
several geographic segments.
2. PCPPI annual reports for investor and stakeholder relations are not readily available
3. PCPPI’s carbonated drinks can be a weakness for the business firm



Company Values
PCPPI’s company values stand for one letter each in “PEPSI.” These are: Passion, excellence,
professionalism, service, and integrity.”

Figure 20 PCPPI Company values



MODULE 4
Vision & Mission  Evaluation of present strategies  Proposed corporate
strategies Objectives to be attained by the proposed strategies Competitive
Advantage using Wharton model

Vision
Figure 21 PCPPI Vision Statement
Mission
Figure 22 PCPPI Mission statement


Statement of Financial and Strategic Objectives
The strategies of PCPPI are also aligned with the strategies of PepsiCo. To summarize, its
strategies are as follows:
Strategy 1: Focusing on emerging markets
PCPPI, influenced by the strategies of parent PepsiCo, has a keen and aggressive pursuit of
emerging markets. PepsiCo and PCPPI are no longer just soft drink companies anymore and its product
line is not focused solely on Pepsi-Cola. It has ventured into the energy drink market through Gatorade,
fruit juice market through Tropicana, and food products through Cheetos, among other brands. PepsiCo
seeks to reach out to emerging markets, keeping close watch of those in which they can increase their
market presence. (Dudovskiy, 2016)
Strategy 2: Focusing on organisational culture
PepsiCo’s global reach is vast and massive but its ability to unify the essence of its organisation
and its vast product lines is because of its strong organisational culture. Thus, PepsiCo distributors
whether in North America, in India, or in the Philippines all embrace the PepsiCo organisational culture
of “making the most of the moment.” As a result, the business firm is an organisation where employees
are encouraged to express their individuality and creativity. PepsiCo is also able to translate its focus on
modern and youthful culture to its various geographic segments. (Dudovskiy, 2016)
Strategy 3: Focusing on infrastructure
PCPPI’s bottling plants and food manufacturing facilities in the Philippines are located in various
key strategic areas. This is part of PCPPI’s strategy in its supply-chain management, positioning itself
geographically in strategic areas to minimise transportation costs and to minimise distance between their


facilities and the suppliers of raw materials. PCPPI is continuously expanding its infrastructure to achieve
efficiency and cost savings.
Strategy 4: Cost leadership
PCPPI has achieved economies of scale, allowing it to maintain low selling prices for its
products. Aside from economies of scale, PCPPI continuously finds way to reduce its operating costs, and
offer promotional efforts (Ferguson, 2017). Selling prices in the industry are maintained at lower prices
due to the intense competitive rivalry between Pepsi-Cola and Coca-Cola.
Strategy 5: Broad differentiation
PCPPI uses broad differentiation as another strategy (Ferguson, 2017). Evidence of this is its
impressive portfolio of brands that surpass carbonated beverages. It has included non-carbonated
beverages (including energy drinks) and snacks as part of its product lines. PCPPI, paralleled with the
efforts of PepsiCo, allocates resources to its research and development in experimenting and finding new
flavours. This is also in alignment with its first strategy, focusing on emerging markets.
Senior management for PepsiCo uses the 5C’s framework as its overall business strategy. The 5C’s stand
for:
1. Commercial agenda
2. Building new capabilities
3. Increasing focus on costs
4. Fostering a culture of collaboration
5. Exercise discipline when it comes to capital returns


Evaluation of Current Corporate Strategies
Evaluation of the current corporate strategies of PCPPI is presented in Table 4. Each of the actual
strategies discussed in the previous section are matched with the corresponding appropriate 5C. The last
column evaluates the strategies based on their effectiveness and their alignment with PCPPI’s values.
Table 4: Evaluation of the current corporate strategies at PCPPI
Strategy Corresponding 5C Evaluation
Focusing on emerging markets Commercial agenda If emerging markets pertain to
beverage/food products, PCPPI
has performed extremely well,
largely in cooperation with parent
PepsiCo. PCPPI is no longer a
purely carbonated drink
manufacturer but has ventured
into other product lines, including
non-carbonated beverages and
food items.
If emerging markets pertain to
demographics, PCPPI has not
been able to focus on the
emerging young market. And by
young, this pertains to children,
12 years old and below.
If emerging markets pertain to


lifestyle, PCPPI has not penetrated
the healthy consumers
sufficiently. This is in contrast to
the intensive efforts of PepsiCo
abroad, which is intensively
targeting the increasing number of
health-conscious consumers.
Focusing on organisational Fostering a culture of PCPPI benefits from the prestige
culture collaboration of the Pepsi brand, which
motivates the Filipinos to aspire
for employment in the company.
However, not much information is
provided on its workforce value.
Likewise, because of the lack of
access of the author to annual
reports, not much information on
compensation management is
available for evaluation.
Employee motivation is another


strategy not delivered clearly by
PCPPI. In its Securities and
Exchange Commission (SEC)
filing, PCPPI has stated that it is
periodically reviewing its
compensation packages to cater to
its employees’ needs.
Focusing on infrastructure Building new capabilities The number of plants that PCPPI
has established all across the
Philippines is impressive. It is
without doubt that as per physical
resources, PCPPI is at an
advantage by miles. The author of
this paper aims to identify how
this enormous logistics may be
improved to be more efficient and
to manage service delivery.
Likewise, the author of this paper
also aims to determine the role of
information technology in
PCPPI’s service delivery.


Cost leadership Increasing focus on costs PCPPI has effectively maintained
cost leadership by being efficient
in its operating costs. However,
another aspect of cost leadership
is also the cost of capital. PCPPI
has not made clear its sources of
financing, particularly the
influence of risk to its costs.
Broad differentiation Commercial agenda PCPPI’s brand portfolio has
translated to positive returns on its
financial statements. The wide
array of brand portfolios,
however, has also drawn the ire of
stakeholders, particularly of the
local sugar industry.



Proposed corporate strategies
The corporate strategies listed in Table 5 are proposed by the author to address certain issues that
pose either as opportunities or threats to the overall strategic management of PCPPI. The author deems
these corporate strategies as appropriate in achieving competitive advantage and above-average returns.
Table 5 is divided into three columns. The first column discusses the five proposed strategies for PCPPI.
The second column identifies which category of strategy the proposed strategy addresses. The category
may either be marketing, operational, financial, information technology, or human resource. Each
proposed strategy is also aligned with PepsiCo’s 5C’s, its current practice. This serves as a check to
ensure that the proposed strategies do not veer away from the culture of PepsiCo and PCPPI. Lastly, in
the third column, the author links the proposed strategies with the proposed changes in PCPPI’s current
strategy map (see Figure 11).
Table 5: Proposed strategies at PCPPI
Proposed strategy Strategy category & 5C’s Change in the strategy map
alignment
1. Marketing strategies to the Marketing Strategy/Commercial Reputation (Customer
following markets: children (12 agenda perspective)
years old and below) and the Loyalty (Customer perspective)
health-conscious
2. Implement strategies that target Operations strategy/Building new Service delivery management
key points in the value chain capabilities (Internal perspective)
chain: operating efficiency and
distribution challenges


Proposed strategy Strategy category & 5C’s Change in the strategy map
alignment
3.Identify sources of financing Financial strategy/Increasing Ensure stable sources of financing
and the accompanying costs/risks focus on costs and Exercise (Financial perspective)
of financing. discipline when it comes to capital
returns
4. Establish information Information technology Service delivery management
technology strategies to address strategy/Building new capabilities (Internal perspective)
Strategy #2
5. Adapt a framework for human Human resource Enhance workforce value
resources best practices strategy/Fostering a culture of (Financial perspective)
collaboration Compensation management
(Internal perspective)
Objectives to be attained by the proposed strategies and foundational basis for the
strategies
The strategies presented above in Table 5 aim to achieve the following objective:
1. To be the first-mover in terms of marketing strategies that target particular segments of the Philippine
market (i.e. children and the health-conscious consumer) (Proposed strategy #1)
2. To adapt information technology in order to achieve efficiency in operations and distribution
(Proposed strategy #2 & #4)


3. To secure low costs of financing as a means to minimize cost and maintain cost leadership strategy
(Proposed strategy #3)
4. To enrich the workforce such that they are trained to achieve their fullest potential and are offered
various learning opportunities
The foundational bases for the strategies above are enumerated in Table 6.
Table 6: Foundational basis per proposed strategy
Proposed strategy Foundational basis
1. Marketing strategies to the following markets: Marketing to children: a planning framework

(Ruppal Walia Sharma and Pinaki Dasgupta, 2009)
children (12 years old and below) and the health-
Applying industry practices to promote healthy
conscious foods: An exploration of positive marketing
outcomes (Bublitz and Peracchio, 2014)
2.Implement strategies that target key points in the Distribution challenges and workable solutions
(Mulky, 2013)
value chain: operating efficiency and distribution
How to Achieve Agility in Food and Drink
challenges Manufacturing (Bolseth and Alfness, 2017)
3.Identify sources of financing and the Fundamentals of Financial Management (Brigham,

2009)
accompanying costs/risks of financing.


Proposed strategy Foundational basis
4. Establish information technology strategies to Information and communications technology in food

assistance (Yu, 2017)
address Strategy #2
The Role of mPOS System in Process Change and
Strategy Change: A Situated Change Perspective
(Yao Chin Lin, Nhu-Hang Ha and Kuo-Sung Lin,
2015)
A business process management approach to ERP

implementation (Idorn, 2008)
An Introduction to Advanced Planning and

Scheduling Systems (Spinnaker Management,
retrieved 2017)
5. Adapt a framework for human resources best Human Resource Management Practices on Food
practices and Beverage Performance (AbuKhalifeh AN, Som
APM, and AlBattat AR, 2013)
Developing a Compensation Strategy (Milkovich

and Broderick, 1989)



Competitive Advantage – Present Advantage, Proposed Advantage, Wharton Model
The proposed competitive advantages are based on the Wharton model for competitive
advantage. According to this model, the sources of advantages are superior assets and superior
capabilities. Assets pertain to what the business firm owns. How these are utilized to deliver competitive
advantage is referred to as capabilities. Together, they determine the positional advantages of the business
firm. This position is most advantages when customers perceive superior value from the brand or product.
This superior customer value result to performance rewards in the form of customer satisfaction, brand
loyalty, high market share, and increased profits. Returns from these performance rewards are to be
reinvested to repeat the cycle of competitive advantage.
Figure 23 Wharton Model of Competitive Advantage



Present advantage
PCPPI’s sources of advantage are its superior assets and superior capabilities. Its superior assets include
its infrastructure-intensive manufacturing plants and its enterprise distribution system to expand its
distribution network. Its superior capabilities are its intangible workforce value that generates returns
from the superior assets. Pepsi as a brand has superior customer value, as it is one of Forbes’ List of Most
Valuable Brands. As of May 2016, the value of the Pepsi brand is at $19.4 billion (Forbes). Likewise, its
other beverage brands as well as food brands are well worth $1 billion each. In recent times, however the
Pepsi brand has experienced some beating due to their health complications.
Proposed advantage
The strategies discussed in Table 5 aims to enhance further the superior assets of PCPPI by integrating
operational frameworks and information technology into its current operations. This results to
advantageous efficiency, thereby lowering the costs of production. Securing also low costs for financing
will contribute to the superior assets of PCPPI, as part of its cost savings strategy. Enriching the
workforce will contribute to PCPPI’s superior capabilities, as they compose the intangible assets that
operate the superior assets. By marketing to children and to the health-conscious, PCPPI will be able to
enhance superior customer value and enjoy performance rewards by penetrating all possible sectors of the
food and beverage industry.



MODULE 4
Marketing strategy  Operations strategy  Finance strategy  Information
technology strategy Human resources  other key areas

Relevance of each to the strategic plan and competitive advantages
The discussion that follows this section pertains to the proposed strategies for Pepsi-Cola
Products Philippines, Inc. (PCPPI). The strategies aim to target the following areas: marketing,
operations, finance, information technology, and human resource. The last part, other key areas, aims to
discuss stakeholder theory and stakeholder management in the face of current events surrounding the
carbonated beverage industry in the Philippines.
In this strategic management paper, the overall framework is to devise a strategic plan that will
generate competitive advantage for PCPPI. The strategic plan includes the following: to be the first-
mover in emerging market segments in the Philippines, to integrate operations and information
technology for efficiency, to secure low costs of financing for cost savings, and to enrich the workforce.
These plans were all designed and structured according to the Wharton Model of Competitive Advantage
in Figure 23. Thus, it is believed that these strategic plans will enhance superior assets and superior
capabilities in order to generate superior customer value that result to performance rewards.
The competitive advantage that these strategic plans aim to achieve is that by penetrating all
possible segments of the food and beverage market, Filipino consumers become loyal to PCPPI product
lines. As this demand increases, maintaining operating efficiency and low-cost sources of financing will
also drive competitive advantage for PCPPI.


The proposed strategies to achieve the strategic plan are as follows:
1. Implement marketing strategies directed towards children and the health-conscious.
2. Implement operating strategies that the key points in the value chain: operating efficiency and
distribution networks including distribution challenges.
3. Implement financing strategies that will identify sources of financing that are available and low-cost,
as part of PCPPI’s cost-savings plan
4. Implement information technology strategies that will support the operations strategy of PCPPI
5. Implement human resource strategies that will adapt best human resource practices in the industry
The first strategy is relevant to the first strategic plan of targeting emerging marketing segments. The
second and fourth strategies are relevant to the second strategic plan of achieving efficiency in
operations. The third strategy is relevant to the third strategic plan of securing low costs of financing.
Lastly, the fifth strategy is relevant to the last strategic plan of enriching the workforce.



Marketing strategy: Marketing to children and to the health-conscious
The marketing strategy aims to focus the strategic actions of a business firm towards “who the
target market that the business intends to serve (Hitt, 2011)”. In this section, the author discusses potential
target market segments that PCPPI may direct its strategic actions to. This is in alignment with PCPPI’s
strategy of focusing on emerging markets.
For this to be done, a framework called the “Ansoff Matrix” will be used. This matrix is useful
for strategic marketing where the business firm intends to “look at opportunities to grow revenue
(Hanlon, 2013).” This is achieved by developing new products or services; or by tapping into new
markets. Harry Igor Ansoff, a Russian American business manager, developed the matrix.
The Ansoff Matrix is depicted in Figure 24. The vertical axis on the matrix pertains to whether
there are “existing” or “new” markets while the horizontal axis on the matrix pertains to whether there are
“existing” or “new” products. From the Ansoff matrix, the author determined two strategies: market
penetration strategy and market development strategy.
The existing markets are children aged 12 years old below (as those in ages 13 years old above
are considered preteens and teenagers) and the existing products are both non-alcoholic beverages and
food of PCPPI. There is a growing market for children. A research in the United States revealed that
children under 14 spend around $40 billion annually and influence $500 billion in purchases per ear. As a
result, this generation is by far the most brand-conscious.
The new market is the health-conscious market segment and the existing products are also both
non-alcoholic beverages and food of PCPPI. Consumer healthcare is valued at $502 billion and will grow
to $737 billion in the next five years (Accenture, 2017).


Marketing to children will make use of market penetration strategy while marketing to the health-
conscious market will make use of market development strategy.
Figure 24 The Ansoff Matrix
Marketing to children may be strategised the framework presented in Figure 25 entitled “The
Zone of Influence” (Sharma and Dasgupta, 2009). The framework is divided into three parts: the
preference zone, pester zone, and purchase zone. In the preference zone, the parents are the decision
makers, purchasers, and influencers though they may consider the influence of their children. In the pester
zone, the parents are the decision makers and purchasers but children have very strong influence. In the
purchase zone, parents are purchases while children are the decision makers and influencers. Sometimes,
they are the purchasers as well.


Figure 25 The Zone of Influence
The marketing strategy varies for each zone. In the preference zone, marketing efforts must target
highlighting benefits for children, as the parents are the decision makers, influencers, and purchasers in
this zone. Marketing in the pester zone are directed towards building children’s interests as their influence
are strong in this zone. This includes using cartoon characters, mascots, and other devices that are
considered the trend among children. Marketing in the purchase zone focus more on incentives for
purchase, which includes freebies for children. Adapting these strategies into the framework is presented
in Figure 26.

Figure 26 Marketing strategies for each zone of influence

Marketing to health-conscious consumers will make use of the framework presented in Figure 27
lifted from the journal “Applying industry practices to promote healthy foods: An exploration of positive
marketing outcomes” by Melissa G. Bublitz and Laura A. Peracchio (2015). The framework compares
the difference between advertising for healthy products and advertising for hedonic products. The
framework shows that advertising for healthy food and beverages are more informational in nature with
focus on nutrition and health benefits. Hedonic, on the other hand, focuses more on the sensory
experience that give pleasure or indulgence to the consumer. Presently, PCPPI food and beverage
products are advertised using the hedonic advertising model. To capture the growing health-conscious
market, new advertising will focus on informational advertising. PCPPI may opt to adapt this strategy on
its non-carbonated drinks and food, or across all product lines.
Figure 27 Consumer's marketplace experience
In order to identify which product lines are to be used to in marketing towards health-conscious
consumers, a BCG matrix of PCPPI’s product lines is generated. BCG Matrix stands for Boston
Consulting Group Matrix. It is designed to assist in strategic planning of a business firm by categorizing
its portfolio of products into four quadrants. The positioning of the product lines in the quadrants


determines whether a firm is to invest, to develop, or to discontinue the product line. The vertical axis
represents “market growth rate” and the horizontal axis represents the “relative market share.” The four
quadrants are divided into: stars, question marks, cash cows, and dogs. Dogs are products with low
growth and low market share. Question marks have high growth and low market shares. Stars have high
growth and high market shares. While cash chows have low growth and high market shares. A sample
BCG Matrix is presented below (Teodoro, 2017) and the corresponding strategies for each quadrant.
PCPPI products belonging to Question Mark belong to the Quaker Oats product line. PCPPI
products belonging to Stars are Pepsi, Tropicana and Mountain Dew. PCPPI products belonging to Cash
Cows are Lay’s, Doritos, and Cheetos. No PCPPI product would be considered as Dogs (Kasi, 2017).
From the BCG Matrix and the strategy for each quadrant, it can be concluded that to target
health-conscious consumers, PCPPI would perform intensive strategies for its Quaker Oats and non-
carbonated beverage product lines.
PCPPI may also opt to develop new products by moving into a new quadrant in the Ansoff
matrix, the “Product Development” and utilise the cash cows of PCPPI (i.e. the chips products) as sources
of cash to finance the development and manufacture of healthier options catered specifically to the
Filipino market.
It is worth noting that despite being a multinational, PCPPI has not produced local varieties of
international brand names in contrast to what other multinationals (e.g. McSpaghetti for McDonald’s
Philippines) had done. Perhaps marketing wise, the opportunity is ripe for PCPPI to adapt such marketing
strategies.


Figure 28 BCG Matrix with summary of strategies


Operations strategy: Operating efficiency and address distribution challenges
As a distributor, the sales volume of PCPPI depends on the reach of its distribution networks as.
To increase this, PCPPI continuously adds routes and increases its market penetration. Also, it depends on
a number of channels including direct sales, their distributors and wholesalers. The system used by the
firm in actual practice is the “Entrepreneurial Distribution System” which is composed of independent
contractors who utilize their own trucks. This is the distribution channel we normally see in active use
today. PCPPI also uses its sales force through restaurants and convenience store chains.
The operations strategy presented in this paper aims to address operating efficiency and
distribution challenges. Understanding the foundational basis for operations strategy will be better
appreciated with frameworks lifted from the paper “How to Achieve Agility in Food and Drink
Manufacturing” by Sindre Bolseth and Erlend Alfnes (retrieved 2017). The first framework illustrates the
operations flow in a food and beverage manufacturing plant. The manufacturing process in the food and
beverage industry is described to be on a “per batch” basis with continuous flow and short lead times.
From the framework, it can be seen that “handling and storage” are crucial in the process flow. “Primary
processing” is described as the process wherein the raw materials are processed to become finished goods.
“Secondary processing” is the process where the goods are packaged. At this point, a “variant explosion”
occurs such that similar products may be packaged differently.

Figure 29 Value chain in the food & beverage manufacturing industry


The second framework is depicted in Figure 30, lifted from Terry Hills volume/variety matrix.
The vertical axis pertains to “variety” while the horizontal axis pertains to “ volume.” Products that are
high variety but low volume are “niche products” while products that are low variety and high volume are
“traditional products.” (Bolseth and Alfnes). PCPPI has both niche products and traditional products. Its
operations strategy will vary between the two.
Figure 30 Volume and variety for food products
Achieving operational efficiency for PCPPI involve the following strategic actions (Bolseth and
Alfnes):
1. Strategic positioning of the Decoupling point
Decoupling point is defined as the point where products are stocked as a buffer to smooth demand
variety (Strandhagen & Skarlo, 1995). In the first framework for operating strategy, PCPPI opt to place
the decoupling point between the primary and secondary process.


2. Construct a product-oriented and flow-oriented layout
For this strategy, PCPPI will separate its “traditional products” from its “niche products” as seen
in the second framework. Traditional products would require an automated layout to produce high
volumes of a product line. Niche products, on the other hand, require flexible lines that can produce high
volumes of particular product lines. This goes on to say that not all products of PCPPI have to be in a
product-oriented layout. Neither should they all be in a flow-oriented layout. PCPPI shall categorize its
products as either traditional or niche, and just the layout for the two. A product-oriented layout for a soft
drink manufacturer is presented in Figure 31 (Solar Navigator, retrieved 2017) while a flow-oriented
layout is presented in Figure 32 (Hiezer and Render, 2011).
Figure 31 Process-‐oriented layout for traditional products


Figure 32 Flow-‐oriented layout for niche products
3. Flexible and multi-skilled workforce
Related to the human resource strategy, this strategic action aims to train employees such that
they are flexible enough to alternate between different tasks to avoid bottlenecks in the manufacturing
system. Therefore, workers in the assembly line must be trained to be able to do various tasks as the need
arises. As also presented in Figure 32, an improved flow-oriented layout allows workers in the assembly
line to perform other tasks in addition to their main activities.
Addressing distribution challenges for PCPPI would entail the following strategy
4. Formulate internal benchmarks for distribution, frequency coverage plan, and deploy technology
Benchmarks for distribution would include mapping at the urban and rural level, the outlets, and the
retailers. Frequency coverage plan would address how to meet demands identified by the benchmarks.
Technology would be helpful in distribution as well, with the use of basic enterprise resource planning
(ERP) and advanced planning optimizer (APO) (Mulky, 2013). The last would be connected to the
information technology strategy to be discussed later.


Finance strategy: Identify sources of financing and their accompanying risk & cost
PCPPI has so far maintained its cost leadership by minimising cost. These costs pertain to
operating cost, which would further decrease if efficiency is achieved. Another cost is the cost of raw
materials used by PCPPI in manufacturing its products. Its achievement of economies of scale has
allowed PCPPI the capacity to produce large volume of its products at decreasing cost per additional units
due to strategic partnerships with its suppliers.
However, another aspect of decreasing cost comes with the sources of financing for the business
firm. That is, the cost of financing. Business firms are financed either by debt or equity. Both sources of
financing have their own risks. The risk for debt includes financial risk, which is the risk the obligation
cannot be paid on time. This risk is quantified through interest rates. The higher the risk, the greater the
interest rates. The risk for equity includes business risk, which is the risk that the business would be
operating at a loss. This risk is quantified with higher rates of return required by investors. The higher the
risk, the greater the required rate returns by investors.
The availability of financing, the risks involved and the consequential cost may be analysed based
on the financial ratios of PCPPI. Below are the capital structure ratios of PCPPI.
Figure 33 PCPPI Capital structure ratios


The debt to total assets ratio of 18.34 reveal that PCPPI’s assets are 18.34% financed by debt. The
low ratio poses well for PCPPI as this means that they are not overly dependent on debt. This reduces the
risk for creditors. However, shareholders may prefer to further leverage the business by acquiring more
debt. Interest coverage of 9.63 is well high enough which means that debt is leveraged well and there is
substantial effect of this leverage on the bottomline.
The healthy ratios of PCPPI bid well for the firm. However, analysing these ratios on their own
would be half of the picture. Comparing to the ratios to industry ratios would help the management
further in assessing the ratios. This is information that is available to the public, but need to be purchased.
Because of the healthy ratios, it may be said that PCPPI can easily acquire sources of financing
whether this be debt financing or equity financing. Its financial strategy at this point would be to identify
specifically where these sources of financing would come from, and their accompanying risks, measured
by their cost.
To quantify, use of the weighted average cost of capital (WACC) formula would be beneficial.
The formula for WACC is presented in Figure 34 (Brigham, 2009). The WACC weighs all sources of
financing for a firm and multiplies the weights with the corresponding costs. A lower WACC is
preferable.
Figure 34 Formula for weighted average cost of capital (WACC)
PCPPI shall communicate its WACC to its shareholders.
Based on Figure 34, it can be seen that there are three sources of capital for a business firm: debt,
preferred stock, and common equity. As of this writing, PCPPI does not have preferred stock. Its sources
of financing therefore include long-term debt and common equity. The cost of long-term debt is easily


identifiable, as simply the interest rates stipulated in contractual obligations. In the WACC formula, there
are tax adjustments due to tax savings as a result of incurring interest expense.
The uncertainty lies in the cost of common equity. This cost is determined by the risks, which
PCPPI face. In the financial strategy, PCPPI is recommended to determine the cost of common equity in
order to determine their WACC. Keeping their WACC at an advantageous level will serve as a signal for
PCPPI as to whether they are saving on financing costs or incurring unwanted losses.



Information technology strategy: Strategic alignment of information technology with
operations strategy
The information technology strategy is in alignment with the operations strategy presented
earlier. Needless to say, the purpose of certain implementing information technology practices into the
organisation is to make operations easier and more efficient. The strategic alignment between information
technology and business processes is presented in Figure 35. (Lin, Ha, and Lin, 2015)
Figure 35 Business and IT strategic alignment
Strategic and operational integration are also present in the framework below depicted in
Figure 36. (Lin, Ha, and Lin, 2015).
Figure 36 Strategic and operational integration


In the operations strategy section, enterprise resource planning (ERP) and advanced planning
optimiser (APO) were mentioned. These would be discussed in detail in this section. Before that, it would
be helpful to discuss first an organisation’s processes, presented in Figure 37 (Yu, retrieved 2017). This
framework and the process it represents are the foundation for information technology implementation.
Information technology systems here would be two-dimensional. The first is line-of-business
system, wherein information technology connects core processes and supplementary processes. Yu (2017)
states that, “In food assistance scenarios, these applications range from those supporting basic finance,
administration and logistics, to solutions supporting food monitoring, assessments, distribution and camp
management activities.”
The second are productivity tools, the purpose of which is to facilitate communication and
collaboration. Yu (retrieved 2017) states that this includes “providing voice communication services for
workers in remote or insecure areas of operations, or supporting information sharing for staff with
intermittent online access.”
Figure 37 Core and supplementary processes


For information technology strategy, the author suggests the use of enterprise resource planning
(ERP) in the core processes and advanced planning optimiser (APO) in the supplementary processes.
Both technologies work seamlessly together such that there is a connection between core and
supplementary processes. The ERP Is a line-of-business system while the APO is more of a productivity
tool.
Enterprise resource planning (ERP) is a software. It integrates information systems in order to
enable flow of information and data across departments in a business enterprise, “automating business
process and functions, and thus helping the organisation to work and move forward as a single entity
(Leon, 2014). The ERP is visually presented in Figure 38.
Figure 38 Enterprise resource planning
In PCPPI, enterprise resource planning will not only integrate departments, but also geographic
segments especially considering that there are several plants across the Philippines. This also takes into
consideration the distributing channels, which are always mobile.


Implementation of ERP, may use the following implementation strategy (Idorn, 2008). It is
basically a three-step process wherein management first defines the change, then establish the change, and
then finally put the change into practice (Idorn, 2008).
Figure 39 Implementation process for ERP
Advanced planning is information technology strategy intended for the supplementary process
particularly to assist in the planning process. Advanced Planner and Optimiser (APO) is a software
application from software company, SAP that helps in supply chain management. Its eight application
levels include: network design, demand planning, supply network planning, production planning and
detailed scheduling, global availability, transportation planning and vehicle scheduling, and supply chain
collaboration (Rouse, retrieved 2017).
To understand the importance of advanced planning, a model of a supply chain is presented
below (Spinnaker Management, retrieved 2017). The interconnectedness shows the complicated
relationship between the plants, the distributors, and the customers. Much more so with PCPPI, who is
both plant and distributor. Its customers are businesses as well.


Figure 40 Sample supply chain
The purpose of APO is to give accurate data for planning, to make the flow in the supply chain
easy and continuous, avoiding possible bottlenecks. This flow of information is depicted below
(Spinnaker Management, retrieved 2017).
Figure 41 Flow of information in the supply chain using APO


Likewise, the implementation of the APO is similar to the implementation of the ERP: define,
establish, execute. The implementation of the APO need not replace the ERP as the former is designed to
work with the latter seamlessly.



Human resource strategy: Adapt a framework for best practices
As of 2015, PCPPI has a headcount of 5,931 employees, both casual and regular. It also deploys
2,753 casual employees in its non-core operations. Currently, the business firm takes pride in its human
resources and the quality of talents they are able to acquire, train, and retain. Also, the business firm has
complied within legal parameters of the Department of Labor and Employment (DOLE). It is party to 13
collective bargaining agreements. Despite the nature of the industry, PCPPI has never experienced work
stoppages due to industrial disputes since 1999. PCPPI’s most tangible proof of its outstanding human
resource practices is its “Pepsi University,” which is a facility that trains its employees.
The human resource strategy aims to establish a framework for best human resource practice,
which can serve as a benchmark for PCPPI’s current human resource practices. The framework provides
quantitative measures that keep these human resource practices in check.
The framework to be used is provided by Cho, Jang, and Erdem (2006) provided in Figure 42.
The framework shows that best human resource management practices would translate to improved
performance for the business firm. This translates to quantitative measures: turnover rate of non-
managerial and managerial employees, labor productivity, and return on assets.
Decreasing the turnover rate of its employees decreases the cost of hiring people to fill in vacant
positions due to training costs. Increased labor productivity is a manifestation of a motivated workforce.
The value of a workforce lies on its productivity. To measure labor productivity, PCPPI will divide its
output (manufactured product units) with its input (number of employees, hours worked, or compensation
for assembly line). Inefficient workforce may be an indicator or several things, such as lack of training for
the employees or an overworked assembly line. Return on asset is the ratio of sales to total asset. This
ratio indicates the effectivity of assets to generate sales for the business firm. These assets do not generate
assets on their own, and are manpowered. The ability of these assets to generate returns also depends
largely on the human resources that operate them.


Figure 42 Framework for best human resource practice
Part of the human resource strategy is designing appropriate compensation packages. In fact,
compensation plays a dominant role in the human resource strategy (Milkovich and Broderick, 1989).
PCPPI constantly reviews its compensations packages such that they adhere to local laws and that
they reward employees well. Compensation packages however must also be in alignment with the overall
strategy of the business firm. The framework below shows that the compensation strategy of the
organisation depends on whether it is pursuing business-level strategy or corporate-level strategy.
Business-level strategy is directed towards a single product or market while corporate-level strategy
targets several products or markets (Hitt, 2011).
In reality, PCPPI adapts business-level strategies for each of its brands because each brand is
valued at $1 billion or more. As a result, each brand is a business unit on its own. Business-level
strategies are either “Growth” or “Maintenance.” A growth strategy makes high investments and incurs
high financial risks with the prospect of gaining significant market share. A maintenance strategy, on the


other hand, focuses on minimising costs while maintaining market shares and improving customer
satisfaction (Milkovich and Broderick, 1989). Compensation packages depend on whether a growth or
maintenance strategy is being observed. A sample is presented in Figure 44 succeeding the framework in
Figure 43.

Figure 43 Compensation package framework



Figure 44 Sample strategic compensation decisions for both "Maintenance" and "Growth" strategies


Other Key Areas
In addition to strategies discussed in the coverage of marketing, operations, financial, information
technology, and human resource, there is another aspect that needs strategic management in order to
achieve competitive advantage for PCPPI.
In this paper, the other key area involves stakeholder strategic management. This is most relevant
due to recent events surrounding the beverage industry.
Earlier this year, sugar farmers in Negros Occidental protested about the high importation of the
beverage companies of high fructose corn syrup or HFCS. The sugar producers said that these beverage
companies imported 800,000 metric tons of HFCS into the country, displacing them of potential income
amounting to P35.2 billion. HFCS imports have been reported to decrease sugar prices from P1,800 per
bag to P1,300 per bag, which translates to revenues losses of P20 billion (Simeon, 2017). Beverage
companies in the Philippines started using HFCS because it is a cheaper alternative to expense sugar
produced locally. In fact, local sugar is more expensive than sugar produced by Thailand.
In response, the beverage companies requested revision of government regulations, which restrict
beverage companies’ access to “D” sugar, which is cheaper than the sugar, sold locally. Only food
exporters can access “D” sugar.
In comparison to Coca-Cola FEMSA Philippines, PCPPI did not receive that much backlash from
sugar farmers and the sugar industry. In Negros, boycott of Coca-Cola products has started.


Due to this recent event, it is important to also integrant strategic management of stakeholder
issues in the overall strategy plan of a business firm. Stakeholders are affected by the decisions of a
business firm and some stakeholders have the capacity to affect the value and reputation of a brand.
In strategic management of stakeholder issues, a definition of who stakeholders are is first
discussed. Stakeholders are those who may be benefited or harmed by corporate actions. Stakeholders
have rights that may either be violated or respected by these corporations. (Freeman, retrieved 2017).
R. Edward Freeman in “Stakeholder Theory of the Modern Corporation” presents a model of the
stakeholders in the corporation. The model can be seen in Figure 45. Freeman states that the stakes of
each are reciprocal. That is, they can affect each other. The degree of their stakes varies from one
corporation to another.
Based on the model, six groups of stakeholders are identified. Owners’ stakes are their financial
investments into the corporation. Employees’ stakes are their jobs, or their source of income from the
corporation. Customers’ stakes are the benefits they receive from the consumption of the products offered
to them for sale by the corporation. The local community’s stakes are the economic and social
contributions of the business firm due to their facilities constructed within the community. Management’s
stakes are the assessment of their performance and the compensation they receive or do not receive due to
the assessment of this performance. Lastly, suppliers’ stakes are the seller-buyer relationship they have
established with the firm. The firm is their customer and as a result, their source of revenue as well.



Figure 45 Stakeholder model

Each stakeholder vies for the attention of the business firm, and what each stakeholder needs vary
from one to the other. This makes stakeholder management all the more difficult.
A framework on stakeholder management was formulated by Christina Scandelius and Geraldine
Cohen (retrieved 2017) in the paper “A life cycle stakeholder management framework for enhanced
collaboration between stakeholders with competing interest.” The framework is depicted in Figure 46. In
this framework, the stakeholders are further categorized as value chain stakeholders, natural environment
stakeholders, economic stakeholders, social stakeholders, and internal stakeholders. The framework
suggests that in contrast to the theory on prioritization of stakeholders, all groups must be considered
equally as their powers may change over time.

In the part of PCPPI, its stakeholder management must entail equivocal communication between
all groups. While this section highlights suppliers, it is important that PCPPI treats all its stakeholders
equally and devise mechanisms in engaging with all of them.
As for suppliers, PCPPI shall initiate annual supplier conferences that discuss sustainable
sourcing and value creating partnerships.


Figure 46 Framework for sustainability stakeholder management in a LCSM context



MODULE 6
7S Framework analysis  8-‐SIT Framework  Letter to CEO

7S Framework
The 7S Framework was developed by Robert H. Waterman, Jr. and Tom Peter in order construct
a tool that will enable an organisation to assess and monitor changes. It is also a tool that shows haw all
the elements work together to achieve the competitive advantage of a business firm. According to this
tool, the hard elements are strategy, structure, and systems. The soft elements are skills, style, staff, and
shared values. Figure 47 presents the 7S Framework and Figure 48 presents the 7S Framework for PCPPI.

Figure 47 7S Framework analysis


Figure 48 7S Framework analysis for PCPPI



8-SIT Framework
After having discussed the proposed strategies for Pepsi-Cola Products Philippines, Inc. the last
part of the strategy plan is in its execution. While the planning process is lengthy, the execution process
must be clearly communicated in a manner that is easy to remember and also easy to understand. For this
purpose, the 8-SIT Framework is a tool that allows the communication of a complex topic be done in an
understandable manner. 8-SIT stands for 8-Strategy Implementing Tasks. It is easily recognizable and
because of that all levels of the organization are able to understand and remember the strategic plan.

Figure 49 8-‐SIT Model


The 8-SIT framework is composed of a series of steps, as follows:
1. Building an organization with competencies, capabilities and resource strengths to carry out the
strategy successfully.
2. Developing budgets to steer ample resources into those value chain activities critical to strategic
success.
3. Establishing strategy supportive policies and procedures.
4. Instituting best practices and pushing for continuous improvement in how value chain activities are
performed.
5. Installing information, communication and operating systems that enable company personnel to carry
out their strategic roles successfully day in and day out.
6. Tying rewards and incentives to the achievement of performance objectives and good strategy
execution.
7. Creating a strategy supportive work environment and corporate culture.
8. Exerting the internal leadership needed to drive implementation forward an to keep improving on how
the strategy is being executed.



A more compressed model for the 8-SIT framework is as follows:

Figure 50 Extended 8-‐SIT (Performance Factory)



April 16, 2017
YONG-SANG YOU
Chief Executive Officer
Pepsi-Cola Products Philippines, Inc.
Muntinlupa City, Metro Manila
Philippines
Dear Mr. You:
Greetings! We are pleased to present to you the eight-step process for the strategy plans we have
discussed during last week’s board meeting. The strategies covering marketing, operations, financial,
information technology, human resource, and strategic management will be implemented and executed in
the following steps:
1. Update strategy – Due to changes in the competitive environment, we have decided to update
PCPPI’s strategies to include the strategic plan previously presented
2. Communicate strategy – Make sure that all levels of the organization are aware of the strategies
we are implementing. Suggested platforms include management sessions, websites, and strategy
e-mails.
3. Cascade strategy – In the course of the succeeding weeks, we shall break down our strategic
objectives into smaller chunks down to the lowest organizational level. We will be needing input
from all levels of management, who in turn shall engage their employees.
4. Compare and learn – During the strategic execution, we shall make adjustments in our strategic
plan should we encounter the need along the way. As discussed, we have ensured that our
strategic plan is flexible enough to meet these changes.
5. Manage initiatives – As one of the most difficult steps, this is also often where there are
mistakes in execution. In this stage, we shall select, prioritise, and execute carefully the initiatives
and resources need to execute our strategy properly.
6. Set objectives or personal goals – At this point, individual objectives of the members of our
organization are aligned with our strategic objectives. We shall deploy our management team to
ensure this is routinely upheld.
7. Monitor & coach – During the execution, prepare all levels of management to be able to provide
feedback during crucial points. We shall be able to steer the ship back to its track if it is deemed
loosing course.
8. Evaluate performance – We shall execute a formal performance evaluation at the end of certain
cycles. Several tools are available for this purpose. We shall be choosing appropriate tools when
we meet again.
Thank you very much for your cooperation. We are most looking forward to getting started with our
strategic execution. The days ahead will be tougher than our planning stage, but your organizational
culture is strong enough for this turning point. Needless to say, exciting days are ahead!
Respectfully yours,
(Sgd.)
Michael V. Baylosis, CPA MBA
Partner


MODULE 7
Financial Ratios  Balanced Scorecard  Financial Statements References

Financial ratios
Financial ratios were based from the 2016 audited financial statements of Pepsi Cola
Products Philippines, Inc. and were provided by The Wall Street Journal (retrieved 2017).





Strategic Priorities Objectives Measures Targets Initiatives
Financial To achieve low costs Weighted average 6.62% based from Measure our
for our sources of cost of capital New York current
financing, whether (WACC) University School of investors’
debt or equity Business required rate of
returns
Customer To become the Market share in non- 60% market share Deploy
manufacturer of all carbonated beverage for non-carbonated marketing tools
consumer demands in market and food beverages and 30% to address
carbonated/non- snacks market market shares for emerging
carbonated beverages food snacks
markets among
and snacks
children and
health-
conscious
consumers
Internal Business To achieve operating Total asset turnover Total asset turnover Trial run
efficiency with ratio and Income per of 2.0 and Income Enterprise
technology-intensive employee per employee of Resource
operations and PHP 145,000 Planning (ERP)
efficient distribution
and advanced
channels
planning
optimizer
(APO) in
Bacolod plant
Learning & Growth To be able to learn Research and PHP 10,000,000 Perform
new methods in Development comparative
improving operating expenditures analysis on
efficiency, increasing R&D activities
workforce value, and
of PepsiCo and
innovating in products
local
competitors


Audited Financial Statements
-‐ Statement of Comprehensive Income
-‐ Statement of Financial Position
-‐ Statement of Cash Flows



























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Pepsi-Cola Products Philippines, Inc.

: Strategic Management Paper

MODULE 2- EXTERNAL ENVIRONMENT ANALYSIS

MODULE 3- INTERNAL ENVIRONMENT ANALYSIS

MODULE 4 – STRATEGIC PLAN

MODULE 5 – FUNCTIONAL AREA STRATEGIES

MODULE 6- STRATEGIC IMPLEMENTATION

MODULE 7- FINANCIAL PROJECTIONS

Baylosis, 2017 MBA 218 1

continue, O my God, to do all my actions for the love of You. Animo!

The desired outcome is competitive advantage, measured by above-average returns.

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sale of food and food products.

the management of strategies in these areas.

saved the Philippines for Coca-Cola.

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revenues losses of P20 billion (Simeon, 2017).

This strategic management paper is significant to the following sectors:

with ideas on how to achieve competitive advantage and above-average returns.

same or for similar business firm.

that manufacture tobacco products, such as cigarettes and cigars.”

The same classification system defines the food industry as follows:

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premises not for immediate consumption are included.”

Present Task Environment Analysis

influences that come from outside of the company” (Aparicio, 2017).

Figure 1 Task Environment of McDonald's

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the business” (Aparicio, 2017).

parts” (Aparicio, 2017).

rights and child labor.

includes four levels of engagement, presented in Figure 2 below.

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Figure 2 PepsiCo's Four Levels of Engagement

competing for the same customers” (Aparicio, 2017).

Refreshments Corporation as a competitor.

A report by Euromonitor International entitled “Soft Drinks in the Philippines” states:

in carbonates and compete in other categories such as concentrates and juice.”

and Asia Brewery Incorporated 

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Figure 3 PCPPI competitors in NCB and snacks market

sari stores, tiangges, among other retailers.

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Figure 4 Coca-­‐Cola and Pepsi-­‐Cola restaurant partnerships

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Figure 5 PCPPI partnerships with 7-­‐Eleven and Julie's Bakeshop

requirements by the Food and Drug Administration of the country.

of high-fructose corn syrup (HFCS) into the country.

Development Authority (LLDA).

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the Solid Waste Management Act.

Potential Changes in Macroenvironment Analysis

Figure 6 Macroenvironment analysis framework

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export only (Arcalas, 2017).

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consumers have a more discriminating taste.

innovation and improved management systems, or efficient operations.

Figure 7 Porter's Five Forces Model

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Threat of Substitute Products: High

Bargaining Power of Suppliers: Low

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and Asia Brewery Incorporated

Figure 4 Coca-‐Cola and Pepsi-‐Cola restaurant partnerships

Figure 5 PCPPI partnerships with 7-‐Eleven and Julie's Bakeshop