Information technology is redefining how firms are conducting their operations. Gone are the days when firms used to rely on crude machines and methods to access and share information. Today, an increasing number of firms from across the globe are embracing technology in an effort to enhance their information processes (Ghobakhloo et al., 2012). The Internet has particularly transformed how firms engage with their clients and other stakeholders. The Internet makes it possible for companies to interact with their clients seamlessly and at reduced costs. Access to information has also been made easier by the Internet. Today, a company can easily assess the prevailing trends and the changes in the needs of the market. The company is then able to align its systems and operations to reflect the changes in the market. PepsiAmericas is one of the companies that recognize the need for adopting information technology. This company’s operations have been enhanced immensely by the information systems that it has put in place (Beath and Ross, 2010). The company is in a long list of other companies whose productive capacities have received significant boosts thanks to the adoption of information systems. This paper focuses on the PepsiAmericas. The paper offers a case analysis of the company with focus given to information systems. Among other things, the paper examines the internal and external environment of the company and offers recommendations which promise to improve the firm’s operations.
Company profile
Location and Products
PepsiAmericas Inc. is the company that has been selected for analysis in this paper. The company is headquartered in Minneapolis, Minnesota. The company is currently owned by PepsiCo. Before it was acquired by PepsiCo, it was the second largest company that engaged in bottling of products made by PepsiCo. Apart from bottling, PepsiAmericas also distributes the products that PepsiCo creates (‘Company Overview of…’, 2016). Marketing of these products is another function that the company performs. PepsiAmericas operates mostly in the United States. It also enjoys a presence in Eastern and Central Europe. Slovakia, Czech Republic, Romania, Poland and Ukraine are some of the European countries where PepsiAmericas has a presence (‘Company Overview of…’, 2016). PepsiCo has licensed the company to directly sell some of the products that it manufactures. These products include Pepsi, Mountain View, Pepsi Diet, Aquafina, Lipton Iced Tea and Diet Mountain Dew, among others. While PepsiAmericas primarily sells PepsiCo’s products, it has also developed its own brands. These brands include Toma and Sandora.
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Mission and Vision
A company that lacks a mission and vision lacks direction. PepsiAmericas clearly understands this since it has developed a mission and vision that represent its goals and long term strategies. The company’s mission statement is as follows: ‘We make, sell and deliver beverages’ (‘PepsiAmericas Inc…’, n.d). Its vision is to be ‘the best performing beverage company worldwide’ (‘PepsiAmericas Inc…’, n.d). The firm’s vision and mission statements reflect the key operations that it engages in and the goals that it desires to attain. The fact that the company has a presence in a number of countries in different regions indicates that it has remained committed to its mission and vision.
Strengths and weaknesses
An examination of PepsiAmericas’ internal environment reveals that the firm possesses certain strengths that drive its growth. There are also weaknesses which impede the company’s progress. One of the main strengths of the company lies in its product lines. As mentioned earlier, PepsiAmericas distributes and sells a number of products created by PepsiCo. PepsiCo has developed a total of 18 product lines with each line generating sales revenue totaling $1 billion every year (‘PepsiCo Reaches Merger…’, 2009). Since PepsiAmericas is the chief distributor of these products, it can be argued that the company shares in the financial rewards that PepsiCo reaps from its product lines.
The other strength that PepsiAmericas possesses is found in the fact that it has a presence in a number of countries in different regions. The United States is the company’s main market. However, it has also established bases in countries in Central and Eastern Europe (Beath and Ross, 2010). The wide presence offers the company an opportunity to access a wide market. Access to a large market has been identified as among the key determinants of organizational success. PepsiAmericas’ presence is further strengthened by the fact that PepsiCo has an even larger presence. PepsiCo has established a presence in over 200 countries (‘PepsiCo Reaches Merger…’, 2009). This offers PepsiAmericas the opportunity for even greater global expansion.
Today, PepsiAmericas is a fully-owned subsidiary of PepsiCo. For this reason, the financial performance of PepsiCo can be taken as a reflection of PepsiAmericas’ financial health. Assuming this holds true, PepsiAmericas’ financial performance is another of its strengths. For the 2014 financial year, PepsiCo’s net revenue ranged between $12.6 billion and 19.9 billion for the different quarters (‘PepsiCo 2014 Annual…’. 2015). For the previous year, the net revenue was in the $12.5-20.1 billion range over the four quarters. In the following table, key ratios and other financial details for the most recent three years are provided. The data in the following table is from the company’s consolidated financial report. This means that the data contains information about the finances of PepsiAmericas. It is understood that PepsiAmericas’ own financial records would offer a better reflection of the company’s performance. However, the records appear to be publicly unavailable and for this reason the data for its parent company is used.
| 2015 | 2014 | 2013 | |
| Net Revenue | 63056 | 66683 | 66415 |
| Net Income Attributable to PepsiCo | 5452 | 6513 | 6740 |
|
Net Income Attributable to PepsiCo per Common Share- Basic |
3.71 | 4.31 | 4.37 |
|
Net Income Attributable to PepsiCo per Common Share- Diluted |
3.67 | 4.27 | 4.32 |
| Cash Dividends Declared per Common Share | 2.7625 | 2.5325 | 2.24 |
| Total Assets | 69667 | 70509 | 77478 |
| Long Term Debt | 29213 | 23821 | 24333 |
| Return on Investment Capital | 13.1% | 13.2% | 14.0% |
(‘PepsiCo 2015 Annual…’. 2015).
Apart from the solid financial performance and the wide product portfolio and market reach, PepsiAmericas also possesses as strength in the adoption of information technology. The company continues to investment in information systems. Thanks to this investment, the firm has grown from a regional company and now has operations across the globe. (Beath and Ross, 2010) This has been made possible by information technology which has allowed the company to coordinate its operations across the globe. The investment in information technology has enabled PepsiAmericas to align its systems to changing market dynamics (Beath and Ross, 2010).
PepsiAmericas is not without its share of weaknesses. One of the factors that impede progress at the company is the company’s failure to expand its presence even further. In the discussion above, the firm’s global presence has been identified as a strength. However, this firm has failed to enter new markets. In 2009, the company had operations in 19 states in the United States (Beath and Ross, 2010). Most of these states were Midwestern. The company’s operations are also concentrated in the Americas and Europe (Beath and Ross, 2010). Such other markets as Asia and Africa seem abandoned. If the company desires to achieve even greater growth, it needs to recognize the potential that the African and Asian markets hold. The company also needs to set up operations in more US states.
External opportunities and threats
The external environment shapes the operations of any company. This is true for PepsiAmericas. In the following discussion, the Porter’s Model is used to explore the company’s external environment and the impact on its operations.
Supplier Power
The companies that supply a firm with inputs play an important role in defining its operations. When a company has many suppliers, it is enjoys greater freedom and can make selections easily. On the other hand, firms with fewer suppliers are basically at the mercy of the suppliers and wield limited influence. PepsiAmericas appears to be in the latter class of companies. PepsiCo is the company’s chief supplier. It supplies PepsiAmericas with the beverages that it distributes across the different markets (‘PepsiAmericas Inc…’, n.d).. PepsiCo also owns PepsiAmericas. The fact that it is owned fully by PepsiCo which also serves as the parent company implies that the supplier power for PepsiAmericas is immense. However, it should be noted that the operations of the two companies are tied. None of the two would deliberately institute measures that negatively impact the health or operations of the other. The fact that supplier power is limited means that the company enjoys opportunities that can be exploited for growth.
Buyer Power
Buyers also affect the operations of a company. When buyers have the power to push prices down, companies may suffer. Companies are safer in markets where buyer power is limited. PepsiAmericas serves markets that are made up of millions of individuals (Beath and Ross, 2010). This means that the company is not at the mercy of its buyers. It should be noted that there are powerful retailers that PepsiAmericas delivers to (Beath and Ross, 2010). However, these retailers seem loyal and recognize the symbiotic relationship they have with PepsiAmericas. It can therefore be said that buyer power is limited and PepsiAmericas operates in a market that is fairly safe. The limited buyer power offers the company the opportunity for growth.
Competitive Rivalry
Competition is perhaps the most important factor that shapes the environment in which a firm operates. Intense competition in any firm poses a threat to any company. Firms that are weak and unable to adapt to evolving market dynamics are particularly vulnerable to the effects of competition. PepsiAmericas is not the only player in the bottling and beverage distribution industry as there are other companies which operate in the industry. Coca Cola Enterprises is the company’s main rival (Beath and Ross, 2010). Despite the competition that is posed by such firms as Coca Cola Enterprises, PepsiAmericas has managed to remain profitable. In fact, between 2002 and 2008 the common stock of PepsiAmericas performed better than that of Coca Cola Enterprises (Beath and Ross, 2010). The competitive environment in the industry can be explained by the changes occurring in the environment. The number of players in the industry has been declining as more firms consolidate their efforts through such arrangements as acquisitions and the termination of franchises. The lack of stiff competition implies that PepsiAmericas will continue to achieve progress.
Substitutes
Substitution is another factor that shapes a firm’s operations. If it is easy for consumers to replace a company’s products with another, then the company faces a threat. On the other hand, the finances of a company are protected when the consumers are unable to substitute its products. As mentioned above, Coca Cola Enterprises is the main rival of PepsiAmericas (Beath and Ross, 2010). This company creates and bottles beverages. The company enjoys customer loyalty. It has been very difficult for PepsiCo to win over Coca Cola’s loyal customers. This means that the threat of substitution is real. It is fairly easy for consumers to replace the products that PepsiAmericas manufactures and distributes.
New Entries
The ease with which new firms can enter an industry shapes the conditions in that industry to a great extent. If firms find it easy to enter a market, intense competition is likely to be witnessed. The beverage bottling and production industry is not very easy to enter. The high costs of setting up operations and product differentiation are the main barriers to entry (Gachioch, Kane and Wilson, n.d). Firms that wish to enter the industry need to acquire expensive equipment and purchase land on which their plants will be built. In the current economic climate where firms are downsizing and others are closing operations, it would be very difficult for a company to enter the bottling and beverage manufacture industry. This means that PepsiAmericas is safe. However, the firm should not be complacent as Coca Cola and other competitors are still present.
Investment in information systems
The management of PepsiAmericas decided to invest in information technology in response to changes in the market. Before the adoption of IT, the company relied on traditional systems to supply its market. The truck drivers were the main component of the systems (Beath and Ross, 2010). They were required to anticipate the beverages that clients would need in a given day and ensure that they are delivered. As the market evolved and the number of beverages that the company supplied grew, it was noted that the traditional systems would no longer be effective. This realization was also the result of the increasing and more complex demands of clients (Beath and Ross, 2010). The leaders of PepsiAmericas decided to overhaul the systems. Call centers where queries from clients were received and processed were set up, roles underwent a redefinition and new processes were developed (Beath and Ross, 2010). The new system was redesigned further after it was observed that it did not adequately meet the needs of the company and its clients. The redesign allowed the company to remain agile so that it was able to keep up with changes in the market (Beath and Ross, 2010). Business leadership and information were the key elements in the redesigned system.
IT issue
As it developed its information technology infrastructure, some issues emerged. One of these issues was that the company did not fully understand the limitations and promises that information technology held. The IT system that the company adopted involved handheld devices (Beath and Ross, 2010). These devices were used by drivers and salespeople to receive and process orders by clients. It was observed that the devices made some blunders. For example, they did not provide the correct prices for the company’s products. After an examination, it was noted that prices were not updated properly (Beath and Ross, 2010). The company also learnt that technology was blamed for a problem that was the result of some other issues. It was then that the management of the company decided to improve the IT systems by placing focus on consumers and ensuring that the IT system would reflect the company’s strategy.
Information systems and business strategy
Information systems should be deeply integrated into a company’s business strategy. When one examines how the information systems are linked to the business strategy of PepsiAmericas, they realize that the link is strong. Information systems have been integrated into virtually all elements of the firm’s operations. For example, the company developed an IS initiative that it named Next Gen (Beath and Ross, 2010) . Through this initiative, the company’s leadership placed focus on creating value. The initiative was characterized by the handheld devices used by drivers and salespeople. Information systems also defined how the company was governed (Beath and Ross, 2010). The firm’s leadership recognized the need to infuse the firm’s strategy with information technology. Sponsors and teams charged with executing projects all embraced information systems (Beath and Ross, 2010). All of the company’s employees are part of the information systems and this has allowed the firm to align all its operations to information technology.
Difficulties and successes in implementation of information systems
The implementation of the information systems at PepsiAmericas was plagued by difficulties. One of the challenges that the company faced was the scarcity of equipment needed for the implementation of IS. In the earlier days of implementation, the company was unable to obtain enough handheld devices for its drivers and salespeople (Beath and Ross, 2010). The other challenge was opposition from quarters within the organization. The implementation of the IS would introduce many far-reaching changes. PepsiAmericas was made up of different divisions and there were some divisions that opposed the implementation (Beath and Ross, 2010). The company also faced difficulties posed by retailers who were becoming increasingly powerful. The firm found itself unable to adequately meet the needs of these retailers.
While the company encountered difficulties when implementing the IS, it also met many successes. Improvement in the delivery of products is among these successes. By using the handheld devices, the company’s drivers were able to take orders and deliver with much ease (Beath and Ross, 2010). The salespeople were also able to reach more clients, thereby expanding the firm’s clientele. The other success that the company met as a result of the implementation was enhancement in demand planning (Beath and Ross, 2010). Since it was able to process orders better, PepsiAmericas was able to ensure that it had enough products to satisfy demand.
Costs and benefits of IT implementation
PepsiAmericas incurred huge costs as it implemented the information technology. The costs mainly took a monetary form. The company invested in acquiring the handheld devices and other items that it used for the implementation (Beath and Ross, 2010). The company also invested in terms of human resources. All of the company’s employees were involved in the implementation process. The firm’s management played a leading role in the implementation. They assessed the IT system to ensure that it met the needs of the company (Beath and Ross, 2010). The management also made the decision to overhaul the inefficient system that was replaced by the IT-based system.
PepsiAmericas reaped huge benefits once the IT system was in place. Effective project governance is one of these benefits. As a result of the implementation of IT, the company managed to effectively manage a wide range of projects. Quality assurance is another benefit that the IT presented the company (Beath and Ross, 2010). Thanks to IT, the company has been able to ensure that its products meet quality standards and satisfy clients. Data management is yet another benefit that has resulted from the adoption of information technology. As mentioned earlier, the IT has enabled the company to receive and process orders. It is now able to manage information about its clients with much ease. Huge cost savings are the other benefit that the company enjoyed thanks to the IT system (Beath and Ross, 2010). The company was able to slash the costs that it incurs in distributing and creating products.
Changes introduced by new system
The IT-based system that PepsiAmericas adopted introduced a number of changes. The first change regards supply. Previously, drivers needed to guess the amount of products that consumers would need in a given day. This guessing was eliminated by the new system since the drivers could establish with certainty how much to supply by examining the orders (Beath and Ross, 2010). The other change that was a result of the new system concerns governance. Before the adoption of the system, the 13 units that make up PepsiAmericas were managed independently. With the new system, the units were placed under centralized management (Beath and Ross, 2010). However, each unit retained some autonomy. Stronger partnerships are another change that resulted from the new system. The company has been able to develop stronger ties with its sponsors and other stakeholders (Beath and Ross, 2010). Overall, the IT implementation has essentially overhauled the company’s operations as it develops new processes and redefines roles for its employees.
Company update
PepsiAmericas remains committed to the implementation of the IT initiative. It continues to adopt new technologies that hold the promise of boosting operations. The company is still developing the Cutting Edge initiative. This initiative is allowing the company to be responsive and informed and therefore able to make decisions that deliver great success (‘Evolution of PepsiAmericas…’, 2014). Thanks to the IT initiatives and the continued use of IT resources, PepsiAmericas has been able to standardize its products and processes, carry out environmental analysis and improve its management processes. PepsiAmericas clearly recognizes the need for commitment as evidenced by its continued investment in IT.
Recommendations
There are some challenges that PepsiAmericas faces. Left unresolved, these challenges will continue to threaten the company’s strategic development. The limited market reach is one of these challenges. The company’s operations are mostly concentrated in the Americas and Europe. This challenge can be resolved through an expansion campaign. The company should set up bases in such markets as Africa and Asia. It is reported that African markets are growing fast and hold potential for investment (Leger, 2015). The other recommendation that the company should adopt regards information technology. The company’s IT processes seem focused on receiving orders and delivering products. Little focus is given to marketing. The company needs to use its IT infrastructure for marketing purposes.
Conclusion
Information technology plays an important role in the operations of companies. Almost all aspects of the operations of companies have been shaped by IT. PepsiAmericas is among the companies that desire to improve their operations through the adoption of information technology. Despite not facing any formidable threat from rivals, the company remains committed to embracing IT. Through IT, it has managed to ease the work of its drivers and salespeople. IT has also allowed the company to lower costs and process orders much easier. The gains that PepsiAmericas continues to enjoy highlight the need for more firms to warm up to information technology.
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