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Pepsico's Case Study

1431 words - 6 pages

I. Synopsis of the Situation:

During the 1980s and 1990s, PepsiCo’s business strategy was to increase its presence in the casual dining segment of the restaurant industry, initiated through the purchase of Carts of Colorado and California Pizza Kitchen. While on paper the acquisition plan stood to be lucrative and position PepsiCo as a major competitor in the restaurant industry, relationships between corporate and franchisee became strained. The source of the fracture in PepsiCo’s business strategy was decentralization led by the CEO’s of the company. For example, David M. Kendall set a tone for a competitive and ambitious business acquisition strategy. The strategy endorsed an ...view middle of the document...

10, Magnani). The separation of the franchises further amplified the lack of cohesiveness brought on by the decentralization structure, which also meant there was no consistency on how the businesses should operate.


III. Alternative Solutions:

1. Combine Elements of a Centralized and Decentralized Model:

PepsiCo will integrate elements of the centralized and decentralized business models in order to increase communication amongst the franchises. Utilizing the decentralized structure, franchisees will continue to operate independently however still within parameters outlined by corporate. Management will work under a centralized model and work collaboratively with other franchisees to develop common business goals. Additionally, PepsiCo Branch Committee, a liaison between corporate and the franchises, will be incorporated. The committee will embody the principles that a board does with its verification of initiatives to include the cooperation of communication on all management levels. PBC will also facilitate the integration of the two business models with new management style to facilitate growth into other industries.
A. Con: Because each branch operates individually under competitive settings, integrating a centralized system will require time and resources. Additionally, some managers may not be open to sharing their ideas among other branches and teams. Lastly, extensive coaching will be required to influence change in management.
B. Pro: Increased transparency and idea sharing among franchisees, resulting in more efficient daily operations and the reduction of turf competition between the franchises.
2. Improve Employee Culture and Franchise Relations:

Company culture was based on a competitive model and as a result it was not unusual for individual employees, as well as franchisees, to work in silos, and working against one another. Therefore, it is recommended that PepsiCo management grandfather a non-compete clause in its corporate policy, ensuring that all business strategies are inclusive of and foster collaboration. Included will be a team building process with a series of PepsiCo management team trainings to improve relationships with external businesses, improve communication and educate on positive and effective leadership skills.
A. Con: The educational training initiative will be deployed in two phases, which takes approximately 6 months for launching, and no immediate effect will take place.
B. Pro: An improved and healthy competitive environment built with trust between PepsiCo and its franchisees.
3. Update Pepsi Food System (PFS):

It is recommended that PFS implement a uniform central delivery/order system embodying three priority levels. For example, level 1 would be considered high priority meaning a 48 hour turn around between orders and delivery; level 2 would be considered 72 hour turn around; level 3 requires that orders and deliveries are processed within seven days. With the increase of...

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