case study Pepsico Corporation
To: Chief Executive Officer, PepsiCo RestaurantsSubject: Report of PepsiCo's RestaurantsOver the years PepsiCo has adopted an entrepreneurial management principle which granted decision-making authority to organizational units with little intervention. Many of our organizational units have operated as stand alone businesses. A closer look at operations reveals that cross-business collaboration and achieving tight coordination of related value chain activities would reduce cost across operations. Organizational units may not retain total autonomy but the firm performance will increase.I recommend we take the following actions:1. Centralize and coordinate selective value chain activities across the firm implementing systems and processes that create the desired degree of integration at minimal cost. 2. Incorporate strong executive level insistence on teamwork and cross department cooperation including removal of obstinate or difficult mangers that stonewall collaborative efforts.
Giving business head full operating reins can pose problems. They are given substantial incentives and rewards for producing results. The company has a keen sense of market shift and trends, attractive customer base, (tremendous blue-collar appeal) and wide geographic and global distribution capabilities. Centralize and coordinate selective value chain activities across the firm implementing systems and processes that create the desired degree of integration at minimal cost. Managers develop their own answers and action plans. " These efforts help to minimize agency cost. Each organizational unit pursues its own priorities, projects, and strategic agendas, it's hard for the corporate parent to prevent duplication of effort, capture either economies of scale or economies of scope. Very few activities are shared across the chains. Integration of some value chain activities is necessary to enhance productivity, efficiency, and provide cost reducing benefits. Incorporate strong executive level insistence on teamwork and cross department cooperation including removal of obstinate or difficult mangers that stonewall collaborative efforts. Divisions may not retain total autonomy of their operations but exploiting cross-business value chain match-up capturing the benefits associated with interrelated value chains will produce a consolidated performance greater than the sum of what the businesses can earn pursuing independent strategies. Many of PepsiCo's units operate autonomously. Current Strength and Weaknesses: The company enjoys a strong brand name and reputation.
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