Case Study Description of Pepsico Changchun Joint Venture: Capital Expenditure Analysis
Pepsico, Inc. spanned more than 190 countries and accounted for approximately one-quarter of the world's soft drinks. The vice president of finance for Pepsico East Asia had been collecting data on the firm's proposed equity joint venture in Changchun, People's Republic of China (PRC). Although Pepsico was already involved in seven joint ventures in the PRC, this proposal would be one of the first two green-field equity joint ventures with Pepsico control over both the board and day-to-day management. Every investment project at Pepsico had to go through a systematic evaluation process that involved using capital budgeting tools, such as new present value and internal rate of return. The vice president of finance needed to decide whether the proposed Changchun joint venture would meet Pepsico's required return on investment. He was also concerned what the local partners would think of the project. The final decision would be made after a presentation to the president of Pepsico Asia-Pacific.
Authors :: Geoff Crum, Larry Wynant, Claude P. Lanfranconi, Peter Yuan
Swot Analysis of "Pepsico Changchun Joint Venture: Capital Expenditure Analysis" written by Geoff Crum, Larry Wynant, Claude P. Lanfranconi, Peter Yuan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pepsico Changchun facing as an external strategic factors. Some of the topics covered in Pepsico Changchun Joint Venture: Capital Expenditure Analysis case study are - Strategic Management Strategies, Financial management, Joint ventures and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Pepsico Changchun Joint Venture: Capital Expenditure Analysis casestudy better are - – there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, wage bills are increasing, increasing household debt because of falling income levels,
increasing commodity prices, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Pepsico Changchun Joint Venture: Capital Expenditure Analysis
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pepsico Changchun Joint Venture: Capital Expenditure Analysis case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pepsico Changchun, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pepsico Changchun operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Pepsico Changchun Joint Venture: Capital Expenditure Analysis can be done for the following purposes –
1. Strategic planning using facts provided in Pepsico Changchun Joint Venture: Capital Expenditure Analysis case study
2. Improving business portfolio management of Pepsico Changchun
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pepsico Changchun
Strengths Pepsico Changchun Joint Venture: Capital Expenditure Analysis | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pepsico Changchun in Pepsico Changchun Joint Venture: Capital Expenditure Analysis Harvard Business Review case study are -
Organizational Resilience of Pepsico Changchun
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pepsico Changchun does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Pepsico Changchun in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Finance & Accounting industry
– Pepsico Changchun Joint Venture: Capital Expenditure Analysis firm has clearly differentiated products in the market place. This has enabled Pepsico Changchun to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Pepsico Changchun to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Pepsico Changchun has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Pepsico Changchun is one of the most innovative firm in sector. Manager in Pepsico Changchun Joint Venture: Capital Expenditure Analysis Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Pepsico Changchun is one of the leading recruiters in the industry. Managers in the Pepsico Changchun Joint Venture: Capital Expenditure Analysis are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Pepsico Changchun Joint Venture: Capital Expenditure Analysis Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Pepsico Changchun has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pepsico Changchun has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Pepsico Changchun is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Geoff Crum, Larry Wynant, Claude P. Lanfranconi, Peter Yuan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Finance & Accounting field
– Pepsico Changchun is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Pepsico Changchun in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Pepsico Changchun has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pepsico Changchun to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Pepsico Changchun are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Pepsico Changchun Joint Venture: Capital Expenditure Analysis | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pepsico Changchun Joint Venture: Capital Expenditure Analysis are -
Slow to strategic competitive environment developments
– As Pepsico Changchun Joint Venture: Capital Expenditure Analysis HBR case study mentions - Pepsico Changchun takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Pepsico Changchun needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Pepsico Changchun supply chain. Even after few cautionary changes mentioned in the HBR case study - Pepsico Changchun Joint Venture: Capital Expenditure Analysis, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pepsico Changchun vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Pepsico Changchun has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Pepsico Changchun even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Pepsico Changchun has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Pepsico Changchun Joint Venture: Capital Expenditure Analysis should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Pepsico Changchun 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Pepsico Changchun Joint Venture: Capital Expenditure Analysis can leverage the sales team experience to cultivate customer relationships as Pepsico Changchun is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis, it seems that the employees of Pepsico Changchun don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
No frontier risks strategy
– After analyzing the HBR case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pepsico Changchun is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis, in the dynamic environment Pepsico Changchun has struggled to respond to the nimble upstart competition. Pepsico Changchun has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Pepsico Changchun Joint Venture: Capital Expenditure Analysis | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Pepsico Changchun can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Pepsico Changchun can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pepsico Changchun can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Pepsico Changchun has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pepsico Changchun can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Pepsico Changchun is facing challenges because of the dominance of functional experts in the organization. Pepsico Changchun Joint Venture: Capital Expenditure Analysis case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Pepsico Changchun can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Pepsico Changchun Joint Venture: Capital Expenditure Analysis suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Pepsico Changchun has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pepsico Changchun to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Pepsico Changchun to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Pepsico Changchun to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pepsico Changchun can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Pepsico Changchun can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Developing new processes and practices
– Pepsico Changchun can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Creating value in data economy
– The success of analytics program of Pepsico Changchun has opened avenues for new revenue streams for the organization in the industry. This can help Pepsico Changchun to build a more holistic ecosystem as suggested in the Pepsico Changchun Joint Venture: Capital Expenditure Analysis case study. Pepsico Changchun can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Pepsico Changchun Joint Venture: Capital Expenditure Analysis External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pepsico Changchun can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Pepsico Changchun needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pepsico Changchun can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Pepsico Changchun can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of Pepsico Changchun
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Pepsico Changchun.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis, Pepsico Changchun may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Pepsico Changchun.
High dependence on third party suppliers
– Pepsico Changchun high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Pepsico Changchun in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Pepsico Changchun demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Pepsico Changchun has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Pepsico Changchun needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Pepsico Changchun will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Weighted SWOT Analysis of Pepsico Changchun Joint Venture: Capital Expenditure Analysis Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Pepsico Changchun Joint Venture: Capital Expenditure Analysis is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Pepsico Changchun Joint Venture: Capital Expenditure Analysis is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Pepsico Changchun needs to make to build a sustainable competitive advantage.
