CONTENT : Topic Page Analyze Russia at the time of the case, 1992, 1-2 (Using the PEST and Geography framework) Analyze Pepsi as a company using only the information in the case 3-4 Recommendations for Pepsi to become successful in Russia4-5 Answer the specific questions asked by Bill Shaddy in the last paragraph of the case 5-6
Pepsi challenge – Russia 1992 Pepsi is a soft drink produced and manufactured by PepsiCo. It is sold in many retail stores, places, restaurants, schools, cinemas and from vending machines. However, the article of “The Pepsi Challenge-Russia 1992” discusses on the challenge of hiring people as well as develop staffing compensation and training for the new Russia organization after finding the ineffective business. It is very important that an organization as Pepsi considers Russia environment before beginning re-organization. In fact, environmental analysis should be continuous and treat all aspects of planning.
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One of marketing tools that often uses to analyze environmental economic is PEST including political factors, economic factors, social factors, and technological factors. Political factor; According to beginning of year 1992 in Russia, the politics at that time is concerned to be communist before changing to democracy in May 1992. The regulation of business is based on government. Government policy influence laws that regulate all businesses and every international business agreement involve government to participate in every activity.
The one of examples is that Pepsi hires employees through one of the government employment bureaus unless Pepsi forms a joint stock company, which is the window that allows foreigners to hire Russians directly. The politics in Russia seems to be unstable such as the sensitive between Russia and Ukraine resulting to Pepsi cannot hire people from Ukraine to be the part of PepsiCo in Russia. The country also lacks a legal framework for property rights. The movement of privatization is slow and controversy between different republic.
The business contract has to renegotiate under turmoil situation. It can be conclude that the government influence in economics and social aspect. Economic factor; This is the one of significant factors which influences on PepsiCo. Business needs to consider the state of economy in short and long terms, and economic factors are the important tool for international marketing. In Russia, the economics seems to be capitalism, and a free market, but in fact people still stick to the communist system, so that the free looks unreal.
There is less competition on market due to government regulation and control system. The economic environment has the unappreciated sign. The workers are inefficient, the organization presents overstaffing and nepotism, and the system also identifies as nepotism. The people are employed as presenting high employment rate, but they work with low efficiency and effectiveness. All of these result to low productivity and high inflation rate that is also mention on first paragraph; economic output declines around 20 percent on an annual basic, and the monthly inflation rate is double digits.
The country lacks of a financial system and knowledgeable business. The writer compares the economic system of Russia with another country; In Russia does not have a well developed business system like India. If comparing GNP with Ukraine and Kazakhstan, Russia is quite lower than others. The number of GNP presents only US$ 5,400 per 149 million people. A globally traded currency should serve as a reliable and stable, but it does not act in Russia. “Some companies have paid in hard currency which fuels expectations of locals.
Other companies have paid only rubles”(Honorio, P. 10) In the same business Coke dominates Russia market more than Pepsi; Pepsi has around six percent of the market in total soft drink sales. Therefore, this is the one talent issue for Pepsi to make more market share. Social factor; The social style and culture affect on international business. One problem why Pepsi cannot rapidly grow in Russia is language and cultural barriers. The culture is traditional. There are not many people who have English knowledge. Moreover, confidential issue should be careful because everyone alks and share information to each other in their society. The other interesting point is that Russians are not get use to western style resulting to difficulty of working in western company. Russian system is flexible and no specific rule in some topics; for example businesses cannot get reference checks for their employments. Because of social factors, Russians are less interest in foreign business even though there are many western companies in Russia, so that it creates the difficult work for HR department when they want to hire efficient labor. Technology factor;
Technology is competitive advantage for international business. In Russia, there are fewer technologies to allow customers to easily access to products. All technologies base on the local resources. However, Pepsi use the technology to be the media of their advertising, such as television, and newspaper. Pepsi also adds the technology such as vending machine in their selling instead of using middle man or personal selling. Even though Pepsi want to use the high effective technology, it is useless because the distribution is state-owned and controlled.
Analyze Pepsi as a company. In term of marketing process, there are many interesting key points which contribute its performance. 1. Research: Pepsi tries to build the Russian organization. Bill Shaddy is the company representative to do the research and analyze situation including culture, politics, resource and technology, social environment, demography, business, and human behavior. Even though there is another competition as coke that dominates the soft drink market in Russia, Pepsi wants to expand its market, and it is talent for Pepsi. 2.
Target customer: all genders and ages are the target customers. The middle class is the main target of company that we can see example in India. There are several criteria to analyze its performance which are: * Defendable: it is competitive in its market because it preserves a great quality because Pepsi technicians trained the partners on quality control, and good service in store and out store. Moreover, it has loyal customers in America that can prove by marketing share. There is only one big company as Coca cola that produces the same product. Accessible: Pepsi is dispensed out of sidewalk fountain machines, and distribution to many retailers. * Expandable: there is an opportunity for selling its products, since there is high demand. Pepsi has a lot of franchises, and also creates the new taste for their products; for example, a lemon-flavored soft drink in the Soviet market. * Serviceable: generally, Pepsi relies on shelf space and positioning, as well as convenience packaging and provides the good service for all customers, but in Russian stores do not compete on service. Profitable: it is profitable because Pepsi has a lot of customers and the cost cut in building like the situation in Russia that Shaddy tries to find the cheapest office. Moreover, Pepsi hires many locals, so it can cut excessive payment. 3. Position: the Pepsi captures the code of worldwide business and value. Pepsi reserves the leader in soft drink market in U. S. and try to achieve in other regions. 4. Marketing Mix * Price: price is reasonable; the same price as local soft drink brands. In Russia, suppliers in the same product do not compete on price. Product: Good quality soft drink, and convenient package. * Promotion: Pepsi uses various channels to promote its product, such as news paper, television commercial, outdoor, kiosk displays, sponsored promotion, and events. * Place: Providing in everywhere, especially in American market. 5. Execute: to penetrate the existing market by using many promotion, keeping quality, and developing products. From the above points that make Pepsi achieves its success goal, we can conclude that the Pepsi marketing strategies meet the need of its customers. This situation can be called as touch point.
Moreover, Pepsi also uses push and pull of marketing strategy. It advertises in public. This can be called as creating a demand strategy. When people hear or receive information about it, they go to get the product. Moreover, word of mouth is another channel of advertising which is useful for Pepsi. Recommendation; As we can see that Pepsi gains market share leadership in U. S. food store sales, but in most European and Asian markets where Coke has higher market share than Pepsi. Therefore, researching in all factors, and developing in those markets should be considered in order to be leadership in soft drink market.
In Russia, 1992, there are many problems issued, such as politics, economic system, social factors, technology; all we know as PEST. There are some suitable ways to solve those problems as below, Political factor : The politics still bases on communist even it changed to democracy system. The polictics influences in business. Pepsi should slow down in its investment due to adjusting period of Russian government. Economic factor: Considering in international financial institution due to unstable economics in Russia during this period.
Social factor: Education is the key factor to develop the system. Creating the organize culture to all Pepsi’s employees to make them to be proud in organization. Training is required to improve productivity. Using reward or bonus motivates employees to increase efficiency. Technology factor: Using more technologies offer consumer and business more innovative products and services. The company should hire the specialists to develop programs which support marketing plan, and Human Resource Management. Customer Relationship Management (CRM) should apply. The specific questions asked by Bill Shaddy;
According to the last paragraph, the writer mentions on the Bill Shaddy question that “How to go about finding Russians that could become successful “Pepsi” people. How would he select them? And how should they be compensated, trained and managed? In my point of view, those questions are related to human resource management on recruitment and selection process. Shaddy has to consider all factors about Russia, especially social issue such as culture, education, demographics, and then all components should be included into the recruitment process and selection process in order to get the right person to the right job effectively.
The first job is to identify the job opening as a Sales Manager and a Technical Engineering Manager through HR planning based on organizational values and code of conduct. Next step is to delicately determine the job description and job specification. This process should be clear and easy to understand. If lacking of candidate-qualification’s detail, it is difficult to find the right person due to under qualified applicants. Both a Sales Manager and a Technical Engineering Manager position are in management level; thus the minimum experience should be significant important qualify to handle the jobs.
The other important part of recruitment is that recruiting sources and methods are chosen. There is no single, best recruiting technique, and the most appropriate for any given position depends on a number of factors. In this case, Russia is considered to be the communism, old fashion, and technology is not widely used, so that Shaddy should invest online recruitment in low proportion of recruitment cost. The method should be considered such as government employment agencies, searching through direct networking from foreign company, and print advertising.
The reasons why government employment agencies should be used because Russia government plays high role in every activity of Russians. Another reason is talking with local people might make Russians more comfortable, confidence, and feel more reliable. They will not want to work for western companies because of development aspect; therefore, using government representative to find the effective people should be concerned. The benefit from using foreign company network is that company can be confident the knowledge and language ability of people who are hired.
However, some situation might happen when Shaddy find the right people, but they are working for other companies. In this case, Pepsi should consider investing more money to motivate them to come to be the part of organization. There is another way is printing advertising. This way is the lowest investment, but getting high result. Pepsi has many retailer, outdoor events, and kiosks in Russia. Shaddy should use these channels to post a job advertisement. Many Russian might interest in job advertisement, and directly come to Shaddy.
After finishing recruitment, a pool of qualified recruits is generated. Then, Shaddy should go to the step of selection. First, the people not meeting the essential selection criteria are eliminated first. The remaining are examined and those of them who most closely match the job specifications are identified and consideration. The job positions however require the experience to handle the job. The situation is that there are few Russians with relevant business experience, thus the intensive training program such as oversea training should be provided to them.
Second, the test should be used for finding the appropriate Russians by testing ability, emotional intelligence, and specific thinking skill. The world-wide values of organization should be included in the test. For example, challenging assumptions to generate new ideas and approaches by situation testing. Next, the most important part of selection before hiring decision is the selection interview. Given people, who are selected, higher valid in prediction job performance, the focus should be on situational and behavioral questions.
Shaddy should consider both their aspects and actions when they respond the questions. If Shaddy pays attention to all steps of recruitment and selection, Pepsi will get the efficient people to do the jobs. However, when getting the right people, how they should be compensated, trained and managed. The simple idea is that providing effective training programs in term of practice and theory, and these programs have to be analyzed and evaluated. The foreign assignment in the countries, in which PepsiCo succeeded, is helpful for new managers.
There is the need to manage with a workforce and management colleagues whose cultural factors may be dramatically different from their own, and the considerable stress in foreign land can bring to bear on manager position, but they can learn other things from effective organizations in foreign countries so as to apply to use in Russia. The experience is also helping new managers to solve the problems which might be occurred during working. If Shaddy carefully consider in all above issues, he will hire the proficient Russians to become successful “Pepsi” people, and significantly contributes to be successful.