This paper attempts to describe the change management initiatives required at PepsiCo USA which has lost considerable market share in core North American markets against the major competitor Coca Cola Beverages. The researcher has extensive knowledge about management style, culture and marketing practices about PepsiCo, which will be used in identifying the need of HR change at the global beverage giant. However, it should be noted that the researcher will be using most of the insights about the company gained during 2012 – 2013 as a result of work project. The paper starts with a brief description of PepsiCo in terms of industry, size and history followed by a review of proposed changes in the HR program, policy and procedures. The paper will then present why this change is important for PepsiCo and how the change strategy should be implemented. The researcher will use Kotter’s 8-Stage Process of which key stages in chronological order are establishing a sense of urgency, creating coalition, developing vision and strategy, communicating the vision, empowering broad-based action, generating short term wins, consolidating gains and producing more change, and anchoring new approaches into the culture (Kotter, 1995).
Description of PepsiCo
PepsiCo was formed through a merger between Pepsi-Cola and Frito-Lay; the former was formed during 1890s and the latter in 1961. PepsiCo mainly belongs to the foods and beverages industry by offering products such as sodas, soft drinks, snacks and food items. The company operates in an oligopolistic environment with few major players and it principally competes with Coca Cola in beverage sales worldwide. Unequivocally, PepsiCo is a large multinational corporation with global production facilities and sales presence across all regions and continents such as South Asia, Middle East, Africa, Australia, Europe, North and Latin America etc. In addition, the main brands of the multinational corporation are Pepsi, 7-up, Mountain Dew, Miranda, Quaker, Lays, Cheetos, Aqua Fina, Mist and others.
Proposed Changes in HR Program / Policy / Management
The researcher would like to propose changes in company’s senior management by inducting diverse strategic planners who understand Pepsi’s history, market competition, employees, changing consumer tastes and shareholders’ concerns. The company needs change to revitalize its competitive advantage and arrest the declining trend in market share. Also, PepsiCo enjoys immense financial strength but still the management has failed to instill entrepreneurial culture and leverage organizational resources and core competencies for business sustainability during 2012 – 2013. Indeed, the MNC needs managerial change to resurrect its core local, regional and global brands and heritage in a global marketplace. In short, PepsiCo needs to implement a unified culture that integrates diversity and global cultural differences.
Three Major Reasons for Change at PepsiCo
The first reason is that Pepsi had lost competitive advantage against Coca Cola and other regional players during 2011 – 2013 not only across North America but also in Middle East and Asian countries. The second reason for change initiative is loss in share market amid underlying deep causes such as lack of managerial commitment, inability to correctly identify core problems and lack of vision. The third reason is lack of business focus, which should be eradicated by devising a long-term strategic planning process to implement sustainable strategies for bottom-line growth. In short, the company has lost its position, market growth and business dominance because it fails to satisfy customers (Strom, 2014). Indeed, the lack of focus also affects marketing strategies considering the fact that effective product campaigns largely foster organizational performance and financial growth in industry where Pepsi competes. Finally, the change is essential because contemporary managers at PepsiCo have practically not adopted the shared value system and beliefs unlike leadership in past.
Change Strategy Using Kotter’s 8-Stage Model
PepsiCo’s strategic planners must realize the urgency to make major leadership changes spanning all business units and global operations. The change should start from the parent company by inducting diverse leaders with excellent reputation followed by a coalition of leaders and managers at subsidiary firms worldwide. The new leadership should redefine PepsiCo’s vision and formulate a long-term strategy for absolute, comparative and competitive advantage. The new strategy must focus on sustainable business growth through innovation, continuous learning and experimentation, product expansion, diversification and revitalization of existing brands by resurrecting their historical value and heritage. Next, the leadership should communicate this global vision through HR formal seminars, summits, conferences, change sessions, leadership workshops and interpersonal meetings to promote collaboration among global units for assessment of market challenges and implementation of viable policies. For instance, the adoption of local and regional leadership patterns across subsidiary companies combined with empowerment for market-related decisions in local markets would be an effective strategy to deliver change.
Nonetheless, the change process should be measured through short-term gains such as those pertaining to employee responses, attitudes and behaviors for diversity, engagement and shared value system. The effective short-term results at parent company could lead to consolidation of change initiatives at other subsidiaries to produce more change. Finally, the effective change strategy for PepsiCo is one that anchors new approaches into the culture such as importance of diversity and inclusion of people from diverse cultures and regions. The new Board of Directors, subsidiary Presidents, CEOs and senior managers should be those who have already worked on diversified projects for other MNCs combined with extensive knowledge about FMCG industry and changing consumer needs.
Communicating Change to Employees
The first strategy to communicate change is to use internal HR department and professionals who would develop change literature, print-outs, electronic documents, memorandums and emails to deliver why change is important for PepsiCo, what are long-term objectives and how change is coming to organization. The second strategy is leadership conferences, change seminars and summits that will provide an open opportunity for PepsiCo employees to interact with organizational leaders for communication and engagement in change programs. The leaders will motivate employees about change initiatives and perceived benefits / improvements in individual and organizational performance. The third strategy is to hire a professional external consultancy firm, which specializes in implementing change programs and handling resistance. The external consultants will develop their own distinctive presentations, tutorials and training manuals for change communication and implementation (Mento, Jones & Dirndorfer, 2002).
Managing Resistance to Change
Thomas, Sargent & Hardy (2010) highlight that an employee resists to change when he or she does not want to adapt to change due to negative perceptions about new job roles and authorities. In other words, the changes bring employees out of their comfort zone, which is perturbing for workers thus they retaliate initiatives. Other reasons are perceived job insecurity and fear of career growth under new management (Agboola & Salawu, 2011). The researcher would like to recommend PepsiCo to manage change program and any perceived resistance by extensively communicating the need of change and benefits for employees amid organizational growth and performance due to changes. The employee reservations must be taken into consideration to make some pragmatic revisions in change strategy to integrate cultural standpoints and differences.
Recommendations for Change Sustainability
The researcher recommends initiating change program at PepsiCo parent company by observing major leadership changes to restore organizational commitment regarding vision, mission and values followed by accomplishment of sustained expansion and business growth in global markets. The change program should be implemented after wide spread consensus of strategic leadership and employees at parent company. Curbing resistance at home country will be beneficial for implementing change across all subsidiaries because employees will be mentally prepared for new developments, policies and structures. Indeed, the key change will result when new strategic leadership will successfully adopt a unifying global culture with shared value system by fostering employee diversity, inclusion and engagement in organizational growth and sustainability.
References
Agboola, A. A. and Salawu, R. S. (2011). Managing Deviant Behavior and Resistance to Change. International Journal of Business and Management, Vol. 6(1), pp. 235-242.
Kotter, J. P. (1995). Leading Change: Why Transformation Efforts Fail. Harvard Business Review, March-April, pp. 59-67
Mento, A. J., Jones, R. M. and Dirndorfer, W. (2002). A change management process: Grounded in both theory and practice. Journal of Change Management, 3(1), pp. 45-59.
Strom, S. (2012). PepsiCo Shuffles Management to Soothe Investors. New York Times. Available at http://www.nytimes.com/2012/03/13/business/pepsico-executives-line-up-behind-ceo.html?pagewanted=all&_r=0 [Accessed – December 13, 2014]
Thomas, R., Sargent, L. D. and Hardy, C. (2010). Managing Organizational Change: Negotiating Meaning and Power-Resistance Relations. Organization Science, pp. 22-41
