PepsiCo applied economies of size to reduce cost

PepsiCo applied the economies of range to reduce the fee based on the sum of the reasons. Firstly, "specialization and department of labour" are being used to divide useful departmentalization of Pepsi. Such as, board of directors, marketing and money. In the order palm, its unique market will be run by the manager for a market report general administrator. Sections will are accountable to one of the two CEO in the countrywide business, who in tern report to chairman and CEO of the company. Also, they are divided into accounting department, sales department and human resource office. The specialization and department of labour is influent to economies of range of firm.

Secondly, as a sizable international corporation, it is very important that Pepsi can make a complete use out of most their machines. Such as, Pepsi Fristo had been changed 192 solder collectors to captured solar energy. Utilizing the efficiency these machines Pepsi helps you to save plenty of petrol and cost cutting down.

Thirdly, the "container concept" help decrease the cost of Pepsi by reduce an expense of recycleables and also payment of shipping.

Next, this year 2010, Pepsi and Waste material management introduce the new invention called "Dream Machine"- which gathers soda cans and containers from customers. It is located all over America and collect approximately 300 bottles and cans.

The last however, not the least, delivering in nearly 200 countries in earth, Pepsi gets the huge number of products in four divisions majoring brand. For instance: diet pepsi, aquafina normal water of PAP; LAYS' CHEETOS is belong to PAF, Pepsi Utmost, One fourth Oats is under PepsiCo Europe brands, and finally RedRock Smith's are product of AMEA.


Economies of range are the necessary elements that are every organization need to get in a complex competition. PepsiCo is one of the largest companies have obtained economies of level. Pepsi is well- known across the world about the delicate- drink, beverage's food and snack. In this assignment, we will examine about the economies of range where increasing the level of production brings about a lesser cost per product of output. Generally just the large organization provides the economies of scale in comparison with the smaller firm. These are the stock portfolio of the PepsiCo 'economies of scale which are focused on

Specialization and section of labor.


The "container principle".

By products.

Organizational economies.

Financial economies.

Economies of range.


Specialization is agreement within a community, group or firm under that your member most suited (by virtue of their natural aptitude, location, skill or other certification) for a specific activity on process assume increased responsibility for its execution or performance. [Business dictionary].

Division of labor is small specialization of activity within a production process so that all worker may become an expert in doing a very important factor, especially on an assembly lines. In traditional market sectors (see sunset business) division of labor is a major motive force for financial- development. However, in the age of mass customization (which requires multiple skills and very brief machine change over time) division of labor is becoming much more flexible. [Business dictionary]

There are some interconnection between specialty area and section of labor, it also related to economies of size.

The level of company will benefit to conduce to a result's company. The numbers of workers are also effect to the company. When a company is operating a small business with a tiny scale, they don't have much use. Everyone in the company have to be employed by multiple functions which can be one person will do a lot of job even they don't have an art of that. In the family company, there are just several people so they need to do the most works: sales, marketing, service, maintenance In this case the result won't high as a result of worker can't pay attention on the specific job as good as they should.

In other case, a company is getting bigger. They have got big scale and also have many workers to allow them to split their job to agree with each worker's level. They are able to have different division: human source of information, marketing, accounting Each staff member in each office will have enough knowledge and skill to do their job, then your efficiency will getting higher and can not losing money for something is originate.

This is an example release to the concept.

Pepsi-Cola Company released today an impressive restructuring of its U. S. operations to improve customer service capability, also to position the company for future expansion opportunities. There are a few different parts of the business were divided by the CEO of the company. They repair to open up more store to show out more about their production. They apply the expertise and section of labor into activity of business to build a range of company. The business enterprise units will article everything to the nationwide business units. Each device market will be run by the manager for a market report general manager. Sections will reports to 1 of two chief executive officers in the nationwide business unit, who in turn report to chairman and CEO of the business. All the staff in company work follow their administrator plus they work. The task that they are doing is fit with their skill and knowledge; they work in various team with different skill. In addition they split by accounting department, sale department, human being resource sectionthe expertise and department of labor is influence to economies of scale of company.

"The only sustainable competitive advantage is people"1

1 Human learning resource information system, business of institution, school at Albany, http://www. albany. edu/business/brochure_hris. pdf


Large firms, compare to firms with smaller level, have significantly more advantages like having lower interest levels when they make lending options from banks, easier to have contracts with capital financing companies and even make better great buy with suppliers for the raw materials due to their capabilities to buy in large amount. (John Sloman, 2007). Over time, if a firm wants to broaden its business bigger by building up more factories, buy modern machinery for development, seek the services of more employees with better skills or even spend money on R&D, the main thing it will need to have is the financial economies of level. Due to that, already large firms will tend to be able to develope theirselves to do business more proficiently than smaller ones.

Table 1: Pepsico's long-term debt and annual interest rate from 1999-2009

Source: Based on Pepsico's annual information from 1999-2009

As the graph shows, the money that Pepsi borrowed from many resources every year was really huge. From 1999-2009 the minimum amount was 1, 702 billion dollars in 2003 although it was extremly high at 7, 859 billion in 2008. However the world's market was still experiencing the crisis before, in 2008, Pepsi continuously moved ahead by extending its business bigger, mainly in Brazil, Mexico, India, Russia and China annual report. Pepsi's reputation, earnings in earlier years provided it the ability the have such strong helping from banking companies and cash. In additional, you might pointed out that the interest rates of the loans that Pepsi borrowed, regarded as low risk ones, are much lower than that others could have.

Pepsi also gains reap the benefits of financial economies since it has more bargaining power than its suppliers. For example, Pepsi Cola is one of Pepsi main products that has really high market talk about, it using its major rival CoCa Cola could make up to more than 90% market show in cola products in some countries and so raw materials suppliers for producing cola has not much bargaining capacity to Pepsi. They need to sell materials to Pepsi with cheaper price because, firstly, they don't have many selections left and subsequently, Pepsi can consume theirs products a lot more than others small companies.


A large organization usually has many factories that located in various locations and may produce different productions but under control of just one single centralised administration to carry out business more effeciently(John Sloman, 2007).

. Due to that, in case of Pepsico, every time a demand on something that being made by one of the firm's stock significantly enhances, the headquarter can make others stock make that product to gain more profit. In other hand, if the price tag on that product helps to keep getting higher, the headquarter may move the factory's development to other products which are more profitable.


In the 1950s, it was not easy for individuals to find Australian beef, perfume from France or clothes which are made from Vietnam. As a result, "container" was developed to help entrepreneurs to bring their products with bare minimum fee. The explanation for this is container's fee was extremely expensive which business lead to a cost of several products was higher, so a small quantity of businesses used this travelling. Exactly what does "container" indicate? And what is its mission? Relating to Cambridge Dictionary, "container" is an empty object, like a pack or a container, which is dished up to hold something, especially to carry or move it. On top of that, predicated on Marc Levinson, an economist and previous funding editor of the Economist, he defined a fresh kind of box that: "A soulless metal or steel field held together with weld and rivet, with a real wood floor and two tremendous doors at one the end: the typical box has all the love of your tin can. " As a consequence, shipping and delivery price by the container fell significantly. That is a conclusion for the relationship between a capacity and surface area of container. Corresponding to Sloman, 2007, he demonstrated that giving an example of a pot with length, level and width in one meter, means one cubic meter of volume and a surface area of six meter square. Then, he doubled the distance into two meter, because of this, the capacity can be increased eight times by increasing surface area only four times and rising around four times in cost. The " pot principle" clarifies specifically e theory that trading a small sum of money which lead to a higher positive consequence.


Indivisibilities: the impossibility of dividing one factor without dealing with it independently or separating it into smaller products. Within the economies of level, indivisibilities is a factor that models a company's productions extension based on type. The basic use of indivisibilities is to portray about how indivisibilities; in this case the several machines used to produce and package deal, can effectively impact the full type of maker.

As a big international cooperation, everyday, Pepsi produced approximately one to two 2 million litter of gentle beverage each day. It is rather important that Pepsi can make a complete use out of most their machines.

Recently, Pepsi Fristo have a fresh solar field where that they had place 192 solar lovers to absorb sun rays. These captured solar energy will then be used to generates vapor and warm up the cooking petrol to create SunChips. By causing the full use out of the 192 solar enthusiasts, Pepsi will save plenty of fuel and olive oil.

Regarding to articles, by the end of 2009 packaging division had come to up to 2, 400 containers. However, with this current capacity in 2010 2010, the amounts of production up to 3, 000 million bins.

The four producing divisions can produced above 250 stock continues systems which already included 1, 600 cans/min, 12 oz filling collection, one of 40 bottles/min.

As a large cooperation, it is rather important for Pepsi to make full use out of all of their machine. Financially speaking, it will help Pepsi save a large amount of money each day just by using the full capacity with their creation lines.


The company, which is, gets the economies of range if they are got several lines of product or in their producing. Relating to David Kass in his 1998 article, "Economies of opportunity and Home healthcare", economies of range exist if a company can produce several product lines at confirmed outcome level more cheaply than a combination of distinct firms each producing a solo at the same outcome level. Base on the aforementioned explanation of economies of scope, we can identify that Pepsi. Co is the organization that is satisfies to really have the economies of range, specifically has the economies of scope.

In this assignment, I want to analyze some of factor to justify that Pepsi has the economies of opportunity. Pepsi. Co is a large company, which is well known in around the world. If go to the primary website of Pepsi family, you can easy to determine that Pepsi is attending in almost 200 countries in earth. With the quest that to be the world's top consumer products company focused on convenient foods and beverages, (Our eye-sight and Eyesight ), there are a huge selection of products in four divisions majoring to lead global in food, snack and barrage company. Within the Pepsi. Co's "Created to grow" article 2001; Pepsi was categorized in the 3rd (3 grate) of "World's leading foods and drink companies. "

Just have a preliminarily look, we will amaze about the amount of product that Pepsi has presented into food and drink market. As I speak about before, Pepsi. Co family have four major division-which include PepsiCo Americas Drinks (PAB), PepsiCo Americas Foods (PAF), PepsiCo Europe and PepsiCo Asia, Midsection East& Africa (AMEA). (The PepsiCo Family)

PepsiCo Americas Beverages (PAB).

This is a part of carbonate carbonated drinks, juices and juice refreshments, ready-to-drink teas and espresso drinks, isotonic athletics drinks, water in bottles and enhanced waters - that are in the drink brands in Pepsi. One of them brand will be the several of product are famous such as Mountain Dew, Diet Pepsi, Gatorade, Tropicana Pure High quality, Aquafina water, Sierra Mist, Mug, Tropicana drink refreshments, Propel, SoBe, Slice, Dole, Tropicana Twister and Tropicana Season's Best.

PepsiCo Americas Foods (PAF).

Frito-Lay north America; Quaker Foods THE UNITED STATES in Ravenna and Ohio; Sabritas in Mexico City; Gamesa - headquatered in Monterrey, Mexico; Latin Americas Foods - procedures in Brazil, Agerntina, Colombia, Peru and Venezuela are the collection of PepsiCo Americas Foods (PAF) ' businesses.

In the distinct - products of the PAF, there are huge of


Frito- Lay North America got LAY'S and RUFFLES potato chip; DORITOS tortilla chips; TOSTITOS tortilla chips and dips; CHEETOS cheese flavored goodies; FRITOS corn chip; ROLD Silver pretzels; SUNCHIP multigrain goodies; CRACKER JACK candy coated popcorn.

Quaker Foods North America brand include Quaker oatmeal; Life and Cap'n Crunch ready-to-eat cereals; Aut Jemina mixes and syrups; Rice-A-Rroni; Pasta Roni and Near East area dishes.

Sabritas manufactures and trading markets several local brands such as Crujitos;Poffet; Rancheritos and Sabritones.

Marias Gamesa; Emperador; Acoiris; Mamut; Chokis and Maizoro are the most successful product of Gamesa brand.

The portfolios of the Latin Americas Foods are Lay's, Cheetos, Fritos and Doritos and blessed snack.

PepsiCo Europe.

PepsiCo has present in 45 countries in European countries with Frito Lay down Snack; Pepsi-Cola beverages; Gatorade Sports Refreshments; Tropicana Drink and Quaker foods.

Thses are the list of the most popular products in your community: Walker Sharp; Quaker Oats; Paw Ridge; Pepsi; Diet Pepsi; Pepsi Utmost; Pepsi Organic; 7 Up; Copella; Doritos; Gatorade; Red Sky; V Water; Planet Lunch time; Lays; Cheetos; Smiths; Duyvis; Snack-a- Jack; Quaker; Cruesli; looza; Twistos; Solinki.

PepsiCo Asia, Middle East& Africa (AMEA)

Market and provides lots of popular snack food brands such as: Lay's; Kurkure; Chipsy; Doritos; Smith's; Cheetoe; Red Rock and roll; Deli and Ruffles.

Beside that AMEA also make the impartial deal manufacturers in marketing and reselling for the Quaker-brand cereals and snack foods.


As a large international cooperation, it's very important for Pepsi to spend their money prudently. By following a idea of economies of level, PepsiCo have had save not just a great deal of money, it will help reduce the average cost.

. Company is one of the key key that lead to successful business. By using Specialization and Division of Labor, Multi-stage department, and Organizational Economies methods in economies of scales, it have helped PepsiCo coordinate their development lines, division and people. Which will then increase the working along with producing goods process and lead PepsiCo to become one of the largest food companies in the world. It is also very important to make full use out with their property and goods. Utilizing the "container principle", and indivisibilities which in Pepsi case as a sizable company can make the full use out of the two theory and save plenty of energies and resources (results had already been talk about from above). Every customer seek for products with high quality. In order to gratify their needs Pepsi have put in multiply millions dollars to their research division to invent better products, and improve old products and bring them to meet up with the right standard of quality. As now when global warming is becoming one of the biggest international hazard, many customers looks for for eco-friendly production which is also another reason why Pepsi should use by-product. This also helps Pepsi save their good resources by re-use, recycle their products. Economies of scope and financial economies will help Pepsi collaborate and cooperate with other company business.

By using economies of scales, Pepsi have slowly archive their success. Become one of the greatest food and drink company on the globe. Yet, they aren't slowing down yet. Stay tuned because there is a lot more to come from PepsiCo

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)