case study

Mini Case: PepsiCos Indra Nooyi: Performance With a Purpose

When appointed CEO of PepsiCo in 2006, Ms. Indra Nooyi was only the 11^th woman to run a Fortune 500 company. Since then, Ms. Nooyi has been ranked in the top ten Forbes magazines list of the worlds 100 most powerful women. In 2010, she topped Fortunes ranking of the most powerful women in business. Today, leading a company that employs some 300,000 people worldwide, Ms. Nooyi is considered one of the most powerful business leaders globally.

A native of Chennai India, Ms. Nooyi obtained a bachelors degree in physics, chemistry and mathematics from Madras Christian College, and MBA from eth Indian Institute of Management, and a masters degree from Yale University. Prior to joining PepsiCo in 1994, Ms. Nooyi worked for Johnson & Johnson, Boston Consulting Group (BCG), Motorola, and ABB. For her BCG interview, right out of Yale, Ms. Nooyi wore a traditional sari. Ms. Nooyi Is not the typical Fortune 500 CEO: She is well known for walking around the office barefoot and singing a remnant from her lead role in an all-girls rock band in high school.

It should come as no surprise that Ms. Nooyi an executive who spends more than 50 percent of her time outside the U.S. has been shaking up things at PepsiCo. She took the lead role in spinning off Taco Bell, Pizza Hut and KFC in 1997. Later, she masterminded the acquisition of Tropicana in 1998 and Quaker Oats (including Gatorade) in 2001. As CEO, Ms. Nooyi declared PepsiCos vision as performance with a purpose, defined by three dimensions:

1-Human sustainability, which concerns the strategic intent to make PepsiCos product portfolio healthier, to combat obesity. PepsiCo wants to make fun food such as Frito- Lay and Doritos healthier (less salty and fatty), and to include healthy choices in its product portfolio (such as Quaker Oats products and Tropicana fruit juices). Ms. Nooyi is convinced that if food and beverage companies do not make their product lineups healthier to combat obesity, these companies will face the same repercussions that tobacco companies did.

2-Environmental sustainability, to ensure that PepsiCos operations dont harm the natural environment. The company has initiatives such as water and energy reduction, stepping up recycling, and promoting sustainable agriculture. The goal is to transform PepsiCo into a company with a net-zero impact on the environment. Ms. Nooyi believes that young people today will not patronize a company that does not have sustainable strategy.

3-The whole person at work, which attempts to create a corporate culture in which employee not just make a living, but also have a life. Ms. Nooyi argues that this allows for the unleashing of both the mental and emotional energy of every employee.

PepsiCos vision of performance with a purpose acknowledges the importance of corporate social responsibility and stakeholder strategy. Ms. Nooyi is convinced that companies have a duty to society to do better by doing better. She subscribes to a triple-bottom-line approach to competitive advantage, declaring that the true profits of enterprise are not just revenue- costs but revenues-costs-costs to society. Costs to society are externalities such as pollution or the cost of health care to combat obesity that companies do not bear. Ms. Nooyi argues that the time when corporations can just pass on their externalities to society is over.

Critics note, however that although the rhetoric of performance with a purpose appears to be powerful, PepsiCos financial performance so far has been disappointing. Since Ms. Nooyi took the helm at PepsiCo, Coca-Colas stock has appreciated by roughly 50 percent, while

PepsiCos stock has remained flat and is merely tracking the Dow Jones Industrial Average Index.

a) Apply a PESTEL framework to analyze PepsiCos external environment.

b)Then, conduct a SWOT analysis to see how PepsiCo is addressing the opportunities and threats present in the external environment.

c) One of the measures to assess competitive advantage is shareholder value creation. When comparing Coca-Cola and PepsiCo along this dimension, one would come to the conclusion that PepsiCo, under Ms. Nooyis leadership, has sustained a competitive disadvantage when compared with Coca-Cola.

a)Do you agree with this assessment? Why or why not?

b)If you were a board member at PepsiCo, would you be concerned? If you were concerned, what actions would you recommend?

d) As a senior executive at PepsiCo, Ms. Nooyi was the driving force behind selling PepsiCos restaurant businesses (Taco Bell, Pizza Hut, and KFC) and acquiring Quaker Oats and Tropicana. What type of corporate-level strategic initiatives were these moves? What do you think was the rationale behind them?

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