ICMR Case 10 Indra Nooyi: A Transcultural Leader "If all you want is to screw this company down right and get double-digit earnings growth and nothing else, then I'm the wrong person . . . companies today are bigger than many economies. We are limle republics. We are engines of efficiency If companies don't do { responsible] things, who is going to? Why not start making change now?" - INDRA NOOYI, Chairman and CEO, PepsiCo, Inc. "If you look at the job entirely from the American perspective, then it becomes impossible to run a global business ... you have to relate your interests to the interests of other parts of the world-to be relevant in their societies. Indra seems to understand this instinctively." - HENRY KISSINGER, Former Secretary of State, United States of America Indra Krishnamurthy Nooyi (Nooyi), chairman and CEO of and CEO of Starbucks Coffee Co. Rosabeth Moss Kanter de- PepsiCo, Inc. (PEP) and considered one of the most highly scribed Nooyi as a visionary who was cross-cultural, female, influential CEOs in the world, was for five consecutive years and values-driven whose approach would be required in this from 2006 at the very top of the list of the 50 most power- cra of globalization, where an individual's problems belong to ful women prepared by Fortune magazine." PEP-one of the everyone else." 500 biggest companies in the world-manufactured, distrib uted, and marketed a range of food and beverage items, with HER EARLY YEARS revenues from 200 countries in excess of US$57 billion for the fiscal year ended December 25, 2010." Nooyi rose through Nooyi was born on October 28, 1955 in Chennai, India. She was the ranks after joining PEP in 1994 as its chief strategic heavily influenced by her stay-at-home mother, Shantha Krish- officer." She went on to shatter the glass ceiling when she was namoorthy (Shantha), whom she considered the first manage- appointed its CEO in 2006. During her tenure, the firm took ment teacher in her life.* Though she had a conservative South a serious look at the health issues involved with its products Indian upbringing, there were many contrasting influences in and redefined its links with business and society." She was her life. Observers noted that though she belonged to a Hindu regarded as the creator of PEP's growth strategy, "Perfor- home, she went to a Roman Catholic School. Nooyi admitted mance with Purpose," that strove to balance strong financial that Shantha "encouraged us but held us back, told us we could returns with giving back to communities all over the world. rule the country as long as we kept the home fires burning." As part of the strategy, PEP offered a range of choices that Observers described how Shantha would remind a young Nooyi were healthy, convenient, and fun while reducing their impact that she would get her married at the age of eighteen, while also on the environment and promoting an inclusive culture at the giving her daughter the freedom to dream about rising high in workplace. In line with this strategy, PEP was listed both on life." she Nooyi noted that she was made to compete with her the Dow Jones North America Sustainability Index and Dow sister for a piece of chocolate after meals, with questions like Jones World Sustainability Indexes." " "I have been particu- "What will you do if you were to become a prime minister?" or, larly impressed by her willingness to do the right thing for "How would you change the world?" Nooyi believed that this her employees and consumers . . . I believe that all socially process encouraged her to think, and made her come up with responsible companies could learn from Indra Nooyi's style different ideas in order to get the reward." Another influence of leadership," said Howard Schultz, chairman, president was her grandfather, who kept a tab on her scholastic progress while ensuring that she was always prepared in advance with her lessons."Nooyi recalled that while she was taught Indian @ 2011. IBS Center for Management Research. All rights reserved. classical music, she also had the permission to be part of a rock To order copies, call +91-08417-236567/58 or write to IB5 Center for Man- band in which she played the guitar." agement Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 304, Andhra Pradesh, India or email: info@ icmrindia Nooyi went on to graduate from Madras Christian College .org www.icmrindia.org. Used with permission. in Chemistry, Physics, and Mathematics."This was immedia ately followed by an MBA from the Indian Institute of Man- This case was written by Amrit Chaudheri and Debapratim Purkapustha, IBS agement, Calcutta. Then she went on to work with ABB* and Center for Management Research. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. Rosabeth Moss Kanter is a professor at the Harvard Business School. | Forteone is a global business magazine published by Time Inc. ABB is a multinational headquartered in Zurich, with operations in power 2 The Dow Jones Sustainability Indexes were launched in 1999 and were and automation technology- the first global indexes for tracking financial performance of the leading Johnson and Johnson is a global American pharmaceutical, medical devices, sustainability -driven companies all over the world. and consumer packaged goods manufacturer.Johnson and Johnson," where she successfully launched vari- a person in consulting (Refer to Echitbir / on the positions held ous products." However, Nooyi's heart was set on other things. by Nooyi). She said. "I always had this urge, this desire, this passion . . After a stint in strategy with telecom major Motorola Inc. to settle in the United States."" Nooyi said her parents were and with ABB, Nooyi made a move to PEP as its chief strate- apprehensive about letting her go to the U.S., and derived com- gist in 1994, attracted by the chance of making a difference to a fort from their belief that she would not get admission. How- company that was then struggling.""She began working under ever, she proved them wrong and got an excellent scholarship then-CEO Roger Enrico (Enrico). at Yale," where she pursued her Master's in Public and Private Management."For Nooyi, the experience led to a profound shift in thinking. and she observed: "You come from India off RISE AT PEPSICO the boat, you go to business school, and you realize that you PEP was going through a difficult time-its restaurant business come from a fairly sheltered life . . . I learnt everything over was not doing well in the saturated fast-food market and its again." " While studying, she worked as a dorm receptionist revenues from the international markets were lagging far be- on night shifts to support herself and saved some money to buy hind archrival Coca-Cola Company' (Coca-Cola). Nooyi was herself a Western suit for her first job interview out of Yale." instrumental in the spinning off of the restaurant chains-KFC, Nooyi had opted for the night shift as it paid an extra 50 cents Pizza Hut, and Taco Bell-in 1997, a difficult move that shrank an hour. the company by a third."However, as a part of the strategic Nooyi learned to be herself the hard way. She recalled that view, the company acquired Tropicana in 1998 for US$ 3.3 bil- the Western suit that she bought for USS 50 from the local bud- lion and Quaker Oats in 2001 for US$ 14 billion."" Nooyi get store was ill fitting and that she wore orange snow boots to went on to prove her mettle with a presentation to the board the interview, leading to gasps from the interview board. "She in 1998. Enrico remarked, "At that moment the PEP board un- was rejected. When she sought the advice of a professor, the derstood Coke's business model better than Coke's board did"! professor advised her to wear a sari for the next interview, and They also realized that Coca-Cola's growth was not sustain- told her that "if they can't accept you in a sari, it's their loss, able. Nooyi was vindicated when the share price of Coca-Cola not yours."Nooyi wore a sari for the next interview at the began sliding after four months."The moves pushed up leading global management consulting firm, Boston Consulting earnings and grew Nooyi's stature in the company." Enrico Group (BCG), and got the job."Nooyi averred, "Never hide admitted that Nooyi was "the best negotiator I've ever seen what makes you."?" She added, "I am so secure in myself, in my entire life."*23 During the subsequent tenure of Steven I don't have to be American to play in the corporate life."is Reincmund (Reinemund), Nooyi was elevated to president be- She followed the same philosophy ever since-of being herself cause he was impressed by her acquisition of Quaker. and not changing her basic beliefs and drawing strength from Nooyi progressed fast in her career and was eventually de- her traditions. clared as one of the two finalists-along with colleague Mike Describing her experience at the BCG, Nooyi said that White (White)-to succeed Reinemund as CEO in 2006. Af- each of her six and a half years there equaled three years in ter being appointed to the post, Nooyi personally flew down the corporate world, given the number of challenges thrown at to retain her former colleague, with whom she had worked for EXHIBIT | Positions Held by Indra Nooyi Academics: Bachelors in Mathematics, Physics, and Chemistry from Madras Christian College, Chennai, India, 1976. MBA from Indian Institute of Management, Kolkata, 1978. Masters in Public and Private Management, Yale University, 1980. Before PepsiCo: Manager positions at Mettur Beardsell Lid. and Johnson and Johnson Lid. Senior Vice-President of Strategy and Strategic Marketing for Asca Brown Boveri. International Corporate Strategy Projects at Boston Consulting Group. Motorola-Vice-President and Director of Corporate Strategy and Planning. At PepsiCo: Senior Vice-President of Strategic Planning and Development. Chief Financial Officer, 2001.EXHIBIT II Food Portfolio of Pepsico Inc.* Fun for You These products are a part of PepsiCo's core food and beverages business. They include Pepsi Cola, Mirinda, Doritos, Lays, Cheetos, Mountain Dew, 7Up, and Red Rock Deli Potato Chips. Better for You These products are foods and beverages that have levels of total fat, saturated fat, sodium, and sugar that are in line with global dietary intake recommendations. They include Lay's Baked Potato Crisps, Pepsi Max, Diet Mug Root Beer, Diet Sierra Mist, H20h!, Diet Pepsi, and Propel Zero water. Good for You These products offer positive nutrition through inclusion of whole grain fruits, vegetables, low-fat dairy, nuts and seeds or significant amounts of important nutrients, while moderating total fat, saturated fat, sodium, and added sugar. They also address the performance needs of athletes. They include Quaker Instant Oatmeal, G series, Tropicana, Nut Harvest, and Naked juice. * Data as of 201 1. Source: www.PER.com/Download/PEP_Annual_Report_2010_Full_Annual_Report.pdf several years. Nooyi offered him a compensation that nearly on PEP's formidable distribution system to tackle the under- matched hers, creating in the process her right-hand man." nutrition issues facing the world." The following week, while addressing PEP employees, White Observers appreciated the unusual and tremendously am- remarked "I play the piano and Indra sings." Nooyi emphas bitious vision that Nooyi had of reinventing PEP." This came sized, "I treat Mike as my partner. He could easily have been under her leadership banner and corporate mission of "Per- CEO." She ensured that he was always next to her during key formance with Purpose," which ensured that PEP achieved fi- meetings." nancial success and social responsibility along with it." The Nooyi was candid enough to admit that she had had a diffi- initiative was composed of three important elements: human cult journey to reach the top from her humble middle-class back- sustainability, environmental sustainability, and talent. (Refer ground in South India. She said, "Immigrant, person of color, and to Table L.) woman, three strikes against you. . . . So I would work extra hard The company began to focus on getting an increased at it. More hours, yes. More sacrifices and trade-offs, yes. That has amount of earnings from health products, such as oatmeal. been the journey." aw Some observers said Nooyi was true to There was a push away from snack food, caffeine colas, and her name Indra, the Hindu "God of War."According to Nooyi, shareholder value toward health foods, fruit juices, and sustain- it was essential to focus on establishing an ethical corporate cul- able enterprise." For Nooyi, the most important issue was the ture and long-term planning to avoid any corporate scandals." linkage of performance with a sense of purpose in the sense of "a very closely linked ecosystem" and not performance and A NEW CORPORATE VISION purpose or performance or purpose. She emphasized that un- Nooyi continued to be a major change agent at PEP after tak- less one focused on purpose, there could not be performance; ing over as CEO. Observers said that the earlier acquisitions of unless there was performance there could be no purpose in the Tropicana, Quaker Oats, and Gatorade pointed to the direction that PEP would take in the future-toward "better-for-you" TABLE | Food Portfolio of PepsiCo Inc. * products, and away from junk foods." (Refer to Exhibit I/ on the Food Portfolio of PEP.) Components of "Performance with Purpose" Initiative At the World Economic Forum in Davos in 2008, Nooyi Human Sustainability Ensuring that products ranging remarked that it was essential that "we use corporations as a from treats to health foods allow productive player in addressing some of the big issues facing customers to make balanced, the world."She said that an important way of achieving this sensible choices. was to inspire people to have a vision that everyone could re- Environmental Sustainability Ensuring that the company late to""Critics noted that as a child growing up in a develop- replenishes the planet and ing India, she had seen the success of the Green Revolution in leaves the world a much better transforming society; they felt that this had made her sensitive to place than it was before. the role of the corporate sector in sharing their expertise in the Talent Sustainability Ensuring that the employees developing world."" Going forward, Nooyi wanted to leverage of PEP also have a life while they earn their living with the Green Revolution refers to the introduction of high-yielding varieties of company. seeds after 1965, along with the increased use of fertilizers and irrigation, to increase production and make India self-sufficient in food grains. Source: www.leadership.beg.com/americasooyi.aspxactions."She clarified further, "It doesn't mean subtracting thinking that had shaped her leadership style. "I don't think from the bottom line . . . (but rather) that we bring together what I could have gotten here without a strategy consultant back- is good for business with what is good for the world. . . . People ground because it taught me inductive thinking. It taught me these days are bringing their principles to their purchasing . . . how to think of the problem in micro terms but also to zoom we, in return, are bringing a purpose to our performance." out and put the problem in the context of its broader environ- Nooyi emphasized that the economic downturn since 2008 ment and then zoom back in to solve the problem,"" she said. had made the idea of performance with purpose even more im- Experts noted that she could successfully predict the slowdown portant. For instance, it required that PEP's portfolio be trans- in the acrated soft drinks market and lead the foray of PEP into formed in such a way as to ensure performance. PEP's green the sports drink market with Gatorade." Her deep knowledge initiatives ensured that costs were controlled, while talented and of the products and financial affairs of the company was widely young people were attracted to work with the firm." Observers appreciated. appreciated the fact that the vision had enabled the firm to be Nooyi felt that no matter what the previous experience of a adaptable in order to continue growth at a time where there was person, nothing could really prepare him/her for the top job at increasing public awareness about the environment, customer an organization. She believed that leaders should have the abil- concern about health, and a difficult economic climate." ity to draw on their previous experiences while having an en- Her philosophy made her back "Pepsi Refresh" and other during commitment to the learning process. According to her, social-responsibility positioning. "The "Pepsi Refresh" project "If you want to improve the organization, you have to improve worked under Nooyi's vision of "Performance with Purpose" yourself and the organization gets pulled up with you. That is and allowed tapping into the Millennials," who would be more a big lesson. I cannot just expect the organization to improve if likely to choose brands that would contribute to the society at I don't improve myself and lift the organization." *According large. Observers termed the project a phenomenal success in to some experts, Nooyi also had the traits of being a Level 5 terms of participation as it allowed people to put their ideas into leader that lead the company's transition from good to great. action in the form of grants that were voted on by the public. Nooyi saw five things that would change the workings of Critics noted that Nooyi was able to understand the cul- a CEO. First, she believed that there had to be an emphasis ture of Pepsi, and to go on to challenge its accepted beliefs on the long-term outcomes rather than a focus on short-term and practices in ways that were quite non-confrontational. earnings emphasized by shareholders. Second, for working of- For many critics, this was the result of Nooyi's Indian cultural fectively in a world that was becoming increasingly complex, background that had various regional and lingual influences." there would have to be an emphasis on strong public-private Nooyi was named the CEO of the year 2009 by the Global partnerships. Nooyi felt that governments had become intru- Supply Chain Leaders Group (GSCLG) for her continued sive and had begun to challenge corporate governance since the contribution to responsible corporate citizenship even at a time trust in companies had touched an all-time low, that the par- when there was a global economic slowdown. They acknowl ties saw themselves as adversaries. Third, there had to exist a edged Nooyi's long-term vision and execution capabilities and strong ability to think local while acting globally, especially in her efforts to provide a wider portfolio of healthier foods and the context of newer markets in the developing world. Nooyi beverages."Some experts said that if Nooyi could actually de- said that in developed countries there were large stores that liver on both wholesome food and healthy profits, the future of allowed the development of hundreds of new products. How- PEP would be very bright. ever, for the developing world, which typically had small, tiny stores, the need was to give choices in a completely different LEADERSHIP AND MANAGEMENT STYLE way. Fourth, Nooyi wanted CEOs to be more open minded, so Nooyi had the good fortune of being guided by three former that they not only understood better leadership principles but PEP CEOs-Reinemund, Enrico, and Don Kendall. Observers also the needs of the newer technologies and the younger gen- noted that her mix of South Asian heritage and mentoring at crations. She wanted greater openness toward cultures. To get PEP had given her a strategic view of world markets. Though this, she believed in having great people to run the company so critics held that Nooyi might not treat everybody the same way that the CEO got a chance to travel. Nooyi herself spent nearly as she did White, they agreed that she was ready to take help two weeks in China, where she went to customers' homes and from others in whatever areas she felt there was a need. interacted with people to understand how they lived, what they Nooyi admitted that even after retirement, Reinemund contin- thought about the products, and what the company should do ued to reply to her emails within seconds and was ready to be differently in order to succeed. Fifth, she felt that there would at her side if she needed advice. be increased requirements of emotional intelligence for leaders, Experts felt that her experiences carly in her career with so that they could create a bond between the company and the organizations such as the BCG had taught her the inductive employee, through the business model and the values the com- pany stood for. " Nooyi was known to be highly charismatic, with a clear "The Millennials are Generation Y with birth-dates between the mid '70s to voice. " She retained her Indian accent and went on to use the late '90s. Given the stronger reach of the media during the formative years of this generation, many of these members have a nco-liberal approach. Americanisms in her interactions." Experts noted that Nooyi "The GSLG award is given to individuals who get the highest appregate rat- could inspire employees to take on monotonous and difficult ings in leading, developing, and maintaining sustainable, responsible business tasks. " According to Nooyi, a great leader was one who could practices on a global scale. get people to follow her to the ends of the earth. She remainedtough on herself and set high standards for everyone. Experts values to work, and to use them every day. Observers pointed pointed out that since she had been held to high standards in to the increased levels of pride at PEP, an integration of work her childhood, she applied the same to everybody else. They and life values, and the satisfaction of contributing to consum- pointed to her practice of using green, red, and purple pens to ers, communities, and countries. They noted that the initiatives highlight issues on documents. Nooyi admitted that her scrib- had enabled employees to hit their career "sweet spot" and to bles were legendary, and she would write statements like "I have make talent sustainability a strategic advantage at PEP."Nooyi never seen such gross incompetence,"or "this is unacceptable" launched the "Leading with Purpose" program at Yale University and would underline "unacceptable" three times. Employees re- for all the divisions at PEP, which enabled leaders to move in the membered the time when they were asked to find an alternative direction of "Performance with Purpose.""She treated the em- to the use of palm oil. Nooyi pushed them hard until they came ployces at PEP as leaders and built a culture that recognized hard up with a solution. One employee recalled, "Don't try to del- work and encouraged initiatives from employees. She defined egate up, because she will bounce it right back in your face." vili her leadership philosophy into the "Five C's". bail However, she nurtured the employees at the same time so that her followers aspired to be like her in the future. biz Competency: Being an expert in your field, stand out from Reinemund considered Nooyi a "decply caring person . . . who the crowd and be a lifelong learner. can relate to people from the boardroom to the front line." Courage and Confidence: Having the courage and confi- Nooyi always seemed comfortable with her leadership pres- dence to do and say what you believe is right. Establish the ence, as she often moved around in the office barefoot, singing knowledge base and be confident. in the halls." She was said to have gifted former CEO Enrico Communication skills: Good communication skills are a karaoke machine and was herself known to sing out during critical for progress. management conferences."" Known to be a style apostle, she Consistency: Being steady, reliable, and determined so that preferred wearing saris topped with a simple shawl and pearls. one is credible and has a baseline to measure successes and Nooyi's attire showed her deep connection with India. failures. She attended board meetings in a sari, as she believed that the corporate world preferred people who were genuine." Coaching: Being surrounded by mentors that enable She became a mother figure at PEP, looking after the com- change. pany as if it were her family. Observers noted that she made Having a Moral Compass' Having the desired strength and time for regular staff who needed to interact with her-be it courage to do what is right and not what may be expedient ba even the security guards at the Purchase, New York, headquar At PEP, Nooyi ensured that employees balanced life and ters. Every quarter, she sent a hand-written letter to the spouses work and had an extended family at the workspace to achieve of all 27 of her top executives, thanking them for their support that balance. despite the long hours of work and travel that the executives had to undergo."As she was very demanding at the work- STRIKING A BALANCE place, she made up by throwing dinner parties for the members of her team and their spouses. At these dinners she interacted Nooyi sums up the trade offs and sacrifices she has made in her with her team members' spouses and fielded questions from life "Any woman who reaches the kinds of positions we do, and them. Nooyi also took the personal initiative to thank the par- I'll speak for myself here, there are so many tradeoffs, compro- ents of the senior executives at PEP for the great job they had mises, heartbreaks, regrets that we've had to make along the done in bringing up capable children, and this unleashed strong way. It has not been casy. You know, I have two daughters. I emotions that created a bond between the executives, their par- have a husband, been married for 28 years. I have a mother still ents, and her. ""She also insisted on celebrating everyone's alive, and my family is very close." She candidly admitted birthdays with a cake. Her extracurricular activities were not that between the roles of being a mother and a CEO, it was the limited to playing the electric guitar at office parties, but also role of the mother that came first. She said that she would take included reading a book every day from1 1 p.m. to 2 a.m. to a call from her daughters any time, even during work hours. keeping herself up-to-date on innovation." She held on to her value system that gave emphasis on being Nooyi strongly believed that globalization and the spread there for her children. " During long trips, Nooyi called up of information technology had turned organizations inside her family to keep in touch; if she was on a domestic trip, she out and upside down. The decision-making ability had shifted tried her best to be there with her daughters for breakfast. She to lower levels that tended to operate through self-organizing also acknowledged the support she got from her husband in networks."PEP saw a broadening of the power structure when her progress. According to her, she faced enormous pressures the executive team was nearly doubled to reach 29 members. in meeting the expectations of being a wife, a daughter, and a High-profile additions included Mehmood Khan, who be- daughter-in-law while being responsible for the affairs of PEP. came PEP's first chief scientific officer for looking into food She admitted that it was late in life that she stopped being con- research." Nooyi used her leadership banner of "Performance sumed by the guilt of not being good at everything and did with Purpose" to ensure that PEP's leaders had an opportunity to work for achieving an integrated life. " While focusing on the talent sustainability pillar, Nooyi rolled out her "cherish" prin- "A career "sweet spot" enables employees to work harder with higher impact ciples for valuing employees, encouraging people to bring their and yet feel less stressed.the best that she could."She also made it a point to call her EXHIBIT Ill Characteristics of Hybrid Leaders mother in India twice a day. Nooyi was a tireless worker who would sleep not more than 1. Are deep enough to deliver four to five hours every night. Observers remarked that despite 2. Have genuine concern for people her highly successful career, Nooyi held on to her Indian roots 3. Drive collaboration through the organization and balanced her high octane job with the calm, collected be- 4. Celebrate diversity havior required for a wife and mother at home. Visitors to her 5. Are excellent communicators house were required to take off their shoes before entering. The 6. Emphasize work/life balance house had a worship room where the alya (traditional lamp) was 7. Admit their constraints kept burning. Camatic music was played at her house almost all day, creating the aura of a temple at home. Nooyi believed that Source: www.lesaffaires.com/uploads/references/1266_ her belief in religion enabled her to do a better job. She quipped, creatingthehybridleader.pdf; www.jumpassociates.com/a- "I don't know about a better job, but it certainly makes me calm hybrid-leader-for a hybrid-school.html . . . there are times when the stress is so incredible between of- fice and home . . . then you close your eyes and think about a slogan of "Performance with Purpose" as a marketing ploy that temple like Tirupati, and suddenly you feel 'Hey-I can take on happened to be in vogue. They pointed out that the company the world."am She also kept a Ganesha (a Hindu deity) in her was still best known for making soda and potato chips. She office. According to Nooyi, when things got difficult, it was her was also criticized for the way she handled issues such as the family and her belief in God that kept her going. "At the end of pesticide controversy in India in 2006, and health issues related the day . . . don't forget that you're a person, don't forget you're to the company's products. They argued that despite being an a mother, don't forget you're a wife, don't forget you're a daugh- Indian she did not take the initiative to reassure the Indian pub- ter . . . what you're left is family. friends, and faith."Issix lic that the company's product was safe." At a Fox Business show, Nooyi had also infamously quipped, "Doritos is not bad HANDLING THE DOWNTURN for you . .. Doritos is nothing but corn mashed up, fried a little bit with just very little oil, and then flavored in the most delec- According to Nooyi, setting the agenda in a downturn was of table way."The statement led to a flurry of criticism against prime importance. She ensured that she was visible in order to Nooyi." Her image took a beating when, at the last moment, convey a strong message that things were all right and the orga- she pulled out of a major soft-drink industry conference at nization would come out of the problems. To tide over the down- which she was to give the keynote speech. The participants felt turn, the company made substantial reductions in spending, but that her excuse for not attending was quite lame and were not not at the cost of long-term investments."Nooyi emphasized satisfied with the fact that she sent a subordinate in her place. the realistic optimism considering the fact that they were a con- Nooyi's explanation, that she wanted to give the spotlight to sumer staple company, which would not be affected much. the CEO-designate of Coca Cola, Mukhtar Kent, did not find PEP launched a restructuring program in October 2008 many takers. Critics were convinced that Nooyi could be quite with the focus clearly on prioritization. The company set prior- temperamental."vi ity points which were repeated at each and every interaction the Nooyi's strategy was also criticized as there were reports company had with its employees. The line managers were given that developing markets were not seeing a change in dietary agendas-but also the freedom to achieve their goals. Nooyi habits. For instance, PEP was banking on a successful launch gave substantial freedom of action, and intervened only when of Pepsi Max in the summer of 2010 to extend its market share businesses were in dire need of a turnaround. While employees in India. However, the launch was not successful. Experts be- traditionally could be motivated by the high growth being en- lieved that many people in the developing world were not buying joyed in developed markets, the thrust in the future would only into the healthy food habits concept being propagated by Nooyi. come from developing markets. Nooyi felt that people should Sales of 100% juices continued to lag behind sugary ones by have the inclination to work in international environments." a wide margin, while pizza chains like Dominos continued to However, Nooyi was also criticized for laying off almost beat sales targets.""Moreover, some of PEP's new forays were 3,300 employees-nearly 1.8% of PEP's global workforce in not doing too well: its Flat Earth chips"- had disappointed at the 2008-and closing factories to survive the downturn, moves market and had to be discontinued because of slow sales." Critics that would enable it to save almost USS 1.2 billion."Nooyi's accused the products of having a taste-barrier and even went to response then had been, "This will enable our competitiveness the extent of saying that some of them had a really awful taste." and give us breathing room to respond . . . it is no news to you Meanwhile, Quaker Oats had had little success in attracting at- the economy is turbulent and there are uncertainties and volatil- tention to its oatmeal, which was tagged as a "best-for-you" food ity in every part of the environment."ci by PEP. The company was criticized for diverting funds from RISING STAKES? expensive Super Bowl" commercials to the "Pepsi Refresh" While some industry observers and experts described her as a New Age hybrid leader (refer to Exhibit I// on Characteristics 12 Flat Earth Chips were snacks that had half a serving of fruits or vegetables of a Hybrid Leader) and praised her leadership style, Nooyi T ounce "The Super Bowl is the annual championship for the National Football also came in for some strong criticism. Critics termed Nooyi's League in the U.S.EXHIBIT IV Total Net Revenue and Operating Profit of Pepsico Inc. 2010 2009 2008 2007 2006 2005 Total Net Revenue US$ 57,838 USS 43.232 US$ 43,251 USS 39,474 USS 35,137 USS 32,562 Operating Profit FINA US $3.549 US $3,258 US $2,959 US$ 2.845 US $2,615 US $2,529 OFNA 568 628 582 568 554 537 LAF 1.004 904 897 714 2,016 1.661 PAB 2.776 2,172 2,026 2487 PepsiCo Europe 1.020 932 910 855 AMEA 742 716 592 466 Corporate Unallocated Market-to-market (net) 91 274 346 19 Merger and (191) (49) - Integration Charges Restructuring and (10) - Impairment Charges IIIIII Venezuela currency (129) - - - - devaluation Asset Write Off (145) - Foundation (100) contribution Other (853) (791) (651) (772) (738) (780) Total Operating US $ 8,332 US $ 8,044 US $ 6,959 US $ 7,182 US $ 6,502 US $ 5,984 Profit Total Operating 14.4% 18.6% 16.1% 18.2% 18.5% 18.4% Profit Margin Note: PepsiCo is organized into four business units. These are PepsiCo Americas Foods (PAF), which is comprised of FINA, OFNA and LAF; the PepsiCo Americas Beverages (PAD); PepsiCo Europe; and AMEA. FINA: Frito Lay North America OFNA: Quaker Foods North America LAF: Latin American Food PAR: PepsiCo Americas Beverages AMEA: Pepsi Co Asia, Middle East and Africa Figures in USS, (millions) Source: www.pepsico.com/Investors/Annual-Reports.html challenge." Critics pointed out that PEP had returned to TV ad- much lower cost structure. According to a report in 2011, Coke vertising in June 201 1 after three years of focus on social media had held on to the #1 slot in sales and unseated Pepsi from the #2 and crowdsourcing through corporate philanthropy-based pro- spot as well with Diet Coke in the U.S. Globally, while PEP was grams such as Pepsi Refresh. Nooyi was accused of ignoring being affected by increased commodity costs and the uncertain marketing and product positioning while giving too much em- economic conditions and had to cut its camings growth to single phasis on "Performance with Purpose." However, Nooyi termed digit levels in 2011, Coca-Cola had reported increasing sales as "rubbish" claims that she had not paid attention to the leading volumes. Though both Coke and Pepsi had agreed to pass on brands of PEP and argued that emphasis on corporate citizenship some of the higher costs of drinks to customers, PEP was in and healthy foods did not come at the cost of driving sales." a difficult position given its substantial food business where it Critics said that Coca-Cola had emerged stronger during could not turn away customers given the high prices." Critics Nooyi's tenure as the CEO at PEP, with increasing sales and a argued that though PEP had created a desirable association with itself, the association remained vague and the firm was pay- The Pepsi Refresh Challenge aimed at finding innovative not-for-profit ing through loss of market share. But Nooyi countered, saying. organizations. "From my perspective, we are a different company . . . differentfrom a business makeup, different culturally, in the way we because you are CEO, don't think you have landed . . . You must think, the way we act. We are different every which way . . . continually increase your learning, the way you think, and the we are in businesses that give you more good-for-you products, way you approach the organization. I've never forgotten that "is and that means closer to crops. When you're closer to crops, you're going to have some inflation."However, there was con- siderable pressure on her from shareholders to improve the mar- Assignment Questions ket share of PEP's flagship brands." A shareholder remarked, 1. What were the factors that shaped Indra Nooyi as a "I think it is hard to give Indra much better than a C-plus as a leader? CEO." given the fact that PEP shares had fallen by 7% by 2009, compared to a 28% surge for Coke during the same period, from 2. What are the factors that could make Nooyi change her the time she took over."""(Refer to Exhibit /V on the Total Net decision about corporate sustainability? Revenue and Operating Profit of PepsiCo.) 3. Do you think Nooyi has a life outside of PepsiCo? However, Nooyi was confident of the vision she had for 4. Which leadership style is being used by Nooyi at PEP, even as industry observers were closely watching her next PepsiCo? Highlight the mix of various leadership styles moves. "We are confident that we will reinvent the cola busi- found in Nooyi, such as that of servant leadership, ethical ness the right way,"" she quipped. She was willing to stretch leadership, socialized charismatic leadership, and authentic herself while taking the firm forward. According to her, "Just leadership