Enterprise Integration: the Pepsi Challenge - Essay Example

Enterprise Integration: The Pepsi Challenge Duc Hoang Nguyen SIM 21st of May 2009 Total Number of Words: 2,006 Introduction Aside from additional costs for technology maintenance like data backups, software updates and technology support; the use of different databases, different human resources systems, different financial applications, different distribution software, and different hardware in different PepsiCo divisions is very costly. Internal conflicts associated with implementing “the Power of One” are likely to take place. However, there are still several strategies wherein the CEO could effectively improve the implementation of “the Power of One”. Effectively Managing Organizational Conflicts A good example of using political power is when the CEO effectively influences the managers in Pepsi-Co Beverages North America, PepsiCo International, Frito-Lay North America, and Quaker Foods North America by allowing them to actively participate in the decision-making process during the development of strategies behind the implementation of “the power of one”. By doing so, the CEO can effectively increase the managers’ interest in participating during the implementation process. Likewise, allowing them to participate in the decision-making process could lessen the chances wherein the managers would feel unimportant or is threatened of losing their authoritative power as a result of implementing the plan. In general, there are a lot of factors that contributes to the failure of implementing an organizational change. One of the most common failures is caused by the inability of the managers / leaders of the organization to handle resistance to change (Burke, 2002, Ch. 11, p. 262). According to Uris (1964), there are three common factors that could lead to resistant to change. This includes the following: (1) the fact that people may feel that they have no control over the sudden changes; (2) employees may see change as a threat to their current positions of authority; and (3) employees may fear that change could result to a loss of status or privileges. By effectively communicating the expected operational costs reduction and increase in profit aside from acknowledging that the support and contribution of each manager and staff are equally important over the success of the plan, the CEO will be able to minimize the potential risk of developing organizational conflicts. Likewise, the CEO should also make use of position power to effectively manage and control the decision-making of each manager within the four subsidiaries. In line with the use of position power, the CEO has to option to release an official memo informing each of the four PepsiCo subsidiaries to strictly implementation of the “the Power of One”. Considering the significance of the two types of exercising power, the CEO should combine the use of political and position power to successfully implement “the power of one” without causing too much stress and conflict among the managers and staffs within the four subsidiaries of Pepsi-Co. Organizational culture is “a pattern of behaviour developed by an organization to cope with problems related to external adaptation and internal integration aside from enabling the employees to feel and think positively” (David, 1999, p. 143). By using the CEO’s positional power, the leader can develop organizational culture that could easily support organizational changes. Since Pepsi-Co has already authorized the Business Solutions Group (BSG) to handle the unification of technology among the four Pepsi-Co subsidiaries, the CEO should be firm that each subsidiary should professionally collaborate and discuss with the BSG personnel when deciding for a specific information technology that will be used in unifying the Pepsi-Co technology system. Therefore, the CEO should not allow the people to manage technologies within each of the four business units. By being persistence with the new business plan, the CEO can effectively lead the managers and staff to support the necessary changes with regards to the use of information technology. Importance of Establishing and Strengthening EIS/DSS Instead of using different data warehouse in each of the four PepsiCo subsidiaries, the CEO should first decide to develop and strengthen its Executive Information System (EIS) environment since this type of environment can enable the company to maximize the use of its data warehouse (Inmon, 2005, p. 247). As a common IT knowledge, EIS and DSS are among the common technology that works together when transporting data to different parties (Dallas, 2005). In line with strengthening its EIS environment, the use of on-line analytic processing (OLAP) and decision support system (DSS) is highly recommended since these types of EIS allows the business executives to receive a better insight out of the collected data in a fast and interactive way of viewing the information. In general, the use of OLAP enables the business executives to transform the information stored in the data warehouse into useful strategic information whereas EIS enables the user to navigate, browse, and calculate information in the form of time series and other related business model. Therefore, the use of EIS empowers the business executives not only in making their future decision-making more efficient but also increasing the profitability of the company. On the other hand, DSS allows the business executives to store, access, analyze, and manipulate the gathered data to enhance the decision-making process of the managers. When EIS is used together with DSS, the EIS provides the users with a graphic display of information available in DSS (Dallas, 2005). Another benefit of using the EIS/DSS is that this type of technology enables the business executives not only in storing and analyzing the gathered information but also manipulate the data to enable the business executive to make important managerial decisions. For instance: The use of EIS will empower the business executives behind PepsiCo subsidiaries to determine the price impact in case the market prices of fuel increases by $0.20/gallon given that the delivery truck maintenance costs increases by $0.4 per mile. Providing the business executives with immediate information will enable them to know whether or not they are selling within the desire profit margin or not. In case the market prices of PepsiCo products fall below the desired profit margin, the business executives could simply call for a meeting whether or not it is necessary for the company to increase the market price of each of the Pepsi products. With regards to tracking the PepsiCo revenues, the use of EIS enables the business executives to map the corporate revenues each month. This enables the top management to easily determine whether or not the sales team had already reached the expected sales and profit (Inmon, 2005, p. 252). To enable the sales executives determine the significant relationship between the PepsiCo’s corporate revenues and the consumer spending index as published by the Bureau of Statistics, the use of EIS and data warehouse enables the business executives to superimpose another trend analysis which reveals the relationship between the two aside from the impact of sales and marketing promotional plan each month (Inmon, 2005, p. 253). Increasing the Company’s Operational Efficiency with the Use of ERP and CRM Another best strategy that will enable Pepsi-Co to have a competitive edge over its rivals in the food and beverages industry is to ensure that the company will maximize its operational efficiency as they continuously improve the product quality and pricing. For instance: Developing a single supply chain management or procurement system throughout the four subsidiaries will enable Pepsi-Co have a better competitive edge over its suppliers. Since Pepsi-Co will be able to purchase similar raw materials by bulk, the company can bargain the price from its accredited suppliers. With regards to increasing the company’s operational efficiency by developing a single procurement system, the use of Internet-oriented Enterprise Resource Planning (ERP) solution can be used in enabling PepsiCo monitor the four subsidiaries’ material requirements (Chorafas, 2001 , p. 1). Over the years, ERP developed modern facilities which could meet the supply chain management requirements of PepsiCo’s four subsidiaries. Likewise, the same software can be used in enabling PepsiCo develop a single marketing and sales database will enable the four Pepsi-Co subsidiaries to cut down on unnecessary delivery expenses. Thus, enabling the company will be able to sell Pepsi-Co products at a relatively competitive price. The use of ERP is not only limited in enhancing the efficiency of monitoring PepsiCo’s supply chain management and marketing/sales database, the same software can be used in providing the business executives with the following: (1) customer information; (2) sales targets, quotas, and sales order management; (3) production, planning, and control; (4) quality assurance; (5) facilities scheduling; (6) inventory control and warehousing; (7) human resources; (8) cost accounting; and (9) monitoring the efficiency and return on investment (ROI) (Chorafas, 2001, p. 4). Basically, developing a single customer billing system that produces reports regarding PepsiCo’s customers and establishing a central help desk could improve the service efficiency given to PepsiCo customers. ERP software are designed for internal use. Since this particular software is automates complex business processes, requiring employees in each of the four PepsiCo subsidiaries to undergo traing. Although establsihing ERP system can be very useful in the case of PepsiCo, this particular information technology system requires routine maintenance (Sysoptima, 2005). Therefore, PepsiCo has to shutdown the system either on weekends or during holidays to ensure that the system provides the user with high quality performance. With regards to establishing strong relationship with PepsiCo’s valuable clients, the company has to make use of customer relationship management (CRM) software as a way of getting hold onto its loyal customers (Sysoptima, 2005b). For instance: PepsiCo management can make use of CRM when conducting direct marketing to its target customers. Basically, what the CRM software does it to identify the company’s target consumers in each promotional activity. Not only does it provides the company with a list of direct mail, it also analyzes some basic information about the target consumers (ibid). It is essential for the top management of Pepsi-Co to restructure the company’s operational procedures whenever possible. Since there is a tight competition in the global markets of food and beverages, the company should be able to cut down the number of its employee by maximizing the use of its information technology. In line with the importance of maximizing the use Pepsi-Co’s existing human resources as its four subsidiaries meet the annual target sales and production demand, the use of a single technology could increase the company’s expected annual direct savings and gross profits. Aside from selecting the most applicable IT software that could enhance the decision-making of PepsiCo management, it is also essential to consider promoting or offering competitive IT technicians to be a part of the Business Solutions Group (BSG) while considering the possibility of slowly dissolving the existing IT department in each of the four subsidiaries upon determining the strength and weaknesses of each IT personnel.1 By selecting the best people in each of the four existing IT department, the company will be able to capture people who knows the historical development of IT in each company. This information is very important during and after implementing the plan to integrate the existing technology. Conclusion Aside from the importance of being able to control and avoid the incidence of resistance to change, selecting the most appropriate decision-making software could enhance the operational efficiency and profitability of PepsiCo. Since Pepsi-Co has already established the BSG, the group should focus on establishing and strengthening the EIS environment to enable the IT personnel maximize the use of the company’s data warehouse. EIS works together with DSS and OLAP in terms of enabling PepsiCo’s business executives to be able to make on-line decision making processes. To ensure the efficiency of internal business processes and maintains the company’s relationship with its target customers, the use of ERP system and CRM software is highly recommended. *** End *** References: Burke, W. (2002). Organizational Change: Theory and Practice. Sage Publication. Chorafas, D. (2001). Integrating ERP, CRM, Supply Chain Management and Smart Materials. NY: CRC Press. Dallas, L. (2005). EIS/DSS can improve decision-making process. (Executive Information Systems, Decision Support Systems): An article from: National Underwriter Property & Casualty-Risk & Benefits Management. The National Underwriter Company. David, F. (1999). Strategic Management: Concepts. 7th Edition. New Jersey: Prentice-Hall. Inmon, W. (2005). Building the data warehouse. 4th Edition . Wiley Publishing Inc. Sysoptima. (2005, March 12). Retrieved May 18, 2009, from The Differences between ERP Systems and Ecommerce Applications : http://sysoptima.com/erp/erp_and_ecommerce.php Sysoptima. (2005b, March 13). Retrieved May 18, 2009, from Functional Modules of CRM Software Applications: http://sysoptima.com/crm/crm_modules.php Uris, A. (1964). Retrieved May 1, 2009, from Techniques of Leadership’ New York: McGraw Hill. In Statpac ‘An Overview of Organizational Leadership and Management’: http://www.survey-software-solutions.com/walonick/leadership.htm Read More