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Shamim & Company (Pvt) Ltd. Pepsi Cola Bottlers - Production & Operations Management

Shamim & Company has completed 29 years of its operations. Operations management functions are being successfully implemented by management. A brief summary of operations management functions studied by this group are described below.

Product Planning:

At present new product decision is taken by the top management. Demand for new product is investigated by production manager- terms of raw material, machinery operations, and quality. Fro this purpose he can get guidance from constructions. Finance department evaluates financial viability. Sample production is conducted. Response from buyer in terms of satisfaction and company’s ability to meet the requirement helps in deciding to produce new product.

Process Design:

In the company process is continuous supply of concentrate is critical but process can be automated. Process is flexible and production on plant can be changed within one hour. Production on plant can be changed within one hour. Production is of large scale and covers a wide area for the distribution of the product.

Facility Design and Layout:

Facility design and physical layout of plant, supporting facilities and building is provided by the parent company that is PEPSI COLA International. Transportation costs with the plant is minimum. Physical layout provides maximum utilization of available space by optimizing costs.

Inventory:

Company is not using the quantitative methods for calculating economic order quantity, reorder point, safety stock and annual inventory cost. The company does not give importance to control inventory cost. Lead time is usually 2 days an in an exceptional case it can be up to 4-5 days. this also one reason that EOQ, ROP, lead time are calculated using qualitative techniques, by estimates of experienced managers.

Martial Requirement Planning:

Company produces beverages and uses Sugar, Carbon Dioxide, Ammonia and concentrate as raw material. Sot drink is a seasonal product. Most of the sale is done during summer season. Concentrate is bought from the franchiser PepsiCo. Sugar is bought directly from the sugar manufacturers of the area. CO2 is prepared within the premises, which is enough for the full capacity of two plants. When during samara 4 plants are in working, CO2 is purchased from the outside suppliers.

Quality.

Quality standard are followed at each and every step. Shamim & CO. has won best quality award for many times by PepsiCo competing all the Asian countries. Quality control labs are fully equipped. Quality controllers are at home in their jobs. That’s why the quality control efforts are recognized by the international management of Pepsi cola. This “serves as motivator for the organization, on no compromise on quality”.

Company Profile:

Pepsi co. is in-fact a corporation listed in the New York Stock Exchange USA. It is the owner of globe products like Pepsi Cola, Team, Marinda etc. Being owner of the products they give the rights of manufactures of its products to different countries. All over the world, the products are standard. If you buy a Pepsi from a remote area like Talamba and from Washington D.C., you will find absolutely same taste and color. Franchisees have to follow these standards; otherwise they have to face penalties from the real owners of the product. In Pakistan there are 10 units of Pepsi cola are working. Each unit has its own license of production. And each unit has its own territory in which it can sell its products. No unit can interfere in the area of other unit.

Brief History:

Shamim and Company was introduced in 1967 as a (Pvt.) Limited company. It started its production in 1968. In the early stages it was famous with the name of 7-up factory. Because 7-up was its first product. The other brands were introduced after 7-up. Pepsi Cola, Marinda and Green Marinda have been different products of Shamim and Co. Since its introduction. At present 7-up, Pepsi Cola and Marinda are being produced.

Company Characteristics:

Shamim & Co. is the biggest soft drink manufacturing unit in Pakistan with its four plants having full capacity of 50,000 crates per day. Company covers area of Southern Punjab including Sahiwal, Mianwali, Rajan Pur, Bahawalnagar and Khan Pur.

Organizational Structure

Location

Location has important impact on company’s ability to compete and on its exposure to risk from external factors. In a dynamic market the company may expand, add or relocate new facilities.

Location decisions are important due to following reasons.

- Competition.

- Cost.

- Hidden effects.

Factors that effect the location decisions are

- Market related factors.

- Tangible Cost factors.

· Transportation.

· Labor availability and costs.

· Energy availability and costs.

· Water availability and costs.

· Site and construction cost.

· Taxes.

- Intangible Factors.

· Legal regulation.

· Community attitude.

· Expansion potential.

· Living conditions.

Steps in Location Selection are:

- 1) Select the general region, select generally acceptable communities.

- 2) Select appropriate sites within communities.

- 3) Determine method of evaluating community site combination.

- 4) Compare sites and select one.

Shamim and company is located near MDA chowk Multan in province of Punjab. The site of company is not of some strategic value. Because Shamim and Co. covers a large area of Southern Punjab. So there is no importance of site with reference to the other cities of this area. Any way; site of the company is considerable for Multan. As the major proportion of population lives in Cantt. and Down town (city). The site is nears to these both areas. In this way transportation cost to these 2 areas in very less. In this way it can serve it customers effectively and efficiently.

Location Factors:

Market Related Factors:

As the unit is located in Multan which is heart of its selling territory. In this way transportation cost is not high. Mean while its major revenues are collected from Multan and Bahawalpur. In so far Multan is concerned, transportation cost is minimum and Bahawalpur is only 60 miles away from Multan. In this way Multan is the city which can supply the product in all areas of its territory on right time.

Labor Availability:

Cost of labor is very important while setting up a plant. As there were villages in the west of the company when it was inaugurated. So labor was in ample supply at cheaper cost. But now all over the unit there are suburb colonies. But labor supply in still not a problem.

Energy Availability:

As the plan requires a large amount of electricity. Electricity is available at location on similar prices like all other areas of Pakistan.

Water Availability:

As the plant also requires huge amount of water, and at the site under ground water is easily available.

Social Response:

Public opinion is very favorable toward the company. Mean while the organization is not causing any pollution.

Expansion Potential:

In the early days of production, there were expansion potential in unit. So the unit is expand by putting 2 new plants. But at the moment there is no expansion potential.

Departmentalization:

There are six departments in the company, which are

1) production

2) Marketing

3) Finance

4) Sales

5) Shipping administration

6) Personnel.

In each deptt. there is a manger which is responsible for the working of his department to the general manager. A manager has an assistant manager. After Ass. A manager their are Shift Incharge in production and supervisors in sales. They control the activities of operatives.

Product Planning:

Uptill now the company has not produced any product of its own and there is no concept of product planning in future as well, because the management considers it a very theme to introduce a new brand of their own. In the brand like Pepsi Cola and 7-up are selling in the market like hot cakes. Meanwhile the people in Pakistan are reluctant to purchase Pakistan branded beverages and we don’t find any successful domestic brands of soft drinks in Pakistan. That’s why the management does not have any motivation to do product planning.

Shamim and company is a cold drink manufacturing unit that comprises of four plants to produce drinks. Investing in such a unit involves large investment of capital for long period of time, and requires considerations of all types.

Operations Planning

Process Design and Facility Layout

Having done the location selection company design a building, select the appropriate process technology and equipment and arranges it in away so that it has greatest potential to meet the strategic demand of organization. Experience and informed judgment are useful guides to layout decisions. Computer models are available to assist in deicing factory and office layout.

The type of operations to be performed in a facility, influence the facility’s needs and layouts. Equipment involved effects the layout. Facilities must be designed for the efficient operations in the organization.

Layout for Operations:

Facility is designed in numerous ways to support this work to be done within each facility numerous factors must be considered. Amount of available space and its shape. Design objective is very imprint. some of layouts are:

· Retail layout.

· Office layout.

· Distribution and ware house layout.

· Manufacturing layout.

Manufacturing Layouts

Jobshop Layout:

It is also called layout by process, functional layout. Any particular item in the job shop may require a unique sequence to convert the req. material to the desired and item. all people and equipment that perform the same function are grouped together.

Flow Line Layout:

Involved the arrangement of activities in some sort of line along which a service receiver or product process moves. This is called lay out by process. Machines or pieces of assembly equipment are located along the route over which product travel and are arranged in the sequence required by production plan. the path of flow may follow straight line or any other shape.

Layout By Fixed Position:

Organization choose to bring the necessary people and equipment to the item being produced. Work item does not move from one operation to another. Fixed position layout may be used because the work item is too fragile, too bulky, too heavy to move without complications. Fixed position method necessitates the use of portable equipment.

Many organizations find that no fixed type meets their needs but instead that combination of types work well.

Manufactering Process:

In Shamim & Co. manufactering process is as follows;

Water Extraction:

Raw water is extracted from the sources. It is treated to remove its hardness. Here water is tested in lab to check it harness. If water has some Co3 or Hco3 it is drained and again soft water is used in the preperation of syrup.

Preperation of Syrup:

Syrup is prepared with sugar, concentrate and water. this syurup is heated upto 90 C to get it pasturized. this hot syrup is collled down and stored in the tanks. Here lab testing of syrup is done to check its quality standard.

Production:

Syrup is sent to Carbo Cooler. During flow of syrup from tanks to Carbo Coolers, Ammonia and Carbon Dioxide are mixed in the syrup.

In production process empty is feeded from on side. This emplty is washed and light check is done to see quality of washing.

From Carbo Cooler syrup goes to the Filler. At filler syrup is filled in the empty bottles, and Cap Crown is fixed on the bottols. Here and operater looks after the filling process. He can increase, derease or even stop production speed accordingly.

Filled bottols are tested in lab. by taking samples. Light check is done to check the level of syrup in bottles and chek some solid partieals. The overfilled or underfilled bottols are separated. If some partical is found in some bottlol it is also separated.

After light check bottols passed under a printer and code is printed on the bottoles, with this code the date of manufactering and shift time can be identified.

When all checking process is done the bottlols are cased in the crates.

The whole process of manufactaring is automatic. It required a little supervision. Raw material is put from one side and filled bottles come out of the process.

Support Facilities:

Support facilities are carried out in such a way that the direct operations can function smoothely. support facilities are essential for operations. Some of departments to be considered in layour are

· Inventories, material and suppliers.

· Tool room.

· Inspection and quality control.

· First aid.

· Maintenance.

· Safety and security.

· Clerical and bookkeeping.

· Tube well.

· Airconditioning plant.

· Transformer.

· Equipment for work shop.

· Bailing press.

· Parking facility.

· Canteen.

· Emergency situation analysis.

· Medical facility.

Considerations for inventory layout are considerable.

Inventory Management:

Inventory is very important to many companies because it helps the company respond quickly to customer demand, which is an important element of competitive strategy. Inventories of raw material or partially processed goods can help a company complete the production cycle in a much shorter time then would otherwise be possible. The more affective a company inventory’s system, the better able it is to manage its resources and to compete effectively.

An inventory system is collection of people, equipment and procedures that function to keep account of the quantity of each item in inventory and to determine which item should buy or produce in what quantities and at what time. Some inventory systems require transaction reporting to keep track of every instance in which units are added or taken from the existing inventory at Shamim & Co. can be classified int five categotries.

- General items.

- Part items.

- Electirc items.

- Lubrication items.

- Stationary items.

Issuance of Differant Items:

When production department requires a particular item from inventory, they fill the requisition slip. One copy is kept at the store and a carbon copy is kept by the production deptt.

This slip includes the quantity issued, stock register page number, iteem code, This slip is signed by the production manager. Inventory items are issued on these slip.

Control of Inventory:

At the end of each month, store prepares a monthly consumption report. This report includes the detail of all the inventory items which were consumed by the production deptt. of Shamim & Co. during the month.

In this way the inventory is controlled in the Shamim & Company.

Quality Control

The quality control should

1. Define specific product and service quality level requirements.

2. Determine the relationship of design and process characteristric to output quality and related process requirement.

3. Dewtermine methods, personnel and equipment for measuring quality.

4. Measure and record the quality achieved.

5. Trigger corrective processess when actual quality varies from the acceptable quality.

Specification of quality requirements begins in market research continue as part of the product design activity, and culminates in the quality specification and design subsystem output. That output defineates the specific product or service attribute that effect the quality and must be assured.

The Quality Specification And Design Subsystem

The activities of this subsysten are integral part of the product design activities, its objectives are to be determine that the new design output

1. Will meet the customer need.

2. Will operate under end use conditions.

3. Can be produced or provided given the organizions capabilities.

4. Will function with the specified level of reliability in terms of minimum means time between failure.

5. Will require less than a specified amount of maintenance hours and material costs operating hour.

6. Can be required within a certain time frame.

Quality Assurance:

Quality assurance is the title given to those management activities and systems required to provide assurance that the over all quality controlled task is being carried out. The quality asssurance system is the aggregate quality management system. It interfaces with other general management system performong similar functions relative to the organizations financial personnel facilities and marketing policies

Process Quality Planning & Control Subsystem:

This subsystem concerns the what, where, when, who of quality control during operations. It frequently involves major expenditure for personnel, equipment, inspection and testing activity.

The objectives of this subsystem are to be......

1. Determine the process attribute and characteristic to be measured.

2. Determine the methods of measurement and develope detalied instructions describing the measurement process.

3. Determine, select and train the personnel required to implement the quality control procedures.

4. Measure and record operational quality interms of the number of defects and seriousness of defects and causes of defect.

5. Provide corrective action procedures forout of control situation.

6. Define the dispositions of quality deficiencies.

Personnel :

Briefly, individuals must be selected and trained to caryy out the measuring process. The capability necessary and number of individual required, selected and trained for implementation of measuring procedures. Development of the skills of quality control personnel is a continuous process as products. Processess, the equipments and procedures evolve.

Measurement And Documentation

Product quality must be measured on both quantitative and qualitative basis, and the measurements must be recorder. Quantification of the qualitative aspects occurs whe defects are classified into categories such as critical major, and minor, which were describe earlier. A classification such as this one of the inputs to the organization’s as greater measure of quality.

Product or services that do not meet the desired quality standards generate two types of required corrective actions

1. The disposition of the defective product or service.

2. An analysis of the cause of the defeciencies.

Disposition

Defective products fall in to three categories:

1. Defective units are beyond being reworked and must be scrapped.

2. Defective units can be reworked to meet specification.

3. Defective units can be modified to meet all the functional requirements but still not meet the atandard blueprint specification.

The latter units are approved on a variance basis:

Many organizations establish a material review board, consisting of engineering, manufacturing quality control, marketing and a customer reprentative to review proposed rework of defective parts that are out side the standards of blueprints qualifications. Approval by all the members must be recevied before rework can procede.

Purchase of Raw Material:

Direct raw material for the products include the following items.

i) Sugar

ii) Concentrate

iii) Treated water

iv) Empty bottle

v) Amonia and Carbon Dioxide.

From above items only concentrate is provided by the franchiser. All other raw material is purchased by the company itself.

Sugar Quality Testing:

Purchase of sugar is a critical step in the purchase of raw material. When sugar bags are arrived at the plant that time it has to pass through a strict quality check. In fact sugar quality is very very important in the production of the beverages.

In order to test the quality of sugar first supervisor checks the apparent status of sugar. It should be free of moisture. After that randomly selected sample from sugar bags is sent to labortary for labortary testing. If sample is passed the sugar is stored for further processing. If sample is not passed then the whole lot is sen back to the sugar mill.

Concentrate:

Concentrate is the most important raw material raw material used in the production. As concentrate is supplied by the franchsder from the peant located in industrial zone Hatttar, so there is no question about the quality of concentrate.

Water Treatment Tests:

The company has installed four tubewells to meet the requirement of water. The extracted water is then treated for the use in the final processing. At different staged of treatment tests include:

1 Upper tap tests.

2 Sand filter and carbon purifier test.

3 Water softness test.

For this purpose the company has prepared forms for the record of these tests which are signed by the shift incharge after each shift. If he observed some abnormility he stops supply from one container and provides the required water through other container. The company has two ocntainers for the supply and storage of trated water. The closed containe4r is then sanitated and washed back. The sanitation and washing back of containers is also done at regular basis, after ten days.

Syrup Testing:

After mmixing water, sugar and cocentrateit is treated at 900 C and then it is stored in the tanks. This is called simple syrup. This syrup is tested in the lab. This syrup goes into carbo cooler. Here Ammonia and Carbon Dioxide are mixed in the syrup. This is called finished syrup. The finished syrup is also tested in the lab. If chemist finds any deviation from the standards, the syrup is drained before any further processing.

Finished Bottle Tests

When the bottles are filled at filler, the chemist take sample after every half hour. If any deviation from the standard is found the whole batch is drained before going in market.

A microbiological test is also taken by the chemist after a week of production. If any kind of germs growth is found the stored bottles are declared rejected.

The management of PepsiCo is also concious about quality standards of its products. So the quality inspectors of Pepsi Cola International take sample of different brands from the market, check it in the laboratory and send the results to PepsiCo. In case of any deviation from the standards the management of PepsiCo sends advice or strict warning to the concerend unit according to the degree of severness.

Other Tests

When the empty bottles are processed to clean and rinse a sample is taken to see any possibility of Caustic Soda. Light check is also done to see the presence of any solid particle in it. Moreover when the bottles are purchase they are also checked against the sets standards. The quality of glass, size of neck and size of bottom should be according to the given standards. Sugar which is an important ingredients of syrup, the quality of sugar is also checked when the sugar is recieved at the store from different suppliers. The sample is selected randomly. If the sample is not up to the mark, the other bags are also checked. If any deviation occurs, the shipment is rejected. Meanwhile the surface of bags is also examined to see any external problem with the lot. But there is no particular method of samlping.

Role Of PepsiCo:

PepsiCo is the franchiser of Shamim & Company and it has full responsibility for the quality of Pepsi Cola and other product line. So the franchiser has arranged a system through which they buy some bottles from the market which are produced by the Shamim & Company and it is checked in labortary of New York. This system also shows that the company has been trying to make a rigid quality control system in order to provide better product to its customers.

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Total Quality Management Benchmarking at Pepsi Cola

Pepsi – An Introduction

Introduction

PepsiCo, Inc., major producer of carbonated soft drinks, other beverages, and snack foods. Its beverage division, Pepsi-Cola Company, bottles and markets several popular brands of soft drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay Company, the leading snack-food maker in the United States. PepsiCo is based in Purchase, New York.

PepsiCo’s soft drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other beverages include Lipton Brisk and Lipton’s Brew iced teas, All Sport athletic drink, and Aquafina bottled water. Frito-Lay products include Lay’s and Ruffles Potato Chips, Fritos and Doritos Corn Chips, Chee-tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels, and Grandma’s Cookies.

Early History

PepsiCo traces its origins to 1898 when Caleb Bradham, a pharmacist in New Bern, North Carolina, created a curative drink for dyspepsia called Pepsi-Cola. Pepsi-Cola, later referred to simply as Pepsi, was a mixture of carbonated water, cane-sugar syrup, and an extract from tropical kola nuts. To sell his product, Bradham formed the Pepsi-Cola Company in 1903. In addition to selling the drink at drugstore counters, Bradham bottled Pepsi for sale on store shelves. At this time, bottling was a new innovation in food packaging.

However, due to major increases in the price of sugar, Bradham began to lose money on Pepsi, and in 1923 he filed for bankruptcy. The Craven Holding Company of Craven County, North Carolina, purchased the company’s assets. In 1931 Charles G. Guth of the Loft Candy Company in New York City purchased Pepsi-Cola from the holding company. Guth had difficulty getting the business going again, but he increased sales by selling larger bottles at an unchanged price. By 1933 Pepsi-Cola was sold by 313 franchised U.S. dealers; bottled in the United States, Cuba, and England; and sold in 83 countries.

PepsiCo’s snack-food business dates from 1932 when ice-cream seller Elmer Doolin of San Antonio, Texas, developed a business idea after eating a package of Mexican-made fried corn chips. He purchased a recipe for the chips and established the Frito Company in 1932. Originally, Doolin produced Frito’s corn chips in his mother’s kitchen. He later mechanized production and moved operations to Dallas, Texas, in 1933. Around the same time, Herman Lay of Nashville, Tennessee, developed a business distributing potato chips made by an Atlanta manufacturer. In 1938 Lay bought the manufacturing company, renaming it H. W. Lay & Company. The company prospered, becoming one of the largest producers and distributors of snack foods in the southeastern United States. The company made and sold many snack foods, but its best-seller was its brand of potato chips, known as Lay’s. In 1945 the Frito Company gave H. W. Lay & Company exclusive Southeast distribution rights for Frito’s corn chips, a market both companies hoped to expand nationwide. After continuing their close business association for over 15 years, the two companies merged in 1961 to become Frito-Lay, Inc., with headquarters in Texas.

Growth

The Pepsi-Cola Company, meanwhile, had changed hands several times and grown greatly since 1933. The Loft Candy Company merged with the company in 1941, keeping the Pepsi-Cola name. About this time, Pepsi became the second-best selling soft drink in America behind its chief market rival, Coca-Cola (popularly known as Coke). In 1948 the Pepsi-Cola Company began canning drinks in addition to selling them in bottles. Alfred Steele, formerly an executive with the Coca-Cola Company, became president of the Pepsi-Cola Company in 1950. Former amateur boxer Donald Kendall took over as company president and chief executive officer (CEO) in 1963 and began marketing Pepsi to young people in an advertising campaign called “The Pepsi Generation.” The company acquired another popular soft drink, Mountain Dew, in 1964. In 1965 the Pepsi-Cola Company merged with Frito-Lay, Inc., to become PepsiCo, Inc., based in New York City. As president and CEO of the newly merged company, Kendall later moved the corporate headquarters to its current home in Purchase, New York.

In 1972 PepsiCo struck a deal with the Union of Soviet Socialist Republics (USSR), allowing the company to distribute Stolichnaya vodka in the United States and to build soft-drink bottling facilities in the USSR. Pepsi thus became one of the first American products to be made and sold in the Soviet Union. In the late 1970s the company began to purchase fast-food chains. It acquired Pizza Hut in 1977, Taco Bell in 1978, and Kentucky Fried Chicken (later named KFC) in 1986.

The Cola wars

PepsiCo’s leading soft drink, Pepsi-Cola, and its chief rival, Coke, have dominated the soft-drink market for decades, although Pepsi has traditionally remained behind Coke. In 1950 Coke outsold Pepsi by 500 percent worldwide. But Pepsi’s aggressive advertising campaigns aimed at young consumers and major bottling and marketing deals made Pepsi a close rival to Coke by the 1980s. PepsiCo has also enjoyed great success with its canned and bottled Lipton brand iced teas, earning higher sales than the Coca-Cola Company’s Nestea products. Also, in the United States, Pepsi had virtually an even market share with Coke in the mid-1980s, when the Coca-Cola Company changed the formula for Coke. (It later reintroduced the original formula under a new name, Coke Classic.) However, as Coke regained popularity worldwide in the late 1980s and into the 1990s, it again became the global soft-drink leader. In 1996 Pepsi-Cola International, PepsiCo’s international beverage production and marketing division, suffered difficulties in Latin America, one of its most important markets. The company was particularly hurt by the loss of a bottling plant to the Coca-Cola Company in Venezuela.

Snack food Market Dominance

Many of PepsiCo’s other products continued to dominate their markets in the 1990s. Sales of Frito-Lay products accounted for about 40 percent of PepsiCo’s total profits. By the mid-1990s Frito-Lay products made up more than half of the U.S. market for snack chips, and the company owned eight of the top ten chip brands. In 1995 U.S. consumers bought the company’s original potato chip brand, Lay’s, at a rate of 4.5 kg (10 lb) a second. The company’s leading product, Dorito’s tortilla chips, was the best-selling salty snack (packaged) food in America in the mid-1990s. Salty snack foods include chips, pretzels, and nuts, as opposed to nonsalty snack foods such as cookies and cakes. In 1994 Frito-Lay began producing several baked and low-fat versions of some of their snack foods—such as Baked Lays potato chips and Baked Tostitos tortilla chips—which soon dominated the company’s sales growth.

Recent Developments

By the mid-1990s PepsiCo’s restaurant business consisted of 28,000 outlets worldwide, more than were owned by any other company. The company also supplied its own restaurants through a separate division, PepsiCo Food Systems (PFS). In 1997 PepsiCo sold PFS. Also that year, PepsiCo spun off its restaurant chains to form a new company. The move enabled PepsiCo to focus on its beverages and snack foods. In 2001 PepsiCo acquired The Quaker Oats Company, a food and Beverage Company.

In Pakistan, there have been consumed different types of soft drinks but Pepsi is the most frequently consumed soft drink. It is very much popular in the consumer; it has got big target market and is competing with the other companies of soft drinks. 10 units of Pepsi cola have been installed, in the different places of Pakistan i.e., Lahore, Multan, Gujranwala, etc., and working with the best utilization of their resources in the optimum way. Each of these units is owned by the different parties, which are strictly following the rules of the parent company. The company to made production has licensed each unit. These units have their own areas of selling and have different target markets. All these units are considered as separate firms, which are the franchisees of Pepsi cola international.

Pepsi in Multan

Shamim & Company

History

SHAMIM & Co. was established in 1967 as a private limited company. It started its business in 1968. Allah Nawaz Khan Tareen (Ret. DIG) got license of 7-up franchise and was producing only one product, 7-up. But in 1973, it became Pepsi Cola franchise. Now a day MD of SHAMIM & Co. is Alamgeer Khan Tareen son of Allah Nawaz Khan Tareen.

Total production of that plant was 600 crates per 24 hours. Now Factory has 5 plants, which can produce 110,000 crates per 24 hours.

In start Pepsi in Multan imported the material from USA & Ireland but due the problems of shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they import the material from USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate from the HariPur plant.

Along with the concentrate, Pepsi in Multan also imports the Sugar from Sheikho Sugar mill & from Shaker Kunj. The bottles are manufactured by Tariq Glass in Lahore under licensed by PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory itself but in case of shortage Factory buys it from Supreme Gas & Pak Gas. The caps and crowns are imported from Imran Cork, Mehran – Karachi and Wincloa – Lahore.

Introduction

In Pakistan, at present SHAMIM & Co. is the largest production unit out of 11 franchisees. SHAMIM & Co. covers the area of Southern Punjab which consists of Multan, Bahawalpur, Bahwalnagar, Dera Ghazi Khan, Sahiwal, Khanewal, Rajan Pur, Taunsa, Okara, Rahimyar Khan and Layyah. The company is properly serving all these areas with quality products.

Honors

In Pakistan, SHAMIM & Co. is in the list of top three out of eleven showing financial and sales growth according to their relative volume size basis. When franchise cross a certain volume, plant is classified as, “Mega Plant Status”. SHAMIM & Co. has achieved this status in 2000 and 2001. Also it has ISO 9002 Certification and for year 2005 Shamim and Company won the award of best quality unit among the eleven 11 units in Pakistan.

Mission Statement

“To earn profit by meeting the customers needs with quality products”.

Organization

Managing Director

He is the owner of this company and final operational authority to manage all departments of the company. All departments’ heads are responsible to report him all about their performances and matters.

General Manager Sales

G. Manager Sales is responsible for the performance of his department and to achieve the objectives assigned to him such as marketing, sales, distribution. To carry out his duties more efficiently he has four Regional Managers, 15 Area Sales Managers.

General Manager Operation

He is responsible for the whole administrative, shipping, workshop related activities to smooth on the factory operations without any hindrances.

General Manager Technical

He is unlike Sales department performs key role as to manage Production Department producing quality Products as per need of the sales department. Quality Control Department also works under him.

G. Manager Finance

Finance, Accounts and MIS departments work under his control. He is responsible to make major company financial policies to meet the needs of the each and every department regarding budgets etc.

Organizational Chart

Global strategy

Pepsi has divided the total international market on the basis of taste constituting into three zones.

Asian zone European zone African zone

Pepsi is using the licensing strategy to go abroad. SHAMIM & Co. is also a Licensee.

Competitive priorities

“The competitive priorities are the operating advantages that firm’s processes must possess to outperform its competitors.”

Shamim & Co. has the competitive priorities of high-performance design and consistent quality.

High-Performance design

Actually Pepsi is getting the competitive edge in our region on the basis of its quality and the quality is its taste. Through a complete marketing research they found that sweet taste is liked more by this region. That’s why in Pakistan Pepsi is dominant soft drink and it has almost 75% shares in this market. On the other hand when we look internationality then Coca Cola is the leading company. So Pakistan is a big market for the Pepsi, where Pepsi is generating a lot of revenues.

Consistent Quality

Another major and the strong aspect of the Pepsi in Multan is that they are producing a consistent quality according to the PCI standards. The low quality bottles and the damaged bottles are not dispatched towards the market. Pepsi has a lot of checks and balances on its output level.

MANUFACTURING AND SERVICES STRATEGIES

Make-To-Stock Strategy

In Pepsi, Make-To-Stock manufacturing strategy is used. Bottles are produced in a standardized process because the competitive priority is consistent quality. Firstly, marketing department forecasts the demand then according to this forecasting MPS is made and after making bottles Pepsi distribute these bottles to the market.

DEPARTMENTALIZATION

As it is a formalized company therefore there is a hierarchy of employees and the division of departments in the organization. Following are the departments working in the organization.

Production Department Administration and Personnel department Sales/ marketing Department Finance Department Shipping Department Purchase Department Excise Department Computer Department

Each manager of a department is responsible for overall working of the department. A manager has an assistant manager and after this there are shift in charge in production and supervisors in sales. They control the activities of operatives.

Brief introduction of the working of these major departments

Production department

As we can see with the name of the department the working of this department is to control the production process i.e., to get raw material and process them and convert them into finished goods.

Administration department

The major function of this department is to manage the employees and to made recruitment of new employees. Assign them their according jobs. And government affairs if employees are working effectively or not and what are the government recent policies

And what is the impact of these policies on the organization. These are the few matters where administration plays its role.

Publicity problems

Some government policies directly affect organizational expenses like the tax on different campaigns that is tax on cap, banners, shirts, and as many taxes on different publicity methods about which organization come tow know at the end of the year.

Sales/marketing department

The marketing department of this organization is assigned to make public dealing. The marketing department is responsible to make advertisements of the company products and get them sold. Advertise through road site Painting, Wall Chalking, Billboard, TV adds etc. They are given yearly sales targets and they are liable to achieve that. They use different schemes and offer different discounts etc. to achieve those targets. Schemes like:

Ø Prize Winning Schemes

Ø Pepsi Ramzan Offer

Ø Haj scheme

Ø Omera scheme

Ø And many more schemes

Finance department

This is one of the most important departments of this organization. This department makes the financial plans of the organization; they analyze their resources and then compile other reports and give the whole budget the organization can afford. Another job of this department is to make the complete record all financial and non-financial transactions made inside as well as outside the organization.

Purchase department

The whole processing of production department is based on the availability of raw material and all the dealing regarding raw material is under purchase department. They made purchases from their contractors i.e., bottles, caps ingredients etc.

Computer department

Pepsi-Cola uses a software package (Road Net) to facilitate the design of efficient routes and schedules for the delivery of bottled and canned products to customers assigned to a given location. In order for automated routing and scheduling to achieve maximum benefit, however, the set of customers assigned to each warehouse and bottling facility must be appropriate. During the course of this project the students developed a procedure based on cluster analysis to assign customers to bottling facilities and integrated this analysis into a Geographic Information System.

PRODUCTION PROCESS

Water Treatment Plant

PEPSI Bottles Filling Process

Purchasing and washing of bottles

First step regarding the production is the purchasing and washing of bottles. Mainly company use the bottles returned from the market but if it needed more bottles, then these are purchased from the glass company, Lahore.

These bottles are placed on conveyer and washed through an automatic plant. Caustic Soda and boiled water is used for washing of bottles.

Water Traeatment

Raw water is treated to remove its hardness. Here raw water with the Lime, Feso4, and Chlorine comes to the Coagulation Tank where the initial sludge is removed then this water is moved to Buffer Tank where it is kept for a certain period in order to stable it. Then this water comes to the Sand Filter and passes through the Sand and Gravel bed, and then this half treated water comes to the Carbon Filter and passed through the Carbon and Gravel bed for more purification. After that it is moved to the Purifix Carbon Filter and then to the Spool Polisher where the filter papers are used to remove the sludge and then to Water Polisher and then to Ultra Violet Filter where Ultra Violet rays passes through the water in order to eliminate the future growth of bacteria and lastly this treated water passed through the Thread Type Filter. After passing through this complex process water is completely free from sludge and bacteria and other hazardous waste.

After that this water comes to the Water Softer Tank and passed thorough the Gravel Bed and this soft water is used for the syrup making.

Preparation of Simple Syrup

In the sugar weight room sugar is weighted for different brands, because each brand requires different quantity of sugar, then this weighted sugar is passed to the syrup storage room, where the sugar and water in equal quantity processed in Pasteurizer Tanks, and heated up to 85 C where Activated Carbon is used to remove the bacteria, and Chlorine and TSP (Tri Sodium Phosphate) used to remove the smell and color of the sugar. Chlorine and TSP is also stored in different tanks. After that this mixture of water and sugar is cooled down up to 20C in order to prevent from the further growth of bacteria, after that in this mixture Concentrate of each brand is added as per requirement.

Washing of Bottles

The empty bottles that come from the market are brought into the washing room of bottles where different employees first check the initial damages to the bottles. Damaged bottles are screened out from the lot. Only the acceptable lot is allowed going towards the bottle washer machine. The bottles remain 45 minute in this washer machine so that only the good quality bottles that are free from sludge and breakage can be passed to the filling room.

Filling of Bottles

Mixing of CO2 Gas in Syrup

Syrup is sent to carbon coolers, Ammonia, Carbon Powder and Carbon Granular are mixed in the syrup.

In the filling room the syrup and CO2 comes from syrup and CO2 room. From Carbon cooler syrup goes to the filler and from other side empty bottles and then crown cock or cap cocks are fixed on the bottles. Here operator looks after the production process.

Filled bottles are then passed thorough light room where quality of bottles is checked. Here under filled or, over filled bottles or dirty bottles are separated. There are two light rooms and in each room one employee is placed to trace out the dirty bottles.

After passing through light room the code is printed on the bottles, which contain the manufacturing date, machine number and time of manufacturing and the batch number.

After all this checking process bottles are placed in the crates. The whole process of production is automatic. Only supervision is required. Then these crates are sent to the output warehouse.

QUALITY CONTROL

It has become crystal clear that high quality products have a distinct advantage in the market place, that market share can be gained or lost over the quality issue. Therefore quality is a competitive priority.

Quality is important due to the following reasons:

• Cost and market share

• Company’s reputation

• Product liability

• International implications

SHAMIM & COMPANY (PVT) LTD takes effective measures for the quality control. Production of the company is according to the standards set by PCI. So the company is very much concerned about quality. Quality of raw material as well as of end product is checked.

Following are the main steps taken by the company for quality control.

Testing of Raw Material

Raw material used in production, comprises of the following items.

• Concentrate

• Sugar

• Treated Water

• Empty Bottles

• Carbon Dioxide

• Crown

From the above items, previously the franchiser from USA provided concentrate. Now it has plant at Haripur and SHAMIM & COMPANY (PVT) LTD purchase the concentrate from there. Because the franchiser provides concentrate, so there is no question about its quality. All other raw material purchased by the company itself.

Sugar Testing

The company from sugar mills purchases sugar. After the arrival of sugar at the plant, it has to pass through a strict quality check. It should be free from moisture.

First of all supervisor checks the quality of sugar. After this checking, a randomly selected sample from sugar bag is sent to laboratory for testing. After this testing, if the quality of sugar is according to the standards, then this sugar is stored for further processing. If the sugar quality is not up to the mark, then it is sent back to the sugar mill.

Water Treatment Testing

The company has four containers to meet the requirement of water. The water is treated for the use in final processing. At different stages, different treatment tests are done.

These tests include:

• Upper top test

• Sand filter and carbon purifier test

• Water softness test

Company also keeps the record of these tests. If some abnormality is observed by the shift in charge, then he stops the supply of water from the container. The supply of water is made from other container. These containers are also washed at regular basis.

Syrup Testing

Mixing of sugar and water into concentrate produces syrup. This mixture is treated at 90oc and then it is stored in the tanks. This is called simple syrup. This syrup is also tested in the lab. Then carbon dioxide and ammonia are mixed into the syrup. Now this is final syrup this is also tested in the lab. If this syrup is not according to standards, then new syrup is prepared for production.

Finished Product Testing

When bottles are filled, a chemist also takes the sample and checks the quality. Here preservation and ingredients ratios are also checked. If any deviation from the standard is found, the whole batch is drained before going in market.

These finished bottles are also passed through light room to control the quality. Here if the bottle is low filled or dirty, then it is sorted out. The quality of glass, size of neck and size of bottom should be according to the given standards.

Internal Audit

The firm has hired an internal audit team. And the purpose of this audit team is to make periodic inspection of output after every 30 minuets. And if they find any laziness from the employee’s side they immediately inform to the operation manager, so that right action can be taken.

External Audit

Similarly there are some external auditors from Dubai, they take the random sample of bottle from market and check the quality of beverages according to their standards. In the past 4 to 5 years the Pepsi Multan has proved good quality and got a lot of reward from international auditors.

Pepsi cola international also plays an important role in maintaining the quality. Sample from different markets at different selling points at different times, are collected and quality of these samples are checked.

Coding is also done on the caps of the bottles. In this coding manufacturing date, machine number and time is printed. So from the above testing, we can conclude that the company has very rigid quality control system.

Capacity

“Capacity is the limiting capability of a productive unit to produce within a stated time period, normally expressed in terms of out put units per unit of time.”

This is actually the intensity with which a facility is used. This intensity is increased through overtime. Other way of increasing the capacity is to engage in subcontracting when it is feasible.

In Pepsi, the capacity measure in out put form is the number of crates produced. There are two production units having different lines. The first unit contains 3 lines and allocated for 250 ml. Pepsi, 7UP, Dew & Marinda. The second unit contains 2 lines and produces 1 & 1.5 litre bottles. These lines are flexible in a sense that through one line you can produce multiple brands having a set-up time of 2 hrs. They are not fully utilized. The capacity of one line is 1100 bottles per minute but it is being operated at 800 to 900 bottles per minute. The reason is that, the bottles move very fast that may cause serious accidents by breaking into small pieces. There are 3 shifts working in Pepsi cola. The total capacity of 5 lines is 160,000 crates per day. But the average utilization of 5 lines is 100,000 crates per day in peek season.

Planning Strategies

Chase Strategy

A chase strategy matches demand during the planning horizon by varying either (1) the workforce level or (2) the output rate.

Pepsi is also following the Chase policy. When higher production is required in the peak season, company hires the new workers, and during low production the workers are fired from the company to prevent from unnecessary cost. Company also tries to increase demand through advertising, price cuts and by giving different incentives.]

FORECASTING

Planning and control for operations requires an estimate of the demand for the product or the service that an organization expects to provide in the future. Since forecasting should be an integral part of planning and decision making, the choice of a forecasting horizon (a week or a month, for example), a forecasting method with desired accuracy, and the unit of forecasting (dollar sales, individual product demand.) should be based on a clear understanding of how the output of the forecast will be used in the decision process.

SHAMIM & COMPANY (PVT) LTD uses the historical data for forecasting demand. As the company has seasonal business so the demand is high in the month of March, April, May, June, July, August and September. Sixty percent sale of the company takes place in these months. This is the peak season for the company.

Company makes the sales forecast on the basis of historical data. For example, if a company wants to forecast the sale for June 2005. They will take the data of last five year in order to forecast the sale for June 2005. They also take into account the current trend factor.

Level of Forecast

The Pepsi cola forecast the demand for their products on aggregate level. Then they forecast demand for Pepsi, 7up, Mountain Dew and Miranda individually.

Unit of measurement

They forecast the demand in crates instead of bottles. Pepsi normally forecast the demand in 250ml.

Forecasting error

It is difficult to reduce the error of forecast demand. They say that the six to eight months are required to install a new plant. And they lose the market for this particular period.

Inventory Management

Inventory is very important to every company because it helps the company to respond quickly to customer demand, which is an important element of competitive strategy. The more effective a company’s inventory system is helped full in manage the company’s resources.

In SHAMIM & COMPANY the inventory is divided in to two main categories:

Critical material Non-critical material

Critical Material

Critical material is that which is directly related to the production so management gives full concentration to critical material to avoid irregularity in operation. The critical materials include:

CONCENTRATE SUGAR CO2 GAS EMPTY BOTTLES CROWN CORK CAUSTIC SODA

The store provides a daily stock report of critical material with balance. If that material is reach at reorder point then they write that material in the daily stock in the column of urgent. If any material is going to be reordered, it is highlight with red pen. The procurement manager physically checks the stock and place order. They are managing high inventory in which order for concentrate is placed for 3 months and the order for the rest of the material is placed for 1 month.

The reason for maintaining high inventory is;

Customer satisfaction, to prevent from stock-outs and back-order situation Low ordering cost Labor and equipment utilization Low transportation cost

Non-Critical Material

In Pepsi cola the non-critical material are those material which is not directly related to the production. The storekeepers inform the procurement manager. When there is need. The non-critical material consists of stationery, Greece, and supplies etc.

Selection of Supplier

The co. purchase material from those suppliers, which provide the material at least cost, on time delivery and meets the specification of the quality control department

In start Pepsi in Multan imported the material from USA & Ireland but due the problems of shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they import the material from USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate from the HariPur plant.

Along with the concentrate, Pepsi in Multan also imports the Sugar from Sheikho Sugar mill & from Shaker Kunj. The bottles are manufactured by Tariq Glass, Toynasic and BGL under licensed of PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory itself but in case of shortage Factory buys it from Supreme Gas & Pak Gas. The caps and crowns are imported from Imran Cork, Mehran – Karachi and Wincloa – Lahore.

Distribution

In Shamim & company, major item of inventory is finished product. There are two ways to distribute that finish inventory, the first method is direct and second is indirect method. In direct method they provide crates of bottles to their dealers at the required destination through their own transport, in indirect method the dealers have their own transport for distribution.

PEPSI is just one link in a customer value delivery system that includes thousands of dealers. It is a winner in this part of the world because they have superior dealer networks. Also the wholesalers and retailers involved are doing well because PEPSI supplies superior beverages. PEPSI also focuses on placement of their product such that the consumer can buy a PEPSI from nearby location. PEPSI also takes immediate action in delivering its products to market. Overall PEPSI is focusing on fastest delivery and great assortment.

PEPSI Multan is obtaining strong trade cooperation and support from resellers. The marketing department commands unusual cooperation from resellers regarding displays, shelf space, promotions and price policies.

“ The bench marking is a continuous process of comparing a company’s strategy, products and processes with those of world leaders and in best-in-class organizations in order to learn how they achieve excellence and then setting out to match and even surpass it.”

We will compare these two companies in regard of shares. The shares can be described in two ways:

Ø Market shares

Ø Volume shares

The market share of a company represents the portion of accounts that the company holds from the 100% accounts of the market. The market share distribution of Pepsi and Coca-Cola is more than 80% and remaining respectively. For Instance if the total market comprises of 100 consuming accounts then 80 accounts are being served by Pepsi and rest are being server by Coca-Cola and others. Pepsi has been focusing to increase its market share, which represents the long-term approach of organization because majority of the customers of the Pepsi are low volume purchase and if someone will switch towards the other brand then it would not be a big loss for the firm. But on the other hand Coca cola is focusing on the short-run approach, it is dealing with the institutional customers, which are high volume purchaser. But the major disadvantage of this approach is that if Coca-Cola will lose any one customer among these 20 then it would be a great loss for the firm but in case for it.

The volume share of a company represents the portion of sales volume that the company holds form the 100% sales volume of the market. The volume share distribution of Pepsi and Coca –Cola is 65% and 34% respectively. For instance if total market demand is 100 units then Pepsi is supplying 65 units while Coca-Cola is supplying 34 units and remaining 1 unit is supplied by other beverages companies of Pakistan.

In 1970s Pepsi was the follower and Coca-Cola was the leader here in Pakistan as well. At that time Pepsi used to benchmark the Coca-Cola in order to prosper and progress. But after 1970s Pepsi stopped benchmarking strategies and procedures of Coca-Cola and adopted an idea of Out-of Box thinking.

Thinking Outside the Box means thinking beyond the parameters of human consciousness and experience - to see beyond the norm - to be a visionary - to activate your DNA. We exist inside the box - the physical plane - but we soon evolve our conscious awareness back to its source of creation - outside the box.

Are you trapped inside the box - the emotions of the game?
Thinking 'outside the box' means balancing lower frequency emotions - fear, anger, etc.
With higher frequency emotions and therefore not being controlled by your emotions.
Let it all go ... it's just an illusion in time.

………

Humanity is evolving out of the box and into the light of creation.

What PEPSI found out from out-of-box thinking?

Pepsi got following findings from this idea:

Ø Cricket is the most Popular game in Pakistan.

Ø Pakistan is an immature market.

The tactics that Pepsi derived from above ideas are:

It is an admitted fact that there is a craze of cricket in Pakistani Nation irrespective of age factor. So the Pepsi thought to take the benefit from it and made a contract with PCB in mid 70s. This created a fantasy in the minds of people and market shares of Pepsi Cola started increasing. It gave real boost up to repute of Pepsi in world-cup 1992 and in very short span of time; Pepsi was able to double its sales.

In view of the lack of knowledge and immature market of Pakistan Pepsi adopted the aggressive strategies of distribution and advertisement. This also was proved to be an effective move towards the growth of the company. They are using almost all modes of advertisement and are using them extensively right now such as:

Ø Electronic Media

Ø Print Media

Ø Display Media

It is the task of the sales and marketing officer of Pepsi Cola that whenever and wherever a departmental store will open they have to capture it and have to convince the shopkeeper to make an agreement by meeting his requirements.

Benchmarking PCI

As we already mentioned that in sub-continent Pepsi is the leader so here in Pakistan Pepsi is not benchmarking Cola-Cola’s standards rather Coca-Cola is benchmarking Pepsi here such as in pricing, advertisement (Celebrity Hiring) and aggressive distribution. Pepsi benchmark its parent company for technical, quality and for human resource considerations.

Quality issues

Shamim & Company infect adopt the standards of PCI such as about the proportion of ingredients. Such as the standard for CO2 in 7’up was set 3.5 to 3.9 but to become more efficient in quality issues the Shamim and Company redefined it as 3.6 to 3.8. However the ideal standard for CO2 is 3.7. Similarly for the Marinda they refined the standard for getting much and much closer to the ideal standard.

Technology

Pepsi in Pakistan always benchmarks its parent Company for the sake of technology improvement. For instance they are going to start a new plant in Lahore, which would have the capacity to fulfill the total demand of Lahore district. And it would require only 3 operatives to operate this plant.

Celebrity Hiring:

In our culture cricketers and film stars have much influence on people. Pepsi is using both the vehicles to advertise its brands. It has established the contract with prominent film star Reema as a brand representative for Pepsi. Similarly contracts have been established with Inzamam-ul-Haq and other cricketers.

Employee policies

Earlier Pepsi was not focusing too much on employee’s benefits and facilities. Then it adopted the idea that “result and rewards have a positive co-relation.” Shamim & Company took this idea from PCI that if employees and satisfied and motivated towards the achievement of the Goals only then organization can better grow. In early 90s Pepsi adopted a new benefit plan for its employees and management. Now in employee in the marketing department has a car, having the medical facilities, insurance and a good compensation. So these policies regarding the employees helped the organization to achieve its target related to sales, growth and image of highly committed organization.

Collecting Feedback from customers

Actually, Pepsi is using two ways to collect the feedback from its customers.

Ø Direct Method

Ø Indirect Method

In direct method they collect feedback from its distributors, business customers and retailers about demand, market situation, consumer behavior and on other issues through its Sales Information System (SIS). For example they take vehicle plan from the distributors.

And Pepsi measures the performance of its distributors and other customers through collecting the data about

Targets Inventory Level Repute Daily, monthly and yearly sales Report

This method is specifically used to judge the consumer behavior. In this method Pepsi uses the services of ACNELSON Company, which is basically a biggest and authentic most research organization in Pakistan.

They use two vehicles focus and employees policies to incorporate the quality culture. For the urgent and most important issues they make employee’s policies and make sure these policies are being followed with considerate supervision. And for less urgent issues they use focus strategy and arrange lectures, presentations, conferences and excessive training programs.

Pepsi has NO agreement with Coca-Cola on pricing and other strategic issues. And the major reason of recent increase in prices has been reported to be the revision of tax policy of the Government.

ISO 9000

Now the situation has been changed. Products of low standards are not acceptable in international markets. These standards are ISO-9000 i.e., International Standard Organization. Now as the world has become a global village, therefore, there is a very tough competition among the companies. Especially for the companies of developing countries, they have to do much more smart work than the companies of developed countries because they have strong economy and their products are widely acceptable in the international market. For this purpose almost all organizations are doing struggle for getting ISO-9000 certificate. Shamim & Company (PVT) Ltd is one of those Pakistani organizations that struggled for ISO-9000 and awarded. They have been awarded ISO-9002 certificate.

The management and labor of Pepsi is committed with their responsibilities. The evidence of this the company has certified as international standard organization. They had to fulfill the 20 clauses of ISO 9000. In this way they got ISO 9002 certificate. The company is franchisee so; they have no authority to design a product.

They up date their records on daily basis. In Pakistan no one have authority for inspection for ISO 9000. The company has selected SGS Malaysia for inspection of their records. This is a continuous process the auditors come after six month and check the records.

SWOT Analysis

1- Strength

Activities the firm does well or resources it controls are called strength. Resources that a company contains, size of organization, size of market, loyalty of the organization’s products, sales point of product of the company shows the company strength.

The strength of PEPSI lies in the loyalty of the product, their market share, size of market, having numerous sales points and efficient delivery system.

2- Weaknesses

Activities the firm does not do well or resources it needs but does not possess. Such activities that a firm does not perform or not have some resources those other competitors have.

Locally, PEPSI is enjoying its position in the market. Internationally, PEPSI faces some tough competition from Coca-Cola. Their weakness is the lack of relationship marketing in some parts of the world. And also in Pakistan they are facing some serious problems in building the relationship with institutional customers.

3- Opportunities

A combination of favorable circumstances or situations for organization’s product/s such as loyalty of customer about your products, social environment, size of target market, size of organization, advantages over other competitors etc.

Opportunities are coming in the market day by day in the shape of new retailers. PEPSI has a big research department; they try to capture each new retailer who comes in the market. Pakistan population size is rapidly increasing with the passage of time so opportunities are there for Pepsi to enhance its sales volume more than others.

4- Threats

Unfavorable circumstances that a company faces time by time to achieve its goals are called threats. Some times small companies introduce the same products with low quality and low price that the company did not produce.

Locally, PEPSI stands second to none. Internationally, Pepsi is facing heavy competition from its rival Coca-Cola. Coca-Cola is focusing global market while PEPSI is somehow lagging behind. The situation can become a serious threat to PEPSI globally.

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SMEs and Globalization

SME Definition

There is no single uniform definition of SMEs applicable across the board in Pakistan. Different departments and organizations define SMEs in accordance with their functional ease rather than market situation. For example, the SME Bank defines an SME as that which has total assets up to Rs. 20 million whereas a medium scale enterprise may have total assets equaling Rs. 100 million. On the other hand, SMEDA defines SMEs according to the dual criterion of productive assets and number of employees. This disparity in definitions adopted by various SME support departments.

Various Institutional Definitions of SMEs in Pakistan are:
Small and Medium Enterprise Development Authority (SMEDA)

According to SMEDA an entity who has 36-99 Employees or Productive assets of Rs. 20-40 million.

SME Bank

An Entity having total Assets of Rs. 20 million.

Federal Bureau of Statistics

An entity which holds less than 10 employees and Total Assets of Rs. 100 million

State Bank of Pakistan

An entity, ideally not being a public limited company, which does not employee more than 250 persons (manufacturing) and 50 persons (trade / services) and also fulfills one of the following criteria:
(i) A trade / services concern with total assets at cost excluding land and buildings up to Rs 50 million.
(ii) A manufacturing concern with total assets at cost excluding land and building up to Rs 100 million.
(iii) Any concern (trade, services or manufacturing) with net sales not exceeding Rs 300 million as per latest financial statements.

Punjab Industries Department

An entity with the Fixed assets of Rs. 10 million excluding cost of land.

Sindh Industries Department

Entity engaged in handicrafts or manufacturing of consumer or producer goods with fixed capital investment up to Rs.10 million including land & building.

Punjab Small Industries Corporation

An entity having fixed investment up to Rs. 20 million excluding land and building

SMEs contribute to economic development in multiple ways, creating employment for expanding rural and urban workforce and providing much needed flexibility and innovation in the economy as a whole. Their ability to diversify economic activity makes a significant contribution to exports and alleviates poverty. Such benefits, however, have not been fully realized in Pakistan yet.

SMEs play a vital role in the growth & development of leading economies of the world such as USA, Japan, South Korea, Thailand, Malaysia and many others. SMEs in these countries make major contributions to employment creation as well as GDP growth. That’s why the major focus of these developed and developing country’s governments are on the SMEs. A number of developed countries of the world depend on their small and medium for technological innovation, revenue growth and employment generation.

SMEs constitute more than 90 per cent of businesses in Pakistan, all of which function within the private sector and mostly operate in the undocumented informal part of the economy. They represent a significant component of Pakistan’s economy in terms of both value addition and employment generation. As they predominantly provide employment to lower income groups, they are also considered an important vehicle for poverty reduction.

SMEs, in particular, play a key role in the manufacturing sector by providing 80 per cent of the total employment, contributing over 30 per cent to GDP, and generating one-fourth of the sector’s export earnings.

1- Contribution of SMEs in Manufacturing Sector

Employment GDP Value Added Export Earnings
80% 30% 30% 25%
Source: Economic Survey of Pakistan, 2004-05

Approximately, half of the total SMEs activity is concentrated in five sub-sectors; grain milling, cotton weaving, wood and furniture, metal products and art silk. For the past three decades, the fastest-growing export industries have been dominated by the SMEs.

Sub-sectors Percentage Share in exports

Cotton Weaving 13%
Other Textiles 6%
Metal Products 7%
Carpets 4%
Art Silk 5%
Grain Milling 16%
Jewelry 4%
Wood & Furniture 10%
Others 35%

Source: Economic Survey of Pakistan, 2004-05

There are a number of factors responsible for the importance of SMEs in Pakistan. First, SMEs foster an entrepreneurial culture and provide resilience in the economy. Second, SMEs dominate the fastest growing export sub-sectors, such as cotton weaving and surgical instruments. Third, they are an important vehicle for poverty reduction. Finally, SMEs are significant contributors to the Pakistani economy in terms of both value-addition (30 percent) and employment (80 percent)

For instance, the Ministry of Labor, Government of Pakistan, estimates that between 2003-2008, there will be an addition of 16 million persons in the labor force. To put these new entrants to work would take an investment of Rs. 5.2 trillion in large scale sector while only Rs. 8 billion in the small/micro scale sector. In the medium scale sector the cost would be Rs. 0.8 trillion.

3- Investment Estimates for Job Creation

Investment Required to Create Jobs

(Large Scale Sector)

Investment required to Create Jobs (small and medium enterprises)

Source: SMEDA estimates based on approximated number of future entrants in the job market.

4- Distribution of SME in GDP by Sector

Source: SMEDA

There is considerable evidence to show that sectors dominated by SMEs are better able to exploit ‘dynamic’ gains through widely dispersed learning, both geographically and in terms of the number of firms. Sectors dominated by SMEs tend to generate higher levels of competition and mobility, which in turn forces higher levels of learning among firms. This occurs through two mechanisms. First, the discipline imposed by competition forces firms to innovate at a faster rate in order to survive. Second, liberal entry into the population of firms allows greater experimentation, which increases the probability of a firm developing or adapting better organizational and technological traits.

Of the many impacts of globalization, the following two are having particular interest to SMEs:

1) Acceleration in the pace of growth of world trade
2) High levels of competition in the global market place

1- Acceleration in the pace of growth of world trade:

With the coming of WTO regime, SMEs have to manage growth and change in an environment where the pace, patterns and organization of production will need to be transformed fundamentally. Trade liberalization at the global and regional levels, the new Information & Communication Technology tools have combined to create rich opportunities as well as formidable challenges to all interdependent countries and enterprises.

2- High levels of competition in the global market place:

Competition has become increasingly fierce among the global and regional economies and enterprises. Consumer preferences and market standards have become more sophisticated and exacting. Competitive advantage is now determined by several non-price parameters such as quality, health and safety, social equity in employment and production and ecological compatibility of products and processes.

Ø High transaction costs associated with the development of capacities and capabilities to manage and generate technological change. Due to these high costs, enterprises in developing countries tend to be ineffective in exploit available technology options, as well as in utilizing the transferred technologies.

Ø Inability to acquire sophisticated testing equipment and R&D facilities.

Ø Lack of skills/experience to operate the high technological machinery.

Ø Insufficient knowledge of possibilities for technological co-operation.

Ø Inadequate knowledge and resource base for searching for partners and sources of new technology.

Ø SME’s often lack information on target market quality requirements and regulations as well as knowledge to achieve the quality levels.

Ø Absence of appropriate testing and other quality control or measuring equipment and related infrastructure as common facility centers.

Development of small businesses has long been debated at public and private forums in Pakistan, but until recently the motivation behind these efforts was more socio-political than economic. The main focus of economic policies, budgetary measures and regulatory regime was large scale industry. As a result, structural imbalances were created in Pakistan’s business environment, which got skewed unhealthily towards promoting large scale industry.

In 1998, the government of former Prime Minister Nawaz Sharif, becoming cognizant of SMEs’ economic importance, formed Small & Medium Enterprise Development Authority (SMEDA) as the flagship organization meant to provide support to SMEs in Pakistan through:
1. the creation of a conducive and enabling regulatory environment;
2. development of industrial clusters;
3. and the provision of Business Development Services to SMEs in all areas of business management.

1- Single uniform definition for SMEs

It is extremely important to have a single uniform definition for SMEs in order for the support institutions to implement assistance programs for all enterprises in lieu of resource constraints. The issue of SME definition therefore requires careful consideration, taking into account the position of SMEs in the national economy, the level of economic development, industrial structure, level of technology, the character of labor market and more importantly, the value which society attributes to the concept of public policy. Until there is an acceptable definition of SMEs, applicable across all institutions, their development will remain subject to the whims of the organizations they have to deal with.

2- Coordination & Institutional Support
Given the limitation of SMEs in terms of technical inadequacy, non-availability of cheap raw materials, inefficient production techniques and limited access to profitable markets, coordinated business support programs are a cornerstone of any system which strives for sustainability. This also maximizes the potential for cooperation with private sector organizations to minimize distortions in the market economy.
The role of government as a facilitator of business and its interaction with business support institutions is imperative for the establishment of a mutually beneficial relationship for the growth of the sector. In Pakistan there are a number of ministries and departments that are concerned with SME development. At present the situation is marred with lack of coordination and regular information exchange mechanism among institutions constrains their collective ability to deliver.
Ministry of Industries and Production, through SMEDA, is primarily responsible for the coordination of development efforts for SMEs.

The Government of Pakistan has developed a number of strategies for socio-economic development of the country. Most of the activities mentioned above include assistance in the creation of a network of institutions stimulating the growth of SMEs. These institutions cover Regional Development Agencies, Business Support Centres, Chambers of Commerce and a number of other organizations which are established as an initiative of local communities. For coordination among all these institutions, an SME Task Force has been established in the Ministry of Industry & Production with SMEDA as its secretariat. But greater coordination and similarity of approach is needed.

3- Simple business registration process

Establish simple business registration to facilitate entry into the formal economy it has been proposed to assist the Government in undertaking measures of awareness building and to support the development of simple, cheap, and easy registration processes and business friendly one-stop-shop arrangements to improve the coverage of registration.

4- Improve quality standards

Improve quality standards for industry and labor. This can be achieved by reducing the abuse of power by inspectors through a non-invasive inspection policy and promotion of self-inspection by the private sector.

5- Enhance export readiness of SMEs

Enhance export readiness of SMEs through enabling policy measures and an action plan. For this purpose, effective collaboration among SMEDA, Export Promotion Bureau (EPB), and Pakistan Standard and Quality Control Authority (PSQCA) has been proposed for the development of a policy and action plan to enhance export readiness of SMEs with the help of these institutions.

6- Improving SMEs’ Access to Finance

Following steps are required for increasing their access to formal financial sources:

Establishment of support infrastructure to improve coverage of credit information to facilitate quick and reliable loan processing mechanismImprove access to risk capital by revising tax regulations for risk capital investorsDeepen supply and marketing channel financing to small clients of corporate entities through partial credit guarantee. Support commercial banks to develop SME dedicated financing capabilities, equity investment products and to invest in capacity building of their staff to deal with the peculiarities of the SME sector.

SMEDA has so far undertaken significant advocacy work, awareness-building activities, and prepared a number of important sector strategies, publications and feasibility studies for SMEs. However, the qualitative fruits of these efforts are yet to reach the SMEs. Thus in order to achieve a significant outreach to the SMEs and fulfill its mandate more effectively, SMEDA needs to be empowered in terms of resources and its autonomous status needs to re-established as the apex body for SME growth stimulation.

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Telenor Total Quality Management

Code Of conduct

Telenor Pakistan’s activities should serve to illustrate that business success in demanding markets can be achieved without compromising ethical principles or international norms. Our Codes of Conduct have been adopted by the Telenor Board and are a key management tool for influencing all our activities.

The Codes of Conduct cover areas that are important for ensuring solid business ethics in all aspects of our activities. They contain specific and practical rules, and set the standards for how individual employees should conduct business when faced with competition and demands for meeting business objectives. Failure to comply with the Codes of Conduct results in sanctions suited to fit the nature and extent of unauthorized actions. The Codes of Conduct apply to managers, employees, hired staff and anyone acting on behalf of Telenor Pakistan.

Telenor's Code of Conduct

This is Telenor's global Code of Conduct:

1. GENERAL GUIDELINES

Corporate ethics are about more than avoiding contravention of any law; they are about how we behave towards each other and the outside world. Everybody associated with Telenor is responsible for following the rules and guidelines that build on Telenor's basic values and that form attitudes we can be proud of. At Telenor, we want everyone to be involved in this and help create a sound corporate culture based on satisfaction and security.

Telenor's guidelines for corporate ethics apply to members of the board of directors, managers and other employees of Telenor as well as others acting on behalf of Telenor. It is the line managers' responsibility to make sure everybody is aware of, and complies with, these guidelines. As a Telenor employee, it is your duty to read and follow the guidelines. Those who infringe Telenor's rules and guidelines must be prepared to face the consequences that are in line with the infringement's type and scope.

It is Telenor's policy to comply with all applicable laws and governmental rules and regulations. It is the personal responsibility of each to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters.

Human worth

Telenor supports the international human rights as outlined by the UN declaration and conventions. No one shall in any way cause or contribute to the violation or circumvention of human rights. We place great importance on ensuring the compliance with employees' basic human rights as outlined in the International Labour Organisation's core conventions.

Working environment

Telenor shall be a professional and positive workplace with an inclusive working environment. Therefore, you shall behave with respect and integrity towards anyone you come into contact with through your work. You shall help create an environment free from any discrimination, be it due to religion, skin colour, gender, sexual orientation, age, nationality, race or disability and free from bullying, harassment or similar. We do not tolerate any behaviour that can be perceived as degrading or threatening.

Health and the environment

Telenor shall be a pioneer in the field of health, safety and environment so as to promote high levels of satisfaction and good health. You share a responsibility for achieving this goal.

Loyalty, impartiality and conflict of interests

Telenor respects the individual employee's right to a private life and private interests, but demands openness and loyalty to the group and the group's interests. You shall not take actions or have interests that make it difficult to perform your work objectively and effectively. Service to Telenor should never be subordinated to personal gain and advantage. Conflicts of interest should, wherever possible, be avoided. You shall never take part in or attempt to influence a decision or settlement if there is a conflict of interest or other circumstances exist, which could give grounds to question one's impartiality.

Conflicts of interest could involve, but are not limited to, customers, suppliers, contractors, present or prospective employees, competitors or outside business activities. Anything that would present a conflict for you would likely also present a conflict if it is related to a member of your family.

Should a conflict of interest arise you shall on your own initiative evaluate and notify your immediate superior of your partiality or the conflict of interest.

Confidentiality

Every employee in the group has a duty of confidentiality by law and written agreement. You shall keep confidential all corporate and other matters that could provide third parties unauthorised access to confidential information, and exercise caution when discussing internal affairs so as to avoid being overheard by unauthorised persons. The duty of confidentiality also applies after the conclusion of employment or contractual relationship with Telenor for as long as the information is considered to be of a sensitive nature or in any other way confidential.

Protection of personal data

Telenor's processing of Personal Data shall be subject to the care and awareness which is required according to law and regulations and relevant for information that might be sensitive, regardless whether the data refer to customers, employees or others. Processing of personal data should be limited to what is needed for operational purposes, efficient customer care, relevant commercial activities and proper administration of human resources

Intellectual property

Intellectual property such as know-how, methodology, concepts and ideas are important to Telenor's success in the market. If you are involved with the group's intellectual property you shall protect and administer it in the interest of the group. You shall also respect the intellectual property rights of others and seek to avoid contravention of such rights. Unless otherwise specified by law or orders from public authorities, you shall not make corporate secrets or other important information available to unauthorised persons before obtaining a signed confidentiality agreement from each of those persons.

Property and assets

Telenor's property and assets, e.g. buildings and equipment, shall be managed and safeguarded in an appropriate manner. You shall observe the group's security requirements concerning access to and use of the group's facilities, IT resources and access to electronic resources and documents. The group's equipment and property may only be used for personal purposes if agreed in connection with the employment or as a result of Telenor's rules and guidelines.

Nature and the environment

Telenor shall be a pioneer regarding environmental protection, by minimising environmental damage and by developing, promoting and utilising environmentally friendly technology. You shall bear in mind the environmental effects work-related activities have on nature and the environment and shall choose environmentally friendly solutions as far as this is possible.

Information that may affect the stock price

As a publicly listed company, Telenor is subject to strict rules concerning the handling of non-public information that may affect the market price of Telenor shares and other financial instruments issued by Telenor. In this context, the deciding factor is how a normal investor would have reacted to this information if it had been included in that investor's decision making.

If you have such information about Telenor, it is your responsibility to prevent access to it by unauthorised persons and/or disclosure before it has been received by the stock exchange and made available through the stock exchange's information system, or before the information ceases to be sensitive.

If you have or receive information that may affect the stock price, you shall not trade in the financial instrument/share before the information has been made public or ceases to be sensitive. You must not provide such information to anyone, directly or indirectly, except those who have a real need for the information in order to perform their duties on behalf of Telenor.

If you are in doubt as to whether you have quotation sensitive information or how you should act, ask for advice from the Compliance Officer as soon as possible.

Information, communication and contact with the media

All information from Telenor shall be reliable and correct, and maintain high professional and ethical standards. All of those who, through their work, deal with information are responsible for meeting these standards. Communication with the media, the public and the financial markets shall take place in accordance with established guidelines and routines and satisfy the regulations and practice applicable to publicly listed companies.

Expertise and authority

All decisions shall be made at the appropriate level in accordance with the applicable regulations concerning authority. You may only obligate a company vis-à-vis others if you hold such special authority, and you must at all times keep within the limits of your authority.

Accounting

Telenor's accounting shall ensure that all transactions are correctly registered in accordance with Norwegian law and good accounting practice. You shall follow the group's regulations concerning the registration of transactions and proper documentation and you share a responsibility for ensuring that business transactions are fully and correctly reported and documented, and in accordance with applicable accounting practices. The annual accounts and interim accounts shall be in accordance with the law, IFRS and good accounting practice.

Reporting and disclosure

Telenor's reporting shall in all material respects comply with applicable laws and regulations and be full, fair, accurate, timely and understandable.

If you are involved in Telenor's disclosure process you are required to be familiar and comply with Telenor's disclosure controls and procedures and internal controls over financial reporting, to the extent relevant to your responsibility, so that Telenor's public reports and documents filed with Oslo Børs and the US Securities and Exchange Commission (SEC) and other public communications comply in all material respects with applicable laws and regulations.

Internal control

Telenor shall have good internal controls that ensure that the group's goals and strategies are fulfilled and complied with. Internal controls shall ensure that the business processes are at all times efficient and carry an acceptable level of risk, that physical and intangible assets are safeguarded and utilised, that financial information is correct and timely, and that laws, regulations and guidelines are followed. Internal controls are the responsibility of management, but the individual employees also share this responsibility.

2. RELATIONS WITH CUSTOMERS, SUPPLIERS, COMPETITORS AND PUBLIC AUTHORITIES

Customers shall be met with insight, respect and understanding. You shall always try to fulfil the needs of the customer in the best possible manner, within the guidelines for corporate ethics that apply to the business. Customer's personal information shall be protected in accordance with the relevant laws on protection of personal data.

Suppliers shall be treated impartially and justly. Suppliers in competition for contracts with Telenor shall at all times be able to trust Telenor's selection processes. When selecting suppliers you shall therefore follow the group's established guidelines and routines at all times.

Telenor's competitiveness in the market is based on good products and services at the right price. You shall always meet the group's competitors in an honest and professional manner.

Public authorities shall be met in an appropriate and open manner. Public information about the Group shall only be supplied by Telenor's management or by the person responsible for public communications, unless otherwise agreed.

Competition

Telenor wants fair and open competition in all markets, both nationally and internationally. Under no circumstances shall you cause or be part of any breach of general or special competition regulations, such as illegal cooperation on pricing, illegal market sharing or any other behaviour that is in breach of relevant competition laws.

Corruption and bribery

Telenor is firmly opposed to all forms of corruption. You shall never offer or accept illegal or inappropriate monetary gifts or other remuneration in order to achieve business or personal advantages for yourself or others. Nor shall you use agreements with middlemen to channel payment to anyone in such a way that may be interpreted as corruption.

Gifts and business courtesies

You shall always exercise caution in relation to offering or accepting gifts and business courtesies. You shall not accept gifts or other remuneration if there is reason to believe that its purpose is to influence business decisions. If in doubt, always consult your immediate superior.

Money laundering

Telenor is firmly opposed to all forms of money laundering and shall take steps to prevent its financial transactions from being used by others to launder money.

3. RELATIONS TO EMPLOYEES' PRIVATE INTERESTS AND ACTIONS

As an employee of Telenor you shall not hold another position or carry out work for others during working hours without prior express written permission from your superior.

Duty, positions and ownership of external businesses

Engagements in external duties and positions are positive, but their scope or type must not affect your working relationship with Telenor or come into conflict with Telenor's business interests. Board duties, consultancy for or ownership of customers', suppliers', joint-venture partners' or competitors' businesses as well as duties and positions of a scope or nature that can affect your working relationship with Telenor shall be expressly agreed in writing in advance by your immediate superior.

Political activity

Telenor does not give support to political parties, either in the form of direct financial support or paid working time. Employees who take part in political activities will be granted leave from their work in accordance with the law and any agreements.

4. REPORTING AND ACCOUNTABILITY

Should you become aware of an infringement of Telenor's rules and guidelines, you should raise this issue with your immediate superior. If this is not possible you should report the infringement directly to the Compliance Officer. Incidents may be reported confidentially to the Compliance Officer if desired. Failure to do so is itself a breach of this

Code.

Reporting to the Compliance Officer:

Telenor ASA

Compliance Officer

NO-1331 Fornebu

Norway

E-mail: compliance@telenor.com

Tel.: +47 678 90 000

Telenor does not allow reprisals of any kind against those who, in good faith, report an infringement or suspicion of an infringement of the rules or guidelines.

Any questions relating to how this Code should be interpreted or applied should be addressed to Telenor's Compliance Officer.

The Board of Directors shall take all action it considers appropriate to investigate any violations reported to it. If a violation has occurred, Telenor will take such disciplinary or preventive action, as it deems appropriate, after consultation with the Board of Directors, in the case of a director or executive officer, or after consultation with Telenor's Compliance Officer, in the case of any other employee.

Any changes to or waivers of this Code for executive officers or directors or other employees of Telenor may only be made by the Board of Directors and must be promptly disclosed as provided by SEC or NASDAQ rules.

5. CONFIRMATION

I hereby confirm that I have read and understood Telenor's Code of Conduct. I am familiar with the fact that this code is revised once a year, and that I am obliged to keep myself updated on possible changes.

Therefore conclusively different packages that are offered is the main attraction to all the people. Quality of service was the second most important attribute. Also increasing one’s balance through an incoming call and the prompt response of employees at the Telenor call center add value to the services provided by this company. What makes Telenor popular is the service quality, the value added services and the affordable packages.

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