A nation, corporation, and the individual, will find it imperative to have a realistic picture of the current and future financial standing. Strategic and financial planning provides PepsiCo the foresight to have initiative reflected in the annual report, initiative effects on cost and pricing, and all risks associated with the plan. Motivation for the having a stout strategic and financial plan assists with PepsiCo’s success and stays a critical area to address. No available resource is more important to survival than the need for fresh water, and the supply for safe water is diminishing as the need for more people to have access to fresh water is on the rise. Seventy percent of the earth’s surface is covered by huge bodies of water and less than three percent is fresh water and the other 30 percent being salt water. About a billion people are without access to clean drinking water (PepsiCo, 2011). One of PepsiCo’s strategic planning initiatives is to provide ways for safe water to be made available. The goals are to be able to provide it to over three million people in evolving countries around the world at the end of the year 2015 as their annual report suggests.
April 2010 PepsiCo unveiled their new strategic planning initiative with a global minded presence in several different countries by stating that they will respect the human right to water by shielding water means and providing access to water that is safe. They have committed to three objectives; objective number one is to increase and create more efficient water usage by 20 percent per unit of production by the end of 2015. Objective number two is to strive for “positive water balance” in water-distressed areas, and objective three refers to being able to provide safe water access to people in evolving countries by the end of the year 2015 as stated previously. As the company PepsiCo works diligently to reach their goals, they are striving to do this by reducing the impact their organization has on different environments while at the same time working with other companies in the same industry; such as governments, academia, nongovernmental organizations and communities to find solutions in the different parts of the world that they are conducting business in (PepsiCo, 2011).
PepsiCo understands and recognizes that an adequate supply of safe water is critical for their business to function; they also notice the global economy runs on safe water. Fresh water is essential to their business operation but they understand that fresh water is the most essential natural resource for the earth’s population to continue to exist. With the safe water initiative PepsiCo can become more efficient with the use of fresh water within their plants and every day operations as well as providing solutions for the needs of fresh water for the people within the countries they are operating in (PepsiCo, 2011). Due to the billion-dollar scale of Pepsi the 15 million dollars going to the clean water project is a drop in the bucket but will not go without much planning. In order to implement this program Pepsi will need to decide which assets they will use in order to build clean water community stations and hygiene education programs.
Every detail of the program needs to be planned such as how much money and equipment will go to what communities and what local and international personnel will be needed to run the program in the prospect areas. It’s important to mention that the assets portion will shrink and also the company’s liquid cash. There may be some tax incentives for donating to a world cause. Pepsi also supports a microloan-financing program for interested parties. This Project will open many doors in the countries’ it helps. And With the future economic growth due to the clean water, the people of those areas will be receptive to the brands in the future. This may put Pepsi in position A to further their global position. Though communities will have excellent marketing at the cost of doing good. There are also many people who watch the company and their philanthropic dealings and will either consume more Pepsi Brands or will be more apt to invest in a company that gives back.
In general sales may stay just the same with no change at least for a few years when these communities with water are grown economically. Even then they may have no need or desire for Pepsi product. Working to become an industry leader in providing safe water and water systems to developing countries will not only put the Pepsi Corporation in the front lines of human sustainability, but also under the financial microscope due to the potential of any costs associated with the initiative. Anytime a corporation works on a new project, a new product, or an initiative, the cost of doing so has to be budgeted into the larger picture. When Pepsi decided that this initiative is one they wanted to embark on (PepsiCo, 2011), one area of the budget that they needed to determine was an estimated cost from start to finish as well as any future on-going costs associated with the initiative. Pepsi’s staff will need to determine if the costs of building water kiosks, rainwater-harvesting systems would have a positive return on investment (PepsiCo, 2011). In the current economy, timing is everything when it comes to initiatives the corporations want to embark on.
The decision to build and provide the safe water systems will need to be based on the anticipated return on investment. Another risk includes that of location of the developing country or choosing the areas to install these systems within said country. If the wrong country is chosen, or a poor location within a country is chosen, then there is potential that the citizens of that community within the country would not be able to support the products. The key to placing these systems in the correct area is finding locations that will maximize the systems to their potential.
The high risk of placing the safe water systems could have a significant impact on PepsiCo’s financial stability. If the return on investment is not living up to the anticipated goal, the corporation could find themselves at risk for not having the ability to meet their short-term liabilities.
Any initiative taken by PepsiCo will be to the benefit of company and customers. Those motives will be reflected in all strategic and financial planning initiatives. PepsiCo benefits from the preplanning of safe water systems, which is the realistic plan reflected in the annual report.
PepsiCo (2011). 2010 Annual Report.
PepsiCo. (2011). Water Stewardship. Retrieved fromhttp://www.pepsico.com/Download/PepsiCo_Water_Report_FNL.pdf