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HSM Analysis Pepsi Cola International

Executive Summary

In the 1993 crisis of hypodermic syringes, reportedly being found in Diet Pepsi cans, the company demonstrated effective communications management stemming from the company openness with the media. The Alpaca Bottling Company, which was the local canning and distributor of Diet Pepsi, immediately opened its door to media and invited them to tour and film the plant's canning operations. The company deals with the media in an organized, aggressive and timely fashion. Their efforts resulted in positive media coverage during and after the crisis, which in turn reflected positively on the company.

In Our case study we will adopt & apply HSM (Hard system method) according in our case project and execute all requirements as per instructor instructions.

Madeira handled the situation to the best of her ability. This crisis was unusual in that it was completely ruled by the media. As Milton Freedman wrote in Capitalism and Freedom, Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. The media made the problem a nation issue. Because of the uniqueness of the case, the reaction had to be calculated specifically to the events that transpired. Ultimately, the PR firm’s management of the crisis upheld the Pepsi image and saved the company from a major downfall.

Many critics say that PepsiCo was too delayed in their response to the allegations. Time was most certainly of the essence in a case like this. However, PepsiCo made a smart decision to wait to put out a statement until they got the facts about the happenings. Madeira stated in an interview a year later, “Speed is essential, but so is accuracy. It is very dangerous to attempt to explain the cause of the crisis without facts that are corroborated from outside experts” PepsiCo did everything right in this crisis management effort. They could not have possibly relied on precedent to help them in this case, as no two crises are alike. They thought quickly, acted responsibly, were completely transparent, and resolved the crisis in a short weeks’ time. Crisis management needs to be a unique, flexible, and essential division of every company. PepsiCo recognized this fact and acted appropriately to the specifics of the predicament. Public opinion is king of capitalism. Without the support of the public, a company will fail. Public relations focus on the idea that effective communication is key to success

PepsiCo’s crisis management team had to persuade the public to accept their side of the story. There are three theories that apply to this idea, each one illustrated by the communication processes throughout the case. The first is the Two-Step theory. This theory suggests that opinion leaders influence public opinion. In this case the prominent opinion leader was the FDA. The FDA is a credible expert on the matter and was a key component to disproving the claims. Without the backing of this expert organization, PepsiCo lacked an unbiased supporter of their innocence as a company. The second is the Diffusion theory. This theory is based on the idea that the media’s purpose is to simply inform the masses. The diffusion theory is relevant to this case because it was responsible of getting the word out about the unsafe Diet Pepsi cans. People heard these

Media relations played a massive part in the restitution of PepsiCo’s image. However, not all press in this case was positive. PepsiCo was bombarded with uncontrolled media stories that centered on their company. Their logo was often pictured with fowl images of syringes and other disturbing items on broadcasts; the public started to correlate the two. The only way to fight this uncontrolled media was to put out news that they had produced. The biggest example of controlled media in this case was the multiple VNRs that PepsiCo filmed and released the public. These VNRs were the biggest indication to the public that the rumors were false and eventually lead the downfall of the crisis.

Lastly, the behavioral objectives include the monitoring of sales. The behavior of the consumers was critical to PepsiCo income during the crisis. Luckily, sales only dropped 3-4% during the hoax. The strategy to achieve this objective was to keep positive relations with the businesses that sold their products. A tactic was ensuring customers that their products were safe. PepsiCo did not issue a recall to the customers because they knew that there was no real health concern. The theme throughout this campaign was media relations. From the beginning, PepsiCo knew that there was no truth to these allegations, but the only way to prove that to everyone else was to get the media’s attention and dilute the false stories with the concrete, proven facts. For example, the objective of keeping the media up to date on developments within the investigation.

Table of Contents

Introduction 1

Being Aware Phase 1

Engaging Phase 1

Site Map 2

Execution of HSM Analysis 3

Stage 1 4

Stage 2 4

Stage 3 4

Stage 4 4

Stage 5 4

Stage 6 5

Stage 7 5

Stage 8 6

Tutor’s Report 6

Conclusion 6

Recommendation 7

Bibliography 7

Tutor Report

1

Introduction

PepsiCo Inc. is an American multinational food and beverage corporation headquartered in Purchase, New York, United States, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which includes an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001—which added the Gatorade brand to its portfolio.

As of January 22, 2012 PepsiCo's product lines generated retail sales of more than $1 billion each and the company's products were distributed across more than 200 countries, resulting in annual net revenues of $43.3 billion. Based on net revenue, PepsiCo is the second largest food and beverage business in the world. Within North America, PepsiCo is ranked (by net revenue) as the largest food and beverage business.

Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006, and the company employed approximately 274,000 people worldwide as of 2013. The company's beverage distribution and bottling is conducted by PepsiCo as well as by licensed bottlers in certain regions. PepsiCo is a SIC 2080 (beverage) company. (Pepsi CO , 2012)

Being Aware Phase

In June of 1993, Pepsi-Cola endured a media scandal resulting in millions of dollars of losses to the company. It all started in Tacoma, Washington on June 9th, when a couple reportedly found a syringe inside of a Diet Pepsi can. The story went viral in the media the next day, and resulted in dozens of alleged cases nationwide. Within days, people from all around the country reported finding objects such as needles, pins, screws, a crack cocaine vial, a bullet and a glob of dark brown glue inside of their Diet Pepsi cans.

Engaging Phase

The main goal for Pepsi was to present all of the facts to the public to maintain their good name. One type of research performed by the crisis management team was secondary research that required collecting information about the manufacturing process at sales locations. Gathering this information set to prove the improbability that foreign objects could enter the cans during manufacturing. The crisis team analyzed the tampering reports and saw no “logical pattern.” According to Pepsi spokesperson

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Andrew Giangola, the company “knew all along” that it wasn’t a manufacturing issue. He explained that canning lines are “high-speed production lines in which cans are inverted upside down, shot with a blast of air or water and then turned right side up and filled.

System Map

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Execution of HSM Analysis

System Description

Right now we are in the phase where the problem is identified and strategy is develop to dealt with situation The Pepsi made effective communication to respond the issue .Pepsi made a contact to FDA (Federal Drug Authority ) which issue advisory to media regarding the usage of product to refrain the use of product.

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Identification of objective and Constraints

From the start of the crisis, Pepsi-Cola “knew that there was no way a syringe could enter its manufacturing process” and that it was “mathematically unfathomable” for the incidents to happen simultaneously since “Pepsi products are made and distributed locally” (Mason, 1993). However, the company took the claims very seriously, and thoroughly investigated each claim to expose the truth to the public. The crisis management team set out to analyze the contents of each can, to determine “whether the materials were put into the cans during production or later, or whether some reports were hoaxes.

Formulating measuring of performance

Pepsi performed qualitative research, in which they performed polygraph tests to get the truth from the victims themselves. These tests could tell if a subject was lying based on consistency of their story along with a behavioral analysis. The chief of the FDA’s criminal investigation division, Secret Service veteran Terry Vermillion, said that immediately after the first tampering reports, “about 60 investigators began fanning out to every locale where a report.

Generation of routes of Objective

The main goal for Pepsi was to present all of the facts to the public to maintain their good name. One type of research performed by the crisis management team was secondary research that required collecting information about the manufacturing process at sales locations. Gathering this information set to prove the improbability that foreign objects could enter the cans during manufacturing. The crisis team analyzed the tampering reports and saw no “logical pattern.” According to Pepsi spokesperson Andrew Giangola, the company “knew all along” that it wasn’t a manufacturing issue. He explained that canning lines are “high-speed production lines in which cans are inverted upside down, shot with a blast of air or water and then turned right side up and filled.

Modeling

Throughout the crisis, Pepsi’s main objective was to prove to consumers that the claims were hoaxes, and to restore customer faith and loyalty to the brand. The crisis management team always supplied information to consumers throughout the investigations, which successfully demonstrated the company’s dedication to resolving the issue. In order to get the word out, Pepsi developed objectives for their media campaign. The company used the research gathered to formulate a campaign that would unveil the truth and shed a positive light on the brand. Pepsi’s informational objective was to educate consumers on the impossibility of objects entering the cans during the manufacturing process. They also

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aimed to motivate consumers to continue buying and instilling their trust in the company. By presenting all of the facts to the public as they were discovered, the public had a positive reaction.

Due to the massive clientele of the company, another main objective for Pepsi was to create a campaign that would be effective and easily understood by a large audience of many demographical factors. People of all ages, incomes, and educational levels were consuming Pepsi, so it was important that the campaign display solid facts and evidence. The company needed to get out the message that all claims were false, and that their products were always safe to consume. Pepsi was an American staple, so maintaining a positive image and integrity was most important.

Evaluation

As best of my knowledge following findings have been made.

• Crisis cost Pepsi $25 million in lost sales

• Consumers bounced back and showed their confidence in Pepsi.

• Pepsi’s crisis response was deemed a success by cooperation of FDA and clients.

• Media debated its role in escalating the scare.

• Pepsi was lauded in congressional record by U.S. House of Representatives for its quick and decisive action to end the national scare.

Choices of routes of Objective

PepsiCo responded quickly and effectively to sensationalized media reporting that could otherwise have proved catastrophic. The crisis management team determined that the most effective method for communicating with PepsiCo’s constituencies was through the very media that was reporting the hoaxes. Once that decision was made, teams were mobilized to provide VNRs and news updates, and a corporate spokesperson was selected to present a calm and reassuring face to PepsiCo’s constituencies.

PepsiCo worked closely with the FDA to ensure that their products were safe. They reassured their bottlers and distributors by including them in their communication chain. PepsiCo took a situation that could have proved devastating to their corporate image and product line and instead emerged from the crisis “stronger and more united than ever” (Collins, 2009)

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Implantation

Regarding effective Execution Pepsi management take several steps which are following

• Crisis team updated communication to target groups.

• Company worked quickly to understand the problem thoroughly.

• On-site interviews, making films of canning lines and issuance of press release assured consumers to answer them.

• FDA termed the issue “The vicious cycle of media reports begetting copycat complaints”.

• Messages and tools were created to counteract the phenomenon.

Staff was appointed to deal clients.

• FDA officials concentrated on finding the cause of syringe claims.

• Pepsi focused on showing its product virtually tempers proof. ('saher, 1993)

Client Report

Conclusion

There are many lessons that companies can learn from Pepsi’s handling of this crisis. You never know when a crisis will strike, and the damage can be exponential if there is no emergency plan in place. In Pepsi’s case, their crisis management team was the core of the situation. They pulled out all the stops to solve the issue and maintain a positive reputation. Because the company is such a major American staple, every move they made during the crisis was scrutinized in the media. In this case, the company knew that the claims being made were completely false. However, they handled the situation with grace and care. Pepsi took every detail into consideration, and came back with evidence from all angles to prove their innocence. Evaluations were measured by informal research such as surveys and feedback research.

PepsiCo set up a 1-(800) hotline number to take calls and record feedback from consumers. This measure showed the success of the objective to keep track of public opinion. Many consumers supported PepsiCo and their PR efforts. The sales of Pepsi products started to recover leading up to the 4th of July holiday This measured the success of the objective to track sales and ensure good relationships with the customers. The lasting affects to their public image are harder to ascertain, however. PepsiCo has to focus on their vital stakeholders and how it affected them in order to determine the magnitude of damage and/or success the crisis had on those relationships. In order to do this, PepsiCo must continue to learn from this situation by questioning all aspects of the plan.

Project Log

Weekly Work Summary

Date: 1-11-2018

To: Norah Amajid

From: 22-11-2018

Subject: Summary of My Activities during the Previous Week

Structure:

Your summary should be organized into three parts. Each part should contain a brief description.

Week 1

I. At the first week the system practitioner started to prepare herself to award the project.

Week 2

II. started to search in internet and other sources of information to reach for one good and strong organization that has a business problem. After a lot of searching i found a really well-known company which lately has some issues with their customer, so she decided to choose this as a topic for her project “Customers Loyalty Issues at Best Buy”. The reason for choosing this topic was that a lot of Best Buy’s customers were complaining about the services and experience they had with best buy

Week 3

After getting approval i started to work in the project index, which include the objectives and goals of the project and the structure of it, including tutor report, client report and project log. It was noticed that each part of this has its importance and characteristics. Each part adds information to complete the other, and considering different points to focus on. After that the system practitioner started to work with project balls which helped in getting a full picture of the situation.

Week 4

After assigning a topic I started work made a proper frame work to accomplish the assignment

Week 5

Accomplish my assignment and made some rectification of work and add some new points with the consultation of my teacher.

Week 5	At week five the systems practitioner started to work on the BECM balls. BECM ball are a shortcut of being, engaging, conceptualization and managing. In this week system practitioner started to work with b ball which is about being in the situation as a part of it to see the actual diminutions of the situation as a whole. The situation was messy and it was a challenge to get primary full understanding.
Week 6	In this week started to work in the second ball which is engaging, here where the system practitioner started to point out the messy characteristics of the situation and figure out the issues. Then she started to work on the conceptualization ball which is about applying the system method that is suitable for the situation. In Best Buy case the most suitable approach was SSM because the situation is messy and hard to figure out the real causes behind the issues. The first stage of SSM was applied this week which include diagrams to get full understanding of the case study without focusing in the problem.
Week 7	in this week she started to do the second stage of the SSM which is drawing a rich picture that shows the whole situation with mentioning the problem in order to make more able to be showed as in real life situation. A drawing was done and attached in the project file with mentioning the primary tasks which are the main objectives that Best Buy aims to and the issues they have faced when they were trying to reach them.
Week 8	Here the third stage which is relevant systems and root definitions was done by doing the CATWOE checklist to point out the factors that affect Best Buy and know exactly the systems that are rounding them in order to know how to deal with everything. After doing this a conceptual model of Best Buy issue in customer loyalty is done which shows the consequences and sequence of the actions that happened in the problem and how it should be done.
Week 9	A comparison between the rich picture and the conceptual model was done and if the actions should be in the agenda or not. Most of the points in the conceptual model was actually in real life and should be included in the agenda in order to make better dictions regarding their customer’s problems. After that she debated with stakeholders in order to see their perspectives and what we see right to do.
Week 10	The stakeholders with the help of us are ready to implement the steps and strategies that we found useful to use and the changes that we found the most important in the Best Buy case in order to get better employees abilities and customers served properly. Then she did the last ball of the BECM balls which is managing where she managed the implementation that should be done and make them in order summarized. A client reports was done after that and a project log which shows what she did in the weeks of working in the project. The project took 10 weeks to be done. An overall summary was following this to show the whole process of the project and what she found out.

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Recommendations

Planning

• Response plan was triggered from day one of the crisis

• Objectives convince the public about safety of the product. Planned tempering involving syringe couldn’t logically occur.

• Strategic Approach should use: To communicate the facts early and often to the audience. To work closely with the FDA.

Bibliography (2012). Pepsi CO . New York. Collins, R. (2009). Corporate Communication Case Study. 'saher, B. (1993). Pepsi case.