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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 include an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001—which added the Gatorade brand to its portfolio.
P5 DESCRIBE THE INFLUENCE OF TWO CONTRASTING ECONOMIC ENVIROMENTS ON BUSINESS ACTIVITIES WITHIN A SELECTED ORGANISATION.
Kenya officially the Republic of Kenya, is a country in East Africa that lies on the equator. With the Indian to its south-east, it is bordered by Tanzania to the south, Uganda to the west, South Sudan to the north-west, Ethiopia to the north and Somalia to the north-east. Kenya has a land area of 580,000 km2 and a population of a little over 43 million residents. The country is named after Mount Kenya, a significant landmark and second among Africa’s highest mountain peaks. Its capital and largest city is Nairobi.
India, officially the Republic of India, is a country in South Asia. It is the seventh-largest country by area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world. Bounded by the Indian Ocean on the south, the Arabian Sea on the south-west, and the Bay of Bengal on the south-east, it shares land borders with Pakistan to the west;[d] China, Nepal, and Bhutan to the north-east; and Burma and Bangladesh to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka and the Maldives; in addition, India’s Andaman and Nicobar Islands share a maritime border with Thailand and Indonesia.
Economic factors affecting PepsiCo:
Kenya recorded its ultimate high level of unemployment in 2011 reaching 40% unemployment. This would affect PepsiCo in the following ways:
• The demand of goods will decrease, because consumers will no longer have money to spend.
• Total revenue will decrease due to lack of purchases by a customers
• However government may decrease tax in order to encourage businesses to employ more.
• The public will be desperate for jobs and therefore will be willing to settle for a lower paying job
• The*re will be a lower chance of staff turnover.
Unemployment rate has decreased significantly in the past year this could affect the business in the following ways:
• People will be willing to spend more on PepsiCo’s products thus increasing total revenue.
• There will be a rise in demand thus increasing profit.
• PepsiCo can now expand and will not have to worry about workforce
• However, staff may demand higher salaries as they see many other opportunities opening up
• There is a high chance of staff turnover.
Inflation occurs when there is a general rise in the price of goods in the whole economy
The inflation rate in Kenya was recorded at 3.25 percent in November of 2012. Inflation Rate in Kenya is reported by the Kenya National Bureau of Statistics. Historically, from 2005 until 2012, Kenya Inflation Rate averaged 12.5 Percent reaching an all-time high of 31.5 Percent in May of 2008 and a record low of 3.2 Percent in October of 2010. In Kenya, the inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods.
This means that:
• the capital Pepsi uses for buying raw materials is reducing due to a fall in prices
• Staff will no longer be too concerned about their real value of their income.
• Consumers will now be able to afford better established labels like Pepsi.
• However, because of the general decrease in prices, Pepsi may not be able to justify any price increase.
The inflation rate in India was recorded at 7.45 percent in October of 2012. Inflation Rate in India is reported by the Ministry of Statistics and Program Implementation. Historically, from 1969 until 2012, India Inflation Rate averaged 7.8 Percent reaching an all-time high of 34.7 Percent in September of 1974 and a record low of -11.3 Percent in May of 1976. In India, the inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods
inflation rate in India is high this means that:
• Staff will become concerned about their real income high wage demands are likely and there could be an increase in industrial disputes.
• Consumers are likely to become more prices sensitive and look for bargains rather than big names causing revenue to decrease.
• The living standard will drop, therefore PepsiCo will have to reduce prices or risk losing their customers.
• However, consumers will make purchases faster fearing that prices will rise even more.
The benchmark interest rate in India was last recorded at 8 percent. Interest Rate in India is reported by the Reserve Bank of India. Historically, from 2000 until 2012, India Interest Rate averaged 6.5 Percent reaching an all-time high of 14.5 Percent in August of 2000 and a record low of 4.3 Percent in April of 2009.
This will affect pepsi in the following ways:
• Pepsi will be unable to borrow and therefore will have to cut down on cost thus producing less
• Pepsi will be unable to expand if they are not willing to pay 8%.
• However, if pepsi feels like the 8% is within their budget then they would probably be safe to borrow seing as the rates are stable.
The benchmark interest rate in Kenya was last recorded at 11 percent. Interest Rate in Kenya is reported by the Central Bank of Kenya. Historically, from 1991 until 2012, Kenya Interest Rate averaged 15.1 Percent reaching an all-time high of 84.7 Percent in July of 1993 and a record low of 0.8 Percent in September of 2003. In Kenya, interest rates decisions are taken by The Monetary Policy Committee (MPC) of the Central Bank of Kenya.
This will affect pepsi in the following ways:
• It will cause a fall in production.
• It will cause a faal in profits due to controlled spending.
• However interest rates are likely to fall as we can see from the gragh above.
Comparison of the economy in both India and Kenya
both the Kenyan and indian economy are recovering from an economic crunch.
If you compare the inflation rates of Kenya and india with their respective interest rates they correspond. This is because when inflation is high, the government needs to control spending and to do this, they need to increase interest inorder to encourage spending