Negotiation Techniques used in PepsiCo agreement with Romania
I. Parties involved in the negotiation
PepsiCo is an American multinational corporation headquartered in Purchase, New York, with interests in manufacturing and marketing a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and cereal-based snacks, and other foods. Besides the Pepsi brands, the company owns the brands Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked, Tropicana, Copella, Mountain Dew, Mirinda and 7 Up (outside the USA).
In 1966, when Romania was living under the communist manifesto, in US, the newly-born cola brand began full-scale commercial distribution of Pepsi. Determined to expand its reach and turn into a global soda maker, the cola company began to search out the most promising markets and decided to leverage upon the strengths of the Eastern Europe region, in under-served countries.
Donald McKendall, co-founder of PepsiCo, arrived in Romania and reached an out-of-the-ordinary agreement with Romanian authorities in 1967 that terminated in 1989. Under the agreement, PepsiCo would supply Romanian market with carbonated cola drinks and receive in exchange Romanian wine.
So Romanians could enjoy Pepsi ever since the communism era.
Pepsi entered Romanian market in 1992 and began full-scale distribution in 1992 and held the first spot for 3 years. In Romania, Pepsi was first introduced in 1966 and continues to have an extremely strong brand visibility (“When you say Pepsi, everyone understands what you’re talking about”), relevance (“Whatever you do, drink Pepsi”) and esteem (“Pepsi deserves its position as a market leader”). Since the birth of Pepsi, with more than a century before, the company has maintained its reputation for innovative and creative advertising.
Pepsi has always been synonymous with cutting-edge creativity. Few people know that Pepsi has a long history of promoting their brands with celebrities, what the company has done successfully, even in 1922. After rock images of Pink, Beyonce and Britney in Gladiator Pepsi, National England football captain David Beckham entered the arena in a commercial all-star. In this version, Beckham leads the line of artists, gladiator players such as Roberto Carlos, Ronaldinho, Torres, Totti, Raul, Ricardo, and Van der Vaart.
In 2006, Pepsi has come up with a new TV ad, Pepsi fest, the same football team as the Gladiators, but were added Crespo, Huth, Lampard and Nesta. Christina Aguilera became Pepsi Music image in 2006.
Considering the aspects presented above it is clear that PepsiCo has proved a well structured expansion and marketing strategy to support its revenues and objective accomplishment. However, the company is also famous for a well sustained organizational culture and care for its employees. Among facilities provided to employees the following can be distinguished: attractive salaries, bonuses, commissions, trainings, workshops, team buildings.
II. History of the conflict
PepsiCo has located some facilities and headquarters in a business park from Romania, which is not very well communicated with the local transportation network. Though, the employees find it hard to commute and to arrive to their work place.
A previous analysis of the national culture, showed that in Romania, it is very common that the companies which are located outside the living area, would offer their employees a free and private line transportation from their homes to their work places.
Due to the influence of the national culture on the organizational culture, so on the project’s one, PepsiCo considered that the implementation of a private transportation line may be a good strategy in the attempt to increase their employees’ motivation.
A project management team was nominated for the completion of a strategy regarding the implementation of a private transportation line for PepsiCo’s employees.
The name of the project is Go4ward and it is sponsored by the CEO of PepsiCo. An important characteristic of this project is that it is a pilot project which will be implemented just in a single department which will be the production one. The period within it will be developed is 6 months. During this interval of time the employees will have to complete a Before and After questionnaire which will evaluate if they appreciate and use the new transportation line.
This pilot project tries to increase the employees’ motivation and improve the work environment, though, after the analysis of the questionnaires’ results, the project team will be able to inform the top management if the new transportation line was an important factor in increasing this items. In case of a favorable result considering the employees’ motivation which will prove that this pilot project was efficient, the top management will decide whether to permanently implement this transportation line within all company’s departments.
Our main goal is to develop and execute a pilot project which aims at organising and implementing a private transportation network for PepsiCo’s production department employees in order to try to increase their motivation and to improve the work environment.
Go4ward pilot project’s objectives are:
to respect the budget given by the sponsor: 95,000 Euro;
to plan, execute, monitor&control and close within 6 months;
80% of the targeted employees use the new transportation line.
Once the implementation plan was drawn, the project management team needed a final approval from the CEO in terms of allocated budget and other delivarables.
For this purpose, a meeting was schedueled having as participants:
PepsiCo’s CEO
Project management team representatives
III. Stages of the negotiation process
1. Preparation
The main topic which requires attention is the final budget of the project. Initially, after presenting the project charter to the CEO, the allocated budget was 95,000 € but due to the economic crisis the market is facing, he decided to decrease it.
That is why we developed the work-breakdown structure and according to this we splited the budget allocation into several phases.
WBS Dictionary:
WP 1 – DATA ACQUISITION
WP 2 – COMMUNICATION CAMPAIGN
WP 2A – INTERNAL MARKENTING
WP 2B – DEPARTMENT MEETINGS
WP 3 – TRANSPORTATION
WP 3A – CONTACTING THE PROVIDERS OF THE BUSES
WP 3B – HIRING DRIVERS
WP 3C – ESTABILISHING ROUTES
WP 4A – LAUNCHING THE CONTROLLING PROCEDURE
WP 4B – ANALISYS OF THE RESULT
WP 5 – PROJECT MANAGEMENT
WP 6 – LEGAL ISSUES
WP1
600 Euro
WP2
300 Euro
WP3
85560 Euro
WP4
1560 Euro
WP5
1500 Euro
90,020 Euro
1,500 Euro
91,520 Euro
750 Euro
92,270 Euro
WP6
500 Euro
Cost Budget
Management Reserves (7%)
Cost Baseline
Contingency Reserves
Project estimates
Work package estimates
BATNA
In order to decide our BATNA we had to make an analysis of the work packages and to establish their level of importance and availability for lowering their initially allocated budgets in order to meet the CEO’s requirements and our as well.
Following the analysis, we concluded that the most important can be realized at the level of WP3 which regards transportation issues such as bus acquisition, drivers and routes. Our BATNA for this work package is 70,000 €.
For the rest of the work packages we also established that a decrease can be made as follows:
WP1: 500 €
WP2: 200 €
WP4: 1400 €
WP5: 1300 €
WP6: 350 €
Considering these modifications, the final project estimates 73,750 €. Adding the Contingency Reserves we reach 75,250 € cost baseline level.
To sum it all up the BATNA regarding the allocated budget is 76,000 €.
KEY ISSUES (regarding the allocated budgets)
Essential: WP1, WP2, WP3
Important: WP6
Desirable: WP5
Throwaways: WP4
Data
Transportation
Communication Tools
Weak time and cost estimation
Improper use of questionnaires
Poor communication campaign
Failure in establishing routes
Employees will not get convinced by campaign
Poor data acquisition
As preparation for the project we also provided the CEO with a risk analysis (illustrated below), quality plan and acqusition plan.
2. Opening session
The negotiation situation which will be described, concerns the allocated budget for the implementation of a private transportation line for PepsiCo employees. In order to describe the negotiation process better it is necessary to answer to the following questions:
WHO speaks for each party, is authorized to make/reject offers, and how many people will be on each team?
WHERE will negotiation take place, and what will be the seating arrangement?
WHEN will negotiations begin, and how long will sessions last?
HOW will offers be made, issues included in the discussion?
WHAT form of final agreement is acceptable (handshake, verbal, written, notarized)?
The project management team will be represented by two members, namely the team leader and the HR Manager. The CEO himself will represent the other party of the negotiation process. According to their positions within the company, both parties are entitled to make decisions with respect to the ongoing topic.
The negotiation will take place at the Romanian PepsiCo headquarter and is intended to be concluded at the end of the session.
The main aspects included in the discussion will be the key issues presented above, all of them regarding the budget allocation. The offers will be made considering the work break-down structure, risk analysis and qualtity plan.
The final agreement will be written and signed by both parties for the further implementation.
The CEO established his BATNA at the level of 80,000 € and made it clear that no budget extension would be possible.
The project management team representatives’ offer was of 85,000 €, decreased with 10,000 € comparing with the initial approved budget.
The issues included in the discussion were:
WP 1 – DATA ACQUISITION
WP 2 – COMMUNICATION CAMPAIGN
WP 2A – INTERNAL MARKENTING
WP 2B – DEPARTMENT MEETINGS
WP 3 – TRANSPORTATION
WP 3A – CONTACTING THE PROVIDERS OF THE BUSES
WP 3B – HIRING DRIVERS
WP 3C – ESTABILISHING ROUTES
WP 4A – LAUNCHING THE CONTROLLING PROCEDURE
WP 4B – ANALISYS OF THE RESULT
WP 5 – PROJECT MANAGEMENT
WP 6 – LEGAL ISSUES
It has to be mentioned that all these aspects were strictly discussed with respect to the allocated amount of money for each work package.
3. Bargaining
The common goal of the two parties was the implentation of the private transportation line in order to try to increase the employees’ motivation. As a result there were several compatible goals that the project management team and the CEO had and did not need any bargaining.
The main compatible goal was represented by the importance of the marketing campaign and internal communication for the success of the project. Since the CEO had a special interest in meeting his employees’ expectations and raising their motivation, he immediately agreed with the budget we proposed for WP2, namely 300 €. Also, the legal issues were seen as a compatible goal since the company is known for its compliance with the current regional lesiglation. Also, the budget allocated for the project management team was not questionable, considering that the CEO was satisfied with the work delivered up to that moment.
However there were several issues that had to be traded upon in order for the project management team to obtain the desired budget.
The main discussed aspect was the transportation budget which happened to be the largest within all work packages. The CEO considered that the company did not need new vehicles, taking into consideration that the project was just a pilot one and nobody could insure the increase in the employees’ motivation, one of the primary goals of Go4ward Project. Still, the project management team tried to convince the CEO that new vehicles would be more efficient for the company in terms of depreciation in the event the project would turn into a great success. However, the CEO intervened again, highlighting the fact that employees would be grateful for the new facility but they will not be necessarily interested in the vehicle brand, as long as the buses are safe, reliable and with updated and checked technical requirements.
In conclusion, the budget for the transportation was decreased from 85,560 € to 72,000 €, pointing out that second hand vehicles will be purchased.
Considering the data aquisition work package we established the final amount of money at 500 €, due to the fact that no further decrease could have been made, taking into account that this work package was of an utmost importance for the development and implementation of the project.
The WP4 was decided to be realized also by the project management team, even if firstly it was considered a throwaway issue, the allocated budget being 1500 €.
4. Settlement
Following the negotiation process, the two parties reached the agreement outlined below:
WP1: 500 €
WP2: 300 €
WP3: 72,000 €
WP4: 1,500 €
WP5: 1,500 €
WP6: 500 €
The final budget of the Go4ward Project was settled to be 78,750 €, fact which led to a win-win situation considering the BATNAs of the two parties.
III. Conclusions
Considering all the aspects of the negotiation process, it can be concluded that the negotiation proved to be a real success due to the fact that the main goal of the two parties was the approval of a appropriate budget that would allow the further implementation of the project.
The negotiation resulted in a win-win situation, as the CEO’s imposed budget was observed while the project management team accomplished to obtain a larger amount of money then their minimum expectations.
Both parties were willing to reach an agreement as easy as possible, but according to the budget limit imposed by the General Manager. They both proved to have a mixture between collaborating and compromising conflict styles within the negotiation process – there were several compatible desires, which significantly helped the parties to reach an agreement meeting the deadline; however, there were also severasl aspects that required bargaining in order to reach the best alternative.
To conclude, the negotiation process was a success overall. Still, there was clear room for improvement in some areas, namely more money could have been obtained from the CEO for the project management work package (for a better access to resources needed to accomplish the project objectives).
IV. References
1. www.pepsico.com
2. www.wall-street.ro
3. Negotiation Techniques Seminars and Lectures
4. Project Management Lectures, La Salle Summer School, Barcelona, 2010
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