PepsiCo Operations in United Arab Emirates

PepsiCo is a multinational company headquartered in New York City. The company operates subsidiaries in more than 200 countries globally, boosts more than 200,000 employees, and is worth more than $40 billion. PepsiCo has adopted a regiocentric system where its operations have centralized in three central regions: North America, Latin America, and other subsidiaries. However, the autonomy granted to the regional subsidiaries is guiding by PepsiCo policy framework and ethics. The company deals with the manufacture of beverages, foods, and snacks that are fit the regional culture, preference, and values. In a natural state, PepsiCo, just like other multinationals is attracted by host countries with similar cultures, and language plays a critical role in establishing subsidiaries.

PepsiCo’s internationalization activities are motivated by efficiency- and market-seeking objectives utilizing the regiocentric strategy. PepsiCo establishes a subsidiary in countries with similar cultures as the United States, then spread to other countries within the region from that host country. According to Kluckhonh and Kroeber’s culture theory, the organization closely monitors the values and traditional ideas of the host nation before establishing a subsidiary. Although the organization makes some cultural blunders, in most cases, their marketing strategies are a success since they factor in the feelings, ethics, thinking, and the reaction of the targeted customers in the host country. Applying this theory shows why adverts designed in the parent company have failed in other regions since they do not sync with the cultural values of those in the subsidiary stations since the organization has been unable to respond effectively to local demand. To address the language barrier, PepsiCo uses emojis to pass the message to target customers in countries not sharing a common language while also using host nation nationals to design and interpret marketing stunts to avoid misinterpretation (Rao, 2021).

PepsiCo considers cultural closeness before opening any subsidiary. The host country must have close cultures to the United States, such as language and lifestyles, to market the products without substantial constraints. PepsiCo then uses those subsidiary headquarters to enter the regional markets. For instance, PepsiCo identifies a country with English-speaking nationals to establish a subsidiary and then uses those nationals to reach regional countries where English is not the cultural language. Regional cultural simulations provide more correct models on consumption patterns than economic situations of a country, hence the more reason PepsiCo considers the cultural factors in regiocentric activities of its operations (Ivaturi, 2018).

Another cultural aspect that has influenced PepsiCo’s internationalization is adapting to new eating habits to cater to populations that do not prefer sugary drinks. For instance, the current campaigns on healthy diets pushed PepsiCo to introduce healthier and nutritious alternatives such as Aqua mineral juice and water to cater to the market segments not comfortable with traditional juice with high sugar content. The organization also considers regional cultures in establishing products. For instance, the introduction of whole grain oats for Latin America and potato and vegetable crisps for the American and European regions shows the organization understands the cultural segmentation of its target population. Over the years, the organization has also shown knowledge in generational gaps and how such could affect consumption patterns of their products. Hence, the organization has produced generation-specific products to cater to the different market segments. Such products include those targeted to certain racial groups, baby boomers, and young people. Such innovations include “think young”, “come alive”, “Pepsi generation”, and “Pepsi challenge” (Ng & Lillevik, 2017).

Challenges faced in sourcing, training, and development while operating in UAE

Sourcing

The culture in the host country can be a significant setback for any multinational corporation if not considered (Ng and Lillevik, 2017). Sourcing is one of the significant challenges that PepsiCo faced when the UAE market in the Middle East. PepsiCo uses the geocentric approach when sourcing its staff internationally, which is a global strategy recognizing the corporation’s subsidiaries’ abilities rather than the nationalities where they are locating. Therefore, the corporate strategy emphasizing the contribution of each subsidiary to the success of the entire organization is the key driver. Sourcing out staff can come from the Parent country Nationals, the host country nationals, or the third-country nationals.

When making staffing choices, cultural values are of great importance, and this entails the similarity between the host country and the parent country’s culture. PepsiCo in the UAE cannot ignore the contrasting cultural values between the host country and the Parent country in the United States. The differing cultures pose a challenge in sourcing out staff from the host country. That means the behavior of the labor obtained from the host country may differ considerably from the one in the parent country. For instance, power distance varies using Hostfede’s 6-D model (the United Arab Emirates* – Hofstede Insights, 2021). UAE has a high score in power distance, whereas the United States has a low score. Hierarchy order in the United States means to depict convenience where both the top managers and their subordinates work as a team consulting each other and valuing the opinion of each other. Unlike in UAE, where employees have to be direct on what to do (Edwards, 2021). UAE is a Muslim nation that requires all people and business operations to adhere to Muslim traditions closely. This rule reflects a high score in the power distance dimension where people know their places and employees accept the inequalities and do not question those above them. In the US, employees are self-reliant and objective. Hence, based on PepsiCo’s global strategy initiative, there was a challenge concerning recruiting staff from the host country.

Additionally, on individualism, UAE has a low score where the United States scores high. That means that UAE is a collectivist culture US is an individualistic culture. Hiring and recruitment are slightly different in a collectivist society since people are organized in groups; thus, recruitment and promotions consider the in-group where one belongs. For example, a management position only goes to a management group; loyalty is key in these groups. On the other hand, individualism considers fairness based on skills and competence irrespective of your social status. In terms of masculinity, the US has a high score, meaning its society is driving by competition and success (Edwards, 2021); UAE has an average score, meaning neither a masculine nor a feminine organization.

On the uncertainty avoidance dimension, UAE has a high score, whereas the US has a low score. US staff, therefore, are risk-takers, open-minded, and flexible to future ideas. In contrast, UAE has laid out guidelines on avoiding uncertainty in the future, which explains its strict adherence to the Islamic religion. For instance, (law and venture, 2021))employees having breaks five times a day to accommodate the religious culture and the Ramadhan month of fasting interrupts the ordinary operating activities of the organization. Disruption and shortening of business operations due to the nation’s cultural and religious aspects result in unprecedented challenges compared to other countries where strict adherence to religion is not followed. Sales during the month of Ramadhan also might be low since no people, including non-Muslims, are allowed to drink or eat in public during the fasting is one of the significant setbacks of multinationals operating in UAE (Schmid, 2018). In the parent country, such restrictions are non-existent, making the workforce there to be more flexible. UAE is a restrained society, whereas the United States scores high in indulgence. The strong beliefs govern UAE society, and this explains why alcoholic drinks are prohibiting in Muslim societies. Since the country’s majority population are Muslims, PepsiCo only makes and distributes soft drinks since it is against Muslim culture and religion to consume alcohol. Such is important to consider in cross-cultural management.

Additionally, the female gender participation in the workforce is limiting by their culture, which puts more value on their role in the family than at work. For females, big positions at work are not an outstanding achievement compared to raising children and taking care of the family. Long-term orientation, UAE maintains its past norms but still keeps an open mind for modernization, balancing. On the other hand, the US evaluates new ideas and information in their validity (Jallow, 2021). Therefore, the culture of the UAE significantly impacts the recruitment of the host country nationals, which makes it wise to include the parent country nationals in the workforce. The institutional environment is another factor to consider when recruiting, and this entails the aspect of labor force availability. UAE has enough population that can serve the organizations in its vicinity; however, only a tiny percentage of its population has attained high levels of education. Since PepsiCo selects its staff based on skills and competence. The host country lacks enough skilled workforce for its operation. It hence needs to outsource expatriates from the parent country or the third country, which affects labor force affordability resulting in high operating costs.

Moreover, hunting for talent is difficult since UAE has put in place bans on the entry of citizens from some countries, limiting the demographic pool for hiring. Additionally, UAE enforces quotas on the recruitment of young nationals (Dicce and Ewers, 2021). Firing an underperforming UAE workforce is not also allowed. Therefore sourcing staff in the host country is quite difficult.

Training and development

Training and development’s primary goal is to help improve performance at the workplace. UAE culture being a bit different from the host country poses a challenge to the operation of PepsiCo in the UAE. Additionally, the low education levels of the UAE citizens calls for an initiative of training to offer potential workforce with the required skills and also develop them to able to occupy higher positions in the organization(“PepsiCo announces new $40 million scholarship and mentoring program.”, 2021). Labor challenges in the UAE also imply hiring experts from outside the host country who are not familiar with the culture and sometimes the language. The official language for UAE is Arabic, and most transactions are contacting in the official language. Therefore, indeed a wide gap needs to be filled through training and development. Training and development exist in three types: pre-assignment, during the assignment, and post-assignment.

PepsiCo’s corporate strategy entails diversity and engagement; recruitment is usually done based on skills and competence, meaning all applicants should be considered irrespective of their origin. Training and development were one of the best solutions to labor challenges in the UAE. The area itself was a challenge since the company was venturing into a new market facing different government regulations. For the success of the training, Pepsi had to penetrate the UAE’s conservative culture, which prefers to preserve their way of living. One of the most significant challenges of administering training and development was costly. Considering the levels of education, the top management had to be outsourced and therefore required a lot of pre-assignment training on the culture and language. For success, they were training the entire management team on international human resource management.

PepsiCo’s most significant challenge in training and development is first attracting and recruiting the right people with talent to invest in them and grow them(SEHRAWAT, 2019). Additionally, the resistance of employees to the whole thing of training programs. Most people looking for jobs feel qualified, and so they might fight, feel pressured and fail to understand the importance of training, and might quit later due to dissatisfaction. Additionally, working while training could result in a work-life imbalance where employees feel they do not have time to attend to their issues. Another challenge of development that PepsiCo continues to face is the possibility of missing out on talent (SEHRAWAT, 2019). Deciding to develop the human resource to prepare them for future positions is good. Still, the company could miss out on potential people with talent while relying on the human resource within the company. Further, the human resource department should be consistent and accurate enough when hunting talent and recruiting employees.

Recommendations

Sourcing

To curb the cultural difference between the host country and the parent country in recruiting its staff, PepsiCo should consider incorporating the host country nationals, Parent country nationals, and third-country nationals to work together. This way will help integrate both the host and parent country cultures. The staff from the parent country should entail the top management primarily considering that UAE has a shortage of skilled workforce, especially with high levels of education. The top management staff will help cascade the company’s corporate strategy to the other employees since they should have been working in the headquarters and understood the organizational structure and its operations. The host country nationals are also very important since they are familiar with the culture and understand the market well and will be a cheaper source of labor since it is their home country. The third-country nationals have neither affiliation with the host nor the parent country and have to learn the host country’s culture. Additionally, third country nationals are also a source of cheap labor. The diversification of the staff means that teamwork and a great organizational culture that supports diversity are key. PepsiCo should create a corporate culture that supports diversity and gives all the employees a sense of belonging and working together as a team.

Training and development

Training and development is another way of cross-culture management (Ivaturi, 2018). Carrying out the pre-assignment training will be very important for all the staff before they start their duties; this will eliminate culture shock and poor communication and facilitate a good working environment for the diverse workforce.

Embracing joint ventures in the host country is another way to curb recruitment difficulties since that gives PepsiCo an advantage and ease of operation and penetration.

The major challenge in training and development is getting the right people without missing out on talent. It is recommended that the company diversify its recruitment process to access different people so that the training administered later complements its human resource. The recruitment should provide internships, job rotations amongst the subsidiaries to assess managerial skills, mentorship programs, create links with as many learning institutions as possible to harvest talent.

It advises that the company create a flexible training program that does not pressure the workforce and rob them of their time (Jallow, 2021). Most employees of long working hours and this are due to working combined with training and development. Hence, there will be no tension in the human resource and dissatisfaction, leading to high employee turnover.

The company should compensate the workers during training to curb resistance and dissatisfaction during the training program. The company should also create a family-friendly environment and understand its employee’s personal lives by creating bonding activities that bring them together once.

Conclusion

PepsiCo’s corporate strategy has dramatically influenced its success in the global market, especially the regiocentric approach that gives space and appreciation to the diversity of its subsidiaries as well as their ability and importance. Appreciating the different cultures in the international business platform is important since it contributes to managing the differences and integrating where possible to work together successfully. The UAE’s diverse culture to that of the United States poses some challenges to PepsiCo multinational; however, since the company embraces a global strategy, the diverse cultures are well managed. Sourcing, training, and development are the areas with some challenges in PepsiCo’s operation. However, it is manageable since PepsiCo is a strong brand, which is well establishing.

Work Cited

Dicce, R., & Ewers, M. (2021). Solar labor market transitions in the United Arab Emirates. Geoforum, 124, 54-64. https://doi.org/10.1016/j.geoforum.2021.05.013

Edwards, L. (2021). Comparing China to United States Using Hofstede’s Six Cultural Dimensions. Sites.psu.edu. Retrieved 25 August 2021, from https://sites.psu.edu/global/2020/11/01/comparing-china-to-united-states-using-hofstedes-six-cultural-dimensions/.

Hofstede Insights. 2021. United Arab Emirates* – Hofstede Insights. [online] Available at: [Accessed 25 August 2021].

Hoppe, M. (2004). An interview with Geert Hofstede. Academy Of Management Perspectives, 18(1), 75-79. https://doi.org/10.5465/ame.2004.12689650

Ivaturi, P. (2018). Training in Intra-Language Variants of English: Implications for International Business. Journal of Management 10 (2), 109-114.

Jallow, A. (2021). A Strategic Case Study on PepsiCo. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3828353

Kluckhohn, C., and Murray, H. A. (Eds.) Personality in nature, society and culture. New York: Knopf, 1948, pp. 570. $6.00. (1949), 5(1), 105-105. https://doi.org/10.1002/1097-4679(194901)5:1<105::aid-jclp2270050112>3.0.co;2-p

law, r. and venture, I. (2021). PepsiCo Inc. International Business Strategy – 3165 Words | Research Paper Example. [online] Free Essays. Available at: [Accessed 25 August 2021].

Ng, E. S., & Lillevik, W. (2017). 27. Intercultural communication in the world of business. In Intercultural Communication. De Gruyter Mouton. 597-616. DOI 10.1515/9781501500060-027

PepsiCo Inc. (2008), 5(3), 214-214. https://doi.org/10.1002/div.7476 (“PepsiCo Inc.”, 2008) PepsiCo announces new $40 million scholarship and mentoring program. (2021), 36(6), 3-3. https://doi.org/10.1002/cprt.30943

Schmid, S. (2018). Strategies of internationalization: An overview. Internationalization of Business, Springer. 1-25.

SEHRAWAT, S. (2019). PEPSICO’S SUSTAINABLE STRATEGIES. JOURNAL OF MANAGEMENT, 6(2). https://doi.org/10.34218/jom.6.2.2019.010

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