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the working on these pages. It is His help that we finally able to compile this document. We are indebted to our respected teacher Mr. Jawad Saleem who’s indispensable and intricate comments on various aspects conjoined with motivation made us come forth holding such as project. Executive Summary Purpose of this project is to study the strategies which Pepsi is doing in Pakistani market for its product Pepsi cola. Pepsi International is a world renowned brand. It is a very well organized multinational company, which operates almost all over the world. In Pakistan It also has proved itself to be the No.1 soft drink. Now days Pepsi is recognized as Pakistanis National drink Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand. Coke’s basic strength is its brand name. But Pepsi with its aggressive marketing planning and quick diversification in creating and promoting new ideas and product packaging, is successfully maintaining is No.1 position in Pakistan. Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.” We also did analysis of the soft dink industry in Pakistan and world wide. The soft drinks set to become world's leading beverage sector. Global consumption of soft drinks is rising by 5% a year. FACTS ABOUT THE COMPANY 1. Pepsi is a USA based public company whose stocks are available in New York.
2. Mountain Dew, acquired by Pepsi-Cola in 1964, switches its advertising and package graphics room hillbillies to action-oriented scenes. 3. The third Mountain Dew slogan appeared in 1973 "Put A Little Yahoo in Your Life." 4. PepsiCo acquired Pizza Hut, Inc. Pizza Hut was founded in 1958 by Dan and Frank Carney. 5. Taco Bell is was acquired by Pepsi. Taco Bell was established in the mid 1960s by Glen Bell. 6. PepsiCo purchased Kentucky Fried Chicken, the leader in the quick service chicken market. KFC was founded by Colonel Harland Sanders. Colonel Sanders began franchising the company in 1952. KFC was spun off along with Pizza Hut and Taco Bell businesses as Tricon Global Restaurants, Inc. in 1997. 7. PepsiCo purchases Seven-Up International, the third largest franchise soft drink operation outside the United States PEPSI PAKISTAN The market in Pakistan is surely dominated by Pepsi. It has proves itself to be the No.1 soft drink in Pakistan. Now days Pepsi is recognized as Pakistanis National drink. In 1971, first plant of Pepsi was constructed in Multan, and from their after Pepsi is going higher and higher. Pepsi is the choice soft drink of every one. It is consumed by all age groups because of its distinctive taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all. Consumer’s survey results explain the same outcome and Pepsi has been declared as the most wanted soft drink of Pakistan. Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand. Coke’s basic strength is its brand name. But Pepsi with its aggressive marketing planning and quick diversification in creating and promoting new ideas and product packaging, is successfully maintaining is No.1 position in Pakistan. In coming future Pepsi is also planning to enter into the field of fruit drinks. For this purpose it has test marketed its mango juice in Karachi for the first time. When Pepsi was introduced in Pakistan, it faced fierce competition with 7up, lemon and lime drinks, which was established during 1968, in Multan. Pepsi introduced its lemon and lime, "Teem" to compete with 7up. It successfully, after some years, took over 7up, and this enhanced Pepsi's profits and market share. In Pakistan, Pepsi with 7up enjoys 70% of the market share where as the coke just has 20% markets share. Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.”
New product development by Pepsi Pepsi is doing new product development on frequent interval of times. The purpose of which is to refresh the brand. By new products and innovative ideas consumers can easily be attracted. In following ways Pepsi is doing new product development. New product category Pepsi which is mainly a company of soft drinks After establishing a brand in Pakistan Pepsi came into several new product category. Lays, kurkuray and aqua fina, fast food restaurants are the examples of new product category. Product line extension Mountain dew is the most recent addition in the product line of soft drinks which is very popular especially among the youngsters. However Pepsi launch its several variants with a minor difference on frequent interval of time. There have been many Pepsi variants produced over the years since 1903, including Diet Pepsi, Crystal Pepsi, Pepsi Twist, Pepsi Max, Pepsi Samba, Pepsi Blue, Pepsi Gold, Pepsi Holiday Spice, Pepsi Jazz, Pepsi X (available in Finland and Brazil), Pepsi Next (available in Japan and South Korea), Pepsi Raw, Pepsi Retro in Mexico, Pepsi One, Pepsi Ice Cucumber and Pepsi White in Japan.
PepsiCo International generated US$13 billion, which represents 37% of the firm's total revenues in 2006. Snack and beverage sales from Canada and the United States accounted for the remainder of PepsiCo's overall revenues. In contrast, 72% of Coca-Cola's global beverages are sold outside North America. PepsiCo International Brands PepsiCo International makes salty and sweet snack brands including Lay’s, Walkers, Cheetos, Doritos, Ruffles, Gamesa and Sabritas. PepsiCo also markets Quaker brand snacks. Beverage brands include Pepsi, 7UP, Mirinda, Gatorade, Tropicana and Mountain Dew which are sold to authorized bottlers, independent distributors and retailers. PepsiCo also owns the Aquafina water brand.
Read more at Suite101: Pepsi Global Sales: PepsiCo International Snack & Beverage Sales Up 9% In 2006 http://international-trade-leaders.suite101.com/article.cfm/pepsi_global_sales#ixzz0oU8db1Uw PepsiCo's international division operates in approximately 200 countries, with largest operations in Mexico (Gamesa and Sabritas snack brands) and the United Kingdom (Walkers snack brand). 2007 International PepsiCo Snack Sales Overall international snack sales rose 9%, led by double-digit growth in Russia, Turkey, Egypt and India. Sales from Europe, the Middle East and Africa grew 17%, Asia Pacific sales rose 12% while Latin America revenues lagged at 2.5%. 2007 International PepsiCo Beverage Sales Overall international beverage sales grew 9%. In the Middle East, China, Argentina, Russia and Venezuela PepsiCo drinks enjoyed double-digit growth. PepsiCo's International Growth Engine
The portfolio of international markets continues to broaden and strengthen as PepsiCo deliver exciting new products, tailored to local tastes, to consumers in approximately 200 countries. And in developing and emerging markets in particular, growth in per capita GDP levels continues to generate increased demand for the world's number two softdrink maker. PepsiCo's continued success depends on its ability to broaden and strengthen its presence in emerging markets notably Brazil, Russia, India and China. Investment analysts believe that PepsiCo's near-term results may be affected by sluggish sales in Europe. However, most agree that PepsiCo's stock price (PEP on NYSE) should rise as Pepsi snacks and beverages win over more consumers in developing nations. PepsiCo's International Acquisitions Part of PepsiCo's global strategy is growth through acquisition. The company acquired Duyvis nuts in the Netherlands and Star Foods snacks in Poland during 2006, as well as Bluebird snacks in New Zealand in early 2007. Sources: PepsiCo's Annual 2006 SEC Filing; hoovers.com
Read more at Suite101: Pepsi Global Sales: PepsiCo International Snack & Beverage Sales Up 9% In 2006 http://international-trade-leaders.suite101.com/article.cfm/pepsi_global_sales#ixzz0oU8glthh
PepsiCo, Incorporated (NYSE: PEP) is a Fortune 500, American multinational corporation headquartered in Purchase, NY with interests in manufacturing and marketing a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and grain-based snacks, and other foods. Their main product, Pepsi Cola, sells over 100 trillion cans a year. Besides the PepsiColabrands, the company owns the brands Quaker Oats, Gatorade, FritoLay, SoBe, Naked, Tropicana, Copella, Mountain Dew, Mirinda and7-Up (outside the USA). Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006. During her time, healthier snacks have been marketed and the company is striving for a net-zero impact on the environment. This focus on healthier foods and lifestyles is part of Nooyi's "Performance With Purpose" philosophy. Today, beverage distribution and bottling is undertaken primarily by associated companies such as The Pepsi Bottling Group(NYSE: PBG) and Pepsi Americas (NYSE: PAS). PepsiCo is a SIC 2080 (beverage) company.
Headquartered in Purchase, New York, with Research and Development Headquarters in Valhalla, The Pepsi Cola Company began in 1898 by a NC Pharmacist and Industrialist Caleb Bradham, but it only became known as PepsiCo when it merged with Frito Lay in 1965. Until 1997, it also owned KFC, Pizza Hut, and Taco Bell, but these fast-food restaurants were spun off into Tricon Global Restaurants, now Yum! Brands, Inc. PepsiCo purchased Tropicana in 1998, and Quaker Oats in 2001. In December 2005, PepsiCo surpassed Coca-Cola Company in market value for the first time in 112 years since both companies began to compete.
PepsiCo owns 5 different billion-dollar brands. These are Pepsi, Tropicana, Frito-Lay, Quaker, and Gatorade. The company owns many other brands as well.
Pepsi, Caffeine-Free Pepsi, Diet Pepsi/Pepsi Light, Caffeine-Free Diet Pepsi, Caffeine-Free Pepsi Light, Wild Cherry Pepsi, Pepsi Lime, Pepsi Max, Pepsi Twist and Pepsi ONE.
Other U.S. carbonated soft drinks, including Mountain Dew, Slice, Mug Root Beer, Sierra Mist, Tropicana Twister Soda and Frawg,
7 Up (Globally, outside the USA) Other U.S. beverages, including Aquafina (Flavor Splash, Alive, and Twist/Burst), Tava, Dole, Gatorade, Izze, AMP Energy, Propel Fitness Water, SoBe, Quaker Milk Chillers, andTropicana
Beverages marketed outside the U.S.: Alvalle, Concordia, Copella, Evervess, Fiesta, Frui'Vita, Fruko, H2OH!, Ivi, Junkanoo, Kas, Loóz a, Manzana Corona, Manzanita Sol, Mirinda,Paso de los Toros (drink), Radical Fruit, San Carlos, Schwip Schwap, Shani, Teem, Triple Kola, and Yedigun
Frito-Lay brands: Baken-ets, Barcel, Bocabits, Cheese Tris, Cheetos, Chester's, Chizitos, Churrumais, Cracker Jack, Crujitos, Doritos, Fandangos, Fritos, Funyuns, Gamesa, Go Snacks, James' Grandma's Cookies, Hamka's, Lay's, Miss Vickie's, Munchies, Munchos, Nik Naks, Ollie's Meat Snacks, Quavers, Rold Gold, Ruffles, Rustler's Meat Sticks,Sabritas, Sabritones, Sandora, Santitas, Smartfood, The Smith's Snackfood Company, Sonric's, Stacy's Pita Chips, Sun Chips, Tor-tees, Kurkure, Tostitos, Walkers, and Wotsits
Quaker Oats brands: Aunt Jemima, Cap'n Crunch, Chewy Granola bars, Coqueiro, Crisp'ums, Cruesli, FrescAvena, King Vitaman, Life, Oatso Simple, Quake, Quisp, Rice-A-Roni, and Spudz
In 2007, Nooyi spent $1.3 billion on healthier-alternative brands like Naked Juice, a California maker of soy drinks and organic juice.
In 2010 PepsiCo launched Sting Energy Drink (carbonated) in some Asian countries including Pakistan, Philippines & Malaysia.
Pepsico has also recently acquired a 50% stake in U.S.-based Sabra Dipping Company.
Partnerships PepsiCo also has formed partnerships with several brands it does not own, in order to distribute these or market them with its own brands.
Frappuccino Starbucks DoubleShot Starbucks Iced Coffee Mandarin (license) D&G (license) Lipton Brisk Lipton Original Iced Tea Lipton Iced Tea Ben & Jerry's Milkshakes Dole juices & juice drinks (license) Sunny Delight (produced by PepsiCo for Sunny Delight Beverages)
Teem, Pepsi's answer to Sprite and 7up, discontinued after PepsiCo bought 7up. All Sport, a line of sports drinks. All-Sport was lightly carbonated; in contrast, rivals Gatorade and Coke-owned POWERade were non-carbonated. The 2001 purchase of Quaker Oats(in effect acquiring Gatorade) made All Sport expendable, and the brand was sold to another company.
Aspen Soda, an apple-flavored soft drink (late 1970s-early 80's) Crystal Pepsi, a clear version of Pepsi-Cola. FruitWorks: Flavors were Strawberry Melon, Peach Papaya, Tangerine Citrus, Apple Raspberry, and Pink Lemonade. Two other flavors, Passion Orange and Guava Berry, were available in Hawaii only.
Josta: launched 1995, "with Guarana," the first energy drink launched by a major soft drink company in the US.
Matika: Run in August 2001, it was a tea/juice alternative beverage, sweetened with cane sugar & containing Ginseng. Dragonfruit Potion, Magic Mombin, Mythical Mango, Rising Starfruit, Skyhigh Berry
Mazagran: launched 1995 Mr. Green (SoBe)
Patio (soda): line of flavored drinks (1960-late '70s) Pepsi Edge, a mid-calorie version of Pepsi-Cola. Pepsi Blue, a berry-flavored, blue version of Pepsi-Cola. Pepsi Kona: launched 1997, a coffee-flavored version of Pepsi-Cola. Smooth Moos: launched 1995, a flavored milk-based drink. Storm: launched March 15, 1998, replaced by Sierra Mist. Miranda Lime: Launched in the second half of the 1990 decade(in India) but failed
PepsiCo owned a number of restaurant chains until it exited that business in 1997, selling some, and spinning off others into a new company Tricon Global Restaurants, now known asYum! Brands, Inc.. PepsiCo also previously owned several other brands that it later sold.
California Pizza Kitchen (bought 1992, sold back to original founders in 1997) Chevys Fresh Mex (bought August 1993, sold May 1997 to J. W. Childs Equity Partners) D'Angelo Sandwich Shops (sold August 1997 to Papa Gino's) East Side Mario's (United States franchises – bought December 1993, sold early 1997 ) Hot 'n Now (bought in 1990, sold in 1997) Jollibee (bought in 1994,sold in 1997) KFC (bought October 1986 from RJR Nabisco, spun off October 1997 to form TriCon, later Yum! Brands)
North American Van Lines Pizza Hut (bought in 1977, spun off October 1997 to form TriCon, later Yum! Brands) Stolichnaya Taco Bell (bought in 1978, spun off October 1997 to form TriCon, later Yum! Brands)
Wilson Sporting Goods Soft drinks market in India
India is one of the top five markets in terms of growth of the soft drinks market. The per capita consumption of soft drinks in the country is estimated to be around 6 bottles per annum in the year 2003. It is very low compared to the corresponding figures in US (600+ bottles per annum). But being one of the fastest growing markets and by the sheer volumes, India is a promising market for soft drinks.
The major players in the soft drinks market in India are PepsiCo and Coca-Cola Co, like elsewhere in the world. Coca-Cola acquired a number of local brands like Limca, Gold Spot and Thums Up when it entered Indian market for the second time. Pepsi Co’s soft drink portfolio also consists of Miranda and 7Up along with Pepsi. The market share of each of the company is more or less the same, though there is a conflict in the estimates quoted by different sources  The major ingredient in a soft drink is water. It constitutes close to 90% of the soft drink content. Added to this, the drink also contains sweeteners, Carbon dioxide, Citric Acid/Malic acid, Colors, Preservatives, Anti Oxidants and other emulsifying agents, etc. Consumption
patterns in India
In Tier 1, 2 and 3 cities in India, 29% of Indian consumers report consuming carbonated beverages/soft drinks during a fixed time of the day suggesting consumption has become a routine part of their day, with most consumption taking place during the 'afternoon to evening' time period. Not surprisingly, consumption is highest in Tier I cities such as Mumbai, Delhi, Kolkata, Chennai, Hyderabad and Bangalore. The level of consumption is seen to increase with rising household incomes (with the exception of the highest income level) while decreasing with age. This section may contain original research. Please improve it by verifying the claims made and adding references. Statements consisting only of original research may be removed. More details may be available on the talk page. (September 2009) The Indian soft drinks market is not under any regulation. Prevention of Food adulteration act 1954 does not include soft drinks. None of the BIS standards that existed before August 2003 had any guidelines or set criteria for the residue levels of pesticides in the soft drinks. But different lie agencies have set standards for the residue levels of pesticides. The European Economic Community (EEC) sets the maximum admissible concentration of individual pesticides and related products in drinking water at 0.1 parts per billion to ensure that the toxicity is not dangerous to human beings. For a few pesticides like aldrin, dieldin and heptachlor epoxide the admissible limit is even more stringent, i.e., 0.03 parts per billion. Prices
in India(updated in Feb 2010)
Until the late 90s drinks were bottled in 250ml reusable glass bottles. It then shifted to 300ml botles priced at 10/-. Then came the can model which with 350ml costing around 18/- INR. Later mini bottles of 200ml quantity became a huge success with each bottle costing 6/- which later dropped by a rupee. For family packs there was the 1.5 lt plastic pet bottle costing about 43/-. Then with competition from Coca-Cola the pet bottle resized to 2 lt for just 50/-. It was at this time the smaller pet bottle of 500ml hit the markets tagged with a price of 20/-. Later the quantity was increased to 600ml(mentioning a 20% extra-free)
without any increase in the price. But, due to inflation, the 600ml pet bottle price has been revised to 22/from mid 2009, with the 2lt pet bottle also being increased by 2/-(it is now 52/-). PepsiCo
From 1991 until 1997, PepsiCo is one of the most notable companies to do business in Burma. PepsiCo's business partner, Thein Tun, was a noted business partner of the ruling Burmese military junta, which has been alleged to be responsible for some of the worst human rights violations in the world. PepsiCo's involvement prompted one of the biggest Burma-related boycotts in history. The campaign was on a par with those against Texaco and Unocal, running around the same time, and currently against Total Oil. PepsiCo formally began their investment in Burma in November 1991 when they opened a bottling plant in the then-capital Rangoon, despite the call by Aung San Suu Kyi and theNational League for Democracy for companies to avoid doing business in Burma until it returned to democracy. The campaign against Pepsi was initiated by the Asian-based Burma Rights Movement for Action. The campaign later gained growing strength in the West as Burmese human rights groups focused on campaigns against companies in Burma, including the oil giants Texaco, Unocal, Amoco, and Petro-Canada. When Petro-Canada left Burma, Canadian and U.S. based Burmese democracy groups sharpened their focus on PepsiCo. The campaign received a massive boost when, in 1996, theFree Burma Coalition took the lead in forcing Pepsi out of American universities. This included the scrapping of a multi-million dollar deal at Harvard. The campaign also spread to Europe, where the UK-based organization, Third World First, adopted the boycott. In response, in 1996, PepsiCo attempted to step out of the spotlight by selling its share of its Burmese joint venture to its partner but retaining its Burmese franchise agreement. Aung San Suu Kyi responded, "As far as we are concerned, Pepsi[Co] has not divested from Burma" and both human rights and environmental groups continued the pressure on Pepsi. Eventually, with the Burmese regime holding violent anti-democracy rallies and pressure from around the world mounting, PepsiCo announced in January 1997 that it would cut all ties with Burma. However, to this day, PepsiCo has not admitted that it was morally wrong to invest in Burma as some other companies have upon leaving the country. PepsiCo
Until 1991 PepsiCo was not sold in Israel, for which it was criticised by many in the United States who believed it was supporting the Arab boycott of Israel. PepsiCo always denied this allegation, saying Israel was simply too small to support a franchise. As a result, the Israeli market was taken over by Pepsi's rival Coca Cola, and to this day Pepsi has a very small market share in Israel. Pepsi
The Pepsi Beverages Company logo.
On August 4, 2009 PepsiCo announced that it had reached a final merging agreement with its two largest bottlers The Pepsi Bottling Group, Inc and PepsiAmericas, Inc both of which it had previously spun off in the 1990s. The total cost of the transaction is estimated at $7.8 billion. The merger was approved by shareholders of both bottling companies on February 17, 2010 and was completed on February 26, forming a new wholly-owned division of the PepsiCo North American Beverages unit, Pepsi Beverages Company (PBC). Also included in the merger was a new agreement with the Dr Pepper Snapple Group in which PBC would soon be taking over the bottling and distribution of the Dr Pepper,Schweppes and Crush brands in those markets where they were formerly distributed by PBG and PAS through a 20-year licensing deal (PBC's predecessors have been bottling and distributing Crush in most of their markets since February 2009). It is currently unknown if and when PBC will also distribute Dr Pepper and Schweppes in the rest of its territory (as those markets, such as the Chicago market, also have DPS-owned bottlers serving those areas). Additionally, in those areas of the US that are served by PBC- and DPS-owned bottlers, the bottling rights to certain other DPS-owned brands such as Vernors and Hawaiian Punch would be transferred to the DPS bottlers. The international operations of both former bottlers were transferred directly to the wholly separate PepsiCo International unit.
The globalization of competition
To be successful in global markets, firms must not only understand their potential buyers but also learn to compete effectively against other firms from many different countries. International firms have both advantages and disadvantages when they encounter local competition in foreign markets. Multinational corporations may be larger than local firms and may have better access to sources of finance. They may enjoy greater experience worldwide in product development and marketing. This experience can be brought to play in the new market. However, local competitors may better understand the local culture and hence operate more effectively not only in addressing consumer needs but in dealing with local distributors and governments as well. Today many local competitors, even those in less developed markets, have built up popular brands that a foreign newcomer can find difficult to dislodge. Clash of global giants
Some industries are becoming increasingly global. In these industries, the same global competitors hold significant global market share and face each other in virtually every key market. Major global competitors such as Kodak and Fuji Film consider each other carefully on a worldwide basis. They watch each other’s moves in various markets around the world in order to respond to, or even preempt, any actions that will give the competitor a market advantage. Unilever, a Europe-based firm, and Procter & Gamble of the United States clash in many markets, particularly in laundry products. The two firms compete with each other in most world markets, and action in one market easily spills over into others. Observers have described this competitive action as “The Great Soap Wars”. George Yip suggests several ways in which one global competitor can address another.
• • •
Cross-country subsidization. Using profits from one country in which a business operates to subsidize competitive actions in another country. Counterparry. Defending against a competitive attack in one country by counterattacking in another country. Globally coordinated moves. Mounting a coordinated assault in which competitive moves are made in different countries. For example, some multinational firms now choose global rollouts for products. By introducing new products in all major national markets simultaneously, a firm ensures that its global competitors have no time to learn from one market in order to respond in another. Targeting of global competitors. Identifying actual and potential global competitors and selecting an overall posture – attack, avoidance, cooperation, or acquisition.
Fight for market dominance One of the longest-running battles in global competition has been the fight for market dominance between Coca-Cola and Pepsi Co, the world’s largest soft-drink companies. Some of the most dramatic action has taken place in Latin America. Coke struck at Pepsi in Venezuela, the only market in Latin America where Pepsi led Coke by a substantial margin (76% share versus 13%), thanks to long-standing ties with a local bottler. In a bold play for share, Coke negotiated with Pepsi’s Venezuelan bottler to acquire a controlling interest in that company. The day after the deal was announced, the Venezuelan bottler switched to bottling Coke, and Pepsi lost its distribution literally overnight. It took Pepsi 30 months and a combined investment of more than $500 million to reestablish itself in the country. Another arena, and potentially the largest prize, is Asia. Because the mature U.S. market is growing slowly, Coke and Pepsi have set their sights on major growth markets, such as China, India, and Indonesia, that are home to almost half the world’s population. In India, Pepsi attempted to preempt Coke. Coca-Cola had previously relinquished its position in the Indian market when the Indian government passed a law that would require the company to share its Coke delayed returning to India while rival Pepsi made India a priority market. When Coke finally returned, it found Pepsi well established in the market. Coke, at an estimated market share of 16.5%, was trailing Pepsi’s 23.5% share, when Pepsi accused Coke of hoarding over five million returnable Pepsi bottles collected from recycles in order to disrupt Pepsi production. Pepsi called the police, and a court ordered Coke to return the bottles. The two companies subsequently agreed to a regular exchange of bottles. As can be expected in true global competition, Coke and Pepsi square off in all important
Excerpt from ‘Global Marketing’ by Kate Gillespie, Jean-Pierre Jeannet & H. David Hennessey. Reproduced with permission, Wiley India.
There are competing definitions of globalization, some favorable and others less so. From the perspective of business, it is a process of worldwide economic integration. A more broad perspective describes the process through which culture is diffused throughout the world as a result of various forces including trade, travel, and communications. In some cases, the term is often used without clear definition. For example, Ramesh Diwan, professor of economics at Renssalaer Polytechnic Institute, says, "Globalization has become a buzz word." He continues, "Like other similar buzz words, such as sustainable development, it is rarely defined but used to promote arguments favoring business interests." Therefore, an introduction to the topic requires a working definition. The Turin European Council calls economic globalization one of the major challenges facing the European Union. The Council defines globalization as a process of worldwide economic integration based on three forces: • • • The liberalization of international trade and capital movements Accelerating technological process and the advent of the information society Deregulation through withdrawal of the state from specified areas of economic activity. Businesses want to know what it means for a company to globalize, and they ask several kinds of questions. First, is there something fundamentally different about doing business globally as compared to established business practices? Second, will globalization require different practices in the future as compared to today? Third, what products and services will firms need as they globalize? Meanwhile, globalization involves more than economics. Cultural globalization involves the spread of language, products, and customs as people intermingle. In some cases, cultural perspectives literally involve love and gene pools as people from around the world intermarry.
A third facet of globalization involves government and international organizations. Nation states have created supranational organizations such as the European Union and the World Trade Organization. Such organizations, in turn, include new rules of law and international bodies charged with enforcement of those laws. Further, governments of single nations are changing their outlooks as a result of globalization. Globalization means different things to every nation of the world and cannot be discussed fully in a short essay. Therefore, this discussion provides only an introduction to several facets of globalization. First, the forces behind globalization are outlined. Second, examples of global businesses are given along with discussion of characteristics they share. Third, the results of globalization are discussed. Finally, there is a brief introduction to issues arising from globalization that must be addressed as we enter the 21st century.
THE FORCES BEHIND GLOBALIZATION
Business firms want to globalize in order to expand their markets, increase sales, and increase profits. Free trade agreements facilitate those activities and promote economic globalization. Such agreements vary in scope. Some are bilateral such as the U.S.Canada Free Trade Agreement and the U.S.-Israel Free Trade Agreement. Others are multilateral and regional such as the North American Free Trade Agreement (NAFTA), Mercosur (including Argentina, Brazil, Paraguay, and Uruguay as full members and Chile as an associate member), and the 18-member Asia Pacific Economic Cooperation Group (APEC). TheEuropean Union (EU) goes further by creating a supranational government. And the World Trade Organization (WTO) includes more than 120 nations from around the world. These agreements and organizations are facilitating economic integration on a regional and worldwide basis. Trade agreements facilitate the activities of major companies. For example, Ford Motor Company is working to create a "world car" that can be sold and used throughout the "global village." Trade agreements facilitate distribution systems, franchising, joint ventures, and other cross-border collaborations between and among businesses. CocaCola and Pepsi-Cola are sold in hundreds of countries throughout the world. Franchises for McDonald's hamburgers, Pizza Hut, Subway, Burger King, and others carry U.S. trade names as well as U.S.-style fast foods (and fast eating styles) throughout the world.
One of the major forces facilitating such globalization is the expansion of communication systems. During the final decades of the 20th century, the Internet globalized communications. One document can be distributed throughout the world in seconds. Using computer software, that document can be converted quickly to various languages for use almost anywhere in world. Telecommunications systems allow radio and television transmissions to be broadcast throughout the world within seconds. For example, the Cable News Network (CNN), based in the United States, produces 24-hour news broadcasts that can be seen around the world by traveling businesspeople and others. CNN's 24-hour coverage of the Persian Gulf War in 1991 established the network as one that serves global audiences. It is not viewed as "foreign" when it broadcasts to and from countries other than the United States.
EXAMPLES OF GLOBALIZED BUSINESSES
There is no established definition of the "global" business, but it is helpful to look at companies that operate on a worldwide basis to try to identify characteristics that show how their outlook and operations are global. One group of researchers identified and studied how the following large companies are responding to the forces of globalization: Banque National' de Paris; Canon; CSX; Electrolux, JCB; Pirelli; Royal Trust; TNT Express Worldwide; and Waste Management, Inc. That study identified four common characteristics of global companies. First, activities such as marketing, manufacturing, logistics, and research and development are approached based on a holistic, worldwide plan. Second, the global company does not confine itself within boundaries; its headquarters is, ideally, transparent to customers. Third, global business adjusts its business to meet the needs of local customers; cultural diversity and understanding are crucial. Fourth, the company strives to balance an integrated, global system with the need to be sensitive to local needs. The automobile industry provides excellent examples of the globalization of business. Toyota (a Japanese firm) manufactures its Camry model in the United States. Major U.S. automobile firms have all formed alliances with Asian or European firms. GM is allied with Toyota and Saab; Ford has alliances with Mazda, Jaguar, and Volvo; and Chrysler has joined forces with a European company to become Daimler Chrysler.
THE RESULTS OF GLOBALIZATION
Globalization has various effects, some positive and some negative. One effect is that it promotes greater cultural homogeneity. Common demands, common consumer preferences, and large bodies of common information can (sometimes unfortunately) lead to the blending of cultures and the erosion of cultural differences. A second effect of globalization is that it changes the role of government. For example, as individual nations join the European Union (EU), they give up certain powers of law that previously belonged to individual national governments. As EU nations agree to a common currency (the Euro) and defer to the judgment of the European Court of Justice on matters covered by EU law, they give up certain aspects of individual sovereignty. Yet, at the same time, globalization does not eliminate the need for government. Rather, according to Claude Smadja, managing director of the World Economic Forum, it is forcing governments to redefine their role at the national level. Governments must strive to formulate and implement policies that facilitate economic activity, and they must provide citizens with education and skills needed to function in a global economy. Smadja asserts that governments must strive to provide a counterbalance to the negative effects of globalization—insecurity resulting from an emphasis on speed, flexibility, and permanent change. Governments must work to prevent social instability and political backlash. A third effect is that increased industrialization resulting from economic globalization leads to environmental pollution. These effects are illustrated by massive environment problems along the U.S./Mexican border. But such problems are found throughout the world, especially in developing nations. As a result, many environmentalists actively oppose trade agreements such as NAFTA and trade organizations such as the WTO and APEC. A fourth effect is that globalization increases the gap between the rich and the poor. This gap is especially pronounced in Latin America. In the late 1990s, there was a severe food shortage in Argentina, and many Argentinians relied on the government for food supplies. Seventy-eight percent of Brazil's population survived on less than $100 U.S. per month per family. Further, globalization causes economic problems in one region of the world to be felt throughout the world. In the late 1990s, there were signs of recession in Latin America, and East Asia suffered from a severe economic downturn. Economic woes in Latin
America, Asia, and the economies of other emerging markets affect the economies of nations around the world. As a result, it is said that the pronouncements of the "Group of Seven" do provide a true representation of world economic interests. (The Group of Seven, or G-7, is an economic group that includes the United States, Japan, Germany, France, Great Britain, Canada, and Italy.) Some economists suggest that powers such as Brazil, China, and others deserve representation in world economic summitry.
LOOKING TO THE FUTURE
As we look to the future, we face various questions. Are there alternatives to globalization? Perhaps. Some commentators, for example, assert that regionalization can and should shift the balance of economic power away from the United States and toward lesser developed economies in Latin America and Asia. Others assert that globalization is an inevitable and irreversible process. If that is true, how can harm resulting from globalization be avoided or minimized? How can the globalization process be used to promote a more even distribution of wealth instead of widening the gap between the rich and the poor? These are challenges that world leaders face as we enter the 21st century. The answers will not be easy. [ Paulette L. Stenzel ]
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Case Analysis on Pepsi's Entry to India
Pepsi's Entry into India: A Lesson in Globalization
SUMMARY: The case discusses the strategies adopted by the soft drinks and snack foods major PepsiCo to enter India in the late 1980s. To enter the highly regulated Indian economy, the company had to struggle hard to 'sell' itself to the Indian government. PepsiCo promised to work towards uplifting the rural economy of the terrorism affected north Indian state of Punjab by getting involved in agricultural activities. In addition, it made a host of other promises that made its proposal very attractive to the regulatory authorities. The case also discusses the criticisms leveled against the company, in particular, criticism of its failure to honor many of its commitments after it started operations in the country and after the liberalization of the Indian economy. Finally, the case takes a look at the contract farming initiatives undertaken by Pepsi since the 1990s and seeks to critically analyze the
strategies used by the company to enter India.
Your Analysis should include discussion of the following: � Was Pepsi really interested in the betterment of Punjab, its farmers and its people? � Did the company take undue advantage of the liberalization of the Indian economy by breaking its commitments? � Why do you think the government did not take any action against the company even after discovering that it had broken many of the agreements it had entered into? 1.Why do companies like Pepsi need to globalize? What are the various ways in which foreign companies can enter a foreign market? What hurdles and problems did Pepsi face when it tried to enter India during the 1980s? 2.Critically analyze the strategy adopted by Pepsi to sell itself to the Indian government. Do you think the biggest factor responsible for the acceptance of its proposal by the regulatory authorities was its projection of its operations as the solution to many of Punjab's problems? Why/Why not? 3.How did the company react to the changes in the business environment after the liberalization of the Indian economy in the early 1990s? Critically comment on the allegations that Pepsi deliberately did not adhere to most of its commitments. 4.Examine the contract farming initiatives undertaken by Pepsi in India and explain the rationale for such initiatives from the company's perspective. Why is it important for multinational corporations to work towards the improvement of the economy of the countries in which they operate? What are the various other ways in which this can be done? Include at least two related appendices
Thailand, or shopping at Marks and Spencer in Singapore, or with your credit card worldwide. Welcome to the golden era of our time. Time when the whole world under one roof. This movement is called globalization began in the second half of the 20th century, when governments on the need for their borders with other countries for trade, investment and perceived openMigration. Globalization has helped them to see unprecedented growth in their economies, how they had not seen in centuries. The widespread increase in the use of Internet and IT-enabled services promoted the development of their economies. As a result, people have had access to products from different countries on their doorstep. Whether it is for German cars, Egyptian cotton, soap and American music, Belgian chocolate and coffee in Colombia, people could taste the products andServices around the world. Economics of developing countries through foreign direct investment (FDI), ie benefit to investment from other countries in the heritage of the country. open economies have allowed people to travel freely and work in other countries. Globalization has benefited countries around the world in more ways than one. Apart from the direct implications politically and economically, he could join the world culturally. For example, English has become auniversal language of the species. Fashion, trends and news
ideas move through travel, trade and media from around the world. Exchange of best practice in the sector has better access to talent and technology were all due to globalization is possible. global brands such as Reebok, Pepsi, Panasonic, Sony etc for the world to provide consumers in all. An individual carries the same brands in India as an individual in Mexico. Even in countries technology have benefited greatly from globalization.News and media have developed and improved communications. Internet revolution has provided a common platform and enabled people around the world to communicate. Everything you can imagine and things you can not even imagine are available on the Internet. Transport systems are robust and the costs came as a result of technological progress, making markets more accessible to foreign trade. Tuna in the North Atlantic mayServe the next day in a sushi restaurant in Sri Lanka. While globalization has its critics, it is an irreversible process. With the economies of different countries work together and depend on each other for growth, the world will continue to remain a global village. This is clearly evident from the economic collapse in recent years. Global Governance for the maintenance of social standards, economic, cultural, environmental and political world is already a reality.
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