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Final Case Study

Coke and Pepsi Learn to Compete in India

Question 1:
The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola India. What specific aspects of political environment have played key roles? Could these effects have been anticipated prior to market entry? If not, could development in political arena have been handled better by each company?

Question 3:
The Indian market is enormous in terms of population and geography, how have the two companies responded to the sheer scale of operations in India in terms of product policies, promotional activities, pricing policies and distribution arrangements

Question 4:
"Global localization" (glocalization) is a policy that both companies have implemented successfully; give example for each company from the case?

Question 7:
What lessons can each company draw from its Indian experience as it contemplates entry into other big emerging markets?

Question 1:
The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola India. What specific aspects of political environment have played key roles?
The primary barrier to Pepsi and Coca-Colas entry into the Indian market was its political / legal environment as a result of its history. First, despite the liberalization of the Indian economy in 1991 and introduction of the New Industrial Policy to eliminate barriers, such as bureaucracy and regulation to foreign direct investment, India still had a strong history of protectionism, dating back most recently to its economic policies following the Gulf War. Indias past promotion of indigenous availability depicts its affinity toward local products. In fact, the idea of protectionism mean if a product could be obtained anywhere in the domestic market, imports were forbidden. Due to Indias suspicion of foreign business stemming from history, both Pepsi and Coca-Cola received alien status upon entry to the Indian market. The two corporations were required to follow many laws, designed as obstacles to impede foreign business. India seen as unfriendly to foreign investors for many years.

Indian Laws:
Unlawful to market under their Western name in India Pepsi became Lehar Pepsi Coca-Cola merged with Parle and became Coca-Cola India Different Laws for Pepsi and Coke Coca-Cola forced to sign to sell 49% of its equity in order to buy out Indian bottlers. This response might have been acceptable if investment rules in India were clear and unchanging. Pepsi entered earlier, and was not subject to this. Pepsi sales of soft drink to local bottlers could not exceed 25% of total sales.

Could these effects have been anticipated prior to market entry?


Many of the problems would not have been anticipated. Government situations are dynamic and inconsistent where there is not a strong foundation of law.

How could these developments in the political arena have been handled differently?
In my point of view, Coke could agreed to start new bottling plants instead of buying out Parle, and thus wouldnt have to agree to sell 49% of their equity & maintaining a good relationship with the host countrys government.

Question 3:

The Indian market is enormous in terms of population and geography, how have the two companies responded to the sheer scale of operations in India in terms of product policies, promotional activities, pricing policies and distribution arrangements
Pepsi and Coca-Cola responded in many ways to the enormity of India in terms of it population and geography. Product Policies Catering to Indian tastes Entering with products close to those already available in India such as colas, fruit drinks, carbonated waters. Waiting to introduce American type drinks Lime sodas (Coke-Sprite and Pepsi-7 Up). Introducing new products Bottled water (Coke- Kinley and Pepsi-Aquafina) Promotional Activities Both advertise and use promotional material at Navrartri Pepsi gave away a kilo of Basmati rice with every refill of a case of Pepsi. This is an effective strategy to blend the old (rice) with the new (Pepsi). Pepsi launched an ambitious marketing campaign sponsoring Cricket celebrities and athletes from the World Cup. Coca-Cola gave away vacations to Goa, a famous resort in India and offers free passes. Coca-Cola launched its Lifestyle Advertising Campaign as a method of building brand loyalty among its target markets. Use of different campaigns for different areas of India India A campaigns try to appeal to young urbanites. India B campaigns try to appeal to rural areas.

Pricing Policies Pepsi started out with an aggressive pricing policy to try to get immediate market share from Indian competitors. Pepsi introduced returnable glass bottles for customers to recoup costs. Coca-Cola reduced prices nationwide by 15-25% to make them affordable and easy to get access to & try to compete with Pepsi and gain market share. Distribution Arrangements Production plants and bottling centers placed in large cities all around

India.

More added as demand grew and as new products were added.

Question 4:

"Global localization" (glocalization) is a policy that both companies have implemented successfully; give example for each company from the case?
The successful of implementation glocalization is to apply the concept of "Adapt our strategy to the local culture". Both companies have successfully implemented glocalization by taking a product global, a firm will have more success if they adapt it specifically to the location and culture that they are trying to market it in.

First, Pepsi forms joint venture when first entering India with two local partners, Voltas and Punjab Agro, forming Pepsi Foods Ltd. Then, In 1990, Pepsi Foods Ltd. changed the name of their product to Lehar Pepsi to conform with foreign collaboration rules. In addition, to keep with local tastes, Pepsi launched its Lehar 7UP in the clear lemon category. Advertising is done during the cultural festival of Navrartri, a traditional festival held in the town of Gujarat that lasts for nine days. Most effective glocalization strategy has been sponsoring world famous Indian athletes, such as cricket and soccer players.

First joined forces with the local snack food producer Britannia Industries India Ltd. in the early 90s. Formed a joint venture with the market leader Parle in 1993.

Advertising is done during the cultural festival of Navrartri, Coca-Cola issued free passes to the celebration in each of its Thums Up bottles. Also ran special promotions where people could win free vacations to Goa, a resort state in western India. Coca-Cola also hired several famous Bollywood actors to endorse their products.

Vivek Oberoi

Aishwarya Rai

Amitabh bachchan

Question 7:

What lessons can each company draw from its Indian experience as it contemplates entry into other big emerging markets?
There are many lessons have been learned from this case for both companies:

:
Entered the market Before Coca-Cola and was able to gain a foothold in the market while it was still developing. Beneficial to keep with local tastes. Beneficial to pay attention to market trends. Celebrity appeal makes for exceptional advertising. It pays to keep up with emerging trends in the market.

:
Pay specific attention to deals made with the government. Establish / Maintaining a good relationship with the host countrys government. Investment in quality products. Advertising is crucial.

Coca-Cola Indias Mistakes:


o Coca-Cola should have been more careful of when they entered the market and what they were promising when they entered. o Coca-Cola India tries to expand investment; Government allowed acquisition only if Coca-Cola agreed to sell 49% of equity within 2 years. o Coca-Cola tried to get extensionstwice, India granted the first extension & denied the second. o Coca-Cola should not have tried to weasel their way out of promises that they made.

Why does not this multinational set an example by fulfilling its own commitment?

These mistakes hurt Coca-Colas image and reputation as an International Company.