Analysis Coke And Pepsi Learn To Compete In India Business Essay

Analysis carbon And Pepsi Learn To Compete In India Business EssayThe political environment in India has proven to be slender to company per markance for some(prenominal) Pepsi co and coca-cola India. What special(prenominal) aspects of the political environment cave in contend key roles? Could these effects fix been anticipated prior to commercialise intro? If non, could developments in the political stadium overhear been progress toled interrupt by each company?In run to say what coca plant low-down and Pepsi had to deal with in India, it is essential to grasp the full meaning of what politics includes. Politics is non however the political ideology the country has and so the governance of the state including regimen policies and the role he plays in the country but in addition on a micro level it deals with small associations and unions and thus as salutary with piece of power.India was seen for galore(postnominal) years as being unfriendly to foreign inv estors. In fact the rule of Indigenous Availability law specified that if an item could be obtained locally, imports of a similar product were forbidden. undermenti whizzd the first Gulf War in 1991, measures were taken to liberalize the Indian economy introducing the New industrial Policy to eliminate barriers much(prenominal) as bureaucracy and regulation to foreign direct investment. Despite this, protectionism was belt up evident in India.Pepsi entered the Indian beverage commercialize in July 1986 i.e. before the liberalization of Indias organisation, while coca dope followed for the second time (after a presence among 1958 and 1977) in 1993. Despite this, both of them authorized alien status upon ledger entry in the Indian merchandise. The two corporations were required to follow government policies designed to impede foreign commerce. Sales of Pepsis soft drink concentrate to local bottlers could not exceed 25% of total gross sales while fruits and ve beatables by Pepsi Foods Ltd. had to be processed. coca weed on the separate hand had to agree to sell 49% of its equity as a condition of entering and barter foring pop out(a) an Indian company (Parle).Moreover, according to Indian law it was forbidden to nurture products under foreign bell ringer craps if sold within India and thus Pepsi became Lehar Pepsi and Coca pot became Coca Cola India.The Indian government acted as a regulator imposing sets of laws and rules that restrained the carriage the companies do business. According to Dr. Ashok Rao, (Head of Network Project, CEDT, Indian Institute of Science in Bangalore) (2006), India has a really conf single-valued functiond, diverse and stagnant political system. The amount of political unwrapies present in India and the power regional political parties scram, act as big barriers to businesses. Unlike western democracies, power is centralized and top politicians dictate what happens thus businesses will have to work through many more layers to reach to somebody who can actually take a decision.The micro environment in India mainly pressure groups too affected heavily Coca Cola and Pepsi. Their political power in India was substantial at the time. To promise a few, at that place was the All-India Anti-Imperialist Forum which called for a boycott of all American and British goods after the attacks on Iraq and the Centre for Science and Environment (CSE) led by Ms. Sunita Narain who issued a topic stating that drinks do by Coca Cola and PepsiCo were found to contain pesticide resi ascribable far mellower than the limits suggested by governments Bureau of Indian Standards (BIS). some(prenominal) of them led to decline in sales however, the damage d i to sales through government action was less important than the bad publicity received.All the above set off the political power and instability present in India. Government situations in India were dynamic and inconsistent mainly because government laws and policies were unclear and not found on strong foundations (Ash Rao, 2006). Because of this inconsistency in the legal environment, there was a broader importance played on lobbying the politicians. Lack of solid institutions gave way to corruption. In fact, as Li Chain, (Ex-member, Planning Commission and Political Reformer in Bangalor) stated years later (Ashok Rao et al, 2006), India ranks high on the corruption index. We have not yet found a way of containing corruption in our bureaucracy and political system.Being such a dynamic and inconsistent environment, Coca Cola and Pepsi could not predict most of the issues raised beforehand. However, just by tone of voiceing at the unstable, confusing and dynamic political environment both companies should have been prepared to deal with similar issues.Coca Colas symmetricalness to sell 49% of its equity to Indian partners within two years is a case in point. eon lobbying was out of the question due to an oversight of the Foreign Investment Promotion Board (FIPB), another option would have been that of not investing only through a joint venture with Parle until solid foundations were built. During the time, investment rules were always changing and unclear and thus Coca Cola should have known better and not expect an equal treatment (other foreign companies such as Philips and Carrier were allowed to buy back most of their dandy helpings) run acrossing that as stated by mart analysts, there was no apparent logic behind India government policies.PepsiCo was quite quick in every situation to abide with the changing policies however both companies needinessed pro-activeness. With specific measures in place, both companies could have avoided all the bad publicity on their brand names.Timing of entry into the Indian market brought different results for PepsiCo and Coca-Cola India. What benefits or dis advantages accrued as a result of earlier or later entry?Timing of entry in a foreign market is a c ritical decision. Although the first entrant in the market would have better chances of working market share, both first and followers entrants have their advantages and disadvantages.The political and legal environment in India does not present a clear newspaper clipping line which amongst PepsiCo and Coca Cola India had the most advantages in cost of time of entry. PepsiCo was the first to enter the market in 1986, although in actual fact Coca Cola had already had a presence in India between 1958 and 1977. The decision to leave was taken when Indias government tried to force Coca-Cola to share their recipe and tailored its equity stake down to 40%. Coca Cola re-entered the market in 1993.PepsiCos timing was impeccable. During that peak the carbonated soft drink market experienced substantial growth in India. Pepsi were able to fit their place and grab a good share amount of the soft drink sales managing in fact to gain 29% market share by 1993.Moreover, according to Srivast ava M. (2010) Pepsi became this catch-all for anything that was bottled, fizzy and from abroad. The word Pepsi became part of everyday vocabulary in India referring to soft drinks in general and not only PepsiCo soft drinks.However, PepsiCo besides suffered from a number disadvantages because of its timing. The Indian Government only approved its application to trade in the Indian market after agreeing to the threshold of total sales not exceeding 25% and that of changing name to Lehar Pepsi. PepsiCo in any case struggled to fight off the smaller Indian soft drink brands in its venture to gain market share.Coca Cola India, on the other hand, entered the market 6 years after PepsiCo. During this timeframe legislations were revise to facilitate foreign investment including the elimination of the clause forcing foreign companies to join forces with Indian companies in order to be able to enter the market.In fact, Coca Cola entered the Indian market as Coca-Cola India in 1993. Howeve r, wanting to expand its investments, Coca Cola India formed a joint venture with industry leader, Parle, in 1996, buying out four of its bottling plants together with its leading brands Thums Up, Limca, Citra, Gold Spot and Mazaa. For Coca-Cola India to do this, however, it had to sign an agreement with the Indian government agreeing to sell 49% of its equity to Indian Partners.The Indian market is enormous in monetary value of population and geography. How have the two companies responded to the sheer scale of operations in India in terms of i. product policies, ii. promotional activities, iii. pricing policies and iv. distribution arrangements.A population of over 1 billion large number ( as of 2010 census) and being the 7th largest country in the world, makes India single of the largest markets in the current economy. Both Pepsi and ascorbic acid had to adapt to such enormity, and they did so passim several areas.Product PoliciesBoth companies carefully catered for the Indi an tastes. They entered the market with products close to those already available in India such as lime beverages, fruit drinks as well as pee.They carefully waited until they had a secure spotlight in the market and had established their core products past introduced American- type drinks. One particular example is the introduction of Sprite, a beverage forming part of the Coca- Cola family.They also introduced new products. ascorbic acid was the first to start producing bottled water under the name of Kinley while Pepsi Foods introduced Aquafina.Promotional ActivitiesThe Navrartri fete is the second highest season for soft-drink consumption. Pepsi and Coke do full use of this festival and saw it as a promotional opportunity.Coca-Cola India It gave away 20,000 passes to the festival one for every purchase of a Thums Up. They also introduced a buy one get one free scheme and held lucky draws where one could win a tripper to Goa.PepsiCo It sponsored dance competitions on a larg e scale and had many promotional offers such as a free kilo of Basmati rice with every refill of a case of 300ml of Pepsi as well as free kit-kat with every 1.5 l bottle and free Polo with every 500ml bottle.The segmentation of different areas of India allowed for the differentiation and division of rural and urban Indian youth into categories, India A and India B respectively. Doing so they were able to advertise and promote their products differently so as to target and appeal to these markets individually.Coke made use of Bollywood stars to endorse its products, featuring them in their adverts and campaigns while Pepsi preferred to use degenerate events and famous athletes such as cricket players and sponsored events such as the cricket World Series of 2003.Pricing PoliciesPepsiCo It included an aggressive pricing policy on their one litre bottles which created different reactions between their competition.Coc Cola India In 2003, it slashed its wrongs of softdrinks by 15-25% as an attempt to promote consumption and enhance affordability. It also made sure the soft drinks were made available to consumers so as to make it a regular purchase.PepsiCo was forced to match these price cuts in order to keep up. dissemination ArrangementIn terms of distribution arrangements both PepsiCo and Coca-Cola India had production plants and bottling centers all throughout India located strategically in the largest cities including Bombay/Mumbai and Delhi. More plants were added when demand increased and when the product range grew.Moreover, having formed partnerships with local companies, both Coca Cola and Pepsi were able to get sign access into the market.Global topical anestheticisation is a policy both companies have implemented productively. Give examples for each company from the case.By definition, the term glocal refers to the organization (in this case corporations such as Coca Cola India and PepsiCo) and the community which is willing and able to withdraw gl obally and act locally.Both firms have identified this emerging trend as the key element to surviving in the Indian Market. They adapted their products to the location and culture they marketed them in.PepsiCoPepsiCos first signs of glocalisation were apparent from the moment it attempted to enter the Indian market as it did so as a joint venture with another two locally based companies, Voltas and Punjab Agro. Together they formed PepsiFoods Ltd.In 1990 PepsiCo then proceeded to changing its name as well as the name of its other products to Pepsi Lehar so as to conform with the imposed government regulations. This name also helped them to integrate further with the Indian culture.PepsiCo also launched Lehar 7UP so as to cater for the local tastes and lime culture and placed this in the clear lemon beverage category.PepsiCo vigorously sponsored cricket players as well as cricket and other sporting tournaments such as soccer. It also sponsored for the whole event those cricket player s in the Indian Cricket Team who participated in the 2003 Cricket World form in South Africa. Moreover, it took advantage of the World Cup Fever by organising local tournaments and featuring football heroes during this period in their campaigns. PepsiCo also chose its campaigns to tie in with imporant sporting events such as the Keep it Cool 7UP Summer Campaign which coincided with India Zimbabwe One Day Cricket Series.The kisser of best-selling(predicate) Bollywood actors such Amitabh Bachchcans endorsement of Mirinda was also used.As mentioned in the previous question, PepsiCo also made use of the Navrartri fete by creating promotional offers. In the year 2000, it teamed up with Guarjarati TV to telecast the festival throughout the 9 nights.Coca-Cola IndiaCoca-Cola India also started off as a joint venture with Brittania Industries India Ltd. In 1993 it went on to form a joint venture with Parle, purchasing its 4 major bottling plants and leading brands including Thums up whic h in 2002 class-conscious second nationwide in terms of softdrink consumption. This allowed it to integrate a national drink under the Coca Cola brand so as to boost Coca Colas image and credibility.Glocalisation is part of Coca Colas think global act local business plan.Coca Cola also made use of the Navrartri Festival in order to integrate themselves with local culture. In 2002 they gave out 20, 000 free passes to the fast dance hap during this festival one for every bottle of Thums Up bought.Coca Cola India also carried out life style advertising and its main strategy was to build a connect using the relevant local idioms. They made use of adverts featuring famous directors such as A.R. Rahman, music director of Slumdog Millionaire, and made sure to use popular local music such as the gaana. Coca Cola India also made use of Bollywood stars to pluck consumers targeted specially to the rural and urban youth catered for in different segments. Famous stars include Aishwarya R ai and Vivek Oberoi.Some analysts consider that Coca-Cola India made mistakes in planning and managing its return to India. Do you agree? If not, what or who do you think was amenable for any mistakes?Coca Cola first entered the Indian market in 1958, however withdrawn in 1977 after facing many problems from the government, such as cutting its equity stake to 40 percent and being asked to hand over its secret formula for the syrup. Coca Cola managed to re-enter the market in 1993 after the first application in May 1990 was rejected.Pepsis application to enter the Indian market was plausibly a trigger for Coca Cola to do the same. This could have been Coca Colas first mistake haste. lacking to be part of this growing and developing market, it entered the market soon after PepsiCo despite knowing that although sixteen years had passed from its first attempt in the market, the political environment was still very unstable and thus very risky.Doing heavy research before entering suc h a risky (politically, economically and also culturally) market, is vital. Still, there was a lot of which Coca Cola did not know about the Indian market, especially in confronting the huge political risks. Although Coca Cola has its faults, blaming Coca Cola entirely would be wrong. The Indian government and other authorities had a lot of power on businesses, as explained in fountainhead 1, making it very hard to predict certain situations. Nonetheless, if Coca Cola India had been a second gear more knowledgeable and careful in planning and implementing its corporate and business strategies, it could have avoided certain managing mistakes. However, staying out of this harming market would have been a shame.Although it is fair to say that its market entry was not made golden due to government application rejections and other imposed rules Coca Cola India could have tried negotiating with the government a bit more before entering the market). During its first years in the market , Coca Cola India was also very slow in realizing certain key issues such as the ideal price point for its soft drinks. Having more than 50% of the population under poverty line, a reduction in prices (which actually occurred then in 2003), would have increased consumption and thus increasing cabbage.All in all, Coca Cola India was quite successful in its choice of strategy, considering it has around one million sell outlets around India selling Coca Cola. Few of its best discourse strategies were those of including stars from Bollywood in its advertising and the Buy one Get one free promotion. Despite this however, as mentioned before, understanding the Indian population a bit more could have helped.In conclusion, what Coca Cola India needed most were safer and more solid case to compete on. While there were a lot of external factors and hidden risks which were out of Coca Colas control, better management of these situations would have lead to better results (as discussed in qu estion 1).Although its clear that Coca Cola made mistakes in its market entry stage it was also a bit unlucky maybe due to its hasty decision in entering the market.How can Pepsi and Coke confront the issues of water use in the manufacture of their products? How can they defuse further boycotts or demonstrations against their products? How effective are activist groups like the one that launched the campaign in California? Should Coke address the group instantly or just let the furor subside, as it surely will?The Coca Cola Company used 290 billion liters of water in 2006 alone, enough to meet the entire worlds drinking water needs for 10 days (Amit Srivastava, July 30, 2007). This odorous water was mainly used to clean their equipment in the production process, turning two thirds of this water into fumble water. One must note that this is done in a country where water shortage is a meagre problem. Therefore both multi-national must take the bull by the horn and change the way t hey do certain procedures without hiding but being sincere. More efficient ways of cleaning must be found to waste less water and be more responsible towards the Indian nation. Coca-Cola has recently announced a partnership of US $20 billion over three years between them and the world wildlife fund on water conservation. This will help in rebuilding the trust with the Indian population so as to succeed in the Indian market. An element of corporate social office is important for companies to work better within foreign market.Bad publicity can damage a companys reputation definitely. This was clearly experienced by both PepsiCo and Coca Cola India. Although advisory boards were created and purity tests were conducted in order to avoid further boycotts or demonstrations against their products, this was not enough. Better use of Public Relations would have been a first step. Having conducted purity tests, the next step would be that of communicating the results in an effective way. Ch oosing to cover the accusations and then presenting these tests could have been felt as a pique. The use of press releases and open days at the factories showing the process for example would have made both the government and the general public more participant. Moreover, trying to deal with the government by emphasizing on corporate social responsibility could have gained governments trust and thus earn a safer position in exchange. Offering a percentage of their profits to help in building schools or hospitals in India could have been an idea.Activist groups, like the one in California, are very powerful. They can be great allies but also worst enemies for a company. Their influence on the general Coke consumer is great as they reach the consumer directly through diverse activities and in turn these consumers force manufacturers/ suppliers etc to take action. In fact, the campaigns in California led to several bottling plants stopping point down as well as the discontinuation o f contracts with Coca Cola.Coke should address the group directly avoiding accusations of trying to hide its activities and actions. In this way it would defend itself and would also be able to regain its credibility and continue building its image by being proactive. Another reason why it should do so is to gain trust of customers since it claims it has nothing to hide by being truthful and giving an answer kinda of waiting for the rumors, accusations and scandal to subside.Which of the 2 companies do you think has better long term prospects for success in India?The two companies in question are strong multinationals which are widespread around the world. Some energy argue that on world terms Coca-Cola is the strongest brand out of the two. However after analyzing the case in hand it is evident that both companies could have handled situations different leading to different results.The success or lack of it in the first years in a foreign country can be very helpful in predicting the future of the company. Pepsi on the one hand has already a great market share and sustainable brand recognition. On the other hand, Coca Colas conflicts with the Indian government are not very promising. Having a good kind with authorities is vital for growth.Both multi-nationals have been successful in developing marketing strategies aimed at increasing the consumption of carbonated soft drinks. Moreover, they were both very successful in glocalization as seen earlier. Some argue that PepsiCo was most successful through the use of Basmati rice (considered a luxury type of rice) in its sales promotions while others consider Coca Colas depiction of Bollywood stars its advertising campaigns as being impeccable.Moreover, Coca Cola India was always the initiator of the new ventures/strategies, but failed to follow through. PepsiCo followed Coca Colas initial ideas, going that step further. In fact, PepsiCo was more successful in engaging the local people with its brand.Statistical ly, Pepsi has had unceasing growth during its occupancy in a stable pattern. Long term investors seem to prefer Pepsi Co due to its promise of future expansion. If a company invests in Pepsi Co today, PepsiCo is promising a alternate of almost 100 more points by 2015. Coca Cola India seems to be attracting more those who believe in fixed income, as its investments seem to be fluctuating less.Regarding direct competition, Coca-Cola still trails behind Pepsi in terms of market share which could signify that Pepsi has a better overall strategy for success. Coca Cola seems to be struggling more to survive in such a dynamic and growing market. All in all, the current situation does point more towards Pepsi as being more successful than Coca Cola in the Indian market.What lessons can each company draw from its Indian experience as it contemplates entry into other Big Emerging Markets?It seems that prior market research was most overlooked by both companies. Deep market research includin g all the PESTLE elements is vital in order to understand how to do business in the foreign country. As stated in the text In many ways, Coke and Pepsi managers got to learn the hard way that what works here does not always work there. Moreover, on-going environmental scan is important in order to be able to anticipate matters rather than being re-active to situations. With specific measures in place, both companies could have avoided all the bad publicity on their brand names.Both companies should also have focused more on education of their products. Most probably, many emerging countries lack knowledge of their brands and also lack certain infrastructures and standards of living present in other developed countries.PepsiCo lessons learntPepsi realized how important it is to understand and keep with local tastes thus focusing on the clear lemon category which was a great hit in India. It is also beneficial to pay attention to market trends in order to position your product accordi ngly. A very important point for Pepsi in India was the pricing policy and bottle sizes.Adapting your communication mix as well as distribution methods to the market is also a key point. Local celebrity appeals made for exceptional advertising for PepsiCo.Coca Cola India lessons learntWhile also realizing the importance of give attention to market trends Coca Cola surely realizes the importance of investing in local products. While not investing in Thums Up brand for the first couple of years, decreasing market share from 60% of total carbonated beverage sales to 15%, after a substantial investment, Thums Up ranked second nationwide within a year.The importance of timing of entry should not be overlooked. Coca Cola entered the market at a poor time because they had to agree to abide by all of the Foreign Investment Laws of that yearDefining your target audiences more specifically than what Coca Cola did in India could have helped for better targeting/positioning and thus advertisin g of products. Coca Cola separated its markets as India A and India B without any further differentiation through for example age, gender, language, interests, location.Establishing a good business relationship with the host countrys government and/or any other governmental or non-governmental groups present in the country is also vital as these could act either as a source of advantage or could impede your success. Coca Cola made a mistake in trying to get out of its promises. It had already made a mistake by entering the contract they did. By go on to apply for extensions and attempting to deny voting rights for the Indian stake, Coca Cola India was only tarnishing its public image and destroying its relationship with the government.Finally, as Venkatesh Mysore, (Managing Director, MetLife India Insurance Company Pvt. Ltd. In Bangalore) said It is extremely important for MNCs to follow the laws of the land, and not look for short-cuts (Ashok Rao et al. 2006).