Good Example Of Coke And Pepsi Learn To Compete In India Case Study
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 the political environment have played key roles? Could these effects be anticipated prior to market entry? If not, could developments in the political arena have been handled better by each company?
In fact, the political environment in India is known to be rather challenging for business, especially for international one. First of all, in spite of the fact that India is a WTO member (and till 1995 was a member of GATT), the Indian government still often implies restrictive and discriminatory measures against foreign investors. For instance, as in PepsiCo case in 1986 (“Coke and Pepsi Learn to Compete in India” 2), a company can be restricted in sales, there can be rules concerning brand names, or the prescription to use national element (labor, products, etc.). It is no wonder that since 1995 India acted as a respondent in 22 cases within WTO dispute settlement procedure (The World Trade Organization, n.d.).
Secondly, Indian authorities (government and public administration) are quite corrupted, and it causes additional barriers for international business. According to the 2001 Corruption Perceptions Index report conducted by the Transparency International, India ranked 71 out of 91 countries with 2,7 CPI score (The Transparency International 2001). As of 2014 India ranks 85 out of 175 countries with 38 CPI score (The Transparency International 2014).
Finally, the key role also played the Indian perception of foreign investors, and especially Western companies, as the latter are often seen as “symbols of Western cultural imperialism”. The Coke communications director explains, “Fringe politicians will continue to be publicly hostile to big Western companies, regardless of how eager they are for their investment” (“Coke and Pepsi Learn to Compete in India” 4).
In my opinion, all these effects could be easily anticipated before entering the market. Coca Cola, for example, experienced pressure from Indian government in 1977 and could anticipate that despite new economic polity government attitude didn’t change.
2. Timing of entry into Indian market brought different results for PepsiCo and Coca-Cola India. What benefits or disadvantages accrued as a result of earlier or later market entry?
The first market entry of Coca-Cola in 1958 was not a success and resulted in the withdrawal in 1977, but at the same time the company gained valuable experience. The second try was made in May 1990 as a joint venture with Britannia Industries India Ltd. Whereas PepsiCo entered Indian market only in 1986 for the first time and faced more restrictive measures than Coca-Cola in 1990 (“Coke and Pepsi Learn to Compete in India” 2).
Actually, Coca-Cola benefited from later market entry for the second time, because by May 1990 some strict restrictions concerning foreign investors had been already cancelled. Thus Coca Cola was obliged neither to process local products, nor to change its brand name in some way. In this regard Pepsi faced some disadvantages due to an earlier market entry.
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 arrangement?
As to PepsiCo, initially, they had implied an aggressive pricing policy and launched several new brands which affected local producers. Then the company used cultural traditions and sponsored dance competitions during annual Navratri celebrations that last 20-25 days a year. Another campaigned started during the India-Zimbabwe One-Day cricket series and was marked by the introduction of a 200-ml bottle to increase frequency of purchase. Besides, PepsiCo made use of India’s victory at in the India–England NatWest One-Day cricket series finals and engaged Indian sports stars in the advertising campaign (“Coke and Pepsi Learn to Compete in India” 2-3).
As to Coca-Cola marketing policies, the company has also managed to employ successfully different tactics. In July 1993 the company bought Parle’s bottling plants in four Indian cities with good consumption rates as well as some local popular brands. In addition, while implementing its “think local—act local” business plan, Coca-Cola also improved the sales during traditional cultural festival Navratri. What’s more, the company developed advertising company targeted at Indian youth, urban as well as rural one. Finally, Coca-Cola took measures to increase affordability of its beverages among Indian people in order to gain new consumers and raise popularity (“Coke and Pepsi Learn to Compete in India” 2-3).
5. 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 directly or just let the furor subside?
Both companies should test in advance the quality of water they are going to use for beverage production. The tests must be conducted by local laboratories in order to get confirmation from local level and gain trust. Then, the companies should report the expertise results to public as well as companies’ measures taken to clear the water. Additionally, the companies should regularly inform the people about the quality of their beverages with due reference to the local expertise result (some reputable Indian labs should be chosen) to prevent further anti-advertising campaigns. Activist groups launching such anti-campaign can be very effective, if the company doesn’t manage to answer to their accusations and charges properly and with due concern, and what is more important – in time.
Undoubtedly, some problems may occur with getting necessary permissions from local authorities, as stated above they are highly corrupted. Besides, according to Doing Business Report 2015 India’s ranking are very poor: the country is at 158th place in the “starting business” category, at 184th place in the field “dealing with construction permits”, at 186th place in “enforcing contracts” area (Ease of Doing Business in India 2015). These factors are to be taken into consideration by legal departments of both companies.
8. Comment on the decision of both Pepsi and Coke to enter water bottled market instead of continuing to focus on their core products – carbonated beverages and cola based drinks in particular.
I’m inclined to think that it was a well-developed strategy to explore new market sectors, as there is increasing demand for bottled water in India. At the same time the popularity of soft drinks is declining. For that reason, both Pepsi and Coke have entered water bottle market.
Furthermore, they responded to the current trends to lead a healthy life, which includes sport, fitness, healthy food and regular consumption of pure water (minimum 1.5 liter a day pro capita).
Coke and Pepsi Learn to Compete in India. Supplementary Material. United States.
The Transparency International. Corruption Perceptions Index 2001. Retrieved February 7, 2015, from http://www.transparency.org/research/cpi/cpi_2001
The Transparency International. Corruption Perceptions Index 2014. Retrieved February 7, 2015, from http://www.transparency.org/cpi2014/results
The World Bank Group. Ease of Doing Business in India 2015. Retrieved February 7, 2015, from http://www.doingbusiness.org/data/exploreeconomies/india
The World Trade Organization. (n.d.). India and the WTO. Retrieved February 7, 2015, from http://www.wto.org/english/thewto_e/countries_e/india_e.htm