Jorge Martinez Professor Chueng M320 International Marketing 30 January 2018 Case 1.3 “Coke & Pepsi in India”1. The case study “1-3 Pepsi and Coke learn to compete in India” clearly demonstrates the impact a political government can have on a growing, foreign corporation. Despite already being well-established global presences, Pepsi and Coke underestimated the difficulties and troubles expanding in India would bring about. The article definitely hammers home the point, “‘what works here’ does not always ‘work there'” (Amine, 2008, pg. 1), to demonstrate how firms must adjust to foreign norms. The Indian political forces have proven to be pivotal in regards to company performance for Coke and Pepsi. After trying to enter the market, Coke decided to leave after they were given an ultimatum to turn over their secret recipe for syrup. This clearly exemplifies the past corruption of the Indian government. However, in 1991, a new form of government arose which facilitated completing business deals with foreign corporations. As a result, there started to be more economic growth and expansion. Since India was just coming out of an economic hardship, there was a rising market that many companies were excited to associate themselves with. Pepsi took advantage of this movement and was able to enter the market as a joint venture company with two local firms: Voltas and Punjab Agro.As India was dealing with the contaminated water, there seemed to be an increased pressure from consumers and the government towards Pepsi and Coke. Due to their unsuccessful past in India, these corporations needed to work extra hard to prove themselves to the government and country as a whole. Some of the difficulties that Pepsi and Coke encountered could have been reduced with proper planning and execution. As we established in class if the world consisted of 100 individuals, the United States/Canada could take up 5 and Asia would take up 60 (class lecture, Erickson, 100People: A World Portrait). Therefore, “companies need to customize, adapt and have a diversified workforce” (Dr. Chueng, class lecture). Pepsi and Coke went into India with the idea to expand their soft drinks into the Indian culture and diet. However, they did not consider all factors, making their journey a lot more difficult than expected. Among other elements, they underestimated the power of the Indian government, the intensity of diet and cultural norms, and the difficulties contamination and water usage brought about. Given, not all could have been anticipated, but others (such as the aggressiveness of the Indian gov’t and regulations) could have been limited with proper research and approach. There should have been supervision from start to finish throughout this operation, especially because India was a new market and a third world country. Coke and Pepsi could have reached out to Indian consulting groups and hired Indian citizens so they could have avoided butting heads with the government, i.e. policies that excluded international companies and the syrup recipe incident. There is large scale value in hiring externally due to the perspectives those individuals can bring about (Class notes, Dr. Chueng). Luckily, things got better over the years and in 2008, “the study reported that none of the pesticides were found to be present in processed water used for beverage production and that the plants met governmental regulatory standards” (Amine, 2008, pg. 4. By definition, globalization is the method or process where firms develop an international presence and begin to work globally. When Coke and Pepsi were moving into India, globalization was essential in order to appear as an attractive brand to customers. Coca-Cola formed a joint venture with Britannia Industries India Ltd., a local producer of snack foods. This new partnership was then called “Britco Foods”. Another example of Coke’s globalization in India took place during the national holiday “festival of Navratri”, where free entry passes were found in each of its “Thumbs Up” bottles. This move incentivized the Indian public to buy this product and attend the national holiday. Third, since Bollywood has the attention of the Indian media, Coke was able to capitalize on advertisement by hiring many actors to promote their goods. Pepsi, much like Coca-Cola, was successful in its globalization process. Pepsi united with Voltas and Punjab Agro in order to put forth “Pepsi Foods Ltd.” The government restrictions were tough on this new joint venture, but Pepsi-Cola CEO said, “We’re willing to go far with India because we want to make sure we get an early entry while the market is still developing” (Amine, 2008, pg. 2). In order to keep with Indian tastes and preferences, the drink Lehar 7UP was released with the lemon flavor. Similar to Coke’s advertising strategy with Bollywood strategy, Pepsi based a great deal of its advertising campaign by sponsoring famous Indian athletes. 7. Entering India resulted as a great learning experience for both Pepsi and Coca-Cola. This project brought home the idea of “cultural congruence” (International Marketing McGraw Hill pg. 127) and being able to thrive in an alien environment. Pepsi learned the importance of keeping local tastes, i.e. lemon-lime drink, for they were more success bound if the public could identify a product that is typically seen in the Indian culture. Pepsi also learned that it is beneficial to stay up to date with market and business trends, meaning, trending towards the likes of the population. Third, Pepsi’s advertising campaign with athletes took them a long way. Since sports have been on the come-up in the last few decades, associating famous faces with the product would push young people to buy the new product. For example, the article states, “To consolidate its investment in its promotional campaigns, Pepsi Co-sponsored a music video with celebrity endorsers including Bollywood stars, as well nationally known cricketers” (Amine, 2008, pg. 3). Coca-Cola definitely underestimated the power and influence the Indian government would have on its operations. In 1990, Coca-Cola had to spend an unnecessary amount of money and resources by trying to re-enter the market more than once due to the government not approving of their methods and approach. Therefore, they should have established a relationship with the Indian government since the beginning so rejection could have been avoided. Much like Pepsi, Coca-Cola learned that the use of popular figures as forms of advertisement could be a game changer. The use of actors got the general public thinking, “Wow, if my favorite actor is buying this drink, I must buy it too.” Works Cited Amine, L.S. (2008) Case 1-3 Coke and Pepsi Learn to Compete in India, pgs. 1-5Cateora, R. Philip (2016). International Marketing. New York, NY. McGraw-Hill Education. Chueng, Mee-Shew (2018). International Marketing, class notes (PowerPoint Slides). Erickson, Fritz J. (2016) 100People: A World Portrait, www.100people.org.
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