Case Study: Coke and Pepsi Learn to Compete in India
- 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 have been anticipated prior to market entry? If not, could developments in the political arena have been handled better by each company?
India is a conservative society with a growing middle class (Fernandes, 2000). The main issues political issues that Coca Cola and PepsiCo faced were the way the Indian Government is run. It is world’s largest democracy but totally different than western democracies. There are many political pressures that an international company have to expect before doing business in India. In my opinion this issues could have been anticipated prior to coming to India and arrangements could have been made to deal with them effectively.
The second issue that was faced by both the companies was a strong sense of nationalism in India. Indians are encouraged to consume national products. Coca Cola and PepsiCo are both international brands. They could have handled this by investment in Cricket which is a game that is loved by tens of millions of Indian. This strategy has been employed by both the companies in the recent years and it seems to be working.
- Timing of entry into the 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?
What Coca Cola did was introduce their products and then withdraw. They did not return to the Indian market for another 15 years. I believe that they should have been more consistent like PepsiCo who were able to find their place. It is true that the quest of Indian people for healthier drinks posed a great obstacle for both the Cola companies.
- 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?
Both of the companies are using different strategies to reach out to the Indian population. Though both are focusing on targeting the youth as they see a greater market share in the youth. Both of the companies are using the electronic media advertisement very effectively keeping in view the social norms of India.
Coca Cola is using Indian movie starts to reach out to the Indian urban and rural populations. The main focus of Coca Cola is to create a Coke “lifestyle” which makes Coca Cola as an important ingredient in the daily lives of Indians.
On the other hand PepsiCo has focused on targeting the same customer base as by Coca Cola but with the help of sporting stars mostly Cricket stars. They also seem to be taking advantage of the Soccer-Fever in India.
- “Global localization” (glocalization) is a policy that both companies have implemented successfully. Give examples for each company from the case.
Glocalization is a terminology that means to adopt global items and make them fulfil local needs. PepsCo has been able to join two local companies and rebrand them from Voltas and Punjab Agro to Lehar Pepsi. PepsiCo also focused on introducing some local tastes from their brand name 7UP Lehar.
Coca Cola also formed partnership with Godrej which is a local bottling firm. New bottle shapes were introduced corresponding to local festivals.
- Some analysts consider that Coca-Cola India made mistakes in planning and managing its return to India. Do you agree? What or whom do you think was responsible for any mistakes?
Coca Cola made some mistakes while planning and managing its return to the Indian consumer market in my opinion. First mistake was they did not red the government policies about investing in India due to which they later had to dilute a huge amount of their share in the local market. Second is they did not opt for a green fields bottling plant. Coca Cola took an extension two times.
- 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, as it surely will?
Organization do have to face situations where they have to face local outrage against them. This is what is happening in this case. What I would suggest for both the companies to look at the moods of the consumers. They may rethink some of the decisions they have made in regards to the use of water in the manufacture of their products. Consumers must come first in my opinion. Coke must not address the group directly in my opinion. This could create more problems for them. They should just wait for the issue to subside in think.
- Which of the two companies do you think has better long-term prospects for success in India?
After reading the case study, I have come to the conclusion that Pepsi has a better long-term prospect than Coca Cola has. Pepsi possess the larger market share and have a more solid advertisement campaign compared to Coca Cola. Pepsi has a good relation with the government than Coca Cola has in my opinion which would help Pepsi and would prove troublesome for Coca Cola.
- What lessons can each company draw from its Indian experience as it contemplates entry into other Big Emerging Markets?
What these companies must learn is to do an extensive research about the culture, society and the government structure prior to entering to a consumer market. Each market has its own norms, trends, attitudes and financial status. Whenever these two companies want to enter to another market. This learning could help them avoid the issues they had to face in the Indian Market.
PepsiCo has learned the lesson to try the local flavors in their beverages and use local celebrities in advertisement to attract more customers. While Coca Cola’s primary lesson is to deal more effectively with the governmental authorities in new markets.