The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola. There were specific aspects of the political environment in India that played key roles in both companies’ difficulties. India is a nation with a strong belief in loyalty and devotion to their culture and Indian products. The government promoted the consumption of local products rather than that of foreign products. The Indian government also has very strict trade policies which created many entry barriers for both PepsiCo and Coca-Cola. The stern rules and regulations of their government did not allow either company to freely promote their products. Typically, foreign investment denotes that foreigners take a somewhat active role in management as part of their investment and typically works both ways. India practices a more controlled foreign investment environment. Both companies should have done extensive research on India’s political environment before attempting to enter their market.
Due to the trade barriers established by the Indian government Coca-Cola’s first entry into India’s market was not successful. Coca-Cola’s first entry into India was in 1958 but they existed in 1978 after the Indian government asked them to reveal their formula. Coca-Cola refused and decided to shut down. PepsiCo entered the market during Coca-Cola’s 16 years of exile, in 1989. Both companies face major controversy when the Centre for Science and Environment (CSE), an environmental policy-orientated non-governmental organization (NGO) announced the results of a study. The study found that soft drinks sold in India, including those made by both companies, contained a cocktail of pesticides at concentrations far higher than considered permissible by national authorities and the World Health Organization (WHO). CSE had established a formidable reputation for accurate data-gathering and sharp analysis. They tested numerous branded aerated drinks sampled from...
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