Pepsi Entry Into India
1. Why do companies like PEPSI need to globalize? What are the various ways in which foreign companies can enter a foreign market? What hurdles and problems did Pepsi face when it tried to enter India during the 1980s?
Companies like Pepsi need to be global for the following: * Expand Sales- Increase the market for their production by tapping potential new countries * Minimize Risks- Globalization and International trade also helps in minimizing risks. * To leverage on technology * To increase production efficiencies * For diversification so as to reduce risks * To counter foreign investments by competitors * Minimize Costs and optimal resource utilization- By shifting operations in areas with cheaper labour and resources.
Companies can enter foreign markets through the following ways: * Export * Joint Ventures * Mergers and Acquisitions * Licensing, franchising * Strategic Alliances * Management Contracts * Contract Manufacturing * FDI
Hurdles faced by Pepsi: * India being a closed economy till 1991, there was high level of intervention by the government in the corporate sector * Low awareness, demand and consumption for soft drinks. The per capita consumption was only 3 per annum * Foreign brand name could not be used * There was no liberalization and this not even 1% FDI was allowed. * Sensitive political and social problems in the country like terrorism * Cola concentrate – the major ingredient to make Pepsi soft drink could not be imported * Agriculture sector was the priority and thus Pepsi had to win the government by making promises of development in the agriculture sector
2. Critically, analyze the strategy adopted by Pepsi to sell itself to the Indian government. Do you think the biggest factor responsible for the acceptance of its proposal by the regulatory authorities was its projection of its operations as the solution to many of Punjab’s problems?
Companies like Pepsi need to be global for the following: * Expand Sales- Increase the market for their production by tapping potential new countries * Minimize Risks- Globalization and International trade also helps in minimizing risks. * To leverage on technology * To increase production efficiencies * For diversification so as to reduce risks * To counter foreign investments by competitors * Minimize Costs and optimal resource utilization- By shifting operations in areas with cheaper labour and resources.
Companies can enter foreign markets through the following ways: * Export * Joint Ventures * Mergers and Acquisitions * Licensing, franchising * Strategic Alliances * Management Contracts * Contract Manufacturing * FDI
Hurdles faced by Pepsi: * India being a closed economy till 1991, there was high level of intervention by the government in the corporate sector * Low awareness, demand and consumption for soft drinks. The per capita consumption was only 3 per annum * Foreign brand name could not be used * There was no liberalization and this not even 1% FDI was allowed. * Sensitive political and social problems in the country like terrorism * Cola concentrate – the major ingredient to make Pepsi soft drink could not be imported * Agriculture sector was the priority and thus Pepsi had to win the government by making promises of development in the agriculture sector
2. Critically, analyze the strategy adopted by Pepsi to sell itself to the Indian government. Do you think the biggest factor responsible for the acceptance of its proposal by the regulatory authorities was its projection of its operations as the solution to many of Punjab’s problems?