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 role? 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?
The political environment have played key role as follow:
- Indian government viewed as unfriendly to foreign investors. Outside investment had been allowed only in high-tech sectors and was almost entirely prohibited in consumer goods sectors. The “Principle of indigenous available” If an item could be obtained anywhere else within the country, imports of similar items were forbidden. This made Indian consumers had a little choice of products or brands and no guarantees of quality or reliability.
- Indian Laws, the government mandated that Pepsi’s products be promoted under the “Lehar Pepsi” name. For Coca-Cola, they attempted to enter into Indian market by joining with Parle and became “Coca-Cola India”
Some of these effects may have been anticipated, especially foreseeing the corruption within Indian government. Taking that into account more proactively might have helped Coca-Cola avoid hardships in the past. As far as the contamination issues goes, that might not have been so easy to anticipate. Both companies held their own when trying to prove their products were within safe limits compared to other food products.
They could developments in political arena; Coke could agreed to start new bottling plants instead of buying out Parle, and thus wouldn’t agreed to sell 49% of their equity.
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?
Pepsi early entry than Coca-Cola so it must be different in benefits and disadvantages between them in timing of entry into the Indian market:
Pepsi: Advantage – It could enter into market before Coca-Cola so it could gain a foothold in the market while it was still developing.
Disadvantages – It was forced to change its name to Lahar Pepsi. And government limited its soft drink sales to less than 25% of total sales.
Advantages – It could buy 4 bottling plants from industry leader (Parle). It also bought Parle’s leading brands such as Thums Up, Limca, Citra, Gold Spot and Mazaa. And it could set up 2 new ventures with Parle to bottle and market product.
Disadvantages – It denied to entry in Indian market until 1993 because Pepsi was already there, so it was not easy to establish the market share with Pepsi.
The India 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?
Coca-Cola and Pepsi launched different product lines for attractive to the Indian consumer tastes. They started with product lines that were already available, such as cola, fruit drinks, and carbonated water. And they introduced new products such as Sprite and bottled water.
Promotion Activities – Pepsi and Coca-Cola adapted themselves to the local market with promotions. Pepsi: They promoted heavily during the cultural festival of Navrarti by offering people fetch one kilo of Basmati rice with every refill of a case of Pepsi. This is an effective strategy to exchange between the old (rice) and the new (Pepsi). On the other side, Coca-Cola offers free passes, and giveaway as well as vacations to Goa, a famous resort in India for promoting its product.
Pricing Policies - Pepsi launched with an aggressive pricing policy to attempt to get immediate market share from Indian...
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