Pepsi in India

Pages: 5 (891 words) Published: October 3, 2009
Pepsi wanted to enter India…
As the major market for PepsiCo, the US, was reaching saturation levels

India's vast population offered a huge untapped customer base

Urbanization had familiarized indians with leading global brands Question 1
Why do companies like Pepsi need to globalize?

What are various ways in which foreign companies can enter a foreign market?

What hurdles and problems did India face when it tried to enter India in 1980s? Need for globalization
Wider and newer markets

Increasing competition in the existing markets

Huge potential for growth
Various ways of En entering
License and Franchise
Joint Venture
Wholly owned Subsidiary

Hurdles & Problems

Advantages to Countries close in economic development
have similar market segments
similar types of goods and services
knowledge about market demand transfers easily
similar physical infrastructure, such as airports, roadways, railways, and seaports

Indian market did not offer Pepsi any of the above advantages

The timing was not favoring the entry of MNCs in India

The joint venture with RPG didn’t work

Question 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 it’s proposals by the regulatory authorities was it’s of it’s operations as the solution to many of Punjab’s problems? Why/Why not? Initial entry strategy failed

Joint venture RPG Group
Agro Product Export Ltd and Pepsico would sell soft drinks under the Pepsi Label Import of Cola concentrate in return of the exporting the juice concentrate Export : Import Ratio 3:1

The Strategy to enter
Key Commitments
Import of concentrate in return of export of agro processing foods Export – Import Ratio 5:1 for 10 years
Focus on Food Agro – processing
Only 25 percent investment in the soft drink business
Half of the production would be exported

What made the strategy work
Joint venture included
Punjab Agro Industrial Corporation - 36 percent
Voltas -24 percent
PAIC stake was almost at par with Pepsico’s stake
60 percent [36+24]stake lied with the Indian Company
Touching the most sensitive issue – Punjab
Creation of Job opportunities
Making it look like a win win situation
Hidden Lobbying would have also existed

Pepsico’s ploy was just to gain entery into the Indian market But each commitment could not be sustained because –

Pepsico was entering into their non core business
Agro Business
Agro Research Institute
No understanding of the farming conditions
How could Indian productivity standard match the export requirements? The commitments were made without any reality check

Question 3
How did the company react to changes in the business environment after the liberalization of the Indian economy ?

Critically comment on the allegations that Pepsi deliberately did not adhere to most of its commitments Pepsi and liberalization of the Indian economy
Restriction on foreign trade was lifted

Role of private equity

Lehar Pepsi was now Pepsi

The company would focus on food & agro processing & only 25 % of the business would be directed towards soft drink business. The company would not only bring advanced food processing technology to India, but also provide a boost to the image of products made in India in foreign markets. Half of the production would be exported & export-import ratio would be 5:1 for a period of 10 years. Creation of jobs for 50,000 people across the nation out of which 25,000 would be in Punjab, its main area of operation. Foreign brands would not be used

An agricultural research centre would be established.

783 were directly employed in Punjab
Clever usage of its brand by naming its cola as “Lehar Pepsi Failing to adhere to its commitment to export 50 % of its production wherein it was found that Pepsi...
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