Coke and Pepsi in India - Essay Example

1. Some specific aspects of the Indian political environment have played a key role in determining company performance for both PepsiCo and Coca-Cola India. Even though the Indian government had opened its doors wide to foreign investors, it has imposed ranges of restrictions too. The government had allowed outside investment mainly in high-tech sectors whereas it was almost completely prohibited in consumer goods sectors. India had followed the “principle of indigenous availability” that forbade the imports if similar items obtainable anywhere else within the country. As a result, Indian customers had a little choice of products or brands and sometimes they were forced to purchase products regardless of quality and reliability. In addition, Indian government mandated that the companies Pepsi and Coca Cola must be promoted in India under the names ‘Lehar Pepsi’ and ‘Coca-Cola India’. Boycotts of American goods and water contamination issues were some other aspects of Indian political spectrum, which influenced operations of both Pepsi and Coca-Cola in the country. The company management could have anticipated some of the Indian market issues particularly corruption within the Indian governmental settings. By forecasting this, the Coca-Cola could have avoided its hardships in the past. However, it was not possible for the company to anticipate the ongoing water contamination issues. In other words, each company could have handled the unexpected developments in Indian political arena better, if its management had been flexible enough to adapt to the developments emerged. 2. As compared to the Coca-Cola, Pepsi entered the Indian market early in 1986. During that time, the Pepsi had not to compete with other multinational companies once it was the initial stage of Indian soft drink market. Therefore, the early entry assisted the company to attain a significant foothold in the market while it was still working with its product positioning operations. In addition, the Pepsi acquired 26% market share by 1993 as a result of its early market entry. At the same time, the early entry forced the company to change its name to Lehar Pepsi and additionally Pepsi had to struggle with other local issues. The Indian government restricted Pepsi’s soft drink sales to less than 25% of total sales. Likewise, the late entry of Coca-Cola in Indian market in 1993 aided it buying four bottling plants from the industry leader Parle. In addition, the Coca-Cola was able to buy some of the Parle’s leading brands including Thums Up, Limca, Citra, Gold Spot, and Mazaa. However, since the Pepsi had already established its own market, the Coca-Cola really struggled to work with its product positioning strategies. In addition, the Coca-Cola was not allowed to buy back 49% of equity and it is also attributable to its late entry in the market. 3. Pepsi and Coca-Cola responded in many ways to the sheer scale operations in India in terms of product policies, promotional activities, pricing policies, and distribution arrangements. The companies’ product polices were specifically designed to cater Indian tastes at their initial stages and gradually they introduced American type drinks. As part of promotional activities, Pepsi freely offers premium rice and candy whereas Coca-Cola gives away free passes as well as vocational packages. Similarly, both the companies have framed different campaigns for different areas of India. Pepsi began its operations with an aggressive pricing policy with intent to attain immediate market share from Indian competitors while Coca-Cola has been following a 15-25% price cut since 2003 for effectively competing with Pepsi. Finally, both the companies have established their production plants and bottling centers in large cities all around India in order to effectively manage distribution arrangements. 4. From the case study, it seems that both the companies have successfully implemented global localization or glocalization strategies. The case scenario indicates that the Pepsi’s major glocalization strategy has been sponsoring world famous Indian athletes including cricket and football players (“Coke and Pepsi”,603-604). In contrast, as part of its glocalization strategy, Coca-Cola hired several famous film stars like Aishwarya Rai and Vivek Oberoi to endorse its products. 5. Currently, Coca-Cola is really struggling in the Indian market with water contamination issues and therefore they need to thoughtfully act on such issues in order to continue their operations effectively. Primarily, the companies (Pepsi and Coca-Cola) have to convince the strikers that they do not harm the water resources of the country. In order to defuse further boycotts or demonstrations against their products, both Pepsi and Coca-Cola must work with Indian citizens to clean up the country’s water resources. By inviting the striking group representatives to learn about the problem, the companies can be effectively get rid of further people protests. In addition, the companies may make their policies and practices transparent so that it would assist them to eliminate all negative perceptions. Activist groups, like the one launched the campaign in California, are very effective since it could shake the world’s biggest corporations Coca-Cola. In my opinion, the Coke should address such activist groups directly as their deeds can greatly threaten the company’s long term sustainability. If the company just lets the furor subside, the general public may misinterpret that the firm fears someone and hides something from consumers. 6. The case context clearly provides potential strengths and weaknesses of each company and based on this information, it possible of to anticipate the future of both the companies in Indian market. It seems that Pepsi has better marketing and advertising strategies than Coca-Cola. As we discussed earlier, Pepsi sponsors world famous cricket players and this strategy has great potential in India since cricket game is highly popular across India. Similarly, Indian consumer trends are greatly subjected to seasonal fluctuations and based on this realization; Pepsi’s advertising is mainly done during festival times. Relatively, Pepsi has been more widely accepted in Indian market than Coca-Cola not only as a result of Pepsi’s early entry but also due to Coke’s bad market stature. Recent financial reports indicate that Pepsi’s Indian market share is threatening Coca-Cola and this situation offers competitive advantages to Pepsi over Coca-Cola in the country’s market. At the same time, Coke is largely struggling with government conflicts particularly the one relates to Plachimada bottling plant conflict. Such adverse market events caused Coca-Cola to lose a large number of its potential customer groups in India. Moreover, Pepsi is a close substitute to Coca-Cola and therefore many people switched their demand from Coca-Cola to Pepsi when Plachimada event caused great furor over Coca-Cola products. 7. From the long years’ Indian market operation, both Pepsi and Coca-Cola have a series of lessons to study. In Pepsi’s experience, it is necessary to keep with local tastes in order to ensure long term sustainability in Indian market. From the market, the Pepsi also learned that it is beneficial for the company to pay attention to market trends as India is a cultural agglomeration of different communities. In addition, seasonal fluctuations also largely affect Indian market trends. Pepsi management also understood that celebrity appeal makes the company’s product promotion exceptional, because celebrities like film stars and cricket players have great influence on Indian people. The Pepsi has also identified that it is essential to keep up with emerging trends in the market for effectively competing with market rivals. In contrast, the Coca-Cola learned that it is fundamental to give specific emphasis on deals made with the government since a company is remarkably benefited from establishing a good business relationship with a country (or government) in which it operates. Coca-Cola did not try to create a good relationship with Indian government and this strategic failure led them to further troubles. From its Indian market experiences, Coca-Cola also realized that it cannot meet its customer tastes unless the firm invests its various resources in quality products. Finally, the company also learned that advertising strategies can greatly influence the marketing of its bottled products in India. 8. In my opinion, the strategic move of Pepsi and Coke towards introducing bottled market instead of continuing to focus on their conventional products is appreciable. From the case study, it is clear that Indian market for carbonated drinks was growing at a slow pace during the period 1999 and 2006. In contrast, the overall market for beverages grew 6 percent from $3.15 billion to $3.34 billion (“Coke and Pepsi”, 604). At this juncture, that change was the best option for both the companies as their continuation in the carbonated drinks business might have ended up a total business collapse. This strategy has greatly assisted the companies to survive the market threats related to declining popularity of carbonated products. It also seems that their strategic move was really thoughtful as it fits the present market conditions. Nowadays, people are more concerned about their health and hence they tend to drink ozonized water instead of soft drinks or juices. As a result of this turn, the Pepsi and Coca-Cola jointly hold a significant share in Indian bottled water market. In short, this decision aided the firms to continue to be the key players in the Indian bottled water segment. Works Cited Case 1-3, Coke and Pepsi Learn to Compete in India. 602-606. Read More