Pepsi's entry into India: A well planned out strategy

Résumé du document

With other Pepsi markets nearing saturation, Pepsi decided to expand its international operations into India in the late 1980s. However, even prior to entering India, Pepsi was met with strong objections by one of India's leading political parties. George Fernandes, General Secretary of the Janata political party threatened Pepsi that it too, just like Coca Cola, will be expropriated if his political party returned to power. Regardless, Pepsi insisted on expanding into India and came up with a first entry proposal to the government, which was rejected. The second entry proposal followed Pepsi's strategy of primarily focusing on solving Punjab's problems, rather than focusing mainly on the soft drink industry. That proposal contained many promises to improve the economy of Punjab through increasing productivity and employment in the agricultural sector. Nevertheless, the reality turned out to be something rather different; Pepsi broke many of its promises to Punjab. This lead to a general public disapproval towards Pepsi, and just as the government was considering action against Pepsi, India experienced a foreign currency crisis in the early 1990s.

Extraits

[...] Pepsi tried to enter India with a first proposal in 1989. However, it was rejected for two main reasons: its clause on the import of concentrate, and the use of its foreign brand name. Pepsi came back shortly after with another proposal emphasizing on its two additional Ps- politics and public opinion. The second proposal possessed a totally new perspective, focusing on India rather than on Pepsi itself. More specifically, the second proposal focused on the Punjab province and proposed a series of actions and promises that would help them. [...]

[...] Pepsi also assumed that the costs of setting up as a first-mover were worth it in the long run, as Pepsi could establish its brand name before Coca-Cola made its return to India. All in all, entry into the Indian market was a calculated risk by Pepsi. Currently, Pepsi is firmly established in India and sales have been steadily increasing and Pepsi has managed to become a part of the Indian population's daily lives;[4] nonetheless, Pepsi faces a lot of problems these days. [...]

[...] First, India represents a huge, untapped market. Pepsi targets mainly to India's youth, which presents of the world's youth population; therefore, this is a market that Pepsi can not disregard. Moreover, Pepsi has the opportunity to have a first-mover advantage in India, since none of the big players in the soft drink industry are established in India. Pepsi can then forge people's awareness as well as habits to drink Pepsi, above all other brands. As in other Asian countries, Pepsi is able to benefit from low production costs. [...]

[...] Once again, the Supreme Court is involved and has accused Pepsi of breaking strict advertising guidelines and conservations laws by painting large logos alongside more than fifty kilometers of road along the Himalayan Mountains. The paints killed many species of moss, and the removal of the paintings would require large amounts of paint thinner that would kill even more surrounding organisms.[8] Overall, Pepsi has not been concerned with environmental effects of its actions in India and these have had global repercussions resulting in spreading a negative image of Pepsi. However, regardless of the problems, Pepsi's sales in India keep increasing. Pepsi aims its products at the Indian youth population. [...]

[...] New countries give MNCs entrance to new markets, and therefore, increase their sales. Greater sales allow MNCs to achieve economies of scale and scope. Also, producing in other countries can lead to significant cost advantages where lower production costs abroad are possible. Lower wages, such as those in Asia and Latin America, as well as different tax rates and legislations, can lead MNCs to seek advantages production advantages abroad. For Pepsi the main reasons it wanted to enter India were as follows: Coca-Cola was expatriated by the Indian government; First-mover advantage, no significant competitor Market Size- 1/4 of the world's youth is in India Healthy agricultural sector Changing demographics, increase in urbanization, and an increasing awareness of leading global brands Cheap labour, low production cost, and low costs for their global market The increase in globalization is an effect of the increasingly more open global markets. [...]