Decent Essays
Case 2.4 Coke and Pepsi Learn to Compete in India BRIEF SUMMARY OF CASE CONTENT: This is a detailed and comprehensive case describing the market entry of two global consumer product companies, PepsiCo and Coca-Cola Corporation into a Big Emerging Market (BEM), India. It traces the history of the challenges encountered by these two companies in the developing country environment of India from the late 1980s to the present time. Emphasis is placed on lessons learned by the two companies as they adjust to competing in an unfamiliar and rapidly-changing environment. Key themes include: the effects of the changing political scene resulting in the imposition of a non-standard domestication policy on foreign direct investors; the…show more content…
The cap on the equity stake has been gradually lowered over the years, giving greater flexibility to foreign companies in terms of operation and profitability. The ouster of Coca-Cola in 1977 was probably the most damaging effect of traditionally restrictive rules governing foreign investment that the Indian government had. Until recently, the Indian government had a policy whereby no foreign company could own a majority equity stake (greater than 50%) in a venture/project in the country. Coca-Cola’s withdrawal from India was partly due to this reason, and partly due to the demand by the government to share its secret formula for the concentrate. Leaving the country on a non-cordial note with the government in 1977 had negative repercussions when Coca-Cola tried to re-enter. After being turned down on initial proposed joint venture with Godrej it finally reentered the Indian market in the early 90’s via a joint venture with Britannia Industries. This market entry was forced on Coca-Cola because its major competitor PepsiCo had already entered the Indian market in 1986. Entering later in the market had costs associated with it – (1) spending greater time, energy and money in building relationships with key government officials because PepsiCo had a headstart of about four years in the game; (2) spending maximum money on advertising to woo customers away from Pepsi’s substantial base in the cola market. PepsiCo had its own share of problems dealing with the
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