CASE STUDY
Pepsi 's Entry into India: A Lesson in Globalization
Abstract:
The case discusses the strategies adopted by the soft drinks and snack foods major PepsiCo to enter India in the late 1980s. To enter the highly regulated Indian economy, the company had to struggle hard to 'sell ' itself to the Indian government. PepsiCo promised to work towards uplifting the rural economy of the terrorism affected north Indian state of Punjab by getting involved in agricultural activities. In addition, it made a host of other promises that made its proposal very attractive to the regulatory authorities. The case also discusses the criticisms against the company, in particular, criticism of its failure to honor many of its commitments after it started operations in the country and after the liberalization of the Indian economy.
Finally, the case takes a look at the contract farming initiatives undertaken by Pepsi since the 1990s and seeks to critically analyze the strategies used by the company to enter India. A Letter to Pepsi
In the year 1988, the New York office of the President of the multi-billion cola company PepsiCo received a letter from India. The company had been trying for some time to enter the Indian market. This letter was written by George Fernandes, the General Secretary of one of the country 's leading political parties, Janata Dal. He wrote, "I learned that you are coming here. I am the one that threw Coca-Cola out, and we are soon going to come back into
1. Using the current ratio, discuss what conclusions you can make about each company’s ability to pay current liabilities (debt).
PepsiCo. Incorporated and The Coca-Cola Company are the two largest and oldest archrivals in the carbonated soft drink (CSD) industry. Coca-Cola was invented and first marketed in 1886, followed by Pepsi Cola in 1898. Coca-Cola was named after the coca leaves and kola nuts John Pemberton used to make it, and Pepsi Cola after the beneficial effects its creator, Caleb Bradham, claimed it had on dyspepsia. The rivalry between the soda giants, also known as the "Cola Wars", began in the 1960’s when Coca-Cola's dominance was being increasingly challenged by Pepsi Cola. The competitive environment between the rivals was intense and well-publicized, forcing both companies to continuously establish and
Exchange rate gains or losses are brought to account in determining the net profit or loss in the period in which they arise, as are exchange gains or losses relating to cross currency swap transactions on monetary items. Exchange differences relating to hedges of specific transactions in respect of the cost of inventories or other assets, to the extent that they occur before the date of receipt, are deferred and included in the measurement of the transaction. Exchange differences relating to other hedge transactions are brought to account in determining the net profit or loss in the period in which they arise. Foreign controlled entities are considered self-sustaining. Assets and liabilities are translated by applying the rate ruling at balance date and revenue and expense items are translated at the average rate calculated for the period. Exchange rate differences are taken to the foreign currency translation reserve.
For more than a century, Coca Cola and PepsiCo have been the major competitors within the soft drink market. By employing various advertising tactics, strategies such as blind taste tests, and reward initiatives for the consumer, they have grown to become oligopolistic rivals. In the soft-drink business, “The Coca-Cola Company” and “PepsiCo, Incorporated” hold most of the market shares in virtually every region of the world. They have brands that the consumers want, whether it be soft-drink brands or in PepsioCo’s case, snacks. With only one soft-drink market, the two competitors have no choice but to increase sales by stealing the other competitor’s clients. This led to the term, the “cola wars” which was first used
When reading the letter from the chief Executive Officer Muhtar Kent the content of the letter was optimistic and upbeat. Also, the CEO references to the company as global thirst quenching corporation that do not take the size for granted, this helps the reader understand Coca-Cola modesty. Likewise, the CEO added Targeted disciplined investments for the future of the company that will help the company to expand and grow. Furthermore, increasing revenue, profit and growth by building the brand Coca-Cola. Furthermore, Simplifying and streamlining operations of the company enabling to standardize the operation around the world.
1. 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 roles? 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?
Executive summary: The case mentions about how PepsiCo had to withdraw all its assets from Burma despite the fact that they were doing very well in this country.
This case describes the complexity of PepsiCo's competitive position in the Mexican soft-drink market during the late 1990's. Between 1993 and 1996 PepsiCo and Coca-Cola waged a classic cola war in Latin America. The goal for both companies was to gain market share and by the end of 1996, Coca-Cola had clearly won the Latin America cola war. In 1993 PepsiCo enjoyed a 42% market share in Venezuela thanks to the success of its bottling partner, the Cisneros Group but by the end of 1996, PepsiCo held less than 1% of the Venezuelan cola market. Following PepsiCo's anchor bottler in Mexico, Gemex, the case details the strategies employed by PepsiCo's senior management beginning in 1993 to expand its
When Roger Enrico, Chief Executive Officer for PepsiCo, took over he began to examine the corporation. Going on the belief that if you can't make diversification work, give it up. For nearly three years PepsiCo has been undergoing a major strategic transformation. PepsiCo's chairman, Roger A. Enrico, stated in his letter, "…And while 1998 certainly offered its share of challenges, I'm very pleased to report that our strategy is beginning to payoff."
In an industry dominated by two heavyweight contenders, Coke and Pepsi, in fact, between 1996 and 2004 per capita consumption of carbonated soft drinks (CSD) remained between 52 to 54 gallons per year. Consumption grew by an average of 3% per year over the next three decades. Fueling this growth were the increasing availability of CSD, the introduction of diet and flavored varieties, and brand extensions. There is couple of reasons why the industry is so profitable such as market share, availability and diversity and brand name and world class marketing.
The case discusses the strategies adopted by the soft drinks and snack foods major PepsiCo to enter India in the late 1980s. To enter the highly regulated Indian economy, the company had to struggle hard to 'sell' itself to the Indian government. PepsiCo promised to work towards uplifting the rural economy of the terrorism affected north Indian state of Punjab by getting involved in agricultural activities. In addition, it made a host of other promises that made its proposal very attractive to the regulatory authorities. The case also discusses the criticisms leveled against the company, in particular, criticism of its failure to honor
Pepsi Co 's assignment taken as a whole is to amplify the value of its shareholder 's investment through sales intensification, expenditure gearshift and prudent investment of resources (Bongiorno, 1996, p 71). In this pose, Pepsi believes that its moneymaking triumph depends on
The case explains the economics of the soft drink industry. There activities that add value to consumer at nearly every stage of the value chain of the soft drink industry. The war is primarily fought between Coca-Cola and PepsiCo as market leaders in this industry; who combined have roughly a ninety percent market share in their industry. The impact of globalization on competition has allowed both of these major players to find new markets to tap which has allowed each continued growth potential.
Who would have known that Coca-Cola debut to the world was all because of a pharmacist? And just a touch of carbonation has truly made it a refreshing and an enjoyable carbonated soft drink. It is within “arms reach of desire” as former CEO Robert Woodruff notes. The Coca-Cola Company ultimately cares about its customers and prides itself into providing good citizenship. One of Coca-Cola’s largest international investors was India, from 1993 up until 2003, Coca-Cola invested more than US$1 billion into the country. In August of 2003, CEO of Coca-Cola India, Sanjiv Gupta came to a standstill where he had to further anticipate his next move for the company. The company faced a crisis where the Center for Science and Environment (CSE) issued a press release affirming that three samples of the 12 cold drink brands sold in and around Delhi containing pesticide residues were of Coca-Cola and PepsiCo brands.
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 its proposal by the regulatory authorities was its projection of its operations as the solution to many of Punjab’s problems? Why/Why not?