Course Title: International Marketing
Case study about:
Coke and Pepsi Learn to Compete in India
Case 1-3: Coke and Pepsi Learn to Compete in India
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?
Answer:
India is a conservative society with a growing middle class (Fernandes, 2000). The
main issues political issues that Coca Cola and PepsiCo faced were the way the
Indian Government is run. It is world’s largest democracy but totally different
than western democracies. There are many political pressures that an
international company have to expect before doing business in India. In my
opinion this issues could have been anticipated prior to coming to India and
arrangements could have been made to deal with them effectively.
The second issue that was faced by both the companies was a strong sense of
nationalism in India. Indians are encouraged to consume national products. Coca
Cola and PepsiCo are both international brands. They could have handled this by
investment in Cricket which is a game that is loved by tens of millions of Indian.
This strategy has been employed by both the companies in the recent years and it
seems to be working.
2. Timing of entry into the Indian market brought different results for
PepsiCo and Coca-Cola India. What benefits or disadvantages accrued as a
result of earlier or later market entry?
Answer:
What Coca Cola did was introduce their products and then withdraw. They did not
return to the Indian market for another 15 years. I believe that they should have
been more consistent like PepsiCo who were able to find their place. It is true that
the quest of Indian people for healthier drinks posed a great obstacle for both the
Cola companies.
3. The Indian market is enormous in terms of population and geography.
How have the two companies responded to the sheer scale of operations
in India in terms of product policies, promotional activities, pricing
policies, and distribution arrangements?
Answer:
Both of the companies are using different strategies to reach out to the Indian
population. Though both are focusing on targeting the youth as they see a greater
market share in the youth. Both of the companies are using the electronic media
advertisement very effectively keeping in view the social norms of India.
Coca Cola is using Indian movie starts to reach out to the Indian urban and rural
populations. The main focus of Coca Cola is to create a Coke “lifestyle” which
makes Coca Cola as an important ingredient in the daily lives of Indians.
On the other hand PepsiCo has focused on targeting the same customer base as
by Coca Cola but with the help of sporting stars mostly Cricket stars. They also
seem to be taking advantage of the Soccer-Fever in India.
4. “Global localization” (globalization) is a policy that both companies have
implemented successfully. Give examples for each company from the
case.
Answer:
Globalization is a terminology that means to adopt global items and make them
fulfil local needs. PepsiCo has been able to join two local companies and rebrand
them from Voltas and Punjab Agro to Lehar Pepsi. PepsiCo also focused on
introducing some local tastes from their brand name 7UP Lehar.
Coca Cola also formed partnership with Godrej which is a local bottling firm. New
bottle shapes were introduced corresponding to local festivals.
5. How can Pepsi and Coke confront the issues of water use in the
manufacture of their products? How can they defuse further boycotts or
demonstrations against their products? How effective are activist groups
like the one that launched the campaign in California? Should Coke
address the group directly or just let the furor subside, as it surely will?
Answer:
Organization do have to face situations where they have to face local outrage
against them. This is what is happening in this case. What I would suggest for both
the companies to look at the moods of the consumers. They may rethink some of
the decisions they have made in regards to the use of water in the manufacture of
their products. Consumers must come first in my opinion. Coke must not address
the group directly in my opinion. This could create more problems for them. They
should just wait for the issue to subside in think.
6. Which of the two companies do you think has better long-term prospects
for success in India?
Answer:
After reading the case study, I have come to the conclusion that Pepsi has a better
long-term prospect than Coca Cola has. Pepsi possess the larger market share and
have a more solid advertisement campaign compared to Coca Cola. Pepsi has a
good relation with the government than Coca Cola has in my opinion which would
help Pepsi and would prove troublesome for Coca Cola.
7. What lessons can each company draw from its Indian experience as it
contemplates entry into other Big Emerging Markets?
Answer:
What these companies must learn is to do an extensive research about the
culture, society and the government structure prior to entering to a consumer
market. Each market has its own norms, trends, attitudes and financial status.
Whenever these two companies want to enter to another market. This learning
could help them avoid the issues they had to face in the Indian Market.
PepsiCo has learned the lesson to try the local flavors in their beverages and use
local celebrities in advertisement to attract more customers. While Coca Cola’s
primary lesson is to deal more effectively with the governmental authorities in
new markets.
8. Comment on the decision of both Pepsi and Coke to enter the bottled
water market instead of continuing to focus on their core products—
carbonated beverages and cola-based drinks in particular.
Answer:
I think their move to enter the bottled water market was very strategic and
beneficial for both companies. With the many health concerns that are apparent
today in the US and in all other cultures, it’s important for them to stay
competitive. People are drinking more water, bottled in particular. It is a very
logical step for the companies to enter the bottled water business.
9. Most recently Coca-Cola has decided to enter the growing Indian market
for energy drinks, forecasted to grow to $370 billion in 2013 from less
than half that in 2003. The competition in this market is fierce with
established firms including Red Bull and Sobe. With its new brand Burn,
Coke initially targeted alternative distribution channels such as pubs,
bars, and gyms rather than large retail outlets such as supermarkets.
Comment on this strategy.
Answer:
This move of Coca-cola is another way of taking advantage of the growing Indian
market for energy drinks. People in India are now more health-conscious and
tend to live a healthy lifestyle by engaging themselves in sports and other physical
activities. Energy drinks for this instance have a greater market for acceptability
and consumption. However, this venture might be rough for Coca-cola
considering that there are already established firms including Red Bull and Sobe
offering the same kind of products. Targeting pubs, bars, and gyms as their
distribution channels would be an ideal way to slowly introduce their product to
target consumers and eventually give them a better position in the market.
