Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Operation Research Expert

International Business Considerations and Variables

Read the case below and answer the problems that follow.

Coke in India, Before and After

BEFORE

Coke in India

PepsiCo was in the Indian market during the mid-1950s, but pulled out because the business was unprofitable. Coca Cola had operated in India since 1950 but left in
1977 because the Indian government insisted on some unacceptable conditions. The Indian government demanded that Coke reduce its ownership from 100 to 40 percent; that it divulge its formula, and that it use dual trademarks so that Indian consumers would have a local logo. Coke was especially adamant about preserving the mystique of its secret formula and pulled out of India rather than comply.

Coca-Cola's departure gave PepsiCo a great opportunity, but Pepsi did not begin negotiations with the Indian government until 1985, and did not get formal permission to return immediately. Although the initial investment Pepsi proposed was only $15 million, approval had to be given at the cabinet level. There were twenty parliamentary debates, fifteen committee reviews and 5,000 articles in the press about the proposed investment over a three year period. Finally approval was granted under onerous terms. Pepsi gave too many concessions for too little in return.

Pepsi had to:

1) Limit its ownership to 39.9%;
2) It had to promise to export about $150
Million over the first ten-year period of operation;
3) Soft drink sales could not exceed 25% of total sales;
4) It had to promise to export 75% of concentrate;
5) It had to set up an agricultural research center;
6) It had to set up fruit and vegetable processing plants).

After Pepsi accepted these terms and was readmitted, Coke than reapplied to re-enter India around 1988, but its application was denied, to Coke's fury and disgust. Then in 1991, Prime Minister Rao was elected and launched broad economic reforms. Coca-Cola announced its return to India in 1993.

In order to get permission to return, Coke had to form a 51%-owned JV with an Indian company named Parle Exports. Coke had to agree to export three times the value of its imports. It also had to promise to export plastic beverage cases to compensate for its imports of concentrate.

After Pepsi became the target of militant protestors in 1995, Pepsi's second KFC restaurant in New Delhi was closed for a month by the Indian authorities because two flies were found in its kitchen.

However, India is a huge potential market and both companies have persevered. The Indian market has opened up fast in the last fifteen years and now the two companies are dealing with marketing issues rather than with a business-unfriendly government. The government of India has become much more business-friendly.

Coke's new strategy in India

With slowdown in developed markets, companies like PepsiCo and Coca-Cola are looking at emerging markets like India and China for growth. PepsiCo is aiming to triple its businesses in India over the next five years (and also setting up a new leadership structure in India). The Coca-Cola Company (Coke), the world's largest non-alcoholic beverage company, is not one to be left behind. Coke has a new strategy and has renewed its focus on semi-urban and rural markets in India.

The soft drink consumption market in India is mainly concentrated in urban cities. Market research data suggests that consumers in urban cities spend ten times more than consumers in semi-urban and rural markets. However, Coca-Cola has renewed its focus on the rural market in India and believes there is huge opportunity with vast growth potential in these markets. Coke is targeting small towns (tier II and III towns like Agra, Bilaspur and Lucknow) and rural markets in India.

Coke's new strategy involves training retailers (around 6,000 of them) in a program launched by the Coca-Cola University. [In 2007, the company launched Coca-Cola University - a virtual, global university for all learning and capability-building activities.]

The company calls this the "parivartan" program (meaning "Change" in English). Shop owners (traditional retailers) are given training on displaying and stocking products well. The goal of the innovative training program is to provide traditional Indian retailers with the skills, tools and techniques required to succeed in a constantly changing retail scenario. Presentations (including audio/visual technology) in local Hindi language help small retailers (with stores less than 200 square feet in average size) to better understand the concepts involved. Each retailer also receives a Coca-Cola "Certified Retailer" certificate at the conclusion of the program.

Last year, PepsiCo set up a research facility in India. Last month, Coke too set up an R&D faculty in India to develop beverages that suit local taste and increase focus on localizing its portfolio of beverages. Earlier, Coca-Cola India had been outsourcing all R&D functions from its facility in Shanghai. Some exs of local flavors include Maaza aam panna by Coca-Cola and Pepsi has locally-produced flavors under its Tropicana juice brand (with nimbu pani (lemon water) in the pipeline).
Moving from a price strategy to stepping up distribution

In the past (in 2002-03), Coke had already targeted rural consumers by bringing down the entry price (Rs 5 a bottle) for its product. Now, it has stepped up distribution of its 200-ml (priced at Rs 7 and Rs 8) returnable-glass-bottles.

Case Discussion problem:

What lessons can international marketers learn from Coke and Pepsi's experiences in India? Please list up three or four different items.

Operation Research, Management Studies

  • Category:- Operation Research
  • Reference No.:- M924518

Have any Question? 


Related Questions in Operation Research

In every organization inputs of some kind services

In every organization, inputs of some kind (services, information, and/or products) are transformed into outputs (services, information, and/or products) on an ongoing, continuous basis, which are of value to internal or ...

Michael has decided to invest 40000 in three types of funds

Michael has decided to invest $40,000 in three types of funds. Fund A has projected an annual return of 8 percent, Fund B has projected an annual return of 10 percent, and Fund C has projected an annual return of 9 perce ...

Question 1at the beginning of each day a patient in a

Question 1: At the beginning of each day, a patient in a hospital is classified into one of three conditions; good, fair, or critical. At the beginning of the next day, the patient will either continue to be in the hospi ...

A critical review on use of operations research for

A critical review on use of Operations Research for Decision Making

For 100 consecutive days a company making nutritional

For 100 consecutive days, a company making nutritional supplements has measured the amount of a protein the company puts into its protein bars. Each day, the company takes a sample of 6 protein bars. The average across a ...

Read and answer following questions with1-2 pages papermike

"Read and answer following questions with1-2 pages paper." Mike graduated from school a few months ago. He applied to various companies and has decided to take a position as a supervisor at a well-known local restaurant. ...

Questionusing minitab andor a cause-and-effect diagram

Question: Using Minitab and/or a cause-and-effect diagram, identify the root cause of the problem you are trying to solve for the process you chose in 1-3. Also, construct a main effects plot, if applicable.

Please explain how each department in a company could

Please explain how each department in a company could approach assessing customer expectations of a new product launch product. Describe how to use a TQM approach for fulfilling customer expectations associated with a ne ...

Business models and consumer choices please respond to the

"Business Models and Consumer Choices" Please respond to the following: Debate It: Take a position on the following statement: Copyright laws protect rights of creative independent artists against a large corrupt music i ...

The relationship between language and thinking please

"The Relationship Between Language and Thinking" Please respond to the following: Consider the following quote by the philosopher Ludwig Wittgenstein, who believed that thought without language was impossible: "The limit ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro