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Assignment Details:

Pepsi Co and Coke American beverage giants must adhere to the U.S Foreign Corruption Act wherever their businesses may take them. Both companies expanded their U.S businesses to India with differing initial results. Coke came home (initially) and Pepsi Co prospered.

Do your research and explain the socio-cultural barriers faced by these two companies? What in your view were the reasons, which negatively impacted Coke and positively touched Pepsi Co?

You are not permitted to use any open-source Web site.

Deliverable Length:

250 words (minimum) per reply

ONE:

When a company decides to do business in another country, they need to learn how business is done un that country, it is important to learn the market base and what consumers want. Both Pepsi Co and Coca Cola expanded their U.S. businesses in India and had differing results. When Pepsi and Coca Cola entered the market in India, there was a high population, but, low consumption of soft drinks. 

Coca Cola has a strong presence and the brand is well known around the world since 1886. Coca Cola was the first international soft drink brand to enter the Indian market in the 1970’s until 1977. But later due to the Foreign Exchange Regulation Act had to leave. Coca Cola was criticized for water pollution of fresh water and ground water and soil. Coca Cola returned in 1993. at the time of reentry Coke would not be able to take the market share because the the beverage market was growing from local companies. Although Pepsi gained entry into India in 1989 before Coke returned their main barrier was its political /legal environment. the government mandated that Pepsi be promoted under the name “Lehar Pepsi” to conform with foreign collaboration rules within the Indian market. Coke faced the same entry barrier and was able to return by joining forces with Britannia Industries India Ltd., the new venture was called “Britco Foods”. 

The Socio Cultural barriers that both companies faced was that they beverages were unsafe and it was causing harm to the environment. Coca Cola however has been accused of unethical behavior since the 1990s in a number of areas including product safety, anti-competitiveness, pollution, depletion of natural resources and health concerns. Coca Cola did not focus on their target audience and did not establish good business relationships with the government and they learned that just because their brand was well known advertising was important. In my opinion Pepsi was more positively impacted because they kept with local taste and launched Lehar 7up in the clear lemon category.

References

www.theguardian,com>environment

dev.harbert.auburn.edu/binaries/documents/center-for

 ethical-organizational-cultures/cases/coca-coca.

www.business-standard.com>companies>feature

TWO:

The socio- cultural that Coke encounter in India was sparked by political upheaval. During prime minister Gandhi reign parliament passed a set of regulations that would trigger the pitch. Foreign Exchange Regulation Act of 1973 required many multinationals to hand over 60% of the equity in their local subsidiaries to Indian partners. Coca-Cola would have had to release its top secret syrup recipe and IBM its computer codes in order to comply. So along with other companies Coke left India.

PepdiCo in India 

Within 30 years of PepsiCo India establishment has grown to be the largest Food and Beverage company in the country. PepsiCo India has always kept a pulse on consumer trends and continue to develope it’s portfolio in line with what people want. As people adjust to the new normal in home consumption is witnessing a significant uptake. (Ians 2020) 

(www.economictimes.com)

Obermeier K. (2019) When India kicked out Coca-Cola, Local Sodas Thrives. Retrieved from 

When India Kicked Out Coca-Cola, Local Sodas Thrived – Gastro Obscura (atlasobscura.com)

THREE:

Do your research and explain the socio-cultural barriers faced by these two companies? What in your view were the reasons which negatively impacted Coke and positively touched Pepsi Co?

Research is required whenever businesses enter a foreign market.  It is vital to a business’s success that the culture and economy is understood.  Coke simply did not do that.  They did research the country or market they entered.  Pepsi Co did.  PepsiCo had a much better understanding of India’s culture and taste preferences.  This was in part due to Ramesh Vangel, Pepsi Co’s first Indian CEO.  He brought Pepsi in through food processing. 

FOUR:

Coke was in India until leaving in 1977 because it would not agree to a new Indian law that limited a foreign company’s holding to 40%.  At this time no U.S. soft drinks were available in India.   This changed when Pepsi Co joined with a state-run company and private company.  

The socio-cultural barriers faced by Pepsi Co and Coke in India were that local competitors filled the void when Coke left.  One of the competitors even vowed to keep foreign competitors out of India.   Pepsi was able to partner with Agro Industries Corporation and Voltas and open a food processing plant.  The plant would process soft drinks concentrate and process tomatoes as well.  

In my view the things that negatively affected Coke were their practices used to open other international locations would not work for India and they refused to adjust or change to accommodate.  It also refused to provide a majority share and control in its Indian company to Indian shareholders.

The things that positively touched Pepsi Co were its ability to adapt to and capitalize on the culture and unrest in the Punjab area by developing a plan that would help the Punjab area with food processing.  The willingness of Pepsi to share closely guarded secret ingredients and agree to a hybrid name is what solidified their success in the Indian market.

Gupta, S.  (2014).   How India became Pepsi’s right choice.   Retrieved from https://www.business-standard.com/article/companies/how-india-became-pepsi-s-right-choice-114032701308_1.html

Pomfret, J. (1990).  Pepsi-Cola Back in Indian Market After a 28-Year Absence: Marketing: The U.S. soft-drink firm cracked the tightly controlled market, in part, by promising to invest $1 billion in the country.  Retrieved from https://www.latimes.com/archives/la-xpm-1990-05-24-fi-451-story.html#:~:text=The%20Pepsi%20project%20began%20in,the%20privately%20owned%20Tata%20Group.

FIVE:

Pepsi and Coke joined many other companies to expand their company in Indian. First up was Coke in 1958 and it soared in sales until 1977. When the Foreign Exchange Regulation Act was revised in 1977, Coke did not like the change and left India but they returned in 1993 (Mills, 2004). Pepsi did not have a problem with the new changes and launched in 1989. They partnered with a native merchant Parle Agro and Voltas India Ltd.

     When Coke had reentered the market, Pepsi was already booming and on top of sales with soft drink however, Coke Americanized their product that didn’t sit well with the economy which led to complete and utter failure.  Pepsi strategically planned their entrance to the market where they gained insight into what the locals like and by partnering with the local merchants. The knowledge gained gave them the insight of lemon flavor in which the locals like and Pepsi became a hit amongst the locals. They also used native celebrities as an advertisement strategy. They went as far as adapting to local traditions such as pricing and bottle.

      In 1995 Coke adopted the strategy by acknowledging local commodities. Coke also bought Maaza, Limca, Thums Up, and Gold Spot that put them above the soft drink shares in India. However, the success was longed lived because, in 2003, both companies faced legal issues because pesticides were found in their soft drinks. They were above the permitted limit that can be found in soft drinks.  Both companies denied the allegations but the same issue surfaced a few years later. The issues started the ban of Pepsi and Coke products in some areas.