Pepsis entry into India: A well planned out strategy
- Case summary.
- SWOT analysis.
- Internal analysis.
- External analysis.
- Pepsi's need to globalize.
- Pepsi and the Indian government.
- Pepsi after India's liberalization.
- Working towards improving the foreign economy.
- Recommendations for Pepsi's future success.
With other Pepsi markets nearing saturation, Pepsi decided to expand its international operations into India in the late 1980s. However, even prior to entering India, Pepsi was met with strong objections by one of India’s leading political parties. George Fernandes, General Secretary of the Janata political party threatened Pepsi that it too, just like Coca Cola, will be expropriated if his political party returned to power. Regardless, Pepsi insisted on expanding into India and came up with a first entry proposal to the government, which was rejected. The second entry proposal followed Pepsi’s strategy of primarily focusing on solving Punjab’s problems, rather than focusing mainly on the soft drink industry. That proposal contained many promises to improve the economy of Punjab through increasing productivity and employment in the agricultural sector. Nevertheless, the reality turned out to be something rather different; Pepsi broke many of its promises to Punjab. This lead to a general public disapproval towards Pepsi, and just as the government was considering action against Pepsi, India experienced a foreign currency crisis in the early 1990s.
[...] This is affects Pepsi’s reputation on a global level. Trust issues between Pepsi and the Indian population have become a major concern, particularly as this has hampered sales. b. External Analysis India offers market opportunities that strongly overcome the threats it presents. First, India represents a huge, untapped market. Pepsi targets mainly to India’s youth, which presents of the world’s youth population; therefore, this is a market that Pepsi can not disregard. Moreover, Pepsi has the opportunity to have a first-mover advantage in India, since none of the big players in the soft drink industry are established in India. [...]
[...] Furthermore, Pepsi has changed its initial penetration pricing strategy, to a skimming pricing strategy as it focused on selling to the better-off social classes that have more exert more demand and are able to afford the product. This youth population tends to also look favorably at Western culture. Lastly, large investments in trendy, funny, and sexy ads have appealed to the target market and helped increase sales. V. Working towards Improving the Foreign Economy It is crucial for MNCs to try to improve the economy of the countries they operate in, since operating in a more developed country gives MNCs several advantages. [...]
[...] This can, for example, be a contribution in health, education, or sports projects. Cooperation with the local government or organizations like United Nations Children’s Fund (UNICEF) or the World Wildlife Fund (WWF) can make this easier and will improve the image of the company, showing its strong commitment to social and environmental responsibility. Furthermore, improvements in infrastructure can benefit both the MNC and the country. Construction of new roads and communication ways can profit both of them. But it should be mentioned that all of this should go in cooperation with the government in order to avoid doubling work and other inefficiencies. [...]
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