1.1 Why do companies like Pepsi need to globalize?
1.2 What are the various ways in which foreign companies can enter a foreign market?
1.3 What hurdles and problems did Pepsi face when it tried to enter India during the 1980s?
To Broaden the markets
To seek raw materials
To seek the technologies
To seek the production efficiencies
To avoid political hurdles
To postpone the payment of domestic taxes
To counter foreign investments by competitors
Assembly line operation
Turn Key Projects
In 1988, the threatening letter by George Fernandes.
There should be no import of cola concentrate
There should be no use of foreign brand name.
Lack of liberalization
100% FDI was not allowed
Agricultural sector was the priority
2.1 Critically analyze the strategy adopted by Pepsi to sell itself to Indian government.
2.2 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 problem? Why/Why not?
Promoting and developing the export of Indian Agro-based products, though it got rejected.
Each cola import would be in return of exporting juice concentrate from Punjab.
Development and Welfare of State.
Bringing about Agriculture Revolution in state.
Terrorists to return to society.
Punjab boasted a healthy agricultural sector
Development of Areas it planned to operate in
Directing major (75%) investment towards agricultural sector
Focusing on food and Agro-processing.
Boosting the image of Indian products in foreign market.
Establishing Agricultural Research Centre.
More emphasis on Exports than imports to improvise the balance of payment.
Yes, Most of the commitments were related with Punjab therefore it is the biggest factor responsible for acceptance of Pepsi.
3.1 How did company react to changes in the business environment after the liberalization of the economy in the early 1990s?
3.2 Critically comment on the allegations that Pepsi deliberately did not adhere to most of its commitments?
In 1994, it bought off its partner in venture i.e. Voltas and PAIC.
Establishing wholly owned subsidiary PepsiCo Holding India Pvt. Ltd.
Changed name from “Lehar Pepsi” to “Pepsi”
Sold off its Tomato Paste Plant in 1995
Gradually reduce the contract farming
Plastic Exports were 67%.
Till 1997, the agro research centre was no where.
Failing to create jobs
50% of employee working for Concentrate and Bottling Business not for Food processing Business.
Pepsi with Futura Polymers Ltd. were reducing the workforce and more machine oriented
More lasting impression of “Pepsi” and “Lehar Pepsi”.
Export of fruit & vegetable based products was negligible & started exporting Tea, Rice & Shrimps
Failed its commitment to export 50% production.
Products exported were same which use to happen earlier.
4.1 Examine the contract framing initiatives undertaken by Pepsi in India and explain the rationale for such initiative from the company’s prospective.
4.2 why is it important for multinational corporations to work towards the improvement of the economics in the country in which the operates?
4.3 What are the various other ways in which this can be done?
Increase in Tomato crop production
Providing High yield seeds to increase the productivity in the tomato cultivation
Offered advanced equipments (Free of cost) to increase the speed & efficiency
Imported the required material for tomato cultivation
Rationale behind the contract farming was that in one or the other way company insisted on the development of those crops which were directly or indirectly related to their businesses such as soft drinks, snacks, fruit juices & mineral water.
Other rationale behind the contract farming was to increase their own business rather than any social welfare.
Taken initiative for
Groundnuts production over paddy production
Fruits & Vegetable Farming
Encouraging farmers to cultivate potato with low sugar content for chips.