International Marketing Case Study


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I made this PowerPoint presentation for my International Marketing class in 2006. It was the for a case study in which we critiqued how Coca-Cola and Pepsi tried to enter the Indian soda industry, and we examined what went right and what went wrong.

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International Marketing Case Study

  1. 1. Coke and Pepsi Learn to Compete in India By Diana Berger, Arthur Catlin, Ian Cavanaugh, Larry Cenotto, Dave Christiansen, and Matt Ross
  2. 2. Background of Beverage Industry in India <ul><li>Coca-Cola’s past in India </li></ul><ul><ul><li>Present from 1958 until 1977 </li></ul></ul><ul><li>Industry Shakeup in 1988 </li></ul><ul><li>State of the Industry in 1993 </li></ul><ul><ul><li>45% of market consisted of small manufacturers </li></ul></ul><ul><ul><li>$3.2 million market share </li></ul></ul><ul><li>Low Demand for Carbonated Drinks </li></ul><ul><ul><li>Average of 3 servings a year/person in 1989 </li></ul></ul><ul><ul><li>Average of 1404 servings a year/person in U.S. in 2003 </li></ul></ul>
  3. 3. Political Environment in India
  4. 4. Political Environment in India <ul><li>Key Issues </li></ul><ul><ul><li>India seen as unfriendly to foreign investors for many years </li></ul></ul><ul><ul><li>The “Principle of Indigenous Availability” </li></ul></ul><ul><ul><ul><li>Policy banning imports being sold in India </li></ul></ul></ul><ul><ul><li>The Liberalization of India’s Government in 1991 </li></ul></ul><ul><ul><ul><li>“New Industrial Policy” </li></ul></ul></ul><ul><ul><ul><li>Trade rules & regulations simplified </li></ul></ul></ul><ul><ul><ul><li>Foreign investment increased </li></ul></ul></ul><ul><ul><li>Pepsi enters in 1986 </li></ul></ul><ul><ul><li>Coca-Cola follows in 1993 </li></ul></ul>
  5. 5. Political Environment in India <ul><li>Indian Laws </li></ul><ul><ul><li>Unlawful to market under their Western name in India </li></ul></ul><ul><ul><ul><li>Pepsi became “Lehar Pepsi” </li></ul></ul></ul><ul><ul><ul><li>Coca-Cola merged with Parle and became “Coca-Cola India” </li></ul></ul></ul><ul><ul><li>Different Laws for Pepsi and Coke </li></ul></ul><ul><ul><ul><li>Coca-Cola agreed to sell off 49% of its stock as a condition of entering and buying out an Indian company </li></ul></ul></ul><ul><ul><ul><li>Pepsi entered earlier, and was not subject to this </li></ul></ul></ul>
  6. 6. Political Environment in India <ul><li>Problems </li></ul><ul><ul><li>India forced Coke to sell 49% of its equity to Indian investors in 2002 </li></ul></ul><ul><ul><li>Coke asked for a second extension that would delay it until 2007 </li></ul></ul><ul><ul><ul><li>India denied this </li></ul></ul></ul><ul><ul><li>Pepsi was held to this since they entered India in a different year. </li></ul></ul><ul><ul><li>Coke asked the Foreign Investment Promotion Board to block the votes of the Indian shareholders who would control 49% of Coke </li></ul></ul><ul><ul><li>Change in oversight of the FIPB </li></ul></ul><ul><ul><ul><li>Past lobbying efforts made useless </li></ul></ul></ul>
  7. 7. Political Environment in India <ul><li>Could these problems have been forecasted prior to market entry? </li></ul><ul><ul><li>Probably not </li></ul></ul><ul><ul><ul><li>Inconsistent, and changing government </li></ul></ul></ul><ul><li>How could these developments in the political arena have been handled differently? </li></ul><ul><ul><li>Coke could of agreed to start new bottling plants instead of buying out Parle, and thus wouldn’t of had to agree to sell 49% of their equity </li></ul></ul>
  8. 8. Timing of Market Entry
  9. 9. Timing of Market Entry <ul><li>Pepsi (early entry-1986) </li></ul><ul><ul><li>Advantages </li></ul></ul><ul><ul><ul><li>Entered the market Before Coca-Cola and was able to gain a foothold in the market while it was still developing </li></ul></ul></ul><ul><ul><ul><li>Gained 26% market share by 1993 </li></ul></ul></ul><ul><ul><li>Disadvantages </li></ul></ul><ul><ul><ul><li>Were forced to change their name to Lehar Pepsi </li></ul></ul></ul><ul><ul><ul><li>Govt. limited their soft drink sales to less than 25% of total sales </li></ul></ul></ul><ul><ul><ul><li>Struggled to fight off local competition </li></ul></ul></ul>
  10. 10. Timing of Market Entry <ul><li>Coca-Cola (late entry-1993) </li></ul><ul><ul><li>Advantages </li></ul></ul><ul><ul><ul><li>Were able to buy 4 bottling plants from industry leader Parle </li></ul></ul></ul><ul><ul><ul><li>Also bought Parle’s leading brands: Thums Up, Limca, Citra, Gold Spot and Mazaa </li></ul></ul></ul><ul><ul><ul><li>Set up 2 new ventures with Parle to bottle and market product </li></ul></ul></ul><ul><ul><li>Disadvantages </li></ul></ul><ul><ul><ul><li>Denied entry until 1993 because Pepsi was already there </li></ul></ul></ul><ul><ul><ul><li>Harder to establish market share with Pepsi there </li></ul></ul></ul><ul><ul><ul><li>Were not allowed to buy back 49% of equity </li></ul></ul></ul>
  11. 11. Responses to India’s Enormity <ul><li>Pepsi and Coca-Cola responded in many ways to the enormity of India in terms of it population and geography </li></ul>
  12. 12. Responses to India’s Enormity <ul><li>Product Policies </li></ul><ul><ul><li>Catering to Indian tastes </li></ul></ul><ul><ul><ul><li>Entering with products close to those already available in India such as colas, fruit drinks, carbonated waters </li></ul></ul></ul><ul><ul><li>Waiting to introduce American type drinks </li></ul></ul><ul><ul><ul><li>Coca-Cola introducing Sprite recently </li></ul></ul></ul><ul><ul><li>Introducing new products </li></ul></ul><ul><ul><ul><li>Bottled water </li></ul></ul></ul>
  13. 13. Responses to India’s Enormity <ul><li>Promotional Activities </li></ul><ul><ul><li>Both advertise and use promotional material at Navrartri </li></ul></ul><ul><ul><ul><li>Pepsi gives away premium rice and candy with Pepsi </li></ul></ul></ul><ul><ul><ul><li>Coca-Cola offers free passes, Coke giveaways as well as vacations </li></ul></ul></ul><ul><ul><li>Use of different campaigns for different areas of India </li></ul></ul><ul><ul><ul><li>“ India A” campaigns try to appeal to young urbanites </li></ul></ul></ul><ul><ul><ul><li>“ India B” campaigns try to appeal to rural areas </li></ul></ul></ul>
  14. 14. Responses to India’s Enormity <ul><li>Pricing Policies </li></ul><ul><ul><li>Pepsi started out with an aggressive pricing policy to try to get immediate market share from Indian competitors </li></ul></ul><ul><ul><li>Coca-Cola cut its prices by 15-25% in 2003 </li></ul></ul><ul><ul><ul><li>Attempt to encourage consumption to try to compete with Pepsi and gain market share </li></ul></ul></ul>
  15. 15. Responses to India’s Enormity <ul><li>Distribution Arrangements </li></ul><ul><ul><li>Production plants and bottling centers placed in large cities all around India </li></ul></ul><ul><ul><li>More added as demand grew and as new products were added </li></ul></ul>
  16. 16. Coke and Pepsi’s “Glocalization Strategies” <ul><li>What is “Glocalization”? </li></ul><ul><ul><li>Global + Localization = Glocalization </li></ul></ul><ul><ul><li>By taking a product global, a firm will have more success if they adapt it specifically to the location and culture that they are trying to market it in. </li></ul></ul><ul><ul><li>Both companies have successfully implemented glocalization </li></ul></ul>
  17. 17. Pepsi’s Glocalization <ul><li>Pepsi forms joint venture when first entering India with two local partners, Voltas and Punjab Agro, forming “Pepsi Foods Ltd”. </li></ul><ul><li>In 1990, Pepsi Foods Ltd. changed the name of their product to “Lehar Pepsi” to conform with foreign collaboration rules. </li></ul><ul><li>In keeping with local tastes, Pepsi launched its Lehar 7UP in the clear lemon category. </li></ul>
  18. 18. Pepsi’s Glocalization <ul><li>Advertising is done during the cultural festival of Navrartri , a traditional festival held in the town of Gujarat which lasts for nine days. </li></ul><ul><li>Pepsi’s most effective glocalization strategy has been sponsoring world famous Indian athletes, such as cricket and soccer players. </li></ul>
  19. 19. Coca-Cola’s Glocalization <ul><li>First joined forces with the local snack food producer Britannia Industries India Ltd. in the early 90’s. </li></ul><ul><li>Formed a joint venture with the market leader Parle in 1993 </li></ul><ul><li>For the festival of Navrartri, Coca-Cola issued free passes to the celebration in each of its “Thums Up” bottles </li></ul><ul><li>Also ran special promotions where people could win free vacations to Goa, a resort state in western India </li></ul>
  20. 20. Coca-Cola’s Glocalization <ul><li>Coca-Cola also hired several famous “Bollywood” actors to endorse their products. </li></ul><ul><li>Who could forget… </li></ul>Vivek Oberoi Aishwarya Rai
  21. 21. Coca-Cola India’s Mistakes <ul><li>Enters Market at the Wrong Time </li></ul><ul><ul><li>By entering at this time, Coca-Cola India agreed to abide by all the Foreign Investment Laws of that year. </li></ul></ul><ul><li>Coca-Cola India tries to expand investment </li></ul><ul><ul><li>Government allowed acquisition only if Coca-Cola agreed to sell 49% of equity within 2 years </li></ul></ul><ul><li>Coca-Cola tried to get extensions…twice </li></ul><ul><ul><li>India granted the first extension, denied the second </li></ul></ul><ul><li>Coca-Cola India tried to deny the upcoming Indian shareholders voting rights </li></ul><ul><ul><li>Foreign Investment Promotion Board (FIPB) Denies This </li></ul></ul>
  22. 22. Coca-Cola India’s Mistakes <ul><li>1 st Mistake </li></ul><ul><ul><li>Coca-Cola should have been more careful of when they entered the market and what they were promising when they entered. </li></ul></ul><ul><li>2 nd Mistake </li></ul><ul><ul><li>Coca-Cola should not have tried to weasel their way out of promises that they made. </li></ul></ul><ul><li>These mistakes hurt Coca-Cola’s image and reputation as an International Company </li></ul>“ Why doesn’t this multinational set an example by fulfilling its own commitments?”
  23. 23. Coke or Pepsi in the Long Run? <ul><li>Pepsi </li></ul><ul><ul><li>Better marketing and advertising strategies </li></ul></ul><ul><ul><li>More widely accepted </li></ul></ul><ul><ul><li>More market share </li></ul></ul><ul><li>Coke </li></ul><ul><ul><li>Government conflicts </li></ul></ul><ul><ul><li>Trailing Pepsi in market share </li></ul></ul><ul><li>Pepsi will fare better in the long run </li></ul>
  24. 24. Pepsi’s Lessons Learned <ul><li>Beneficial to keep with local tastes </li></ul><ul><li>Beneficial to pay attention to market trends </li></ul><ul><li>Celebrity appeal makes for exceptional advertising </li></ul><ul><li>It pays to keep up with emerging trends in the market </li></ul>
  25. 25. Coca-Cola’s Lesson’s Learned <ul><li>Pay specific attention to deals made with the government </li></ul><ul><li>Establish a good business relationship with the government </li></ul><ul><li>Investment in quality products </li></ul><ul><li>Advertising is crucial </li></ul>