PEPSI WANTS TO GLOBALIZE

CASE STUDY OF INDIA

BY

CHAUDHRY SHAHID MEHMOOD

GUILDHALL COLLEGE
Q.1 Why do companies like Pepsi to globalize? What are the various ways in which

foreign companies can enter a foreign market? What hurdles and problems did

Pepsi face when it tried to enter India during the 1980?

Answer. Globalization is a term that refers to the acceleration and intensification

of mechanisms, processes, and activities that are allegedly promoting global

interdependence.

Pepsi like other big companies also wants to globalize the market because of

certain facts. Firstly, globalization territorial boarder is now almost instantaneous.

Secondly, communication technology have improved access to overseas markets and

streamlined both production and distribution of goods. Thirdly, companies can address an

offshoring strategy as part of their value chain. Companies seeking to keep operational

costs low and turn a profit will benefit from sending certain jobs abroad in areas where

conducting business is less expensive.

India was a big and profitable market and its owm economy was not much strong

and wealthy. It provides opportunity to create a monoply in foreign markets.

Foreign companies adopted different ways to access the foreign markets, it tries to

create lobbies with the governments to obtain permission to being operation in the

country. It also tries to give the attractive package for government related to inverstments

and profit.

Pepsi faced many hurdles and problems when it was trying to enter the India

during the 1980s because India political parties and government were not agree to

globalized the Indian market. They were feeling fear for the monoply of the foreign

products, and also feeling insecurity for their own manufactured good. Even the General
Secretary of one of the indian political paties, Janata Dal, wrote the letter to the President

of multi billion-cola company and wrote, you are coming here. I am the one that threw

Coca-Cola out, and we are soon going to come back into the government. If you come

into the country, you have to remember that the same fate will awaits you as Coca-Cola.

They were clqiming that the companies would siphon out money from the country

in form of profits, promotionalfee, and various other maens. They justified themse;lves

with the example of the Chilli.

Question no2.Critically analyze the strategy adopted by Pepsi to sell itself to

the Indian government. 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 problems? Why?Why not?

Answer. Pepsi company adopteddifferent strategies to enter the indian market.

Firstly, in May 1985, it joined hands with the RP Goenka group to import the cola

concentrate and sell soft drinks under its own name label. Which was rejected by the

Indian governmennt because of two reasons: one, the government did not accept the

clause regarding the import of the cola concentrate and two, the use of foreign name was

not allowed accoding indian regulatory framework. Secondly, Pepsi company used the

sensitive issue of Punjab for its own mean. It linked itself with the welfare and

developemnt of the punjab, and indicated the punjab healthy agriculation sector. It’s new

proposal was that PepsiCo’s will play important role to bging about the agriculture

revolution in Punjab. It will provide the employment opportunities . for more attraction, it

claimed that these new employment opportunities would tempt many of the terrorist o

return to society.
 PepsiCo’s made important commitments like:

• The company would focus on food and agro-processing and only 25% of

the inverstment woud be directed towards the soft drink buisness

• The company would not only bring advanced food processing technology

to Indai, but also provide a boost to the image of production made in India in foreign

markerts

• Half of the production would be exported and the export –import ratio

would be 5:1 for a period of 10 years

• Creation of job for 50,000 peoples, of which 25,000 were in Punjab

• Foreign brand name would be used

• An agriculture research center would be establilshed

This package was really attractive for the indian government. Some political

parties still opposed it but government accepted itb after great conversation. And clared

itin September 1988. PepsiCo’s provided the solution of the Punjab’s related problem

which was hot issue for the government of india at that time. Because of un employment,

young people of Punjab were not satisfied with the government. They wetre protesting

against the policies of the government. This solution has been provided by the

PepsiCo’scompany within actractive packing, according to them employment

opportunities would tempt many of the terrorist return to the society. That’s why is aws

not easy for the government to ignore the attractive package to sort out the solution of the

Psunjab problems.