GBS Response Paper 1 Pepsi And Coke In India
Laura Lindroth
GBS 235
Paper #1
Prof Cherivtch
21 March 2015
Response Paper: Coke and Pepsi Learn to Compete in India
1. The political environment in India has proven to be critical to company performance for both
PepsiCo and Coca-Cola India. What specific aspects of the political environment have played key roles? Could these effects have been anticipated prior to market entry? If not, could developments in the political arena have been handled better by each company?
There have been several aspects to the political environment in India that have played key roles in company performance for both PepsiCo and Coca-Cola. As far back as 1977, Coca-Cola was pressured by the government to share their secret formula for their cola syrup and share equity with them. They chose to leave the country rather than do so. This predicament probably could not have been anticipated since the government had traditionally opened its doors wide to foreign investors, and they probably made the right move in leaving rather than taking an enormous risk in handing over such a huge equity and major secret--their product recipe--especially in a country where they were not all that successful anyway, especially at that time.
In 1988, the government announced a warning that all producers of soft drinks had to eliminate use of an essential ingredient called BVO after it was discovered to be carcinogenic. Again, this probably could not have been anticipated. While one would like to think that producers are cautious and conscious enough to do their own research and testing of all ingredients used in their products, that is likely not the case as they do not necessarily have a moral obligation to do so and it costs them money. Therefore, eliminating the use of BVO or using the more costly substitute, estergum, was probably the best move for soft drink producers (note: Coca-Cola was not yet in
India at that time so this did not directly affect them, only PepsiCo).
Prior to the 1990’s, the
GBS 235
Paper #1
Prof Cherivtch
21 March 2015
Response Paper: Coke and Pepsi Learn to Compete in India
1. The political environment in India has proven to be critical to company performance for both
PepsiCo and Coca-Cola India. What specific aspects of the political environment have played key roles? Could these effects have been anticipated prior to market entry? If not, could developments in the political arena have been handled better by each company?
There have been several aspects to the political environment in India that have played key roles in company performance for both PepsiCo and Coca-Cola. As far back as 1977, Coca-Cola was pressured by the government to share their secret formula for their cola syrup and share equity with them. They chose to leave the country rather than do so. This predicament probably could not have been anticipated since the government had traditionally opened its doors wide to foreign investors, and they probably made the right move in leaving rather than taking an enormous risk in handing over such a huge equity and major secret--their product recipe--especially in a country where they were not all that successful anyway, especially at that time.
In 1988, the government announced a warning that all producers of soft drinks had to eliminate use of an essential ingredient called BVO after it was discovered to be carcinogenic. Again, this probably could not have been anticipated. While one would like to think that producers are cautious and conscious enough to do their own research and testing of all ingredients used in their products, that is likely not the case as they do not necessarily have a moral obligation to do so and it costs them money. Therefore, eliminating the use of BVO or using the more costly substitute, estergum, was probably the best move for soft drink producers (note: Coca-Cola was not yet in
India at that time so this did not directly affect them, only PepsiCo).
Prior to the 1990’s, the