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.[9] 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. [...]
[...] Since Pepsi had the capital, as well as the credibility, Pepsi's strategy of putting India first by proposing to help the economy of one of its provinces, was the major factor why the government did accept Pepsi's entry into the Indian market. However, in reality there was a large gap between what was put on paper and what was actually carried out. Pepsi did not hold to most its promises. Among others, Pepsi created only about 2,400 jobs by 1996. [...]
[...] This case will first present a thorough analysis of Pepsi as a multinational corporation, as well as Pepsi's expansion strategy into India. Secondly, the impact that the market liberalization had on Pepsi will be analyzed and assumptions will be drawn as to why Pepsi still decided to invest into India's agricultural sector. Lastly, several recommendations will be made as to Pepsi's future success in India. I. SWOT Analysis a. Internal Analysis Pepsi possesses numerous internal strengths that can facilitate its entry and adaptation to the Indian market. [...]
[...] All in all, entry into the Indian market was a calculated risk by Pepsi. Currently, Pepsi is firmly established in India and sales have been steadily increasing and Pepsi has managed to become a part of the Indian population's daily lives;[4] nonetheless, Pepsi faces a lot of problems these days. Firstly, Coca-Cola, Pepsi's largest global competitor, is back and is eating into Pepsi's market share, thus reducing Pepsi's potential profits. On a national level, Pepsi has several ongoing environmental problems in India. [...]
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