Coca Cola Timing of Entry of Entry Into the Indian Market

Q. Timing of entry into the Indian market brought different results for PepsiCo and Coca Cola India. What benefits or disadvantages accrued as a result of earlier or later market entry?

Introduction
When an organization has made the big decision to enter into an overseas market, there are many options in relation to entry modes it must consider. The options vary from cost, risk and control measures associated to each. Here I will try and evaluate the Indian market and the benefits and disadvantages faced by PepsiCo and Coca Cola as they entered the market.

Timing of Entry:
PepsiCo formerly known as Pepsi Cola Company was formed in 1898, 12 years after its closest rival Coca Cola was formed. Due to strict regulation in entering the Indian market companies could only enter by means of a joint venture with another Indian company as part of their anti-foreign policy laws which lead to it trading under the name of Lehar Pepsi. Coca Cola was formed in 1886, it is today the world’s largest soft drink manufacturing company with a host of different variety of drinks under its name, unlike Pepsi they had already been in India in 1958-1977 but left as they were being pressured by governments over their secret formula. It traded under the name of Britco Foods (joint venture with Britannia Industries India Ltd.)

The timing of entry by both companies lead to them experiencing different reactions. To enter the highly regulated Indian economy, the company PepsiCo had to struggle hard to ‘sell’ itself to the Indian government. It promised work towards uplifting the rural economy of the terrorism affected north Indian state of Punjab by getting involved in agricultural activities. In addition, it made a host of other promises that made its proposal very attractive to the regulatory authorities.

Advantages of Entry: PepsiCo
* 1st mover advantage- being the first of the big beverage companies to enter into the market helped it a lot and limited the difficulties it might have had if Coca Cola had been in the market at the time. India was vastly an untapped economy and was a developing country and a huge population in excess of 1 billion, even a little portion of that would have been admirable even Robert Beeby, CEO of Pepsi-Cola International backed this idea up as he said “We’re willing to go far with India because we wanted to make sure we get an early entry while the market is developing”(Page 605).

* It familiarized itself with the Indian population and a vast majority of the people and this led to the majority of the population associating cola with Pepsi as opposed to its rival Coca-Cola, while this view is not shared worldwide it can play to Pepsis advantage. This could later be transformed to a strategic move if Pepsi saw the need to. * In India the government liberalized the economy this: * Freed Pepsi from commitments it made as part of the entry into the market * Allowed them to sell subsidiaries it took on as part of the joint venture such as the chilli, tomato and basmati businesses. * Allowed it to trade under the name Pepsi and not “Lehar Pepsi” * Were able to set up green bottling plants

Advantages of Entry: Coca Cola
Unlike PepsiCo they entered at a later date, they reentered India in 1993. * An advantage to them entering latter to PepsiCo enabled them to learn from the actions of their rivals and as they were a big brand name they had the expertise and management to try and minimize the likelihood of mistakes. * Their title also helped again as Parle offered to sell 4 of its bottling plants in major cities, something Pepsi were not able to do. * It was able to reenter without having to give up its secret formula. * It entered during a time where India was more welcome to foreign companies.

Disadvantages
* They had to follow strict rules and regulations under a different government to the ones in power when PepsiCo entered the market. * Failed to recognize the impact of the government again as it had to sell 49% of its equity * Found it hard to establish itself and failed to capitalize on its acquisition of Parle, instead they focused on their brand.

Conclusion
While both were in my opinion did good marketing strategy before entering India Coca Cola in my opinion failed to recognize the impact of the government and received negative criticism as a cause of this. One thing they both did not anticipate were the difference in the Indian market as aggressive marketing does not work in a market like this, patience and familiarity would have got them further.

It doesn´t seem like Coca Cola and Pepsi tried to make an effort to adapt to the culture and business differences there are between India and USA. It looks like they had a more self-reference and ethnocentric approach which is one of the main reasons why firms being aware of the culture difference (as mentioned in chapter 1),( if it can sell in America It can probably be sold in India). If you want to succeed in the world market you need to have knowledge of the culture, history, world market potential, and global economic, social, and political trends. If I was in their position I would have made a detailed cultural analysis (PEST-analysis) of the Indian market with focus on the cultural imperatives, electives, and exclusives. Then I would look internally at the export engagement in the company are we able to coop with the cultural differences or do we need expertise from people with higher knowledge and network. The business culture is also an essential area that I would have reviewed carefully. I would have tried to get connections with an influential person from a high bureaucracy level (maybe opinion leaders) to establish a network. The way Coca Cola could have gained knowledge was by focusing on Parle products in the beginning as I mentioned before

References

http://www.economist.com/node/7827267?story_id=E1_SRNSNGS
http://www.hartford-hwp.com/archives/52a/042.html

http://www.chron.com/disp/story.mpl/business/7198814.html