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Case Analysis on Pepsi's Entry to India

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Pepsi's Entry into India: A Lesson in Globalization

SUMMARY:

The case discusses the strategies adopted by the soft drinks and snack foods major PepsiCo to enter India in the late 1980s. To enter the highly regulated Indian economy, the company had to struggle hard to 'sell' itself to the Indian government. PepsiCo promised to 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. The case also discusses the criticisms leveled against the company, in particular, criticism of its failure to honor many of its commitments after it started operations in the country and after the liberalization of the Indian economy. Finally, the case takes a look at the contract farming initiatives undertaken by Pepsi since the 1990s and seeks to critically analyze the strategies used by the company to enter India.

Your Analysis should include discussion of the following:

? Was Pepsi really interested in the betterment of Punjab, its farmers and its
people?

? Did the company take undue advantage of the liberalization of the Indian
economy by breaking its commitments?

? Why do you think the government did not take any action against the
company even after discovering that it had broken many of the agreements it had entered into?

1.Why do companies like Pepsi need 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 1980s?

2.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?

3.How did the company react to the changes in the business environment after the liberalization of the Indian economy in the early 1990s? Critically comment on the allegations that Pepsi deliberately did not adhere to most of its commitments.

4.Examine the contract farming initiatives undertaken by Pepsi in India and explain the rationale for such initiatives from the company's perspective. Why is it important for multinational corporations to work towards the improvement of the economy of the countries in which they operate? What are the various other ways in which this can be done?

Include at least two related appendices

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? Was Pepsi really interested in the betterment of Punjab, its farmers and its
people?
No, in my opinion, Pepsi was not interested in the betterment of Punjab, its farmers and its people. What it was interested was in surpassing the governmental barriers and entering the Indian market. It essentially wanted to capture the Indian soft drinks market.

? Did the company take undue advantage of the liberalization of the Indian
economy by breaking its commitments?
Yes, the company took undue advantage of the liberalization of the Indian economy by breaking its commitments. The commitments had been made prior to the liberalization and if it had been a commercial contract Pepsi could have been sued for breach of contract. However, as there was liberalization Pepsi though it was not required to honor its commitments.

? Why do you think the government did not take any action against the
company even after discovering that it had broken many of the agreements it had entered into?
The government had changed its policy to liberalization and was attempting to attract foreign investors into the country. If it took action against Pepsi it would send adverse ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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