Worldwide Economics Task
Case – Pepsi's Entry Into India – A Lesson in Globalization| Ankur Sikka
PGDM – IBRoll No . 007
ANSWER 1 .
A. NEED FOR GLOBALIZATION
With respect to the strategy which a company comes after, there are 3 primary reasons a company like Pepsi engages in international business: 1 . To Increase sales/ Product sales Expansion
a. Economies of Scale
An organization like Soft drink usually runs on the principle of Financial systems of Range. In order to acquire a larger marketplace canvas and operate on this kind of minimum useful scale of operation, it is extremely essential the company protects more market and potential customers by moving from a saturated industry to an unsaturated one. (E. g. Soft drink shifted their focus via saturated U. S. market to nascent Indian market in order to expand) b. To leverage Foreign Product lifecycle
A product in one country could be at a different sort of phase of its lifecycle in another country and this difference could be exploited with a company to direct all their product source to a more demanding market. (E. g. Pepsi looked at the extremely low per household consumption of soft drinks being a great chance to create a new growth period for its soft drinks rather than exploiting the mature markets in other countries)
2 . To acquire methods
a. Companies just like Pepsi desire a lot or perhaps resources at lower cost so as to have more profitability while keeping up with the demand pertaining to raw materials. These companies thus target those countries which can give the production, removal or cultivation of these resources at a much lower cost than the current ones (in operation) with little tariffs and other barriers. m. This will also help them to obtain materials and components from a different nation in case if perhaps sourcing from one country can be badly influenced due to selected reasons, as a result allowing global sourcing.
several. Reducing Risk
c. Most of these companies tend to shift when going into other countries in order to decrease their risk from elements such as politics hurdles, differences in Industry circuit or basic geographic exposure to possible that subject. d. It is also essential that risk because of existing opponents is minimized by trading into not developed areas so as to counter-top investing simply by competitors.
W. STRATEGIES TO ENTER IN FOREIGN MARKETPLACE
1 . Indirect and direct Exports – Possible the moment transportation costs and contract price barriers are low. It offers higher competitive advantage. (E. g. Soft drink in new proposal committed to export half of its creation and retaining export – import ratio of 5: 1 for a period of 15 years) 2 . Contract Manufacturing – (E. g. Soft drink entered into negotiating with a few big farmers and began developing tomatoes through the contract farming route) several. Joint Projects – (E. g. Soft drink entered while Pepsi Foods Ltd. which has been a venture between PepsiCo (36. 8%), Punjab Agro Industrial Organization (36. 11%) and Voltas India Limited. (24%)) 4. Licensing
a few. Mergers and Acquisitions
6th. Strategic Alliances and Turn Key Projects
several. Management Control and Wholly owned subsidiaries
C. OBSTACLES AND CHALLENGES FACED BY SIMPLY PEPSI DURING ITS ENTRY
1 ) Opposition by many people political celebrations and parti (including a letter of non conformance by George Fernandes, Basic Secretary of Janata Dal, to Chief executive of PepsiCo) 2 . Rejection of terms regarding the diet coke import
3. Prohibition to work with foreign manufacturer
4. Insufficient liberalization
your five. Total possession not allowed (100% FDI was not allowed) six. Primary focus on development of Farming Sector
ANSWER 2 .
Approaches adopted simply by Pepsi
1 . PepsiCo exploited the sensitive issue concerning the political and interpersonal problems to devise a new proposal that could fit with the present ‘Politics' and ‘Public Opinion'. 2 . The modern proposal gave a lot of emphasis towards the effects of PepsiCo's entry upon agriculture and employment in Punjab. PepsiCo claimed that this would have a determining rold in the farming...