Kristian Arnesen

Kristian Arnesen

BUSA460

9.25.06

Kristian Arnesen

BUSA460

9.25.06

Coke and Pepsi learn to compete in India

1. Looking at Hofstede’s indexes, one can see that India has a low IDV score, a relatively high PDI score and a low UAI score. India’s low individualism score could pose problems for companies, because boycotts and strikes are effective as people are more easily persuaded to embrace them if they benefit the collective. The boycott of Pepsi and Coke at the time of the Iraq invasion in 2003 caused the sale of Pepsi and Coke products to plummet 50% in the Indian state of Kerala because of the high sense of collectivism in this area.

With India having a high power index score, Coke and Pepsi could run into problems with one class, or caste as they call it in India, buying their products and the other feeling distanced from the product because of people in a different caste. It could also make advertisement and harder because people have a hard time identifying with an advertisement and a product if it is too focused on one caste’s culture or consumed more by one caste. A normal American advertisement focusing on the middle class might therefore not be as effective in India.

The uncertainty avoidance score is about the same as that of western countries and should therefore pose few if any problems as long as the cultural differences and religion are taken into consideration

3.

Both companies focus their advertisement campaigns heavily on celebrity advertising endorsements. Instead of airing previously seen commercials fitted for the Western markets with for example Britney Spears fronting the product, Pepsi and Coca Cola have picked up on popular sports and the lifestyle of the Indians. Just because the target market which the advertisements are created for is the same in India and America, it might not appeal to the target market in both countries because of the cultural differences. By putting the extra money down and customizing their Indian advertisement campaigns to the new culture at hand, both companies will have ad campaigns that will appeal to their around their own culture.

By taking what Pepsi knows about sponsoring major national sport events in Europe and America, they used famous cricket and soccer players to promote their products in their Indian advertisement campaigns. Coca Cola also built regional ad campaigns around local idioms and artists in different regions, which will give consumers a better perception of Coca Cola as a drink for the community to which they belong. Seeing how India is more focused towards communal belonging than individualism, Coke might have boosted their sales a lot from going with this approach in their advertisement campaign.

Pepsi and Coke also embraced the Indian cultural celebrations and sponsor them with free giveaways with the purchase of their product as part of their sales promotion. By forming promotions around such events, cultural festivals and holidays that are specific to nations’ cultural values, you get your brand associated with the culture and national identity. This is a great way to build brand recognition and get your product adopted into a new culture.

Coke, Pepsi and local producers of soft drinks have an aggressive pricing policy and are constantly battling to attract consumers with the better price for the higher quantity of product. Producers also reduce the price and increase the amount of product consumers are able to buy, allowing soft drinks to be more affordable, by releasing smaller and larger bottles ranging from 200ml, 250ml, 300ml, 500ml and upwards. This is another great way to meet the consumer’s price range in a country with a large lower class that has fewer resources to spend on products like soft drinks. It is also helpful in creating a higher amount of sales and increases the frequency of consumption in an area with a very low consumption rate per-capita at only 7 servings a year.

Pepsi and Coca Cola set up a distribution, literally in months, which is a supreme case of efficiency and what these companies are capable of. Both companies have several plants all across the country and they are run as company-owned plants, franchisee operations and contracting companies, although they own about 70% of them. Coke closed eight outdated and inefficient plants that the company had acquired through buying Thums Up. Coke also started supporting the Indian economy by purchasing the raw material locally, and saved 57% on import duties. They have also upgraded the bottling technology at their plants, are improving maintenance of its plants and are start to train their Indian employees. The companies have millions of retailers and thousands of wholesalers across the country and are able to get their product out from strategically placed bottling plants and warehouses, to rural areas and major cities.

6.

An environmental organization claimed that Coke and Pepsi contained significant amounts of pesticide residue, which was later found to be untrue by the Ministry of Health and Welfare. Their tests showed that levels of pesticides in Coke and Pepsi soft drinks were safe to consume under Indian health standards. Still, after the tests proved the environmental organization wrong, people didn’t regain confidence in the two companies.

Coke and Pepsi needs to confront these issues in public, ensure the public that they are getting a quality product which will not destroy consumers health, at least not by toxics. To further keep up sales and try to regain the trust of the Indian consumers, they can focus more on their Indian brands which they bought up at the time of entry into the Indian market and regain consumer’s positive perception of Coke products. Coke and Pepsi can also try to contribute more to the Indian society in terms of humanitarian aid, community projects and national projects to increase literacy for example. Companies of the west are accepted in India, but that doesn’t mean that the government or consumers feel like they contribute anything to the Indian society. Looking at India’s high sense of collectivism, if would be a good idea for the two companies to support India, and join them in their society, not only as for-profit organizations, but also as a positive force in leading India further into the new world market.

The activist group that launched the campaign in California mostly bases