The political environment in India proved to be very problematic for both PepsiCo and Coca-Cola when they entered the market. The government has long enforced a protectionist stance on its economy in order to safeguard the interests of its people. Even with the New Industrial Policy in 1991 (Pathak 2007), that loosened the grip on foreign businesses entering the country, PepsiCo and Coca-Cola still had to jump through many hurdles before they could operate. For example, PepsiCo was limited to selling at most 25% of total sales of their soft drink concentrate to local bottlers (Cateora 2007). They were also not allowed to use foreign brand names on their products, which meant that PepsiCo had to rename their products Lehar Pepsi and Lehar …show more content…
Coca-Cola attempted to connect with their consumers through ad campaigns that promote drinking Coke a cool lifestyle choice. In order to segment the market, they divided the population into two groups (Rural and Urban population) in order to effectively target both markets (Mohaiemen 2004) with different marketing mixes. While I wouldn’t go so far to say that Coca-Cola had failed in their operations in India, they could have definitely handled the situation much better. However, it wasn’t entirely their fault. There were some unforeseen factors that played into situation, the most important of which is the political and legal environment of India. Hoping to get a jump on rival PepsiCo and at the same time take advantage of the desperate local businesses, Coca-Cola bought over Parle in order to use their existing bottling plants. The government had issued a ruling that Coca-Cola accepted without hesitation and much thought because they so frantically wanted to regain a foothold in the industry. They assumed that in those 5 years, the market would have flourished and they would have made up their losses. Unfortunately this is their first mistake. They assumed that everything would go to plan. They assumed that everything will work out, even when they have once failed in India few years back. In the end, it didn’t; the market didn’t grow to accept