Question

NO COPY AND PASTE. Write your own opinion.

Pepsi enters India.

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

Answer 1

Pepsi enters India.

How did the company react to the changes in the business environment after the liberalization of the Indian economy in the early 1990s?

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.

After Liberalisation in 1994, it bought off its partner in venture ie. Voltas and PAIC.Establishing wholly owned subsidiary Pepsico Holding India Pvt.Ltd.It also changed name from "Lehar Pepsi" to "Pepsi".It sold off its Tomato paste plant in 1995.They gradually extended the contract farming.Their plastic exports were 67%.Till 1997,the agro research center was nowhere.

Critically comment on the allegations that Pepsi deliberately did not adhere to most of its commitments.

Allegations:

• Failing to create jobs
• 50% of employee working for Concentrate and Bottling Business not for Food processing Business.
• Pepsi with Future Polymers Ltd. were reducing the work force and they became more machine oriented.
• More lasting impression of Pepsi and Lehar Pepsi.
• Pepsi failed to adhere its commitment to export 50% of its production.To overcome its commitment it started exporting tea,rice,shrimps,glass bottles,leather products,and champagne.
• Products exported were same which use to happen earlier.
• Pepsi paid the farmers only Rs.0.75 per kg of tomatoes,when the market price was Rs. 2 per kg.