|Case Code||:||BSTR062||Electronic Format: Rs. 300;|
Courier (within India):Rs. 25 Extra
ThemesMNCs in India
|Case Length||:||11 Pages|
|Period||:||1994 - 2003|
|Industry||:||Beverages & Snack Food|
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 levelled against the company, in particular, criticism of its failure to honour 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.
» understand the kind of strategy a multinational company develops to enter highly regulated economies that have immense market potential
» analyse the importance of formulating and selling a business proposal in such a manner that it becomes attractive to the regulatory authorities of a foreign country
» appreciate how and why a company changes its strategies in tune with changes in the regulatory environment of a foreign country
» understand the role big private sector corporations can play in the development of the economies in which they operate, and the financial and social implications (reputation, goodwill) of doing so. The case is aimed at MBA/PGDBA students, and is intended to be part of the strategy and general management curriculum
Pepsi, PepsiCo, Indian soft drink market, Globalisation, Entry strategy, Mega-marketing, Lobbying, Contract farming, Political environment, India's liberalisation, Business environment
Pepsi's Entry into India: A Lesson in Globalization- Next Page>>
Facts about India’s service sector;
1. India stands out because India’s service sector currently is close to 60% of the economy (source). This has increased from 15% in 1950
2. Companies attracted to India and its Special Enterprise zones include Nokia SEZ in Tamil Nadu (telecom equipment/R&D services), Motorola and DELL, and Infosys Technologies in Bangalore.
3. The demand for Indian BPO services has been growing at an annual growth rate of 50%
4. Indian IT and BPO generates $71 Billion per year
5. Approximately 4million Indian’s worked directly in BPO and IT in 2015
6. Indian BPOs handle 56% of the world's business process outsourcing
7. India’s BPO contributes about 5% to annual GDP
8. In 2009, the top 15 technology outsourcing companies in the world included seven Indian firms, including Tata Consultancy Services, Wipro Technologies and Infosys Technologies. Source
9. Indian companies are also expanding across the world e.g. Tata Consultancy services has delivery centres in Argentina, Brazil, China, Hungary, Mexico, Singapore, USA and Uruguay, plus numerous centres in India.
Why has India developed as a major GLOBAL service provider?
1. It has the second largest English speaking workforce in the world - a legacy of colonisation
2. Cost are low (particularly labour costs) and products are generally high quality – cost savings were initially 30-40% for companies (source)
3. The Government is supportive to companies willing to invest their foreign capital and expertise and offers supportive policies. This has happened since 1991 and this included the government liberalising its economy, getting rid of barriers to trade such as tariffs, allowing 100% foreign ownership of firms and allowing foreign direct investment. This includes the idea of Software Technology Parks of India (STPI) whose objective was to encourage, promote and boost software exports from India. In 2000 the Indian Government announced a policy to create Special Economic Zones, and by 2009 578 had been set up. These create $15billion in exports and employ more than 1/2million people.
4. People and companies are able to adapt to new technologies
5. The government is stable and India is the world’s largest democracy, since independence in 1947 (Indian Independence Act)
6. India offers Legal protection for intellectual property rights
7. India has good infrastructure in terms of energy, data communication and transport.
8. India has the World’s second largest population after China and also a large middle class population of 267million people expected to expand to 547million by 2025. These people have extra purchasing power so the Indian Market is very large and attractive
9. The population is EDUCATED – there are well over 1.5 million IT professionals for example. India also creates over a million graduates each year, which includes 350,000 engineers.
10. India is part of the South Asian Association for Regional Cooperation (SAARC) so businesses operating in India can access those markets too
11. There are Technology corridors throughout India which provide a focus on technology, innovation and knowledge based industries. These also boast well developed R&D functions.
12. Location – India is in a position to provide services during the night to be ready for US and European markets in the morning because of the time difference.
(Source of much of this – Geofile 617 “the globalisation of services – calling India”)
Read pages 187 to 190 of AQA Geography. Produce a promotional leaflet on why many high tech industries have relocated to Bangalore in India, and why other firms should do so.
You should cover a range of Geographic points in your report, to include social, economic and environmental reasons to locate in Bangalore.
The following resources might help you;
Advantages of India as a country
A.T.Kearney, leading financial firm - report on country attractiveness for investment
Infosys.com -the official Infosys website - a major employer in Bangalore
For information about the High tech park click here
Review - what do you think of the concept of a FLAT WORLD as proposed by Infosys? Think of the advantages and disadvantages of this concept