Pepsi's Entry Into India - a Lesson in Globalization Essay example

1564 Words Apr 7th, 2012 7 Pages
International Economics Assignment | Case – Pepsi’s Entry Into India – A Lesson in Globalization | Ankur Sikka
PGDM – IBRoll No. 007 |

Depending on the strategy that a company follows, there are three primary reasons a company like Pepsi engages in international business: 1. To Increase sales/ Sales Expansion a. Economies of Scale
A company like Pepsi usually operates on the principle of Economies of Scale. In order to achieve a larger market canvas and operate on this minimum efficient scale of operation, it is very essential that the company covers more market and potential customers by moving from a saturated market to an unsaturated one. (E.g. Pepsi shifted its focus from
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3. It then made several key commitments that clinched the deal. It promised to focus on food and agro-processing and only 25% of the investment would be directed towards the soft drinks business. 4. One essential commitment was to bring advance food processing technology to India along with the promotion of Indian made product’s image in foreign market. 5. Commitment to maintain 5:1 export – import ration for a period of 10 years and entering the market as a new brand ‘Lehar Pepsi’. 6. Moreover it also made commitments to bring in advanced food processing technology to India which would boost India’s image in the world market. It also wouldn’t use foreign brand names under the rules of the game. 7. An agricultural research centre was to be established under the deal and creation of jobs for 50,000 people across the nation of which 25,000 were to be in Punjab.
Since the company was able to strike directly on the prevailing needs of the ailing society in line with government’s expectations, it was able to enter into Indian market as a Joint venture.

ANSWER 3. 1. Post Liberalization Change 1. The removal of various restrictions meant that it no longer had to fulfil many of the commitments it had made at the time of its entry. 2. The government removed the restrictions that bounded Pepsi’s investments in the soft drinks business to 25 % of the

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