Coca-Cola in Indian Market Motives & Future of this Business Venture
In the year 1973, the Indian Government introduced the Foreign Exchange and Regulation Act which made it mandatory for foreign companies, operating in India, to dilute their shareholdings to 40 per cent. After some harsh disagreements with the Indian government, Coca-Cola, the U.S. soft-drinks manufacturing giant, decided to discontinue its operations in the Indian Market. But, with the liberalization policy of the Indian Govt. in 1992, Coca-Cola reentered India in 1993 through its 100 percent owned subsidiary, Hindustan Coca-Cola Holdings. There are many reasons for which India wants Coca-Cola to continue its operations freely without any obstacles and the later is also eager to capture a wider Indian market.
The collaboration between India and Coca-Cola (marketed with brand name Coke) would be a positive expansion for both the parties. From India’s point of view, Coke will bring a huge number of job and advanced technological up-gradations along with much needed revenues for the Indian Government. Coke is a leading international company and several other companies will watch and learn from this business venture. If this merger is successful, many more multinational companies will definitely be attracted to the Indian market which, in turn, will increase the revenue of the government.
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Coca-Cola is also in a position to gain significantly from this joint venture. India is one of the fastest growing economies in the world. It is also the second largest populated country in the world having more than one billion people. India has a growing middle class and a very hot climatic condition. Thus, Coke can enjoy a huge advantage and establish itself as the world leader in soft drink industry if it can occupy a considerable market in the
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developing countries like India and China. Coke’s revenues along with such successful collaboration will allow them to seek more investors for future joint ventures
Now, the question will arise about how and where Coke should enter the Indian market. It is believed that people are always brand-loyal and they use products that they are most accustomed to. Coke is required to acquire a smaller but popular locally-produced soft drink and let India to have a share in their business. They need to establish their product by cultural advertising with great exposure to media and marketing resources. Coke should also invest in sponsoring campaigns for the exposure of local products and associate their brand with these local products’ name to gain considerable trust as familiar local product. There is a huge craze for the film stars and cricketers in India and Coke can enjoy several tangible and intangible benefits by associating them with these celebrities. Another important aspect on which Coke needs to concentrate, is the price advertising by which they can attract the middle and lower-middle class categories by showing them that the product is available at a lower price without a compromise on the standard. Coke already has a wide variety of soft-drinks ranging from 5-rupee bottles to 50-rupee bottles.
Thus, the fast developing Indian economy, the huge population, growing middle-class, hot climatic conditions, Coke’s brand image — all these factors will contribute much to Coke’s success in Indian market in the future. But it should be borne in mind that there has been a huge controversy on the quality of Coke’s products in the Indian market. A few months earlier, they have been banned in several states in India. It has also been questioned in the Parliament whether Coke should be allowed to continue its operations freely or banned in India. According to some media reports, Indian Govt. has agreed to bend its rules and allow Coke to defer its IPO by another 5 years. But, if the Govt. does so, then how can it stop other TNCs from voicing similar demands? But excluding few such negative points, it is beyond any iota of doubt that Coke’s future as market leader in India is very bright and prosperous.
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ICFAI Center for Management Research, Marketing Management, Part IV – V
ICFAI Center for Management Research, Economics for Managers, chapter – 22
Coca-Cola Bends Rules in India, Public Interest Research Group, India (Kavaljit Singh) – website source: http://www.indiaresource.org/campaigns/coke/2003/cocacolabends.html