Coca Cola in India, Research Paper Example

Coca Cola is the world’s leading soda drink manufacturer and producer within the soda drink industry. On a yearly basis that serve over 1.8 billion each day. Coca-Cola, founded in 1886, is the world’s leading manufacturer of non-alcoholic beverage concentrates and syrups with 400 brands. The global headquarters of the TNC is Atlanta in USA, and it has local operations in over 200 countries (Coca-Cola India, 2013). The Company has already invested more than $1.2 billion in India. The Coca-Cola India is comprised of 25 exclusively owned bottling companies, and 24 franchisee owned bottling operations.(Coca-Cola India, n.d) A network of 21 contract producers also manufacture a range of products for the company. Coca-Cola is located in almost in all States of India with eight plants in UP, six in West Bengal, five in Andhra Pradesh, to/one in others. It claims that it is directly employing 6000 local people and indirectly 150,000 people. The main product brands are Thumps up, Limca, Maaza, Citra, Sprite, Gold spot, Kinley and Sunfill. (Coca-Cola India, n.d)

“With roughly 1.2 billion people, India is the world’s largest democracy and second largest country by population.”(Global Sherpa, n.d) There is a mixture of cultures within India that are different from one part India to another part, including the varying levels of income of families depending on their area. Their hierarchical caste system plays a vital part in their culture from politics, marriage, and other crucial decisions. “All relationships involve hierarchies. In schools, teachers are called gurus and are viewed as the source of all knowledge. The patriarch, usually the father, is considered the leader of the family. The boss is seen as the source of ultimate responsibility in business. Every relationship has a clear- cut hierarchy that must be observed for the social order to be maintained.”(Kwintessential, n.d) In order to serve the markets better, Coca Cola sold their drinks in 200ml bottles within the southern regions of India, where it is more rural to promote an increase of purchase frequency. The smaller bottles the consumption of the bottles affordable for those with lesser income.

Potential Ethical & Social Conflicts

For Coca Cola in India, the political environment proved to be hugely problematic. The government had since the 70’s enforced protectionist laws that would protect their businesses and economy for the better interests of its people. The New Industrial Policy in 1991 loosened the grip on foreign businesses entering the country, however, major industries like Coca-Cola still had to conform their operations to their new policies and regulations before operating. Coca-Cola, was forced by the government to relinquish their company’s shares, even after pleading and lobbying with the government to waive the ruling. However due to the change in the political party within the Indian government, the efforts of Coca Cola went in vain. The lack of solid institutions not only made it hard for companies to manage the environment, but also gave way to corruption.

Coca-Cola entered the Indian market again. Coca-Cola was India leading soft drink until 1977 when it was kicked out of India after a new government political party ordered the company to turn their formula and give up shares in their Indian unit that was required by stringent regulations imposed by the 1973 Indian Foreign Exchange Regulation Act (FERA) on foreign companies’ operations that exacerbated tensions between the company and the Indian government. Coca Cola refused to oblige the government and left in 1993. Coca-Cola India made significant investments to continually build and consolidate its business within India that included new production facilities, waste water treatment plants, distribution systems and marketing channel.

“In 2003, the Centre for Science and Environment (CSE), a non-governmental organization in New Delhi, said aerated waters produced by soft drinks manufacturers in India, including multinational giants PepsiCo and Coca-Cola, contained toxins including lindane, DDT, malathion and chlorpyrifos pesticides that can contribute to cancer and a breakdown of the immune system.” (Ecologist, nod) State of Kerala published a report recommending that Coca-Cola should pay $48 million for damages they caused within their bottling plant in India Villages. “Campaigners say groundwater levels have dropped over 22 meters since Coca-Cola started operating the facility in the desert region.”(Ecologist, n.d) A study paid for by Coca-Cola and conducted by the Energy and Resources Institute in 2008 recommended that the plant be shut down, relocated or stop extracting groundwater. (Ecologist, n.d)

According to Rajat Ganguly, there are several potential political and social ethical conditions that if put in the right atmosphere can cause considerable conflict with businesses in India. India has a strong fear of assimilation of their cultural, which includes dilution, and unfulfilled national aspirations. According to Ganguly India is afraid that their culture will be lost to the needs of the majority. It can also mean that India is apprehensive of foreign (internal or external) migration that will cause cultures to blend, and diluting both cultures. A second condition that potential conflict could arise is the process of modernization. This condition is induced by large-scale migrations from other states, which include raising the standards of literacy and aspirations. Leading groups to have to compete for rewards and resources, but it sharpens the socio-political awareness and increases capacity to mobilize for collective action. A positive effect for the citizens is that it could help foster mutual understanding, respect, and trust; therefore would defuse before violence became a problem. A third condition is an unequal development, exploitations, poverty, and threats that lead to existing group privileges. These conflicts could develop feelings of relative deprivation among ethnic groups, spark ethnic political mobilization, and conflict. The last condition that Ganguly mentions is political factors. That create endemic poor governance, a growth of anti-secular forces, and an institutional decay and political deception. Experience in the past and often in the present of India’s government is a corruption of politicians and political parties. (Ganguly, 2007)

Doing business within India, businesses must realized that Indian business practices are different, and several ethical behavior may impact dealings with Western companies. Indian businesses rely on favors, friendship and clansmen. The Western concept of conflict of interest will not mesh with Indian loyalty values. Indian government will sometimes acts as a gatekeeper rather than an enabler, with slow approval, a complex bureaucracy, and corruption due to lax enforcement.(Steen, 2007) Within in businesses in India, corporate social responsibility is highly beneficial, and management of businesses are run differently than Western businesses, with decisions made solely from the top instead of input from shareholders. (Steen, 2007) According to a 2010 survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), they found that only 12% of foreign companies rated the overall legal framework and regulatory mechanism as “good.” Furthermore, when asked about the ground-level hassles, only 14% reported the situation as comfortable while 93% found procedural delays to be a serious concern.”(Knowledge@Wharton, 2012) Other potential conflicts that could arise in India are due to their lax ethical standards, in addition to their rigid bureaucracy, and weak enforcement mechanisms that have and will lead to multiple political and business strategies. These conflicts only hurt their business industry and turn potential industries away in favor of more stable and developed countries.

Strategies & Policies for 5-10 Years

Coca-Cola’s winning strategies is to keep manufacturing and releasing new products that keep up with the changing tastes of the consumers. Coca Cola started off with familiar products such as soft drinks, fruit juices, bottled water, lemonade, and they released new products such as diet versions. One of Coca-Cola‘s leading promotional campaigns in India targeted the common interests of the Indian people. In India, Coca Cola used the influence of local celebrities in celebrity endorsement to promote their products. Coca-Cola brought on mega star Indian actress Aishwarya Rai, Salman Khan, Sachin Tendulkar, and other Indian celebrities. Coca Cola strategy is to reach their targeted audience through pinpointed ad campaign that show the favorite local celebrities drinking Coca Cola products.

In order to segment the market Coca Cola decided to divide India population in the rural and urban population in order to better get a hold of targeting their audience. Coca-Cola had initially failed in their operations in India, due to some unforeseen factors that a part of the changing atmosphere of India’s government including the political and legal environment of India. In the 90’s India went through an industry reform that led to stringent and unfavorable rules to businesses within India, and regulations that kept changing which made India’s business environment unstable. Coca-Cola had the misfortunate of being one of the biggest industries within the Indian market at the time of political change. The government was reinforcing their protectionist policies for Indian business after years of having policies that promoted industries to do business within their market,

Coca-Cola learned from their past mistakes in India. Coca Cola’s strategy focuses solely on brand recognition, awareness, and sustainability in all global markets. When Coca Cola first entered in 1950 the India system was ran different after the political parties changed Coca Cola was forced to follow the new rules, however like other companies chose to leave instead. This move proved to hurt their reputation within India, however, their strategy when their re-entered in 1992 they tried different approaches. Coca-Cola started an advisory board for Coca Cola operations in India after they were accused of having pesticide residue in their products. This strategy although taken later after the accusation will prove beneficial in the future to keep the Coca Cola image intact, and create a more proactive approach to avoid similar situations. Not only did they include one advisory board but they added, Advisory council on Environment and Sustainability that “guides our company to preserve, protect and enhance the environment and natural resources. The ACES also helps to ensure that our Company uses its resources and capabilities to provide active leadership on the environment and sustainability related matters relevant to our business.” (Coca Cola India, n.d) They also have the Health and Wellness Advisory Council that “committed to developing and launching a portfolio of products that enable the Indian consumer to lead healthier lives.”(Coca Cola India, n.d) Lastly they added, Coca-Cola India Foundation Advisory Board, “to advise it on its overall working, its mission objectives, functioning priorities and long term strategies best designed to achieve maximum public benefit.”(Coca Cola India, n.d)

Coca Cola’s strategy within India is to remain focused on their target audience, by making bottled Coke more affordable for customers, stepped up distribution of their smaller bottles, targeting rural areas, and training small retailers on Coca Cola selling operations. Coca Cola has set up and R&D operations within India to research India’s culture and various tastes in order to better serve the Indian public. This will only lead to better sales, and a better reputation in India by showing that they are more interested in the needs and wants of the Indian consumer than other industries within the counties. Coco Cola strategy has learned from past mistakes about the changing political and social atmosphere that drove the industry to leave India in the first instance. Now with more resources and research they are doing a better job.

Bibliography

Business vs. Ethics: The India Tradeoff? Knowledge Wharton. (2012). Retrieved from http://knowledge.wharton.upenn.edu/article.cfm?articleid=2897

Company History. (n.d). Coca Cola India. Retrieved from http://www.coca-colaindia.com/home.html

Coca-Cola accused of misleading investors over water. (n.d.).Ecologist. Retrieved from http://www.theecologist.org/News/news_round_up/470622/cocacola_misleading_invest

India – Language, Culture, Customs and Etiquette | global. (n.d.). Retrieved from http://www.kwintessential.co.uk/resources/global-etiquette/india-country-profile

India – Country Profile, Facts, News and Original Articles. (n.d). Global Sherpa. Retrieved from http://www.globalsherpa.org/india

Steen, Margaret. Business Ethics in a Global World: India’s Changing Ethics. (2007). Santa Clara University. Retrieved from http://www.scu.edu/ethics/practicing/focusareas/business/conference/2007/present