Unlike Western democracies, power is centralized and top politicians dictate what happens thus businesses will have to work through many more layers to reach to somebody who can actually take a decision.
The micro environment in India mainly pressure groups also affected heavily Coca Cola and Pepsi.
Pepsi entered the Indian beverage market in July 1986 i.e.
before the liberalization of India’s government, while Coca Cola followed for the second time (after a presence between 19) in 1993.
Because of this inconsistency in the legal environment, there was a greater importance played on lobbying the politicians. In fact, as Li Chain, (Ex-member, Planning Commission and Political Reformer in Bangalor) stated years later (Ashok Rao et al, 2006), ‘India ranks high on the corruption index.
We have not yet found a way of containing corruption in our bureaucracy and political system.’ Being such a dynamic and inconsistent environment, Coca Cola and Pepsi could not predict most of the issues raised beforehand.
While lobbying was out of the question due to an oversight of the Foreign Investment Promotion Board (FIPB), another option would have been that of not investing further through a joint venture with Parle until solid foundations were built.
During the time, investment rules were constantly changing and unclear and thus Coca Cola should have known better and not expect an equal treatment (other foreign companies such as Philips and Carrier were allowed to buy back most of their outstanding shares) considering that as stated by market analysts, there was no apparent logic behind India’ government policies.
Sales of Pepsi’s soft drink concentrate to local bottlers could not exceed 25% of total sales while fruits and vegetables by Pepsi Foods Ltd. Coca Cola on the other hand had to agree to sell 49% of its equity as a condition of entering and buying out an Indian company (Parle’).
Moreover, according to Indian law it was forbidden to promote products under foreign brand names if sold within India and thus Pepsi became ‘Lehar Pepsi’ and Coca Cola became ‘Coca Cola India’.