The environment of an organization in business like that of any other organic entity is the pattern of all the external conditions and influences that affect its life and development. According to Christensen, Andrews &. Bower (2008, 247), “the environmental influences relevant to strategic decision operate in a company’s industry, the total business community, its city, it’s country and the world. They are technological, economic, social, and political in kind.”
In the case of Coke and Pepsi, entry into the Indian market was influenced by all the abovementioned environmental factors, particularly the political environment. The political forces important to both Pepsi and Coke are similarly extensive and complex. In this regard, there are several aspects of India’s political environment that played key roles in both organizations’ performance. These aspects are described below:
First and foremost, the government imposed entry regulations to foreign investors, In the case of Coke, it initially operated in India since 1958 but decided to leave due to the government’s requirement to divulge its trade secret, particularly Coke’s secret formula for the syrup. (Doole &. Lowe, 2008, 538) In its re-entry in 1993, Coke was allowed to operate with the condition that 49% of its equity would be divested to local Indian corporations within five years.
Secondly, the government monitors the ingredients and components used in the manufacture of consumer products. A situation occurred in 1988 when the government issued a warning that BVO, an ingredient in locally produced soft drinks causes cancer. (Doole &. Lowe, 2008, 538)
In addition, the Indian government was perceived by foreign investors as unfriendly where outside investors were allowed only in high-tech sectors and entry was entirely prohibited in the consumer goods sector (Doole &. Lowe, 2008, 537).