Business - Pestle - Coca Cola in India [Official] PDF

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Coca-Cola is a carbonated soft drink produced by The Coca-Cola Company in 1886. It comes in a range of different flavours such as Coca-Cola Cherry and Coca-Cola Lemon and Lime as well as there are a zero sugar and zero calorie version called Coca-Cola Zero and many more. Coca-Cola became a global product which is sold in over 200 countries worldwide. Based on Interbrand's best global brand study of 2015, Coca-Cola' is the third most valuable brand in the world and the company has a brand value of $78,423 million (Interbrand, 2015). India is a developing country in South Asia, gained its independence in 1947. It is the seventh-largest country and it has the most populous democracy and the second biggest population in the world with over 1.2 billion people. India has the seventh largest economy in the world. The country's president is Pranab Mukherjee. This essay analyses some of the major political, economic, social, technological, environmental, ethical and legal issues the company CocaCola faces. It also, however, looks at the positive impacts of these factors as well as the negative.

Political:

A major factor within the political aspect affecting Coca-Cola in India is the corruption of India's government. Every operation carried out by any business will always be influenced/affected by the policies set up in that particular country. This means that CocaCola's business in India has to abide by the regulations of the Indian government. The Corruptions Perceptions Index shows an increase within the corruption in India as India's CPI score raised from 36 in 2013 to 38 2014. This gave India a higher corruption level ranking of 85th in 2014 (Transparency, 2015). "In a recent poll 96% of Indians said corruption was holding their country back, and 92% thought it has got worse in the past five years" (Economist, 2014: Online). Corruption reduces the efficiency and increases the inequality of

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India. This has a substantial impact on India for many reasons such as they lose credibility and foreign investors are deterred from doing business with them. If the corruption levels remain the same or worsen this could deter Coca-Cola from continuing to operate within India. However, Coca-Cola has an anti-corruption policy in which they specifically state that they do business with integrity which means they abstain from all forms of corruption and they comply with the anti-corruption laws of each country. Coca-Cola became the first food and beverage company to become a signatory to the World Economic Forum Partnering Against Corruption Initiative (PACI). "The PACI's mission is to develop multi-industry principles and practices that will result in a competitive, level playing field, based on integrity, fairness and ethical conduct" (The Coca-Cola Company, 2015: Online).

Economic:

India's economic environment has a huge impact on Coca-Cola. A positive impact is a decrease in the Indian's unemployment rate. More people are being employed, this will help to raise India's Growth Domestic Product (GDP) which overall assists the economic growth of India. India's GDP in 2009 was 1365.40 USD billion and in 2013, India's GDP was 1861.80 USD billion (Trading Economics, 2015: Online). Over a period of five years, India's unemployment rate decreased by 4.5% and as the unemployment rate decreased the GDP rose due to more people becoming employed and contributing to the growth of India's economy. Coca-Cola has employed 26,000 women in India alone. (Coca-Cola, 2014). This makes the business more sustainable and is likely to have contributed to the decrease in India's unemployment rate. A negative impact India's economic environment has had on Coca-Cola is India's national debt. "India recorded a Government Debt to GDP of 66.10 percent of the country's Gross Domestic Product in 2014" (Trading Economics, 2015: Online). India is in a

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large amount of debt and may, therefore, take action such as cutting government spending and raising taxes. This may then put the public off of buying Coca-Cola as they will then have less money in their pockets and will, therefore, be less willing to spend as much. "In 2014 India public debt was 1,354,658 million dollars, has increased 120,614 million since 2013" (Country Economy, 2015: Online). India is one of Coca-Cola's biggest buyers and due to the fact that the country is in a large amount of debt, the government may choose to reduce the amount of Coca-Cola that is bought or even choose to close some of Coca-Cola's factories within India. This will result in the loss of profit and sales as Coca-Cola may be at risk of losing its market shares in India.

Social:

One major social factor that needs to be taken into consideration by Coca-Cola is health. Coca-Cola is an unhealthy drink containing a large amount of sugar and caffeine, a 330ml can contains 35 grams of sugar and 139 calories. India is a major buyer of this fizzy drink which contribute to the health problems and the rise of obesity within the country. "73% of urban Indians are overweight" (Stathoyiannis, 2013: Online). Indians are increasingly becoming overweight and unhealthy. "India is the third most obese country in the world" (Sharma, 2014: Online). This may lead to action from the Indian government which may limit the amount of Coca-Cola exported and produced into India in order to lower the rising obesity and health problems within the country. On the other hand, Coca-Cola is aware of this issue and have introduced a ‘healthier' alternatives of Coca-Cola such as Coca-Cola Zero and Diet Coke, both of these drinks contain 0 sugar, 0 fats and 0 calories. Coca-Cola Life has been created, this drink has 1/3 less sugar than the original Coca-Cola and contains 89 calories. However, these drinks are not actually a healthier alternative as both Coca-Cola

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Zero and Diet Coke contain artificial sweeteners. Although, Coca-Cola Life is sweetened from natural sources it still contains 22 grams of sugar which are more than the recommended daily intake. A social factor Coca-Cola had taken into consideration is religion. Coca-Cola is a non-alcoholic drink. This is good for religious reasons as India is home to one of the largest Muslim populations in the world. The Indian population has "172.2 million Muslims, who make up 14.23% of the population" (Singh, 2015: Online). Muslims cannot drink alcohol and, therefore, resort to drinking soft-drinks, so many Muslims will buy this drink.

Technological:

Technology has become vital for businesses, businesses depend on technology to ensure the success of their company, Coca-Cola included. Televisions, mobile phones and computers all assist Coca-Cola in the advertisement of their products. The creation of the Internet has led to online advertising, this includes websites and advertising on social media, this is also accessible through mobile phones. India is the 3rd largest Internet user in the world (The Hindu, 2013). In 2013, India had nearly 74 million Internet users (The Hindu, 2013). And in 2014, India's Internet users increased, with around 237.3 million people now online (CIA, 2015). "There are roughly 105 million homes with televisions in India, up from 88 million in 2000" (Bajaj, 2007: Online). These statistics show that India is quickly expanding its use of technology. Televisions and the Internet are marketing tools used in order to promote CocaCola's products. This is an effective way to bring more customers. On the other hand, the majority of people within India still do not have access to the Internet and one-sixth of the country do not have televisions or mobile phones. Therefore, they cannot see Coca-Cola's advertisements and may not even be aware of Coca-Cola's existence. The reason for this is

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poverty, a large portion of the Indian population are suffering from poverty. "200 million Indians have no TV, phone or radio" (Shrinivasan, 2012: Online). India's population in 2014 was 1.267 billion and around 237.3 million have access to the Internet that leaves over 1 billion people within India who have no access to Internet. Coca-Cola's money and marketing ideas are being wasted as their endorsement ideas are only being seen by a minority of the population.

Environmental/Ethical:

Environmental factors which affect Coca-Cola within India is their exploitation of the natural resource, water. Indian officials are demanding the closure of a Mehdiganj plant in Varanasi as they are extracting too much groundwater. Coca-Cola's over usage of water has led to water scarcity in this area at the "expense of the poor, the women, the children, farmers and livestock who have to live with less water because Coca-Cola mines groundwater in a water scarce area for profit" (Khaleej Times, 2015: Online). This is a major issue for Coca-Cola as authorities have ordered the closure of one of their bottling plants due to water pollution. The result of this will be less production of Coca-Cola and the issue of water pollution will need addressing as less water needs to be used in order for them to continue operating within India. Coca-Cola may also face legal charges for breaching the conditions of their operating license. This is also unethical as Coca-Cola are taking away people's water supply leaving them with a limited access to water. However, Coca-Cola is trying to preserve water. The company understand the value of water and are trying to cut down their water usage. "Over the past 5 years, our water use ratio has come down by over 40%" (Coca-Cola, 2014: Online). Anandana (the Coca-Cola India Foundation) and their bottling partners are currently undertaking water replenishment projects in different areas within India, this, therefore, adds

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to water availability within India. Coca-Cola's plans to help save and restore water will assist them in their continuation to operate within India (Coca-Cola, 2014).

Legal:

One legal issue Coca-Cola faces is the implementation of a new legislation by the city Kerala. Due to the environmental issue which is causing severe water shortages within India, the law allows people to take action against Coca-Cola by receiving compensation from them. This could cost Coca-Cola a large sum of money and could result in a loss of profit. A second legal issue is that India's ruling party are attempting to impose a national goods and services tax which will effectively be a higher tax than the previous tax. This tax will be 40% higher on some goods including the drinks Coca-Cola produce (Reuters, 2015). Coca-Cola India said in a statement that this ‘sin tax' "will lead to a sharp decline in consumer purchase and that [i]n these circumstances, [they] will have no option but to consider shutting down certain factories" (Reuters, 2015: Online). This higher tax can cause major damage to the Indian subsidiary of Coca-Cola as this will lead to a loss in consumer purchase. Coca-Cola drinks will become expensive to buy and then, as a result, there will be a decline in sales which will then lead to the closure of many factories and plants.

Overall, Coca-Cola is partially viable within India. India is the sixth largest market of CocaCola (Sen, 2014), Coca-Cola has been operating there for around 20 years with 57 bottling plants and factories within India. (Tandon, 2013). Coca-Cola provides more jobs to Indians which helps the economic growth. However, there are a numerous amount of reasons as to why Coca-Cola is not viable within India. This is for reasons such as despite Coca-Cola raising the GDP, India's national debt is very high so this does little to assist the economic

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growth of India. Coca-Cola caused major damage by their extensive water usage. India's corrupt government are currently trying to implement a higher tax upon Coca-Cola and have introduced a legislation whereby the company has to pay compensation due to the water scarcity issue. Coca-Cola drinks are as a whole unhealthy and are contributing towards the high levels of obesity in India. The company should look into using a much lower amount of water and sugar for their drinks and their water replenishment projects should be continued. Bibliography: Badkar, M. (2011). India's Economic Decline Is One of the Most Under-Reported Stories This Year. Business Insider. [online] [Accessed 24 Nov. 2015] Available at: http://www.businessinsider.com/indian-economic-decline-december-2012?IR=T Badkar, M. (2012). A Blatant Example of How Corruption Is Destroying the Indian Economy. Business Insider. [online] [Accessed 22 Nov. 2015] Available at: http://www.businessinsider.com/how-corruption-is-destroying-the-indian-economy2012-3?IR=T Bajaj, V. (2007). In India, the Golden Age of Television Is Now. NY Times. [online] [Accessed 28 Nov. 2015] Available at: http://www.nytimes.com/2007/02/11/business/yourmoney/11india.html Bambrick, Scott, and Julie Stepney. Introduction To Business: Foundation Year. Harlow: Pearson Education Limited, 2013. Print. BBC News, (2012). India unemployment rate 'falling' - BBC News. [online] [Accessed 24 Nov. 2015] Available at: http://www.bbc.co.uk/news/world-asia-india-17216820 BBC News, (2012). India's corruption scandals - BBC News. [online] [Accessed 18 Nov. 2015] Available at: http://www.bbc.co.uk/news/world-south-asia-12769214 Boumphrey, S. (2011). Corruption Impacts India's Business and Political Environment. Euromonitor International Blog. [online] [Accessed 22 Nov. 2015] Available at: http://blog.euromonitor.com/2011/09/corruption-impacts-indias-business-and-politicalenvironment.html CIA, (2015). The World Factbook. CIA. [online] [Accessed 28 Nov. 2015] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html

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