Course Title: International Marketing

Course Code: MKT 427

Submitted By: Sultana Rajia

ID: 1318

Batch: 21

Submitted To: Salma Honey Assistant professor, Royal University of Dhaka

Submission Date: 29.04.2014

Nestl: The Infant Formula Controversy

Question 1: What are the responsibilities of companies in this or similar situations?

Solution: Nestl should find a way to become involved with the Baby-Friendly Hospital Initiative, like

sending in donations or even working with the organization to help. Nestl should remain a member of Infant

Food Manufactures (IFM). They should keep its internal Nestl instructions to Nestl employees updated and

up to standards to avoid any more problems and should continue their efforts on social responsibility by

sponsoring events at international medical and nutrition conferences, and events like celebrating the

Canadian Year of the Family, and funding research on infant feeding. Nestl needs to do whatever it can to

reposition itself as a force of good.

Question 2: What could Nestl have done to have avoided the accusations of killing Third World

babies and still market its product?

Solution: One thing that Nestl could have done to have avoided the accusations of "killing Third

World babies" and still market their product is to develop a (global) marketing campaign designed specific to

the country, supporting breastfeeding and its benefits. Educate or fund the education of communities about

breastfeeding. Market bottle feeding and formula as options to moms if they are sick, malnourished, or if the

baby isnt gaining adequate weight. Offer testing for HIV and other contagious diseases that can be passed

from a mom to her baby via breast milk.

Question 3: After Nestls experience, how do you suggest it, or any other company, can protect itself

in the future?

Solution: I suggest following steps:-

1. Understand the local culture of the nation

2. Working local government and any national health organization

3. Market Products with different approaches in different societies

4. Educate the local with adequate information about their product to avoid misuse.

Question 4: Assume you are the one who had to make the final decision on whether or not to promote

and market Nestls baby formula in Third World countries. Read the section titled Ethical and

Socially Responsible Decisions in Chapter 5 as a guide to examine the social responsibility and ethical issues regarding the marketing approach and the promotion used. Were the decisions socially

responsible? Were they ethical?

Solution: There are difficulties arise in making decisions, establishing policies, and engaging in business

operations in five broad areas:

1. Employment practices and policies

2. Consumer protection

3. Environmental protection

4. Political payments and involvement in political affairs of the country

5. Basic human rights and fundamental freedoms

6. In our opinion, the decisions made were not socially responsible.

7. The company distribute free samples to the public.

8. Nestle hiring unqualified sales girls in their promotion activities.

Question 5: What advice would you give to Nestl now in light of the new problem of HIV infection

being spread via mothers milk?

Solution: Nestle Alimentana of Vevey Switzerland, one of the worlds largest food processing

companies. It has been directly or indirectly charged with the death of Third world infant. As of 2001 it is beloved that some 3.8 million children around the world have contracted the human immunodeficiency virus

(HIV) at their mother breast. So my advice will be:

1. We can advertise nestle for those who are already having HIV and having babies.

2. Nestle can establish a HIV detection center for every region for those who are willing to take babies.

3. It can more concentrate on developing countries (Africa) because developing countries are more

risky.

4. By ethical issue it can aware women to donate their milk to those babies whose mother has HIV. And

it can campaign that breastfeeding reduces breast cancer. It will be an advertising for Nestle.

Coke and Pepsi Learn to Compete in India

Question 1: The political environment in India has proven to be critical to company performance for

both PepsiCo and Coca-Cola India. What specific c aspects of the political environment have played

key roles? Could these effects have been anticipated prior to market entry? If not, could

developments in the political arena have been handled better by each company?

Solution: The political environment have played very vital role. Indian government viewed as

unfriendly to foreign investors. Outside investment had been allowed only in high-tech sectors and was almost

entirely prohibited in consumer goods sectors. The Principle of indigenous available If an item could be

obtained anywhere else within the country, imports of similar items were forbidden.. Indian Laws, the

government mandated that Pepsis products be promoted under the Lehar Pepsi name. For Coca-Cola,

they attempted to enter into Indian market by joining with Parle and became Coca-Cola India They could

developments in political arena; Coke could agree to start new bottling plants instead of buying out Parle,

and thus wouldnt agree to sell 49% of their equity.*

Question 2: Timing of entry into the Indian market brought different results for PepsiCo and Coca-

Cola India. What benefit its or disadvantages accrued as a result of earlier or later market entry?

Solution: Timing of entry is a crucial element in the future growth and prosperity of a global company.

In the case of India, Coca-Cola had had a presence since 1958 though in a very small way. PepsiCo did not

enter India until 1986. The advantage of earlier entry was lost when Coca-Cola had to exit the Indian market

in 1977. Coca-Cola re-entered in the early 1990s, about 4-5 years after PepsiCo. By that time PepsiCo had

accumulated knowledge about local market conditions, understood the sentiments of the local people, was

creating a solid distribution network, and had established a strong lobby with the government in New Delhi.

Overall the cost of later entry into the Indian market for Coca-Cola proved to be very expensive. In 2001 the

company had to write off a loss of $400 million accumulated since its return in 1993. India is one of the few

markets in the world where Coca-Cola lags behind PepsiCo in terms of market size and total sales.

Question 3: The Indian market is enormous in terms of population and geography. How have the two

companies responded to the sheer scale of operations in India in terms of product policies, promotional activities, pricing policies, and distribution arrangements?

Solution: To capture the huge market that India has to offer, both Coca-Cola and PepsiCo have

consistently tailoring their strategies to meet local needs and tastes.Both companies market a range of

brands, in a range of bottle sizes. This is critical given the low purchasing power of most of the people in India

(more so in the rural areas). In fact the 200ml bottle is very popular in rural areas owing to its low price. Bottle

sizes range from 200ml, 250ml, 300ml, 500ml, 1 liter, to 2 liters. Both Coca-Cola and PepsiCo have marginally

increased the sweetness level in their products for the Indian market. In order to serve the Indian consumers

taste both companies have now extended their brand lines into the bottled water market as well. The range

of bottle sizes in the bottled water market is even greater than for carbonated drinks. This market has also

seen fierce competition in terms of advertising, sales, promotions and pricing

Question 4: Global localization (glocalization) is a policy that both companies have implemented

successfully. Give examples for each company from the case.

Solution: The concept of glocalization plays a very important role in making or breaking of the brand

in India. It is very clearly shown in the promotional campaigns of both PepsiCo and Coca-Cola in India.

PepsiCos strategy to promote their main brand under the name Lehar Pepsi worked very well in connecting

with the Hindi speaking people in India. Although the new brand name was required by the Indian

government. Apart from summer sales the second highest sales period is during the festival of Navratri, which

is mainly in the west part of India. PepsiCo also came up with several offers during the Garba (dance)

festival. For example a refill of 300ml fetches one kilo (close to 2.2 pounds) of premium quality rice. PepsiCo

also tied up with other companies for various promotional offers. For example free Kit-Kats were given away

with every 1.5 liter bottle or a pack of Polo (hard mint candies) with each 500ml bottle of Pepsi and Mirinda.

Pepsi is one of the biggest sponsors of cricket tournaments around the world in order to build awareness and

preference among target consumers.

Question 5: How can Pepsi and Coke confront the issues of water use in the manufacture of their

products? How can they defuse further boycotts or demonstrations against their products? How

effective are activist groups like the one that launched the campaign in California? Should Coke

address the group directly or just let the furor subside?

Solution: Re-entry for Coca-Cola in India was not easy. It had to face a tough time when its application

of an initial proposed joint venture with a local bottling company was turned down by the government headed

by Rajiv Ghandhi. In contrast, PepsiCos application for entry through a joint venture was approved easily.

Later Coca-Cola made its entry by joining forces with Britannia Industries (a local snack producer). In 1993

Coca-Cola filed an application to create a 100% owned Soft Drinks Company. In July 93 it bought bottling

plants from Parle in the key cities of Delhi, Mumbai, Ahmedabad and Surat and bought Parles leading brands,

Thums Up, Limca, Citra, Gold Spot and Maza. Parle held 49% of marketing venture but took an equal 50%

stake in the bottling venture. On the whole, critical environmental factors plus some marketing and financial

blunders committed by the Coca-Cola executives can be said to be the leading causes of dismal performance

of the company in its initial few years in India.

Question 6: Which of the two companies do you think has better long-term prospects for success in

India?

Solution: A definite answer to this question is difficult and calls into question the assumptions and

anticipations about strategy, structure and performance of both companies. Based on the past experience of

over 10 years for Coca-Cola and over 15 years for Pepsi, PepsiCo appears slightly ahead in the race.

PepsiCo saw an opportunity in entering the Indian market after Coca-Cola had to withdraw in 1977. Long-

run sustainability will depend on how these two companies manage their Indian operations in terms of the

broader global operations that they have. How PepsiCo and Coca-Cola can use their Indian operations to

compete in the global marketplace is probably what will decide which one outshines the other.

Question 7: What lessons can each company draw from its Indian experience as it contemplates entry

into other Big Emerging Markets?

Solution: An important element for the long-term success of Coca-Cola and PepsiCo depends on

how they can transfer learning from one market to another, particularly Big Emerging Markets (BEMs). This

is where both companies can utilize their Indian experience, as for example in Pakistan or China. This

necessitates changes to product, packaging, promotions (advertising/marketing), and distribution in order to

meet local demands. Of all the elements of the marketing mix, pricing seems to be most critical in BEMs

where the greater part of the population suffer from low purchasing power. Finally, having a good exit strategy

is a lesson that both these companies should keep in mind while working in politically unstable countries.

Coca-Colas exit in 1977 from India is the perfect example where having such an exit strategy could have

worked well for the company.

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