BUSINESS STUDIES PROJECT

Business Environment

The reasons behind changes in the following: Coca – Cola and Fanta in the
seventies to Thumbs up and Campa Cola in the eighties to Pepsi and Coke in
the nineties.

TOPICS:
● Meaning of Business Environment
● Features of Business Environment
● Importance of Business Environment
● Dimension of Business Environment
● Legal
● Political
● Economic
● Social
● Technological
● Introduction of Coca Cola in India
● Indian Government’s FDI Policies in the 1970s and 1980s
● The Exit of Coca-Cola from India in 1977
● Emergence of Indian Soft Drink Brands
● Role of Ramesh Chauhan and Parle in Creating Thumbs Up
● Economic Liberalization of India in 1991
● Pepsi’s Entry into India (1989)
● Return of Coca-Cola to India in 1993
● Acquisition of Thumbs Up by Coca-Cola in the 1990s
● Cultural Shifts and Consumer Preferences (1970s–1990s)
● Advertising and Branding Strategies of Indian vs. Foreign Cola Brands
● Political Influence on Business Decisions in India (1970s–1990s)
● Globalization and the Cola Wars in India
● Conclusion

MEANING OF BUSINESS ENVIRONMENT ([Link]

 Business Environment is the sum of all external and internal factors that impact a
business and its business operations. Internal factors are those components that
exist within the company, while external factors are outside causes that influence an
organisation's functioning. The business environment indicates the totality of all the
individuals, resources, stakeholders, institutions, regulations, and market forces that
exist around the organisation.

FEATURES OF BUSINESS ENVIRONMENT ([Link]

1. Totality of external forces:

The business environment is the total of all the external forces that directly or
indirectly influences the working of a business system. The external forces refer to
those individuals and groups, also known as stakeholders, with which a particular
organization comes into direct and frequent contact in the course of its functioning.

2. Specific and General Forces:

The business environment is made up of both specific and general forces. Specific
forces such as investors, customers, competitors, and suppliers affect individual
enterprises directly and immediately in their everyday work. General forces such as
social, political, legal, and technological conditions indirectly affect the business
environment.

3. Inter Relatedness:
The various elements of the business environment are closely interrelated, which
means a change in one element affects the other elements of the business
environment.

4. Dynamic Nature:

The business environment is dynamic in nature, i.e. it keeps on changing whether in

terms of technological improvement, a shift in consumer preferences or entry of new
competition in the market. For example, changes like invention of new techniques of
production, changes in industrial policies,

5. Uncertainty:

It is very difficult to predict the happenings in the future, especially when frequent
changes are taking place in the environment.
Example: Women traditional clothes —---> modern clothes
Normal cell phones —----> smart phones

6. Complexity:

Business environment consists of numerous interrelated and dynamic forces which

arise from different sources. So, it becomes difficult to understand what exactly
constitutes a given environment. The environment is a complex phenomenon that is
relatively easier to understand in parts, but difficult to know the relative influence on
the functioning of the business enterprise.

7. Relativity:

Business environment is a relative concept because it differs from country to country

or from one organization to another. For example, demand for traditional wear may
be high in India, but it is not static in Japan, or a shift of a preference from soft drinks
to juice will be welcomed as an opportunity by the juice company, while the soft
drinks company takes it as a threat.

IMPORTANCE OF BUSINESS ENVIRONMENT ([Link]

● Finding Opportunities to Gain a First-mover Advantage: An understanding of
the business environment aids a firm in identifying beneficial opportunities and
 taking advantage of them before competitors, allowing it to reap the rewards
of being a pioneer.
● Threat Identification: A thorough understanding of the business environment
aids an organisation in identifying hazards that could jeopardise its
operations. When Honda and other businesses entered the car market, Bajaj
Auto, for example, made significant upgrades to its two-wheelers.
● Using Beneficial Resources: The business environment makes numerous
resources available to a business enterprise, such as capital, labour,
machines, raw materials, and so on. Such knowledge is required to determine
the availability of resources and make them available on time and at a
reasonable cost.
● Dealing with Rapid Changes: Continual study/scanning of the corporate
environment aids in understanding the occurring changes and allows them to
be dealt with efficiently.
● Planning and Policy Formulation Assistance: An organisation’s planning and
policy development is aided by a thorough understanding and analysis of the
business environment. ITC Hotels, for example, developed new hotels in India
after seeing a surge in visitors.

DIMENSIONS OF BUSINESS ENVIRONMENT ([Link]

Dimensions of or the agents forming the business environment involve economic,
social, legal, technological and political circumstances which are contemplated
properly for decision-making and enhancing the achievement of the trading concern.

LEGAL ENVIRONMENT
● It includes various laws passed by the government, administrative
orders issued by government authorities, court judgments as well as
decisions rendered by the central, state or local governments.
● Understanding of legal knowledge is a prerequisite for the smooth
functioning of business and industry.
 ● Understanding the legal environment by business houses helps them
not to fall in a legal tangle.
● The legal environment includes various laws like Companies Act 2013,
Consumer Protection Act 1986 ect

POLITICAL ENVIRONMENT

● It means that the actions were taken by the government, which potentially
affect the routine activities of any business or company on a domestic or at
the global level.
● The success of business and industry depends upon the government’s
attitude towards the business and industry, Stability of Government, Peace in
the country.

ECONOMIC ENVIRONMENT

● The economic environment consists of an economic system, economic

policies and economic conditions prevailing in a country.
● Interest Rates, Taxes, Inflation, Stock Market Indices, Value of Rupee,
Personal Disposable Income, Unemployment rate etc. are the factors which
affect the economic environment.

SOCIAL ENVIRONMENT

● Social Environment consists of social forces like traditions, values, social

trends, level of education, the standard of living etc. All these forces have a
vast impact on business.
● Tradition: It refers to social practices that have lasted for decades, such as
Ugadi, Deepavali, Id, Christmas,etc.,
● Impact: More demand during festivals provides opportunities for various
businesses.
● Values: It refers to moral principles prevailing in the society, such as Freedom
of choice in the market, Social Justice, Equality of opportunity, Non-
discriminatory practices etc.
● Impact: The organisations that believe in values maintain a good reputation in
society and find ease in selling their products.
● Social Trends: It refers to a general change or development in the society,
such as health and fitness trends among urban dwellers.

TECHNOLOGICAL ENVIRONMENT

● It consists of scientific improvements and innovations which provide new ways

of producing goods, rendering services, new methods and techniques to
operate a business.
 ● It is very important for a firm to understand the level of scientific achievements
of a particular economy before introducing its products.
● Technological compatibility of products also drives the demand for
manufactured products by a company.

Introduction of Coca Cola in India ([Link]

Post World War II and Indian Independence in 1947, India became a big opportunity
for Coke. And Coke did not wait to pounce on it. By 1956 Coke established its 1st
bottling plant in New Delhi.
The Indian government wanted to promote local business at the expense of foreign
firms. However, Coca-Cola in the initial years was able to navigate the issue
successfully. So, while India recovered from the devastating partition, Coca-Cola
deepened its roots across [Link]-Cola wanted to become so entrenched in India
that when the government’s focus would shift on them, they would be too big and
important to be disturbed. And this is what exactly happened, at least initially.
Not enough restrictions were put on Coca-Cola, which effectively captured the entire
Indian territory.

Indian Government’s FDI Policies in the 1970s ([Link]

Historically, India had followed an extremely cautious and selective approach while
formulating FDI policy given the dominance of the “import-substitution strategy” of
industrialisation intending to become “self-reliant”.

There was a dual nature of policy intention-FDI through foreign collaboration was
welcomed in the areas of high technology and high priorities to build national
capability and discouraged in low technology areas to protect and nurture domestic
industries.

The regulatory framework consolidated through the enactment of the Foreign

Exchange Regulation Act (FERA-1972), wherein foreign equity holding in a joint
venture was allowed only up to 40 per cent. It means a foreign investor cannot invest
more than 40 per cent in total equity share.

The policy had characterised by de-licensing of some industrial rules and promotion
of Indian manufacturing exports as well as emphasising on the modernisation of
industries through liberalised imports of capital goods and technology
During the restrictive regime, many big MNCs left India including General Motors in
1954, Ford Motors in 1954, PepsiCo in 1961, Exxon Mobil in 1974, IBM in 1977,
Coca Cola in 1977

The Exit of Coca-Cola from India in 1977

In June 1975 National Emergency was imposed in India. Post-Emergency, the
Morarji Desai government emerged victorious. An important person in this context
was George Mathew Fernandes. In the Desai cabinet, he was appointed as the
Union Minister for Industries. And the first major point of focus for him was the
alleged investment violations by multinationals, including Coca-Cola.

Fernandes not only wanted Coke to transfer 60% of its shares to an Indian entity but
also wanted them to disclose its secret formula to its shareholders. While Coke was
okay with transferring its majority stake, it did not want to part way with its formula,
which it said was protected as a trade secret.

Faced with an ultimatum from Fernandes, several multinational companies left,

including Coca-Cola.

EMERGENCE OF INDIAN SOFT DRINKS BRANDS

Several Indian companies emerged to fill the market void left by Coca-Cola's
departure in the 1970s. Prominent among these were Parle's Thumbs Up, Campa
Cola, and Double Seven.

DOUBLE SEVEN
In came Double Seven, popularly known as the Sarkari Cola or Sattatar (77 in Hindi).
The name ‘Double Seven’ was to commemorate the occasion of Coke leaving India
and the launch of the Indian Cola in 1977.
Its formula was developed at Central Food Technological Research Institute
(CFTRI), Mysore
Despite government backing, however, Double Seven failed.
While some say that Indira's government was not directly against the brand, there is
a strong theory backed without much evidence that funding and support to Double
Seven were restricted by the government as it reminded them of their defeat to the
Janata Party.

CAMPA COLA ([Link]

Campa Cola is a soft drink brand in India. It was a market leader in the Indian soft
drink market in the 1970s and 1980s in most regions of India.
Campa Cola was a drink created by the Pure Drinks Group, owned by Mohan Singh
in the 1970s.
The Pure Drinks Group and Campa Beverages Pvt. Ltd. virtually dominated the
entire Indian soft drink industry for about 15 years. Then they started Campa Cola
during the absence of foreign competition. The brand's slogan was "The Great Indian
Taste", an appeal to nationalism. It subsequently marketed an orange flavoured drink
called 'Campa Orange', with the logo "Campa" on its bottles.
Following the return of foreign corporations to the soft drink market in the 1990s, the
popularity of Campa Cola declined.

THUMS UP ([Link]
Thums Up was created in 1977 by Ramesh Chauhan, who owned part of the Parle
company that also produced Limca and Gold Spot, two other soft drinks.
Chauhan decided to launch a new cola brand after the American company Coca-
Cola withdrew from India.
Chauhan developed the formula for Thums Up from scratch, experimenting with
ingredients such as cinnamon, cardamom, and nutmeg. He wanted the drink to be
fizzier and spicier than Coca-Cola, and to retain its carbonation even when it was not
ice-cold, so it could be sold by street vendors. He originally planned to name the
drink “Thumbs Up”, but removed the “b” to make the name unique. Thums Up
quickly became the most popular cola brand in India, achieving a near-monopoly
among cola products in India during the 1980s, standing above other cola products
such as Campa Cola, Double Seven etc.
Thums Up also introduced a larger 300 ml bottle, branded “MahaCola” (meaning
‘great [in size] cola’; the original size was 250 ml), which gained popularity in smaller
towns where people would ask for “Maha Cola” instead of Thums Up.

Economic Liberalization of India in 1991 ([Link]

Liberalisation means lifting restrictions on certain private activities, usually related to

the economic system. It often refers to a government easing previously imposed
restrictions on economic or social policies.
Economic liberalisation involves removing unnecessary restrictions and controls from
a country’s economy to allow businesses and enterprises to contribute more
effectively.

The Indian economy was liberalised in the year 1991. In India, the concept of
economic liberalisation was introduced to attain several objectives – industrialisation,
expansion in the role of private and foreign investment, and introducing a free market
system. Restrictions were relaxed for private companies to enter several core
industries, which were previously reserved for the public sector.

India's economic liberalisation was triggered by a balance of payments crisis in 1985.

This crisis left the country unable to pay for essential imports or meet its debt
obligations, pushing it to the verge of bankruptcy.

What were the Objectives of Liberalisation in India?

The primary objectives of initiating liberalisation in India can be summed up as
follows –
1. To solve India’s impending balance of payment crisis.
2. To boost the private sector’s participation in the development of India’s
economy.
3. To increase the volume of foreign direct investment in India’s businesses.
4. To introduce competition between India’s domestic businesses.
5. To maximise India’s economic potential by encouraging multinational and
private companies to expand.
Advantages
Free Capital Flow in The Economy
Diversification of Investor Portfolio
Improvement of Stock Market Performance
Impact on The Agricultural Sector

DISADVANTAGES
Economic Destabilisation
Increased Competition from MNCs
FDI impact on The Banking Sector
Increase of Acquisitions and Mergers

PEPSI’S ENTRY TO INDIA ([Link]

FIRST ENTRY
In May 1985, PepsiCo had joined hands with one of India's leading business houses,
the R P Goenka (RPG) group, to begin operations in the country. The company,
along with the RPG group company Agro Product Export Ltd., planned to import the
cola concentrate and sell soft drinks under the Pepsi label.
To make its proposal attractive to the Indian government, PepsiCo said that the
import of cola concentrate would essentially be in return for exporting juice
concentrate from operations to be established in the north Indian State of Punjab,
The government rejected this proposal primarily on two grounds:
Import of the cola concentrate .
The use of a foreign brand name (Pepsi)
The association with the RPG group too ended at this juncture.
SECOND ENTRY
The company knew that the political and social problems that plagued Punjab were
an extremely sensitive issue for India.
PepsiCo's decision to link its entry with the development and welfare of the state.
The new proposal gave enough emphasis on effects of PepsiCo’s entry on
agriculture and employment in Punjab.
The company promised to create many employment opportunities in the state.
The govt. was quite impressed with Pepsi’s promises.
Finally, Pepsi Foods Ltd. venture was finally cleared in Sep ’88.
“Pepsi” – a JV b/w PepsiCo (36.89%), PAIC (36.11%),
and Voltas (24%) India Ltd.
The co. launched its soft drinks business in 1989.
Pepsi benefited from the economic changes in many ways:
● It was free from the commitments that it made at the time of its entry the co.
can now invest more than 25% in its soft drinks business
● It was also no longer required to export 50% of its production
● PAIC’s share was brought down to 1% and Voltas’s to nil
● The co. established a wholly-owned subsidiary, PepsiCo Holdings India Pvt.
Ltd.
● Pepsi changed its cola’s name from “Lehar Pepsi” to “Pepsi”

COCA COLA’S RE-ENTRY

In 1993, Coca-Cola officially returned to India after a 16-year absence. But instead of
building from scratch, they used a strategic acquisition approach.

🔑 Key Strategy: Acquisition of Parle’s Soft Drink Brands

To instantly gain a foothold, Coca-Cola acquired the soft drink brands of Parle, which
included:
● Thumbs Up (the market leader at the time)
● Limca
● Citra
● Gold Spot
● Maaza

This acquisition gave Coca-Cola:

● Immediate access to a well-established distribution network
● Dominant shelf space and brand recognition
● Market leadership within months of re-entry

Marketing and Positioning Strategy

Once back, Coca-Cola launched a strong marketing campaign:

● Celebrity endorsements (e.g., Aamir Khan, Hrithik Roshan)
● High visibility through TV commercials, hoardings, and event sponsorships
● Heavy focus on Indian youth and “cool” culture

ACQUISITION OF THUMBS UP BY COCA COLA

In 1993, Coca-Cola re-entered the market, and the three companies competed
intensely. Later in the year, Coca-Cola bought the Parle-owned drinks Gold Spot,
Limca and Thumbs Up for $60 million (equivalent to $100 million in 2024). When
these were sold to Coca-Cola, Thums Up had a market share of 85 percent in India.
Despite its strong overall equity, the brand was losing its popularity among the core
cola-drinking age group of 12- to 25-year-olds, partly due to a lack of advertising. At
first, Coca-Cola cut advertising and production for Thums Up to drive customers to
their flagship brand, but they soon realised that Thums Up customers would turn to
Pepsi instead of Coca-Cola if Thums Up withdrew.
Instead, Coca-Cola decided to use Thumbs Up as a rival brand to Pepsi. The Coca-
Cola Company by this time had about 60.5% share of the Indian soft-drink market
but found out that if it took out Thumbs Up, it would remain with only 28.7% of the
market, hence Thums Up was re-launched, targeting 30- to 40-year-olds.

The brand was re-positioned as a "manly" drink, drawing on its strong taste qualities
and thus the brand's market share and equity increased.
CULTURAL SHIFTS AND CONSUMER PREFERENCE

🇮🇳 1970s – Simplicity, Nationalism & Limited Choices

Context:

● India was a closed economy with high protectionism.

● Limited foreign products due to government restrictions.
● Focus on self-reliance (Swadeshi) and import substitution.

Consumer Behavior:

● Consumers had limited brand choices.

● Preference was given to Indian-made goods.
● People were loyal by default—there weren’t many alternatives.
● Soft drinks like Coca-Cola and Fanta were seen as elite but still accessible in
urban areas.

Brand Loyalty:

● Loyalty was habit-based rather than choice-based.

● Once Coca-Cola left, consumers quickly accepted Indian brands like Thums
Up and Campa Cola.

1980s – Rise of Indian Brands & Middle-Class Aspiration

Context:

● Coca-Cola had exited (1977).

● Indian companies stepped in to fill the gap (e.g., Parle with Thums Up, Limca,
etc.).
● Advertising in print and radio grew.

Consumer Behavior:

● A growing urban middle class wanted modern, stylish, "cool" products.

● Indian youth started shaping buying trends.
● Preferences were influenced by local identity and desi pride.

Brand Loyalty:

● Strong loyalty emerged for Indian brands like Thums Up, seen as bold and
masculine.
● Soft drinks became a symbol of social status during celebrations, college
outings, and movies.
1990s – Globalization, Cable TV & New Choices

Context:

● Liberalization in 1991 opened India to global companies.

● Entry of Pepsi (1989) and return of Coca-Cola (1993).
● Rise of satellite TV and Western media influenced fashion, music, and food
culture.

Consumer Behavior:

● People, especially urban youth, became brand-conscious.

● Advertising had a big impact – slogans, celebrities, jingles.
● Consumers wanted global products to feel modern and "cool".

Brand Loyalty:

● Loyalty became emotional and aspirational.

● People started choosing brands that matched their identity (e.g., Pepsi = fun
and youth, Thums Up = bold and strong).
● The market became more competitive, and loyalty could shift quickly based
on ads, pricing, packaging, and peer influence.

Era Consumer Culture Brand Loyalty Preferred Cola

Brands

1970s Nationalistic, Limited Habit-driven Coca-Cola, Fanta

Options

1980s Desi Pride, Indian Strong for local Thumbs Up, Campa
Brands brands Cola

1990s Global Influence, Identity-based, Pepsi, Coca-Cola

Media Exposure Aspirational (again), Thumbs Up

Advertising and Branding Strategies of Indian vs. Foreign Cola Brands

INDIAN COLA BRANDS

1. CAMPA COLA
Swadeshi Appeal: “The Great Indian Taste”
● Their tagline “The Great Indian Taste” emphasized national pride.
 ● Positioned as an Indian alternative to Coca-Cola, after Coca-Cola exited India
in 1977.
● Played on the emotional sentiment of buying local during a protectionist era.
● This connected deeply with a generation that grew up under slogans like "Be
Indian, Buy Indian."

Family-Friendly & Youth-Oriented Imagery

● Ads featured happy Indian families, young people having fun, or celebrating
together.
● Focused on togetherness, friendship, and celebration.
● Portrayed the drink as something to be enjoyed at weddings, picnics, and
festivals.

Urban Presence & Availability Push

● While advertising was mostly emotional, branding was reinforced through

local events, shop signs, hoardings, and wall paintings.
● Targeted urban markets where the vacuum left by Coca-Cola was most
visible.

2. THUMB-UP

Bold & Macho Positioning

● Thums Up was positioned as a strong cola for strong people.

● The tagline “Happy days are here again!” (initially) later evolved into a more
rugged and daring image.
● The brand promoted masculinity, thrill, and adventure, appealing especially to
young Indian men.

Action-Packed Visuals

● Ads showed stuntmen, bikers, skydivers, and race car drivers.

● The message: Thums Up is not just a drink—it’s for people who live life on the
edge.
● This was a first in India, where most ads had been soft and family-focused.

Memorable Taglines & Slogans

Some notable taglines from the late 1980s onward:

● “Taste the Thunder” – became iconic in the 1990s, but the groundwork was
laid in the late ’80s.
● Earlier slogans like “Thums Up Charged!” focused on energy and excitement.
FOREIGN COLA BRANDS

PEPSI

"Yehi Hai Right Choice Baby!" Campaign

● One of Pepsi’s most iconic and memorable campaigns.

● Targeted urban Indian youth.
● Focus was clearly on the product appeal – fun, energetic, and cool.
● Featured celebrities like Shah Rukh Khan, helping it gain mass popularity

“Yeh Dil Maange More" Campaign

● Achieved great success by balancing:

● Emotional appeal (desire, aspiration).
● Functional appeal (thirst satisfaction, taste).
● Endorsed by top Indian celebrities like Sachin Tendulkar and others.
● Became one of Pepsi’s longest-running and most-loved campaig

Missed Opportunity in Emotional Branding

● After the success of “Yeh Dil Maange More”, Pepsi failed to evolve
emotionally.
● Instead of building a purely emotional brand connection, it shifted back to
product-focused messaging.
● Current campaigns still include some emotional elements, but:
● The core focus remains the product.
● The shift caused Pepsi to lose momentum in connecting deeply with its
audience.

COCA COLA

"Jo Chaaho Ho Jaaye, Coca Cola Enjoy" Campaign

● One of Coca-Cola’s first major campaigns after re-entering India.

● Featured celebrities like Hrithik Roshan and Aishwarya Rai.
● Targeted the youth segment.
● Successfully combined:
● Product appeal (refreshing, enjoyable drink).
● Emotional appeal (joy, excitement, and desire).

"Thanda Matlab Coca Cola" Campaign

● Shifted focus from emotional to mass appeal.

● Leveraged product-based messaging: Coca-Cola as the go-to chilled
refreshment.
● Became one of the most recognizable and viral slogans in India.
 ● Used regional language and cultural cues to connect with rural and semi-
urban audiences.

Coca-Cola’s Adaptation to Indian Market

● Globally, Coca-Cola:
● Avoids excessive use of celebrity endorsements.
● Maintains uniform marketing strategies across countries.
● In India, Coca-Cola:
● Adapted its approach due to India’s unique celebrity culture.
● Made exceptions by using Bollywood stars and customizing campaigns
for the Indian audience.

Political Influence on Business Decisions in India (1970s–1990s)

The Legacy of the Swadeshi Movement

● Though the original Swadeshi movement began during India’s freedom

struggle (1905), its ideology continued post-independence.
● It emphasized:
● Self-reliance
● Use of Indian-made goods
● Opposition to foreign products
● This thinking shaped India’s economic policies after independence, especially
under leaders like Jawaharlal Nehru and Indira Gandhi.

Protectionist Economic Policies (1950s–1980s)

● India adopted a socialist-inspired, centrally planned economy.

● The government restricted foreign companies to protect local industries.
● Key policies included:
● License Raj – Companies needed licenses for everything from
production to expansion.
● High import tariffs and restrictions
● Public sector dominance

Foreign Exchange Regulation Act (FERA), 1973

● Required foreign companies to dilute their equity to 40% or less.

● Aimed to reduce foreign control over Indian businesses.
● Led to the exit of Coca-Cola and IBM in 1977, who refused to share their
proprietary technologies or reduce ownership.

Rise of Indian Brands Due to Policy Pressure

 ● The vacuum left by exiting MNCs gave rise to Indian brands:
● Thums Up (replaced Coca-Cola)
● Campa Cola (local cola brand)
● HCL, Wipro (grew when IBM left)
● These brands gained popularity through national pride messaging and lack of
foreign competition.

Liberalization of 1991: A Major Policy Shift

● By the early 1990s, India faced a balance of payments crisis.

● Under P.V. Narasimha Rao and Manmohan Singh, India:
● Ended the License Raj.
● Open up to foreign investment (FDI).
● Reduced import tariffs and privatized many industries.

Return of MNCs Post-Liberalization

● The shift in political ideology from protectionism to globalization led to:

● Return of Coca-Cola in 1993
● Entry of Pepsi in 1989 (through a joint venture)
● Influx of global brands in sectors like technology, automobiles, and
food