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Environmental regulation and western food culture in India was almost non-existent. In pursuit of economic development, the Government of India liberalised the economy in food sector and kept environmental regulation of multinational corporations to a minimum in order to attract foreign direct investment. Multinational corporations have often been blamed for taking advantage of weak enforcements in India; however, in recent years, many of them have started to self-regulate and often set their environmental standards above the minimum compliances enforced by the Government of India.
Advancement of foreign culture in India in the food industry has given many multinational companies (MNCs) an opportunity to grow and flourish. MNCs that set up operations in India or do business with Indian companies find that managing Indian workforce requires understanding Indian work culture that has evolved over several centuries. Thus there is a need to study the difference in the culture of Indian food industry. Many socio economic factors and other influencing factors are responsible for setting a new trend. These factors form the independent variables on which the preference of selection of food will depend i.e. dependent variables. These literatures are classified based on:-
(a) Studies corresponding to major 'influencing factors' governing selection and demand of ready-made food items.
(b) Studies corresponding to the 'socioeconomic factors' affecting the demand for ready-made food items.
(c) Framework for examining the environmental management of MNCs
The conclusion expected from the research is that the socio economic factors and other influential factors play an important role on consumer's preference in food industry. Based on the finding, few suggestions and limitations affecting influential factors to Indian food industry for future research will be provided. AndÂ my research will also investigate the change in environmental managementÂ in food industry.
Globalisation and the Indian food Industry
A study into the key factors influencing consumer behaviour in the Indian food industry.
A comparative study of past and present culture and environment in Indian food industry
Project submitted to University of Bradford School of Management
In partial fulfilment of the requirements
For the Degree of
BSc. (Hons.) in Business Management
Chapter 1 - Introduction : â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..4
Objective of the Researchâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦4
Approach to the Researchâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦...5
Chapter 2 - Literature Review:â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦...6
Influencing factors affecting choice and demandâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦...6
Influence of Socio-economic factorsâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦...9
Influence of Global flowsâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..11
Framework for examining the environmental management of MNCsâ€¦â€¦â€¦â€¦â€¦..13
Chapter 3 - An overview of culture in Indian food industryâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦14
Chapter 4 - Study of globalized food culture evolving in Indiaâ€¦â€¦â€¦â€¦â€¦â€¦â€¦...16
Chapter 5 - PepsiCoâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦18
Chapter 6 - KFCâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦21
Chapter 7 - McDonald'sâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.22
Chapter 8 - Analysis and Conclusionâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.24
Chapter 1 - Introduction :
Objective of the Research
Fast-food is not an alien concept to Indians; roadside shops have offered snacks-to-go since time immemorial and the country has a long tradition of indigenous fast-food served by a variety of street vendors.Â With the rapidly growing middle class population and changing lifestyle, India is blessed with one of the fastest growing fast food markets in the world. The fast food industry in India has evolved with the changing lifestyles of the young Indian population. There are many factors that makeÂ India an attractive market for Western consumer goods. With one-sixth of the world's population,Â India is the second most populous countryÂ in the world, following China. The purposesÂ of this research is to compare the attitudes aboutÂ new food purchases between innovators/earlyÂ adopters and non-innovators and also is to empirically substantiate if the forces of globalization are impacting consumer culture and behavioural traits in a developing country (India).
The Indian fast food market has been witnessing rapid growth on the back of positive developments and presence of massive investments. Currently, market growth is largely fuelled by the rising young population, working women, hectic schedules, and increasing disposable income of the middle-class households. Some of the unique properties of fast food like quick served, cost advantage, etc are making it highly popular among the masses. Thus, India offers enormous opportunities for both domestic as well as international players.
In the past, the overwhelming majority of Indian consumers had little purchasing power, and spent almost all of their income on the basic necessities. Industrial growth and increasing affluence of the middle classes, however, have led to important increasesÂ in consumer demand and spending power. Regardless of this compulsory Indian input, as yet, these western companies cannot match the popularity of local Indian chains such as Nirula's or the 'corner shops' selling indigenousÂ foods. To compete, they are not only changing their business models but also their identity. There has been a drastic change, as seen in past, in taste and preferences of the consumers in India. India has taken a step forward in adopting western culture. Thus foreign firms have been adapting Indian culture while running their business here. In past there were many restrictions in the culture of consumers in India, but now many of them has moved forward with the taste of new generation. But some of them are still very conservative towards the food sector.
Approach to the Research
On the back of rising disposable income, changing consumer behavior, huge population base, India is witnessing a tremendous growth is its fast food industry over the past few years. Other reasons like - rising number of nuclear families, exposure to western cuisine and increasing number of employed women are also having a significant impact on the eating out trends and growth of the fast food industry in the country. As a result, all the international players like Pizza Hut, Dominos, McDonalds and KFC, etc. are investing huge amount of money to grab a share of this highly lucrative market.Â
Three big food companies have been taken in consideration for this research. And their case studies are been discussed below, which shows us how did the company manage to change its cultural environment to adjust with the country requirements and ethical issues. This paper focuses on determining aÂ foodÂ choice model in wake of changingÂ foodÂ and eating habits in India, using literature reviews, exploratory surveys and reliable data sources.Â This case study focuses on growing trends towards organicÂ foodÂ and green consumerism in viewÂ ofÂ rising global obesity with fastÂ foodÂ consumption in Western countries and significantly very less in India despite obesity being an epidemic in India.
Literature review used in this research is:-
Influencing factors affecting choice and demand
Influence of Socio-economic factors
Influence of Global flows
Framework for examining the environmental management of MNCs
With the help of above literature review we can discuss how the taste of Indian consumers has been changed and also we can analyse how the companies by changing its strategy has achieved their goal in Indian market. Findings - Based on literature reviews and exploratory surveys, the key determinants impacting consumersÂ foodÂ choice are passion for eating out, socialize, ambience and taste for school and college goers and convenience for dual-income families in urban India. Findings indicate that fastÂ foodÂ companies can no longer rely on convenience as USP in India, unless the implicationsÂ ofÂ same on consumer's health are given equal importance in the years to come.
Chapter 2 - Literature Review:
Influencing factors affecting choice and demand :-
A household's demand for food away from home also may depend on the ages of family members. One reason is that the tastes may change as people progress with their age. The empirical study conducted by Byrene et al, (1998) observes that the households with younger members tend to spend more money on fast food restaurants, while households with older people tend to spend more money on full service restaurants. In this context, Blisard (2001) while, stating the significance of age in the demand for food items prepared outside home, observes similarity in the behaviour by the members of different generations at the same points in their lives. According to Friddle et al., (2001) the sensitivity of taste buds diminishes with age and hence, they observe that the older people may demand foods with bolder flavours.
In addition to the taste factor, certain textural properties are also intrinsic in judgments of qualities like crispness, crunchiness, and freshness all of which are important in the selection of food items. Barthes (1975) has suggested that there is a general symbolic opposition between "crisp, brisk, and sharp" foods and "soft, soothing, and sweet" foods in Western cultures. Texture and flavour may also be associated with palatability and digestibility. Firth (1966) observed that people sometimes use these descriptive characteristics to distinguishing between preferred and less preferred foods and those consumed under normal or starvation conditions.
The theory of household production proposed by Becker (1965) explains how prices, income, demographics, and time constraints can all influence a household's purchases of items like food. He extended the classical demand theory to explain these aspects more elaborately. According to this economic model, the cost of food purchased includes the cost of consumption, cost of preparing the equivalent food in the home and also the cost of cleaning up after a meal or snack. In the context of the Becker's model, a household manager can be defined as the person primarily responsible for shopping, cooking, cleaning, and other household chores.
In the study of food choices on Native Americans Galloway and Gibbs (1976) concluded that inadequate nutrition levels were the result of lack of purchasing power rather than the lack of nutrition knowledge. Similarly, DeWalt and Pelto (1976) conducted a study on food rating with factor analysis- as the basis for analytical construct. In the context of this study, the respondents in a Mexican village were asked to rate food according to taste, healthfulness, and economic value, and found that people had accurate notions of "nutrition". Also, this study found that people chose food mainly on budgetary considerations. The factors related to food choice in this study were identified through factor analysis from sets of food choices provided by respondents. In similar line of thought Schuftan (1979) stated that the real problem in malnutrition is lack of food-purchasing power from the buyers and hence, he suggested that the nutrition programs should address malnutrition in economic rather than nutritional terms; that is, they should measure deficits in the purchasing power of the households and give priority to nutrition programs that generate income, new employment opportunities in food production, and food-related services.
The impact of specific economic and demographic characteristics of a household, in its demand for ready-made food items are considered very important. In this context, McCracken and Brandt (1987) analyzed the relationship between some key household characteristics and expenditure at different categories of restaurant. The empirical analyses of their study have shown the influencing pattern of economic and demographic characteristics of households in their demand for restaurant made food items. Also, they stated that an inverse relationship could be observed between the number of people in the household and its requirement for food prepared outside home. The significant finding indicated in the above study observes decrease in the expenditure of large households for food items prepared outside home. This is understandable for the simple reason that cost of cooking in terms of fuel expense is less, if food is prepared for more number of people. Based on the household survey data from the year 1970s and 1980s, Nayga and Capps (1994) studied the relationship between a household's characteristics and its frequency of dinning at each category of food selling enterprises. Hiemstra and Kirn (1995) analyzed the impact of household characteristics on expenditure by eating occasion and market segment.
A specific household may demand more restaurant made food items if both husband and wife work outside. In such situations food prepared outside home will form a convenient meal option if the sellers are reasonably accessible. Two studies conducted by Popkinn and Solon (1976) and Popkin (1980) identified deficiencies in the food intake of children who have their mothers with employment. Further, these studies confirmed no such deficiencies in the food intake of the children who have their mothers without employment. According to Byrene et al., (1998) the spending for fast food is increasing along with the number of hours, the household manager works in the labour force. In this context, Rajmohan and Panchanatham (2002) reported that the female employment in IT jobs makes women to struggle a lot in terms of fulfilling the domestic responsibilities like preparing food items at home. This practically means that more office responsibilities for women will cause increased demand for ready-made food items in the market.
Influence of Socio-economic factors
The booming Indian economy (Lenartowicz and Balasubramanian, 2009) and the huge Indian consumer market (Enderwick, 2009) is encouraging many researchers to study the various socio-cultural dimensions influencing the Indian consumers' behaviour (Kopalle et al., 2010). Another stream of study that is luring leading researchers (Craig et al., 2009; Yaprak, 2008) is the influence of forces of globalization on the changing consumer culture of a society. Such influence, according to Ger and Belk (1996), would be more intensive on the consumers in the developing economies of the world, India being one of them. In fact, Durvasula and Lysonski (2008) and Mathur et al. (2008) have empirically shown how forces of globalization are bringing in changes in the culture of Indian consumers. One such culture based dimension of consumer behaviour is materialism.
The current work studies materialism, a construct defined by Belk (1984) and Richins (1987) "giving importance/being attached to worldly possessions", and its influence on consumer culture, which encompasses the prevalent cultural influence among consumers, in the Indian context. Extant research suggests that globalization is rapidly influencing consumer culture in India with people showing increasing "predisposition towards foreign brands" (PTFB), a construct defined by Bandyopadhyay (2001), Batra et al. (2000) and Kinra (2006) as admiration of foreign brands and intention to purchase them vis- a`-vis home country's brands. Such cultural influences are also likely to impact Indian consumers' purchase behaviour, e.g. credit card usage (Chibber, 2010), impulse purchases (Datamonitor Report, 2010) and consideration of shopping as an enjoyable behaviour (Ghosh et al., 2010). Although marketing scholars (Cleveland et al, 2009; Richins and Dawson, 1992) have already established the impact of materialism on these important consumption traits, studying the same in the Indian context would provide interesting insights for both scholars and practitioners alike. The paper thus makes an effort to study extent of materialistic values (MV) amongst Indian consumers; differences in such values based on demographics; whether such values impact various buying behaviour traits of Indian consumers and are itself being impacted by the onslaught of forces of globalization.
Materialism among Indian consumers has been studied by Chaudhuri and Haldar (2005) and Cleveland et al. (2009). These studies brought forth the relationship that materialism has with cultural adherence and regional differences with-in India (Chaudhuri and Haldar, 2005) and materialism's impact on various purchase behaviour like purchasing frequency of luxury products, etc. (Cleveland et al., 2009). Though Cleveland et al. (2009) also attempted to study the relationship between materialism and various demographic variables like age, income, gender and educational qualification for the Indian sample; they could not get significant results on any of the relationships. Both Cleveland et al. (2009) and Chaudhuri and Haldar (2005) used student samples in their study, which could limit the generalization of their findings. Further, neither of these studies attempted to operationalize globalization as an antecedent impacting the MV of Indian consumers. These studies also did not empirically study the impact of other demographic factors (besides age) like income, educational qualification and gender on the MV of Indian consumers. The present study addresses these existing gaps in the extant literature.
Pettys and Balagopal (1998) are of the view that since individual attachment in India is seen as temporary and as an illusion, Indians are very non-materialistic. They also believe that an inherent risk of westernization is that the Indian consumers might become more materialistic. On the other hand, Venkatesh (1995) states that Indians are not averse to materialism because in Indian culture spiritualism and materialism are not considered opposites, instead they belong to the same realm of experience and hence there is no confrontation of beliefs if both are adopted together. Still, compared to other developed nations like USA and New Zealand, Indians are relatively less materialistic (Ger and Belk, 1996). This might be due to conservatism preached by the Indian culture. The results of Chaudhuri and Haldar's (2005), empirical study on Indian respondents showed that there is a significant negative correlation between the degree of materialism and the intensity of cultural adherence. In other words the more a person moves away from the Indian culture, the more are the chances that materialism will manifest itself in him.
Influence of Global flows
Globalization is leading to various types of global flows across the world. According to Appadurai (1990), there are five types of global flows - mediascapes (flows of image and communication), ethnoscapes (flows of tourists, migrants and foreign Students), ideoscapes (flows of political ideas and ideologies), technoscapes (flows of technology and know-how) and finanscapes (flows of capital and money). Considering the influence of these global flows, Craig et al. (2009) observe that in today's world, cultural products and lifestyles from the developed world are spreading across developing countries. This is the result of contact through traditional media such as TV and films, as well as through new media such as the internet, electronic social networking, blogs, etc. (Craig et al., 2009).
This phenomenon, according to Craig et al. (2009), is changing the cultural fabric and patterns of a society as products, icons, lifestyles and rituals of one culture are being adopted by another (Craig and Douglas, 2006). Further, its pervasive influence on consumer behaviour is affecting consumer tastes, preferences and purchase behaviour (Douglas and Craig, 1997). Venkatesh and Swamy (1994) state that Indian consumers, even if they have not travelled abroad, are still being influenced by the consumerism (or consumer culture) brought by foreign influence through media and products (foreign brands). Ger and Belk (1996) state that the reason for this is that with the coming of globalization and westernization, developing countries' consumers emulate the lifestyles and consumption patterns of more economically developed nations. Many studies (Batra et al., 2000; Kinra, 2006; Maxwell, 2001) have shown that Indian consumers have a very high PTFB. According to Eckhardt and Mahi (2004), these foreign brands are also bringing foreign cultural influence with them in the Indian market place.
Since 1991, India has witnessed a dramatic increase of multinational corporation activity, giving rise to tremendous economic development of the country (Emde, 1999). From provision of services to manufacturing, multinational corporations (MNCs) play a big role in almost all the economic sectors in India. Consequently, their business operations impact the physical environment of the country on a large scale. In the post-industrialized era, MNCs in the developing world are changing their environmental management in the context of various internal and external drivers. These changes often lead to an introduction of new strategies, systems, and practices across the environmental management of MNCs (Moser, 2001). Despite significant environmental policies introduced in India, such as the Water Act (1974), Air Act (1981), and Environmental Protection Act (1986), its environmental quality has continued to deteriorate (Reich & Bowonder, 1992).
India's Industrial Policy of July 1991 radically pushed for an open economy by globalization, liberalization, and privatization. The policy opened up India's economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity (Goyal, 2006). The economic policy reforms of India removed constraints for entry of MNCs into India, allowed Indian companies to form joint ventures with the foreign companies, and encouraged a free inter-country transfer of technology and labor (Goyal, 2006).Â An open economy, large manpower, and a weak environmental regulatory framework reduced the cost of doing business in India as compared to other developing countries such as Brazil, Mexico, China, and Indonesia (Jain et.al, 2006). Therefore, these factors made India a preferred destination of MNC activity from developed countries.
Framework for examining the environmental management of MNCs
The project draws from the framework within organization theory and specifically on Andrew Pettigrew's famous work on the management of strategic change (Pettigrew, 1987).Â His framework has been widely adapted to study how changes in the management of environmental and social issues by MNCs operating in less developed countries can lead to sustainable development (Moser, 2001). Pettigrew offers a framework -consisting of three dimensions: context, content and process. He suggests that organizational change process and decision-making can be understood in terms of these three inter-linked dimensions. The context of change is concerned with how an MNC's internal context and aspects of external environment promote or inhibit the change process.Â Internal context refers to characteristics of the MNC's internal organization: its structure, culture, and politics, and how these have shaped/continue to shape its environmental management (Moser, 2001). The external context can be sub-divided into "formal" and "informal" components.Â The "formal" or institutional component of context consists of factors such as headquarter policies, host country's (India in this case) regulatory framework, investor pressure, standard industry codes of conduct, international regulations, international nongovernmental organizations (NGOs), and media comment. The "informal" or socio-political component consists of factors such as brand image, risk management, competition, eco-efficiency (cost effectiveness with reduced environmental impact), and pressure from local or domestic NGOs, public, and local communities. The content dimension of the framework refers to the economic, social and environmental impacts (both positive and negative) of current MNC practices and operations. The process dimension refers to how change within an MNC is effected over time.Â The adoption of environmental management changes can also be understood in terms of the interrelated dimensions of context, content, and process. This research focuses on the content and context dimensions as they apply to the case study. In the context dimension, only the external aspects containing formal and informal institutions are studied.Â These external aspects play the role of drivers that change the environmental management of MNCs. The content dimension is studied to direct the second research question about the implementation of new environmental strategies, systems, and practices to incorporate the changes driven or impeded by the contextual factors listed above.
Chapter 3 - An overview of culture in Indian food industry
Due to the cultural and personal attitudesÂ of Indian consumers about food and the perceived importance of "fresh" food, processed food is aÂ new concept to this population, and thus should be viewed as aÂ new product and an innovation. CountlessÂ new products are introduced on world markets only to fail and to be taken off the market within a few months. Usually, the failureÂ of aÂ new product is accompanied by substantial financial losses to manufacturers, middlemen, and retailers. Market researchers, therefore, need to examine carefully the relationship betweenÂ product and marketing innovation, and other important variables that make the introductionÂ of aÂ product successfulÂ in new markets.
Food diversity is an implicit characteristic ofÂ India's diversified culture consisting of different regions and states within. Indians like to have home-cooked meals - a concept supported religiously as well as individually. However, with times due to increasing awareness and influence of western culture, there is a shift inÂ foodÂ consumption patterns among many Indian families. It started with eating outside and moved on to accepting a wide variety of delicacies from world-over. Liberalization of the Indian economy in the early 1990s and the subsequent entry of new players set a significant change in lifestyles and theÂ foodÂ tastes of Indians.Â
Fast foodÂ is one which gained acceptance of Indian palate after the multinationalÂ fast foodÂ players adapted the basic IndianÂ foodÂ requirements viz. vegetarian meals and selected non-vegetarian options excluding beef and pork totally from their menu.
MultinationalÂ fast food outlets initially faced protests and non-acceptance from Indian consumers. This was due to primary perception that theseÂ fast foodÂ players serve only non-vegetarian and do not serve vegetarian meals. In addition,Â fast foodÂ is perceived expensive besides being out-of-way meals in Indian culture.
Today,Â fast food industry is getting adapted to IndianÂ foodÂ requirements and is growing inÂ India. It is gaining acceptance primarily from Indian youth and younger generations and is becoming part of life. Keeping in view the Indian habits and changing preferences towardsÂ foodÂ consumption, this study has its focus to understand the factors affecting the perception of Indian youth, in the age group of 20-30 years, towards consumption ofÂ fast foodÂ as well as towards making choice ofÂ fast foodÂ outlets. All the popular fast food chainsÂ have chalked out massive plans forÂ expanding theirÂ business and presence throughout theÂ country. Moreover, foreign fast-food chains are aggressively increasing their presence in the country. International fast-food chains such as McDonald's, Domino's, Pizza Hut and Kentucky Fried Chicken (KFC) are doing brisk businessÂ in India's ready-cooked meal fastÂ food segment.
Chapter 4 - Study of globalized food culture evolving in India:
Some traditional attitudes of Indians, however, have created challenges to foreign companies that attempt to make a successful entry into the country.Â Food is believed to be an effective and tangible differentiator of consumer preferences among different cultures. Indian consumers tend to be traditionalÂ in their approach to food products, thus, unlike many countriesÂ in the developing world, WesternÂ food is not widely consumedÂ in India.
The highly distinct tastes of Indian consumers are a challenge for many multinationals seeking to enter the IndianÂ food market. Unlike citizens of other rapidly industrializing countries, about 40 per cent of Indians are vegetarian, according to reportsÂ in The Economist (1997). Even among Indian meat eaters, many consumers have an aversion to beef and/or pork and dislike frozen meat and fish.
Despite these challenges, the US International Trade Administration (2000) estimated that the processed food marketÂ in India was worth over US$22.2 millionÂ in 1999. However, marketers need to develop a very high level of expertiseÂ in tapping into this potential market since importedÂ food products are not widely accepted by the general Indian population.
Research has demonstrated that younger Indian consumers are more open to novelÂ food products and are more likely to perceive importedÂ food as high quality as compared with locally producedÂ products.
Direction of business globalization it has to be not only about uniformed customization of the economies of the different countries and human need, but also about sensitive and understanding approach to local and national values and principles. In practise the most mistakes are made alongÂ this chain of management processes.
The success of the foreign business is not only determined by a good quality of the products but a solid preparation, search for adequate businessÂ partners, market knowledge, attentive acquisition of local staff and a well-founded business concept. For success of fast foodÂ restaurant the store image isÂ very important. Firstly, they are functional qualities of a store (assortment, store layout, location, price-value relation). Secondly, psychological attributes refer to the consumer's perception of the store attributes, such asÂ friendliness, helpfulness of store personnel or attractiveness of decor.
For kid's market segment and market segment of young people students the emotional material as a part of store image is of great importance. Shoppers differentiate one store from another by the images of each project. The simplest approach to such image projection is likely to be based solely onÂ price-quality relation.
After the liberalization policy that came in force in 1991, fast food industry grown in India as multinational fast food providers have set up their business either jointly with Indian partners or independently. From next chapters we will discuss about the companies environmental management and the cultural change. And we will see how companies adapt to these situations.
Chapter 5 - PepsiCo
In this research we will discuss about the change in environmental management of PepsiCo, India (An American large food and beverage Multinational Corporation). Environmental regulation in India was almost negligible before 1980s. For economic development, the Government of India kept environmental regulation of multinational corporations to a minimum in order to attract foreign direct investment (FDI).
Problems faced by PepsiCo:-
The two most major environmental issues faced by PepsiCo India are the quality and quantity of water extracted for its beverages and the resulting water pollution due to the company's industrial residue. Another challenge faced by the company is the amount of plastic use and waste generated in bottling and packaging of its products.
1. Industrial water use:-
According to Indra Nooyi, CEO of PepsiCo Inc., only 0.04% of the total industrial water usage in India is being used for soft-drinks and bottle water. 10 litres of water is being used by PepsiCo for every one litre of soft-drink they produce. So, they are using about 30 million litres of ground water every year to make soft-drinks. They have been blamed for practising "water piracy" for misuse of ground water resources which leads to scarcity of drinking water to the people of Kerala (A state in India). Kerala groundwater department has done a study and reported that the factory extracts about 366,000 litres which is more than the limit allowed.Â The company was also blamed for adding toxic sludge containing heavy metals such as calcium and lead into the nearby streams which causes water pollution.Â A study led by the Centre for Science and the Environment (CSE), an environmental NGO in 2003 released the report nationwide confirming that Pepsi and Coca-Cola use pesticides for their soft drinks. The samples were around 24 times above the general standards set. This created panic in public about national public health care, in 2006, in seven out of 24 states in India. Many schools and colleges banned both Pepsi and Coca Cola.
2. Industrial plastic waste management:-
Consumers and environmental NGOs criticized PepsiCo for the environmental waste created by bottling their drinks. In 1994, the beverage giant experienced national antagonism over its alleged contamination of the country's environment through the dumping of plastic waste. Indian environmentalists, along with Greenpeace's Toxic Trade Project, investigated PepsiCo's involvement in both production and disposal of plastic waste in India.
PepsiCo also has been criticized in its headquarters in New York for environmental waste created by bottling a drink (water) that people can get from the tap. As a result, PepsiCo has launched its new Eco-Fin a bottle that uses 50% less plastic than its traditional Aquafina bottle.
Changes in the Environmental Management of PepsiCo, India:-
To survive in Indian market PepsiCo applied some strategies and changed its environmental management. . It refers to the new environmental strategies, policies, or systems that PepsiCo has adopted. It also reveals the underlying environmental strategy followed by the company: its central objectives, source of strategy, and the extent to which the strategy is implemented.
After the various environmental issues faced by PepsiCo, the company has made periodic changes in its environmental management. Since 2006, PepsiCo has adopted the mantra of "Performance with Purpose."Â It mainly initiated two main programs to attain environmental sustainability: Replenishing Water and Waste to Wealth.
The Replenishing Water program addresses the problem of water quality and ground water depletion by introducing the concept of a positive water balance. The programs adopted under this umbrella at the community level are: In-Plant Water Recharge and Harvesting and Zero Water Discharge. As a part of the overall program, PepsiCo has partnered with TERI-a scientific research organization in India-to enhance and rejuvenate local water bodies in some states of India.
The Replenishing Water program has achieved a current recharge rate of 300 million litres of water every year. To provide safe water and sanitation for communities in developing countries, and to improve rural water in India, PepsiCo has partnered with Water PartnersÂ and the Safe Water Network.
Part of the Waste to Wealth program is directed towards reducing material waste through sustainable packaging and recycling of waste generated at its bottling plants. PepsiCo now uses "light -weighting" in its packaging which is cost-effective, generates less waste, and reduces the amount of energy and raw materials, such as plastic, that are used.
In dealing with the issue of water pollution with toxic waste and pesticides, PepsiCo changed its environmental management based on a host of drivers.Â The formal institutional drivers are media comment, investor pressure due to fall in sales, and the Government of India regulation that established new standards for industrial water use and disposal. The informal drivers attributed to the change are protection of brand image, consumer pressure, and the pressure of domestic NGOs and environmental agencies.Â For changes made in PepsiCo's packaging, headquarter environmental policies and reports revealed by Greenpeace can be identified as the two main institutional drivers. The informal drivers for this move are: protection of brand image, rise in environmental concerns of its consumers, competition, risk management as a result of its falling shares, and attainment of eco-efficiency.
Chapter 6 - KFC:
In this case we will discuss about the ethical and cultural problem faced by Kentucky Fried Chicken's (KFC) business operation in India. After economic liberalization policy by Indian government in 1990s many western fast food chain started coming India. KFC was one of the first foreign fast food restaurants entering India in 1995. Before they could settle themselves and start full-fledged business there were obstacles which led KFC to close down. But, they re-entered the market with different strategy and adopting the culture of India and succeeded. Below we will discuss the Problems faced by KFC and how did they re-entre.
Problems faced by KFC in India:-
KFC was involved in ethical and cultural issues in India. KFC was in midst of controversies since it started its operation in India. While establishing they were not completely aware of tastes, cultural, ecological issues in India. KFC was found guilty by the regulatory authorities of India for not following the Prevention of Food Adulteration Act, 1954. People for Ethical Treatment of Animals (PETA) an animal rights protection organisations protested that KFC's chickens contained about three times more monosodium glutamate (popularly known as MSG, aÂ flavourÂ enhancingÂ ingredient) as allowed by the Act. KFC faced many severe protests by PETA. PETA blamed KFC for brutality towards chickens and also showed a video tape regarding the abuse of birds in KFC's poultry farms. KFC ignored their protests and planned a massive expansion in India. So, many people stopped eating KFC products after watching the tape, which ultimately pressurized KFC to shut down its chains in India.
Re-entry of KFC into Indian market:-
In 2003 KFC re-entered Indian market with new strategies and new menu items that is accepted by Indian consumers. Since then they started building slowly and today they are one of the most profitable fast food restaurant in India.
Chapter 7 - McDonald's:
McDonald's in India, as one of the first global companies, shows not only in which way the process ofÂ globalization will proceed but also that Western values can't be assumed without any constriction and that they should not be spread unlimited. But the interdependency gives the opportunity to create new products and aggregated values.
It is going to be even a little bit more complex in a subcontinent and multi ethnic state like India. This country, inhabited by members ofÂ many different religious communities developed significant differences in the eating habits. The religious community of the Hindus forms a significant majority in some areas. This group declines the consumption of any products from cows for religious reasons. From the perspective of the marketing department of McDonald's therefore the challenge results, that neither cow products nor pork products can be offered.
Additionally, most of the Indians consider the products of McDonald's as too expensive, very often there are more expensive than a whole meal in a typically Indian restaurant. To adapt to this condition screening of the regions was carried out by McDonald's. Even nowadays McDonald's is not represented in all federal states of India. Generally there are only restaurants in those cities, which show a higher percentage of Indians with high incomes.
To be in accordance with the eating habits and especially with the prohibitions of the several religious groups, also the products are adapted to some extent. The main part of the Indian McDonald's products is based on a vegetarian basis, followed by a high share ofÂ fish and chicken products. There where pork and beef, which is common in Europe and Arabia, cannot be replaced by implication, lamb and goat were used. Thereby also typical Indian food isÂ used as an addition to the basic range.
Due to the size of the country, McDonald's neither succeed in creating a uniform Indian McDonald's nor enforcing a uniform marketing strategy for India. Rather a compromise had to be found by separating the country in two mainÂ regions (the West & South zone and the North & East zone) and different federal states. There are completely different marketing strategies as well as different products in the two main regions. Whereas the Chicken Maharaja Mac symbolizes an association with India in the West & South Zone, in the North & East region it is the wrap.
In terms of McDonald's chain the social aspects and enjoyment are of greater importance. Based on the research results we can stateÂ thatÂ eatingÂ inÂ McDonald'sÂ followsÂ from combination of personal, social andÂ rational motives. Depending on market segment one category of motives is always prior to others. Our international survey shows how cultural distance activates the standardization-differentiation continuum and degrees ofÂ marketing mix adaptation. Using the consumer behaviour theory approach we can emphasize the role of learning and memory in this process. Higher involvement of memory, more adaptation is needed. Higher involvement of original inter-generation socialization processes (from older to younger generation), more adaptation is needed. On the other side, higher involvement ofÂ learning process and effective marketingÂ education requires, less adaptation is needed.
Chapter 8 - Analysis and Conclusion
The leading domestic fast food chains has meanwhile been playing on the fact that it has an extensive menu, insisting that other factors such as restaurant ambience and the whole eating experience also make a big difference to the customer. McDonald's, for instance, plays very heavily on the ambience factor, combining it with affordability. The international chains have also changed the concept of 'fresh food'. McDonald's has taken freshness to another plane all together, by establishing an extensive cold chain system. For example the lettuce used in burgers is exposed to the open air for less than six minutes; this makes sure it is as fresh as possible when it reaches the consumer.
The largest domestic and internationally reputed dairy product manufacturer Gujarat Co-operative Milk Marketing Federation (GCMMF) has forayed into a fast food chain business very recently. Their brand has been a huge success in India. The organisation now plans to set up around 2000 pizza parlours across India. The basic idea behind this is to establish consumption of 'mozzarella cheese'.
Industry sources reveal that the next largest competitor to McDonald's worldwide, Burger King, is also eyeing India.
Fast-food chains spreading fast (Number of outlets)
BrandÂ 1996-97Â 1998-99Â 2000-2001Â 2005
DominosÂ 5Â 28Â 60Â 100
KFCÂ 3Â 5Â DiscontinuedÂ -NA-
McDonaldsÂ 3Â 15Â 30Â 80
Pizza HutÂ 2Â 10Â 15Â 30
TGI FridayÂ 1Â 1Â 2Â 5
Pizza ExpressÂ 1Â 1Â 2Â 4
Pizza CornerÂ -Â 4Â 25Â 50
The above table indicates the way the fast-food chains are spreading in India. McDonald's has plans to establish new outlets at the newly constructed highways and expressways in and around Delhi. The only unsuccessful story is that of KFC which did not blend well in the Indian market.
Some challenges still faced by international fast-food entrants
Cold Chains in India are inadequate so sector entrants must have their own system.
Raw materials sourced from India sometimes may not match the international standards.
Continued competition from the culturally embedded 'artisan' sector.
A large majority of Indian consumer still prefer traditional style and ethnic cuisine in restaurants.
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