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On Protectionism and Globalisation.

In 0.43 seconds, Google tells you that globalization is ‘the process by which businesses or other organizations develop international influence or start operating on an international scale.’ At the very outset, this may seem right — but I believe that globalization is far wider in scope and applicability. Globalization to me signifies integration — integration of world economies, cultures, traditions, trade, and beliefs, to name a few. It’s a concoction — based on an energetic and dynamic interaction between the old and new, between tradition and change and between supporters of free trade and those who vehemently oppose the idea of bringing down local industries. Again, the notion that globalization has the inherent power to completely disrupt all local establishments somewhere highlights our own fallacy — do we really think so low of our industries, that a sudden wave of companies that newly establish themselves in our local territory, that no Indian even knows about, has the ability to eliminate the deep-rooted local players? ‘We cannot support globalization because our domestic industries need to be protected.

The biggest takeaway from the discussion for me was the idea of underestimating the power of the ‘local’ and the ubiquitous presence of culture even in a field like economics. To validate my claims, I’d like to cite the example of the Cola wars that was touched upon in the discussion — which ties globalization, protectionism, and culture to a great deal. In 1949, Parle decided to venture into the cola market, and even capitalized on their brand of glucose biscuits by launching ‘Gluco Cola’. With time, around 1970’s, Gold Spot and Limca had acquired a significant market share of the soft drinks industry and established themselves as strong brands. Coca-Cola was a renowned soft drink brand in India, but due to the norms of the Foreign Exchange Regulation Act (FERA), Coca-Cola did not return to the Indian industry till 1993. The government instructed Coca-Cola to either revise their plans in accordance with the norms set or to leave the country. FERA needed Coca-Cola to reveal its secret concentrate formula as well as reduce its equity stake (foreign companies were required to invest 40% of its equity stake in India in its Indian associates), which was not acceptable to Coca-Cola.

In 1980, Parle launched ThumsUp, the drink that is said to have actually won the Cola wars — even till now, it holds the 42% of the market share, the largest in the industry. Thums Up truly filled the void left by Coca-Cola. Ramesh Chauhan, the force behind Parle, had done extensive product research to ensure ThumsUp was not just made in India, but also tasted like India. This is where culture comes into play. In the cola drinks industry, an expensive ingredient called the ‘kola nut extract’ had to be imported from Africa. Ramesh Chauhan wanted to surpass this obstacle and set himself up with the herculean task of developing a traditional, Indian flavored drink. Chauhan wanted to capture on the Indian palate — so he developed a drink that was spicy, pungent, less sweet and fizzier than Coca-Cola. This move made ThumsUp overshadow all domestic rivals like Campa Cola, Double Seven, Dukes and United Breweries Group’s McDowell’s Crush.

However, in 1993, Coca-Cola resurfaced due to the new liberalization policies. Constantly competing against each other, Parle though that it would not be able to sustain in front of giants like Pepsi and Coca Cola, and so decided to surrender. The soft drinks portfolio was sold for around $60million, and ThumsUp had 85% market share when sold. The Indian culture and more importantly, the Indian taste buds actually won the Cola Wars. The local companies DO have the power to sustain and defeat international giants like ThumsUp did, but being subservient to global companies and completely underestimating the power of our own local industry will only lead to catastrophic results. ThumsUp had 85% market share when it was sold — this is a gross underestimation of the potential by the Parle group. They now only hold a little market share of the drinks industry by owning Bisleri. Is it time to look beyond globalization and protectionism as contradictory to each other? Is it time to give the power to the small brands to fight, to fight for themselves as opposed to spoon feeding them with protectionism? Is it time to truly allow interaction of the economies all over the world and not just the start of international operations of any business? In 0.43 seconds, my mind says yes — it is time.

By Arshita Malhotra. 
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