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BUSINESS ENVIRONMENT Assignment on

PEST ANALYSIS
of

ITC (India Tobacco Company)


Submitted to : Dr. Anupreet Kaur Mavi Lecturer, Business Environment Submitted by :
Aashish Kumar - 15001 Dupinder Singh - 15002 Akhil Awasthi - 15003 Satwant Singh - 15030

Retail Management, Semester-2 UIAMS, P.U.

PEST ANALYSIS OF ITC (India Tobacco Company) PEST Analysis:


The scan of the macro-environment in which the firm operates can be expressed in terms of Political, Economic, Social or Technological factors. The acronym PEST is used to describe a framework for the analysis of these macro-environmental factors. POLITICAL FACTORS may include Government Regulations, Legal issues, Freedom of Press, Regulation-de regulation trends, Likely political change, various Rules of Laws, etc. ECONOMIC FACTORS may include Economic growth, Inflation Rate, Interest Rate, Globalization, Labour supply, Labour Costs, likely Economic change, etc. SOCIAL FACTORS may include Population growth rate, age distribution, emphasis on safety, health, education, social mobility, employment patterns, lifestyle choices, etc. TECHNOLOGICAL FACTORS may include impact of emerging technologies, R&D activities, impact of Internet, reduced Communication costs, likely Technological changes etc.

Introduction on ITC:

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. As the Company's ownership progressively Indianised, the name of the Company was changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Fast Moving Consumer Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology. The full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'.

PEST ANALYSIS of ITC POLITICAL FACTORS : The political arena has a huge influence upon the regulation
of businesses, and the spending power of consumers and other businesses. The Indian polity is increasingly seen by political observers as the problem. When populist political appeals stir the passions of the masses, government institutions appear less capable than ever before of accommodating conflicts in a society mobilized along competing ethnic and religious lines. Budget impact - Among the FMCG stocks, ITC is one of the biggest gainers. Due to Govt. new conditions, ITC Maurya won the 'Best eco-friendly hotel Special Prize' award by the Ministry of Tourism, Government of India. Some recent Political Factors ITC had to face in some previous years are mentioned as below: Huge burden of VAT increase in prices may affect the sales. Excise duty raised by union budget by 5 %. Ban on communication. Luxury tax in 10 states making it difficult for ITC to maintain the consistency level in prices for different places. Smuggling - regarding Tobacco products.

100% FDI allowed - as it will allow several Foreign Brands to enter the Indian Markets, and thus, may affect the share of ITC in the Indian Markets.

ECONOMIC FACTORS : Marketers need to consider the state of a trading economy


in the short and long-terms. This is especially true when planning for international marketing. India has been one of the best performers in the world economy in recent years, but rapidly rising inflation and the complexities of running the worlds biggest democracy are proving challenging. Indias economy has been one of the stars of global economics in recent years, growing consistently over the past decade. Growth had been supported by markets reforms, huge inflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and a flourishing capital market. ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by Business World and among India's Most Valuable Companies by Business Today. ITC ranks among India's 10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by Business Week. ITC employs over 25,000 people at more than 60 locations across India. Some Economic Factors ITC had to face in some previous years are mentioned as below: Bidee : cigarette ratio = 10:1 which means they are the producers of a very less level of tobacco products as compared to overall consumed. Profit margin is high and thus, it will yield higher level of returns over comparatively lesser inputs. Other forms of cheap tobacco intake the economy of India is not as strong which leads to people consuming cheap tobacco products. This means they can have higher returns as production of cheap tobacco products is comparatively cheaper. Indias top producer of cigarettes. and it can be concluded that since ITC is the leading producer of tobacco products in India, they earn a higher proportion of their income by selling these tobacco products.

SOCIAL FACTORS : The social influences on business vary from country to country.
It is very important that such factors are considered Envisioning a larger societal purpose has always been a hallmark of ITC. As a corporate citizen with enduring relationships in rural India, ITC has a history of collaboration with communities and government institutions to enhance farm productivity and the rural resource base. Some Social Factors ITC had to face in some previous years are mentioned as below: Becoming status symbol for many, intake of tobacco is a status symbol. They feel that the usage of Cigars and high-branded Cigarettes gives an increase to their status in the society. ITC banks on it and makes highly-prices tobacco products as well in addition to the cheaper ones. Companions mounted by W.H.O. Changing attitudes towards tobacco Many people are becoming aware about the ill-effects of intake of Tobacco. This may lead to the industry suffering some amount of loss in the years to come. Restrictions by government Several restrictions on tobacco and it advertising has made the promotion of tobacco brands almost impossible, thus leading to a decline in their sales.

TECHNOLOGICAL FACTORS : Technology is vital for competitive advantage,


and is a major driver of globalization. Technology in India accounts for a substantial part of the country's GDP and export earnings while providing employment to a significant number of its tertiary sector workforce. ITC's development of its Integrated Quality Management System (IQMS) is based on its strong foundation of implementing ISO 9001:2000, ISO 14001, OHSAS 18001, SA 8000, HACCP (for Foods) and IQRS (performance rating and benchmarking of the quality management system). Likewise, ITC's strategic initiatives for developing its people have been based on participative management concepts like QC (Quality Control), TQM (Total Quality Management), KSS (Kaizen Suggestion Scheme), 5S, Six Sigma etc. All ITC manufacturing units have ISO quality certification. Almost all contract manufacturing units in the Foods Business and all large hotels have food safety and quality systems certified by accredited 'third party' in accordance with 'Hazard Analysis Critical Control Points' (HACCP) standards. Additionally, the quality of all FMCG products of the Company is regularly monitored through 'Product Quality Rating System' (PQRS). The Leaf Tobacco and Printing & Packaging businesses have achieved world-class ratings in the 'International Quality Rating System' (IQRS) for business excellence in which key processes are rated against international benchmarks and certified by accredited 'third party' independent assurance providers. IT also plays a very critical role in driving the ITC business strategies. IT is an enabler of the business process to ensure business growth through efficient management of operations in the value chain. IT creates new business process or restructures the current business process to enhance customer service availability, efficient manufacturing / supply chain operations etc. Some Technological Factors affecting ITC in some previous years are listed as below: State-of-the-art factories. Cheap labour supply It has often been noticed that labour is very cheap and in abundance in India. Thus, ITC gets large number of labour supplies from underdeveloped areas for a comparatively cheaper cost and thus, their margin on the product increases significantly. Development of IQMS i.e. Innovative Quality Products and Systems. The basic principle of ITC is to produce quality products and thus, systems are set-up in order to obtain them. Adapting other concepts like QC and TQM Various techniques such as QC (Quality Control) and TQM (Total Quality Management have regularly been adopted by ITC so as to ensure the Quality is maintained and managed regularly. Hardware investment High amount of investment is done in hardware such as large Storehouses, high shelves, etc. Software investment such as GPS monitoring circuits, long-distance clients landing
enquiries, GIS circuit optimization, and online method of electronic clearing, etc.

Miscellaneous along with good Hardware and Software investment, ITC also possesses a great Logistic as well as Inventory support.