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Pestel Analysis On Fmcg Industry

Economics Essay
INTRODUCTION:The term Fast moving consumer goods (FMCG) refers to those retail goods that are
generally used or replaced in short period of time i.e. a day, a week, a month, & within one
year. FMCG is also known as Consumer Packaged Goods (CPG). These products are
relatively sold at low cost.
FMCGs have a short life, either as a result of high consumer demand or because the value
of product deteriorates gradually. It comprises consumer non-durable products that include
food, beverages, personal care, & household care. Goods such as meat, fruits & vegetables,
daily products & baked goods are highly perishable.
Among all the sectors FMCGs industry is one of the fourth largest sector in the country &
growing at a booming rate over the years. The Indian FMCG industry is mainly classified as
organised & unorganised. The FMCG sector is highly segmented as different products are
made for different segments in the society.

INDUSTRY CLASSIFICATION:The FMCG industry is characterised by low margins. The FMCG segment can be classified
under two segments
A: Premium segment:- Premium segment covers mostly to higher / upper class which is not
price sensitive but brand conscious.
B: Popular segment:- The popular or mass segment consists of consumers belonging to the
semi- urban or rural areas who are not brand conscious.Products sold in the popular
segment have lower prices than premium segment.

PESTEL ANALYSIS:Pestel analysis is a tool to understand the environment in which business operates, & the
opportunities & threats that lie within it. By understanding the environment in which it
operates, it can take advantage of the opportunities & minimizing the threats. Specifically
PESTEL analysis is useful tool for understanding risks associated with markets growth or
decline, & directing business to grow.
P Political factors
E Economic factors

S Socio-cultural factors
T Tecnological factors
E Environment factors
L Legal factors
A PESTEL analysis is a measurement tool, looking at all the external factors of the
organization. It is often used within a strategic SWOT analysis (strength, weaknesses,
opportunities & threats analysis).

PESTEL ANALYSIS ON FMCG


INDUSTRY:POLITICAL FACTORSPolitical stability : Political stability is one of the important most factor which influence the
growth of business directly. If Political stability is higher, then it leads to perfection in
business & on the other hand if there is unstability the business will have to suffer.
Taxation policy : Tax policy of government will affect the price of inputs & it ultimately affect
the prices of final products & it will directly affect the sale of product.
Government intervenes : This indicates that at what level the government intervences in the
economy. If the government intervence is more sometimes it helps the organization at large
extent.
Subsidies : The subsidies which are provided by government to different organisation at
different level also help it to grow at faster rate & helps the organisation in reducing the
finance which is to be funded from outside & it directly reduces interest amount paid in
favour of fund raised from outside.
Trading policies : This indicates the policies related to import & export of goods and services
from different nations. If the policies are favourable more goods & services will be imported
& exported, & on the other hand if policies are unfavourable it will restricts the import &
export.
Labour law : Labour law also affect the organisation, for example- child labour, a child below
14 year of age can not work In factory or any hazardious place.

ECONOMIC FACTORS
Interest rates : Interest rate directly affect the cost of capital, if the interest rate is higher the
cost of capital will increase & if it is lower then cost of capital will be lower. This directly affect
the profit of the organization & its growth.

Tax charges : If the tax charged by the government is lower then it will reduce the product
price & if it is higher then it will increase the prices of the products.
Exchange rates : This shows that what is the exchange rate or foreign currency rate. If
exchange rate is higher more amount is paid on import of goods & if it lowers less amount is
to be paid & on the other hand if it is higher the amount received will be more & if it is lower
the amount received will be low.
National income : National income is important factor as if affect the growth of the
organisation. If per capita income is more the amount spend will be more & if it will be lower
the amount spent will be less.
Economic growth : Economic growth is important factor in the development of the
organization. If economy grows at a higher speed it will directly affect the growth of the
organization.
Inflation rate : Inflation means the rise in the value of all the product in the economy, if
inflation rate is higher the cost of products will be higher & if inflation rate is lower the cost of
product will be lower. This directly affect the growth of the organization.

SOCIO CULTURAL FACTORS


Demographics : Demographics is the study of human population in the economy. It helps the
organzation to divide the markets in different segments to target a large of customers. For
Example- according to race, age, gender, family, religion, & sex.

Distribution of income : This shows that how income is distributed in the ecconomy. It directly
affect the purchasing power of the buyers. And ultimately leads to increase or decrease in
the consumption level of the products.
Changes in life style : Change in life style also leads to increase or decrease in the demand
for different commodities. For example- presently LCD & LED TVs have replaced Digital
displayed TV set, this shows that the changes in life style of consumers.
Consumerism : This indicates that a large number of options are available while purchasing
of goods to consumers, so the choice becomes easy & quality products can be choose by
consumers. So while purchasing a consumer have different choices to select product
according to his needs.
Education levels : Education is one of the most important factor which influence the buying
power of consumer, while selecting a particular good a consumer should know all its
features so it can differentiate them with another products.
Law affect social behaviour : Different laws are made by the government to safe guard the
rights of consumers. For example- Consumer protection act, this law indicates that a
consumer can file a case against a seller if he finds that he is cheated.

TECHNOLOGICAL FACTORS
Advancement in technology : New technology helps in economising the scale of production,
this means that new technology helps in increasing the level of production, & reducing the
costs of inputs, & maximising the level of profits.
Discoveries & innovation : Advancement in technology will leads to discoveries &
innovations & further improvements in technology so as to improve perfections in the
production process.
Competitive forces : Advancement in technology will also leads to competition in the
markets, more quality products will be provided to consumers to cover a large number of
market.
Automation : Change in technology will leads to automation, this means that with new
technology labour required is less as machines are automatic. All the works are done
automatically by the machines as earlier it is labour oriented. Now all the work is machine
oriented.
Obselete rate : Day-by-day new inventions are made so the rate of obselete is higher, as in
Computer LAPTOPS have replaced the PC. This shows that the technology becomes
obselete very fast.
Research & development : This department plays a vital role in the development of the
organization. As this department always do research that what are the demand of the
markets & how to make advancements so the organization can survive in the competitive
world.

ENVIRONMENTAL FACTORS
Ecological : The ecological and environment aspects such as weather, climate, & climate
changes, which may especially affect industry such as tourism, farming, & insurance. In
FMCG Air conditioners demand increase in summer season.
Environmental issues : Global warming is one of the major issue now-a-days as external
factor is becoming a significant issue for firms to consider. Many remedies have been taken
to reduce Global warming.
Environmental regulations : Various regulations have been declared by government to safe
guard the environment. For example- no company should through its waste in rivers.

LEGAL FACTORS
Employment law : Employment law provides equal opportunities to every citizen to work &
earn his livelihood. It provides equal opportunities to every citizen.

Consumer protection : This law helps to protect the rights of consumers & he can file a case
against seller if he fined that he is cheated.
Industry-specific regulations : These laws are related to industry for example- no industry
can establish in between cities i.e. it should be outside the cities.

LG PEST ANALYSIS
LG controls 114 local subsidiaries all over the world .The are 82000 people work for this
company. LG accept as true that technological innovation is the only way to achieve the
market. So its delivery latest technology to the customer.
MACROENVIRONMENT
Main external and out of control factor that influence an organization decision making and
change the performance and strategies The major factor are
1. Political factor
2. Ecomnomic factor
3. Social factor
4. Technical factor
These are the main factor influence the company or organization decision making and its
improve or decrease company performance.
LG
Political factor
Technical factor
Economic factor
Social factor

Political Analysis:
LG Electronics is the intercontinental Company which has a range of industrialized Units
and sources. The company focus the international market for his product .the political
environment nothing but how the law and government taxation policy influence an
organization .There is a lot of political interaction has integrated in this business and it has
operated between the political and legal factors. This factor may increase the cost of factor
some time it decrease the product cost. The LG electronics facing lots of problem while its
production and exporting goods to the overseas.

Economic Analysis:

LG has a very big competitive market in world and it have constant development in their
innovation in electronics equipment , secondary products, planned process of LG etc.. it
have leads to sell goods to other countries . The LG contribute the world wide stock market
and money market also. The LG have well and strong economic source and it has capable
of introduce some new technology to the electronic market. LG leads the electronics market
with enormous technology and economic resource. The below the table shows the financial
highlight of LG electronics. The sale of the company is constantly increase the last seven
year it possible by the good economic status

Technological Analysis:
The LG has more technology shock towards its electronics product. In every manufactured
goods in LG they improve their technology and they became a first world exporter of the
country. The LG has a huge technology like LCD, plasma TV, Games and, Laptops,Videos,
CDMA Mobile phones with a number of features. The challenger cant beat its clear imagery
their technology towards its innovation of product. The 3D Plasma TV , Camera with
massive features like clear images and slide activities, high battery etc..
The LG introduce lots of new technology to the digital world such as This business group
has entitled more quality product and services to the customer. it has introduced lot of
technology in every business group of product. Recently the LG has introduced 3k model of
Camera which has lot facilities and clear images. It is a exiting product to the market. and
also the company has introduced more innovative product like 3D products, professional
cameras, Blue ray Disk, increasing network services etc.. The LG has lead its technology
and it introduce number of products with exclusive features to the market.

Socio-cultural Analysis:
LG Corp has introduced the number of product to the different customer into the society.
Mainly it has introduced for easy usage with several option of different user. It has
introduced to the delighting product to the customer. The LG product such as laptop, various
electrical products, mobile devices, ipod, ipad, financial services, network system etc. So it
has changing life style of the LG user. LG increase its ethical standard contributes in
Research and development and health of the organisation. It also leads to image of the
country.