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PESTEL Analysis

The document analyzes various factors that affect ITC Limited using PESTEL analysis. Politically, increased taxes on cigarettes in major states have raised prices and lowered sales. Economically, filter cigarette sales grew 15% while non-filter sales declined sharply due to equal taxes. Socially, while income growth may increase leisure spending, health concerns have led to advertising bans. Technologically, ITC has efficient supply chains and factories due to India's low labor costs and large tobacco production. Environmentally, abundant raw materials and labor keep costs low. Legally, smoking bans and age restrictions have reduced sales.

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Arun Prasaath
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1K views1 page

PESTEL Analysis

The document analyzes various factors that affect ITC Limited using PESTEL analysis. Politically, increased taxes on cigarettes in major states have raised prices and lowered sales. Economically, filter cigarette sales grew 15% while non-filter sales declined sharply due to equal taxes. Socially, while income growth may increase leisure spending, health concerns have led to advertising bans. Technologically, ITC has efficient supply chains and factories due to India's low labor costs and large tobacco production. Environmentally, abundant raw materials and labor keep costs low. Legally, smoking bans and age restrictions have reduced sales.

Uploaded by

Arun Prasaath
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PESTEL Analysis:-

Political factors:
The increase in the tax policies such as increase in excise duty and the vat from 12.5%
to 20% in three major cigarettes consumption states of Maharashtra, Rajasthan and Delhi
have resulted in the increase in the overall selling price of the cigarettes which deters the
potential customers and results in lower sales, Also challenging regulations relating to
communication and consumption.
Economic factors:
With non filter cigarettes being levied the same tax as compared to the filter
cigarettes, there was a sharp decline in the volume of the non filter cigarettes. ITCs volume
declined by only 3% even though it discontinued the production of non filter cigarettes.
ITCs volume was supported by filter cigarettes which grew by almost 15% despite the price
hike. This shows that ITC is gaining at the expense of competitors. India is a major grower
and exporter of tobacco in the world. Presently India is among the top three producers of
tobacco in the world.
Social factors:
The aspirations of the tobacco consumers to upgrade the consumption can
multiply the shares of cigarettes. However, growing public concern with regard to the
consumption of tobacco has led the government to ban all sorts of advertisements like the
commercials, print media and pamphlets. This may act as a setback for the company. For the
hospitality business, the society is now turning more towards an individual oriented culture
which means that people spend only for themselves. The rise in the per capita income and the
working population in the country is also a good sign for the company because the number of
people willing to spend more on leisure increases with per capita income
Technological factors:
ITC came a long way on the technological front. With state of the art factories
and cheap labour supply from the second largest tobacco producing country in the world,
India, the supply chain management of the ITC follows the latest trend. ITC also has the great
inventory control and logistics support. They have also been adapting other quality concepts
such as quality control, total quality management and 6-sigma concepts.
Environmental factors:
The main source of raw material for cigarettes is tobacco which is found
mainly in the states of Andhra Pradesh and Karnataka in India. The environment is
favourable for the company because of the abundance of raw material and inexpensive and
large availability of cheap labour.
Legal factors:
The developments in the environmental and consumer regulations and protection such
as the ban on smoking and the ban on selling cigarettes to minors have resulted in setbacks
for the company in terms of the number of sales of their product which draws them the most
revenue. The legal issues related to the hospitality industry affect the international customers
because of the visa and other administrative issues involved.

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