BUSINESS ENVIRONMENT Assignment on

PEST ANALYSIS
of
ITC (India Tobacco Company)

Submitted to : Submitted by :
Dr. Anupreet Kaur Mavi Aashish Kumar - 15001
Lecturer, Dupinder Singh - 15002
Business Environment 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 world’s biggest democracy are proving challenging. India’s 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.
• India’s 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 under-developed 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.