ASSIGNMENT – ENVIRONMENTAL ANALYSIS

CIPLA LIMITED
PESTEL ANALYSIS
A PESTEL Analysis (formerly known as PEST Analysis) is a framework or tool that is used by
marketers worldwide to analyze as well as monitor the various macro-environmental or
external marketing forces that have a reflective impact on any business organization.

Cipla limited PESTEL analysis includes macro environment factors that impact the overall
business environment – Political, Economic, Social, Technological, Environmental, and Legal
factors.

 Political factors

Political stability

High political stability provides a stable and friendly business environment with predictable
market growth trends. However, when there is political chaos, it deters the investors and
harms the stakeholders' trust in economic and consequent organizational performance.
Currently, Cipla is present in different countries, each having own political tensions. Growing
tensions and instabilities in the global political environment can affect the growth and limit
the growth opportunities available to Cipla.

Changing policies

Frequent changes in government policies harm business performance by increasing

environmental uncertainty. It is important for Cipla limited to study the current trends in the
country's political scenario as changes in government may alter the government's priorities
towards the development of different industries.

Pressure groups and governance system

Cipla should carefully analyze the protests by pressure groups, social/environment activists
and worker unions as such protests play an important role in the policy making process.
Close collabouration with such groups may enhance the Cipla’s ability to collabourate with
community and achieve long-term corporate goals. Moreover, a well-developed governance
system with a democratic political environment makes the business environment more
comfortable for international business organizations like Cipla limited.
 Bureaucracy and corruption

Bureaucracy and corruption negatively influence the business environment. Operating in

countries with high corruption level and weak law enforcement makes the business
environment increasingly unpredictable for Cipla limited due to jeopardized public trust on
business organizations and overall political and economic structure. The corruption can
influence various business operations, ranging from licensing, contracting, fraudulent deals
to frequent lawsuits. If Cipla decides to enter in markets with the corrupt economic, political
system, it will threaten the organization's sustainable development by destabilizing the
society, harming justice system and endangering the rule of law.

Taxation, trade restrictions and intellectual property protection

Entering in countries with high taxation level will directly influence the profitability of Cipla
limited. High taxation affects international trade and prevents exports. Cipla can enter in low
taxation markets and benefit from high profits that can be invested in research and
development activities.The organization may also study the industry specific taxation
policies to understand the host government's priorities and interest in developing industries.
Similarly, high trade restrictions can make the business environment more complex by
affecting the exports and harming relationships with foreign trade partners. Moreover, if the
government of the country under consideration is not serious about protecting the
intellectual property rights of business organizations, it will deter the entrepreneurs from
investing in organizations due to high risk of ideas being stolen. Hence, Cipla limited should
study how intellectual property rights are protected in the host country and make the
business strategies accordingly.

 Economic factors

Economic/business cycle stage

The economic development of a country directly influences organizational performance.

Growing economies offer wide-ranging growth opportunities to the Cipla limited Similarly, it
is important to understand the industry lifecycle stage. Entering in mature industries can be
more challenging due to market saturation than industries at the growth stage. Moreover,
the business performance of Cipla limited. is also influenced by the extent to which the host
country government has spent on core infrastructure development. A well-developed
infrastructure facilitates the business environment and increases the growth potential of the
pharmaceutical industries in the respective country.
Inflation/employment/interest/exchange rates

The GDP growth rate will determine the Cipla limited ’s ability to pursue its long-term
growth strategies. Low GDP also signals the consumers’ inability to spend on offered
products. High unemployment signals the availability of surplus labour at comparatively
lower wages. Operating in such a market can lower the production cost of Cipla limited. The
organization should also carefully consider the interest rate and its influence on borrowing
ability and attitude towards investment. The high interest rate will encourage the attitude
towards investment and increase growth opportunities for the company. Finally, the
exchange rate fluctuation can also influence the profitability and international trade. The
high fluctuation on local currency can be a cause of serious concern for Cipla Company

Labour market conditions

The demand and supply of labour determine the wage rates and supply of skilled workforce.
Cipla limited must study and predict the labour market conditions to understand how it can
attract talented workers and leverage their skills to improve production performance. When
labour markets are flexible, Cipla limited can take advantage of higher labour productivity.
Whereas, operating in rigid labour markets may cause labour wage and other issues raised
by powerful labour unions. Cipla should also carefully analyze the availability of skilled
human capital as a shortage of skilled labour can affect business efficiency and make talent
attraction and retention more challenging.

Financial markets efficiency

The global expansion strategies of the Cipla limited are influenced by the financial market
efficiency as operating in highly efficient financial markets leads towards improved liquidity
position and strengthened ability to enter new markets. The health and efficiency of
financial markets will determine Cipla’s ability to raise the capital at fair prices.

 Social factors

Increasing health consciousness

Increasing health consciousness is main social factor that the firm is monitoring closely.
People these days are more health conscious and want to live a healthy life. They are willing
to spend on products that help them stay healthy. Major target audience is women who like
to take care of their skin, its glow and smoothness. People these days are worried about
obesity. It is one of the main reasons for illness like diabetes. Also, the products by Johnson
& Johnson should look into economic stratification of the public. Not everyone can prefer to
buy premium products. They have to have a mix of products for everyone.

Societal norms and class distribution

Culture is considered an important variable by international marketing managers. Each
society has distinctive norms and values that play an important role in shaping consumer
behavior. Cipla limited should develop local teams and develop local partnerships for
understanding the societal attitudes and norms to tailor strategies according to unique
cultural context. People should be made aware of uses and importance/impact of modern
medicines as people living in rural areas rely on traditional methods for treating any disease.

Consumer ethnocentrism

Cipla limited should attempt to understand the degree of consumer ethnocentrism and
consider the country of origin effect to determine local consumers’ evaluation of foreign
products. Company should study the consumers’ leisure interests and should focus more on
enhancing the customer experience if customers prefer experiential products over
traditional product offerings.

Social media marketing

The development of information and communication technologies has led towards the
adoption of innovative marketing techniques to enhance collaboration with customers. Use
of social media has become common in a modern business environment. Cipla limited can
leverage the opportunities offered by social media marketing to improve business
performance. Technological trends can be used to start the creative social media campaigns
for developing online brand communities.

Technological innovations and development level

Cipla limited. should carefully consider the on-going technological innovations to stay ahead
of the competition. Cipla Should focus more on automation in lab operations to better
control, manage, organize and document data in labs. This will resulted in improvement in
efficiencies by providing more analytical results at lower cost, enhancing customer service,
and reducing cycle time. Cipla has now introduced Manufacturing Execution System
(MES) which automates material flow and accurately captures cost-information with
a paperless workflow in turn reducing waste, re-work and scrap. This information
helps to increase the volumes while maintaining quality.

Research and development on technology and impact on cost structure/value chain

Cipla continuously work towards enhancing the affordability of medicines worldwide by

investing in our manufacturing capital. Research and Development has always been and will
continue to be the focus area for Cipla. As in the past, they have earmarked a significant
portion of their funds for R&D. Their R&D successes have certainly been directly responsible
for their better performance each year for the past several decades. The R&D work being
undertaken focuses on new chemical entities, new drug delivery systems, development of
patent-free processes for known molecules, etc.In order to meet this and other additional
business requirements and opportunities, last year Cipla Company has set up a state-of-the-
art centre for manufacturing a wide range of pharmaceutical formulations in the country.
New technologies will change the way we live, work maintain our health.

Shortened product life cycles

The adoption of new technologies has shortened the lifecycle of new product development.
Today, new products are developed quickly, and supply chain partners have also gained
more power. It pressurizes the Cipla limited to develop new products quickly, increase
product range diversity, integrate flexibility into the value chain and develop healthy
business relationships with value chain partners.

 Environmental factors

Recycling and waste management

The growing environmental pollution coupled with technological advancement has

compelled business organizations to adopt innovative recycling and waste management
practices. In some countries, recycling has almost become a business norm. Moreover,
adopting efficient waste management practices in organizational units that are located in or
near urban areas is highly crucial for Cipla limited. Many countries have placed strict norms
to protect their urban areas through effective waste management.

Renewable technologies

Some countries offer subsidies for encouraging investment in renewable technologies. Cipla
limited can benefit from it and invest in renewable technologies to ensure long-term
sustainability. This investment will also increase stakeholder satisfaction and expand the
customer base due to enhanced brand image.

Weather and climatic conditions

Changes in weather and climatic conditions can influence business efficiency. For instance,
extreme weather conditions can increase the cost of operations and compel the Cipla
limited to make the value chain more flexible.

Environmental regulations to avoid resource depletion

Excessive resource depletion by Cipla limited can draw the negative response from media,
environment protection groups, customers and the general public. Cipla limited must study
the specific environmental regulations of the country under consideration to understand
which resources (like water, electricity etc.) are considered rare or which species are
endangered whose excessive consumption can cause trouble for the organization.
 Legal factors

Employee protection laws (discrimination and health and safety)

Cipla limited must follow the employee/labour health and safety laws as some countries
have strict regulations to ensure labour safety. Providing a secure work environment for the
workforce is the ethical and moral obligation of Cipla limited. Similarly, anti-discrimination
laws (like equal employment opportunity) also need to be carefully studied when developing
human resource practices as discriminatory suits against employer harm the organizational
image and affect organizations’ ability to attract and retain the talent.

Consumer protection laws

Cipla Hamied needs to know what are the consumer laws, what is the rate of
enforcement, what is the attitude of authorities towards consumer protection laws,
and what is the role activist groups in enforcement of consumer protection laws.The
data protection has become an important issue due to consumers’ privacy and security
concerns. Cipla limited need to study data protection regulations to protect the customer
data.

Intellectual property laws

Intellectual property regulations are designed to protect the companies' patents and
valuable ideas. Inability to protect intellectual property rights can result in losing
competitive advantage, which may weaken the positioning of Cipla limited against other
market players.