Published by MBA Skool Team, Last Updated: January 24, 2021
PESTLE Analysis of ITC analyses the brand on its business tactics. ITC PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as ITC, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the ITC PESTLE Analysis can be explained as follows:
ITC is a multinational conglomerate that is headquartered in Kolkata. Since inception, the company has expanded into various sectors and various markets. As a result of its diverse operations, the organization needs to follow various policies that apply across the regions of its operations. Keeping a tab on the changing policies is a mandate that the company needs to undertake, be it local or national. The better the stability of the government, the higher is the ease of working in that region. There are various opportunities that ITC can utilize, and thus making it a strength rather than just a policy to be followed. A recent example of policy change that has affected the operations of the organization is the lowering of the percentage of corporate tax in India. While using this as an advantage to increase its profitability, the company needs to keep in mind to clear all the local legislative requirements. Though the company has many products, it's the most prominent product since its inception has been tobacco-based products and this is the area where it faces maximum restriction and regulation. The issues related to discriminatory taxation policy were eradicated and a new taxation system, that classifies these products in a better way was introduced in India. Through GST has reduced the effect of discriminatory taxation, the products continue to be taxed. This has increased the expenditure of the company, to monitor the changing cost of raw materials and the different tax slabs they fall into. On the bright side, the FMCG market in India is expected to triple in size by 2020, to Rs. 4,00,000 crores. This provides the company with an opportunity to seize the opportunity of becoming a market leader in various segments, by working in close ties with the local governments as well as the central governments. The trade wars between countries are expected to affect the business of the organization, but yet the recent trade agreements signed by India with various countries may rule out the intensity of the trade war. The biggest threat as of now is the Brexit. Once the finalization of the particulars of the deal is undertaken the company may be affected positively or negatively depending on the intricacies of the deal.
Image: company website
Below are the economic factors in the PESTLE Analysis of ITC:
The economic stability of a country is one of the major factors that affect the business in the region.
The business gets affected when the market changes are anywhere across the world. With India being a developing country, the more stable the economic policies higher will be the disposable income, and better will be the standard of living. This will benefit the company since it believes in the development of all. The company preaches this thought through its tagline “sab sath me badhein”. With any changes in the policies relating to income, there will be a sharp change in the consumption of necessity goods. It may be higher or lower depending upon the new policy. Any event that causes a currency devaluation or fluctuation in the currency values, especially in the developing markets. Further a change in the capital controls, government currency policies such as demonetization in India, or others, increase the restrictions to the trade of raw materials or finished products to and from different countries. With the ban of e-cigarettes in India, ITC expects a higher sale, with more economic benefits for the company. The industry in India is known to employ 4.5 crore people with a total valuation of 11.79 lakh crore. India is the largest producer and exports account to 6000 crore annually. ITC has invested over 6000 crores in the last decade and created employment for over 20,000 employees directly and approximately 5 million people indirectly. It saw the highest quarterly profit in the second quarter of 2019. With these attempts to strengthen the economy of the country while making profits for all its stakeholders the company seems to have come a long way from its initial phase and will definitely achieve major targets in the coming years.
Following are the social factors impacting ITC PESTLE Analysis:
The huge scale of operations of the company has positive as well as negative effects attached to it. A slight change in the operations of the company can affect its profitability of a large scale, thus staying updated with the recent trends popular among the population is a must. The quality of its products is of prime concern to ITC. Any deviation from the standard quality that the society expects, is a major setback for the company. Since these products are seen as a negative element in the society, the company needs to take due care that it does not promote such products actively. The ban on advertising products on social media platforms keeps a check on the promotional activities of the company. Since the concern for these products has increased in the society, and with the need for overall health status improvement of the society, the company needs to make sure that it clearly states the use of any sort of harmful products across its entire product line. The society is concerned with the growing consumption of these products by minor-aged i.e. people below the age of 18. The company needs to make sure that it runs proper awareness programs, and proper information is transmitted through various platforms, to prevent minor people from consumption of these products. The ability of the company to success lies in its capability to analyze the changing trends and grasp the requirements of the consumers. Only through continuous analysis can the organization maintain its status in the market. Innovation is something that the consumers expect of the company. The company believes in effective growth for the country and believes in strengthening the rural areas in the country. The company has undertaken various CSR initiatives to empower the impoverished farmers, with one of its initiatives being the e-Choupal. A major impact on the development and growth of the company comes from the level of talent of the workforce employed. With a higher level of skills and education, the company can employ more people and thus enrich society as well as increase its profitability.
The technological factors in the PESTLE Analysis of ITC are mentioned below:
The company has undertaken various initiatives on the technological end to stay relevant in the market. It utilizes the various social media platforms to describe the various changes that are being brought about by the company for the betterment of society. It also markets and promotes its various products through the utilization of media to create an emotional connect with its consumers. The company has recently launched the first multi-layer plastic collection and recycling unit in Pune. Through this venture, the company believes in creating a more sustainable environment through the use of advanced technology. The company has set up established new systems to constantly monitor all its operations and supply chain related processes. Artificial Intelligence is another area where the organization can try its luck. Since the world is moving towards digital, and advancement in technology will help the organization increase its hold in the fields of consumer engagement and insight discovery, smart manufacturing, agri-value chains, supply chain agility, etc. With major changes in the paperboards and packaging industry, ITC stands out with its latest innovations of antifungal coated cartons, micro-perforation for specific laminates, braille features for labels and cold seal laminates for chocolates.
With continuous efforts in the field of research and development, the organization seems to have many more products in the pipeline.
Following are the legal factors in the ITC PESTLE Analysis:
The legal requirements that the company needs to meet are huge. When operating in a country like India, the need to maintain a continuous tab on the changing regulations is a must. The regulations that need to be followed involve various aspects including the quality of the product. If under any circumstances the company, creates an issue, concerning violation of the laws, it will have to face major reputation damage along with certain monetary damage. A team of experts needs to be in constant check for compliance related to the changes brought about. Compliance includes not just the regulations related to the product, but also compliances related to the health and safety of the employees, labor laws established in different countries and the social benefits that need to be provided to the employees. Apart from these, trademark and IPO rules need to be kept under constant watch, along with environmental laws. Since ITC wishes to expand into newer regions, it needs to make sure that the entire team is up to date with the various patents that exist in the segment and the laws that govern these patent rights. One major advantage that ITC has is its brand name. With such a glorious past, it becomes people to accept the company in new regions.
In the ITC PESTLE Analysis, the environmental elements affecting its business are as below:
The company has undertaken various initiatives to preserve the environment, and work in a sustainable manner. To reduce its carbon footprint, the company has undertaken a two-fold strategy “reduce specific energy consumption in its operations through improved technology and processes; and (b) sequester greenhouse gases, especially carbon dioxide, through a large-scale forestry program”. Similarly, to prevent water wastage, it has undertaken various wastewater management initiatives and also has expanded into solid waste management. Its well being out of the waste program (WoW) covers about 89 lakh people across the country. ITC has been the only company in the world to be carbon positive for 14 years, water positive for 17 years, and solid waste recycling positive for 12 years.
The organization boasts about 41% of its energy consumption to be derived from renewable sources. The company has carried out afforestation over 7,30,000 acres of land, and 10,12,000 acres of covered with watersheds. The company has reduced the use of single-use plastic and with continuous adoption of the latest technologies, it believes in doing its part to keep the environment safe and sound.
To conclude, the above ITC PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
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