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. ITC‟s volume

declined by only 3% even though it discontinued the production of non – filter cigarettes.

ITC‟s 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.