Principles of Management Assignment

PEST Analysis (TATA)

-Vineet. M. Ganvi. JKITM

PEST analysis stands for "Political, Economic, Social, and

Technological analysis" and describes a framework of macro-environmental
factors used in the environmental scanning component of strategic
management.
In analyzing the macro-environment, it is important to
identify the factors that might in turn affect a number of vital variables that
are likely to influence the organization’s supply and demand levels and its
costs. The "radical and ongoing changes occurring in society create an
uncertain environment and have an impact on the function of the whole
organization”. A number of checklists have been developed as ways of
cataloguing the vast number of possible issues that might affect an industry.
A PEST analysis is one of them that is merely a framework that categorizes
environmental influences as political, economic, social and technological
forces. Sometimes two additional factors, environmental and legal, will be
added to make a PESTEL analysis, but these themes can easily be subsumed
in the others. The analysis examines the impact of each of these factors (and
their interplay with each other) on the business. The results can then be used
to take advantage of opportunities and to make contingency plans for threats
when preparing business and strategic plans.
It is very important that an organization considers its
environment before beginning the marketing process. In fact, environmental
analysis should be continuous and feed all aspects of planning. The
organization's marketing environment is made up of:
1. The internal environment e.g. staff (or internal customers), office
technology, wages and finance, etc.
2. The micro-environment e.g. our external customers, agents and
distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces,
Socio-cultural forces, and Technological forces. These are known as PEST
factors.
 The Model's Factors
1) Political Environment Factors:
Political factors, are how and to what degree a government
intervenes in the economy. Specifically, political factors include areas such
as tax policy, labour law, environmental law, trade restrictions, tariffs, and
political stability. Political factors may also include goods and services
which the government wants to provide or be provided (merit goods) and
those that the government does not want to be provided (demerit goods or
merit goods). Furthermore, governments have great influence on the health,
education, and infrastructure of a nation.
The political arena has a huge influence upon the regulation of
businesses, and the spending power of consumers and other businesses. You
must consider issues such as:
1. How stable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3. What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA,
ASEAN, or others?

2) Economic Environment Factors:

Economic factors include economic growth, interest rates,
exchange rates and the inflation rate. These factors have major impacts on
how businesses operate and make decisions. For example, interest rates
affect a firm's cost of capital and therefore to what extent a business grows
and expands. Exchange rates affect the costs of exporting goods and the
supply and price of imported goods in an economy
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. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per
capita, and so on.
3) Social Environmental Factors:
Social factors include the cultural aspects and include health
consciousness, population growth rate, age distribution, career attitudes and
emphasis on safety. Trends in social factors affect the demand for a
company's products and how that company operates. For example, an ageing
population may imply a smaller and less-willing workforce (thus increasing
the cost of labor). Furthermore, companies may change various management
strategies to adapt to these social trends (such as recruiting older workers).
The social and cultural influences on business vary from country
to country. It is very important that such factors are considered. Factors
include:
1. What is the dominant religion?
2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Does the population have a strong/weak opinion on green issues?
4) Technological Environment Factors:
Technological factors include ecological and environmental
aspects, such as R&D activity, automation, technology incentives and the
rate of technological change. They can determine barriers to entry, minimum
efficient production level and influence outsourcing decisions. Furthermore,
technological shifts can affect costs, quality, and lead to innovation.
Technology is vital for competitive advantage, and is a major
driver of globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply
and to a better standard of quality?
2. Do the technologies offer consumers and businesses more innovative
products and services such as Internet banking, new generation mobile
telephones, etc?
3. How is distribution changed by new technologies e.g. books via the
Internet, flight tickets, auctions, etc?
4. Does technology offer companies a new way to communicate with
consumers e.g. banners, Customer Relationship Management (CRM), etc?

Applicability of the Factors

 The model's factors will vary in importance to a given
company based on its industry and the goods it produces. For example,
consumer and service companies tend to be more affected by the social
factors, while a global defense contractor would tend to be more affected by
political factors. Additionally, factors that are more likely to change in the
future or more relevant to a given company will carry greater importance.
For example, a company who has borrowed heavily will need to focus more
on the economic factors (especially interest rates).
Furthermore, conglomerate companies who produce a wide
range of products (such as Sony, Disney, or BP) may find it more useful to
analyze one department of its company at a time with the PESTEL model,
thus focusing on the specific factors relevant to that one department. A
company may also wish to divide factors into geographical relevance, such
as local, national, and global (also known as LoNGPESTEL).

Diagram of PEST Analysis

TATA Group
 The TATA group has always merged commercial orientation
with corporate sustainability initiatives, aiming to see that its innovations are
applied for the good of the largest number of people. TATA Group is a multi
venture multinational company under the chairmanship of Ratan Naval Tata.
Its extents can be listed as follows:

Companies bearing the TATA label:

• Tata Group, India's largest business group and multinational

company.
• Tata Capital, a wholly-owned subsidiary of Tata Sons Limited, the
apex holding company of the Tata Group.
• Tata Communications, also known as Tata VSNL, a communication
company acquired in 2002.
• Tata Consultancy Services, Asia's largest IT Company.
• Tata Elxsi, another Tata IT company.
• Tata Interactive Systems (TIS) is a provider of performance support
systems and e-learning platforms.
• Tata Motors, world's eighteenth largest automobile company.
• Tata Power, India’s largest private sector electricity generating
company.
• Tata Steel, World's 5th largest steel company.
• Tata Tea Limited, World's second largest tea business, owner of
Tetley.
• Tata Tele services, India's second CDMA telecom company.
• Tata DoCoMo, a GSM based mobile company with alliance with NTT
DoCoMo
• Titan Industries, World's sixth largest watch manufacturer.
• Tata Chemicals
• Tata Sky, a Direct to Home service company in alliance with British
Sky Broadcasting.

Subsidiaries without the TATA Label:

• Corus Group, UK steel company.

• Tetley, UK based International Tea Brand.
 • Taj Hotels Resorts and Palaces, Owner of 'Taj' hotels
• Computational Research Laboratories, Tata initiative in high
performance computing.
• VSNL International Canada VSNL in Canada.
• The Indian Hotels Company, Chain of Hotels.
• Titan Industries, Clock and watch maker in India.
• Tanishq, India Jewellery Brand.
• Infiniti Retail Limited, a 100% subsidiary of Tata Sons[1]
• Croma, a consumer electronics retail chain.[1]
• Trent (Westside), Shopping Mall.
• Brunner Mond, Subsidiary of Tata Chemicals.

Educational and Research Institutes:

• Tata Institute of Fundamental Research

• Tata Institute of Social Sciences
• Indian Institute of Science
• Nettur Technical Training Foundation R D Tata Technical Education
Centre Jamshedpur
• National Centre for Performing Arts
• Tata Management Training Centre
• Tata Memorial Hospital
• The JRD Tata Eco technology Centre

PEST Analysis considerations for TATA Group can be shown as follows:

POLITICAL ENVIRONMENT ECONOMICAL ENVIRONMENT

Current Government Current economical status or condition.

Government Policies Current Economic Trends.

Current Government Regulations Current Interest/Exchange Rates

Rules and regulations of other governing Bodies General and Specific Taxation Policies (Towards certain
(ILO, WTO, UN, etc.) products)

Government ventures acting as competition for Overseas change or fluctuation of economies.

home product (eg. SAIL for TATA Steel and MTNL
for TATA Indicom) Any Inflation or Depression or Recession if prevalent in
the economy.
Internal or International Wars or conflicts if any.
Interruption from terrorist organisations or anti-social International trade or monetary issues.
elements, and Government actions against them.
Sudden rise or fall in volumes or rates of Export and
Government bias towards competitors company or Import Products.
political corruption leading to frustrating
disturbances.

SOCIAL ENVIRONMENT TECHNOLOGICAL ENVIRONMENT

Lifestyle Trends Competing Technology development.

Demographic consumer attitudes and opinions. Research funding.

Media Trends Associated or Dependent technology.

Change in laws or policies affecting social factors. Consumer buying mechanisms or technology.

Certain product or service being collectively Use or adoption of Automation or Robotics for
acclaimed or frowned upon by the society. production and functioning processes.

Consumer Buying patterns and behaviors. Achieving certain Standardizations or Grades on

account of Adopting technological developments.
Ethnic/religious sensitivity of the society.
General use of technology and development for increase
Quality and attitudes of working class of the society. in profitability and competitive edge.

People Buying capacity (PPP), Standard of living of

the people and willingness to change or switch
products or services.

Distinct or Change in Fashions, Styles and Trends.

Report by: Vineet. M. Ganvi (JKITM)

For: Principles of management
PEST Analysis for TATA
Dr. Kavita KM