PEST ANALYSIS OF TOBACCO

Political
In Pakistan, Ministry of health has made various efforts to discourage the smoking in Pakistan because its injurious for health. And every Ciregrette manufacturer has to print a warning on the boxes of cireggrette that Smoking is Injurious to health or Smoking is cancerous etc Although this did not has seriously affect the companys growth and the sales volume but it imposes restriction on the company as it cannot publicized its products a healthy products. there is also a law relating smoking in public places, A person in Pakistan cannot smoke at public places, this can affect the sales volume because there are many persons in Pakistan who smoke only for style and fashion.

Economic
The tobacco industry has commissioned numerous reports evaluating its gross economic contribution in terms of employment (in both manufacturing and agriculture, but not in the health sector), earnings, exports and taxes paid. Universally, these studies conclude that the industry makes a major economic contribution. In almost all cases, the studies are based on two important implicit assumptions: That it would be possible totally to eliminate all tobacco consumption; and That where tobacco consumption is reduced, money that used to be spent on tobacco consumption would not be spent on other forms of consumption (yet nor would it be saved). In other words, these studies do not ask: What would be the net economic effects of a reduction in tobacco consumption? In the real world, if tobacco consumption is reduced, two outcomes are possible: the level of national savings increases; and/or other forms of consumption expenditure are substituted for tobacco expenditures. If smokers reduce their consumption and simply spend their money elsewhere, the relative economic effects of the two different consumption patterns must be identified. There is some evidence that a reduction in expenditure on smoking could well lead to higher levels of domestic employment and earnings (because cigarette production is relatively capital-intensive and, in many countries, foreign-owned). If the money is saved rather than spent, the increased savings are likely to have stimulatory macroeconomic effects which should be compared with the direct economic effects of reduced tobacco expenditures. On balance, it seems reasonable to expect that the economic effects of reduced tobacco expenditures on earnings and employment are likely to be close to neutral. Reduced smoking will change the structure of national consumption, but is unlikely to have a major impact on its total level.

Social, Welfare
In India (reported by Dr. Bhandari), 16 million people are estimated to be

involved in the tobacco industry, with 2.1 million in the cultivation sector. In his study, he found that the average monthly household income for tobacco farmers is 4,700 rupees, compared with 4,000 rupees for non-tobacco farmers in the same area and this is reflected in a greater affluence and a better quality of life ( e.g. television sets, own transport). There are fewer under-age marriages, dowry is less frequently stipulated and a larger proportion is educated to at least secondary school level. Tobacco farmers also have greater contact with other branches of agriculture and this is reflected in a higher standard of overall crop production. It is interesting to note that, although the non-tobacco growing communities receive more government aid for health facilities, transport and other aspects of infrastructure, the tobacco-growing sector has as a matter of fact the better overall infrastructure as it tends to attract greater private investment. The social relevance of leaf tobacco production was also demonstrated by Ayres for Brazil. A viable agricultural community is particularly important there to avoid rural migrations to the cities and consequent extreme poverty. Tobaccogrowing provides such viable communities. Furthermore, because most farm units which are relatively small are farmer-owned, they provide centres for family activity and this helps increase the stability of the social environment. Growers and their families feel secure in their occupations as they are growing a crop with the highest return in that region, marketing is assured, transportation is provided by the buyers, etc. The strength and afflu+ence of the industry enables an integrated system of leaf production, involving crop planning, extension, financing, guaranteed purchase of the crop and environmental and social programmes. His message is that farmers should be kept on the land. With a crop like tobacco they can be part of organised agriculture that considerably strengthen their representative power on social and other issues and on the services they receive. This is largely absent in other commodities.

Technological
LTC is the pioneer of using latest technology in Pakistan. The machine they use to manufacture cigarettes Loga Max can produce 8000 sticks per minute. Although now Pakistan Tobacco Company is also using the same technology but it was LTC which introduced it in the country. Everyone knows that technology has a significant effect on companys production capabilities. Use of this technology (Loga Max) enables LTC to fulfill the market demand well in time and more efficiently.

PEST ANALYSIS

Political Pakistan is a country of political tensions and fluctuations. Pakistan Tobacco Company is a major contributor in the countrys wealth in term of Taxes and Duties and by providing employment to thousands of persons in Pakistan. Due to nature of the Business, Ministry of health has made various efforts to discourage the smoking in

Pakistan because its injurious for health. And every Ciregrette manufacturer has to print

a warning on the boxes of cireggrette that Smoking is Injurious to health or Smoking is cancerous etc Although this did not has seriously affect the companys growth and the sales volume but it imposes restriction on the company as it cannot publicized its products a healthy products. But the point here to note that PTCs aim is not to make people smokers but to provide quality product to those who are already addicted. The marketing standard of PTC clearly accept that smoking is risky but its business is not about persuading people to smoke; its about offering quality brand to adults who have already take the decision to smoke. There are also laws relating smoking in public places, a person in Pakistan cannot smoke at public places, this can affect the sales volume because there are many persons in Pakistan who smoke only for style and fashion.

Economical The economic factors that affect the Pakistan Tobacco company include the inflation rate because it affect the price and the market position of the business and now a days the inflation rate in Pakistan are very high. The interest in Pakistan are also not stable that affect the cost of capital. PTC is a major contributor and have contributed about Rs.45 billion to Government in terms of Excise, Income tax and custom Duties which is 12.8% higher as compare to previous year. The cigarette industry remains a major contributor and a significant source of revenue for the government however a large portion of this revenue is lost due to the presence of a large duty not paid segment. The PTC is also contributing in term of job creation and employment opportunities for the people. Pakistan Tobacco Company is also affected by the exchange rates as it imports many goods and material from other countries and Pakistani currency is weakened against those currencies.

Socio-Cultural Factors Pakistan Tobacco Company is also affected by the socio-cultural factors. PTC considers the local and cultural factors. In September 2001, British American Tobacco and a number of other tobacco businesses agreed a set of voluntary International Tobacco Products Within British

Marketing Standards, to be applied by no later than the end of 2002.

American Tobacco, these Standards, which built on our previous Advertising Principles, have continued to govern the marketing of tobacco products by all Group companies. British American Tobacco

International Tobacco Products Marketing Standards was issued to deal with the marketing of the tobacco and many voluntary codes are adopted, examples includes, there should be no advertising which appeal the minors to smoke, Models under 25 years and celebrities should not be used for promotional purposes etc therefore PTC is not intended to make people smoker but to provide the quality product to persons who are already addicted to smoking. PTC always considers the local cultural issue and it is sensitive enough and make sure that it always comply with the laws and regulations and the voluntary codes. The PTC main Competitor in Pakistan Philips Morris Pakistans Excutive of marketing has been fined for violation of the advertising rule (http://www.tobaccofreekids.org/tobacco_unfiltered/post/2012_04_11_pakistan/?utm_sourc e=alert&utm_medium=email&utm_campaign=tobacco_unfiltered) There are many people who are against tobacco companies. They argued that smoking should be banned and company should stop their businesses. They admit that there are thousands of people attached to this industry and it is the major source of revenue for the Government but all they refer to the benefits to economic health, but ignore the cost of illness. Technological

Technological factors are very important and play a very important role in the success of the business. PTC has considered it and dont hesitate to invest in the new technology whether it is a plant or machinery or information technology. Pakistan Tobacco has invested Rs. 1,167million in property, plant and equipment during 2011. Major part of these expenses were on machinery up gradation and modernization as well as reconfiguration of the production facilities post imposition of ban on below 20s cigarette packs. PTC also inducted a new plant to reduce product waste, a new tobacco curing facility to ensure superior quality and sustainability of leaf supply and modern cigarette packing machines for improved product quality and process productivity. The Pakistan Tobacco Company also often invest in Information technology to get upgraded and to cope with modern business environment.

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