PEST Analysis:

Political Factors: - Government banned the import of tallow, a soap making rawmaterial (which was requiring a very little processing to make soap). It then followed an incidence of adulterationof vanaspati by unscrupulous manufacture.

Economic Factors

Soaps in India cost very high in India as compared to other countries like Indonesia. This is primarily attributed to the high cost of imports due to high import duties.

Since India is now a WTO member India will have to bring down the import duty rates to as much as 20% from35%. Also the excise rate at 16% forms formidable portion of the cost. For toilet soap, the average expenditure per user household for low-income households is Rs. 237, while it is Rs. 706 for high-income groups.

Social factors:

With the rising education and disposable income levels, the need for hygiene and personal / skin care becomes important. Premium soaps are thus targeted at the audience to change their habits by raising their aspiration levels. Fragmented approach of govt. and NGOs towards inefficient PHC-primary health center also aggravates the problem.

Technological Factors: The industry though capital intensive is not very technologyintensive. Premium soap manufacturing though compared withother soaps manufacturing relies to an extent on technology(especially in the finishing stage). The more important is logisticsmanagement where marketing and distribution play a pivotalrole. Here technology like (SCM) Supply Chain Management and(E-CRM) Electronic Customer Relationship Management will playa pivotal role. Companies like HLL are working very hard towardssuch a system to rope up the entire small stores and retailers(Kirana Stores).

SWOT ANALYSIS OF SOAP INDUSTRY Strengths: 1. Low operational costs 2. Presence of established distribution networks in both urban and rural areas 3. Presence of well-known brands in FMCG sector Weaknesses: 1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3. "Me-too" products, which illegally mimic the labels of the established brands. These products narrow the scopeof FMCG products in rural and semi-urban market. Opportunities: 1. Untapped rural market 2. Rising income levels, i.e. increase in purchasing power of consumers 3. Large domestic market- a population of over onebillion. 4. Export potential 5. High consumer goods spending Threats 1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demandTax and regulatory structure