Pestle analysis food industry
. We are a government recognized Star export house and deal in Spices, Oil seeds and Dehydrated vegetables. Our main markets are Russia, Eastern Europe and The Middle East. We plan to expand our business into Brazil, Ukraine, Poland and Taiwan. Through the analysis we will try to look into several factors that we think will have an impact on our future investment plans. 2. 0 INDUSTRY ANALYSIS: PESTEL FRAMEWORK 2. 1 Political Factors.
Internal factors In India as in elsewhere politics and economics get intertwined quite often. Sudden ban on exports of products such as onion, rice etc. have an adverse effect on our business. Many a time these policy decisions (Bans) are more of a knee jerk reaction to sudden crises rather than a well thought out strategy. This leads to disruption of supplies to the markets that traditionally the Indian exporter’s supply to and eventually gives an opportunity for other countries to get into the market.
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Also, NCDEX although is a tool for better price realization what it is actually leading to is more speculation leading to abnormal fluctuations in the commodities market. (b) External factors: The west is looking towards Asia for new markets. But wants to continue to subsidies its farm produce while at the same time it expects concessions from the developing nations. Many a times instead of putting bans they put non-tariff barriers which is an indirect mode of trade protectionism. Hence today most of the countries have their own Free Trade Agreements with other nations.
The ability of a nation to have a balanced trade negotiations and in return get special access to markets leads to economic as well as political benefits. For example there are special trade incentives given by governments for doing business with lesser known and more risky regions such as the CIS countries under the Focus Market scheme. War and political unrest also effects our trade as it leads to increase in uncertainty. For example during the Arab spring there was a decline in trade between Egypt and the world due to the political unrests.
Egypt is a major supplier of cumin seeds, dehydrated onion same as India. But due to shortage of these goods the international prices shot up and countries like India and China benefited from this. In many countries including Indiathere is debate going on GMO (genetically modified) and Non–GMO food (non-genetically modified). There is no clear cut decision being taken on the issue leading to uncertainty in the agricultural development of the country. Effect of impact: High impact Dimension: Both micro as well as Macro level
Time: All the factors mentioned will have the impact on the present as well as future growth of the company. 2. 2 Economical Factors Economic factors are of concern to Deepkamal Exports Pvt Ltd as they are likely to influence demand, costs, prices and profits. Most of the economic factors are largely outside the control of the company, but their effects on performance and the marketing mix can be profound. Although our business with other countries is growing and is expected to contribute a greater amount to company’s profits over the next few years, the company is still highly dependent on the Russian market.
Hence, the company would be badly affected by any slowdown in the Russian food market and hence we are exposed to market concentration risks. The other economic factors that have impact are listed as below: Economic Criteria’s to look for Reason Population of the country As it is one of the indicators of possible higher consumption As to the composition of the food industry Our products are mainly used in confectionary, meat and ready to eat food industry. This data helps us to decide which markets to focus upon. Per capita income and therefore disposable income
Another indicator of whether a market is price sensitive or willing to pay a premium for quality products. Effect of impact: Positive Degree of impact: High Forecast for future: With the advent of institutions such as world trade organization, free trade organizations the economies are becoming more and more intertwined. If we consider the factors mentioned above then we will have a better chance to enter these markets as well as an increased chance of establishing business in future. 2. 3 Social/Cultural Factors Since we are into exports “Social factors” that affect us are mostly macro–environmental in nature.
The food habits of the importing country is of great importance to us. The existing and acceptance of new tastes. Also, increasingly due to the busy lifestyle there are more and more instances were both members of a family are working. This has led to people consuming more ready to eat food products. Many of the European countries face severe winters which makes them stock food ingredients for the duration of the winter. Due to globalization people are getting exposed to different types of cuisine. This has given a boost to food and beverage industries were our products are used.
In The Middle East the spices and herbs used in cooking are quite similar to that of India and hence a huge market for us. Effect of impact: Positive Degree of impact: Moderate Forecast for future: As people are getting exposed to different cultures and cuisines as well as migration of people from one part of the world to another food habits and tastes are evolving. Indian food especially the chicken curry has become a house hold dish in UK and Europe and hopefully around the world. We see demand for our products to be stable in the near future. 2. 4 Technological Factors
It is an aspect which is rapidly gaining in importance. Many a times due to lack of technological advancement in our agricultural and food processing technology we lose out on final product and quality. This make Indian goods costlier as there are more wastages during the various processes. Also, the care that needs to be taken post-harvest is improper due to which Indian food products fail to meet the micro- biological specifications of many importing countries. Technology is a major macro-environmental variable which has influenced the development of many of our products.
The improvement in food processing and packaging technology has helped to us to get faster production as well as maintain quality. Although this area still requires a lot of improvement. More and more countries are putting strict micro biological parameters for food products which is making exports difficult to these countries. We require to rapidly adapt to new technologies such as steam sterilization treatment of food products and stricter implementation of laws against the use of banned pesticides which are still being used for farming. Effect of impact: Negative Degree of impact: High
Forecast for future: In future if our agricultural techniques and post-harvest practices are not modernized then our agricultural output as well as global competitiveness of our food products will be severely affected. China by using collective farming and modern technology has managed to increase its yield per hectare and has gained grounds in markets were India used to be strong. Same is the case in Cashew industry where with mechanization the Vietnamese are fast catching up with the Indians. 2. 5 Environmental Factors As we are into agro-commodities the monsoon plays crucial role in our business.
As Indian agriculture is heavily rain dependent this is one factor which we have no control over. This phenomenon is not just specific to India but the world over due to the effect of El-Nino in the pacific and La-Nina in Asia the weather patterns are changing. This has led to heavy flooding in some parts of the world and soaring temperatures and drought in other parts leading to destruction of crops. Effect of impact: Neutral Degree of impact: High Forecast for future: These factors are all external in nature and one has to take them in stride.
It is not possible to do much forecasting in these matters. 2. 6 Legislative Factors These are mainly macro environmental variables which affect our business. Nowadays there is more and more legislation towards non-tariff barriers as developed countries while using mechanization / packaging are not price competitive vis-a-vis developing economies. Therefore more and more legislation is done to protect their industry. Effect of impact: Neutral Degree of impact: High Forecast for future: These factors are all external in nature and one has to take them in stride.
It is not possible to do much forecasting in these matters. 2. 7 Ethics: Good trade practices are pre-requisite for any business to have longevity. We at Deepkamal Exports Pvt. Ltd believe that our adherence to ethical practices has helped us to reach wherever we are. In future also it will be our endeavor to stick to ethical practices in our endeavor to grow into large organization keeping in mind the welfare of all the stakeholders. By stakeholders we mean not only the customers but also the supplier, employees and all others involved in our business.