Pest Analysis Of Paper Industry 525o3r

PEST ANALYSIS POLITICAL FACTORS: 1. Service tax on development and supply of content for use in advertising purpose (advertising cost increases). 2. Sales of space for ment in print media left out of the ambit of service tax. Service tax increased from 10% to 12%. Sale of space or time for ment service, excluding that in print media and that by broadcasting agency, brought under the service tax net. 3. The pre-conditions of FDI in print. • At least three-fourth of the board of a print media company with FDI must be a a Indians. • All key editorial posts must also lie with resident Indians. • Any print media company wishing to change its share-holding pattern must get a a prior government approval 4. Foreign Investment in Print Media Only 26% FDI is allowed: the government allows 26% F.D.I limit for the investment in print media in that 100% F.D.I is allowed in non news segment which includes magazines like scientific magazines but in news segment only 26% F.D.I is allowed due that foreign players are restricted. And in the company ¾ of the board member should be Indian only and should be having control in their hands. The process of economic liberalization in India, which began more than a decade ago, has taken another significant step, namely opening up a very sensitive sector. The print media Government of India in June 2002 had decided to allow 26% foreign direct investment (FDI) in news and current affairs print media. Technical and medical publications have been allowed a higher FDI of 74%. The decision, taken by the Union Cabinet, reverses the 1955 Cabinet resolution prohibiting any foreign investment in print media. A detailed policy statement on FDI in print would be issued shortly. Foreign investments in news agencies, however, remain barred. The government has attempted to address the concerns of political parties that fear FDI in print might lead to foreigners controlling the Indian media. 5. MRTP act on news: While general legislation exists to regulate monopolies and cartels – the Monopolies and Restrictive Trade Practices Act – this has been ineffectual in

curbing the formation of monopolies and cartels of private media companies. In the absence of restrictions on cross-media ownership, such monopolies in fact straddle various units of the media. Thus, private monopolies and cartels of the media do exist. Such monopolies and cartels are found largely in the press, but some media barons have overlapping interests in television and FM radio. Media monopolists are generally proestablishment and the governments of the day to ensure that their monopoly positions are not threatened. These monopolies exist mainly to enrich the owner of the media company. State authorities have in the recent past not taken any action against private media monopolies. This is largely because such monopolists ruling dispensations, are adept at gauging the popular mood about political parties and see no difficulty in swearing or switching allegiance to those in power.

6. Custom duty on import of newsprint. The total requirement of newsprint in the country today is around 10 lakh tonnes. The domestic production of newsprint by the existing manufacturers can fully meet the country's demand, as the installed capacity is around 12 lakh tonnes. Currently, approximately five lakh tonnes of newsprint are being imported at the cost of around Rs 1,000 crore to the country's exchequer. Currently on import of newsprint, there is five per cent. "Due to negligible duty on import of newsprint, large quantities of the same are being dumped from South-East Asian countries, Russia and America and the indigenous industry is suffering badly. The above duty is even less than the duty on raw material i.e., waste paper whereon the duty incidence is 9.2 per cent (basic duty five per cent plus SAD four per cent). WTO bound rate for newsprint is 25 per cent," FICCI said. But duty was bound to be reduced because of the increase in the price of news print globally and due to that government reduce the duty from 5 percent to 3 percent and due to that import can be done at easy rate But import on newsprint for newspaper is exempted from the import duty. The present newsprint policy of the Government of India is as follows: a) Not less than one-third of the annual production of indigenous newsprint will be reserved for small and medium newspapers. b)

Import of newsprint is allowed to actual s.

7. Coping with Regulations: Marketers can cope with advertising regulation in various ways: •

Monitor regulations and pending legislation: Monitoring legislation and gathering intelligence on possible changes in advertising regulations is crucial since advertising regulations change from time to time. In many countries, the prevailing mood is in favor of liberalization with the important exception of tobacco and alcohol advertising.

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Lobbying: Local governments or international legislative bodies can be lobbied usually tly by rs, advertising agencies and the media. But too much lobbying carries the risk of generating bad publicity, especially when the issues at hand are highly controversial.

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Legal remedies: rs may also consider fighting advertising legislation in court. In Chile, outdoor board companies, rs and sign painters filed suits in civil court when the government asked rs to place outdoor boards several blocks from the road. In the European Union, rs appealed to European commission or the European court of justice to overturn local laws.

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Modify marketing-mix: Tobacco marketers have been extremely creative in handling advertising regulations. A widely popular mechanism to cope with tobacco ad bans is brand extension or surrogate advertising. For instance, the Swedish Tobacco Co. whose brands have captured more than 80% of the Swedish cigarette market started promoting sunglasses and cigarette lighters under the blend name, its best-selling cigarette brand, to cope with a complete tobacco ad ban in Sweden. In the United Kingdom, Hamlet, the leading cigar brand, shifted to other media vehicles following the ban on all TV tobacco advertising in the United Kingdom in octomber1992. Hamlet started using outdoor boards for the first time, installing them at 2,258 sites. It ran a sales promotion campaign at a horse race where losing bettors got a free Hamlet cigar. it also started selling a video cassette with about 20 of its celebrated commercials. In South Korea, Virginia slims pitched itself as a man’s cigarette because the Korean law banned advertising that targeted women and young adults.

Economical: Attracting foreign investment Most Indian print players continued to dominate the local regions and did not enter new territories, mainly due to lack of funds. However, foreign investment regulations were relaxed in 2002. Currently, up to 26% foreign direct investment (FDI) is permitted in newspapers and periodicals dealing with news and current affairs. In non-news publications, 100% foreign investment is permitted. Since the changes in the regulation many foreign investors have taken strategic stakes in the domestic print media companies. Domestic Company

Investor Independent News& Media Public (IPO) Public (IPO) Public (IPO)

Jagran Prakashan HT Media Jagran Prakashan Deccan Chronicle HT Media Henderson Henderson Dainik Bhaskar Warburg Pincus Amar Ujala DE Shaw Ushodaya Enterprises Blackstone Source: Ficci PWC, companies

Amount Invested (Rs. bn) 1.7 3.7 3.3 1.5 1 1.5 1.2 12

Global crises: Due to global crises in the whole world the corporate has control their expenditures and due that they had restricted the their advertising expenses which directly affect the earning of different medias and this also affect the print media earnings because advertising income contributes 75% of their total earnings and due to these reduction their earnings are negatively affected. Effect of inflation: Inflation rate has positive relation with the growth of print media advertising because when inflation rate increases the purchase of an individual also get increases and that lead corporate to more. Thus, this increased ment of corporate lead the print media to grow more. On the other hand when inflation rate decreases purchase of an individual also get decreases and at that time generally corporate do not prefer to increase the frequency of the ment.

Slowdown in the economy: Historically, the advertising industry has had a strong correlation with the growth in the economy. Between 1996 and 2006, the advertising industry grew at a CAGR of 11%, while the economy grew at an average 6%. While, circulation revenues for newspaper companies are recession-resistant, 61% of their revenues come from advertising, which is very sensitive to the overall trends in the economy. Any slowdown in the Indian economy and the consequent impact on disposable income could adversely affect advertising income. Further, ad spend is influenced by a number of factors including the Indian economy, the performance of particular industry sectors, shifts in consumer spending patterns and changes in consumer sentiments and tastes. For e.g. in 2QFY08, the print companies faced pressure on the ad revenues as a slowdown was witnessed in the retail and real estate sectors. Increasing disposable income: In India, the disposable income of people is increasing year by year, purchase power also get increased. People are spending more money day by day that lead r to increase their frequency of ment. Even the 6th pay commission also increases the purchasing power of individual. (source: equity master march 26, 2008) Increase in price of newsprint: The cost of production of a newspaper is directly linked to the cost of newsprint, which varies with the market price of newsprint, availability and location of printing facilities and the number of pages used. Newsprint costs generally for almost 50-70% of total expenses for a publishing business. Below we have enumerated newsprint costs for our Print Media universe vis-à-vis their total expenditure and revenue. Newsprint prices vary according to quality. Newsprint is a freely traded commodity on the international markets and exhibits price volatility. (Source: angel survey april-2008) Geographical expansion: The national players are penetrating regionally because the regional and especially rural market is also showing more potential. The numbers of readers are increasing in rural area, reasons for that are, 1. Increasing literacy level 2. Increasing awareness level of stock market 3. Regional newspapers are also providing news of Business, Classified etc.

Low cost of production (small players can easily survive): Less technological changes in every business make small players to grow faster or help to survive up to some extend. Same is the situation in print media industry where the technological changes are very nominal and that give a chance to small player to survive. The changes in industry are only in Production capacity and the cost related to production like increase in paper cost which is nominal in nature. Higher literacy levels: In 2006, the literacy levels increased to 71.1% as compared to 69.9% in 2005. While rural literacy is at 64.8%, urban literacy touched 85.3%. Currently Indian print media is estimated to reach over 220 m people, and has immense growth potential since close to 370 m literate Indians are believed to not be served by any publication. Also, the reach of newspapers is only 27%, as compared to the global average of 50%.

Lower cover prices: Earlier, due to strong hold over a region, the newspaper had higher cover charges. However, with increasing competition and venture into newer regions the companies have reduced the cover prices to augment more sales. Many English dailies are sold for as low as Re 1 or Rs 2. The initial subscription offers of ‘DNA’ and ‘Hindustan Times’ (HT) in Mumbai, during their launch period, further reduced the cost of the newspaper to around 50 paise for an average issue.

Base Population Any Publication Any Daily Any Hindi Daily Any English Daily Any Magazine

Urban & Rural Urban Rural (m (m (m ) % ) % ) % 18 10 4 24 0 42 84 16 17 0 22 94 40 77 14 63 8.1

36

15

27 5.1

17 2.2

16 6.7

1.6 0.3

59 7.6

34

25 4.6

14

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Sociological factors: ASCI NORMS: WHY SELF-REGULATION IN ADVERTISING In recent years the quantity of false, misleading and offensive advertising has resulted in consumers having an increasing disbelief in advertising, and a growing resentment of it. Misleading, false advertising also constitutes unfair competition. It could lead to marketplace disaster or even litigation. If this kind of advertising continues, it won’t be long before statutory regulations and procedures are imposed which make even fair, truthful, decent advertising cumbersome if not impossible. This certainly will affect your ability to compete and grow. The Advertising Standards Council of India (ASCI) (1985) has adopted a Code for SelfRegulation in Advertising. It is a commitment to honest advertising and to fair competition in the market-place. It stands for the protection of the legitimate interests of consumers and all concerned with advertising - rs, media, advertising agencies and others who help in the creation or placement of ments. As the Code becomes increasingly accepted and observed pro-actively, three things will begin to happen. 1. Fewer false, misleading claims 2. Fewer unfair ments 3. Increasing respectability Which, only means more freedom for you to practise your craft or carry on your business effectively. As a member of ASCI, you can mould the course of Self-Regulation and participate in the protection of healthy, effective advertising. You can have a say, through the Board of Governors, in the further development of the Code and future appointments to the Consumer Complaints Council (CCC). hip of the ASCI (open only to Firms) entitles you to appoint your nominee to discharge your function as a member, including standing for election to the Board of Governors and voting at general meetings. Why not have a say in matters affecting your own destiny? Why not make Self-Regulation truly work for you? In India, as in several advanced economies, there is only ONE BODY for Self-Regulation in Advertising – the ASCI, which is concerned with safeguarding the interests of consumers whilst monitoring/guiding the commercial communications of Practitioners in Advertising on behalf of rs, for ments carried by the Media, in their endeavours to influence buying decisions of the Consuming Public.

Bad effect on children: Parents have a different opinion according to them the excessive information and products thrown at them via the media, print and visual, spoiled the children. Most marketers were targeting kids even for products that had nothing to do with children. Since most middle class families have both parents working the marketer tries to work through the children on the guilt of the parents and thus encourage children to make very unreasonable demands. Language barriers: Language is one of the most alarming barriers in international advertising. Numerous promotional efforts have misfired because of language-related issues. Given the bewildering variety of language, advertising copy translation mistakes are easily made. In general, there are three different types of translation errors: simple carelessness, words with multiple meanings and idioms.

Religious barriers: Many of the trickiest promotional issues occur in the area of religion. In Saudi Arabia, for example, only veiled women can be shown in TV commercials. Such restrictions create problems for hair care rs. P&G overcame that constraint by creating a spot for pert plus shampoo that showed the face of a veiled woman and the hair of another woman from the back. In Brazil, Pirelli, the Italian tire maker, ran into problems when it used an ad with a Christ-like depiction of Ronaldo, the Brazilian soccer star. The ad showed Ronaldo with his arms spread and a tire tread on the sole of his foot, standing in place of the “Christ the Redeemer” statue. The ad drew heavy criticism from the Brazilian church authorities and the Vatican. In , after protests from local bishops, Volkswagen withdrew a billboard campaign involving an ad the relaunch of Golf with a modern version of the Last supper. Culture barriers: rs must escape cultural traps by getting inputs from local staff, distributors or ad agency people. The Hofstede cultural grid is useful in understanding the influence of culture on global advertising. The grid classifies national cultures on various dimensions: power distance, uncertainty avoidance, individualism, masculinity, and long termism. Power distance refers to the degree of inequality that is seen as acceptable within the country. Ads that position products or services as status symbols may be

effective in countries with large power distance (e.g, the Arab countries, Indonesia, Mexico). Deceptive Advertising: Sometimes, rs give untrue and misleading information. It can take quite a number of forms like making a claim which it cannot fulfill, publicizing false benefits, use of ambiguous phrases, etc.; for example, the ment of fairness cream for men. rs often take the help of puffery (praising the item to be sold with vague claims, without specific facts) to achieve their goals. One of the major areas of concern for the regulatory authorities is whether rs can substantiate the claims which they are making. Comparative Advertising: In the mad rush to outweigh the competitor, rs are using comparative advertising, which has always been there in the advertising world; it appears when owner of brand X claims that his product is better than brand Y of the competitors; for example, the ments of Mountain Dew of PepsiCo and Sprite of Coca-Cola. This has been extensively criticized by various researchers, because of the wrong perceptions in the minds of the consumers. More and more companies are resorting to “masked” comparative advertising. By this, the name of the competitor is not directly mentioned. But the question remains whether it is advisable or not? Another question that comes to mind is “how effective comparative advertising is?” Ads to Kids: As per a study conducted by Business Today, ever year, kids between the age group of 8 and 12 in India spend a whopping sum of around Rs.20, 000 cr, starting from the clothes to food and recreation. This figure is enticing the marketers to target the children with specific advertising, and is also another cause for concern to the rs. They are targeted through TV and print media. According to experts, the problem is not in using children in advertising, but with the context in which they are used. Let us take the example of baby shampoo (name of the company withheld). The problem here is that there is no adult who is shown supervising the child near the swimming pool. The Children’s Advertising Review Unit (CARU) of the batter business bureau (BBB) keeps a close eye on kid’s advertisings and advocates that adults be shown supervising children if the product and service are supposed to be risky. Tobacco and Alcohol Commercials: Advertising related to tobacco (in any from) is under the scanner of the government of many nations including India. It has an adverse effect on the,

population, especially the young. Tobacco companies have a tough challenge ahead of them in using advertising to target potential customers. Similarly, the ments of alcohol brand are restricted in many from media, but the rs are smart enough to use the name of their brands for other products. For example, McDowell’s No.1 is d through the product “mineral water” this known as surrogate advertising. Condom Ads: There is a heated argument going on about the use of advertising to promote condoms. Certain sections of the society feel prickly when these ments are shown in front of their children. Some people might call this hypocrisy, but one has to keep in mind the Indian values and ethics when advertising any product related to this category. Most of the time, an ment for condoms shows a couple in their wedding attire, i.e., the focus is mostly on the nuptial bed, but the biggest market for condoms lies outside this context. This is another aspect to be looked into. The ‘X’ Factor: A debate had been initiated a few years ago regarding the portrayal of women in advertising. On close examination of the ads featuring women, it is observed that, mostly, mo0dels having perfect bodies are preferred. For example, the cover page of a fashion magazine features photographs which are not conducive to Indian culture. According to Scott A Lukas (teacher at Lake Tahoe Community College), “Women’s bodies are objectified in common ways. In the case of many popular ads, the objection comes through stereotyping.” Women are used extensively by different rs to promote their products.

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Technological factors:

30000 color copy in an hour is available with new machines: Scanners: Colors: Yellow, Magenta, Cyan, Black Which are major color. Ink: Pilofranic nature Paper: Green shade paper Machines There are three types of machine which used in producing or printing newspaper or magazine. They are as below: City line machine: German machine which has capacity to print 20 copy in one print

Way Mack machine: Swiss machine which has capacity to print 24 copy in one print 45 GSM machine: An Indian machine which is capable to print 24 copy in one print Indian and swits machine can print 35000 copy per hour.