PEST ANALYSIS

The market environment is a marketing term and it refers to all of the forces outside of marketing that affect
marketing management‟s ability to build and maintain successful relationships with target customers.Company,
its suppliers, distributors, and its competitors are also impacted by what is happening in the world. To succeed
therefore, it is necessary to continuously monitor, anticipate, and adapt, to that environment, and wherever
possible, shape that environment.
The market environment consists of both the macro environment and the micro environment.

Micro environment
This environment influences the organization directly. It includes suppliers that deal directly or indirectly,
consumers and customers, and other local stakeholders. This determines the relationship between consumers,
suppliers, distributors, public and dealers.

Macro environment
This includes all factors that can influence and organization, but that are out of their direct control. A company
does not generally influence any laws (although it is accepted that they could lobby or be part of a trade
organization). It is continuously changing, and the company needs to be flexible to adapt. There may be
aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute
products and new entrants. The wider environment is also ever changing, and the marketer needs to
compensate for changes in culture, politics, economics and technology. The acronym “PEST” is used to
describe framework for the analysis of these macro environmental factors.

PEST Analysis of the Mobile Phone Industry

There are many factors in the macro-environment that will affect the decisions of the managers of any
organisation. Tax changes, new laws, trade barriers, demographic change and government policy changes are
all examples of macro change. To help analyse these factors managers can categorise them using the PESTEL
model. This classification distinguishes between following factors:
Political –legal environment
Economic environment
Socio-cultural environment
Technological environment
Political-Legal Environment: This environment is composed of laws, government agencies, and pressure
groups that influence and limit various organizations and individuals .Sometimes these laws create new
opportunities for business. Various political and legal factors affect a particular industry. By crossing the critical
100 million mark, India has one of the largest mobile service markets in the world. In last two years alone,
mobile phone users have jumped from 50 million to over 100 million. Other than the trend of growing Household
income in India, the recent mobile market expansion in India has been driven mainly by enlightened regulation
and market innovation. We explore some of the drivers below:
 Enlightened Regulation

The Indian Government has been promoting market liberalisation and simplifying regulation.
 Unified Licensing

Indian government has issued new type of unified licences to operators, enabling them to provide both fixed and
mobile services. Fixed-Mobile convergence makes the bundling of services easier and operators are offering
much wider choice of product to consumers. The unified licences also allow interconnectivity across contiguous
circles ; it is no longer necessary to route inter-circle traffic through a National Long Distance operator which
causes delay and increases costs.
 Lowering of Interconnect Charges

Lowering interconnection charges has direct impact on mobile service tariff and interconnection traffic will be
boosted significantly, both fixed to mobile and mobile to mobile services will benefit.

 Made Licence Fees 10%-15% of Revenue instead of a fixed amount irrespective of the operator‟s revenue.
The fixed amount licence fee posed a serious entry barrier to smaller operators and service providers before,
now with fee linked with revenue, small players can grow, evolve and diversify into different segment and offer
innovative products and services to the market.

 Simplified Frequency Allocation Process

Radio spectrum is critical for mobile service, therefore if frequency allocation process is lengthy and
bureaucratic, mobile services deployment will be delayed and it will hamper the whole industry‟s development.
As the allocation process is getting more simplified and transparent, networks are rolled out faster. In summary,
regulatory changes have lowered tariffs, bringing down overall cost of service ownership and boosted
investments in the networks which enhance both mobile service quality and capacity, widened network
coverage, which in turn will further lower the tariff, then encourage more consumers to take up services. 10 | P a g
e
ECONOMIC ENVIRONMENT Market requires not only people but purchasing power also. The available
purchasing power in an economy depends on
 The state of the economy – State of the economy related to the category of economic status of that country
either is developed, developing or underdeveloped economy. Basically developing economy is the potential
market of handsets as these countries have many of service providers so the demand of reliable and efficient
handsets as well.... India in spite of the recession had a growing economy and hence this contributed to
increased sales of handsets in these years.

 Income distribution- Income distribution basically related to the section of the society, high income group,
high middle class group, middle class group, low middle class group & low class group. The preference of
handset varies according to the income groups. As per the survey done by Nokia Mobile main focus of high
income group is in the price range of >16000, Middle class group 5000 to 15000 and lower class group <5000.

 Market innovation has contributed to the reduction of the cost of ownership and made services more
accessible for low income groups which are very price sensitive. To overcome this hurdle, Indian operators boost
the penetration in low income groups with use of innovative tariff plans, offer very cheap handset to the public
and exploring attractive VAS which are appealing to different segment of customers.

 Innovative tariff plans

The following tariff plans are examples of how they have boosted handset sales: • Incoming-only plans -
employers got phones for chauffeurs and domestic staff; companies keep in touch with mobile work force • One
India tariff plan (1 Rupee/min anywhere in India) – simple to grasp • Lifetime prepaid plan – no obligation for
regular recharging • Barter of talk minutes for extension of account validity • Affordable (e.g. 10 Rupees) top-up
values for prepaid accounts
 Affordable Handset

• The availability of low cost models from handset manufacturers – price as low as Rs1, 300 to 1,400 (US$ 29 to
32) • An active second-hand handset market – handsets selling at as low as Rs300 to 400 (US$ 7 to 9)
Attractive VAS that is compatible with less sophisticated handsets

DEMOGRAPHIC FACTORS
People make up markets. Marketers would therefore like to know the Size of population , Growth rate of
population, Age distribution of population, Regional distribution of population, Ethnic mix, Education levels, and
Household patterns. In May 2000 India‟s population had 11 | P a g e
reached the billion marks - only the second country to do so. There are only four countries in the world that have
a population exceeding that of Uttar Pradesh (166 million).India adds roughly 18 million people, the population of
Australia, every year. Demographic factors have an influence on the evaluations of different attributes related to
mobile phone choice. Specifically, gender and social class will impact on the evaluations of the attributes as men
belonging to higher social class seem to be more technology savvy. Consumers value in smart phones features
that enhance their personal time planning (e.g., Jones, 2002). These high-rated features include calendar and e-
mail services. New technology features such as built-in cameras, better memory, radio, more developed
messaging services, and colour displays are influencing consumer decisions to acquire new models, which
depend on the different age groups. Different age groups prefer different cell phones. Teenagers mostly prefer
cells which are attractive, look trendy and have attractive features whereas people of age group i.e. between 40-
50 use mobiles for communication purposes mainly. Size and brand play to some extent an important role in
decision making. When choosing between different mobile phone models, consumers value familiar brands
.When choosing between different mobile phone models, consumers prefer handsets which are user friendly.
Still after so many brands entering into the market, a major portion of the population still prefer familiar reliable
brands like Nokia. Because it is user friendly as compared to brands like Sony Erickson, Micromax, LG, and
Samsung and so on. Price of the phone has been identified as a critical factor in the choice of the mobile phone
model, especially among the younger generation .It has been found that besides new technological advances
price is the most influential factor affecting the choice of a new mobile phone model. Still large chunks of the
population prefer the middle price range of cell phones. That ranges between 5 to 12 thousand Indian rupees. In
fact value for the money is most important factor that influences consumer choice for a cell phone.
 SOCIO-CULTURAL FACTORS One of the greatest socio-cultural factors affecting the handset market is the
increasing need of social recognition among the masses, which is further fuelled by lowering of tariff rates by the
service providers. Moreover with higher spending power among the masses, festivals and marriages and other
socio cultural factors affect handset sales. Socio-cultural environment shapes customers‟ beliefs, values, and
norms.
The social and cultural factors that influence the buying behaviour of consumers are inclusive of culture, social
class, reference group, family, demographics and geography. Culture is an amalgam of tangible factors and
intangible traditions that enunciate the lifestyle of a particular group of people. As for social class, it defines the
income group the individual belongs too and that, in turn, is heavily dependent on the income earned, which is a
great factor in determining buying behaviour. The third factor is the reference group. As is obvious from the
name it is the group from whom the consumer seeks reference. It could range from people like one's parents,
members of the family whom the individual feels close to, close friends, celebrities who endorse the brand etc.
People whom we trust, their opinion means a great deal to us and affects many decisions of ours including
buying behaviour. Regarding family, this determinant is totally different from the erstwhile one as this one
focuses on the norms and preferences of the family in which the individual lives and is brought up. Moreover this
determinant is on a collective and unconscious basis as the individual's buying decision is taking effect from the
ambience of his family and the unconscious way he has grasped the values that have been given to him by his
family. Coming to demographics, these are small and specific details about the individual such as age, gender,
education, income, occupation etc. Also the geographical location in which the consumer resides also
determines the buying behaviour depending on sub-factors like climatic conditions, availability of resources,
surroundings etc.
TECHNOLOGICAL ENVIRONMENT One of the most important factors that affect our lives is “Technology.”It is
the most important force that keeps on changing our day to day lives, which not only affects individuals but can
also affect economy as a whole. Technology is a dynamic force which shapes people and industries‟ lives and
even wipes out entire industries. We live in an age in which the pace of technological change is pulsating ever
faster, causing waves that spread outward toward all people, and all industries. Cell phones have no longer
been limited to communication but also have indirectly emerged as a means of reducing face to face social
interaction as people can listen to music, can watch movie on their cell phone and so on. So, it has become very
essential for marketers to have a look on dynamic technological environment, so that they can actual find out
customers‟ needs and aspirations. Marketers should monitor the following three trends:

Accelerating the pace of growth :

The pace of change is accelerating as a consequence of two primary factors. Firstly, consumers are adopting
new technologies faster than ever before, as a result of: widespread, ultra-fast wireless broadband; increased
choice of platforms and providers; and a vastly increased level of trust in technology generally (versus the
hesitant adoption of new technologies just a few years ago). Secondly, the recession is proving to be a catalyst
for powerful organisations to look beyond their narrow field of vision for incremental future growth opportunities. .
Technology has created a society which expects instant results. This technological revolution has increased the
rate at which information is exchanged between stakeholders. A faster exchange of information can benefit
businesses as they are able to react quickly to changes within their operating environment. However an ability to
react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever
decreasing timescales. For example the Internet is having a profound impact on the marketing mix strategy of
organisations. Consumers can now shop 24 hours a day from their homes, work, Internet cafes and via 3G
phones and 3G cards. Some employees have instant access to e-mails through Blackberry but this can be a
double edged sword, as studies have shown that this access can cause work to encroach on their personal time
outside work
 Increased regulation of technological change

Various agencies have been expanded to investigate and ban potentially unsafe products. One such agency is
MEF. The Mobile Entertainment Forum is the global trade association of the mobile media industry, working on
behalf of its diverse membership to drive mobile entertainment adoption, shape regulation and deliver
competitive advantage to its members MEF engages stakeholders across the industry at a local & international
level, to shape regulation & raise awareness of its effective implementation with the aim of protecting revenues
& ensuring a positive consumer experience. This ongoing activity looks at the development of new and existing
regulations affecting the market for mobile entertainment services. MEF Policy & Regulation achievements
include:
 Established the EMEA Regulatory Committee to discuss the effective implementation of policy codes
 Completed a regulatory tour of Asia, covering Singapore, Malaysia, Indonesia and India, to meet with the
industry and regional regulators to provide thought leadership, foster collaboration and create an environment
conducive to continual industry growth
 Launched the first ever interactive resource for sweepstakes promotions in the US
 Launched the first ever practical guide to the AVMS Directive for the mobile entertainment industry.
 Co-produced a European Framework for Safer Mobile Use by Younger Teenagers and Children
 Was mentioned in the Ayre report on TV broadcasters‟ use of premium rate telephone services in
programmes as a body developing is its own voluntary „framework‟ for good practice in participation TV services
in the UK.
 Another law which looks at regulation is Mobile Telecoms Regulation and Competition Law.