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 advertisement in print media left out of the ambit of service
tax.

Service tax increased from 10% to 12%. Sale of space or time for advertisement
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 support 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 support 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 users.

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.

• Lobbying: Local governments or international legislative bodies can be lobbied

usually jointly by advertisers, 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.

• Legal remedies: Advertisers may also consider fighting advertising legislation in

court. In Chile, outdoor board companies, advertisers and sign painters filed suits
in civil court when the government asked advertisers to place outdoor boards
several blocks from the road. In the European Union, advertisers appealed to
European commission or the European court of justice to overturn local laws.

• 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 Amount Invested

Company Investor (Rs. bn)
Independent
Jagran Prakashan News& Media 1.7
HT Media Public (IPO) 3.7
Jagran Prakashan Public (IPO) 3.3
Deccan Chronicle Public (IPO) 1.5
HT Media
Henderson Henderson 1
Dainik Bhaskar Warburg Pincus 1.5
Amar Ujala DE Shaw 1.2
Ushodaya
Enterprises Blackstone 12
Source: Ficci PWC, companies

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 advertise more. Thus, this increased
advertisement 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
advertisement.
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
advertiser to increase their frequency of advertisement. 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
account 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.

Urban
& Rural Urban Rural
Base (m (m (m
Population ) % ) % ) %
Any 18 10
Publication 4 24 0 42 84 16
17
Any Daily 0 22 94 40 77 14
Any Hindi
Daily 63 8.1 36 15 27 5.1
Any English
Daily 17 2.2 16 6.7 1.6 0.3
Any
Magazine 59 7.6 34 14 25 4.6
• 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 market-
place 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 Self-
Regulation 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 - advertisers, media, advertising agencies
and others who help in the creation or placement of advertisements. As the Code
becomes increasingly accepted and observed pro-actively, three things will begin to
happen.

1. Fewer false, misleading claims

2. Fewer unfair advertisements
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). Membership 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 advertisers, for advertisements 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 advertisers. 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 France, 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:

Advertisers 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, advertisers 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 advertisement of
fairness cream for men. Advertisers 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
advertisers can substantiate the claims which they are making.

Comparative Advertising:

In the mad rush to outweigh the competitor, advertisers 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 advertisements 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 advertisers. 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
advertisements of alcohol brand are restricted in many from media, but the
advertisers are smart enough to use the name of their brands for other products.
For example, McDowell’s No.1 is advertised 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 advertisements
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 advertisement 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 advertisers to promote their products.

• 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.