PESTEL Analysis

Imperial Tobacco Company

Imperial Tobacco Company

A PESTEL analysis of any industry serves to identify the major factors prevalent in the macroeconomic environment that affect the performance of businesses operating in that sector. The acronym 'PESTEL' refers to the Political, Economic, Social, Technological, Environmental, and Legal concerns that a business may be confronted in the external business environment. This way, the PESTEL analysis is the ideal tool that helps managers and policymakers in identifying the external forces that drive the industry and determining what nature of influence they have on their business in general. Imperial Tobacco Company is among the leading manufacturers of tobacco product in the UK. The following is a PESTEL analysis of the Imperial Tobacco Company and the overall tobacco manufacturing products industry in general. It takes into account the external economic factors affecting the business:

Political factors

The tobacco industry is typically affected by government taxations that significantly affect product pricing. For example, the government may deliberately increase taxation on cigarette companies in order to push their price higher. This way, people who are price-sensitive may be less inclined to purchase cigarettes. Or, they may be able to purchase fewer of them than they were able to previously.

The government may promote an awareness campaign that highlights the significant health hazards that cigarettes pose to smokers. Most governments around the world require cigarette manufacturers to print on their products a clear message that cigarettes are injurious to health and that they are the leading cause of cancer. Such regulations imposed by the government have an adverse effect on the business.

It is also common for governments to set an age limit on the purchase and consumption of tobacco-based products. As a result, Imperial Tobacco Company is restricted to selling its products to customers above the age of 18.

The government also determined the minimum wage limit that tobacco industries must pay to their workers. This means that in the event that the government announces an increase in these wage rates, the final selling price of tobacco products will inevitably increase. This will either decrease the profit margins of the company or force an increase in the final selling price. Both of these factors will affect the profitability of the company.

Economic factors

Economic conditions have a direct impact on the sales of tobacco based products. For instance, in times of economic boom, people may have more disposable income to spend on cigarettes. On the other ...