Case: ‘Pepsodent Fights On’

Cross-Functional Management

Environmental Scanning:PESTLE Analysis

• Scope: Macro-environmental factors, relevant to this case, which are affecting the convergent region, between 3 different environments, that HUL’s Pepsodent has to compete in– India– Oral-Care Industry– Advertising Industry

• Objective: To narrow down on only the key macro-economic PESTLE factors within the space of‘Advertisements for the Indian Oral-Care (specifically toothpaste) market’

Political Factors• Most factors here are at country level (not as specific as the objective

states)PARAMETER DESCRIPTION/DETAILS ANALYSIS/IMPLICATION

Type of government regime

Democratic •Freedom of speech » AD CREATIVITY•No cap on amount of production or sales » MARKET GROWTH

Nature of Goods/Service under consideration

•Good: Toothpaste (Oral Hygiene Product) » MERIT•Service: Advertising » MERIT

•Govt. wants more people to use the product » MARKET GROWTH•Govt. wants more people to be rightly informed about product benefits» POSITIONING

Legislation •No minimum wage laws•Rudimentary anti-discrimination laws

Competition may be able to produce/source cheaper » PRICING

Voluntary codes and practices (Oral care & Advertising Industry)

•Product: FDA-India regulations•Advertising : ASCI (Advertising Standards Council of India)

FDA – Govt. regulated : Products have to meet a certain quality and safety standard in production » PRODUCT QUALITYASCI – Self Regulated : Industry-wide representation from all constituent stakeholders ensures fair play » PROMOTION

Political Factors

PARAMETER DESCRIPTION/DETAILS ANALYSIS/IMPLICATION

Market regulations Product: Toothpaste - Drug or Cosmetic?

FDA-India market regulations: Product must meet standards for both» SOURCING, PRODUCTION, R&D

Trade agreements, tariffs or restrictions

Restrictions: 100% FDI in multi-brand retail channel

Channel: Impact is yet to be seen » DISTRIBUTION, COMPETITOR DENSITY, MARKET SHARE

Tax levies and tax breaks •Structure: GST (Goods & Services Tax)•Service Tax Relief: Union Budget 2013•Tax credit on earnings of consumers: Union Budget 2013

•GST: Implementations deferred » Will benefit HUL massively•Service Tax Relief: Service tax on alcohol based deodorants, soaps and sprays withdrawn » Difference can be used to create/increase market share of Pepsodent•Tax credit for consumers: Very small to affect disposable income and thus spend on FMCG (Product is still not considered essential with substitutes) » POSITIONING

Economic Factors• Most factors here are at country level (not as specific as the objective

states)PARAMETER DESCRIPTION/DETAILS ANALYSIS/IMPLICATION

GDP growth Rates •GDP: 5.3% (2012-13), $1.946 tn•Total MARKET SIZE ~ $450 bn

•Retail ~ 14-15% of GDP: Expected to grow as income levels rise » MARKET GROWTH•Income Levels Rise » INCREASED MARKET SEGMENTATION » POSITIONING OR PRODUCT MIX (Sensodyne - Premium Segment might grow)

Interest Rates •Repo - 7.5%•Reverse Repo - 6.5%•Bank Rate - 8.5%

•Cost of Capital: Commercial Lending » CAPACITY ADDITION & UTILIZATION

Exchange Rates •Price of imported chemicals/additives components of product

•Suppliers » SUPPLIER BASE RATIONALIZATION, LOCAL SOURCING, VENDOR DEVELOPMENT •Raw materials » VENDOR EVALUATION, VALUE ENGINEERING

Inflation Rates CPI: 10.56%, WPI: 7.18% (Dec 2012)

Food inflation is high » Does not affect toothpaste business, but consumers discretionary spending reduces » POSITIONING OR BETTER SEGMENTATION