Pest Analysis of Textile Industry

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PEST ANALYSIS

A PEST (Political, Economic, Social and Technological) analysis is a major part of the environmental scanning section of strategic management and it is used by companies during market research and strategic analysis.

Using a PEST analysis helps a business to understand various macro environmental factors that they need to take into consideration when determining the decline or growth of a particular market.

What does PEST stand for?

Political – this refers to the ways in which the government can intervene in an economy in terms of environmental and labor laws, tariffs, trade restrictions and tax policies. It also shows how a government can influence education and health and how it will affect the infrastructure of a country.

Economic – this refers to how exchange rates, inflation rates, interest rates and economic growth will impact on a business and how it can grow, develop and make various decisions. For example if a business exports goods these operations can be greatly affected by exchange rates and these are factors that need to be included in a business’s strategic management plan if they are to succeed.

Social – these factors refer to how a society behaviors culturally, how the population rate will grow, how health-conscious people in a country are, how its range is distributed in a country and the various attitudes that people have towards their careers. When social trends change it can greatly affect the need for a business’s products or services. Similarly if a society has an older population the cost of labor will increase and a business will need to change their management strategies in order to cope with these changes.

Technological – this refers to how technology can change and looks at automation, R&D activity and technological incentives that are available. Technology can also have a great impact on efficient production levels and influence decisions on outsourcing. In addition to this there are some changes in technology that can affect the costs that a business needs to meet and can improve the quality of a product or service that a business offers.

Textile Industry in India:
The textile industry is mainly a labor intensive industry as it provides livelihood to the huge population, mainly consists of unskilled workers, and thus plays a pivotal role in the development of any economy. As this particular industry also comes under the basic necessities of human beings, it impacts a lot to the society as a whole. There has been increase in demand of textile products in last few decades globally, mainly due to rapidly changing social and economic structure of the countries worldwide. In past few years, especially after the removal the trade related tariffs and non tariff barriers in 2005, Asian countries such as India, China, Hongkong and Japan have emerged as major players in this particular industry, Indian textile industry contributes about 14% to industrial production, 4% to the country's gross domestic product (GDP) and 16.63% to export earnings. Nearly 40% of the textiles produced in the country is exported and the textiles sector is the biggest employment generator after agriculture. The sector is expected to generate 12 million new jobs by 2012. The sector targets US$ 6 billion foreign direct investment (FDI) by 2015 to be invested in green field units in textiles machinery, fabric and garment manufacturing, as well as technical textiles. India has made inroads into the markets of its key competitors which include Asian countries such as Sri Lanka, Bangladesh, Vietnam and Cambodia. The Indian textile and apparel industry is taking a new course by entering the Chinese market. Most of the top global apparel retailers, such as JC Penny, Nautica, Docker and...
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