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Most of us are consciously trying to ignore the industry that determines the way we live. The industry silently persuades us into something or the other without we ever realizing it. But this industry gets less respect and many harsh words are spoken about it. Yet, its impact is profound on the very fabric of our lives. Thinkers dub it as the 'spark' that runs the 'economy engine' and critics call it as the 'evil thing' that constantly creates wants! Yes, it's the advertising industry.
Advertising is one of the oldest industries. Traditionally, agencies that sell media space at a commission have given birth to present day's advertising agency. Then, their sole purpose is to act like media space selling agents and thrive on 15 percent commission. Gradually, they started to offer whole range of allied services like, providing creative ideas, media planning and coordinating in so- called below the line activities. Thus, media space selling agencies evolved to become modern day's full service advertising agency. When industry attractiveness grew, new players started flocking in, eventually to combat competition; consolidation and diversification became the order of the day. No one can completely visualize the direction towards which the industry is moving. The pace of transformation seems very high when one is about to gather and share a view, the industry is no longer the same!
The Political and legal, Economic, Social and Technological environment, in which the industry operates is subject to constant change and has an immense impact on the advertising industry itself. Here, each of these factors has been analysed in detail.
Political and Legal Environment
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Governments all over the world have always craved control over their media, either directly or indirectly. The several laws and regulations that regulate the advertising industry are given as under
1. MINISTRY OF INFORMATION & BROADCASTING FOREIGN INVESTMENT
POLICY
(Ministry of Information and Broadcasting is the nodal Ministry for formulation of policies on
foreign investment in broadcasting, film, print and advertising sector. It invites foreign investment
and frames laws keeping an eye on the widest national interest.)
ADVERTISING SECTOR
Following guidelines for foreign direct investment in advertising sector is being pursued
There should not be any cap on the percentage of foreign investment in a new project. Where the proposal is for a new joint venture or enhancing foreign direct investment in an existing joint venture, foreign direct investment should be limited to 74%. In exceptional cases, the 74% limit could be relaxed to go up to 100% with the consent of the Indian partner/partners and subject to the justification being established to the satisfaction of the Government.
Where a foreign company/investor already has a joint venture in this sector, a new wholly owned subsidiary shall normally not be permitted, unless there are strong reasons to make such an exception.
Foreign Direct Investment would include all repatriable investment, irrespective of who or what the investor is. Such investment would be permitted through the automatic approval route.
ELECTRONIC SECTOR
Foreign investment proposals directly linked to Broadcasting will be kept pending till Broadcasting Law comes into effect. Presently, companies with 80% Indian equity may be allowed to uplink for satellite channels. The proposals related to production of software and marketing of TV rights, airtime, advertisements, etc. may be recommended with the condition that
a). All future laws on Broadcasting will be applicable to them and they will not claim any privilege or protection by virtue of this approval;
b). They will not undertake any broadcasting from Indian soil unless specially permitted to do so;
c). Companies desiring to market TV software in India will in addition to conditions mentioned at (a) and (b) above will observe the Programme Law and Advertisement Codes of Doordarshan. Proposals having an Indian equity of atleast 5% will be encouraged, however, in genuine cases, even 100% foreign equity can be allowed. There is no foreign equity allowed in private FM broadcasting (to be introduced).
PRINT MEDIA
Foreign ownership of newspapers and periodicals in India and publication of their Indian editions is guided by the Cabinet decision of 1th Sept., 155. The relevant extracts of the decision are
•No foreign owned newspapers and periodicals should, in future, be permitted to be published in India. Foreign newspapers and periodicals which deal mainly with news and current affairs should not be allowed to bring out Indian editions.
•Above decision was taken on recommendation of the First Press Commission, which inter-alia had observed that proprietorial interest in the daily and weekly newspapers should predominantly vest in Indian hands. It also considered Indianisation of both capital and staff desirable, especially at the higher level. It was felt that newspapers should not be viewed similar to an industry since their true function was to influence working of democracy by shaping public opinion. Foreign participation in ownership or control of newspapers could be used for purpose of influencing Indian opinion in support of foreign interest and in some cases such participation could be at the instance of a foreign Government as well.
•In pursuance of the above decision, this Ministry has since 155, consistently denied permission for any foreign equity holding in print media or publication of Indian editions of foreign newspapers and periodicals. Due to many developments taken since then in the overall media scenario in the country and grant of Open General Licence to foreign newspapers and magazines, which resulted in their easy availability in the market, efforts are being made to review the 155 Cabinet decision.
FOREIGN OWNERSHIP OF NEWS AGENCIES
The existing policy of foreign ownership of news agencies in India is governed by the Cabinet decision of 156 which was also based on the recommendation of the first Press Commission. The relevant extracts of the decision is reproduced below
•Communication facilities should be granted to foreign news agencies only where the distribution of news within the country is to be effected through an Indian news agency owned and managed by Indians, which would have full and final authority in the selection of foreign news for distribution and which would also be in a position to supply Indian news in a reasonable volume to the foreign news agency with whom they have a working arrangement.
This decision has been the yardstick for examining requests of foreign news agencies to operate in India. Direct distribution of financial news by foreign news agencies is not violative of the 156 Cabinet decision. Subsequent to this decision, this Ministry conveyed to its no objection to the permission accorded by RBI to M/s Reutors, subject to the condition that their financial services would be only for selected Indian non-media clients for their own use and not for reproduction and public distribution.
. DOORDARSHANS ADVERTISING CODE
General rules for conduct in advertising
1. Advertising shall be so designed as to conform to the laws of the country and shall not offend the morality, decency and the religious susceptibilities of the people.
. No advertisement shall be permitted which
derides any race,caste,colour,creed and nationality;
is against any of the directive principles, or any other provision in the Constitution of India;
tends to incite people to crime or glorifies violence or obscenity in any way;
adversely affects friendly relations with foreign countries;
exploits the National emblem or any part of the constitution or the person or personality of a national leader or state dignitary.
relates to or promotes ciggarettes and tobacco products,liqour,wines and other intoxicants;
in its depiction of women violates the Constitutional gaurantees given to all citizens such as equality of status & oppurtunity and dignity of the individual Women must not be potrayed in derogatory light and in a manner that emphasizes passive, submissivequalities and encourages them to play a subordinate and secondary role in family and in society. The potrayal of the female form shall be aesthetic and within the well established norms of good taste and decency.
. No advertisement shall in any way be presented as News.
4. Advertisements must not be directed towards any religious or political ends or have any relation to any industrial dispute.
5. Advertisements for services concerned with the following services shall not be accepted
money lenders
chit funds
savings schemes and lotteries other than those conducted by the Central & state Government organisations, Nationalised or recognised banks and public sector undertakings;
unlicenced employment services
betting tips &guide books relating to horse racing or other games of chance.
6. No advertisement shall make claims to the effect that the product advertised posesses any miraculous or supernatural property or quality which is difficult of being proved, eg cure for baldness, skin whitener.
7. Scientific or statistical excerpts from technical literature etc. may be used only with a proper sense of responsibility to the ordinary viewer.
8. Advertisers or their agents must be ready to furnish evidence to substantiate any claims or illustrations since the Director General of DD has the right to demand the same.
. Advertisements shall not contain disparaging or derogatory references to another produt or service.
10. Testimonials must be genuine and used in a manner not to mislead viewers.
11. No advertisement shall be accepted which violates AIR and TV Broadcast code which is reproduced below
Criticism of friendly countries;
Attack on religions or communities;
Anything obscene or defamatory;
Incitement to violence or anything against maintenance of law & order;
Anything amounting to contempt of court;
As persons against the integrity of the President and the Judiciary;
Anything affecting the integrity of the Nation; and
Criticism by name of any person.
1. Information given to consumers in relation to the price quality & weight of products shall be accurate.
1. Any pretence in advertising copy must be avioded. The simulation of appearance or voice of a personality in connection with the advertisements for commercial products requires a permission from the personality to that effect.
14. Advertisements for a product or a service shall not be accepted if it suggests that if children do not buy it they shall be lacking in thir duty or loyalty to any person. Also if it is suggested in the advertisement that the children shalln be condemned,ridiculed if they do not buy the product. The advertisements shall also not create in the children an interest to do something which can prove to be dangerous to the children.
15. No advertisement shall try to take advantage of the superstition or ignorance of the public.
16. Advertisements should be truthful,avoid distorting facts and misleading the public by means of implications and ommissions.
17. Testimonials of any kind from experts etc.other than Government recognised standardisation agencies shall not be permitted.
18. Imitations likely to mislead the viewers shall be avoided.
1. Advertisements shall not be obscene, vulgar and offensive in their theme or treatment. This also applies to such advertisements which advertise objectionable books or photographs.
0. For advertising for medicines the general principles have laid down the following guidelines
No advertisement shall contain a claim to cure any ailment or symptoms of ill health.
There should be no exaggerated claims regarding the composition, character, action and suitability of the purpose for which it is recommended.
Appeals to fear shall not be made.
Advertisements for diagnosis or treatment by correspondence are strictly prohibited.
When words such as college, clinic, institute, laboratory are used in advertisements, such references can be made only when the said establishment does actually exist.
Advertisements for products specifically offered to women shall not be advertised as products that are effective in inducing miscarriage.
Advertisements relating to claims about curing of sexual weakness, premature ageing, loss of virility, sexual excesses etc. shall not be accepted.
No advertisements should offer any medical product that is for the purposes of slimming, weight reduction or figure control.
No advertisement shall contain any offer to diagnose or treat complaints or conditions by hypnosis.
. GUIDELINES FOR UPLINKING FROM INDIA
The Union Government has taken a decision on 5th July, 000 to further liberalise its Uplinking Policy and permit the Indian private companies to set up uplinking hub/teleports for licensing/hiring out to other broadcasters. The new policy also permits uplinking of any television channel from India. It also allows the Indian news agencies to have their own uplinking facilities for purposes of newsgathering and its further distribution. The salient features of eligibility criteria, basic conditions/obligations and procedure for obtaining the necessary permission for these services are briefly described below. For details, reference should be made to the relevant terms and conditions of Licences/Permission/Approval.
1. LICENCE FOR SETTING UP OF UPLINK HUB/TELEPORTS
(i) Eligibility Criteria
Company to be incorporated in India.
Foreign equity holding including NRI/OCB/PIO not to exceed 4% .
(ii) Period Of Licence 10 years.
(iii) Basic Conditions/Obligations
To uplink only those TV channels which are specifically approved or permitted by the Ministry of I&B for uplinking from India.
To stop uplinking of TV channels whenever permission/approval to such a channel is withdrawn by the Ministry of I&B.
Can uplink both to Indian as well as foreign satellites. However, proposals envisaging use of Indian satellite will be accorded preferential treatment.
To keep record of materials uplinked for a period of 0 days and to produce the same before any agency of the Government as and when required.
To permit the Government agencies to inspect the facilities as and when required.
To furnish such information as may be required by the Ministry of I&B from time to time.
To provide the necessary monitoring facility at its own cost for monitoring of programme or content by the representative of the Ministry of I&B or any other Government agency as and when required.
To comply with the terms and conditions of the licensing Agreement to be signed between the Applicant and the Ministry of I&B.
To comply with the terms and conditions of the Wireless Operational licence to be issued by WPC.
To uplink in C-Band only. • The satellite to which uplinking is proposed should have been co-ordinated with Insat system.
Failure to comply with the terms and conditions of above licences would result in termination/cancellation of the licences.
. PERMISSION/APPROVAL FOR UPLINKING A TV CHANNEL FROM INDIA
(In case a TV channel proposes to set up its own uplinking facility/earth station, it has to apply separately for the same after following the procedure as in case of 1 above.)
i) Eligibility Criteria Any TV channel irrespective of its ownership, equity structure or management control which is aimed at Indian viewership.
ii) Period Of Approval/Permission 10 years.
iii) Basic Conditions/Obligations To undertake to comply with the Broadcasting (Programme & Advertising) Codes laid down by Ministry of Information & Broadcasting.
To keep record of materials uplinked for a period of 0 days and to produce the same before any agency of the Government as and when required.
To furnish such information as may be required by the Ministry of I&B from time to time.
To provide the necessary monitoring facility at its own cost for monitoring of programme or content by the representative of the Ministry of I&B or any other Government agency as and when required.
 If the applicant hires its own transponder on a satellite, the same should be in C-Band and should have been coordinated with INSAT system.
To comply with the terms and condition of the permission/approval of the Ministry of I&B.
Failure to comply with the terms and conditions of the permission/approval would result in withdrawal of such permission approval.
. LICENCE FOR UPLINKING TO INDIAN NEWS AGENCIES
i) Eligibility Criteria
The Company/Agency to be incorporated in India
Accredited by Press Information Bureau (PIB).
 100% owned by Indian with Indian Management Control.
ii) Period Of Licence As per WPC licence.
iii) Basic Conditions/Obligations
To use uplinking for news-gathering and its further distribution to other news agencies/broadcasters only.
Not to uplink TV programmes/channels for direct reception by public.
To keep record of materials uplinked for a period of 0 days and to produce the same before any agency of the Government as and when required.
To furnish such information as may be required by the Ministry of I&B from time to time.
To provide the necessary monitoring facility at its own cost for monitoring of programme or content by the representative of the Ministry of I&B or any other Government agency as and when required.
Conformity with the provisions of inter-system coordination agreement between INSAT & the satellite to be used.
To comply with the terms and conditions of the No Objection Certificate to be issued by the Ministry of Information & Broadcasting.
To comply with the terms and conditions of Wireless Operational Licence to be issued by the WPC.
Failure to comply with the terms and conditions of the No Objection Certificate or the Wireless Operational Licence would result in withdrawal or cancellation of such certificate or licence.
The government is now contemplating on a media regulator as it feels that it is the government's responsibility to have a free and fair media. Regulation is, perhaps, needed due to the great divide among the stakeholders MSOs (multi-system operators), cable operators, broadcasters. The question is, how will they work together? Will the relationship between the stakeholders be there? As of now, there is a Convergence Bill which talks of a common regulator for TV, telephone and airwaves, also, content and carriage. But regulation has three aspects one is a very bad advertisement, other is a very bad programme (content) and the third is the rate part of it (carriage rate). The existing Convergence Bill envisages one regulator for both content and carriage. However, it is to be decided whether to go for a separate regulator for broadcasting.
But the question remains how can a regulator make things better? The FIPB (Foreign Investment Promotion Board) or the I & B ministry has not clarified some issues like, is the 6 percent cap of foreign investment in print and TV news applicable only to FDI and not portfolio investment? And why is investment by foreign institutional investors (FIIs) allowed in radio when FDI is not? Again, there is little that a regulator can do about technology issues other than laying the ground rules. Where Cross media restrictions are being dismantled around the world what sense would it make in India? Some experts feel that as long as equity caps are enforced and 51percent Indian control is in place, there is no need for any other regulation. That leaves pricing and content. Pricing, in any country, is left for the industry to decide. It is a business decision and hence it is for the broadcasters to decide whether the pay channels should carry ads or not. Then there is content. India has a fairly well defined programming and advertising code which no foreign or Indian broadcaster or publisher is allowed to violate. In case there is any odd obscene ad or show, usually the I & B ministry steps in. Even though the press in India is very independent, a few instances show that the government is not averse from using its stick from time to time. Moreover, the concept of an independent regulator appointed by the government is an oxymoron. Thus, with the rising change in the political and legal scenario in which this industry is operating will lead to many more changes in the way it operate.
Economic environment
The major trend is the changing revenue model of agencies. Traditionally, all agencies used to get a commission from the media groups. Thus 15 percent commission was in vogue. When we observe remuneration patterns across the world, fee- based remuneration models have increased from 5 percent to 5 percent in comparison with the decline of commission based model from 61 percent to 5 percent, as per the study conducted by Association of National Advertisers of United States. The scenario in Asia, Hong Kong and Singapore is at about 0 percent working on a fee or commission hybrid model. The real issue seems to be accountability and transparency in dealings. Analysts opine that there are three reasons for the increased popularity of fees. Primarily, to overcome hyperinflationary trends in media costs so as to maintain comparable levels of media impressions and share of voice. Secondly, to offset media expenses, advertisers reduced commissions from 15 to 10 percent. Thirdly, when commissions were eroded, agencies demanded labour based fees. The confluence of all these factors led to the shift and had an effect on profits. Unlike in the past, advertising is now short term. Nearly 70 percent of the expenditure goes towards sales promotion and a flimsy 0 percent towards branding. The number of promotional campaigns has also increased in the recent times. The possible reasons for this shift could be, consumer inclination towards freebies, impulse buying behaviour or the sheer attractiveness of the promotion itself. However, a notable change behind the change could be the stock market pressure exerted on advertisers. Whether this shift dilutes the role of creativity in the industry as a whole or are the agencies forced to adopt more lateral thinking techniques in designing promotional campaigns, are questions that have no answers at the moment. If at all there are any, they are inconclusive.
Adding on to this, much against the convention, clients have started preferring one stop shops for all their communication requirements. Unable to survive with low commissions, many players are wiped from the business or have become prey for major giants touting around to increment size and consolidation. Industry as a whole has seen many mergers and acquitions. M & As though consolidated the industry; yet they have redefined the client agency relationship. To counter the heavy toll, many agencies spun off their own sister concerns and started claiming, as independent arms without any link with the parent company or accounts. In addition to this, the ever changing market dynamics also increment problems. In 00, 57 percent of the agencies admit that existing clients knew that they grew, whereas 76 percent of the agencies now say new business wins will push growth in 00. Experts however, say that growth will be tied to maintaining the same level of spending from existing clients and a little extra business and this extra won't be for many.
The biggest trend is the explosion of media, which has an all round effect on the way the industry operates. Traditional media vehicles lost their lustre, as advertisers felt that they no longer have the desired reach or efficacy to lure the customer base. Print media in particular witnessed slump in advertising revenue worldwide. Advertisers preferred more of local media vehicles than those which have nation wide presence. Magazines were a hard hit than dailies. Competition has further intensified with more and more players entering into the fray and all of them choose to fight the pricing model as the differentiation plank. This is further eroding the advertising revenues. Although, radio and television with varied sounds and images continue to lure customers, now they are on the verge of losing their efficacy due to clutter.
Social Environment
The industry perceived the consumer as a naïve 'object' and bombarded him with commercials. Traditional media vehicles, both broadcast and non broadcast, intrusively persuaded him. Commercials accomplished their objectives through cajoling and kindling consumer desire. Suddenly, a host of new technological devices started empowering consumer. The industry finds itself in a vulnerable situation. Industry can no longer take consumer for granted as the new technological gadgets hardly allow the advertiser to reach them. Now, it is the consumer who decides which advertisement to watch and through which medium. Advertisers are finding it hard to reach their prospective consumers at right place, right time, through right medium and get noticed which they hope will get transformed into sales. Michael Goldhaber rightly says, "The scarcest resource in the new economy is consumer attention".
Technological Environment
New technologies like TiVo enables viewers to both record programmes and to take the commercials out of them has become a marketing executive's nightmare as it affects television as a medium. But now TiVo has adorned a new role of a friend to advertisers by providing them with statistics of advertisements, which are being skipped by the viewers. This helps the advertisers to ascertain which type of ads are generally not liked by the viewers and therefore helps them in preparing better ads. The recorder sends the data back to the headquarters without revealing the user. Driven by regulations and a desire for transparency and accountability consumers are preferring to obey Conditional Access System (CAS) through set-top boxes, a powerful device to empower consumer. In post CAS era, advertisers' reach by default gets limited and at the same time tailor- made communications to specific customer segments may increase. On the whole, the days of intrusive advertisements seems to be over, communicating at 'mass' gradually getting replaced by one to one communication sowing the seed for interactive advertising. With the change in consumer viewing habits, outdoor advertising is no longer a reminder media. In some markets indeed, it is turning out to be the main media. Several new brands are built using outdoor advertising. With the development of sci fi technology it is now possible to identify a passerby on the road and interact with him as well as display individualized communications. The real onslaught on these conventional media was due to the advent of World Wide Web. Search engines gained more prominence. Their speed and ability to crawl through, determined page exposures. Advertisers tried several methods to reach net savvy modern consumer. Otherwise ignored, contextuality of banner ads helped to increase involvement of consumers and was felt suitable for small business enterprises. Intrusive forms, pop ups and pop under were vehemently opposed. New and innovative forms like advergraming, streaming videos are still under nascent stage due to technological, financial as well as compatibility constraints. The most significant development of this new form of media Web, is the shift in power from advertiser to consumer. New media empowered all the consumers as they use their discretion whether to get exposed to an ad or skip it. Intrusive marketing tactics were replaced by permission based concepts. Spams were treated as illegal and offenders penalized. Thus reaching customers has become the toughest task for marketers in the Web age. This is where media planners' role becomes significant. Traditionally they were back room boys, now they lead the bandwagon. Increasingly, traditional media planning approaches were taken over by modern, sophisticated methods. Conventional cost led media planning strategies were replaced by brand strategy led consumer psychographics. On the whole, broadcasting techniques lost their relevance and increasingly narrow, casting methods are gaining prominence.
Another interesting trend across the globe that shall have a greater role to empower consumer is also taking place. Consumers have started using more of mobile devices to get information. Now an advertiser has to reach consumers on the move mobile advertising and the tool is through SMS or MMS. New versions of mobile devices and the technological compatibility barriers are slowly phasing out. SMS advertising is increasingly becoming popular as a most effective, low cost, personalized advertising technique. Ring tones also help to build brands based on sounds (sonic branding). Hence, the potential is endless.
It was SMS, now it is wi fi (wireless fidelity), popularly termed as "Hot Spot" or wireless Web. The possibilities thrown open are endless. Now it is a challenge for advertisers and agency people to own the upside of the inflection curve rather than get subdued at the downside. With every twist and turn, the industry jolts. Ti Vos, CAS, In film advertising and ever explosive media with no proportionate increment of audience attention are all the hurdles that the optimistic marketer has to surpass. Change is imminent and the ideal way is to embrace it!
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