PESTEL Analysis of ACI Ltd.

PESTEL analysis of any industry investigates the important factors that affect the industry and
the companies operating in the industry. ACI has three different business units which operate in
different industries, so all the factors affecting these industries- pharmaceutical, agribusiness,
consumer brand and commodities, will altogether have impact on the business performance of
ACI Ltd. Although, factors affecting all these industries will be discussed in a general way, but
this analysis will have more focus on the pharmaceutical industry than the others.
Political factors:

Relatively Instable political environment

Political instability and political unrest of any country affects countrys business operations.
When political situation transforms, it affects the buyer-supplier relationship and also political
instability of a country negatively affects business and consumer perception of the corporation.
General strikes by opposite political parties those caused huge loss to the businesses and
industries are a regular part of political life in Bangladesh.
Strong Support of Government
Bangladesh government regards the pharmaceutical industry as one of the key sector for foreign
investment in the country. As the demand for Bangladeshi pharmaceutical products grows, the
government is paying increasing attention to the quality of drugs in order to safeguard peoples
health. The governments drug-testing laboratories and the Directorate General of Drug
Administration (DGDA) have the monitoring and supervision roles in this regard. The
government has also taken necessary steps to establish an Active Pharmaceutical Ingredients
(API) Industrial Park at Gazaria, Munshiganj, which will boost the industrys competitiveness as
well as exports. With strong government support Bangladesh is developing a robust
manufacturing and technically experienced industrial base for this sector. ACI Pharmaceuticals
Ltd is being benefitted by the support of Government in many aspects as one of the
pharmaceuticals companies of Bangladesh along with all other pharmaceutical companies in
Bangladesh.
Corruption and bureaucracy
Companies are still facing some corruption and bureaucracy issues when to do business in
Bangladesh. Due to bureaucratic government structure it is time consuming to get any kind of
government permission or license For example, according to the World Bank report (2009) it
requires 7 procedures and takes 44 days to start a business there.
Impact of Political factors: Political factors of Bangladesh have negative impact for all industries
except the pharmaceutical industry. Although the political environment is unfavorable, the focus
and strong support from Government is helping the industry to flourish to a great extent.

Economic factors:
Positive and relatively higher economic growth and market demand
Economic growth of individual markets has its influence on businesses. For example, rapidly
growing economies provide higher standard of living and higher employment rate. As a result,
consumers disposable income increases and so does their purchase power, ultimately benefiting
business profits.
Relatively higher inflation rate
Inflation rate is a measure of the increase in the cost of living that influence on many parts of the
economic confidence, and the stability. Higher inflation rate raises the cost of living, erodes
confidence in a countrys currency and spurs people to search for better ways to store value.
Lower inflation could be a good indicator for ACIs Bangladesh marketplace but prevailing
higher inflation rate increasing the price of raw materials is not a good influence on the
company.
Relatively higher unemployment rate
Unemployment depresses economic growth, create social pressures, and provoke political
uncertainly and thus cumulatively affecting any business.
Larger Debt
The larger the total debt becomes, the more uncertain a countrys economy becomes.
Unfavorable interest and exchange rates
The fluctuation in interest rate and exchange rate in market of Bangladesh generally create
disadvantages for investors.
Unskilled Labor force and Cheap labor cost
Bangladesh has a huge labor force to enforce but a huge portion of the labor force is not skilled
adequately. Where being unskilled make our labor force a weakness, one strong point is, the cost
of labor is cheap in Bangladesh. Cheap labor cost makes the cost of production relatively less
than other countries thus profiting more locally as well as when exporting.
Impact of Economical factors: Despite the higher inflation rate, unfavorable interest rate,
exchange rate, unemployment rate- the economic factors exert a positive influence on the
business operation of Bangladesh. The benefit from higher economic growth and cheap labor
outmaneuvers the negative impact of all other economical factors.
Social Factors:

Higher population growth rate

Higher population growth rate of Bangladesh is a favorable factor for most of the businesses.
Larger population will have more daily needs to be satisfied. And all the industries can be
profited from that. Such as, a growing population signifies a growing need for medicines hence
increase the sales of medicine.

Age

The age composition is a important factor for the sale of any product. Preference of a product
varies according to the age of the consumer. So, manufacturers have to keep in mind about the
demand variation of consumers of different age.

Education

Improvements or rather increase in education will decrease the dependency of the less educated
rural population on alternative sources of medicines such as faith healing which will also lead to
increased sales of of medicines.

Use of Alternative medication

There is a long tradition of self-medication in Bangladesh as many of its population cannot

afford to see health professionals when they fall ill. Majority of population are still using
complementary and alternative medicine (CAM) in the country
(Islam & Farah
2008).Alternative medicine refers to health practices, approaches, knowledge and beliefs
incorporating plant, animal and mineral based medicines, spiritual therapies, manual techniques
and exercises, applied singularly or in combination to treat, diagnose and prevent illnesses or
maintain well-being.

Religion

The religious belief and practices have influence and impact on national/international business
that is seen in a cultures values and attributes toward entrepreneurship, consumption and social
organization. The pharmaceutical companies need to consider these religious factors to do the
business in Bangladesh. Like, Muslims are forbidden from the consumption of pork and alcohol.
So, manufacturers have to be careful about what ingredients to use.

Spending pattern and consciousness

Spending pattern and consciousness of the consumers controls the decision of buying a product.
A consumer conscious about protecting the environment will use product which is least likely to
harm environment. A health conscious people will try to buy healthy product. And, if a consumer
is more conscious about health, s/he may like to reserve more savings for health care purpose
than to expend in luxury item.
Impact of Social Factors: Age, religion and spending pattern & consciousness impose
constraints on manufacturer and also give opportunities for business of every industry. On the
other hand, higher population growth and higher level of education is most likely to have a
positive effect on the business profit. But, among all the industries, pharmaceutical industry
endures more losses due to religious restrictions. So, it can be said that social factors have both
positive and negative impact on ACI ltd.

Technological Factors:

Research and development

According to the World Bank report (2008), pharmacists of Bangladesh have been trained for
quality assurance and skilled engineers for reverse engineering and manufacturing but its
workforce has lack of new research and innovation skills, which is very important for innovative
drugs. Bangladeshi pharmaceutical firms target mainly lower-end branded generics. Despite the
country possessing huge manufacturing capabilities of domestic need, the complete lack of R&D
in domestic companies could cause the market to be idle. According to the Kostermanss (2008)
report, universities and government research is currently under funded in Bangladesh and the
pharmaceutical industry here currently invests about 1% in R&D.
Bangladesh also lacks behind in terms of capital investment in to state of the art technology in
terms of tools, equipments, and machineries. Already established firms are reluctant to invest in
newer technology because of their high cost, and because many such equipments will require
expansion of facilities or changes in structure that the firms deem too costly to pursue.
Automation & Supply chain Managements
Emergence of technology particularly popular with in the retail sector such as RFID (Radio
Frequency Identification), and online and mobile shopping, has immensely benefited
corporations. RFID helps businesses to reduce their cost of operations through inventory
shrinkage, smart labeling, self-stocking, efficient checkout process etc.
Further on easy access to retailers online stores provides enormous selling opportunities for the
seller. In addition, technological innovations in the retail sector like consumer mobile payment,
and mobile gift cards promises consumer to experience easier, and reliable means of payment.
On the contrary, in other industries, some older establishments are prevented from going in to
automation, due to their agreements with trade unions which prevents them from firing the
workers who will become redundant once the machines arrive.
Impact of Technological Factors: Although automation has improved supply chain management
and improved selling opportunities, firms are not technologically equipped adequately. The
access to technology is low for most firms due to their lack of resources and low innovation
skills.
Environment/Ethical Factors:
Natural disaster and epidemic
Bangladesh is extremely vulnerable to natural disasters such as cyclones, earthquakes, tidal
surges, tornadoes, floods, river bank erosions, droughts, and cold waves. The extent of any
natural disaster impact on the country is usually massive and often exceeds the capacity of local
coping mechanisms. Natural disaster has hove positive and negative impact on the business.
These natural disasters come along with diseases and these diseases affect a large number of

people who need immediate medical attention and medicines to survive. This gives huge scope
for the pharmaceutical sector to expand their business as well as contribute to the nation. On the
other hand, natural disasters interrupt the daily operations of a business making the business to
have loss.
Waste Management
The National Drug Policy 2005 of Bangladesh states that the pharmaceutical plants must need to
comply with environmental legislation like disposal of waste streams. Environment may have
hazardous impact if the wastages of manufacturing plants are not managed properly. Novartis
takes care of all their toxic and non toxic waste to make sure that all the disposable water is
properly treated and disposed.

Environmental Agenda and community awareness

Due to mass campaign against forestry consumption, presentation of consequences of global

warming and other reinforcement properties of natural forestry, consumer preference is shifting
and demand products that are environment friendly.
Impact of Environmental Factors: Most of the environmental factors create a threat to the
business by imposing various laws but also gives opportunity by creating a new horizon to attract
the environment friendly customers. Pharmaceutical industry benefits most from these
environmental factors, since, where the arrival of a natural disaster negatively impact the
business of other industries companies, pharmaceutical companies get the scope to expand
business.
Legal Factors:

Advertising Laws

Pharmaceuticals companies do not have the right to advertise their drugs using media in
Bangladesh. This is a huge constraint for the pharmaceutical companies.

Labor laws of Bangladesh

The labor laws were adopted for enforcement of law in the field of employment and particularly
relating to wages, benefits, compensation for injuries and weekly holidays, working hours,
maternity benefit for women workers, legal provision made for trade union activities, workers
participation fund, fixation of minimum wages in informal sectors and the like. The labor laws of
Bangladesh are quite supportive of business and industry as well as the economy as a whole.

Existing Laws and Government Policies

Other than labor law, there are many other existing laws and government policies that may affect
a particular industry. Such as, for pharmaceutical industry, The Bangladesh governments
Director of Drug Administration (DDA) has an essential monitoring and supervisory role on all

activities related to import, procurement of raw materials, production and import of finished
drugs, export, sale, pricing, etc. for all kinds of medicine. The National Drug Policy (2005) states
that the WHOs current Good Manufacturing Practices (GMP) should be strictly followed and
that manufacturing units will be regularly inspected by the DDA. The local entrepreneurs found a
golden opportunity in the new drug policy. The new ordinance made it policy that common
medicines like vitamins, cough syrups, and antacids were not allowed to be made by the
multinational.
Liberal government's policy in agribusiness and consumer market is supportive for respective
industries. Lower chance of imposing strict laws in consumer, pharmaceuticals and agribusiness
sector mostly goes in favor of the manufacturers.
Liberal regulatory framework
The Directorate General of Drug Administration (DGDA) under the Ministry of Health and
Family Welfare is the drug regulatory authority in the country. But despite extensive rules, the
pharmaceutical market remains under-regulated due to lack of capacity at DGDA. Its
effectiveness is further complicated due to complexities of multiple administrative bodies and
committees involved in the regulatory process.
Other factors that adversely affect exports include weak enforcement of quality regulations and
strict foreign exchange controls. (World Bank, 2013).
Liberal tax and fiscal policy.
The level of corporate tax and consumer taxation regulated by political authorities of any country
affects corporations after-tax income. The rate of corporate impacts profits, hence lowering
after-tax income.Addition to corporate tax, tariff and trade barriers also impact businesses. Some
of the major reasons for imposing tariffs and trade barriers such as protecting local employment,
new industries, consumers, retaliation and national security, tariffs increase the prices of
imported product into the country. For example, tax and trade barrier is not that strict for
pharmaceutical industry. The pharmaceutical sector has been among the high-priority ones in
Bangladesh export policy since 2006. These sectors are entitled to income tax exemption for
export earnings, export credit at reduced rates, assistance in marketing abroad through
participation in export fairs etc. In addition, the government reduced or exempted duties on some
capital machinery and raw materials imported for pharmaceutical production. The sector also
enjoys a tax holiday and duty drawback scheme.
Impact of Legal Factors: Due to liberal regulatory framework, laws, regulations, tax and tariff
policies, every industry enjoy certain amount of advantage but Lax enforcement of regulations
has allowed local companies to fall below the standards necessary for the stringently regulated
export markets. And among all the industries associated with ACI ltd., pharmaceutical industry
suffers a little more due to the restriction in advertising of drugs.