Strategic Management of ITC

By

R K Krishna Vazrapu

Joel.J

Solmon Victor

Shruthi

Sarath Chand

OBJECTIVE:-

The objective of the paper is to analyze the various strategies of ITC and understand how

these strategies are offering the company a competitive, sustainable development even on

account of intense competition.

METHODOLOGY:-

The research is done using secondary data. The secondary sources include Internet,

Magazines, and Books.

Introduction:-ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of

India Limited. The name of the Company was changed from Imperial Tobacco Company of

India Limited to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974.

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India

Limited. As the Company's ownership progressively Indianised, the name of the Company was

changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited

in 1970 and then toI.T.C. Limited in 1974. Though the first six decades of the Company's

existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf

Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that

would usher in momentous changes in the life of the Company.

ITC is one of India's foremost private sector companies with a market capitalization of

nearly US $ 8 billion and a turnover of over US $ 4.75 billion. ITC also ranks among India's top

10 `Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by

the Economic Times.

ITC employs over 22,000 people at more than 60 locations across India. The Company

continuously endeavors to enhance its wealth generating capabilities in a globalizing

environment to consistently reward more than 3, 74,000 shareholders, fulfill the aspirations of its

stakeholders and meet societal expectations. This over-arching vision of the company is

expressively captured in its corporate positioning statement: "Enduring Value for the nation and

for the Shareholder."

VisionSustain ITC's position as one of  India's most valuable corporations through world class

performance, creating growing value for the Indian  economy and the Company’s stakeholders.

Mission

To enhance the wealth generating  capability of the enterprise in a  globalizing

environment, delivering superior and sustainable stakeholder value

Bussiness Mix of ITC

ITC Business Model

ITC crossed significant milestones both in the range of FMCG products launched as well

as the breadth of distribution. Investment in people systems, trade marketing expertise and

product development enabled the launch and national rollout of several FMCG products

spanning Apparel, Packaged Foods, Greeting Cards and Stationery, Safety Matches and Incense

Sticks (Agarbatti). The business model in each of these product categories envisages retaining

core competency-based elements of each value chain in-house. Manufacturing is outsourced

largely to small and medium enterprises (SMEs). Such a model enables ITC to participate

effectively in strengthening the capability of these SMEs, thereby enhancing the competitiveness

of the entire value chain. ITC is engaged in further expanding its distribution and delivery

bandwidth to serve as a springboard to cater to a much wider range of FMCG products.

ITC is developing its internationally competitive agricultural business by empowering,

not eliminating, the independent small farmer. Its business model centers around the deployment

of a network of Internet-connected kiosks, known as e-Choupals, throughout agricultural areas in

India. The premise of ITC's expanded business model is backward integration, a form of virtual

vertical integration that involves the direct purchase of produce from farmers, thereby reducing

ITC's dependence on middlemen.

ITC’s Corporate Strategies

Create multiple drivers of growth by developing a portfolio of world class

businesses that best matches organizational capability with opportunities in

domestic and export markets.

Continue to focus on the chosen portfolio of FMCG, Hotels, Paper, Paperboards &

Packaging, Agri Business and Information Technology.

Benchmark the health of each business comprehensively across the criteria of Market

Standing, Profitability and Internal Vitality.

Ensure that each of its businesses is world class and internationally competitive.

Enhance the competitive power of the portfolio through synergies derived

by blending the diverse skills and capabilities residing in ITC are various

businesses.

Create distributed leadership within the organization by nurturing talented and focused

top management teams for each of the businesses.

Continuously strengthen and refine Corporate Governance processes and systems to

catalyze the entrepreneurial energies of management by striking the golden balance

between executive freedom and the need for effective control and accountability.

ITC introduces each product with a strategy. The following gives details of the strategy that ITC had kept in mind, while launching the product.

1. Though the first six decades of the Company's existence were primarily devoted to the

growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies

witnessed the beginnings of a corporate transformation that would usher in momentous

changes in the life of the Company.

2. ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration

for ITC's Cigarettes business. It is today India's most sophisticated packaging house.

3. In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai

which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into

the hotels business was rooted in the concept of creating value for the nation. ITC chose the

hotels business for its potential to:

earn high levels of foreign exchange,

create tourism infrastructure and

generate large scale direct and indirect employment.

Since then ITC's Hotels business has grown to occupy a position of leadership, with over 90

owned and managed properties spread across India.

4. In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards

Limited, which today has become the market leader in India. Bhadrachalam Paperboards

amalgamated with the Company effective March 13, 2002 and became a Division of the

Company, Bhadrachalam Paperboards Division. In November 2002, this division merged

with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers

Division. ITC's paperboards' technology, productivity, quality and manufacturing processes

are comparable to the best in the world. It has also made an immense contribution to the

development of Sarapaka, an economically backward area in the state of Andhra Pradesh. In

2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co.

Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve

customer service with reduced lead time and a wider product range.

5. Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business

Division for export of agri-commodities. The Division is today one of India's largest

exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000

with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million

farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004

at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operatonal in the 3 states of

Madhya Pradesh, Maharashtra and Uttar Pradesh.

6. In 2000, ITC launched a line of high quality greeting cards under the brand name

'Expressions'. In 2002, the product range was enlarged with the introduction of Gift

wrappers, Autograph books and Slam books. In the same year, ITC also launched

'Expressions Matrubhasha', a vernacular range of greeting cards in eight languages and

'Expressions Paperkraft', a range of premium stationery products. In 2003, the company

rolled out 'Classmate', a range of notebooks in the school stationery segment. This way it

established itself as a brand for students and is performing excellently due to its quality and

price strategy.

7. In 2000, ITC spun off its information technology business into a wholly owned subsidiary,

ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area.

8. ITC's foray into the Foods business is an outstanding example of successfully blending

multiple internal competencies to create a new driver of business growth. It began in August

2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002,

ITC entered the confectionery and staples segments with the launch of the brands mint-o and

Candyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction

of Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing

branded snacks category with Bingo! in 2007. In just seven years, the Foods business has

grown to a significant size with over 200 differentiated products under six distinctive brands,

with an enviable distribution reach, a rapidly growing market share and a solid market

standing.

9. ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the

manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands

include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine, Bouquet,

Sandalwood, Madhur, Sambrani and Nagchampa.

10. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body

care products for men and women in July 2005. Continuing with its tradition of bringing

world class products to Indian consumers the Company launched 'Fiama Di Wills', a

premium range of Shampoos, Shower Gels and Soaps in September, October and December

2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in

the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivel

range of soaps in February and Vivel range of shampoos in June 2008.

PESTEL

POLITICAL

ITC has some set of standard to handle political issues. Change in the ruling government polices

on the tax rates and the control on the prices. ITC used its experience, brand image and goodwill

to make contacts to bargain with government so as to modify their regulations.

ITC is one company that follows all the standards in an ethical manner and it never goes against

any political rules. ITC has also been awarded as one of the most respectable companies of India.

ECONOMIC ENVIRONMENT

ITC has a very good pricing strategy which is very economical that makes the company more

sustainable and competitive in the market. HUL, Procter & Gamble (P&G) are the major

competitors for ITC in the FMCG sector . ITC has newly diversified into the FMCG sector and

the market is highly competitive in this sector with so many major players already well

established. There are also so many local traders who offer many and consumers on the other

hand would not want to buy expensive product or brands due to current economic tide. Therefore

the company has to supply the goods at a price which is economical and affordable by the

consumers. ITC has adopted many strategies to ensure that its profitability drive is

sustained. Some Products are packaged in small size for low or regular income earner, for

affordability.

.

SOCIO-CULTURAL ENVIRONMENT

ITC's businesses generate livelihoods for over 5 million people.

ITC has a very good brand image in the society. Though their initial offerings were cigarettes,

they developed goodwill and its brand signifies quality in the minds of the customers. ITC is the

only company which had done a research on tastes of different people across different cultures

in India and accordingly manufactured the Aashirvad Atta. ITC is focused on building an

exclusive culture and embracing difference, which resulted in high demand of its products in

the developing and emerging markets.

ITC's globally recognised e-Choupal initiative is  the world's largest rural digital infrastructure

benefiting over 4 million farming families.

ITC's Sustainable Community Development initiatives include women empowerment,

supplementary education, integrated animal husbandry programmes.

TECHNOLOGICAL ENVIRONMENT

ITC is continuing to diversify into many fields, recently it launhed the VIVEL fairness cream.

ITC has got a strong distribution network base which they make it possible with the effective use

of the technology. Business continue to boom with new technology being invented to boost

production and enhance quality products for consumer, competitors improving their

products using new inventions.

One of the major inventions of ITC is the e-choupal where they connect to the farmers directly

with the help of Internet and provide them solutions regarding their problems. ITC has also

invested a huge amount in its R&D sector by including the latest technologies so that it helps to

identify the exact consumer preferred products at the best prices available. Through their R&D

they are able to innovate new inventions and diversify into various fields.

ENVIRONMENT  

ITC has been ‘Carbon Positive’ three years in a row (sequestering/storing twice the amount of CO2 than the Company emits).

‘Water Positive’ six years in a row (creating three times more Rainwater Harvesting potential than ITC's net consumption). Close to 100% solid waste recycling.

  All Environment, Health and Safety Management Systems in ITC conform to the best international standards.

 

PORTERS FIVE FORCE

Buying Power

The most important determinants of buyer power are the size and the concentration of

customers. Other factors are the extent to which the buyers are informed and the concentration or

differentiation of the competitors.

The switching cost is pretty low for customers in FMCG sector and stationery sector. The

market has immediate substitute. With the competition in the retail sector is reaching it’s peak

the retailers in the organised sector are able to bargain the price.

PORTER’S FIVE FORCES:

BUYER POWER:- HIGH- UNFAVOURABLE.*Low switching cost *Buyers are numerous and fragmented*Considering buyer power retailers , they are able to negotiate the price with the company.

SUPPLIER POWER:-LOW-FAVOURABLE*Large number of suppliers in the country *Cost of switching suppliers is low*Prices of substitutes are low

THREAT OF NEW ENTRANTS:-HIGH- UNFAVOURABLE

*To many small firms*No dominating firm*Little product differentiation*Customer switching costs are low

DEGREE OF RIVALRY:-HIGH- MODERATELY UNFAVOURABLE

*Consumer in this category enjoy multitude of choices.*It does not cost anything for a consumer to buy one brand of shampoo instead of another, making the industry quite competitive.

THREAT OF SUBSTITUTES :-HIGH- MODERATELY UNFAVORABLE

Numerous substitutes are available

Suppliers Power

Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier

power typically focuses first on the relative size and concentration of suppliers relative to

industry participants and second on the degree of differentiation in the inputs supplied.

Where the switching cost from one supplier to other supplier is high. In some of it’s

sector most of the suppliers are thinking of forward integration of their business. Where the

suppliers are low and customers are more.

Threat of substitutes

The threat that substitute products pose to an industry's profitability depends on the

relative price-to-performance ratios of the different types of products or services to which

customers can turn to satisfy the same basic need.

As consumer preference changes and they expect more from a product which leads them

to switch to other products. With increase in competition difficult to differentiate one product

from other.

Threat of new entrants

Both potential and existing competitors influence average industry profitability. The

threat of new entrants is usually based on the market entry barriers. They can take diverse forms

and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost

of capital, rise above zero.

Increase in local and private brands. The FMCG and paper industry are a kind of market

where the competition is highly competitive which requires less technology and it has very low

barriers.

Rivalry from existing Competitors

HUL and P&G are the major competitors for ITC in the FMCG sector. As these

companies are well established in the market ITC has to follow some innovative pricing,

promotional strategies so that it gives tough competition to its competitors and attain a

sustainable business. Similarly it is same in other sectors.

SWOT Analysis of ITC

ITC is one of India's biggest and best-known private sector companies. In fact it is one of

the World's most high profile consumer operations. Its businesses and brands are focused almost

entirely on the Indian markets, and despite being most well-known for its tobacco brands such as

Gold Flake, the business is now diversifying into new FMCG (Fast Moving Consumer Goods)

brands in a number of market sectors - including cigarettes, hotels, paper, agriculture, packaged

foods and confectionary, branded apparel, personal care, greetings cards, Information

Technology, safety matches, incense sticks and stationery.

Examples of its successful new FMCG products include:

* Aashirvaad - India's most popular Atta brand with over 50% market share. It is also present

in spices and instant mixes.

* Mint-o - Mint-0 Fresh is the largest cough lozenge brand in India.

* Bingo! - A new introduction of finger snacks.

* Kitchens of India - pre-prepared foods designed by ITC's master chefs.

* Sunfeast - ITC's biscuit brand (and the sub-brand is also used on some pasta products).

Strengths

ITC leveraged it traditional businesses to develop new brands for new segments. For example,

ITC used its experience of transporting and distributing tobacco products to remote and distant

parts of India to the advantage of its FMCG products. ITC master chefs from its hotel chain are

often asked to develop new food concepts for its FMCG business.

ITC is a diversified company trading in a number of business sectors including cigarettes, hotels,

paper, agriculture, packaged foods and confectionary, branded apparel, personal care, greetings

cards, Information Technology, safety matches, incense sticks and stationery.

Weaknesses

The company's original business was traded in tobacco. ITC stands for Indian Tobacco

Company. It is interesting that a business that is now so involved in branding continues to use its

original name, despite the negative connection of tobacco with poor health and premature death.

To fund its cash guzzling FMCG start-up, the company is still dependant upon its tobacco

revenues. Cigarettes account for 47 per cent of the company's turnover, and that in itself is

responsible for 80% of its profits. So there is an argument that ITC's move into FMCG (Fast

Moving Consumer Goods) is being subsidized by its tobacco operations. Its Gold Flake tobacco

brand is the largest FMCG brand in India and this single brand alone holds 70% of the tobacco

market.

Opportunities

Core brands such as Aashirvaad, Mint-o, and Bingo, toiletries, Sun Feast (and others) can be

developed using strategies of market development, product development and marketing

penetration.

ITC is moving into new and emerging sectors including Information Technology, supporting

business solutions.

e-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an

original and well thought of initiative that could be used in other sectors in many other parts of

the world. It is also an ambitious project that has a goal of reaching 10 million farmers in

100,000 villages.

ITC leverages e-Choupal in a novel way. The company researched the tastes of consumers in the

North, West and East of India of Atta (a popular type of wheat flour), then used the network to

source and create the raw materials from farmers and then blend them for consumers under

purposeful brand names such as Aashirvaad Select in the Northern market, Aashirvaad MP

Chakki in the Western market and Aashirvaad in the Eastern market. This concept is

tremendously difficult for competitors to emulate.

Threats

The obvious threat is from competition, both domestic and international. The laws of economics

dictate that if competitors see that there is a solid profit to be made in an emerging consumer

society that ultimately new products and services will be made available. Western companies

will see India as an exciting opportunity for themselves to find new market segments for their

own offerings.

ITC's opportunities are likely to be opportunities for other companies as well. Therefore

thedynamic of competition will alter in the medium-term. Then ITC will need to decide whether

being a diversified conglomerate is the most competitive strategic formation for a secure future.

STRENGTHS

Well known brand name Respected company Good distribution network and

skills Good product quality(business

has been awarded with ISO 9001:2000 by Det

Norske Veritas.) Diversified company trading in

a number of business sectors New Brands for New

segements.

WEAKNESSES

Still people connect ITC with a tobacco brand which is related with poor health and premature death.

Still the company is dependent on tobacco for its revenue generation.

OPPORTUNITIES

New product discoveries

ITC is moving into new and emerging sectors including Information Technology, supporting business solutions

S-O strategies

Adding innovative products to the existing product line (new designs and look of products)

Further Diversification in this business.

W-O strategies

Making use of distribution channels to provide the products as and when need arises

Providing offers with products

More investment in advertising and promotional activities

THREATS

Changing customer needs and preferences

Threats from rival firms- domestic and international.

Western companies see India as an exciting opportunity for themselves to find new market segments for their own offerings

S-T strategies

Producing quality product using core competencies

Working out measures to over take the rival company products, in this case of HUL.

W-T strategies

targeting government offices in rural areas.

Value Chain

The value chain is a systematic approach to examining the development of competitive

advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain

consists of a series of activities that create and build value. They culminate in the total value

delivered by an organization. The 'margin' depicted in the diagram is the same as added value.

The organization is split into 'primary activities' and 'support activities.

Primary Activities

Inbound Logistics

Here goods are received from a company's suppliers. They are stored until they are needed on the

production/assembly line. Goods are moved around the organization. ITC has got a strong and

effective inbound logistics which a strong connectivity from its factories to warehouses.

Operations

This is where goods are manufactured or assembled. Individual operations could include room

service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a

new car's engine. ITC is regarded as one of the most reputed companies to have the excellent

operational structure. E-choupal is an example of its operational excellence.

Outbound Logistics

The goods are now finished, and they need to be sent along the supply chain to wholesalers,

retailers or the final consumer. ITC has as strong distribution network which makes the company

make its products available even in the nook and corner of the rural areas.

Marketing and Sales

In true customer orientated fashion, at this stage the organization prepares the offering to meet

the needs of targeted customers. ITC has a strong focus upon marketing communications and the

promotions mix. This helps the company to create a brand image in the minds of the customers.

Service

This includes all areas of service such as installation, after-sales service, complaints handling,

training and so on. ITC tries to offer the best quality products to its customers. They re collect

the unsold items and recycle them every year. ITC also offers a good service to its suppliers and

distributors and develop goodwill.

Support Activities

Procurement

This function is responsible for all purchasing of goods, services and materials. The aim is to

secure the lowest possible price for purchases of the highest possible quality. They will be

responsible for outsourcing (components or operations that would normally be done in-house are

done by other organizations), and ePurchasing (using IT and web-based technologies to achieve

procurement aims). The goodwill they develop through their services help them to procure at

lowest prices rather than its competitors.

Technology Development

Technology is an important source of competitive advantage. Companies need to innovate to

reduce costs and to protect and sustain competitive advantage. This could include production

technology, Internet marketing activities, lean manufacturing, Customer Relationship

Management (CRM), and many other technological developments. ITC has one of the best R&D

that helps the company to come out with new inventions for example like e-choupal and also

provide the consumers with the lowest and best possible prices.

Human Resource Management (HRM)

Employees are an expensive and vital resource. An organization would manage recruitment and

selection, training and development, and rewards and remuneration. The mission and objectives

of the organization would be driving force behind the HRM strategy. ITC takes care of its

employees and the system is also very transparent. It encourages new talents which makes the

company to grow every day.

Firm Infrastructure

This activity includes and is driven by corporate or strategic planning. It includes the

Management Information System (MIS) and other mechanisms for planning and control such as

the accounting department. The distribution network is an example of the firms infrastructure.

This is one of the major factors for ITC to be in the list of the top companies.

Boston Consultancy Graph

It is a management tool that serves four distinct purposes. It can be used to classify

product portfolio in four business types based on four graphic labels including Stars, Cash Cows,

Question Marks and Dogs; it can be used to determine what priorities should be given in the

product portfolio of a company; to classify an organisation’s product portfolio according to their

cash usage and generation; and offers management available strategies to tackle various product

lines. Consider companies like Apple Computer, General Electric, Unilever, Siemens, Centrica

and many more, engaging in diversified product lines. The BCG model therefore becomes an

invaluable analytical tool to evaluate an organisation’s diversified product lines as later seen in

the ensuing sections.

The BCG Growth-Share Matrix is based on two dimensional variables: relative market

share and market growth. They often are pointers to healthiness of a business (Kotler 2003;

McDonald 2003). In other words, products with greater market share or within a fast growing

market are expected to wield relatively greater profit margins. The reverse is also true.

Components of the model:

Stars

• Hotels• Paperboards/

Packaging• Agri business

Question Mark

• FMCG- Others

Cows

• FMCG-Cigarettes

Dogs

• ITC InfoTech

Cash Cows

These products are said to have high profitability, and require low investment for the fact that

they are market leaders in a low-growth market. This viewpoint is captured by the founders

themselves thus:

The cash cows fund their own growth. They pay the corporate dividend. They pay the corporate

overhead. They pay the corporate interest charges. They supply the funds for R&D. They supply

the investment resource for other products. They justify the debt capacity for the whole

company.

ITC`s cigarette business:

Market leadership Powerful brand across segments Leadership in all segments - geographic & price Extensive FMCG distribution network

Direct servicing of 1,00,000 markets & 2 million retail outlets World-class state-of-the-art technology and products

Investment - Rs.10 billion in six years Exciting long term growth potential

 Stars

Stars are leaders in high growth markets. They tend to/should generate large amounts of cash but

also use a lot of cash because of growth market conditions.

ITC`s Paperboard Industries:

Market leader in growth segment - value added coated boards

World-class contemporary technology

• Elemental Chlorine Free (ECF) Pulp Mill fully operational – only one of its kind

in India meeting world-class environmental standards

Internationally competitive quality and cost

Social farm forestry in mill command area to improve access to cost effective fibre & to

attain self-sufficiency

• Biotech research based high yielding Clones – effectiveness tested in nearly

68,000 hectares

Fully integrated operations with in-house pulping capacity at appx. 1.10 lac MT

• Expansion programme underway; source of sustainable competitive advantage

ITC`s Agri commodity Business:

Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products, Coffee etc.

Unique CRM programme in commodity exports

Leveraging IT for the transformational ‘e-Choupal’ initiative

Rural India’s largest Internet-based intervention

Over 38000 villages linked through around 6400 e-Choupals servicing over 3.5

million farmers

Distinctive sourcing capability for ITC’s Foods business

ITC`s Hotel Business:

ITC-Welcomgroup : a leading hotel chain in India

• Strategy to establish presence in key business locations to complete the chain

achieved in end 2004

• Over 5200 rooms under 4 distinct brands

CATEGORY BRAND POSITIONING

Luxury ITC Hotel: Luxury

Collection

“Mansions of Luxury”

Upper Scale Welcome Hotel: Sheraton “Passion for Quality”

Upper- mid- scale Fortune Hotels “Promise of True Value”

Heritage Welcome Heritage “Unique Experiences”

Capacity expansion underway at Bangalore and Chennai; plans for other locations also

being progressed

Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @

45%) amongst the 3 leading chains

Leverages unique service proposition and international alliance with Starwood Hotels &

Resorts

• ‘Luxury Collection’ / ‘Sheraton’

 

Question Marks

Question Marks have not achieved a dominant market position, and hence do not generate much

cash. They tend to use a lot of cash because of growth market conditions.

The FMCG sector that includes the personal care products (Vivel, Fiama) are yet to gain the

market position.

 

Dogs

Dogs often have little future and are big cash drainers on the company as they generate very little

cash by virtue of their low market share in a highly low growth market.

The ITC InfoTech at present has relatively very low market share compared to the other

companies. The company has to decide whether this can be liquidated or it can be or it can

develop some ew innovation strategies so that it grows well in the future.

ECONOMIC TIMES

The following are some articles that we have picked up from the Economic Times which makes

the strategic decisions of ITC even clearer.

ITC up on ahead of quarterly numbers(19 Jan 2009, 1335 hrs IST, ET Bureau)

MUMBAI: Shares of FMCG major ITC Ltd were trading 0.7% higher at Rs 173.50 on

expectations of appreciable quarterly numbers.

Analysts are expecting ITC to register a top line growth (YoY) in the range of 18 to 20% for the

quarter ended Dec. 31, 2008. PAT (net profit) is expected to rise in the range of 10% and 14%

during the considered quarter.

Hotels business is expected to report decline in sales. FMCG losses are likely to decline, as the

company benefits from the decline in palm oil price, a key ingredient in toilet soaps. Paper and

paperboard division will gain from stabilization of the pulp facility although increase in input

costs in previous quarters will limit gains.

"Operating margins will still be under pressure for ITC. The company is expected to be under

pressure as a result of losses arising out of non-FMCG businesses. We maintain a neutral view

on the stock," said Angel Broking's FMCG analyst Anand Shah.

ITC looking for acquisition of hotels (11 Dec 2008, 1639 hrs IST, PTI)

With the global downturn throwing up opportunities to take over valuable assets at attractive

price, diversified conglomerate ITC Limited on Thursday said it is considering acquisitions,

mainly in the hospitality sector.

"We are looking for operations to buy assets, particularly in hotel area. We will buy where asset

prices are feasible and we are looking at all categories ranging from three to seven star hotels,"

ITC Chairman Y C Deveshwar said on the sidelines of a CII summit here.

He said the company has resources to expand and will take the opportunity of economic

slowdown to acquire assets as asset value at present is very attractive.

"In fact, we are looking this (economic slowdown)as an opportunity to grow. In every adversity

there is an opportunity," Deveshwar added.

Asked if the slowdown had impacted the company's expansion plans, he said, "There are no

plans to cut back on investments. We will stick to our capex plan because we would not sacrifice

our long-term focus. We are going to accelerate our investment."

Last year, the company had said it plans to invest about Rs 15,000 crore in the next five to seven

years in areas such as hotels, agri-business and FMCG.

Conclusion

“BLENDING DIVERSE SKILLS AND LEVERAGING ITS DISTRIBUTION MUSCLE, THE TOBACCO GIANT IS UNLEASHING A WELTER OF NEW BUSINESSES. AN INSIDE ACCOUNT OF THE SILENT REVOLUTION”

These are the words from the mouth of the editor of business today Sanjoy Narayan. This is very

true in the context of ITC. ITC has been a leader in the tobacco business, but it realize from the

upcoming trends that remaining with a single business is not a noble thought, moreover the

company was threatened of the anti-tobacco campaign. Therefore the company decided to

venture into InfoTech with ITC InfoTech, foods via Kitchens of India, greeting cards through

Expressions and lifestyle retailing through Wills Sport. The revenue generation also is very high

from each of these products. .ITC was a cash rich company with a liquidity of Rs.8816 million in

the cigarette business, even though the company understood the need and usefulness of

diversification.ITC by spreading its wings in the lifestyle segments has opened forty-five stores

in 34 cities in just under a year, selling an expensive fashion brand of relaxed-wear. This way it

has gained a victory lap through its Wills Sport Brand.

The company has started its retail stores not only in Indian metros but also in the small towns

like Ranchi, Jabalpur, Gwalior, Belguam, Ernakulam etc. thus the company adopted strong

market campaign, and used its brand image to attract the Indian youth. The strategies adopted by

the company has helped it to differentiate itself in this segment, like the company is outsourcing

its designs to The American Design Intelligence Group (ADIG), a San Francisco, US-based

garment and retail consultancy. Now it has its own six-member team, even as it continues a tie-

up with Science & Designs, an Italian fashion design house – through which it keeps a watch on

hot western labels such as Banana Republic and Armani Exchange.

Thus by adopting these strategies ITC will surely maintain its success and add many more new

sub-brands to its corporate group-ITC.