STM Term Paper - Britannia - Group2 - SecD

8/12/2019 STM Term Paper - Britannia - Group2 - SecD

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STRATEGIC MANAGEMENT

Term Paper

Assignment on

Presented by Group 2:

Abhijeet Patnaik- 12202176

Abhishek Khetan12202178

Amit Kumar Das12202179

Koustav Laha12202193

T. Raj Kumar12202230

Shalini Gupta - 12202240


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Britannia Industries Ltd. 2

TABLE OF CONTENT

Value.......................................................................................................................................... 4

Impacts on Return on Equity: ........................................................... .............................................................. .... 4

Economic Value Added ........................................................................................................... 6

Ratios Analysis ......................................................................................................................... 7

Profitability Ratio: ...................................................... ................................................................. ....................... 7

Liquidity Ratio: ................................................................................................................ .................................. 7

Strategic Direction ................................................................................................................... 8

Vision: ............................................................. ................................................................. .................................. 8

Mission: ........................................................... ................................................................. .................................. 8

Values: ............................................................................................................................................................... 8

Goal: ..................................................... ................................................................. ............................................. 8

Objectives: ......................................................................................................................................................... 8

Plans: ............................................................... ................................................................. .................................. 8

Analysis of External Environment ......................................................................................... 9

Threat of New Entry:.......................................................................................................................................... 9

Power of Suppliers: ............................................................................................... ............................................. 9

Power of Customers: ............................................................................................. ........................................... 10

The Threat of Substitutes: ................................................................................................................................ 10

Rivalry among Existing Competitors: ........................................................ ...................................................... 10

Complementors: ......................................................... ................................................................. ..................... 10

Social: .............................................................. ................................................................. ................................ 11

Technology:...................................................................................................................................................... 11

Economical:...................................................................................................................................................... 11

Political: ........................................................................................................................................................... 11

Key Success Factor ................................................................................................................ 12

Demand from Customers side: ................................................................................................. ........................ 12

Coping up with Competition: ........................................................... .............................................................. .. 12

Internal Analysis .................................................................................................................... 13

Tangible Resources: .............................................................. ................................................................. .......... 13

Intangible Resources: ............................................................ .............................................................. ............. 15

Human Resources: ........................................................................................................................................... 15

Marketing Capabilities: ......................................................... .............................................................. ............. 16

R & D Capabilities: ..................................................................................................................... ..................... 16

Technological Capabilities: .............................................................. .............................................................. .. 17


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Supply Chain and Manufacturing Capabilities: .................................................... ........................................... 17

Competitive Advantage ......................................................................................................... 19

Creating Competitive Advantage: .................................................................................................................. .. 19

Sustaining Competitive Advantage: ........................................................... ...................................................... 19

Appropriability: .......................................................... ................................................................. ..................... 21

Competitor Analysis .............................................................................................................. 22

Opportunity: ............................................................... ................................................................. ..................... 22

Risks and Concerns: .............................................................. ................................................................. .......... 22

Challenges: ...................................................... ................................................................. ................................ 22

Functional Strategy ................................................................................................................ 23

Differentiation: ........................................................... ................................................................. ..................... 23

Low Cost: ........................................................ ................................................................. ................................ 24


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Value

Impacts on Return on Equity:

Asset Turnover Ratio: Asset turnover measures a firm's efficiency at using its assets in

generating sales or revenue - the higher the number the better. It also indicates pricing

strategy: companies with low profit margins tend to have high asset turnover, while those

with high profit margins have low asset turnover.

Britannia Industries Ltd. 2013 2012 2011 2010 2009

Currency: Rs. Thousand 12 mths 12 mths 12 mths 12 mths 12 mths

Revenue / Sales 56,496,600 50,056,600 42,459,805 34,266,411 31,428,919

Total Assets 16,830,300 16,723,400 8,889,881 8,258,690 8,596,456

Asset Turnover Ratio 335.68% 299.32% 477.62% 414.91% 365.60%

Profit Margin Ratio: Looking at the earnings of a company often doesn't tell the entire

story. Increased earnings are good, but an increase does not mean that the profit margin of a

company is improving. For instance, if a company has costs that have increased at a greater

rate than sales, it leads to a lower profit margin. This is an indication that costs need to be

under better control.



Net Income / PAT 2,338,700 1,867,400 1,452,913 1,165,110 1,804,001

Revenue / Sales 56,496,600 50,056,600 42,459,805 34,266,411 31,428,919

Profit Margin Ratio 4.14% 3.73% 3.42% 3.40% 5.74%

2013 2012 2011 2010 2009

Asset Turnover Ratio 335.68% 299.32% 477.62% 414.91% 365.60%

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

Percentage

Asset Turnover Ratio


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Leverage:Leverage helps both the investor and the firm to invest or operate. However, it

comes with greater risk. If an investor uses leverage to make an investment and the

investment moves against the investor, his or her loss is much greater than it would've been if

the investment had not been leveraged - leverage magnifies both gains and losses. In the

business world, a company can use leverage to try to generate shareholder wealth, but if it

fails to do so, the interest expense and credit risk of default destroys shareholder value.



Debt 4,001,400 5,464,100 4,314,459 4,296,168 251,623

Total Equity 6,364,100 5,200,400 4,513,049 3,962,522 8,245,412

Leverage 0.63 1.05 0.96 1.08 0.03

2013 2012 2011 2010 2009


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Percentage

Profit Margin Ratio

2013 2012 2011 2010 2009

Leverage 0.63 1.05 0.96 1.08 0.03

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Times

Leverage


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Economic Value Added

1. Taken 10 years value of share for Britannia and S&P BSE 200.2. Calculated Beta as shown below.

COVARIANCE.P 0.000246819

VARIANCE.P 0.000591309

Beta 0.42

3. Calculated Return on Equity by the Formula:

Beta 0.42

Market Return 6.08%Risk Free Return 8.47%

Return on equity 7.47%

4. Calculate EVA:Particulars 2013 2012 2011 2010 2009

Total Equity 6,364,100,000 5,200,400,000 4,513,049,000 3,962,522,000 8,245,412,000

Cost of Equity 7.47% 7.47% 7.47% 7.47% 7.47%

Total Debt 2,345,400,000 4,541,900,000 4,314,459,000 4,296,168,000 251,623,000

Interest 377,400,000 380,700,000 400,783,000 82,059,000 160,071,000

Cost of Debt 16.09% 8.38% 9.29% 1.91% 63.62%

Tax 30.00% 30.00% 30.00% 30.00% 30.00%

D+E 8,709,500,000 9,742,300,000 8,827,508,000 8,258,690,000 8,497,035,000

COC 8.49% 6.72% 7.00% 4.28% 8.57%

Operating Income 3,144,500,000 2,319,100,000 17,940,000,000 12,480,000,000 22,930,000,000

Tax 983,100,000 656,300,000 528,502,000 509,035,000 521,176,000

NOPAT 2,161,400,000 1,662,800,000 17,411,498,000 11,970,965,000 22,408,824,000

Capital 8,709,500,000 9,742,300,000 8,827,508,000 8,258,690,000 8,497,035,000

EVA =

NOPAT-(COC*Capital) 1,421,821,730 1,007,840,120 16,793,825,140 11,617,523,307 21,680,842,024


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Ratios Analysis

Profitability Ratio:

Britannia Industries Ltd. 2013 2012 2011 2010 2009Currency: Rs. Thousand 12 mths 12 mths 12 mths 12 mths 12 mths

1

Net Income / PAT 2,338,700 1,867,400 1,452,913 1,165,110 1,804,001

Revenue / Sales 56,496,600 50,056,600 42,459,805 34,266,411 31,428,919


2

Net Income / PAT 2,338,700 1,867,400 1,452,913 1,165,110 1,804,001

Total Assets 16,830,300 16,723,400 8,889,881 8,258,690 8,596,456

Return on Asset / ROA 13.90% 11.17% 16.34% 14.11% 20.99%

3

Net Income / PAT 2,338,700 1,867,400 1,452,913 1,165,110 1,804,001

Total Equity 6,364,100 5,200,400 4,513,049 3,962,522 8,245,412Return on Equity/ROE/ROI 36.75% 35.91% 32.19% 29.40% 21.88%

Liquidity Ratio:



1

Current Asset 7,153,800 8,579,800 11,704,473 10,295,469 9,624,384

Current Liability 8,677,400 9,792,600 5,968,539 5,017,270 4,132,898

Current Ratio 82.44% 87.62% 196.10% 205.20% 232.87%

2

Cash and bank Balance 644,800 309,400 287,465 233,804 407,978

Marketable Securities 455,000 2,105,400 5,449,993 4,906,389 4,230,969

Accounts Receivable 771,200 521,400 572,651 394,868 496,143

Current Liability 8,677,400 9,792,600 5,968,539 5,017,270 4,132,898

Quick Ratio 21.56% 29.98% 105.72% 110.32% 124.25%

3

Accounts Receivable 771,200 521,400 572,651 394,868 496,143

Revenue / Sales 56,496,600 50,056,600 42,459,805 34,266,411 31,428,919

Avg Revenue / Day 154,785.21 137,141.37 116,328.23 93,880.58 86,106.63

Avg. Days Receivable 4.98 3.80 4.92 4.21 5.76

4

Inventory 3,314,900 3,822,800 3,112,005 2,683,435 2,536,331

Profit Before Tax 3,321,800 2,523,700 1,981,415 1,674,145 2,531,472

Cost of Goods Sold 53,174,800 47,532,900 40,478,390 32,592,266 28,897,447

Cost of Goods

Sold / Day 145,684.38 130,227.12 110,899.70 89,293.88 79,171.09

Avg. Day Inventory 22.75 29.35 28.06 30.05 32.04


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Strategic Direction

Vision:

To dominate the food and beverage market in India with a distinctive range of Tasty Yet

Healthy Britannia brands.

Mission:

To dominate the food and beverage market in India through a profitable range of Tasty yet

Healthy products by making every Indian a Britannia consumer. We want to be part of our

consumer- at home, out of home, a natural part of his life.

Values:

Britannia Nutrition Foundation:Autonomous, nonprofit entity that works with the issue ofchild mal-nutrition

Goal:

To provide consumers the highest standards of food safety and ensure hygiene in new

diversified food category.

Objectives:

To enter ready to eat food category within next 1 year and focus on generating growth

through increasing the base and frequency of consumption.

Plans:

We aspire to achieve a market share of 20% in ready to eat food category in next 2 years after

launch.


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Analysis of External Environment

Threat of New Entry:1. Supply-side economies of Scale: Britannia has an advantage of backward integration

in the field of wheat supply.

2. Demand side benefit of scale: Britannia is a well-known brand and very popular in themarket. It is known for its product differentiation with new products in the market

continuously.

3. Customer Switching Cost: In this industry of customer switching cost is very lesswhich is risky for Britannia.

4. Capital Requirement: In this kind of industry the initial Capital Requirement is veryhigh. With sophisticated machineries and complex supply chain.

5. Unequal access to distribution channel: Each Company has its own uniquedistribution channel which enables it to differentiate. For a new entrant in this

industry it is difficult to design and implement new distribution channel.

Power of Suppliers:

Wheat, sugar and milk are the main raw material for the company. The prices have been

volatile and continue to remain volatile. The company is open to taking calibrated price hikes

to protect margins. The company is backward integrating to maintain quality and quick

turnaround in all regional markets. It has increased the investments behind creating backend

capacity to further increase the scope of internal sourcing.

Factors to be kept in mind are:

1. Determine the cost of switching between suppliers.2. Do the suppliers offer products that are differentiated from other suppliers available?3. There are always chances that, the suppliers can integrate forward into the industry.

Economic Profit = [(Price - Avg. Cost) X Sales Volume] - COC

Economic Profit = [(Price- Avg. Cost) X Sales Volume] - COC


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Power of Customers:

Biscuits which are the largest contributor in the segment at 75% have witnessed an industry

wide trend shift towards the value added cream & cookies segment. The industry witnessed a

visible change in demand pattern over this period from glucose biscuits to higher valued

added biscuits such as creams, cookies &health digestive biscuits which saw a rise in

demand. Britanniasproduct portfolio across these categories is priced at a premium.

The Threat of Substitutes:

The Brand Asset Valuator (BAV) from Re-diffusion- found that Britannia enjoys high

scores on Differentiation (reason to stand out), Relevance (reason to adopt in consumers'lives), Esteem (regard for the brand), and Knowledge (awareness and saliency). Although

Parle is the market leader in terms of volume and value, it got fewer score on differentiation.

Substitutability of the industrys product might be available but Britannia has the advantage

of Differentiation which allows them to enjoy high customers willingness to pay for their

products.

Rivalry among Existing Competitors:

A number of MNC bakery giants are entering Indian biscuit market over the last 2 years. This

coupled with a very large and unorganized local biscuit manufactures add to the competition.

Britannia is fighting competition through its new launches positioned with a health and

wellness tag and also with entry into other new growing snack and dairy categories. This

provides them the ability to differentiate amongst the competitors.

Complementors:

We cant find any such complementors for Britannia as it is not dependent on any other

supplier which majorly delivers some value to its products.





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Social:

The company is going for a pre immunization of product portfolio. The company was quick

to notice the rise in health awareness and used its brand leverage to gain foothold in new

segments such as dairy products health snacks, yogurts and bread offerings. On a macro level

there is huge opportunity ahead as demographic dividend plays out.

Technology:

With plants located in Kolkata, Delhi, Chennai, Mumbai & Pantnagar the company began

investing in capacity addition with geographical diversification 2 years ago. The companys

average CAPEX was Rs. 200crores p.a. The company is backward integrating to maintainquality and quick turnaround in all regional markets.

Economical:

The staggered increase in diesel prices during this fiscal will have a negative impact on cost

of distribution. To overcome these challenges, company has planned manufacturing

capacities across regions, which will result in controlling distribution costs. Decentralized

manufacturing facilities to help consolidate regional distribution costs and hence control

overall logistics cost.

Political:

The MRP for wheat has been recently been revised upwards but because of ensuing elections,

prices of sugar & milk have started to ease off and stabilize.





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Key Success Factor

Demand from Customers side:

Britannia has successfully understood the need of the customers in the present generation as it

has capitalized well particularly on the health segment. It is very successful and has no other

competitor in this segment i.e. NutriChoice

Coping up with Competition:

The company has been very successful in coping up with the competition as it is facing a lot

of challenges in the Cream Biscuit Segment and Cookies, which are priced at premium.

Major Competitors are:

1. Parle2. Priya3. Sunfeast4. Anmol5. Biskfarm


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Internal Analysis

Tangible Resources:

1. Financial Resources: Credit Rating:

CRISIL has assigned credit rating to Britannia Industries as AAA rating.

Debt-Equity Ratio:Debt

(all values in '000) 4,001,400 5,464,100 4,314,459 4,296,168 251,623

Total Equity

(all values in '000) 6,364,100 5,200,400 4,513,049 3,962,522 8,245,412

Leverage 0.63 1.05 0.96 1.08 0.03

Cash flow:Britannia Industries Ltd. Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Currency: Rs. Million (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

-

Net cash flow from operating activities 631.4 2,467.80 2,039.40 2,431.90 2,115.40 2,778.30

Net profit before tax & extra-ordinary income 2,322.60 2,325.20 1,207.80 1,980.60 2,523.70 3,321.80

Add: Adjustments for non-cash and non-operating expenses 503.7 1,103.30 884 823.4 877.4 948.2

Less: Adjustments for non-cash and non-oper income 467.3 523.3 409.3 483.6 578.1 552.9

Operating cash flow before working capital changes 2,359.00 2,905.20 1,682.50 2,320.40 2,823.00 3,717.10

Add:Cash inflow due to 363.7 774.5 1,191.30 864.9 1,075.40 746.5

Less: Cash outflow due to 1,678.20 520.4 748.6 428.6 1,286.60 890.9

Net cash inflow from investing activities -1,211.00 -1,041.10 -405.2 -1,532.90 -524.4 495.1

Less: Cash outflow due to investing activities 2,410.10 2,454.90 1,255.40 1,936.70 2,277.70 2,207.70

Add: Cash inflow due to investing activities 1,199.10 1,413.80 850.2 403.8 1,753.30 2,702.80

Net cash inflow or (outflow) from financing activities 530.8 -1,456.40 -1,808.40 -781.5 -1,577.90 -2,996.20

Less: Cash outflow due to financing activities 1,803.20 3,211.10 1,840.50 1,073.90 1,577.90 5,570.80

Add: Cash inflow from financing activities 2,334.00 1,754.70 32.1 292.4 0 2,574.60

Net increase or (decrease) in cash & cash equivalents -48.8 -29.7 -174.2 117.5 13.1 277.2

Net increase or (decrease) in cash & cash equivalents(cl-op) -48.8 -29.7 -174.2 117.5 13.1 277.2


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2. Physical Resources: The Company's plants are situated in Kolkata, Delhi, Chennai, Mumbai, Uttarakhand,

and Orissa & Bihar with a capacity of 160,000 MT.

The company announced a plan to setup a Greenfield plant in Gujarat also. This willhelp increase presence in the Western markets and decentralised distribution activitiesfor Western India.

Wheat, sugar and milk are the main raw material for the company. The prices havebeen volatile and continue to remain volatile. The company is open to taking

calibrated price hikes to protect margins.

In March 2007, Britannia Industries Limited formed a Joint Venture with the KhimjiRamdas Group, one of the largest and the most respected business conglomerates in

the Middle East.

Britannia and its Associates have acquired a significant stake in Dubai based StrategicFood International Co. LLC and Oman based Al Sallan Food Industries Co SAOG.

Plants:Plant locations

Britannia Industries Ltd.

Year-ended : March 2013

Location State Product

Bihar Bihar

Biscuits & High Protein Food

Bread

Cake & Rusk

Lawrence Road Delhi


Bread

Cake & Rusk

Orissa Orissa


Bread

Cake & Rusk

Taratalla West Bengal


Bread

Cake & Rusk

Uttaranchal Uttarakhand


BreadCake & Rusk

Fixed Asset:Britannia Industries Ltd. Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Currency: Rs. Crore 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Gross fixed assets 453.18 511.51 547.82 593.56 677.36 784.22

Total cumulative depreciation 212.18 233.67 266.33 289.86 298.27 332.54

Net fixed assets 241.00 277.84 281.49 303.70 379.09 451.68


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Intangible Resources:

3. Technological Resources: R & D:

R & D - Expense Details

Britannia Industries Ltd. Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Currency: Crore 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

R & D expenses

(capital & current account) 3.48 4.28 4.61 9.28 6.50 8.33

Patents: Britannia Industries Limited had filed an application for the trademarkSNAX, which they had claimed to have been using from 1965. Britannia had already

registered trademarks BRITANNIA SNAX for biscuits breads, buns etc in Class 30.

The trademark application for the mark SNAX was published in the TrademarksJournal in 2005 and was opposed by PepsiCo on the grounds that the mark SNAX is

snacks misspelt and since snacks was a common English word; it should not be

registered as a trademark.

4. Reputation: Britannia Industries Ltd. is Ranked 67 out of the top 100 most trusted brands of India

according to Trust Research Advisory.

Source:http://www.trustadvisory.info/allindia.html

Good Day completed 25 years and it was appropriate to celebrate this milestone withconsumers, who, for the last 25 years have chosen Good Day as their favorite cookie.

Towards the close of the anniversary, Good Day ran a program - Heart of Gold,

which was enthusiastically received by consumers.

Britannia was once again rated the Most Trusted Food Brand by consumers acrossIndia in the annual survey done by Nielsen for The Economic Times. This is the

fourth year in succession that Britannia has achieved this distinction.

Additionally, Brand Britannia also rose to the No. 2 position across all productcategories amongst Indias Most Trusted Brands, as voted by consumers.

Human Resources:

Britannian exhibits the following leadership behaviors:

Integrity Team Orientation People Development Learning Orientation Customer Orientation
http://www.trustadvisory.info/allindia.htmlhttp://www.trustadvisory.info/allindia.htmlhttp://www.trustadvisory.info/allindia.htmlhttp://www.trustadvisory.info/allindia.html


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Quality Orientation Drive for Results Entrepreneurial Spirit System and Process Orientation Communication

Marketing Capabilities:

Currency depreciation in South Africa and certain import restrictions in Nigeria andAngola limited growth. Soft Commodity prices coupled with several initiatives aimed

at containing cost, helped support higher marketing investments to build the business

for Strategic Food International Co. LLC, Dubai (SFIC).

In 2013-14, the Company proposes to build powerful IT capabilities for marketing. Improving and maintaining consumer preference and purchase form the basis of your

Companys business and long-term success. This involves considerable investment

both in the business infrastructure and in Marketing and Sales.

The Company is using sophisticated analytical tools to isolate the impact of differentelements of the marketing mix, like price, promotions, advertising, availability, etc.,

on consumer purchases.

Britannia has a Marketing infrastructure of 16.90crores as on 31stMarch 2013.R & D Capabilities:

Core areas of Research by the Company:

Creation of a range of differentiated products / packaging for premium health,premium creams and premium cookies.

Continuous interaction and partnership with institutions and subject matter experts toderive improvements in ingredients, process technologies and cost-effective solutions.

Continuous research in the area of nutrition, analytical techniques, ingredients,packaging materials, process technology and food safety.


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Technological Capabilities:

Various actions were initiated for up gradation of technology and automation in specific

areas:

Britannia implemented best in class Supply Chain IT capabilities enabled throughSAP to transform and integrate end-to-end supply chain covering demand, capacity,

production and material planning. This will enable dynamic demand planning and

accurate forecasting in both the short and long term and provide the capability to

quickly respond to changing market needs.

Britannia has also successfully implemented a handheld based system to enable itssales people to drive efficiencies in generating and servicing retail orders.

BritanniaKonnect is another world class capability that was launched during theyear to enable tighter collaboration, communication and knowledge managementwithin the organization.

In 2013-14, Britannia proposes to build powerful IT capabilities for marketing. Britannia will also be implementing analytics in procurement to enable its

procurement team to gain greater visibility and better forecast commodity price

trends.

Technology initiatives like continuous mixing, new design oven using a differentheating system and high speed Packing Machines with auto feeders, secondary

packing system and end of line conveyorisation implemented in the Greenfield unit at

Khurda, have yielded desired results.

Using renewable fuels (biomass) as a baking fuel through the gasifier technology hashelped in reducing the carbon footprint as well as cost of baking fuel.

Supply Chain and Manufacturing Capabilities:

New biscuit manufacturing facilities at Hajipur, Khurda and Madurai were optimallyutilized.

Your Company has added a state-of-the art facility for cake manufacturing atRudrapur and along with its co-packer, a Greenfield factory for biscuit manufacturing

at Hyderabad.

To improve the back-end planning process and availability, Britannia is in the processof implementing Advanced Planning & Optimizing (APO) which is progressing as

per plan.


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The culture of continuous improvement is being created through deploying variousinitiatives like Kaizen, Total Productive Maintenance (TPM) and Total Quality

Management (TQM).

The Lean Six Sigma methodology has been adopted in solving complex issues in theorganization, thereby improving the effectiveness of processes and systems.


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Competitive Advantage

Creating Competitive Advantage:

1. Scarcity:Britannia as such has no resources that are scarce and will not be available to its

competitors.

2. Relevance: Cost effectiveness has been a key pillar of your Companys value creation strategy. A

focus on Revenue management, Cost management and Innovation forms the basis of

your Companys operations.

As in previous years, the Companys focus on creating and delivering relevant anddifferentiated propositions across the portfolio of products continued and will be

elaborated later in the section on Brands. The year 2012 also marked the Silver

Jubilee year of your Companys most iconic brand - Good Day.

Sustaining Competitive Advantage:

1. Durability: The Resources of Britannia are very strong as we have seen above. From many years Britannia has maintained the Credit rating of AAA awarded by

CRISIL.

The Net Asset of the company has been increasing continuously as the company isalso very capitalizing very well on it.

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00400.00

450.00

500.00

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

AssetValue(inCror

es)

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Net fixed assets 241.00

277.84

281.49

303.70

379.09

451.68

Net Fixed Assets


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Britannia Nutrition Foundation has been setup to demonstrate the strength anddurability of Britannia's commitment to health and enable the brand to play a

significant civic role in social community through concrete action.

2. Transparency: The information made open by the firm about its resources and capabilities should not

be to that extent that its competitors are able to copy/replicate them.

Britannias technological steps in ERP systems, Supply chain Management, QualityControl can be replicated by its competitors if they dont design it in that manner.

Company maintains transparency in its dealings, creating robust policies and practicesfor key processes and systems with clear accountability, integrity, transparent

governance practices and the highest standard of regulatory compliance.

Procurement processes have been reinforced to ensure greater competitiveness andtransparency in price discovery, through the use of e-platform.

3. Transferability: The cost of creation and relocating of large resources are difficult or not possible to be

done like the fixed assets (Plants and Manufacturing facilities) of Britannia.

Heterogeneity of resources & capabilities play a major role as coping all and enablethem to work in the same manner is not an easy job to be done.

Firm specific resources play major role as they will not be available to thecompetitors.

Capabilities are immobile as they are not dependent on a individual, as transferringthe whole team is not possible practically.

4. Replicability: Many resources and Capabilities may be easily purchased or copied like a group of

person or some technology ( SAP at Britannia), but it is not necessary that that thecompetitor will also enjoy the same productivity out of SAP as Britannia, as support

and acceptability is very important.

Resources like, Britannia is committed to driving an effective and transparentPerformance Culture and mindset wherein people take higher ownership and

accountability for their own performance and contribute positively and collaboratively

to your Companys Business Goals.


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Competitor Analysis

Opportunity:

The opportunity for Britannia is the large base of consumers in India seekingupgradation at every price pointfrom unbranded to branded at one end and to highly

differentiated and indulgent products at the other end.

The large and growing base of consumers in India attracts international and localcompetition. As discussed earlier, branded food is relatively nascent in the Indian

market and poised for fast growth in line with the experience of other countries.

Britannia continues to be the ability to service countries in the GCC and Middle Eastand selectively enter North America and other select markets, with the differentiated

and successful product range from India.

Rural India offers huge growth opportunity as Britannias market share in rural Indiais only 70% of its urban share (total share 33%). Strong brand equity, rising

aspirations, pricing power and cost effective distribution can increase growth

significantly.

Risks and Concerns:

The major risks and areas of concern stem from the aspiration to drive high double digit

growth in an environment of economic sluggishness in India, coupled with the volatility of

commodity prices and policies. Additionally, greater competitive intensity in this context

could drive up the cost of doing business.

Challenges:

In 2005, Britannia lost some of its mojo, being trounced when it came to exciting products bynew and nimble competitors like ITC's Sunfeast.

2007-Britannia had partnered with the Naandi Foundation to bring iron-fortifiedbiscuits to 150,000 children in the Indian state of Andhra Pradesh through Naandis

midday meal program. But both faced challenges to grow and sustain their efforts.

2007-Britannia faced critical challenges due to declining margins in the biscuitindustry due to the increasing costs of raw materials.

2013- Britannia finds itself staring at a new challenge, which is employee attrition.Several middle and senior level managers are choosing to exit and the company is

struggling to find replacements.


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Functional Strategy

Cost management and Innovationforms the basis of Britannias operations. As in previous years, the Companys focus on creating and delivering relevant and

differentiated propositions across the portfolio of products continued and will be

elaborated later in the section on Brands.

The year 2012 also marked the Silver Jubilee year of your Companys most iconicbrand - Good Day which saw new advertising and several consumer activities,

culminating with the Heart of Gold program that showcased stories of ordinary

people doing extraordinarily compassionate acts.

Cost effectivenesshas been a key pillar of Britannias value creation strategy. As inthe past, Britannia addressed the cost challenge by continuing to build on several cost

effectiveness and efficiencyinitiatives through a special program spanning the entire

value chain. This program involved 400 projects across functions and geographies.

Britannia continues to foster several qualityimprovement tools, using Kaizen, TotalProductive Maintenance, Total Quality Management and Six Sigma in several

manufacturing units. Britannia believes that these programs implemented continually

will hardwire a culture of efficiencyand effectiveness.

Differentiation:

The industry witnessed a visible change in demand pattern over this period fromglucose biscuits to higher valued added biscuits such as creams, cookies &health

digestive biscuits which saw a rise in demand.

During the same time period Britannia also increased its product offerings whilesimultaneously increasing its presence in diary & bakery segment. Over the years the

company has increased its offerings in both these segments with product

differentiators to beat competition.

The companys recent launches have been focused on the health and nutritionplatform. Examples of its health and nutrition launches are Nutri choice biscuits,Slimz Milk, Britannia cheese slices with 30% more calcium, Nutri choice Roasty

(savory), and Multigrain, multi-fiber, honey & oats, and wheat breads.

Over a period of time launches in this health & wellness segments likely to providethe company with improving pricing power as consumers of such products are

relatively less price sensitive.


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Britannia Industries Ltd 24

Low Cost:

Adopted various means like better use of energy and machineries, processimprovement and efficiency in use of materials.

Using renewable fuels (biomass) as a baking fuel through the gasifier technology hashelped in reducing the carbon footprint as well as cost of baking fuel.

Continuous interaction and partnership with institutions and subject matter experts toderive improvements in ingredients, process technologies and cost-effective solutions.

Company has taken an oath to create and make available products that coalesce cost,quality and aspiration imaginatively to create experiences that are unique and

differentiated.

In spite of a significant increase in fuel and energy costs and a shift in the product-mixin the factories towards products which consume more energy per ton of biscuitsproduced, both electricity and baking fuel consumptions were maintained with a

marginal increase.

Revenue and cost management form an intrinsic part of operational excellence andwill continue to be monitored closely for improvement. The role of innovation in

Britannia is about creating new sources of value. These include completely new or

renovated products and packs that create greater consumer delight or the application

of new technology that reduces cost and increases quality delivery, or a process

innovation that reduces time to completion and increases efficiency.

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STM Term Paper - Britannia - Group2 - SecD

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