Strategy Management - ITC LTD

Strategic Management

Case Study

Strategic management Strategic management

Case study:

ITC Limited

Prepared By: Manohar M. M. Iyer

XMBA Batch 19 , ITM Vashi, 2012.


Case Study

Disclaimer

– This presentation is prepared purely as an educational project assignment to be

submitted as a component of the XMBA curriculum being conducted by ITM

(Institute for Technology and Management) at Vashi, Navi mumbai.

– The information contained within this presentation is for sample representation

purposes only.purposes only.

– Though this document is prepared by taking due references from various websites,

however, no information contained in this document should be considered by any

individual, investor,share holder, group, organization, company or any other entity

as a true & correct information provided directly by ITC Ltd.

– The reader of this presentation is strongly advised not to use this as a guide that

may influence any of your ideas/views/interests/feedback related to ITC Ltd.




Case Study

Introduction

• To understand the strategic management

initiatives implemented by ITC Ltd. by

perusing the following areas

– What is ITC Ltd?– What is ITC Ltd?

– Diversifications

– Contribution of products towards the Group

– Performance over the years

• An attempt to suggest future strategy




Case Study

What is ITC Ltd.?




Case Study

The ITC Profile

• Started on August 24, 1910 as Imperial Tobacco

Company of India Limited

• Became India Tobacco Company Limited in 1970

• Renamed as I.T.C. Limited in 1974• Renamed as I.T.C. Limited in 1974

• Over the years built a portfolio encompassing a wide

range of businesses.

• Rechristened as 'ITC Limited‘ on September 18, 2001

• Current Market capitalization of over US $ 33 billion

• Current Turnover of US $ 7 billionPrepared By: Manohar M. M. Iyer



Case Study

ITC list of Businesses

• Cigarettes

• LRBD

• Hotels

• Paperboards & Specialty Papers• Paperboards & Specialty Papers

• Packaging

• Agri Business Division

• Agri Business Division - ILTD

• e-Choupal




Case Study

ITC Purpose

• Vision

Sustain 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 • Mission

To enhance the wealth generating capability of the enterprise in a

globalizing environment, delivering superior and sustainable stakeholder

value .

• Core Values

Aimed at developing a customer-focused, high-performance organization

which creates value for all its stakeholders, includes Trusteeship, Customer

Focus, Respect For People, Excellence, Innovation and Nation Orientation.Prepared By: Manohar M. M. Iyer



Case Study

Chairman Speaks

• "ITC believes that its aspiration to create

enduring value for the nation provides the

motive force to sustain growing shareholder

value. ITC practices this philosophy by not only value. ITC practices this philosophy by not only

driving each of its businesses towards

international competitiveness but by also

consciously contributing to enhancing the

competitiveness of the larger value chain of

which it is a part.“ – Shri. Y C DeveshwarPrepared By: Manohar M. M. Iyer



Case Study

Corporate Strategy

• 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. 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’s various businesses.

• Create distributed leadership within the organization by nurturing talented and focused

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.




Case Study

Diversifications




Case Study

The ITC Journey

• Initial years primarily devoted to growth of Cigarettes and

Leaf Tobacco businesses.

• Packaging & Printing Business set up in 1925 as a strategic

backward integration

• In 1975, the Company launched its Hotels business with the • In 1975, the Company launched its Hotels business with the

acquisition of a hotel in Chennai which was rechristened 'ITC-

Welcomgroup Hotel Chola‘

• In 1979, ITC entered the Paperboards business by promoting

ITC Bhadrachalam Paperboards Limited.

• In 1990, ITC acquired Tribeni Tissues Limited, a major supplier

of tissue paper to the cigarette industry.




Case Study

The ITC Journey…………………….(contd.)

• In 1990, set up the Agri Business Division for export of agri-

commodities.

• Entered the Lifestyle Retailing business with the Wills Sport range of

international quality relaxed wear in 2000

• In 2000, ITC spun off “ITC Infotech India Limited”

• 2002’s Safety Matches initiative; brands like iKno, Mangaldeep and Aim.

• In 2003 forayed into the marketing of Agarbatti; Mangaldeep.

• Launched range of notebooks under brand Paperkraft in 2002 &

Classmate in 2003. 2007- 2009 saw the launch of Practical Books,

Drawing Books, Geometry Boxes, Pens and Pencils under the

'Classmate' brand.

• ITC entered the Personal Care Business in 2005; 'Essenza Di Wills',

'Fiama Di Wills', 'Vivel' and 'Superia' brands.Prepared By: Manohar M. M. Iyer



Case Study

The ITC Journey……………………………..

ITC's foray into the Foods business

• In August 2001 with the introduction of 'Kitchens of India'

ready-to-eat Indian gourmet dishes.

• In 2002, ITC entered confectionery and staples segments :

launched “mint-o” , “Candyman” and “Aashirvaad “

• 2003 witnessed introduction of Sunfeast (biscuits segment).• 2003 witnessed introduction of Sunfeast (biscuits segment).

• Entered branded snacks category with Bingo! in 2007

• In 2010, ITC launched Sunfeast Yippee! to enter the Indian

instant noodles market




Case Study

Contribution of products towards

the Groupthe Group




Case Study

Facts - Net Profit up 20.2%

Food Business

• Non - Cigarette FMCG segment registers robust revenue growth of

23%

• 'Aashirvaad' atta strengthened its leadership position across

markets & with value-added offerings like 'Multi-grain' and 'Select'

brands, the Staples category improved margins.brands, the Staples category improved margins.

• 'Sunfeast Yippee!' noodles continued to garner consumer franchise

• 'Sunfeast' biscuits sustained its robust growth trajectory, launched

'Kaju Badam Cookies’ response been encouraging.

• The Bingo! range of potato chips and finger snacks grew at a rapid

pace. 'Tangles’ and 'Mad Angles Masti Chaat' were well received by

target consumers




Case Study


Personal Care

• The Personal Care Products business made significant strides during

the quarter with its carefully crafted portfolio of product offerings

under the 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia'

brands, further gaining consumer franchise.

• The skin care category was fortified with the launch of 'Vivel • The skin care category was fortified with the launch of 'Vivel

Summer Fair', a differentiated summer specific offering with Triple

Filter SPF 15 and Aloe Vera for fresh, fair skin.

• Together with 'Vivel Active Fair' and 'Superia Super Fair', the

augmented portfolio of fairness creams continues to receive

encouraging consumer response and is being rolled out to target

markets.




Case Study


Education & Stationery Products

• The Education & Stationery Products business registered

impressive growth powered by the 'Classmate' brand

which continued to consolidate its leadership position in

the student notebooks category. the student notebooks category.

• In the writing instruments and scholastic products

categories, the business introduced a number of new

products and variants in pens, pencils and scholastic

products under the 'Classmate and 'Paperkraft' brands.




Case Study


Cigarettes

• Several initiatives across the portfolio in terms of pack

modernization and introduction of variants and limited

edition packs under the Classic', 'Flake', 'Gold Flake

Premium Filter' brands further bolstering market standing Premium Filter' brands further bolstering market standing

• Also test marketing filter cigarettes of length not

exceeding 65 mm.

• On the manufacturing front, investments continued to be

made towards enhancement of quality, productivity and

variety.




Case Study


Hotels

• In line with its investment led growth strategy, given the compelling

longer term potential of this sector, the Company, through a newly

formed subsidiary, acquired a prime plot of land in Colombo, Sri

Lanka on a 99-year lease from the Government of Sri Lanka, for

developing a 5- star luxury property. developing a 5- star luxury property.

• The super luxury property, ITC Grand Chola at Chennai, is complete

and awaiting statutory clearances prior to commercial launch.

• The construction activity of the new luxury properties at Kolkata

and at Classic Golf Resort near Gurgaon are progressing

satisfactorily.




Case Study


Paperboards, Paper & Packaging

• Segment Revenues recorded a growth of 9%

• Segment Results grew faster at 17% driven

primarily by continuous enhancement in the

product mix. product mix.

• The business continues to leverage its state-of-

the-art facilities to provide strategic sourcing

support to the FMCG businesses, enabling product

differentiation and faster speed-to-market.




Case Study


Agri Business

• The business continues to provide strategic

sourcing support to the Company's Cigarettes and

Branded Packaged Foods business by ensuring

high quality supplies at optimal costs. high quality supplies at optimal costs.

• The new green leaf tobacco threshing facility in

Karnataka is fully operationalized and will further

enhance quality and improve supply chain

efficiencies.




Case Study

Performance over the years




Case Study

Results 2012

• Net Revenue : +15.3%

• Profit from Operations : +21.3%

• Profit Before Tax : +20.6%

• Net Profit : +20.2%• Net Profit : +20.2%

• Gross Income for the year grew by 14.9% to over Rs.

36,000 crores.

• Profit before tax increased by 22.4% to over Rs. 8,800

crores

• Net Profits grew by 23.6% to over Rs. 6,100 crores.Prepared By: Manohar M. M. Iyer



Case Study

Over the years

• Non-cigarette segment net revenue growing 12-fold from

about Rs. 1,360 crores in 1996 to Rs. 16,150 crores today.

• 57% of net segment revenue from businesses other than

cigarettescigarettes

• Market capitalization, which stood at Rs. 5,570 crores in

1996, has multiplied over 35 times to touch Rs. 2 lakh

crores.

• Total Shareholder Returns, measured in terms of increase

in market capitalization and dividends, have grown at a

compound rate of 25.7% per annum during this period.Prepared By: Manohar M. M. Iyer



Case Study

Attempt to suggest future

strategystrategy




Case Study

SWOT

• STRENGTHS– Brand Image

– Distribution Network

– Management

• WEAKNESS• WEAKNESS– Unrelated diversification

• OPPORTUNITY– Rural Market

– E – choupal

• THREATS– Increasing tax in Cigarettes & Health hazard

– Competition From Domestic & International players




Case Study

Competitors of ITC Ltd

• Parle, Britannia, etc.

• Godrej, Unilever Ltd, etc.

• TCS, Wipro, infosys, etc.• TCS, Wipro, infosys, etc.

• TAJ hotels, Sherton, etc.

• Etc., etc., since ITC is diversified in to

various areas




Case Study

Suggested Strategies

• Gradually divest from Tobacco business

• Invest in Non-Tobacco Agri producton (Aid ITC

foods)

• Increase M & A to boost ITC infotech business• Increase M & A to boost ITC infotech business

• May enter into other FMCG sectors like soaps &

detergents or soft drinks

• Use & increase distribution network to penetrate

Rural MktsPrepared By: Manohar M. M. Iyer



Case Study

I thank one and all who have provided me with the opportunity to handle this

responsibility and the knowledge & support to prepare this Presentation.

Please feel free to forward your valuable feedback, comments, queries and

suggestions related to this presentation to [email protected]

Thank you,

Warm regards,

Manohar M. M. Iyer

XMBA Batch 19 , ITM Vashi, 2012



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