Itc - Abd Report

7/21/2019 Itc - Abd Report

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A Project Report on

Submitted to:- Submitted by:-

C. NAGAPAVAN (Assistant Professor) CHIRANJEEV RAJ

Centre for Business Administration, CUJ/I/IMBA/2011/08

School of Management Sciences, Centre for Business Administration

Central University of Jharkhand. Central University of Jharkhand

Brambe, Ranchi. Brambe, Ranchi.


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ABOUT ITC

ITC was incorporated on 24 August, 1910 under the name

Imperial Tobacco Company of India Limited. It was changed to

India Tobacco Company Ltd. in 1970. It was renamed as I.T.C.Limited in 1974. Finally on 18 Sept 2001 it was rechristened as ITC

Limited.

Registered Office at Virginia House, 37 J .L. Nehru Road,

Kolkata.

ENVIRONMENTAL ANALYSIS:-

INTERNAL ENVIRONMENT-

ITC CORE VALUES:-

Trusteeship; Customer Focus; Respect to people; excellence;Innovation and Nation orientation.

PERSPECTIVE:-

Focus on transforming commodity export business from being a

price-sensitive and a cash leveraged trading operation.

MISSION OF ITC- ABD :-

To become the first choice supply chain partner for select

international customers accessing the finest agricultural and aqua

products.

VISION OF ITC-ABD:- To create 20,000 e-choupals to spreadinto 1,00,000 villages representing 1/6th of rural India.

ITC ABD was established in 1990 which contributes 60% of ITCs

total foreign exchange earnings.


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ITC Agri-business operates in 2 areas:-

1. Leaf Tobacco by ILTD ITC Leaf tobacco Division which

is Indias largest buyer, processor, consumer and

exporter of cigarettes and tobaccos. It has emerged as a

major exporter of tobacco leaf.

2. Agri-commodities by ITC-ABD ITC Agro-Business

Division.

Where ITC-ABD does fits into ITC Family?

ITC has wide range of business activities:-

The Brand Equity and Public Image is represented by:

ITC-ABD Awards & Honours

1. Golden Star trading house by Govt. of India.

2. UNIDO United nations Industrial development Organization

Award

3. The Ashoka - Changemakers Health for all4. CSR Award from TERI Tata energy research institution

5. E-choupal initiative applauded byDr. A.P.J . Abdul Kalam

during his presidentship tenure on 5thjune 2007

ITC Chairman Y.C. Deveshwar was recently ranked 7thamong

World top 100 CEOs by Harvard Business Review J an-Feb

2013 edition

ITC Limited

FMCG HotelsPackaging

Paperboards &

Specialty Paper

Information

Technology Agri-business

Leaf Tobacco

Agri- commodity


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HIERARCHY OF ITC-ABD:-

CEO- S. Shivkumar

COO- Rajnikant rai

VP Finance- Kuryan G. Stephanos

VP HR- L. Prabhakar

GM Channel & Head e-choupal- Shailesh Naik

ITC-ABD Headquarter - HYDERABAD, Andhra Pradesh.

FINANCIAL CAPABILTIES :-

ITC is the parent company of ITC-ABD. Non- cigarette

business of ITC is worth 5500 crore . 60% of ITC is Non-

cigarette business i.e. Foods business. ITC-ABD through

its production has fuelled the growth of ITC FMCG

Business in form of contributing to Kitchens of India andpromotion of brands such as Aashirwad atta, potato

chips for Bingo and others.

PRODUCTS OF ITC-ABD:

ITC

-ABD

Coffee

Food Grains

Feed Ingredients

Processed Fruits

Aqua Products

Nuts & Spices


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TECHNOLOGICAL CAPABILITIES:-

1. Coffee - State-of-the-art Curing works to process the raw

coffee supervised by a dedicated team.

2. Food Grains - Products are packed in Polypropylene & J ute

bags. Operational efficiency is achieved by vessel chartering

skills for swift loading and forwarding the cargo for timely

delivery.

3. Food Ingredients - Processed soya beans are manufactured

in leased processing plant under strict quality control team.4. Processed Fruits - ITC-ABD possess operational logistics,

processing network for fruit packed in aseptic bags, frozen

forms or in cans.

5. Aqua products Products are processed in hygienic

conditions under in-house control norms. Products are

bacteriologically tested. In-house stuffing is present to

maintain product temperature.

6. Nuts & Spices - Packed in J ute bags, polypropylene bags,paper bags. Strict quality norms are followed.

To sum up ITC-ABD has state-of-the-art technological

capacities which makes it most preferred and those factors

are:-

Efficient warehouse management Vessel charting skills

Logistics planning & control on delivery time

0% default record of delivery on time

R & D centres at Bangalore for research in agronomy,

microbiology, plant breeding, genetics and cell biology.

R & D Centres are also at Bhadrachalam and Rajahmundry

(Andhra Pradesh).

Collaboration with IISc( Indian Institute of Science)Bangalore & University of agriculture science, Bangalore.


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HACCP (Hazard Analysis and Critical Control Point) for

ensuring food safety; ISO 17025 for key-testing protocols

It follows TQM (Total quality management) & 6 sigm

ITC-ABD e-Choupal: (Version 3.0)

A unique initiative by ITC which was the brainchild of

S. Shivkumar. It uses physical transmission capabilities of

current intermediaries - aggregation, logistics, counter-

party risk and eliminate middlemen.

Village internet kiosks managed by trained farmers called

Sanchalaks who help in enabling access to website

www.itc.abd.comwhich helps to gain information in local

language about weather, market price of crops, scientific

crop practices, risk management and also provides

customised knowledge to farmers.

This technology is supported in remote areas

through power back-up by solar panel; upgraded BSNL

exchanges; VSAT equipment installation; mobile choupals

and 247 helpdesk support.

ITC e-choupal has become a case study for graduates of

Harvard Business Schol (HBS) and a forthcoming issue in

World Business Council for Sustainable Development

(WBCSD).

MARKET CAPABILITIES:-

1. Coffee - Strong procurement centres in Coorg &

Chickmagalur district (Karnataka) in collaboration with

network of agents and select coffee curing works.

2. Food grains - Strong backward linkage on supply

chain with farmers, millers & processors. Loyal

customer base in markets of Middle East & South East

Asia.


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3. Feed Ingredients - Possess integrated value chain

ensuring credibility and zero default record of delivery

time. Exported to customers like - Cargill. Abu Dhabi

Flour Mills, Toepfer etc.

4. Processed fruits - Strong & loyal network with

agriculturists, blender-bottler, end users and off-shore

logistics service providers. Emerged as a reliable

exporter to US, Western Europe and Middle east.

5. Aqua products- State-of-the-art preserving units in

Andhra Pradesh. High level of personalized

communication network.

6. Nuts & Spices - Procurement network in Kerala,

Gujarat, Maharashtra and Rajasthan. Expertise in

business relationship with agents, suppliers and

marketers.

ITC- ABD has established its stronghold position in rural market

through Hariyali- Choupal rural retail chains (275 stores) and

Choupal Sagar which provides FMCG to electronic appliances

to automobiles for rural market.

MICRO ENVIRONMENT FACTORS:

BANKERS :- ITC-ABD has strong support and good

terms with bankers for financial leverage and

capabilities . Bankers are :-

ABN-AMRO - KOLKATA

STANDARD CHARTERED BANK - HYDERABAD

SBI OVERSEAS BANK - HYDERABADHDFC BANK LTD. - HYDERABAD

External

Environment

Micro

Environment

Macro

Environment


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CUSTOMERS:-

Marubeni Feed - J apanBungePhoenix Commodities Limited - ThailandVoest Alpine Inter Trading - AustriaLiberty Commodities Ltd - LondonPT J ackson - IndonesiaLouis Dreyfus Commodities - SingaporeNidera Food grains - SwitzerlandAbu Dhabi Flour Mills- UAECargill International - USA

Concordia Agri - SingaporeToepfer InternationaL - SingaporeAmerican Key Food Products - USABarrowlane & Ballard - UK Choei Trading Company Limited - J apanCapital Commodities (VLC) Pty Ltd - AustraliaGaldisa S.A - Mexico

J H Lutge Gmbh Germany

Muffadlal Enterprises - Egypt

Nichiryo Limited - J apan

Sino J apan Chemical Co Ltd - TaiwanThe Coca Cola Trading Company - USAAziende Riunite Caffe SPA - MilanBernhard Rothfos, GmbH - GermanyCoca Cola International Trade - USAHolland Coffee BV - The Netherlands

OlamInternational Limited - SingaporeOrimi Trade Limited - RussiaFuga Ag - SwitzerlandHanawa Company Ltd - SingaporeMitsubishi - J apanShowa Trading Co. - J apan

Toyo Marine - J apanGollucke Rothfos Gmbh - Germany


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PROCESSORS :-

J agdeesh Marine Bhimavaram - Bhimavaram, APSadaf Seafood - Kolkata

Khalsa Overseas - Madhya PradeshDhulichand NarendrakumarExports Ltd - Karnal, HaryanaAseptic Fruit Products(India)Pvt Ltd - KrishnagiSAM Industries - Madhya PradeshBhaskar Agro Ingredients - Maharashtra

Travancore Coffee CuringWorks - Kushalnagar

Kushalnagar Works - KushalnagarSLN Coffee Curing Works - KushalnagarChamundi Coffee Curing Works - ChikmanglurSargod Coffee Curing Works - ChikmanglurAnjanaya Sea Foods - NelloreSastha Spices & Oleresin Pvt ltd. - KalpetaExcel Foods Private Ltd - Hubli

SUPPLIERS :-

ITC-ABD has strong procurement network for supply of rawmaterials and goods on time and quality ensured.

1. Coffee:- Procurement centre in Coorg & Chickmagalur(Karnataka).

2. Food grains: - Strong linkage with farmers, millers &

processors.3. Feed Ingredients :- Soyabean oil processed from leasedprocessing plants.

4. Processed Fruits:- Strong network with agriculturists,blenders-bottlers and logistical service providers.

5. Aqua Products:- Supplied from processing units in AndhraPradesh and from brackish-water of Vijayawada and Krishnadistrict for shrimps & prawns.

6. Nuts & Spices:- Procurement network in Kerala, Gujarat,Maharashtra and Rajasthan.


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COMPETITORS :-

Godrej Agrovet

DCM Shriram Consolidated ltd.National Agro IndustriesDuPontMonsanto India ltd.Advanta India ltd.

MARKET INTERMEDIARIES :-

C & F Agents:- (Clearence / Carry and Forward Agents)

1. B Devchand and Sons - J amnagar2. Guru Clearing - Haldia3. Interport - Mumbai4. Leaap International Pvt Ltd - Bangalore, Cochin, Mangalore5. Friends - Kandla6. Priya Export Agencies - Kakinada7. Nandan Shipping Agency - Mumbai8. Ashirwad Clearance Agency - Kandla

9 .Seaways Shipping Company - Chennai10.Merlyn Shipping Comapany - Visakhapatnam11. Ambica Freight Forwarders - Nagpur12. STP Freight Forwarders - Chennai13.Pratyusha - Vishakapatnam/Kakinada

Value Chain of Integration (Minimizing Intermediaries )


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So firm needs to adapt and find short-term as well as long-term solutions to survive and grow in the political and legalenvironment of the nation.

ECONOMIC ENVIRONMENT:-

This is the most critical and sine qua non factor for a firm tocope-up and grow in the long run .

Long-term and recent economic situations will have asignificant impact upon ITC-ABD business operations.

ITC ABD processes food grains and spices which are packed inhygienic jute bags under strict quality norms. But price hike byGovt in jute 1 would raise the procurement price of jute as a

packing material for the customer.ITC-ABD is known for delivering quality products on time dueto efficient vessel chartering skills and strong logistics whichhelps to make it a competitive exporter. Govt is on the way topartially deregulate port tariffs2 in which operators can fix highercharges than the regulator ( government s body)recommendation once a year. High tariff charge by the privateport developers would mean the price rise in the marine/vesselfreight transport cost for ITC-ABD.

In case of agriculture economic reforms, policy, budget, GDPand purchasing power of the consumers will shape the firmspolicy and decisions. Food Inflation due to fiscal deficit3 andmarket factors is a prime cause and concern for ITC-ABD as itwould influence its procurement decision from suppliers andtrading in the rural market.

Moreover agriculture subsidies and food subsidies 4 providedby Govt needs to be implemented properly but with a long-termvisionary policy which is lacking in India.Proper crop insurance 5 is another problem for farmers in Indiamaking them deprive of timely premiums. This poses a challengefor ITC-ABD to be in constant sync with the economic changes inIndia.i

1. (2013, April 3). Govt hikes support price for jute. Business Line, pp. 16.

2. (2013, March) Govt partially deregulates port tariffs. Business Line, pp. 14.

3. (2013, April 4) Food inflation: Blame the fisc, not the private trade, Business Line, pp. 7.

4. Subsidies difficult to roll back. Business Line, Hyderabad .Retrieved November 19, 2013, from

http://www.thehindubusinessline.com/industry-and-economy/agri-biz/subsidies-difficult-to-roll-back/

5. Crop Insurance. Retrieved from http://www.tejas/iimb.ac.in/interviews/


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SOCIAL & CULTURAL ENVIRONMENT:-

Several social and cultural factors may affect the agribusiness operations of ITC-ABD in India.Agriculture in India faces a cultural efficiency problem incase of agriculture productivity.Societal distribution is unequal in case of agricultural trendwhere rice and paddy are prevalent and other multi-cropsare ignored.

Agriculture in India being stigmatised as a low-profile occupation,high risk and low returns. The next generation of farmingcommunity has been on the verge of drift from agriculture to

service sector jobs. Their indigenous knowledge could not beencashed properly so there is a need of well-managed agriculturesupported with latest and affordable technology.

TECHNOLOGICAL ENVIRONMENT:-

Technological impositions are rampant in agriculture. First of allprocessing plant for a single crop is not viable to set up.1

Integration of irrigation sources and its availability is amajor need for farmers.Latest technology is costly and not easily feasible in India.However KVKs (Krishi Vigysn Kendra)2 and NGOs haveworked to harness indigenous technology which has beenwell tapped by ITC-ABD in case of Spices & Nuts and foodgrains.

Ensuring quality of produce through IT platform technology suchas E- Choupal by ITC-ABD has brought sufficiency in exports.

Andhra Pradesh has unveiled Indias 1st action plan 3

1 . Subsidies difficult to roll back. Business Line, Hyderabad .Retrieved November 05, 2013, from

http://www.thehindubusinessline.com/industry-and-economy/agri-biz/subsidies-difficult-to-roll-back/

2. KVKs. Retrieved from http://www.tejas/iimb.ac.in/interviews/

3. (2013, March 18). AP unveils countrys 1st

action plan for farm sector. Business Line, pp. 16.


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for farm sector to provide 3622 cr for agriculture power. Thiswould help ITC-ABD as it has HQ in Hyderabad and a strongprocurement network accompanied with processing plants for

food and fruits

DEMOGRAPHIC ENVIRONMENT :-

ITC-ABD has correctly identified the demographic segmentsand its implications as an external macro factor on itsoperations. Govt of India promotes export of foodgrains andprovides tax waivers through agri-export zones. There hasbeen an upsurge in demands from Middle east, USA, Europeand African nations. Recently Egypt the worlds largestorganised commodity importer , is in talk to import wheatfrom India 1 by its own amending food security laws. Thisemerges out to be a big opportunity for ITC-ABD which is amajor wheat exporter.Moreover demographic strata is classified on variouselements. A recent study revealed that Gujarat per capitafood expenditure is highest 2 followed by Maharashtra &Haryana. This can be a huge growing marketing for foodgrain products of ITC-ABD.

NATURAL ENVIRONMENT :-Be it any firm related to food processing or food exporter it isdependent heavily on natural environment and its elements.Heavyrains or droughts affect the crops such as Chikmagalur district(Karnataka which is a Coffee supplier to ITC-ABD has experiencedblossom showers .3This will result in a good production for ITC-ABD.Monsoon, rain-fed rivers and quality of soils determine the natural

environment for agriculture as well as agri-business firms in India.

1. (2013, March 20). Egypt in talks to import wheat from India. Business Line, pp. 16.

2. (2013, March 13). Bengal spends least on food, household goods. Gujarat tops. Business Line, pp. 15.

3. (2013, March 16). Karnataka coffee belt gets good blossom showers. Business Line, pp. 16.


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SWOT ANALYSIS OF ITC - ABD

SWOT is an acronym for

S- StrengthW- WeaknessO- Opportunity

T- Threat

Its an effective management analysis tool for describing the

external and internal environment of a firm/organizationoperating under important factors.

S- Strength of ITC ABD :

The biggest Strength of ITC-ABD is the trust of farmersearned through its E- Choupal programme.

Strong procurement network with suppliers , farmers ,millers and processors which enables quality

purchase of raw materials. R & D research centre located in Bangalore the hub of

agriculture and genetomy research. Strong chain of integrated processing plants, expertise

in agri-management practices and adherence toHACCP and ISO certifications has made it a preferredfirm for customers.

Large base of loyal customers in international arenamaking it a major exporter of coffee, aqua products andfeed ingredients enabling it as a top earner of foreignexchanges.

Strong financial support by parent brand ITC which inturn gets funded by ITC-ABD (60% foreign exchange toITC) and ITC FMCG products supply is fuelled by agri-business.

ITC ABD strategic location in Hyderabad, AndhraPradesh , so the firm harnesses the connectivity forsupply chain, brackish water of state for exportingaqua products and strong presence of infrastructure.


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W Weakness of ITC ABD:

Restricting itself to regional markets of Karnataka,

Tamil Nadu & Andhra Pradesh . ITC- ABD has a portfolio of products . But it still lags

behind in export of coffee and ornamental fish which isa hidden potential for increasing foreign exchanges.

Farmers need proper crop insurance, micro-creditfacilities and automated farm equipments which still isbeyond reach of farmers in which ITC- ABD shoulddiversify in.

Being an agri business enterprise it must concentrate

on processing of cheap and quality ethanol and otherbio-diesel fuels which is the need of the hour. ITC ABD must focus on acquisition of foreign agri-

business firms and expand to emerging markets suchas Brazil, China, West Africa and Latin countries whichwould definitely open new avenues of market.

Legal lobbying for common interests is a requisite toinfluence the Govt to amend APMC Act and essentialCommodity reforms.

Choupal Sagar - the rural retail outlet which is on aslow expansion mode and is still a far-off for manyfarmers.

Absence of large-scale of mobile telephonytechnologies to assist farmers which would be acheaper and efficient technology platform.

O Opportunity for ITC ABD :

E-Choupal Version 3.0 which is a better versionand linked to rural employment youth portalswould leverage the technological capacities offirm.

Approval of 61 agri-export zones in India wouldhelp in boosting ITC- ABD export revenue.

Capital goods purchased for agriculture to beduty-free is an economic benefit for the firm.


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Emergence of Shrimp and prawn entrepreneursin Andhra Pradesh which would fuel ITC - ABDaqua division business as partners.

Action Plan to be launched in Andhra Pradeshfor agriculture power which would be a first of itskind injecting a 3622 crore.

Rapid rise of online retail websites such asFlipkart.com , snapdeal.com and others can havetradable products of ITC-ABD such as Shrimpsand prawns ( for city customers \ hotel chains);fresh fruits \ vegetables. It will help in shifting ordiversifying to tastes of urban youth market usingpre-tested online and cheaper technologyplatform.

Eco-tourism can become a brighter avenue forITC-ABD in those villages whose face hasprogressed tremendously making it a modelvillage.

T Threat for ITC-ABD :-

Rising Indian competitors like GodrejAgrovet, DCM Shriram consolidated andforeign companies in India such as DuPont,Monsanto etc.

APMC Act which is a blockage for openmarket operations in India.

Essential Commodities Market Regulation inwhich Govt can anytime have their owndecision on the required minimum storage of

produce. Lack of infrastructure such as Irrigation

facility, Warehouse, strong supply chain andrural transportation.

Red-tape bureaucracy in the implementationof agricultural reforms is a bbig threat

Digital Gap and slow technology adsorptionin rural areas affect farming business.

No competition in selling of agri-produce

and agri-insurance products in rural areas.


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Electricity problem, system crash, e-choupalhacking, lack of Commodities trading marketknowledge among farmers could easily

impose a threat on the business of ITC ABD.

FUTURE PREDICTION OF ITC ABD:

Future is an unseen child born and reared in the cradle

of present actions which nourishes it either as anirresponsible one or as a bright and responsible man.

Based on SWOT Analysis and company report findings,ITC- ABD is spearheaded towards a bright future with E-Choupal 3.0 as a torchbearer in the fists of farmers.

Soon ITC- ABD is going to face a tough competitionregarding online trading of agricultural products .

Expansion of rural retail malls is still in a nascent stagewhich would grow gradually in future.

Penetration of ITC ABD processed fruits and freshproducts in Tier -1 and Tier-2 cities would be on rise incoming days.

Cost to company would increase as investment getsinjected into establishing 20,000 choupals in villagesand maintaining them in case of power generationfluctuations.

Today is the age of e-commerce but in near future m-commerce (Mobile Telephony Network) would be aviable option for rural farmers.

ITC-ABD would invest in agri-export zones and addexport oriented products to its portfolio.


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ITC ABD is poised to become as the preferred agri-exporter and increase the loyal customer base byreplicating its indigenous business model of harnessing

the fortune at the bottom of the pyramid and emergingas a socially responsible institution which would besynonym to innovation and catalyst to 2nd GreenRevolution in India.

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Itc - Abd Report