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ITC. Touching your life. Everyday
Imperial Tobacco Company of India Limited (ITC).
Presented byAnuja Jain
Arihant DardaArun ChaharAshwini JainCharu PahwaMohit Rathi
ITC. Touching your life. Everyday
INTRODUCTION
• ITC Limited which previously stood for ‘Imperial Tobacco Company one of India's foremost private sector companies with a market capitalization of nearly US $ 18 billion and a turnover of over US $ 4.75 billion.
• ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management and acknowledged service skills in hoteliering.
• continues in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is gaining market share in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting Cards.
ITC. Touching your life. Everyday
Contd..
• ITC's wholly owned Information Technology subsidiary, ITC InfoTech India Limited, is pursuing emerging opportunities in providing end-to-end IT solutions, including e-enabled services and business process outsourcing.
• ITC's Agri-Business is one of India's largest exporters of agricultural products.
• ITC's Agri-Business is one of India's largest exporters of agricultural products.
Hotel
Cigarettes
Incense Sticks
Personal Care
Safety Matches
Agricultural IndustryInformation Technology
Paperboards
Packaged Foods
Stationery
Branded Apparel
ITC. Touching your life. Everyday
ITC. Touching your life. Everyday
Strategy of Organisation to manage diversity of Portfolio
Formal 3-tiered governance structure: Board of Directors :
Comprising executive (4) and non-executive directors (11) Strategic supervision
Corporate Management Committee : Comprising executive directors and senior managers Strategic management
Divisional Chief Executive & Divisional Management Committee : Executive management
ITC. Touching your life. Everyday
Board of directors
ChairmanY.C Deweshwar
Executive Director Anup Singh K.vaidyanath
Non Executive DirectorAnil Baijal, R.K.Kaul,s.H Khan, S.B.Mathur, D.K Mehrotra, H.G.
Powell, P.B Ramanujam, Anthony , B Vijayraghwan, Basudev Sen
Key persons of tobacco divison• Kurush N Grant, T.V Ramaswamy, Hemant
Malik, R Tandon
ITC. Touching your life. Everyday
• 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: To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value.
VISION & MISSION
ITC. Touching your life. Everyday
Values
• ITC's Core Values are aimed at developing a customer-focused, high-performance organisation
• Customer Focus we are always customer focused and will deliver what the customer needs in terms of value, quality and satisfaction.ITC. WORKING FOR YOU. WORKING FOR
INDIA.
ITC. Touching your life. Everyday
ENDURING VALUE
• Expressing concern and desire to help, is the spirit of ITC’s rural development initiatives. A social mission reaching out to join hands, convert old relationships into new partnerships, put on the ground solutions that bring lasting benefits to society.
• .• ITC regards corporations as critical tools of social
development, and considers public - private - people partnerships – bringing together community, government and business– as the only sustainable basis for social sector and infrastructure development.
ITC. Touching your life. Everyday
Corporate Social Responsibility•Environmental1. ITC has been Carbon Positive 3 years in a row.
2. Water Positive 6years in a row.
3. 100% solid waste recycling
• Social1. ITC's businesses generate livelihoods for over 5 million people.
2. ITC's globally recognised e-Choupal initiative is the world's largest rural digital infrastructure benefiting over 4 million farming families.
3. ITC's Social and Farm Forestry initiative has greened over 80,000 hectares creating an estimated 35 million person days of employment among the disadvantaged.
4. ITC's Watershed Development Initiative brings precious water to nearly 35,000 hectares of dry lands and moisture-stressed areas.
5. ITC's Sustainable Community Development initiatives include women empowerment, supplementary education, integrated animal husbandry programmes.
6. The first ITC Sangeet Sammelan showcasing the best in Indian classical music was held in Delhi in 1971
ITC. Touching your life. Everyday
CORPORATE SOCIAL RESPONSIBILITY
Healthcare services have been provided to over 45,000 mothers-at-risk and children below 5Women join their ITC supported self-help
cow artificially inseminated at ITC’s cattle development
centreITC assists rural families
to construct low cost sanitary units for their
homes
develop water and forest resources to enhance soil
fertility,adopt soil and water
management practices,the teachers at village
ITC Supplementary Learning Centre
persuaded parents to send children to evening coaching classes at the
Centre
ITC offers facilitation to farmers to form agri-
business societies, pool knowledge and
resources, improve productivity and qualityOver 8 years, ITC has assisted nearly 2,700 families to construct
their own sanitary units.apply superior farming
methods to improve quality and quantity of
farm yields.
ITC. Touching your life. Everyday
Pest analysis POLITICAL
• Huge burden of VAT• Excise duty raised by union budget by 5 %• Ban on communication• Luxury tax in 10 states• Smuggling• 100% FDI allowed
ECONOMICAL
• Bidee : cigarette ratio-10:1• Profit margin is high• Other forms of cheap tobacco intake
SOCIO -CULTURAL
• Becoming status symbol• Companions mounted by W.H.O.• Changing attitudes towards tobacco• May 31 is no tobacco day• Change in life style
TECHNICAL •State-of-the-art factories•Cheap labour supply•Development of IQMS•Adapting other concepts like QC,TQM, KSS, 5 S, 6 sigma
ITC. Touching your life. Everyday
SWOT AnalysisStrength•Cigarette market is 22,000 cr and ITC has lion’s share in it•Strong brand recognition and product portfolio •Distribution network•Management
Weakness•Dependence on tobacco revenues• Negative Connection of Tobacco
Opportunity•Low per capita consumptionOf personal care products•Rural Market •E-Choupal• Filter cigarette segment of less than 60mm size
Threat•Competition both Domestic & International•Increasing Tax on cigarettes•Excise duty on unfiltered cigarettes less than 60mm in length was increased 387% last year •Hike was 142% for those between 61mm and 70mm long. •Regulatory restrictions on cigarettes•Ban on smoking
ITC. Touching your life. Everyday
TOWS MATRIX• • Strengths • Weaknesses
•Opportunities
• Market expansion• Promotion• Awareness• Affordability
• Emphasize on personal care
•Threats
• Diversification• Strategic alliances
with international players
ITC. Touching your life. Everyday
Future SWOT of ITCStrength•Brand•More advanced distribution network(ERP,SCM)•Management:- CRM•Increase in disposable income
Weakness•Entry of other players•Health awareness
Opportunity•Increasing retail market•Rural market•Increasing e-commerce
Threat•Bargaining power of suppliers•Bargaining power of customers•Smuggling•Ban on smoking
ITC. Touching your life. Everyday
Porters 5 forces
moderate bargaining power of customer
High bargainng power of supplier
High threats of new entrants
High rivalry
Low substitutes due to strict laws
ITC. Touching your life. Everyday
Market share of ITC Ltd.
Outstanding market leader • Cigarettes, Hotels, Paperboards,
Packaging and Agri-Exports.Gaining market share
• Nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting Cards.
Source: Annual Accounts/Equity research
ITC. Touching your life. Everyday
H1 Segment Revenue
Rs crs
Half Year Half Year Golyended ended (%)
30.09.2008 30.09.2007
1. Segment Revenue (Net)a) FMCG - Cigarettes 3552 3211 10.6%
- Others 1449 1126 28.7%Total FMCG 5001 4337 15.3%
b) Hotels 467 412 13.4%c) Agri Business 2699 2127 26.8%d) Paperboards, Paper & Packaging 1306 1038 25.8%
Total 9473 7915 19.7%Less : Inter-segment revenue 1810 1351 34.0%
Net sales / Income from operations 7663 6564 16.7%
ITC. Touching your life. Everyday
Segment Dominance Contribution %Revenue PBIT
Cigarettes 70% share 77.0% 87.7%
Paper & Packg.
Packaging board – No. 1 in Asia
7.3% 10.7%
Agri business
1of the largest xporters from India
7.0% 3.7%
Hotels ITC Group ranks No.2 4.3% 5.4%
FMCG(Others)
20% share of greeting cards market, 'Aashirvaad' atta is No.1 in branded segment
4.4% -7.5%
Source: Equity research reports
ITC. Touching your life. Everyday
CAGR during FY 2005-2008
Category CAGR Growth parameters
Cigarettes 10.9 % Pricing power
Hotels 22.7% Inward traffic, occupancy
Paper 17.2 % Capacity utilization, value added products
Agri business
34.3 % E-choupal, choupal sagar,
FMCG-Others
60.2 % Fast track, decent share.
Source: Equity research reports
ITC. Touching your life. Everyday
The BCG Matrix for ITC Ltd.StarsHotelsPaperboards/ Packaging.Agri business.
?FMCG- OthersITC Infotech
CowsFMCG-Cigarettes
Dogs •Branded apparel•Packaged foods
ITC. Touching your life. Everyday
Sustain multiple drivers of growth, matching internal capabilities
with emerging market opportunities
Pursue World class competitiveness in all businesses and across
the entire value chain
Best-in-class in terms of:
Internal Vitality
Market Standing
Profitability
Strategy of Organisation and Governance processes geared to
manage multiple businesses
Blend core competencies and leverage ITC umbrella strengths to
create new avenues of growth
Corporate Strategies
ITC. Touching your life. Everyday
GOVERNANCE, COMMITMENTS & ENGAGEMENTS
• Our Corporate Governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them. The practice of Corporate Governance in ITC takes place at three interlinked levels –
• Strategic supervision- by the Board of Directors• Strategic management- by the Corporate Management Committee• Executive management- by the Divisional/Strategic Business Unit (SBU) Chief
Executive assisted by the respective Divisional/SBU Management Committee
• The role, powers and composition of the Board of Directors, Board Committees, Corporate Management Committee and Divisional Management Committees are articulated and available on the Company’s corporate website.
ITC. Touching your life. Everyday
Critical Success Factor
•SITE AND LOCATION•POSITIONING AND GUEST PROFILE•FINANCIAL STRENGTH•BRAND RECOGNITION•YIELD MANAGEMENT•DIFFERENTIAL PRICING
ITC. Touching your life. Everyday
Positioning of ITC
•TOUCHING YOUR
LIFE EVERYDAY.
ITC. Touching your life. Everyday
SPANCOP
• S:- Suspect who can buy our product• P:- Prospect the chances and needs for which
customers may buy the product• A:- Approach the prospect with the USP’s of our
product• N:- Negotiate the deal for the product • C:- Closing of deal• O:- Get the order• P:- Payment follow up
ITC. Touching your life. Everyday
Cigarettes • ITC, 32% owned by British American
Tobacco Plc., raised prices of its Gold Flake and Classic cigarette brands
• ITC commands around 70% of India's Rs 130 bn domestic cigarette market (value terms). Out of the top 10 cigarette brands in India, 6 belong to ITC.
ITC. Touching your life. Everyday
OBJECTIVES• Cigarette revenues to increase by 9% during FY09
as a result of the full impact of price hikes and improved realizations on account of favourable product mix.
• The company expect to register 17% CAGR in net profit over FY09-11. At the current market price of Rs175, the stock is trading at EPS of Rs12.1.
Cigarettes Sizes Prices
Insignia (Wills) 97mm 100/-
KSFT- 84mm
IK Regular (Rich Gold) 84mm 88/-
IK Crystal Blue 84mm 88/-
Ocean Blue 84mm 88/-
IK Menthol 84mm 88/-
B&H Special 84mm 100/-
B&H Light 84mm 100/-
Classic Regular 84mm 88/-
Classic Mild 84mm 88/-
Classic Ultra Mild 84mm 88/-
Classic Menthol 84mm 88/-
Gold Flake Kings 84mm 54/-
Gold Flake Light 84mm 44/-
Silk Cut Kings 84mm 44/-
555 84mm
Wills Navy Cut 74mm 24/-
Wills Navy Cut Light 74mm 34/-
Gold Flake Premium 69mm
Silk Cut Premium 69mm
Wills Flake 69mm
Wills Capstan 69mm
ITC. Touching your life. Everyday
Places
ITC. Touching your life. Everyday
ITC’s Distribution channelITC’s Distribution channel is as follows:-
ITC. WORKING FOR YOU. WORKING FOR INDIA.
COMPANY HUB FACTORY
Retailer
small Wholesale dealer
Wholesale dealer
Carried and forward agent
consumer
ITC. Touching your life. Everyday
Promotion
Direct marketing:- Sign boards, posters at shops on point of sale
Delivery vans
Sales force
ITC has just packed a classic punch (Jazz,Blues,Rocks)
Bann on T.V commercial
ITC. Touching your life. Everyday
S T P Segmentation Geographic:• Rural• Urban Demographic:• Age• Gender• Occupation Psychographic:• Lifestyle
ITC. Touching your life. Everyday
Targeting
M1 M2 M3
P1
P2
P3
ITC. Touching your life. Everyday
P O S I T I O N I N G In 70’s they have positioned themselves by
saying:-• “For the gracious people”• “A touch of Gold”• "A tribute to the gracious people” It is still differentiating itself on the purity
and quality of its experience. • The brand stands for a celebratory attitude.
“Celebrate the feeling” is the new message
ITC. Touching your life. Everyday
COMPETITOR ANALYSIS The cigarette market in India has 3 players• Godfrey Phillips India (GPI), a Philip Morris affiliate,13%
of market share • Vazir Sultan Tobacco (VST), a BAT affiliate, 13% of the
total market share• Golden Tobacco Company (GTC) with 8% of the market
share. Domestic competitors• Kanhayya tobacco• MR tobacco• Sapna enterprises• Sudarshan tobacco
ITC still attains a gigantic market share of 66%
ITC. Touching your life. Everyday
7’S OF ITC
• STRATEGY• STRUCTURE• SYSTEM• STYLE• SKILLS• STAFF• SHARED VALUES
ITC. Touching your life. Everyday
CONFRONTATION
NAVY CUT,CLASSIC,INSIGNIA,INDIA KINGS,CAPSTEN,GOLD FLAKE,SISSORS,SILK CUT,BRISTOL,BERKELEY
GOLD FLAKE PREMIUM29%
GOLD FLAKE KINGS
4%
IK Regular (Rich Gold)1%
B&H Light2%
Classic Regular4%
Classic Ultra Mild4%
Silk Cut Kings5%
Wills Navy Cut7%
Silk Cut Premium11%
Marlboro Regular6%
Select Filter 5%
Four Square Specia
5%
Four Square Premier
5%
Panama Plain 4%
Red & White Super4% Cavender Magna
4%
ITC. Touching your life. Everyday
Diversification
• ITC over the years has been investing cash flows from its cigarette business into various lucrative segments like foods, personal care, hotels and paper.
• With the paperboard division coming out of a major capex cycle and a reduction in losses from FMCG-others division from FY10E, we expect the non-cigarette businesses to become self-sufficient.
• The agriculture division continues to provide a strong support as an excellent raw material sourcing base. Hotels segment though is likely to register slower growth in FY10E due to economic slowdown and terror attacks.
ITC. Touching your life. Everyday 40
Source : Based on Cigarette consumption data(2003) from “World Cigarettes”,ERC Group plc.
Per Capita Adult C igarette Consumption (Sticks)
16621753
561 488
141
1190
USA China Pakistan Nepal India W orld Avg.
ITC. Touching your life. Everyday
FINANCIAL ANALYSIS
Gold flake
Profit Before Tax 28083757
Provision For Taxi ncluding Tax 141700
Profit After Tax 27942057
Add:profit Brought ForwardFrom Previous Year
15605975
Surplus Available For Appropration 43548032
Tranffered To General Reserve --------
Balance Carried Forward 43548032
ITC. Touching your life. Everyday
FINANCIAL ANALYSIS
Wills
Profit Before Tax 3506186
Provision For Taxincluding Tax 116810
Profit After Tax 3389376
Add:profit Brought ForwardFrom Previous Year
6251604
Surplus Available For Appropration 9640980
Tranffered To General Reserve ---------
Balance Carried Forward 9640980
ITC. Touching your life. Everyday
Financial analysis ratios Amount As per date
P.E Ratio 22.54 27-03-09
Eps 8.28 Mar08
Sales 3858.65 Dec 08
Face Value Rs 1
Net Profit Margin 21.50% Mar08
Last Bonus 1:2 23/05/08
Last Dividend 350% 23/05/08
Return On Average Equity
25.99 Mar08
27th mar 186.65
Market capitalization 70340.92 cr
52 weeks high/low 232.40-132.05
ITC. Touching your life. Everyday
HRM POLICY
• ITC believes that all its employees must live with social and economic dignity and freedom, regardless of nationality, gender, race, economic status or religion.
• ITC upholds international human rights standards, does not condone human rights abuses, and creates and nurtures a working environment where human rights are respected without prejudice.
• The Corporate Human Resources function conducts non-discrimination reviews annually on a sample basis with unit heads and through on-site assessments.
• ITC Unit has appropriate systems and checks to ensure compliance with the Policy and statutory provisions, including means for filing of grievances, collective bargaining agreements and minutes from worker meetings.
ITC. Touching your life. Everyday
CONTD..
• ITC does not employ any person below the age of eighteen years in the workplace. ITC prohibits the use of forced or compulsory labour at all its units. No employee is made to work against his/her will or work as bonded/forced labour.
• All major changes in operations involving work processes, manning norms and other productivity linked issues are carried out after discussions with the employees and the recognized unions at each location.
• ITC is committed to providing a safe and healthy work environment to all its employees. These policy guidelines on HIV/AIDS are an endorsement of this commitment and, in particular, of the Company's commitment to specific programmes and actions in response to the HIV epidemic.
ITC. Touching your life. Everyday
OPERATIONS AND LOGISTICS
• Operation management emphasis the current programs of an organizations and planning which essentially deals with the future and two intimately related activities.
• A distinction should be made between planning and forecasting .• Planning departments are key in critiquing strategies ,crystallizing
goals ,setting objectives, maintain control.• NEEDS FOR STRATEGY:
1) resources are finite
2) uncertainty about competitive strength and behavior
3)when commitment is irreversible
ITC. Touching your life. Everyday
Contd…
• Logistic/supply chain management enabling technologies cover a wide spectrum of technology that facilitates smooth flow of goods and services and related information as well as integration of business processes.
• The overall competitiveness of industry would increase by having proper operations and logistic managements.
ITC. Touching your life. Everyday
Research and development
• ITC is committed to delivering world class product and services. this requires clear focus on continuously striving to create a higher value to customers by achieving excellence in all companies operations.
• ITC development of its integrated quality management system (IOMS) is based on its strong foundation of implementing ISO9001:2000,ISO14001,OHSAS18001,SA8000,HACCP(for foods) and IQRS(Performance rating and benchmarking of the quality management system.
• ITC R&D centre are at bengalure,hyderabad,bhadrachalam,rajamundry,the company has assembled a pool of world class scientist focused on providing the requiste R&D support system.
ITC. Touching your life. Everyday
Contd…
• ITC research and developed facilities Rajahmundry in AP cover all aspects of tobacco crop cultivation. its collaboration with the central tobacco board research institute and tobacco board ITC pioneered FCV tobacco cultivation in India and introduced the burley and HDBRG varieties.
ITC. Touching your life. Everyday
Information system in ITC
• IT plays a very critical role in driving the ITC business strategies.
• IT is an enabler of the business process to ensure business growth through efficient management of operations in the value chain.
• IT creates new business process or restructure the current business process to enhance customer service availability , efficient manufacturing / supply chain operations etc
ITC. Touching your life. Everyday
HI-TECH SUPPLY SOLUTIONS
• Thousands of small retailers in India who sell cigarettes and confectionery supplied by ITC Ltd, and who have thus far had to wait for the next arrival of the company’s delivery van.
• Place orders through mobile phones• Vans go without knowing actual demand so after using this
they can save cost as well as time.• Mobility based applications can bring down the cost of
operation by 20-30% from the manual basis of operation
ITC. Touching your life. Everyday
FUTURE OF CIGARETTES
• An average of 2,800 people die every day in India with tobacco-related diseases.
• Cancer of lungs, lips, tongue, oral cavity, throat and larynx, uterus and urinary bladder are some of the common tobacco-related diseases.
• Adding some 184 million people consume cigarettes, beedis and gutka every day.
• ITC researchers are continuously doing research on ayurvedic cigarette which would be harmless.
ITC. Touching your life. Everyday
ITC CAN BE A FOLLOWER
Guardian pharmacy has launched a herbal cigarette named HONEYROSE which is 100% harmless.
• Nicotine-free, tobacco-free” cigarette seemed like an oxymoron
• Cigarettes are made with naturally grown Marshmallow herb, Red Clover and Rose
• As ITC has got more experience and brand image it can improve its quality and thus can tab the health consious people FORTRESS STRATEGY
ITC. Touching your life. Everyday
CERTIFICATIONS, HONOURS & AWARDS
• All the Environment, Health and Safety (EHS) Management systems & Sustainability Reporting in ITC conform to the best international standards.
• SA 8000 - Social AccountabilityLeaf processing plants at Chirala and Anaparti, Cigarette factory at Kolkata and SNPL factory at Simra have achieved this certification.
• OHSAS 18001- Occupational Health & Safety Management Systems All the manufacturing units of ITC and Corporate EHS Department have achieved this certification.
• ISO 14001- Environment Management SystemsAll manufacturing units of ITC, all the major hotels, Corporate EHS Department & ITC R&D Centre at Bengaluru have achieved this certification.
ITC. Touching your life. Everyday
Recommendation
•Improved security for hotel guests.•Floor access control in hotels through key card system.•Precision analysis of products in Food Business.•Process optimisation for product development in Food Business.•Automation of lighting controls.•Use of Solar energy for hot water generation and outside area illumination.•Installation of PNG (Piped Natural Gas) fuelled generator sets and PNG fired calendar and tumbler drier machines in hotel laundries.• Improvements to reduce heat gain/cooling losses from building envelops in hotels.•Impact of measures for reduction of energy consumption and consequent impact on the cost of production of goods.
ITC. Touching your life. Everyday
CONCLUSION
• ITC promoting their brands through advertisement campaign as well as door to door promotion.
• ITC is also focusing on Retailers and Wholesalers to promote their brand.
• The demand of their product in very low, because people don’t know about their brands very well.
• ITC knows their strength and weakness in the personal care market, so they are applying new concept to overcome their weaknesses.
• ITC now offering more margins, exiting offers and long credit period to retailers and wholesalers.
ITC. WORKING FOR YOU. WORKING FOR INDIA.
ITC. Touching your life. Everyday
THANK YOU