STRATEGY

PURCHASING STRATEGY OF ITC

ITC's Agri Business Division, one of India's largest exporters of agricultural commodities, has conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis.

The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterised by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others.

VALUE CHAIN –FROM FARM TO FACTORY

'e-Choupal' also unshackles the potential of Indian farmer who has been trapped in a vicious cycle of low risk taking ability > low investment > low productivity > weak market orientation > low value addition > low margin > low risk taking ability. This made him and Indian agribusiness sector globally uncompetitive, despite rich & abundant natural resources.

Such a market-led business model can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher incomes, and enlarged capacity for farmer risk management, larger investments and higher quality and productivity.

Further, a growth in rural incomes will also unleash the latent demand for industrial goods so necessary for the continued growth of the Indian economy. This will create another virtuous cycle propelling the economy into a higher growth trajector

INFORMATION TECHNOLOGY STRATEGY

ITC’s e-Choupal network, which leverages information technology to empower farmers, is a rich repertoire of agri-based interventions and not only addresses the core needs of farmers in terms of infrastructure, connectivity, price discovery and market access, but also provides a significant boost to farm productivity through extension services and research-based agri-inputs. Initiatives like the ‘Choupal Pradarshan Khet’ bring suitable agricultural best practices to farmers and have demonstrated significant productivity gains. These interventions have helped transform village communities into vibrant economic organisations by enhancing incomes and co-creating markets. ITC’s e-Choupals serve 40,000 villages and 4 million farmers, making it the world’s largest rural digital infrastructure

HUMAN RESOURCE STRATEGY

More than 70% of the category permanent professional staffs is on long-term contracts, indicating that they have been with the ITC for more than five years. Permanent staff members on short-term contract are those that have not completed five years’ service with the organization. ITC provides a supporting working environment for its generally well qualified, professional and motivated staff. . The ITC training and development budget is low for an organization with ITC‟s scale and much of that budget is spent on Information Technology and language training. No clear rotation program is found within ITC. No career planning for staff.

The talent management programme in ITC Company strives to deliver its unique talent promise: ‘Building Winning Businesses. Building Business Leaders. Creating Value for India.’

ITC believe 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 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

INFORMATION STRATEGY

ITC Infotech is a fully owned subsidiary of ITC Ltd. Formed in 2000, ITC Infotech has today carved a niche for itself in the arena of global IT services and solutions.

PEOPLE FIRSTITC Infotech nurtures its employees through numerous training and development programmes to help them actualize their potential.

Services for the Banking, Financial Services & Insurance industry

ITC

SWOT ANALYSIS

SWOT ANALYSIS

A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieve that objective. Some authors credit SWOT to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies. However, Humphrey himself does not claim the creation of SWOT, and the origins remain obscure. The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit.

Strengths: characteristics of the business or project that give it an advantage over others.

Weaknesses: characteristics that place the business or project at a disadvantage relative to others.

Opportunities: elements that the project could exploit to its advantage. Threats: elements in the environment that could cause trouble for the business or

project. SWOT ANALYSIS OF ITC

S-STRENGTHS

Leveraged it traditional businesses to develop new brands for new segments. For example, ITC used its experience of transporting and distributing tobacco products to remote and distant parts of India to the advantage of its FMCG products.

ITC master chefs from its hotel chain are often asked to develop new food concepts for its FMCG business.

ITC is a diversified company trading in a number of business sectors including cigarettes, hotels, paper, agriculture, packaged foods and confectionary, branded apparel, personal care, greetings cards, Information Technology, safety matches, incense sticks and stationery.

ITC has a strong and experienced management Strong brand presence, excellent products advertising Diversified product and services portfolio which includes FMCG, Hotel chains, paper

& packaging and agri-business Over 6500 E-Choupal CSR activities and sustainability initiatives enhance ITC’s

brand image reaching over 4 million farmers ITC limited employees over 25,000 people Excellent research and development facilities Government support Market share

Managing diverse business. ITC has 105 subsidiaries connected with its various operations. Wealth of local knowledge & international expertise helps it to be globally competitive.

High quality standard products & services Excellent export earnings. Highly professional management. Excellent distribution network. Excellent brand making capability helping it to diversify it into Retailing, IT & Hotel

segments Agro-export segment showing excellent growth of 28 % & earning Rs. 4 billion foreign exchange

ITC ltd is one of the most liquid scripts in the capital market. With domestic institutions having a considerable stake this is likely to improve liquidity in De-mat

trading. Good returns by way of dividend per share every year. In 31.3.2002 the dividend declared is 13.50 Rs per share .The lifestyle retailing segment has won acclaim & moving towards higher sales. The expression greeting card is widening its base all over India & it is available at most retail shops. Steady increase in the return on capital employed. Sophisticated research & development facilities.

WEAKNESSES

The company’s original business was traded in tobacco. ITC stands for Imperial Tobacco Company of India Limited. It is interesting that a business that is now so involved in branding continues to use its original name, despite the negative connection of tobacco with poor health and premature death.

ITC is still dependent upon its tobacco revenues. Cigarettes account for 47 per cent of the company’s turnover, and that in itself is responsible for 80% of its profits. So there is an argument that ITC’s move into FMCG (Fast Moving Consumer Goods) is being subsidised by its tobacco operations. Its Gold Flake tobacco brand is the largest FMCG brand in India – and this single brand alone hold 70% of the tobacco market.

Hotel industry has not been able to create a huge market share

Diversification into various lines in which it does not have much knowledge would be very risky proposition. High competition from established brands which has resulted in reduction in profit margins. Steep increase in cigarette taxes has adversely affected the revenue earned. Due to high price of cigarette, consumers are switching to other cheaper forms of tobacco. Its hotel industry has still not created a big share in the market size

Diversification into various lines in which it does not have much knowledge would be very risky proposition. High competition from established brands which has resulted in reduction in profit margins. Steep increase in cigarette taxes has adversely affected the revenue earned. Due to high price of cigarette, consumers are switching to other cheaper forms of tobacco. Its hotel industry has still not created a big share in the market size

OPPORTUNITIES

Core brands such as Aashirvaad, Mint-o, Bingo! And Sun Feast (and others) can be developed using strategies of market development, product development and marketing penetration.

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

E-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an original and well thought of initiative that could be used in other sectors in many other parts of the world. It is also an ambitious project that has a goal of reaching 10 million farmers in 100,000 villages.

ITC leverages e-Choupal in a novel way. The company researched the tastes of consumers in the North, West and East of India of atta (a popular type of wheat flour), then used the network to source and create the raw materials from farmers and then blend them for consumers under purposeful brand names such as Aashirvaad Select in the Northern market, Aashirvaad MP Chakki in the Western market and Aashirvaad in the Eastern market. This concept is tremendously difficult for competitors to emulate.

Per capita consumption of personal care products in India is the lowest in the world offering an opportunity for ITC’s soaps, shampoos and fragrances under their Wills brand.

Tap rural markets and increase penetration in urban areas Mergers and acquisitions to strengthen the brand Increasing purchasing power of people thereby increasing demand More publicity of hotel chains to increase market share Big untapped market available. For cigarettes, hotels, it, retail garment, packaging &

agricultural products. High growth potential could be achieved. Good source of revenue & foreign exchange available by way of exports of agricultural products, hotels & cigarettes. Its competitor’s don’t have the financial banking like it so it can

take advantage of this. Proper publicity of the hotels would increase its brand image & revenue.

THREATS

The obvious threat is from competition, both domestic and international. The laws of economics dictate that if competitors see that there is a solid profit to be made in an emerging consumer society that ultimately new products and services will be made available. Western companies will see India as an exciting opportunity for themselves to find new market segments for their own offerings.

ITC’s opportunities are likely to be opportunities for other companies as well. Therefore the dynamic of competition will alter in the medium-term. Then ITC will need to decide whether being a diversified conglomerate is the most competitive strategic formation for a secure future.

Increasing Tax on Cigarettes Regulatory Restrictions on Cigarettes Ban on Smoking Negative publicity for smoking could affect its cigarette segment. Government is

under huge pressure from public organizations for banning tobacco products which could affect it adversely.

High competition from established brands. Competition from unbranded products. Due to terrorist attacks the tourism industry has taken a back seat which would affect

the hotel segment. Poor monsoon leads to poor agricultural growth which would affect the agro-exports

FUTURE PROSPECTS OF THE COMPANY

There are some 40 “active” projects—or ones at various stages of implementation—into which the company proposes to pump in some Rs.6,000-7,000 crore in the current year. More are in the pipeline.

ITC’s consumer goods business is expected to recover operating costs in the current year and make sustained profits from next year

ITC on Friday revealed the “consumer spends” on its key brands such as  Aashirvaad and Sun feast These two generate about Rs.2,000 crore each in annual revenue, followed by stationery products sold under the Classmate brand. This generates Rs.1, 000 crore in annual revenue

Bingo, Candyman and Vivel are estimated to have attracted consumer spends of Rs.500 crore each,” .Some products are described under the Aashirvaad, Candy man and Sun feast brands as market leaders.

ITC is a growth company looking to invest Rs.26, 000 crore to expand all key businesses over the next 5 years

KEY FINANCIALS

SEGMENT REVENUE 2013-2014

SEGMENT RESULTS 2013-2014

ITC KEY FINANCALS – (2013-2014)

Segment Capital Employed – Q3 2014/15

ITC Pricing strategy:The pricing of the ITC food division depends upon the Customers’ demand schedule, the cost function and the competitors’ price. The pricing of the company is such that it caters to the need of all income groups of people but special provision has been kept for Low and middle income group, and their pricing are competitive with respect to other players like Britannia, Parle and Brisk farm. The company follows the Going rate pricing that is the price of the product depends upon the competitors price. The firm chooses pricing more or less the same as Market leader. ITC Promotional activitiesA particular budget is allocated for the promotion of the products, the local promotion scheme is decided by the Area Sales Manager, it give its suggestion to the District office and that is forwarded to the Head Quarter in Kolkata. In another promotional scheme for Biscuits a particular number of cases is given freely to the distributors according to the amount of sale they make, this was a drop down promotion i.e. of the number of free cases that a particular distributors gets, off them a certain part is reserved for the retailers and customer if they buy a certain level of biscuit quantity. ITC DistributionBuoyed by a strong distribution network ITC is likely to retain its market share in the cigarettes business; the ban on advertisements is likely to work in favour of ITC thanks to the recall factor. The company's reliable distribution network also ensures superior inventory turnover than its peers.

REFERENCES

1. http://www.mbaskool.com/brandguide/fmcg/1485-itc-limited.html2. http://www.slideshare.net/Mj880/itc-swot-analysis3. https://ideas.repec.org/a/jge/journl/345.html4. http://www.itcportal.com/5. http://en.wikipedia.org/wiki/ITC_%28company%296. http://www.marketingteacher.com/itc-swot/7. http://en.wikipedia.org/wiki/SWOT_analysis8. http://www.scribd.com/doc/59098501/itc-swot-analysis