Mrp Interim Report- Amartya Dasgupta

8/8/2019 Mrp Interim Report- Amartya Dasgupta

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A INTERIM REPORT

ON

COMPARATIVE ANALYSIS OF ITC AND

THE STRATEGIES ADOPTED BY

THEM IN THE PRESENT MARKET

SCENARIO.

BY

AMARTYA DASGUPTA

(09BS0000176)


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Objective:-

The objective of this research project is to analyze the various strategies of ITC and to

understand how these strategies are offering the company a competitive, sustainable

development even on account of intense competition, followed by comparative analysis of ITC.

Methodology:-

The research is done using secondary data. The secondary sources include Internet,

Magazines, and Books.

Introduction:-

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of

India Limited. The name of the Company was changed from Imperial Tobacco Company of

India Limited to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974.

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India

Limited. As the Company's ownership progressively Indianised, the name of the Company waschanged from Imperial Tobacco Company of India Limited to India Tobacco Company Limited

in 1970 and then to I.T.C. Limited in 1974. Though the first six decades of the Company's

existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf

Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that

would usher in momentous changes in the life of the Company.

ITC is one of India's foremost private sector companies with a market capitalization of

nearly US $ 8 billion and a turnover of over US $ 4.75 billion. ITC also ranks among India's top

10 `Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by

the Economic Times.

ITC employs over 22,000 people at more than 60 locations across India. The Company

continuously endeavors to enhance its wealth generating capabilities in a globalizing


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environment to consistently reward more than 3, 74,000 shareholders, fulfill the aspirations of its

stakeholders and meet societal expectations. This over-arching vision of the company is

expressively captured in its corporate positioning statement: "Enduring Value for the nation and

for the Shareholder."

VisionSustain ITC's position as one of India's most valuable corporations through world class

performance, creating growing value for the Indian economy and the Companys stakeholders.

Mission

To enhance the wealth generating capability of the enterprise in a globalizing

environment, delivering superior and sustainable stakeholder value

Bussiness Mix of ITC


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ITC Business ModelITC crossed significant milestones both in the range of FMCG products launched as well

as the breadth of distribution. Investment in people systems, trade marketing expertise and

product development enabled the launch and national rollout of several FMCG products

spanning Apparel, Packaged Foods, Greeting Cards and Stationery, Safety Matches and Incense

Sticks (Agarbatti). The business model in each of these product categories envisages retaining

core competency-based elements of each value chain in-house. Manufacturing is outsourced

largely to small and medium enterprises (SMEs). Such a model enables ITC to participate

effectively in strengthening the capability of these SMEs, thereby enhancing the competitiveness

of the entire value chain. ITC is engaged in further expanding its distribution and delivery

bandwidth to serve as a springboard to cater to a much wider range of FMCG products.

ITC is developing its internationally competitive agricultural business by empowering,

not eliminating, the independent small farmer. Its business model centers around the deployment

of a network of Internet-connected kiosks, known as e-Choupals, throughout agricultural areas in

India. The premise of ITC's expanded business model is backward integration, a form of virtual

vertical integration that involves the direct purchase of produce from farmers, thereby reducing

ITC's dependence on middlemen.


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ITCs Corporate Strategies

Create multiple drivers of growth by developing a portfolio of world class businesses that best matches organizational capability with opportunities indomestic 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 MarketStanding, 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 are various

businesses.

Create distributed leadership within the organization by nurturing talented and focusedtop 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.


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ITC introduces each product with a strategy. The following gives details

of the strategy that ITC had kept in mind, while launching the product.

1.Though the first six decades of the Company's existence were primarily devoted to thegrowth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies

witnessed the beginnings of a corporate transformation that would usher in momentous

changes in the life of the Company.

2.ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integrationfor ITC's Cigarettes business. It is today India's most sophisticated packaging house.

3.In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennaiwhich was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into

the hotels business was rooted in the concept of creating value for the nation. ITC chose the

hotels business for its potential to:

y earn high levels of foreign exchange,y create tourism infrastructure andy generate large scale direct and indirect employment.

Since then ITC's Hotels business has grown to occupy a position of leadership, with over 90

owned and managed properties spread across India.

4.In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam PaperboardsLimited, which today has become the market leader in India. Bhadrachalam Paperboards

amalgamated with the Company effective March 13, 2002 and became a Division of the

Company, Bhadrachalam Paperboards Division. In November 2002, this division merged


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with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers

Division. ITC's paperboards' technology, productivity, quality and manufacturing processes

are comparable to the best in the world. It has also made an immense contribution to the

development of Sarapaka, an economically backward area in the state of Andhra Pradesh. In

2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co.

Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve

customer service with reduced lead time and a wider product range.

5.Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri BusinessDivision for export of agri-commodities. The Division is today one of India's largest

exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000

with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million

farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004

at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operatonal in the 3 states of

Madhya Pradesh, Maharashtra and Uttar Pradesh.

6. In 2000, ITC launched a line of high quality greeting cards under the brand name'Expressions'. In 2002, the product range was enlarged with the introduction of Gift

wrappers, Autograph books and Slam books. In the same year, ITC also launched

'Expressions Matrubhasha', a vernacular range of greeting cards in eight languages and

'Expressions Paperkraft', a range of premium stationery products. In 2003, the company

rolled out 'Classmate', a range of notebooks in the school stationery segment. This way it

established itself as a brand for students and is performing excellently due to its quality and

price strategy.

7.

In 2000, ITC spun off its information technology business into a wholly owned subsidiary,ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area.


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8.ITC's foray into the Foods business is an outstanding example of successfully blendingmultiple internal competencies to create a new driver of business growth. It began in August

2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002,

ITC entered the confectionery and staples segments with the launch of the brands mint-o andCandyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction

of Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing

branded snacks category with Bingo! in 2007. In just seven years, the Foods business has

grown to a significant size with over 200 differentiated products under six distinctive brands,

with an enviable distribution reach, a rapidly growing market share and a solid market

standing.

9.ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked themanifestation of its partnership with the cottage sector. ITC's popular agarbattis brands

include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine, Bouquet,

Sandalwood, Madhur, Sambrani and Nagchampa.

10. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & bodycare products for men and women in July 2005. Continuing with its tradition of bringing

world class products to Indian consumers the Company launched 'Fiama Di Wills', a

premium range of Shampoos, Shower Gels and Soaps in September, October and December

2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in

the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivel

range of soaps in February and Vivel range of shampoos in June 2008.


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PESTEL ANALYSIS

POLITICAL

ITC has some set of standard to handle political issues. Change in the ruling government polices

on the tax rates and the control on the prices. ITC used its experience, brand image and goodwill

to make contacts to bargain with government so as to modify their regulations.

ITC is one company that follows all the standards in an ethical manner and it never goes against

any political rules. ITC has also been awarded as one of the most respectable companies of India.

ECONOMIC ENVIRONMENT

ITC has a very good pricing strategy which is very economical that makes the company more

sustainable and competitive in the market. HUL, Procter & Gamble (P&G) are the major

competitors for ITC in the FMCG sector . ITC has newly diversified into the FMCG sector and

the market is highly competitive in this sector with so many major players already well

established. There are also so many local traders who offer many and consumers on the other

hand would not want to buy expensive product or brands due to current economic tide. Thereforethe company has to supply the goods at a price which is economical and affordable by the

consumers. ITC has adopted many strategies to ensure that its profitability drive is

sustained. Some Products are packaged in small size for low or regular income earner, for

affordability.

.

SOCIO-CULTURAL ENVIRONMENT

ITC's businesses generate livelihoods for over 5 million people.

ITC has a very good brand image in the society. Though their initial offerings were cigarettes,

they developed goodwill and its brand signifies quality in the minds of the customers. ITC is the

only company which had done a research on tastes of different people across different cultures


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in India and accordingly manufactured the Aashirvad Atta. ITC is focused on building an

exclusive culture and embracing difference, which resulted in high demand of its products in

the developing and emerging markets.

ITC's globally recognised e-Choupal initiative is the world's largest rural digital infrastructurebenefiting over 4 million farming families.

ITC's Sustainable Community Development initiatives include women empowerment,

supplementary education, integrated animal husbandry programmes.

TECHNOLOGICAL ENVIRONMENT

ITC is continuing to diversify into many fields, recently it launhed the VIVEL fairness cream.

ITC has got a strong distribution network base which they make it possible with the effective use

of the technology. Business continue to boom with new technology being invented to boost

production and enhance quality products for consumer, competitors improving their

products using new inventions.

One of the major inventions of ITC is the e-choupal where they connect to the farmers directly

with the help of Internet and provide them solutions regarding their problems. ITC has also

invested a huge amount in its R&D sector by including the latest technologies so that it helps to

identify the exact consumer preferred products at the best prices available. Through their R&D

they are able to innovate new inventions and diversify into various fields.

ENVIRONMENT

ITC has been Carbon Positive three years in a row (sequestering/storing twice the amount ofCO2 than the Company emits).

Water Positive six years in a row (creating three times more Rainwater Harvesting potential

than ITC's net consumption). Close to 100% solid waste recycling.

All Environment, Health and Safety Management Systems in ITC conform to the best

international standards.


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PORTERS FIVE FORCE

Buying Power

The most important determinants of buyer power are the size and the concentration of

customers. Other factors are the extent to which the buyers are informed and the concentration or

differentiation of the competitors.

PORTERS

FIVE FORCES:

BUYER POWER:- HIGH- UNFAVOURABLE.

*Low switchingcost

*Buyers arenumerous and fragmented

*Consideringbuyerpowerretailers , they are abletonegotiatethe pricewiththecompany.

SUPPLIER POWER:-LOW-

FAVOURABLE

*Largenumberof suppliers inthe

country

*Costof switchingsuppliers is low

*Pricesof substitutes arelow

THREAT OF NEW ENTRANTS:-

HIGH- UNFAVOURABLE

*Tomany small firms

*Nodominating firm

*Little productdifferentiation

*Customer switchingcosts

arelow

DEGREE OF RIVALRY:-HIGH-

MODERATELY UNFAVOURABLE*Consumerinthis categoryenjoymultitudeofchoices.

*Itdoes notcost anything for aconsumerto buyone brandof

shampooinsteadof another,makingtheindustry quitecompetitive.

THREAT OF

SUBSTITUTES :-HIGH-

MODERATELYUNFAVORABLE

Numerous substitutes

are available


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The switching cost is pretty low for customers in FMCG sector and stationery sector. The

market has immediate substitute. With the competition in the retail sector is reaching its peak

the retailers in the organised sector are able to bargain the price.

Suppliers Power

Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier

power typically focuses first on the relative size and concentration of suppliers relative to

industry participants and second on the degree of differentiation in the inputs supplied.

Where the switching cost from one supplier to other supplier is high. In some of its

sector most of the suppliers are thinking of forward integration of their business. Where the

suppliers are low and customers are more.

Threat of substitutes

The threat that substitute products pose to an industry's profitability depends on the

relative price-to-performance ratios of the different types of products or services to which

customers can turn to satisfy the same basic need.

As consumer preference changes and they expect more from a product which leads them

to switch to other products. With increase in competition difficult to differentiate one product

from other.

Threat of new entrants

Both potential and existing competitors influence average industry profitability. The

threat of new entrants is usually based on the market entry barriers. They can take diverse forms

and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost

of capital, rise above zero.

Increase in local and private brands. The FMCG and paper industry are a kind of market

where the competition is highly competitive which requires less technology and it has very low

barriers.


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Rivalry from existing Competitors

HUL and P&G are the major competitors for ITC in the FMCG sector. As these

companies are well established in the market ITC has to follow some innovative pricing,

promotional strategies so that it gives tough competition to its competitors and attain asustainable business. Similarly it is same in other sectors.

SWOT Analysis of ITC

ITC is one of India's biggest and best-known private sector companies. In fact it is one of

the World's most high profile consumer operations. Its businesses and brands are focused almost

entirely on the Indian markets, and despite being most well-known for its tobacco brands such as

Gold Flake, the business is now diversifying into new FMCG (Fast Moving Consumer Goods)

brands in a number of market sectors - including cigarettes, hotels, paper, agriculture, packaged

foods and confectionary, branded apparel, personal care, greetings cards, Information

Technology, safety matches, incense sticks and stationery.

Examples of its successful new FMCG products include:

* Aashirvaad - India's most popular Atta brand with over 50% market share. It is also present

in spices and instant mixes.

* Mint-o - Mint-0 Fresh is the largest cough lozenge brand in India.

* Bingo! - A new introduction of finger snacks.

* Kitchens of India - pre-prepared foods designed by ITC's master chefs.

* Sunfeast - ITC's biscuit brand (and the sub-brand is also used on some pasta products).


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Strengths

ITC 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.

Weaknesses

The company's original business was traded in tobacco. ITC stands for Indian Tobacco

Company. 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.

To fund its cash guzzling FMCG start-up, the company is still dependant upon its tobaccorevenues. 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 subsidized by its tobacco operations. Its Gold Flake tobacco

brand is the largest FMCG brand in India and this single brand alone holds 70% of the tobacco

market.

Opportunities

Core brands such as Aashirvaad, Mint-o, and Bingo, toiletries, Sun Feast (and others) can be

developed using strategies of market development, product development and marketing

penetration.


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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.

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 theirown offerings.

ITC's opportunities are likely to be opportunities for other companies as well. Therefore

thedynamic 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.


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STRENGTHS

yWell known brand name

y Respected companyy Good distribution network and skillsy Good product quality(business has

been awarded

y with ISO 9001:2000 by Det NorskeVeritas.)

y Diversified company trading in anumber of business sectors

y New Brands for New segements.

WEAKNESSES

yStill people connect ITCwith a tobacco brandwhich is related withpoor health andpremature death.

y Still the company isdependent on tobacco

for its revenue

generation.

OPPORTUNITIES

y New productdiscoveries

y ITC is moving intonew and emergingsectors includingInformationTechnology,supporting business

solutions

S-O strategies

Adding innovative products to theexisting product line (new designs andlook of products)

Further Diversification in thisbusiness.

W-O strategies

Making use ofdistribution channels toprovide the products asand when need arises

Providing offers withproducts

More investment inadvertising and

promotional activities

THREATS

y Changing customerneeds andpreferences

y Threats from rivalfirms- domestic andinternational.

y Western companiessee India as anexciting opportunityfor themselves tofind new marketsegments for theirown offerings

S-T strategies

Producing quality product using corecompetencies

Working out measures to over take therival company products, in this case ofHUL.

W-T strategies

targeting governmentoffices in rural areas.


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Further this management research project will include :

y Value chain.y Bostan Consultancy Group Matrix.y Positioning of ITC in various segments.y Comparative Analysis.y Questionnaire


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Documents

Mrp Interim Report- Amartya Dasgupta