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(CH INSTITUTE OF MANAGEMENT AND COMMUNICATION)

PGDM
Post Graduate Diploma in Management

Batch-III

Term paper On ITC

Submitted to Mr. Mayank saxena

Submitted ByLahar pandey Swati dwivedi

Company Overview

ITC Ltd, which had originally started in 1910 under the name of Imperial Tobacco Company of India Limited with humble beginnings, is a leading FMCG Cigarette major is one of the most valuable companies of India. It has been rated among the World's Best Big Companies by Forbes magazine. Although the company is most famous for its tobacco business consisting of cigarette, now the company has ventured into a number of new businesses providing a variety of products and services. These include the hospitality industry with their hotels, their products such as paperboards, paper and packaging, their agricultural exports business and some other fast moving consumer goods (FMCG) such as branded packaged foods, safety matches and incense sticks.

Mission:
To enhance the wealth generating capability of the enterprise in a globalizing environment, developing superior and sustainable stakeholder value

Vision:
Sustain ITCs position as one of Indias most valuable corporations through world class performance, creating growing value for the Indian economy and the Companys stakeholders

SWOT Analysis of ITC

Strength
Diversity Government support Market share

Weakness
Slow implementation Susceptible to political event

Opportunity
Rising income of consumers

Threats
Increasing competition as a threat for all players

FMCG sector on India

Indias FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000 Crores. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments. The Rs 85,000-crore Indian FMCG industry is expected to register a healthy growth in the third quarter of 2008-09 despite the economic downturn. The industry is expected to register a 15% growth in Q3 200809 as compared to the corresponding period last year. Unlike other sectors, the FMCG industry did not slow down since Q2 2008. The industry is doing pretty well, bucking the trend. As it is meeting the every-day demands of consumers, it will continue to grow. In the last two months, input costs have come down and this will reflect in Q3 and Q4 results

ITCs Corporate Strategy ITCs corporate strategies are aimed at matching its core capabilities with market opportunities to produce superior shareholder value. The key corporate strategies are as follows:

1. Continue to focus on the core business of cigarettes and Tobacco, Hotels, packaging and Paperboard 2. Ensure that each of its businesses meets the three criteria of sustainability, namely market Standing, profitability and internal vitality. Making an exit from business which does not meet these criteria within an agreed time frame. There is a classic example of this case. The decision to exit from the Financial Services and Edible Oils businesses was based on the need to focus on such businesses where the Company possessed a credible track record, and where it had the relative capacity to strengthen and nurture core capabilities over time to sustain a leadership position in the Indian global market of tomorrow. A careful analysis made it readily evident that ITC was not well positioned to add long term value in these areas. In fact, persisting with these businesses over the years had caused a substantial drain of corporate energy and shareholder value. A hard-nosed, determined and responsible exit was the only answer. During the annual general meeting in 2009, Mr. Deveshwar said clearly that It would be the endeavor of the Board to keep the portfolio of businesses under periodic review. They would not hesitate to invite a partner, or even to exit a business, if it is concluded that our capabilities cannot match competitive forces in a reasonable time span. Each of the businesses that remain in the company's portfolio, therefore, would have to sub serve the abiding purpose of generating value.

3. Ensure that each business is internationally competitive in the Indian Global Market 4. Create distributed leadership within the organization by nurturing talented and focused top Management teams for each of its businesses 5. ITCs Corporate Governance/ Organization Structure Institute and practice a system of corporate governance appropriate to ITCs character and constitution. Such a system of governance must achieve a wholesome balance between the need for executive freedom for management and the requirement of a framework for effective accountability.

Why competitive strategy?

Competitive strategy consists of move of companies iv order to attract customers. With stand competitive pressures and strength an organizations market position. The main objective of competitive strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors Five main competitive strategies are Overall low cost leadership strategy Best cost provider strategy Broad differentiation strategy Focused low cost strategy Focused differentiation strategy

Here competitive strategy varies from sector to sector and company to company. Thus it is not easy to predict a single or to find a single strategy for the whole sector. When we come on to FMCG sector main strategy lay behind market strategies, cost and quality strategies. ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversified into nontobacco. FMCG segments like foods, personal care, paper products, hotels and agri- business to reduce its exposure to cigarettes.

Overall strategy of ITC

ITC is focusing on delivering value at competitive prices. Its tremendous reach through extensive distribution chain has been a competitive advantage, additionally the company e-chaupal model for direct procurement is well know under which ITC partners with over 1,000,00 farmers for spices and wheat procurement and an even larger number for oilseeds, this kind of rural pedigree is hard to beat

Growth drives for ITC

ITCs backward integration to ensure that its products pass efficiently from the farms to consumers has helped it to cut down supply and procurement costs. ITCs non-cigarette FMCG leverages the large distribution network the company has developed by selling cigarettes over the years, a rich product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting ITCs growth path

Risk for ITC

Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its foray into the conventional FMCG space, ITC has entered the high-clutter branded products market. This will burden its resources in terms of ad spend and brand-building. Creating brand recall and building market share in new products are ITC's key challenges. Export ban and rising crop prices pose a threat for its agribusiness, taxing its margins

ROA of ITC

ROA = RETURN ON ASSETS

YEAR

ROA

% CHANGE

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2.81 2.73 2.95 3.09 3.23 3.06 3.14 3.44 3.62 3.76

0.8 -0.22 -0.14 -0.14 0.17 -0.08 -0.3 -0.18 -0.14 0.12

Recommendations

According to us the companies should continue with their CSR and also continue with their strategies. The thing that needs to be changed is that, ITC should go for more diversification in Non cigarette segment (FMCG) while HUL should come up with the new strategies that could take the new product forward to create a new segment. A common recommendation for both is that they should focus on rural area more