A Strategic Report On

“ITC Limited”

Submitted to: Prof. Soumitra Samaddar

Submission date: 11.09.2019

Submitted by:

Shreya Singh (3302)

Shubham Tikekar (3313)
Snigdha Singh (3330)
Soumya Keshri (3336)
Sumit Kumar Gupta (3353)
Introduction:

ITC Limited is an Indian multinational conglomerate company headquartered in

Kolkata, West Bengal. Established in 1910 as the “Imperial Tobacco Company of India
Limited” in 1970 and later to I.T.C Limited in 1974. The dots in the name were removed
in Sept. 2001 for the company to rename as ITC Limited. The company completed 100
years in 2010 and ITC has reported 10.69 per cent year on year growth in consolidated
net profit at Rupees 13,162.30 crore for the financial year 2018-19, driven by
paperboards, paper and packaging, hotels and FMCG business. It has a market
capitalization of Rupees 301,596.34 crores. It employs over 30,000 people at more
than 60 locations across India and is a part of Forbes 2000 list.

Profile:
• One of the India’s most admired and valuable companies
Market capitalisation: rupees 3.4 lakh crores
• A USD 10.8 billion enterprise by Gross Sales Value
60% of net revenue from non-cigarette segment
• Leading Fast-Moving Consumer Goods Market in India
Established over 25 world class mother brands within a short span of time
• 10 year value addition ~ Rupees 3.5 lakh crores Among the top tax payers in
the country

ITC’s 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.”

ITC’s Mission:
“To enhance the wealth generating capability of the enterprise in a globalizing
environment, delivering superior and sustainable stakeholder value.”

Core Values:
ITC’s Core Value is aimed at developing a customer-focused, high-performance
organization which creates value for all its stakeholders:

TRUSTEESHIP

As professional managers, we are conscious that ITC has been given to us in "trust"
by all our stakeholders. We will actualize stakeholder value and interest on a long term
sustainable basis.

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CUSTOMER FOCUS

We are always customer focused and will deliver what the customer needs in terms of
value, quality and satisfaction.

RESPECT FOR PEOPLE

We are result oriented, setting high performance standards for ourselves as individuals
and teams.

We will simultaneously respect and value people and uphold humanness and human
dignity.

We acknowledge that every individual brings different perspectives and capabilities to

the team and that a strong team is founded on a variety of perspectives.

We want individuals to dream, value differences, create and experiment in pursuit of

opportunities and achieve leadership through teamwork.

EXCELLENCE

We do what is right, do it well and win. We will strive for excellence in whatever we do.

INNOVATION

We will constantly pursue newer and better processes, products, services and
management practices.

NATION ORIENTATION

We are aware of our responsibility to generate economic value for the Nation. In pursuit
of our goals, we will make no compromise in complying with applicable laws and
regulations at all levels.

Objectives:
• The primary focus of ITC’s Social Development Initiative is to create sustainable
sources of farm and off-farm livelihood.
• Web-enables 10 million farmers through 20,000 e-choupals in 100,000 villages.
Brings at least 50,000 hectares under soil and moisture conservation practices.
• Transform at least 100,000 hectares of wastelands into productive and
revenuegenerating assets for poor.
• Create at least 10,000 women entrepreneur with a sustainable source of
supplementary incomes.
• Improve the genetic stock of at least 150,000 cattle through artificial insemination
practices.

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Business Portfolio:
Cigarette
ITC's cigarette business stands testimony to the company's unwavering and unrivalled
commitment to quality, innovation and consumer focus.

With more than one hundred years of expertise in developing products to match the
evolving taste of the consumers, ITC's cigarette business continues to be relentless in
its pursuit of strengthening its leadership position in every segment of the market in
India. ITC's wide range of brands includes Insignia, India Kings, Classic, Gold Flake,
American Club, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk
Cut, Duke and Royal.

• FMCG
ITC's Branded Packaged Foods business is one of the fastest growing foods
businesses in India, driven by the market standing and consumer franchise of its
popular brands - Aashirvaad, Bingo! Sunfeast, Fabelle, Sunbean, Yippee! Kitchens of
India, B Natural, ITC Master Chef, Farmland, mint-o, Candyman and GumOn. The
Foods business is today represented in multiple categories in the market - Staples,
Spices, Biscuits, Confectionery & Gums, Snacks, Noodles & Pasta, Beverages, Dairy,
Ready to Eat Meals, Chocolate, Coffee and Frozen Foods.

• Hotels
Launched in 1975, ITC Hotels, India's premier chain of luxury hotels has become
synonymous with Indian hospitality. ITC Hotels pioneered the concept of 'Responsible
Luxury' in the hospitality industry, drawing on the strengths of ITC groups' exemplary
sustainability practices. Responsible Luxury personifies an ethos that integrates world-
class green practices with contemporary design elements to deliver the best of luxury
in the greenest possible manner.

• Paperboards and Specialty Paper Business

ITC's Paperboards and Specialty Papers Business is the leader in volume, product
range, market reach and environmental performance, and is the clear market leader
in the value-added paperboards segment. Providing internationally competitive quality
and cost, the Business caters to a wide spectrum of packaging, graphic,
communication, writing, printing and specialty paper requirements.

• ITC Packaging and Printing Business

ITC's Packaging & Printing Business is the largest value added converter of
paperboard packaging in South Asia. It converts over 70,000 tonnes of paper,
paperboard and laminates per annum into a variety of value-added packaging
solutions for the food & beverage, personal products, cigarette, liquor and consumer
goods industries.

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The Division, which was set up in 1925 as a strategic backward integration for ITC's
Cigarettes business, is today India's most sophisticated packaging house. State-ofthe-
art technology, world-class quality and a highly skilled and dedicated team have
combined to position ITC as the first-choice supplier of high value added packaging.

The Division supplies value-added packaging to ITC's various FMCG businesses. Its
client list includes several well-known national and international companies like Nokia,
Colgate Palmolive, Pernod Ricard, Diageo, British American Tobacco, Philip Morris
International, Agio Cigars, UB Group, Tata Tetley, Tata Tea, Reckitt Benckiser, Radico
Khaitan, Akbar Brothers, Surya Nepal, VST Industries, etc.

• Agriculture Business
ITC's pre-eminent position as one of India's leading corporates in the agricultural
sector is based on strong and enduring farmer partnerships that has revolutionized
and transformed the rural agricultural sector. A unique rural digital infrastructure
network, coupled with deep understanding of agricultural practices and intensive
research, has built a competitive and efficient supply chain that creates and delivers
immense value across the agricultural value chain. One of the largest exporters of agro
products from the country, ITC sources the finest of Indian Feed Ingredients, Food
Grains, Marine Products, Processed Fruits & Coffee.

ITC's Agro Business is the country's second largest exporter of agro-products. It

currently focuses on exports and domestic trading of:

Feed Ingredients - Soya meal

Food Grains - Wheat & Wheat Flour, Rice, Pulses, Barley & Maize

Marine Products - Shrimps and Prawns

Processed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic Fruit

Products, Coffee

Information Technology

ITC Infotech is a specialized global technology services provider, led by Business and
Technology Consulting. ITC Infotech's “Digitaligence@Work” infuses technology with
domain, data, design, and differentiated delivery to significantly enhance experience
and efficiency, enabling our clients to differentiate and disrupt their business.

The company caters to enterprises in Supply Chain based industries (CPG, Retail,
Manufacturing, Hi-Tech) and Services (Banking, Financial Services and Insurance,
Healthcare, Airline, Hospitality) through a combination of traditional and newer
business models, as a long-term sustainable partner.

In today's age of digital disruption, ITC Infotech has adopted a '5D' framework of
excellence to serve its clients better through;

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DOMAIN Led: ITC Infotech's solutions & services are powered by deep Domain
understanding and practitioner's expertise in focus industries

DATA: DATA Infra to Insights to Interventions, ITC Infotech enables clients to leverage
the power of Data with actionable insights and prescriptive analytics

DIGITAL Ready: ITC Infotech provides Digital solutions to help clients transform their
business and enhance customer engagements

DESIGN Expert: ITC Infotech provides UI/UX, high-end engineering design solutions
and services to market-leading engineering organizations worldwide

DIFFERENTIATED Delivery: With excellence forming the corner stone of each

engagement, ITC Infotech is committed to customized Delivery: Outcome-based,
BOT, JVs, As-a-service and Subscription models

ITC Infotech is committed to consistently deliver enduring value on the 5D Framework

through “Digitaligence@Work”. These have been designed to not only be the critical
pillars in creating a compelling value proposition for clients, but also provide the
company with a clear competitive advantage.

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 3-Tiered Governance Structure:

Awards and Achievements:

• One of the foremost in the private sector in terms of;

– Sustained value creation

– Operating profits

– Cash Profits

– Contribution to Exchequer

• ITC won the prestigious Porter Prize 2017 for 'Excellence in Corporate
Governance and Integration' and for its exemplary contribution in 'Creating Shared
Value'.
• ITC ranked 3rd amongst leading corporates in India in terms of Corporate
Reputation (Nielsen Corporate Image Monitor 2014-15).
• ITC ranked as the most admired company in India in 2014 (Fortune-Hay Group
survey).
• ITC recognised amongst the Top 10 employers in India by Randstad Employer
Brand Research survey 2018.

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 SWOT Analysis:

Strengths

1. ITC has a strong and experienced management

2. Strong brand presence, excellent products advertising
3. Diversified product and services po
4. rtfolio which includes FMCG, Hotel chains, paper & packaging and agri-
business
5. Over 6500 E-Choupal CSR activities and sustainability initiatives enhance
ITC’s brand image reaching over 4 million farmers
6. ITC limited employees over 25,000 people
7. Excellent research and development facilities

Weakness

1. ITC is still dependent on its tobacco revenues and people have cheaper
substitutes and other brands
2. Hotel industry has not been able to create a huge market share

Opportunities
1. Tap rural markets and increase penetration in urban areas
2. Mergers and acquisitions to strengthen the brand
3. Increasing purchasing power of people thereby increasing demand 4. More
publicity of hotel chains to increase market share

Threats
1. Strict government regulations and policies regarding cigarettes
2. Intense and increasing competition amongst other FMCG companies and hotel
chains
3. FDI in retail thereby allowing international brands

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 Porter’s Five Force Analysis:

Barriers to Entry
Entry of new players in an industry raises the level of competition, thereby reducing
its attractiveness. The threat of new entrants largely depends on the barriers to
entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other
industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to
entry include

Economies of Scale
• Capital / investment requirements
• Customer switching costs
• Access to industry distribution channels
• The likelihood of retaliation from existing industry players
• The Indian FMCG Industry is characterized with modest entry and exit barriers

Threat of Substitutes
The presence of substitute products in FMCG lowers industry attractiveness and
profitability because they limit price levels. The threat of substitute products depends
on:

Buyers’ Willingness to Substitute

• The relative price and performance of substitutes
• The costs of switching to substitutes
• Being an essential commodity the demand for consumer products is
elastic. Several brands are positioned with narrow product differentiation.
Companies entering a category /trying to gain market share compete on

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 pricing which increases products substitution. Hence, threat of substitute is
high in the FMCG industry.

Bargaining Power of Suppliers

Prices are generally governed by international commodity markets, making most of
the FMCG companies’ price takers. Due to the long term relationships with suppliers
etc., the FMCG companies negotiate better rates during times of high input cost
inflation.

Bargaining Power of Consumers

High brand loyalty for a product discourages customers’ product shift. But low
switching cost and aggressive marketing strategies under intense competition
between the FMCG companies, induce consumers to switch between products,
thereby driving value for money deals for consumers. However on account of large
number of buyers and limited suppliers, the bargaining power of consumer is low in
Indian FMCG.

Intensity of Rivalry
Competitiveness among the Indian FMCG players is high. With more MNCs entering
the country, the industry has become highly fragmented. Spending on advertisements
continues to grow and marketing budgets as well as strategies are becoming more
aggressive. The private labels offered by retailers at a discount to mainframe brands
also act as competition to undifferentiated and weak brands.

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 Boston Consulting Group Matrix of ITC Ltd

Star Question Mark

• Hotels • FMCG Business
• Paperboards
• Agro based business

BCG MATRIX

Cash Cows Dogs

• Cigarettes • ITC infotech

CASH COWS:

Cash cows are the products that have a high market share in a market that has low
growth. For ITC, there is one product that has undoubtedly been the Cash Cow and its
FMCG Cigarettes. Having a market share of 80-85 %, ITC Cigarettes holds a very strong
hold in the market. The product requires very less investment to maintain its market share
and fight off any competition.

STARS:

High market share product in high growth industry are considered Stars of the
organization. ITC’s paperboard and packaging business, Agribusiness and Hotels are
the Stars of the organization.

QUESTION MARK:

There are products that formulate a part of the industry that is still in the phase of
development, yet the organization has not been able to create a significant position in that
industry. The small market share obtained by the organization makes the future outlook
for the product uncertain, therefore investing in such domains is seen as a high-risk
decision.
With stiff competition and the growing demand for ayurvedic products has
prompted ITC to go back to the drawing board, invest in R&D and look out for
improvements in their products

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 ITC’s FMCG business, Personal Care business, are placed in the Question Mark
quadrant of the BCG Matrix of ITC. Decreasing market share due to new entrants to the
market and the introduction of new ayurvedic products and their growing demand are the
main reasons that these business units have become Question Marks.

DOGS:

Dogs are those products that were perceived to have the potential to grow but however
failed to create magic due to the slow market growth.
Failure to deliver the expected results makes the product a source of loss for the
organization, propelling the management to withdraw future investment in the venture.
Since the product is not expected to bring in any significant capital, future investment is
seen as a wastage of company resources, which could be invested in a Question
mark or Star category instead. ITC Infotech a specialized global full service IT consulting
& outsourcing solutions provider focused on creating value for Supply Chain based
Industries etc.
Heavy competition from the likes of Infosys, TCS, Accenture, HCL etc have led to
a decrease in the market share of ITC Infotech and made it tough for the organization to
survive in such tough market scenario.

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 ITC’s Different Strategic Levels:

Business Level Strategies

ITC has grown around 300% during last ten years. Introduction of brands like Sunfeast,
Mangaldeep and Classmate has been a great success. Entry in the personal care
products market after 2005 boosted the company income and growth.
Company’s focus on quality, innovation and differentiation backed by deep consumer
insights, world-class R&D and an efficient and responsive supply chain will further
strengthen its leadership position in the Indian FMCG Industry.

• Product Differentiation:
The company has been launching new products and brand extension with investment
being made towards brand building and increasing its market share.

• Cost Leadership:
ITC is focusing on delivering value at competitive prices. They believe in customer
friendly products with major emphasis on low cost overall without compromising on the
quality of the product.

Functional Level Strategies

• Core Competency:

ITC has defined its core competency as its distribution reach and has used it to expand
into other FMCG like mints, salty snacks. The cigarette business is its core
competency. ITC has the highest market share from its cigarette business that is 70%.

• Promotional Strategy:

Push Strategy- In popular category with innovative scheme to distributors. ITC

adopted this strategy to increase its sales and awareness and to gain favouritism from
the shop owners. The shop owners kept offering ITC cigarettes to all the customers
first and only upon request and insistence they sold the requested brand. ITC did this
by putting up posters in the kiranas and use the concept of mystery shopping in case
of tobacco industry. Hence, they requested the shop owners to offer ITC cigarettes

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first to every customer and if he sold a particular target, he will be qualified to enter a
lucky draw and hence bumper price.

Pull Strategy- The pull strategy is where the producer directs its marketing activities
(primarily advertising and consumer promotion) towards final consumer to induce them
to buy the product. Under this strategy the consumer demand pulls the product through
the channels. The Sunfeast ready to eat pasta has established its presence with 6%
in volumes of the branded noodles market. This was achieved by excessive
advertising which pulls the product through the distribution channels. The strategy
adopted is to spend more money on consumer advertising design to build brand
awareness so that shoppers will ask for the product. For example, Luxury products
like Wills Signature, Essensa and strong brand like Pasta, MTR and Bingo.

Pricing Strategy:
ITC has different price points as it has a diversified product portfolio. ITC have products
in all price brackets but more and more new products are on the premium side as they
provide higher margins. Bingo entered the market, it adopted a very clever aggressive
pricing strategy to capture the market share. They maintained their prices as per the
market leader but offered more quantity and more margin to the retailer which gave
them a competitive edge.

ITC follows different marketing mix pricing strategy for different products. Their
economy brands follow economy pricing. Market and manufacturing cost is kept at a
minimum. ITC has to hike the price its premium products in the industry due to the hike
in excise duty. Classmate is priced over 5% over its competitors.

Corporate Level Strategies

ITC is a board-managed professional company, committed to creating enduring value

for the nation and the shareholder. It has a rich organizational culture rooted in its core
values of respect for people and belief in empowerment. Its philosophy of all around
value creation is backed by strong corporate governance policies and systems.

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ITC's Key Corporate Strategies are:

• Focus on the chosen business portfolio

-- FMCG; Hotels; Paperboards, Paper & Packaging; Agro Business; Information
Technology
• Blend diverse core competencies residing in various Businesses to
enhance the competitive power of the portfolio
• Position each business to attain leadership on the strength of worldclass
standards in quality and costs
• Craft appropriate ‘Strategy of Organisation’ and governance processes
to:
– Enable focus on each business
– Harness diversity of portfolio to create unique sources of competitive
advantage

ITC's other corporate strategies are:

• Create multiple drivers of growth by developing a portfolio of world class

businesses that best matches organizational capability with opportunities in
domestic and export markets.
• Benchmark the health of each business comprehensively across the criteria of
Market Standing, Profitability and Internal Vitality.
• Ensure that each of its businesses is world class and internationally
competitive.
• Create distributed leadership within the organization by nurturing talented and
focused top 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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 New Ventures: How ITC plans to top FMCGs’

Kolkata-based conglomerate plans will explore every possible consumer category and
launch 30-40 new products each year in its effort to become the country's biggest fast-
moving consumer goods (FMCG) company. To achieve the target of becoming a
company of Rs. 1 lakh crore by 2030 the company is strengthening its existing
categories and venturing into newer ones.

ITC’s FMCG business includes cigarettes, packaged food, personal care, stationery,
safety matches and Incense Sticks. The company will launch more products in the
packaged food space since it’s the largest FMCG business for ITC. Last fiscal, it
launched 30 products, next only to the rapidly expanding Patanjali Ayurved.

The company is also actively scouting for acquisitions to plug portfolio gaps. However,
ITC will only acquire brands that it can scale up using its own distribution network as
it would be easier to break even. Moving in this direction ITC in the past few years
have acquired brands such as B Natural, Savlon, Shower to Shower and, Charmis.
Last month, it ventured into the herbal floor cleaner space by acquiring Nimyle.

The company recently ventured into the premium skincare market with the Dermafique
range of products, centre-filled snacks under Mad Angles, Bounce Mini biscuit, Dark
Fantasy Jelifills cake and chicken instant noodles under Yippee. It is yet hard to say in
what categories the ITC would enter in the future, but according to what analysts are
talking the company is likely expand in food besides beauty and homecare.

ITC also decided to merge some of its subsidiaries into itself. So hotels, paper,
packaging and paper boards, tobacco and agriculture businesses became part of the
main company.

ITC does not intend to take its feet of the pedal on cigarettes. “Cigarettes” as a sector
is facing growth issues and is heavily taxed in India. Smuggled cigarettes have eaten
into the market as the mandatory pictorial warning covering 85 per cent of the pack in
India puts off many.

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At ITC, the rhetoric often hovers around doing things for the country and stressing on
the Indian-ness of the company. Last April, public interest litigation was filed by a group
of eminent citizens in Mumbai, led by a doctor and the widow of a cancer victim, asking
why an insurance company like Life Insurance Corporation should hold a stake in a
cigarette maker.

Almost taking a cue, at the July annual general meeting of ITC, shareholders passed
a resolution to allow the conglomerate to start a hospital or a chain of hospitals. The
company has not yet decided how to go about starting this new line of business. But
the intent of entering healthcare makes it clear that ITC can go the distance to achieve
its desired avatar.

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 ITC’s ranking amongst

All Listed Private Sector Companies

• Market Capitalisation=6th

• PBT=5th

• PAT=5th

ITC Performance Track Record:

2008-09 2018-19 10-yr CAGR
Net Revenue 15,612 44,415 11.0%
PBT 4,826 18,444 14.3%
PAT 3,264 12,464 14.3%
Capital Employed 14,780 60,005 15.0%
Segment ROCE % 39.7% 70.3%
Market Cap 69,751 3,63,714 18.0%
Total Shareholder’s 20.3%
Returns %

• Sensex (CAGR 08-09 to 18-19): 14.8%

ITC’s Total Economic Contribution to the Nation:

• 10 year Value addition ~ Rs. 3.5 lakh crore (US$ 59 billion)

– Among the top tax payers in the country

– Over the last five years, the Value-Added by your Company, i.e. the value created
by the economic activities of your Company and its employees, aggregated over

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220000 crores of which nearly ` 160000 crores accrued to the Exchequer.

Foreign exchange earnings in the last 10 years: US$ 7.2 billion

– Of which agro exports constituted ~56%.

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 CONCLUSION:

Competitive Analysis

There could be number of factors that contribute to the success of the company, but
the key factors for the success of ITC include;

• Quality
• Innovation
• Distribution Channel
• Brand Image
• Variety of Products
• Promotion

ITC HUL P&G

3.5 3.8 3.8

A score of 3.5 is a very good score and with the innovation, R & D (E-Chappal,
Aashirwad Aata) and the brand image (100 years old) of the company is making a
strong base for the company to develop its potential and market in FMCG.

The company has been a leader in the tobacco business and hence, for a change it
decides to venture in Infotech (ITC Infotech), Foods (Kitchens of India), Greeting Cards
(Expressions), and Lifestyle fashion–retailing (Wills Lifestyle). With a number of CSR
activities across rural and semi-urban areas, ITC has invaded every home in the
country in way or another.

ITC employs over 34,000 people across the nation and has supported in creating 6
million sustainable livelihoods.

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