TOPIC 10 :

Project Report
On
Strategic Analysis of ITC INCLUDING SWOT ANALYSIS
STUDY OF ITC IN TERMS OF OWNERSHIP, CAPITAL AND
PROFITABILITY
BY
RAUNAK
CHAUDHURY
CLASS: 12 A

INTRODUCTION
Incorporated on 24 August 1910 as the Imperial Tobacco Company of India Limited, the
company's name was changed to ITC Limited in 1974. This company is rated among the 'World's
Best Big Companies' by Forbes magazine. ITC ranks third on all major profit parameters among
India's private sector corporations. ITC employs over 20,000 people at more than 60 locations
across India. ITC is one of India's foremost private sector companies with a market capitalization
of over US $ 13 billion and a turnover of US $ 3.5 billion.
ITC has a diversified presence in cigarettes, hotels, paperboards and specialty papers, packaging,
agri-business, packaged foods and confectionery, branded apparel and greeting cards. ITC's agribusiness is one of India's largest exporters of agricultural products. A wholly-owned subsidiary,
ITC
InfoTech
India
Limited,
provides
end-to-end
IT
solutions.
MISSION & VISION STATEMENT OF THE COMPANY AND COMPARATIVE
ANALYSIS

VISION: Sustain ITC position as one of the Indias 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 enterprises in a globalizing
environment, delivering superior and sustainable stakeholder value.

FACTORS
Products & Services
Market Share
Technology
Survival, Growth & Profitability
Self Concept
Public Image
Customer
Employee
Philosophy

ITC

HUL
Yes

Yes
Yes
Yes
Yes

Yes

Market share of ITC is 66% and HULs market share is 56%. This shows it has huge
market share.
ITCs profit is increasing by 15% p.a. but HUL has a constant growth which shows that
ITC has more survival growth rate.
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 ITC has a good public image because it has a large contribution to the rural area like echaupal and also has a huge market share comparison to HUL
ENVIRONMENT ANALYSIS
EXTERNAL ENVIRONMENT
THE MICRO-ENVIRONMENT
This environment influences the organization directly. It includes suppliers that deal directly or
indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small,
but this can be misleading.
In this context, micro describes the relationship between firms and the driving forces that control
this relationship. It is a more local relationship, and the firm may exercise a degree of influence.
Stakeholders:
As organization requires greater inward investment for growth,increasing pressure to move from
private ownership to public. Satisfying shareholder needs may result in a change in tactics
employed by an organization. The companies have no conflict between the twin goals of
shareholder value enhancement and societal value creation. The challenge lies in fashioning a
corporate strategy that enables realization of these goals in a mutually reinforcing and synergistic
manner.
244,65,39,845 ordinary shares of the company, representing 64.79% of the company's paid up
capital, as on 11th September, 2009 are in dematerialized form. The paid-up share capital of the
company is Rs. 377, 62, 86,590(rs.377.63 crores) divided into 377, 62, 86,590 ordinary shares of
the face value of re 1/- each.
Supplier:
Raw materials, intermediates and the final product sourcing/distribution in wide spread across
the country few items have more than 1 supplier for the raw material e.g. Filter rods can be
sourced from Mumbai, Bangalore or M.P. huge supply-demand network for cigarette business
which must operate in the cost optimal way to maximize the profits few segments are particular
to factories e.g. King size.
Consumer:
Organizations survive on the basis of meeting the needs, wants and providing benefits for
their customers. Failure to do so will result in a failed business strategy. Its businesses and brands
are focused almost entirely on the Indian markets, and despite being most well-known for its
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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.

THE MACRO ENVIRONMENT (PESTLE)

Political factors/Legal factors:
The political environment is quite favorable for ITC and has a positive impact on FMCG and
Hotel business. For example, the removal of the expenditure tax from2007-08 and the exemption
of service tax in budget 2008-09 which helps in increasing the buying power of the customers.
(http://indiabudget.nic.in) The increase in the tax policies such as increase in excise duty and the
vat from 12.5% to20% in three major cigarettes consumption states of Maharashtra, Rajasthan
and Delhi have resulted in the increase in the overall selling price of the cigarettes which deters
the potential customers and results in lower sales.

Economic factors:
With non filter cigarettes being levied the same tax as compared to the filter cigarettes, there was
a sharp decline in the volume of the non filter cigarettes for fy09. ITCs volume declined by
only 3% even though it discontinued the production of non filter cigarettes.
ITCs volume was supported by filter cigarettes which grew by almost 15% in fy09 despite the
price hike. This shows that ITC is gaining at the expense of competitors.
Social factors:
The aspirations of the tobacco consumers to upgrade the consumption can multiply the shares of
cigarettes. However, growing public concern with regard to the consumption of tobacco has led
the government to ban all sorts of advertisements like the commercials, print media and
pamphlets. This may act as a setback for the company. For the hospitality business, the society is
now turning more towards an individual oriented culture which means that people spend only for
themselves. The rise in the per capita income and the working population in the country is also a
good sign for the company because the number of people willing to spend more on leisure
increases with per capita income.
Technological factors:
ITC came a long way on the technological front. With state of the art factories and cheap labor
supply from the second largest tobacco producing country in the world, India, the supply chain
management of the ITC follows the latest trend. ITC also has the great inventory control and
logistics support. They have also been adapting other quality concepts such as quality control,
total quality management and 6-sigma concepts.
Environmental factors:

The main source of raw material for cigarettes is tobacco which is found mainly in the states of
Andhra Pradesh and Karnataka in India. The environment is favorable for the company because
of the abundance of raw material and inexpensive and large availability of cheap labor.
Legal factors:
The developments in the environmental and consumer regulations and protection such as the ban
on smoking and the ban on selling cigarettes to minors have resulted in setbacks for the company
in terms of the number of sales of their product which draws them the most revenue. The legal
issues related to the hospitality industry affect the international customers because of the visa and
other administrative issues involved.
INTERNAL ENVIRONMENT

Leadership of company:
Under his leadership, ITCs Sustainability initiatives were given shape by fashioning corporate
strategies that not Only enhance shareholder value but add significantly to the development of
natural and social capital. ITC is today acknowledged as a global exemplar in sustainable
business practices and is the only Company in the world, of comparable dimensions to be
carbon positive, water positive and solid waste recycling positive. The Companys
businesses generate livelihoods for over 5million people, many of whom represent the poorest in
Rural India.
The pioneering farmer empowerment initiative, ITC e-Choupal, is today the world's largest rural
digital infrastructure and is a case study at the Harvard Business School besides receiving several
global awards including the inaugural World Business Award instituted by the United Nations
Development Programme, International Chamber of Commerce and the HRH Prince of Wales
International Business Leaders Forum.
In 2011, Deveshwar was conferred the Padma Bhushan, one of the highest civilian awards in the
country, by the Government of India in recognition of his distinguished International Business
Leaders Forum.
Leveraging the significant learning of sustainable excellence within ITC, he pioneered the
concept of Responsible Luxury in the hospitality industry that led to the LEED Platinum
certification of all ITC super premium luxury hotels, making it the Greenest Luxury Hotel
Chain in the world. Anand is widely recognized for excellent people management and teambuilding abilities. He has formulated value-based strategies to create a unique quality control
model. His dynamic leadership and passion for the business is recognized and acknowledged by
his peers. He is presently the President of the Hotel Association of India. (Report and accounts
2012)
Company policies:
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To Ensure Respect for Human Rights Policy across the Supply Chain- ITC nurtures an internal
working environment which respects human rights without prejudice. Likewise, it expects its
business partners to establish a human rights compliant business environment at the workplace.
Policy to Prevent Discrimination at Workplace-ITC acknowledges that every individual brings a
different and unique set of perspectives and capabilities to the team. A discrimination-free
workplace for employees provides the environment in which diverse talents can bloom and be
nurtured.
ITC does not engage in or support direct or indirect discrimination in recruitment, compensation,
access to training, promotion, termination or retirement based on caste, religion, disability,
gender, age, race, color, ancestry, marital status or affiliation with a political, religious, or union
organization or minority group.
Policy on Freedom of Association-ITC respects the employees' right to organize themselves into
interest groups as initiatives of the workers, independent from supervision by the management.
In keeping with the spirit of this Policy, employees are not discriminated against for exercising
this right.
Policy Prohibiting Child Labour and Preventing Forced Labour from Workplace-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, or subject to corporal punishment or
coercion of any type related to work.
Policy on Information and Consultation on Changes-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.
Resources:
The physical resources such as the raw material are available in abundance in India. Their
sources of innovation such as the e-choupal initiative are very useful intangible benefits of the
company.
Capabilities:
The state of art factories of ITC are one of the capabilities of the company. The technological
advantages of the company combined with the labor have allowed the company to develop their
resources well into their capabilities.
Core competencies:
ITC knows how to capitalize on its core competencies, which include unmatched
distributionreach, superior brand-building capabilities, effective supply chain management and
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acknowledged service skills in hotel ring. This has also helped them to strategically diversify and
enter into the foods division.
Organization structure:

On the basis of portfolio

On the basis of decision making power-

Board of
directors

Managing
directors

Business
development
department
Property development

Human
resource
development

Group internal
audit
Management
service department
Financial accounting

Industry

Management accounting

Agribusiness & services

Group company secretary

Workout

Risk management

Research & public relation

Information technology

EmployeesThe Company is currently headed by Yogesh Chander Deveshwar. It employs over 29,000
people at more than 60 locations across India and is listed on Forbes 2000. ITC Limited
completed 100 years on 24 August 2010.

Financial analysis of ITC

Working capital ratio:

Current asset = 14443.57
Current liabilities = 9101.83
So ratio is: 14443.57/ 9101.83 = 1.6
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We can say it is good sign for company and also for the investors.

Debt equity ratio:

Total long term debt: 1072.68
Total equity: 18791.89
So ratio is: 1072.68/ 18791.89 = .057
It is good sign for company but not for investors or shareholders, because most of the funds are
through equity.

Earnings per share given in P&L a/c

Basis: 8.05
Diluted: 7.96
Company provides good returns to their investors.
It provides 796% return to shareholders.
HR Policy of ITC:
Fixed-Term 71%
Permanent 28%
Short-Term 1%
More than 70% of the category permanent professional stafs is on long-term contracts, indicating
that they have been with the ITC for more than five years. Permanent staff members on shortterm 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 ITCs
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.
Marketing Policy of ITC:
Segmentation:

10

Targeting: All sets of customers including rural people, farmers, cigarette smoking people,
students, etc.

11

Positioning:

ITCs pricing strategy:

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.
ITCs Promotional activities
A particular budget is allocated for the promotion of the products. The local promotion scheme is
decided by the Area Sales Managers.
ITCs Distribution
Buoyed 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 favor of ITC. The company's reliable
distribution network also ensures superior inventory turnover than its peers.

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BCG MATRIX OF ITC

SWOT ANALYSIS

13

SWOT ANALYSIS
Strengths:

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.

A lasting impression by catchy ads.

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.

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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.

Weakness:
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:
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 competitors dont 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:

Negative publicity for smoking could affect its cigarette segment.

15

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.

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INDUSTRY & COMPETITION

ANALYSIS

17

Porters Five Forces

Threat of new entrants

Degree
Low

Remark
Favorable

Threat of substitute products

High

Unfavorable

Bargaining power of customers

High

Unfavorable

Bargaining power of suppliers

High

Unfavorable

Competitive rivalry within an industry

High

Unfavorable

INDUSTRY ANALYSIS
Porters five force model

Interpretation: [FMCG SECTOR]

1. Threat of new entrants:
Economies of Scale
Product Differentiation
Capital Requirements
Access to Distribution Channels
Cost Disadvantages
Government Policy
Switching Costs

Not Easy to Achieve

Requires huge R&D
High
Not Easy
More
More
Low

Positive
Positive
Positive
Positive
Positive
Positive
Negative

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2. Threat of substitute products:

Products with improving price/performance tradeoffs relative to present industry products

3. Bargaining power of customers:

Low switching cost

Buyers are numerous and fragmented

Considering buyer power retailers , they are able to negotiate the price with the company

4. Bargaining power of suppliers:

Supplier industry is dominated by a few firms

Suppliers products have few substitutes
Buyer is not an important customer to supplier
Suppliers product is an important input to buyers product
Suppliers products are differentiated
Suppliers products have high switching costs
Supplier poses credible threat of forward integration

5. Competitive rivalry within an industry:

Using price competition

Staging advertising battles
Making new product introductions
Increasing consumer warranties or service
Advertising battles may increase total industry demand, but may be costly to smaller
competitors

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COMPETITION ANALYSIS

Near competitors of ITC (FMCG):

From the charts drawn below, it becomes obvious that following are the competitors of ITC:

HUL
P&G

H
DISTRIBUTION
CHANNEL

P&G
HUL
ITC

M
L
H

BRAND IMAGE

H
QUALITY

ITC
P&G,HUL

M
L
H
M
INNOVATION

Key success factors of ITC:

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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

Comparison on the basis of key success parameters:

Wt. allotted

20%
20%
20%
20%
10%
10%

Parameters

Quality
Innovation
Distributio
n
Brand
Image
Variety
Promotion
Total

ITC

HUL

P&G

Rating
4
4
3

WAS
.8
.8
.6

Rating
4
3
4

WAS
.8
.6
.8

Rating
4
3
4

WAS
.8
.6
.8

.6

.8

.8

3
4

.6
.3
3.5

4
4

.4
.4
3.8

4
4

.4
.4
3.8

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CONCLUSION
From the above comparison it could be inferred that besides ITC is new in the FMCG sector but
still it has managed to reach a level at which the other strong companies are. A score of 3.5 is a
very good score at a point when the old competitors (leaders) are at a score of 3.8. ITC is paying
heavy competition to the old competitors and this growth will help the company to boom in
future. The innovation, R&D (e-chaupal ,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.
ITC has been a leader in the tobacco business, but it realize from the upcoming trends that
remaining with a single business is not a noble thought, moreover the company was threatened of
the anti-tobacco campaign. Therefore the company decided to venture into InfoTech with ITC
InfoTech, foods via Kitchens of India, greeting cards through Expressions and lifestyle retailing
through Wills Sport. The revenue generation also is very high from each of these products. .ITC
was a cash rich company with a liquidity of Rs.8816 million in the cigarette business, even
though the company understood the need and usefulness of diversification.ITC by spreading its
wings in the lifestyle segments has opened forty-five stores in 34 cities in just under a year,
selling an expensive fashion brand of relaxed-wear. This way it has gained a victory lap through
its Wills Sport Brand.
The company has started its retail stores not only in Indian metros but also in the small towns
like Ranchi, Jabalpur, Gwalior, Belguam, Ernakulam etc. thus the company adopted strong
market campaign, and used its brand image to attract the Indian youth. The strategies adopted by
the company has helped it to differentiate itself in this segment, like the company is outsourcing
its designs to The American Design Intelligence Group (ADIG), a San Francisco, US-based
garment and retail consultancy. Now it has its own six-member team, even as it continues a tieup with Science & Designs, an Italian fashion design house through which it keeps a watch on
hot western labels such as Banana Republic and Armani Exchange.
Thus by adopting these strategies ITC will surely maintain its success and add many more new
sub-brands to its corporate group-ITC.

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REFERENCS

Join StudyMode and get inspired today!

State of Competitiveness - Essays - Qztezeezoo
Competitive Analysis Of Itc Free Essays 1 - 20
Competitive Analysis Of Itc Hotels Free Essays 1 - 20
Competitive Analysis Of Itc Hotels Free Essays 1 - 20
ITC: Key Metrics and Competitive Analysis for ITC Holdings - Wikinvest
COMPETITOR ANALYSIS for ITC finalised
Scribd
Share Price of ITC Ltd., Real Time Quotes, Live Share Prices | Follow ITC Ltd.
on ET Speed
ITC Competitors - Compare ITC Ltd with Competitors
Indian tobacco company
Indian tobacco company
Hindustan Unilever Limited (HUL)
ITC: Cash Flow Statements, recent and historical, for ITC Holdings - Wikinvest
information flow oin ITC - Google Search

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