BCG Matrix of ITC Ltd.

Introduction:-
ITC Ltd is one of India's premier private sector companies with diversified presence in
businesses such as Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-
Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel,
Greeting Cards, Safety Matches and other FMCG products. Presently, ITC has a market
capitalisation of nearly US $ 15 billion and a turnover of over US $ 4.75 billion. It employs over
21,000 people at more than 60 locations across India. ITC has been rated among the World's
Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes
magazine, among India's Most Respected Companies by Business World and among India's
Most Valuable Companies by Business Today.

ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of
India Limited'. ITC had a humble beginning and in the initial days it used to operate from a
leased office on Radha Bazar Lane, Kolkata. On its 16th birthday on August 24, 1926, ITC
purchased the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata.
Two years later company's headquarter building, 'Virginia House' came on that plot.
Progressively the ownership of the company Indianised, and the name of the Company was
changed to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio
encompassing a wide range of businesses, the full stops in the Company's name were removed
effective September 18, 2001 and the Company was rechristened as 'ITC Limited'.

Vision and Mission of ITC Ltd:-

• 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.

• Mission:

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

delivering superior and sustainable stakeholder value.
ITC Business Units:-

ITC is involved in following businesses:

Cigarettes: ITC is the market leader in cigarettes in India and has a wide range of popular
brands such as Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan,
Berkeley, Bristol and Flake in its portfolio.

Packaging: ITC's Packaging & Printing Business is the country's largest convertor of
paperboard into packaging. It was set up in 1925 as a strategic backward integration for ITC's
Cigarettes business. It offers a variety of value-added packaging solutions for the food &
beverage, personal products, cigarette, liquor, cellular phone and IT packaging industries.

Hotels: ITC entered the hotels business in 1975 with the acquisition of a hotel in Chennai which
was rechristened Hotel Chola. Today ITC-Welcome group with over 70 hotels is one of the
foremost hotel chains in India.

Paperboards: In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam
Paperboards. ITC's Paperboards business has a manufacturing capacity of over 360,000 tonnes
per year and is a market leader in India across all carton-consuming segments.

Greeting, Gifting & Stationery: ITC's stationery brands "Paper Kraft" & "Classmate" are
widely distributed brands across India. The Paperkraft designer stationery range consists of
notepads & multi subject notebooks in hard, soft covers & multiple binding formats including
spirals, wiros etc. ITC's Greeting & Gifting products include Expressions range of greeting cards
and gifting products.

Safety Matches: ITC's brands of safety matches include iKno, Mangaldeep, VaxLit, Delite and
Aim. The Aim is the largest selling brand of Safety Matches in India. ITC also exports premium
brands to markets such as Europe, Africa and the USA.

Aggarbattis: ITC has launched Mangaldeep brand of Aggarbattis with a wide range of
fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri,
Ananth and Mogra. Mangaldeep is also being exported to USA, UAE, Bahrain, Nepal,
Singapore, Malaysia, Oman and South Africa.

Lifestyle Retailing: ITC entered the Lifestyle Retailing business with the Wills Sport range of
international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of
exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills
Clublife evening wear (2003). In 2002, ITC entered into the popular segment with its men's wear
brand, John Players. In 2005, ITC introduced Essenza Di Wills, an exclusive line of prestige
fragrance products.

Food: ITC made its entry into the branded & packaged Foods business in August 2001 with the
launch of the "Kitchens of India" brand. In 2002 it expanded into Confectionery, Staples and
Snack Foods segments. ITC's brand in Food category include: Kitchens of India, Aashirvaad,
Sunfeast, Mint-O, Candyman, and Bingo!.

Agri Exports: ITC's International Business Division (IBD) is the country's second largest
exporter of agri-products. ITC exports Feed Ingredients (Soyameal), Foodgrains (Rice, Wheat,
Pulses), Coffee & Spices, Edible Nuts, Marine Products, and Processed Fruits.

e-choupal: The e-Choupal model of ITC has been very effective in tackling the challenges posed
by the unique features of Indian agriculture, characterised by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among others. ITC's e-Choupal
won the Stockholm Challenge 2006 award is for using information technology for the economic
development of rural communities.

BCG Matrix of ITC Ltd:-

Market share of ITC Ltd.:-

Outstanding market leader

Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports.

Gaining market share

Nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting Cards.

The BCG matrix method is based on the product life cycle theory that can be used to determine what
priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a
company should have a portfolio of products that contains both high-growth products in need of cash inputs and
low-growth products that generate a lot of cash. It has 2 dimensions: market share and market growth. The
basic idea behind it is that the bigger the market share a product has or the faster the product's market grows the
better it is for the company.
Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
 Relative market share (cash generation)
generation)
HIGH LOW

Stars ?
• Hotels • FMCG- Others
HIG
• Paperboards/
H
Packaging.
• Agri business.

Market Cows Dogs

growth • FMCG-Cigarettes
rate (cash
usage)
LO
W
 Segment Dominance Contribution %
Revenue PBIT

Cigarettes 70% share 77.0% 87.7%

Paper & Packg. Packaging board – No. 1 in 7.3% 10.7%

Asia

Agri 1of the largest exporters 7.0% 3.7%

business from India

Hotels ITC Group ranks No.2 4.3% 5.4%

FMCG 20% share of greeting cards 4.4% -7.5%

(Others) market, 'Aashirvaad'
atta is No.1 in branded
segment

The BCG Matrix method can help understand a frequently made strategy mistake: having a
one-size-fits-all-approach to strategy, such as a generic growth target (9 percent per year) or a
generic return on capital of say 9,5% for an entire corporation.
In such a scenario:
A. Cash Cows Business Units will beat their profit target easily; their management have an easy
job and are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash
amounts in their businesses which are mature and not growing anymore. In ITC the cigarettes are
the cash cows as they need low investment and can hold the market share easily as it needs little
resource.
B. Dogs Business Units fight an impossible battle and, even worse, investments are made now
and then in hopeless attempts to 'turn the business around'. Until now ITC does have units that
are poor in performance.
C. As a result (all) Question Marks and Stars Business Units get mediocre size investment
funds. In this way they are unable to ever become cash cows. These inadequate invested sums of
money are a waste of money. Either these SBUs should receive enough investment funds to
enable them to achieve a real market dominance and become a cash cow (or star), or otherwise
companies are advised to disinvest and try to get whatever possible cash out of the question
marks that were not selected. Hotels, packaging and paperboards, agri-business are covered
under the stars of business units. FMCG goods such as personal care products face an uncertain
future.

Category CAGR Growth parameters

Cigarettes 10.9 % Pricing power

Hotels 22.7% Inward traffic, occupancy

Paper 17.2 % Capacity utilization, value

added products

Agri business 34.3 % E-choupal, choupal sagar,

FMCG-Others 60.2 % Fast track, decent share.

Limitations of BCG matrix:-

Some limitations of the Boston Consulting Group Matrix include:

• High market share is not the only success factor
• Market growth is not the only indicator for attractiveness of a market
• Sometimes Dogs can earn even more cash as Cash Cows

Conclusion:-
Major strategies followed by ITC:

• Entering into less competitive or unexplored markets (ready to eat, staples, wafers)

• Distribution network

• Market differentiation ( Ready to eat, biscuits)

• Cost control strategy (all products)

• Extensive advertising (biscuits, confectionary, wafers)

• Regular introduction of new products (all products)