CORPORATE STRATEGY
Assignment 2
Submitted To:
Submitted By: SRIRAM
USN Number: 19MBAR0584
Section: IFA
INDUSTRY: FMCG SECTOR
COMPANY: ITC
ITC is one of India's foremost private sector companies with a Gross Sales Value of ₹ 76,097.31
crores and Net Profit of ₹ 15,136.05 crores (as on 31.03.2020). ITC has a diversified presence in
FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. ITC's aspiration
to be an exemplar in sustainability practices is manifest in its status as the only company in the
world, of its size and diversity, to be carbon, water and solid waste recycling positive. In
addition, ITC's businesses and value chains create sustainable livelihoods for more than 6 million
people, a majority of whom represent the poorest in rural India.
2.1 SWOT Analysis of ITC Brand:
Strengths:
Portfolio of Business: ITC has 6 strong and diverse businesses under its name which
boasts its total revenue and allows ITC to innovate and explore other
business opportunities.
Strong Brands in various businesses: ITC is a strong house of brands with most of
its products leading the segments in which they operate. ITC owns some of the most
popular cigarette brands like gold flake and Classic. It also owns Sun feast, which is
amongst the top selling biscuits in India. Similarly, Aashirvaad, Yippee!, Engage, John
Players and Bingo are also amongst the market leader in their respective categories.
ITC’s hotel and property businesses are also doing well.
Effective Social Business Initiatives: ITC has developed a triple-bottom-
line strategy through which concentrates on developing the nation’s economic, social and
environmental capital. ITC has brought in initiatives like E-Choupal, Choupal Pradarshan
Khet (CPK) which benefits the people at the grass root level, i.e. farmers. These
initiatives have also helped ITC to improve its corporate image from a traditional tobacco
manufacturer.
Inter and Intra-divisional Synergy: ITC has successfully utilized the strengths of
existing business to foray into a newer products or categories. ITC leveraged the
strong distribution system of cigarette brands to create a channel for its FMCG products.
Furthermore, ITC leveraged the knowledge of food and bakery items from its hotel
business to enter into Packaged Food category.
Weakness:
High Proportion of revenues from Tobacco products: ITC has been continuously
making efforts to divert the FMCG business from over dependence on tobacco products
and have been successful in doing so to an extent. But, tobacco products remain to be the
major source of the revenue contributing more than 60% of the total revenue from FMCG
businesses.
Association with Tobacco Products affects the image: ITC has made a lot of efforts to
improve its corporate image but the fact that ITC has many tobacco products in its
portfolio impacts its corporate image.
An increase in Tax on Tobacco affects revenue: Due to the increase in taxation on
tobacco products, the prices and hence revenues get affected.
Multiple brands– ITC Limited has way too many brands and its business is expanded to
various different industries which is causing brand dilution.
Opportunities:
Strategic Acquisitions: ITC should continue making the strategic acquisition like they
have done in the past by acquiring Salon from Johnson & Johnson and B Natural from
Balan natural Foods. Keeping in mind that the product fits into the existing distribution
network, ITC can look to increase its portfolio of products and expand its Non-Tobacco
FMCG business and thereby strengthening the base of revenue.
Growth in Purchasing power and improving lifestyle: ITC should tap on the
increasing purchasing power and improving the lifestyle of customers in India. This
could help in increasing revenue for all its businesses.
Growing Personal Hygiene as well as Food processing Industry in India: ITC should
utilize its distribution channel in Personal Hygiene and Food Processing Industry to
capitalize on the growth in the categories and hence increase revenue.
Tap opportunities created in the Rural Market: The growing rural market in India and
other emerging nations create huge opportunities to improve the bottom-line of the
company.
Threats:
Intensifying Competition in FMCG businesses: ITC faces intense competition in its
FMCG business from large MNCs like HUL and P&G and Indian FMCGs
like Patanjali and Dabur. This limits the market share for ITC.
Strict Regulations and Increasing Taxation in Cigarette Business: The Tobacco and
Cigarette Industry in India continue to be targeted by strict government regulations and
taxation system. This possesses a threat to the highly profitable Cigarette business of
ITC.
Increasing awareness on health: There has been an increase in the health consciousness
which has resulted in the decrease in demand for tobacco products in India. Also, anti-
smoking campaigns throughout the country affect the sales of cigarettes.
ITC Competitive Advantages:
The urgency of catalyzing and channelizing investments towards up gradation of human
capital, expansion and modernization of infrastructure, and productivity enhancement in
the agro-sector, cannot be overstated. The foundation of economic growth activity lies in
the perception of a favorable risk reward outcome of investment opportunities. In order to
mobilize investments, it is critical to sustain investor confidence.
Restructuring and Rationalizing:
The first task which has been substantially accomplished is the rationalization and
restructuring of your Company's portfolio of businesses and investments. 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
Strategic Focus and Challenges:
Strategies are already in place for inculcating internationally benchmarked operating
standards, marketing orientation and the related processes to exploit the special insight
into the Indian market that arises from being close to the consumer. Consumer loyalty
flows from the speed and efficiency with which an organization adapts and innovates in
satisfying his/her needs. Competitive advantage therefore is derived from anticipating the
future and encouraging strategic thinking capabilities in the organization.
ITC Distinctive Competencies:
ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers
of growth, anchored on its core competencies of strong distribution reach, superior brand-
building capabilities, effective supply chain management and service skills in hoteliering. Its
distribution reach is one of the largest in India – the FMCG business has a retail network over 2
million retailers in the country, ranging from premium outlets in the metros to small shops in the
interiors of rural India.
UNMATCHED DISTRIBUTION REACH
ITC has an unmatched distribution infrastructure which increases the reach of its products
Warehousing space of over 6.5 million square feet
Presence of distribution channel in 20 states and more than160 districts,
Operates through 65 hubs and over 300 warehouses across India
Its products are available at 4.3 million of the estimated eight million retail stores in India
Minimum number of stocking points leading to lower costs and greater freshness of
products
BRAND BUILDING CAPABILITIES
DEEP FARMER LINKAGES AND RURAL MARKET EXPERTISE
The e-Choupal initiative empowers Indian farmers with the help of Internet
Cost-effective procurement system through e- Choupal
For its paper industry, ITC gets its raw materials through a farm plantation program
which also provides employment and income to farmers
More than 1,93,000 hectares of plantations have been added
Presence of dedicated retail and distribution infrastructure in Tier III and Tier IV cities
(like Choupal Sagar, Choupal Haat, etc) Customized below-the-line engagement
platforms
Direct interaction and engagement with farmers and rural population through events like
Choupal Mahotsav
MAP OF COMPETENCIES
2.3 Indicators to show how well this competitive strategy is working
ITC revenue contribution from segments in last 10 years
Business Segments Growth
Cigarettes
ITC cigarettes brands include Insignia, India Kings, Classic, Gold Flake, American Club,
Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke and Royal.
Cigarettes Industry: After 4 consecutive years of decline, Indian cigarette industry
reported an increase of 1.5% in 2018.
Cigarette taxes in India ranks among the highest in the world. Therefore, high tax rates
make cigarettes unaffordable to a large section of consumers & in turn the overall
tobacco market experiences slow growth. The cigarette industry in India declined from
100.9 billion sticks in 2013 to 82.5 billion in 2018. During the same period, retail sales
value has increased from Rs. 568 billion to Rs. 831 billion.
Moreover, share of legal cigarettes declined considerably from 21% in 1981-82 to mere
9% by 2019. Furthermore, 13% increase in cigarette taxes with effect from 1st February
2020 will provide further fillip to the large & rapidly growing illicit cigarette trade in the
country.
Due to this change, there will be increase in cigarettes pricing. There is volumes drop in
last 3 years. But ITC achieved margin expansion.
FMCG
Despite the intense competitive environment, ITC brands created a significant market
positioning.
Moreover, ITC brands represent annual consumer spend of Rs 18,000 crore in aggregate.
‘Bingo!’ snacks, ‘Aashirvaad’ atta, ‘YiPPee!’ noodles and ‘Dark Fantasy Choco Fills’
super-premium cream biscuits were the key drivers of growth in the Branded Packaged
Foods Businesses.
On the other hand, ‘Engage’ deodorants, ‘Vivel’/‘Fiama’ shower gels & bodywash and
‘Savlon’ hand wash reported robust growth in the Personal Care Products Business.
FMCG Revenue for FY20 amounted to Rs. 12,875 crore, segregated in following brands:
Responsive to New Trends:
ITC finds product expansion opportunity in the noteworthy consumer trends including
emergence of health & wellness products.
Secondly, increasing preference for products rooted to ‘Indianans’ & with
regional/cultural connects.
Growth in demand for ‘on-the-go’ consumption formats in low-unit packs.
Also, influence of social media & digitalisation on consumer preference & consumer
behaviour.
Moreover, ITC Life Sciences and Technology Centre is now working on various
dimensions of health that will enable ITC to roll out products that help improve
cognition, immunity, manage cholesterol, retention of calcium, among others.
So, a pipeline of products on the health vector is currently a work in progress.
In addition, ITC has a steep target to meet. By 2030, the aim is to realise Rs.100000
crore (US$ 14.30 billion) of revenues from the branded consumer goods. Therefore,
roughly a 16-17% year-on-year growth.
In addition, ITC recently in May 2020 acquired Sunrise Foods Private Ltd, which is
market leader in eastern India in the spices category with a legacy of over 70 years.
A New Paradigm of Competitiveness:
This impending reality will progressively change the rules of the game. It requires businesses to
shape a totally new paradigm of competitiveness. A strategic shift that will require businesses to
build capabilities to address the stringent demands of a low carbon global business environment.
For a country like India with millions below the poverty line, and nearly 12 million people
entering the job market every year, a competitive low carbon strategy of growth will also have to
generate incremental employment and livelihoods. Therefore, for Indian business, this new
paradigm of competitiveness will not only require the creation of “green businesses”, but also the
generation of “green livelihoods”.
Innovation, and Inclusiveness hold the key to crafting this new dimension of
competitiveness. Innovation in technology, processes, and business models that enable
achievement of a low carbon high-growth economy. Incentives that encourage and reward the
adoption of corporate strategies which go beyond the traditional frontiers of the market to
achieve a larger societal contribution. Inclusiveness in aligning all forces be it public, private and
people partnerships, or the power of supportive fiscal policies, financial initiatives, and market
institutions to achieve a common shared goal.
ITC’s e-Choupals serve 40,000 villages and 4 million farmers, making it the world’s largest rural
digital infrastructure. This extensive network also provides a unique source of competitiveness to
your Company’s Packaged Foods Business, through its efficient supply chain and identity
preserved procurement. It also strengthens your Company’s competitiveness in servicing the
requirements of international buyers who demand agro-products based on sustainable
agricultural practices with associated stringent traceability assurance.
REFERENCE
https://blog.pawealthadvisors.com/2020/07/16/itc-key-business-highlights/
https://www.itcportal.com/about-itc/shareholder-value/report-and-accounts.aspx
https://www.slideshare.net/TathagataGhosh6/core-competence-and-competitive-advantage-
indigo-airlines-and-itc
http://www.ijrmet.com/vol5issue1/spl1/8-Durga-Prasad-Bhuyan.pdf
https://www.intracen.org/uploadedFiles/intracenorg/Content/About_ITC/Corporate_Documents/
Annual_Report/AR2018.pdf
ITC.ltd department, Cuttack
Tone.A.Ostagurd, Sue Briley,"Personal networks and firms competitive strategy Journal of
Business Venturing, Vol. 9, Issue 4, 1994.
