Assignment

On
Strategic Management

Submitted To:
Prof. S.P. Singh

Submitted By:
Utkarsh Mishra
Roll No:69/08
Section C
PGDM Finance
Index:

Role of Business…………………………………………………………………...3

Strategy of ITC……………………………………………………………………..5

Mission, Vision and Values.......................................................................................7

Internal Analysis................................................................. ……………………..…8

Environmental Analysis……………………………………………………………..11

Portfolio Analysis……………………………………………………………………12

Corporate Parenting and Critical Success Factors........................................................15

References……….…………………………………………………..……………….16

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Role of Business:
About ITC: ITC stands for the Imperial Tobacco Company and is headquartered at Kolkata and
its current CEO is Mr. Y C Deveshwar. It employs nearly 22,000 people and generates annual
revenue of nearly $5 Billion. It has a very diversified portfolio of its products and it continuously
keeps on extending its brand line.ITC is one of the largest exporting company for agricultural
products and has strong competencies in several areas which include supply chain management,
rural reach, service skills, brand building and well developed distribution channel.

To look after its IT solutions it has Indian subsidiary which is fully owned by ITC and is known
as ITC InfoTech Limited which provides entire IT solution for the company that includes web
based services and business process outsourcing. Its offices are located in around 60 cities across
the Country. Also printing and packaging Business of ITC is the Country’s largest Business to
convert paper into the packaging material. Following figure shows the areas in which ITC is
operating.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging,
Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel,
Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an
outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards,
Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of
Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery.

ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers
of growth anchored on its time-tested core competencies: unmatched distribution reach, superior
brand-building capabilities, effective supply chain management and acknowledged service skills
in hoteliering. Over time, the strategic forays into new businesses are expected to garner a
significant share of these emerging high-growth markets in India.

ITC is India’s FMCG major and has been among the most valuable organizations of this
Country. Current CEO of ITC is Mr. Y C Deveshwar and earlier it was known as Imperial
Tobacco Company, due to its well crafted strategies and strategic re-engineering it has turned out
to be among the leading FMCG major across the globe. It employs nearly 22,000 employees and
has overall revenue of $5 Billion. ITC has a much diversified portfolio of products ranging from
Biscuits to Hotels and it becomes very difficult to manage such a diversified organization if no
proper strategy is implemented for achieving the objectives of the organization. It has huge
infrastructure for distribution in rural areas which helps it to penetrate the market in a much
better manner.

Origination of this diversification lies in the corporate strategy of ITC which helps it to create the
multiple growth drivers due its competencies in the several areas such as:

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  Effective distribution channel

 Superior supply chain Management.

 Excellent reach in rural areas.

 Strong capabilities for brand building.

 Effective service skills.

Due to all the above reasons it becomes an interesting choice to look after the strategies of ITC
and its turnaround.

It has a range of products in FMCG that includes cigarettes, biscuits, agarbatti and several others.
It has also got its presence in the retail sector.

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ITC’s Strategy:
Pricing Strategy:

ITC follows a pricing strategy which depends on the schedule of the demand of the customers,
Price of the competitors and the function which are related to the costs. If suppose in a particular
season demand of its biscuits is low then it provides discount offers in the form of more weights
or buy one bet one free. This strategy helps to attract the customers.ITC prices its products in
such a manner that it fulfills the needs of people from all sections of the society with a special
emphasis on the people from lower segment group. Also it keeps a check on the price of its
competitors and its prices are very competitive with respect to the other competitors. For this
purpose ITC uses the going rate pricing in which the price of its products are more or less similar
to the one who leads the market.

Promotional Strategy:

ITC has always been very keen about the promotion of its products, activities related to
promotion are performed at lower level by sales manager of the area who gives the suggestions
to district level manager who in turn forward the recommended suggestions with necessary
amendments to ITC headquarters at Kolkata.

Also company uses the drop down promotion scheme for its FMCG products in which a
particular number of free samples are given to the distributor from which a certain part is
reserved for the retailers and certain part is reserved for the consumers and they get the free
quantity in proportion to the quantity which is bought by them.

Distribution Strategy:

ITC has a well developed distribution channel for supplying its products so that they can quickly
and easily reach the end consumers. Due to its effective distribution network it has to maintain
less inventory hence inventory turnover is good as compared to the other players in the market
which helps it to easily manage its working capital requirements.

Agri Business:

ITC is very keen to develop its rural distribution network also it continuously focus to transform
the rural sector by using the digital technology which would help it to become a leader in market
at domestic as well as global level. So that it can become a global supplier of agri commodities.

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For this purpose ITC has taken an initiative known as “e choupal” for continuous development of
rural areas at a lower cost and easy flow of goods and services by developing a kind of
broadband capability.

Marketing Strategy:

ITC uses a marketing Strategy which is differential in nature and instead of focusing on new
channels it always rely on the existing channels for the purpose of the marketing. ITC always
selects the brand ambassadors according to the product it is going to market and most of the
times it selects the youth icons for the purpose of marketing.ITC main emphasis is not to be the
leader in first sense but to continuously improve the quality of its products and hence increase
the attraction of people towards its products.

Benchmarking Strategy:

ITC’s strategy is to raise the standard of its products according to the international benchmark so
that it gains an edge over its competitors that’s why it continuously focus on improving the
quality of its products so that it becomes the most admired brand across the Nation.

Diversification Strategy:

It has been the strategy of ITC to diversify its portfolio of products and add new products to it.
For this it has been able to manage the multiple drivers of growth and match the internal
capabilities of the organization with the available market opportunities or the one which are
emerging.

Some other strategic moves which are followed by ITC are:

 To create the products competitiveness of world class level in all its businesses and
across the whole value chain.

 To be the best in terms of Governance processes which are used to manage the multiple
businesses, for this purpose it is having a board of experts from diversified fields and
tremendous experiences.

 To blend a mix of strategies so that it can leverage the advantage that arises from its
diversified portfolio of products.

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ITC's Vision:
Vision of ITC is to sustain its position as India’s most valuable corporation through continuous
performance, creating value for stakeholders and for the economy.

Explanation:

Through this vision statement ITC tries to signify that it wants to be the most admired brand
across this country and it will achieve through its world class practices and well formulated
corporate strategies and by continuously performing well and working towards the welfare of the
society and creating the value for its shareholders. Through its high standards of performance it
will be leader in its own segment as well as the admired brand among all by having various
programs for the welfare of the society, eradication of the poverty which helps creating an
overall value for the entire economy.

ITC's Mission:
Mission of ITC is to increase its capability to generate wealth in a global environment and create
sustainable value for its stakeholders.

Explanation:

Through its mission statement ITC wants to signify that it wants to improve or enhance its
overall capability for production of wealth and it is achieving this by its strategic management
and organizational practices which it has implemented in the organization. Through its best
practices it will generate a superior value for its stakeholders and become the most admired
brand among all.

Values:
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.

Objective:

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Objective of ITC is to develop a customer centric and high performing organization which
creates value for its stakeholders. It aims to achieve its objective through following core values:

 Respect for People

 Customer Focus
 Nation Orientation
 Innovation
 Excellence

Internal Analysis: Resources and Capabilities required for the Strategy:

Resource Implication required for the Strategy:

Main strategy of ITC is based on the pricing as well as competitiveness so in order to be able to
manufacture its products at a lesser cost it has to optimize its production line so that it can cut
down the overall production cost and achieve profits without compromising on the quality. Also
in order to deliver the world class products ITC spends a lot the part of research and
development for this purpose it has employs several techniques such as six sigma, total quality
management and various techniques to control the quality. To serve this purpose it has separate
research and development department in the organization which continuously keeps on reducing
the production costs for manufacturing the new products. In order to manage its diversified
portfolio it has formed the 3 tier management structure:

 Board of directors which includes executive and non executive directors, the main
purpose of this team is strategic supervision.

 Corporate committee for management which includes executive directors and senior
managers this team mainly focuses on the strategic management.

 Divisional chief executive and management committee which mainly focuses on the
activities which are related to the executive management.

For the agri based business agriculture is the main supplier of its raw material for this purpose
commodities related to the agriculture is procured directly from the open markets.

Also in order to properly train its employees it has nearly 16,000 man days of the training period
within the company. Business plans and any changes are properly communicated with the
employees through the intranet portal of the company. The employees are given enough time to
discuss the effect of changes and the change is implemented only when the employees accept
that the change is going to be beneficial for the company.

ITC’s Agri Business Division, one of India’s largest exporters of agricultural commodities, has
conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers
around the world on a sustainable basis.

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The e-Choupal model has been specifically designed to tackle the challenges posed by the unique
features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the
involvement of numerous intermediaries, among others.

The Value Chain - Farm to Factory Gate:

Such a market-led business model can enhance the competitiveness of Indian agriculture and
trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for farmer risk
management, larger investments and higher quality and productivity.

Further, a growth in rural incomes will also unleash the latent demand for industrial goods so
necessary for the continued growth of the Indian economy. This will create another virtuous
cycle propelling the economy into a higher growth trajectory.

SWOT Analysis can be used to evaluate the objective. This tool helps to analyze the strengths as
well as weaknesses, the new opportunities which are emerging in the markets and the threat
arising from the competitors. ITC’s SWOT analysis is illustrated below.

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Strengths:

 Well developed distribution network, Strong Brand equity and experienced management
which helps it to take the correct management decisions and formulate the corporate
strategies.
 It has been on the path of constant growth for several years.
 ITC follows an excellent supply chain management which helps it to reduce the inventory
level.
 Able to target the youth with the help of its marketing strategies that mostly involve the
youth icons such as Shahrukh Khan for the branding of Sunfeast biscuits.

Weakness:

 Diversification is not relative.

 Not able to leverage the opportunities at the fullest.
 Effective marketing not done due to which the company is not able to grass its roots in
big metro cities of India which can be a huge market opportunity for ITC.
 It has not been able to achieve its projected sales targets.

Opportunities:

 Emerging Rural markets.

 Identifying the new emerging areas such as retail.
 New areas such as hotels provide an attractive opportunity for ITC.
 Due to the changing scenario the tastes of the consumers keeps on changing which
provide ITC an opportunity to launch new types of products.
 To use the new technology in its operations so that it can reduce its overall manufacturing
cost.

Threats:

 Health Hazard may lead to fall in cigarette sales.

 Threats from other competitors.
 Due to the new Government regulations or policies in a particular sector it can pose
threats for ITC. Suppose Government introduces new export import policy or policy
related to the taxation then ITC is bound to follow those rules or regulations even if they
create a negative effect on the business of ITC.
 Threats of exchange rate which can arise on the part of its global expansion activity.
 Global recession can result in reduced demand of its products.

BCG Matrix:

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Environmental Analysis:
STEEPLE Analysis:

Social and Business:

ITC uses the best business practices and is committed to the welfare of the society and the
nation. It has started various programs for poor people in rural areas to teach them and provide
employment to them by purchasing the raw materials from them. It uses best labor practices and
believes in the thinking of customer first.ITC has started programs to reduce poverty in some of
the most under developed areas of this country.

As a part of the corporate social responsibility ITC is also engaging in the various social welfare
development programs in order to improve the status of the people also it has started an initiative
to launch the internet service in rural areas so that the people from the rural areas have access to
the internet free of cost.

Technological:

All ITC manufacturing units have ISO quality certification. ITC's strategic initiatives for
developing its people have been based on participative management concepts like QC (Quality
Control), TQM (Total Quality Management), KSS (Kaizen Suggestion Scheme), 5S, Six Sigma.

Economical:

Turnover of over $5 Billion and increasing market capitalization, generate the value for the
shareholders with growing portfolio of the business.

Environmental:

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ITC is one of the kinds of organizations which continuously keep a check of its effect on nature.
In order to study the extent of climate change it has formed a carbon committee which would
suggest the measures so that ITC could become zero carbon emitting company. The company
has adopted 4 goals towards the environmental welfare:

 Zero solid waste.

 Zero water discharge.
 Carbon Free State.
 Beyond compliance performance.

Besides these it has rain harvesting system to preserve the rain water. Also it uses the practices
which are energy efficient.

Political:

Political framework concerns with the political environment and the stability of the government
as well as the policies framed by government which affect the company.

Legal:

ITC is transparent in providing the information to the shareholders and the media and uses the
appropriate accounting standards.

Ethical:

All standards and systems which are used at ITC comply with the relevant national as well as
international standards so that the organization can benefit from the best practices which are
accepted internationally. Also it uses the accounting standards which are quiet significant from
the point of view of shareholders. As a part of the ethical activity it never employs in any unfair
practices and if any of its employees is found guilty to be involved in unfair practices his /her
duties are immediately terminated.

Portfolio Analysis:

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Cigarettes:

ITC is market leader in cigarettes in India. With its wide range of invaluable brands, it has a
leadership position in every segment of the market. Its portfolio of brands includes Insignia,
India Kings, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake.

Hotels:

 ITC-Welcome group : a leading hotel chain in India

 Established presence in key business locations
 Over 6000 rooms under 4 distinct brands
 Capacity expansion underway at Bangalore and Chennai; plans for other locations also
being progressed. Positions on land taken at other locations such as Hyderabad and
Ahmedabad
 Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @
40%) amongst the 3 leading chains
 Leverages unique service proposition and international alliance with Starwood Hotels &
Resorts
 ‘Luxury Collection’ / ‘Sheraton’

FMCG:

Staples

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Aashirvaad Atta, Salt, Spices

Biscuits
Sunfeast

Salty Snacks
Potato chips, Bridge products : Bingo!

Confectionery
Candyman, Mint-o

Ready to Eat
Kitchens of India (Ready to Eat, Conserves & Chutneys and Frozen Foods), Aashirvaad (Instant
Mixes & Cooking Pastes), Sunfeast Pasta

Agarbattis and safety matches:

 Mangaldeep which is the only national agarbatti brand in the country.

 AIM’ – India’s largest selling Safety Matches brand

Personal Care Products:

 Essenza Di Wills (Super Premium) – Portfolio’s premium imagery augmented with

launch of ‘Aqua’ for men in fine fragrances and grooming range
 Fiama Di Wills (Premium) – Launched with Shampoos/Soaps/Shower Gels/Conditioners
 Vivel Di Wills and Vivel (Mid) – Soaps and Shampoos
 Superia (Popular) – Soaps and Shampoos

Education and stationary products:

 Classmate’ brand already the most widely distributed brand in India. Scholastic products
launched
 Branded Copier Paper ‘Paperkraft’ footprint being enhanced. Enthusiastic customer
response based on green credentials.

Apparels:

 Designer association with leading Indian designers – ‘Wills Signature’ line

 Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills Sport’ relaxed
wear and ‘Wills Clublife’ evening wear
 Strong distribution network in place for the mid-market brand ‘John Players’

Agri business:

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Unique e choupal model creates significant 2 way multi dimensional channel which can
efficiently carry products and services into and out of rural India, while recovering associated
costs through agri sourcing led efficiencies. This initiative now comprises 65,000 installations
covering 40,000 villages and serving 4 million farmers.

Leaf Tobacco:

ITC is largest, buyer and processor of leaf tobacco in India

Information Technology:

ITC infotech offers IT services and solution across following key industry verticals:

 Banking financial services and insurance(BFSI)

 Consumer Packaged Goods(CPG)
 Retail, Manufacturing and engineering services.

Corporate Parenting and Critical Success Factors:

The following diagram shows the corporate parenting of ITC

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Critical Success Factors:

 Sustain multiple drivers of growth, matching internal capabilities with emerging market
opportunities
 Pursue World class competitiveness in all businesses and across the entire value chain
 Best-in-class in terms of:
• Internal Vitality
• Market Standing
• Profitability
 Strategy of Organization and Governance processes geared to manage multiple
businesses
 Blend core competencies and leverage ITC umbrella strengths to create new avenues of
growth

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