Date: To: From:

10 October 2013 Y C Deveshwar, Chairman ITC Ltd Mukul Garg, learner At Coursera.org, Program of Darden Business School Amateur, Business Strategy Analysis

Re:

As a part of the final project submission for completion of course in Fundamentals of Business Strategy, I have chosen ITC Ltd as subject. The submitted Analysis Report is my original work and hope it is useful in deeper analysis of your establishment. ITC basically competes in FMCG (Fast Moving Consumer Goods) Sector. The Indian FMCG sector is the fourth largest in the Indian economy and has a market size of $13.1 billion [1]. The sector is growing at rapid pace with well-established distribution networks and intense competition between the organized and unorganized segments. It has a strong and competitive MNC presence across the entire value chain. The FMCGs promising market includes middle class and the rural segments of the Indian population, and give brand makers the opportunity to convert them to branded products. It includes food and beverage, personal care, pharmaceuticals, plastic goods, paper and stationery and household products etc. Other key sectors, with which company is associated like Hotel business, stationary, Agri business are also highly competitive. Population of India has already crossed 1.2 Billion and continues to grow at 1.13% [2]. With ever increasing population, rises the ever increasing demands and in such a situation the basic commodity market provide ample opportunity for the FMCG, and other generalized sectors to grow at rapid rate. The ITC Ltd. was incorporated as Imperial Tobacco Co. of India Ltd in the year 1910[3]. Since its very inception, ITC has dominated in the tobacco industry. As of now ITC Ltd sells 80 percent of the cigarettes in the India, where 275 million people use tobacco products [4]. In late 70s, the company decided to divert in the hospitality sector and as of now owns more than 90 hotels [5]. Later on, it again diverted into agricultural, paper industry, beauty products and packed food category. ITC Ltd is ranked No.5 on BT500 list with net market capitalization of 1,55,683.00 (in Crore )[6]. The company is number one in the FMGC sector [7]. The company faces stiff competition from other FMCG majors like HUL, Nestl, Godrej, hoteliers like the Leela Group, Taj Group, paper industry majors like Orient Papers and similar rivals in respective sectors. ITC has always out performed its rivals by sticking to highest grade of products, huge range, diverse sectors and social initiatives like E-choupal, Pay for Each Buy initiative of stationary division of ITC and many more . These initiative has helped in making a goodwill amongst people which has in turn created huge market acceptability and the company face no major problem in entering the packed potato chips market, which was already in possession of the Frito-Lay ( A Division of PepsiCo).

1. SWOT Analysis for ITC Ltd

2. Competitor Analysis

Competitor analysis has been done taking into consideration Companys primary sector, i.e. FMCG

3. Porters Five Forces Analysis:

4. Strategic Changes that can be incorporated

4(a) Company has a core competency in the tobacco industry. It also has experience in hospitality business. These two capabilities can be intertwined together to start a Smoking Club or Place. In later phases of Tobacco industry, when government would put very strict restriction on tobacco sales, it would become difficult to realize economic rents. Thus the company can switch to Differentiated Strategy. The clubs would be open to very elite section of society, who can pay for ambience and other added costs. This step would also serve as Forward Integration into existing Clubs. Just before dwindling of Tobacco industry, the company can acquire some of its competitors, at a premium price. It would ensure its rivals do not have the opportunity to take the Second Mover Strategy.

4(b) Another strategic change that ITC Ltd can administer is, opening of Retail Supermarket. It already has expertise in FMCG retail marketing .With a great management team and existing robust distribution network, it is no big deal. The added advantage of this kind of supermarket would be , that ITC would get a readymade platform for it future products , taking a very simple example of ITC toothpaste or ITC packed juice . Also it can also serve as a doorway to ITC food chain.

Strategic Map (FMCG) sector:

#Area is proportional to net market capitalization #Value increases upward and towards left on respective axis

5. Core Capability Analysis:

ITC has an excellent manegement team with over 25000 employees Excellent network of auxillary staff and good rapport with suppliers

people

process

More than a century of expertise , especially in field of Tobacco products High brand Equity Train it employees to get best out of them

system

Robust distribution network Excellent R&D wing , with state-of-the-art infrastructure Commited to highest standards of Quality

6. References:
[1]http://www.researchandmarkets.com/reports/2484001/fmcg_sector_in_india_strategic_review_ budget [2] http://www.tradingeconomics.com/india/population-growth-annual-percent-wb-data.html [3] http://economictimes.indiatimes.com/itc-ltd/infocompanyhistory/companyid-13554.cms [4] http://www.firstpost.com/business/itc-on-a-health-kick-post-global-anti-smoking-regulations445489.html [5]http://www.itcportal.com/businesses/hotels.aspx [6,7] http://businesstoday.intoday.in/bt500/index.jsp?compid=5&type=COMP&year=2012

SWOT Analysis References: http://articles.economictimes.indiatimes.com/2012-07-02/news/32508423_1_bse-fmcg-fmcg-indexfmcg-pack http://stockshastra.moneyworks4me.com/company-shastra-apply/fundamental-analysis-itc-ltd-report/ http://articles.economictimes.indiatimes.com/2011-10-30/news/30336737_1_fmcg-business-kurush-ngrant-cigarette-business Competitor Analysis References: http://www.mbaskool.com/fun-corner/top-brand-lists/7764-top-10-fmcg-companies-in-india-2013.html http://businesstoday.intoday.in/bt500/ Five Forces Analysis References: http://www.itcportal.com/sustainability/embedding-sustainability-in-business.aspx http://articles.economictimes.indiatimes.com/2012-07-02/news/32508423_1_bse-fmcg-fmcg-indexfmcg-pack http://stockshastra.moneyworks4me.com/company-shastra-apply/fundamental-analysis-itc-ltd-report/ http://www.cii.in/Sectors.aspx?enc=prvePUj2bdMtgTmvPwvisYH+5EnGjyGXO9hLECvTuNvwUH5MWzEu AiG8dfH+/Z7F Strategic Analysis References: http://www.itcportal.com/media-centre/press-reports-content.aspx?id=1375&type=C&news=ITC-NetRises-18%-on-FMCG-Sales-Growth http://www.hul.co.in/investorrelations/AnnualReports/ http://www.nestle.in/investors/stockandfinancials/annualreports General References: http://en.wikipedia.org/wiki/Main_Page http://hbr.org/ http://www.bseindia.com/ http://www.itcportal.com/