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ITC Group

International Business Strategy

Submitted By:
Sujay Ambure (07)
Aprameya K A (12)
Sanket Boghani (21)
Ravi Patel (39)
Vrushada Tawar (53)
Utkarsh Agarwal (56)
Flow of
Presentation

2
1.
Diversification
Strategy
History and Evolution
Imperial Tobacco
India Tobacco
Company of India I.T.C. Limited
Company Limited
Limited (1974)
(1970)
(1910)

ITC is one of India's most diversified consumer goods company


having increasingly reduced its dependence on its core cigarette
business.

FMCG (cigarette and non-cigarette)

Hotels

Agri-Business

Information technology

Paperboards, Paper & Packaging

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Diversification during the years

1910 1925 1975 1979


Packaging and Hospitality Sector Paperboards &
Printing: Backward Specialty Papers
Started producing
Integration Launched Hotels
cigarettes under
Factory at Munger business acquiring ITC's paperboards'
the name of
was equipped with hotel in Chennai technology,
Imperial Tobacco
printing facility, as ”ITC- productivity, quality
Company of India
paving way for its Welcomgroup Hotel and manufacturing
Limited
first non tobacco Chola” To create processes are
business value for the nation. comparable to the
. ITC chose this for its best in the world.
potential to earn high Contribution to the
levels of foreign development of
exchange, create “Sarapaka” through
tourism infrastructure education,
and generate large environmental
scale direct and protection and
indirect employment. community
development
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Diversification during the years

1990 1990 2000 2001


Agri Business - Education & Lifestyle Retailing -
Strengthening Stationery Products Premium Offerings
Paperboards &
Farmer Linkages Classmate over the Wills Sport: range of
Specialty Papers - international quality
Through the years has grown to
Consolidation and relaxed wear for men
'Choupal Pradarshan become India's
Expansion and women. Wills
Khet' initiative, the largest notebook
Classic formal
agri services vertical brand. Paperkraft
wear (2002) and Wills
has been focusing offers a diverse Clublife evening
on improving portfolio in the wear (2003). John
productivity of crops premium executive Players, in 2002. In
while deepening the stationery and office 2006, Wills Lifestyle
relationship with the consumables became title partner of
farming community. segment. the country's most
. . premier fashion event -
Wills Lifestyle India
Fashion Week- that
has gained high
recognition to the
brand.
Diversification during the years

2000 2001 2001 2002-05


Information Branded Packaged Branded Packaged 2002: Agarbattis &
Technology - Foods Foods Safety Matches -
2010 With Sunfeast Supporting the Small
Business Friendly Yippee! entered instant
Solutions 2001 'Kitchens of and Cottage Sector
noodles market.
India' ready-to-eat
ITC Infotech India Indian gourmet dishes. &
2014 ITC launched
Limited provides GumOn Chewing Gum. 2005: Personal Care
outsourced IT solutions 2002 confectionery & Products - Expert
and services to leading staples segments Solutions for
2015 It entered the Fruit-
global customers across with minto and Candy Discerning
based juices and beverages
Banking Financial man and Aashirvaad Consumers
market with the launch of B
Services & Insurance Atta (wheat flour).
Natural Fruit and dairy
(BFSI), Consumer
segment with the launch of
Packaged Goods (CPG), 2003 introduction
Aashirvaad Svasti Ghee.
Retail, Manufacturing, of Sunfeast the
Engineering Services, biscuits segment.
Media & Entertainment, 2016 Fabelle chocolates
Travel, Hospitality, Life are ITC's premier offering in
2007 fast growing
Sciences and the luxury chocolate space.
branded snacks
Transportation & category Bingo.
Logistics
.
.
In 2010, ITC launched its hand rolled cigar, Armenteros, in the Indian market. Armenteros cigars are available
exclusively at tobacco selling outlets in select hotels, fine dining restaurants and exclusive clubs.
Broad Diversification Strategies

 Aimed at synergising both backward and forward integration


 Convergence of multiple core competencies
 Value derived from diversified portfolio of related businesses through efficient value
chains.
 Brand management + Understanding markets + Consumer tastes.
 Selection criterions:
i. Good likely ROI
ii. Potential for future expansion

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Analysis of Strategies – Organic growth

 Entering into less competitive or unexplored markets (ready to eat, staples,


wafers)
 Maintaining a well-managed supply chain network
 Innovation- Regular introduction of new products, duly supported by R&D
 Mix of more than one business strategies
 Extensive Advertising (biscuits, confectionary, wafers)
 Multiple drivers of growth – matching internal capabilities with emerging market
opportunities
 Pursue World class competitiveness in the entire value chain
 Transformational strategy – eChoupal

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Challenges for Strategies

 Capability of organisation to manage multiple businesses indefinitely


 ITC has been trying to develop a capacity to manage their large portfolio which
will result in a need of huge funds
 ITC needs to maintain a proper flow of cash and proper project budget control
 Investing in people

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2.
Internationalizatio
n Strategy
in a
significant manner?
1985: Nepal Subsidiary - First Steps 2006: ITC Infotech expands footprints
beyond National Borders in USA

In 1985, ITC set up Surya Tobacco Co. The Company has entered into a strategic
in Nepal as an Indo-Nepal and British alliance with AK-Global Solutions, Inc. a
joint venture. In August 2002, Surya leading business consultant, providing
Tobacco became a subsidiary of ITC strategic integrated solutions to better
Limited and its name was changed manage talent pool, technology and
to Surya Nepal Private expertise. Targeting a rapid growth both
Limited (Surya Nepal). In 2004, the in top line and staffing numbers, ITC
company diversified into manufacturing Infotech aims to expand its manpower
and exports of garments. capacity to employ 100 people in
Alabama over the next three years.
ITC’s Spices Business continued to expanding Food Safe Markets viz. US, EU and
Japan, leveraging its strong backward integration and customer focused strategies.
Export of spices grew at a healthy pace, well ahead of industry trends, driven by the
addition of new customers and foray into new markets such as Australia, Germany,
Turkey and Ukraine.
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in a
significant manner?
Technico Pty Limited and its subsidiaries
In the Branded Apparel business, The company continues to focus on upgradation and
‘John Players’ has established commercialisation of its TECHNITUBER® seed technology
itself as a leading brand at the and customising its application across various geographies.
premium end of the branded Besides, the company is engaged in the marketing of
menswear segment in Nepal, with TECHNITUBER® seed to global customers produced at
a significant presence across the facilities of its subsidiaries in China and Canada and
markets through exclusive Technico Agri Sciences Limited, India, a wholly-owned
branded outlets, departmental subsidiary of your Company. The Canadian subsidiary of
chains and multi-brand outlets. the company is also engaged in field multiplication of
seeds.
Technico Pty Limited, Australia
Surya Nepal Private Limited, WelcomHotels Lanka (Private) (Technico)
Nepal Limited, Sri Lanka Shareholding: 100% held by ITC
Shareholding: 59% held by ITC Shareholding: 100% held by ITC Limited
Limited. Limited Nature of Business: An agri-
Nature of Business: Manufacture Nature of Business: The Company biotechnology company Primarily
and sale of cigarettes and in the is developing a plot of land in engaged in rapid multiplication of
business of garments, matches, Colombo seed potatoes with
agarbatti and branded packaged for a mixed use development TECHNITUBER®
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food products. project including a luxury hotel. technology.
Entry Mode Adopted

Surya Nepal Private WelcomHotels Lanka Technico Pty Limited,


Limited, Nepal (Private) Limited, Sri Lanka Australia (Technico)
• Indo Nepal-UK joint The Board of Investment of Sri • Subsidiaries
venture Lanka has provided about 5.86 Technico has two wholly owned
• Stakeholders include acres of prime sea-facing land subsidiaries, namely Technico
local napalese, ITC and in Colombo to the company on Technologies Inc., Canada and
British American a 99-year lease for this Technico Asia Holdings Pty
Tobacco (Investment) purpose. Limited, Australia. Technico
Limited, UK Asia Holdings Pty Limited,
Australia, has a wholly owned
subsidiary, Technico
Horticultural (Kunming)
Company Limited, China. These
companies support Technico in
the production and
commercialisation of seed
potato technology in different
14 geographies.
3.
Divestments
Divestment is a form of retrenchment strategy used by businesses
when they downsize the scope of their business activities. Divestment usually
involves eliminating a portion of a business. Firms may elect to sell, close, or spin-
off a strategic business unit, major operating division, or product line.

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ITC Foods, withdrawn its snacks food brand 'Bischips' from the
market in 2013. The brand, which was launched late 2012 as a
nutritious snack, could not generate enough demand.

On 9 October 2016 ITC announced divestment of its entire


shareholding in its wholly owned subsidiary King Maker Marketing
Inc. USA along with assignment of certain trademarks owned by
the company for total consideration of US$24 million.

On 5th Aug 2017 the government divested 2 percent of its stake


held in ITC held through the Specified Undertaking of the Unit
Trust of India (SUUTI). The surprise divestment had only one
buyer, the Life Insurance Corporation of India, which picked up
the entire 2 percent stake in ITC.

In 2018 ITC had withdrawn from the race to acquire nutritional


drink market brands Horlicks and Complan as it considered the
valuations of the brands were too high.

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4.
Group Level
Restructuring
Changes and Synergies
Challenges leading up to the restructuring of ITC:

In 1996, ITC’s core business of cigarettes was slapped with a


retrospective excise duty demand of 803 Crore

In the same year, Y C Deveshwar assumed office of CEO


of ITC, the company was criticized for weak diversification

A battle for control of the company had ensued amidst a


huge public smear campaign that significantly damaged its
reputation

India had just entered a phase of liberalization, drastically


changing the country's competitive landscape

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ITC Group Restructuring
(Post 1996)

• The Group restructure was based on the strategic fit between market
opportunities and its core capabilities

• Paradigm shift with a new focus - acquiring international competitiveness in cost


and quality in each of ITC's businesses through substantial investments in
technology, processes, innovation and brands

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Group Restructure: Changes and Synergies
Changes brought about in the restructure plan:

• ITC exited the edible oils and financial services business in 1998
• The paperboards business was merged with ITC, infusing it with new life
• The hotels business was also folded back into ITC in 2004
• ITC also entered the IT space through its wholly owned subsidiary ITC Infotech

Synergistic effects through the restructure plan:


• ITC’s finance business was incurring huge outlays. Winding up Classic Finance
helped the firm from the adverse effects of the retrospective excise duty
demand of 803 crores
• Merging paperboards business with ITC led to greening over 1,60,000 hectare
and created 70 million person days of employment. The paperboards business
stands transformed into a clear industry leader - profitable and environmentally
responsible
• ITC Hotels pioneered the concept of 'responsible luxury', becoming the
greenest luxury hotel chain in the world
• ITC Infotech is one of the fastest growing mid-tier IT companies in India