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Estila
Team:
ITC is one of India's foremost private sector companies with a market capitalisation of nearly US $ 19 billion and a turnover of over US $ 5.1 Billion.
Business Mix: FMCG, Hotels, Paper and Paper Boards, Agri-Business, Information Technology Main Revenue Stream : Cigarette
Team:
Subhashis Guha , Yuva Damodaran , Ashwin Natarajan , J Pavaanjeet Singh
PEST ANALYSIS
Political
The Current political outlook for the Philippines is stable. The policies of the central government are pro business and favored towards tax reforms and increased private participation in various sectors. Areas of concern remain in terms of the security environment in the Mindanao region
Economic
The Philippines has been affected by the Sub-prime crisis and is growing at the rate of 0.4% this year. But the tobacco industry is considered recession proof and smokers tend to smoke the same volumes in a recession. We expect this growth to be buttressed by the governments focus on the infrastructure sector of the Philippines. The government allows upto100% FDI in certain sectors The per capita income of the Philippines is estimated to be 2100$ as of 2009, this makes this market lucrative for tobacco.
Social
Philippines is one of the largest female smoking country in the world (16th in 2008, according to a couple of international surveys) More and more women are lighting up cigarettes around the world even as the smoking rate declines for men. This fact is true even in the Filippino context.
Technological
State of the art manufacturing facilities established have been established by competitors in the Philippines.
Market Attractiveness
In addition to the social factors we mentioned in our PEST analysis we can see the following trends which favor the launch of a new brand of cigarettes:
According to a global study on tobacco usage young Filippino women are ranked 2nd in the consumption of tobacco. A recent Global Youth Tobacco Survey states that 22% of Filipino teenagers or 1 in 5 currently smoke. The above mentioned factors in addition to the social factors already mentioned make this market attractive for ITC to enter.
Conclusion: Based on these four primary parameters we can say that the market is ready for the introduction of a new brand of cigarettes exclusively for women.
Market Potential
Population of Philippines : 92.23 million (www.census.gov.ph) Female Population: 46.12 million 55% of the Population in the age range (18 to 64): 28.13 million 12% of adult females are smokers: 3.38 million (WHO report on Philippines) High Value Female Smokers (36%): 1.22 million (Based on UAI Survey) So, Market Potential = 1.22 million female smokers
Sales Potential
To calculate the sales potential we have tried to estimate the potential brand switchers.
Brand switchers = the female smokers smoking more than 3 brands or the ones willing to try out a new female cigarette brand. Then we tested the hypothesis that not more than 70% of our target market will be brand switchers i.e. Null Hypothesis, H0 : 70%, Alternate Hypothesis, H1 : 70%
On the basis of the testing we rejected the null at 95% interval concluding that we may assume at least 70% of our niche market to respond to our new product.
Sales Potential = 70% of 1.22 million = 0.85 million female smokers
SWOT ANALYSIS
STRENGTHS 1. Strong Financial Reserve 2. Ability to manufacture a wide array of Products 3. IT enabled six-sigma based product development processes 4. Excellent Track Record on CSR SO-Strategies 1.Venture into the Philippine Cigarette Market. (S1, O1) 2. Present products for Filipino women(S2, O2) 3. Enter into a JV with a distributor(S1,O4) 4. Extend the CSR work to get noted at public and individual levels.
WEAKNESSES 1. No exposure in the international cigarette market 2. High Excise duty in India 3. No brand awareness in Philippines 4. Not a European or US brand
OPPORTUNITIES 1. High percentage of smokers in Philippines 2. Large women smoking population 3. Open Culture and strong influence of western societies 4. More than 50% FDI allowed in Philippines cigarette industry 5. Rising urban women with disposable income.
WO-Strategies 1. Lobbying for export promotion zones in India (W2,O1,O2) 2. Target the niche market of women smokers, selective distribution to build the brand. (W3, S2) 3. Brand the product with a western name and give it the image of a self-dependent yet caring urban woman. (W3,W4,O5)
THREATS 1.Special taxes and duties on Cigarette imports in Philippines. 2.Well established international brands in Philippines 3.Illicit trade and cheap contraband Products 4.Anti-smoking campaigns from NGOs and social organizations 5.Currency fluctuations
ST-Strategies 1. Introduce high quality products for Premium female smokers and those with disposable income. (S3,T1) 2. Avoid direct confrontation with established players by targeting a niche market. (S2,T2) 3. Involve as a social player by promoting NGOs and community organizations. (S4,T4)
WT-Srategies 1.Make use of its learning from other business segments that have a global presence (W1,T2) 2.After the initial market testing keep the long-term plan to invest in setting up a plant. (W2,T1)
Competitors
Major competitors
Brand Vogue Company BAT Presence Asia- Korea Price 84 Pesos
ESSE
75 Pesos
Virginia Slims
80 Pesos
All the above mentioned competitors have significant investments in the distribution chain, full fledged product lines, cash reserves and hence pose a very high threat to our new product line.
Target Market
The traits of our target segment are:
Age range between 18 to 50 years Independent successful women Fashion conscious High Disposable Income Caring
Entry Strategy
51%-49% Joint Venture
Major Distributor/ Big Players like San Miguel Sales and Marketing - ITC Leverage distribution strength of the partner
Product
Flavor (Menthol, Strawberry, Chocolate) Estila Ice, Estila Pink, Estila High Fragrance ( Lesser smell of nicotine ) Longer Filters covered with special tipping paper. Sleek Look (100 mm length; 3.7 mm diameter) Colored sticks Designer rolling paper. Packaging (Open book pack)s
Place
Selective Distribution Dedicated shelves in departmental stores. Special Kiosks in leading Malls. Dispensers in offices We are using this method of distribution to: Build exclusivity Build a strong brand Be accessible to the target market
Promotion
Phase 1 Teasers Text games, Website (forum, Computer room) Magazines Phase 2 Amazing race for women
Phase 3 Advertorials Club Promotions & Music Nights Special events for selective audiences (Call center employees) Limited Edition Customized Packs
Print Ad
Price
Price before distributor 1.98 Import(7% on RP) Excise(P20/20 sticks) Sales(10% on RP) Inspection 0.315 1 0.45 0.0001
Price to distributor
3.75
Retail Price
4.48
Operating Expenses
Advertising and Promotion Selling, General and Administrative Other expenses(Legal etc) Total Income before taxes Income tax(30%)
Net Income
-4.54
1.78
9.21
14.79
20.85