Académique Documents
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Project Report
Strategic Management
INDIAN TOBBACO COMPANY
By:
Group 10
SYBBA-B
S No.
Name Roll No.
1 Shivam Sharma
B046
2
Shraddha Kaku
B047
3
Shreyans Jain
B048
4
Shubham Garg
B049
5 Siddhant Agrawal
B050
Table of Contents
Acknowledgement................................................................................................. 3
About the Project................................................................................................... 3
About the Group.................................................................................................... 4
KEC International at a glance................................................................................5
Business Portfolio............................................................................................... 5
History................................................................................................................ 5
Introduction........................................................................................................... 6
Human Resource Department................................................................................ 8
Finance and Commercial Department..................................................................12
Marketing Department......................................................................................... 15
Recommendations............................................................................................... 17
Conclusion........................................................................................................... 18
Questionnaire...................................................................................................... 19
Bibliography......................................................................................................... 20
Page 2 of 23
ACKNOWLEDGEMENT
We would like to express our special thanks to our teacher Ms Pallavi Rallan who gave us the
golden opportunity to do this project, which also helped us in conducting a lot of research and
broadening our scope of knowledge.
We also appreciate the help and guidance provided to us by our friends and family, without
which we would not have been able to successfully complete this project.
This project has not only assisted us in increasing our knowledge but also helped us gain and
improve new skills of corporate analysis techniques.
THANKING ALL OF THOSE WHO HELPED US
Shivam Sharma
Shraddha Kaku
Shreyans Jain
Shubham Garg
Siddhant Agrawal
Page 3 of 23
A BRIEF BACKGROUND
India
Tobacco
Company
FMCG
Hotels
(Cigarettes &
Non-Cigarettes)
Paperboards &
Packaging
ITCs Diversification
1910: ITC was incorporated on August 24
Page 4 of 23
Agriculture
Businesses
Information
Technology
Page 5 of 23
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
Mission:
To enhance the wealth generating capability of the enterprise in a globalising environment,
delivering superior and sustainable stakeholder value
WHY DIVERSIFY?
Page 6 of 23
The Indian rural and agricultural market is 70% to other resources in India, but only 30 % of
the GDP is from the agricultural sector. ITC realized that their cigarette business has a limited
future for innovation and expansion. So diversification was needed in any case, to build a
foothold in Indian market. FMCG being the fourth largest sector in the field which is
expanding at a very fast pace and has huge potential, along with the benefit that it can be
accrued by organizing the existing fragmented market accrued by market leading to concept
of one stop shop, ITC decided to enter this market. Further India being one of the largest
economies with the benefit of its vast market, it attracted ITC to the expand its operation in
various areas of Hospitality, FMCG, Greeting cards, branded apparels etc.
Page 7 of 23
2. 2nd Strategy
They decided to enter the foods segment because it's a Rs 550,000 crore
market in India. But only 6 per cent of it was branded and packaged. In
developed markets, nearly 95 per cent of the food market is branded and
packaged. So there was lot of scope for a branded player.
b.
The large gap between the organized and unorganized retail sector gave ITC
extra incentive to push further into this diversification. The only organized
retail at the time of entry was Parle and Britania and so the potential for
growth was huge and the market was attractive.
4. Standard Products
a. Before entering the segment, ITC dug into market research. Research revealed that
the category had gaps which ITC could settle into. Findings revealed that consumers
wished to taste new and innovative products. That was precisely what the
competition had not done in a big way.
Page 8 of 23
b. The biscuits industry had witnessed little innovation; Glucose was Glucose and
Marie was still Marie. The company decided that this could be its biggest point of
differentiation.
10
10
7.5
2.1
India
1.9
USA
UK
Japan
China
Page 9 of 23
Product Differentiation
Capital Requirements
High
Not Easy
Cost Disadvantages
More
Government Policy
More
Switching Costs
Low
Implementation of Strategy:
1) Innovation
a) ITC launched Sunfeast with six ranges. But it was a calculated risk. ITC stuck to
category favourites like Glucose, Marie and Bourbon cream.
b) Along with that, it also launched innovations such as orange-flavoured Marie, Marie
light and butterscotch-flavoured cream biscuits. In 2004, Sunfeast followed this up
with the launch of Sunfeast Milky Magic. More recently, it also has launched the
Sunfeast Snacky and Sunfeast Golden Bakes.
c) Even the competition had not made things better. Between 2000 and 2005 neither
Parle nor Britannia launched any major new product. Yes, Britannia did re-launch its
Tiger brand in 2005.
2) Distribution
a) It's common knowledge, that for FMCG products, distribution channels are very
important.
Page 10 of 23
b) Says Pravin Kulkarni, general manager, marketing, Parle Products, "For biscuits,
distribution and visibility are extremely important as it's partly a impulse purchase
product." And in biscuits, setting up a distribution channel is anything but easy.
c) However, in this regard, Sunfeast has been fortunate: thanks to its tobacco business,
ITC already had a good understanding of distribution channels.
d) The company used its existing network of convenience stores -- the company's name
for the hole-in-the-wall pan-beedi shops -- for Sunfeast. Not content with the existing
resources, the company also looked at grocery stores and other retail formats.
e) The company says the brand is now available in nearly 1.8 million outlets. Britannia
claims it has a superior distribution clout with its presence in nearly 3.3 million
outlets. Parle, the seasoned player itself, says it is available in 1.5 million outlets.
3) Pricing models
a) The biscuits industry now has two clear models. Parle products plays the low price
game at all varieties of biscuits from glucose to cream.
b) Essentially, Parle plays a high volume, low margin game. But Britannia and Sunfeast
look at a two-pronged strategy. High margins in cream variants and volumes from the
Marie and Glucose segments.
c) For instance, cream biscuits from both Britannia and Sunfeast cost Rs 10 for 100
grams. Parle, however, only charges Rs 5 for its cream variants. Except for Hide &
Seek, all of Parle's products lie in the price range between Rs 4 and Rs 6 for 100 gram
packs.
d) To be fair, in Glucose and Marie, the companies have little choice. As there is little
differentiation, consumers are extremely price sensitive. But these segments are
important. Marie and the popular glucose varieties make up for nearly 55 per cent of
the Rs 4,000 crore (Rs billion) biscuits segment -- a significant Rs 2,200 crore (Rs
billion).
e) Says Sunil Alagh, chairman, SKA Advisors, and former CEO of Britannia Industries,
"the biscuit consumer is willing to pay more only when he sees a clearly differentiated
product. Hence companies have little choice in terms of pricing." No wonder all the
Glucose and Marie variants straddle price points of Rs 4-6 (for 100 grams).
Page 11 of 23
cent in 2004-05 to 30.5 per cent in May 2006 (volumes). Parle's shares had also dropped
from 42.2 to 38.4 per cent in the same period.
3) Even Priya Gold had seen a minor dip from 6.4 per cent to 5 per cent. ITC's Sunfeast had
been a big gainer with its share increasing from 2.7 to 6.7 per cent.
4) In terms of value, Britannia leads the market with 37 per cent market share, followed by
Parle's 31.3 per cent and ITC's 6.3 per cent. Nevertheless, the gap is still wide. Sunfeast
still has a long way to go.
5) For the year ended October 31, 2013, ITC's cream biscuit market share stands at around
25% in value, according to industry sources who quoted all-India Nielsen numbers. The
market share numbers for Parle Products and Britannia for the same period were under
20%
6. Since the time ITC has entered in 2003, the biscuit industry has been on a steady
increase in terms of volume of production (in metric tonnes as well as in Rs.) over the
years as per the charts below. The annual growth rate of the biscuit industry has been
at a steady average of 13-14% over the past 6 years.
Page 12 of 23
11
18.25
17.44
16.57
16.14
14.29
12.54
19.6
14500
9830
11206
6800
4000
14%
15%
14%
13%
15%
10%
Page 13 of 23
Strategy Analysis:
The high-end cream biscuit market is even more organized. Sunfeast was launched at the
right time when the organized market was expanding. This helped the brand to expand
rapidly in a market, which was for years dominated by Britannia and Parle.
Biscuits are the biggest contributor to ITC Foods top line and premium segments. The chief
executive of the diversified conglomerate's food business says plans are afoot to link its
mammoth back-end support, the e-choupal network, for biscuits, as well. Currently, it is
restricted to the atta brand, Aashirvaad, but will soon extend it to biscuits.
Page 14 of 23
5) CSR
a) Classmate notebooks were launched with the initiative of contributing Re. 1 towards
the education of poor children from every 4 notebooks it sold
b) Increasing literacy levels in country means increasing demand for stationery.
6)
Page 15 of 23
Implementation
1) Expansion of its product portfolio:
a) Following its stellar performance in the greeting cards business ITC laid special thrust
on the stationery market and made a move towards expanding its product portfolio.
The company launched Classmate, a brand of note-books, under its umbrella brand
Expressions PaperKraft, catering to the mass and high-end segment.
2) Wide range
a) The Classmate range, which stands for quality and dependability, is available in more
than 180 variants and comes in hard as well as soft covers. Besides, it is available in
different rule formats - single, double, square as well as unrule format. The entire
range has cover designs that have graphic visuals ranging from birds, flowers,
animals, sports, space, transport and monuments.
3) Innovation
a) ITC focused on the design elements of notebooks: each Classmate notebook has a
theme on the cover and related information inside.For instance, if the cover has a
photograph of a ship, the inside front cover has information about ships. Then, the last
two pages of the notebook have trivia and the back cover highlights the corporate
social responsibility initiatives of the company (Re 1 from each notebook sold is set
aside for the cause of underprivileged children).
4) Appealing product range
a) The company has laid great emphasis on designs and features that would truly appeal
to the target consumers, evoking interest leading to trial and joy of experiencing the
product. The inside of the cover page has a small write up on each of the cover visual.
The last two pages are totally devoted to trivia on various subjects adding fun to
learning.
5) High quality
a) The uniqueness of the product in terms of paper is the usage of 60 GSM paper as
compared to 54 - 58 GSM used by various competitions. The other features of the
paper can be attributed to the smoothness, whiteness and opacity.
Page 16 of 23
6) Eco-friendly paper
a) The use of eco-friendly paper bleached without elemental chlorine is the first
chlorine-free stationery product in the country and the young generation would feel
proud to be associated with environment friendly stationery. ITC is the manufacturer
of Indias first Ozone-treated environment friendly Elemental Chlorine Free (ECF)
pulp, paper and paperboard.
7) Pricing
a) The Classmate range is priced between Rs 10 - Rs 40. The pricing is very competitive
and is in sync with market expectations. ITC would be distributing its Classmate
stationery products through stationery outlets as well as greeting cards outlets that
stock stationery products.
8)
a) ITC blends its knowledge of image processing, printing and conversion garnered from
Packaging & Printing Business with its brand building and trade marketing &
distribution strengths resident in its FMCG business to offer superior value products
to consumers.
9) Promotional strategy:
a) A man's signature is perhaps one of the most impressive portrayals of his identity. We
have all toiled hard, as a child, to get that signature worthy of the person we aspire to
be. Keeping this proposition in mind, ITC has launched a campaign for
its Classmate range of pens.
b) "Classmate as a brand recognises that an individual is born unique. Therefore, it is
crucial to recognise, nurture and celebrate this uniqueness. They reflected this in their
advertisement relating to pens.
c) ITC will bank on cross-promotions with its notebooks, as range enjoys a 18-20 per
cent market share of the Rs 3,000-3,500-crore market. But in writing instruments, it
has had only two per cent owing to its late entry. At the moment, its focus is on brand
creation and communication. This reflects on its budget allocation too. Of the Rs 3550 crore advertising budget, a lion's chunk is being spent on consumer connect.
d) ITC identified that the age when children first start using pens is significant for them.
The permission to use pens in schools, as against the pencils they had used so far, is a
sort of a rite-of-passage for the child, a sign of empowerment. Which is why they try
to imitate the first grown-up habit they can imagine - carve out a unique signature for
themselves. This the basis which their TV commercials revolve around.
e) ITC plans to extend the campaign to different media. It will be using the social
medium extensively to increase the outreach. There will also be school contact
Page 17 of 23
ITC outsourced the final production to 20 satellite manufacturing plants across the
country. These plants are supplied with paper from ITC's plant at Bhadrachalam, in
Andhra Pradesh. To keep a check on transportation costs, Das says the company tries
to manufacture and sell within the same area.
Post Implementation
1) Today in the operating segments in notebook, ITC has a more than 50% share. That
makes them by far the largest player. They outsell their closest competitor 1:2 and they
outsell their second closest competitor 1:5.
2) "When the company got into the stationery business way back in 2003, there was a lot of
scepticism, but today we are market leaders in the branded notebooks category," says
Chand Das, chief executive, education and stationery products business at ITC.
3) The company's rise to the Rs 1,000-crore mark took a little over 10 years, which
according to Das is the fastest in the history of the stationery business in India.
Companies such as Navneet, for instance, despite being around since 1956, have a
turnover of less than Rs 1,000 crore.
4) ITC played a major role in getting consumers to think brands while buying a
commoditised category like notebooks.
5) The organized market for notebooks is around Rs 4,000 crore, where ITC's Classmate is
the market leader with a 20 per cent share. The other national brand, Navneet, is a distant
second with 7 per cent share. The rest of the market is controlled by a host of regional
brands.
6) Almost 85 per cent of the classmate's revenue comes from notebook sales, while the rest
is from other stationery products such as pens and art stationery.
7) ITC started Classmate around six years ago when the market was highly commoditized
and fragmented. Classmate has recorded a CAGR of 70% over this period. They are in the
process of enlarging their basket of offerings.
8) ITC's stationery business, which sells notebooks under the Classmate brand name,
brought in earnings of Rs 40 crore (Rs 400 million) in 2005-06.
Page 18 of 23
9) Classmate is India's No. 1 Notebook brand. Its range of more than 300 variants is custom
made to take care of varying needs in notebooks, long books, practical books, drawing
books & reminder pads segments. These notebooks reach more than 90,000 outlets across
the country.
Key to Success
1) Getting the entire product proposition right in terms of :
a) need gap,
b) consumption,
c) usage and behaviour in the category,
d) research on whether the current products in the category are failing consumers.
e) paper quality and binding quality;
f) responsible marketing to children ensuring that the brand proposition resonates with
children and is important for their future.
2) Its range of more than 300 variants is custom made to take care of varying needs in
notebooks, long books, practical books, drawing books & reminder pads segments. These
notebooks reach more than 90,000 outlets across the country.
3) Meticulous understanding of consumer needs helped creating a relevant and
comprehensive portfolio satisfying the needs of different sets of consumers.
Page 19 of 23
4) Paperkraft Business paper and the papers used in Classmate and Paperkraft notebooks are
superior in quality and environment-friendly.
5) Other offerings available in education and Stationery range are safe and certified nontoxic, specially designed for children.
6) Choosing Soha Ali Khan and Yuvraj Singh as the brand ambassadors- youth icons.
7) ITC also had the advantage of sharing infrastructure with its food and cigarette business the group has 19 branch offices across India. These offices became a nodal point for sales
and distribution of notebooks. Enabling them to hit the market fastest.
SWOT ANALYSIS
Strengths:
Managing diverse business. ITC has 105 subsidiaries connected with its various
operations.
Excellent brand making capability helping it to diversify it into Retailing, IT & Hotel
segments
Page 20 of 23
ITC ltd is one of the most liquid scripts in the capital market. With domestic
institutions having a considerable stake this is likely to improve liquidity in De-mat
trading.
Good returns by way of dividend per share every year. In 31.3.2002 the dividend
declared is 13.50 Rs per share
The lifestyle retailing segment has won acclaim & moving towards higher sales.
The expression greeting card is widening its base all over India & it is available at
most retail shops.
Weakness:
Diversification into various lines in which it does not have much knowledge would be
very risky proposition.
High competition from established brands which has resulted in reduction in profit
margins.
Steep increase in cigarette taxes has adversely affected the revenue earned.
Due to high price of cigarette, consumers are switching to other cheaper forms of
tobacco.
Its hotel industry has still not created a big share in the market size.
Opportunities:
Big untapped market available. For cigarettes, hotels, it, retail garment, packaging &
agricultural products.
Page 21 of 23
Threats:
Government is under huge pressure from public organizations for banning tobacco
products which could affect it adversely.
Due to terrorist attacks the tourism industry has taken a back seat which would affect
the hotel segment.
Poor monsoon leads to poor agricultural growth which would affect the agro-exports.
Page 22 of 23
BIBLIOGRAPHY
1. Interviews by Mr Shubhankar Dutta, Mr Nilesh Bakale, Mr Chinmay, Mr Sandeep
Tambe & Mr Jitender Thanvi.
2. The company website i.e. http://www.kecrpg.com
3. The
Wikipedia
webpage
of
KEC
http://en.wikipedia.org/wiki/KEC_International
International
Limited
4. http://money.rediff.com/companies/KEC-International-Ltd/15150022?src=srch
Page 23 of 23
i.e.