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General Management Project Report

ITC Limited

Prepared by:
Heet Jakharia(M1906)

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Contents
Introduction ............................................................................................................................................ 3
ITC Limited. ............................................................................................................................................. 9
A Modest Beginning ........................................................................................................................... 9
Multiple Drivers of Growth .............................................................................................................. 10
Creating Enduring Value .................................................................................................................. 10
Global Exemplar in Sustainability .................................................................................................... 11
Product range of the company includes. .............................................................................................. 12
Top 10 ITC FMCG Products List As Per Consumer’s Choice in India. ............................................... 12
1. Aashirvaad Atta ............................................................................................................................ 12
2. Sunfeast Biscuits ........................................................................................................................... 12
3. Bingo ............................................................................................................................................. 13
4. Yippee Noodles and Pastas from ITC ........................................................................................... 13
5. Candyman Confectioneries ........................................................................................................... 13
6. Vivel.............................................................................................................................................. 14
7. Fiama ............................................................................................................................................ 14
8. Sunbeam Gourmet coffee ............................................................................................................. 15
9. Fabelle ........................................................................................................................................... 15
10. B Natural ..................................................................................................................................... 16
Strategic Frameworks ........................................................................................................................... 17
PESTEL Analysis ................................................................................................................................. 17
SWOT Analysis....................................................................................................................................... 21
Ansoff Matrix........................................................................................................................................ 25
BCG Matrix .......................................................................................................................................... 28
GE Matrix ............................................................................................................................................. 31
McKinsey’s 7s Framework ................................................................................................................... 36
Competence Model ............................................................................................................................... 38
Resource Based View ........................................................................................................................... 40
VRIO Framework ................................................................................................................................. 43
Value Chain Analysis ........................................................................................................................... 47
VUCA World ........................................................................................................................................ 50
Porters Five Forces ............................................................................................................................... 56
Michael porter generic strategy............................................................................................................. 61

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Introduction

Fast moving consumer goods (FMCG) is the 4th largest sector in the Indian
economy. There are three main segments in the sector – food and beverages
which accounts for 19 per cent of the sector, healthcare which accounts for 31
per cent and household and personal care which accounts for the remaining 50
per cent.

Accounting for a revenue share of around 45 per cent, rural segment is a large
contributor to the overall revenue generated by the FMCG sector in India.
Demand for quality goods and services have been going up in rural areas of
India, on the back of improved distribution channels of manufacturing and
FMCG companies. Urban segment accounted for a revenue share of 55 per cent
in the overall revenues recorded by FMCG sector in India.

FMCG Companies are looking to invest in energy efficient plants to benefit the
society and lower costs in the long term. Patanjali will spend US$ 743.72
million in various food parks in Maharashtra, Madhya Pradesh, Assam, Andhra
Pradesh and Uttar Pradesh. Dabur is planning to invest Rs 250-300 crore (US$
38.79-46.55 million) in FY19 for capacity expansion and is also looking for
acquisitions in the domestic market.

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Growing awareness, easier access, and changing lifestyles are the key growth
drivers for the consumer market. The focus on agriculture, MSMEs, education,
healthcare, infrastructure and employment under the Union Budget 2018-19 is
expected to directly impact the FMCG sector.

Market Size

The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from
US$ 840 billion in 2017, with modern trade expected to grow at 20 per cent - 25
per cent per annum, which is likely to boost revenues of FMCG companies. In
2016-17, revenue for FMCG sector have reached US$ 49 billion and is expected
to grow at 9-9.5 per cent in FY18 supported by expectations of the total
consumption expenditure reaching nearly US$ 3,600 billion by 2020 from US$
1,595 billion in 2016. Direct selling sector in India is expected to reach Rs
159.3 billion (US$ 2.5 billion) by 2021, if provided with a conducive
environment through reforms and regulation.

Investments/ Developments

The government has allowed 100 per cent Foreign Direct Investment (FDI) in
food processing and single-brand retail and 51 per cent in multi-brand retail.
This would bolster employment and supply chains, and also provide high
visibility for FMCG brands in organised retail markets, bolstering consumer
spending and encouraging more product launches. The sector witnessed healthy
FDI inflows of US$ 13.07 billion, during April 2000 to December 2017. Some
of the recent developments in the FMCG sector are as follows:

 The Hershey Co plans to invest US$ 50 million over the next five years in
India, its fastest growing core market outside of US.
 As a part of its Rs 25,000 crore (US$ 3.88 billion) investment package,
ITC will invest Rs 10,000 crore (US$ 1.55 billion) to expand its food
processing segment.
 The bottling arm of Coca-Cola India, Hindustan Coca-Cola Beverages
(HCCB) is planning to increase its retail reach by one million new outlets
and is targeting revenue of US$ 2.5 billion by 2020.
 Future Retail will acquire HyperCity, which is owned by Shoppers Stop
for Rs 911 crore (US$ 139.7 million) to further consolidate its business
and have a better footing in the hypermarket segment.

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 Patanjali will spend US$743.72 million in various food parks in
Maharashtra, Madhya Pradesh, Assam, Andhra Pradesh and Uttar
Pradesh.

Government initiatives

Some of the major initiatives taken by the government to promote the FMCG
sector in India are as follows:

 In the Union Budget 2017-18, the Government of India has proposed to


spend more on the rural side with an aim to double the farmer’s income in
five years; as well as the cut in income tax rate targeting mainly the small
tax payers, focus on affordable housing and infrastructure development
will provide multiple growth drivers for the consumer market industry.
 The Government of India’s decision to allow 100 per cent Foreign Direct
Investment (FDI) in online retail of goods and services through the
automatic route has provided clarity on the existing businesses of e-
commerce companies operating in India.
 With the demand for skilled labour growing among Indian industries, the
government plans to train 500 million people by 2022 and is also
encouraging private players and entrepreneurs to invest in the venture.
Many governments, corporate and educational organisations are working
towards providing training and education to create a skilled workforce.
 The Government of India has drafted a new Consumer Protection Bill
with special emphasis on setting up an extensive mechanism to ensure
simple, speedy, accessible, affordable and timely delivery of justice to
consumers.
 The Goods and Services Tax (GST) is beneficial for the FMCG industry
as many of the FMCG products such as Soap, Toothpaste and Hair oil
now come under 18 per cent tax bracket against the previous 23-24 per
cent rate.

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Road Ahead

Rural consumption has increased, led by a combination of increasing incomes


and higher aspiration levels; there is an increased demand for branded products
in rural India. The rural FMCG market in India is expected to grow at a CAGR
of 14.6 per cent, and reach US$ 220 billion by 2025 from US$ 29.4 billion in
2016. In FY18, FMCG’s rural segment contributed an estimated 10 per cent of
the total income and it is forecasted to contribute 15-16 per cent in FY 19.

On the other hand, with the share of unorganised market in the FMCG sector
falling, the organised sector growth is expected to rise with increased level of
brand consciousness, also augmented by the growth in modern retail.
Another major factor propelling the demand for food services in India is the
growing youth population, primarily in the country’s urban regions. India has a
large base of young consumers who form the majority of the workforce and, due
to time constraints, barely get time for cooking.

Online portals are expected to play a key role for companies trying to enter the
hinterlands. The Internet has contributed in a big way, facilitating a cheaper and
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more convenient means to increase a company’s reach. It is estimated that 40
per cent of all FMCG purchases in India will be online by 2020, thereby making
it a US$ 5-6 billion business opportunity. By the year 2025, e-commerce will
contribute around 10-15 per cent sales of few categories in the FMCG sector*.

Mr Mark Mobius, Executive Chairman, Templeton EM, opined that the Goods
and Services Tax (GST) will lead to mergers and rise of world class consumer
companies in India. GST and demonetisation are expected to drive demand,
both in the rural and urban areas, and economic growth in a structured manner
in the long term and improve performance of companies within the sector.

Fast Moving Consumer Goods (FMCG) Industry in India - Facts

The Fast Moving Consumer Goods (FMCG) Industry in India include segments
like cosmetics, toiletries, glassware, batteries, bulbs, pharmaceuticals, packaged
food products, white goods, house care products, plastic goods, consumer non
durables, etc. The FMCG market is highly concentrated in the urban areas as the
rise in the income of the middle-income group is one of the major factors for the
growth of Indian FMCG.

The penetration in the rural areas in India is not high as yet and the opportunity
of growth in these areas is huge by means of enhanced penetration in to the
rural market and conducting awareness programs in these areas. The scopes for
the growth of the FMCG industry are high as the per capita consumption of the
FMCG products in India is low in comparison to the other developed countries.
The manufacturing of the FMCG goods is concentrated in the western and
southern belt of the country. There are other pockets of FMCG manufacturing
hubs.

Fast Moving Consumer Goods (FMCG) Industry in India - Major Players

 Britannia India ltd


 Dabur India ltd.
 Marico
 Nirma ltd.
 Cadbury India ltd
 Nestle
 Cargill
 Coca-cola
 Colgate-Palmolive India
 Heinz co.

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 Unilever
 Nestle
 Pepsi co.
 ITC
 Procter & Gamble
 Samsung
 LG
 Haier
 Sony
 Whirlpool
 IFB
 TCL
 Electrolux
 Videocon

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ITC Limited.

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco
Company of India Limited. As the Company's ownership progressively
Indianised, the name of the Company was changed from Imperial Tobacco
Company of India Limited to India Tobacco Company Limited in 1970 and then
to I.T.C. Limited in 1974. In recognition of the Company's multi-business
portfolio encompassing a wide range of businesses - Fast Moving Consumer
Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded
Apparel, Education and Stationery Products, Incense Sticks and Safety
Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business
and Information Technology - the full stops in the Company's name were
removed effective September 18, 2001. The Company now stands
rechristened Limited, ‘where ‘ITC’ is today no longer an acronym or an
initialised form.

A Modest Beginning

The Company's beginnings were humble. A leased office on Radha Bazar Lane,
Kolkata, was the centre of the Company's existence. The Company celebrated
its 16th birthday on August 24, 1926, by purchasing the plot of land situated at

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37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs
310,000. This decision of the Company was historic in more ways than one. It
was to mark the beginning of a long and eventful journey into India's future.
The Company's headquarter building, 'Virginia House', which came up on that
plot of land two years later, would go on to become one of Kolkata's most
venerated landmarks.

Multiple Drivers of Growth

ITC’s aspiration to create enduring value for the nation and its stakeholders is
manifest in its robust portfolio of traditional and greenfield businesses
encompassing Fast Moving Consumer Goods (FMCG), Hotels, Paperboards &
Specialty Papers, Packaging, Agri-Business, and Information Technology. This
diversified presence in the businesses of tomorrow is powered by a strategy to
pursue multiple drivers of growth based on its proven competencies, enterprise
strengths and strong synergies between its businesses.

The competitiveness of ITC’s diverse businesses rest on the strong foundations


of institutional strengths derived from its deep consumer insights, cutting-edge
Research & Development, differentiated product development capacity, brand-
building capability, world-class manufacturing infrastructure, extensive rural
linkages, efficient trade marketing and distribution network and dedicated
human resources. ITC’s ability to leverage internal synergies residing across its
diverse businesses lends a unique source of competitive advantage to its
products and services.

Within a relatively short span of time, ITC has established vital brands like
Aashirvaad, Sunfeast, Fabelle, Sunbean, Dark Fantasy, Mom's Magic Bingo!,
Yippee!, Candyman, mint-o, Kitchens of India, Farmland, B Natural, ITC
MasterChef in the Branded Foods space; Essenza Di Wills, Fiama, Vivel,
Engage, Savlon, Charmis, Shower to Shower and Superia in the Personal Care
products segment; Classmate and Paperkraft in Education & Stationery
products; Wills Lifestyle and John Players in the Lifestyle Apparel business;
Mangaldeep in Agarbattis and Aim in the Safety Matches segment. This growth
has been rated by a Nielsen Report to be the fastest among the consumer goods
companies operating in India.

Creating Enduring Value

Today, ITC is India's leading Fast Moving Consumer Goods company, the clear
market leader in the Indian Paperboard and Packaging industry, a globally
acknowledged pioneer in farmer empowerment through its wide-reaching Agri
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Business and a trailblazer in green hoteliering. ITC Infotech, a wholly-owned
subsidiary, is one of India's fast-growing IT companies in the mid-tier segment.
This portfolio of rapidly growing businesses considerably enhances ITC's
capacity to generate growing value for the Indian economy.

ITC's Agri-Business is one of India's largest exporters of agricultural products.


The ITC Group’s contribution to foreign exchange earnings over the last ten
years amounted to nearly US$ 6.8 billion, of which agri exports constituted
57%. The Company's 'e-Choupal' initiative has enabled Indian agriculture
significantly enhance its competitiveness by empowering Indian farmers
through the power of the Internet. This transformational strategy has already
become the subject matter of a case study at Harvard Business School apart
from receiving widespread global acclaim.

As one of India's most valuable and respected corporations, ITC is widely


perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this
source of inspiration "a commitment beyond the market". In his own words:
"ITC believes that its aspiration to create enduring value for the nation provides
the motive force to sustain growing shareholder value. ITC practices this
philosophy by not only driving each of its businesses towards international
competitiveness but by also consciously contributing to enhancing the
competitiveness of the larger value chain of which it is a part." ITC group
directly employs more than 32,000 people and the Company's Businesses and
value-chains generate around 6 million sustainable livelihoods many of whom
live at the margin in rural India.

Global Exemplar in Sustainability

Acknowledged as a global exemplar in sustainability, ITC is the only enterprise


in the world, of comparable dimensions to be carbon-positive, water-positive,
and solid waste recycling positive. A testimony to its commitment to a low
carbon growth path - over 43% of the total energy requirements of ITC is met
from renewable sources. All ITC's premium luxury hotels are LEED
(Leadership in Energy and Environmental Design) Platinum certified making it
the "greenest luxury hotel chain" in the world. ITC's Paperboards and Paper
business is an icon of environmental stewardship.

ITC's production facilities and hotels have won numerous national and
international awards for quality, productivity, safety and environment
management systems. ITC was the first company in India to voluntarily seek a
corporate governance rating.

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The Company continuously endeavours to enhance its wealth generating
capabilities in a globalising environment to consistently reward more than
7,76,000 shareholders, fulfill the aspirations of its stakeholders and meet
societal expectations.

Nearly 80% of the capital employed in the hotels business is already residing in
ITC's Balance Sheet. The amalgamation would facilitate better alignment of
investment and incomes, besides promoting fiscal efficiencies, rationalising
operating costs and facilitating clear visibility for investors of the totality of the
Company's hotels business.

Product range of the company includes.


Top 10 ITC FMCG Products List As Per Consumer’s Choice in India.

1. Aashirvaad Atta

2. Sunfeast Biscuits

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3. Bingo

4. Yippee Noodles and Pastas from ITC

5. Candyman Confectioneries

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6. Vivel

7. Fiama

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8. Sunbeam Gourmet coffee

9. Fabelle

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10. B Natural

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Strategic Frameworks

PESTEL Analysis

Political factors

PESTLE Analysis Political ITC faces stiff restrictions from the government on
its tobacco business because of the nature of the product. Discriminatory central
taxes are levied on the cigarettes. This has been worsened by the rise in VAT
notwithstanding the fact that only 5. 7% of all adults smoke cigarettes while
almost 35% adults consume tobacco. The per- capita consumption of cigarettes
in India is among the lowest in the world while tax per 1000 cigarettes as a
percentage of per capita GDP is one ofthe highest. The tobacco industry has
always been under government’s scanner.

Economic Factors

If rapid economic growth is to be sustained in a country as large and diverse as


India, it is imperative to include those living at the margin as meaningful
participants in the economic process. The slow pace of progress so far towards

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achievement of the Millennium Development Goals highlights the seriousness
of the issues relating to human development.

ITC's aspiration to create enduring value for the nation provides it the
inspirational motive force to sustain growing shareholder value. ITC practices
this philosophy of a 'commitment beyond the market' by not only driving each
of its businesses towards international competitiveness, but by also consciously
contributing to enhancing the competitiveness of the larger value chain of which
it is a part.

ITC's investments of over Rs. 6,000 crores in the last decade towards enhancing
the competitiveness of its businesses support direct employment to the tune of
20,000 and indirect employment across the value chains of nearly 5 million
people, whose livelihoods are substantially linked to their association with ITC.
The investment plans envisaging Rs.14,000-15,000 crores over the next few
years would further enlarge ITC's economic contribution.

ITC's mission of fulfilling a larger social purpose is based on the bedrock of


sound financial performance. It is ITC's belief that creation of shareholder value
provides the only basis for sustainable contribution to the superordinate goal of
creating national value.

Social Factors

ITC believes that an effective growth strategy for the nation must address the
needs of rural India, home to 75% of the country's poor. It is imperative to
ensure that India's economic growth is inclusive, embracing its villages, so as to
free millions of disadvantaged citizens from the indignity of poverty.

ITC has partnered the Indian farmer for close to a century. ITC is now engaged
in elevating this partnership to a new paradigm. The ITC e-Choupal initiative is
a powerful illustration of the Company's commitment to empower the small
farmer and thus engender rural transformation.

ITC is also engaged in several other CSR initiatives in the economic vicinity of
its operating locations. The Company's Sustainable Livelihoods initiative strives
to create alternative employment for surplus labour and decrease pressure on
arable land by promoting non-farm incomes. The thrust of the Company's social
sector investments, christened 'Mission Sunehra Kal', is on: natural resource
management, which includes wasteland, watershed, and agricultural
development, creating sustainable livelihoods, comprising genetic improvement
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in livestock and economic empowerment of women and community
development, with a focus on primary education, health and sanitation (Detailed
plans for each of the above initiatives are available in the 'Social Performance'
section of this Report).

Through its rural partnerships, ITC touches the lives of nearly 4 million
villagers across India. In the next 5 years, ITC aspires to empower over 10
million rural Indians.

Technological Factors

ITC has launched many new products like Sunfeast Yippee and Aashirvaad atta
which cater to the growing urban population. Technology ITC has a competitive
edge over its competitors when it comes to technology and innovation. ITC ‘s
inherent expertise in in the areas of contemporary product development,cutting-
edge technology and robust go-to-marketprocesses, combined with
thecompany’s deepconsumer insights saw the launch of several new andexciting
offers, in line with the strategy of continuallymeeting emerging consumer
needs.
During the year, the new cigarette factory set up at Ranjangaon scaled up
operations to full capacity,enabling the company to service the markets better.
ITC has very diverse business portfolio. ITC Infotech services various sectors of
the service industries and is CMMI level 3. ITC extensively uses Oracle eBiz
and SAP solutions to improve its operations. This had huge impact on its paper
industry.
Environmental Factors

Cigarette factories continue to recycle 100% of the solid waste generated. They
also maintained the highest standards of Environment Health and Safety (EHS)
and won recognition by way of numerous awards. The Munger Factory was
awarded the ‘PrashansaPatra’ Safety Award under the National Safety Council
of India Safety Award Scheme – 2009 (Manufacturing Sector), Energy Efficient
Unit under the CII National Energy Award 2010, Globe of Honour Award from
the British Safety Council and Certificate of Appreciation at the CII Eastern
Region.

Law/Legal Factors

The company follows the highest standards of Corporate Governance. The


company has enabled its consumers to make contact with the Secretarial &
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Legal department anytime for any queries. The board of the company goes
through the legal compliance reports periodically to check and rectify if there
are any non-compliances with the laws of the company. The company has even
developed the software which assigns different compliance to each individual.
The software helps in monitoring the compliances activities going throughout
the company.

The company deals with the international trade and has to follow the laws of the
country with which it is trading, which consequently affects the business.

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SWOT Analysis

ITC Limited is one of the Indian giant companies operating in FMCG sector.
Apart from ITC, the major players of Indian FMCG sector are Hindustan
Unilever, Britannia, Nestle, Godrej Consumer, Patanjali Ayurveda, Marico,
Glaxo smith Kline etc.

A brief overview of ITC Limited:- ITC Limited was founded on August 24,
1910 as Imperial Tobacco Company of India. It is an Indian conglomerate (a
corporation that is made up of a number of different, seemingly unrelated
businesses where one company owns a controlling stake in a number of
companies, which conduct business separately) having diversified business in
the following five sectors-

1. FMCG (Fast Moving Consumer Goods)


2. Hotels
3. Paperboard and packaging
4. Agri-Business and
5. Information technology

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SWOT Analysis:- It is an analysis which talks about a company’s strengths and
weaknesses and tries to figure out opportunities and threats which a company is
most likely to meet in the future on the basis of current happenings.

Strengths:

1. Brand image– ITC is the most valuable brand of India with net income of
Rs. 10,471 crore in 2017.

2. Competence– ITC has a track record of 100 years of presence, quality,


consistency and continuous progress, expansion and diversification.

3. Market position– ITC is dominating Indian tobacco market by selling 81%


of the cigarettes and cigar such as Gold Flake, Gold Flake Super Star, Wills
Navy Cut, Premium Lights, Classic (Regular, Verve, Menthol, Menthol Rush,
Citric Twist, Ice Burst, Mild & Ultra Mild) etc.

4. Core competency– ITC is India’s largest seller of branded foods with sales
of over Rs. 4600 crore in 2012-13. Its most famous food brands are Aashirwaad,
B Natural, Sunfeast, Yippee! , Bingo! And Candyman.

5. Leader of other sectors– ITC has India’s largest hotel chain with over 90
hotels throughout India. ITC is exclusive franchise holder of two brands owned
by Sheraton International Inc.

Weaknesses:

1. Declining industry trend– Legal cigarette business has witnessed a 25%


decline in volumes from 2012-13 which has affected the profits of ITC Limited.

2. Tax reforms in India– Under the newly enforced Goods and Services Tax
Act, 2017 tax is charged at a higher rate than before GST which is exacerbating
the business especially cigarette business of ITC.

3. Multiple brands– ITC Limited has way too many brands and its business is
expanded to various different industries which is causing brand dilution.

4. Debt– ITC has total debt of 3.38 billion this is much higher than that of the
sector and significantly higher than that of the Total Debt Industry.

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5. Dependence on tobacco products– ITC Limited is largely depending upon
tobacco products which may become detrimental to its progress in future.

Opportunities:

1. Growth rate of the economy– Growth rate of Indian economy is expected to


be 7% that means new opportunities will arise in future in different sectors and
industries of the economy.

2. Change in customer habits– Living standard of Indians is rising causing the


increase in their purchasing power because of which now customers are
choosing to buy branded products over unbranded cheap products for better
quality, have started to dine out in restaurants and hotels which is opening doors
of new opportunities for ITC.

3. Unchanged interest rate– In the meeting of the Monetary Policy Committee


of the Reserve Bank of India held in October, 2017 RBI left the repo rate
unchanged (6%) consequently, banks will not increase interest rate on the
amount of loan that they will advance to borrowers hence raising debt funds
will not be expensive for further expansion or diversification of the business.

4. Growing demand in FMCG sector– Increasing urbanization and a growing


middle class are resulting in an ever-growing demand for processed food in the
FMCG sector consequently a total investment of Rs. 68,000 crore has been
proposed from various global and domestic companies in the World Food India,
2017 out of which ITC is planning to invest Rs. 10,000 crore in food processing
over the next five to seven years which will ultimately reduce the over
dependence of ITC on tobacco business.

Threat:

1. Competition– ITC Limited is facing and will face in future, intense


competition from domestic and foreign companies in various industries.

2. Compliance– GST has imposed stricter and heavier compliance regulation


and filings which will ultimately increase the cost of compliance of ITC.

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3. Inflation effect– In July, 2017 fuel prices increased to 5.56% consequently
freight and transportation charges will increase.

4. Political disturbance– Disruption caused by demonetization has affected


Indian economy adversely in many ways, causing its growth forecast to be
reduced from 7.4% to 7% by the World Bank. It may affect all the sectors and
companies operating within the economy.

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Ansoff Matrix

Market Penetration

BETTING big on the farm sector, ITC is planning to increase its penetration in
the rural areas. As part of this plan, the company will introduce a small
hypermarket format in select states with an investment of around Rs 80 crore. It
will also open more e-choupal kiosks.

The company believes that these initiatives will help farmers in less developed
markets like Uttar Pradesh, Madhya Pradesh, Rajasthan and Maharashtra to get
a better return for their produce.

Market penetration seeks to achieve four main objectives:

 Maintain or increase the market share of current products – this can be


achieved by a combination of competitive pricing strategies, advertising,
sales promotion and perhaps more resources dedicated to personal selling
 Secure dominance of growth markets
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 Restructure a mature market by driving out competitors; this would
require a much more aggressive promotional campaign, supported by a
pricing strategy designed to make the market unattractive for competitors
 Increase usage by existing customers – for example by introducing
loyalty schemes

Market Development

Market development is the name given to a growth strategy where the business
seeks to sell its existing products into new markets.

There are many possible ways of approaching this strategy, including:

 New geographical markets; for example, exporting the product to a new


country
 New product dimensions or packaging: for example
 New distribution channels (e.g. moving from selling via retail to selling
using e-commerce and mail order)
 Different pricing policies to attract different customers or create new
market segments

Market development is a more risky strategy than market penetration because of


the targeting of new markets.

Product Development

ITC already has 25 “mother brands” (Sunfeast, Ashirvaad, etc) in its FMCG
portfolio targeted at market segments, and expansion plans will involve filling
in the sub-segments covered by these brands with sub-brands and product
variations

At the same time, ITC continues to launch new brands. Dermafique, for
example, is its first premium skin care offering, being launched in April. As a
first in the Indian market, the brand marks its product range of cleansers, toners
and moisturisers. All cleansers have 01 written prominently on them. Similarly,
toners have 02 and moisturisers have 03 printed prominently on the packs. Puri
explains that it is to help the customer complete a face and skin care regimen.

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A successful product development strategy places the marketing emphasis on:

 Research & development and innovation


 Detailed insights into customer needs (and how they change)
 Being first to market

Diversification

The symbolism of the two contrasting buildings, standing back to back, cannot
be lost on ITC, India’s fourth largest company by market capitalisation. After
all, ITC itself is also a study in contrasts — trying to emerge as a modern
diversified fast moving consumer goods (FMCG) player, while trying to shed its
cigarette and tobacco legacy.

ITC tries to tap the synergies between its older and newer businesses. But these
days, its top brass rarely talks about cigarettes, its bottom line mainstay. Most of
ITC’s communication and investments are around FMCG — its growth engine.
But the market still values the company on the basis of the cigarette business.

For a business to adopt a diversification strategy, therefore, it must have a clear


idea about what it expects to gain from the strategy and an honest assessment of
the risks. However, for the right balance between risk and reward, a marketing
strategy of diversification can be highly rewarding.

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BCG Matrix

The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help
with long-term strategic planning, to help a business consider growth opportunities by
reviewing its portfolio of products to decide where to invest, to discontinue or develop
products. It's also known as the Growth/Share Matrix.

1. Dogs: These are products with low growth or market share.

2. Question marks or Problem Child: Products in high growth markets with low market share.

3. Stars: Products in high growth markets with high market share.

4. Cash cows: Products in low growth markets with high market share.

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To apply the BCG Matrix you can think of it as showing a portfolio of products or services,
so it tends to be more relevant to larger businesses with multiple services and markets.

1 Stars

Stars are the cash cows without bounds. They have a high relative piece of the
overall industry, in a quickly developing commercial center. That implies that
they have not achieved their maximum capacity and are for the most part
contending in an exceptionally appealing commercial center where there is a lot
of focused contention.

he stars of ITC are paper board and packaging, Agri business and hotels. ITC’s
Paperboards and Specialty Papers Division is India’s biggest, mechanically
progressed and most eco-accommodating, paper and paperboards business.
(nehapunjabi26, 2010) The business takes into account a wide range of
bundling, realistic, correspondence, composing, and printing and claim to fame
paper prerequisites through its four world-class producing units, 7 deals
workplaces and a system of more than 50 merchants in India.

2 Cash Cows

Cash cows are vast organizations/marks in a stable develop advertise. Cash


cows are ordered by having substantial relative pieces of the pie (being number
maybe a couple in the commercial center) in a low development advertise,
generally where huge changes in pieces of the overall industry are improbable.

The cash cows of ITC are FMCG cigarettes. ITC Ltd offers 80 percent of the
cigarettes in India, where 275 million individuals utilize tobacco items and the
aggregate cigarette market is worth near $6 billion (around Rs.65,000 crore).
(pandey, 2009) ITC’s significant cigarette brands incorporate Wills Navy Cut,
Gold Flake Kings, Gold Flake Premium lights, Gold Flake Super Star, Insignia,
India Kings, Classic (Verve, Menthol, Menthol Rush, Regular, Citric Twist,
Mild and Ultra Mild), 555, Silk Cut, Scissors, Capstan, Berkeley, Bristol, Lucky
Strike, Players, Flake and Duke and Royal.

3 Question Marks

Question marks are additionally infrequently alluded to as the issue youngster.


This is the most troublesome quadrant of the BCG lattice to survey – as
firms/brands ordered in this quadrant have the benefit of being in a high-

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development showcase, yet having a powerless focused position and well
behind in the piece of the overall industry race.

Question marks of ITC are FMCG food. ITC’s Foods brands enchant a large
number of families with an extensive variety of separated, esteem included
items created by utilizing ITC’s in-house R&D capacities, important shopper
bits of knowledge, a profound comprehension of the Indian sense of taste
picked up from its Hotels business, its agri-sourcing and bundling qualities,
energizing, imaginative correspondence and an unmatched appropriation
organize. So these question marks can turn into cash cows.

4 Dogs

Dogs are generally low piece of the overall industry players in stable develop
markets. They are probably going to produce a little measure of gainfulness and
some may much convey significant benefits. Be that as it may, they are named
dogs fundamentally in light of the fact that there is constrained potential to
develop, they for the most part have various focused shortcomings, and their
level of gainfulness is generally minor when contrasted with a cash cows
animal’s business/mark.

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GE Matrix

The GE matrix was developed by Mckinsey and Company consultancy group in


the 1970s. The nine cell grid measures business unit strength against industry
attractiveness and this is the key difference. Whereas BCG is limited to
products, business units can be products, whole product lines, a service or even
a brand. You can plot these chosen units on the grid and this will help you to
determine which strategy to apply.

Before you can plot anything on the grid however first you need to decide how
you will determine both industry attractiveness and business unit strength.

Industry Attractiveness:
Factors you could choose to base this on include:
 Market size
 Market growth
 Pestel factors
o Political
o Economical
o Social

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o Technological
o Environmental
o Legal
 Porters five forces
o Competitive rivalry
o Buyer power
o Supplier power
o Threat of new entrants
o Threat of substitution

Business Unit Strength:


Factors to determine how strong a unit is compared to others in its industry
include:
 Market share
 Growth in market share
 Brand equity
 Profit margins compared to competition
 Distribution channel process – the strength of

Grow/Invest:
Units that land in this section of the grid generally have high market share and
promise high returns in the future so should be invested in.

Hold/Selectivity:
Units that land in this section of the grid can be ambiguous and should only be
invested in if there is money left over after investing in the profitable units.

Harvest/Divest:
Poor performing units in an unattractive industry end up in this section of the
grid. This should only be invested in if they can make more money than is put
into them. Otherwise they should be liquidated.

As you can see this model is very useful for analysing your business units
against multiple factors rather than the 2 dimensional approach of the BCG. In
doing so you will have a starting point in which to build your strategy for
allocating resources and expanding products.

Different factors can also be used to define SBU Strength. Like: - Market Share,
Distribution Channel Access, Financial Resources, R&D Capability, Brand

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equity, Production Capacity, Knowledge of customer and market, Calibre of
management.

Segments:-

 Low Market Attractiveness Low Business strength


 Low Market Attractiveness Medium Business Strength
 Medium Market Attractiveness Low Business Strength
 Low Market Attractiveness High Business Strength
 Medium Market Attractiveness Medium Business Strength
 High Market Attractiveness Low Business Strength
 Medium Market Attractiveness Medium Business Strength
 High Market Attractiveness Medium Business Strength
 High Market Attractiveness High Business Strength

These segments are further explained as follows:

 RED SEGEMENT: -

 Low Market Attractiveness Low Business strength


 Low Market Attractiveness Medium Business Strength
 Medium Market Attractiveness Low Business Strength
Business units that fall under this phase are unattractive. The organization can
increase its business strength by:
 By increasing Market Share
 By using Better Technology
 Hiring Better people
The Organization can increase the market Attractiveness by:

 By increasing Promotion
 Better pricing of the product
 Offering a wide range of products
ITC Engage, Deos, ITC Yum Fills, ITC Branded Aparell Are the products of
ITC that are in these segment. They can either improve their market

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attractiveness and business strength or else can adopt strategies such as
DIVESTMENT, MILKING OR HARVESTING OR LINE EXTENSION.

 YELLOW SEGMENT: -

 Low Market Attractiveness High Business Strength


 Medium Market Attractiveness Medium Business Strength.
 High Market Attractiveness Low Business Strength.
The product in these segments should increase their business strength by
adopting following strategies:

 Recruiting better skilled force


 By adapting to new technology.
 Getting more capital

The Organization can increase the market Attractiveness by:


 Increasing advertisement and pricing Strategies.
 Improving the quality of existing product
 Taking customer feedback and implementing necessary measures.
 Understanding customers wants and needs.
Gum on, Chewing Gum, ITC Candy man Toffees, ITC Cigarettes’, Hotels,
are the products of ITC that follow under this segment. The organization can
build up selectively, specialize around its strength, try to overcome its
weakness. This segment should try to protects their earnings and try to move
towards high business strength and high market attractiveness.

 GREEN SEGMENT: -

 Medium Market Attractiveness Medium Business Strength


 High Market Attractiveness Medium Business Strength
 High Market Attractiveness High Business Strength

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Business units that fall under grow attract high investment. Firms may go
for product differentiation or cost leadership. Huge cash is generated in
this phase. Market leaders exist in this phase. The company should make
it position strong by adopting following strategies:
 By investing Further
 By exploring more
 By mergers and acquisitions
 They should try to protect their position
ITC InfoTech, ITC Bingo, ITC Aashirvaad, Sunfeast, Yippee are the
products of ITC that follow under this segment. These products enjoy high
market attractiveness because of their high business strengths. They should try
to uphold these positions.

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McKinsey’s 7s Framework

McKinsey 7S model was developed by Robert Waterman and Tom


Peters during early 1980s by the two consultants McKinsey Consulting
organization. The model is a powerful tool for assessing and analyzing the
changes in the internal situation of an organization. It is based on 7 key
elements, which determine the organization’s success, which should be
interdependent and aligned for producing synergistic outcomes. The model can
be used widely in various situations where an alignment is required:

 For improving organizational performance.


 Analyzing and evaluating the effects of futuristic changes on the
organization.
 Can be a useful framework during the situation of Merger and
Acquisition involving striking an alignment between the key processes of
an organization.
 Providing a recommendative framework for implementing a strategic
plan of action.
 The model can be effectively applied to various teams or groups or
projects as well.

The McKinsey 7 S model refers to the seven key interrelated or integrated


elements of an organization which are subdivided into hard and soft elements:
The Hard elements are within the direct control of the management as it can be
easily defined and identified. The following elements are the hard elements in
an organization.
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The Soft elements are less tangible and are difficult to be defined and identified
as such elements are more governed by the culture. But according to the
proponents of this model, these soft elements are equally important as the hard
elements in determining an organization’s success as well as growth in the
industry. The following elements are the soft elements in an organization.
Strategy: the plan devised to maintain and build competitive advantage over
the competition. By using mission and vision the organization’s objectives
become clear. You can find these elements in the strategic planning of an
organization.

Structure: the way the organization is structured and who reports to whom.
How is the organization structured and which hierarchical layers are there.

Systems: the daily activities and procedures that staff members engage in to get
the job done. Systems are all formal and informal methods of operation,
procedures and communication flows.

Shared Values: called "superordinate goals" when the model was first
developed, these are the core values of the company that are evidenced in the
corporate culture and the general work ethic. The standards and values and
other forms of ethics within an organization in which vision, corporate culture
and identity are the key elements.

Style: the style of leadership adopted. Style represents the way the company is
managed by top-level managers, how they interact, what actions do they take
and their symbolic value. In other words, it is the management style of
company’s leaders.

Staff: the employees and their general capabilities. This soft element is about
the employees, their competences and job descriptions.

Skills: the actual skills and competencies of the employees working for the
company. These concern both the skills of the organization and those of the
employees.

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Competence Model

The 4 States of Competence

Stage 1: Unconsciously Incompetent

Before an individual undertakes an activity that is novel to him, he trudges


through the state of unconscious incompetence. During this stage, an individual
lacks the skills, knowledge and capacity to do a certain skill excellently.

The stage of unconscious incompetence can linger for years. In order to learn a
new skill, it is important for a person to recognize his inability in order to
perform a skill perfectly. The burden of informing the pupil about his
wrongdoings lies on the teacher – or an expert in the said skill.

Stage 2: Consciously Incompetent

The second stage of proficiency, the phase of conscious incompetence starts


when you develop consciousness about the things you do not know. In this
state, you plant yourself with hopes and aspirations.

Most view stage 2 as the most uncomfortable phase, because you recognize the
fact that you are a failure in a certain activity. The only difference it has with
stage 1 is that you do not pursue the thing you ‘suck at.

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While this can be embarrassing, the acknowledgement of your incompetence
prods you to move and train – so you can be competent in it, eventually.

Stage 3: Consciously Competent

Slowly taking over the role of the facilitator, an individual lodged in the third
stage begins the adventure towards utmost competency. A consciously
competent individual dedicates himself in the improvement of the craft by
undertaking repeated practice, participation and formal training of the said skill.

The development of competence is faster than the development of


consciousness, as an individual “grows and knows and it starts to show.”

Stage 4: Unconsciously Competent or Mastery

As you build experience and expertise, you reach the stage of unconscious
competence – wherein you do not have to think about the activity you are very
good in.

Unlike the first two stages, the journey to unconscious competence does not
take a lot of time – as it happens quickly with constant practice. However, one
can go in and out of unconscious competence, depending on his mastery of
skills.

As an unconsciously competent person, you are summoned because of what you


know. You deem it to ‘feel right,’ that is why you go ahead with the activity.
You prove to be good at it – without exerting too much effort.

Stage 5: Conscious Competence of Unconscious Incompetence

While this is not included in Burch’s original model, many experts are
campaigning for the inclusion of this fifth stage. In this phase, a ‘master’ can
influence other persons to develop unconscious incompetence. This ability
paves the way for the learning of new skills in people who are otherwise
deemed ‘incompetent’ of the said skill.

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Resource Based View

Definition

The resource-based view (RBV) is a model that sees resources as key to


superior firm performance. If a resource exhibits VRIO attributes, the resource
enables the firm to gain and sustain competitive advantage.

RBV is an approach to achieving competitive advantage that emerged in 1980s


and 1990s, after the major works published by Wernerfelt, B. (“The Resource-
Based View of the Firm”), Prahalad and Hamel (“The Core Competence of The
Corporation”), Barney, J. (“Firm resources and sustained competitive
advantage”) and others. The supporters of this view argue that organizations
should look inside the company to find the sources of competitive advantage
instead of looking at competitive environment for it.

According to RBV proponents, it is much more feasible to exploit external


opportunities using existing resources in a new way rather than trying to acquire
new skills for each different opportunity. In RBV model, resources are given the
major role in helping companies to achieve higher organizational performance.
There are two types of resources: tangible and intangible

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The following model explains RBV and emphasizes the key points of it.

Tangible assets are physical things. Land, buildings, machinery, equipment and
capital – all these assets are tangible. Physical resources can easily be bought in
the market so they confer little advantage to the companies in the long run
because rivals can soon acquire the identical assets.

Intangible assets are everything else that has no physical presence but can still
be owned by the company. Brand reputation, trademarks, intellectual property
are all intangible assets. Unlike physical resources, brand reputation is built
over a long time and is something that other companies cannot buy from the
market. Intangible resources usually stay within a company and are the main
source of sustainable competitive advantage.

The two critical assumptions of RBV are that resources must also be
heterogeneous and immobile.

Heterogeneous. The first assumption is that skills, capabilities and other


resources that organizations possess differ from one company to another. If
organizations would have the same amount and mix of resources, they could not
employ different strategies to outcompete each other. What one company would
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do, the other could simply follow and no competitive advantage could be
achieved. This is the scenario of perfect competition, yet real world markets are
far from perfectly competitive and some companies, which are exposed to the
same external and competitive forces (same external conditions), are able to
implement different strategies and outperform each other. Therefore, RBV
assumes that companies achieve competitive advantage by using their different
bundles of resources.

The competition between Apple Inc. and Samsung Electronics is a good


example of how two companies that operate in the same industry and thus, are
exposed to the same external forces, can achieve different organizational
performance due to the difference in resources. Apple competes with Samsung
in tablets and smartphones markets, where Apple sells its products at much
higher prices and, as a result, reaps higher profit margins. Why Samsung does
not follow the same strategy? Simply because Samsung does not have the same
brand reputation or is capable to design user-friendly products like Apple does.
(heterogeneous resources)

Immobile.The second assumption of RBV is that resources are not mobile and
do not move from company to company, at least in short-run. Due to this
immobility, companies cannot replicate rivals’ resources and implement the
same strategies. Intangible resources, such as brand equity, processes,
knowledge or intellectual property are usually immobile.

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VRIO Framework

Definition
VRIO framework is the tool used to analyze firm’s internal resources and capabilities to find
out if they can be a source of sustained competitive advantage.

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When used correctly, looking at these four points one at a time can have a
powerful effect on how you understand your business. It is essential to be
constantly evaluating the capabilities that your company has on hand, as it is
those capabilities that you will use to compete out in the market. If you don’t
understand exactly what you have in house, there will be no way to win when
you face the tough competition that you are sure to encounter.
1 Question of Value

When looking at a resource within your organization, one of the first things you
should do is determine whether or not that potential resource actually has any
value to the company as a whole. So, if something within your company can
help you to exploit a hole in the marketplace, it can usually be considered
valuable. Or, on the other hand, if it can help you to hold off a threat that could
potentially damage your operation, it can be valuable as well. However, if a
resource does nothing to either help you take advantage of the market or
mitigate a market threat, it should be considered a weakness.

2 Question of Rarity

Rarity can be hard to come by in business, but it is exceptionally valuable when


it does exist within your company. Do you hold something inside your
organization that is rare in your field? For rarity to actually take hold as an
advantage that you possess over your competition, it needs to meet two specific
qualifications – it needs to be hard to find, and it needs to last.

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3 Question of Imitability

Imitation is everywhere in business. When a company sees that a competing


company is having success with a given product, they will often quickly work
toward imitating that product as closely as possible in order to enter the market
as a direct competitor. The second company to come to market will usually try
to compete with a lower price, as the initial entry will already have brand
recognition and some degree of loyalty. So, when it comes to the things you are
doing in your business, how likely are they to be imitated? If they can be
imitated relatively easily, what would be the cost of doing so? Thinking about
these points will help you predict in advance exactly what the competition is
going to do.

4 Question of Organization

The last point on this list is the question of organization. This is where the
company is structured in such a way that it is able to exploit any and all
advantages that have been discovered within the first three points. As was

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mentioned above, and advantage is only useful if you are able to successfully
leverage it into additional sales, market share, profits, etc.

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Value Chain Analysis

Value chain analysis (VCA)


is a process where a firm identifies its primary and support activities that
add value to its final product and then analyze these activities to reduce
costs or increase differentiation.

Value chain

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represents the internal activities a firm engages in when transforming
inputs into outputs.
M. Porter introduced the generic value chain model in 1985. Value chain
represents all the internal activities a firm engages in to produce goods and
services. VC is formed of primary activities that add value to the final product
directly and support activities that add value indirectly.

There are two different approaches on how to perform the analysis, which
depend on what type of competitive advantage a company wants to create (cost
or differentiation advantage). The table below lists all the steps needed to
achieve cost or differentiation advantage using VCA.

Primary activities include the following:

 Inbound logistics are the receiving, storing and distributing of raw materials
used in the production process.
 Operations is the stage at which the raw materials are turned into the final
product.
 Outbound logistics is the distribution of the final product to consumers.
 Marketing and sales involves advertising, promotions, sales-force
organization, distribution channels, pricing and managing the final product
to ensure it is targeted to the appropriate consumer groups.
 Service refers to the activities needed to maintain the product's performance
after it has been produced, and includes things like installation, training,
maintenance, repair, warranty and after-sale services.

The support activities help the primary functions and comprise the following:

 Procurement is how the raw materials for the product are obtained.
 Technology development can be used in the research and development
stage, in how new products are developed and designed, and in process
automation.
 Human resource management includes the activities involved in hiring
and retaining the proper employees to help design, build and market the
product.
 Firm infrastructure refers to an organization's structure and its
management, planning, accounting, finance, and quality-control
mechanisms.

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 Cost advantage: After identifying the primary and support activities,
businesses should identify the cost drivers for each activity. For a more
labor-intensive activity, cost drivers could include how fast work is
completed, work hours, wage rates, etc. Businesses should then identify
links between activities, knowing that if costs are reduced in one area,
they can be reduced in another. Businesses can then identify opportunities
to reduce costs.

 Differentiation advantage: Identifying the activities that create the most


value to customers is the priority. These can include using relative
marketing strategies, knowing about products and systems, answering
phones faster, and meeting customer expectations. The next step is
evaluating these strategies in order to improve the value. Focusing on
customer service, increasing options to customize products or services,
offering incentives, and adding product features are some of the ways to
improve activity value. Lastly, businesses should identify differentiation
that can be maintained and adds the most value.

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VUCA World

There are many things that might be considered volatile, uncertain, complex and
ambiguous, although the acronym VUCA has gained traction over the past few
years as a way of describing today’s business world. The increasingly speedy,
rocky and complicated landscape in which we operate, one with new challenges
of technology, globalisation and changing workforce demographics, leaves
more unknown than ever before and moves at continued pace, changing the
playing field altogether. It’s important that organisations today can change, flex
and adapt to the VUCA world around them to succeed, although many
businesses feel uneasy at the prospect of change. There’s a lot to adjust to, make
sense of and consider, but luckily, the learning technologies space doesn’t stand
still, utilising new and emerging forms of technology for learning in order to
improve how organisations operate.

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ITC INDIA LTD requires new ways of thinking, change to happen more readily
and on a larger scale than ever before. About some of the challenges we’re
facing today and what the VUCA world means for your business.

1 Volatile – dealing with the impact of technology

Things change continuously. What is true today isn’t true tomorrow. Even the
nature and dynamics of change change. Products that are an absolute success
today can be worthless in less than a years’ time. 10 years ago, Blackberry knew
an exponential growth with it smartphone. Competing touchscreen smartphones
couldn’t spoil the party, until the launch of the iPhone. Because of iPhone the
sales of Blackberries collapsed in two years’ time. Or take the world of banking
when suddenly faced with negative interest rates. This previously unthinkable
situation completely changes some of the fundamental banking business
models.

The influence, use and general uncertainty of technology has made the digital
conversation in organisations a much higher priority than ever before. On one
hand technology offers opportunities, opens up possibilities and promotes
efficiency, while its very disruptive nature also poses a near-constant threat to
established businesses.

Emerging communication technologies are amongst the areas with the biggest
impact to ITC, consistently providing opportunities to diversify and scale. In
just a few years, mobile drastically changed the way we approach work, while
its long-term impact and integration into the workplace remains to be seen. The
opportunities that wearable, immersive and other emerging technologies
provide us are even hazier, leaving ITC to try and make sense of when a shift in
technology might happen and, if so, how the workplace can benefit from it.

2 Uncertain – global skills shortages

More than ever, we live with a lack of predictability and a prospect for surprise.
It is impossible to predict how markets will evolve. Vinyl records, believed to
have died a long time ago, can have a sudden revival. Fixed values in the
economy and stock exchange can collapse overnight. And because of
globalization a relatively small cause can have huge worldwide consequences.

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ITC Industry regulation is an important driving force for learning and
development because it triggers so much training to be commissioned. Even in
recent years, events such as the global banking crisis keep the pressure on risk,
safety and increased regulation, which has a knock-on effect to ITC.

The increasing transparency and visibility of global operations also drives


compliance. Not only is global accountability and safety a key concern of multi-
national organisations, but compliance training also offers a means of
standardising process at a global scale. While it doesn’t necessarily pose a
constant, direct threat to any one area of business, global and industry regulation
certainly has a bearing on many decisions and business initiatives.

3 Complex – increased regulation

Simple cause-and-effect chains have been replaced by complex interconnected


forces and events. Interconnectedness makes all things increasingly complex.
Your phone or tv were simply connected with a wire to an antenna or the phone
network. Today it has become far more complex with setup-boxes, routers, wifi
connections, etc… Or take the advertising world: in the past the advertiser
bought advertising space in printed media, on radio or tv and reached his
targeted audience. Today’s programmatic advertising is a labyrinth of complex
bidding systems to get the right advertisment on the right screen of the right
person. The possibilities are endless, but the realization is highly complex.

ITC Industry regulation is an important driving force for learning and


development because it triggers so much training to be commissioned. Even in
recent years, events such as the global banking crisis keep the pressure on risk,
safety and increased regulation, which has a knock-on effect to ITC.

The increasing transparency and visibility of global operations also drives


compliance. Not only is global accountability and safety a key concern of multi-
national organisations, but compliance training also offers a means of
standardising process at a global scale. While it doesn’t necessarily pose a
constant, direct threat to any one area of business, global and industry regulation
certainly has a bearing on many decisions and business initiatives.

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4 Ambiguous – organisation-wide leadership

Is milk good or bad for you? What’s the cost of nuclear versus wind energy?
Are internal social media such as Yammer a success or not? You can easily find
convincing but totally contradictory information for any assertion. Old
certainties have disappeared in a mist of haziness and misunderstanding. And
because of complexity and unpredictability, many leaders avoid taking
positions. Is Donald Trump in favor or against raising minimum wages? He
might be a champion in ambiguity, but I see similar vagueness in many
organizations. The ubiquitous availability of information has created a mist in
which it becomes increasingly difficult to find clarity.

ITC Leadership training has historically been about training leaders, but with a
lack of future leaders in today’s organisations, that must drastically change. The
messages and skills of leadership can no longer be filtered from the top
downwards; ITC must spread deeper and wider into an organisation, with the
skills taking root at all levels. In essence, it’s about deploying training that’s
more effective, brings permanent change and doesn’t cause a huge uplift in
training cost per person. ITC Investing in leadership can bridge the skills gap,
deal with the impact of technology and help take an organisation into the future,
despite the VUCA world we find ourselves in.

ITC should also look at following Aspects:-

 What are the drivers of stagnant growth?

Have they looked at other options or been single-minded and therefore


susceptible to confirmation bias.

 How confident are you that those are the correct drivers of the
problem? What data do you have to back up your hypotheses?

How sound will this investment be? If you create a new sales role and
reorganize the entire function, how confident are you that the problem will
get resolved.

 Does the revenue problem show up in leads or in conversion?

If they want to create a new role, is it focused on addressing the actual


problem.

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 Is your goal in the executive team meeting to agree to a direction or
convince them of the right one?

How far along is the executive team in their desire to implement this
solution.

VUCA can be seen as four types of environment in a matrix with 2 dimensions:

– How much you know about the situation?


– How much you can predict the results of your actions?

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Challenges of ITC a VUCA Environment

Build a Responsive Culture

Top of the to-do list for ITC is talked to is creating, shaping and transforming
their organization’s culture to be more responsive.

The ITC executives spoke about the values of integrity, trust, empowerment,
employee and leader development and learning as being essential in the new
normal of VUCA.

“In the end, the biggest thing you can try to shape is the culture in the
organization, ITC is “getting the right culture, setting the right tone,
demonstrating… that is the way we want to do things, but it’s picking the right
folks and then allowing them the leeway… giving their folks room to run and
room to grow.”

Conclusion

VUCA might be a relatively old term; it clearly sets the scene for future
organizational challenges of itc. The description of our world as volatile,
uncertain, complex and ambiguous might not be perfect, but it is the best I came
accross and it makes us reflect on what should be done by ITC. Business
models, strategies and organization models will have to change. As leaders will
have to let go even more control, their leadership skills will become even more
important.

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Porters Five Forces

Consumer faces low buying power because of fragmented and have


littleinfluence on product price. Comparing the buyer power retailers it is very
high since they are needed to negotiate the price with their competitors.

Supplier power

ITC Consumer product faces few quantity of supplier power simply due to the
cost they effected when switching supplier. Suppliers are doing high volume of
business with these companies are also positive value totheir customers.

Threat of new entrants

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The amount of capital investment required to enter in certain house
holdconsumer products needs more, so the threat of new entries may results
fairly low.

Threat of substitutes

Within the business sector, brand name proceeds to get success with building a
competitive advantage, but even though the pricing power of the products can
be eroded.

Degree of rivalry

It does not price anything for a consumer to buy one brand of shampoo instead
of another, preparing the industry quite competitive. Consumer in this class
enjoys variable choices.

Value chain Analysis

ITC target to refine its environmental impacts by 2020 not only applies to its
industries, but also to its total value chain, from the sourcing of raw materials to
the disposal of product packaging. For example, in its production industries,
initiatives have been taken to reduce water, waste and carbon emissions.

ITC industry in Coimbatore is now preparing biogas energy from the waste by-
product of the manufacturing products. Such initiatives of ITCS Business
Principles’, which need the company to work forward to the goal of developing
a sustainable business. The business benefits are increase in sales, build
consumer preference and business benefits for suppliers by sustainable supply
chain projects.

Internal strengths and weaknesses

Leveraging more unremarked resources: ITC has been trying to improve a


capacity to manage their portfolio which will finally in a need of huge funds.

Upgrading financial management: As ITC is being achieved funds from


different sources; it needs to maintain an ideal flow of cash and proper project
budget control. As flow of cash is important for every organization, the
decisions making by the administration must be very accurate and flexible
according to the market trends.

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Investing in people: ITC consider their staff as their heart of the organization in
order to reach the business targets and objectives which require a good personal
management.

Improving communications and information system: ITC is expanding its


market area, it should keep a proper communication level in order to regulate a
smooth flow of business.

Strength

ITC leveraged its businesses to introduce new brands for new products. For
example, ITC used its experience of logistics in tobacco products to remote and
other parts of India as the advantage of its FMCG products. ITC master chefs
from its food industry are often ready to prepare new food items for its FMCG
business.

ITC is a diversified industry who trading in a number of business sectors


including cigarettes, restaurants, agro business, bakery and confectionary,
branded apparel, cosmetics, cards, Information Technology, incense sticks,
paper and stationery products.Its Gold Flake cigarettes brand is the largest brand
in India which takes over 70% of the tobacco market

Weakness

The company’s traditional business was traded in tobacco. It is surprising that a


business now involved in branding continues to use its original name, despite
the negative connection of tobacco with cancer and death.

To fund its cash guzzling FMCG start-up, the company is still stands upon its
tobacco income. Cigarettes takes place 47 per cent of the company’s cash flow,
and that in itself is source for 80% of its profits. So there is a conflict that ITC’s
move into Fast Moving Consumer Goods is being subsidised by its tobacco
revenues.

Strategy formulation is major to the well-being of an organization. There are


two types of strategy: (1) corporate strategy, in which companies decide in
which sector of business to engage in; and (2) business or competitive strategy,
which sets the objectives to get success in a particular business. Even business
strategy receives more attention than corporate strategy in the forms of
planning, market analysis, goal fixing and monitoring.

Buy over the competitor

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In 1975, the Company starts its Hotels business with the acquisition of a hotel in
Chennai which was named as ‘ITC-Welcomgroup Hotel Chola’.Then ITC’s
Hotels business has grown to get a position of leadership, with over 100 owned
and managed properties spread across India under four brands namely, ITC
Hotels -, Welcome Hotels, Welcome Heritage, Luxury Collection and Fortune
Hotels.

Find a partner

In 1985, ITC starts Surya Tobacco Co. in Nepal as an Indo-Nepal and British
joint venture. In August 2002, Surya Tobacco became a subsidiary of ITC
Limited and its name was changed to Surya Nepal Private Limited. In 2004, the
company entered into production and exports of branded garments.

Cut the price

ITC is compressing costs due to the impact of raw material prices. The
manufacturer of brands including Vivel, Fiama and face cream are raised to
higher costs for vegetable oil and chemicals in 2011. In February it forecast
price rose to 11-13%, but now estimates that it will have to pay 14-16% much
important for raw materials in this year. The group also includes soap, halls and
fair and lovely, said it would find an extra Rs.300 cores in cuts this year.

Cost-Benefit analysis

The process of manipulating and evaluating costs and benefits of an assignment


or project called cost-benefit analysis. It has two major purposes: 1. to eliminate
if it is a favor investment/decision 2. It involves by matching the total budgeted
cost of each option verses the total expected benefits, to analyze either the
benefits outweigh by how much in its price.

Availability of raw materials

Because of the Indian agro-climatic forecast, there is a mass production of raw


material recourses base suitable for food processing companies. India is the
largest producer of milk, canes, coconuts, spices, paddy, rice and cashew nuts. It
is one of the largest growers of rice, wheat and fruits &vegetables. India also
produces washing soda and soda ash, which are used in the manufacturing of
soaps and detergents. The productivity of these raw materials makes India the
location advantage.

Low cost labor

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Low cost labor makes India a competitive advantage value. India’s labor cost is
very low amongst the other countries in the world, after China & Indonesia.
Low labor costs make the advantage in low cost of mass productions. Many
international companies have established their production units in India to
outsource for domestic and export markets.

On basis of above statement the cost benefit of ITC can be analyzed as follows
with current market situation

As a result existing retailers will be out from remaining in a market in which a


huge discount chain receives competitive situations.

ITC gets……………

1. Lower tax rates of products

2. Zoning waivers allows a lot which is twice what other retailing shoppers
allow

3. Grades from infrastructure improvements

4. Zoning waivers permits for a store volume that is larger than the average
store in the nearby surrounding area

5. The small volume retail businesses have generates a climate that is


responsible for the customers who draw to ITC – shopping in the unique market
is the rated reason by customers for coming to ITC. These are the difficult
businesses risk from a retail development.

Marketing plan(4P’s)

In the consumer-driven approach, customer needs are the vital drivers of all
strategic marketing decisions. No strategy will won until it passes the test of
customer research. Every segment of a market, including the nature of the
product itself, is driven by the expectations of customers. The initial point is
always the customer. The approach is that there is no valuable reason to spend
funds in research and developing products that consumer will not buy. There
were possibilities of commercial failures in the marketing plan due in spite of
technological breakthroughs.4Ps supply is act as side model as product, price,
placement, promotion of marketing management.

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Michael porter generic strategy

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A firm's relative position within its industry determines whether a firm's
profitability is above or below the industry average. The fundamental basis of
above average profitability in the long run is sustainable competitive advantage.
There are two basic types of competitive advantage a firm can possess: low cost
or differentiation. The two basic types of competitive advantage combined with
the scope of activities for which a firm seeks to achieve them, lead to three
generic strategies for achieving above average performance in an industry: cost
leadership, differentiation, and focus. The focus strategy has two variants, cost
focus and differentiation focus.

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its
industry. The sources of cost advantage are varied and depend on the structure
of the industry. They may include the pursuit of economies of scale, proprietary
technology, preferential access to raw materials and other factors. A low cost
producer must find and exploit all sources of cost advantage. if a firm can
achieve and sustain overall cost leadership, then it will be an above average
performer in its industry, provided it can command prices at or near the industry
average.

2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some


dimensions that are widely valued by buyers. It selects one or more attributes
that many buyers in an industry perceive as important, and uniquely positions
itself to meet those needs. It is rewarded for its uniqueness with a premium
price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope
within an industry. The focuser selects a segment or group of segments in the
industry and tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants.
In cost focus a firm seeks a cost advantage in its target segment, while
in (b) differentiation focus a firm seeks differentiation in its target segment.
Both variants of the focus strategy rest on differences between a focuser's target
segment and other segments in the industry. The target segments must either
have buyers with unusual needs or else the production and delivery system that
best serves the target segment must differ from that of other industry segments.
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Cost focus exploits differences in cost behaviour in some segments, while
differentiation focus exploits the special needs of buyers in certain segments.

ITC Approaches to Competitive advantage

A competitive advantage exists when the firm is able to deliver the same
benefits as competitors but at a lower cost (cost advantage), or deliver benefits
that exceed those of competing products (differentiation advantage). Thus, a
competitive advantage enables the firm to create superior value for its
customers and superior profits for itself.

The Competitive Advantage model of Porter learns that competitive strategy is about taking
offensive or defensive action to create a defendable position in an industry, in order to
cope successfully with competitive forces and generate a superior return on
investment. According to Michael Porter, the basis of above-average
performance within an industry is sustainable competitive advantage.

There are 2 basics types of CA:

- cost leadership (low cost), and

- differentiation.

Both can be more broadly approached or narrow, which results in the third
viable competitive strategy: focus.

Approach 1 to Competitive advantage: Cost leadership.

•a firm sets out to become the low cost producer in its industry.
• Note: a cost leader must achieve parity or at least proximity in the bases of differentiation,
even though it relies on cost leadership for it’s CA.
• Note: if more than one company aim for cost leadership, usually this is disastrous.
• Often achieved by economies of scale

Competitive advantage model 2: Differentiation.

•a firm seeks to be unique in it’s industry along some dimensions that are widely valued by
buyers.
• Note: a differentiator cannot ignore it’s cost position. In all areas that do not affect it’s

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differentiation it should try to decrease cost; in the differentiation area the costs should at
least be lower than the price premium it receives from the buyers.
• Area’s of differentiation can be: product, distribution, sales, marketing, service, image, etc.

Competitive advantage 3: Focus.

•A firm sets out to be best in a segment or group of segments.


• 2 variants: cost focus and differentiation focus.
Stuck in the middle:

• Usually a recipe for below-average profitability compared to the industry


• Still attractive profits are possible if and as long as the industry as a whole is very attractive
Especially risky for focusers that have been successful and then to loose their focus. They
must seek for other niches rather then compromise their focus strategy.

A firm possesses a Sustainable Competitive Advantage (SCA) when it has


value-creating processes and positions that cannot be duplicated or imitated by
other firms that lead to the production of above normal rents. An SCA is
different from a competitive advantage (CA) in that it provides a long-term
advantage that is not easily replicated.

ITC Limited has won the prestigious Porter Prize 2017 award for
'Excellence in Corporate Governance and Integration' and for its
exemplary contribution in 'Creating Shared Value'.

A leading multi-business conglomerate in India with a market-cap of over $ 50


billion, ITC Ltd, is the country's leading FMCG marketer, the market leader in
the Indian Paperboard and Packaging industry, a globally acknowledged pioneer
in farmer empowerment through its wide-reaching Agri Business, the second
largest Hotel Chain in India and a trailblazer in 'green hoteliering'. ITC's
wholly-owned subsidiary, ITC Infotech, is a player of promise in the
Information Technology segment.

ITC is also a global exemplar in sustainability. It is the only enterprise in the


world, of comparable dimensions, to be carbon-positive (12 years in a row),
water-positive (15 consecutive years), and solid waste recycling positive (for
the last 10 years). More than 48% of the total energy requirements of the
Company is met from renewable sources, a testimony to its commitment to a
low carbon growth path. All ITC's premium luxury hotels are LEED®

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(Leadership in Energy and Environmental Design) Platinum certified making it
the "greenest luxury hotel chain" in the world.

The Company's businesses generate sustainable livelihoods for over 6 million


people, many of whom represent the poorest in Rural India. The pioneering
farmer empowerment initiative, ITC e-Choupal, is today the world's largest
rural digital infrastructure and is a case study at the Harvard Business School
besides receiving several global awards including the inaugural World Business
Award instituted by the United Nations Development program (UNDP),
International Chamber of Commerce (ICC) and the HRH Prince of Wales
International Business Leader's Forum.

ITC was also conferred the World Business and Development Award 2012 at
the historic Rio+20 United Nations Summit for its large scale Social and Farm
Forestry Programme.

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