Vous êtes sur la page 1sur 59

DIVERSIFICATION OF ITC

By
Kaushik Majumdar
Abhishek Khemka
Sudip Kumar Das
Sudipto Ghosh
DIVERSIFICATION
Diversification is a form of corporate strategy for a
company.
It seeks to increase profitability through greater sales
volume obtained from new products and new markets.
Diversification can occur either at the business unit level or
at the corporate level.
At the business unit level, it is most likely to expand into a
new segment of an industry which the business is already in.
At the corporate level, it is entering a promising business
outside of the scope of the existing business unit.
DIVERSIFICATION
Diversification is part of the
four main marketing
strategies defined by the Product/Market Ansoff
matrix:

Diversification usually requires a company to acquire


new skills, new techniques and new facilities.
DIVERSIFICATION
Jindal Steel

Power plant to support their


Vijayanagar steel plant (mid 1990)

JSW Energy
We want to enter all fields of energy including wind and
solar.Our aim is to be in all segments such as transmission,
generation and trading in the next five
years. Senior Jindal Executive
DIVERSIFICATION AS A CORPORATE
STRATEGY
Should companies concentrate on one business or
should they be holding a portfolio of businesses?
Almost 40 years back, Peter Drucker argued that
Every business needs a core an area where it leads
and along with it, every business must diversify to
compete in an era of fast changing markets and
technologies.
Today, the business environment has become much
more volatile and dynamic. So, the key issue, is not
whether to diversify, but when and how to diversify.
DIVERSITY IN DIVERSIFICATION
Microsoft Wipro
Operating systems Vegetable oils
Video games Lighting soaps
Web hosting Medical equipment
Enterprise software Computer software

Related Diversification Unrelated Diversification


DIVERSITY IN DIVERSIFICATION
Related diversification, occurs when a company develops beyond its present
product and market whilst remaining in the same area. For example a
newspaper company expanding by acquiring a TV station remains with media
sector. It will use its present strengths by using its expertise to develop new
interests in same area.
Backward diversification, when activities related to the inputs in the
business are developed. For example a newspaper company acquiring a
printing or publishing company.
Forward diversification, refers to development into activities which are
concerned with a companys output. For example a newspaper company
acquiring a distribution outlet.
Horizontal diversification, occurs when a company develops interests
complementary to its current activities. For a company may integrate its
activities to include all aspect of the value chain; design, manufacture,
market and distribute.
Unrelated diversification is used to describe a company moving its present
interests into unrelated markets or products. For example a company whose
core business is media services may diversify into provision of financial
services.
ADVANTAGES
Control of inputs, leading to continuity and improved
quality. For instance 1984 and 1985 NewsCorp acquired
Twentieth Century Fox and six television stations of the
Metromedia Broadcasting Group in the US. These
acquisition provided the company with a wider platform for
consolidation of its related activities through access to
studios for making films and television Programmes.
Control markets by guaranteeing sales and distribution. This
can arise through a combination of linkages in the value
chain.
Take advantage of existing expertise, knowledge and
resources in the company when expanding into new
activities.
Provide better risk control through no longer being reliant
on a single market
Provide movement away from declining activities
Spread risk by avoiding having all eggs in one basket
DISADVANTAGES
May result in slowing growth in its core business
Adding management costs.
Diversification through acquisition May result in failure
where there is a mismatch between core competencies or
experiences of the acquirer and acquired businesses.
While taking heart from the success of Wipro and GE, the
dangers of unrelated diversification should not be
underestimated
Metal Box (India) Ltd, the metal packaging company
which diversified into bearings. This move destroyed the
company
Polaroid lost heavily (about $200 million) when it
diversified into instant movies
WHEN TO DIVERSIFY
When the profitability of a business is in secular
decline, a new core makes sense. Apples share of
the market for personal computers plummeted and
profitability steadily declined. So Apple moved its
business toward digital music.
Inherently inferior economics. This becomes more
apparent when a new competitor enters with a
different cost structure. General Motors saw this in
competition with Toyota
Unsustainable growth formula. The market may be
reaching saturation or competitors may have started
to replicate a once unique source of differentiation.
DEVELOPING A NEW CORE
When the core business is under severe threat,
Some companies go into denial and decide to defend the
status quo
Others try to transform their companies all at once
through a big merger or by leaping into a hot new
market.
The most successful companies proceed more
systematically.

American Can turned Primerica, Barrick, ITC


American Can to Primerica saga
American Can initially manufactured cans/containers for the
beverage industry.
In an industry which used a simple technology, intensifying
competition were inevitable.
Forward integration by aluminum producers and backward
integration by food companies eroded the companys ability to
raise prices.
Plastics emerged as an important substitute.
American Can diversified into paper, musical records retailing and
direct mail marketing.
In 1980, it started to refocus and entered the financial services
business in a big way through acquisitions. The can business was
sold off.
In 1987, the company changed its name to Primerica.
In 1997, it acquired Salomon for $9.2 billion. About a year later, it
merged with Citicorp.
DIVERSITY IN INDIA
A good example of an Indian company attempting to
diversify and develop a new core is ITC.
Though it is a subsidiary of the UK based BAT, ITC has
operated with considerable autonomy.
Among the businesses which ITC has entered in recent
years are
Apparel retailing and branding
Ready-to-eat packaged foods
Confectionery items
Infotech
Paper and boards
Welcome Group hotel chain
INTRODUCTION
ITC Limited which previously stood for Imperial Tobacco Company one
of India's foremost private sector companies.

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.

ITC's diversified status originates from its corporate strategy aimed at creating
multiple drivers of growth anchored on its time-tested core competencies:
unmatched distribution reach, superior brand-building capabilities, effective
supply chain management and acknowledged service skills in hotel.
100 Inspiring years.
Established by UK-based tobacco major BAT
1910, full fledged sales organization named Imperial Tobacco Company of
India Limited
July 1912,Indian Leaf Tobacco company(ILTC)
1925 ITCs Packaging & Printing Business Division was set up as a strategic
backward integration for ITCs Cigarettes business.
Late 1960s,GoI pressured MNC to reduce holdings. Though Imperial clearly
dominated cigarette business, decided to reduce its dependence & so diversify.
Though Imperial clearly dominated cigarette business, decided to reduce its
dependence & so diversify.
1971, Marine product export division
1974 The name of the Company was changed to ITC Limited (Indian
Tobacco company).
1975 The Co. launched its HOTEL BUSINESS which was named ITC-
Welcome group Hotel Chola.
Contd..
1977- Textile industry
1979 ITC entered the Paperboards Business by promoting. Bhadrachalam
Paperboards Limited, which today has become the market leader in India.
1981- Cement business
1985 Surya Nepal Pvt. Ltd.
1990- ITC set up the Agri Business Division for export of agri-commodities. The
Division is today one of India's largest exporters.
1994- Consultancy from McKinsey & Co. to study businesses of company
2000- ITCs Packaging & Printing- Expressions
2000- Lifestyle Retailing business division with the Wills Sport range of
international quality relaxed wear
By 2001,undisputed leader in cigarette industry with popular brands- Gold Flake,
Scissors, Wills, India kings and Classic
2003- Classmate was launched to reach a wider student population.
Strategy of Organization to manage
diversity of Portfolio

Formal 3-tiered governance structure:


Board of Directors :
Comprising executive (3) and non-executive directors (11)
Strategic supervision

Corporate Management Committee :


Comprising executive directors and senior managers
Strategic management

Divisional Chief Executive & Divisional Management Committee


:
Executive management
VISION & MISSION

Vision: Sustain ITCs position as one of Indias most


valuable corporations through world class performance,
creating growing value for the Indian economy and the
Companys stakeholders.
Mission: To enhance the wealth generating capability of
the enterprise in a globalizing environment, delivering
superior and sustainable stakeholder value.
Values

ITC's Core Values are aimed at developing a


customer-focused, high-performance organization

Customer Focus - always customer focused and


deliver what the customer needs in terms of value,
quality and satisfaction.
.
Corporate Social Responsibility
Environmental
1. ITC has been Carbon Positive 3 years in a row.
2. Water Positive 6years in a row.
3. 100% solid waste recycling
Social
ITC's businesses generate livelihoods for over 5 million people.
ITC's globally recognised e-Choupal initiative is the world's largest rural digital
infrastructure benefiting over 4 million farming families.
ITC's Social and Farm Forestry initiative has greened over 80,000 hectares creating
an estimated 35 million person days of employment among the disadvantaged.
ITC's Watershed Development Initiative brings precious water to nearly 35,000
hectares of dry lands and moisture-stressed areas.
ITC's Sustainable Community Development initiatives include women
empowerment, supplementary education, integrated animal husbandry programmes.
The first ITC Sangeet Sammelan showcasing the best in Indian classical music was
held in Delhi in 1971
ITC Business Portfolio
FMCG
Cigarettes Foods Personal Care Lifestyle Retailing

Education & Stationery Matches Incense Sticks

Paper & Agri Business Information


Hotels Packaging Technology
FMCG-Cigarettes
Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan,
Berkeley, Bristol and Flake

'Best Manufacturer of Cigarettes for the year 2007'


FMCG-Others

Ashirvad Atta, Kitchens Of India, Mint-o, Sunfeast, Candyman, Bingo,


Superia, Wills LifeStyle, Fiama Di Wills, Expressions, Classmate

Superbrand 2006 - Superbrand Council.


Hotels

ITC Maurya (Delhi), ITC Maratha (Mumbai), ITC Grand Central (Mumbai),
ITC Sonar (Kolkatta), ITC Windsor (Bengaluru),
ITC Kakatiya (Hyderabad), ITC Mughal (Agra).

Bukhara Restaurant named as Best Indian Restaurant in the World.


eChoupal, Agri Exports, Leaf Tobacco

Innovation for India Award 2006 for ITC e-Choupal in the


Social Innovations category for business organizations
Packaging & Paperboards

Packaging & Paperboards and Specialty Paper

Indian Manufacturing Excellence Gold Award 2007 and 2006 to


Unit Bollaram by Frost & Sullivan
Infotech
ITC Infotech Ltd.

Featured amongst Top 100 Global Outsourcing Companies in the


Leaders category - International Association of Outsourcing
Professionals
ITCs Cigarettes Business
Market leadership
Powerful brands across segments
Leadership in all segments - geographic & price
Extensive FMCG distribution network
Direct servicing of 1,00,000 markets & 2 million retail
outlets
World-class state-of-the-art technology and products
Investment - Rs.10 billion in six years
Exciting long term growth potential
Cigarettes: Growth potential
Cigarettes account for less than 15% of tobacco consumed in India.
Cigarettes (15% of tobacco consumption) contribute nearly 85% of
Revenue to the Exchequer from tobacco sector
48% of adult Indian males consume tobacco. Only 10.3% of adult
Indian males smoke cigarettes as compared to 16% who smoke biris
and 33% who use smokeless tobacco (Source: Global Adult Tobacco
Survey India 2010)
Biri : Cigarettes ratio = 10 : 1
Annual per capita adult cigarette consumption in India is appx. one
tenth world average.
Future growth depends on relative rates of growth of per capita
income and moderation in taxes.
30
2920
Per Capita Cigarette Consumption
3000

2500
No Of Cigarettes

2000 1886
1771

1500

1000 844
618
488
500 303 243
85
0

Bangladesh

Average
Japan

India
Pakistan
China
USA

Nepal

Sri Lanka

World
Countries

Per Capita consumption in India ~ 10% of World average 31


Cigarettes: Challenges

Competitive context
Competition including international majors becoming more active.
Domestic illegal volumes still very strong. Along with smuggled
contraband, has emerged as substantive segment.

Regulatory & Taxation


Pictorial Graphic warnings in place w.e.f. June 09.
VAT hikes in Maharashtra, Delhi, Rajasthan, Punjab, Haryana,
Gujarat - threatening the concept of the Indian Common Market

Cost table increasing with increase in leaf costs


32
Hotels & Tourism

33
Hotels & Tourism industry
Foreign arrivals into India: 5 million appx. Vs. 35 million in China
The two nations were on par 2 decades ago at 750,000 arrivals
Today, Beijing alone has as many hotel rooms as the whole of India
Indias luxury rooms availability lower than even smaller East Asian
countries

80000
70000
60000
50000
40000
30000
20000
10000
0
HongKong Bangkok Singapore Malaysia India

Source: Compendium of Tourism statistics, WTO 34


Indian Hotel Industry

Current supply appx. 110,000 rooms of which 5 Star category


accounts for appx. 30%
India needs an additional 50,000 rooms in the next 2/3 years to
service projected tourist arrivals
Present mismatch between supply and demand expected to
persist over the short term
As infrastructure for trade & commerce improves - growing
potential for leisure tourism

35
ITCs Hotel Business
ITC-Welcome Group:

Welcome Hotels
Fortune Hotels
Welcome Heritage
Fastest growing hotel chain with highest operating efficiency
(PBDIT/Net Income @ 40%) amongst the 3 leading chains
Leverages unique service proposition and international alliance
with Starwood Hotels & Resorts - Luxury Collection / Sheraton
Capacity expansion underway at Chennai & Kolkata; plans for other
locations also being progressed.
Paperboards, Paper
&
Packaging

37
ITCs Paperboards Business

Market leader in growth segment - value added coated boards


World-class contemporary technology
Internationally competitive quality and cost
Social farm forestry in mill command area to improve access to cost
effective fibre & to attain self-sufficiency
Biotech research based high yielding Clones effectiveness tested in >
1,00,000 hectares
Fully integrated operations with in-house pulping capacity at appx. 2.80
lac MT.
It is the largest exporter of coated boards from India.

38
ITCs Paperboards & Packaging businesses

Capacity expansion projects installed at optimum capacity utilization

120000 TPA Pulp Mill Machine stabilised

100000 TPA paper machine (to support Education & Stationery business
growth plans) Machine stabilized

Investment in 100,000 TPA paperboards machine underway

ITCs packaging SBU -Indias largest converter of paperboard into high


quality printed packaging

Leading supplier to Indian FMCG and Consumer Electronic segments

Provides superior packaging solutions to the cigarettes and new FMCG


businesses
39
Agri Businesses
- Leaf Tobacco
- Agri Commodities

40
Indian Leaf Tobacco industry
India the third largest producer of tobacco
However, Indias share is only 7% in world tobacco trade
Upgradation of tobacco consumption from other formats to cigarettes
will enable:
growing domestic base & larger opportunities for value added exports
ITC Indias largest buyer, processor, consumer & exporter of
cigarette tobaccos
6th largest leaf tobacco exporter in the world
Pioneering cultivation of flavourful Flue-cured, superior Burley and
Oriental tobaccos in India
Export business - robust growth in export volumes with improvement in
realization over the last 2 years
41
ITCs Agri Commodity Business

Farm linkages in 14 states covering Soya, Wheat, Marine


products, Coffee etc. Focus on value added agri commodities
Unique CRM programme in commodity exports
Leveraging IT for the transformational e-Choupal
initiative
Rural Indias largest Internet-based intervention
Over 40000 villages linked through around 6500 e-Choupals
servicing over 3.5 million farmers
Distinctive sourcing capability for ITCs Foods business .
ITC's Agri Business Division, one of India's largest exporters of
agricultural commodities. 42
Future Growth & Value Capture

New FMCG Initiatives

43
Branded Packaged Foods
Leverages:
Unique Agri sourcing skills
ITC Welcomgroups specialist cuisine & bakery knowledge
FMCG distribution synergies
ITC R&D Centre, Bangalore
6 chosen categories:
Staples
Aashirvaad Atta, Salt, Spices
Biscuits
Sunfeast
Salty Snacks
Potato chips, Bridge products : Bingo!
Confectionery
Candyman, mint-o
Noodles: Launched Sunfeast Yippee Noodles in Sept 10 in Karnataka and
Tamil Nadu markets
Ready to Eat
Kitchens of India (Ready to Eat, Conserves & Chutneys and Frozen Foods),
Aashirvaad (Instant Mixes & Cooking Pastes), Sunfeast Pasta 44
Branded Packaged Foods

Aashirvaad Atta:
Current market leader amongst national branded players; leverages the e-
choupal network for cost-quality optimisation and region specific
offerings

Sunfeast Biscuits:
Differentiated & innovative products; continues to build consumer
franchise; distributed & outsourced supply chain being ramped up
Targeted cost management actions shore up margins

Number of innovative products in the pipeline leveraging the capabilities


of the ITC R&D Centre
45
Lifestyle Retailing
Leverages trade mark and services expertise of hotels
Relaxed wear market growth > 20% p.a
Up market product range available in exclusive Wills Lifestyle stores (67)
and multi-branded outlets/ large format retail stores across the country
Premium segment comprising the Classic range of formal wear, Wills
Sport relaxed wear and Wills Clublife evening wear
Designer association with leading Indian designers Wills Signature line
Strong distribution network in place for the mid-market brand John Players
availability in 225 Exclusive Branded outlets, 200 multi branded outlets and
departmental stores
Wills Lifestyle rated amongst the top 5 Luxury brands in the country (Global
Luxury Survey conducted by TIME Magazine)

46
Education & Stationery Products Business

Leverages print and paper know-how. Forward linkages with new paper
capacity (already commissioned).
An emerging (currently Rs 9000 cr stationery) market in India - growth
driven by increasing cross-cultural exposure, govt. spending on
education
Mostly commoditized. Offers opportunity for branding
Robust distribution network in place to scale up the Stationery business
significantly
Classmate brand already the most widely distributed brand in India. Scholastic
products launched
Branded Copier Paper Paperkraft footprint being enhanced. Enthusiastic
customer response based on green credentials.
Comprehensive portfolio approach with new variant/category launches
47
Safety Matches

Current industry consumer spend estimated at Rs. 1250 crores p.a. for 24
billion match boxes
Mass market moving from 0.50 p price point to Re 1.00.
ITC markets its brands with value added products across each price point
Support SMEs with complementary marketing strengths
AIM Indias largest selling Safety Matches brand
Successful acquisition of WIMCO Ltd. by Russell Credit
Key brands: Homelites, Ship, Cheetah Fight etc.

48
Incense sticks (Agarbattis)

Current industry consumer spend estimated at over Rs. 900 crores p.a.
ITC markets its brands with value added products across each price
point
Mangaldeep : second largest national brand in the country
Support cottage sector with complementary marketing strengths
Provides livelihood opportunities to more than 8000 under privileged
women

49
Personal Care Products
Current market size estimated at over Rs. 29000 crores (growing at 12% p.a.)
ITC presence established in Body Wash (Soaps, shower gels), Hair Care (Shampoos,
conditioner).
Product portfolio enlarged with the launch of Fairness cream Vivel Active Fair

Portfolio approach straddling all consumer segments with 4 umbrella brands:

Essenza Di Wills (Prestige)


Fiama Di Wills (Premium)
Vivel Di Wills and Vivel (Mid)
Superia (Popular)
Products well received in the market, gaining customer acceptance

Supported by investments in brands celebrity endorsements

Investments being made in Research & Development and strategic tax incentivized
manufacturing sites
50
Elephant that can dance

A full spectrum added value only when the activities are


joined and connected
A robust corporate strategy

Core competencies
Distribution reach
Superior brand building
Effective supply chain management
6 million retail outlets
Directly services more than 2 million of these
retail outlets
Acknowledged skills
Performance Track Record -
Snapshot Rs crores
Cagr 95-96
Rs Crs 95-96 09-10
to 09-10
Gross Turnover 5115 26,260 12.4%
Net Turnover 2536 18,153 15.1%
Market Capitalisation 5571 100,475 22.9%
PBDIT 584 6,677 19.0%
PBIT 536 6,069 18.9%
PBT 452 6,015 20.3%
PAT (After Exceptional Items) 261 4,061 21.7%
EPS Rs (Equalised for 95-96) 0.7 10.73 21.4%
Net Worth 1121 14,064 19.8%
Capital Employed 1886 14,957 15.9%
ROCE% 28.4 40.6
Total Shareholders Returns % 24.3%
Source: itcportal.com
Source: itcportal.com
Source: itcportal.com
2009/10: Segment Rs crores
Segment Gross Revenue PBT Capital Employed

Cigarettes 17,283 66% 4,938 82% 2,988 24%

Others 3,642 14% (350) -6% 1,719 14%

Total FMCG 20,925 80% 4,589 76% 4,717 38%

Hotels 911 3% 217 4% 2,457 20%

Agri Business 3,862 15% 436 7% 1,580 13%

Papers 3,234 12% 684 11% 3,711 30%

Total 28,932 110% 5,926 99% 12,465 100%


Less Other Revenue,
Income/Expenditure 2,672 10% (89) -1% - -

Total 26,260 100% 6,015 100% - -


Source: itcportal.com
BCG Matrix
FMCG -
foods/others

Agri Business
Hotels
Paperboards & packing

FMCG - Cigarettes
ITC InfoTech
Businesses for Tomorrow
In FMCG sector expected to triple in size to
over Rs 3,55,000 crores by 2018,
investment opportunity upto Rs. 8,000
crores over the next 7 to 10 years.
Paper, Paperboards &
Packaging investment opportunity of upto
Rs. 6,000 crores.
investment opportunity for ITC of upto Rs.
9,000 crores in the next 7 to 10 years
THANK YOU

Vous aimerez peut-être aussi