A Case Analysis on ITC Limited
Submitted by Ashok Kumar 13AC06 Raveen Selvan 13AC28 Revathi Priya 13AC30 Stanley Jebakumar 13AC36 Vinoth Kumar 13AC44Submitted to : Ms. B. Uma MaheswariIntroduction An Indian Conglomerate (103 years old) Has Five Diversified Segments (FMCG, Hotels, Paperboards, Paper & Packaging, Agri Business) 2012-2013 Revenue US$ 8.31 Billion One of Forbes 2000 list Only company in the world to be Carbon Positive, Water Positive, Solid Waste Recycling PositiveVisionSustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company's stakeholders.MissionTo enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value.Corporate Strategies Continue to focus on their existing portfolio Ensure that their business is world class and internationally competitive Enhance competitive power of the portfolio Create distributed leadership within the organization Continuously strengthen & refine Corporate governance processDeveloped VisionTo make ITC as the worlds most valuable corporations through developing technology, many more new innovative products that add value to the customers and the companys stakeholders.Developed MissionTo enhance the wealth generating capability of the enterprise in a digital environment and create a new superior digital way to reach the customers, delivering sustainable stakeholder value.Porters Five Force ModelRivalry Among CompetitorsAttractivenessRemarks
LowHigh
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No of CompetitorsLargeSmallCompetitors like HUL, Cadbury, P&G
Industry GrowthSlowFastFMCG sector grows 17.3% every year (IBEF)
Fixed CostHighLowEconomies of Scale avoids most of the fixed costs
DifferentiationLowHighNot much differentiation is found unless they have varieties
Switching CostLowHighNo cost involved
Openness in terms of salesSecretOpenThe process is known
Excess CapacityLargeSmallDemand is always high in FMCG sector
Strategic StakesHighLowFMCG sector is stable, so people invest more
Barriers to ExitAttractivenessRemarks
LowHigh
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Asset SpecializationHighLowHold-up is bilateral
Cost of ExitHighLowMarket Demand almost nullifies their cost of exit
Government restrictionsHighLowThere is no restriction and no need to pay any cost to the government
Barriers to EntryAttractivenessRemarks
LowHigh
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Economies of ScaleSmallLargeLarge Scale Production
Product DifferentiationLowHighMarket Expansion
Brand IdentityLowHighConsumers are brand conscious
Switching CostLowHighNo cost for preferring a different brand
Access to Channels of DistributionEasyLimitedPlanned Distribution
Capital RequirementSmallLargeDemand is high, so more investment is needed
Access to TechnologyEasyRestrictedFaster access to information
Access to Raw MaterialEasyRestrictedRaw material are easily available
Government ProtectionNoneSubstantialNo Restriction
Threat from SubstitutesAttractivenessRemarks
LowHigh
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Availability of close SubstitutesHighLowPlenty of SubstitutesLow Attractiveness
Switching CostLowHighNot much switching cost is involved
Substitutes' price valueBetterWorseComparatively better price
Profitability of the producers of substitutesHighLowIf they lose customers once, its tough to retain them back
Bargaining power of BuyersAttractivenessRemarks
LowHigh
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No of BuyersSmallLargeFourth Largest sector in Indian Economy(IBEF)
Availability of SubstitutesManyFewMany local producers have similar products
Switching CostLowHighAlmost all variants are of same price
Buyers Threat of Backward IntegrationHighLowCustomers long for these products in market
Industrys threat of Forward IntegrationLowHighNo Dominant Suppliers
Contribution to QualityLowHighCustomers are highly concerned about quality
Contribution to CostHighLowBuyer has no involvement in cost
Buyers ProfitabilityLowHighCustomer Delight is relatively high
Bargaining power of SuppliersAttractivenessRemarks
LowHigh
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No of SuppliersSmallLargeMany Players are there in this industry
Availability of SubstitutesFewManyMany local players are there to produce similar products
Switching CostHighLowAlmost all variants are of same price
Suppliers Threat of Forward IntegrationHighLowChances of Forward Integration for suppliers is less
Industrys threat of Backward IntegrationLowHighBuyers do not threaten to integrate backward
Contribution to QualityHighLowSuppliers are highly concerned about customer retention
Contribution to CostHighLowSuppliers always minimize the cost to gain their edge in market
Industrys Importance to SuppliersLowHighIf they lose customers once, its tough to get them back
Government ActionsAttractivenessRemarks
LowHigh
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Industry ProtectionLowHighGovernment extends its hand to protect an industry by exempting tax and through other policies
Industry RegulationHighLowGovernment encourages new entrepreneurs of FMCG products
Customs and Tariff Restrictions AbroadHighLowExport duties are less to encourage more exports from India
Overall AssessmentAttractivenessRemarks
LowHigh
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Barriers to EntryBarriers to entry is almost less
Rivalry Among CompetitorsCompetition is moderate
Barriers to ExitBarriers to exit is low
Power of BuyersPower of Buyers is moderate
Power of SuppliersPower of Suppliers is moderate
Threat of SubstitutesThreat of Substitutes is high
Government ActionsGovernment has many supportive policies
Overall AssessmentUltimately its a good sector to do business
External Opportunities And ThreatsOpportunities Untapped Rural Markets Mergers and Acquisition Increasing Buying Power of Customers Rapid Growth of Media Growth of New Customers Growth of E-Commerce Brand Consciousness of PeopleThreats Competitors in Market FDI Interventions Emergence of Local Players Government Actions No. of Substitutes
Competitive Profile MatrixFactorITC LimitedHindustan Unilever Limited
R&D Expenses240 Crores22.91 Crores
Product InnovationNew varieties of Fiama Di WillsKnorr Soups
RevenueUS$ 8.31 BillionUS$ 3.6 Billion
Brand AwarenessVery HighHigh
Attrition Rate (Top Mgmt.)0% for past 15 yearsAbout 5%
Products VarietiesFew productsWide range of Products
S. No Factors ITC HUL
Weight Rating Weighted Score Weight Rating Weighted Score
1 R&D Expenses 0.18 3 0.54 0.18 3 0.54
2 Product Innovation 0.13 2 0.26 0.13 4 0.52
3 Revenue 0.14 4 0.56 0.14 3 0.42
4 Brand Awareness 0.22 4 0.88 0.22 3 0.66
5 Attrition Rate (Top Mgmt.) 0.18 4 0.72 0.18 2 0.36
6 Product Varieties 0.15 2 0.3 0.15 4 0.6
Total 1 3.26 1 3.1
External Factor Evaluation MatrixS. NoKey External OpportunitiesWeightRatingWeighted Score
1Untapped Rural Markets0.1340.52
2Mergers & Acquisition0.0610.06
3Increasing Buying Power of Customers0.0820.16
4Rapid Growth of Media0.0720.14
5Growth of New Customers0.0930.27
6Growth of E-Commerce0.0610.06
7Brand Consciousness of People0.0720.14
Total0.561.35
S. NoKey External ThreatsWeightRatingWeighted Score
1Competitors in Market0.1340.42
2FDI Intervenstions0.0930.27
3Emergence of Local Players0.0820.16
4Government Actions0.0620.12
5No. of Substitutes0.0820.16
Total0.441.13
S. NoKey External FactorsWeighted Score
1Opportunities1.35
2Threats1.13
Total2.48
Internal Strengths And WeaknessesStrengths Brand Name Quality Market Share Good Top Management Product Diversification Big Supply Chain Marketing Team Low Price R&D DepartmentWeaknesses Negative Notion on Tobacco High Taxation Unrelated DiversificationInternal Factor Evaluation MatrixS NoKey Internal StrengthsWeightRatingWeighted score
1Brand Name0.0640.24
2Quality0.120.2
3Market Share0.0640.24
4Good Management0.0740.28
5Product Diversification0.120.2
6Big Supply Chain0.0740.28
7Marketing Team0.0740.28
8Low Price0.1310.13
9R&D Dept0.0830.24
Total0.742.09
S NoKey Internal WeaknessesWeightRatingWeighted score
1Negative Notion on Tobacco0.0920.18
2High Taxation0.0730.21
3Unrelated Diversification0.110.1
Total0.260.49
S. NoKey Internal FactorsWeighted Score
1Strengths2.09
2Weaknesses0.49
Total2.58
SWOT MatrixStrength 1. Strong & experienced management 2. Trusted brand in India 3. Diversified products and service portfolios 4. Excellent R&D facilities5. One of the most liquid script in capital market Weakness 1. Diversification into various fields would be risky if there s no knowledge in that 2. Largely Dependent on cigarette revenues 3. Low market share in hotels segment
Opportunity 1.Increase reach in rural markets 2.Mergers and acquisitions to strengthen the brand 3.Increasing purchasing power of people 4.Good source of foreign exchange is available from the export of agri products SO StrategyWith its strong brand image it could extend its markets in rural regions (S2,O1 )WO StrategyWith the mergers and acquisitions it can improve its hotels segment (W3,O2)
Threat 1.Negative publicity for smoking could affect its cigarette segment2. Competition from unbranded products3. Intense competition from other FMCG and hotel chains4.Monsoon failures could affect the agri exports ST StrategyFinding alternatives to overcome monsoon failures with its organised R&D facilities (S4,T4)WT StrategyCould increase the market share of hotels chain through vigorous marketing (W3,T3)
BCG MatrixGrowthStar
Agri Business Hotels Paperboards & Packaging Question Mark FMCG (Food Products)
Cash Cow
FMCG (Cigarettes) Dog
ITC - Infotech
Market Share
IE Matrix
Grand Strategy Matrix
QSPM MatrixStrategy 1 Tapping the rural marketStrategy 2Increasing the market share of Hotels
S. NoKey External OpportunitiesWeightStrategy 1Strategy 2
ASTASASTAS
1Untapped Rural Markets0.1340.42--
2Mergers & Acquisition0.06--10.06
3Increasing Buying Power of Customers0.0820.1620.16
4Rapid Growth of Media0.0720.1420.14
5Growth of New Customers0.0930.2730.27
6Growth of E-Commerce0.06--10.06
7Brand Consciousness of People0.0720.14--
Total0.561.130.69
S. NoKey External ThreatsWeightStrategy 1Strategy 2
ASTASASTAS
1Competitors in Market0.1340.5240.52
2FDI Intervenstions0.09----
3Emergence of Local Players0.0820.16--
4Government Actions0.0620.12--
5No. of Substitutes0.08--20.16
Total0.440.80.68
S. NoKey Internal StrengthsWeightStrategy 1Strategy 2
ASTASASTAS
1Brand Name0.0640.2440.24
2Quality0.120.220.2
3Market Share0.06----
4Good Management0.07--40.28
5Product Diversification0.120.2--
6Big Supply Chain0.0740.28--
7Distribution channel0.0740.28--
8Low Price0.1310.1310.13
9R&D Dept0.08----
Total0.741.330.85
S. NoKey Internal WeaknessWeightStrategy 1Strategy 2
ASTASASTAS
1Negative Notion on Tobacco0.0920.18--
2High Taxation0.07--30.21
3Unrelated Diversification0.110.1--
Total0.260.280.21
S. NoKey FactorsWeightStrategy 1Strategy 2
TASTAS
1Opportunities0.561.130.69
2Threats0.440.80.68
3Strengths0.741.330.85
4Weaknesses0.260.280.21
Total23.542.43
Space MatrixS.NoFactorsRatings
Industrial Strength
1Viral Marketing & Promotions5
2Brand Image3
3Diversification2
Total10
Competitive Advantage
170% Market Share in Indian Cigarette Industry-1
20% Attrition Rate in Top Mgmt. for the past 15 years-2
3Spends nearly 240 Crores for R&D Projects-3
Total-6
S.NoFactorsRatings
Financial Strength
1Net Profit has increased by 17% during 2012-20135
2Phenomenal increase of ROC from 28.4% to 45.74
3Has a liquidity ratio of 1.272
Total11
Environmental Stability
1High Inflation rate in India-4
2Low Switching cost in FMCG industry-2
Total-6
ES Average is -6/2 = -3 IS Average is 10/3 = 3.33 CA Average is -6/3 = -2 FS Average is 11/3 = 3.66 Directional Vector Coordinates X-axis : -2+3.33 = 1.33 Y-axis : -3+3.66 = 0.66
The Firm is in good shape in a stable and growing industry. So it is better for the firm if it continues its same aggressive style.
