Bsiness Environment & Strategic Analysis Of Itc Hotels


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  • Bsiness Environment & Strategic Analysis Of Itc Hotels

    1. 1. ITC Limited One of India’s Most Valuable Corporations HIMANSHU DIXIT MBA
    2. 2. Performance Track Record- Snapshot Rs. 1 crore= Rs. 10 million Rs crores
    3. 3. ITC - Key Financials – H1 08/09
    4. 4. Q2 Segment Results
    5. 5. H1 Segment Revenue
    6. 6. H1 Segment Results
    7. 7. Segment Capital Employed
    8. 8. <ul><li>One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004 </li></ul><ul><ul><li>Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are rated as the ‘most attractive companies for investors’ </li></ul></ul><ul><li>Only Indian FMCG Company to feature in Forbes 2000 List </li></ul><ul><ul><li>A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value </li></ul></ul><ul><li>Among top in : </li></ul><ul><ul><li>Sustained value creation (BT-Stern Stewart survey) </li></ul></ul><ul><ul><li>Operating profits </li></ul></ul><ul><ul><li>Cash Profits </li></ul></ul><ul><li>Ranks No. 5 among Indian listed Private Sector Companies by market cap . (@ 30/09/08) </li></ul><ul><ul><li>No. 1 in FMCG Sector </li></ul></ul><ul><li>Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey 2006) </li></ul>ITC One of India’s most valuable corporations
    9. 9. Awards & Accolades (1) <ul><li>‘ ITC received the FICCI Outstanding Vision Corporate Triple Impact Award 2007 for invaluable contribution to the triple bottom line benchmarks of building economic, social and natural capital for the nation. </li></ul><ul><li>Sustainability Leadership Award 2007 conferred on Chairman Y C Deveshwar by the Sustainability Forum, Zurich and SAM/SPG at the International Sustainability Leadership Symposium </li></ul><ul><li>Business Today Award for the Best Managed Company – Retail and Consumer Products , has been conferred on ITC in recognition of its outstanding initiatives in the consumer products segment. </li></ul><ul><li>Asian CSR Award 2007 for Environmental Excellence given by the Asian Institute of Management </li></ul><ul><li>Ryutaro Hashimoto Incentive Prize 2007 for Environment & Development from the Asia Pacific Forum </li></ul><ul><li>In the first of its kind S&P Environmental, Social and Corporate Governance (ESG) ratings released recently, ITC ranked second among top Indian companies . </li></ul><ul><li>The Company has won the Corporate Social Responsibility Crown Award for Water Practices from UNESCO and Water Digest for its distinguished work carried out in the water sector in India. </li></ul><ul><li>NDTV Profit Business Leadership Award for being the Best Food Company of 2007 . </li></ul>
    10. 10. Accolades & Awards (2) <ul><li>e-Choupal initiative wins global recognition: </li></ul><ul><ul><li>Stockholm Challenge Award 2006 in the Economic Development category which recognises initiatives that leverage Information Technology to improve living conditions and foster economic growth in all parts of the world. </li></ul></ul><ul><ul><li>First Indian Company to win the Development Gateway Award 2005 for the most exemplary contribution in the field of Information & Communication Technologies (ICT) for development during the last 10 years </li></ul></ul><ul><ul><li>World Business Award 2004 : International Chamber of Commerce & the HRH Prince of Wales & International Business forum </li></ul></ul><ul><ul><li>Harvard University case study </li></ul></ul><ul><ul><li>Recognised in World Development Report 2008 published by World Bank </li></ul></ul><ul><ul><li>Applauded by President of India Dr APJ Kalam in his “special address during the national symposium to commemorate 60th year of independence” </li></ul></ul>
    11. 11. ITC - Business Portfolio ITC FMCG: Cigarettes Other FMCG Hotels Agri Business Leaf Tobacco Agri Commodities Paperboard Paper & Packaging
    12. 12. Strategy of Organisation to manage diversity of Portfolio <ul><li>Formal 3-tiered governance structure: </li></ul><ul><li>Board of Directors : </li></ul><ul><ul><li>Comprising executive (4) and non-executive directors (11) </li></ul></ul><ul><ul><li>Strategic supervision </li></ul></ul><ul><li>Corporate Management Committee : </li></ul><ul><ul><li>Comprising executive directors and senior managers </li></ul></ul><ul><ul><li>Strategic management </li></ul></ul><ul><li>Divisional Chief Executive & Divisional Management Committee : </li></ul><ul><ul><li>Executive management </li></ul></ul>
    13. 13. <ul><li>Sustain multiple drivers of growth, matching internal capabilities with emerging market opportunities </li></ul><ul><li>Pursue World class competitiveness in all businesses and across the entire value chain </li></ul><ul><li>Best-in-class in terms of: </li></ul><ul><ul><li>Internal Vitality </li></ul></ul><ul><ul><li>Market Standing </li></ul></ul><ul><ul><li>Profitability </li></ul></ul><ul><li>Strategy of Organisation and Governance processes geared to manage multiple businesses </li></ul><ul><li>Blend core competencies and leverage ITC umbrella strengths to create new avenues of growth </li></ul>Corporate Strategies
    14. 14. Hotels & Tourism
    15. 15. Hotels & Tourism industry <ul><li>Foreign arrivals into India: 5 million appx. Vs. 35 million in China </li></ul><ul><ul><li>The two nations were on par 2 decades ago at 750,000 arrivals </li></ul></ul><ul><li>Today, Beijing alone has as many hotel rooms as the whole of India </li></ul><ul><li>India’s luxury rooms availability lower than even smaller East Asian countries </li></ul>Source: Compendium of Tourism statistics, WTO
    16. 16. Indian hotel industry <ul><li>Current supply – appx. 110,000 rooms of which 5 Star category accounts for appx. 30% </li></ul><ul><li>India needs an additional 50,000 rooms in the next 2/3 years to service projected tourist arrivals </li></ul><ul><li>Present mismatch between supply and demand expected to persist over the short term </li></ul><ul><li>As infrastructure for trade & commerce improves - growing potential for leisure tourism </li></ul>
    17. 17. Economic impact of the Travel & Tourism Sector Full potential yet to be harnessed in the Indian context
    18. 18. ITC’s Hotel Business <ul><li>ITC-Welcomgroup : a leading hotel chain in India </li></ul><ul><ul><li>Established presence in key business locations </li></ul></ul><ul><ul><li>Over 6000 rooms under 4 distinct brands </li></ul></ul><ul><li>Capacity expansion underway at Bangalore and Chennai; plans for other locations also being progressed. Positions on land taken at other locations such as Hyderabad and Ahmedabad </li></ul><ul><li>Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @ 45%) amongst the 3 leading chains </li></ul><ul><li>Leverages unique service proposition and international alliance with Starwood Hotels & Resorts </li></ul><ul><ul><li>‘ Luxury Collection’ / ‘Sheraton’ </li></ul></ul>
    19. 19. ITC’s Hotel Business <ul><li>Manages 24 full service mid-market properties (1700 + rooms ) under the Fortune Hotels brand </li></ul><ul><ul><li>100% subsidiary company : Fortune Park Hotels Ltd. </li></ul></ul><ul><li>Also operates 60 properties under the ‘WelcomHeritage’ brand in 19 states </li></ul><ul><ul><li>Maharaja Heritage Resorts Ltd. 50% JV with Marudhar Hotels (P) Ltd. </li></ul></ul><ul><li>Business growth expected to be impacted by financial meltdown </li></ul>
    20. 20. e-choupal:Strategic Thrust <ul><li>Procurement: cost & quality optimisation </li></ul><ul><ul><li>strategic sourcing support to the Foods business (support creation of verticals in wheat, soya, corn, potato etc.) </li></ul></ul><ul><ul><li>cost-effective sourcing for exports/domestic external business </li></ul></ul><ul><li>Rural Distribution </li></ul><ul><ul><li>‘ last mile connectivity’: 100 partnering companies </li></ul></ul><ul><ul><li>diverse range of goods/services : FMCG, consumer durables,agri-inputs, paid extension services etc. </li></ul></ul><ul><li>Financial Services </li></ul><ul><ul><li>insurance (focus: weather) </li></ul></ul><ul><ul><li>credit (focus: Kisan credit card scheme) </li></ul></ul><ul><li>Rural retail </li></ul><ul><ul><li>23 Choupal Saagars operational </li></ul></ul><ul><ul><li>Rapid expansion planned in identified rural markets and Tier 2, 3 & 4 towns </li></ul></ul>
    21. 21. Positioning of ITC A leading FMCG player in India F A R M E R S M A R K E T S Cigarette Trade Marketing capability Branded Foods Expanded FMCG distribution capability e-choupal rural two-way fulfillment capability A basis for strategic partnerships with other FMCG brand owners VPN providing SCM, ERP & CRM capability Lifestyle retailing Education Stationery Matches & Agarbattis Personal Care Products
    22. 22. The Value Chain <ul><li>Primary activities </li></ul><ul><li>Inbound logistic </li></ul><ul><li>Outbound logistic </li></ul><ul><li>Operations </li></ul><ul><li>Marketing & Sales </li></ul><ul><li>Service </li></ul><ul><li>Support activities </li></ul><ul><li>Procurement </li></ul><ul><li>HRM </li></ul><ul><li>Technology development </li></ul><ul><li>Firm infrastructure </li></ul>
    23. 23. The Environment <ul><li>Tourism </li></ul><ul><li>Business factor </li></ul><ul><li>Room occupancy </li></ul><ul><li>Seasonality </li></ul><ul><li>Political Scenario </li></ul><ul><li>Tax structure </li></ul><ul><li>Differential Pricing </li></ul>
    24. 24. BCG Matrix <ul><li>Star </li></ul><ul><li>Hotels </li></ul><ul><li>Paperboard/ Packaging </li></ul><ul><li>Agro Business </li></ul><ul><li>Question Marks </li></ul><ul><li>FMCG- Others </li></ul><ul><li>ITC INFOTECH </li></ul><ul><li>Cows </li></ul><ul><li>FMCG-Cigarettes </li></ul>Dogs
    25. 25. Competitors <ul><li>EIH </li></ul><ul><li>INDIAN HOTEL </li></ul><ul><li>HOTEL LEELA </li></ul><ul><li>ASIAN HOTEL </li></ul><ul><li>JAPYEE HOTELS </li></ul><ul><li>ORENTIAL HOTELS </li></ul><ul><li>TAJ GVK HOTELS </li></ul><ul><li>ROYAL ORCHID </li></ul><ul><li>ADVANI HOTELS </li></ul><ul><li>EIH ASSOCIATE HOTEL </li></ul>
    26. 26. Critical Success Factor <ul><li>SITE AND LOCATION </li></ul><ul><li>POSITIONING AND GUEST PROFILE </li></ul><ul><li>FINANCIAL STRENGTH </li></ul><ul><li>BRAND RECOGNIYION </li></ul><ul><li>YIELD MANAGEMENT </li></ul><ul><li>DIFFERENTIAL PRICING </li></ul>
    27. 27. SWOT Analysis <ul><li>Strength </li></ul><ul><li>Brand </li></ul><ul><li>Distribution network </li></ul><ul><li>Management </li></ul><ul><li>Weakness </li></ul><ul><li>Dependence on tobacco revenues </li></ul><ul><li>Negative Connection of Tobacco </li></ul><ul><li>Opportunity </li></ul><ul><li>Low per capita consumption </li></ul><ul><li>Of personal care products </li></ul><ul><li>Rural Market </li></ul><ul><li>e-Choupal </li></ul><ul><li>Threat </li></ul><ul><li>Competition both Domestic & International </li></ul><ul><li>Increasing Tax on cigarettes </li></ul>
    28. 28. Corporate Social Responsibility <ul><li>Environmental </li></ul><ul><li>ITC has been Carbon Positive 3 years in a row. </li></ul><ul><li>Water Positive 6years in a row. </li></ul><ul><li>100% solid waste recycling </li></ul><ul><li>Social </li></ul><ul><li>ITC's businesses generate livelihoods for over 5 million people.   </li></ul><ul><li>ITC's globally recognised e-Choupal initiative is  the world's largest rural digital infrastructure benefiting over 4 million farming families.   </li></ul><ul><li>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.   </li></ul><ul><li>ITC's Watershed Development  Initiative brings precious water to nearly 35,000 hectares of dry lands and moisture-stressed areas.   </li></ul><ul><li>ITC's Sustainable Community Development initiatives include women empowerment, supplementary education, integrated animal husbandry programmes. </li></ul>
    29. 29. Recommendation <ul><li>Improved security for hotel guests. </li></ul><ul><li>Floor access control in hotels through key card system. </li></ul><ul><li>Precision analysis of products in Food Business. </li></ul><ul><li>Process optimisation for product development in Food Business. </li></ul><ul><li>Automation of lighting controls. </li></ul><ul><li>Use of Solar energy for hot water generation and outside area illumination. </li></ul><ul><li>Installation of PNG (Piped Natural Gas) fuelled generator sets and PNG fired calendar and tumbler drier machines in hotel laundries. </li></ul><ul><li>Improvements to reduce heat gain/cooling losses from building envelops in hotels. </li></ul><ul><li>Impact of measures for reduction of energy consumption and consequent impact on the cost of production of goods. </li></ul>
    30. 30. THAK YOU