3. PESTLE ANALYSIS
POLITICAL
ECONOMICAL
SOCIAL
• Government’s thrust on
agriculture and rural economy
in the twelfth five year plan has
facilitated improved demand for
the FMCG products.
• Failure to comply with laws and
regulations such as tax may
leave the company open to legal
challenge in the court of the
law.
• Restrictions in import policies.
• Tax exemption in sales and
excise duty for small scale
industries.
• The India GDP per capita rate of
Indian economy is increasing
every year, because of which
consumers have more amount in
their hand to spend on their
necessities.
• Inflation rate is also increased in
India compared to previous year,
prices went up consumers tend
to save their money and spend
less.
• FMCG sector is the 4th largest
sector in India, though the
growth declined in comparison
to last year.
• Rural employment,
standard of living in rural
areas is increasing. More
number of people are
aspiring for the urban
lifestyle.
• Volume driven growth in
rural market.
• The Indian culture, social
and life styles are
changing drastically.
4. TECHNOLOGICAL
• State of the art
factories
• ITC also has the great
inventory control &
logistics support (SCM).
• Quality concepts such
as quality control, total
quality management
and 6-sigma concepts.
LEGAL
• The developments in the
environmental and
consumer regulations and
protection such as the ban
on smoking and the ban on
selling cigarettes to minors
have resulted in setbacks
for the company in terms of
the number of sales of their
product which draws them
the most revenue
ENVIRONMENTAL
• The environment is
favorable for the
company because of
the abundance of
raw material and
inexpensive and
large availability of
cheap labor.
5. SWOT ANALYSIS
STRENGTHS
Experienced
Management: Strong
WEAKNESSES
OPPURTUNITIES
THREATS
Unrelated Lines:
Rural openings:
Cigarettes
A Strong Brand:
The Diversification stretches
over many streams. It is not
concentrated on a particular
line and can add additional
campaigning overhead
Reasonable pricing
strategy and diversified
products, ITC is strongly
suited to cater to the rural
market.
Adds value for the
stakeholders
Tobacco Dependent
E-Choupal: It has
Heavy taxation on
tobacco and the rapid
initiatives to highlight
its hazards to health can
deter its tobacco
business.
loyalty quotient, adding
stability to the brand.
Diversity:
The Company
is proactive in churning out
new lines of products.
Sustainability:
The
Company is well-equipped to
handle failures in its product
segments due to its large array
of product lines.
CSR:
The Company’s CSR
activities are rich and add
value to the brand. (ITC’s
Classmate )
Well Distributed: The
Supply chain is a strong factor
in the easy accessibility of the
ITC products.
The Company is still largely
dependent of its Cigarettes
and Cigar lines. It is still the
most revenue generating
function for ITC.
Taxation Policy:
The diversification adds
multiple liabilities for heavy
taxation.
Second Best:
In many of its product
lines, the company has still
not managed to gain a
foothold. Some of the
products have yet to find a
valid market.
added a strong statement
under ITC’s CSR. It has
greatly benefitted the
farming community.
Mergers: The ITC
can selectively merge
with complementary
products to enhance its
product array.
New Lines: ITC can
keep adding new sections
of products to its current
catalogue to expand its
market.
Franchise: ITC can
start its own franchise
outlets. That would
increase its visibility and
would increase revenues.
FDI
The FDI in retail can
allow easy access to
new entrants and can
affect its revenues.
Competitors
ITC’s diversification
leads to a wide array of
competitive tussles and
hence it has to be in
alignment with each of
its product race.
Strike Rates
There have been recent
strikes in some of its
plants. ITC needs to
keep a check on this
human element in its
industry
6. Predicted P/L statement ( for the year ender 31st March 2014)
(Rs in Crores)
GROSS INCOME
48639.95
GROSS SALES / INCOME FROM PRODUCTS & SERVICES
47245.1
EXCISE DUTIES
13619.18
1). INCOME FROM OPERATIONS
33625.92
a) NET SALES/INCOME FROM OPERATIONS(Net of Excise Duty)
334.12
b) OTHER OPERATING INCOME
1060.73
2) OTHER INCOME
TOTAL INCOME FROM OPERATIONS (1+2)
35020.77
7. EXPENSES
a)Cost of materials consumed
10097.92
b)Purchases of stock-in -trade
3814.79
c)Changes in inventories of finished goods, work-in-progress and stock-in-trade
(278.38)
d)Employee benefits expense
1509.2
e)Depreciation and Amortisation expense
898.98
f) Other expenses
6577.7
TOTAL EXPENSES
22620.21
PROFIT FROM OPERATIONS BEFORE FINANCE COSTS
12400.56
PROFIT BEFORE TAX
12389.73
TAX EXPENSE
3840.81
NET PROFIT FOR THE PERIOD
8548.91
8. Assumptions
Average Growth is taken
13 % ( Quarterly Result
Comparison as 2013-14
quarterly results are out)
Finance Cost is ignored
due to unavailability of
Data
Depreciation and
Amortisation
considered from past
trends.
Employee Benefit
Expense 0.056 Crores per
Employee - 6 % increase
YOY
Excise Duty is averaged
for last 3 years ( exact
is difficult to find as
revenues are from
different business)
Changes in Fixed
Inventories taken same
as that of last year so
expenses are not
reduced much
Employees for 2014
considered to be 26950
increased at 3.8 % ( past
2 years average)
9. Options To Finance Expansion
•Share Capital
•Reserve and Surplus
•Borrowings
a) Long Term Borrowings
b) Short Term Borrowings
c) Bonds and Debenture Issuance
•Investment in Bank Deposits
•FMCG crossed Breakeven
11. • Company’s non cigarette revenue produced 42% of overall
revenue.
• ITC moving from a purely tobacco company.
• Government’s 12 five year plan put emphasis on agriculture
and rural economy
• Free from recession
• E-choupal network – an advantage for the company
• Existing Sales and Distribution channel
• Collaboration with the Paanwallahs
12. Revenues Distribution across different Segments
Segment wise
Revenue Distribution
FMCG –
Cigarettes
FMCG Others
Packaging
16%
2%
10%
57%
Hotels
15%
Agri Business
17. FMCG should consider venturing into the beverages business. They can start by a juices good for health.
Both pepsi and coke are not very good in that segment, they are still growing
Consumers are more health oriented
Both Coke and Pepsi expanding in India
Coke recently launched their 57th plant in India
We can try to get the growth opportunities in the beverages sector
Also we can show how coke and pepsi dominating and compare their revenues
What strategies they are following and ITC can be made to launch a drink and penetrate into their shares.
FMCG through wide sales and distribution network (Paanwallaha’s)- Packaged Food and personal care products
New Paan Plus Channel
Stationary Product
