The document details ITC's corporate and diversification strategies aimed at achieving market leadership, discussing its evolution from a tobacco company to a diversified conglomerate. It highlights the challenges and opportunities faced by ITC, such as regulatory pressures on tobacco, competition, and the need to invest in sustainable practices. Recommendations include reducing reliance on tobacco, maintaining quality standards, and leveraging existing capabilities to meet future challenges.

1. &
ITS DIVERSIFICATION STRATEGIES FOR
MARKET LEADERSHIP

2. Team Members
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•
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•
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•
Abhinav
DISCLAIMER
Aman
Hemraj
No member of this team endorses
use
Kavish of tobacco or any such
products.
Amit
Paritosh
Viewers’ discretion is
Col Ajay K Raina, SM
recommended.
2

3. Case Study : Vital Stats
• Vintage – Early 2005.
• Focus – Corporate Strategy
• Ingredients:– Need to diversify.
– Strategies adopted.
– Future possibilities.
• Our Approach:–
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–
–
An overview.
Analysis.
Recommendations.
Real time benchmarking.
• Limitations.
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4. Overview
• Incorporated in 1910 as Imperial
Tobacco Company.
• Ownership shifted from British to
Indian management team in 1974;
rechristened as India Tobacco
Company Limited.
• Strategic diversification started in
1970s into related as well as unrelated
businesses.
• Has successfully spread its business
and market risks.
4

5. The Start Point
• ITC‟s Vision and Mission statements.
• Corporate Strategy briefly touched upon:– “It is ITC‟s endeavour to continuously explore
opportunities for growth by synergising and
blending its multiple core competencies to create
new epicentres of growth”.
– YC Deveshwar, Chairman.
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6. Two Datelines
1970s
2005
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7. Change is Never Easy
ANALYSTS’ VIEW
- Risk of overspreading its
assets.
- Fear of losing effective
control over businesses.
- Survival of one may cost
profit of another.
MANAGEMENT’S
STANCE
“We will either become
the market leader or
exit”
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8. Changing Ambitions
• Core business – cigarette & tobacco.
– Market share of 60%.
– Revenue contribution of 78%.
– Profit margins of 40%.
• Among top five private sector
companies in India; aiming to be a global entity.
• Early 2000s – India amongst economic boom.
• Anti-tobacco campaign & regulatory restrictions.
• “Everyone still refers to us as a cigarette
company….one of the largest hotel chains,
largest print shop…..” YC Deveshwar.
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9. What Did
ITC
Do?

10. FMCG-Cigarettes
• Focus on delivery of highest product quality.
• Leadership maintained through delivery of
value.
• Innovative marketing schemes (eg festival
packs, limited edition).
• Segmentation of
consumers/ pricing.
• Increasing costs of
the selected ones to
increase margins.
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11. FMCG-Other
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Bukhara‟s popularity – Kitchens of India.
Agro products – Aashirvaad – Sunfeast.
Consumer quest for healthier snacks and food.
Innovative additions (eg orange Marie).
Exporting Mint-O-Fresh & Eclairs.
Wills and John Players- secondary advertising.
Lifestyle stores – international shopping
experience.
• Expressions, Regalia and Matrubhasha.
• AIM (120 hits) & Mangal Deep – the leaders.
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12. Hotels
• Among top with Taj & Oberai.
• ITC Sonar Bangla Sheraton,
Kolkata – one of the best by
ABTA.
• Logo‟s Indian connection.
• Segmentation strategy –
„Branded Accommodation‟
(hotel within the hotel).
• Restructuring of operations for
better efficiency = higher
occupancy+ increased
revenues.
12

13. ANALYSIS OF STRATEGY

14. Broadly…. (Seen it)
• At the corporate level, ITC aims
to create multiple drivers of
growth by developing a portfolio
of such businesses that best
matches organisational
capability with opportunities in
domestic and export markets.
• As regards Business
Strategies, all three
types have been used with
varying degrees of mix.
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15. Understanding the
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17. PEST Analysis….
• Political Aspects.
–
–
–
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Crusaders.
2001 ban on the advertising.
Increased excise duties.
Economic reforms, de-licensing
and liberalisation.
– New technologies in agriculture,
manufacturing…. Tax incentives
on R&D and technology upgradation.
– State governments and luxury
tax.
– Focus on rural sector
development.
17

18. …..PEST Analysis…
• Economical Aspects
– A growing economy = A growing
portfolio of businesses… already
seen.
– Offshore businesses, especially
IT industry.
– Era of international tie-ups.
– Huge commercial spaces
available.
– Corporate culture and associated
needs.
– Rising small town aspirations.
– National imperatives.
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19. …..PEST Analysis…
• Social Aspects
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Younger demographic profile.
Increased PCI and spending power.
Lifestyle & brand consciousness.
Desire for high end international products.
Changing definition of luxury and necessity.
Health/nutrition consciousness.
Leaning back on mother tongue.
Yearning for Personalised products.
Averse to smoking.
Elite among equals.
Less leisure time.
Need for innovative gifting options.
CSR prism.
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20. …..PEST Analysis
• Technological Aspects
– Farming technology under revolution.
– Innovation vis-à-vis competitive
advantage.
– Acceptable substitutes to traditional
foods.
– Huge impacts on SCM started to be
felt.
– Cheap labour for high tech jobs.
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22. Strengths
• Brand Image.
• Largest selling Tobacco brand
in India; regulations.
• Illustrated ability to leverage
traditional businesses to
develop new brands (Chefs +
Cigarette =FMCG; paper+
package = Greeting cards).
• Diversification profile and track
record.
• Distribution network.
• Strong financial performance.
• R&D.
• CSR programmes and
success therein.
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23. Weaknesses
• Too much reliance on tobacco
revenues.
• Miles to go.
• Essentially “Desi”.
• Unrelated diversifications.
• Heavy taxation prone products.
• Brand name‟s association with
tobacco.
• Other businesses subsidized by
tobacco segment.
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24. Opportunities….
• Leveraging brand equity.
• Government policies
(liberalisation) and stable
economy.
• Untapped Rural market.
• Lowest per capita FMCG
consumption.
• Personal care & booming
incomes.
• Synergies across businesses +
leveraging domain expertise for
growth in other sectors.
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25. ……Opportunities
• The enviable reach and distribution
network of e-choupal.
• Taking IT business to USA; 60% in
Europe.
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26. Threats
• Competition – domestic+
international.
• Increasingly hostile attitude
towards smoking in general.
• Government policies towards
tobacco= tax, regulations.
• Systematic threats.
• IT bubble (assumed).
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27. Focus : Cigarettes
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28. Porter’s 5 Forces:
Cigarettes…
• Bargaining Power of
Buyers=LOW
– Addicted customers .
– Symbolic and emotional
values.
– Product quality not much
important to smokers.
– Low switching costs.
– Brand loyalty insignificant.
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29. ….Porter’s 5 Forces…
• Bargaining Power of Suppliers
= LOW
– Many small, un-organised
suppliers available.
– Direct access to growers by big
companies.
– Suppliers have no influence on
consumers.
– No one-stop solution provider
vis-à-vis variety.
– No constitutional protection.
– Unorganised financing; prone to
exploitation.
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30. ….Porter’s 5 Forces…
• Competitive Rivalry in the
Industry=HIGH
– Many competing players.
– Brand loyalty in premium
segments.
– Price competition through cost
efficiency.
– Advertisement for cigarettes is
now prohibited in India.
– Replacement for ads – event
sponsorships and costs.
– New product launches.
– Cost of secondary promotion.
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31. ….Porter’s 5 Forces…
• Threat of Substitute Product=MEDIUM
– Two aspects.
– Sin vs Sin:• Pan.
• Beedi and Gutkha
– Buyers‟ propensity
driven by health &
costs
•
•
•
•
e-cigarettes
Herbal Cigarettes.
Nicotine patch.
Pills.
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32. ….Porter’s 5 Forces
• Barriers to Entry = HIGH
– New product differentiation very difficult; huge
variety available.
– Local launches can not achieve economies of
scale.
– Govt regulations.
• No fresh licenses for setting up new plants.
• No incentives permitted.
– Huge capital required to manufacture for an all India
presence. Ban on advertisements & brand identity.
• SUMMARY – High Barriers, Stiff competition,
Low powers and Medium for substitutes.
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34. Assumed Data
G
R
O
W
T
H
•Agro Business
•Hotels
•Paperboards
& Packaging
•FMCG-others
•Hotels
•FMCG•Cigarettes
•ITC Infotech
MARKET SHARE
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35. The Net Outcome
YoY Growth : 2001
80.00%
72%
AWARDS :
2004
• Forbes –World‟s
Leading
companies list.
70.00%
60.00%
50.00%
37%
40.00%
35.60%
30.00%
20.00%
10.00%
8.30% 10.60%
14.20%
• World Business
Award.
• Enterprise
Business
15.90%
Transformation
Award
0.00%
Gross Net
Opg Opg FMCG Hotel EBT
Sales Sales Margin Profit
Margin
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38. Broad Diversification
Strategies
• Aimed at synergising both backward and
forward integration.
• Convergence of multiple core competencies.
• Value derived from diversified portfolio of
related businesses through efficient value
chains.
• Brand management + Understanding markets +
Consumer tastes.
• Selection criterions:– Good likely ROI.
– Potential for future expansion.
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39. Analysis of Strategies
• Entering into less competitive or unexplored
markets (ready to eat, staples, wafers).
• Maintaining a well-managed supply chain network.
• Innovation-Regular introduction of new products,
duly supported by R & D.
• Mix of more than one business strategies.
• Extensive advertising (biscuits, confectionary,
wafers)
• Multiple drivers of growth - matching internal
capabilities with emerging market opportunities
• Pursue World class competitiveness in the entire
value chain
• Transformational strategy (e-choupal).
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40. Challenges
for Strategies
• Capability of organisation to manage multiple
businesses indefinitely.
• ITC has been trying to develop a capacity to
manage their large portfolio which will result in
a need of huge funds.
• ITC needs to maintain a proper flow of cash
and proper project budget control.
• Investing in people.
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41. Recommendations
• No choice but reduce
dependence on tobacco.
• Needs to continue to
leverage upon its existing
skills and competencies.
• Good quality needs to be
maintained to back strong
brand capabilities.
• Need to formulate strategies
to meet new challenges like
FDI.
• ITC‟s CSR must continue to
offset the negativity
associated with smoking.
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42. Reality Check : Beyond CS
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43. It pays to be Competent
– A turnover of over US $ 5 billion and a market capitalization
of over US$ 18 billion.
– Total shareholder returns grew at a compound rate of over
24% per annum over the last 5 years.
– Reputed to be one of the world‟s most successfully
diversified companies.
– Direct employment to more than 26,000people.
– e-choupal initiative is the world‟s largest rural digital
infrastructure benefiting over 4 million farmers.
– Watershed Development initiative brings water to over
46,000 hectares of dry lands and moisture-stressed areas.
– ITC‟s sustainable community development initiatives include
women‟s empowerment, supplementary education.
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