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DISSERTATION REPORT
MARKETING & BUSINESS STRATEGY
OF
ITC LTD.
Submitted in partial fulfillment
Master of Business Administration
in
Marketing
Under the Guidance of: - Submitted By :
Col. Guruswamy Akash Deep Garg
Roll No : 520788905
Batch : 2007-09
EMPI Business School
New Delhi-110074
(2007-2009)
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ACKNOWLEDGEMENT
I extend my sincere gratitude to Col K Guruswamy, our Project guide, for
the successful completion of the project. He has been a great support and
guide to me during the entire dissertation. He has helped me throughout,
from choosing the project till I completed the Project Report. This project
has given me more confidence about the subject and various concepts of
‘Consumer Behavior’.
My sincerest gratitude also extends to Mrs. Shailja Manocha, who has taken
a keen interest in my project from time to time, and encouraged me to
perform to the best of my ability. I am also thankful to my faculty members
for their support and help for completion of the project.
Thank you all for your time and guidance in helping me achieve my goal of
completing this project to the best of my ability.
Akash Deep Garg
Roll No-520788905
MBA 2007-09
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DECLARATION
I, AKASH DEEP GARG, hereby declare that the project on
DISSERTATION REPORT ON MARKETING & BUSINESS
STRATEGY OF ITC LTD. is written by me under the guidance of Mrs.
Shailja Manocha. The empirical conclusion & findings in the project are
based on the data collected by me and the entire project work is not a
reproduction of any other sources.
Signature
Name-AKASH DEEP GARG
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TABLE OF CONTENTS
TOPIC PAGE NO.
1. EXECUTIVE SUMMARY OF THE PROJECT 6
2. INTRODUCTION TO THE PROJECT 7-9
3. OBJECTIVE OF THE PROJECT 10
4. RESEARCH METHODOLOGY 10
5. PROFILE OF ITC LTD. 11-17
6. INITIATIVES TAKEN 18-20
7.FINDINGS & ANALYSIS- MARKETING 21-25
8.ANALYSIS ON DIVERSIFICATION 26-28
9.FUTURE PLANS 29
10. RECOMMENDATIONS 30
11. LIMITATIONS 31
12. REFERENCES 32
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EXECUTIVE SUMMARY OF THE PROJECT
This topic has been chosen to study the Marketing & Business strategy of ITC Ltd. There
are certain prospective on which a company sells their products in to the market and
diversifies their business. This project has been a great learning experience for me; at the
same time it gave me enough scope to implement my analytical ability. Full project gives
an insight about the strategies and its various aspects. It is purely based on whatever the
researcher learned at EMPI Business School. All the topics have been covered in a very
systematic way. The language has been kept simple so that even a layman could
understand. The whole theoretical part is covered with relation to the product. It helped to
understand the various concepts of marketing. The various theories like learning,
perception, attitude, motivation, and personality are fully studied in the project.
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Introduction
ITC India Limited
Type Public (BSE:ITC)
Founded August 24, 1910
Radha Bazar Lane, Kolkata, India
Headquarters Virginia House, Kolkata, India
Key people Y C Deveshwar, ChairmanK Vaidyanath, Director, CFO: Partho Chatterjee
Industry Tobacco, Foods, Hotels
Products Cigarettes, Packaged Food, Hotels, Apparel
Revenue $4.75 billion USD (2006)
Employees 20,000 (2006)
Website http://www.itcportal.com/
ITC is one of India's foremost private sectors companies with a market capitalization of
nearly US $ 15 billion and a turnover of over US $ 4.75 billion. ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's most Reputable
Companies by Forbes magazine, among India's Most Respected Companies by Business
World and among India's Most Valuable Companies by Business Today. ITC also ranks
among India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand
Finance and published by the Economic Times.
ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Greeting Cards, Safety Matches and other FMCG products. While ITC
is an outstanding market leader in its traditional businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its
nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting
Cards.
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As one of India's most valuable and respected corporations, ITC is widely perceived to be
dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to
create enduring value for the nation provides the motive force to sustain growing
shareholder value. ITC practices this philosophy by not only driving each of its
businesses towards international competitiveness but by also consciously contributing
to enhancing the competitiveness of the larger value chain of which it is a part."
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 hotelier. Over time, the strategic forays into new
businesses are expected to garner a significant share of these emerging high-growth
markets in India.
ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is
one of the country's biggest foreign exchange earners (US $ 2.8 billion in the last
decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly
enhance its competitiveness by empowering Indian farmers through the power of the
Internet. This transformational strategy, which has already become the subject matter of a
case study at Harvard Business School, is expected to progressively create for ITC a huge
rural distribution infrastructure, significantly enhancing the Company's marketing reach.
ITC's wholly owned Information Technology subsidiary, ITC InfoTech India Limited, is
aggressively pursuing emerging opportunities in providing end-to-end IT solutions,
including e-enabled services and business process outsourcing.
ITC's production facilities and hotels have won numerous national and international
awards for quality, productivity, safety and environment management systems. ITC was
the first company in India to voluntarily seek a corporate governance rating.
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ITC employs over 21,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalizing
environment to consistently reward more than 3,95,000 shareholders, fulfill the
aspirations of its stakeholders and meet societal expectations. This over-arching vision of
the company is expressively captured in its corporate positioning statement:
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Objective
The primary objective of this study is to systematically explore the determinants
responsible for the competitive advantage of ITC Limited and how ITC developed new
product lines in its foods business drawing on its competencies in brand-building, R&D,
packaging, and distribution. However, market analysts were not sure whether ITC would
achieve success in all the food categories that it had entered.
• Why people are buying the products.
• What all the things which influences them to buy
• To understand how ITC has diversified themselves to a multi-product corporation
from a single product company
Research Methodology
The researcher has used secondary data, magazines, internet, books, some market survey
using marketing tools like asking question through phone, personal interview etc.
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Profile
ITC in FMCG
Cigarettes
ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it
has a leadership position in every segment of the market. It's highly popular portfolio of
brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut,
Scissors, Capstan, Berkeley, Bristol and Flake.
The Company has been able to build on its leadership position because of its single
minded focus on value creation for the consumer through significant investments in
product design, innovation, manufacturing technology, quality, marketing and
distribution.
All initiatives are therefore worked upon with the intent to fortify market standing in the
long term. This in turns aids in designing products which are contemporary and relevant
to the changing attitudes and evolving socio economic profile of the country. This
strategic focus on the consumer has paid ITC handsome dividends.
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Foods
ITC made its entry into the branded & packaged Foods business in August 2001 with the
launch of the Kitchens of India brand. A more broad-based entry has been made since
June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments.
The Foods business is today represented in 4 categories in the market. These are:
* Ready To Eat Foods
* Staples
* Confectionery
* Snack Foods
In order to assure consumers of the highest standards of food safety and hygiene, ITC is
engaged in assisting outsourced manufacturers in implementing world-class hygiene
standards through HACCP certification. The unwavering commitment to internationally
benchmarked quality standards enabled ITC to rapidly gain market standing in all its 6
brands:
* Kitchens of India
* Aashirvaad
* Sunfeast
* mint-o
* Candyman
* Bingo!
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Lifestyle Retailing
ITC’s Lifestyle Retailing Business Division has established a nationwide retailing
presence through its Wills Lifestyle chain of exclusive specialty stores. Wills Lifestyle,
the fashion destination, offers a tempting choice of Wills Classic work wear, Wills Sport
relaxed wear, Wills Clublife evening wear, fashion accessories and Essenza Di Wills – an
exclusive range of fine fragrances and bath & body care products and Fiama Di Wills - a
range of premium shampoos and shower gels. Wills Lifestyle has also introduced Wills
Signature designer wear, designed by the leading designers of the country.
Wills Classic work wear was launched in November 2002, providing the premium
consumer a distinct product offering and a unique brand positioning.
ITC forayed into the youth fashion segment with the launch of John Players in
December 2002 and John Players is committed to be the No. 1 fashion brand for the
youth.
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Education & Stationary products
ITC made its entry into the stationery business in 2002 with its premium range of
notebooks, followed in the year 2003 with the more popular range to augment its
offering.
ITC's stationery Brands are marketed as "Classmate" and "Paperkraft", with Classmate
addressing the needs of school goers and Paperkraft targeted towards college students and
executives.
Agarbattis
As part of ITC's business strategy of creating multiple drivers of growth in the FMCG
sector, the Company commenced marketing Agarbattis (incense sticks) sourced from
small-scale and cottage units in 2003.
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Hotels
ITC entered the hotels business in 1975 with the acquisition of a hotel in Chennai, which
was then rechristened ITC Chola. Since then the ITC-Welcomgroup brand has become
synonymous with Indian hospitality. With over 90 hotels in 77 destinations.
Packaging
ITC's Packaging & Printing Business is the country's largest convertor of paperboard
into packaging. It converts over 50,000 tonnes of paper and paperboard per annum into a
variety of value-added packaging solutions for the food & beverage, personal products,
cigarette, liquor, cellular phone and IT packaging industries. It has also entered the
Flexibles and Corrugated Cartons business.
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Agri Business
e-Choupal
The unique e-Choupal model creates a significant two-way multi-dimensional channel
which can efficiently carry products and services into and out of rural India, while
recovering the associated costs through agri-sourcing led efficiencies. This initiative now
comprises about 6500 installations covering nearly 40,000 villages and serving over 4
million farmers.
Leaf Tobacco
ITC is the largest buyer, processor and exporter of leaf tobaccos in India - creating a
global benchmark as the single largest integrated source of quality tobaccos. Serving
customers in 50 countries across more than 70 destinations, ITC co-creates and delivers
value at every stage of the leaf tobacco value chain.
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Information Technology
ITC Infotech offers IT services and solutions across five key industry verticals: Banking,
Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG) & Retail,
Manufacturing & Engineering Services, Travel, Hospitality & Transportation and Media
& Entertainment.
ITC Infotech, a global IT services company, is today one of India’s fastest growing IT
services and solutions providers.
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Initiatives taken - Let’s put India first
ITC is committed to a national agenda of raising agricultural productivity and making the
rural economy more socially inclusive. ITC believes that the urgency and scale of these
tasks make market linked solutions and innovations more effective and sustainable than
capital intensive approaches.
Social & farm Forestry
ITC has helped to bring nearly 13,000 hectares of wasteland under social forestry
benefiting more than 16,000 poor households in 466 villages.
ITC’s social forestry programme simultaneously addresses the livelihood problems of
marginal farmers and the ecological imperative of regenerating biomass and nurturing
depleted soils.
Watershed Development
ITC’s watershed initiatives have led to an improvement in soil and moisture regimes –
there is more land under irrigation, water tables have risen and farmers can harvest more
than one crop, making it possible to live off the land round the year.
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Agricultural Development
ITC offers facilitation to farmers to form agri-business societies, pool knowledge and
resources, improve productivity and quality, and reach out beyond local markets to sell at
better margins.
Women Empowerment
The confidence and skills generated among women by forming credit groups and
managing businesses become assets to their communities.
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Livestock Development
The milk marketing co-operatives represent exemplary change in rural enterprise, away
from dependence on agriculture and local markets.
Primary Education
School going becomes an empowering process for the child and the community. The
awareness of entitlements like education and health grows, along with a sense of the
community’s responsibility.
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Findings & Analysis
Analysis of marketing activities
The Product Mix of ITC
ITC had launched nearly all the products range off Non tobacco Products; they are very
aggressive in their distribution of such products. The existing network of ITC’s
Cigarettes distribution is being used extensively for the sales all products of ITC Food
division. They are trying to capitalized the market by associating the products with the
ITC brand.
ITC Ltd.
FMCG-Cigarettes
FMCG-Others
Hotels
Agri Business
Paperboards &
Packaging
Infotech
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ITC Pricing strategy:
The pricing of the ITC food division depends upon the Customers’ demand schedule, the
cost function and the competitors’ price. The pricing of the company is such that it caters
to the need of all income groups of people but special provision has been kept for Low
and middle income group, and their pricing are competitive with respect to other players
like Britannia, Parle and Briskfarm.
The company follows the Going rate pricing that is the price of the product depends upon
the competitors price. The firm chooses pricing more or less the same as Market leader.
ITC Promotional activities
A particular budget is allocated for the promotion of the products, the local promotion
scheme is decided by the Area Sales Manages, it give its suggestion to the District office
and that is forwarded to the Head Quarter in Kolkata.
In another promotional scheme for Biscuits a particular number of cases is given freely to
the distributors according to the amount of sale they make, this was a drop down
promotion i.e. of the number of free cases that a particular distributors gets, off them a
certain part is reserved for the retailers and customer if they buy a certain level of biscuit
quantity.
ITC Distribution
Buoyed by a strong distribution network ITC is likely to retain its market share in the
cigarettes business; the ban on advertisements is likely to work in favour of ITC thanks to
the recall factor.
The company's reliable distribution network also ensures superior inventory turnover
than its peers.
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BCG Matrix
Star
• Agri Business
• Hotels
• Paperboards & Packaging
Question mark
• FMCG
o Foods
Cash Cow
• FMCG
o Cigarettes
Dog
• ITC Infotech
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Consumer Buying Decision
The main driver in attracting the consumers is Quality of the product itself with nearly
65% of the people surveyed citing it as the main criterion for choosing the product,
followed by past experience of the consumer with the brand (17.6%). Price was third
criterion with a percentage of 11.7% of the people surveyed gave importance during
buying.
An effective advertisement will attract more and more customer to buy, helps in the
brand and image formation, and informative in telling the USP of the product.
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The above graph shows the experience of the customer after using the product i.e.
whether they were satisfied with the product as a whole. The higher the satisfaction level
higher will be the chances that the customer will buy the same brand again and again that
leads to the building of the Brand loyalty.
The Availability of the Product itself determine the effectiveness and the penetration of
the distribution channel of that particular brand among the people.
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Analysis on Diversification
ITC has been a leader in the tobacco business, but it realize from the up coming trends
that remaining with a single business is not a noble thought, moreover the company was
threatened of the anti-tobacco campaign. Therefore the company decided to venture into
InfoTech with ITC InfoTech, foods via Kitchens of India, greeting cards through
Expressions and lifestyle retailing through Wills Sport. Each of these is intended to draw
revenues of at least Rs. 250 crore by 2005.
ITC was a cash rich company with a liquidity of Rs.8816 million in the cigarette
business, even though the company understood the need and usefulness of diversification.
The writer in the article is mainly concerned with the way ITC spreads its wings in the
lifestyle segments, he writes:” forty-five stores in 34 cities in just under a year, selling an
expensive fashion brand of relaxed-wear. If retail swamp-out and brand salience were the
goals, ITC’s Wills Sport would be on a victory lap already.”
The company has started its retail stores not only in Indian metros but also in the small
towns like Ranchi, Jabalpur, Gwalior, Belguam, Ernakulam etc. the article also talks
about the strong market campaign done by the company, it also describe how the
company has used its brand image to attract the Indian youth. It also tells about the
strategy adopted by the company to differentiate itself in this segment, like the company
is outsourcing its designs form the American Design Intelligence Group (ADIG), a San
Francisco, US-based garment and retail consultancy. Now it has its own six-member
team, even as it continues a tie-up with Science & Designs, an Italian fashion design
house – through which it keeps a watch on hot western labels such as Banana Republic
and Armani Exchange.
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Financial Analysis of ITC Ltd.
In the quarter ended June, 07, ITC’s net profit grew 20% to Rs.782.87 million and net
sales rose up 17% to Rs.3325.23 million. This profit growth was primarily driven by its
cigarette business because of high margin and agribusiness, but its top line growth mainly
comes from non tobacco business and agro business. ITC is facing pressure on its
consolidating operating margin due to continued losses by its non- cigarette FMCG
business and decline in the profitability for paper and paper board business. Higher
advertising expanses, which grew 35% in FY07 and freight cost, which were up 31% last
year, have also affected the margins. Going forward, the focus will be on the performance
of its non tobacco FMCG business, which has begin to show sign of turning around.
ITC’s top line and bottom-line growth is likely to be marginally affected looking at its
aggressive investment in hotel and other FMCG business. Its recent foray in to home and
personal care also need immediate investment.
At the current market price of Rs.180, the stock is valued at around 20.5 times its FY08
estimated earning per share of Rs.9. this is significantly lower than its historical price to
earnings multiple of around 25 and also lower than its peers in FMCG sectors. This
provides 20-25% upside over the next 12-18 months.
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SWOT Analysis of ITC Ltd.
Strengths
• Brand
• Distribution Network
• Management
Weaknesses
• Dependence on Tobacco Revenues
• Negative connection of Tobacco
Opportunities
• Rural market
• e-Choupal
• Low Per capita consumption of
personal care products
Threats
• Competition both domestic and
international
• Increasing tax on cigarettes.
Market stand of ITC Ltd.
Segment Dominance Revenue % PBIT %
Cigarettes 70% share 77 87
Paperboard &
Packaging
Packaging board –
No. 1 in Asia
7 10
Agri – Business One of the largest
exporters from India
7 4
Hotels ITC Group ranks
No. 2
4 5
FMCG (Others) 20% share of
greeting cards
market,
‘Aashrivaad’ atta is
No.1 in branded
Segment
4 (7)
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FUTURE PLANS OF THE COMPANY
Today, the Aashirvaad brand stands for atta and salt and is expected to add suji, spices
and rice in the staples segment. In the ready-to-eat segment, Aashirvaad has been
expanding the range and the latest offering includes its combo packs of rice and gravies.
Besides, an all-purpose curry paste has also been included in the range. To make a
success of any foods business, apart from understanding the palate, it would be
procurement and sourcing which have to deliver on two fronts: mainly that of quality and
efficiency.
As for its ready to eat category Kitchens of India (KOI), the company’s strategy is to
expand the KOI product porfolio. In this category, the company plans to introduce new
products to meet the evolving needs of consumers. This premium brand is targeted at
tourists, consumers who order at home, NRIs and women in the age group 25 plus.
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Recommendations
According to the survey conducted and after analyzing the Price, Promotion, Place and
Product of the ITC and the consumer behavior in the market the company can implement
the following measure for increasing the sales and volume of their products.
• Advertisement for the Aashirvaad atta is found to be ineffective and infrequent. So,
the company can come up with an aggressive advertisement to attract the Indian
housewife as they are found to be the decision maker in the buying of Atta.
• The company can come up the concept of forming a Retail chain of Food products
across all over India as it is follows the marketing strategy of Umbrella branding.
In such retail chains all the food division products can be sold at the discounted
rate, as more and more products are coming under the Umbrella products like
food processing.
• The branded atta can be exported to other countries where we are currently
exporting the whole wheat.
• The company can approach the government or distributing their products in
Military canteens and can sell them to organization that provides the afternoon
meals to the children as a part of mid-day meal scheme.
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Limitations
• Skill set shortage
• Maintaining high quality standards
• Lack of talent pool
• Unable to do primary research
• Confidentiality
• Enhanced risk management
• Time constraint
