a study on critical success factors of itc ltd
TRANSCRIPT
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PDCS MINOR PROJECT
A Study On Critical Success Factors Of ITC Ltd.
SUBMITTED IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF BACHELOR
OF BUSINESS ADMINISTRATION
(BBA)
Submitted to: - Submitted by:-
Ms Anshika Goel Aakash Bhargava
Assistant professor Roll no.06914101710
BBA III (M)(A)
SESSION : 2011 2012
JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
KALKAJI, NEW DELHI
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Acknowledgment
A lot of effort has gone into this training report. My thanks are due to many
people with whom I have been closely associated. .
I would like all those who have contributed in completing this project. First of all, I
would like to send my sincere thanks to Ms. Anshika Goel for her helpful hand in
the completion of my project.
I would like to thank my entire beloved family & friends for providing me monetary
as well as non monetary support, as and when required, without which this
project would not have completed on time. Their trust and patience is now
coming out in form of this thesis.
Mr. Aakash Bhargava
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Executive Summary In ITCs branded packaged foods business, the company has created a new
epicenter of rapid growth by blending its time tested key competencies and
organizational strengths.ITCs portfolio, currently consisting of 45 value added
products, appeals to changing consumer preferences in virtually all categories
staple, confectionery, snack foods and biscuits, and ready to eat meals.
The company is engaged in scaling up the supply chain through distributed and
outsourced manufacturing capacity to service market requirement in the cost
effective manner. Significant investment in brand building activities is also
envisaged in the light of heighten competition. Despite sluggish performance and
pressure on margins in recent times the micro trends in FMCG sector shows
compelling opportunities. Per capita consumption and penetration lines of most
FMCG categories in India are relatively low as compared to other south Asian
countries. Branded atta consumption in India is only 5%. Disposable incomes are
projected to grow rapidly and drive up the demand for consumer and FMCG
Goods.
Gross turnover of the company for the year 2004-05 grew by 13% to Rs. 13350.
Pretax Profit increased by 15.3%. The financial for the year include Rs. 692
crores representing net income from exceptional items. ITC has planned to invest
around Rs.3500 crores in the Atta, confectionery businesses and greeting cards
over the next five years with its prime focus on the food business.
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CERTIFICATE OF COMPLETION
This is to certify that AAKASH BHARGAVA student of JAGANNATH
INTERNATIONAL MANAGEMENT SCHOOL, KALKAJI OF BBA OF THIRD
SEMESTER has completed this Project and prepared this report on A STUDY
ON CRITICAL SUCEES FACTORS OF ITC LTD. under my guidance. The
matter embodied in this project work has not been submitted earlier for the award
of any degree or diploma to the best of my knowledge and belief.
Ms. ANSHIKA GOEL
Assistant Professor
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TABLE OF CONTENTS
Description Page No.
Acknowledgement 2
Executive Summary 3
Certificate Of Completion 4
Introduction 6
Company Background 7
Culture 11
ITCs Core Values 12 Research Methodology 46
Findings & Analysis 48
Critical Success Factors Of ITC 74
Conclusion 80
Bibliography 81
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INTRODUCTION
Over the years, ITC has evolved from a single product company to a multi-
business corporation. Its businesses are spread over a wide spectrum, ranging
from cigarettes and tobacco to hotels, packaging, paper and paperboards and
international commodities trading. Each of these businesses is vastly different
from the others in its type, the state of its evolution and the basic nature of its
activity, all of which influence the choice of the form of governance. The
challenge of governance for ITC therefore lies in fashioning a model that
addresses the uniqueness of each of its businesses and yet strengthens the
unity of purpose of the Company as a whole. Globalization will not only
significantly heighten business risks, but will also compel Indian companies to
adopt international norms of transparency and good governance. ITC's
governance policy recognizes the challenge of this new business reality in India.
ITC is one of India's biggest and best-known private sector companies. In fact it
is one of the World's most high profile consumer operations. This SWOT analysis
is about ITC. Its businesses and brands are focused almost entirely on the Indian
markets, and despite being most well-known for its tobacco brands such as Gold
Flake, the business is now diversifying into new FMCG (Fast Moving Consumer
Goods) brands in a number of market sector including cigarettes, hotels, paper,
agriculture, packaged foods and confectionary, branded apparel, personal care,
greetings cards, Information Technology, safety matches, incense sticks and
stationery.
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Company Background
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 endeavours 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:
ITC was established on August 24, 1910 as the Imperial Tobacco
Company of India Limited in Kolkata. Initially, the company was involved in
the trading of imported cigarettes.
In 1925, in a backward integration move, the company started a
packaging and printing business.
The name of the company was changed to India Tobacco Company
Limited (I.T.C. Ltd.) in 1974.
In 1975, I.T.C. Ltd., through ITC-Welcome group, tied up with the US-
based Sheraton Corporation to enter the hospitality industry. It acquired its
first hotel in Madras (later renamed Chennai) in Tamil Nadu and called it
the Welcome group Chola Sheraton.
I.T.C. Ltd established ITC Bhadrachalam Paperboards Ltd. (IBPL) in 1975.
The company started production at its integrated pulp and paper/board
manufacturing facility at Bhadrachalam, Andhra Pradesh, in 1979.
In 1990, I.T.C. Ltd. set up an International Business Division (IBD) for
export of agricommodities.
I.T.C. started a greeting cards business under the brand name
Expressions in the year 2000.
In the same year, I.T.C. also entered the fashion retailing business by
extending its well known cigarette brand Wills. The retail outlets were
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called Wills Lifestyle and offered premium leisure wear for men and
women under the Wills Sport brand.
In September 2001, the company was renamed ITC Ltd (without full stops,
and with no meaning attributed to the alphabets).
In 2001, ITC made an entry into the foods business.
In 2002, the company launched another clothing brand, John Players,
which targeted the urban youth.
In 2004, ITC was one of eight Indian companies to make it to the Forbes
A List8 which featured 400 of the worlds best big companies.
In Oct 2005, ITC has launched an exclusive line of prestige fine
fragrances and personal care products under the Essenza Di Wills brand.
In late 2007, ITC launched Fiama Di Wills soaps and shampoos following
the success of Essenza Di Wills.
In Dec 2007 ITC launches ECF (Elemental Chlorine Free). ITC is the first
and only Company in India using the ECF technology.
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PRODUCTS
CULTURE
ITC's Vision
Sustain ITC's position as one of India's most valuable corporations
through world-class performance.
Create growing value for the Indian economy and the Company's
stakeholders.
ITC's Mission
To enhance the wealth generating capability of the enterprise in a
globalizing environment
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Deliver superior and sustainable stakeholder value.
ITC's Core Values
ITC's Corporate Governance initiative is based on two core principles. These are:
Management must have the executive freedom to drive the enterprise forward
without undue restraints; and
i. This freedom of management should be exercised within a framework of
effective accountability.
ITC believes that any meaningful policy on Corporate Governance must
provide empowerment to the executive management of the Company, and
simultaneously create a mechanism of checks and balances which
ensures that the decision making powers vested in the executive
management is not only not misused, but is used with care and
responsibility to meet stakeholder aspirations and societal expectations.
Cornerstones
From the above definition and core principles of Corporate Governance emerge
the cornerstones of ITC's governance philosophy, namely trusteeship,
transparency, empowerment and accountability, control and ethical corporate
citizenship. ITC believes that the practice of each of these leads to the creation of
the right corporate culture in which the company is managed in a manner that
fulfils the purpose of Corporate Governance.
Trusteeship:
ITC believes that large corporations like itself have both a social and economic
purpose. They represent a coalition of interests, namely those of the
shareholders, other providers of capital, business associates and employees.
This belief therefore casts a responsibility of trusteeship on the Company's Board
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of Directors. They are to act as trustees to protect and enhance shareholder
value, as well as to ensure that the Company fulfils its obligations and
responsibilities to its other stakeholders. Inherent in the concept of trusteeship is
the responsibility to ensure equity, namely, that the rights of all shareholders,
large or small, are protected.
Transparency:
ITC believes that transparency means explaining Company's policies and actions
to those to whom it has responsibilities. Therefore transparency must lead to
maximum appropriate disclosures without jeopardising the Company's strategic
interests. Internally, transparency means openness in Company's relationship
with its employees, as well as the conduct of its business in a manner that will
bear scrutiny. We believe transparency enhances accountability.
Empowerment and Accountability:
Empowerment is an essential concomitant of ITC's first core principle of
governance that management must have the freedom to drive the enterprise
forward. ITC believes that empowerment is a process of actualising the potential
of its employees. Empowerment unleashes creativity and innovation throughout
the organisation by truly vesting decision-making powers at the most appropriate
levels in the organisational hierarchy.
ITC believes that the Board of Directors are accountable to the shareholders, and
the management is accountable to the Board of Directors. We believe that
empowerment, combined with accountability, provides an impetus to
performance and improves effectiveness, thereby enhancing shareholder value.
Control:
ITC believes that control is a necessary concomitant of its second core principle
of governance that the freedom of management should be exercised within a
framework of appropriate checks and balances. Control should prevent misuse of
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power, facilitate timely management response to change, and ensure that
business risks are pre-emptively and effectively managed.
ITCs Philosophy
ITC believes in practicing ethical behaviour among the corporate citizen. The
company follows an HR policy that is regulated by Teamwork, Trust,
Collaboration, Mutuality, Meritocracy, Objectivity, Collaboration, Self-respect and
Human-dignity. It is also deeply committed to make the company a gender
friendly place for each individual while also ensuring enhancement of equal
opportunities for men and women, preventing sexual harassment of any form and
the adherence to good employment practices. It is ensured that the interest of the
company is foremost and in this context acceptance of any kind of gifts or
payments from suppliers or customers is viewed as a serious breach of company
discipline. And such acts are also considered as damaging to the reputation of
the company.
High standards of housekeeping and hygiene are followed to ensure excellent
physical working conditions. It is understood that all the directors, senior
management and employees shall conduct themselves in an honest manner and
avoid any conflict of interest.
The top officials and employees of ITC believe that ITC provides them freedom at
work and resources to experiment. Employees take pride in working for ITC for
its work culture, environment, and the way people are treated. They are
consulted before a new project\system is introduced and their concerns and
suggestions addressed. ITC also gives a lot of input to develop their skill and
career. They give utmost importance to equal opportunities, better work
environment.
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Structure
ITC has a three-tier management structure
At the top are Chairman and Board of Directors, who are responsible for the
strategic supervision of ITC, its wholly owned subsidiaries and their wholly owned
subsidiaries. The ITC board is a balanced board comprising Executive and Non-
Executive Directors. The Board ensures that the Company has clear goals
relating to shareholder value and its growth. It sets strategic goals and seeks
accountability for their fulfilment. There are four board committees, namely, the
Audit Committee, the Nominations Committee, the Compensation Committee
and the Investor Services Committee.
At the second level is the Corporate Management Committee, which is
responsible for the strategic management of the company's businesses within
Board-approved direction/framework. It comprises all the Executive Directors and
three or four key senior members of management.
Third level consists of divisional CEOs of each business assisted by their own
divisional management committees. Corporate Functions of the Executive
Management Team includes Planning and Treasury, Accounting, Legal,
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Secretarial, Human Resources, Communications, Internal Audit and Information
Technology.
Formal 3-tiered governance structure
The companys organizational structure and governance processes are designed
to support effective management of multiple businesses while retaining focus on
each of them." This three-tier governance structure ensures that:
For and on behalf of the shareholders the company believes in incorporating
strategic governance in its work culture so as to ensure that despite being free
from involvement in the task of strategic management of the Company, it can be
conducted by the Board with objectivity, thereby sharpening and ensuring
accountability of management;
With mundane tasks of everyday executive management being delegated the
management remains focused on issues of immediate importance;
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The Executive management of the individual businesses that are free of handling
strategic management responsibilities of ITC as a whole is then able to
channelize their energies and time in enhancing the effectiveness and overall
growth of their individual units.
Corporate Governance as defined by ITC is a systemic process by which
companies are directed and controlled to enhance their wealth-generating
capacity. A company employs vast sums of societal resources during this
process of wealth generation. ITC is of the firm belief that the governance
process being followed should ensure that these resources are used optimally to
meet the aspirations of its stakeholders and society. This is further reflected in
the deep commitment of the company to contribute to the Triple Bottom Line,
which is the development of the nations economic, ecological and social
resources.
The company believes in empowering the executive management. But corporate
governance ensures a system of checks and balances to ensure that these
powers that are bestowed upon the executive management are used in a
responsible manner so as to meet shareholder and societal expectations. The
core strengths of ITC's governance philosophy are trusteeship, transparency,
empowerment and accountability, control and ethical corporate citizenship. The
practice of each of these creates the right corporate culture that fulfils the true
purpose of Corporate Governance.
Overall, the structure of ITC has high complexity because of horizontal
differentiation within the organization. The most visible evidence is that of
specialization and departmentation. Complexity also increases because of spatial
differentiation.
The ITC Code of Conduct, as adopted by the Board of Directors, is applicable to
all Directors, senior management and employees of the Company. This Code is
derived from three interlinked fundamental principles, viz. good corporate
governance, good corporate citizenship and exemplary personal conduct. The
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Code covers ITC's commitment to sustainable development, concern for
occupational health, safety and environment, a gender friendly workplace,
transparency and audit ability, legal compliance, and the philosophy of leading by
personal example. Since non-adherence to the code is brought to the attention of
the immediate reporting authority, formalization is also there in ITC.
Decision-making is decentralized, as the company believes in giving executive
freedom to the management to drive the enterprise forward without undue
restraints but this freedom of management should be exercised within a
framework of effective accountability.
DESIGN
Looking at the structure and culture of ITC, we can say that its design is based
more or less on the Divisional Structure. ITC has a diversified presence in
different industries and each of its businesses act as an autonomous unit which
are coordinated by the top level, i.e. the board and corporate management
committee. The divisional managers are responsible for performance and hold
complete strategic and operating decision-making authority. The top
management provides support services to the divisions. It acts as an external
overseer, evaluating and controlling performance. Hence the top management is
free from being concerned with the day-to-day operating details so they can pay
attention to the long term. Big picture, strategic decision making is done at the
top level.
Areas of Diversification
ITC has transformed itself from a leading cigarette manufacturer to an umbrella
group that offers a diversified product mix to enhance its brand image and reduce
dependency on tobacco related products. It has forayed into the hospitality
service industry and has become a major player in the hotels segment. Its
position in the FMCG (fast moving consumer goods) business is also on a growth
curve; especially its confectionery and biscuits which are slated to achieve the
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top ranks among its peers. It has made heavy investments to strengthen its IT
(information technology) segment and to compete with the big players like
Infosys and Wipro. Although the ITC group is marketing its image as an ideal
corporate citizen and a company that takes its social responsibility seriously, it
still earns 80% of revenues from selling cigarettes and other tobacco related
products.
The major areas in which ITC has diversified are:
FMCG
Cigarettes
Food
Lifestyle Retailing
Greetings and stationery
Safety Matches
Incense sticks
Hotels
Paperboards and Packaging
Paperboards and specialty papers
packaging
Agri-Business
Agri- exports
E-choupal
Information Technology
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BCG MATRIX
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Restructuring and Rationalizing
STRATEGIC FOCUS
ITC in FMCG Sector
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
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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.
ITC's pursuit of international competitiveness is reflected in its initiatives in the
overseas markets. In the extremely competitive US market, ITC offers high-
quality, value-priced cigarettes and Roll-your-own solutions. In West Asia, ITC
has become a key player in the GCC markets through growing volumes of its
brands.
ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru,
Munger, Saharanpur and Kolkata. These factories are known for their high levels
of quality, contemporary technology and work environment.
Cigarettes Business
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
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been made since June 2002 with brand launches in the Confectionery, Staples
and Snack Foods segments.
For ITC, the packaged foods is an ideal business to utilize ITC's proven strengths
in the areas of hospitality, branded cuisine, contemporary packaging and
sourcing of agricultural commodities. ITC's world famous restaurants like the
Bukhara and the Dum Pukht, nurtured by the Company's Hotels business,
demonstrate that ITC has a deep understanding of the Indian taste and the
expertise required to translate this knowledge into delightful dining experiences
for the consumers. ITC has stood for quality products for over 98 years to the
Indian consumer and several of its brands are today internationally benchmarked
for quality.
All products of ITC's Foods business available in the market today have been
crafted based on consumer insights developed through extensive market
research. Apart from the current portfolio of products, several new and innovative
products are under development in ITC's state-of-the-art Product Development
facility located at Bengaluru.
ITC has over the last 98 years established a very close business relationship with
the farming community in India and is currently in the process of enhancing the
Indian farmer's ability to link to global markets, through the e-Choupal initiative,
and produce the quality demanded by its customers. This long-standing
relationship is being utilized in sourcing best quality agricultural produce for ITC's
Foods business. The Foods business is today represented in 4 categories in the
market. These are:
1. Ready To Eat Foods
2. Staples
3. Confectionery
4. Snack Foods
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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:
1. Kitchens of India
2. Aashirvaad
3. Sunfeast
4. mint-o
5. Candyman
6. Bingo!
Recently, on Aug 1, 2008, ITC Foods has drawn up plans to extend its Kitchen of
India brand to frozen foods. ITCs Branded Packaged Foods business continues
to expand with sales growing by 23% over the previous year. Apart from the
development costs of new products, the business has had to contend with the
recent economic slowdown and severe cost increases in input commodities
including wheat, vegetable oil, maize and skimmed milk powder, in addition to
the soaring fuel prices.
Having acquired reasonable scale in a relatively short span of time, the business
is progressively focusing on consolidating the portfolio in certain categories,
improving market servicing and driving supply chain efficiencies.
Market and Competition
Indian Foods market is a monopolistic market. There are many competitors in all
the categories and although they all have similar products available at similar
prices, they are trying to prove themselves different through their marketing
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strategies. However, entry to this business is easy and ITC has utilized this fact
very efficiently to their benefit as they entered into the several categories among
this Foods business.
READY TO EAT
ITC entered into the branded and packaged foods business in with the launch of
Kitchens of India brand. In 2004, the company launched KoI brand fruits and
spice conserves and cooking pastes. The fruits and spice conserves, were
developed jointly with Karen Anand, a food expert. Priced at Rs. 70, these were
targeted at the premium segment. The KoI cooking pastes, which were priced at
Rs.30 for a 100g pack, also targeted the high-end market. Multi-purpose cooking
pastes were also launched under the Aashirvaad brand and these were priced at
Rs. 10 for 80g pack. The manufacturing of these products was outsourced to
contract manufacturers for saving the operating cost.
ITC entered the branded spices market in 2005 and the Instant Mix segment in
2006, both under the Aashirvaad Brand. As on April 2006, the total turnover in
the Indian ready-to-eat and ready-to-cook segments was only around Rs. 700
million, but it continued to post an annual growth of 20%. By early 2006, though
ITC had captured a 35% market share in the ready-to-eat segment, MTR was the
clear market leader with close to 60% in market share. ITC exported 40-50% of
KoI brand products (in terms of volumes) to the US, Canada, the UK,
Switzerland, and Australia.
In May 2006, ITC planned to introduce ten more varieties under the KoI brand
within a price range of Rs. 35 to Rs. 98. In 2007, some new products have been
launched under Ready To Eat category like chutneys, curries, conserves,
biryanis (Noor Mahal, Bhori Biryani and some new range of products under
Gharana (Paneer Malai, Keema Mutter). After launching all these products ITC
FOODS is looking to share 50 to 60% of market by 2008-2009.Following are the
major competitors ITC is competing with in Ready to Eat category:
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Brands Description
Gits Gits produces the selected range of popular ready to cook
and instant foods that cover a range of ethnic Indian
cuisine-and where the recipes have "Global pallete
acceptance".
Haldirams Offers packaged Bhel puri chats such as Sev Puri, Chana
Masala,
Samosa, Pakoras, Alu Tikki, Pao Bhaji, Gol Gappa, Dhokla
among
others
Ethnic
Kitchens
Offers packaged sweets, syrups, namkeens, cookies,
pickels, aloo masala, bhujia,bhelpuri,Chana Dal,Kajui
Ladoo and many more items.
MTR MTR foods currently comprises of twenty-two
delicious
and completely authentic Indian curries,gravies and
rice.
Priya
Foods
Priya has a range of popular traditional recipes starting
from Dal Makhani,Navratana Korma to Palak
Paneer,Paneer Butter Masala,Punjabi Chhole and
Rajma Masala along with true southern delicacies
Andhara Veg.,Mango Dal and Gongura Dal.
CONFECTIONERY
Confectionary market in India is about Rs.2500 crore. It is loosely divided into
seven categories:
1. Hard boiled candies
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2. Toffies
3. Eclairs
4. Chewing gum
5. Bubble gum
6. Mints
7. lozenges
ITC has currently in market with its two brands Mint-o and Candyman. ITCs
Mint-O fresh secured a 17% share of Indian cough lozenges market ahead of
former leader Perfetti which only achieved 14.3% with chloromint. The Indian
giant marked the confectionary sector in 2002 and has only two brands mint-o
fresh and Candyman. But in overall confectionary market they are lagging
behind having just 3% market share as compared to market leader Perfetti with
more than 37% market and providing larger number of brands.
Perfetti van melle ITC Ltd. Nestle Cadbury
Alpenliebe
Alpenliebe Creamfills
Alpenliebe Lollipop
Big Babol
Center Fresh
Center Fruit
Center Shock
Chatar Patar
Chlor-mint
Chocotella
Cofitos
Fruittella
Happydent White
Protex Happydent
Marbels
Mentos
Chocoliebe
Candyman
Minto
. Kit Kat . Kit
Kat Lite . Milky
Bar . Munch .
Milk Chocolate
. Fun Bar . Polo
. Polo Power
mint . Munch
Pop Choc .
clairs
Bubbaloo
Dairymilk
Eclairs
% Star
Gems
Perk
Halls
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STAPLES
ITC entered the staples market in 2002 with wheat flour under the Aashirvaad
brand. In 2003, ITC extended the Aashirvaad brand to edible salt. By early 2006,
ITC had a 40% market share in the Rs. 6 billion packaged flour business. Its
closest competitor HLLs Annapurna brand was trailing behind with a market
share of 18%. The market was growing at 12%. Under its Aashirvad brand ITC
FOODS also launched salt, mixers, ready to cook pastes. In the Rs. 4 billion
organized salt market (as of 2006), Tata Salt was the market leader with a 28%
market share. ITC had only a 5% share of the market. Other players in this
business are HLL (Knorr Annapurna), Nirma (Shudh), Marico Industries (Saffola),
etc.
BISCUITS
Indian biscuit market is estimated to be around 5000 crore. Biscuit industry in
India in the organized sector produces around 60% of the total production, the
balance 40% being contributed by the unorganized bakeries. ITC with its
premium product, SUNFEAST, is acquiring a big share of market. Within few
years, they are able to get 12% share of the market.
Britannia ITC Ltd (Sunfeast) Parle Priyagold
Tiger
Nutrichoice Junior
Good Day,
50 50,
Treat
Pure Magic,
Milk Bikis
Good Morning.
Marie
Dream cream
Milky Magic
Fit kit
Choco Nut
Butter Nut
Parle-g
Krack-Jack
Monaco
Kreams
Hide and Seek
Milk Shakti
Butter Bite
Classic Cream
Butter Lite
Big Boss
Marie Lite
Magic Gold
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SNACKS
Snacks industry overview
Snacks industry in India is worth 1800 Crores of Rs. and growing at 10% is one
of the largest markets in the world, out of which potato chips holds the major
market share of around 85%.
Product Price
(ITC Ltd)
Product Price
(Frito Lay)
Product Price
(Haldiram)
Bingo
Rs. 5
Rs. 10
Rs. 20
Lays
Rs. 5
Rs. 10
Rs. 20
Lehar
Namkeen
Rs. 5
Rs. 20
Kurkure
Rs. 5
Rs. 10
Rs. 20
Namkeen
Rs. 5
Rs. 10
Rs. 20
The foods business is expanding rapidly with sales growth of 35% in the year
2007. This range of product includes more than 150 different products. The
growth of this sector in terms of product categorization is as follows.
Sales in biscuits category grew by 55%.
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Sales in staples category grew by 52%
Sales in confectionary grew by 51%.
Sales in RTE grew by 35%
ITC Food is looking to expand its RTE category to maximize its profit.
ITCS NEW CHALLENGES:
This food industry is the industry with very less profit margins. So low operation
cost is the key. Also, Indian middle class is price sensitive. In this area
international, national and also regional competition is very tough. With that
wheat, petrol and labor cost is increasing day by day. Different types of
restrictions imposed by the government are also playing a vital role in reducing
profit margins. For example, exporting non-vegetarian foods out of India is
restricted. To cover this up, ITC is trying to reduce cost of its biscuits by acquiring
mass production of wheat directly from farmers through its e-chaupal initiatives.
Also in this way ITC is able to reduce the price of its staples. As far as
Confectionary market is concerned, ITC is looking to launch its brand of
chocolate in collaboration with an American company. After analyzing the food
sector, one can say that it is one of the toughest market to compete in as all the
market giants are already there.
GROWTH AND INVESTMENT PLANS:
This food sector is the most promising field and has already overtaken IT and
PHARMACEUTICALS Sector of India. Even Indian Government is looking to
develop this sector. Thats the reason central Government has already passed
several projects for food parks. In this way FDI in this sector is possible. Also
government in its 2006 budget has reduced custom duty from 16% to 8% on
packaged food and also excises duty on instant food mixes. This will help ITC to
be competitive in the market. Recently ITC has started exporting packaged food
from its Bangalore plant. It is also planning to open one more new plant in
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Calcutta for Indian market. They are looking to add several products in their RTE
list which will be exported as well. Also in late 2007 ITC has acquired one
Australian Plant and seed technology industry. Through this they will provide
highly valuable seeds and other solutions to farmers in India, which ultimately will
increase the productivity and cost effectiveness for their staples and biscuits
business.
Its turnover in the foods business was around Rs. 8 billion in 2005-06 which
further increased to Rs. 10.2 billion in year 2006-2007.
ITC has decided to make an investment of 300 crores over a period of 5 years.
ITC Foods has also decided not to make heavy investments in manufacturing
unless volumes pick up. As of today ITC has invested 20 crores in R & D and
planning to invest further 15 crores to produce new products in different
categories.
Thus looking at all the strategy of ITC future investment and planning. The future
investment plan is as follows
Rate of Increase Sales Operating Profits Net Profit/loss
2005 18.07 18.30 37.58
2006 28.16 19.15 2.01
2007 26.34 18.90 20.79
2008 12.76 11.31 15.56
2009(Projected) 21.33 16.92 18.98
Major Strategies Adopted by ITC Foods
Entering the foods business was itself a strategic decision for ITC. While ITCs
core business, tobacco, was under pressure owing to several factors like
government bans on advertising and on smoking in public places, hikes in the
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excise duty for cigarettes, and anti tobacco campaigns, ITC planned to deploy its
surplus in the packaged food business where it saw huge business potential.
Following are some of the strategies that ITC adopted to make its food business
a success:
Entering into less competitive or unexplored markets (Ready to eat,
Staples, Wafers): When ITC entered into the foods business in 2001, it
focused on unleashing the areas where the competition is very less or there is
no competition. It started with packaged ready to eat food and later extended
that to Aashirvaad brand of edible salt and Atta. Recently ITC has announced
its desire to forge in the frozen foods category in the domestic market.
Players in this category are limited and ITC hope to exploit this fact. Also, in
Bingo, although the competition is tough but there is only one player with
whom ITC has to compete i.e. Frito Lay. This strategy has helped ITC to
quickly establish itself in the above mentioned businesses.
Distribution Network: ITC already had a huge distribution network due to its
tobacco business. ITC used this network to distribute their biscuits and
wafers. This not only provided a good launch to their products but also helped
in boosting sales. Today, ITCs Bingo and Sunfeast are available at nearly 1.8
million outlets whereas Parle is available at only 1.5 million outlets.
Market differentiation (Ready to eat, Biscuits): ITC started packaged foods
business with the KoI brand of ready-to cook products. They were positioned
as premium products with target groups including tourists, NRIs, etc. In
Biscuits also, ITC launched differentiated products in each and every
segment. For e.g. it introduced an Orange Marie, a butterscotch cream
biscuit, chilli flakes in a biscuit and even honey flavor under the Sunfeast
brand.
In March 2005, ITC Foods launched Sunfeast Pasta, a whole wheat based
product targeted at children. It was expected to compete with products like
Nestles Maggie noodles. With this strategy ITC built for itself new markets.
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Cost control strategy (all products): When ITC started the foods
division, its main challenge was to compete with the players who were
already there. To overcome this challenge, ITC realized that they have to
offer products at a price which is either equal or less than what the
competitors are offering. To do this, they planned to capitalize by
leveraging the strength of the groups other businesses. ITCs printing and
packaging business provided high-quality, cost-effective, and innovative
packaging. ITC also enjoyed cost advantages over its competitors owing
to its electronic procurement system called e-Choupal. This helped ITC to
compete with the best.
Diversification of products (Biscuits, Wafers, and Ready to Eat): One
of the ITCs successful strategies has been the method of diversifications
among its various products. If we talk just about Bingo, ITC has come up
with 16 flavors in comparison to its competitor Lays of Frito Lay which
has only 4 major flavors. Same is the case with Ready to Eat food
category and Biscuits. This strategy has helped ITC to attract a wide
range of market.
Extensive advertising (Biscuit, confectionary, wafers): Just like a
Bollywood movie needs good publicity to be a super hit, every new
product launched in the market needs to be known to the consumers
before it is launched. Advertising is where ITC made the difference in
comparison to its competitors. They hired the best professionals and the
best ambassadors in the country to make their products famous. This is
evident form the award winning marketing campaign for Bingo and Minto
Fresh. The tagline "Jab Laila ko karna tha impress to majnu ne khayi mint
o fresh" has stood the test of times and is still widely known and
remembered. Hiring the best people from the film industry and sports
(Sharukh Khan and Sachin Tendulkar for Biscuits, Rakhi Sawant for Minto
Fresh) showed ITCs urge to be the best.
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On television, the company booked 10 to 15 spots per channel per day on youth
channels such as MTV and Star World, mass Hindi channels like Zee and Star
TV, and news channels. It also had around 20 spots on a variety of radio
channels and advertised in most leading national dailies. In the top-30 cities, over
1,000 outdoor hoardings advertised the product. According to industry estimates,
ITC spent close to Rs 100 crore on marketing.This kind of promotion of products
helped ITC to make its products known to everyone and now it was not difficult to
attract consumers.
Regular introduction of new products (all products): Having acquired
reasonable scale in a relatively short span of time, ITC realized that, to
remain in the competition it had to introduce new products regularly. ITC
has been expanding its distribution network aggressively and also their
product range. In biscuits and wafers range, it is launching new products
or flavours week after week. Same is the case with Ready to Eat and
Kitchen of India.
Innovation (all products): When the need to introduce new products
arrived, ITC shifted its focus on to the innovation. Also, ITC was innovative
in identifying the market or niche for all its products.
Maintenance of freshness and hygiene (all products): ITC positioned
its wheat flour on the health & hygiene and value for money terms.
Success in the staples business, especially in the branded and packaged
wheat flour business, depended on two factors an effective distribution
network and the quality of the product. Therefore, ITC attempted to ensure
that the supply chain was responsive, and laid emphasis on making
accurate sales forecasts using inputs from distributors, sales personnel
and a well-managed MIS system. To maintain freshness of the product,
the company strove to minimize the transit time by regulating the shippers
to maintain company-specific transit norms. The physical aspects of the
supply chain like warehouses and trucks were closely monitored to
maintain cleanliness.
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From Analyzers to Prospectors (Biscuits): When ITC entered the
biscuits market with Sunfeast in 2003, with three varieties of biscuits -
glucose, marie, and cream, they did what any new player in the market
does, imitating and emulating the leader that was Britannia. Their strategy
was to manufacture those products which are already a success in the
market. But, as ITC got hold of the market, it started to manufacture
flavors which were never heard of. This was the result of ITCs desire to
exploit new product and market opportunities.
All the above strategies and with the help of launch of Bingo in 2007, ITC
finally tasted success in its food business in 2008 when it became a
profitable business for the first time since its launch in 2001 freshness of
the product, the company strove to minimize the transit time by regulating
the shippers to maintain company-specific transit norms. The physical
aspects of the supply chain like warehouses and trucks were closely
monitored to maintain cleanliness.
From Analyzers to Prospectors (Biscuits): When ITC entered the
biscuits market with Sunfeast in 2003, with three varieties of biscuits -
glucose, marie, and cream, they did what any new player in the market
does, imitating and emulating the leader that was Britannia. Their strategy
was to manufacture those products which are already a success in the
market. But, as ITC got hold of the market, it started to manufacture
flavors which were never heard of. This was the result of ITCs desire to
exploit new product and market opportunities.
All the above strategies and with the help of launch of Bingo in 2007, ITC finally
tasted success in its food business in 2008 when it became a profitable business
for the first time since its launch in 2001.
Branded Packaged Foods
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ITC in Hotel Industry
ITC Limited entered the hotels business in 1975 with the acquisition of a hotel in
Chennai, which was rechristened Hotel Chola. Since then the ITC-Welcomgroup
brand has become synonymous with Indian hospitality. Today amongst India's
finest and fastest growing hotel chains, it consists of over 70 hotels across as
many destinations in India. These include super deluxe and five star hotels,
heritage palaces, havelis and resorts and full service budget hotels.
The 440-room ITC Maurya at New Delhi is not only amongst the leading
business hotel in the country, but is in a class by itself. Complete with the 'ITC
One', the hotel has played host to a galaxy of world dignitaries, including Bill
Clinton and Bill Gates. In fact, even as he was leaving the White House, the
former US President nostalgically recalled the memories of a fabulous Indian
meal he and his family had at the Bukhara restaurant in the hotel.
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Bukhara has been declared the Best Indian Restaurant in the world, by 'The
Restaurant Magazine', UK The 386-room ITC Maratha, opened in February
2001, is perceived as amongst the leading and the finest properties in Mumbai,
designed in a grandiose classic style, the hotel pays tribute to Mumbai's colonial
roots and the spirit of the Great Marathas.
In keeping with its plan to have a presence in every major business destination in
India, ITC-Welcomgroup unveiled one of Asia's finest business resort, the 238-
room ITC Sonar in Kolkata on December 31, 2002.
Another landmark hotel - the ITC Grand Central in Parel, Mumbai was formally
inaugurated in January 2005. This five star deluxe property with 242 suites and
rooms offers international standards of service, state of the art amenities and
culinary excellence. ITC Mughal at Agra, a proud recipient of Asia's first Aga
Khan Award for Architecture, is an outstanding resort hotel, lavishly spreading
across 35 acres of beautifully landscaped Mughal gardens. ITC-Welcomgroup
also pioneered a holistic concept of "branded accommodation" in the hospitality
industry. It was the first to launch the powerful idea of a 'Hotel within a Hotel' by
segmenting and branding the hotel services. It created the exclusive 'ITC One',
'The Towers' and the 'Executive Club' each catering to the needs of the global
business traveller with unmatched quality and a range of services.
In 2007, ITC-Welcomgroup entered a new phase in its collaboration with
Starwood Hotels & Resorts. ITC-Welcomgroup now has an exclusive tie-up with
Starwood in bringing its premium brand, the Luxury Collection, to India. The
seven hotels which are part of this collection are: ITC Maurya in Delhi, ITC
Maratha in Mumbai, ITC Sonar in Kolkata, ITC Grand Central in Mumbai, ITC
Windsor in Bengaluru, ITC Kakatiya in Hyderabad and ITC Mughal in Agra. The
agreement also includes the rebranding of WelcomHotel New Delhi as a
Sheraton, while the Chola and the Park in Chennai, and the Rajputana in Jaipur
retain their Sheraton connections. The Welcome Heritage brand brings together
a chain of palaces, forts, havelies and resorts that offer a unique experience.
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Welcom Heritage endeavours to preserve ancient royal homes and the historical
Indian grandeur, opulence of romance, valour and adventure for the future Indian
generations. Welcom Heritage Hotels, provide a fine range of hotel services
inside these architectural legacies present in Rajasthan, Punjab, Himachal
Pradesh, Madhya Pradesh, Uttaranchal, Jammu & Kashmir, West Bengal, Tamil
Nadu, Haryana and Karnataka.
ITC-Welcomgroup was also the first to brand its cuisine. The Bukhara, the
Dakshin and the Dum
Pukht are today powerful cuisine brands, which delight connoisseurs in
restaurants in several ITC Welcomgroup hotels. Others included Dublin, West
View and the Pan Asian. Fortune hotels are a part of the well thought-out growth
strategy that brings out the mid-level business and leisure traveler under the ITC-
Welcomgroup umbrella, offering full service properties without compromising on
quality. With a strong presence at Ahmedabad, Thiruvananthapuram, Calicut,
Darjeeling, Jamshedpur, Vapi, Hyderabad, Gurgaon, Indore, Ootacamund,
Madurai, Jodhpur, Tirupati and Port Blair, it will be shortly commissioning several
more hotels across India.
Hotel Business
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ITC in Agricultural Industry
ITC's International Business Division (IBD) is the country's second largest
exporter of agriproducts with exports of over Rs. 1000 Crores (Rs. 10 billion). Its
domestic sales of agriproducts are in excess of Rs. 1500 Crores (Rs. 15 billion).
It currently focuses on exports of :
Feed Ingredients Soyameal
Foodgrains - Rice (Basmati & Non Basmati), Wheat, Pulses
Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil
Marine Products - Shrimps and Prawns
Processed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic
Fruit Products, Fresh Fruits
Coffee & Spices - Coffee, Black Pepper, Chilly, Turmeric, Ginger, Celery
and other Seed Spices Although one of the relatively younger business
divisions of ITC, it has, in a short span established itself as a first-choice
supply chain partner of several leading international customers. Its major
customers include Cargill, Marubeni, Toepfer, among others, who source
agriculture commodities and food products from India. Its customer
relationship management has enabled it to achieve a very high reputation for
quality, reliability and value added services. ITC's unique strength in this
business is the extensive backward linkages it has established with the
farmers. This networking with the farming community has enabled ITC to
build a highly cost effective procurement system. ITC has made significant
investments in webenabling the Indian farmer. Christened 'e-Choupal', ITC's
web plan for the farmer centres around providing Internet kiosks in villages.
Farmers use this technology infrastructure to access on-line information from
ITC's farmer friendly website. Data accessed by the farmers relate to the
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weather, crop conditions, best practices in farming, ruling international prices and
a host of other relevant information.
Currently, the 'e-Choupal' website - www.echoupal.com - provides information to
farmers across the nine States of Madhya Pradesh, Haryana, Uttaranchal, Uttar
Pradesh, Rajasthan, Karnataka, Maharashtra, Andhra Pradesh and Kerala. ITC
plans to extend the 'e-Choupal' to cover 10 million farmers across 100,000
villages covering 15 Indian states. Following the impressive success of e-
Choupal, the Company unveiled the first 'Choupal Saagar' near Sehore in
Madhya Pradesh in August 2004. Eighteen more 'Choupal Saagars' have
commenced operations in the states of Madhya Pradesh, Maharashtra and Uttar
Pradesh. The 'Choupal Saagar' is a rural hypermarket which provides multiple
services under one roof. It creates a platform for farmers to sell their produce.
Farmers can also buy quality products for their farm and household consumption
from 'Choupal Saagar'. These rural malls also provide farmers the invaluable
additional services of soil testing, banking, insurance, medical facilities and
restaurant. Such mall, in synergistic combination with the e-choupal network,
serves as the core infrastructure to support ITC's rural distribution strategy. Over
the next 7-10 years ITC plans to open over 700 such hypermarkets. The
business is progressing a pilot project for retailing fresh fruits and vegetables.
Three Choupal Fresh Cash & Carry Stores are currently operational at
Hyderabad, Pune & Chandigarh. The Company has set up a complete
warehousing and cold chain infrastructure for ensuring the availability of fresh
products in the market, besides direct linkages with the farmers for sourcing farm
fresh produce.
In Processed Fruits category, ITC exports from HACCP Certified plants to
Western Europe, North
Africa, Mid-East, Japan and North America, a wide range of Processed Fruits
products made from Mango (Alphonso, Kesar & Totapuri), Guava, Papaya, &
Pomegranate for Industrial and Consumer use. ITC is the leading Indian exporter
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of Organic Fruit Products Certified to European (EC 2092/91) & US (NOP)
Standards.
Fresh Table Grapes & Pomegranates are sourced from ITC's EUREPGAP
Certified Farmer groups & retailed through prominent supermarkets like
Sainsbury's & Albert Heijn in Europe , Daiei in Japan.
ITC's countrywide network of procurement teams, handling agents and
contemporary warehousing facilities enable it to source quality merchandise even
at short notice. ITC's processors are handpicked reliable outfits which ensure
hygienic processing and modern packaging. Strictest quality control is exercised
at each stage to preserve the natural flavour, taste and aroma of the various agri-
products.
ITC has been a significant exporter of seafoods from India since 1971. It exports
frozen as well as cooked shrimps and other seafood products to Japan, USA and
Europe. Its well-known brands include Gold Ribbon, Blue Ribbon, Aqua Kings,
Aqua Bay, Aqua Feast and Peninsular. ITC's International Business Division
continues to use innovation as its core strategy to retain its position as the one-
stop shop for sourcing agri-commodities from India.
Other businesses
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ITCs e- choupal
ITCs International Business Division, one of Indias largest exporters of
agricultural commodities, has conceived e-Choupal as a more efficient supply
chain aimed at delivering value to its customers around the world on a
sustainable basis. The e-Choupal model has been specifically designed to tackle
the challenges posed by the unique features of Indian agriculture, characterised
by fragmented farms, weak infrastructure and the involvement of numerous
intermediaries, among others.
e-Choupa also unshackles the potential of Indian farmer who has been trapped
in a vicious cycle of low risk taking ability > low investment > low productivity >
weak market orientation > low value addition > low margin > low risk taking
ability. This made him and Indian agribusiness sector globally uncompetitive,
despite rich & abundant natural resources. Such a market-led business model
can enhance the competitiveness of Indian agriculture and trigger a virtuous
cycle of higher productivity, higher incomes, enlarged capacity for farmer risk
management, larger investments and higher quality and productivity. Further, a
growth in rural incomes will also unleash the latent demand for industrial goods
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so necessary for the continued growth of the Indian economy. This will create
another virtuous cycle propelling the economy into a higher growth trajectory.
Stunted Growth: From Field to Factory
Farmers in Madhya Pradesh made their living in much the same style as their
predecessors 50 years earlier. The process of getting crops to market began with
farmers harvesting the soybeans and loading them onto tractors and bullock
carts. Farms varied in size from under five acres for a small farmer to greater
than 12 acres for a large farmer. An average farmer, with about nine acres of
farmland, could expect an annual net income of approximately Rs. 20,000 ($443)
from soybeans and wheat together. After the harvest, farmers hauled their loads
of produce 30-50 kilometers to the closest mandi and then waited for the crop to
be auctioned. The auction began when a government-appointed bidder valued
the produce and set the initial bid. From here, government-licensed buyers called
commission agents (CAs) bid upwards until the crop was sold.
ITC contracted with a specific CA in each mandi to bid on behalf of the company.
Prices were authorized by ITCs office in Bhopal, MP. Here ITC employed a team
of traders who followed the global market. Although the CA knew what price ITC
would pay, nothing prevented him from buying from the farmer at a much lower
price, selling to ITC at market price, and pocketing the difference.
Once a CA won an auction, the farmer brought his tractor to that CAs shop in the
mandi and waited for the produce to be weighed on a manually operated balance
scale that accommodated only small increments of the lot. The actual weight of
the crop was often manipulated at this point because of the inaccuracy of the
crude beam scales. For example, if the farmer brought 20 quintals of loose
soybeans to the mandi, he could expect to lose about 10 kilograms total during
the transactions, or 0.5% of his original lot. This translated to a loss of about 100
Rs. ($2.22) per lot. After the weighing process, the product was bagged and the
farmer was paid. According to the law, CAs were supposed to pay the farmer
immediately, but, in smaller mandis, farmers were often paid after an unofficial
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credit period. The CA would simply tell the farmer to return after a few days for
the money.
On any given day, at least 1,000 farmers could be found trying to file into the
market to sell their produce. Some had to wait for two or three days just to get
into the crowded marketplace. Once inside the mandi, the farmer was faced with
further challenges of the chaos and pressure that characterized the market yard.
The Bhopal mandi, hosting an average of 1,700 farmers a day and the sole
destination for farmers in Dahod, was a dusty yard with a perimeter of booths
belonging to the various CAs. It teemed with adolescent boys who ran through
the crowd, kicking up dust and eating beans off the farmers carts. Laughing,
joking men loitered and watched the auctioneers.
Farmers suffered as a result of the time it took to sell produce in the mandi, for
they were dependent on timely cash flow for subsistence. Thus, when harvest
time arrived, they all descended upon the mandi at once. The crop had to go to
market immediately, and, more importantly, it had to be sold. Farmers were stuck
in the position of not being able to turn down a CAs offer; in many cases it had
taken him all day to reach the mandi from his village, and to return with a full cart
of unsold produce would be a waste of time and money. Farmers rarely had
access to adequate storage facilities in which to hold the crop if it was not sold. If
a farmer were able to store the soybeans, and sell before or after harvest,
without the time pressures associated with a perishable product, he would have
more leverage over their value. This was impossible, however, under the
prevailing system, where the farmer did not have other options.
Once a transaction had taken place, the CA brought the produce to an ITC
processing facility. There, ITC paid him for the cost of the soybeans. This was
effectively a reimbursement, since the CA had paid the farmer in the mandi from
his own resources at the time of the sale.
The farmers isolation from one another and lack of telecommunications meant
they had no way of knowing ahead of time what price would be offered the day
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they arrived at the mandi other than word of mouth. As a result, price discovery
occurred only at the end of their growing and selling process.
Knowledge shared and captured in the traditional choupal could be
extraordinarily useful to farmers, but it had traditionally been limited to verbal
communication. In the absence of telecommunications, and even electricity in
some places, news from the closest city could take days to reach an outlying
farming village.
The uncertainty surrounding cash flow prevented the farmers from creating a
sound financial base; instead, they had become locked into subsistence living.
Prices of Indian soybeans generally followed the agriculture futures market on
the Chicago Board of Trade and the Kuala Lumpur Commodity Exchange.
Given the volatility of the spot market, and the fact that the value of agricultural
commodities was based on largely uncontrollable factors such as weather,
disease, and pest infestation, farmers needed to be aware of market activity.
They needed to understand their product in its global context, so that they could
plan their activities with more confidence.
The Agricultural
Produce Marketing Act, under whose aegis mandis were established, prohibits
procurements outside the mandi. ITC convinced the government that e-Choupal
would operate according to the spirit of the Act and thus e-Choupal procurement
was in line with its goals. Since ITC would not be using the mandi infrastructure
for its procurement, and would have to incur its own costs with the e-Choupal.
Infrastructure, the government offered to waive the mandi tax on the produce
procured through the e-Choupal. However, ITC recognized that the tax was a
major source of revenue for the government and local mandis and, as ITCs
competition was also subject to the tax, the tax itself was not making ITC
uncompetitive. ITC therefore chose to continue paying the tax rather than risking
the relationships with the government and the mandis.
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Research Methodology
Sample and Sampling Method
Sampling is the process of collecting information only from a small representative
part of the population. Stratified Random Sampling is one amongst the most
elementary random sampling techniques. A stratified random sampling is a
method that allows each possible sample to have an equal probability of being
picked and each item or individual in the entire population have an equal chance
of being included in the sample. For this project work, without replacement
sampling method is used. It means that a person or item once selected is not
returned to the frame and therefore cannot be selected again. This selection
process continues until the desired sample size n is obtained.
Sample Selection : As the objective of the project is to study the Employee
Engagement to know the perception of the Employees, sample is selected from
Voice and Non voice based profiles.
Source of data: For the purpose of the study the following sources of data are
used.
Primary data: Primary data refers to the collection of first hand data.
Data is collected through
Questionnaire
Observations
Questionnaire: Questionnaire is prepared and circulated to the employees to
know their opinion.
Observations: Observations were done during the visits to the organization.
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Secondary data:
Secondary data refers to the data, which is not newly generated but rather
obtained from.
Published sources.
Unpolished sources i.e., information about the performance of the
company
Report on the study.
Review of literature etc.
i. Sampling chosen with the Random method
ii. Sampling Area would be Delhi & NCR and near area only
iii. Sample Size: 100
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Findings &Analysis
Performance Track Record
ITC Key Financials 2009/10
Rs Crs 95-96 09-10Cagr 95-96
to 09-10
Gross Turnover 5115 26,260 12.4%
Net Turnover 2536 18,153 15.1%
Market Capitalisation 5571 100,475 22.9%
PBDIT 584 6,677 19.0%
PBIT 536 6,069 18.9%
PBT 452 6,015 20.3%
PAT (After Exceptional Items) 261 4,061 21.7%
EPS Rs (Equalised for 95-96) 0.7 10.73 21.4%
Net Worth 1121 14,064 19.8%
Capital Employed 1886 14,957 15.9%
ROCE% 28.4 40.6
Total Shareholders Returns % 24.3%
Rs crs09/10
Actuals
08/09
ActualsGoly %
Gross Turnover External 26260 23144 13.5
Net Turnover External 18153 15612 16.3
PBDIT 6677 5393 23.8
PBIT 6069 4844 25.3
PBT 6015 4826 24.7
PAT 4061 3264 24.4
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2009/10 : Segment Revenues
2009/10 : Segment Results
2009-10 2008-09 Goly
3. Segment Results
a) FMCG - Cigarettes 4,938 4,184 18.0
- Others (350) (483) 27.7
Total FMCG 4,589 3,700 24.0
b) Hotels 217 316 (31.5)
c) Agri Business 436 256 70.3
d) Paperboards, Paper & Packaging 684 509 34.5
Total 5,926 4,781 23.9
Less : i) Interest (Net) 53 18 191.2
ii) Other net un-allocable expenditure/ income (143) (63) 127.6
Total PBT 6,015 4,826 24.7
Full Year
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2009/10 : Se3gment Capital Employed
Awards
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.
Global Leadership Award conferred on Chairman Y C Deveshwar by the
US India Business Council of the US Chamber of Commerce
Sustainability Leadership Award 2007 conferred on Chairman Y C
Deveshwar by the Sustainability Forum, Zurich and SAM/SPG at the
International Sustainability Leadership Symposium
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.
Ryutaro Hashimoto Incentive Prize 2007 for Environment & Development
from the Asia Pacific Forum
In the first of its kind S&P Environmental, Social and Corporate
Governance (ESG) ratings released recently, ITC ranked second among
top Indian companies.
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.
2009-10 2008-09 Goly
4. Capital Employed
a) FMCG - Cigarettes * 2,998 2,936 2.1
- Others 1,719 2,101 (18.2)
Total FMCG 4,717 5,037 (6.4)
b) Hotels 2,457 2,189 12.3
c) Agri Business 1,580 1,039 52.1
d) Paperboards, Paper & Packaging 3,711 3,771 (1.6)
Total Segment Capital Employed 12,465 12,035 3.6
* Local Tax Provision not incl. 628.64 542.86 15.8
Full Year
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ITC Limited won the top UNIDO award at the International Conference on
Sharing Innovative Agribusiness Solutions 2008 at Cairo in recognition for
its initiatives in agri business.
ITC has been conferred the ICAI Award for Excellence in Financial
Reporting with its Annual Report and Accounts, adjudged as a
commendable entry under the Manufacturing and Trading Enterprises
category.
The Best Corporate Social Responsibility Practice Award 2008 jointly
instituted by the Bombay Stock Exchange, Times Foundation and the
NASSCOM Foundation.
e-Choupal initiative wins global recognition:
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.
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
World Business Award 2004: International Chamber of Commerce & the
HRH Prince of Wales & International Business forum
Harvard University case study
Recognised in World Development Report 2008 published by World Bank
Applauded by President of India Dr APJ Kalam in his special address
during the national symposium to commemorate 60th year of
independence
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e-choupal: Strategic Thrust
ITC in Paper Industry
ITC is one of the world's most modern and contemporary manufacturers of
packaging and graphic series of boards. ITC's Paperboards business has a
manufacturing capacity of 360,000 (TPA) tonnes per annum and is India's market
leader across all carton-consuming segments including cigarettes, foods,
beverages, pharma, personal care & toiletries, durables and match shells. ITC
makes some of the premium graphic boards used for greeting cards, covers,
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sleeves, tags and playing cards. The Company produces both Virgin and
Recycled boards spanning the full requirement of a packaging customer. The
erstwhile ITC Bhadrachalam Paperboards Limited was incorporated in 1975. It
set up an integrated pulp and paper/board manufacturing facility in 1979 at
Bhadrachalam in Andhra Pradesh in South India, 300 kms. east of Hyderabad.
Since then, the mill facilities have been continuously upgraded to achieve
internationally benchmarked quality standards and operational efficiencies. In
1998, the Paperboards business commissioned a new production line for coated
boards. This production line incorporated Paper Machine 4, with original capacity
of 120,000 tonnes per annum (TPA) and finishing & packing lines sourced from
internationally renowned suppliers. This machine has been fitted with a
sophisticated 'Web Detection and Inspection system' and since been modernised
further with the addition of the latest web forming technology.
The PM4 board machine can deliver international quality boards for Cigarette,
Liquid, Food and Pharma Packaging by providing a flawless surface for print
reproduction. To meet the growing requirement for high quality paperboards ,
PM5 was commissioned in 2003 with a capacity of 80,000 TPA.
In September 2002, ITC's Bhadrachalam Paperboard Unit commissioned a
110,000 TPA Elemental Chlorine Free (ECF) fibre line. This is a state-of-the-art
fibre line and the only one in India, which meets effluent norms, set by the
Ministry of Environment and Forests of the Government of India and Pollution
Control Boards. The product range has also been enhanced as ECF pulp
uniquely fulfills the demand for food-grade packaging and environment-friendly
paper. To meet its growing need for bleached pulp, a second ECF pulp line with
a capacity of 120000 TPA is now nearing completion at Bhadrachalam.
ITC is the largest exporter of coated boards from India. The Company exports
nearly 15 percent of the coated boards it produces. Its coated boards fulfill
exacting customer requirements in Malaysia, Sri Lanka, Bangladesh, Iran,
Australia, UAE, UK, Italy, Poland and Russia.
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ITC has set up India's first world-class plant for the manufacture of premium Cast
Coated Boards that meet highly sophisticated packaging and printing
requirements. The Unit at Bollaram has been expanded further to accommodate
specialized converting production lines. ITC has added a modern Poly-extrusion
line to its production facility, to meet the growing demand for food packaging and
beverage cups. A 2nd poly-extrusion line is due for commissioning in Jan 2008 ,
to meet the growing demand for barrier boards. The Super-Calendering line
installed at Bollaram Unit near Hyderabad has also added Art Boards and Ivory
Cards to its product range. ITC has also pioneered the development of Liquid
Packaging Boards and Plasterboard liners. Continuous product development has
reinforced ITC's market leadership in the Paperboards business.
ITC's Paperboards business has a strong customer focus. The Company's
Paperboards business devoutly practices a 'TPM' philosophy during each stage
of manufacture. Lean management techniques have also been introduced in
making the operations more responsive and efficient.
Statistical Process & Quality control supplement the state-of-the-art on-line
process controls and scanning systems in the production lines. ITC is the premier
manufacturer of Specialty Papers in India, with a diversified product portfolio.
ITC's Specialty Papers are used in the manufacture of opaque lightweight fine
printing papers, cigarettes, papers for decorative laminates, electrical insulation-
grade papers , fireworks fuse tissue and automotive filter paper.
This Division pioneered the manufacture of Specialty Papers for the Indian
cigarette industry in 1949. It currently offers a comprehensive range of Cigarette
Tissues, Plug Wrap, Tipping Base, Printed tipping papers and Metallising Base.
The Specialty Papers Unit of PSPD at Tribeni, Chandrahati, West Bengal aims to
reach out and fulfill existing and emerging customers needs. The Unit
reconfigures systems and processes to meet specific customer requirements.
Quality control processes at the Unit are designed to ensure consistent high
quality at every stage of manufacture. On-line monitoring and documentation of
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production parameters are carried out for continuous correction and updation of
quality standards.A Product Development Team ensures Total Quality
Management (TQM) in all operations. The TQM group closely dovetails its
operations with marketing, production and research teams to ensure international
standards in products and services. The business creates long-term product
development solutions on the basis of customer specifications and market
trends.ITC has demonstrated strong capability in product development and
research in pulp and paper. The Company has collaborated with the United
Nations Development Programme (UNDP) and the Government of India on
research programmes to develop high quality pulp. The Division exports cigarette
tissues and dcor paper for laminates to Iran, Turkey , Nepal, and Bangladesh.
ITC in Apparels
ITCs 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,
Essenza Di Wills an exclusive range of fine fragrances and bath & body care
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products for men and women and Fiama Di Wills a range of premium
shampoos and shower gels. Wills Lifestyle has also introduced Wills Signature,
designer wear by leading designers of the country. With a distinctive presence
across segments at the premium end, ITC has also established John Players as
a brand that offers a complete fashion wardrobe to the male youth of today. The
recent launch of Miss Players with its range of trendy fashion wear for young
women has been a successful addition to the youth portfolio. With its brands, ITC
is committed to build a dominant presence in the apparel market through a robust
portfolio of offerings. This season, Wills Lifestyle presents a complete fashion
wardrobe that complements every facet of your lifestyle - at work, when you're
relaxed, while you party and for those special occasions. Wills Lifestyle has been
established as a chain of exclusive specialty stores providing the Indian
consumer a truly 'International Shopping Experience' through worldclass
ambience, customer facilitation and clearly differentiated product presentation.
Our stores have established themselves as preferred shopping destinations in
the prime shopping districts across the country.
At Wills Lifestyle, customers can browse at leisure, and shop in a relaxed and
pleasing atmosphere. The use of space is refreshing, which is reflected even in
the spacious changing rooms. Every store offers an international retailing
ambience with the extensive use of glass, steel and granite, reflecting the most
contemporary trends in store design, thereby creating a splendid backdrop for
the premium offerings. superbrand 2006 was awarded to Wills Lifestyle by the
Superbrands Council of India. At the Images Fashion Awards 2001 & 2003, Wills
Lifestyle was declared ' The Most Admired Exclusive Brand Retail Chain of the
Year'. Wills Lifestyle is now title partner of the countrys most premier fashion
event - Wills Lifestyle India Fashion Week. Taking the celebration of the event to
its stores, Wills Lifestyle has partnered with leading designers Rohit Bal, Rajesh
Pratap Singh, Manish Malhotra and Rohit Gandhi - Rahul Khanna to create a
new edition of Designer wear, which is now available at Wills Lifestyle Wills
Sport, fashionable relaxed wear for men and women has, over fifteen seasons,
become the vibrant face of contemporary fashion. At the Images Fashion Awards
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2001, Wills Sport was declared The Most Admired Brand Launch of the Year'.
Following this, Wills Sport was declared 'The Most Admired Women's wear
Brand of the Year', at Images Fashion Awards 2002. This season, Wills Sport
presents a collection designed to complement your exuberant lifestyle. Vibrant
designs create magic in breezy fabrics. Racy stripes and enchanting details add
charm to the purest linen and cotton. Wills Classic work wear was launched in
November 2002, providing the premium consumer a distinct product offering and
a unique brand positioning. Featuring luxurious fabrics crafted to perfection with
the most contemporary styling, Wills Classic work wear is positioned as the
brand for new age leaders, who are changing the rules of business and
encouraging a dynamic culture of enterprise, innovation and teamwork.
Showcasing the epitome of new age luxury. Featuring the finest shirts, crafted in
Italy. Complemented by exquisite trousers and jackets, made by European
master craftsmen. Experience a new language of charming sophistication this
season. Wills Lifestyle complements the range of premium apparel with a
tempting choice of fashion accessories.
This season a wider choice of accessories will be offered across ties, cuff links,
socks, caps, hand bags, wallets, belts, eyewear and shoes. With the introduction
of premium formal and relaxed jackets in the range, Wills Lifestyle will continue to
offer the definitive look of the season. Continuing with its philosophy of bringing
to Indian consumers world class products that enrich the quality of their lives, ITC
launched Essenza Di Wills - an exclusive range of fine fragrances and bath &
body care products for men and women in July 2005. Inizio, the signature range
under Essenza Di Wills provides a comprehensive grooming regimen with
distinct lines for men (Inizio Homme) and women (Inizio Femme).The rich and
sensual fine fragrances are all day offerings designed by the leading international
fragrance houses in France. The personal care range includes a host of bath and
body care products that share the same olfactory signature of the mens and
womens fine fragrances to offer you a harmonized fragrance experience.
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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. This
foray leverages ITCs proven competencies in understanding consumer insights,
brand building and design capabilities. Hrithik Roshan, Superstar and Youth Icon,
with his innate style, vibrancy and playfulness best personifies the core attributes
of the brand as its ambassador.
FMCG Business Initiatives Lifestyle Retailing
ITC in Information Technology
ITC InfoTech, a global IT services company, is today one of Indias fastest
growing IT and ITES service providers. Since it's inception in October 2000, the
company has established itself as key player in offshore outsourcing, providing
outsourced IT solutions and services to leading global customers. While an