bcg matrix of itc
TRANSCRIPT
BCG Matrix of ITC
Introduction of ITC limited.
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company
of India Limited. As the Company's ownership progressively Indianised, the name of the
Company was changed from Imperial Tobacco Company of India Limited to India Tobacco
Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's
multi-business portfolio encompassing a wide range of businesses - Fast Moving Consumer
Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and
Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty
Papers, Packaging, Agri-Business and Information Technology - the full stops in the
Company's name were removed effective September 18, 2001. The Company now stands
rechristened 'ITC Limited'.
ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for
ITC's Cigarettes business. It is today India's most sophisticated packaging house. In 1975, the
Company launched its Hotels business with the acquisition of a hotel in Chennai which was
rechristened 'ITC-Welcomgroup Hotel Chola' (now renamed My Fortune, Chennai). In 1979,
ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited.
Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and
became a Division of the Company, Bhadrachalam Paperboards Division.
In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. In
August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to
Surya Nepal Private Limited (Surya Nepal). In 2004, the company diversified into manufacturing
and exports of garments.
ITC's foray into the Foods business is an outstanding example of successfully blending multiple
internal competencies to create a new driver of business growth. It began in August 2001 with
the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC entered
the confectionery and staples segments with the launch of the brands mint-o and Candyman
confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction of Sunfeast as
the Company entered the biscuits segment. ITC entered the fast growing branded snacks
category with Bingo! in 2007. In 2010, ITC launched Sunfeast Yippee! to enter the Indian instant
noodles market. In just over a decade, the Foods business has grown to a significant size under
seven distinctive brands, with an enviable distribution reach, a rapidly growing market share and
a solid market standing.
In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value
chain found yet another expression in the Safety Matches initiative. ITC now markets popular
safety matches brands like iKno, Mangaldeep and Aim.
ITC entered the Personal Care Business in 2005. In seven years, the Personal Care portfolio has
grown under 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia' brands which have
received encouraging consumer response and are also being progressively extended nationally.
In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market. Armenteros
cigars are available exclusively at tobacco selling outlets in select hotels, fine dining restaurants
and exclusive clubs.
Agricultural Business
E-Choupal,
Agri Exports
Leaf Tobacco
ITC Agri Business is one of India’s largest exporter of agricultural commodities. June 2000,
eChoupal – strategic and cost effective sourcing support to the Foods business (support creation
of verticals in wheat, soya, corn, potato etc.) eChoupal - Services reaches to 4 million Farmers
who are growing Wheat, Rice, Pulses, Soyabean, Coffee in over 40,000 villages thru nearly
6,500 kiosks across nine states. Diverse range of goods/services: FMCG, consumer durables,
agri-inputs. Farmer Financial Services - insurance (focus: weather), credit (focus: Kisan credit
card scheme) Rural Retail – 18 Choupal Sagars Agenda 2012 is to cover 15 states with 1,00,000
Villages with about 20,000 eChoupal Kiosks servicing about 10 million farmers. Largest Buyer,
Processor and Exporter of leaf tobacco in India. Exports to about 48 countries. ITC processes
about 120 million kgs of high quality tobacco yearly. Overall 550m Kg of tobacco is produced in
India.
Hotel
Hotel Brands: ITC-WelcomGroup, WelcomHeritage & Fortune. Totally 90 Hotels, 77
Destinations and 5500 Rooms under management. Destinations include most of India as well as
Singapore and Dubai. Hosted a galaxy of world dignitaries like Bill Gates to Bill Clinton,
Condoleezza Rice to Benazir Bhutto. Restaurant Brands: Bukhara, Dum Pukht and Dakshin.
ITC Ltd.
FMCG-Cigarettes
FMCG-Others
Hotels
Agri Business
Paperboards & Packaging
Infotech
Packaging & Paperboards
Annual paperboard demand – appx. 1.1 million tonnes .Indian paperboard market growing at 7%
p.a. Significant export opportunities for high quality Indian manufacturers. ITC paperboards
exports - Rs. 2 billion appx. ITC’s packaging unit - India’s largest converter of paperboard into
high quality printed packaging. Provides superior packaging solutions to the cigarettes and new
FMCG businesses. India has low per capita usage at around 6 kgs p.a. (World average – over 50
kgs p.a.). ITC Bought 0.5% in Ballarpur Industries in July 2008.
FMCG-Others
Ashirvad Atta
Kitchens Of India
Mint-o
Sunfeast
Candyman
Bingo
Superia
Wills LifeStyle,
Fiama Di Wills
Expressions
Classmate
Ashirvad Atta is now no one selling.
Sunfeast Biscuits is ranked no3.
Bingo, launched in August 2007, now enjoys 16% market share.
November 2007 Mint-o overtakes its competitor Chlormint
‘Classmate’ brand already the most widely distributed stationary brand in India
Kitchens of India have about 48% market share in India and a huge export potential.
Ready to Eat food Market is estimated to be Rs.700m.
Safety Matches market at Rs. 1250 crores p.a. for 24 billion match boxes which is
targeted by ITC’s iKno, Aim, Aim Mega, Aim Metro.
Successful acquisition of 94% of WIMCO Ltd. i.e. Homelites, Ship.
‘Mangaldeep’ the only National brand in the country serves the nation’s 900cr incense
sticks market.
FMCG-Cigarettes
Insignia
India Kings
Classic
Gold Flake
Silk Cut
Navy Cut
Scissors
Capstan
Berkeley
Bristol
Flake
'Best Manufacturer of Cigarettes for the year 2007'
Started in 1910 As Company’s Core Business. Market leadership in all segments -
geographic & price (70% Market Share)
Extensive FMCG distribution network (Direct servicing of 1,00,000 markets & 2
million retail outlet)
Cigarettes account for only 15% of tobacco consumed in India unlike world pattern
of 85% due to prolonged punitive taxation. Of the 58% of adult Indian males who
consume tobacco, barely 15% can afford cigarettes. (Biri : Cigarettes ratio = 10 : 1).
Annual per capita adult cigarette consumption in India is approx one tenth world
average which is 141
In 2001 - Lost 15% of Its Business Because of Rise in Excise Duty. In 2007 - VAT
Was charged at 12.5% which increased the price of cigarettes by 84ps per cigarette.
Hence ITC had to shut down their business of Plains (i.e. Non Filter Cigarettes)
which was 20% of total FMCG Cigarette Business.
ITC Infotech
ITC InfoTech Ltd. Is a wholly owned subsidiary of ITC LTD.?
ITC InfoTech is responsible for developing & maintaining the entire ITC eChoupal
infrastructure.
Although a separate entity and brand, ITC InfoTech’s primary job is to keep ITC as a
group up to date with latest technology.
Introduction of BCG Matrix. The BCG matrix method is based on product life cycle theory that can be used to
determine what priorities should be given in the product portfolio of a business
unit.
To ensure long term value creation, a company should have a portfolio of product
that contain both high growth product in need of cash input and low growth
products that generate lot of cash.
It has two dimension:
I. Market Share
II. Market Growth
The basic idea behind it is that bigger the market share a product has or the faster
products market grows the better it is for company.
STARS (high growth, high market share)
Stars are using large amounts of cash. Stars are leaders in the business. Therefore they
should also generate large amounts of cash.
Stars are frequently roughly in balance on net cash flow. However if needed any attempt
should be made to hold your market share in Stars, because the rewards will be Cash
Cows if market share is kept
CASH COWS (low growth, high market share)
Profits and cash generation should be high. Because of the low growth, investments which
are needed should be low.
Cash Cows are often the stars of yesterday and they are the foundation of a company.
DOGS (low growth, low market share)
Avoid and minimize the number of Dogs in a company.
Watch out for expensive ‘rescue plans’
Dogs must deliver cash, otherwise they must be liquidated.
QUESTION MARKS (high growth, low market share)
Question Marks have the worst cash characteristics of all, because they have high cash
demands and generate low returns, because of their low market share
If the market share remains unchanged, Question Marks will simply absorb great amounts
of cash.
Either invests heavily, or sells off, or invests nothing and generates any cash that you can.
Increase market share or deliver cash
BCG Matrix of ITC
Relative Market share(Cash Generation)
HIGH LOW
STAR
Agri Business
Hotels
Paperboards &
Packaging
QUESTION MARK
FMCG-Others
CASH COW
FMCG-Cigarettes
DOG
ITC Infotech