2010
Submitted by: Derrick Derr ick Vijayan (24) (24 )
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INTRODUCTION TO ITC ITC is a conglomerate established in 1910. Their head quarter is in Kolkatta. With a turnover of 6 billion$ and market capitalization of 22 million $, it is the only Indian FMCG in Forbes 2000. IT has over 26000 employees across 60 centers in India. It also provides sustainable development to over 5 million people, especially in rural India.
Analysis of ITC
ITC was established on August 24, 1910 under the name Imperial Tobacco Company of India Limited. The ownership of the company as transferred to Indian owners and the name was renamed as India Tobacco Company Limited in 1970, I.T.C. Limited in 1974 and to 'ITC Limited' in 2001. India’s most technological technological Packaging house, ITC’s Printing &Packaging house was established in 1925 as a strategic link up to the ITC’s cigarette business. ITC’s hotels business, launched in 1975 earns high levels of foreign exchange via creation of tourism infrastructure and generates large scale of employment. ITC's Hotels business has over 100 owned and managed properties spread across India. Bhadrachalam Paperboards Division, the market leader in India was promoted by ITC since 1979. ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture in 1990. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed changed to Surya Nepal Private Private Limited (Surya (Surya Nepal). India’s India’s largest largest expo export rter er,, ITC’ ITC’s s agri agri busi busine ness ss divi divisi sion on was was set set up in 19 1990 90.. The The uniq unique ue and and acknowled acknowledged ged e-choupal e-choupal was launched launched in 2000 at Madhya Pradesh. Pradesh. E-choupal E-choupal covers 4 million customers throughout India. The company places computers with Internet access in rural farming villages; the e-Choupals serve as both a social gathering gathering place for exchange exchange of informati information on (choupal (choupal means gathering gathering place in Hindi) and an e-commerce hub. There are 24 rural markets or choupal bazaars in Madhya Pradesh, Uttar Pradesh and Maharashtra. In 2000, ITC entered into stationary business with the launch of Expressions range of greeting cards. Premium and Economic note books were launched under the brands ‘Paperkraft’ and ‘Classmate’, which is also India’s largest notebook seller. In 2008, 2008, ITC reposi repositio tioned ned the busin business ess as the Educat Education ion and Statio Stationer nery y Produc Products ts Business, with pencils, pens and geometry boxes. ITC also entered the Lifestyle Retailing business in 2000 with Wills Sport. Wills Classic formal wear (2002) and Wills Clublife evening wear (2003) followed. John Players was ITC most most popular popular brand with offering offerings s in Men’s wear. wear. ITC also sponsors the country's most premier fashion event - Wills Lifestyle India Fashion Week.
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ITC's foray into the Foods business began in August 2001 with the introduction of 'Kitchens 'Kitchens of India' India' ready-to-ea ready-to-eatt Indian Indian gourmet gourmet dishes. dishes. The other brands brands which which followed later are mint-o and Candyman confectionery, Aashirvaad atta (wheat flour Sunfeast biscuits segment and Bingo int the fast growing branded snacks category. ITC introduced Essenza Di Wills range of fine fragrances and bath & body care in July 2005. The company launched 'Fiama Di Wills', a premium range of Shampoos, Shower Gels and Soaps in September, October and December 2007 respectively Vivell De Will Wills s & Vive Vivell range and Vive range of soaps soaps in Februa February ry and Vivel range range of shampoos in June 2008.
CULTURE IN ITC Key Characteristics of Culture at ITC Individual Initiative: Initiative: ILTD provides high freedom, less responsibility due to set procedures.
Direction: Direction: Organisational objectives are very well defined and practiced. Management Management Support : Highly Highly supportiv supportive e managemen managementt towards towards employees employees & their families.
Identity : High High degree degree of ident identifi ifica catio tion n toward towards s the organi organisa satio tion, n, especi especiall ally y by workers.
Conflict Tolerance: Tolerance: ILTD offers high tolerance, newer divisions averse to conflict tolerance.
Risk Tolerance: Tolerance: Independence to employees in older divisions like ILTD, less in FMCG.
Integration: Integration: Due to interdependent products (in FMCG & ABD), high degree of integration.
Control : FMCG division exerts high degree of control due to highly competitive market.
Reward System Reward System:: Employee performance highly valued for reward allocation. Communication Patterns: Patterns: High High degree degree of formal formality ity exist exists s in FMCG FMCG divisi divisions ons,, lower in plants.
Core Values Trusteeship: 1. Trusteeship:
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There is a belief in "trust" by all the stakeholders. ITC actualizes stakeholder values and interests on a long term sustainable basis. Respect for People: People : The There re are are high high perf perfor orma manc nce e stan standa dard rds s for for indi indivi vidu dual als s and and team teams. s. Simultane Simultaneousl ously y respect respect and value for people people and uphold humannes humanness s and human dignity. Every individual brings different perspectives and capabilities to the team. team. A stron strong g team is founded founded on a variet variety y of perspe perspecti ctives ves.. ITC ITC believes in achieving leadership through teamwork and valuing differences. Excellence: Excellence : ITC is the leading FMCG marketeer in India. It has the second largest Hotel chain in India. It is the clear market leader in the Indian Paperboard and Packaging industry and the country's foremost Agri-business player. All ITC businesses strive to minimize energy consumption and wherever possible use environment friendly sources of energy. Innovation: ITC pursues newer and better processes, products, products, services and management practices Customer Focus: ITC is highly highly custom customer er focuse focused d and deliv delivers ers what what the the custom customer er needs needs in terms of value, quality and satisfaction. satisfaction. Nation Orientation: ITC feels responsible to generate economic value for the nation. It believes that business exists to subserve larger societal goals. It’s 'e-Choupal' services today today reach out to over 4 million million farmers. farmers. ITC tolerates tolerates no compromi compromise se in complying with applicable laws and regulations at all levels.
CULTURE: An interdependent set of values and ways of behaving that are common to a ENVIRONMENT ITCto perpetuate themselves, sometimes over a long period of time - Kotter community and tend and IN tend ITC’s Specific Environment ITC’s ITC’s speci specific fic enviro environme nment nt compr comprise ises s of its custom customers ers,, supp supplie liers, rs, contr contrac actor tors, s, government and its agencies, shareholders, employees and local communities. The aspect of the specific environment which had a major impact on most tobacco comp compan anie ies s was was the the Ciga Cigare rett ttes es and and othe otherr Toba Tobacc cco o Prod Produc ucts ts (Pro (Prohi hibi biti tion on of Advertis Advertisement ement and Regulatio Regulation n of Trade Trade and Commerce, Commerce, Producti Production, on, Supply Supply and Distribution) Distribution) Act-2003 legislated by the Government of India 1 May 2003 went down in history as the day when cigarette advertising went up in smoke in India. That's the day when the government's diktat stubbing out cigarette and tobacco advertising, and smoking in public places came into force. No more could the stick sellers be huffing and puffing, exhorting you to buy an individual brand from your newspaper, and radio set, the roadside billboard, or the cinema screen. Promoting themselves through ads could be injurious to tobacco companies'
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health. Starting from May 31, the World No Tobacco Day, all tobacco products in India will carry graphic pictorial warnings According to industry sources, it was expected the ban would take a heavy toll on tobacco companies, outdoor ad agencies, hoarding suppliers, charity organizations who rely very very much much on the tobacc tobacco o compan companies ies'' sponso sponsorsh rships ips,, etc. etc. Apart Apart from from outdoor agencies, tobacco companies who relied heavily on outdoor promotions were expected to bear the brunt. Ad agencies which handle ITC’s accounts i.e. Lowe, O&M, JWT, Initiative Media and Rediffusion were in deep trouble.
ITC’s Strategy Though the ban would force them to mellow down on their advertising activities, ITC had already started taking the changes in their stride. The industry was anticipating such such a ban ban for for over over a year year as Indi India a had had sign signed ed and and rati ratifi fied ed the the Inte Intern rnat atio iona nall Framework Convention on Tobacco Control and hence was prepared for change. The Company was far sighted and ventured into trade mark diversification or brand extensions. It was actually a considered a blessing in disguise by the company as thei theirr bran brands ds got got a high higher er reca recall ll valu value e and and they they woul would d need need to rely rely much much on advertising. ITC diverted the money which used to be spent on advertising to retail signag sig nage, e, promot promotion ions s inside inside movies movies and music, music, for locali localized zed privat private e events events and and direct-to-consumer initiatives etc. The focus was shifted to smoker contacts, bar & restaurant promotions and lifestyle-related event associations at the upper end. At the lower end, they focused on mean ground level participation in weekly markets, road shows, interactive shows etc. ITC resorted to aggressive marketing campaigns plus new product launches to draw maximum eyeballs as soon as the ban was announ announced ced.. ITC also also foraye forayed d into into market marketing ing of incens incense e stick sticks s (partn (partneri ering ng with with cottage industries), launched Sunfeast biscuits, expanded to Wills Clublife Evening Wear to expand its domain in order to get some positive publicity in the eyes of its consumers despite the ban.
SPECIFIC ENVIRONMENT: It is part of the environment that is directly relevant to the organization in achieving its goals. It is made up of those critical constituencies that positively GREEN TECH AT influence ITC or negatively an organization’s effectiveness. effectiveness. – Robbins & Mathew Introduction: ITC has committed itself to conducting business with a passionate respect for the environment. Business at ITC, ITC, therefore, is conducted conducted at three distinct distinct levels: Ecological Social Economic Water: 100% 10 0% of the the rain rain fall fallin ing g on the the buil buildi ding ng is harv harves este ted d via via interlocking tiles through the grass growing in between the tiles ensuring 0% surface run-off. 100% 100% of the water used in the buildin building g is recycled recycled through through sewage treatment using Fluidised Aerobic Bioreactors Waterless urinals use biological blocks containing bacteria that redu reduce ces s odor odor prob proble lems ms and and bloc blocka kage ges s in the the urin urinal als. s. This This •
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Energy (Temperature (Temperature Control) •
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The high albedo roof coating reduces the amount of heat absorbed by reflecting over 90% heat radiations away from the building thereby minimizing AC usage. The air conditioning operating within ITC Green Centre is Chloro
Air Quality: During work hours, the CO2 monitoring system maintains carbon dioxid dioxide e levels levels based based on the the number number of occupa occupants nts withi within n the building and the conditions outdoors. The low levels of Volatile Organic Compounds in the materials used in the construction of ITC Green Centre endures that there aren’t any known harmful substances in the air that might affect inhabi inhabitan tants ts of of the the build buildin in . e-CHOUPAL •
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ITC's Agri Business Business Division, Division, has conceived conceived e-Choupal e-Choupal as a more efficient efficient supply supply chain aimed at delivering value to its customers around the world on a sustainable basis.
The Value Chain - Farm to Factory Gate:
STRUCTURE OF ITC ITC has a formal three tiered governance structure: structure: 1. Board Board of Direct Directors ors:: It compri comprises ses of execut executive ive and nonnon- execut executive ive direct directors ors.. Their main purpose is to ensure strategic supervision. 2. Corporat Corporate e Management Management committee: committee: It comprise comprises s of executive executive director directors s and senior managers whose main responsibility responsibility is strategic management.
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3. Divi Divisi sion onal al Chie Chieff Exec Execut utiv ive e and and Divi Divisi sion onal al Mana Manage geme ment nt Comm Commit itte tee: e: it comprises of all the executives who are actively involved in management.
STRATEGIES OF ITC Corporate Strategy •
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It pursues world class competitiveness in all businesses and across all value chains It tends to blend its core competencies and leverage ITC umbrella strength to create new avenues of growth It pursues to be the best in terms of market standing , internal validity and profitability
Innovation Strategy 1. From Mandi to Market – E-choupal
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ITC realized that by owning the agri-product procurement value chain, they could serve the needs of the end customer better and reduce their "true cost of contract." This was the birth of e-Choupal—a shift in the business model of procuring from mandis to directly procuring from farmers. It led to substantial reduction in procurement costs, and also brought consistency and predictability in the supply chain. For ITC, e-Choupal was a channel innovation that was able to extend its reach through a VSAT based IT network, even in villages with no proper road connectivity.
1. Lives Livestoc tock k Devel Develop opmen mentt The milk milk marke marketin ting g co-op co-opera erativ tives es repres represent ent exemp exemplar lary y chang change e in rural rural enterprise, away from dependence on agriculture and local markets.
2. Social Social & farm farm Fores Forestry try 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 program simultaneously addresses the livelihood problems of marginal farmers and the ecological imperative of regenerating biomass and nurturing depleted soils
Marketing differentiation Strategy 1. Segmentation: Creating brands from scratch with no history and lineage, ITC used used clear clear segmen segmentat tation ion acros across s its five five produc productt lines lines and the target target audience.
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2. Group Synergy: Once the five products were created and communication strategies set, ITC leveraged its properties like hotels, foods and apparel store network to retail these brands. 3. Communication Strategy: These brands sport Western names. Essenza & Fiama are meant for the elite, using English, while Vivel & Superia use Hindi.
Extension: ITC delves into selective extensions as it doesn’t want to 4. Brand Extension: confuse consumers with too many irrelevant brand extension & sub-brands. sub-brands. Ambassador: ITC uses brand ambassad 5. Brand Ambassador: ambassadors ors strategic strategically. ally. For the Fiama and Vivel ranges it has roped in key brand ambassadors. 6. Packaging: Since packaging plays a key role in product differentiation, ITC uses it to the hilt. It has taken foreign experts’ help to make its products stand out from competition.
Breadth Strategy 1. Ciga Cigare rett ttes es ITC is the market leader in cigarettes in India. It's highly popular portfolio of brands includes Insignia, Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut. 2. Foods The Foods business is today represented in 4 categories in the market. These are: * Ready to Eat Foods * Staples * Confectionery * Snack Foods 3. Lifestyle Retailing ITC’s ITC’s Lifest Lifestyle yle Retail Retailing ing Busine Business ss Divisi Division on has establ establish ished ed a nation nationwid wide e retailing presence through its retail chains of exclusive specialty stores. 4. Education Education and Statio Stationery nery produ products cts The more more popula popularr range range to augmen augments ts it’s it’s offeri offering ng as "Class "Classma mate" te" and "Paper "Paperkra kraft" ft",, with with Class Classmat mate e addres addressin sing g the needs needs of schoo schooll goers goers and Paperkraft targeted towards college students and executives. 5. Hotels Category Brand Positioning Luxury ITC Hotel Luxury Mansions of Luxury Collection Upper Upscale Welcome Hotel Sheraton Passion for Quality Upper mid scale Fortune Hotels Promise of True Value Heritage Welcome Heritage Unique Experiences Structure is the means for attaining the objectives and goals of an institution. Any work on structure must therefore start with objectives and strategy. Strategy can be defined as the determination of basic long term goals and objectives of an EFFECTIVE EFFEC TIVENESS IN ITC enterprise and theNESS adoption of courses of action and allocation of resources necessary necessary for
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Competing Value Approach This approach we use return on investment, market share, new product innovation, job security etc. as the criteria depending on who you are and what your interest is.
There are 3 sets of competing values: Flexibility v/s Control: These are incompatible dimensions of an organisational structure. People v/s Organisation: They deal with placing emphasis on well-being and development of people or organisation Means v/s Ends : They stress on internal process and the long term or on inal outcome and the short term. •
These values can be combined to form 8 sets of organisation effectiveness criteria within 4 diverse models of OE viz. i. Huma Human n rel relat atio ions ns mode modell ii. ii. Open Open syst system ems s mod model el iii. iii. Ratio Rational nal goal goal model model iv. Internal Internal process process model model
Analysis We can rate the effectiveness of ITC in the 8 OE cells. 1) OFM (Flexibility): When When the the numb number er of smok smoker ers s was was redu reduci cing ng due due to increase in awareness of bad effects of smoking, ITC faced the situation by transforming itself from a tobacco firm to a multi business conglomerate. Rating 2/2 (Acquisi sitio tion n of resour resource ces): s): 2) OFE (Acqui They hey are a big and succ uccess essful ful conglomerate, with constant increase in sales as well as profit (6.28% in last four years), implies that acquisition of resources is continually taking place. 2/2 3) OCM (Planning): As mentioned before, ITC has well defined goals in all departments. Rating 1.5/2 (Producti ctivit vity y & effic efficie iency ncy): ): 4) OCE (Produ They They have have high high prod produc ucti tivi vity ty and and efficiency. ITC paper board has received credits for carbon efficiency with annual energy savings of 13.36 Gwh. Rating 2/2 (Availability lity of informati information on): ITC 5) PCM (Availabi ITC has has a tran transp spar aren entt chan channe nell to communicate with employees, trade unions unions etc. Rating 1.5/2 (Stability): ): The 6) PCE (Stability The firm firm has a very very smooth smooth funct function ioning ing of operat operation ions, s, based on the goals they have set. 1.5/2
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7) PFM (Cohesive work force): ITC emphasizes on employee trust, mutual respect and team work. Rating 2/2 8) PFE (Skilled work force): Most of the employees have training, ability, skill etc. etc. requ requir ired ed to do thei theirr work work and and they they are are prov provid ided ed with with works worksho hops ps,, seminars etc. to hone their skills. Rating 2/2
Amoebagram of ITC
CONCLUSION ITC in a nutshell
ITC takes pride in its 100 year legacy of sustained effort, unmatched commitment to growth, robust strategy and an unshakable belief in delivering differentiated value and services.
