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SWOT Analysis of FMCG- Cigarette Division of ITC Ltd.
Marketing Management Assignment II Submitted to: Dr. S.K. Pandey
SUBMITTED BY Group 1 ( Section A) Amir Khan – PGP05001 Abhishek Anand – PGP05002 Abidulla Shariff – PGP05003 Akul Minocha – PGP05004 Anjali Singh – PGP0005
About the Company ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its diversified business includes five segments: Fast Moving Consumer Goods (FMCG), Hotels, Paperboards & Packaging, Agri Business & Information Technology. ITC i s one of India's foremost private sector companies with a market capitalization of US $ 45 billion and a turnover of US $ 7 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 and among India's Most Valuable Companies by B usiness Today. ITC ranks among India's '10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by t he Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by Business Week.
About the ITC-Cigarettes ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, ITC has a leadership position in every segment of the market. ITC's highly popular portfolio of brands includes Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal
STP of ITC Cigarettes Segment
Premium Segment cigarettes
Target Group
Middle level people who are concerned for price as well as brand
Positioning
For People who are passionate for quality and sensitive to price
PEST ANALYSIS OF ITC A scan of the external microenvironment i n which the firm operates can be expressed through a pest analysis. The PEST factor combined with external micro environmental factor can be classified as opportunities and threat in SWOT Analysis. POLITICAL FACTORS:
Huge burden of VAT Excise duty raised by union budget by 5 %. Luxury tax in 10 states – making it difficult for ITC to maintain the consistency level in prices for different places
SOCIAL FACTORS:
Becoming status symbol Companions mounted by W.H.O. Changing attitudes towards Restrictions by government
ECONOMIC FACTORS:
Profit margin is high Other forms of cheap tobacco intake India’s top producer of cigarettes
TECHNOLOGICAL FACTORS:
Cheap labor supply Development of IQMS Adapting other concepts like QC and TQM Hardware investment
SWOT Analysis of ITC Cigarettes
Strengths 1. Available in nine different varieties 2. Strong brand name and reputation of ITC in Tobacco industry 3. Economies of scale 4. Customer loyalty amongst customers is high 5. Excellent availability due to ITC’s strong distribution network
Weaknesses 1. The manufacturing process very time consuming 2. Company has to rely on surrogate advertising to promote products
Opportunities 1.Ever-growing Consumer base due to addiction 2. The opportunity of the company (ITC) is to reduce the price of t he product and offer the same quality. This will increase the sales volume of the company. 3.Social media marketing as a replacement for advertisement
Threats 1. Ban on cigarette smoking in public places 2. High duty on cigarettes leading to high prices. 3. In future the government may completely put ban on advertisement of cigarettes or also put a ban on sponsorship under the consideration that cigarette is harmful for health.
Prioritization of SWOT Strengths and weaknesses are evaluated on 3 categories:
Importance. Importance shows how important a strength or a weakness is for the organization i n its industry as some strengths (weaknesses) might be more important than others. A number from 0.01 (not important) to 1.0 (very important) is assigned to each strength and weakness. The sum of all weights will be equal to 1.0 (including strengths and weaknesses). Rating. A score from 1 to 3 is given to each factor to indicate whether it is a major (3) or a minor (1) strength for the company. The same rating is assigned to the weaknesses where 1 would mean a minor weakness and 3 a major weakness. Score. Score is a result of importance multiplied by rating. It allows prioritizing the strengths and weaknesses.
Opportunities and threats are prioritized slightly d ifferently than strengths and weaknesses. Their evaluation includes:
Importance. It shows to what extent the external factor might impact the business. Again, the numbers from 0.01 (no impact) to 1.0 (very high impact) is assigned to each item. The sum of all weights will be equal to 1.0 (including opportunities and threats). Probability. Probability of occurrence is showing how likely the opportunity or threat will have any impact on business. It is rated from 1 (low probability) to 3 (high probability). Score. Importance multiplied by probability will give a score by which will help to prioritize opportunities and threats.
STRENGTHS
Importance
Rating
Score
Ranking
Available in nine different varieties
0.2
3
0.6
1
Strong brand name and reputation of ITC in Tobacco industry
0.2
3
0.6
2
Economies of scale
0.1
2
0.2
5
Customer loyalty amongst customers is high
0.2
2
0.4
3
0.15
2
0.3
4
Importance
Rating
Score
Ranking
The manufacturing process very time consuming
0.05
3
0.15
1
Company has to rely on surrogate advertising to promote products
0.1
1
0.1
2
Excellent availability due to ITC’s strong distribution network
WEAKNESS
OPPORTUNITY
Importance
Probabil ity
Score
Ranking
Ever-growing Consumer base due to addiction
0.2
2
0.4
1
The opportunity of the company (ITC) is to reduce the price of the product and offer the same qual ity. This will increase the sales volume of the company.
0.15
1
0.15
2
Social media marketing as a replacement for advertisement
0.15
1
0.15
3
Importance
Probabil ity
Score
Ranking
Ban on cigarette smoking in public places
0.2
3
0.6
1
High duty on cigarettes leading to high prices.
0.15
2
0.3
2
In future the government may completely put b an on advertisement of cigarettes or also put a ban on sponsorship under the consideration that cigarette is harmful for health
0.15
2
0.3
3
THREAT
SWOT with Prioritization STRENGTHS
1. 2. 3. 4. 5.
1. 2.
3.
WEAKNESSES
Available in nine different varieties Strong brand name and reputation of ITC in Tobacco industry Customer loyalty amongst customers is high Excellent availability due to ITC’s strong distribution network Economies of scale OPPORTUNITIES
1.
Ever-growing Consumer base due to addiction The opportunity of the company (ITC) is t o reduce the price of the product and offer the same quality. This will increase the sales volume of the company. Social media marketing as a replacement for advertisement.
1. 2.
2.
The manufacturing process very time consuming Company has to rely on surrogate advertising to promote products
THREATS
Ban on cigarette smoking in public places High duty on cigarettes leading to high prices. 3. In future the government may completely put ban on advertisement of cigarettes or also put a ban on sponsorship under the consideration that cigarette is harmful for health
CONCLUSION
ITC has strong brand name, reputation and high c ustomer loyalty in the tobacco industry. It should keep leveraging upon these strengths to retain market leadership. One of the major weakness of ITC cigarettes is its high manufacturing time. Using technological advancement as per PEST analysis ITC should try to convert this weakness to opportunity leading to high production and low price leading to increase in sales volume for the company. Threats are due t o government policy changes and ITC has no control over these threats. Direct advertising of cigarettes is banned so social media marketing should be used as a replacement.
References:
http://www.itcportal.com/ http://www.strategicmanagementinsight.com http://www.moneycontrol.com/ http://www.indianmirror.com/indian-industries/industries-home.html https://insight.dionglobal.in/Index.aspx http://www.indiastat.com/default.aspx Wikipedia ITC Annual Report