REPORT ON ITC

(ENVIRONMENT SCANNING)

From:-
Sandeep

Dated: September 25, 2009

Executive Summary
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. 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
ITC Limited
new FMCG (Fast Moving Consumer Goods) brands
in a number of market sectors - including cigarettes,
hotels, paper, agriculture, packaged foods and
confectionary, branded apparel, personal care,
greetings cards, Information Technology, safety
matches, incense sticks and stationery. Examples of
its successful new FMCG products include:

• Aashirvaad - India's most popular atta brand

with over 50% market share. It is also Type Public (BSE:ITC)
present in spices and instant mixes.
24 August 1910
• Mint-o - Mint-0 Fresh is the largest cough Founded Radha Bazar Lane, Kolkata,
lozenge brand in India. India
• Bingo! - a new introduction of finger
Headquarters Kolkata, India
snacks.
• Kitchens of India - pre-prepared foods Yogesh Chander Deveshwar,
designed by ITC's master chefs. Chairman
• Sunfeast - is ITC's biscuit brand (and the Key people K. Vaidyanath, Director,
sub-brand is also used on some pasta Partho Chatterjee, CFO
products).
Tobacco, foods, hotels,
Industry stationery, greeting cards
ITC is one of India's foremost private sector
companies with a market capitalization of nearly Products Cigarettes, packaged food,
hotels, apparel
US $ 14 billion and a turnover of over US $ 5
billion.* ITC is rated among the World's Best Big Revenue ▲ $5.00 billion UD (2009)
Companies, Asia's 'Fab 50' and the World's Most Employees 25,000 (2009)
Reputable Companies by Forbes magazine, among
India's Most Respected Companies by Business Website www.itcportal.com
World and among India's Most Valuable Companies by Business Today. ITC ranks among India's
`10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by
the Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by
Business Week.

ITC employs over 25,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalizing
environment to consistently reward more than 3, 53,000 shareholders

The Marketing Environment

The marketing environment surrounds and
impacts upon the organization. There are three
key perspectives on the marketing
environment, namely the 'macro-
environment,' the 'micro-environment' and the
'internal environment'.

The micro-environment
This environment influences the organization
directly. It includes suppliers that deal directly
or indirectly, consumers and customers, and
other local stakeholders. Micro tends to
suggest small, but this can be misleading. In
this context, micro describes the relationship
between firms and the driving forces that
control this relationship. It is a more local
relationship, and the firm may exercise a degree of influence.

Stakeholders: As organization requires greater inward investment for growth they face
increasing pressure to move from private ownership to public. However this movement
unleashes the forces of shareholder pressure on the strategy of organizations. Satisfying
shareholder needs may result in a change in tactics employed by an organization. The Company
sees no conflict between the twin goals of shareholder value enhancement and societal value
creation. The challenge lies in fashioning a corporate strategy that enables realization of these
goals in a mutually reinforcing and synergistic manner. 244,65,39,845 Ordinary Shares of the
Company, representing 64.79% of the Company's paid up capital, as on 11th September, 2009 are
in dematerialized form. The paid-up share capital of the Company is Rs. 377, 62, 86,590
(Rs.377.63 crores) divided into 377, 62, 86,590 Ordinary Shares of the face value of Re 1/- each.

Supplier: Raw materials, intermediates and the final product sourcing/distribution in widespread
across the country. Few items have more than 1 supplier for the raw material e.g. filter rods can
be sourced from Mumbai, Bangalore or Devas in MP. Huge supply-demand network for
cigarette business, which must operate in the cost optimal way to maximize the profits. Few
segments are particular to factories e.g. Kingsize.

Consumer: Organisations survive on the basis of meeting the needs, wants and providing
benefits for their customers. Failure to do so will result in a failed business strategy. 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 sectors.

The macro-environment
This includes all factors that can influence and organization, but that are out of their direct
control. A company does not generally influence any laws (although it is accepted that they could
lobby or be part of a trade organization). It is continuously changing, and the company needs to
be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization
means that there is always the threat of substitute products and new entrants. The wider
environment is also ever changing, and the marketer needs to compensate for changes in culture,
politics, economics and technology.

Economic Factors: Marketers need to consider the state of a trading economy in the short and
long-terms. This is especially true when planning for international marketing. India has been one
of the best performers in the world economy in recent years, but rapidly rising inflation and the
complexities of running the world’s biggest democracy are proving challenging.

India’s economy has been one of the stars of global economics in recent years, growing 9.2% in
2007 and 9.6% in 2006. Growth had been supported by markets reforms, huge inflows of FDI,
rising foreign exchange reserves, both an IT and real estate boom, and a flourishing capital
market.

Socio-Cultural Factors: The social and cultural influences on business vary from country to
country. It is very important that such factors are considered Envisioning a larger societal
purpose has always been a hallmark of ITC. Following are the factor which should be kept in
mind while doing business in india:

1. India, being a multi-cultural and multi-religious society, celebrates holidays and festivals
of various religions
2. India is one of the most religiously diverse nations in the world, with some of the most
deeply religious societies and cultures. Religion still plays a central and definitive role in
the life of most of its people.
3. The demographics of India is remarkably diverse. India's population of approximately
1.17 billion people (estimate for July, 2009) consists of approximately one-sixth of the
world's population
4. India is a young country with an average age between 23-24 years.

As a corporate citizen with enduring relationships in rural India, ITC has a history of
collaboration with communities and government institutions to enhance farm productivity
and the rural resource base. ITC’s commitments in agricultural R&D and knowledge sharing
have spanned vital aspects of competitiveness – efficient farm practices, soil and water
management.

Technology factor: Technology is vital for competitive advantage, and is a major driver of
globalization. Technology in India accounts for a substantial part of the country's GDP and
export earnings while providing employment to a significant number of its tertiary sector
workforce. Technically proficient immigrants from India sought jobs in the western world from
the 1950s onwards as India's education system produced more engineers than its industry could
absorb. India’s growing stature in the information age enabled it to form close ties with both the
United States of America and the European Union

 IT plays a very critical role in driving the ITC business strategies.

 IT is an enabler of the business process to ensure business growth through efficient
management of operations in the value chain.
 IT creates new business process or restructure the current business process to enhance
customer service availability ,efficient manufacturing / supply chain operations etc

Political factors: The political arena has a huge influence upon the regulation of businesses, and
the spending power of consumers and other businesses. The Indian polity is increasingly seen by
political observers as the problem. When populist political appeals stir the passions of the
masses, government institutions appear less capable than ever before of accommodating conflicts
in a society mobilized along competing ethnic and religious lines

 Budget impact: Among the FMCG stocks Marico and ITC are the biggest gainers.
Marico has added 7.3% to Rs 77. ITC has surged 7% to Rs 212, after no change in
excise cuts on cigarettes
 Due to Govt. new conditions ITC Maurya winning the 'Best eco-friendly hotel –
Special Prize' award by the Ministry of Tourism, Government of India.

The internal environment

All factors that are internal to the organization are known as the 'internal environment'. They are
generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and
Markets. The internal environment is as important for managing change as the external. As
marketers we call the process of managing internal change 'internal marketing.'

Men: ITC employs over 25,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalizing
environment to consistently reward more than 3, 53,000 shareholders, fulfill the aspirations of its
stakeholders and meet societal expectations.
Money: ITC is one of India's foremost private sector companies with a market capitalization of
nearly US $ 14 billion and a turnover of over US $ 5 billion. ITC is one of the country's biggest
foreign exchange earners (US $ 3.2 billion in the last decade).
Machinery: ITC is using world class machinery so that they can match with demand of the
market. Their most of the facilities are fully automated.
Materials: ITC is using quality raw material so that they can give world class quality product to
their customers. They are very selective while selecting supplier for them.
Markets: 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
sectors - including cigarettes, hotels, paper, agriculture, packaged foods and confectionary,
branded apparel, personal care, greetings cards, Information Technology, safety matches, incense
sticks and stationery.

SWOT Analysis

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
planning and helps marketers to focus on key issues

Strengths

ITC leveraged it traditional businesses to develop new

brands for new segments. For example, ITC used its
experience of transporting and distributing tobacco
products to remote and distant parts of India to the
advantage of its FMCG products. ITC master chefs from
its hotel chain are often asked to develop new food
concepts for its FMCG business.

ITC is a diversified company trading in a number of

business sectors including cigarettes, hotels, paper, agriculture, packaged foods and
confectionary, branded apparel, personal care, greetings cards, Information Technology, safety
matches, incense sticks and stationery.

Weaknesses
The company's original business was traded in tobacco. ITC stands for Imperial Tobacco
Company of India Limited. It is interesting that a business that is now so involved in branding
continues to use its original name, despite the negative connection of tobacco with poor health
and premature death.

To fund its cash guzzling FMCG start-up, the company is still dependent upon its tobacco
revenues. Cigarettes account for 47 per cent of the company's turnover, and that in itself is
responsible for 80% of its profits. So there is an argument that ITC's move into FMCG (Fast
Moving Consumer Goods) is being subsidized by its tobacco operations. Its Gold Flake tobacco
brand is the largest FMCG brand in India - and this single brand alone hold 70% of the tobacco
market.

Opportunities

Core brands such as Aashirvaad, Mint-o, Bingo! And Sun Feast (and others) can be developed
using strategies of market development, product development and marketing penetration.
ITC is moving into new and emerging sectors including Information Technology, supporting
business solutions.
e-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an
original and well thought of initiative that could be used in other sectors in many other parts of
the world. It is also an ambitious project that has a goal of reaching 10 million farmers in
100,000 villages. Take a look at eChoupal here http://www.itcportal.com/agri_exports/e-
choupal_new.htm

ITC leverages e-Choupal in a novel way. The company researched the tastes of consumers in the
North, West and East of India of atta (a popular type of wheat flour), then used the network to
source and create the raw materials from farmers and then blend them for consumers under
purposeful brand names such as Aashirvaad Select in the Northern market, Aashirvaad MP
Chakki in the Western market and Aashirvaad in the Eastern market. This concept is
tremendously difficult for competitors to emulate.

Chairman Yogi Deveshwar's strategic vision is to turn his Indian conglomerate into the country's
premier FMCG business.

Per capita consumption of personal care products in India is the lowest in the world offering an
opportunity for ITC's soaps, shampoos and fragrances under their Wills brand.

Threats

The obvious threat is from competition, both domestic and international. The laws of economics
dictate that if competitors see that there is a solid profit to be made in an emerging consumer
society that ultimately new products and services will be made available. Western companies will
see India as an exciting opportunity for themselves to find new market segments for their own
offerings.

ITC's opportunities are likely to be opportunities for other companies as well. Therefore the
dynamic of competition will alter in the medium-term. Then ITC will need to decide whether
being a diversified conglomerate is the most competitive strategic formation for a secure future.
TC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India
Limited'. Its beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the
centre of the Company's existence. The Company celebrated its 16th birthday on August 24,
1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru
Road) Kolkata, for the sum of Rs 310,000.
Strategic Rationale

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 hoteliering. Over time, the strategic forays into new businesses are expected to garner a
significant share of these emerging high-growth markets in India.

 Sustain multiple drivers of growth, matching internal capabilities with emerging market
opportunities
 Pursue World class competitiveness in all businesses and across the entire value chain
 Best-in-class in terms of:
1. Internal Vitality
2. Market Standing
3. Profitability
 Business model retains critical elements of value chains within ITC with other elements
outsourced
a. Contributing to the competitiveness of SMEs
 Strategy of Organization and Governance processes geared to manage multiple
businesses
 Blend core competencies and leverage ITC umbrella strengths to create new avenues of
Growth.
 Blend multiple competencies residing within the ITC Group to create new avenues of
growth
 Best fit between internal capabilities and emerging market opportunities
 Each segment enhances the depth and width of ITC’s FMCG distribution capability
Recommendation

 Improved security for hotel guests.

 Floor access control in hotels through key card system.
 Precision analysis of products in Food Business.
 Process optimization for product development in Food Business.
 Automation of lighting controls.
 Use of Solar energy for hot water generation and outside area illumination.
 Installation of PNG (Piped Natural Gas) fuelled generator sets and PNG fired calendar
and tumbler drier machines in hotel laundries.
 Improvements to reduce heat gain/cooling losses from building envelops in hotels.
 Impact of measures for reduction of energy consumption and consequent impact on the
cost of production of goods.

CONCLUSION

 ITC promoting their brands through advertisement campaign as well as door to door
promotion.
 ITC is also focusing on Retailers and Wholesalers to promote their brand.
 The demand of their product in very low, because people don’t know about their brands
very well.
 ITC knows their strength and weakness in the personal care market, so they are applying
new concept to overcome their weaknesses.
 ITC now offering more margins, exiting offers and long credit period to retailers and
wholesalers.