Marketing Strategy of ITC Ltd.

DISSERTATION REPORT

MARKETING & BUSINESS STRATEGY OF ITC LTD. Submitted in partial fulfillment Master of Business Administration in Marketing

Under the Guidance of: -

Submitted By :

Col. Guruswamy

Akash Deep Garg Roll No : 520788905 Batch : 2007-09

EMPI Business School New Delhi-110074 (2007-2009)

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ACKNOWLEDGEMENT I extend my sincere gratitude to Col K Guruswamy, our Project guide, for the successful completion of the project. He has been a great support and guide to me during the entire dissertation. He has helped me throughout, from choosing the project till I completed the Project Report. This project has given me more confidence about the subject and various concepts of ‘Consumer Behavior’. My sincerest gratitude also extends to Mrs. Shailja Manocha, who has taken a keen interest in my project from time to time, and encouraged me to perform to the best of my ability. I am also thankful to my faculty members for their support and help for completion of the project. Thank you all for your time and guidance in helping me achieve my goal of completing this project to the best of my ability. Akash Deep Garg Roll No-520788905 MBA 2007-09

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DECLARATION

I,

AKASH

DEEP

DISSERTATION

GARG,

hereby

REPORT

ON

declare

that

the

project

on

MARKETING

&

BUSINESS

STRATEGY OF ITC LTD. is written by me under the guidance of Mrs. Shailja Manocha. The empirical conclusion & findings in the project are based on the data collected by me and the entire project work is not a reproduction of any other sources.

Signature Name-AKASH DEEP GARG

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TABLE OF CONTENTS TOPIC

PAGE NO.

1. EXECUTIVE SUMMARY OF THE PROJECT

6

2. INTRODUCTION TO THE PROJECT

7-9

3. OBJECTIVE OF THE PROJECT

10

4. RESEARCH METHODOLOGY

10

5. PROFILE OF ITC LTD.

11-17

6. INITIATIVES TAKEN

18-20

7. FINDINGS & ANALYSIS- MARKETING

21-25

8. ANALYSIS ON DIVERSIFICATION

26-28

9. FUTURE PLANS

29

10. RECOMMENDATIONS

30

11. LIMITATIONS

31

12. REFERENCES

32

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EXECUTIVE SUMMARY OF THE PROJECT This topic has been chosen to study the Marketing & Business strategy of ITC Ltd. There are certain prospective on which a company sells their products in to the market and diversifies their business. This project has been a great learning experience for me; at the same time it gave me enough scope to implement my analytical ability. Full project gives an insight about the strategies and its various aspects. It is purely based on whatever the researcher learned at EMPI Business School. All the topics have been covered in a very systematic way. The language has been kept simple so that even a layman could understand. The whole theoretical part is covered with relation to the product. It helped to understand the various concepts of marketing. The various theories like learning, perception, attitude, motivation, and personality are fully studied in the project.

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Introduction ITC India Limited Type Public (BSE:ITC) Founded August 24, 1910 Radha Bazar Lane, Kolkata, India Headquarters Virginia House, Kolkata, India Key people Y C Deveshwar, ChairmanK Vaidyanath, Director, CFO: Partho Chatterjee Industry Tobacco, Foods, Hotels Products Cigarettes, Packaged Food, Hotels, Apparel Revenue $4.75 billion USD (2006) Employees 20,000 (2006) Website http://www.itcportal.com/

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 endeavors 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:

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Objective The primary objective of this study is to systematically explore the determinants responsible for the competitive advantage of ITC Limited and how ITC developed new product lines in its foods business drawing on its competencies in brand-building, R&D, packaging, and distribution. However, market analysts were not sure whether ITC would achieve success in all the food categories that it had entered.

•

Why people are buying the products.

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What all the things which influences them to buy

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To understand how ITC has diversified themselves to a multi-product corporation from a single product company

Research Methodology The researcher has used secondary data, magazines, internet, books, some market survey using marketing tools like asking question through phone, personal interview etc.

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Profile ITC in FMCG 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 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.

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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 been made since June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments. The Foods business is today represented in 4 categories in the market. These are: * Ready To Eat Foods * Staples * Confectionery * Snack Foods 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: * Kitchens of India * Aashirvaad * Sunfeast * mint-o * Candyman * Bingo!

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Lifestyle Retailing ITC’s 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 and Essenza Di Wills – an exclusive range of fine fragrances and bath & body care products and Fiama Di Wills - a range of premium shampoos and shower gels. Wills Lifestyle has also introduced Wills Signature designer wear, designed by the leading designers of the country. Wills Classic work wear was launched in November 2002, providing the premium consumer a distinct product offering and a unique brand positioning. 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.

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Education & Stationary products ITC made its entry into the stationery business in 2002 with its premium range of notebooks, followed in the year 2003 with the more popular range to augment its offering. ITC's stationery Brands are marketed as "Classmate" and "Paperkraft", with Classmate addressing the needs of school goers and Paperkraft targeted towards college students and executives.

Agarbattis As part of ITC's business strategy of creating multiple drivers of growth in the FMCG sector, the Company commenced marketing Agarbattis (incense sticks) sourced from small-scale and cottage units in 2003.

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Hotels ITC entered the hotels business in 1975 with the acquisition of a hotel in Chennai, which was then rechristened ITC Chola. Since then the ITC-Welcomgroup brand has become synonymous with Indian hospitality. With over 90 hotels in 77 destinations.

Packaging ITC's Packaging & Printing Business is the country's largest convertor of paperboard into packaging. It converts over 50,000 tonnes of paper and paperboard per annum into a variety of value-added packaging solutions for the food & beverage, personal products, cigarette, liquor, cellular phone and IT packaging industries. It has also entered the Flexibles and Corrugated Cartons business.

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Agri Business e-Choupal The unique e-Choupal model creates a significant two-way multi-dimensional channel which can efficiently carry products and services into and out of rural India, while recovering the associated costs through agri-sourcing led efficiencies. This initiative now comprises about 6500 installations covering nearly 40,000 villages and serving over 4 million farmers.

Leaf Tobacco ITC is the largest buyer, processor and exporter of leaf tobaccos in India - creating a global benchmark as the single largest integrated source of quality tobaccos. Serving customers in 50 countries across more than 70 destinations, ITC co-creates and delivers value at every stage of the leaf tobacco value chain.

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Information Technology ITC Infotech offers IT services and solutions across five key industry verticals: Banking, Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG) & Retail, Manufacturing & Engineering Services, Travel, Hospitality & Transportation and Media & Entertainment.

ITC Infotech, a global IT services company, is today one of India’s fastest growing IT services and solutions providers.

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Initiatives taken - Let’s put India first ITC is committed to a national agenda of raising agricultural productivity and making the rural economy more socially inclusive. ITC believes that the urgency and scale of these tasks make market linked solutions and innovations more effective and sustainable than capital intensive approaches.

Social & farm Forestry 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 programme simultaneously addresses the livelihood problems of marginal farmers and the ecological imperative of regenerating biomass and nurturing depleted soils.

Watershed Development ITC’s watershed initiatives have led to an improvement in soil and moisture regimes – there is more land under irrigation, water tables have risen and farmers can harvest more than one crop, making it possible to live off the land round the year.

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Agricultural Development ITC offers facilitation to farmers to form agri-business societies, pool knowledge and resources, improve productivity and quality, and reach out beyond local markets to sell at better margins.

Women Empowerment The confidence and skills generated among women by forming credit groups and managing businesses become assets to their communities.

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Livestock Development The milk marketing co-operatives represent exemplary change in rural enterprise, away from dependence on agriculture and local markets.

Primary Education School going becomes an empowering process for the child and the community. The awareness of entitlements like education and health grows, along with a sense of the community’s responsibility.

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Findings & Analysis Analysis of marketing activities The Product Mix of ITC

ITC Ltd.

Agri Business

FMCG-Cigarettes

Paperboards & Packaging

FMCG-Others

Infotech

Hotels

ITC had launched nearly all the products range off Non tobacco Products; they are very aggressive in their distribution of such products. The existing network of ITC’s Cigarettes distribution is being used extensively for the sales all products of ITC Food division. They are trying to capitalized the market by associating the products with the ITC brand.

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ITC Pricing strategy: The pricing of the ITC food division depends upon the Customers’ demand schedule, the cost function and the competitors’ price. The pricing of the company is such that it caters to the need of all income groups of people but special provision has been kept for Low and middle income group, and their pricing are competitive with respect to other players like Britannia, Parle and Briskfarm. The company follows the Going rate pricing that is the price of the product depends upon the competitors price. The firm chooses pricing more or less the same as Market leader.

ITC Promotional activities A particular budget is allocated for the promotion of the products, the local promotion scheme is decided by the Area Sales Manages, it give its suggestion to the District office and that is forwarded to the Head Quarter in Kolkata. In another promotional scheme for Biscuits a particular number of cases is given freely to the distributors according to the amount of sale they make, this was a drop down promotion i.e. of the number of free cases that a particular distributors gets, off them a certain part is reserved for the retailers and customer if they buy a certain level of biscuit quantity.

ITC Distribution Buoyed by a strong distribution network ITC is likely to retain its market share in the cigarettes business; the ban on advertisements is likely to work in favour of ITC thanks to the recall factor. The company's reliable distribution network also ensures superior inventory turnover than its peers.

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BCG Matrix

Star

Question mark

• Agri Business

• FMCG

• Hotels

o Foods

• Paperboards & Packaging Cash Cow

Dog

• FMCG

• ITC Infotech

o Cigarettes

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Consumer Buying Decision

The main driver in attracting the consumers is Quality of the product itself with nearly 65% of the people surveyed citing it as the main criterion for choosing the product, followed by past experience of the consumer with the brand (17.6%). Price was third criterion with a percentage of 11.7% of the people surveyed gave importance during buying.

An effective advertisement will attract more and more customer to buy, helps in the brand and image formation, and informative in telling the USP of the product.

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The above graph shows the experience of the customer after using the product i.e. whether they were satisfied with the product as a whole. The higher the satisfaction level higher will be the chances that the customer will buy the same brand again and again that leads to the building of the Brand loyalty.

The Availability of the Product itself determine the effectiveness and the penetration of the distribution channel of that particular brand among the people.

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Analysis on Diversification ITC has been a leader in the tobacco business, but it realize from the up coming trends that remaining with a single business is not a noble thought, moreover the company was threatened of the anti-tobacco campaign. Therefore the company decided to venture into InfoTech with ITC InfoTech, foods via Kitchens of India, greeting cards through Expressions and lifestyle retailing through Wills Sport. Each of these is intended to draw revenues of at least Rs. 250 crore by 2005. ITC was a cash rich company with a liquidity of Rs.8816 million in the cigarette business, even though the company understood the need and usefulness of diversification. The writer in the article is mainly concerned with the way ITC spreads its wings in the lifestyle segments, he writes:” forty-five stores in 34 cities in just under a year, selling an expensive fashion brand of relaxed-wear. If retail swamp-out and brand salience were the goals, ITC’s Wills Sport would be on a victory lap already.” The company has started its retail stores not only in Indian metros but also in the small towns like Ranchi, Jabalpur, Gwalior, Belguam, Ernakulam etc. the article also talks about the strong market campaign done by the company, it also describe how the company has used its brand image to attract the Indian youth. It also tells about the strategy adopted by the company to differentiate itself in this segment, like the company is outsourcing its designs form the American Design Intelligence Group (ADIG), a San Francisco, US-based garment and retail consultancy. Now it has its own six-member team, even as it continues a tie-up with Science & Designs, an Italian fashion design house – through which it keeps a watch on hot western labels such as Banana Republic and Armani Exchange.

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Financial Analysis of ITC Ltd. In the quarter ended June, 07, ITC’s net profit grew 20% to Rs.782.87 million and net sales rose up 17% to Rs.3325.23 million. This profit growth was primarily driven by its cigarette business because of high margin and agribusiness, but its top line growth mainly comes from non tobacco business and agro business. ITC is facing pressure on its consolidating operating margin due to continued losses by its non- cigarette FMCG business and decline in the profitability for paper and paper board business. Higher advertising expanses, which grew 35% in FY07 and freight cost, which were up 31% last year, have also affected the margins. Going forward, the focus will be on the performance of its non tobacco FMCG business, which has begin to show sign of turning around.

ITC’s top line and bottom-line growth is likely to be marginally affected looking at its aggressive investment in hotel and other FMCG business. Its recent foray in to home and personal care also need immediate investment. At the current market price of Rs.180, the stock is valued at around 20.5 times its FY08 estimated earning per share of Rs.9. this is significantly lower than its historical price to earnings multiple of around 25 and also lower than its peers in FMCG sectors. This provides 20-25% upside over the next 12-18 months.

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SWOT Analysis of ITC Ltd. Strengths

Weaknesses

• Brand

• Dependence on Tobacco Revenues

• Distribution Network

• Negative connection of Tobacco

• Management

Opportunities

Threats

• Rural market

• Competition

• e-Choupal

both

domestic

international

• Low Per capita consumption of

• Increasing tax on cigarettes.

personal care products

Market stand of ITC Ltd. Segment

Dominance

Revenue %

PBIT %

Cigarettes

70% share

77

87

Paperboard &

Packaging board –

7

10

Packaging

No. 1 in Asia

Agri – Business

One of the largest

7

4

4

5

4

(7)

exporters from India Hotels

ITC Group ranks No. 2

FMCG (Others)

20% share of greeting cards market, ‘Aashrivaad’ atta is No.1 in branded Segment

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and

FUTURE PLANS OF THE COMPANY Today, the Aashirvaad brand stands for atta and salt and is expected to add suji, spices and rice in the staples segment. In the ready-to-eat segment, Aashirvaad has been expanding the range and the latest offering includes its combo packs of rice and gravies. Besides, an all-purpose curry paste has also been included in the range. To make a success of any foods business, apart from understanding the palate, it would be procurement and sourcing which have to deliver on two fronts: mainly that of quality and efficiency. As for its ready to eat category Kitchens of India (KOI), the company’s strategy is to expand the KOI product porfolio. In this category, the company plans to introduce new products to meet the evolving needs of consumers. This premium brand is targeted at tourists, consumers who order at home, NRIs and women in the age group 25 plus.

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Recommendations According to the survey conducted and after analyzing the Price, Promotion, Place and Product of the ITC and the consumer behavior in the market the company can implement the following measure for increasing the sales and volume of their products. • Advertisement for the Aashirvaad atta is found to be ineffective and infrequent. So, the company can come up with an aggressive advertisement to attract the Indian housewife as they are found to be the decision maker in the buying of Atta. • The company can come up the concept of forming a Retail chain of Food products across all over India as it is follows the marketing strategy of Umbrella branding. In such retail chains all the food division products can be sold at the discounted rate, as more and more products are coming under the Umbrella products like food processing. • The branded atta can be exported to other countries where we are currently exporting the whole wheat. • The company can approach the government or distributing their products in Military canteens and can sell them to organization that provides the afternoon meals to the children as a part of mid-day meal scheme.

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Limitations •

Skill set shortage

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Maintaining high quality standards

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Lack of talent pool

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Unable to do primary research

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Confidentiality

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Enhanced risk management

•

Time constraint

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References taken : http://www.itcportal.com http://www.google.co.in/ http://www.blonnet.com http://www.just-food.com http://www.thehindubusinessline.com http://www.imcri.org http://www.scribd.com

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