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ITC- ITRODUCTIO

ITC is one of India's foremost private sector companies with a market capitalization of
over US $ 13 billion and a turnover of US $ 3.5 billion. 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 ranks third in pre-tax profit
among India's private sector corporations.

ITC has a diversified presence in the following industries,

• Cigarettes
• Hotels
• Paperboards & Specialty Papers
• Packaging, Agri-Business
• Packaged Foods & Confectionery
• Information Technology
• Branded Apparel
• Greeting Cards
• Safety Matches
• 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.

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

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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."

HISTORY & EVOLUTIO

The story of the Imperial Tobacco Company of India Ltd. extraordinarily though it may
sound, starts long before the company was established, or even thought of. It starts not in
India, but in the US. It was started by James Buchaman Duke in 1881. W. Duke Sons &
Company was doing a flourishing business around 1889 merged with other four players
in the market and set up the American Tobacco Company ( ATC ). ATC looked at the
British market along with Imperial Tobacco Company Ltd. floated a new company, the
British American Tobacco Company Ltd.( BAT ) which was to handle trade outside USA
and Britain. With India having centuries old tradition of tobacco, BAT looked into this
market.

ITC 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.
This decision of the Company was historic in more ways than one. It was to mark the
beginning of a long and eventful journey into India's future.

The Company's headquarter building, 'Virginia House', which came up on that plot of
land two years later, has become Kolkata's most venerated landmarks. The Company's
ownership progressively indianised, and the name of the Company was changed to I.T.C.
Limited in 1974. In recognition of the Company's multi-business portfolio encompassing
a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology,
Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle Retailing and
Greeting Gifting & Stationery - the full stops in the Company's name were removed
effective September 18, 2001. The Company now stands rechristened 'ITC Limited'.

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ITC- MISSIO STATEMET

An organizations mission is the purpose or reason for the organizations existence. it tells
what the company is providing for the society. A well conceived mission statement
defines the fundamental, unique purpose that sets the company apart from other firms of
its type and identifies the scope of the company’s operations in terms of product, services
offered and market served.

ITC-VISIO

A vision statement describes wat the organization would like to become in the future. It
helps in creating a sense of direction for the company and its employees and leads them
towards attaining the goals.

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ITC LEADERSHIP- CORPORATE GOVERACE

The governance framework determines whom the organization is there to serve and how
the purposes and priorities of the organization should be decided. it is concerned with
both the functioning of the organization and the distribution of power among different
stake holders.

Governance chain- the governance chain identifies all those groups that have a legitimate
influence on the organizations purposes. There are likely to be several conflicts of interest
both between different stake holder groups and for individual managers of directors as
they try to balance these various interests.

The role of the governing bodies- the primary statutory responsibility of the governing
body of an organization is to ensure that the organization actually fulfills the wishes and
purposes of the owners.

THE ITC WAY

ITC defines Corporate Governance as a systemic process by which companies are

directed and controlled to enhance their wealth generating capacity. Since large
corporations employ vast quantum of societal resources, ITC believes that the governance
process should ensure that these companies are managed in a manner that meets
stakeholder’s aspirations and societal expectations. ITC has won the ational Award for
Excellence in Corporate Governance 2006 from the Institute of Company Secretaries
of India..The award was presented in Chennai today by Shri Surjit Singh Barnala,
Governor of Tamil Nadu.

Leadership within ITC is exercised at three levels.

• The board of directors

• Corporate management committee
• Divisional management committee

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The Board of Directors at the apex, as trustee of shareholders, carries the responsibility
for strategic supervision of the Company. The strategic management of the Company
rests with the Corporate Management Committee comprising the whole time Directors
and members drawn from senior management. The executive management of each
business division is vested with the Divisional Management Committee (DMC), headed
by the Chief Executive. Each DMC is responsible for and totally focused on the
management of its assigned business.

This three-tiered interlinked leadership process creates a wholesome balance between the
need for focus and executive freedom, and the need for supervision and control.

Since the commencement of the liberalization process, India's economic scenario has
begun to alter radically. Globalization will not only significantly heighten business risks,
but will also compel Indian companies to adopt international norms of transparency and
good governance. Equally, in the resultant competitive context, freedom of executive
management and its ability to respond to the dynamics of a fast changing business
environment will be the new success factors. ITC's governance policy recognizes the
challenge of this new business reality in India.

CORE PRICIPLES

ITC's Corporate Governance initiative is based on two core principles,

(i) Management must have the executive freedom to drive the enterprise forward
without undue restraints
(ii) This freedom of management should be exercised within a framework of
effective accountability

ITC believes that any meaningful policy on Corporate Governance must provide
empowerment to the executive management of the Company, and simultaneously create a
mechanism of checks and balances which ensures that the decision making powers vested
in the executive management is not only not misused, but is used with care and
responsibility to meet stakeholder aspirations and societal expectations.

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Cornerstones

From the above definition and core principles of Corporate Governance emerge the
cornerstones of ITC's governance philosophy, namely trusteeship, transparency,
empowerment and accountability, control and ethical corporate citizenship. ITC believes
that the practice of each of these leads to the creation of the right corporate culture in
which the company is managed in a manner that fulfils the purpose of Corporate
Governance.

The governance structure of ITC,

• Strategic supervision by Board of Directors

• Strategic management by Corporate Management Committee
• Executive management by the Divisional Chief Executive assisted by the
Divisional Management Committee

The 3-tier governance structure thus ensures that:

(a) Strategic supervision (on behalf of the shareholders), being free from involvement in
the task of strategic management of the Company, can be conducted by the Board with
objectivity, thereby sharpening accountability of management.

(b) Strategic management of the Company, uncluttered by the day-to-day tasks of

executive management, remains focused and energized; and

(c) Executive management of the divisional business, free from collective strategic
responsibilities for ITC as a whole, gets focused on enhancing the quality, efficiency and
effectiveness of its business.

THE ROLES OF ITS COSTITUETS

Board of Directors (Board):

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The primary role of the Board of Directors is that of trusteeship to protect and enhance
shareholder value through strategic supervision of ITC, its wholly owned subsidiaries and
their wholly owned subsidiaries. As trustees they will ensure that the Company has clear
goals relating to shareholder value and its growth. They should set strategic goals and
seek accountability for their fulfillment. They will provide direction, and exercise
appropriate control to ensure that the Company is managed in a manner that fulfills
stakeholder aspirations and societal expectations. The Board must periodically review its
own functioning to ensure that it is fulfilling its role.

The Board shall meet at least six times a year and as far as possible meetings will be held
once in two months. The annual calendar of meetings shall be agreed upon at the
beginning of each year. As laid down in the Articles of Association of the Company, the
quorum for meetings shall be one third of members and decisions shall be taken by
simple majority, unless statutorily required otherwise. Meetings shall be governed by a
structured agenda. All major issues included in the agenda shall be backed by
comprehensive background information to enable the Board to take informed decisions.
Agenda papers, as far as practicable, shall be circulated at least three working days prior
to the meeting. Normally items for the Board Agenda, except those emanating from
Board Committees, shall have been examined by the CMC. Minutes shall be circulated
within 15 working days of the meeting and confirmed at the next meeting. Board
decisions shall record the related logic as far practicable.management below the
Executive Directors.

Corporate Management Committee (CMC): The primary role of the CMC is strategic
management of the Company's businesses within Board approved direction / framework.
The CMC will operate under the superintendence and control of the Board. The
composition of the CMC will be determined by the Board (based on the recommendation
of the Nominations Committee), and will consist of all the Executive Directors and three
or four key senior members of management. Membership of the CMC shall be reviewed
by the Nominations Committee annually. The CMC shall be convened and chaired by the
Executive Chairman of the Company. The Company Secretary shall be the Secretary of

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the CMC. The quorum for meetings will be 50% of the members, subject to a minimum
of three members. Decisions will be taken by simple majority. Minutes of CMC meetings
shall be tabled before the Board for its information. However, issues arising from CMC
Meetings and requiring Board's approval / attention should be tabled in the form of a note
from the relevant Executive Director. Agenda items shall be backed by comprehensive
notes from the concerned member / invitee, along with DMC approval where applicable.
Agenda papers, as far as practicable, shall be circulated at least three days prior to the
meeting. The CMC shall normally meet once a month.

Executive Chairman of ITC

The Executive Chairman of ITC shall operate as the Chief Executive for ITC as a whole.
He shall be the Chairman of the Board and the CMC. His primary role is to provide
leadership to the Board and CMC for realizing Company goals in accordance with the
charter approved by the Board. He shall be responsible for the working of the Board, for
its balance of membership (subject to Board and Shareholder approvals), for ensuring
that all relevant issues are on the agenda, for ensuring that all directors are enabled and
encouraged to play a full part in the activities of the Board. He shall keep the Board
informed on all matters of importance. He shall preside over the General Meetings of
shareholders. As Chairman of the CMC he will be responsible for its working, for
ensuring that all relevant issues are on the agenda, for ensuring that all CMC members
are enabled and encouraged to play a full part in its activities.

Executive Director:

a) As a member of the CMC, contribute to the strategic management of the Company's

businesses within Board approved direction / framework.

b) As Director accountable to the Board for a business (Line Director), assume overall
responsibility for its strategic management, including its governance processes and top
management effectiveness.

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c) As Director accountable to the Board for a wholly owned subsidiary, or its wholly
owned subsidiary (Line Director), act as the custodian of ITC's interest and be
responsible for their governance in accordance with the charter approved by the Board.

d) As Director accountable to the Board for a particular corporate function (Line

Director), assume overall strategic responsibility for its performance.

Divisional Management Committee (DMC): Executive management of the divisional

business to realize tactical and strategic objectives in accordance with CMC / Board
approved plan. Composition of the DMC shall be determined by the Line Director with
the approval of the CMC. The Divisional CEO shall convene and chair the DMC
meetings. If the Divisional CEO, for any reason, is not in a position to convene a required
DMC meeting, he shall in writing delegate the power to convene and chair the required
meeting to one of the DMC members identified by name. Such delegation should be
either for a specific meeting or for meetings to be held during a specific period of time. It
cannot be a general, open-ended delegation. The key functions of the Division shall be
represented on the DMC. Normally the Divisional Financial Controller, in addition to
being a member, shall act as the Secretary to the DMC and will be responsible for
circulation and custody of agenda notes and minutes. The DMC shall generally meet at
least once a month to review Divisional performance and related issues. Quorum for
meetings shall be 50% of the members subject to a minimum of three members.
Decisions will be taken by simple majority. Minutes of meetings shall be tabled before
the CMC for its information. Agenda items shall be backed by comprehensive notes from
the relevant member / invitee. Agenda papers, as far as practicable, shall be circulated at
least three days prior to the meeting.

Divisional CEO:

The Divisional CEO shall function as the Chief Operating Officer with executive
responsibility for day-to-day operation of the Divisional business, and shall provide

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leadership to the Divisional Management Committee in its task of executive management

of the Divisional business.

CORPORATE SOCIAL RESPOSIBILITY OF ITC

Corporate social responsibility is the detailed issues on which an organization exceeds its
minimum required obligations to stake holders. It has been noted that companies
increased their awareness of and level of activity in some aspects of social responsibility
but they seemed to limit their involvement to a relatively narrow range of issues. It was
also indicated that most organizations failed to seek out best practice elsewhere and this
they suggested, indicated that social responsibility considerations were not pursued as
keenly as commercial activities.

ITC believes that an effective growth strategy for our nation must address the needs of
rural India, home to 75% of our poor. It is imperative to ensure that India's economic
growth is inclusive, embracing its villages, so as to free millions of our disadvantaged
citizens from the indignity of poverty.

It is ITC's belief that India's rural transformation cannot be brought about by the
government alone. Nor can the efforts of a few enterprises make a decisive difference.
Only an inspired public-private partnership can transform lives and landscapes in rural
India. ITC's humble endeavors have demonstrated that it is possible to create and sustain
a model that can harmonize the need for shareholder value creation with making a
substantial contribution to society.

For ITC, these are expressions of a commitment beyond the market. Of a conviction that
country must come before corporation of a true pride in being Citizen First.

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E-Choupal

The e-Choupal model has been specifically designed to tackle the challenges posed by
the unique features of Indian agriculture, characterized by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among others.

‘e-Choupal’, launched in June 2000 unshackles the potential of Indian farmer who has
been trapped in a vicious cycle of ,

• Low risk taking ability

• Low investment
• Low productivity
• Weak market orientation
• Low value addition
• Low margin
• Low risk taking ability

This made Indian farmers and Indian agribusiness sector globally uncompetitive, despite
rich & abundant natural resources.

The Model in Action:

Appreciating the imperative of intermediaries in the Indian context, ‘e-Choupal’

leverages Information Technology to virtually cluster all the value chain participants,
delivering the same benefits as vertical integration does in mature agricultural economies
like the USA.

With a judicious blend of click & mortar capabilities, village internet kiosks managed by
farmers – called sanchalaks – themselves, enable the agricultural community access
ready information in their local language on the weather & market prices, disseminate
knowledge on scientific farm practices & risk management, facilitate the sale of farm
inputs (now with embedded knowledge) and purchase farm produce from the farmers’
doorsteps (decision making is now information-based).

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Real-time information and customized knowledge provided by ‘e-Choupal’ enhance the

ability of farmers to take decisions and align their farm output with market demand and
secure quality & productivity. The aggregation of the demand for farm inputs from
individual farmers gives them access to high quality inputs from established and reputed
manufacturers at fair prices. As a direct marketing channel, virtually linked to the
‘mandi’ system for price discovery, ‘e-Choupal’ eliminates wasteful intermediation and
multiple handling. Thereby it significantly reduces transaction costs.

‘e-Choupal’ ensures world-class quality in delivering all these goods & services through
several product / service specific partnerships with the leaders in the respective fields, in
addition to ITC’s own expertise.

While the farmers benefit through enhanced farm productivity and higher farm gate
prices, ITC benefits from the lower net cost of procurement (despite offering better prices
to the farmer) having eliminated costs in the supply chain that do not add value.

ITC has taken care to involve farmers in the designing and management of the entire ‘e-
Choupal’ initiative. The active participation of farmers in this rural initiative has created a
sense of ownership in the project among the farmers. They see the ‘e-Choupal’ as the
new age cooperative for all practical purposes.

This enthusiastic response from farmers has encouraged ITC to plan for the extension of
the ‘e-Choupal’ initiative to altogether 15 states across India over the next few years. On
the anvil are plans to channelise other services related to micro-credit, health and
education through the same 'e-Choupal' infrastructure.

CAUSE OF UDERPRIVILEGED CHILDRE

ITC launched its notebooks brand Classmates, deliberately pricing itself 10-15 per cent
higher than the competition, between Rs 10 and Rs 40. This ensured that it created an
affordable-yet-aspirational image and also send a hidden message of being a superior

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product (60 gsm paper, bleached without using chlorine). Then, ITC focused on the
design elements of notebooks: each Classmate notebook has a theme on the cover and
related information inside.

Then, the last two pages of the notebook have trivia and the back cover highlights the
corporate social responsibility initiatives of the company,

Re 1 from each notebook sold is set aside for the cause of underprivileged children

ITC supports 60,000 children in rural India. Providing uniforms and books, improving
school buildings, adding electricity connections, lights and fans and running over 674
Supplementary Learning Centers, helping rural children aspire to a better tomorrow. This
is one of the many ways in which ITC expresses its belief that country must come before
corporation.

WOME ETREPREEURS

The need of the hour is to diversify rural livelihoods. Towards this end, ITC has forged
an empowering partnership with rural women – the most effective development workers.
ITC’s intervention leverages micro-credit and skills training to generate alternate
employment opportunities. Increased income in the hands of rural women means better
nutrition, health care and education for their children

Working with NGOs, ITC has organized village women into micro-credit groups. Group
members make monthly contributions to create a savings corpus. The corpus is used to
extend soft loans to group members, thereby eliminating the stranglehold of the
moneylender. ITC provides training to group members to handle bank accounts and
understand the nuances of government development programs.

Empowered groups function autonomously and take their own decisions, including
sanction of loans to fellow-members and collection of repayments. Well-managed micro-
credit groups with no default records receive further support from ITC in the form of seed

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money for self-employment activities. Venture funds provided by ITC have already
spawned hundreds of women entrepreneurs. Their earnings, ranging from Rs 70 to Rs
150 per day, not only supplement household incomes but also significantly enhance their
self-esteem.

ITC also conducts skills training to enhance employability. Pickle-making, fish-

processing, vermicomposting, spice processing and agarbatti-rolling in rural areas and
chikankari, garment-sewing, driving and computer-aided secretarial training in semi-
urban areas are some of the examples. ITC goes a step further to help find employment
for these trained women in areas related to its operations. This program is helping women
across Andhra Pradesh, Karnataka, Madhya Pradesh, Uttar Pradesh and Bihar.

Through its various initiatives, ITC touches the lives of 4 million villagers and has
proved that it is socially responsible.

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ITC STRATEGIES

ITC's diversified status originates from its corporate strategy aimed at creating multiple
drivers of growth, anchored on its above mentioned time-tested core competencies. Over
time, the strategic forays into new businesses are expected to garner a significant share of
these emerging high-growth markets in India.

Conglomerate diversification

When the management feels that the firm’s outstanding capabilities or skills can be better
utilized and transferred into other industries, though unrelated to the current one, the firm
then adopts conglomerate diversification strategy.

ITC has adopted Conglomerate(Unrelated) Diversification strategy and accordingly has

entered into an array of business apart from its traditional tobacco industry that includes
stationery, FMCG, branded apparel, agri-business and packaging and paperboards.

STRATEGIC BUSIESS UIT

It is that part of the organization which is a cruicial unit for implementing its strategies. It
is also that part which fetches largest revenues. In ITC, tobacco industry is its SBU, as it
fetches largest revenue and is its first business which has given the conglomerate a
national identity. Also it has empowered ITC with an excellent distribution network
which is vital for its success. This network is shared by all other business units of ITC.

BACKWARD ITEGRATIO

ITC's Packaging & Printing Business Division, was set up in 1925 as a strategic
backward integration for ITC's Cigarettes business. It is today India's most sophisticated
packaging house. State-of-the-art technology, world-class quality and a highly skilled and
dedicated team have combined to position ITC as the first-choice supplier of high value
added packaging

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ITC's Packaging & Printing Business is the country's largest convertor of paperboard
into packaging. It converts over 35,000 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.

The Division supplies value-added packaging to the Company's Cigarettes business. Its
client list includes several well-known national and international companies like British
American Tobacco, Surya Nepal Private Limited, VST Industries, , UB Group, Shaw
Wallace, Seagrams, Allied Domecq, Whyte & Mackay, Hindustan Lever, Tata Tetley and
Nestle, Reckitt Benkiser India Limited, etc.

STRATEGIC BUSIESS UIT

It is that part of the organization which is a cruicial unit for implementing its strategies. It
is also that part which fetches largest revenues. In ITC, tobacco industry is its SBU, as it
fetches largest revenue and is its first business which has given the conglomerate a
national identity. Also it has empowered ITC with an excellent distribution network
which is vital for its success. This network is shared by all other business units of ITC.

FORWARD ITEGRATIO

ITC Limited, the tobacco-cum-hotels major which has been fast transforming itself into a
FMCG company, is targeting students by customising notebooks for schools under the
'Classmate' brand name and this is a part of the company's diversification plans to foray
into the other sectors

'Classmate' notebooks,a sub-brand of 'Expressions' has been customised for schools and
is available at retail stores across the country.

For this purpose, ITC has entered into arrangements with 150 renowned ICSE schools
across the country. A portion of the money coming from the sale of the notebooks would

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be contributed to some social. He said in the financial year 2006-07, the division was
targeting a revenue of Rs 100 crore.

The business division of ITC is primarily a forward integration of the company's paper
manufacturing activity.

With ITC having a state-of-the-art paper manufacturing plant at Bhadrachalam in Andhra

Pradesh, the division has been using the high-quality ECF (elemental chlorine free) paper
for its notebooks to make it more eco-friendly.

This division plans to introduce more paper-based products, which would be marketed
under the Expressions brand.It has also introduced the premium 'Papercraft' brand, which
was targeted executives and college students.

The company planned to introduce more similar brands for the rural market which would
complement ITC's e-choupal initiative, he added.

MARKETIG STRATEGY
The marketing logic by which business unit hopes to achieve its marketing objectives.

PROMOTIO STRATEGY

Promotion strategy is the strategy used to communicate the merits of the products and to
persuade the target customers to buy it.

Wills Lifestyle offers a complete lifestyle wardrobe for the premium consumers
incorporating the latest fashion trends. Their clothing is not only the latest in fashion but
they also come out with clothing for different seasons. They are very active in promoting
their products by conducting fashion shows in national and international levels and
sponsoring many fashion shows like India Fashion Week etc.

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PUSH STRATEGY - THE MYSTERY SHOPPER

A push strategy involves ‘pushing’ the product through distribution channels to the final
consumer. The firm directs its marketing activities (primarily personal selling and trade
promotions) towards channel members to induce them to carry the product and to
promote it to final consumers.
Companies spend a large amount of money on trade promotion in order to gain or hold
shelf space in retail outlets. Trade promotion includes discounts, in-store special offers
designed to push products through the distribution system.
As a part of its promotional strategy, ITC put up posters in the kiranas and used the
concept of mystery shopping in case of the tobacco industry. Promoters were sent to the
kiranas in town to inform the kirana owners of “the mystery shopper”, who will visit
them at any time, any day and ask for a cigarette. The shop owner has to offer him only
an ITC brand cigarette first, even if he requests for another brand. If he insists on another
brand, then the shop owner can give him the requested brand. If he does so, he will be
rewarded with gifts like lighters. He will then be qualified to enter into a lucky draw and
if he becomes “lucky” will get a fan or radio set. Also a bumper prize comprising of a trip
to Mumbai or Singapore was offered.

ITC adopted this strategy to increase its sales and awareness and to gain favoritism from
the kirana owners. In anticipation of the mystery shopper, the kirana owners kept offering
ITC cigarettes to all customers first and only upon a request or insistence they sold the
requested brand. This increased the awareness and sales, while the prizes gathered the
“favoritism” of mystery shoppers.

PULL STRATEGY

The Pull strategy is where the producer directs its marketing activities (primarily
advertising and consumer promotion) towards final consumers to induce them to buy the
product. If the pull strategy is effective, consumers will then demand the product from

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channel members, who will in turn demand it from producers. Thus under a pull strategy,
consumer demand ‘pulls’ the product through the channels.

The sunfeast Ready – to - Eat Pasta came into the market recently. They have been able
to establish its presence with 6 per cent in volumes of the branded noodles market and
they come number two behind MTR foods in the ready-to-eat market. This has been
achieved by excessive advertising which pulls the products through the distribution
channels. The strategy adopted is to spend more money on consumer advertising
designed to build brand awareness so that shoppers will ask for the products.

COMPETITIVE TACTICS

PIOEER - FIRST MOVER

Timing tactic- The first company to manufacture and sell a new product or service is
called first mover or pioneer. The advantage of being a first mover is that the company is
able to establish a reputation as industry leader, gain cost leadership, and achieve high
profits from buyers. The first mover can also set standards for all subsequent products.
The first mover has sufficient resources to both exploit the new markets and defend its
position against its late rivals.
ITC-Welcomgroup pioneered a holistic concept of "branded accommodation" in the
hospitality industry. It was the first to launch the powerful idea of a 'Hotel within a
Hotel' by segmenting and branding the hotel services. It created exclusives hotels and
executive clubs each catering to the needs of the global business traveller with unmatched
quality and a range of services.
ITC-Welcomgroup was also the first to brand its cuisine. The Bukhara, the Dakshin and
the Dum Pukht are today powerful cuisine brands, which delight connoisseurs in
restaurants in several ITC-Welcomgroup hotels.

LATE MOVER

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Late Movers are those who are able to imitate the technological advance of others, keep
risks down by waiting until a new market is established and take advantage of the first
movers inclination to ignore market segments.

ITC entered the biscuit business very late when the two major players Britannia and Parle
were busy biting of chunks of the national market among themselves, with a host of
smaller brands in various regions. The strategy that the company followed was to find
loopholes in the industry into which they can tap. Therefore before entering the segment,
ITC dug into market research. Research revealed that the category had gaps which ITC
could settle into. Findings revealed that consumers wished to taste new and innovative
products. That was precisely what the competition had not done in a big way. ITC
launched Sunfeast with six ranges. But it was a calculated risk. ITC stuck to category
favorites like Glucose, Marie and Bourbon cream. Along with that, it also launched
innovations such as orange-flavoured Marie, Marie light and butterscotch-flavoured
cream biscuits. Sunfeast followed this up with the launch of Sunfeast Milky Magic. More
recently, it also has launched the Sunfeast Snacky and Sunfeast

In August 2003, a month after its launch, the company undertook a major sampling
exercise to promote the product. For two years then, the brand did all the usual rounds --
riding behind buses, blocking television spots, booking that corner space in your
favourite newspaper and so on. Well differentiated advertisements, some which showed a
complete cream world with cream rivers, cream mountains and cream trees, were targeted
at kids watching cartoon channels. At the same time, on general entertainment channels,
mothers received information on the importance of glucose, the wholeness of wheat and
so on. Also, the company tied up with Bey Blades, the popular television series that was a
rage among children, to promote itself. In April 2005, Sunfeast launched its major
campaign. It signed on Hindi film actor, Shah Rukh Khan as its brand ambassador. In the
same year, as the official sponsor of the WTA tennis championship - titled the Sunfeast
Open - the company had teenage sensations Sania Mirza and Mahesh Bhupathi
campaigning for it. But that's not all. For promotions in southern states, Sunfeast has
signed Tamil super star Surya as a brand ambassador.

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PRICIG MODEL – TWO PROGED STRATEGY

The biscuits industry is very competitive and the players fight for market shares. One
way of gaining market share is by pricing the products attractively. The industry now has
two clear models. Parle products play the low price game at all varieties of biscuits from
glucose to cream. Sunfeast looks at a two-pronged strategy where it looks for high
margins in cream variants and volumes from the Marie and Glucose segments. It does
this as it cannot expect volumes of sales in the cream variant business and so they have a
higher margin of profit. In the marie and glucose segment there is heavy competition and
the biscuits hardly have any differentiation like the cream biscuit market and the
consumers don’t pay extra if there is no innovation in the product, so they look for having
a lower margin of profit and more volume of sales. The strategy adopted by them is very
profitable for the company.

FUCTIOAL STRATEGY

Outsourcing is purchasing from someone else a product or service instead of provided it

internally. The key to outsourcing is to purchase from outside only those activities that
are key to the company’s distinctive competencies.

ITC's agarbatti SBU and Cottage Industries, Aurobindo Ashram, Pondicherry, which
makes the Spriha brand of handmade incense sticks have a strategic tie-up

The agarbatti SBU, which recently launched the Mangal Deep range of agarbattis through
100 per cent outsourcing from the small, medium and cottage sector, has launched an
assorted Spriha gift pack product.

The gift packs, designed and developed in-house by ITC and specially created (with
handpicked materials) by Cottage Industries, Aurobindo Ashram, will be in two sizes,

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and will contain items like high quality incense sticks in two fragrances, a perfumed
designer candle, a collection of choice "dhoops" and a handy ceramic agarbatti/dhoop
holder (all hand-made) in a compact box pack.

Priced at Rs 100 and Rs 150 (two sizes), the gift packs have been launched in Bangalore
as part of a test marketing exercise through outlets stocking ITC's Greetings Cards
(Expressions).

Planned as a stand-alone gift item, especially for festive occasions, the plan is to utilise
the available in-house greeting cards distribution channel to position the product, and
gradually scale up visibility at various gift shops through a national roll-out. Cottage
Industries, Pondicherry, produces half-a-million packs of handmade Spriha agarbattis per
month for ITC under a contractual agreement.

ITC follows strict quality parameters in all its sectors and in this sector has expressly
stated that it will buy from any cottage industry that agrees to adhere to their quality
standards.

GROWTH STRATEGIES

Growth strategies are defined to achieve growth in sales, assets profits or some
combination. A corporation can grow internally by expanding its operations both globally
and domestically, or it can grow externally through mergers and acquisitions and
strategic alliances.

MERGERS AD AMALGAMATIO

A merger is a transaction involving two or more companies in which stock is exchanged

but from which only one company survives. Mergers take place between companies with

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similar sizes. Amalgamation refers to where two companies join together with some
mutual understanding and it exists as a single entity.

ITC Ltd has decided to consolidate its hotels business and has accordingly proposed to
amalgamate its wholly owned ITC Hotels Ltd and other hotel subsidiaries with the main
company. ITC is considering the amalgamation of its subsidiaries such as ITC Hotels,
Ansal Hotels Ltd and Bay Islands Hotels Ltd (a wholly owned subsidiary of ITC Hotels
in Port Blair), with the company.

The company may actually be following the Hindustan Lever model, which some years
ago saw the merger of the key companies in the group such as Ponds, Brooke Bond and
Lipton, with the main company to emerge as a much stronger entity in the market place.
ITC too may be trying the same formula, especially since the hotels business essentially
involves a lot of real estate (land and building). ITC had already merged Bhadrachalam
Paperboards Ltd with the main company to position itself as a leader in the paperboards
market.

It is expected that the valuation of the ITC Hotels property may also go up substantially.
This will prove to be good for the company, as Welcomgroup, with its hoteliering
capability and strong positioning in chosen consumer segments such as super deluxe
hotels, 5-star mid-market and heritage properties, has already consolidated its position in
the business.

Strategic Alliance

A strategic alliance is a partnership of two or more corporations or business unites to

achieve strategically significant objectives that are mutually beneficial. Some alliances
are very short term, over time conflicts over objectives and con troll often develop among
the partners. Between thirty percent and fifty percent of all alliances perform
unsatisfactorily. Companies may go in for strategic alliances for a number of reasons like
to obtain technology or to obtain specific markets, to reduce financial risks or may be
achieve competitive advantage.

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In a significant move to strengthen its presence in the greeting cards industry, ITC’s
Greeting Cards Business has entered into a strategic alliance with Maple Leaf, the
country’s leading pop-up card manufacturer.
As a part of this alliance, Maple Leaf will exclusively make pop-up cards for ITC. ITC is
expected to re-launch the pop-up cards under its Expressions brand. Maple Leaf is
India’s premier pop-up card manufacturer considered to be pioneers in this segment of
the Greeting Cards Market and enjoy very high equity in the trade.

Manufacture of pop-up cards require intricate designing and hence requires specialized
skills. This alliance with Maple Leaf the leading player in the segment and the pioneer of
pop-up cards in the country will leverage the manufacturing skills of Maple Leaf and the
marketing organization of ITC to help tap the latent demand for such cards in the country.

Pop-up cards occupy a niche segment in the overall cards market with almost a 5%
market share in the metros. However, in value terms pop-cards are estimated to have a
larger share due to their higher price tags compared to normal cards.
Internationally pop-cards are very popular and contribute almost ten per cent to total sales
of the industry. However, in India the manufacturing skills of pioneers like Maple Leaf
have not been backed by adequate distribution support. Through this alliance a rapid
growth can be seen in the segment by launching the Expressions range of pop-up cards
nationally in more than 10,000 outlets across the country supported by an intensive
communication program.

Joint Venture

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint
venture. Since inception, its shares have been held by ITC, British American Tobacco
and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a

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subsidiary of ITC Limited and its name was changed to Surya epal Private Limited
(Surya Nepal).

Acquisition

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing

company and a major supplier of tissue paper to the cigarette industry. The merged entity
was named the Tribeni Tissues Division (TTD). To harness strategic and operational
synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the
Paperboards & Specialty Papers Division in November 2002.

SWOT AALYSIS

Opportunities Strengths

Threats Weaknesses

SWOT is an acronym used to describe the particular Strengths, Weaknesses,

Opportunities and Threats that are strategic factors for a specific company. SWOT
analysis should not only result in the identification of a company’s distinctive
competencies, the particular capabilities and resources that a firm possess but also in the
identification of opportunities that the firm is currently able to take advantage of due to

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lack of appropriate resources. SWOT analysis is an analytical technique used in strategic

management.

ITC- SWOT AALYSIS

Strengths

Unmatched distribution reach

Superior brand building capabilities

Acknowledged service skill in hoteliering

Weaknesses

E- greeting has picked up recently and most of the people are going in for SMS
and MMS , and also increased the usage of telephone which resulted the greeting
cards to be old fashioned.

In case of certain product lines, branding and other strategies adopted make it
successful but they are not immediately associated with the parent company. In
spite of extensive diversification strategies adopted, ITC to a great degree is still
associated prominently with Tobacco and Hotels

Opportunities

Today major players from the international market are entering India in various
industries, for example the launch of Malboro in India. ITC should utilize this
opportunity to prove its capabilities and retain its status in the market.

Threats

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Government ban on Cigarettes. ITC is still having growth in that segment but
consumption rate per person has reduced and also people are becoming more
health conscious

In today’s world and in the future there is an anticipation that the word notebook
would conjure up images of a sleek portable computer.

Threat of new entrants

BCG MATRIX
The Boston Consulting Group (BCG) reflects the company’s portfolio of investments.
Each of the company’s product lines are plotted in a matrix according to its growth rate
of the industry and its relative market share
The BCG matrix results in four types of decisions they are Question marks, Stars, Cash
Cows and Dogs.

STARS QUESTIO MARKS

ITC HOTELS STATIOERY

CASH COWS DOGS

TOBACCO FMCG

Question Marks

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These are new products with the potential for success but need a lot of cash for
development. If such a product is to gain enough market share to become a market leader
then money must be taken from mature products. ITC brand of notebooks Classmates are
classified as question marks as they it was launched recently in 2003 and its revenue
accounts for only 40 crores while ITC’s total revenue is 7600 crores though it is
fundamentally gaining the market share it must try to generate more revenue, this is done
by means of obtaining the funds from other product lines.

Stars

Stars are market leaders typically at their peak of their product life cycle and usually are
able to generate enough cash to maintain their high share of the market. ITC group of
Hotels are placed in this category as they have a high market share in this segment. This
industry also has a high growth potential in India due to various reasons some of them
being tourism development in India; Global players entering Indian markets in different
industries, ITC can cater to their needs of foreigners through their excellent services.

Cash Cows

These are businesses that have high market share but are low in growth rate industries.
Due to a high market share they generate large amount of cash. But as they operate in low
growth industries reinvestment of cash is not done in the same industry. ITC Tobacco
which is a market leader in India, is a cash cow.

Dogs

The businesses in this category have low market share, they are unlikely to be currently
profitable and have few prospects of immediate growth. ITC FMCG businesses as in the
case of Aashirvad Atta, is a dog. ITC has very low market share in this industry and also

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faces stiff competition from the other existing players hindering its overall growth
potential.

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