Adnan Arshad

1835190
MBA 36 E ( Sec 1-E)
Strategic Management

Case no – 9
ITC Limited, Bangalore (B)

Introduction:
Incorporated on 24 August 1910 as the Imperial Tobacco Company of India Limited, the company’s
name was changed to ITC Limited in 1974. By 1977 The Company become a widely held company after
repeated rounds of dilution of foreign shareholding.
This company is rated among the World’s Best Big Companies by Forbes magazine. ITC ranks third on all
major profit parameters among India’s private sector corporations. ITC employs over 20,000 people at
more than 60 locations across India. 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 .ITC has a diversified
presence in cigarettes, hotels, paperboards and specialty papers, packaging ,agri-business, packaged
foods and confectionery, branded apparel and greeting cards. ITCs agri-business is one of India’s largest
exporters of agricultural products. A wholly-owned subsidiary, ITC InfoTech India Limited, provides end-
to-end IT solutions

Vision

Sustain ITC's position as one of India's most valuable corporations through world class performance,
creating growing value for the Indian economy and the Company’s stakeholders.

Mission

To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering
superior and sustainable stakeholder value.

Core Values

Aimed at developing a customer-focused, high-performance organization which creates value for all its
stakeholders, includes Trusteeship, Customer Focus, Respect For People, Excellence, Innovation and
Nation Orientation.

The Company had a very diversified pool, this diversification was because the company realized the
uncertainties associated with smoking and health concerns like to affect its traditional business. The
investment that was needed for this transaction of diversified pool was to be done from the money
generated by their traditional business which was tobacco. ITC knew that their production facility is not
being utilized about the mark and therefore they decided to use its excellent human resource team
consisting of 5 Members. ITC was already known for its human resource management and its policies
that were employee driven, these policies insisted that growth should be within the company. ITC
believed that higher positions should be assigned to employee being internally promoted. ITC also won
various awards, like the Federation of Indian Chambers of commerce and industry (FICCI). The company
also allowed the workers union like ITC workers union and ITC employee association.

Problem Identification:

As it was decided that the company would be utilizing the money from its cash cow, ( Tobacco business)
to further diversify ( Unrelated business) in order to minimize the risk associated with the current
business. It was believed that this was possible with less capital investment, and rationalizing the man
power by increasing their productivity to gain from improved operation practices.

ITC had an opportunity of utilizing the plant used for production of tobacco to the fullest at 60 Million
units per day, where as they were producing 33 million unit a day. With working over its policy, training
of employees and restructuring the company knew it could achieve this milestone.

The committee was formed that consisted of 5 People, who were responsible for enhancing the core
competency by passing on the expertise of various plants location to other locations and this is how they
believed better operation practices and corporate culture together infused can be better taken in the
favor of the company.

ITC knew it had less technical workers and they would need to hire from external resources as their own
labor was not up to the mark, being less technical. The major issue faced by this committee was to hire
potential resource while the policy of the company was contradicting to it. Also ITC knew that the labor
unions would not let this happen.

Anyhow this committee launched a new plan that suggested, which ever department would work
together towards cost cutting and save resources would be awarded 1/3 of the amount saved in their
wage as an incremental part. The company also launched PIP (Productivity Index Payments) whereby
each workman would earn a PIP payment corresponding to his job based on consolidated PIP index.

However the external hiring was still an issue, the company therefore asked the employees of the
company to suggest any worker from their own families or relatives who could be given a chance as
these senior employee were retiring. The union promised that they no strike will be called if fair
opportunities are given to all employees equally for senior technician’s job.

These internal employees did not possess the quality required for senior positions and external hiring
was announced over which the workers union called down for a strike. The option was to either let the
strike continue and lose around 10 Million Rs per day or accept the demand of these workers and let go
the plan for restructuring.

The decision was either to lay of the employees at Bangalore and work towards restricting that would
have resulted in a long term benefit for ITC or could have been to accept the demand of the union and
avoid the strike that could result in huge loss in the shorter run.
Recommendation:

ITC should have taken the hard decision of laying off the employee at their Bangalore plant, as many of
the workers over explanation by the employee association understood that this was for the betterment
of the company. Whereas half of the workers were against the decision of external hiring and resisted
over strike. ITC in case of laying off these workers would have definitely faced the consequences and
delayed operations but this would have been the scenario only in the shorter run, as junior workers
were already being sent to training center for technical skill development and external highly technical
staff was to be brought on board, the company could have done much better in the longer run.
Scarifying over profits in the shorter pan of time could have earned huge returns in future as the plant
could have been utilized at its full capacity and the cash flow from the traditional business could have
been invested in other ventures resulting in diversified portfolio and less risk of keeping all the eggs in
the same basket.