hul

Introduction

Competitive Strategy consists of move of companies in order to attract customers. With stand
competitive pressures and strengthen an organization's market position. The main objective of
Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers
and to beat competitors.
Five main competitive strategies are:

 Overall low cost leadership strategy

 Best cost provider's strategy
 Broad differentiation strategy
 Focused low cost strategy
 Focused differentiation strategy

Here competitive strategy varies from sector to sector and company to company. Thus, it is not
easy to predict a single or to find a single strategy for the whole sector. When we come on to
FMCG Sector main strategies lay behind market strategies, cost, and quality strategies. Here in
this report you are going to get information about such type of strategies of FMCG giants.

What are HUL and ITC Ltd.?

HUL (Hindustan Unilever Ltd.)

This Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG sector
company with all type of household products available with it. It has Home & Personal Care
products, and also food and Water Purifier available with it. According to Brand Equity, HUL
has largest no of brands in most trusted brands list.

16 of HUL's brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008
in an annual survey. For the entire year ending March - 2009 net turnover of company is Rs.
20'239.33 Crore which is 47.99% higher than 31st December 2007's Rs. 13675.43 Crore driven
mainly by dom estic FMCG's with net profit stood at Rs. 2'496.45 Crore.

Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair
& Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight;
Surfexcel; Vaseline; Wheel.

ITC Limited

This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently
headed by Yogesh Chander Deveshwar. Company mainly operates in the industry like Tobacco,
Foods, Hotels, Stationary and Greeting Cards with the major products constitutes Cigarettes,
packed foods, hotels, and apparels. For the entire year ending Mar-2009 the turnover of company
is at Rs. 15388 Crore which is 10.3% higher than previous year's Rs. 13947.53 Crore, driven
mainly by robust 20% growth in non cigarette FMCG business with net profit stood at Rs. 3324
Crore
Analysis of Both Companies

HUL & ITC are major companies in FMCG market in India. When we compare both companies on the basis of their
strategies i.e. , their competitive strategies in the present market. When we look at the present segment breakup for
both of the companies then we came to know that their different products vary too much in the market. 

Now let us take a comparative analysis of both the companies under some heads:

HUL

ITC

Hindustan Unilever (HUL) is the largest pure-play FMCG company in the country and has one
of the widest portfolio of products sold via a strong distribution channel. It owns and markets
some of the most popular brands in the country across various categories, including soaps,
detergents, shampoos, tea and face creams.

ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversifying
into non-tobacco. FMCG segments like foods, personal care, paper products, hotels and agri-
business to reduce its exposure to cigarettes.
Performance

After stagnating between 1999 and '04, the company is back on the growth track. In the past
three years, till 2008 HUL's net sales have witnessed a CAGR of 11%, while net profit has
posted a CAGR of 17%.

Despite diversification, ITC's reliance on cigarettes is still huge. The tobacco business
contributes 40% to its revenues, and accounts for over 80% of its profit. This cash-generating
business has enabled it to take ambitious, but expensive bets in new segments and deliver modest
profit growth.

Overall Strategy

HUL always believes in customer friendly products with major emphasis on low cost overall
without compromising on the quality of the product. They are leveraging the capabilities and
scale of the parent company and focusing on the value of execution. The entire product product
portfolio is also being tweaked to include premium offerings such as Pond's Age Miracle and
dove shampoo in skin and hair care.

TC is focusing on delivering value at competitive prices. Its tremendous reach through extensive
distribution chain has been a competitive advantage. Additionally, the company's e-choupal
model for direct procurement is well known under which ITC partners with over 100,000
farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of
rural pedigree is hard to beat.   
Growth Drivers

The Company has been launching new products and brand extensions, with investments being
made towards brand-building and increasing its market share. HUL is also streamlining its
various business operations, in line with the ‘One Unilever' philosophy adopted by the Unilever
group worldwide. Introduction of premium products and addition of new consumers via market
expansion will be HUL's growth drivers.

ITC's backward integration to ensure that its products pass efficiently from the farms to
consumers has helped it to cut down supply and procurement costs. ITC's non-cigarette FMCG
business leverages the large distribution network the company has developed by selling
cigarettes over the years. A rich product mix, along with ramp-up of investments in its new
sectors, will be instrumental in charting ITC's growth path.

Risk for both the companies

For HUL

Being an MNC operating in India, HUL is more conservative in its strategies than its Indian
counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by
domestic players in various categories. Prolonged inflation may lead to margin contraction, in
case HUL is not able to pass on this burden to consumers. The company's large size also poses a
problem, since it does not give HUL the agility to address the competition it faces from national
and regional players.

For ITC

Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for
ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its
foray into the conventional FMCG space, ITC has entered the high-clutter branded products
market. This will burden its resources in terms of ad spend and brand-building. Creating brand
recall and building market share in new products are ITC's key challenges. Export ban and rising
crop prices pose a threat for its agri-business, taxing its margins. 

Conclusion

HUL's up-and-running business model is a treat for investors seeking exposure in the FMCG
segment. The company has delivered in the past and has the potential to do better in future. In the
small and medium term. ITC's growth story is still evolving.

ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the
company's business model will pay off in the long run. ITC has proved its expertise in the
cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability
in FMCG can consider the stock with a long-term horizon.