ITC’s diverse portfolio: Smelling Sweeter

1. How well does ITC’s portfolio fit in terms of the BCG matrix

Cigarettes

 ITC hold about two thirds of the market for cigarettes in India (high market share)
 However, cigarettes in India are highly discouraged by the Indian government (low sales
growth)

Hotels

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 ITC entered the hotel business and become second largest operator in India (high market

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share)

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 Run over 100 hotels and have high profits over year. (high sales growth)

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Agri-business
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 Growth of leaf tobacco developed into range of agricultural businesses. (high market
share)
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 Increase of sales and profits from 2009 to 2011 (high sales growth)
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Paperboard, paper and packaging

 Indian largest packaging solution provider. (high market share)

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 Largest paperboard industry in India. (high market share)

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 Increase of sales and profits from 2009 to 2011 (high sales growth)

Others FMCG
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 Aashirvaad reach over 50 percent of Indian market share (high market share)
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 Sunfeast and bingo had 12 and 11 percent market share (low market share)
 Loss from 2009 to 2011 (low sales growth)
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RELATIVE MARKET SHARE

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 STAR QUESTION MARK
 HOTELS  FMCC
 PAPERBOARD/ PACKAGING
SALES GROWTH  AGRIBUSINESS
COWS DOGS
 CIGARETTES  FMCC- Sunfeast and bingo
 FMCC- Aashirvaad

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 2. Identify and evaluate the various synergies in ITC’s business.

Synergies defines as the two firms combined their capabilities to achieve higher
profitability either increase their revenue or decreased their expenses or both in the same time.
The mission of these synergies are to merger and acquisition of other companies to expend their
business globally. In a management scope, synergies are about to increase the capacity and
workflow in the company. Furthermore, in the costs scope, synergies are about to reduce the
multiple levels of management and duplication and spread fixed cost of technologies over the
larger operations where company allow economies of scale.

ITC expend their business globally by merger and acquisition of other companies. The
mission of the company was to continuously explore opportunities for growth by synergizing and

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blending its multiple core competences to create new epicenters of growth. So that, the core

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business of ITC was in tobacco product in doing cigarettes and then they expend their business

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and go further to other Fast-Moving Consumer Goods (FMCG) sector, Hotel business, Agri-

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business, and paperboard, paper and packaging.
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ITC enter to other Fast-Moving Consumer Goods (FMCG) sector in early twenty-first
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century and started in the food business. Which focus on Kitchens-of-India ready-to-eat gourmet
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foods, the Aashirvaad wheat-flour business, Sunfeast biscuits and Bingo snacks. This sector is
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completely the new market for the company and need to know how the sector operates. Here,
ITC take an opportunities to sell cigarettes even if the profits are not as important as other
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categories like foods, personal care and many more. The advantages of this synergies are ITC
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can increase the selling of cigarettes in parallel with the sale of FMCG product. Besides that, this
synergies will give good advantage to the company which giving a more-friendly-image because
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they care and provide about what the customers need. It also have low profit margin which
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company sell large volume of goods, acquire and maintain the product to get the higher product
turnover. The disadvantages of this synergies are ITC not exactly in the same target market. In
the selling of cigarettes they focused on people who smoking, but in FMCG sector they go wide
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to the consumers. This sector will become deficit because of selling cigarettes in the market are
heavily taxed and discouraged by Indian government. Here we can see, the sector are not
actually a “healthy” company and will give bad image to the company.

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 In 1975, ITC enter to the hotel business and became the second largest operator in India
by 2009. The strategy that company focus was to sustain their leadership status in the industry
and poised to emerge as the largest hotel chain in India. ITC operating under four brand which is
ITC Hotel at the luxury end, WelcomeHotel in the 5 star segment, Fortune in the mid-market and
Welcome Heritage catering to the heritage leisure segment. The sales of the hotel business drop
by 1,014 Rs in Crores in 2009 to 996 Rs in Crores in 2011. The advantages of hotel business that
run by ITC are provide the luxury hotel for customer that offers something different and
possesses an element of uniqueness. Here, ITC can monopoly the market by different segment of
hotel business provided to customers. Besides that, ITC’s core business are in cigarettes so that
they can create smoking room that more comfortable for the customers who smoking.
Furthermore, the disadvantages of the hotel business of ITC are they need to search new market

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to meet demand because hotel (service) and tobacco (good) are two different things.

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Additionally, they will face the security challenges which are the credit card fraud, cyber-crime

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attacks, terrorism and physical crime that happened like professional burglaries.
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ITC’s agri-business sector are the sector that they export agri-products abroad and for
domestic trading such as feed ingredients, food grains, marine product, processed fruits and
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coffee. ITC take an advantage of agricultural knowledge in business to develop other producer.
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The need to find the unique rural digital infrastructure network and deeply understanding of
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agricultural practice and intensive research of this sector. So ITC need to have the extensive
backward linkages with the farmers and at the same time develop cost effective to this sector.
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The advantages of this synergies are ITC can control the quality of the agricultural product for
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distribution to the consumers. Besides that, they always increase the knowledge of agricultural
production in terms continues to use innovation as its core strategy to retain its position as the
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one-stop shop for sourcing agri-commodities from India. They also can take an advantages on
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the changes of business dimension which “go green”. In the green business, company can save
the environment and also increase the profit. Lastly, the disadvantages of this synergies are this is
the expensive synergy because of they need to invest to new plant, new technologies and many
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more. It also low profit in return because of the product limited as compared to demand and
typically, the production cost is higher and the post-harvest handling of relatively small
quantities.

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 ITC set up a packaging and printing business in order to become its own client and in
2012, they was an India’s largest packaging solution provider to supply cigarettes. Then they
diversified the market in paperboard, thus three years after ITC entered the new market which is
paperboard industry, they became the largest producer in the country. The sales of cigarettes was
a huge sales among the other segments which was increased from 15,155 Rs in Croses in 2009
and 22,250 Rs in Croses in 2011. The advantages of this synergies are they can control and
inspect each step of the production of cigarettes and can reduce the expenses and increase the
revenue in the same time. They also can reduce the cost on rolling papers to make cigarettes that
do not depend on suppliers as well as go further to production of packages. But, they have
disadvantages on this synergies which are they need to find other alternative of the material used
in making cigarettes because the paperboard, paper and packaging are from wood, and the

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resource become decrease from year to year. Thus, if ITC cannot produce enough of paperboard,

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paper and packaging, the profits and sales will decrease that year.

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