BY

G. S
.
A
Y
AN
SHAR

COMPETAT
I VE
STRATEGY
OF
H UL V / S I T
C

INTRODUCTION
0 Competitive Strategy consists of move

of companies in order to attract

customers. With stand competitive
pressures and strengthen an
organizations 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 providers 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.

What are HUL and ITC

Ltd.?
HUL (Hindustan Unilever Ltd.)
0 This Company is earlier known as

Hindustan Lever Ltd. This is Indians 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.

0 16 of HULs 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. 20239.33 Crore which is 47.99% higher
than 31st December 2007s Rs. 13675.43
Crore driven mainly by domestic FMCGs with
net profit stood at Rs. 2496.45 Crore.
0 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; Surf
excel; Vaseline; Wheel.

ITC Limited
0 This Company was earlier known as Imperial

Tobacco Company of India Ltd.

0 It is Currently headed by Yogesh Chander
Deveshwar.
0 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.
0 For the entire year ending Mar-2009 the
turnover of company is at Rs. 15388 Crore
which is 10.3% higher than previous years
Rs. 13947.53 Crore, driven mainly by robust

Analysis of Both
Companies
0 HUL & ITC are major companies in FMCG

market in India.
0 When we compare both companies on the
basis of their strategies i.e. , their
competitive strategies in the present market.
0 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.

HUL Segment Breakup

ITC Segment
Breakup

COMPARATIVE ANALYSIS OF BOTH

THE COMPANIES UNDER SOME
HEADS:
HUL
0Hindustan 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.
0 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
0 ITC is not a pure-play

FMCG company, since

cigarettes is its
primary business.
0 It is diversifying into
non-tobacco.
0 FMCG segments like
foods, personal care,
paper products, hotels
and agri-business to
reduce its exposure to
cigarettes.

PERFORMANCE
0 After stagnating between 1999 and 04, the

company is back on the growth track. In the

past three years, till 2008 HULs net sales
have witnessed a CAGR of 11%, while net
profit has posted a CAGR of 17%.
0 Despite diversification, ITCs reliance on
cigarettes is still huge. The tobacco business
contributes 40% to its revenues, and
accounts for over 80% of its profit. This cashgenerating business has enabled it to take
ambitious, but expensive bets in new
segments and deliver modest profit growth.

Risk for both the companies

HUL

ITC
0 Increased regulatory clamps

0 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

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 highclutter 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 ITCs key
challenges. Export ban and

OVERALL STRATEGY
HUL

ITC

0 HUL always believes in

0 ITC is focusing on delivering

customer friendly products

with major emphasis on
low cost overall without
compromising on the
quality of the product.
0 They are leveraging the
capabilities and scale of
the parent company and
focusing on the value of
execution.
0 The entire product
portfolio is also being
tweaked to include
premium offerings such as
Ponds Age Miracle and

value at competitive prices.

Its tremendous reach
through extensive
distribution chain has been
a competitive advantage.
0 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
HUL
0 The Company has been

launching new products

and brand extensions,
with investments being
made towards brandbuilding 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
HULs growth drivers.

ITC
0 ITCs backward integration

to ensure that its products

pass efficiently from the
farms to consumers has
helped it to cut down
supply and procurement
costs. ITCs 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
ITCs growth path.

Conclusion
0 HULs 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. ITCs growth story is still evolving.

0 ITC is eyeing the pie which HUL and other FMCG

players currently enjoy. Though risky, the

companies 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.