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DISSERTATION REPORT

MARKETING & BUSINESS STRATEGY

OF

ITC LTD.

Submitted in partial fulfillment

Master of Business Administration

in

Marketing

Under the Guidance of: - Submitted By :

Col. Guruswamy Akash Deep Garg

Roll No : 520788905

Batch : 2007-09

EMPI Business School

New Delhi-110074

(2007-2009)

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ACKNOWLEDGEMENT

I extend my sincere gratitude to Col K Guruswamy, our Project guide, for

the successful completion of the project. He has been a great support and

guide to me during the entire dissertation. He has helped me throughout,

from choosing the project till I completed the Project Report. This project

has given me more confidence about the subject and various concepts of

‘Consumer Behavior’.

My sincerest gratitude also extends to Mrs. Shailja Manocha, who has taken

a keen interest in my project from time to time, and encouraged me to

perform to the best of my ability. I am also thankful to my faculty members

for their support and help for completion of the project.

Thank you all for your time and guidance in helping me achieve my goal of

completing this project to the best of my ability.

Akash Deep Garg

Roll No-520788905

MBA 2007-09

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DECLARATION

I, AKASH DEEP GARG, hereby declare that the project on

DISSERTATION REPORT ON MARKETING & BUSINESS

STRATEGY OF ITC LTD. is written by me under the guidance of Mrs.

Shailja Manocha. The empirical conclusion & findings in the project are

based on the data collected by me and the entire project work is not a

reproduction of any other sources.

Signature

Name-AKASH DEEP GARG

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TABLE OF CONTENTS

TOPIC PAGE NO.

1. EXECUTIVE SUMMARY OF THE PROJECT 6

2. INTRODUCTION TO THE PROJECT 7-9

3. OBJECTIVE OF THE PROJECT 10

4. RESEARCH METHODOLOGY 10

5. PROFILE OF ITC LTD. 11-17

6. INITIATIVES TAKEN 18-20

7. FINDINGS & ANALYSIS- MARKETING 21-25

8. ANALYSIS ON DIVERSIFICATION 26-28

9. FUTURE PLANS 29

10. RECOMMENDATIONS 30

11. LIMITATIONS 31

12. REFERENCES 32

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EXECUTIVE SUMMARY OF THE PROJECT

This topic has been chosen to study the Marketing & Business strategy of ITC Ltd. There

are certain prospective on which a company sells their products in to the market and

diversifies their business. This project has been a great learning experience for me; at the

same time it gave me enough scope to implement my analytical ability. Full project gives

an insight about the strategies and its various aspects. It is purely based on whatever the

researcher learned at EMPI Business School. All the topics have been covered in a very

systematic way. The language has been kept simple so that even a layman could

understand. The whole theoretical part is covered with relation to the product. It helped to

understand the various concepts of marketing. The various theories like learning,

perception, attitude, motivation, and personality are fully studied in the project.

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Introduction

ITC India Limited

Type Public (BSE:ITC) Founded August 24, 1910

Radha Bazar Lane, Kolkata, India Headquarters Virginia House, Kolkata, India

Key people Y C Deveshwar, ChairmanK Vaidyanath, Director, CFO: Partho Chatterjee Industry Tobacco, Foods, Hotels

Products Cigarettes, Packaged Food, Hotels, Apparel Revenue $4.75 billion USD (2006)

Employees 20,000 (2006)

Website http://www.itcportal.com/

ITC is one of India's foremost private sectors companies with a market capitalization of

nearly US $ 15 billion and a turnover of over US $ 4.75 billion. ITC is 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 also ranks

among India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand

Finance and published by the Economic Times.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,

Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,

Branded Apparel, Greeting Cards, Safety Matches and other 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.

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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

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."

ITC's diversified status originates from its corporate strategy aimed at creating multiple

drivers of growth anchored on its time-tested core competencies: unmatched distribution

reach, superior brand-building capabilities, effective supply chain management and

acknowledged service skills in hotelier. Over time, the strategic forays into new

businesses are expected to garner a significant share of these emerging high-growth

markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is

one of the country's biggest foreign exchange earners (US $ 2.8 billion in the last

decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly

enhance its competitiveness by empowering Indian farmers through the power of the

Internet. This transformational strategy, which has already become the subject matter of a

case study at Harvard Business School, is expected to progressively create for ITC a huge

rural distribution infrastructure, significantly enhancing the Company's marketing reach.

ITC's wholly owned Information Technology subsidiary, ITC InfoTech India Limited, is

aggressively pursuing emerging opportunities in providing end-to-end IT solutions,

including e-enabled services and business process outsourcing.

ITC's production facilities and hotels have won numerous national and international

awards for quality, productivity, safety and environment management systems. ITC was

the first company in India to voluntarily seek a corporate governance rating.

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ITC employs over 21,000 people at more than 60 locations across India. The Company

continuously endeavors to enhance its wealth generating capabilities in a globalizing

environment to consistently reward more than 3,95,000 shareholders, fulfill the

aspirations of its stakeholders and meet societal expectations. This over-arching vision of

the company is expressively captured in its corporate positioning statement:

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Objective The primary objective of this study is to systematically explore the determinants

responsible for the competitive advantage of ITC Limited and how ITC developed new

product lines in its foods business drawing on its competencies in brand-building, R&D,

packaging, and distribution. However, market analysts were not sure whether ITC would

achieve success in all the food categories that it had entered.

• Why people are buying the products.

• What all the things which influences them to buy

• To understand how ITC has diversified themselves to a multi-product corporation

from a single product company

Research Methodology

The researcher has used secondary data, magazines, internet, books, some market survey

using marketing tools like asking question through phone, personal interview etc.

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Profile ITC in FMCG

Cigarettes ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it

has a leadership position in every segment of the market. It's highly popular portfolio of

brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut,

Scissors, Capstan, Berkeley, Bristol and Flake.

The Company has been able to build on its leadership position because of its single

minded focus on value creation for the consumer through significant investments in

product design, innovation, manufacturing technology, quality, marketing and

distribution.

All initiatives are therefore worked upon with the intent to fortify market standing in the

long term. This in turns aids in designing products which are contemporary and relevant

to the changing attitudes and evolving socio economic profile of the country. This

strategic focus on the consumer has paid ITC handsome dividends.

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Foods ITC made its entry into the branded & packaged Foods business in August 2001 with the

launch of the Kitchens of India brand. A more broad-based entry has been made since

June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments.

The Foods business is today represented in 4 categories in the market. These are:

* Ready To Eat Foods

* Staples

* Confectionery

* Snack Foods

In order to assure consumers of the highest standards of food safety and hygiene, ITC is

engaged in assisting outsourced manufacturers in implementing world-class hygiene

standards through HACCP certification. The unwavering commitment to internationally

benchmarked quality standards enabled ITC to rapidly gain market standing in all its 6

brands:

* Kitchens of India

* Aashirvaad

* Sunfeast

* mint-o

* Candyman

* Bingo!

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Lifestyle Retailing ITC’s Lifestyle Retailing Business Division has established a nationwide retailing

presence through its Wills Lifestyle chain of exclusive specialty stores. Wills Lifestyle,

the fashion destination, offers a tempting choice of Wills Classic work wear, Wills Sport

relaxed wear, Wills Clublife evening wear, fashion accessories and Essenza Di Wills – an

exclusive range of fine fragrances and bath & body care products and Fiama Di Wills - a

range of premium shampoos and shower gels. Wills Lifestyle has also introduced Wills

Signature designer wear, designed by the leading designers of the country.

Wills Classic work wear was launched in November 2002, providing the premium

consumer a distinct product offering and a unique brand positioning.

ITC forayed into the youth fashion segment with the launch of John Players in

December 2002 and John Players is committed to be the No. 1 fashion brand for the

youth.

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Education & Stationary products ITC made its entry into the stationery business in 2002 with its premium range of

notebooks, followed in the year 2003 with the more popular range to augment its

offering.

ITC's stationery Brands are marketed as "Classmate" and "Paperkraft", with Classmate

addressing the needs of school goers and Paperkraft targeted towards college students and

executives.

Agarbattis As part of ITC's business strategy of creating multiple drivers of growth in the FMCG

sector, the Company commenced marketing Agarbattis (incense sticks) sourced from

small-scale and cottage units in 2003.

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Hotels ITC entered the hotels business in 1975 with the acquisition of a hotel in Chennai, which

was then rechristened ITC Chola. Since then the ITC-Welcomgroup brand has become

synonymous with Indian hospitality. With over 90 hotels in 77 destinations.

Packaging ITC's Packaging & Printing Business is the country's largest convertor of paperboard

into packaging. It converts over 50,000 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.

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Agri Business

e-Choupal The unique e-Choupal model creates a significant two-way multi-dimensional channel

which can efficiently carry products and services into and out of rural India, while

recovering the associated costs through agri-sourcing led efficiencies. This initiative now

comprises about 6500 installations covering nearly 40,000 villages and serving over 4

million farmers.

Leaf Tobacco ITC is the largest buyer, processor and exporter of leaf tobaccos in India - creating a

global benchmark as the single largest integrated source of quality tobaccos. Serving

customers in 50 countries across more than 70 destinations, ITC co-creates and delivers

value at every stage of the leaf tobacco value chain.

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Information Technology ITC Infotech offers IT services and solutions across five key industry verticals: Banking,

Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG) & Retail,

Manufacturing & Engineering Services, Travel, Hospitality & Transportation and Media

& Entertainment.

ITC Infotech, a global IT services company, is today one of India’s fastest growing IT

services and solutions providers.

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Initiatives taken - Let’s put India first

ITC is committed to a national agenda of raising agricultural productivity and making the

rural economy more socially inclusive. ITC believes that the urgency and scale of these

tasks make market linked solutions and innovations more effective and sustainable than

capital intensive approaches.

Social & farm Forestry ITC has helped to bring nearly 13,000 hectares of wasteland under social forestry

benefiting more than 16,000 poor households in 466 villages.

ITC’s social forestry programme simultaneously addresses the livelihood problems of

marginal farmers and the ecological imperative of regenerating biomass and nurturing

depleted soils.

Watershed Development ITC’s watershed initiatives have led to an improvement in soil and moisture regimes –

there is more land under irrigation, water tables have risen and farmers can harvest more

than one crop, making it possible to live off the land round the year.

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Agricultural Development ITC offers facilitation to farmers to form agri-business societies, pool knowledge and

resources, improve productivity and quality, and reach out beyond local markets to sell at

better margins.

Women Empowerment The confidence and skills generated among women by forming credit groups and

managing businesses become assets to their communities.

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Livestock Development The milk marketing co-operatives represent exemplary change in rural enterprise, away

from dependence on agriculture and local markets.

Primary Education School going becomes an empowering process for the child and the community. The

awareness of entitlements like education and health grows, along with a sense of the

community’s responsibility.

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Findings & Analysis Analysis of marketing activities

The Product Mix of ITC

ITC had launched nearly all the products range off Non tobacco Products; they are very

aggressive in their distribution of such products. The existing network of ITC’s

Cigarettes distribution is being used extensively for the sales all products of ITC Food

division. They are trying to capitalized the market by associating the products with the

ITC brand.

ITC Ltd.

FMCG-Cigarettes

FMCG-Others

Hotels

Agri Business

Paperboards & Packaging

Infotech

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ITC Pricing strategy: The pricing of the ITC food division depends upon the Customers’ demand schedule, the

cost function and the competitors’ price. The pricing of the company is such that it caters

to the need of all income groups of people but special provision has been kept for Low

and middle income group, and their pricing are competitive with respect to other players

like Britannia, Parle and Briskfarm.

The company follows the Going rate pricing that is the price of the product depends upon

the competitors price. The firm chooses pricing more or less the same as Market leader.

ITC Promotional activities A particular budget is allocated for the promotion of the products, the local promotion

scheme is decided by the Area Sales Manages, it give its suggestion to the District office

and that is forwarded to the Head Quarter in Kolkata.

In another promotional scheme for Biscuits a particular number of cases is given freely to

the distributors according to the amount of sale they make, this was a drop down

promotion i.e. of the number of free cases that a particular distributors gets, off them a

certain part is reserved for the retailers and customer if they buy a certain level of biscuit

quantity.

ITC Distribution Buoyed by a strong distribution network ITC is likely to retain its market share in the

cigarettes business; the ban on advertisements is likely to work in favour of ITC thanks to

the recall factor.

The company's reliable distribution network also ensures superior inventory turnover

than its peers.

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BCG Matrix

Star

• Agri Business

• Hotels

• Paperboards & Packaging

Question mark

• FMCG

o Foods

Cash Cow

• FMCG

o Cigarettes

Dog

• ITC Infotech

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Consumer Buying Decision

The main driver in attracting the consumers is Quality of the product itself with nearly

65% of the people surveyed citing it as the main criterion for choosing the product,

followed by past experience of the consumer with the brand (17.6%). Price was third

criterion with a percentage of 11.7% of the people surveyed gave importance during

buying.

An effective advertisement will attract more and more customer to buy, helps in the

brand and image formation, and informative in telling the USP of the product.

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The above graph shows the experience of the customer after using the product i.e.

whether they were satisfied with the product as a whole. The higher the satisfaction level

higher will be the chances that the customer will buy the same brand again and again that

leads to the building of the Brand loyalty.

The Availability of the Product itself determine the effectiveness and the penetration of

the distribution channel of that particular brand among the people.

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Analysis on Diversification ITC has been a leader in the tobacco business, but it realize from the up coming trends

that remaining with a single business is not a noble thought, moreover the company was

threatened of the anti-tobacco campaign. Therefore the company decided to venture into

InfoTech with ITC InfoTech, foods via Kitchens of India, greeting cards through

Expressions and lifestyle retailing through Wills Sport. Each of these is intended to draw

revenues of at least Rs. 250 crore by 2005.

ITC was a cash rich company with a liquidity of Rs.8816 million in the cigarette

business, even though the company understood the need and usefulness of diversification.

The writer in the article is mainly concerned with the way ITC spreads its wings in the

lifestyle segments, he writes:” forty-five stores in 34 cities in just under a year, selling an

expensive fashion brand of relaxed-wear. If retail swamp-out and brand salience were the

goals, ITC’s Wills Sport would be on a victory lap already.”

The company has started its retail stores not only in Indian metros but also in the small

towns like Ranchi, Jabalpur, Gwalior, Belguam, Ernakulam etc. the article also talks

about the strong market campaign done by the company, it also describe how the

company has used its brand image to attract the Indian youth. It also tells about the

strategy adopted by the company to differentiate itself in this segment, like the company

is outsourcing its designs form the American Design Intelligence Group (ADIG), a San

Francisco, US-based garment and retail consultancy. Now it has its own six-member

team, even as it continues a tie-up with Science & Designs, an Italian fashion design

house – through which it keeps a watch on hot western labels such as Banana Republic

and Armani Exchange.

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Financial Analysis of ITC Ltd. In the quarter ended June, 07, ITC’s net profit grew 20% to Rs.782.87 million and net

sales rose up 17% to Rs.3325.23 million. This profit growth was primarily driven by its

cigarette business because of high margin and agribusiness, but its top line growth mainly

comes from non tobacco business and agro business. ITC is facing pressure on its

consolidating operating margin due to continued losses by its non- cigarette FMCG

business and decline in the profitability for paper and paper board business. Higher

advertising expanses, which grew 35% in FY07 and freight cost, which were up 31% last

year, have also affected the margins. Going forward, the focus will be on the performance

of its non tobacco FMCG business, which has begin to show sign of turning around.

ITC’s top line and bottom-line growth is likely to be marginally affected looking at its

aggressive investment in hotel and other FMCG business. Its recent foray in to home and

personal care also need immediate investment.

At the current market price of Rs.180, the stock is valued at around 20.5 times its FY08

estimated earning per share of Rs.9. this is significantly lower than its historical price to

earnings multiple of around 25 and also lower than its peers in FMCG sectors. This

provides 20-25% upside over the next 12-18 months.

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SWOT Analysis of ITC Ltd.

Strengths • Brand

• Distribution Network

• Management

Weaknesses • Dependence on Tobacco Revenues

• Negative connection of Tobacco

Opportunities • Rural market

• e-Choupal

• Low Per capita consumption of

personal care products

Threats • Competition both domestic and

international

• Increasing tax on cigarettes.

Market stand of ITC Ltd. Segment Dominance Revenue % PBIT %

Cigarettes 70% share 77 87

Paperboard &

Packaging

Packaging board –

No. 1 in Asia

7 10

Agri – Business One of the largest

exporters from India

7 4

Hotels ITC Group ranks

No. 2

4 5

FMCG (Others)

20% share of

greeting cards

market,

‘Aashrivaad’ atta is

No.1 in branded

Segment

4 (7)

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FUTURE PLANS OF THE COMPANY

Today, the Aashirvaad brand stands for atta and salt and is expected to add suji, spices

and rice in the staples segment. In the ready-to-eat segment, Aashirvaad has been

expanding the range and the latest offering includes its combo packs of rice and gravies.

Besides, an all-purpose curry paste has also been included in the range. To make a

success of any foods business, apart from understanding the palate, it would be

procurement and sourcing which have to deliver on two fronts: mainly that of quality and

efficiency.

As for its ready to eat category Kitchens of India (KOI), the company’s strategy is to

expand the KOI product porfolio. In this category, the company plans to introduce new

products to meet the evolving needs of consumers. This premium brand is targeted at

tourists, consumers who order at home, NRIs and women in the age group 25 plus.

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Recommendations According to the survey conducted and after analyzing the Price, Promotion, Place and

Product of the ITC and the consumer behavior in the market the company can implement

the following measure for increasing the sales and volume of their products.

• Advertisement for the Aashirvaad atta is found to be ineffective and infrequent. So,

the company can come up with an aggressive advertisement to attract the Indian

housewife as they are found to be the decision maker in the buying of Atta.

• The company can come up the concept of forming a Retail chain of Food products

across all over India as it is follows the marketing strategy of Umbrella branding.

In such retail chains all the food division products can be sold at the discounted

rate, as more and more products are coming under the Umbrella products like

food processing.

• The branded atta can be exported to other countries where we are currently

exporting the whole wheat.

• The company can approach the government or distributing their products in

Military canteens and can sell them to organization that provides the afternoon

meals to the children as a part of mid-day meal scheme.

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Limitations

• Skill set shortage

• Maintaining high quality standards

• Lack of talent pool

• Unable to do primary research

• Confidentiality

• Enhanced risk management

• Time constraint

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References taken :

http://www.itcportal.com

http://www.google.co.in/

http://www.blonnet.com

http://www.just-food.com

http://www.thehindubusinessline.com

http://www.imcri.org

http://www.scribd.com