Analysis of Itc External and Internal for Further Transforming It as an Strategic Alliance

Management Development Institute (MDI)

Group Project -SFI

Company: ITC Ltd

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Table of Contents

Pages

• Acknowledgements……………………………………………………………………

• Executive Summary…………………………………………………………………

• Introduction……………………………………………………………………………

• ITC’s Diversified Business Portfolio………………………………………………….

• External Audit…………………………………………………………………………

• Internal Audit………………………………………………………………………….

• Strategies for competitive Advantage ………………………………………………...

• Recommendations …………………………………………………………………….

• Conclusion……………………………………………………………………………

• Bibliography & References…………………………………………………………

ACKNOWLEDGEMENT

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During the course of this project, we were able to better appreciate the Strategic Implications, the importance and rewards in fulfilling organisational objectives. Without this project, our understanding of Strategy and our grooming as managers would have been incomplete. We are extremely grateful to Prof. Veersh Sharma for introducing this subject to us.

 Executive Summary

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Introduction- (About ITC)

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ITC Diversified Business Portfolio [pic 8]

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External Analysis [pic 37]

Internal Analysis[pic 38]

Strategies for Competitive Advantage

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ITC is the market leader of consumer products in India. It has a wide range of invaluable brands, and a leadership position in every segment of the market.

The Company has been riding high on its leadership position because of  the single-minded focus of  value creation for the consumer through significant investments in product design, innovation, manufacturing technology, quality, marketing and distribution.

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

Which in turns helps in designing products which are contemporary relevant to the changing attitudes and evolving socio-economic profile of the country.

Such type of strategic focus on the consumer has paid ITC handsome dividends.

The competitiveness in Overseas markets is reflected in its initiatives.

For example- In the extremely competitive US market, ITC offers high-quality products.

In Western part of Asia, it has become a key player through growing volumes of its brands in GCC countries.

Strategies for competitive advantage:

• ITC’s Strategies have always been to create multiple drivers of growth by developing a portfolio of world class businesses that best matches organizational capability, opportunities in both the domestic and export market
• It should continue to focus on the chosen portfolio of FMCG, Hotels, Paper Boards, Packaging, Agri Business and Information technology
• Benchmark the health of each business comprehensively across the criteria of Profitability
• Ensure that each of its business is world class and highly competitive globally
• Enhance the competitive power of portfolio through synergies derived by bending the diverse skills and capabilities residing in ITC’s various businesses
• Create a distributed leadership within the organization by nurturing talented and focused top management teams for each of the business
• Continuously strengthen and refine the corporate governance processes and systems to catalyze the entrepreneurial energies of management by striking the golden balance between executive control and accountability

Brand Positioning Strategy

• Under the expansion program, ITC has planned to scale up the number of its retail stores by 60% from 250 to 400 within a year
• It has also strengthened its retail identity and is trying to Reposition Wills Lifestyle as an international and an aspirational brand
• In an image makeover Exercise, It has roped in Services of International professional agencies as FRCH design (US), Elemental Design (UK), The Friedman Group (US), who among the others will help the retailer in designing the stores, Product presentation, Visual Merchandising and retail training.
• The Idea of Concept store design is also a valuable prospect which is also seen an out of these stores

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Repositioning ITC for Competitiveness:

• Restructuring and Rationalizing

• The first task to be done is rationalization and restructuring of company’s portfolio of business and investments.
• The decision to exit from the financial services and edible oils business is also seen as a long-term strategic intent to focus on such business where the company possessed a credible track record and a relative capacity to strengthen and nurture the core capabilities over a period of time to sustain leadership position in the Indian Global Market of tomorrow.
• A careful analysis made it readily evident that ITC was not well positioned to add long term value in those areas. Infact persisting with these business over the years had caused a substantial drain of corporate energy and shareholder value and so a hardnosed, determined and responsible exit was the only answer
• The financial collapse of Classic Finance would have caused distress and panic among lakhs of deposit holders, which would have neither been in the interest of Company nor in the national interest.

• Strategic Focus and Challenges

• The business that remain in company’s portfolio are those where ITC has had a credible track record over a longer period of time, ranging from 25 to 100 years
• These are also the business that represent abundant opportunities for growth in line with the growth of Indian economy. More importantly these are the businesses that can be infuse with core capabilities through modernization, scaling up, nurturing human skills
• These businesses are already at a stage that actually provides a platform from where strategic positioning can be accomplished for sustainable goals competitiveness over medium to long term
• Strategies are already in place for inculcating internationally benchmarked operating standards, market orientation and the related processes to exploit the special insight into the Indian market that arises from being close to the consumer
• Competitive advantage therefore is derived from anticipating the future and encouraging strategic thinking capabilities in the organization.

• The three major strategic thrusts of ITC are:

1. Focus on crop development to enhance quality and farm productivity. The Company has nurtured apool of trained manpower for this purpose. The Ultra-Modern storage facilities to improve quality, reduce waste and enhance productivity.
2. Modernization of cigarette plants by inducting contemporary technology, involving investments to the tune of Rs. 900 crores over the next five years.
3.  A new, greenfield, state-of-the-art factory is being established outside Bengaluru to match globally benchmarked standards.
4. Brands at the upper end of the market are being strengthened in anticipation of consumer aspirations which is an important area of investment as it takes several years to build sustainable brand equity.

Recommendations

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• Having laid before you the framework and the nature of our Company's strategic thinking, I would like to touch upon the challenges inherent in repositioning these businesses for sustainable competitiveness.
• In addition to the core capabilities required to generate superior value for the consumer, in most areas of economic activity, size would play an increasingly significant role.
• The largest corporations of India are tiny in the international context. None of the Indian private sector corporation features in the Top 500 Companies of the world. Besides the benefits of size, the large corporations entering the Indian market are able to take a long-term investment view, because they can service their shareholders from their established bases in other markets.
• Strategic moves will therefore require large amount of investments, gestation periods would be longer, and staying power and commitment to a business would be severely tested.
• It is quite imperative to shed preoccupation with maximization of tactical results and focus on investing in technologies and capabilities for tomorrow.
•  A wholesome balance will have to be struck for profits and cash flows over the three-time  horizons, namely, short, medium and long terms.
• In today's dynamic environment, the only constant is called as change. Each of the Company's businesses would need to adapt to such change continuously and always be ready for anything and everything
•  It would be an endeavor of ITC Board to keep the portfolio of businesses under periodic review.
• Each of the businesses that remains in the Company's portfolio, therefore, would have to sub serve the abiding purpose of generating value.
• Improving competitiveness in export market requires a strategy to improve the business environment and export competency at the national level. The strategy should focus on cross-cutting issues, with the needs of key growth sectors determining areas for priority attention- National Competitiveness Strategy
• The National branding can boost a country's profile on the international business scene, but strategists must think long term and promote national characteristics that match business reality
• Value chain analysis highlights links in the chain where firms and countries can capture more value from exports- Sectoral Competitiveness
• Industrial clusters, contract farming, export production villages, business networks and alliances between non-governmental organizations and exporters provide unique ways to improve a country's international position while reducing its reliance on foreign direct investment- In-country Alliances
• Trade development officials need benchmarks to establish how far they are meeting their aims and objectives. They should try to measure impact, not just resource inputs but service outputs. New tools such as ITC's benchmarking tools, the balanced scorecard and contingent valuation by users are useful for conducting evaluations- Measuring Performance

Conclusion

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ITC’s vision is to sustain its position as one of India's most valuable corporations through world-class performance, creating value for the Indian economy and the Company's stakeholders has been a standing proof of its commitment to delivering superior and sustainable stakeholder value, over the last twenty-two years of its operations.