INTRODUCTION

Incorporated on 24 August 1910 as the Imperial Tobacco Company of India Limited, the company's name was changed to ITC Limited in 1974. This company is rated among the 'World's Best Big Companies' by Forbes magazine. ITC ranks third on all major profit parameters among India's private sector corporations. ITC employs over 20,000 people at more than 60 locations across India. ITC is one of India's foremost private sector companies with a market capitalization of over US $ 33 billion and a turnover of US $ 7 billion. ITC has a diversified presence in cigarettes, hotels, paperboards and specialty papers, packaging, agri-business, packaged foods and confectionery, branded apparel and greeting cards.

PRODUCTS

SWOT ANALYSIS

STRENGTHS
Wealth of local knowledge & international expertise helps it to be globally competitive. High quality standard products & services Excellent distribution network. Excellent brand making capability helping it to diversify it into Retailing, IT & Hotel segments. A lasting impression by catchy ads. The lifestyle retailing segment has won acclaim & moving towards higher sales. Steady increase in the return on capital employed. Sophisticated research & development facilities.

WEEKNESSES
Diversification into various lines in which it does not have much knowledge would be very risky proposition. High competition from established brands which has resulted in reduction in profit margins. Steep increase in cigarette taxes has adversely affected the revenue earned. Due to high price of cigarette, consumers are switching to other cheaper forms of tobacco. Its hotel industry has still not created a big share in the market size.

OPPORTUNITIES
Big untapped market available. For cigarettes, hotels, retail garment, packaging & agricultural products. High growth potential could be achieved. Good source of revenue & foreign exchange available by way of exports of agricultural products, hotels & cigarettes. Its competitors dont have the financial banking like it so it can take advantage of this. Proper publicity of the hotels would increase its brand image & revenue.

THREATS
Negative publicity for smoking could affect its cigarette segment. Government is under huge pressure from public organizations for banning tobacco products which could affect it adversely. High competition from established brands. Competition from unbranded products. Due to terrorist attacks the tourism industry has taken a back seat which would affect the hotel segment. Poor monsoon leads to poor agricultural growth which would affect the agro-exports.

POLITICAL
The political environment is quite favorable for ITC and has a positive impact on FMCG and Hotel business. For example, the removal of the expenditure tax from2007-08 and the exemption of service tax in budget 2008-09 which helps in increasing the buying power of the customers. The increase in the tax policies such as increase in excise duty and the vat from 12.5% to20% in three major cigarettes consumption states of Maharashtra, Rajasthan and Delhi have resulted in the increase in the overall selling price of the cigarettes which deters the potential customers and results in lower sales.

ECONOMIC
With non filter cigarettes being levied the same tax as compared to the filter cigarettes, there was a sharp decline in the volume of the non filter cigarettes for. ITCs volume declined by only 3% even though it discontinued the production of non filter cigarettes. ITCs volume was supported by filter cigarettes which grew by almost 15% despite the price hike. This shows that ITC is gaining at the expense of competitors.

SOCIAL
The aspirations of the tobacco consumers to upgrade the consumption can multiply the shares of cigarettes. However, growing public concern with regard to the consumption of tobacco has led the government to ban all sorts of advertisements like the commercials, print media and pamphlets. This may act as a setback for the company. For the hospitality business, the society is now turning more towards an individual oriented culture which means that people spend only for themselves. The rise in the per capita income and the working population in the country is also a good sign for the company because the number of people willing to spend more on leisure increases with per capita income

TECHNOLOGICAL
ITC came a long way on the technological front. With state of the art factories and cheap labor supply from the second largest tobacco producing country in the world, India, the supply chain management of the ITC follows the latest trend. ITC also has the great inventory control and logistics support. They have also been adapting other quality concepts such as quality control, total quality management and 6-sigma concepts.

ENVIRONMENTAL
The main source of raw material for cigarettes is tobacco which is found mainly in the states of Andhra Pradesh and Karnataka in India. The environment is favorable for the company because of the abundance of raw material and inexpensive and large availability of cheap labor.

LEGAL
The developments in the environmental and consumer regulations and protection such as the ban on smoking and the ban on selling cigarettes to minors have resulted in setbacks for the company in terms of the number of sales of their product which draws them the most revenue. The legal issues related to the hospitality industry affect the international customers because of the visa and other administrative issues involved.

BCG MATRIX

PORTERS 5 FORCES MODEL

PORTERS 5 FORCES

DEGREE

Threat of new entrants Threat of substitute products

Bargaining power of customers

LOW HIGH
HIGH

Bargaining power of suppliers

HIGH

Competitive rivalry within an industry

HIGH

ITCS PRICING STRATEGY

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 Brisk farm. 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.