ABSTRACT

In report a detailed study about the fmcg sector in India is been done. ITC is one of the oldest

fmcg company in India. In this study a comprehensive study has been made starting from the

vision and mission of the company and the various strategies which the company is been using in

the past, we have also given various recommendations to improve the sales of the company. We

have analyzed the various strengths and weakness of the company by comparing it with its close

competitors and come up porters five force model considering the entire sector and the various.

Our study is been concluded deriving conclusions from SWOT Analysis and various matrixes

viz. EFE, IFE BCG etc. We have analyzed the various financial aspects of the company and also

have provided with certain recommendations which might improve the same.

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1. INTRODUCTION

ITC was initially started as Imperial Tobacco Company of India Limited. It was started

on August 24th 1910.in 1970 the name was changed to India Tobacco Company Limited and later

to I.T.C Limited in 1974. In 1925, ITC started with the packaging & printing business as a

strategy for backward integration. In 1975, it started off with the hotel business by acquiring a

hotel in Chennai which was called ‘ITC- Welcome group hotel Chola’ and now it is called as My

Fortune, Chennai. It remains behind entering the hotel business is to create tourism

infrastructure, direct and indirect employment. n 1979, ITC entered the Paperboards

business by promoting ITC Bhadrachalam Paperboards Limited. ITC acquired BILT Industrial

Packaging Co. ltd (BIPCO) in 2004 which is a paperboard manufacturing facility near

Coimbatore.ITC entered the agriculture industry is the year 1990.In the year 2002, ITC launched

a brand called Paperkraft which is a premium range of notebooks. Classmate notebooks were

launched in 2003. All stationery items were launched between the years 2007- 2009. Colour

crew which is a new brand of stationery was launched in 2010. Wills sports a garment shop for

both men and women was launched in the year 2000 and thus ITC entered the Lifestyle Retailing

business. In 2002, John Players which is a company for men’s outfit was launched by ITC.

ITC is India’s earliest private sector company with a turnover of US $ 7 billion. ITC

initially started with cigarettes and now we can find the presence of ITC in food industry, Hotels,

Paperboards & Specialty Papers, Packaging, Agri-Business, and Information Technology. Forbes

magazine has rated ITC has one the most reputable company and Business Today has ranked

ITC as the India’s most valuable companies. Business Week has ranked ITC among Asia’s 50

best performing companies.

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1.1 VISION STATEMENT

“Sustain ITC's position as one of India's most valuable corporations through world class

performance, creating growing value for the Indian economy and the Company's stakeholders”

1.2 MISSION STATEMENT

“To enhance the wealth generating capability of the enterprise in a globalizing

environment, delivering superior and sustainable stakeholder value”

1.3 STRATEGIES

ITC’s strategies are more focused to create value for the customers and the nation. It has

a rich organization culture and believes in empowerment. The company’s corporate strategies are

1. To concentrate on their existing portfolio that includes FMCG, hotels, agriculture,

paperboards & packaging and information technology.

2. To make sure that they are competitive enough in all their business.

3. To create competitive power by using synergies derived from ITC’s various business.

4. To develop a world class portfolio which suits the company’s capacity with the help of

the opportunities that is present domestically and through export markets.

+2.1 DEVELOPED VISION STATEMENT

“Make ITC as one of the most valuable corporations in FMCG products through

improved technology and new products and creating new value for both stakeholders and

economy of the country”.

2.2 DEVELOPED MISSION STATEMENT

“To be the leading player globally in the FMCG sector and to provide quality goods by

sustaining the stakeholders”.

3.EXTERNAL OPPERTUNITIES & THREATS

3.1 EXTERNAL OPPORTUNITIES

3.1.1 INCREASE OF DISPOSAL INCOME

3

Since India is growing rapidly, the country has seen a compounded growth rate of 7.6 %

in the past five years. The middle class disposal income increases from Rs 200,000 to Rs

1,000,000 per year, by the year 2025 it is assumed that 41 % of the Indian population will be

middle class people.

3.1.2 FOOD PROCESSING SECTOR

The government of India has been constantly encouraging the food processing sector, as

India is one of the major consumers and producers of food in the world. The government has

given 100 % import free duty for food items and import tax free for food materials been

imported in to the country, for a country like India where there are close to 49 million people

who are directly or indirectly involved the sector is big. The food sector in India is growing at a

rate of 10 % every year and the opportunities keep growing big day by day.

3.1.3 RURAL MARKETS

The rural India has close to 40 % of consumption of all the fmcg products in India by

2012 the figure is expected to increase to 66 %, with 150 million households the rural market is

thrice as big as the urban market and there are no one solid player which has been able to exploit

the market.

Area Household population

Rural 72.6 74.6

Urban 27.4 25.4

All-India 100 100

3.1.4 RURAL PEOPLE BECOMING MORE BRAND CONSCIOUS

The rural population of India is the major consumers of Indian fmcg market, close to half of the

Indian population lives in the rural area. Now since the country is expressing growth and the

standard of living of people gradually increasing too the country is experiences a change in the

preferences of goods purchased by the people. The brand image is slowly getting into the minds

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of the rural people of India who are getting more brand conscious. The rural market of India is

close to 1,000,000 million industries.

3.2 EXTERNAL THREATS

3.2.1 INCREASE OF PRICE OF FOOD ITEMS

The price of food items are in the higher side due to the failure of monsoons and other factors, in

the past year the price of wheat saw an increase of 10-15 %.

3.2.2 FDI IN RETAIL

The recent government decision to allow fdi in retail sector will give a lot of chances for many of

the foreign brands to have a try in the Indian market, government has given 100 % entry for

single brand which provides an opportunity for all the foreign players.

3.2.3 SWITCHING COST OF SUPPLIERS

ITC deals with products which have a less amount of switching cost, this gives the consumers

the freedom to change their mind and try a lot of other products too. A recent survey shows if the

fmcg company doesn’t give anything new for the customers and keep them interested there are a

lot of chances that the customers may change from their products.

3.2.4 EMERGENCE OF SMALL SCALE INDUSTRIES

The government of India offers a lot of support to the small scale industries, as a result of this

there are a lot of competition from the regional players who offer the products in a competitive

price too. According to the Indian industries act of the small scale industries if owned by a

company they have a tax rebate of 30 % for the first ten years.

4. COMPETITIVE PROFILE MATRIX

FACTOR ITC P&G

R&D expenses 1.3 billion dollar 1billion dollar

Product innovation Vivel 3 in 1 product of the Comes under top 100

5

year innovator award

Revenue 26000 crore 1365 crore

Brand awareness Kitchen of India is No.2 in

USA

Started too late

Attrition rate(Top mgmt) 0% for past 15 yrs 8%

Export Ashirward atta 87%

Table 4.1 CPM

ITC P&G

S. No FACTORS WEIGHT RATING WEIGHTED

SCORE

WEIGHT RATING WEIGHTED

SCORE

1 R&D

expenses

0.15 4 0.6 0.15 3 0.45

2 Product

innovation

0.1 2 0.2 0.1 4 0.4

3 Revenue 0.15 3 0.45 0.15 1 0.15

4 Brand

awareness

0.2 4 0.8 0.2 1 0.2

5 Attrition

rate(Top

mgmt)

0.3 3 0.9 0.3 1 0.3

6 Export 0.1 2 0.2 0.1 2 0.2

TOTAL 1.0 3.15 1.0 1.7

Table 4.2 COMPETITVE PROFILE MATRIX

This shows the CPM matrix of ITC and P&G. This matrix considers the strength of

weakness of the company and compares it with the rival company. In this report, P&G is the

rival company for ITC. The weighted score is found out for both the company by multiplying the

weight and rating. The weighted score for ITC is 3.15 and for P&G is 1.7. The weight and rating

6

is given by us. From this matrix, we find that ITC is doing well when compared to P&G on the

various factors which we have considered.

5. EXTERNAL FACTOR EVALUATION MATRIX

KEY INTERNAL FACTORS WEIGHT RATING WEIGHTED

SCORE

Opportunities

1.Increase in the disposal income 0.1 3 0.3

1. Government concentration on food sector 0.08 4 0.32

2. Government exemption 0.1 4 0.4

3. Untapped markets in the rural sector 0.12 3 0.36

4. Rural people becoming more brand

conscious

0.08 3 0.24

Threat

1. Increase of price of inflation is 14% 0.07 5 0.35

2. Government allowance of FDI 0.09 4 0.36

3. Switching cost for the suppliers 0.06 3 0.18

4. Government supporting small scale

industries

0.07 2 0.14

5. Emergence of many local players as

competitors

0.11 3 0.33

6. Number of substitutes is very high 0.12 2 0.24

TOTAL 1 3.22

Table 5.1 EXTERNAL FACTOR EVALUATION MATRIX

For EFE, we should consider the opportunities and threat for the company. The weighted

score is calculated with the help of weight and ranking. The weighted score for ITC is 3.22

according to EFE matrix. If the weighted score is 4, it implies that the company is reacting well

to the external opportunities and threat. Since for ITC, it is 3.22 it means the company is aware

of the opportunities and the threats.

6. INTERNAL STRENGTH & WEAKNESS

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6.1 INTERNAL STRENGTH

6.1.1 DISTRIBUTION CHANNEL

ITC is a company which is been listed in the Forbes best 2000 companies of the world. It

is the only fmcg company from India to be listed in this prestigious list. This is one of the oldest

companies which were started in the year 1910.

ITC Biscuits- 1.8 million outlets in India it had seen 7 % growth within 3 years of launch.

They supply their goods to 10-13 million retail stores and they supply close to 9 million kirana

stores.

6.1.2 HIGH INVESTMENT IN R&D

The company had always been backed from a lot of funding from the directors. In the

year 2012 ITC has invested close to Rs 100 crores for their R&D. The R&D head quarters is in

Bangalore which concentrates on growing hybrid potatoes, this initiate from ITC R&D has

resulted in the growth and profitability of the firm.

6.1.3 ATTRITION RATE

The top level management of ITC has been the back bone for their success, the director

and the executive directors are continuously working for the company for the past 15 years,

because of this the companies attrition rate is been grounded to zero.

6.1.4 QUALITY AWARDS

ITC is a brand which is known for its quality of preparation of work, the company is able

to retain its customers due to the extensive usage of quality. Recently the factory in Manpura

received certifications for ISO 9001 (Quality Management System), ISO 14001 (Environment

Management System) OHSAS 18001 (Occupational Health & Safety Assessment System) from

Messrs. Det Norske Veritas (DNV). The company also has launched six sigma methodology of

production in the factories to ensure repeated quality.

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6.1.5 ENVIRONMENTAL FRIENDLY PRODUCTS

Class mates are one of those of one of the brands which had bought awareness about the

eco friendly books. When they entered into the stationary market they started growing more trees

for cutting down more trees.

6.1.6 OLDEST PLAYER IN THE MARKET

ITC is a company which was started in the year 1910, they have been successful in the

initial products of cigarettes which paved way for them to learn about the Indian people’s

mindset and their cultures. This was the secret of success of the fmcg products and is the reason

why they were able to break even in the fmcg sector in a short span of time.

6.1.7 KNOWLEDGE ABOUT THE MARKET

In the cigarette industry only they had an extensive distribution channel which was their

success factor, when they launched the other fmcg products these distribution channel was an

added advantage for the company which resulted in success.

6.2 INTERNAL WEAKNESS

6.2.1 TOBACCO PRODUCTS

ITC has 75 % per share in the Indian tobacco industry, there are no players who can come

close to this mark, because of such an image in the market the other products which ITC comes

up with will always be somehow connected with the success rate of the cigarette company,

people will think before trying any of these products.

6.2.2 ESTABLISHMENT IN THE FMCG SECTOR

ITC products are one of the oldest players in the fmcg industry, but for their majority of

the time they had only cigarettes as their products, in the food sector and stationary sector they

are relatively new when compared to the other major players in the field.

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6.2.3 LIMITED PRODUCT LINE

ITC has a lot of untapped product’s in the personal care sector, their product line when

compared to the other major’s in the fmcg sector are limited and they don’t have any personal

care items for men.

7. INTERNAL FACTOR EVALUATION MATRIX

KEY INTERNAL FACTORS WEIGHT RATING WEIGHTED

SCORE

Strengths

1. Distribution channel 0.12 3 0.36

2. R&D 0.1 4 0.4

3. Attrition rate 0.08 3 0.24

4. Quality 0.1 3 0.3

5. Eco friendly measures 0.06 2 0.12

6. Knowledge about the market 0.05 2 0.1

7. Oldest player in the industry 0.05 3 0.15

8. Product innovation 0.1 3 0.3

9. Brand awareness 0.09 2 0.18

Weakness

10. Dependence of tobacco products 0.08 4 0.32

11. Limited product lines 0.1 3 0.3

12. Less efforts to enter into coconut

oil industry

0.07 2 0.14

TOTAL 1 2.9

Table 7.1 INTERNAL FACTOR EVALUATION MATRIX

For IFE matrix, the strength and the weakness of the company is considered. ITC has got

a weighted score of 2.9 which is above average (2.5) . This indicates that the internal position of

ITC is good.

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8. SWOT ANALYSIS

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Distribution channel.High investment in R&D.Attrition rate.Reputed Quality Awards.Environmental friendly products.Extensive knowledge about the market.Being one of the oldest player in the Indian market.

STRENGTH

Still dependent on the initial cigarette industry.Yet to establish as a major brand in the Fmcg sectorLimited product line

WEAKNESS

OPPORT

UNITIES

Increase in the disposal income of the middle class people.Government concentrating more on the food processing sector.Government exemption for major five fmcg products.The growth of untapped markets in the rural sector.Rural people of India becoming more brand consciousness

STRENGTH OPPORTUNITIES

There is still untapped market in rural sector so ITC with its excellent distribution channel can grabe the untapped marketPeople are becoming more brand conscious and ITC takes care of it by providing them with quality products.

WEAKNES

S OPPORTUNITIES

ITC can improve its product line because the governmnet is providing tax exemption for five major fmcg products.ITC can become a major brand in fmcg food sector with the help of government's concentration more on food processing

8.1 STRATEGIC POSITION AND ACTION EVALUATION MATRIX

Financial strength

The net profit if ITC has been increased to Rs.181.29 crore from Rs.150.88

crore from previous year, increased by 20.6% from previous year.

Return on capital employed is 45.4% which is a 59% increase than previous

year.

Revenue of ITC is Rs.27788 crores with a growth rate of 15%

4.0

3.0

3.0

Industry strength

FMCG sector growth rate is 16.5% among urban population and 17.2%

among rural population.

Deregulation in FDI by Indian constitution increased the investment in

FMCG sector.

Deregulation may give rise to many competitors.

3.0

3.0

1.0

12

THREATS

Increase of price in food products.Government allowance of fdi in retail, which will lead to competitation from foreign markets.Switching cost for the suppliers are vey less.Government supporting small scale industries which paves way for all local and domestic players.Emergence of many private labels from the retail industry.Number of substitutes is very high

STRENGT

H THRE

AT

ITc is been one of the oldest player in the fmcg sector in India hence this gives them an edge over the foreign players who invest in the indian fmcg sector. It will take time for the FDI to understand the consumer behaviour amd pattern ITC being a oldest player in the indurtsy will be able to understand the consumers better,

WEAKNES

S THRE

AT

The substitution rate for fmcg product is quite high and the product line of ITC is limited when compared to the other players in the industry. The price of the raw materials lie milk, Oil is also increasing and fmcg has not yet established themself as a major player in the food business.

Environmental stability

Switching cost of customers is very less, as the number of competitors are

more in FMCG sector.

High inflation rate makes a major impact on credit payment.

Switching cost of suppliers is low in FMCG sector.

-4.0

-3.0

-2.0

Competitive advantage

ITC has more diversified product range for their customers.

Attrition rate is 0% in the top management for the past 15 yrs.

ITC spends about Rs.100.96 crores in R&D projects.

-2.0

-1.0

-3.0

CONCLUSION:

Competitive advantage average = -6/3 = -2 CA ES FS

Environmental stability average = -9/3 = -3

Industry strength average = 7/3 = 2.33

Financial strength average = 10/3 = 3.33

DIRECTIONAL VECTOR COORDINATES:

x-axis: (-2) + (2.33) = +0.33

y-axis: (-3) + (3.33) = +0.33

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-0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

8.2 BOSTON CONSULTING GROUP MATRIX

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8.2.1 STAR

The packaged food comes under the star because it has high market share and high

market growth

Sunfeast cream biscuits is the market leader and has a share of 25%

Yippee noodles has a market share of 10%

Yippee pasta has a market share of 12.5%

Ashiravad atta has a market share of 30%

Bingo has a market share of 12%

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8.2.2 CASH COW

Cigarette comes under cash cow

The market growth of cigarettes is 56.54% and the market share of cigarette is 80.72%

8.2.3 CASH DOG

ITC’s agarbathis comes under cash dog because it has low market share and market

growth

The market share is 2%

The market growth is 5%

8.2.4 QUESTION MARK

ITC’s personal care comes under this category

The market growth is high which is around 12%

The market share is 5%

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8.3 INTERNAL EXTERNAL MATRIX

2.5 3 3.5 4 4.5 5 5.5 60

0.5

1

1.5

2

2.5

3

3.53.22

IE MATRIX

INTERNAL FACTOR EVALATION

EXTE

RNA

L V

ALU

E EV

ALU

ATI

ON

FIGURE 8.3 IE MATRIX

According to the IE matrix, ITC comes under grow and build strategy. This implies that

the strategy that the company follows right now is doing well so it can continue the same

strategy for its business. It means intensive and aggressive tactical strategies. Strategies should

focus on market penetration, market development, and product development.

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8.4 QUANTITATIVE STRATEGIC PLANNING MATRIX

STRATEGIC ALTERNATIVES

1. Tap untapped market in rural sector with the excellent distribution channel .2. People are becoming more brand conscious and ITC takes care of it by providing them

with quality products.

KEY FACTORS WEIGHT AS TAS AS TAS

STRENGTHS

1. Distribution channel 0.1 4 0.4 3 0.3

2. R&D 0.1 3 0.3 2 0.2

3. Attrition rate 0.06 - -

4. Quality 0.08 1 0.08 4 0.32

5. Eco friendly measures 0.08 - -

6. Knowledge about the

market

0.07 2 0.14 3 0.21

7. Oldest player in the

industry

0.09 2 0.18 1 0.09

8. Product innovation 0.09 - 2

9. Brand awareness 0.08 3 0.24 3 0.24

WEAKNESS

1. Dependence of tobacco

products

0.1 - -

2. Limited product lines 0.08 - -

3. Less efforts to enter into

coconut oil industry

0.07 - -

TOTAL 1 1.34 1.36

OPPORTUNITIES

1. Increase in the disposal

income

0.08 3 0.24 3 0.24

2. Government

concentration on food

0.08 2 0.16 -

18

sector

3. Government exemption 0.1 - -

4. Untapped markets in the

rural sector

0.09 3 0.27 2 0.18

5. Rural people becoming

more brand conscious

0.08 3 0.24 4 0.32

THREATS

1. Increase of price of

inflation is 14%

0.06 - -

2. Government allowance of

FDI

0.12 - 2 0.24

3. Switching cost for the

suppliers

0.08 - -

4. Government supporting

small scale industries

0.11 1 0.11 -

5. Emergence of many local

players as competitors

0.09 1 0.09 -

6. Number of substitutes is

very high

0.11 2 0.22 -

TOTAL 1 2.67 2.34

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8.5 GRAND STRATEDY MATRIX

FIGURE 8.5 GSM

ITC’s FMCG sector in India falls in the first quadrant of the Grand Strategy Matrix.

The firm is located in the first quadrant of this matrix has an excellent strategic position.

Similarly, ITC has a huge market development through its vast product line. Its product line

includes tobacco products, food products, personal care, agarbathies, lifestyle, etc.

ITC also reached a strong competitive position using its market penetration strategies.

ITC’s FMCG segment has been posting a strong 20 per cent plus revenue growth for the past six

to seven quarters. In the December quarter as well, this segment’s revenue grew 30.1 per cent

(on 15-18 per cent volume growth). All its categories, namely, biscuits, soaps and wheat flour

have grown well in the quarter. The company hopes to witness pick-up in the shampoos segment

on the back of recent re-launches. The EBIT losses from this segment have also narrowed to Rs

24 crore as against Rs 68 crore in the March 2011 quarter. A break-even in this segment would

boost sentiments significantly, which analysts expect by early FY14.

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9. PORTERS FIVE FORCE MODEL

RIVALRY AMONG COMPETITORS 

 

Attractiveness

 

REMARKSLow       High1 2 3 4 5

No. Of competitors

Large  *  

Small Competitors like HUL, P&G, Dabur

Industry Growth

Slow

 

*  

Fast Industry grows at a rate of 17%

Fixed Cost

High

  *  

Low

 Since the demand for the product is high the companies go for economy of scales, this will lead to high fixed cost.

Differentiation

Low

  *  

High

 There is no much differentiation as all the product are same.

Switching Cost

Low

  *  

High

 There is not much differentiation between the product

Openness of term sales

Secret

  *  

Open

 The official statements of cash flow won’t be revealed accurately

Excess Capacity

Large

  *  

Small

 Since Fmcg sector is always in pressure to demand product so the stock level is high

Strategic Stakes

High

  *  

Low

 People generally tend to invest more on fmcg since it is stable.

Table 9.1 RIVALRY AMONG COMPETITORS

INTERPRETATION

The value for rivalry among competitors is 2.85. It means that the competition in this

sector is not high.

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BARRIERS TO EXIT 

 

Attractiveness

 

REMARKSLow       High1 2 3 4 5

Asset Specialization

High

        *  

Low

 Fmcg is a sector where the demand for a product will be really high. The industry has to invest in lot of asset to keep up demand

Cost Of Exit

High

       *  

Low

 Since the market is high and the products are in huge demand the company would have set up huge plants.

Government Restrictions

High

         *

Low

 The government do not have any restrictions in a company exiting, there are no hidden costs which have to be paid to the government.

Table 9.2 BARRIERS TO EXIST

INTERPRETATION

The value for barriers to exist is 4.3. This implies that for the fmcg industry to exist the

business is high because it has a number of barriers.

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BARRIERS TO ENTRY 

 

Attractiveness

 

REMARKSLow       High1 2 3 4 5

Economies of scale

Small      *

LargeHigh demand leads to production in large scale

Product differentiation

Low        *  

HighIt is a must or else it might lead to boredom

Brand identity

Low

      *   

High

Consumers in India are becoming more brand conscious , even the people in rural areas

Switching costLow

    *      High

It is low since the product by itself will not cost more

Access to channel distribution

Easy

    *  

Limited

If the distribution channel is low , the frequency of the product reaching the customer is tough

Capital requirement

Small    *  

LargeDemand is high so capital should be high

Access to technology

Easy  *    

RestrictedNot much technology is required .

Access to raw materials

Easy   *      

RestrictedThe raw materials needed is easily available.

Government protection

None * SubstantialNo protection

Table 9.3 BARRIERS TO ENTRY

INTERPRETATION

The value is 3.3 and this shows the barrier for the entry into this industry is not high.

23

THREATS FROM SUBSTITUTES 

 

Attractiveness

 

REMARKSLow      

High

1 2 3 4 5

Availability of Close Substitutes

High  *      

Low  ITC has a number of substitutes for its product from players like HUL, P&G

Switching CostLow

   *      

High  People won’t lose much money by shifting to different products.

Substitute's Price Value

Better    

  *    

Worse

 The switching cost is less between the substitutes.

Profitability of the Producers of Substitutes

High *        

Low  Buyers can switch their products within the same company.

Table 9.4 THREATS FROM SUBSTITUTES

INTERPRETATION

The value is 1.74 and this implies that the threat from substitutes is not that high when

compared with the other industry.

24

BARGANING POWER OF BUYERS 

 

Attractiveness

 REMARKSLow       High

1 2 3 4 5

Number of Buyers

Small

*Large

 Fmcg sector is the 4th largest sector with annual growth of 17%

Availability of SubstitutesMany

*Few

 Fmcg sector has a lot of substitutes like p&g, HUL.

Switching Costs

Low

*

High

 Switching cost is less because buyers are not going to lose much by changing the product

Buyer's Threat of Backward Integration

High

*

Low

There are not much products in which the suppliers can lead into backward integration

Industry's Threat of Forward Integration

Low*

High Most of the fmcg products are complete by itself.

Contribution to QualityLow

*High

 ITC had won number of quality awards.

Contribution to CostHigh

*Low

 The buyer has no involvement when it comes to cost

Buyer's Profitability

Low

*

High

 There is not a big price difference between the products of different brands.

Table 9.5 BARGAINING POWERS OF BUYERS

INTERPRETATION

The value for bargaining power of buyers is 3.12. This implies that the bargaining power

of buyers is on a average. The customers can bargain because there are number of competitors in

this industry.

25

BARGANING POWER OF SUPPLIERS 

 Since the demand for the raw material is high, the suppliers have

more bargaining power.

Attractiveness

 REMARKSLow       High

1 2 3 4 5

Number of SuppliersSmall

*Large

 Suppliers are high because there are number of players in this industry

Availability of Substitutes

Many*

Few The suppliers can sell to any players like HUL, P&G

Switching Costs

Low

*

High

 In the fmcg sector the switching cost for the buyers are really low since most of the products by itself costs a relatively small amount.

Supplier's Threat of Backward Integration

High

*

Low

 The chances of suppliers reaching out for backward integration is less, because they have done all they can do in the sector.

Industry's Threat of Backward Integration

Low * High The Fmcg are not highly technological oriented

Contribution to QualityLow

*High

 ITC has won so many quality awards for its outstanding quality.

Contribution to CostHigh

*Low

 It is the raw material which also contributes to the cost

Industry's Importance to Supplier

Low

*

High

 The suppliers more over set the cost of the product, if there is an increase in the cost of raw materials it will lead to an increase in the cost of the product.

Table 9.6 BARGAINING POWER OF SUPPLIERS

INTERPRETATION

The value for bargaining power of suppliers is 3.25. This shows that the bargaining

power of suppliers is high as they can sell their materials to the competitors also if they don’t get

high margin.

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GOVERNMENT ACTIONS 

 

Attractiveness

 

REMARKSLow      

High

1 2 3 4 5Industry Protection

Low

      *  

High  The government has been providing tax

exemption for 5 major fmcg productIndustry Regulations

High

      *  

Low  The government has reduced the barriers to start of a new

fmcg industry, especially a food processing industry.Customs & Tariff Restrictions Aboard

High

      *  

Low

 The export duties for food products are less, import duties are nil for

Table 9.7 GOVERNMENT ACTIONS

INTERPRETATION

The value for government actions is 4. This shows that the government is supporting this

industry and the growth of the industry is high and it contributes to the revenue of the country.

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OVERALL ASSESSMENTS

 

Attractiveness

REMARKSLow      

High

1 2 3 4 5

Barriers To Entry *  Barriers is medium

Rivalry Among Competitors * Competition is high

Barriers To Exit *  Cannot exit the industry easily

Power Of Buyers * The buyers have bargaining power due to competition

Power Suppliers *  The suppliers can also bargain

Threat Of Substitutes *  Threat is not much from competitors

Government Action *  The government helps in the growth

Overall Attractiveness *  This industry attracts new players

Table 9.8 OVERALL ASSESSMENTS

INTERPRETATION

The value is 3.25 and this implies that the industry is growing and people get profit out

the business and the government also helps in the growth of the industry and it contributes to the

revenue of the country.

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10. PROJECTED ANNUAL REPORT

RATIO/YEAR 2008 2009 2010 2011 2012

RETURN ON CAPITAL EMPLOYEED

36.60 34.60 42.64 44.94 46.95

OPERARTING PROFIT MARGIN

31.57 32.84 33.02 34.08 35.55

NET PROFIT MARGIN

21.56 21.18 21.30 22.91 23.97

11. REFERENCE

http://www.itcportal.com/about-itc/profile/index.aspx

http://www.itcportal.com/about-itc/profile/history-and-evolution.aspx

http://www.moneycontrol.com/financials/itc/ratios/ITC

http://itcportal.com/about-itc/shareholder-value/annual-reports/itc-annual-report-

2012/food-business.aspx

http://itcportal.com/about-itc/shareholder-value/annual-reports/itc-annual-report-

2012/pdf/ITC-Balance-Sheet.pdf

http://ca.finance.yahoo.com/news/procter-gamble-quarterly-profit-soars-121153692-- sector.html

http://www.indiainfoline.com/Markets/News/Gillette-India-tumbles-after-weak-FY- 2012-earnings/4486473530

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