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Imperial Tobacco Company of
India Limited (ITC).
ITC. Touching your life. Everyday
Presented by
GROUP NO.10 Sumit Roy
Anamika singh
Akansha
Kashish Arora
Tarun Dutt
Minaz humdule
FLOW OF PRESENTATION COMPANY PROFILE
VISION & MISSION
VALUE
POSITIONING OF ITC
DISTRIBUTION NETWORK
SUPPLY CHAIN ANALYSIS OF FMCG PRODUCT(CIGARATTE) &
PEST AND SWOT ANALYSIS OF ITC.
SYNERGIES FOR ITC
EFFICIENCIES IN E-CHOUPAL NETWORK
COMPARISON WITH HARYALI KISAN BAZAR
FUTURE OF E-CHOUPAL
CONCLUSION
ITC. Touching your life. Everyday
Introduction
ITC is one of India's foremost private sector companies
Has a diversified presence in Cigarettes, Hotels, Paperboards &Specialty
Papers, Packaging, Agri-Business, Packaged Foods &Confectionery, Branded
Apparel, Greeting Cards and other FMCG products.
ITC is one of the country's biggest foreign exchange earners (US $2 billion in
the last decade).
Ranks No. 4 among Indian listed Private Sector Companies by market cap. (@
April 09)
No. 1 in FMCG Sector
Rated as one of India‟s Most Respected Companies (IMRB-Business world
Survey 2006).
Diversified group of companies with operations in various industry segments from cigarettes to apparels.
Annual turnover is of the order US$2.4 billion
ITC. Touching your life. Everyday
VISION & MISSION
• Vision: 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.
• Mission: To enhance the wealth generating capability
of the enterprise in a globalizing environment, delivering
superior and sustainable stakeholder value.
ITC. Touching your life. Everyday
Values
ITC. Touching your life. Everyday
• ITC's Core Values are aimed at developing a customer-
focused, high-performance Organisation.
• Customer Focus we are always customer focused and will
deliver what the customer needs in terms of value, quality
and satisfaction.
.
POSITIONING OF ITC
ITC. Touching your life. Everyday
PRODUCT PROFILE
ITC. Touching your life. Everyday
Hotel
Cigarettes
Incense Sticks
Personal Care
Safety Matches
Agricultural
Industry
Information
Technology
Paperboards
Packaged Foods
Stationery
Branded Apparel
PRODUCT LINE
ITC. Touching your life. Everyday
ITC Distribution network in India
ITC. Touching your life. Everyday
ITC’s Distribution channel
ITC‟s Distribution channel is as follows:-
ITC. Touching your life. Everyday
.
COMPANY HUB FACTORY
Retailer
small Wholesale dealer
Wholesale dealer
Carried and forward agent
consumer
HI-TECH SUPPLY SOLUTIONS Thousands of small retailers in India who sell cigarettes and
confectionery supplied by ITC Ltd, and who have thus far had to wait for
the next arrival of the company‟s delivery van.
Place orders through mobile phones
Vans go without knowing actual demand so after using this they can
save cost as well as time.
Mobility based applications can bring down the cost of operation by 20-
30% from the manual basis of operation
ITC. Touching your life. Everyday
ITC FMCG Supply chain
• Consists of diverse categories with different priorities
• More than 1000+ SKUs
• Buying Value $68 MM
• Warehousing space of more than 3.5m SFT around 55+
• Locations
• Products manufactured at 45+ plants
• More than 650 trucks moved every day
• Direct distribution from factories to Distributors.
• Indirect movement through RDCs
• Combination of Rail/Road/Sea movement within the
• country depending on the product type.
• (Target is Safer, Faster, cost effective
ITC. Touching your life. Everyday
Indian Tobacco Division (ITD)
Market leaders in Cigarettes and Tobacco business & is
among India‟s most profitable companies
Brands owned by ITC Ltd are Wills Classic, Wills
Navy Cut, Gold Flake, Bristol and Scissors
ITD also sells two luxury filter brands of its parent
company Benson & Hedges and 555
Four manufacturing units for cigarettes at
Bangalore, Saharanpur, Kidder pore, Munger
ITC. Touching your life. Everyday
ITC. Touching your life. Everyday
PEST ANALYSIS
POLITICAL
• Huge burden of VAT
• Excise duty raised by union budget by 5 %
• Ban on communication
• Luxury tax in 10 states
• Smuggling
• 100% FDI allowed
ECONOMICAL
• Bidee : cigarette ratio-10:1
• Profit margin is high
• Other forms of cheap tobacco intake
SOCIO -CULTUR
AL
• Becoming status symbol
• Companions mounted by W.H.O.
• Changing attitudes towards tobacco
• May 31 is no tobacco day
• Change in life style
TECHNICAL
• State-of-the-art factories
• Cheap labour supply
• Development of IQMS
• Adapting other concepts like QC,TQM, KSS, 5 S, 6 sigma
SWOT ANALYSIS
ITC. Touching your life. Everyday
Strength
•Cigarette market is 22,000 cr and ITC
has lion’s share in it
•Strong brand recognition and product
portfolio
•Distribution network
•Management
Weakness
•Dependence on tobacco revenues
• Negative Connection of Tobacco
Opportunity
•Low per capita consumption
Of personal care products
•Rural Market
•E-Choupal
• Filter cigarette segment of less than
60mm size
Threat
•Competition both Domestic &
International
•Increasing Tax on cigarettes
•Excise duty on unfiltered cigarettes less
than 60mm in length was increased 387%
last year
•Hike was 142% for those between 61mm
and 70mm long.
•Regulatory restrictions on cigarettes
•Ban on smoking
CONFRONTATION
NAVY CUT,CLASSIC,INSIGNIA,INDIA KINGS,CAPSTEN,GOLD
FLAKE,SISSORS,SILK CUT,BRISTOL,BERKELEY
ITC. Touching your life. Everyday
GOLD FLAKE PREMIUM
29%
GOLD FLAKE
KINGS
4%
IK Regular
(Rich Gold)
1%
B&H Light
2% Classic Regular
4% Classic Ultra Mild
4%
Silk Cut Kings
5%
Wills Navy Cut
7%
Silk Cut Premium
11%
Marlboro Regular
6%
Select Filter
5%
Four Square Specia
5%
Four Square Premier
5%
Panama Plain
4%
Red & White Super
4%
Cavender Magna
4%
Diversification
• ITC over the years has been investing cash flows from its
cigarette business into various lucrative segments like
foods, personal care, hotels and paper.
• With the paperboard division coming out of a major capex
cycle and a reduction in losses from FMCG-others division
from FY10E, we expect the non-cigarette businesses to
become self-sufficient.
• The agriculture division continues to provide a strong
support as an excellent raw material sourcing base. Hotels
segment though is likely to register slower growth in
FY10E due to economic slowdown and terror attacks.
ITC. Touching your life. Everyday
ITC. Touching your life. Everyday 18
Source : Based on Cigarette consumption data(2003) from
“World Cigarettes”,ERC Group plc.
Per Capita Adult Cigarette Consumption
(Sticks)
16621753
561488
141
1190
USA China Pakistan Nepal India World Avg.
CONT…. • It has 3 contract manufacturers (OCMs)Reliable Cigarette
and Tobacco IndustriesPrivate Ltd. (RCTI)
• Asian Tobacco Company (ATC )Hyderabad Deccan
Cigarette Industries(HDC)
• Huge distribution network with 19 marketing
branches and 33 Godowns across nation
• Also caters to the exports mainly in United States
and Middle-Eastern countries
ITC. Touching your life. Everyday
ITC. Touching your life. Everyday
DISTRIBUTION NETWORK(Tobacco Div.)
Bangalore
Calcutta
Saharanpur
Munger
GODOWNS
(19) BRANCHES
(19)
Factories (4)
WHOLESALE DISTRIBUTORS
(60 PER BRANCH)
RETAILERS SECONDARY
WHOLESALERS
Information
Goods
Role of Each Member
Factories – Supply to 18 godowns
Godowns & Branches
Manage by C&F agents getting monthly remuneration
No rent paid by ITC
one branch – 60 WDs , 5 AMs and 20 Area Executives
Wholesale Distributors(WDs)
Margin – 2% of sales
Appoints secondary Wholesalers
ITC. Touching your life. Everyday
PHYSICAL DISTRIBUTION Demand Estimation – collaborative forecasting( Sales
force with dealers)
Forecast based on last month sales
Production plan made according to forecast
Delivery to C & F agents within 7 days
CFAs deliver goods to dealers on the basis of the branch
office route plan
Factory CFAs- Trucks
CFAs Dealers – Small Vehicles
ITC. Touching your life. Everyday
ITC. Touching your life. Everyday
FLOW FOR E-CHOPAL
Company Logo
ITC e-Choupal : An Introduction, Stake
holder Analysis 1
Comparison of status of Supply Chain
before and after ITC e-Choupal 2
Critical Analysis, and Comparison with
HKB 3
Future Scope 4
ITC e-Choupal : An Introduction
• Started in the year 2000
• Target Area so far 38,000 villages, 6500 kiosks, 9 states
• Wholly owned by ITC
Why it become a success ?
• Only initiative to attempt to combine Services and an Effective Business Model successfully
Designed to address the issues such as: 1. Fragmented farms
2. Weak institutions
3. Involvement of intermediaries
4. Information Asymmetry
ITC’S AGRI COMMODITY DIVISON
Farm linkages in 14 states covering Soya, Wheat, Marine
products, Coffee etc. Focus on value added agri commodities
Unique CRM programme in commodity exports
Leveraging IT for the transformational „e-Choupal‟ initiative
Rural India‟s largest Internet-based intervention
Over 40,000 villages linked through 6500 e-Choupals
servicing over 4 million farmers
Distinctive sourcing capability for ITC‟s Foods business
Low Risk Appetite
Weak Market
Orientation
Low Investment Low Margins
Low Productivity Low Value Addition
Caught in a vicious cycle of
underdevelopment
THE PREDICAMENT OF INDIAN FARMERS
ITC’S SUPPLY CHAIN OF SOYA BEAN BEFORE E-CHOUPAL INITIATIVE
Company Logo
SUPPLY CHAIN FOR E-CHOPAL
Company Logo
Farmer
Agri-Input Companies
Dealer/
StockiestRetailer
Agril University, Met Dept,
Insurance Co.
VLW (of Dept of Agriculture)
Money Lender
Pakka Adtiya(Registered Dealer)
Kaccha Adtiya(Un-Registered Dealer)
Trader
Broker
Proc
esso
r
ITC-IBD
Why ITC thought of e-Choupal
Company Logo
The Tactical Imperative
Capture of Intra-day Price shifts
Seasonal price Inflation
Daily price inflation
ITC’s distance from Farmer
The Strategic Imperative
Horizontal spread
Vertical presence
Risk management
The Social Imperative
ITC’S SUPPLY CHAIN OF SOYA BEAN after e-Choupal Initiative
Supply chain post re-engineering
• Pricing
– Previous day‟s closing price used as benchmark price for next
day
– Mandi prices communicated to sanchalak through e-Choupal
portal
– Sanchalak inspects the sample, assesses quality and gives farmer
a conditional quote and a note (name/village/quality tests/approx.
quantity/conditional price), if farmer decides to sell to ITC
Company Logo
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological support
Company Logo
• Inbound Logistics
– Farmer proceeds to the nearest ITC procurement hub with the
note
– Some procurement hubs are ITC factories, others are purely
warehouse operations
– ITC‟s aim is to have a processing centre within 30-40 km radius
of its farmers
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological support
Company Logo
• Inspection and Grading
– At the ITC procurement hub, laboratory tests are conducted on
a sample of farmer‟s produce
– To change farmer‟s attitude and appreciating produce quality,
ITC is developing lab tests to reward farmers with reward
points for better quality supply
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological support
Company Logo
• Inspection and Grading
– At the ITC procurement hub, laboratory tests are conducted on
a sample of farmer‟s produce
– To change farmer‟s attitude and appreciating produce quality,
ITC is developing lab tests to reward farmers with reward
points for better quality supply
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological support
Company Logo
• Weighing and Payment
– Farmer‟s produce is weighed on electronic weighbridge
– He is then given full cash payment
– Freight expenses are reimbursed
– Appropriate documentation at each stage and farmer is given a
copy of that
– Samyojaks handle cash operations
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological support
Company Logo
• Hub Logistics
– Farmer transports his produce to the nearest processing centre
or storage hub
– ITC incurs the transportation cost
– The farmer bears the risk of transportation until produce is
delivered and the sale is completed
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological support
Company Logo
• Technological support
– Nodal platform catering to commodity blending, agricultural trading, e-
choupal &rural distribution
– 24,000 personalized business function points
– 110,000+ pre-built business function points
– Integrated Business Systems for Direct Agriculture Procurement, Rural
Distribution, e-Choupal Management, Exports, Insurance, Aqua Processing &
Commodity blending
– Support for 8 local languages
Pricing Inbound Logistics
Inspection Grading
Weighing and
Payment
Hub Logistics
Technological
support
A win-win Deal
Company Logo
Farmers gain
• Better information Content
• Better info timing
• Less transportation Cost
• Transaction duration
• Weighing accuracy
• Professionalism
ITC gains
• Disintermediation savings
• Freight costs
• Quality control
• Risk management
Transaction cost in Mandi Chain (before e-Choupal)
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
Transaction cost in Mandi Chain (after e-Choupal)
SYNERGIES FOR ITC
Generation of Goodwill & positive public opinion
Better supply chain for ITC‟s Food & Agri Businesses
Costs, Quality, Traceability
Access to the Underserved Rural Markets
Through a Virtuous Cycle created by “Larger Incomes”,
and founded on “Trust” that is built
New ITES Business Opportunities
Health, Education, Entertainment, eGovernance
Company Logo
Company Logo
F
A
R
M
E
R
S
M
A
R
K
E
T
S
Cigarette Trade Marketing capability
Branded
Foods
Expanded FMCG distribution capability
e-choupal rural two-way fulfillment
capability
VPN providing SCM, ERP & CRM capability
Lifestyle
retailing
Education
Stationery
Matches &
Agarbattis
A basis for strategic partnerships with other FMCG brand owners
OTHER E-CHOUPAL INITIATIVE
Company Logo
Companies using e-Choupal network
Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008
Critical Analysis of ITC’s Supply Chain
Company Logo
Stake holder Analysis Primary Stakeholders Interest
Farmer Community
Access to information
– Empowered decisions
– Improved agriculture
Economic benefits through lower transaction costs and process
efficiencies
Served with dignity
Knowledge bundled sale of goods and services
Co-opted in product design Hope for a brighter future
ITC
Lower procurement costs
Direct interaction with farmers - Control on quality & supply
security
Low cost distribution channel Access to market intelligence
Commission Agents
(Kachha & Pakka
Adatiyas)
Gain access to global markets through ITC and commission to compensate some of the loss revenue
Efficiencies in e-Choupal network
Last mile low cost solution
Full Service approach
Demand aggregation
Third party seller
Extensive use of technology
Access to information about customers
Pull based strategy
Company Logo
Drivers of Supply Chain
Information
Logistics at hub
Transportation
Storage facilities at hub
Who are in problems
Local Mandi
Mandi laborers
Market near Mandi
Small processors
Risk associated with e-Choupal
Eroded dominance of Commission agent
Authenticity of information
Problem of Power and internet connectivity
Hariyali Kisaan Bazaar
Hariyali kisaan bazaar
Farmers
DSCL
ICICI Bank
Other companies
Loan for pass through to farmers
Repayment of loan with interest
Produce procurement
Extension service
E-choupal Haryali Kisaan Bazaar
Main
objective
Procurement Rural Retail
Benefit to the
farmers
computer application to provide
market information
provide better method of cultivation by
trained agronomist
Synergies Synergies with products which
ITC is manufacturing
Synergies with what DSCL is
selling(inputs to agriculture plus other
services
Economies of
scale
25-30 km area coverage 20-25 km area coverage
Procurement
centre
near small town Strategically placed near petrol pump
mainly
Comparison with Haryali Kisaan Bazar
FUTURE OF E-CHOUPAL
Company Logo
e-Choupal 3.0. The Deepening
NEW BUSINESSES:
1) Rural jobs and employability
2) Personalised agri services.
MORE INTERACTION: Through Choupal Saagars and
Haats and via mobile phones
NEW TECHNOLOGY: Use of especially enabled mobile
phones, analytics, new partner
ITC. Touching your life. Everyday
e-Choupal 2.0
Cmpany Logo
ITC e-Choupal Footprint
CONCLUSION
• ITC promoting their brands through advertisement campaign
as well as door to door promotion.
• ITC is also focusing on Retailers and Wholesalers to promote their brand.
• The demand of their product in very low, because people don‟t know about their brands very well.
• ITC knows their strength and weakness in the personal care market, so they are applying new concept to overcome their weaknesses.
• ITC now offering more margins, exiting offers and long credit period to retailers and wholesalers.
ITC. Touching your life. Everyday
.
THINK BEFORE
SMOKING…….
THANK YOU
?????