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
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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
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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.
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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.
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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.
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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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