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ASSIGNMENT ON

CASE STUDY OF ITC IN


RURAL INDIA

Submitted to: Dr. Niladri Das

Date: 20th September, 2010

Subject: Entrepreneurship Management (MSC 43101)

Submitted by:
Vibhor Garg (2009MB0014)
Ravi Biwal (2009MB0027)
Manish Kumar (2009MB0042)
Binay Kumar (2009MB0005)
Rohit Rajak (2009MB0019)
Amit Anthony Soren (2009MB0035)
Manish Kumar Jha (2009MB0011)
INTRODUCTION-ITC
ITC is one of India's foremost private sector companies with a market capitalization of
over US $ 22 billion and a turnover of US $ 6 billion.* ITC is rated among the World's
Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by
Forbes magazine, among India's Most Respected Companies by BusinessWorld and
among India's Most Valuable Companies by Business Today. ITC ranks among India's
`10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and
published by the Economic Times. ITC also ranks among Asia's 50 best performing
companies compiled by Business Week.
ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products.
While ITC is an outstanding market leader in its traditional businesses of Cigarettes,
Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even
in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal
Care and Stationery.
As one of India's most valuable and respected corporations, ITC is widely perceived to be
dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to
create enduring value for the nation provides the motive force to sustain growing
shareholder value. ITC practices this philosophy by not only driving each of its
businesses towards international competitiveness but by also consciously contributing to
enhancing the competitiveness of the larger value chain of which it is a part."
ITC's diversified status originates from its corporate strategy aimed at creating multiple
drivers of growth anchored on its time-tested core competencies: unmatched distribution
reach, superior brand-building capabilities, effective supply chain management and
acknowledged service skills in hoteliering. Over time, the strategic forays into new
businesses are expected to garner a significant share of these emerging high-growth
markets in India.
ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one
of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade).
The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance
its competitiveness by empowering Indian farmers through the power of the Internet.
This transformational strategy, which has already become the subject matter of a case
study at Harvard Business School, is expected to progressively create for ITC a huge
rural distribution infrastructure, significantly enhancing the Company's marketing reach.
ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd,
provides IT services and solutions to leading global customers. ITC Infotech has carved a
niche for itself by addressing customer challenges through innovative IT solutions.
ITC's production facilities and hotels have won numerous national and international
awards for quality, productivity, safety and environment management systems. ITC was
the first company in India to voluntarily seek a corporate governance rating.
ITC employs over 26,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalizing
environment to consistently reward more than 3, 77,000 shareholders, fulfill the
aspirations of its stakeholders and meet societal expectations. This over-arching vision of
the company is expressively captured in its corporate positioning statement: "Enduring
Value. For the Nation. For the Shareholder."
(* as on 31st March 2010)
Source: http://www.itcportal.com/about-itc/itc-profile/itc-profile.aspx

HISTORY-ITC
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of
India Limited. As the Company's ownership progressively Indianised, the name of the
Company was changed from Imperial Tobacco Company of India Limited to India
Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition
of the Company's multi-business portfolio encompassing a wide range of businesses -
Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards &
Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and
Personal Care - the full stops in the Company's name were removed effective September
18, 2001. The Company now stands rechristened 'ITC Limited'.
The Company’s beginnings were humble. A leased office on Radha Bazar Lane, Kolkata,
was the centre of the Company's existence. The Company celebrated its 16th birthday on
August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now
renamed J.L. Nehru Road) Kolkata, for the sum of Rs 3,10,000. This decision of the
Company was historic in more ways than one. It was to mark the beginning of a long and
eventful journey into India's future. The Company's headquarter building, 'Virginia
House', which came up on that plot of land two years later, would go on to become one of
Kolkata's most venerated landmarks.
Though the first six decades of the Company's existence were primarily devoted to the
growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies
witnessed the beginnings of a corporate transformation that would usher in momentous
changes in the life of the Company.
ITC's Packaging & Printing Business was set up in 1925 as a strategic backward
integration for ITC's Cigarettes business. It is today India's most sophisticated packaging
house.
In 1975 the Company launched its Hotels business with the acquisition of a hotel in
Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of
ITC's entry into the hotels business was rooted in the concept of creating value for the
nation. ITC chose the hotels business for its potential to earn high levels of foreign
exchange, create tourism infrastructure and generate large scale direct and indirect
employment. Since then ITC's Hotels business has grown to occupy a position of
leadership, with over 100 owned and managed properties spread across India.
In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam
Paperboards Limited, which today has become the market leader in India. Bhadrachalam
Paperboards amalgamated with the Company effective March 13, 2002 and became a
Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this
division merged with the Company's Tribeni Tissues Division to form the Paperboards &
Specialty Papers Division. ITC's paperboards' technology, productivity, quality and
manufacturing processes are comparable to the best in the world. It has also made an
immense contribution to the development of Sarapaka, an economically backward area in
the state of Andhra Pradesh. It is directly involved in education, environmental protection
and community development. In 2004, ITC acquired the paperboard manufacturing
facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu.
The Kovai Unit allows ITC to improve customer service with reduced lead time and a
wider product range.
In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint
venture. Since inception, its shares have been held by ITC, British American Tobacco
and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a
subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited
(Surya Nepal).
In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing
company and a major supplier of tissue paper to the cigarette industry. The merged entity
was named the Tribeni Tissues Division (TTD). To harness strategic and operational
synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the
Paperboards & Specialty Papers Division in November 2002.
Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business
Division for export of agri-commodities. The Division is today one of India's largest
exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in
2000 with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4
million farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in
August 2004 at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operatonal
in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh.
In 2000, ITC forayed into the Greeting, Gifting and Stationery products business with the
launch of Expressions range of greeting cards. A line of premium range of notebooks
under brand “Paperkraft” was launched in 2002. To augment its offering and to reach a
wider student population, the popular range of notebooks was launched under brand
“Classmate” in 2003. “Classmate” over the years has grown to become India’s largest
notebook brand and has also increased its portfolio to occupy a greater share of the
school bag. Years 2007- 2009 saw the launch of Children Books, Slam Books, Geometry
Boxes, Pens and Pencils under the “Classmate” brand. In 2008, ITC repositioned the
business as the Education and Stationery Products Business and launched India's first
environment friendly premium business paper under the “Paperkraft” Brand.
“Paperkraft” offers a diverse portfolio in the premium executive stationery and office
consumables segment. Paperkraft entered new categories in the office consumable
segment with the launch of Textliners, Permanent Ink Markers and White Board Markers
in 2009.
ITC also entered the Lifestyle Retailing business with the Wills Sport range of
international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain
of exclusive stores later expanded its range to include Wills Classic formal wear (2002)
and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular
segment with its men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle
became title partner of the country's most premier fashion event - Wills Lifestyle India
Fashion Week - that has gained recognition from buyers and retailers as the single
largest B-2-B platform for the Fashion Design industry. To mark the occasion, ITC
launched a special 'Celebration Series', taking the event forward to consumers.
In 2000, ITC spun off its information technology business into a wholly owned
subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging
opportunities in this area. Today ITC Infotech is one of India’s fastest growing global IT
and IT-enabled services companies and has established itself as a key player in offshore
outsourcing, providing outsourced IT solutions and services to leading global customers
across key focus verticals - Manufacturing, BFSI (Banking, Financial Services &
Insurance), CPG&R (Consumer Packaged Goods & Retail), THT (Travel, Hospitality
and Transportation) and Media & Entertainment.
ITC's foray into the Foods business is an outstanding example of successfully blending
multiple internal competencies to create a new driver of business growth. It began in
August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet
dishes. In 2002, ITC entered the confectionery and staples segments with the launch of
the brands mint-o and Candyman confectionery and Aashirvaad atta (wheat flour).
2003 witnessed the introduction of Sunfeast as the Company entered the biscuits
segment. ITC's entered the fast growing branded snacks category with Bingo! in 2007. In
eight years, the Foods business has grown to a significant size with over 200
differentiated products under six distinctive brands, with an enviable distribution reach, a
rapidly growing market share and a solid market standing.
In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire
value chain found yet another expression in the Safety Matches initiative. ITC now
markets popular safety matches brands like iKno, Mangaldeep, Aim, Aim Mega and
Aim Metro.
ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the
manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands
include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine,
Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa.
ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body
care products for men and women in July 2005. Inizio, the signature range under Essenza
Di Wills provides a comprehensive grooming regimen with distinct lines for men (Inizio
Homme) and women (Inizio Femme). Continuing with its tradition of bringing world
class products to Indian consumers the Company launched 'Fiama Di Wills', a premium
range of Shampoos, Shower Gels and Soaps in September, October and December 2007
respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in
the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivel
range of soaps in February and Vivel range of shampoos in June 2008.
Source: http://www.itcportal.com/about-itc/itc-profile/history-and-evolution.aspx

BUSINESS MODEL
ITC is a board-managed professional company, committed to creating enduring value for
the shareholder and for the nation. It has a rich organizational culture rooted in its core
values of respect for people and belief in empowerment. Its philosophy of all-round value
creation is backed by strong corporate governance policies and systems.
ITC’s corporate strategies are:
• Create multiple drivers of growth by developing a portfolio of world class
businesses that best matches organizational capability with opportunities in
domestic and export markets.
• Continue to focus on the chosen portfolio of FMCG, Hotels, Paper, Paperboards
& Packaging, Agri Business and Information Technology.
• Benchmark the health of each business comprehensively across the criteria of
Market Standing, Profitability and Internal Vitality.
• Ensure that each of its businesses is world class and internationally competitive.
• Enhance the competitive power of the portfolio through synergies derived by
blending the diverse skills and capabilities residing in ITC are various businesses.
• Create distributed leadership within the organization by nurturing talented and
focused top management teams for each of the businesses.
• Continuously strengthen and refine Corporate Governance processes and systems
to catalyse the entrepreneurial energies of management by striking the golden
balance between executive freedom and the need for effective control and
accountability.
Source: http://www.itcportal.com/about-itc/itc-profile/the-itc-way.aspx

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.
Businesses:
FMCG
Cigarettes & Cigars
Foods
Lifestyle Retailing
Personal Care
Education and Stationery
Safety Matches
Agarbattis
Hotels
Paperboards and Packaging
Paperboards and Specialty Papers
Packaging
Agri Business
Agri Commodities & Rural Services
e-Choupal
Leaf Tobacco, Spices & Agri Inputs
Information Technology
ITC- AGRI COMMODITIES & RURAL
SERVICES
ITC Limited is undisputedly, one of India's most professionally managed companies. It
has a history of over 90 years, dealing with the Indian agricultural system.
ITC's Agri Business Division (ITC-ABD) is engaged in the trading of a wide range of
Agri Commodities and Aqua Foods. It holds a principal position in a number of
international markets and is backed by
• sound technical expertise,
• a strong proprietary knowledge of the Indian farming system and
• Competency to cater to customer specific requirements.

ITC-ABD today has the enviable reputation of being the most reliable Indian supply
chain partner for select global buyers of India's finest Agri and Aqua offerings.

ITC's pre-eminent position as one of India's leading corporates in the agricultural sector is
based on strong and enduring farmer partnerships that has revolutionized and transformed
the rural agricultural sector. A unique rural digital infrastructure network, coupled with
deep understanding of agricultural practices and intensive research, has built a
competitive and efficient supply chain that creates and delivers immense value across the
agricultural value chain. One of the largest exporters of agri products from the country,
ITC sources the finest of Indian Feed Ingredients, Food Grains, Edible Nuts, Marine
Products, Processed Fruits, Coffee & Spices.
ITC's Agri Business Division is the country's second largest exporter of agri-products
with exports of over Rs. 1000 Crores (Rs. 10 billion). Its domestic sales of agri-products
are in excess of Rs. 1500 Crores (Rs. 15 billion). It currently focuses on exports and
domestic trading of:
Feed Ingredients - Soyameal
Food Grains - Rice (Basmati & Non Basmati), Wheat, Pulses
Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil
Marine Products - Shrimps and Prawns
Processed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic Fruit Products,
Fresh Fruits

• Coffee & Spices - Coffee, Black Pepper, Chilly, Turmeric, Ginger, Celery and
other Seed Spices
Farmer empowerment through e-Choupals

ITC's unique strength in this business is the


extensive backward linkages it has established with the farmers. This networking with the
farming community has enabled ITC to build a highly cost effective procurement system.
ITC has made significant investments in web-enabling the Indian farmer. Christened 'e-
Choupal', ITC's empowerment plan for the farmer centres around providing Internet
kiosks in villages. Farmers use this technology infrastructure to access on-line
information from ITC's farmer-friendly website www.echoupal.com. Data accessed by
the farmers relate to the weather, crop conditions, best practices in farming, ruling
international prices and a host of other relevant information.
e-Choupal today is the world's largest rural digital infrastructure.
The unique e-Choupal model creates a significant two-way multi-dimensional channel
which can efficiently carry products and services into and out of rural India, while
recovering the associated costs through agri-sourcing led efficiencies. This initiative now
comprises about 6500 installations covering nearly 40,000 villages and serving over 4
million farmers. Currently, the 'e-Choupal' website provides information to farmers
across the 10 States of Madhya Pradesh, Haryana, Uttarakhand, Uttar Pradesh, Rajasthan,
Karnataka, Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu. Over the next 5 years
it is ITC's Vision to create a network of 20,000 e-Choupals, thereby extending coverage
to 100,000 villages representing one sixth of rural India.
Supporting the e-Choupal network are ITC's procurement teams, handling agents and
contemporary warehousing facilities across India, enabling its Agri Business to source
identity-preserved merchandise even at short notice. ITC's processors are handpicked,
reliable high quality outfits who ensure hygienic processing and modern packaging. Strict
quality control is exercised at each stage to preserve the natural flavour, taste and aroma
of the various agri products.

Choupal Saagar
Following the success of the
e-Choupal, the Company launched Choupal Saagar, a physical infrastructure hub that
comprises collection and storage facilities and a unique rural hypermarket that offers
multiple services under one roof. This landmark infrastructure, which has set new
benchmarks for rural consumers also incorporates farmer facilitation centres with
services such as sourcing, training, soil testing, health clinic, cafeteria, banking,
investment services, fuel station etc. 24 'Choupal Saagars' have commenced operations
in the states of Madhya Pradesh, Maharashtra and Uttar Pradesh. ITC is engaged in
scaling up the rural retailing initiative to establish a chain of 100 Choupal Saagars in the
near future.
Choupal Fresh

Choupal Fresh, ITC's fresh food wholesale and


retail initiative, leverages its extensive backward linkages with farmers and supply chain
efficiencies. It focuses on stocking fresh horticulture produce like fresh fruits and
vegetables. Five Choupal Fresh retail stores are currently operational at Hyderabad.
The company has also set up a complete cold chain for ensuring the availability of fresh
products in the market, besides directly sourcing farm fresh produce from the farmers.

Choupal Pradarshan Khet


In line with its mission of improving the
quality of life in rural India, ITC's Agri Business has launched a flagship extension
programme called 'Choupal Pradarshan Khet' (CPK) or demonstration plots to help
farmers enhance farm productivity by adopting agricultural best practices. Started in
2005-06, the crop portfolio includes soya, paddy, cotton, maize, bajra, wheat, gram,
mustard, sunflower and potato. This initiative, has covered over 70,000 hectares and has
a multiplier impact and reaches out to 1.6 million farmers.

Processed Fruits
In line with its strategy of achieving a higher order of value capture, the business also
focuses on the value added segment, steadily enhancing its basket of offerings with
several new products. These include frozen foods, IQF (individually quick frozen) fruits,
niche products like baby-food quality purees and high brix pulp and organic purees. ITC
seeks to focus on this segment and exploit the market opportunity for tropical fruits and
fruit products, where India has a natural advantage of growing the complete range,
including exotic varieties. In Processed Fruits category, ITC exports from HACCP
certified plants to Western Europe, North Africa, West Asia, Japan and North America, a
wide range of Processed Fruit products made from Mango (Alphonso, Kesar & Totapuri),
Guava, Papaya and Pomegranate. ITC is the leading Indian exporter of Organic Fruit
Products certified to European (EC 2092/91) and US (NOP) Standards.
Fresh Table Grapes & Pomegranates are sourced from ITC's EUREPGAP certified
farmer groups & retailed through prominent supermarkets like Sainsbury's and Albert
Heijn in Europe and Daiei in Japan.

Marine Products
ITC has been a significant exporter of seafood from India since 1971. It exports frozen as
well as cooked shrimps and other seafood products to Japan, USA and Europe. Its well-
known brands include Gold Ribbon, Blue Ribbon, Aqua Kings, Aqua Bay, Aqua Feast
and Peninsular.
A Customer Centric Approach
ITC's Agri Business Division continues to use innovation as its core strategy to retain its
position as the one-stop shop for sourcing agri-commodities from India. Besides setting
benchmarks in quality, reliability and value-added services, ITC is a trendsetter in
customer care particularly in commodity trading. Major customers include Cargill,
Marubeni, Toepfer, among others, who source agriculture commodities and food
products from India. Customers can log onto www.itcabd.com, and readily access
information on crop production and forecast, market updates, the latest shipment status
and the prevailing foreign exchange rates.
Sourcing for ITC
ITC's Agri business is progressively aligning its commodity portfolio with the sourcing
needs of the Company's Foods business to generate higher order value from its agri
procurement infrastructure. The business has commenced procurement of chipstock
potatoes, one of the critical raw materials in the manufacture of the Company's 'Bingo!'
brand of potato chips. The acquisition of Technico, an Australian company with
technology leadership in the production of early generation seed potatoes, helped the
business access a ready pipeline of new high-yielding varieties of chipstock potato seeds.

E-CHOUPAL
ITC's Agri Business Division, one of India's largest exporters of agricultural
commodities, has conceived e-Choupal as a more efficient supply chain aimed at
delivering value to its customers around the world on a sustainable basis.
The e-Choupal model has been specifically designed to tackle the challenges posed by
the unique features of Indian agriculture, characterized by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among others.
The Value Chain - Farm to Factory Gate:

'e-Choupal' also unshackles the potential of Indian farmer who has been trapped in a
vicious cycle of low risk taking ability > low investment > low productivity > weak
market orientation > low value addition > low margin > low risk taking ability. This
made him and Indian agribusiness sector globally uncompetitive, despite rich & abundant
natural resources.
Such a market-led business model can enhance the competitiveness of Indian agriculture
and trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for
farmer risk management, larger investments and higher quality and productivity.
Further, a growth in rural incomes will also unleash the latent demand for industrial
goods so necessary for the continued growth of the Indian economy. This will create
another virtuous cycle propelling the economy into a higher growth trajectory.
The Model in Action:
Appreciating the imperative of intermediaries in the Indian context, 'e-Choupal' leverages
Information Technology to virtually cluster all the value chain participants, delivering the
same benefits as vertical integration does in mature agricultural economies like the USA.
'e-Choupal' makes use of the physical transmission capabilities of current intermediaries -
aggregation, logistics, counter-party risk and bridge financing -while disintermediating
them from the chain of information flow and market signals.
With a judicious blend of click & mortar capabilities, village internet kiosks managed by
farmers - called sanchalaks - themselves, enable the agricultural community access ready
information in their local language on the weather & market prices, disseminate
knowledge on scientific farm practices & risk management, facilitate the sale of farm
inputs (now with embedded knowledge) and purchase farm produce from the farmers'
doorsteps (decision making is now information-based).
Real-time information and customized knowledge provided by 'e-Choupal' enhance the
ability of farmers to take decisions and align their farm output with market demand and
secure quality & productivity. The aggregation of the demand for farm inputs from
individual farmers gives them access to high quality inputs from established and reputed
manufacturers at fair prices. As a direct marketing channel, virtually linked to the 'mandi'
system for price discovery, 'e-Choupal' eliminates wasteful intermediation and multiple
handling. Thereby it significantly reduces transaction costs.
'e-Choupal' ensures world-class quality in delivering all these goods & services through
several product / service specific partnerships with the leaders in the respective fields, in
addition to ITC's own expertise.
While the farmers benefit through enhanced farm productivity and higher farm gate
prices, ITC benefits from the lower net cost of procurement (despite offering better prices
to the farmer) having eliminated costs in the supply chain that do not add value.
The Status of Execution:
Launched in June 2000, 'e-Choupal', has already become the largest initiative among all
Internet-based interventions in rural India. 'e-Choupal' services today reach out to over 4
million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses, and
shrimp - in over 40,000 villages through 6500 kiosks across ten states (Madhya Pradesh,
Haryana, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh, Rajasthan,
Maharashtra, Kerala and Tamil Nadu).
The problems encountered while setting up and managing these 'e-Choupals' are
primarily of infrastructural inadequacies, including power supply, telecom connectivity
and bandwidth, apart from the challenge of imparting skills to the first time internet users
in remote and inaccessible areas of rural India.
Several alternative and innovative solutions - some of them expensive - are being
deployed to overcome these challenges e.g. Power back-up through batteries charged by
Solar panels, upgrading BSNL exchanges with RNS kits, installation of VSAT
equipment, Mobile Choupals, local caching of static content on website to stream in the
dynamic content more efficiently, 24x7 helpdesk etc.
Going forward, the roadmap includes plans to integrate bulk storage, handling &
transportation facilities to improve logistics efficiencies.
As India's 'kissan' Company, ITC has taken care to involve farmers in the designing and
management of the entire 'e-Choupal' initiative. The active participation of farmers in this
rural initiative has created a sense of ownership in the project among the farmers. They
see the 'e-Choupal' as the new age cooperative for all practical purposes.
This enthusiastic response from farmers has encouraged ITC to plan for the extension of
the 'e-Choupal' initiative to altogether 15 states across India over the next few years. On
the anvil are plans to channelise other services related to micro-credit, health and
education through the same 'e-Choupal' infrastructure.
Another path-breaking initiative - the 'Choupal Pradarshan Khet', brings the benefits of
agricultural best practices to small and marginal farmers. Backed by intensive research
and knowledge, this initiative provides Agri-extension services which are qualitatively
superior and involves pro-active handholding of farmers to ensure productivity gains. The
services are customised to meet local conditions, ensure timely availability of farm inputs
including credit, and provide a cluster of farmer schools for capturing indigenous
knowledge. This initiative, which has covered over 70,000 hectares, has a multiplier
impact and reaches out to over 1.6 million farmers.
Source: http://www.itcportal.com/itc-business/agri-business/e-choupal.aspx
PORTER’S FIVE FORCES ANALYSIS
1. Entry Barriers:-The entry barriers in the software industry are low. For instance,
to set up an ITES business, the initial investments are lower than the revenue
realization per seat.
2. Inter firm rivalry: The Indian ITES industry has intense competition among
themselves.
3. Bargaining power of suppliers: All suppliers have high level of maturity .So it
doesn't appear relevant.
4. Threat from unorganized sector: Since quality is a key factor here, the
competition will not allow the organized sector to survive

SWOT ANALYSIS
1. Strengths:
• The reconfiguration of traditional procurement system eliminated the need
of ITCs commission agent at the mandis. The reconfiguration resulted in
savings for farmers and ITC.
• e–chaupal was Designed to tackle the challenges posed by the unique
features of Indian agriculture, characterised by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among
others.
• Price discovery before deciding to sell.
• Freedom of choice for transaction.
• Payment – cash on spot.
• Knowledge on farming best practices.
• Information on weather.
• High quality products and solutions – usage.
• It provided power of scale to farmers.
• It led to overall improvement in productivity.

2. Weaknesses:
• The company's original business was traded in tobacco. ITC stands for
Imperial Tobacco Company of India Limited. It continues to use its original
name, despite the negative connection of tobacco with poor health and
premature death.

3. Opportunities:
• Enthusiastic response from farmers has encouraged ITC to plan for the
extension of the ‘e-Choupal’ initiative to altogether 15 states across India over
the next few years. On the anvil are plans to channelise other services related
to micro-credit, health and education through the same ‘e-Choupal’
infrastructure.
• Direct interaction with farmers will make it easier for ITC to inform them of
the market needs and influence them to grow high value strains of
commodities.

4. Threats:
• ITC's opportunities are likely to be opportunities for other companies as well. The
obvious threat is from competition.
• Reliance fresh and HULs project shakti.
• Government regulations.

BCG ANALYSIS
• BCG Matrix a.k.a. Growth-Share Matrix, Boston Box, Boston Matrix,
Boston Consulting Group analysis.
• Created by Bruce Henderson for the Boston Consulting Group in 1970 to
help corporations with analyzing their business units or product lines.
• This helps the company allocate resources and is used as an analytical tool
in brand marketing, product management, strategic management, and
portfolio analysis.

Stars ?
• Hotels • FMCG- Others.
• Paperboards/Packaging.
• Agri business.

Cash Cows Dogs


• FMCG-Cigarettes ITC Infotech
FINANCIALS
In India only about 15% of tobacco is consumed in the cigarette form, whilst the
remaining consumption is through other forms of tobacco products like bidi, khaini,
gutkha, zarda and kimam.
Taxation and regulations targeted almost exclusively at the cigarette industry in India has
resulted in the share of cigarettes in total tobacco consumption in India progressively
declining from 23% in 1971/72 to only about 15% currently.
Despite having only a 15% share of consumption, cigarettes contribute more than 85% of
the tax revenues from the tobacco sector.
It is the largest manufacturer of cigarette tissue in India and continues to be the market
leader with a share of 65% of the domestic market.

Tobacco Consumption (Million kg)


Year Cigarettes Non-Cigarette Total
Forms
1981/82 86 320 406
2008/09e 74 421 495
Difference (–) 14% (+) 32% (+) 22%
Source : USDA; Tobacco Institute of India

Market Share of ITC in cigarettes industry is 87.756%.

The business has notched a volume market share of approximately 5% in soaps, and
around 3.4% in shampoos.
ITC is the market leader in the Paperboards segment with a value market share of
around 26%.
(The Indian Paper Industry at 9 million tons per annum accounts for about 2% of the
world’s production of paper and paperboards. India is globally the fastest growing market
for paper, with paper consumption estimated to touch 14 million tons by 2015-16.)
In the Staples category, ‘Aashirvaad’ atta sustained its leadership position with a market
share of 56% among national branded players.
Its ‘Sunfeast’brand continued to consolidate its position with an All India-Urban market
share of 11%.
In the Confectionery category, ‘Candyman’ is the clear market leader in the hard boiled
segment.
In the growing décor segment, it continues to record steady growth with a market share
of 26%.

REVENUE GENERATION
Business Segments (Rs. in Crores)
FMCG - Cigarettes 17283.03
FMCG - Others 3638.73
Hotels 904.92
Agri Business 2388.18
Paperboards, Paper and Packaging 2044.74
Total Revenue Generated 26259.60

Geographical Segments (Rs. in Crores)


Within India 24020.27
Outside India 2239.33
Total Revenue 26259.60
Shareholding Pattern of ITC:
Market Data:

(Source: Capitaline Plus)

Index Comparision:

(Source: www.bseindia.com)
TREND ANALYSIS

The revenue is increasing continuously.

Current ratio gives an idea of the company’s ability to pay back its short-term liabilities
(debt and payables) with its short term assets (cash, inventories, receivables).
A current ratio of 1.33 is considered ideal for a company.
In case of ITC it is not always higher than the ideal norm.
At present ITC has a current ratio of 1.12. This means that ITC has Rs. 1.12 to pay Rs. 1.
The trend of current ratio of ITC is not regular.

We can clearly see that ITC is not a debt free company.


However ITC is reducing its dependency on external debt for financing itself.
This has certain positive implications as well as negative, such as the company is not
dependent on the external borrowers and is free from the interest burden and hence has a
high profit, but it lowers its EPS.
We can also say that the company has a strong support from the shareholders.
ITC was showing a positive trend in EPS upto the year 2005.
After that there is a sharp decline in the EPS. This may be due to stock split in the year
2005-06 due to which the face value of the shares changes from Rs. 10/- per share to Rs.
1/- per share.
It started again showing a positive trend in its EPS after the year 2006. It indicates that
the profit of the company is growing and thus is a good sign for the investors. If the
company will use debt for financing itself, then EPS may rise further.

It is amount of sales generated for each rupee of asset.


It shows how efficiently the company is utilizing its assets in generating revenue.
It indicates the number of times average debtors are turned over during a year.
A high ratio shows that the firm is more efficient in the management of debtors.

It indicates how efficiently a business is using its materials and labour in the production
process.
It shows how much of every rupee of sales, ITC actually keeps in earnings.
A high ratio shows that ITC is making a reasonable profit on sales.
It measures the firm’s ability of generating profits from every unit of shareholders’
equity. It shows how well a company uses investment funds to generate earnings.
It was highest in the FY 1998.
ROE has increased to 29.33 in FY 2010 as compared to 25.42 in FY 2009. It shows that
ITC has utilized shareholders’ fund more efficiently. This is favourable for its image and
it will result in increase in confidence of investors.

FUTURE PROJECTIONS:ITC
Strategic Rationale:
 Blend multiple competencies residing within the ITC Group to create new
avenues of growth
 Best fit between internal capabilities and emerging market opportunities
 Each segment enhances the depth and width of ITC’s FMCG distribution
capability
 Business model retains critical elements of value chains within ITC with other
elements outsourced
• Contributing to the competitiveness of SMEs.
Initiatives:
 Leverages:
 Unique Agri sourcing skills
 ITC Welcomgroup’s specialist cuisine & bakery knowledge
 FMCG distribution synergies
 ITC R&D Centre, Bangalore.
4 chosen categories:
 Staples
 Aashirvaad Atta, Salt, Spices
 Snack Foods
 Sunfeast Biscuits
 Confectionery
 Candyman, mint-o
 Ready to Eat
 Kitchens of India, Aashirvaad ReadyMeals, Sunfeast Pasta
Aashirvaad Atta:
 current market leader amongst national branded players; leverages the e-
choupal network for cost-quality optimization and region specific
offerings
Sunfeast Biscuits:
 Differentiated & innovative products; continues to build consumer
franchise; distributed & outsourced supply chain being ramped up.
 Number of innovative products in the pipeline leveraging the capabilities
of the ITC R&D centre.
Lifestyle:
 Leverages trade mark and services expertise of hotels
 Relaxed wear market growth > 25% p.a
 Upmarket product range available in exclusive Wills Lifestyle stores and multi-
branded outlets/ large format retail stores across the country
 State-of-the-art Master Facility aids speed of execution
 Outsourced JIT plant for ‘quick response’ manufacturing
 Product and brand range being expanded
 ‘Wills’ range expanded to Formals and Social evening wear segments
 Strong distribution network in place for the mid-market brand ‘John Players’.
Stationary:
• Leverages print and paper know-how
• An emerging market in India - growth driven by increasing cross-cultural
exposure
• ITC’s ‘Expressions’ range commenced with greeting cards; now widened
to include stationery & gift wraps
• Distribution network being strengthened to scale up the Stationery
business significantly
• Serves to expand the width of ITC’s FMCG distribution capability with
negligible incremental investment.
Safety Matches:
• Current industry consumer spend estimated at Rs.1250 crores p.a. for 24
billion match boxes
• Fragmented supply base arising from policy of reservation for small scale
industry
• ITC markets its brands with value added products across each price point
o Support SMEs with complementary marketing strengths
• ‘AIM’ – India’s largest selling Safety Matches brand
• Successful acquisition of WIMCO Ltd. by Russell Credit (shareholding as
at 26th May 2006: 93.66%)
Key brands: Homelites, Ship, Cheetah Fight etc.
Incense sticks:
• Current industry consumer spends estimated at over Rs. 900 crores p.a.
• Fragmented supply base arising from policy of reservation for small scale
industry
• ITC markets its brands with value added products across each price point
Support cottage sector with complementary marketing strengths
‘Mangaldeep’: the only National brand in the country.
Business Initiatives:
 Concurrently, ITC’s IT subsidiary assists in web-enabling business processes
 CRM initiatives
 ERP transaction processing systems
 SCM including the e-choupal capability
 hosted on ITC’s Virtual Private Network
 ITC awarded the best IT user in FMCG category by Nasscom.

CONCLUSION
Statements describing the Company’s objectives, future prospects, estimates,
expectations etc. may be “forward looking statements” within the meaning of applicable
securities laws and regulations. Investors are cautioned that “forward looking statements”
are based on certain assumptions of future events over which the Company exercises no
control. Therefore there can be no guarantee as to their accuracy. These statements
involve a number of risks, uncertainties and other factors that could cause actual results
to differ materially from those that may be projected or implied by these forward looking
statements. Such risks and uncertainties include, but are not limited to: growth,
competition, acquisitions, domestic and international economic conditions affecting
demand, supply and price conditions in the various businesses in the Company’s
portfolio, changes in Government regulations, tax regimes and other statutes, and the
ability to attract and retain high quality human resource.
 ? - To be handled with care.
 Strategic forays into emerging high growth markets.
 E-Choupal is a transformational strategy.
 Strong brand building capability will be tested.
 Corporate strategy of creating multiple drivers of growth anchored on its core
competencies and distribution reach.
 Embracing difficult and challenging corporate strategy. (Ex: Paperboards).
 EHS philosophy: Contribution to the triple bottom line- Economic, Environment
and social capital.

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