2. A growth strategy in which a company seeks to develop by
adding totally unrelated products and markets to its existing
business Examples: 3. ITC was incorporated on August 24, 1910 under
the name Imperial Tobacco Company of India Limited. The Company now
stands rechristened ITC Limited Market capitalisation of US $ 45
billion Turnover of US $ 7 billion Operates in: FMCG, Hotels,
Paperboards & Specialty Papers, Packaging, Agri-Business, and
Information Technology The only enterprise in the world, of
comparable dimensions to be carbon-positive, water- positive, and
solid waste recycling positive 4. Politically active unions MNCs
urged to liquidate equity with a cap of 40% Multiparty coalitions
causing political uncertainty Rural job program launched in 2006
Reduced economic control & opened economy to imports Govt.
Approved 51% FDI provided company engaged in single branding
Political Favoured capital goods, increased black market Not
competent enough for international level Foreign investment
discouraged Indias rapid GDP growth led to increase in spending
power Increase income 56% demand for FMCG product from rural sector
Economic 88 % of rural population below poverty line Rural access
hampered by poor road ,rail & telecommunication links
Requirement of combination of low wage & relatively high
skilled labour Social Technologica l Competitive National and
International players interested in same markets Profits to be made
from India, an emerging economy IT sector growth rapid Internet
usage access to rural sector Increased mediums to information
available on the ITC provided web portal Limited mediums available
to promote brand building 5. Bargaining power of suppliers Low 1.
Small qty of inputs 2. Small scale & unorganised suppliers 3.
Less control over smokers Bargaining power of buyers Low 1.
Addiction 2. Symbolic & emotional values attached with it. 3.
Blind taste, low differentiation 4. Low switching cost in terms of
price Threat of New Entrants Low 1. Tough product differentiation
2. Access to distribution channel is tough 3. High capital
requirement 4. No economies of scale for local launch 5. Government
policies Threat of substitutes Low 1. Failure for Herbal cigarettes
2. Nicotine patch low popularity and usage Competitive Rivalry High
1. Many players 2. Price competition 3. Advertisement prohibited 4.
Replacement for ads event & sponsorships and sales promotions
5. All making new product launches 6. Bargaining power of suppliers
Low 1. Large no. of suppliers in the country 2. Cost of switching
suppliers is low 3. Prices of substitutes are low Bargaining power
of buyers High 1. Low switching cost 2. Buyers are numerous and
fragmented. 3. Retailers able to negotiate price with the Company
Threat of New Entrants Medium 1. increasing capital requirement -
Huge investments in setting up distribution networks and promoting
brands 2.competition from established companies 3. Customer
switching costs are low Threat of substitutes High Numerous
substitutes available Competitive Rivalry High 1. Multiple choices
for consumer 2. Switching cost negligible hence making it
competitive 7. Bargaining power of suppliers Low 1. Large no. of
suppliers 2. Few players indispensable to the suppliers. 3.
Switching suppliers is feasible & inexpensive Bargaining power
of buyers Moderate 1. Numerous buyers hence losing one customer
doesnt matter 2. Switching cost is low Threat of New Entrants Low
to moderate 1. Branding plays a very important role. 2. Economies
of scale is also a huge factor. 3. High exit barriers Threat of
substitutes Low Competitive Rivalry High Low switching costs allows
consumers to change their choice anytime 8. ITC P&G Sr. No.
Factors Weight Rating Weight ed score Weight Rating Weight ed score
1 R&D expn 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 manageme nt) 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 9.
Strength MANAGEMENT PRODUCT LINE MARKETING PERSONNEL MANUFACTURING
R & D CONSUMER BASE COMPETITIVE TECHNOLOGY ECONOMY Weakness
MANAGEMENT PRODUCT LINE MARKETING PERSONNEL MANUFACTURING R & D
CONSUMER BASE COMPETITIVE TECHNOLOGY ECONOMY Opportunities MARKET
DEVELOPMENT FMCG LEVERAGING IT BETTER e-CHOUPAL MARKET PENETRATION
TIER 2 and 3 CITIES Threats COMPETITION NATIONAL/INTERNA TIONAL
OPENING OF ECONOMY TO FOREIGN PLAYERS EMPLOYEE ATTRITION 10.
Strengths Weaknesses WeaknessesStrengths Opportunities
ThreatsOpportunities Threats Market Expansion Promotion Awareness
Strategic Alliances with international players Emphasize on
Personal Care Affordability Diversification 11. 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 1. Dependence of tobacco products
0.08 4 0.32 2. Limited product lines 0.1 3 0.3 3. Less efforts to
enter into coconut oil industry 0.07 2 0.14 Total 1 2.9 12. Key
External Factors Weight Rating Weighted score Opportunities 1.
Increase in disposal income 0.1 3 0.3 2. Government concentration
on food sector 0.08 4 0.32 3. Government exemption 0.1 4 0.4 4.
Untapped markets in the rural sector 0.12 3 0.36 5. Rural people
becoming more brand conscious 0.08 3 0.24 Threats 1. Rise in
inflation 0.07 5 0.35 2. Government allowance of FDI 0.09 4 0.36 3.
Switching cost for 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 13. Stars Question Marks Cash Cows
Dogs 14. Market Penetration Product Development Market Development
Diversification Products NewExisting NewExisting Markets 15.
Cigarettes Packaging & printing Hotels FMCG IT 16. ITC Hotels -
Luxury Collection 5 hotels in Dubai Luxury hotel in Colombo Welcom
Hotels Fortune Hotels Welcom Heritage ITC One', 'Towers' and the
'Executive Club' Welcom Cuisine - Over 100 owned and managed
properties in 67 destinations - ITC Hotels : Luxury collection
-WelcomHotels -Fortune Hotels -WelcomHeritage -Revenues inc by 20%
in yr ending march 13 17. Net Profit up 21.5% Net revenue growth of
15.2% year on year Non-cigarette FMCG segment registers a healthy
revenue growth of 15.7% their losses are lower by 33%, foods
bringing in 60% of those revenues, 15% market share Vs 36% of HUL
Agri Business records a growth of 8.5% Paperboards, Paper &
Packaging Segment Revenue up 11.7% Hotels Business continues to be
impacted by the weak macroeconomic environment and a spurt in room
additions in key markets. 18. Shareholder value creation *2009 2010
Includes special Centenary dividend of ` 5.50 per share 19. ITCs
reliance on the cigarette division is still large 40% of revenues
and 80% of profit contributor Increased regulatory clamps and taxes
levied on the tobacco industry has led ITC to foray into different
markets Some investments have paid of well, some have provided
modest results ITC can prove to be a major player in the FMCG
market in the coming years, because of strong distribution channels
and by ensuring a strong product mix 20. Further investment into
ITC Infotech to expand its range of operations Possible
collaboration with the Govt. w.r.t agricultural initiatives
Investments in more R&D w.r.t the FMCG market Expand market
base urban and rural Implement backward integration in the
agricultural sector to ensure products pass from farmer to the end
consumer reducing prices of its FMCG products
