ITC

MARKET ORIENTATED
STRATEGIC PLANNING
FINAL PROJECT

Faculty: Dr. Prantosh J. Banerjee

Submitted by:

S.No. GROUP 7 Roll No.

1 Ayush Goel 180103058

2 Arjun Jain 180103045

3 Bhupika Singh 180103064

4 Anshu Mrinalini 180103039

5 Himanshu Chavan 180103088

6 Jatin Bansal 180103094

7 Divyanshu Raghuvanshi 180103079

The following project contains information for:

Group Selected: ITC

Firm Selected: ITC FMCG

Four SBU: Foods, Personal Care, Cigarettes & Cigars, Safety Matches, Agarbattis & Dhoop

Two Product Lines/Category for Food SBU: a) Noodles b) Biscuits

SECTION 1: VISION AND MISSION FOR ITC BUSINESS GROUP AND FIRM ITC
FMCG

About the Company:

ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West

Bengal. The company started its operation in the year 1910 as ‘Imperial Tobacco Company of
India Limited’ but over the year with many changes company in its today’s form is named as just
ITC Limited. The company operates in various segments including Consumer goods, Cigarettes,
Apparel, Education, Hotels and Resorts, Paperboards & Specialty Papers, Packaging, Agri-
Business and Information Technology. It had a net revenue of 44,415 crores with market
capitalization of 363,714 crores in 2018-19. It employs around 34,000 people directly and
supported creation of ~ 6 million sustainable livelihoods.

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

Core Values: Core Values of ITC Limited are:

● Trusteeship – a respect and understanding of the responsibility given by the stakeholders

of the company and resolve to actualize shareholder value on a long-term sustainable
basis
● Customer Focus – deliver what the customer needs in terms of value quality and
satisfaction
● Respect for People – respect and value people and uphold humanness and human dignity
while at the same time being result oriented and setting high performance standard
● Excellence – a zeal for excellence in all aspects
● Innovation – hunger and perseverance for newer and better processes, products, services
and management practices
 ● Nation Orientation – no compromises to be made in complying with laws and regulation
of the country
Core Purpose: The company’s core purpose is developing a customer-focused, high-
performance organization which creates value for all its stakeholders

Envisioned Future: ITC envisions a future where it can make a significant and growing
contribution towards:

● Mitigating societal challenges

● Enhancing shareholder rewards
BHAG: Focus on the chosen business portfolio FMCG, Hotels, Paperboards, Paper &
Packaging, Agri-business & Information Technology

● Blend diverse core competencies residing in various Businesses to enhance the

competitive power of the portfolio
● Position each business to attain leadership on the strength of world-class standards in
quality and costs
Vivid Description: The company aims at creating multiple drivers of growth while sustaining
leadership in tobacco, and

● Focusing on ‘Triple Bottom Line’ Performance

● Enlarge contribution to the Nation’s -
o Financial capital
o Environmental capital
o Social capital
Governance Structure of Organization

The organization has the following three tired governance structure

 •Strategic Supervision - Board of
Directors • Enabeling Focus on Each
•Strategic Management - Corporate business
Management Committee • Harnessing Diversity of
•Executive Mangement - Divisional Portfolio
Managemnet Committee

Figure 1: Three-Tiered Governance Structure of ITC

ITC FMCG:

Vision: To establish the firm as prime contributor in the ITC portfolio and establish it as India’s
prime

Mission: To position company as market leader by 3030, and reach a market capitalization of 1
lakh crore.
SECTION 2: STRATEGY USED BY ITC FMCG

Hambrick & Fredrickson (2001), defines strategy as a centrally integrated, externally oriented
overarching concept of how the business will achieve its objectives1 and states that the key is not
in following a sequential process, but rather in achieving a robust, reinforced consistency among
the elements of strategy itself. The 5 major elements of strategy given by Hambrick &

Arena

Staging Economic Vehicle

Logic s

Differentiators

Fredrickson is given in the below figure.

Figure: Hambrick & Fredrickson’s Strategy Diamond

ITC (FMCG) is a successful Indian conglomerate, which initially dealt with tobacco products for
decades before diversifying into non-tobacco products in 1970 after which it is trying to secure
long-term growth by synergising and blending the diverse pool of competencies residing in its
various businesses to exploit emerging opportunities in the FMCG sector and for the past 25
years can be seen as coherent, with all 5 elements reinforcing each other.

1. Arena

The arenas in which ITC (FMCG) operates are well defined: The company deals in all the daily
needs of a typical Indian household, starting with cigarettes & cigars, packaged foods, personal
care, education & stationery, lifestyle retailing, safety matches & incense sticks having a wide
product offering. ITC caters to wide range of customers with a product for every segment,
primarily middle and upper middle class under 5 to 60 age bracket. The geographic scope is
country wide, with its extensive distribution reach in India. As an organization that is more than
100 years old in the Indian market, ITC’s biggest strength lies in its insight into the Indian
consumer and the relationship with its wide distribution channel.

2. Vehicles

As its primary vehicle for getting to its channel ITC depends on its well-honed capabilities in
making strategic acquisitions and few joint ventures through multi-dimensional investments.
ITC’s secondary vehicle is by investing in building state-of-the-art manufacturing infrastructure
and advanced in-house R&D capabilities, which it uses for new product development internally
and to rapidly scale up the FMCG business. This reflects top management’s belief about
achieving the company’s long-term growth by using its various businesses to exploit emerging
opportunities in the FMCG sector.

3. Differentiators

ITC (FMCG) attracts customers and beats competitors by offering several important
differentiators. First, its wide reach of distribution channels and relationship with them facilitates
them to reach every nook and corner in India, which is facilitated by the strong vertical
integration with initiatives like e choupal. Secondly, having a huge database of consumer
insights, they understand their consumers, which can be seen with its fun, exciting and
innovative media communications as opposed to other conventional communications of its
competitors. Lastly, as opposed to its local competitors and some major competitors, ITC
products are considered having high quality, safety and hygiene standards, which can be a result
of that all ITC-owned manufacturing units are having Hazard Analysis and Critical Control Point
(HACCP) certification and that, it is the only enterprise in the world of comparable dimensions
to have achieved and sustained the 3 key global indices of environmental sustainability of being
Carbon positive, Water positive and Solid waste recycling positive according to the sustainability
report 2018 giving it an image of environment sustainability.
 4. Staging

As for staging, or ITC’s speed and sequence of moves, the management is expanding
aggressively which can be reflected by the fact that according to the seventh annual Global
Powers of Consumer Products report issued by Deloitte Touche Tohmatsu (DTTL), ITC is
among the 50 fastest growing consumer products companies globally. ITC is investing in every
aspect of manufacturing, distribution and marketing to ensure that it can leverage emerging
opportunities and fulfill its aspiration of being the most trusted provider of Branded Packaged
Foods in the country.

5. Economic Logic

The economic logic of ITC rests primarily on scale of economies and efficient distribution
network which provides them cost advantage and are able to have an assent towards premium
prices due to high product reliability and trust among the consumers towards the brand, giving
them higher margins to invest again in emerging opportunities in the FMCG sector.

According to Michael E Porter in HBR article: What is Strategy (1996), strategy is defining and
communicating the company’s unique position, making trade-offs, and forging fit among
activities.

DIFFERENTIATED STRATEGIC POSITIONING

ITC (FMCG) follows a needs-based positioning, where they target all middle and upper-middle
class households across India. ITC being a focused competitor, uses its wide database of
consumer insights and come up with innovation in its products and communication. Strategic
positioning means performing different activities from rivals or performing similar activities in
different ways. ITC maintains a positioning of a reliable and trusted brand among consumers
with operational efficiency in cost leadership with the help of economies of scale and having a
strong vertical integration with wide distribution channels.
TRADE-OFFS

Strategic positions are not sustainable unless there are trade-offs with other positions and trade-
offs occurs when activities are incompatible. ITC is the only company in the world of
comparable dimensions to be carbon positive, water positive and solid waste recycling positive.
ITC has innovatively crafted unique business models that synergise long-term shareholder value
creation with enhancing societal capital. This has been achieved by ITC by embedding
sustainability in business, investing in social development and adopting a low carbon growth
path and a cleaner environment approach. ITC makes sure that all of its manufacturing units are
Hazard Analysis and Critical Control Point (HACCP) certified adding quality and reliability of
the products which translate into higher trust of consumers towards the brand.

ACTIVITY FIT

ITC tailors all its activities to deliver fast moving common household goods to every nook and
corner across India. Through strong vertical integration and wide distribution channels it is able
to provide quality products at low cost. A very successful example of value chain augmentation
is the ITCs e-Choupal initiative that empowers over 4 million farmers, while at the same time
providing significant competitive advantage in procuring raw material for ITC’s Foods business
– be it for Aashirvaad atta produced from handpicked whole wheat, quality-assured Aashirvaad
spices or superior chip stock potatoes for Bingo! snack foods.

Even ITC’s human resource management systems and processes are designed to empower
employees and enable them adopt innovative approaches to creating enduring value. These
processes aim to create a responsive, customer-centric and market-focused culture that enhances
organizational capability and vitality, so that each business is nationally competitive and
equipped to exploit emerging market opportunities.

The strategy of organization lays great emphasis on developing and supporting distributed
leadership and this has ensured that each of ITC’s businesses is managed by a team of
competent, passionate and inspiring leaders, capable of building an organization anchored in a
culture of learning, innovation and world-class execution.
SECTION 3: ALLOCATION RESOURCES TO SBU USING GE-McKINSEY’S
MULTIFACTOR PORTFOLIO MODEL

A. Branded Packaged Foods

Metric Data (source) Comments
The category includes product
5,981,053.8 (Euromonitor, categories such as snacks, dairy
Market Size (million INR)
Packaged foods statistics) products and alternatives,
cooking ingredients and meals
Growth is calculated on data
Market Growth Rate 17.4%
wrt 2018
Considering the production
Demand Variability 5%
capacity and stock out instances
Assuming a profitability of 10% Britannia Industries,
Industry Profitability
10% 14.23% Nestle India,
Multiple competitors in each
Industry Rivalry 3, Medium High
segment ITC is competing in
Global Opportunities 6 High Medium

Metric Data (source) Comments

1.9% market share in packaged
food industry. GCMMF the first
Market Share 0% placed company occupies 5.5%
share. 65.3% is occupied by the
unorganised sector
-5% (packaged food in The market share changed from
Growth Trend in Market Share
India, Euromonitor) 2.0% (2017) to 1.9% (2018)
The brand Ashirwad has a huge
brand equity whereas the
Sunfeast brand has had its ups
Brand Equity Medium High
and downs. Although no brand
has the absolute equity nestle
brands have
ITC has built its distribution
Access to Distribution
High based on the tobacco market
Channels
distribution
Production Capacity High
In a market where every product
can substitute another, it can
Profit Margins vs Competition 5, same
mean that the profitability is also
similar
 B. Personal Care
Metric
Market Size (million INR)
Market Growth Rate
Demand Variability
Industry Profitability
Industry Rivalry
Global Opportunities
Metric
Market Share
Growth Trend in Market Share
Brand Equity
Data (source) Comments
962,301 Mass beauty and personal care
registers retail value growth of
9% with sales of INR707.8
billion in 2018
9% (Euromonitor, Personal
care in India)
5% Demand variability can be
assumed to be low as it is not
dependent on season, regulations
etc.
15% (20%) Dabur, (15%) HUL,
(30%) Godrej Consumer
Products, so assuming the
industry profitability as same as
the personal care market leader
2- High Companies such as Hindustan
Unilever, Marico, Godrej
Consumer Products, L'Oréal
India and Johnson & Johnson
(India) are a few players that
have strong portfolios in mass
beauty and personal care.
4 – L Med The brands owned by MNC such
as P&G, Unilever, RB, etc. have
pretty much saturated the
international market with very
less gap left to exploit
Data (source) Comments
2% ITC Ltd Trend = from 2014 2.0,
2.1, 2.0, 2.0, 2.1 (Overall
Market Share %)
5% Up to 2.1% from 2.0%
6- LowMedium Multiple brands are included
such as
Fiama Di Wills, Vivel, Savlon,
Engage
Access to Distribution 6 – H - Med A very usual strength for ITC
Channels
Production Capacity 7 – M - High
3 -10 % Competitors such as Dabur,
Godrej have much higher
profitability than the market
leader. Assuming ITC is
spending a lot on marketing and
Profit Margins vs Competition promotions

C. Cigarettes and Cigars:

Metric Data (source) Comments
Market Size (R00,000 million 830,816.9 (Euromonitor,
INR) Tobacco in India)
7.9% (Euromonitor,
Market Growth Rate Cigarettes in India)
5% “an average cigarette can be
increased to Rs. 3.5 per stick
without any fear of losing
revenue”- Price Elasticity
Estimates for Tobacco Products
Demand Variability in India, Rijo M John
20% (net profit percentage 17% GodfreyPhilips, 20% VST
Industry Profitability is the industry average) Industries, 35% Golden Tobacco
High Medium As consumers tend to be loyal to
the brand they buy, there is little
marketing effort to make the
consumer switch. Main rivalry is
Industry Rivalry based on distribution
2-Very low There are very few opportunities
to sell in global markets owing
to high input cost on the supply
and distribution side; as well as
government regulation also
makes foreign markets
Global Opportunities unattractive

Metric Data (source) Comments

80% (Euromonitor report, 79.3% market share
Market Share Cigarettes in India)
Growth Trend in Market Share 5% (Euromonitor,
 Cigarettes in india)
9 V high The brands Gold Flake,
Classic and others enjoy
Brand Equity high consumer loyalty
9 V high ITC prides itself on its
distribution capabilities
and all this distribution
expertise is built using the
Access to Distribution tobacco and cigarette
Channels business
8 High ITC has the biggest
sourcing and production
facilities for manufacture
Production Capacity of cigarettes
Considered around industry 27.7 of ITC co. vs 17%
average of 20% (net profit) Godfrey Philips, 20%
as there is no data specific VST Industries, 35%
to profitability for cigarette Golden Tobacco
Profit Margins vs Competition division

D. Agarbattis and matches:

Metric Data (source) Comments
60,000 million INR
(https://www.thehindubusinessline.com/
companies/itc-trying-out-new-agarbatti-
Market Size (million INR) fragrances/article9603342.ece)
15%
(https://www.franchiseindia.com/wellne
ss/an-overview-on-the-incense-stick-
Market Growth Rate industry-in-india.11194)
Demand Variability 5% variability in demand
20% The profitability is
(https://www.thedollarbusiness.com/ma based on operating
gazine/agarbattithe-sweet-scent-of- profit of 18.2% of
Industry Profitability profits/45966) operating profits
7, Low As there are 2-3
major players in
the market and the
industry is
populated by
Industry Rivalry unorganised sector
Global Opportunities 5, Medium India has only
 (https://www.thedollarbusiness.com/ma recently been
gazine/agarbattithe-sweet-scent-of- surpassed by
profits/45966 ) China as the
world’s leading
exporter

Metric Data (source) Comments

20% Since the two
(https://www.thehindubusinessline.com
biggest brands
/companies/itc-trying-out-new- have 40% market
agarbatti- share, we can
fragrances/article9603342.ece) assume
Mangaldeep shares
Market Share that market evenly
We can assume a 50% growth rate Assumption made
where we saw a change from 5 % on the basis of two
market share to a near 20 % market articles mentioned
share in 1 year as source based off
of interviews of
Growth Trend in Market key people inside
Share the company
5 Medium As there is very
low switching cost
for the product, the
importance of
brand is only
Brand Equity medium
Access to Distribution 5 Medium
Channels
6 High Medium Data not available
regarding the
Production Capacity whole industry
5- Same Assuming that the
(https://www.thedollarbusiness.com/ma data provided for
gazine/agarbattithe-sweet-scent-of- the profitability
Profit Margins vs profits/45966) was included for
Competition every player
ALLOCATION OF RESOURCES

Following is the result of the multifactor analysis using the data mentioned above

According to the data following are the strategies for each SBU:

Cigarettes and Tobacco: Building Selectively, Since the cigarette industry is on a volumetric
decline due to changing trends and government efforts to discourage smoking as a habit, this
SBU has to be carefully managed so that ITC can continue to fund its other expansion plans.
Resouces allocated will go towards building and maintaining its core business. Following are the
implications for building selectively:

 Invest heavily in most attractive segments: Standard, virgina blend cigarettes

  Build up ability to counter competition, in terms of E-cigarettes and other related
products
 Emphasize on profitability
Resources allocated: Approximately 400 Crores

Packaged Foods: Invest to Build, The market for packaged food industry is highly fragmented
and has a lot of presence of unorganised and regional players, capturing over 60% of market
share. The biggest organised player in the market is GCMMF (Amul) with approx 5% market
share. But the market is growing rapidly with a focus on good quality dairy and agro based
products. Sunfeast and Aashirwad brands command a huge equity new product launches are also
being witnessed under these two brand names. Following are the implications for ITC:

 Challenge for leadership

 Build selectively on strengths
 Reinforce vulnerable areas
Resource Allocated: Approximately 800 Crores

Agarbattis and Matches: Invest to Build, The market for agarbattis is same as foods business-
fragmented and unorganised. Mangaldeep brand of ITC is the second largest in the country, the
industry is going through premiumization and organisation. Following are the implications:

 Challenge for leadership

 Build selectively on strengths
 Reinforce vulnerable areas
Resource Allocated: Approximately 300 Crores

Personal Care: Selectively invest/manage for earnings, The market is now witnessing a trend
towards premiumisation and focus on natural ingredients. The problem is that there are big
players in this market which have high brand equity and it will prove difficult to capture any
more market share. Brands like Vivel, Savlon, Shower-To-Shower are strong enough to invest.
The implications are:

 Protect existing program

 Concentrate investments in segments where profitability is good and risks low
Resources Allocated: Approximately 500 Crores
SECTION 4A : SWOT ANALYSIS FOR FOOD SBU

Opportunity
1
1. Increase the market share of natural juices to double digits 18-20% from 5-6% by
focusing on tier 3 cities along with tier 1 and tier 2

Pay Off
High High
High
probability
Success

Low

B Natural is growing 25% annually and is a 100 crore business. Juices and fruit
beverages is a 25000 crore market and is growing at the rate of 13 to 14 percent annually.
ITC plans to focus on regional flavors.

2. Expand dairy beverages portfolio and launch across the country

Pay Off

Low
High
Success Probability

High
Low

1
https://timesofindia.indiatimes.com/business/india-business/itc-aims-10-12-market-share-in-packed-juice-
segment-by-next-year/articleshow/63712840.cms
 The company entered the milkshake market with the launch of Sunfeast Wonderz Milk in
December 2018 and has an opportunity to acquire 5-10% market share in 1 year. The
milkshake is around Rs 1000 crore market. It has also launched pouch milk and ghee
under the brand Aashirvaad Svasti in Bihar

2
3. Add product like Maida, suji and besan in their product portfolio under the brand
aashirvaad

Pay Off

High High
Success Probability

High
Low

Threat
3
1. Entry of new entrants in natural juice market like Amul

Impact Seriousness
High Low
High
Probability of
Occurrence
Low

2
https://www.thehindubusinessline.com/companies/itcs-aashirvaad-becomes-rs-4000-cr-brand-forays-into-new-
segments/article22948940.ece
3
https://economictimes.indiatimes.com/industry/cons-products/food/amul-enters-the-fruit-juice-
market/articleshow/68615872.cms?from=mdr
Amul has launched packaged apple, orange, mango and lychee variants. It is planning to
leverage the strong brand connect and network of market with the brand Amul.

2. Highly unorganized market of milk and strong association of the consumers with brand
Amul for milk beverages as it has been market leaders and from other regional players
like nadini in south India

Impact Seriousness

High Low
High
Probability of
occurrence

Low

4
78% of milk business in India is unorganized and rest 22% is dominated by AMUL,
regional players like mother dairy and kwality in north, parag in west nadini in Karnataka
etc.
Strength

1. O1S1: Strong retail network across kirana stores, modern retail and e-commerce
2. O1S3, T1S1: Can source fruits from farmers and convert pulps into juices by leveraging
their agri division instead of importing concentrates
3. O1S4:Network of e-choupal and choupal sugar to source quality product from farm
4. O2S1: It has 20 integrated factories which can become 20 different hub across the
country to serve the whole of India as 20 different markets
5. O2S2, T2S1: Insight gathered from the research and development done in dairy for 10
years
6. O2S3: Milk processing facility at Munger, Bihar having capacity of 2 lac litres in day
7. O2S4: Separate dedicated channel for milk products
8. O3S1; Strong brand equity of the brand aashirvaad

4
https://www.moneycontrol.com/news/business/companies/opinion-why-itc-wont-find-the-dairy-business-an-
easy-hunting-ground-3123201.html
Weakness

1. O1W1, O1W2, T1W1:Dependence on revenue from tobacco business for investment

into food business
2. O1W2, T1W1:Lack of efficient supply chain infrastructure especially in rural areas
3. O2W2, T2W2:Distribution network in tier 3 cities is not adequate and will take time to
strength it in tier 3 cities
4. O1W3, O2W3, T2W3: Lack manufacturing capacity

SECTION 4B : SWOT ANALYSIS FOR PERSONAL CARE SBU

Opportunity
5
1. Shift towards overall mental and physical well-being through use of natural, organic, anti-
fatigue, antipollution, anti-ageing products

Pay Off
High High
Success probability

High
Low

Nimyle – herbal floor cleaner is the second largest brand in the floor cleaning segment in
West Bengal and Odisha, has been acquired by ITC to expand its presence all over India

2. Fragrances registers retail value growth of 16%, highest in the personal care category

5
https://www.export.gov.il/files/cosmetics/ReportonIndianCosmeticsIndustry.pdf
https://www.thehindu.com/business/Industry/itc-introduces-anti-ageing-skin-creams/article24106439.ece
 Pay Off

High Low

Success Probability

High
Low

Engage-On 2in1 perfume spray, a format which combines two variety of fragrances in one pocket
perfume pack. This innovation certainly caters to the evolving grooming needs and the basic human
need for variety at affordable prices

6
3. Overall the market is moving towards premiumization, with premium segment growing at
6.3%, as compared to 1.1% for mass market
Pay Off

High High
Success Probability

High
Low

ITC has unveiled anti-ageing and specialised hydrating creams under the brand name ‘Dermafique’,
as part of its fresh entry into the premium skincare segment.

6
https://www.livemint.com/industry/media/premiumisation-internet-drive-growth-of-beauty-industry-in-india-
report-1560932612190.html
Threat
7
3. Distribution Channels for beauty and personal care is showing growth of 4.9% in grocery retail
stores as compared to 14.6% with chemist and pharmacies

Impact Seriousness
High Low
Probability of Occurrence

High
Low

4
4. Categories which are volume driven like soaps and shampoos where there is hyper
competition within companies like P&G and HUL controlling leadership for decades

Impact Seriousness

High
Low
Probability of occurrence
High
Low

Market share of Superia has been eroded by more than 10% because of low brand Awareness and
high competition in this bath and soap category

7
https://www.export.gov.il/files/cosmetics/ReportonIndianCosmeticsIndustry.pdf
Strength

1. O1S1: Strong retail network across kirana stores, modern retail and e-commerce will help Nimyle
to grab a pan india exposure

2. O1S2, T1S2: ‘Dermafique’, as part of its fresh entry into the premium skincare segment can be
distributed across all the premium retail and modern stores including pharmacies

3. O2S3: Engage is performing consistently good in the deodorant category and recent product form
innovations has led a visible rise in the market share

4. O3S2: As overall market is growing towards premiumization so doing this will help in increasing
the profit margins for this category

5. O2S3: Strong R&D facilities has helped Enage to reinvent itself into a market leader

Weakness

1. O3W1, T2W2: Dependence on revenue from tobacco business for investment into personal care
business
2. T1W1: Lack of efficient supply chain infrastructure especially in rural areas
3. O1W3, O3W3: It is capital intensive to position a product in the premium category with natural
and organic ingredients

4
https://m.economictimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/itc-plans-to-shift-
focus-in-personal-care/articleshow/66021785.cms
SECTION 5A: PORTER 5 FORCES FOR NOODLES CATEGORY

1) RIVALRY AMONG EXISTING COMPETITORS - HIGH

a) Competition is numerous such as Nestle India Ltd. (Maggi), ITC Ltd. (Sunfeast Yippee
Noodles), Hindustan Unilever Ltd. (Knorr Soupy Noodles), GSK Consumer Healthcare Ltd.
India (Foodles), Indo Nissin Ltd. (Top Ramen), and CG Foods India Pvt. Ltd. (Wai Wai), among
others.
b) Big players such as Nestle, HUL, Patanjali, ITC etc. are already present and rivals are highly
committed to business and have aspirations for attaining leadership

c) Instant Noodle market is expected to expand at a compound annual growth rate (CAGR) of
~5.6% during 2018-2023.

d) High initial manufacturing plant setup cost required

e) Low point of absolute differentiation among various noodles in the market and therefore
customers have very low switching costs

f) Strategic stakes are high as instant noodles in India was valued at 93.66 Bn in 2017 and
thereby firms playing in the market have potential for great gains which if not focused on may
lead to loss in market position in the category.

g) Excess capacity refers to a situation in which demand for a company’s good is less than its
productive capacity but due to high demand of instant noodles, companies are thinking of
opening new plants including Nestle in Sanand

2) BARRIERS TO EXIT - MODERATE

a) Asset specialization: Degree to which asset can be used across multiple situation and
purposes. The noodles manufacturing equipment and machineries can’t be actually put to use
fully for other purposes.

b) Cost to exit is high as manufacturing plant needs to be shut, employees need to be transferred
or removed and there may be other contract contingencies with suppliers or buyers.

c) There are not much Government regulations when removing a product from the market
3) BARRIERS TO ENTRY - HIGH

a) Major players generally produce at large volumes and enjoy low costs per unit deterring
entrants as then they need to enter the industry on large scale.

b) All the noodles product is almost identical and customers tend to switch in case of
unavailability of one type of product. Although some customers recognize the product
differentiation as communicated by advertising such as Patanjali offers healthy variant of
noodles, ITC yippee blend of Aashirvaad atta with different masala which does not allow
formation of lumping

c) Customers identify and distinguish brands in the market as the brands invest a lot in
packaging, communication and advertising.

d) There is relationship-based access to modern trade, local retailers and few firms such as
Patanjali own retailing channels

e) High capital requirements are required to set up fixed facilities, build inventories, R&D,
advertising and promotions.

f) Although access to technology needs investment but is available to everyone who wants to
move into noodles industry in terms of semi-automatic and automatic machines which may be
deployed

g) Basic raw materials such as sugar, wheat flour, salt, starch, different spices etc. based on the
recipe chosen are readily available from various suppliers

h) FSSAI has set clear norms for permissible limits for MSG and ash for instant noodles. The
first time manufacturer or importer of standardized foods only requires an FSSAI license to
begin a food business. Foods Imported into India have to follow the FSS Act, Rules &
Regulations

4) THREAT FROM SUBSTITUTES - HIGH

Although certain consumers prefer to have noodles because of its taste but switch to products
such as pasta, soup, macroni, zucchini, sweet potato noodles etc. in case it’s unavailable. The
producers of these substitutes enjoy a healthy profitability in the respective categories.

5) BARGAINING POWER OF BUYERS - HIGH

a) There are large numbers of buyers of noodles category and buyers can switch from one
product to another due to less differentiation among noodle products
b) Although, home-prepared noodles may not have the same taste but definitely can be prepared
with raw materials readily available with the retailers

c) Since there are a large number of players available in the market, firms usually come up with
consumer promotions to persuade the consumer to buy the product and also try to distinguish
themselves in quality offered communicated through advertising

6) BARGAINING POWER OF SUPPLIERS - LOW

There are large numbers of suppliers available for raw materials such as wheat flour, sugar,
edible starch, spices etc. These are not products that are differentiated. Although, there is no
significant switching cost for the company to switch from one supplier to another; the amount of
relationship held with a supplier can allow the firms to get raw materials at lower cost at best
quality.

Supplier can themselves produce noodles but will face difficulties in achieving the scale as huge
fixed investment is required for the same. As these raw materials are basic and don’t require
high-technological investment, industry can do backward integration. But since they are readily
available and used in various industries, firms may not invest in producing the same.

7) GOVERNMENT ACTIONS - MODERATE

a) FSSAI has specified new standards for instant noodles in terms of permissible limits set for
ingredients used and regulates & monitors the same continuously

b) The number of clearances required from government has reduced drastically while setting up
noodle manufacturing plant in India.

c) Legal compliances:

 First of all, register your business with ROC. Choose your organisation form carefully.
 Obtain Trade License from the local authority.
 In addition, you must apply for Udyog Aadhaar MSME online registration.
 Apply for VAT Registration.
 Additionally, you will need to apply for FSSAI license.
 Furthermore, obtain BIS Certification. It is mandatory.
 Compliance with PFA Act and GMP are mandatory.
 Register your brand name with Trademark
 Furthermore, you can also go for ISO 9001 certification to generate the trust of your
consumers.
STRATEGY FOR ITC IN NOODLES CATEGORY

 BUYER POWER:
a) Add more number of variants in their product portfolio to reduce customer switching
to rivals including more flavours and a healthy variant
b) They should also launch big saver packs as buyers are price sensitive too and help ITC
to increase the consumption of their product

 SUPPLIER POWER: ITC can cultivate additional vendors to bargain for prices of raw
materials from existing suppliers

 THREAT OF SUBSTITUTES:
a) They should increase the penetration of food distribution channel to make their product
available to customers
b) Remarketing to e-commerce buyers of Yippee noodles
c) They can increase customer engagement with their four lip smacking variants – Magic
Masala, Classic Masala, Power Up Masala, Mood Masala by asking them to share their
Magic, Classic, Power and Mood experiences – Build brand loyalty

 WITHIN SEGMENT COMPETITION: Increase expenditures on marketing and

advertising to focus on differentiation of Yippee from its nearest rival Maggi that it need
not be broken while cooking providing really long and slurpy noodles.
SECTION 5B: PORTER 5 FORCES FOR BISCUIT CATEGORY

 Rivalry among competitors: In case of biscuit industry, there are many companies
which closely compete with one another, fighting for market share. The top three players
in this industry are – Britannia Industries Ltd (market share – 25%), Parle Products Pvt
Ltd (market share – 24.8%) and ITC Ltd (market share – 13.5%). Apart from these big
players, there are various small players which are competing for market share.
Also, the products by these companies are such that they are not highly differentiated.
Therefore, the companies indulge in giving trade discounts for product visibility, and
consumer promotions in order to increase brand recall in the minds of the consumers.
Also, the brands fight for shelf spaces in the retail outlets.
Hence there exists huge rivalry among these competitors.

 Barriers to exit: Sometimes, the brands which fail in some aspect over the period of
time, generally have to exit the market. These aspects could be anything from inability
for the brand to build its identity to competitors under cutting its market. For example,
Parle exited the Atta market because it was facing difficultly in building its brand equity
and distribution network in the foods market. The cost of exiting the industry is usually
high, especially for the small players. The reason behind this is the initial capital
investments i.e. the fixed costs that the companies are supposed to incur in order to set up
the business.

 Barriers to entry: Barriers to entry for new biscuit companies/brands are considerably
higher. The reason behind this is the existing market share, distribution network,
production capabilities (economies of scale in production) of the existing players. The
new players would be required to build all of these in order to compete with them. Also,
the biscuit industry offers products which are not much differentiated leading to huge
investments in advertisements as well as consumer and trade promotions in order to make
their products stand out in the market. Also, there is a huge initial capital investment or
fixed cost required to set up the business. Therefore, summing up, there are entry barriers
which are already in place for the new entrants.

 Threat from substitutes: There are a few substitutes that are available for biscuits, for
example chips, instant noodles, cookies, dry fruits and more. Hence, the biscuit industry
faces a small amount of threat from the above-mentioned substitutes.

 Bargaining power of buyers: The bargaining power of buyers for the biscuit industry is
average. The usual considerations that consumers have in mind while purchasing biscuits
are quality and sometimes offers. The reason behind this is the bulk of undifferentiated
products in the market, because of which the buyers usually end up purchasing brands
which offer them consumer promotions in the form of buy one get one free, coupons etc.
However, the buyers do not as such pose any threat to the biscuit brands or companies.
  Bargaining power of suppliers: The bargaining power of suppliers for the biscuit
industry is average. The reason behind this is – biscuits are made using a certain set of
ingredients like flour/wheat, sugar etc. It is possible for the suppliers of such raw
materials to form union thereby raising their prices. Also, government regulations might
lead to the increase in their prices. Furthermore, the quality of biscuits (which is one of
the differentiating factors for any brand) can be impacted if the suppliers decide to
compromise on the quality of the raw materials. This can hamper the brand image of the
companies.
Considering the above-mentioned factors, we can say that the bargaining power of
suppliers are average in the business industry.

 Government actions: There are many Food Laws in place, which are also applicable to
the biscuit industries as well as other food related industries in general. For example, the
recent imposition of Goods and Services Tax by the Indian Government, brought all
variants of biscuits in the 18% bracket. This has led to the increase in prices of the
biscuits.

Developing Strategy for ITC

The threat areas for ITC Sunfeast biscuits from the industry point of view are –

 Rivalry among Competitors: ITC faces competition from two main players i.e.
Britannia and Parle which occupy the number 1 and 2 positions respectively, in terms of
market share for biscuits in India. In order for ITC to increase its market share from
number three position, it has to work on introducing new and undifferentiated products in
the biscuits industry way ahead from competitors, from what is currently prevailing in the
market. This would give ITC the first mover advantage before competitors start coming
up with similar products.
 Barriers to entry: The barriers to entry in the biscuits market is not very high, due to
which it would be very easy for new players having sufficient resources at their disposal
to enter the same. Most importantly, established players which are currently operating in
other FMCG segments can easily leverage their established distribution networks and
enter the biscuits market. This would pose a threat for ITC; hence, it needs to increase
and uphold its position in the biscuits market.
 Threats from substitutes: The biscuit industry faces threat from substitutes which for
biscuits are items which require minimum preparation effort and time. Hence ITC can
introduce new flavoured biscuits in the Sunfeast range thereby making it the most
preferred snack.

 Bargaining Power of buyers: In general, the bargaining power of buyers is higher due to
the fact that not much differentiated products are available in the market. Hence,
consumers tend to purchase the brands which offer them maximum consumer
promotions. Hence, ITC can leverage its deep pockets and give more offers and discounts
to consumers in order to grab more market share. Also, they can target the kids, who
often are the influencers in the purchase decision for biscuits in the household for gaining
a firm position.