Strategic

Implementation:
ITC
Contents
ITC'S VISION ............................................................................................................................... 2
ITC'S MISSION ............................................................................................................................ 2
ITC'S CORE VALUES ................................................................................................................ 2
ITC’S CORE BUSINESS ............................................................................................................. 2
ITC’S PRODUCTS ....................................................................................................................... 3
ITC’S STRATEGY FOR GROWTH .......................................................................................... 4
ITC’S PERFORMANCE EVALUATION IN COMPETITIVE ENVIRONMENT .............. 5
 Cost Reduction .......................................................................................................................... 5
 Returns on Capital Employed.................................................................................................. 6
ITC’S VALUE CREATION OF STAKEHOLDERS ................................................................ 7
ITC’S TECHNOLOGICAL GROWTH STRATEGY .............................................................. 7
ITC’S STRATEGIC RISKS ........................................................................................................ 8
 Asset impairment risk............................................................................................................... 8
 Financial impairment ............................................................................................................... 8
 Physical Impairment ................................................................................................................. 8
 Competitive risk ........................................................................................................................ 8
 Company Specific risk .............................................................................................................. 8
 Regulatory risk .......................................................................................................................... 9
ITC’S STRATEGIC CONTROL LEVERS ............................................................................... 9
 Belief systems -communicate core values .............................................................................. 10
ITC’S STRATEGIC LEADERSHIP ........................................................................................ 11
ITC’S INTERNATIONAL STRATEGY .................................................................................. 11

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 REFERENCES ............................................................................................................................ 12

ITC'S 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.

ITC'S MISSION

To enhance the wealth generating capability of the enterprise in a globalising environment,

delivering superior and sustainable stakeholder value.

ITC'S CORE VALUES

ITC's Core Values are aimed at developing a customer-focused, high-performance organisation

which creates values for all its stakeholders.

 Trusteeship
 Customer Focus
 Respect for People
 Excellence
 Innovation
 Nation Orientation

ITC’S CORE BUSINESS

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ITC’S PRODUCTS

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ITC’S STRATEGY FOR GROWTH

ITC is planning to line up 25,000 crore investment in 65 projects to move from its cigarette
maker tag. The strategy of ‘create the new ITC’ is aimed to have Rs. 1 trillion in revenue from
its non-cigarette packaged goods. Hence, the word ‘diversification’ could explain the growth
strategy of ITC completely.
This growth strategy involves launching a new product every quarter in fruit, vegetables or sea
products packaged food. ITC tries to bring new products and services for superior, very distinct
or differentiated needs customers. They are doing it successfully by adding too many resources
into research and development of specific products and by making strategic investment in
creating right products for right consumers. Besides this, ITC is reinforcing its investment in
the agricultural backend that it has been building for past 20 years.
To diversify into other business than cigarette, ITC’s 80 percent capital expenditure is in non-
cigarette businesses which employees about 88 percent of company’s headcount where non-
cigarette business accounts of 40 percent business currently.
ITC is trying to increase its last mile delivery distribution. Currently its products have a reach
of 4.3 million out of 9 million total outlets. Out of these, 2 million outlets are under direct
distribution from ITC, recently they are working on developing a strategy for factory to retail-
point distribution to have greater control over distribution, to have greater access to secondary
sales data.
Another growth strategy they have is to take Indian brands overseas market. To avoid the
depreciation of the brand value, such products could be taken to the new geographies where
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such low-cost packaged branded products are valued. To happen this in future, they are trying
to create brands which will bring royalty back to India. It has recently added a team of 300
scientist in its Bangalore office to create new brands which could serve the desired goal.
ITC has become third largest company in packaged food segment by valuing more than Rs.
8000 crores. Its introduction of brands in this segment like Bingo, B Natural etc. summarizes
its focus on the segment.
ITC has started experimenting with cultivation of medicinal plants in 110- acre plot near
Bhopal in MP, it is working on health and personal care segments.
ITC acquired Salvon brand in 2015, from then they are trying to make it bigger by promoting
it very innovatively. ITC’s personal care business strengthened its presence in the health and
hygiene space, leveraging the Savlon brand and Shower to Shower brands. During the year,
the company introduced new variants in the hand wash and antiseptic liquid categories under
the Savlon brand, thereby expanding the product portfolio, while gaining access to new
consumer segments and markets, according to the company. ITC has done some path-breaking
campaigns for Savlon and used multiple channels of communication. ITC spearheaded the
Savlon Swasth India Mission, in November 2016 to enhance awareness about the significance
of ensuring health and hygiene through clean hands. In line with the campaign proposition of
‘Healthier Kids, Stronger India’, the program introduced interactive activities including
storytelling and visual engagement that educate and encourage children to adopt good hand
hygiene practices.
ITC launched Engage On in 2013. Between July 2014 and July 2017, the market grew at a
CAGR of 5.2 percent. During this time, ITC decided to launch Engage On at price point of 60
rupees. ITC aims to make it Rs. 500 crore brand by FY20. It’s company’s second personal
brand after Vivel. Engage On is currently available in 500,000 retail outlets including modern
trade formats. ITC wants to increase the reach of the product.

ITC’S PERFORMANCE EVALUATION IN COMPETITIVE ENVIRONMENT

To identify their position in the market companies generally look at various factors of which
one is Profits, because of which Profit Planning plays a crucial role in any organization to be
able to identify the future revenues and expenditures with respect to the business strategy that
will be implemented. For the purpose of understanding the profits of any organization
managers have to keep a more holistic view of the business cash cycle, which in turn will enable
the business to use and acquire new resources for business growth which will then translate
into profits for the company.

ITC with its current market capitalization of INR 3.6 Lakh Crores is the fifth largest private
company in the Indian market. ITC’s business portfolio includes Hotels, FMCG products, Agri
Business, Paper and Packaging, IT and Paperboards. And the brand focuses on product
differentiation strategies to be able to capture a larger share of the market.
 Cost Reduction
ITC firmly believes in best standards and cost to be able to attain a leadership position
for each of its business. ITC’s focus on cost resonates with them being focused on

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 reducing operating expenses by investing in technology which can provide them
economies of scale.
According to ITC’s latest investments in Kaputhala, Panchla, Uluberia, Mysuru, etc. the
organization is also focusing on integrating the manufacturing and distribution of units
by increasing the capacity utilization of current plants and machinery and leveraging on
the current distribution network to reap maximum benefits at reduced cost, this
investment and strategy focuses on attaining economies of scope.
 Returns on Capital Employed
For measuring their performance each year ITC evaluates its ROCE (Return on Capital
Employed) as a very important parameter. The company’s goal is to achieve an ROCE
in excess of the cost of capital employed by the company.
ROCE for ITC FY2019 = 18478 / (69798 – 9622)
= 30.71
The above ROCE suggests low liabilities, which is a good indicator to competitive
business capabilities with the cigarette business market share being more than 75% as
per the shareholder report.

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ITC’S VALUE CREATION OF STAKEHOLDERS

ITC tries to create enduring value for its stakeholders. ITC had redefined its Vision a decade
and a half ago to transmute the Company into a vibrant engine of sustainable growth with
considerable and growing contribution to the Indian Economy.
A portfolio of businesses was carefully chosen in areas where internal competencies best
matched the emerging opportunities of a growing Indian economy. A robust corporate strategy
of creating multiple drivers of growth was put in place which saw company entering new
FMCG businesses as well as Information Technology in addition to revitalizing and growing
its existing businesses of Cigarettes, Paperboards & Packaging, Hotels and Agri-Commodities.
To manage this diversity and retain focus on each business, a new corporate governance
structure was designed with distributed leadership for effective management and attainment of
international competitiveness.
ITC is now positioned in the frontline of the businesses of tomorrow backed by strong
capabilities in R & D, world-class manufacturing practices, robust farmer relationships and a
rich lineage of branding, trade marketing and distribution. What is perhaps even more
significant is that these achievements have been in tandem with the creation of large scale
environmental and social capital.

ITC’S TECHNOLOGICAL GROWTH STRATEGY

Cutting-edge research and development executed by the globally benchmarked, state-of-the-

art ITC Life Sciences and Technology Centre (LSTC) situated in Bengaluru supports ITC’s
strong portfolio of world-class brands and products. With a world-class team of around 350
highly qualified scientists this centre is working on game-changing R&D driving science-led
product innovation. Over 800 patent applications have been filed from this centre in a short
span of time. R&D at this centre widely focusses on addressing the unique needs of the Indian

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consumer by designing differentiated and superior first-in-market innovative products. To
further strengthen ITC’s long-term competitiveness new best-in-class initiatives, such as data
analytics, consumer experience labs and Industry 4.0 are being seeded across
LSTC. Technology spending in favour of digital technologies, are estimated to account for
80% of incremental IT spends.

ITC’S STRATEGIC RISKS

 Asset impairment risk

Asset impairment becomes a strategic risk when there is a deterioration in the financial
value of assets.
 Financial impairment
All firms sell goods on credit. This is depicted as Accounts Receivables on the asset side
of the balance sheet. Taking a look at ITC’s balance sheet, approximately 5.5% of the
total assets are depicted by Trade Receivables. If the possibility of these receivables to
become uncollectable increases, this could result in a strategic risk for the company. The
current Trade Receivable Days is approximately 29.5. If the credit terms are made lax in
an attempt to increase the sales numbers, and the Receivable Days were expected to
increase, these liberal credit terms provided to distributors and wholesalers who are a
credit risk, may increase the strategic risk for the company.
Alternatively, ITC may turn away sales on credit to minimize credit risk, but this is at the
cost of a reduction in revenue. ITC must understand the business and strategic risk from
both the alternatives and must reach a subtle trade-off point between the two extreme
alternatives according to the risk appetite of the company.
 Physical Impairment
ITC is primarily a manufacturing company. Its major asset is the plant and machinery
that it owns. If, due to any kind of physical destruction, the company’s manufacturing
plant and machinery is negatively impacted, the company must have a backup facility.
The lack of such a backup facility may hinder its operations and lead to a strategic risk.
 Competitive risk
Competitive risk results from changes in the competitive environment that could impair
the ability of the business to create value.
ITC has various diversified operations and products. It faces stiff competition by
mammoths in the industry. Each competitor attacks ITC with different marketing
techniques to alter customer tastes and desires, and different pricing techniques to attract
and poach ITC’s customer base.
If ITC fails to anticipate the competitors’ techniques, fails to react to the tactics, it may
face extensive risks.
 Company Specific risk
ITC started its operations as a tobacco manufacturing company. The operations continue
to this day. Although, the company has rebranded, more than 60% of its revenue is a
function of its tobacco operations.
The company has focused its consolidated efforts to brand itself as a consumer goods and
services company with a diversified portfolio of products. Although, if the company fails
to wipe away the tobacco-oriented image that the consumers have of the company, the

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 negative impact will spread to the consumption of the company’s consumer goods and
services.
Their continuation as a tobacco producer may lead to negative impacts on the sales of
their other products and services.
 Regulatory risk
High Rates of taxation on Cigarettes
Cigarettes hold less than 15% of the overall tobacco consumption in Inia, yet they
contribute to approximately 75% of the total revenue from tax from the tobacco sector of
the country. As opposed to this, other forms of tobacco are leniently taxed in comparison,
and in some situations, also exempted from taxation, leading to a huge potential loss in
tax revenue.
The domestic cigarette industry is exposed to negative impact from the discriminatory
taxation levied on it, and from the competition perspective, it is challenged by the
smuggling of tobacco products and illegal manufacturing practices.
These challenges faced by the tobacco industry were further worsened during the year by
the steep increase of 22% in cigarette excise duty rates which were announced in the
Budget of 2012. Additionally, there were increases in the Value Added Tax levied on
cigarettes by certain States. These additional charges will negatively affect the organised
cigarette industry in which ITC operates.
These charges and exorbitant fees levied on the legal tobacco industry stops the industry
from achieving the actual revenue potential as a function of its operation.
These charges and taxes by the Central and State governments has formed a solid base
for the introduction and development of the illegal cigarettes segment. This illegal
segment has grown exponentially, almost two-fold, in the span of 8 years.
With the growth of the illegal cigarettes segment, the organized segment, where ITC
plays, will be impacted negatively. This is a strategic risk for the company

ITC’S STRATEGIC CONTROL LEVERS

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 Belief systems -communicate core values

Creating "national value" is as important to ITC as growing "shareholder value".

Enhancing productivity of the entire value chain and meeting stakeholder expectations is
as critical to the vision as maximising capital efficiency and improving returns on
deployed resources. An example of "national interest" driving ITC's early diversification
is its entry into the hotels and paperboards businesses in the mid-seventies. The potential
to generate significant foreign exchange earnings (when India didn’t have much of it)
and its capacity to create large scale employment in the tourism sector were the triggers
for ITC's foray into the hotels business. The other three lever are also designed in a way
to sustain the belief of creating “national value”.

 Diagnostic control systems - to monitor and adjust operating performance

ITC's performance measurement processes are backed by an elaborate management

accounting system for assessing independent investment centres. ITC's belief that
strength of capital and the scale of operations across product-market arenas would
provide unique competitive advantages was perhaps ahead of its time. This conviction is
validated recently by latest management theory that conglomerates in developing
economies can create incremental value by filling "institutional voids". ITC, of course,
has dramatically stretched this theory to address deficiencies in the entire value chain it
operates in highlights in the conceptualisation and execution of e-choupal.

 Boundary systems -define the limits of freedom

Corporate Governance adopted , leadership within ITC is exercised at three levels. This
three-tiered interlinked leadership process creates a wholesome balance between the need
for focus and executive freedom, and the need for supervision and control.

The Board of Directors -strategic supervision of the Company.

Corporate Management Committee (wholetime Directors and members drawn from

senior management) - strategic.

Divisional Management Committee (DMC, headed by the Chief Executive)- executive

management of each business division .

 Interactive control systems - provide strategic feedback and vehicles to update and
redirect strategy.

Interactive use of control, which seeks to promote dialogue across the organization,
usually starts with the design and implementation of diagnostic controls. So, diagnostic
use is not an end itself.

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ITC’S STRATEGIC LEADERSHIP

The driving force of ITC’s transformation are a series of visionary CEOs who led ITC at
different points of time. Common to all of them was the ambition to develop and sustain ITC
as an 'institution' acting as an instrument of societal change. This is seen by multiple examples
but most impressive one is that the prime motivator for ITC's entry into the paper and
paperboards businesses was to contribute substantially to the economic turnaround of a
backward region like Bhadrachalam in the then Andhra Pradesh. From mid-80s to mid 90s ITC
witnessed feverish execution of the strategy of “national-interest” under two successive CEOs,
JN Sapru and KL Chugh. Leadership is contextual and this is demonstrated in the events that
ITC was faced with. Despite good leadership, the external circumstances led ITC into
turbulence after two decades of diversification. When Y C Deveshwar took charge, ITC was
experiencing difficult challenges: its core cigarette business was put under excise duty demand
of Rs 803 crore. To worsen the situation, a battle for control of the company had significantly
damaged its reputation.Mr Deveshwar embarked on a purposeful journey to restructure the
company. He built the "Vision-Values-Vitality" framework of the triple bottom line strategy
that would simultaneously build economic, ecological and social capital for the nation.

ITC’s history is divided into eras on the leaders:

 Haskar Era: (1969-1983) Ajit Narain Haskar

 Sapru Era: (1983-1989) Jagdish Sapru
 Chugh Era: (1989- 1997)- K.L Chugh
 Deveshwar Era: ( 1997 onwards)- YC Deveshwar

ITC’S INTERNATIONAL STRATEGY

Building global competitiveness in every business through proper investments to strengthen

the pole position accomplished in a few portions and to rapidly achieve authority in the newer
organizations. While for the time being, this would require forthright ventures and development
costs especially in the non-cigarette FMCG organizations, such investments are a source of
competitive advantage and supported an incentive for partners is made over the medium to
long term as brands gather bigger scale and extend their interface with purchasers
In the year 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint
venture. In 1990, ITC set up the Agri Business Division for export of agri-commodities. Today,
the division is one of India's largest exporters. ITC Hotels has tied up with RP Group Hotels &
Resorts to manage 5 hotels in Dubai and India.

Vibrant synergy is obtained through ITC’s diverse portfolio of businesses that contribute to
unique sources of competitive advantage. Also, structural capabilities are being enhanced by
investing in distributed supply chain infrastructure, including state of-the-art company-owned
integrated consumer goods manufacturing and logistics facilities, paperboard technology,
world-class pulp and iconic hospitality properties. Persistent focus on developing world-class
products anchored on innovation and benchmarked international quality standards is a key
source of sustainable competitive advantage for the company.

ITC has the distinction of being the first company in India to obtain the Forest Stewardship
Council-Forest Management (FSC-FM) certification, which ensures compliance with the

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highest international benchmarks of plantation management across the dimensions of social
benefit, environmental responsibility, and economic viability. All manufacturing units of the
Business continue to recycle nearly 100% of the solid waste generated during operations. Thus,
ITC is known for ensuring compliance and this helps in establishing international operations
and getting necessary licenses.
ITC’s Spices Business continued to expand in Food Safe Markets viz. US, EU and Japan by
leveraging on its customer focused strategies and strong backward integration. Exports of
spices is driven by the addition of new customers and entry into new markets. During the year,
Integrated Crop Management (ICM) programme was scaled up thereby enhancing its ability to
produce food safe spices in a sustainable manner. For the production of food safe spices, ITC
continues to partner with the various state governments. A perfect track record on food safety
parameters has been maintained by leveraging on superior processes and custody of supply
chain, thereby consolidating ITCs position as a preferred supplier for food safe customers

In the Agri Business, ITC has remained focused on enhancing its presence in the high value-
added segment. Branded frozen prawns and packaged frozen snacks are the new additions. The
branded prawns under the ‘ITC Master Chef’ range are ‘Super Safe’ frozen prawns which
adhere to the same stringent standards prevalent in USA, Europe, and Japan. These products
go through rigorous testing (240+ tests) and are ‘individually quick frozen’ to ensure freshness.
They have been well appreciated for its taste and quality. ITC has also forayed into branded
packaged frozen snacks under the ‘ITC Master Chef’ brand in select cities for the retail
segment, leveraging the culinary expertise of ITC Hotels.

REFERENCES

 https://www.itcportal.com/sustainability/sustainability-report-2013/sustainability-
challenges-key-impacts.aspx
 https://www.itcportal.com/about-itc/shareholder-value/annual-reports/itc-annual-
report-2019/pdf/ITC-Report-and-Accounts-2019.pdf
 https://www.itcportal.com/about-itc/shareholder-value/ITC-Corporate-
Presentation.pdf
 https://www.itcportal.com/about-itc/profile/history-and-evolution.aspx
 https://en.wikipedia.org/wiki/ITC_Limited
 https://www.business-standard.com/company/itc-301/news
 https://www.thehindubusinessline.com/companies/itc-smells-success-with-
deodorant-brand-engage/article24979691.ece
 https://www.thehindu.com/business/itc-draws-up-strategy-to-grow-savlon-
brand/article18956564.ece
 https://www.livemint.com/Companies/OaVUIWnVoMEjb1YYnDHYVN/ITC-looks-to-
accelerate-growth-in-noncigarette-businesses.html
 https://economictimes.indiatimes.com/industry/cons-products/fmcg/itc-explains-
how-it-plans-to-diversify-business-through-fmcg-bold-
play/articleshow/63763594.cms
 https://www.itcportal.com/about-itc/profile/index.aspx
 https://www.thehindubusinessline.com/companies/itc-plans-to-drive-asset-right-
growth-in-hospitality-sector-business/article24312219.ece

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 https://www.google.com/search?q=ITC%27s+strategy+for+savlon&oq=ITC%27s+stra
tegy+for+savlon&aqs=chrome..69i57.8709j0j7&sourceid=chrome&ie=UTF-8
 https://www.itcportal.com/about-
itc/ChairmanSpeakContent.aspx?id=1231&type=B&news=Chairman-2012

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