BCG Matrix of ITC
Introduction of ITC limited. 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 - Fast Moving Consumer Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and
Stationery Products, Incense Sticks and Safety Matches,
Hotels, Paperboards & Specialty
Papers, Packaging, Agri-Business and Information Technology - the full stops in the
Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'.
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' (now renamed My Fortune, Chennai). In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards Division. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal). In 2004, the company diversified into manufacturing and exports of garments.
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 entered the fast growing branded snacks category with Bingo! in 2007. In 2010, ITC launched Sunfeast Yippee! to enter the Indian instant noodles market. In just over a decade, the Foods business has grown to a significant size under seven 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 and Aim. ITC entered the Personal Care Business in 2005. In seven years, the Personal Care portfolio has grown under 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia' brands which have received encouraging consumer response and are also being progressively extended nationally. In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market. Armenteros cigars are available exclusively at tobacco selling outlets in select hotels, fine dining restaurants and exclusive clubs.
Agricultural Business
E-Choupal,
Agri Exports
Leaf Tobacco
ITC Agri Business is one of India’s largest exporter of agricultural commodities. June 2000, eChoupal – strategic and cost effective sourcing support to the Foods business (support creation of verticals in wheat, soya, corn, potato etc.) eChoupal - Services reaches to 4 million Farmers who are growing Wheat, Rice, Pulses, Soyabean, Coffee in over 40,000 villages thru nearly 6,500 kiosks across nine states. Diverse range of goods/services: FMCG, consumer durables, agri-inputs. Farmer Financial Services - insurance (focus: weather), credit (focus: Kisan credit card scheme) Rural Retail – 18 Choupal Sagars Agenda 2012 is to cover 15 states with 1,00,000 Villages with about 20,000 eChoupal Kiosks servicing about 10 million farmers. Largest Buyer, Processor and Exporter of leaf tobacco in India. Exports to about 48 countries. ITC processes about 120 million kgs of high quality tobacco yearly. Overall 550m Kg of tobacco is produced in India.
Hotel Hotel Brands: ITC-WelcomGroup, WelcomHeritage & Fortune. Totally 90 Hotels, 77 Destinations and 5500 Rooms under management. Destinations include most of India as well as Singapore and Dubai. Hosted a galaxy of world dignitaries like Bill Gates to Bill Clinton, Condoleezza Rice to Benazir Bhutto. Restaurant Brands: Bukhara, Dum Pukht and Dakshin.
Packaging & Paperboards Annual paperboard demand – appx. 1.1 million tonnes .Indian paperboard market growing at 7% p.a. Significant export opportunities for high quality Indian manufacturers. ITC paperboards exports - Rs. 2 billion appx. ITC’s packaging unit - India’s largest converter of paperboard into high quality printed packaging. Provides superior packaging solutions to the cigarettes and new FMCG businesses. India has low per capita usage at around 6 kgs p.a. (World average – over 50 kgs p.a.). ITC Bought 0.5% in Ballarpur Industries in July 2008.
FMCG-Others
Ashirvad Atta
Candyman
Fiama Di Wills
Kitchens Of India
Bingo
Expressions
Mint-o
Superia
Sunfeast
Wills LifeStyle,
Classmate
Ashirvad Atta is now no one selling.
Sunfeast Biscuits is ranked no3.
Bingo, launched in August 2007, now enjoys 16% market share.
November 2007 Mint-o overtakes its competitor Chlormint
‘Classmate’ brand already the most widely distributed stationary brand in India Kitchens of India have about 48% market share in India and a huge export potential. Ready to Eat food Market is estimated to be Rs.700m.
Safety Matches market at Rs. 1250 crores p.a. for 24 billion match boxes which is targeted by ITC’s iKno, Aim, Aim Mega, Aim Metro.
Successful acquisition of 94% of WIMCO Ltd. i.e. Homelites, Ship.
‘Mangaldeep’ the only National brand in the country serves the nation’s 900cr incense sticks market.
FMCG-Cigarettes
Insignia
Silk Cut
Berkeley
India Kings
Navy Cut
Bristol
Classic
Scissors
Flake
Gold Flake
Capstan
'Best Manufacturer of Cigarettes for the year 2007'
Started in 1910 As Company’s Core Business. Market leadership in all segments geographic & price (70% Market Share)
Extensive FMCG distribution network (Direct servicing of 1,00,000 markets & 2 million retail outlet)
Cigarettes account for only 15% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation. Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes. (Biri : Cigarettes ratio = 10 : 1). Annual per capita adult cigarette consumption in India is approx one tenth world average which is 141
In 2001 - Lost 15% of Its Business Because of Rise in Excise Duty. In 2007 - VAT Was charged at 12.5% which increased the price of cigarettes by 84ps per cigarette. Hence ITC had to shut down their business of Plains (i.e. Non Filter Cigarettes) which was 20% of total FMCG Cigarette Business.
ITC Infotech
ITC InfoTech Ltd. Is a wholly owned subsidiary of ITC LTD.? ITC InfoTech is responsible for developing & maintaining the entire ITC eChoupal infrastructure.
Although a separate entity and brand, ITC InfoTech’s primary job is to keep ITC as a group up to date with latest technology.
Introduction of BCG Matrix.
The BCG matrix method is based on product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit.
To ensure long term value creation, a company should have a portfolio of product that contain both high growth product in need of cash input and low growth products that generate lot of cash.
It has two dimension: I.
Market Share
II.
Market Growth
The basic idea behind it is that bigger the market share a product has or the faster products market grows the better it is for company.
STARS (high growth, high market share)
Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash.
Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept
CASH COWS (low growth, high market share)
Profits and cash generation should be high. Because of the low growth, investments which are needed should be low.
Cash Cows are often the stars of yesterday and they are the foundation of a company.
DOGS (low growth, low market share)
Avoid and minimize the number of Dogs in a company.
Watch out for expensive ‘rescue plans’
Dogs must deliver cash, otherwise they must be liquidated.
QUESTION MARKS (high growth, low market share)
Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share
If the market share remains unchanged, Question Marks will simply absorb great amounts of cash.
Either invests heavily, or sells off, or invests nothing and generates any cash that you can. Increase market share or deliver cash
BCG Matrix of ITC
Relative Market share (Cash Generation) HIGH
STAR
Agri Business
Hotels
Paperboards &
LOW
QUESTION MARK
FMCG-Others
Packaging
CASH COW
FMCG-Cigarettes
DOG
ITC Infotech
