ITC targets the schoolbag! Sathyanarayanan
Chakrapani
Foray of ITC into the paper, notebooks and school accessories segments; tremendous growth potential; a case analysis
ITC Ltd 09AB32 2/4/2011
ITC Limited is a public conglomerate company headquartered in Kolkata, West Bengal,
India. It has a turnover of $6 billion and a market capitalization of over $30 Billion. The company has its registered office in Kolkata. It started off as the Imperial Tobacco Company, but was rechristened to Indian Tobacco Company in 1970 and then to I.T.C. Limited in 1974 The company is currently headed by Yogesh Chandra Deveshwar. It employs over 26 ,000 people at more than 60 locations across India. ITC Limited completed 100 years on 24 August 2010. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information I nformation Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding 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. ITC's aspiration to be an exemplar in sustainability practices is manifest in its status as the only company in the world of its size and diversity to be 'carbon positive', 'water positive' and 'solid waste recycling positive.' In addition, ITC's businesses have created sustainable livelihoods for more than 5 million people, a majority of whom represent the poorest in rural India. The following are the group companies of ITC Ltd:
ITC InfoTech
Surya Nepal private limited
King maker marketing Inc.
Russell credit limited
Technico Pvt limited, Australia
Landbase
Here is a snapshot of some of ITCs I TCs flagship brands.
ITC is now planning a full-fledged assault on the paper products industry with special focus on school products and also industry purpose stationery is confident of a 4 fold increase in revenue in this this sector. It has plans to deploy the following following brands as means means towards achieving this end:
Classmate
Paperkraft
A SWOT analysis of ITCs for ay into this sector: Strengths
Weaknesses
Brand name,established distribution network
Opportunities
Size of the Indian stationery market : 10,000-crore,School books alone contribute : 4,000 crore,Only 25 % of it is covered by branded players
Unorganized market,no recognition of brand
Fierce price competitiveness Expensivedistribution network
Threats
Strategies employed by ITC: ITC employs multi-pronged strategies in its pursuit of market leader status in this foray into the education sector.
Pricing The strategy used here could be titled as defensive. Stationery products business in India is fiercely price competitive andtherefore ITCs products are just up to 5 per cent more expensive than its nearestcompetitors. nearestcompetitors. Camel is the market leader in i n geometry boxes and ITCs product offering matches its price at Rs.75. Similarly, the industry average for gel pens is Rs.5 and that is the price at which ITCs offering is pegged.
Segmentation/Brand Positioning
Classmate is mainly aimed at students. ITC I TC has launched ballpoint and gel pens under thisbrand. PaperKraft is targeted at executives and ITC leverages this particular brand for markers and highlighters. Enhanced Product
Range
ITC expects 80 per cent of its stationery products revenues to come from the Classmate brand whichis being aggressively promoted through school contact contact programs, point-of-sale promotions, and the ClassmateYoung Author Contest. The Classmate range has over 300 variants: notebooks, graph books, drawing books, practical notebooks, reminderpads and more. Classmate even ev en provides personalised stationery with school emblems. ITC has plans on further expanding its product offerings like introducing a rangeof pencils from 2B to 8H versions and similar expansion in stock keeping kee ping units (SKUs) of geometry boxes forschool children.
Distribution
Network
This is an Expensive f actor that acts as a major deterrent and the key reason for the low number of branded players in this sector. ITC, with its sound distribution network in place enjoys e njoys a tremendous lead over other players and wannabe players in this nascent industry and this qualifies as a Sustainable Competitive Adv antage. ITC is thus, in a position toleverage its back-end capacities i.e. paper, and also its front-end capacities i.e. sales and distribution. Currently ITC has 900 distributors and 70,000 outlets available across India with plans on the anvil to double this in the next couple of years.
Aces
in the hole
Cause Related Marketing Cause marketing or cause-related m arketing refers to a type of marketing involving the
cooperative efforts of a "for " for profit" business and a non-profit organization for mutual benefit. The term is sometimes used more broadly and generally ge nerally to refer to any type ty pe of marketing effort for social and other charitable causes, including in-house marketing efforts by non-profit organizations. Cause marketing differs from corporate giving (philanthropy) as the latter generally involves a specific donation that is tax deductible, while cause marketing is a marketing relationship generally not based on a donation. The notebooks also serve to send out the message that ITC is an environment-conscious company as itmanufactures elemental chlorine-free (ECF) paper and carry information on its corporate social responsibilityprograms. For every four Classmate notebooks sold, the company contributes Re 1 to its rural developmentinitiative that suppor s upports, ts, among other things, primary education in villages.
Green
Technology
ITC has the following achievements that enhance its standing s tanding in the industry: }
Performance Beyond Compliance C ompliance
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Carbon Positive Footprint
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Water Positive Footprint Zero Solid Waste (reduction, reuse and 100% recycling of all solid wastes)
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ITC is talking to companies c ompanies with its promise of green technology backing its paper. It is now providing the entire officestationery requirements of groups such as the Tatas, Wipro, IBM, HSBC and ICICI Prudential and is looking to stepup such institutional sales.
Conclusion
ITC will be able to achieve its goal of a 4 fold increase in revenue within the next 3-5 years for the reasons enunciated above viz. Pricing, Distribution Network, Segmentation, Enhanced Product Product Range and its Aces in the hole. Through its focused efforts and tunnel vision, ITC will not only have the cake in hand but will also get to eat it.
