Strategic analysis techniques of ITC LIMITED.

Individual application of strategic analysis techniques of ITC LIMITED.

Definition of strategy:

        It is a fact that there is no proper constant definition for strategy. Every authority gives their own version. These ranges from (Wickham, 2000)rhetorical ‘strategy is about winning’ to (Wickham, 2000) exhaustive:

        “A strategy is the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive world. A well-formulated strategy helps to marshal and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents.”

And another simple definition of strategy by (Wickham, 2000), “strategy is a pattern in the stream of actions.”

Introduction about ITC LIMITED:

        ITC LIMITED (the international trade center) is one of the India’s major private sector companies which hold a powerful place in the market with a huge capital of US $ 19 billion and a turnover of over US $ 5 billion. It owns many awards like ‘Asia’s fab 50’ and ‘world’s most reputable companies’ given by Forbes magazine and Business world.

        ITC LIMITED enters into the hotel industry as ITC welcomgroup in the year of 1975 with the aim to promote India’s rich tourism heritage. ITC hotels have unique value and fine art of hospitality which emerged as one of the India’s premier hospitality sector. It has over 100 hotels in more than 80 destinations with good standard services.

Beyond hotel industry, it involves in some other business too. The following are some of the business of ITC LIMITED,

  • Cigarettes
  • Foods
  • Lifestyle retailing
  • Personal care
  • Education and stationary
  • Safety matches
  • Agricultural business
  • Information technology.

Vision:

“Sustain ITC’s position as one of the India’s most valuable corporations through the world class performance, creating growing value for the Indian economy and the companies’ stakeholders.”

(Limited, ITC Limited, 2009)

Mission:

“To enhance the wealth generating capability of the enterprise with the globalizing environment, delivering superior and sustainable stakeholder value.”

(Limited, ITC Limited, 2009)

Values:

“ITC is a demand-driven organization responsive to national development objectives and programmes. It endeavors to deliver relevant and cost-effective services for sustainable development ends. Its staff is committed to providing information and advice according to criteria implicit in the United Nations Charter: the highest standards of efficiency, competence, integrity and neutrality.”

(Limited, International Trade Cenre, 2008)

Objectives:

  • Enterprises:Strengthen the international competitiveness of enterprises
  • Trade support institutions:Develop the capacity of trade service providers to support businesses.
  • Policymakers: support policy makers in integrating the business sector into the global economy.

Stakeholders:

The following table shows us the stakeholders of ITC limited,

(ITC LIMITED, 2009)

It shows us that the company has strong stake holders; hence it is also a key point to survive in the market.

Market position:

ITC hotels can be broadly classified in four major sectors such as,

  • The luxury collection,
  • WelcomHotels,
  • Fortune Hotels,
  • WelcomHeritage.

With some of its unique techniques and design of the hotel, ITC welcomegroups is now one of the best five star hotels with the true essence of Indian hospitality. And it started its special gateways to its new destinations. ITC welcomes groups are also getting a good reputation for its fortune hotels which show the well done survival in the market.

The following points shows the strong position of ITC welcomgroup in the market,

  • Rated among the world’s leading companies by Forbes magazine.
  • Has won the national award for excellence in corporate governance in 2006 from the institute of company secretaries of India.

(Limited, ITC Limited, 2009)

It is clear that ITC is a leading one in almost all of its business in the market.

Although ITC has a reputation in the market, it does actually have some competitors. The major competitors for the ITC welcomgroup is TAJ GROUP OF HOTELS and OBEROI GROUP OF HOTELS which is also a powerful hotel industry in the current market. The service provided by both the hotels is very similar to the ITC welcomgroup hotels which are a threat for losing the customers of ITC.

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It is important to note that the competitors are not only the problem for ITC. There are some general problems which affects both the market as well as the specific hotels or industries which are as follows,

  • The first and the major threat for the entire market is the bad economy which have the both direct and indirect affect on all kinds of industries which are all in the market. The bad economy is what the current market is suffering from where some of the major industrial sectors are facing a huge problem in making a normal profit.
  • The second fact is the ‘new comers’ in the market. According to ITOPC (Indian Tour Operators Promotion Council), there are upcoming hotels in the near future such as,
    • Uppal Group plans to develop seven luxury hotels by 2010
    • Marriott to add 24 hotels by 2011
    • Panoramic Universal to launch new hotels in India
    • Accorr Group has plans to set up 200 hotels in India.

    All these upcoming hotels could be new competitors for the ITC welcomgroup.

  • Another fact is that the cheap hotels. Due to the recession period, people choose cheap hotels in order to save their money. And it is surprising that there are lots of cheap hotels are in the market which gives a good quality and services which are similar to ITC hotels.

    • Tools and techniques of strategic analysis:

    The following are the tools and techniques of strategic analysis of ITC,

  • Investment map: It helps the investment agencies identity such as priority sector for foreign investments, competing countries and potential foreign investors.

    • (ITC, 2005)

  • Market asses’ map: It helps to find out the national tariff level of different countries.
  • Product map: It is an online product context which includes the overall study of the market, price indications and product information of different organizations which helps to comparison of the services.
  • Trade map: It is also an online data base which helps to find the flow of goods and services and the barriers in the international market.

    • (Centre, 2008)

    Internal analysis:

    According to (Centre, ITC Strategic plan, 2008), Though ITC has a good strategic approach in all ways, it has four major challenges such as,

    • Leveraging more unearmarked resources: ITC has been trying to develop a capacity to manage their large portfolio which will result in a need of huge funds.
    • Upgrading financial management: As ITC is being received funds from various different sources; it needs to maintain a proper flow of cash and proper project budget control. As flow of cash is important for every organization, the decisions taken by the management must be very accurate and flexible according to the fluctuations.
    • Investing in people: ITC consider their staff as their heart of the organization in order to achieve the business goals and objectives which need a good personal management.
    • Improving communications and information system: ITC is expanding its level in the market; it should maintain a proper communication level in order to maintain a smooth flow of business.

    Financial performance:

            The financial performance of the ITC limited is excellent when compared to the market situation. The balance sheet as on 31st march 2009 shows that the total value of source of funds which includes share holders funs, loan funds and deferred tax is 14779.82 (Rs in crores) where the 31st march 2008th value is 12817.17 (Rs in crores). It is clear that the funds seem to be increasing.

    On the other hand the net current assets which includes inventories,debtors,cash in hand and bank is 3456.10 (Rs in crores) where the previous year was 2586.97 (Rs in crores) which seems to be increasing too.

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    (ITC, 2009)

            According to Profit and loss as on 31st march 2009 shows that the net income of the year was 15923.04 (Rs in crores) where the previous year was 14558.43 (Rs in crores). The expenses made was 11097.30 (Rs in crores) where the previous year was 9986.66 (Rs in crores) and finally the profit made by the account year was 3988.04 (Rs in crores) where the previous year was 3767.63 (Rs in crores). This shows that there is an increase in the profit which is a boon for the organization. The following graph shows the operating profit of five years starts from 2005 to 2009,C:Documents and SettingsOwnerDesktoppage-14-image-02.jpg

    However the percentage of profit is reduced from 2006 to 2009, It is notable that the organization is still in profit even in the recession period which is a hope for the survival in the market.

            As per the cash flow statement of accounting year ended on 31st march 2009, the cash and the bank balance was 1032.39 (Rs in crores) where the previous year was 570.25 (Rs in crores) which shows the huge amount of cash inflow in the business which is also a boon for the organization. The following chart shows the operating cash flow of recent five years,

    The chart explains that even though there is a hazard in the market, ITC’s market capitalization in the market on the accounting year ended as on 31st march 2009 was rs.69751 Crores. It is clear that the ITC has a strong power in the market.

    The table explains that there was a steady growth of the financial position of the organization for the past ten years which clearly points out the growth of the organization in the market. The same statement could be very clearly explained in the following graph,

            It is clear that the profit of the organization is continuously increased overall in these years. There was a slight decrease in the percentage of the profit occurred but the profit seems to be remain in the increasing state which is very important to all organizations in this competitive market.

    Stars:

    ITC Ltd has a very strong market position in the sectors such as Hotels, Paperboard/packaging and agricultural business. They are very famous for Hotels and Agri business.ITC is very strong in these positions as these sectors are considered as stars in BCG matrix which means these sectors generates a huge amount of profit because of the market shares.

    Question marks:

            ITC Ltd’s FMCG sectors such as automotive companies, furniture companies, financial companies, tobacco companies, food companies are in the stage of ‘question mark’ in the BCG matrix which means these sectors growing rapidly fast and consumes a large sum of cash because of low market shares. But there is a chance that these sectors may become ‘stars’.

    Dogs:

            ITC InfoTech are now the ‘Dogs’ in the BCG matrix as they have very low market share and doesn’t produce lot sum amount of cash which indicates the weakest sector of ITC Ltd.

    Cash cows:

            ITC Ltd’s FMCG-Cigarettes are now in the position of ‘Cash Cows’ in the market as they produce a stable cash flow which makes a good growth rate in the market shares. As there is a good profit, it is a hope that this sector may move to the position of ‘Stars’ or ‘Question marks’ in the near future.

    SWOT analysis of ITC Ltd:

            With the help of SWOT analysis, it will be clear to explain their overall position in the market by analyzing their strength, weakness, opportunities and threats to the organization.

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    (Ganesh Naik, 2009)

            The SWOT analysis can be broadly classified into major two sections which are the internal analysis and the external analysis.

    Internal analysis:

            Internal analysis of ITC Ltd is the strength and weakness of the organization. The strength of the organization is nothing but its brand and the powerful management. ITC Ltd brands are very popular in India. Their beauty products such as ‘Fiama Di Wills’ and ‘Vivel’ are more popular in the market. And the ITC Welcomgroup hotels have a powerful position in the market as well. This is the positive side for the ITC Ltd.

            On the other hand, the weakness of the organization is their unrelated diversification. They have major hotel sectors and as well as Agri sectors and so on. As there is no connection between the different sectors, there may arise a problem in the future of handling the business in the smooth way as the fortune of the market is always unpredictable. This is the negative side for the ITC Ltd.

    External analysis:

            The external analysis of ITC Ltd is the opportunity and threats for the organization. The opportunities for the organizations such as rural market and E-choupal are a big boon to the organization. Investing in the rural areas helps the development of rural markets and the Government lays a very less tax on the rural markets which helps the ITC to save their save their expenses on tax. This one of the biggest advantage and the positive side for the organization.

            Another external factor is the Threats to the ITC Ltd is that the increasing level of tax in Cigarettes which lead to loss the huge amount of cash on tax. The other threat is that the health hazard which the public is very well aware off. So the ITC Cigarettes industry which is doing very well in the present market may face some serious problems in the future market.

    Conclusion:

            It is a clear fact that so far ITC Ltd holds a good reputation in the market and a well slandered position. Even though there is an un-related diversification of ITC, the powerful and the good management help the smooth flow of business which is a successful key factor to survive in the market. Though ITC Ltd has some weak industrial sector, it keeps an overall slandered position in the market even in the recession period where lots of organizations are thrown out of the market. With the level of present status, there is a bright fortune for ITC Ltd after this dark recession which is very near and crystal clear.

    Bibliography:

    • BCG matrix for ITC. (n.d.). Documents for small business and professionals. Retrieved March 23, 2010, from .docstoc: http://www.docstoc.com/docs/12162696/BCG-Matrix-for-ITC
    • Centre, I. T. (2008, January). Retrieved March 21, 2010, from International Trade Centre UNCTAD/WTO: http://www.intracen.org/Docman/MRKM11124.pdf?mn=1
    • Centre, I. T. (2008, December 11). Retrieved March 22, 2010, from ITC Strategic plan: http://www.intracen.org/docman/JAG_12871.pdf
    • Ganesh Naik, N. K. (2009). slideshare. Retrieved March 24, 2010, from Strategic management of ITC Limited: http://www.slideshare.net/ranjanvarma/strategic-management-in-itc-ltd
    • ITC. (2005). Retrieved March 21, 2010, from ITC: http://www.investmentmap.org/invmap/en/index.aspx?prg=1
    • ITC. (2009). Retrieved March 23, 2010, from ITC Limited: http://www.itcportal.com/itc-annual-reports-2009/pdfs/Balance-sheet.pdf
    • ITC LIMITED. (2009, MARCH 31). ITC LIMITED. Retrieved MARCH 17, 2010, from http://www.itcportal.com/itc-annual-reports-2009/pdfs/Shareholder-Information.pdf
    • Limited, I. (2008). Retrieved March 18, 2010, from International Trade Cenre: http://www.intracen.org/Corporate/En/Mission.htm
    • Limited, I. (2009). Retrieved March 18, 2010, from ITC Limited: http://www.itcportal.com/itc-annual-reports-2009/content.htm
    • Limited, I. (2009). Retrieved March 20, 2010, from ITC Limited: http://www.itcportal.com/itc-annual-reports-2009/page-29.htm
    • Limited, I. (2009). Retrieved March 23, 2010, from ITC Limited: http://www.itcportal.com/itc-annual-reports-2009/page-14.htm
    • Limited, I. (2009). Retrieved March 23, 2010, from ITC Limited: http://www.itcportal.com/itc-annual-reports-2009/page-14.htm
    • Limited, I. (2009). Retrieved March 23, 2010, from ITC Limited: http://www.itcportal.com/itc-annual-reports-2009/pdfs/Financials-Ten-Years.pdf
    • Wickham, P. A. (2000). Financial Times Corporate Strategy Casebook. Harlow: Pearson Education Limited.
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