Varun Business Policy Report

BUSINESS POLICY REPORT By, VARUN KUMAR REDDY.E HRM ,FW 08/10 IIPM, BANGALORE [email protected] Phone: +91 9742834459

Report on: Study of BCG Matrix on ITC Company

A Project report submitted in partial fulfillment of the requirements for the course curriculum of the subject Business Policy (60Marks)

ITC profile

Imperial Tobacco Company of India Limited (ITC) ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India Limited'. the Company was changed to I.T.C. Limited in 1974. (In recognition of the Company's multi-business portfolio encompassing a wide range of businesses Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle Retailing and Greeting Gifting & Stationery - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'.)

ITC is one of India's foremost private sector companies with a market capitalization of nearly US $ 18 billion and a turnover of over US $ 4.75 billion. ITC is rated among the World's Best Big Companies. ITC also ranks among India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. ITC is an 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 Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 2.8 billion in the last decade). This transformational strategy is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach. ITC's wholly owned Information Technology subsidiary, ITC Infotech India Limited, is aggressively pursuing emerging opportunities in providing end-to-end IT solutions, including e-enabled services and business process outsourcing.

ITC employs over 21,000 people at more than 60 locations across India. The Company continuously endeavors to enhance its wealth generating capabilities in a globalizing environment to consistently reward more than 3, 73,000 shareholders.

CORE PRINCIPLES ITC's Corporate Governance initiative is based on two core principles. These are: (i) Management must have the executive freedom to drive the enterprise forward without undue restraints; and (ii) This freedom of management should be exercised within a framework of effective accountability. ITC believes that any meaningful policy on Corporate Governance must provide empowerment to the executive management of the Company, and simultaneously create a mechanism of checks and balances which ensures that the decision making powers vested in the executive management is not only not misused, but is used with care and responsibility to meet stakeholder aspirations and societal expectations. Cornerstones From the above definition and core principles of Corporate Governance emerge the cornerstones of ITC's governance philosophy, namely trusteeship, transparency, empowerment and accountability, control and ethical corporate citizenship. ITC believes that the practice of each of these leads to the creation of the right corporate culture in which the company is managed in a manner that fulfíls the purpose of Corporate Governance. Trusteeship ITC believes that large corporations like itself have both a social and economic purpose. They represent a coalition of interests, namely those of the shareholders, other providers of capital, business associates and employees. This belief therefore casts a responsibility of trusteeship on the Company's Board of Directors. They are to act as trustees to protect and enhance shareholder value, as well as to ensure that the Company fulfils its obligations and responsibilities to its other stakeholders.

Inherent in the concept of trusteeship is the responsibility to ensure equity, namely, that the rights of all shareholders, large or small, are protected. Transparency ITC believes that transparency means explaining Company's policies and actions to those to whom it has responsibilities. Therefore transparency must lead to maximum appropriate disclosures without jeopardising the Company's strategic interests. Internally, transparency means openness in Company's relationship with its employees, as well as the conduct of its business in a manner that will bear scrutiny. We believe transparency enhances accountability. Empowerment and Accountability Empowerment is an essential concomitant of ITC's first core principle of governance that management must have the freedom to drive the enterprise forward. ITC believes that empowerment is a process of actualising the potential of its employees. Empowerment unleashes creativity and innovation throughout the organisation by truly vesting decision-making powers at the most appropriate levels in the organisational hierarchy. ITC believes that the Board of Directors are accountable to the shareholders, and the management is accountable to the Board of Directors. We believe that empowerment, combined with accountability, provides an impetus to performance and improves effectiveness, thereby enhancing shareholder value. Control ITC believes that control is a necessary concomitant of its second core principle of governance that the freedom of management should be exercised within a framework of appropriate checks and balances. Control should prevent misuse of power, facilitate timely management response to change, and ensure that business risks are pre-emptively and effectively managed. Ethical Corporate Citizenship ITC believes that corporations like itself have a responsibility to set exemplary standards of ethical behaviour, both internally within the organisation, as well as in their external relationships. We believe that unethical behaviour corrupts organisational culture and undermines stakeholder value. The governance structure Flowing from the philosophy and core principles, Corporate Governance in ITC shall take place at three interlinked levels, namely Strategic supervision by the Board of Directors Strategic management by the Corporate Management Committee

Executive management by the Divisional Chief Executive assisted by the Divisional Management Committee

The composition of these Committees will be as follows :-

Committee

Members

Chairman

Audit Directors of the Company, as One of the Committee may be decided by the Board, Independent with not less than 3 members, Directors, to be all being Non-Executive determined by Directors with majority of them the Board. being independent; and with at least one Director having financial and accounting knowledge. The Director accountable to the Board for the Finance function, Head of Internal Audit and representative of External Auditors shall be the Permanent Invitees with the Company Secretary to act as the Secretary. Compensa Non-Executive Directors, as tion may be decided by the Board, Committee with the Director accountable to the Board for the HR Function as the Secretary.

One of the Independent Directors, to be determined by the Board.

Nominatio The Executive Chairman and ns all the Non-Executive Committee Directors.

Executive Chairman.

Investor Directors of the Company, as Services may be decided by the Board, Committee with the Company Secretary as the Secretary.

One of the nonExecutive Directors, to be determined by the Board.

Board committe Audit Committee P B Ramanujam

Chairman

S B Mathur

Member

B Vijayaraghavan

Member

K Vaidyanath

Permanent Invitee (Director in charge of Finance)

S Basu

Permanent Invitee (Head of Internal Audit)

B B Chatterjee

Secretary

Compensation Committee B Sen

Chairman

J P Daly

Member

S B Mathur

Member

Ram S Tarneja

Member

Investor Services Committee B Sen

Chairman

P B Ramanujam

Member

A Singh

Member

B B Chatterjee

Secretary

Nominations Committee Y C Deveshwar

Chairman

J P Daly

Member

S H Khan

Member

S B Mathur

Member

D K Mehrotra

Member

P B Ramanujam

Member

B Sen

Member

Ram S Tarneja

Member

B Vijayaraghavan

Member

Core values Trusteeship As professional managers, we are conscious that ITC has been given to us in "trust" by all our stakeholders. We will actualise stakeholder value and interest on a long term sustainable basis. Customer Focus

We are always customer focused and will deliver what the customer needs in terms of value, quality and satisfaction. Respect For People We are result oriented, setting high performance standards for ourselves as individuals and teams. We will simultaneously respect and value people and uphold humanness and human dignity. We acknowledge that every individual brings different perspectives and capabilities to the team and that a strong team is founded on a variety of perspectives. We want individuals to dream, value differences, create and experiment in pursuit of opportunities and achieve leadership through teamwork. Excellence We do what is right, do it well and win. We will strive for excellence in whatever we do. Innovation We will constantly pursue newer and better processes, products, services and management practices. Nation Orientation We are aware of our responsibility to generate economic value for the Nation. In pursuit of our goals, we will make no compromise in complying with applicable laws and regulations at all levels

Awards 2007

SAM/SPG Sustainability Leadership Award conferred at the International Sustainability Leadership Symposium, Zurich.

2006

Business Person of the Year from UK Trade & Investment, the UK Government organisation that supports overseas businesses in that country.

2006

Inducted into the `Hall of Pride' by the 93rd Indian Science Congress

2005

Honoured with the Teacher's Lifetime Achievement Award

2001

Manager Entrepreneur of the Year from Ernst & Young Retail Visionary of the Year from Images, India's only fashion and retail trade magazine

1998

Honorary Fellowship from the All India Management

Association 1996

Distinguished Alumni Award from IIT, Delhi

1994

Marketing Man of the Year from A&M, the leading marketing magazine

1986

Meridien Hotelier of the Year

Sunfeast :: Snack foods Sunfeast In 2003, ITC forayed into the Biscuits market with the Sunfeast range of Glucose, Marie and Cream Biscuits. Sunfeast’s brand essence, "Spread the Smile" connotes happiness, contentment, satisfaction and pleasure. The mascot Sunny reinforces the emotional aspects of the brand.

Sunfeast immediately established itself as a provider of innovative and distinctive products - Sunfeast Marie was launched in an innovative orange flavor and the 'Sunfeast Dream Cream' range includes new flavors as well as flavor enhancers. The Sunfeast Dream Cream range is currently available in 8 variants. The Company has also introduced 'Sunfeast Dark Fantasy', a dark chocolate and vanilla cream offering for the premium segment in select markets. Riding on the success of its initial offerings, ITC also entered the milk biscuit category with Sunfeast Milky Magic biscuits in the general milk and milk cream categories. Apart from milk which helps mental growth, these biscuits also contain the finest quality wheat aiding physical growth. Both cream and milk biscuits have received enthusiastic response from consumers. In the last few years the Sunfeast biscuits portfolio has been enhanced to include salted crackers and cookies. The 'Sunfeast Snacky' salted crackers are available in 2 unique variants viz., Chilli Flakes and Classic Salted. Sunfeast's cookie offering, 'Sunfeast Special' biscuits are also available in select markets. The Sunfeast Special range currently includes cookies in three variants – Butter, Cashew and crunchy Coconut, as well as cream biscuits in two variants – Choco and Orange. The recently launched Sunfeast Golden Bakery offers the freshly baked taste of cookies in 3 variants Choco-nut, Butter-nut and Butter scotch. The brand has also launched Sunfeast Nice, a tasty and delightful offering of crispy, sugar sprinkled biscuits. The Sunfeast product portfolio has been further expanded to include healthy snacking options as well. 'Sunfeast Pasta Treat', a whole wheat based instant pasta was introduced as a healthy snacking option for children. After the tremendous success of the 4 initial flavours the instant Pasta range has been extended with two new exciting flavours – Pizza and Chicken. The pasta segment was further expanded with the launch of 'Sunfeast Benne Vita' in 4 innovative variants. This range has been enhanced recently with the launch of Sunfeast

Benne Vita Flax Seed biscuits that reflect the brand essence of Benne Vita, which in Italian stands for ‘Good Life’. The flax seed content in these protein and mineral enriched biscuits is a rich vegetarian source of Omega III acids. With continued focus on health and nutrition, Sunfeast extended the biscuits portfolio to the nutritional segment with the launch Sunfeast Sachin's Fit Kit – a range of healthy products co-created with Sachin Tendulkar. It is for the first time in India that an icon of the stature of Sachin Tendulkar has been actively involved in the product development process as co-creator of the Sunfeast Sachin's Fit Kit range. It is the shared vision of Sunfeast as well as Sachin Tendulkar that products under the Sachin's Fit Kit range will enable create "Champions of Tomorrow". The launch range comprises two offerings - Sunfeast Sachin's Vitamin and Protein enriched biscuits and Sunfeast Sachin's Multigrain biscuits.

Business Mix of ITC Ltd. FMCG • • • • • •

Cigarettes Foods Lifestyle Retailing Greeting, Gifting & Stationery Safety Matches Agarbattis

Paperboards & Packaging • Paperboards & Specialty Papers • Packaging Agri – Business • Agri-Exports • e-Choupal • Leaf Tobacco Hotels Group Companies • ITC Infotech; etc.

BCG Matrix for ITC Ltd.

Cows • Cigarettes

Dogs • •

Investment Golfresorts

OTHERS • Agarbattis • Safety Matches

Stars Hotels Paperboards/Packaging. Agri business

Market share of ITC Ltd. Outstanding market leader Cigarettes, Hotels, Paperboards,Packaging and Agri-Exports. Gaining market share Nascent businesses of PackagedFoods & Confectionery, Branded Apparel and Greeting Cards.

Segment Dominance

Contribution % Revenue PBIT

Cigarettes

70% share

Paper & Packg. Agri business Hotels

Packaging board – 1 in Asia 1of the largest xporters from India ITC Group ranks No.2

FMCG (Others)

20% share of greeting cards market, 'Aashirvaad' atta is No.1 in branded segment

77.0%

87.7% 1

7.3%

0.7%

7.0%

3.7%

4.3%

5.4% 4.4%

Limitations Assumes market growth rate. A firm may grow the market.

-7.5%

A “Dog” may be helping other products. High market share/Growth is not the only success factor. Linkage between market share and profitability is questionable.

Conclusion: ? - To be handled with care. Strategic forays into emerging high growth markets. E-Choupal is a transformational strategy. Strong brand building capability will be tested. Corporate strategy of creating multiple drivers of growth anchored on its core competencies and distribution reach. Embracing difficult and challenging corporate strategy. (Ex: Paperboards). EHS philosophy: Contribution to the triple bottom line- Economic, Environment and social capital.

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