This article is a SWOT analysis of this organisation in its 100th year of operation.

Strengths:

The organisation has some major strengths that give it a competitive advantage over its rivals.

1. Strong Financial Performance:

On 31st march, 2010, ITC’s market cap was Rs. 114000 crores with a Gross income of Rs. 26,863 crores and Profit after tax of Rs. 4061 crores. The company continues its impressive record of financial performance.

2. Products Portfolio:

ITC’s portfolio of products and services is represented by over 50 energetic Brands in a range of more than 650 stock keeping units (SKUs).

3. Distribution Network:

ITC’S products are available in over 6 million retail outlets in the country. Its formidable Distribution organisation directly services more than 2 million of these retail outlets. It used its experience of transporting and distributing tobacco products to remote and distant parts of India to the advantage of its FMCG products.

4. Environmental Friendly:

ITC has a status of being ‘Water Positive’ for the 8th consecutive year, ‘Carbon Positive’ for the 5th year in succession and ‘solid waste recycling positive’ for 3 years in a row. ITC is the only enterprise in the world of its size to have achieved and sustained these three global environmental distinctions. As consumers and investors become more environment friendly, these considerations will provide the organisation an opportunity to create USPs and stronger brand loyalty and brand equity.

5. Research & Development:

ITC recognises that cutting edge R&D can foster breakthrough innovation and create powerful sources of sustainable competitive advantage. This vision has led to the establishment of a state of the art R&D centre at Bengaluru with over 50 world- class scientists. Its R&D program will create new game changing business opportunities.

6. Socially Responsibility:

ITC’s initiatives to build social capital through extensive community engagement have led to the creation of sustainable livelihood opportunities for over 5 million people. ITC has helped create more than 20,000 rural women entrepreneurs. ITC’s supplementary education initiative has reached out to over 200000 schoolchildren in rural areas. ITC’s value chain supports over 5 million livelihoods.

7. Brand Equity:

ITC is one of the best known brands in India.

The above factors definitely make the company a strong corporate organisation.

Weaknesses:

In spite of several strengths, there remain some areas of weakness and concern for the organisation.

1. Dependency on the tobacco business:

To fund its cash guzzling FMCG start-up, the company is still dependent upon its tobacco revenue. Cigarettes account for 47% of the company’s turnover and for 80% of its profits. So there is an argument that ITC’s move into FMCG is being subsidised by its tobacco operations.

2. Not present in many important sectors:

Although ITC is a diversified company trading in a number of business sectors such as cigarettes, hotels, paper, agriculture, packaged foods and confectionary, branded apparel, personal care and other FMCG products, greeting cards, Information Technology, safety matches, incense sticks and stationery etc. Yet, it does not have presence in many important sectors such as insurance, infrastructure, banking and financial services, BPO, telecom, automotive etc. and thus becomes comparatively weak when compared with other conglomerates like the Bharti group, the Tata group and the Ambani groups.

3. Local Company:

ITC is a local company. It does not have a large portfolio of exports in either products or services. This makes the company comparatively weak in terms of being able to leverage global opportunities, talent & financing.

The above represent some of the major weaknesses the company has.

Opportunities

What does the future have as areas of opportunities for the company?

1. Leveraging its brand equity

ITC’s products & services are of high quality. If ITC enter into any business or launch any product, consumer know its ITC’s product, consumers shall trust these to be of good quality. ITC’s brand equity would make ITC successful in most sectors.

2. Right size at the right time:

A corporate must have the right organisational and investment capability and this must coincide with a growth stage in the economy in which it operates. This seems to be a perfect setting for ITC. Given the consumption of most products and services in India at a level far below the global standards and that the Indian economy is on a roll make it a perfect platform for a company like ITC which already is at a fairly strong stage in its own growth with the necessary organisational and financial muscle. For example, the FMCG sector is expected to triple in size to over Rs. 355000 crores by 2018. ITC is a major player in this sector. ITC has investment opportunity of up to Rs. 8000 crores over the next 7 to 10 years to drive growth in this sector.

For example, in Personal Care Products, Per capita consumption in India is among the lowest in the world offering an opportunity for ITC’s soaps, shampoos and fragrances. Similarly, India’s consumption of Paper, Paperboard & Packaging is one of the lowest in the world at around 5 kg. per year compared to nearly 300 Kgs in US, 200 Kgs in UK and 45 Kgs in China. With spread of education and economic growth, demand is expected to grow. ITC has an investment opportunity of up to Rs. 6000 crores for growth.

Further, ITC’s Hotels are at the vanguard of service excellence and are an embodiment of "Responsible Luxury". International arrivals in India are only 5 million a year, compared to around 80 million in France, 58 million in US and 55 million in China. At conservative estimates, India needs 50000 rooms in next 2 to 3 years. This sector too carries an investment opportunity for ITC of up to Rs.9000 crores in the next 7 to 10 years to fuel its growth.

ITC FMCG brands such as Aashirvaad, Mint-o, Bingo, Sun feast and others operate in such high growth segments that given ITCs strengths in market development, product development and marketing penetration, the company can script its own growth targets and achieve it.

3. Synergies across businesses and leveraging domain expertise for growth in other sectors:

ITC’s fast growing Information Technology subsidiary is founded on a strong base of domain knowledge derived from ITC’s multiple businesses. It will continue to add significant value to ITC’s business by providing solution and by enabling them to leverage Information Technology as a source of superior competitive advantage.
Similarly, ITC’s agri-business with its deep rural linkage is well poised as a supply chain partner to create value for ITC’s Food and Tobacco businesses. Its large presence in rural India, with the unique e-choupal infrastructure, will be progressively leveraged to widen ITC’s FMCG distribution network. ITC uses the network to source and create the raw material from the farmers.

4. The unique reach and distribution network of E-choupal:

E-choupal is a community of practice that links rural Indian farmers using the internet. It is also an ambitious project that has a goal of reaching 10 million farmers in 100000 villages. It has already benefited 4 million farmers in 40000 villages. This platform provides ITC an opportunity, virtually unmatchable, to ride the rural growth that India in witnessing for the current sets of products and services and additional ones that can be offered from the same network.

The above opportunities beckon the organisation as it gets into its second century of operations.

Threats

Are there any threats the company needs to be watchful about?

1. Competition:

The obvious threat is from competition, both domestic and international. The law of economies dictate that if competitors see that there is a solid profit to be made in an emerging economy, more and new products and services will be made available. Global companies will see India as an exciting opportunity for themselves to find new market segment for their own offerings. This will put ITC under constant and sustained competitive pressure from international offerings with deep pockets for a long battle.

2. Pressure groups and Government Policy:

Tobacco and allied product businesses, a major cash cow for ITC, will remain under public, anti-tobacco, health lobbies and governments through higher excise duties, advertising restrictions, and packaging guidelines, point of sale restrictions, cancer and TB campaigns with even a remote possibility of complete ban.

3. General threats:

Wide income disparities leading to social tensions, terror acts, political risks, legislation changes, tiffs with taxation and excise authorities and public outrage from negative impacts of products d services remain general treats for the company.
The above, though few, could be potent threats to the company.
In summary, ITC will need to overcome its weaknesses, leverage the opportunities through its multiple strengths and be wary of the threats to march into another 100 years of its glorious journey.