Case Study on ITC ltd

ITC was established on August 24, 1910 as the Imperial Tobacco Company of India Limited in Kolkata. Initially, the company was involved in the trading of imported cigarettes. In 1925, in a backward integration move, the company started a packaging and printing business. The name of the company was changed to India Tobacco Company Limited (I.T.C. Ltd.) in 1974. In 1975, I.T.C. Ltd., through ITC-Welcomgroup, tied up with the US-based Sheraton Corporation6 to enter the hospitality industry. It acquired its first hotel in Madras (later renamed Chennai) in Tamil Nadu and called it the Welcomgroup Chola Sheraton. I.T.C. Ltd established ITC Bhadrachalam Paperboards Ltd. (IBPL) in 1975. The company started production at its integrated pulp and paper/board manufacturing facility at Bhadrachalam, Andhra Pradesh, in 1979.

In 1990, I.T.C. Ltd. set up an International Business Division (IBD) for export of agri-commodities. I.T.C. started a greeting cards business under the brand name Expressions in the year 2000. In the same year, I.T.C. also entered the fashion retailing business by extending its well known cigarette brand Wills. The retail outlets were called Wills Lifestyle and offered premium leisure wear for men and women under the Wills Sport brand. In September 2001, the company was renamed ITC Ltd (without full stops, and with no meaning attributed to the alphabets). In 2001, ITC made an entry into the foods business, and entered the business of safety matches, where it could use the same distribution network as that of its cigarette brands, in 2002. In 2002, IBPL was amalgamated with ITC to form the Paperboards & Specialty Papers Division of ITC. This was done to "harness strategic and operational synergies." In 2002, the company launched another clothing brand, John Players, which targeted the urban youth.

In 2003, ITC started marketing incense sticks manufactured by small scale and cottage units. In 2004, ITC was one of eight Indian companies to make it to the "Forbes 'A' List"8 which featured 400 of "the world's best big companies". In March 2005, the board of directors of ITC approved the company's five-year business plan (2005-06 to 2009-10) which involved an investment of Rs. 140 billion. The plan included setting up of new plants and upgrading existing ones in its tobacco, foods, apparel, paperboards, packaging, and hotels businesses.

As of early 2006, ITC was one of India's most valued and respected private sector companies with a market capitalization of over US$ 7 billion (Refer Exhibit I for ITC's financials and Exhibit II for more details on ITC's businesses).

Entering the foods business was a strategic decision for ITC. While ITC's core business, tobacco, was under pressure owing to several factors like government bans on advertising cigarettes and on smoking in public places (from February 2001), hikes in the excise duty for cigarettes, and anti-tobacco campaigns, the liberalization of the Indian economy had thrown open several opportunities which the company was eager to exploit. Being a cash-rich company, ITC planned to deploy its surplus in the packaged food business where it saw huge business potential.

In 2001, ITC launched the KoI brand of ready-to-eat gourmet dishes under sub-brands - Bukhara, Dum Pukht, and Dakshin - popular cuisines from specialty restaurants of the same names at ITC Welcomgroup hotels.

With prices ranging from Rs.150 to Rs.200 for a 450g pack, they were positioned as premium products for the food connoisseur, with target groups including tourists, NRIs, etc. Ravi Naware (Naware), CEO, ITC Foods, said, "It's actually ready-to-eat gourmet cuisine from ITC's Bukhara, Dakshin and Dum Pukht restaurants

Questions:

-          What Marketing Strategies ITC must adopt in competing with Ready to Eat Snacks Player like Haldiram.

-          Explain the possible source of  synergy between a company’s various businesses.