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Core Competencies: Rural Market Expertise Strong Distribution

ITC has five core competencies that drive its business strategy: a strong distribution network, deep farmer linkages, brand building capabilities, rural market expertise, and managing a portfolio of diverse businesses. ITC has diversified its business from a single tobacco product into five industries including cigarettes, FMCG, hotels, agriculture, and paperboard. It pursues a corporate strategy of developing multiple growth drivers by matching organizational strengths with domestic and export market opportunities. Revenue growth comes from both the cash generated by its market-leading cigarettes business and expansion into new business segments through reinvestment.

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67 views4 pages

Core Competencies: Rural Market Expertise Strong Distribution

ITC has five core competencies that drive its business strategy: a strong distribution network, deep farmer linkages, brand building capabilities, rural market expertise, and managing a portfolio of diverse businesses. ITC has diversified its business from a single tobacco product into five industries including cigarettes, FMCG, hotels, agriculture, and paperboard. It pursues a corporate strategy of developing multiple growth drivers by matching organizational strengths with domestic and export market opportunities. Revenue growth comes from both the cash generated by its market-leading cigarettes business and expansion into new business segments through reinvestment.

Uploaded by

sauvik ghosh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Core Competencies

The core competencies of ITC are

Rural
Market
Expertise

Strong
Distribution

Managing
"Portfolio of
Businesses"
Deep
Farmer
Linkage
Brand
Building
Capability

 Strong Distribution Network – ITC has unmatched distribution infrastructure with


warehousing capacity of over 6.5 mn sq. feet.
 Deep Farmer Linkage – The e-Choupal initiative empowers farmers with the help of
internet, it helps in easy procurement with a cost-effective way.
 Brand Building Capacity – ITC has some well-known brands like, Aashirvaad, ITC
Hotels, Classmate, Sunfeast etc.
 Rural Market Expertise – ITC has expertise in rural market as its main product i.e.
cigarettes, has a strong and deep distribution channel which is spread in villages and
small towns.
 Managing “Portfolio of Businesses” – ITC has diversified into five main businesses
including its core business of Cigarettes and Tabaco. It has ventured into Hotels,
FMCG, Paperboard and Agri-Business.
Corporate Strategy
The corporate strategy of ITC is to create multiple drivers of growth by developing a
portfolio of world class businesses that best matches organisational capability with
opportunities in domestic and export markets. ITC started with single product category or
business segment of Tabaco and cigarettes. It now operates in five different industries,
namely, Cigarettes, FMCG, Hotels, Agri Business and Paperboard.
From being a one-product category, ITC's portfolio now spans 20 categories with over 1,500
stock keeping units (SKUs). Today, a network of 100 factories churn out ITC's products,
compared to just six units set up in the first 50 odd years.
Getting into paperboards was a vertical backward integration for its printing and packaging
business which by then had already developed a sophisticated technology and skills platform.

Revenue Growth and Diversification Strategy


ITC which started its business with tobacco industry and stayed purely in that segment for six
full decades. Later it started diversifying into different segments of businesses like FMCG,
Paperboard and Packaging, Hotels and Agri business.
The Company holds a good competency in diversifying into different segments and
successfully adapting to new businesses. Regardless of such successful diversification and
rising market share in each segment the company continue to derive its maximum profit from
the Tobacco and Cigarettes Segment.
The cigarettes Segment has become a Cash Cow of the BCG growth matrix. A cash cow is
when a segment is generating good amount of cash and is the market leader where the market
growth has become stagnant. Therefore, the segment is a cash cow which is generating ample
amount of money without any much further investments needed. The money generated from
such segments is utilized by company to expand and diversify into new segments.
The tobacco industry lacks any further innovation in terms of product differentiation,
advertisement and packaging. The Customer segment is largely attracted by good distribution
channels and profit margins are dependent on the Tax and other government regulations. The
company is moving forward in expanding more towards FMCG segment.
In building up new products ITC follows bottom up strategy where they believe in building
their own brands rather than acquiring. The company prices its products very aggressively as
the peer competition in FMCG segment is very tight. The work heavily on building
promotional campaigns, running advertisements and building up a strong dealer network
given they are comparatively late entrant in the segment.
The major trouble that the company is facing is how to use the excess amount of cash they
are generating and this is also the major reason of their investments in different business
lines. They already payout 85% of their profits and has a balance of INR 25000 Cr just sitting
on their balance sheet. The further growth is directly correlated with how wisely they invest
and diversify.

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