bcg application on itc

8/9/2019 BCG Application on ITC

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Boston Consulting Growth Matrix [BCG]

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix,

Boston Consulting Group analysis) is a chart that had been created by Bruce

Henderson for the Boston Consulting Group in 1970 to help corporations with

analyzing their business units or product lines. This helps the company allocate

resources and is used as an analytical tool in brand marketing, product

management, strategic management, and portfolio analysis.

The Boston Matrix categorizes opportunities into four groups, shown on axes of

Market Growth and Market Share:


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Dogs

These are more charitably called pets, are units with low market share in a

mature, slow-growing industry. These units typically "break even", generating

barely enough cash to maintain the business's market share. Though owning abreak-even unit provides the social benefit of providing jobs and possible

synergies that assist other business units, from an accounting point of view such a

unit is worthless, not generating cash for the company.

Cash Cows

They are units with high market share in a slow-growing industry. These units

typically generate cash in excess of the amount of cash needed to maintain thebusiness. They are regarded as staid and boring, in a "mature" market, and every

corporation would be thrilled to own as many as possible. They are to be "milked"

continuously with as little investment as possible, since such investment would be

wasted in an industry with low growth.

Stars

They are units with a high market share in a fast-growing industry. The hope is

that stars become the next cash cows. Sustaining the business unit's market

leadership may require extra cash, but this is worthwhile if that's what it takes for

the unit to remain a leader. They have a high point shares and are the ideal

businesses.

Question Marks (Problem Child)

Businesses with low point share but which may have a high growth rate. Thissuggests that they have potential but may require huge ever, a competing force

extraordinary effort in order to grow point share.


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As the BCG stated in 1970:

Onlya diversified companywith a balanced portfolio can use its strengths to truly

capitalize on its growth opportunities. The balanced portfolio has:

y stars whose high share and high growth assure the future;y cash cows that supplyfunds for that future growth; andy Question marks to be converted into stars with the added funds.

Relative Market Share:

This indicates likely cash generation, because the higher the share the more cash

will be generated. As a result of 'economies of scale' (a basic assumption of the

BCG Matrix), it is assumed that these earnings will grow faster the higher the

share. The exact measure is the brand's share relative to its largest competitor.

Thus, if the largest competitor had a share of 60 percent, the ratio would be 1:3,

implying that the organization's brand was in a relatively weak position.

Market Growth Rate:

Rapidly growing brands, in rapidly growing markets, are what organizations strive

for; but, as we have seen, the penalty is that they are usually net cash users - theyrequire investment. The reason for this is often because the growth is being

'bought' by the high investment, in the reasonable expectation that a high market

share will eventually turn into a sound investment in future profits. The theory

behind the matrix assumes, therefore, that a higher growth rate is indicative of

accompanying demands on investment. The cut-off point is usually chosen as 10

per cent per annum. Determining this cut-off point, the rate above which the

growth is deemed to be significant (and likely to lead to extra demands on cash) is

a critical requirement of the technique; and one that, again, makes the use of theBCG Matrix problematical in some product areas. What is more, the evidence,

from FMCG markets at least, is that the most typical pattern is of very low growth,

less than 1 per cent per annum. This is outside the range normally considered in

BCG Matrix work, which may make application of this form of analysis unworkable

in many markets.


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ITC LIMITED

ITC Limited which previously stood for Imperial Tobacco Company of India

Limited, is one of India`s foremost private sector companies with a marketcapitalisation of more than US $ 15 billion and a turover of US $ 4.75 billion. Rated

among the World's Best Big Companies by Forbes magazine, ITC ranks third in

pre-tax profit among India's private sector corporations.

The company is headed by Yogesh Chander Deveshwar. It employs over 20,000

people at more than 60 locations across India and is listed on Forbes 2000.

ITC was incorporated on August 24, 1910 under the name of 'ImperialTobacco Company ofIndia Limited'.

ITC's Packaging & Printing Business Division was set up in 1925. In 1975 the Company launched its Hotels business with the acquisition of a

hotel in Chennai.

In 1979, ITC entered the Paperboardsbusiness. In 1990, ITC acquired Tribeni Tissues Limited. In 2000, ITC's Packaging & Printing business launched a line of high quality

greeting cards under the brand name'Expressions'.

ITC also entered the Lifestyle Retailing business with the Wills Sport rangeof international quality relaxed wear for men and women in 2000.

In 2000, ITC spun off its information technology business into a whollyowned subsidiary, ITC Infotech India Limited.

From 2002 onwards, ITC have also ventured in the market of safetymatches, agarbattis and fragrances.

ITC Business Portfolio

Cigarettes, other FMCG Hotels Agri Business- Leaf Tobacco, Agri Commodities Paperboard, paper and packaging Infotech


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Rural Initiatives

ITC's Agri-Business is India's second largest exporter of agricultural products. ITC is

one of the India's biggest foreign exchange earners (US $ 2 billion in the last

decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture

significantly enhance its competitiveness by empowering Indian farmers through

the power of the Internet. This transformational strategy, which has already

become the subject matter of a case study at Harvard Business School, is

expected to progressively create for ITC a huge rural distribution infrastructure,

significantly enhancing the Company's marketing reach.

Corporate philanthropy

ITC Echoupal creatively leverages information technology to set up a meta-market

in favor of India's small and poor farmers, who would otherwise continue to

operate and transact in 'un-evolved' markets.

As of July 2007, ITC Echoupal services, through 6400 Echoupal across 8 states,

reach more than 4 million farmers in about 40,000 villages. ITC intends scaling up

the initiative with 20,000 choupals and 700 saagars to reach 10 million farmers in

100,000 villages by 2010.Free access to Internet is also opening windows of rural India to the world at

large. ITC eChoupal is now being regarded as a reliable delivery mechanism for

resource development initiatives. Its potential is being tested through pilot

projects in healthcare, educational services, water management and cattle health

management with the help of several service providers including non-

governmental organizations.


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BCG MATRIX FOR ITC LIMITED

Stars

Hotels Paperboards/ Packaging Agri business

?

FMCG- foods, lifestyleRetailing, Personal care,

Education and stationery

ITC InfotechCows

FMCG-Cigarettes Dogs FMCG- Safety Matches,Agarbattis

Market share

High Low

G

rowthRate

Low

High


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1. CASH COW - ITC`s cigarette business Market leadership Powerful brands across segments Leadership in all segments - geographic & price Extensive FMCG distribution network

o Direct servicing of 1,00,000 markets & 2 million retail outlets World-class state-of-the-art technology and products

o Investment - Rs.10 billion in six years Exciting long term growth potential Growth Potential:

o Cigarettes account for only 15% of tobacco consumed in India unlikeworld pattern of 85% due to prolonged punitive taxation

o Cigarettes (15% of tobacco consumption) contribute nearly 85% ofRevenue to the Exchequer from tobacco sector

o Of the 58% of adult Indian males who consume tobacco, barely 15%can afford cigarettes

Biri : Cigarettes ratio = 10 : 1 Annual per capita adult cigarette consumption in India is appx. one tenth

world average : 141 Future growth depends on relative rates of growth of per capita income

and moderation in taxes


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2. STARS- ITC`s Paperboard Industries Market leader in growth segment - value added coated boards World-class contemporary technology

o Elemental Chlorine Free (ECF) Pulp Mill fully operational only one ofits kind in India meeting world-class environmental standards

Internationally competitive quality and cost Social farm forestry in mill command area to improve access to cost

effective fibre & to attain self-sufficiency

o Biotech research based high yielding Clones effectiveness tested innearly 68,000 hectares

Fully integrated operations with in-house pulping capacity at appx. 1.10 lacMT

o Expansion programme underway; source of sustainable competitiveadvantage

- ITC`s Agri commodity Business Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products,

Coffee etc.

Unique CRM programme in commodity exports Leveraging IT for the transformational e-Choupal initiative

o Rural Indias largest Internet-based interventiono Over 38000 villages linked through around 6400 e-Choupals

servicing over 3.5 million farmers

Distinctive sourcing capability for ITCs Foods business


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- ITC`s Hotel BusinessITC-Welcomgroup: A leading hotel chain in India

Strategy to establish presence in key business locations to complete thechain achieved in end 2004

Over 5200 rooms under 4 distinct brandsCATEGORY BRAND POSITIONING

Luxury ITC Hotel: Luxury

Collection

Mansions of Luxury

Upper Scale Welcome Hotel: Sheraton Passion for Quality

Upper- mid- scale Fortune Hotels Promise of True Value

Heritage Welcome Heritage Unique Experiences

Capacity expansion underway at Bangalore and Chennai; plans for otherlocations also being progressed

Fastest growing hotel chain with highest operating efficiency (PBDIT/NetIncome @ 45%) amongst the 3 leading chains

Leverages unique service proposition and international alliance withStarwood Hotels & Resorts

o Luxury Collection / Sheraton


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3.Question Mark- ?- Wills Lifestyle ITC's Lifestyle Retailing Business Division has established a nationwide

retailing presence through its Wills Lifestyle chain of exclusive specialty

stores, which offers:

y Wills Classic work weary Wills Sport relaxed weary Wills Clublife evening weary Wills Signature designer wear

It believes in the philosophy of Enjoying the Change' - the change thatcomes through actively exploring one's own multifacetedness and

stretching one's limits.

Wills Lifestyle provides a truly 'International Shopping Experience' throughworld-class ambience, customer facilitation and clearly differentiated

product presentation.

Plans to increase its footprints by doubling the number the stores and triplethe floor area and thus open larger stores.

- Education and stationery ITC's Greeting & Gifting products include Expressions range of greeting

cards and gifting products.

The gifting portfolio includes autograph books, slam books, partyinvitations, letter pads, gift-wraps, pop up books & mini books.

The business also markets Expressions Regalia, a connoisseur's collection ofgreeting cards.

ITC has a tie-up with the NGO SOS Children's Villages of India. This rangecomprises social cause cards and desk calendars.


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ITC's stationery brands Paper Kraft & Classmate are the most widelydistributed brands across India.

ITC has invested in building a digital library of world class images at itsbusiness headquarters at Chennai.

The business also exports greeting cards to the U.S., Europe, UAE.- Foods ITC made its entry into the branded & packaged Foods business in August

2001 with the launch of the Kitchens of India brand.

A more broad-based entry has been made since June 2002 with brandlaunches in the Confectionery, Staples and Snack Foods segments.

The packaged foods business is an ideal avenue to leverage ITC's provenstrengths in the areas of hospitality and branded cuisine, contemporary

packaging and sourcing of agricultural commodities.

The unwavering commitment to internationally benchmarked qualitystandards enabled ITC to rapidly gain market standing in all its 6 brands:

Kitchens of India Aashirvaad Sunfeast mint-o Candyman Bingo!

- ITC Infotech A service delivery footprint spanning over 140 countries ITC Infotech conforms to the highest standards in international process

quality, with ISO 27001, ISO 9001, SEI CMM Level 5 and BS 7799

accreditations. Featured amongst Top 100 Global Outsourcing Companies

in the Leaders category


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TC Infotech offers IT services and solutions across five key industryverticals: Banking, Financial Services & Insurance (BFSI), Consumer

Packaged Goods (CPG) & Retail, Manufacturing & Engineering Services,

Travel, Hospitality & Transportation and Media & Entertainment.

bcg application on itc

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