The one thing that ITC's annual report desperately tries to hide is its dependance on the cigarette segment. It was a diversified conglomerate in the mid-nineties, too. This is dangerous since new products may not garner the same favor as the company’s other products. It began as a Tobacco Conglomerate, later on expanding to a variety of areas such as Luxury Hotels, Paperboards, Agri-Business and FMCG sectors.ITC is a blue-chip stock and for long been known as a safe investment that gives a high dividend. This was it’s first step towards diversification. The diversification bug bit ITC in the early 1970s. They created a separate company for the paperboard business namely ‘Bhadrachalam Paperboards Ltd.’ A growth strategy in which a company seeks to develop by adding totally unrelated products and markets to its existing business. Diversification - Conglomerate. The "Haksar Era" outlines the strong nationalist context in which BAT's stake in ITC was diluted, and the company's diversification into hotels and paperboards businesses. 4006.39 Cr of its total 4854.54 PBT comes from the segment. Examples: About ITC. Conglomerate Diversification. Analysts feel that ITC's ability to grab a sizable share of the markets it has entered and progressively make profits is doubtful, because it has diversified into areas where there is intense competition. New Delhi: The Narendra Modi government Wednesday announced a complete ban on e-cigarettes, citing the risk they posed to India’s youth. With its stated interest in the ‘areas of tomorrow’, the company’s focus is now on the frozen food industry. to their basic line of textiles. The company’s domestic sales of Tata commercial and passenger vehicles for June 2014 were 34,743 nos., 29% decline over 48,716 nos., sold in June last year. This is not the first time that ITC has diversified in a big way. It makes it a little difficult to evaluate and track for investors. The protagonist of the case is a conservative manager wanting to pursue strategies based on the merits of the company rather than following a role model. This is because ITC has diversified into products like noodles, atta, juice, biscuits, chips, books, hotels, etc. The environment for cigarettes couldn't be more challenging. Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Athenex and ITC into the same portfolio, which is an essential part of the fundamental portfolio management process. Apart from hotels, paper boards and IT services businesses, it also owned edible oil brand Sundrop and a personal finance company called ITC Classic Finance. Diversification. As the name suggests, it operationalizes the ITC Strategic Plan (2018-2021) by specifying concrete actions and milestones to meet the organization’s commitments to clients, partners, governments and funders.. “One of … These interventions are now bearing fruit and is evident in the company's highest ever quarterly revenue from the FMCG segment in the first half of 2020, despite challenging operating environment due to Covid-19. 1.3 Objective of the study. the company to be renamed as ITC Ltd.2005-09, by Boston Consulting Group. Conglomerate diversification occurs when there is no common thread of strategic fit or relationship between the new and old lines of business; the new and old businesses are unrelated. Companies adopt either related or unrelated or both the diversifications according to their capability and need of growth. Read More. The company’s over diversification could lead to shift in the focus from the core segments. Palepu’s work on the relevance of diversification to growth in emerging markets struck a chord with ITC’s big boss. To analyse the various strategies adopted by both the companies to … ITC company is engaged in cigarette manufacturing, FMCG food making, and also in the hotels and hospitality sector. IMPACT OF DIVERSIFICATION FROM DECLINIG INDUSTRIES: ITC GROUP 1 OBJECTIVES METHODOLOGY o Learn how a large scale https://therepresentative.co.in/itcs-diversification-gambit Instead, Deveshwar opted for more diversification - and how. ITC is the best example of conglomerate diversification. By doing so, it can enhance its value and seek diversification with minimum involvement in the day to day affairs and management of the company, and thus being … The first step towards Indianization was taken in the same year with 6% of the Indian shareholding of the company. To identify and compare the marketing strategies of Hindustan Unilever Limited and Nestle India. ITC was incorporated on August 24, 1910 under the nameImperial Tobacco Company of India Limited. ITC has planned to continue diversification into new areas with agri-business set to play a key role. ITC Ltd. or Indian Tobacco Company established as Imperial Tobacco Company was established in Calcutta in 1910. The backdrop was complex --- on the one hand was ITC's legacy of failed diversifications, on the other, BAT was upping the ante. ITC is one of India's foremost private sector companies with a market capitalisation of nearly US $ 35 billion and Gross Sales Value of US $ 10.8 billion with presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers, Agri & IT Businesses. In 1979 they diversified their business & started with the business of manufacturing paper boards. Conglomerate Diversification . This diversification however is not an attempt for a sudden escape from the cigarette industry but began way back in 1970. Also when company’s opportunities for growth in their field have been depleted they strategize for diversification into different business either by concentric (related) or conglomerate (unrelated) diversification. Change in ownership of the company – The Company was facing hurdles in its diversification of the business as its parent company BAT had 55% ownership in the company and thus halted the decision making by chairman and board. New Delhi: Over the years, ITC Ltd has transformed itself into an umbrella group that offers a diversified product mix. As a matter of fact, ITC aims to generate over ₹1 lakh crore in revenue by 2030, and it wants the bulk of the increase to come from its non-cigarette FMCG business. - On 24th August the Company was incorporated as a Private Limited Company under the name, Imperial Tobacco Co. of India Ltd. When a company includes itself in many different sectors. ITC first started diversifying from its core tobacco business in the early 1970s, with the diversification drive picking up steam in 2003 when the Indian behemoth conglomerate started with its slew of launches in the FMCG category. ITC's businesses and value chains create sustainable livelihoods for more than 6 million people. If i remember correctly, it was setup in 1910. "The Sapru Era" describes the consolidation of market leadership in cigarettes and the company's foray into agri-business. [5] Established in 1910 as the 'Imperial Tobacco Company of India Limited', the company was renamed as the 'India Tobacco Company Limited' in 1970 and later to 'I.T.C. Yet, some brokerages have upgraded the stock of tobacco major ITC on two grounds - excise duty rises can be easily passed on to consumers by the market leader; plus, this is expected to be a good year for the conglomerate's non-cigarette fast moving consumer goods (FMCG) business. Synergy may result through the application of management expertise or financial resources, but the primary purpose of conglomerate diversification is improved profitability of the … The company completed 100 years in 2010 and as of 2012-13, had an annual turnover of US$8.31 billion and a market capitalization of US$45 billion. Today ITC is an umbrella group that offers services and products in multiple industries. Several Indian companies have adopted this strategy. For nearly 6 decades it was manufacturing only cigarettes but ventured into hospitality in 1975 and formed the ITC Hotels. the new product forward to create a new Though risky, the company's business segment. The new drivers for growth were created - non-cigarette fast moving goods and information technology. That means we are left with one final alternative — the FMCG business. The company reported healthy Q4FY21 numbers with revenue growth of 23% YoY at Rs 13,295 crore compared to Rs 10,842 crore, a year ago. Several Indian companies have adopted this strategy. India’s one of the largest multi-business conglomerates completes a century of existence on Tuesday, August 24, 2010. 3. In conglomerate diversification strategies, companies will look to enter a previously untapped market. After an aborted attempt to greater foothold in the company, and ITC's failed diversification, the single-largest shareholder wanted the Indian company to stick to its core business. To point it, it is an Indian conglomerate companies which has operations in diverse business fields including five segments: Fast-Moving Consumer Goods (comprising Foods, Personal Care, Cigarettes and Cigars, Apparel, Education and Stationery Products, Incense Sticks and Safety Matches), Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology. The distribution highway now handles over 1,500 SKUs. Wills Lifestyle In 2000, ITC extended one of its most valuable cigarette brands, Wills, to fashion retailing. 2. Since ITC is a conglomerate, it has already diversified into various related and unrelated industries. After an aborted attempt at a bigger foothold in the company, and ITC's failed diversification, the single-largest shareholder wanted the Indian company to … ITC LIMITED Company Products Established Founder Distribution Production plants ITC Cigarettes,foods, 1910 British American India,Americas, India apparel,stationery, Tobacco Europe,Middle East, hotels,paper Asia Pacific,Africa Products and brands This is a part of the fast-moving consumer goods (FMCG) company's India First strategy, under which it aims to create 1 crore sustainable livelihoods by 2030. Conglomerate Diversification - ITC, Strategy formulation, 2013. Govt has banned vapes, but owns 28% of ITC – India’s biggest cigarette maker. This case study gives a glimpse of ITC''s diversified status and its growth as a conglomerate. A growth strategy in which a company seeks to develop by adding totally unrelated products and markets to its existing business Examples: The company reported healthy Q4FY21 numbers with revenue growth of 23% YoY at Rs 13,295 crore compared to Rs 10,842 crore, a year ago. Presented by: Neha Kumar (A029) Rashi Kapur (A039) Sonal Rajadhyax (A050) Tarannoom Rahmani (A053) Yuvraj Tandon (A059) NMIMS, PT-MBA, 2nd Year, 2013. ITC Profit Mix comparison 2001-02 and 2019-2020Before we dig deep into FMCG business, it’s important to analyze the Q2 2020 numbers first. Despite all its diversification efforts, cigarettes still contribute 82.5% to its bottom line. "Organisations have to reinvent themselves because change is … DCM Ltd. is a good example of conglomerate diversification. Since then, it has been using its cash cow Cigarette segment to fund its diversification plans & shed its ‘bad boy’ image to become a ‘har ghar ka’ product. ITC diversification strategy Now, ITC was a big brand. As ITC is a diversified conglomerate there is no one such particular industry to look at although the main industries or market are: Cigarette Industry: ITC is the largest player in the cigarette industry with more than 75% market share in India. When it comes to investment portfolio diversification, an investor may choose to include a series or group of stocks issued by companies that operate in similar markets, such as buying stock in a telephone company and also in a conference call bureau. 4. Generally, the firm follows this type of diversification through a merger or takeover or if the company wants to expand to cover the distinct market segments. Over the years, ITC Ltd has transformed itself into an umbrella group that offers a diversified product mix. So from 1998, Palepu began to advise ITC on its corporate strategy. Also there are 90 countries where ITC exports its products. LEADERSHIP IN DIVERSIFICATION-ITC WAY: CASE STUDY Dr. Belur Baxi, Dr. Shailja Tiwari Assistant Professor Faculty of Business Administration GLS University, Ahmedabad Assistant Professor Gujarat Commerce College Ellisbridge Ahmedabad Abstract ITC is one of India’s largest congonomarate private Organisation. Generally, the firm follows this type of diversification through a merger or takeover or if the company wants to expand to cover the distinct market segments. ITC will continue to invest and grow its diverse businesses with an investment of Rs 28,600 crore planned over the next five years. The Company now stands rechristened ‘ITC Limited’ Market capitalization of US $ 45 billion Turnover of US $ 7 billion Operates in: FMCG, Hotels, Paperboard & Specialty ITC also flirted with edible oils and financial services at one point in time. Its cigarette portfolio has been consistently declining from 63% in FY16 to 41% in FY20 as the company focuses on its diversification strategy. Cedar Rapids, Iowa (May 26, 2021) – ITC Midwest is providing support to mental health agencies throughout its service footprint in May during Mental Health Awareness Month. Competence – ITC has a track record of 100 years of presence, quality, consistency and continuous progress, expansion and diversification. Conglomerate diversification occurs when a firm diversifies into areas that are unrelated to its current line of business. The company has to leverage on the brand loyalty associated with current products. To identify the SWOT analysis. The ITC Operational Plan establishes annual performance targets and specifies the resources needed to achieve results on an annual basis. About ITC ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. Even though there is an un-related diversification of ITC, the powerful and the good management help the smooth flow of business which is a successful key factor to survive in the market. ITC Limited is an Indian company headquartered in Kolkata, West Bengal. The top management, on the other hand, are highly impressed with the growth achieved by ITC and its strategies of diversification and going into new areas. In an interview with India [email protected], Deveshwar, who joined ITC in 1968 and became its chairman in 1996 (from 1991 to 1994 he was the chairman and managing director of national carrier Air India), talks about the company's diversification strategy and its … The wide array of industries the company operates in helps it generate greater revenue. ITC Announces Quarterly Results (2QFY21); Net Profit Down 19.7% (Quarterly Result Update) Nov 25, 2020 | Updated on Nov 25, 2020. ITC has a diversified presence across industries such as cigarettes, FMCG, hotels, packaging, paperboards and specialty papers and agribusiness. This diversification strategy underlines the company’s efforts to slowly but steadily steer its business away from tobacco. The company has a total of 13 businesses in 5 segments. This diversification however is not an attempt for a sudden escape from the cigarette industry but began way back in 1970. The company entered the hospitality business in 1975.In 1979 it entered the paperboards business by promoting ITC Bhadrachalam Paperboards Limited,which was later amalgamated with ITC.In 1992,leveraging its agri-sourcing competency,ITC set up the International Business Division for export of agri-commodities.More new lines of businesses have He is also responsible for ITC's Technituber subsidiary. ITC first started diversifying from its core tobacco business in the early 1970s, with the diversification drive picking up steam in 2003 when the Indian behemoth conglomerate started with its slew of launches in the FMCG category. Become A Better Stock Investor Conglomerate diversification (or unrelated diversifcation) on the other hand is about entering a new market with a new product that is completely unrelated to a company’s existing offering. 2.2 Expansion strategy: Tata group of companies have followed the “unrelated or conglomerate” diversification strategy of expansion which can be clearly known from the above picture. Can any of the company-specific risk be diversified away by investing in both Athenex and ITC at the same time? From there on ITC Ltd. has started, invested or taken over businesses in FMCG, specialty paper, packaging, agriculture commodity, farmer services & information technology. ITC's diversification strategy bearing fruits. Does the company with one of the fastest-growing QSR chains in India have sound prospects? Diversification Diversification refers to the introduction of new products in new markets. ITC, Godrej, Kirloskars etc. With its stated interest in the ‘areas of tomorrow’, the company’s focus is now on the frozen food industry. The company has done conglomerate diversification by diversifying into numerous other industries that are entirely unrelated such as tobacco, hotels, apparel, education, and various others. ITC is the market leader in the cigarette industry, with a presence in fast-moving consumer goods (FMCG), hotels, packaging and agriculture-related businesses (agri business). When a firm diversifies into business, which is not related to its existing business both in terms of marketing, and technology it is called conglomerate diversification. 2. The case presents an overview of the Indian tobacco industry, various players in the industry and the challenges confronting them. When a firm diversifies into business, which is not related to its existing business both in terms of marketing, and technology it is called conglomerate diversification. For the quarter ended September 2020, ITC has posted a net profit of Rs 32 bn (down 19.7% YoY). Now you see, this is a very good situation in these two sectors (FMCG and Tobacco). ITC also became the first Indian company to foray into consumer research during this time. The "Haksar Era" outlines the strong nationalist context in which BAT's stake in ITC was diluted, and the company's diversification into hotels and paperboards businesses. It seems ITC … The general principal of concentric diversification can also translate easily into other settings. ITC now has 58 per cent of its revenue from the non-tobacco segments, which are FMCG, hotel, agribusiness, paper and paperboard as part of its diversification strategy. Kolkata/New Delhi, May 11 (IANS) Yogesh Chander Deveshwar, whose goal was creating “Indian brands”, successfully transformed ITC Ltd from being predominantly a cigarette-maker into a diversified conglomerate.. Recognised around the world for creating an exemplary Indian enterprise, Deveshwar, as ITC Chairman for over two decades, led the company into a range of new businesses … and stood for Imperial Tobacco Company. By IANS. ITC Midwest Provides Support for Mental Health Services. It was originally called I.T.C. The funding will directly support mental health services to those in need. But these ventures never really took off and the company shelved it a couple of decades ago. Advantages of Diversification … LEADERSHIP IN DIVERSIFICATION-ITC WAY: CASE STUDY Dr. Belur O.Baxi Assistant Professor Faculty of Business Administration GLS University, Ahmedabad Dr. Shailja C. Tiwari Assistant Professor Gujarat Commerce College Ellisbridge Ahmedabad Abstract ITC is one of India’s largest congonomarate private Organisaiton. As the chart reveals, the cigarettes business took a beating due to lockdown [COVID-19] and closure of commercial activities and the FMCG business has given a cushion to both the revenue and profit streams of the company. Conglomerate Diversification. ITC first started diversifying from its core tobacco business in the early 1970s, with the diversification drive picking up steam in 2003 when the Indian behemoth conglomerate started with its slew of launches in the FMCG category. Explore ITC Businesses ITC diversification under Mr. Y C Deveshwar The company's net revenues nearly 15-fold to Rs.36,475 crore. Brand image – ITC is the most valuable brand of India with net income of Rs. The company entered the hospitality business in 1975.In 1979 it entered the paperboards business by promoting ITC Bhadrachalam Paperboards Limited,which was later amalgamated with ITC.In 1992,leveraging its agri-sourcing competency,ITC set up the International Business Division for export of agri-commodities.More new lines of businesses have Correspondingly, the value chain of ITC has adapted to suit itself to the organisation’s growing needs. The company completed 100 years in 2010. 1. The Company History page lists out the major events in chronological order for ITC Ltd. Company History - ITC Ltd. 1910. To mark the day, company chairman Y C Deveshwar will address its close to 29,000 employees across the country through a webcast from ITC Sonar, Kolkata. Its profit after tax 37 times to Rs.9,845 crore. The diversification strategy followed for its food business is also analysed in the case. -. ITC is a rich company with a liquidity of Rs.8816 million in the cigarette business, even though the company understood & decide the need of diversification. First came hotels, then paperboard. ITC as company has grown by leaps and bounds – this fact is captured in the history of the firm, and the amount of diversification it has seen in recent times . There has been an addition of a wide range of products such as fertilizers, sugar, chemicals, rayon, trucks etc. ITC Businesses. Towards Indianisation and business diversification. ITC is the market leader in the cigarette industry, with a presence in fast-moving consumer goods (FMCG), hotels, packaging and agriculture-related businesses (agri business). It employs over 25,000 people at more than 60 locations across India and is part of Forbes 2000 list. Limited' in 1974. 10,471 crore in 2017. Conglomerate Diversification . "The Sapru Era" describes the consolidation of market leadership in cigarettes and the company's foray into agri-business. Conglomerate diversification occurs when a company stretches out its business into an area which is dissimilar to its core business. ITC’s diversification strategy bearing fruits. ITC to go in new areas as part of diversification. Diversification is one of the choices for firms to develop and create value.
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