In this SWOT analysis of ITC, we will discover the internal factors that boost ITC Limited as well as some external factors that bring a lot of challenges. This analysis will shed light on ITC’s current position strategic methods and much more.
About ITC
Previously known as the ‘Imperial Tobacco Company in India’, ITC was renamed to the ‘Indian Tobacco Company Limited’. The company is an Indian conglomerate having its presence across different sectors. Since its inception in 1910, the company has become one of the foremost FMCG companies having a huge expansion in the tobacco industry from where it embarked on its journey.
With passing years, ITC is now present in different segments like hotels, packaging, paper boards, agribusiness, as well as information technology. The company is also very prevalent for having a focus on CSR (corporate social responsibility), sustainability, rural growth, etc.
ITC’s FMCG portfolio includes well-known brands like Sunfeast, Bingo, Aashirwad, etc. The company also operates luxurious hotels with its brand ‘ITC Hotels’. These hotels are very famous for their sustainability strategies and exclusive services.
The company is highly committed to social responsibility, innovation, and sustainability which makes it a major player in India’s corporate landscape.
A Quick Glance at ITC Ltd.
| Chairman & MD | Sanjiv Puri |
| Year of Establishment | 1910 |
| Annual Revenue ( as of 2023) | US$ 9.8 billion |
| Net Profit of ITC ( as of 2023) | US$ 2.4 billion |
| Origin of ITC | Kolkata, India |
| Type of Company | Public |
| Total no. of employees | 49,824 |
| Total assets | US$11 billion |
SWOT Analysis of ITC
Let us see the SWOT analysis of ITC in detail demonstrating its resilience, shortcomings, opportunities, and threats.
Strengths of ITC
The major strengths of ITC include the following –
Diversified portfolio
Today, the competitive business landscape can be observed that hold a diversified portfolio with distinct benefits. ITC has strategically entered into different industries including FMCG, hotels, paperboard, information technology, and agribusiness.
The diversified approach has prevented it from being one of the major pillars of the company. The company offers a margin against market changes that affect certain sectors.
Having operations in multiple sectors, the company can easily mitigate the effect of bad conditions in any of the sectors. Diversification of services minimizes the company’s dependency on any of the industries, especially its association with tobacco.
Brand Value
Brand value is quintessential in the sustainability and evolution of enterprise. For ITC which is a giant company operating in different industries holding strong brand equity is one of the major strengths. The company fosters the highest standard of customer trust and loyalty. With constant delivery of high-quality products as well as services, ITC has gained a very strong reputation among the audience.
ITC also has a competitive advantage in the market that positions itself as distinctive among its competitors.
Broad distribution network
The company’s success is also dependent on the level of the distribution network. ITC has a very expensive distribution network that is spread across rural and urban areas in India. This helps the company to reach diverse customer ways.
By implementing a strong presence throughout different markets and regions, ITC Limited can enter into the world of wide customers with different choices. The company’s expanded distribution network also has its competitive benefit while bringing new products into the market.
Sustainable strategies
Today, organizations are highly realizing the significance of sustainable practices in the continuously transforming business landscape.
By combining sustainability into the functionalities of the business ITC has displayed its sheer commitment to social responsibility, ethical governments, and environmental support. It has been implementing various initiatives to minimize the ecological footprint while also promoting the conservation of energy.
R&D capacities
ITC has very strong research and development features that keep it abreast of the competition. The organization’s R&D feature is the driving force behind the innovation in their products and services. The company leverages the latest technology, unique solutions, and innovative product formulations that meet customer-changing requirements.
Through deep R&D, ITC emphasizes the call for enhancement as well as the performance of its services and products. The company has been investing heavily in copyrights, trademarks, and trade secrets as well that secure its cutting-edge processes, formulations, and technology.
Weaknesses of ITC
Below mentioned are the weaknesses of ITC that create a lot of challenges to the company’s development.
Reliance on the cigarette business
ITC has set itself as a massive firm with an interest in various sectors. But, the company is highly reliant on the cigarette industry which creates a lot of vulnerability as well as challenges. Today the cigarette market is very saturated and has intense competition. Hence, ITC has been facing harsh competition from both global and local tobacco manufacturing firms.
The market acquisition of renowned players in the industry makes it very difficult for ITC Limited to expand its footprints. The cigarette industry is also subject to strict regulations and tough quality checks across the world.
Topographical concentration
ITC enjoys benefits in the domestic market but the company is also exposed to some limitations as well as vulnerabilities in the market. The Indian cigarette market is very fast and offers high growth potential. Hence, over-dependency on a particular market constrains the company’s capacity to diversify its revenue platform.
Economic downtime, market fluctuations, or regulatory concerns related to India may have a huge impact on ITC’s annual financial performance. Moreover, since the company is operating primarily in India, it has to face intense competition from local players as well.
Slow increase in e-Commerce
Today’s era is geared toward quick digital evolution and continuously changing customer behavior. However, the slow acceptance of e-commerce platforms creates a serious challenge for ITC.
It means that the company should fully enter into the growth opportunities offered by online retail platforms with the increasing popularity of online shopping among customers who are looking for convenience and fast delivery along with wider product choices and economical pricing.
Raised Debt
ITC is operating throughout different sectors and has accomplished considerable success since its inception. But it also has high debt levels that can stop the company’s growth potential as well as may prove inefficient for the financial stability of the company.
Due to this, ITC confronts issues regarding financial flexibility and cannot allocate resources as per the expectations. ITC’s continuous cash flow as well as profitability may have a negative impact as the company has to pay interest and debt repayments.
Commodity cost volatility
ITC largely relies on commodities as it requires raw materials for the production of its products full stop there for continuous fluctuations in commodity prices can impact the profitability, supply chain, and financial performance of a company.
Abrupt price increases in necessary commodities like metals, energy sources, or agricultural products may lead to higher production costs. This pressure will be passed on to the customers resulting in shrunk profit margins. Moreover, the volatile commodity prices may also disturb the company’s supply chain operations which may lead to potential delays in material availability.
Opportunities for ITC
The opportunities for ITC development and growth embrace –
Expanding FMCG market
ITC Limited has the potential to make more money in the expanding FMCG market. This market offers a golden opportunity to diversify its revenue streams. The company has a very strong presence in different sectors like agribusiness, tobacco, etc.
The FMCG market can also be a new stream of revenue and expansion as well. ITC can leverage expertise in packaging, product development, and formulation to introduce valued expansion into developing markets and unique FMCG products.
Extension into developing markets
ITC has the potential to make the best out of its capabilities as well as resources to enter into the emerging economy of the market system. The growing customer base, increasing disposable incomes, and the highest spending power of customers are the most important elements in this market.
If the company expands its presence in these markets, then it can surely target a new base of customers eager to explore and adopt new brands and products. This will also prove beneficial for long-term growth, sustainable business performance, and profitability of the company.
Awareness of wellness and health
ITC Ltd. can leverage the increasing customer demand for wellness and health products as well as services. There has been a worldwide shift towards health-conscious customers where they are increasingly choosing healthier lifestyles as well as well-being. It represents a huge opportunity for the company to make its product aligned with the portfolio for the growing demand for health-related products.
With all its strengths like existing resources, enhanced research and development features, and customer information, ITC can definitely bring a wide range of health-focused products apt for the changing needs of health-conscious customers.
Collaborations and acquisitions
With statistical partnerships and collaborations, ITC Ltd can gear its growth and improve its competitive advantage in the market. Acquisitions as well as partnerships bring a golden opportunity for the company to expand its market presence and more products to its portfolio.
By acquiring companies in different or same sectors, the company can also enter new markets gaining an advanced customer base. This will help in reducing the dependency of the company on particular sectors and can easily move ahead with a more balanced revenue platform.
Implementation of e-commerce
The e-commerce platforms are booming every day which can help ITC improve its market richness while also driving revenue growth and improving customer experience to a greater extent. With the help of e-commerce, the company can also expand customer reach beyond the physical stores.
By establishing a very strong online presence, ITC can be the best option for those for whom shopping online is the top priority. The company can also reach customers globally in remote areas as well as in underserved regions. This will boost the revenue streams of the company.
Threats to ITC
ITC faces the below-mentioned threats-
Severe competition
ITC faces severe competition from international as well as domestic players. This brings price clashes as companies strive to gain market share. Price-based competition may also bring minimized profit margins for ITC as it may possibly reduce the prices to stay competitive in the market.
It can affect the company’s reputation, profitability, and financial performance making it very hard to maintain sustainable growth and invest in expanding its footprints.
Regulatory issues
ITC has to undergo a number of regulations as well as policies imposed by governments as well as other regulatory parties. The transforming regulatory sector brings increased compliance costs as well as regulatory words for organizations. Changes in existing laws, new regulations, or stringent enforcement call for necessary changes in the operations systems of the company.
Regulation compliance we need particular investments in monetary infrastructure training technology etc. This impacts the profit margins of ITC Ltd.
Quick technological upgradation
ITC has been in the market for more than a decade and operates in an unexpected technical environment. Rapid technological upgradation May make existing products as well as services obsolete. Also, this all comes with her particular implementation costs like investing in infrastructure, new technology, and training employees.
As continuously new technologies are emerging customer demands and preferences are also changing. Here the company faces a major challenge to maintain competitiveness. If the company fails to keep the technical upgradation then it will have to see a huge market loss as its competitors are offering superior and advanced products as well as services.
Environmental elements
Like regulatory laws, ITC Ltd is also subject to the increasing scrutiny and effect of environmental problems. Some environmental elements include the increasing intensity of natural disasters, climate change, etc. that pose a major threat to the company.
Climate change also leads to disturbance in the quality of resources affecting the supply chain and company’s operation.
Natural disasters including droughts, hurricanes, and floods may also damage the infrastructure that may disrupt the production processes and may also badly impact the distribution networks.
Additionally, environmental factors may also disturb the global and domestic supply chains impacting the input quality.
Top Competitors of ITC
ITC confronts competition from different significant companies throughout various sectors. Below are the five top competitors of ITC.
- Hindustan Unilever Limited: HUL is one of the leading FMCG companies in India having a diverse portfolio of its products including food, personal care, etc. The company competes directly with ITC in segments like personal care and packaged foods.
- Britannia Industries: It is another major player in the Indian biscuit market having a strong presence in other FMCG segments like snacks, dairy, bakery products, etc. It competes directly with ITC’s brand Sunfeast.
- Nestle India: Nestle is a multinational conglomerate in the food and beverage sector known for its signature products like KitKat, Nescafe, and Maggi. Nestlé directly competes with ITC in segments like beverages, instant noodles, dairy products, etc.
- Godrej Consumer Products Limited: GCPL offers diversified products in segments like household insecticides, personal care, and hair care as well. These are the segments where the company directly competes with ITC.
- Indian Hotels: Indian Hotels Company Limited operates the popular Taj Hotels brand. This is a very significant competitor of ITC in the hospitality industry. ITC and IHCL both own and operate luxurious hotels as well as resorts in India and abroad as well.
Conclusion
Down the line, ITC Limited has a diverse portfolio, strong distribution network, and strong brand presence making it a leader in different sectors. However, weaknesses like over-dependability on the tobacco business and limited international presence call for immediate attention. To retain its self-sustainable growth and success in the future ITC should leverage its strengths and should convert the weaknesses into strengths.