Final ITC vs HUL

8/8/2019 Final ITC vs HUL

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INTRODUCTION0Competitive Strategy consists of move of

companies in order to attract customers. With

stand competitive pressures and strengthenan organizations market position. The main

objective of Competitive Strategy is to

generate a competitive advantage, increase

the loyalty of customers and to beatcompetitors.


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FIVE MAIN COMPETITIVE

STRATEGIES ARE: Overall low cost leadership strategy

Best cost providers strategy

Broad differentiation strategy Focused low cost strategy

Focused differentiation strategy

Here competitive strategy varies from sector to sector and

company to company. Thus, it is not easy to predict a single

or to find a single strategy for the whole sector. When we

come on to FMCG Sector main strategies lay behind market

strategies, cost, and quality strategies.


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What are HUL and ITC Ltd.?

HUL (Hindustan Unilever Ltd.)

0This Company is earlier known as Hindustan

Lever Ltd. This is Indians largestF

MCG sectorcompany with all type of household products

available with it. It has Home & Personal Care

products, and also food and Water Purifier

available with it. According to Brand Equity, HULhas largest no of brands in most trusted brands

list.


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016 of HULs brands featured in AC-Nielson Brand

Equity list of100most trusted brands in 2008 in an

annual survey. For the entire year ending March -

2009 net turnover of company is Rs. 20239.33 Crore

which is 47.99% higher than 31st December 2007s

Rs. 13675.43 Crore driven mainly by domestic FMCGs

with net profit stood at Rs. 2496.45 Crore.

0 Products of HUL are: Annapurna; Ayush; Axe; Breeze;

Bru; Brooke bond; Clinic; Dove; Fair & Lovely;

Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit;Rexona; Rin; Sunlight; Surf excel; Vaseline; Wheel.


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ITC Limited0 This Company was earlier known as Imperial Tobacco

Company of India Ltd.

0 It is Currently headed by Yogesh Chander Deveshwar.

0 Company mainly operates in the industry like

Tobacco, Foods, Hotels, Stationary and Greeting Cards

with the major products constitutes Cigarettes,

packed foods, hotels, and apparels.

0 For the entire year ending Mar-2009 the turnover ofcompany is at Rs. 15388 Crore which is 10.3% higher

than previous years Rs. 13947.53 Crore, driven mainly

by robust 20% growth in non cigarette FMCG business

with net profit stood at Rs. 3324 Crore.


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Analysis of Both Companies0 HUL & ITC are major companies in FMCG market in

India.

0 When we compare both companies on the basis oftheir strategies i.e. , their competitive strategies in the

present market.

0 When we look at the present segment breakup for

both of the companies then we came to know thattheir different products vary too much in the market.


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HUL Segment Breakup ITC Segment Breakup


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COMPARATIVE ANALYSIS OF BOTH THE

COMPANIES UNDER SOME HEADS:

HUL ITC

0 Hindustan Unilever (HUL)is the largest pure-playF

MCG company in thecountry and has one of thewidest portfolio ofproducts sold via a strongdistribution channel.

0 It owns and markets

some of the most popularbrands in the countryacross various categories,including soaps,detergents, shampoos, teaand face creams.

0 ITC is not a pure-playFMCG company, since

cigarettes is its primarybusiness.

0 It is diversifying intonon-tobacco.

0FMCG segments likefoods, personal care,paper products, hotelsand agri-business toreduce its exposure tocigarettes.


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PERFORMANCE

0 After stagnating between 1999 and 04, the company

is back on the growth track. In the past three years, till

2008HULs net sales have witnessed a CAGR of11%,

while net profit has posted a CAGR of17%.0 Despite diversification, ITCs reliance on cigarettes is

still huge. The tobacco business contributes 40% to its

revenues, and accounts for over 80% of its profit. This

cash-generating business has enabled it to takeambitious, but expensive bets in new segments and

deliver modest profit growth.


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Risk for both the companiesHUL ITC

0 Being an MNC operating inIndia, HUL is more conservativein its strategies than its Indiancounterparts. Moreover, givenincreasing competition, it faces

the risk of being overtaken bydomestic players in variouscategories. Prolonged inflationmay lead to margin contraction,in case HUL is not able to passon this burden to consumers.The company's large size alsoposes a problem, since it doesnot give HUL the agility toaddress the competition it facesfrom national and regionalplayers

0Increased regulatory clamps ontobacco, along with rising tax

burden, pose a business risk for

ITC. So, it has started an

ambitious diversification plan,

which has its own set of risks.

With its foray into theconventionalFMCG space, ITC

has entered the high-clutter

branded products market. This

will burden its resources in

terms of ad spend and brand-building. Creating brand recall

and building market share in

new products are ITCs key

challenges. Export ban and rising

crop prices pose a threat for its

agri-business, taxing its margins.


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OVERALL STRATEGY

HUL ITC0 HUL always believes in

customer friendly products

with major emphasis on low

cost overall without

compromising on the quality ofthe product.

0 They are leveraging the

capabilities and scale of the

parent company and focusing

on the value of execution.

0 The entire product portfolio is

also being tweaked to include

premium offerings such as

Ponds Age Miracle and dove

shampoo in skin and hair care.

0 ITC is focusing on deliveringvalue at competitive prices.Its tremendous reachthrough extensivedistribution chain has been acompetitive advantage.

0 Additionally, the company'se-choupal model for directprocurement is well knownunder which ITC partners

with over100

,000

farmersfor spices and wheatprocurement and an evenlarger number for oilseeds.This kind of rural pedigree ishard to beat


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Growth DriversHUL ITC

0 The Company has beenlaunching new productsand brand extensions,with investments beingmade towards brand-

building and increasing itsmarket share. HUL is alsostreamlining its variousbusiness operations, inline with the One Unilever

philosophy adopted by theUnilever group worldwide.Introduction of premiumproducts and addition ofnew consumers via marketexpansion will be HULs

growth drivers.

0 ITCs backward integrationto ensure that its productspass efficiently from thefarms to consumers hashelped it to cut downsupply and procurement

costs. ITCs non-cigaretteFMCG business leveragesthe large distributionnetwork the company hasdeveloped by sellingcigarettes over the years.

A rich product mix, alongwith ramp-up ofinvestments in its newsectors, will beinstrumental in chartingITCs growth path.


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Conclusion

0 HULs up-and-running business model is a treat forinvestors seeking exposure in the FMCG segment. Thecompany has delivered in the past and has thepotential to do better in future. In the small andmedium term. ITCs growth story is still evolving.

0 ITC is eyeing the pie which HUL and other FMCGplayers currently enjoy. Though risky, the companiesbusiness model will pay off in the long run. ITC hasproved its expertise in the cigarettes, hotels, paperand agri-businesses. Investors who want to bank onits execution ability in FMCG can consider the stockwith a long-term horizon.


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Documents

Final ITC vs HUL