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ITC Limited: India's First - IIM Bangalore

Abstract :This case describes how corporate strategy and competitive strategy, enmesh. Itdescribes an inflexion point at which the company was faced with a prisoners dilemma situation with regard to a critical set of operational decisions of tactical significance affecting manufacturing operations. The unintended consequences, regardless of which path were taken, could have lasting reverberations for sustaining creditability and communication in organization development and managementprocesses. The unfolding situation describes a situation typical of the challenges arising in low margin high volume traditional businesses close to growth saturation and maturity. In ITC Limited, the extent to which the deep restructuringin its traditional businesses was feasible and sustainable also set the pace ofdiversification. The case also brings out tacit dimensions of power conflict that strategy formulation and implementation manifest in industrial relations conflicts.

Abstract :ITC Limited was the first large Indian transactional firm to undertake significant diversifications and restructuring as part of its corporate strategy. The diversification strategy was designated by visionary leaders and professional management from within. The strategy required to be supported by squeezing profits from low margin high volume traditional businesses that were close to growth satur

ation and maturity. The company was required to set the rate of engagement withits diversification strategy by determining the extent to which the deep restructuring in its traditional businesses was feasible and sustainable. The case brings out hidden dimensions of power conflict that strategy formulation and implementation involve and raises questions about the alleged inflexibility of labour markets, the interface between product markets and internal labour development and management processes.

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The case traces the evolution of ITC Limited (ITC) from its inception as a marke

ting subsidiary of British American Tobacco (BAT) in 1910 to one of India's most valued diversified corporations. Remarkably, despite being a dominant market leader in the socially undesirable tobacco business, ITC is regarded as a responsible corporate citizen. Even more significantly, ITC which regards itself as an "Indian" company in which BAT, its ''erstwhile parent'' is a large and important''shareholder'', can be held out as an exemplar of the India Way - looking beyond stockholders' interests to public mission and national purpose - articulated by Professor Peter Cappelli and his colleagues at Wharton. The century long story is captured in five sections. While first section traces the early years of the company, the next four sections present ITC's evolution under its four Indian chairmen. 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. "The Sapru Era" describes the consolidation of market leade

rship in cigarettes and the company's foray into agri-business. "The Chugh Era"captures the tumultuous relationship between BAT and ITC, and the aborted takeover attempt by BAT. "The Deveshwar Era" traces his initiatives to strengthen thecore businesses, diversify into new areas and embed a strong focus on social imperatives. The case concludes with questions on the company's goal to become theNo. 1 FMCG (fast-moving consumer goods) company in the country, and the succession challenges faced by Deveshwar.Learning objective:

The richness of the ITC story (it is a 100-year-old company) along with its uniq

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ue context (its origins as a multinational subsidiary and its dominant presencein the socially undesirable tobacco business) and its emergence as one of India's most valuable corporations helps us to explore the entire gamut of issues ranging from "parent-subsidiary" relationships in the context of managing multinationals (in a course on International Management) to the role and purpose of business in modern day society (in a course on Corporate Governance and Leadership). Specifically, the case can be used to evaluate the viability of governance frameworks/leadership models such as the "India Way" - held out as alternatives to the model of management widely practiced in the United States and other Western countries. Is the relevant "society" the one where the headquarters of the multinational is located ("home" country), or is it that of the subsidiary ("host") country? The potential for conflict between these two mandates is strong. And when the social mission is one of nation development, the management of the parent-subsidiary relationship ? already demanding because of inhabiting diverse competitive and institutional environments ? could become extremely challenging because of the emotional and political undertones that typically accompany any ''national'' cause. The ITC case enables one to explore these issues.Subjects Covered:

Business & government relations; Conglomerates; General management; International management; LeadershipSetting:

Geographic: India

Industry: Tobacco