ITC Case Study Analysis and Strategy Proposal

ITC Case Study Analysis and Strategy Proposal
Abstract
This paper aims to give analysis to the case study ITC LTD: Toward a Triple Bottom Line Performance and proposal a strategy that may help Imperial Tobacco LTD of India (ITC) fulfill its social obligations. Various aspects of the organization may be analyzed to help achieve the purpose of the analysis. Such elements include management strategies and daily company operations that may impact the company’s social responsibilities. Furthermore, the analysis may include the impacts on all the company’s stakeholders whether internal or external as they are the most affected by the company’s strategies.
To aid in the analysis, the company’s key attributes, strengths, and weaknesses may be examined. This, together with an analysis of ITC’s social responsibilities and ethics in decision making may, later on, be used to come up with a revised strategy aimed at helping ITC achieve its social obligations while still turning a profit. Being in India for a relatively long time, the company has evolved ethical values that India’s society accepts as normal and that within the society’s expectations.
Keywords: corporate social responsibilities, Social policies, society, strategies and attributes
Introduction
Imperial Tobacco Company of India Limited (ITC) was founded by a United Kingdom company in 1910. It was fully owned by the British company, but government pressure forced Imperial to put out a public offer in order to divest its equity.

As a result, more than 30% of ITC was held by financial institutions and not less than 36% by foreigners. Indian individuals own up to 30% (Ojha, 2010). It was initially meant to be a tobacco sales organization but after risk assessment the management saw it wise for the company to diversify. The main aim of this was to reduce the risk that comes with depending on a single product as the main revenue earner. Also, the company’s management thought since tobacco was considered hazardous; it would be foolish to depend fully on it. Therefore, by 2011 the company also dealt in agri-business, paperboards, information technology. ITC also deals with stationary, personal care, specialty paper and safety matches. Furthermore, the company has strived to position and establish itself as a socially responsible organization (Ojha, 2010).
ITC has over the years have grown into a very strong organization not only in India but also globally. ITC has grown to become among the foremost company’s in India’s private sector and magazines such as Forbes, Business week Asia, Business world and Business today rated it as one of the best organizations globally (Ojha, 2010). This can be attributed to the various strengths that ITC has. First of all, the fact that ITC does not depend on one source of revenue is a major reason behind the company’s success. This is because the company can earn money and also avoid the inconveniences that depending on one product have. Another factor that had led to ITC’s growth is its corporate strategy. Its strategy had put emphasis on the creation of multiple avenues for grown based on ITC’s core competencies of brand-building capabilities, service skills, distribution reach and supply chain management (Ojha 2010). ITC corporate strategy helped achieve the company’s vision of continuous wealth creation for its shareholders while fulfilling the wishes of other stakeholders and fulfilling its social expectations (Ojha, 2010). However, one drawback that ITC faced is the fact that tobacco was still its major source of revenue (Ojha, 2010). This was a drawback because tobacco is viewed as a health risk to many and thus is not a reliable source of revenue. ITC’s triple bottom line strategy made it achieve its financial, environmental and social goals and even India’s Vice President- M. Hamid Ansari appreciated it (Ojha, 2010).
Analysis of Social Responsibility
ITC’s triple bottom-line approach was and still is very effective in helping the organization achieve its social responsibilities to the people of India. The company recognizes that businesses are organs that use society’s resources and therefore the performance of the company should not only be gauged by financial results but also by social results. The company has in many ways complied with the accepted norms that companies today have on social responsibility. The corporation had come up with policies guided by current social responsibility strategies. The policies were such as: firstly, to encourage self-reliance at grassroots, secondly, through promoting rural education and rural development. The company had many successes in complying. By 2011 ITC had become a carbon positive company for a consecutive period of five years. It achieved this by storing almost double the amount of carbon than it emitted. Furthermore, ITC also harvested more than three times the water it consumed for eight years (Ojha, 2010).
ITC’s social policies have left some gaps in them that if not filled are certain to affect the whole purpose of the policies. Although the social policies are good for the general public, they offer little to the company’s direct employees. More so, the policies are vague about very critical social matters such as consumer education and security. The aspect of public health risks due to tobacco has also been lightly taken in ITC’s social policies.
The company’s social policy impacts the company’s stakeholders positively and negatively though mostly positively. Consumers especially those from poor areas may benefit from the company’s engagement in vocational training and skill building which enhances their employability enabling them to sustain themselves. Moreover, special groups such as women may benefit from ITC’s policy to develop self-reliance of beneficiaries. This is prerequisite to both economic and social development. In addition to that, external stakeholders may benefit from ITC’s policy on promoting education, health care, drinking water and providing sanitation (ITC, 2016). These benefits may also be felt by the company’s employees.
Contrarily, the company’s management may also benefit from their social policies. The more the company continues to help people the more the people may feel close to it and thus they are likely to purchase the company’s products. This may earn the company revenue. Moreover, the social policies may provide an avenue for the management to get information on how the people feel about their company. Also, social policies may offer the management opportunities to advertise their product effectively. However, the policy may bring some negative impacts. The negative impact to consumers may be that they may be inclined to increase their consumption of tobacco- ITC’s main product. This, in turn, causes health risks to them. Additionally, the company may initially incur additional costs setting up structures to help implement the social policies.
Several factors may have influenced the strategy that the organization put in place to fulfill its social obligations. The financial cost is a sure factor that was considered in coming up with ITC’s social policies. Although the company had the society’s interest at heart, it still is a business and would not have implemented the policies if they were a financial burden to the organization itself. Social awareness may also be an influencing factor in the shaping and evolution of ITC’s strategy planning. The company was aware of issues that the society was facing and may have chosen to help solve them out of goodwill. Furthermore, the humanitarian nature of the company’s internal stakeholders may have encouraged them to practice strategic philanthropy and serve the society. Additionally, the relationship between ITC’s profits and its CSR may have made ITC’s policies evolve uniquely. If the two had a negative relation, ITC would have drastically changed its policies but if the relationship were positive ITC would not only keep the policies but also improve them. Furthermore, the fact that ITC has multiple stakeholders each with their own expectations is a factor in the evolution of ITC’s social policies.
ITC is a model company when it comes to being consistent in its quest to fulfill its social responsibilities. Compared to its industry competitors and also other companies in general, ITC is consistent and as result of this consistency it has created a social value. It is ITC’s consistency that enabled its businesses to create employment both directly and indirectly for not less than five million people by 2011. More proof of ITC’s consistency is the greening of over a million hectares of land and provision of water to almost 60,000 hectares of arid land (Ojha 2010). In addition to that, the Vice-president’s appreciation and the success of ITC’s e-Choupal initiative that benefitted almost five million farmers are evidence that ITC must be consistent in its implementation of its social responsibilities following its social policies.
Ethical Decision-making
ITC’s strategy plan is based on decision making on various levels with lower levels reporting back annually or semiannually to higher levels. Decisions are made either through company personnel or external agencies or through trusts and foundations that may be formed from time to time (ITC, 2016). An annual CSR plan that outlines the Programs of the CSR and Sustainability Committee is presented to the board. The board’s mandate is to review, consider and approve the plan with any necessary amendments. People and bodies deemed fit by the Corporate Management Committee (CMC) will then be assigned the duty of implementing the CSR plan. The implementers report back to the CMC who report back to the CSR and Sustainability Committee. An annual report is then submitted back to the board (ITC, 2016). Business ethics are emphasized in this strategy.
First of all, even though there is a clear-cut chain of command, the subordinates are still left to make certain decisions on their own. Therefore they can work freely but still report occasionally to their superiors. On analysis of the decision-making process, potential risks are evident in the strategy plan. Since there is no daily supervision between the various structures when mistakes are made by subordinates, the superiors may find out too late. This may cause the whole strategy to fail. The grassroots beneficiaries do not have direct access to the board and any suggestions or complaints they have must follow the set chain of command. This may cause the suggestions to reach the intended audience late. Thus the suggestions might not help.
Critique of the organization
ITC’s strategic plan has four main components of CSR planning. The components are financial, legal, philanthropic and ethical. ITC has contributed a lot to help improve the grass root economy especially for women and people from less privileged areas. Moreover, ITC has held sports tournaments and supported the health and education sectors. These are good philanthropic gestures. Furthermore, the organization adheres to India’s rules on tobacco and the organization also pays taxes on time. The organization’s goods also meet the recommended safety standards set by the Indian government. Being in India for a relatively long time, the company has evolved ethical values that India’s society accepts as normal and that within the society’s expectations.
ITC believes that a company should grow in a manner which meets society’s expectation. Reliance Industries Ltd also believes that the firm should be committed to all the stakeholders and the society at large. Additionally, both companies have a strong code of ethics. Reliance has a policy framework that consists of codes of ethics, business policies, and commitments (Chatterjee, 2010). Both ITC and Reliance seem to follow Indian Laws. They both follow section 255 of the companies act as written in the Indian constitution (Chatterjee, 2010). Also, both companies engage in philanthropic acts and offer economic help. Reliance has invested in state of the art medical facilities and donated money same as ITC which has also made investments and donated money (Chatterjee, 2010).
Some internal and external factors have influenced the implementation of ITC’s CRS. Finance is a major factor that has influenced how ITC implements its CRS plans. Since annual plans are within a specific budget, the company has to limit its use of money on CSR. This, in turn, affects the effective implementation of the plan. Mismanagement of funds by officials also affects how the plan is implemented. If funds are not used appropriately then, the CSR plan will not be fully implemented. Potential risks to ITC’s plan are the potential for mismanagement of funds and lack of funds. These risks are shared by all the major Indian tobacco companies.
Revised strategy plan
To ensure that ITC’s social responsibilities are met, ITC should consider a change in Strategy. The organization should set up two bodies, one for coming up with the policies and the other for managing the implementation of the policies. This reduces the number of levels in the chain of command ensuring that beneficiaries can reach the top level quickly and on time. The finances for the CSR plans should be put under a trust accessed only by the implementing body but its balance be publicized. A code of ethics should be written and given to all employees. Furthermore, more emphasis should be put on philanthropic gestures and financial support. External sources of funds should also be sought for to supplement the budget. Furthermore, the company should consider supporting the security sector.
The revised strategy was arrived at after a review of the first plan. The ethical component was selected as it would make the company subscribe to society’s expectations and thus bring the company closer to the people. Philanthropy and financial support are important components of the CSR plan as they will help the grass root stakeholders earn money for sustainable living. Since financial factors are the main influencing factors that faced the first plan, the second plan overcomes them by establishing a trust. The trust is accessible by few people but with a public balance. This will minimize the risk of embezzlement.
In conclusion, the factor of low funds will be overcome when other sources of funds are sought after. Issues of ethics were considered in the development of the new strategy in several ways. Furthermore, ethics among the employees were considered that is why only two bodies are needed so as to reduce chances of conflict. Fewer conflicts mean fewer interruptions in the command chain hence effective performance. Societal ethics were also considered to improve the company’s relationship with the people it is offering services to. Finally, ITC corporate strategy helped achieve the company’s vision of continuous wealth creation for its shareholders while fulfilling the wishes of other stakeholders and fulfilling its social expectations. Besides, one drawback that ITC faced is the fact that tobacco was still its major source of revenue. This was a drawback because tobacco is viewed as a health risk to many and thus is not a reliable source of revenue.
References
Chatterjee. D (2010) Corporate Governance and Corporate Social Responsibility: The Case of Three Indian Companies.
ITC.(2016) Corporate Social Responsibility Policy. Retrievedfrom:http://www.itcportal.com/about-itc/policies/corporate-social-responsibility-policy.aspx
Ojha K. Abhoy.(2010). ITC LTD: Toward a Triple Bottom Line Performance. Indian Institute of Management Bangalore publication. pdf