COMPETATIVE STRATEGY OF HUL V/S ITC BY SHARANYA.G.S

INTRODUCTION Competitive Strategy consists of move of companies in order to attract customers. With stand competitive pressures and strengthen an organizations market position. The main objective of Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors. 

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.

What are HUL and ITC Ltd.? HUL (Hindustan Unilever Ltd.) This Company is earlier known as Hindustan Lever Ltd. This is Indians largest FMCG sector company 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, HUL has largest no of brands in most trusted brands list.

16 of HULs brands featured in AC-Nielson Brand Equity list of 100 most 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. 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.

ITC Limited This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently headed by Yogesh Chander Deveshwar. 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. For the entire year ending Mar-2009 the turnover of company 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.

Analysis of Both Companies HUL & ITC are major companies in FMCG market in India. When we compare both companies on the basis of their strategies i.e. , their competitive strategies in the present market. When we look at the present segment breakup for both of the companies then we came to know that their different products vary too much in the market.

HUL Segment Breakup ITC Segment Breakup

COMPARATIVE ANALYSIS OF BOTH THE COMPANIES UNDER SOME HEADS: HUL ITC Hindustan Unilever (HUL) is the largest pure-play FMCG company in the country and has one of the widest portfolio of products sold via a strong distribution channel. It owns and markets some of the most popular brands in the country across various categories, including soaps, detergents, shampoos, tea and face creams. ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversifying into non-tobacco. FMCG segments like foods, personal care, paper products, hotels and agri-business to reduce its exposure to cigarettes.

PERFORMANCE After stagnating between 1999 and 04, the company is back on the growth track. In the past three years, till 2008 HULs net sales have witnessed a CAGR of 11%, while net profit has posted a CAGR of 17%. 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 take ambitious, but expensive bets in new segments and deliver modest profit growth.

Risk for both the companies HUL ITC Increased regulatory clamps on tobacco, 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 the conventional FMCG 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. Being an MNC operating in India, HUL is more conservative in its strategies than its Indian counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by domestic players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not able to pass on this burden to consumers. The company's large size also poses a problem, since it does not give HUL the agility to address the competition it faces from national and regional players

OVERALL STRATEGY HUL ITC HUL always believes in customer friendly products with major emphasis on low cost overall without compromising on the quality of the product. They are leveraging the capabilities and scale of the parent company and focusing on the value of execution. 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. ITC is focusing on delivering value at competitive prices. Its tremendous reach through extensive distribution chain has been a competitive advantage. Additionally, the company's e-choupal model for direct procurement is well known under which ITC partners with over 100,000 farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of rural pedigree is hard to beat

Growth Drivers HUL ITC ITCs backward integration to ensure that its products pass efficiently from the farms to consumers has helped it to cut down supply and procurement costs. ITCs non-cigarette FMCG business leverages the large distribution network the company has developed by selling cigarettes over the years. A rich product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting ITCs growth path. The Company has been launching new products and brand extensions, with investments being made towards brand-building and increasing its market share. HUL is also streamlining its various business operations, in line with the One Unilever philosophy adopted by the Unilever group worldwide. Introduction of premium products and addition of new consumers via market expansion will be HULs growth drivers.

Conclusion HULs up-and-running business model is a treat for investors seeking exposure in the FMCG segment. The company has delivered in the past and has the potential to do better in future. In the small and medium term. ITCs growth story is still evolving. ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the companies business model will pay off in the long run. ITC has proved its expertise in the cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability in FMCG can consider the stock with a long-term horizon.