Final Project Submission: Final Case Study Analysis and Strategy Proposal

7-2 Final Project Submission: Final Case Study Analysis and Strategy Proposal

Southern New Hampshire University

OL-326-X1402 Social Environment of Business

ITC is one of India’s leading private sector corporations with a market value of $ 52 billion U.S. Dollars and a Gross Sales Worth of $ 10 billion U.S. Dollars (ITC, 2019). This renowned business has become the largest tobacco company in the country and has established several brands within this industry. Its leadership model has a single set concentration on an unremitting value for consumers. This is done by utilizing its significant investments in producing superior innovative products, having consistent & superior quality, using advanced production technology, and maintaining a superior marketing and distribution plan. ITC also has a diversified presence in India in regard to its business ventures. Their portfolio encompasses FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. ITC’s diversified businesses’ sit upon a solid foundation of established strengths resulting from its profound consumer understandings, pioneering R&D, distinguished product volume, followed by its, first-class production substructure and effective trade publicizing. The vision of the corporation is to enhance the wealth of its stake holders while fulfilling the aspirations of societal expectations, all while following under the statement “Enduring value. For the nation. For the Stakeholders” (Ojha, A, 2010)

One of the most significant strengths that ITC maintains is the broadening into industries unconnected to tobacco. As of 2011 ITC has become a dominate player in the cigarette and maintains about 75% of the market. As this market is considered controversial due to the health effects of smoking, ITC started to become more diverse in terms of its presence in other markets and industries. However, with an effort to maintain a low-key presence in the tobacco segment, in 2009-2010 80% of the company’s profits came from tobacco related sales. ITC’s dependency on the Tobacco and Tobacco related products couldn’t be more under-emphasized. Their triple bottom line approach has also garnered a strength for the company as its successes within the financial and economic parameters has appeared to be very relevant. The organization has seen a total turnover $6 billion U.S. Dollars and a market capitalization of $30 Billion U.S. Dollars. Shareholder returns have increased as that of the company’s dividends to the tune of a compounded rate of 24% per annum for 15 years before 2010. Multiple drivers of growth have since come from its diversified portfolio (Ojha, A, 2010).

ITC’s corporate plan of action is to maintain various avenues of growth based upon its individual aptitudes such as building product and supply chain management. As an increased level of time and resources being devoted to tobacco, there are some weaknesses that come to mind. Smoking as everyone is aware of, is a major health subject and as a result taxation by the government has increased extensively to replace revenue requirements. Public bans on smoking in the workplace, restaurants, airports, shopping areas and a variety of public areas have proven to be a continuous problem that the company sees (Ohja, 2010). Overall ITC has proven to be a sustainable company that has given so much back to its communities across India through employment and financial support.

To understand Social Responsibility, one would have to look at this concept as, having a duty to act in the best interest of the environment and society. When looking at the business side, social responsibility, is identified as corporate social responsibility (CSR), and should be a part of any businesses plan for success. CSR promotes constructive relationships with the community and fosters a positive image the companies do care about their impact on the environment and humanity (Ganti, A, 2019). Upon the passing of the Companies Act in 2013, India became the first country in the world to require companies, who have more than $70 million in net worth, to invest their profits in areas that include education, poverty, gender equality, and hunger, to be CSR compliant (Shira, D, 2019)

As stated previously, ITC is in full compliance with India law and has developed a corporate social responsibility plan that recognizes business initiatives and economic ventures that come from its society and the resources of the country it operates in. ITC’s company operational contributions come from its Triple Bottom Line approach to developing financial, social and environmental wealth in the direction of enhancing a collective sustainable society. Calculated game changing models developed to present a power of entrepreneurial innovation and creativity has allowed the company to go beyond just financial support and generate a positive livelihood for communities while creating limited environmental impact.

Many of the Corporate Social Responsibility plans the company uses involve environmental replenishment, support of rural development, promotion of education, offering preventive healthcare, creating sanitized drinking water and improving lives for those from disadvantaged sections of society. One potential risk to internal and external stakeholders is if funds appointed for CSR projects are not spent then they can be rolled over into the budget for the next fiscal year however, companies are required by law to deposit the unspent CSR funds into a fund prescribed under Schedule VII of the Act. Noncompliance of the law will result in monetary penalties or imprisonment. Therefore, executives must be fully vigilant and aware of the company’s operations. In addition, the size of the company presents a potential risk in regard to full compliance to laws and the implementation of a program that has the size and magnitude of ITC’s CSR program (ITC, 2019).

Through ITC’s CSR program, potential positive impacts include more rural development, enhancement of the environment and increased support for the community to receive better educations. This will create a positive image of care and responsibility within supported communities, which in turn will benefit the stakeholders of the company. In addition, there is potential to have a large impact on providing jobs throughout the country. One risk that comes from the company’s business operations is that of smoking. By not implementing the risks of tobacco use by consumers in regard to the dangers of smoking, presents a danger to India’s population. The lack of information in ITC’s CSR program will look poorly on the company. Loss of support for ITC’s employees and businesses may result from looking past a socially responsible topic as educating the public on the risks of smoking. Additionally, another key weakness for ITC is that the greater part of their business and revenues are devised from their tobacco production, which is strongly looked down upon throughout the world. Taxes continue to rise on the industry as a result and thus causes the company to raise its prices.

Through the Triple Bottom Line method has allowed ITC to evolve its approach to social responsibility. Changing visions of new generations have also forced companies like ITC to become more socially responsible. The Companies Act also unquestionably resulted in ITC to expand a smaller scaled idea into a much larger one that the end stated resulted in communities benefiting more. What is unique to this organization is that ITC is made up of several entities that can create a larger scale CSR program. The evolution of CSR within this organization may have come from the lack of influence that similar company, Phillip Morris, has on the United State in terms of its own CSR program. As communities have continuously benefited from ITC’s influence, this has allowed them to expand their principles and show their true impact on the people of India. As ITC expands as a company, so does its corporate social responsibility and the ability to evolve its programs (ITC, 2019).

Compared to other corporations ITC is exceedingly steady in respect to social responsibility inside and outside of their corresponding industry. The corporation is extremely involved and has several options in place associated to CSR. The corporate social responsibility values are also entrenched within the company however, it is sometimes difficult to evaluate ITC to other businesses in their industry considering their extensive range of business divisions. If a comparison of corporations was on hand and ITC’s tobacco and cigarette industry that was the topic, they would be looked at as the top in regard to social responsibility. The numerous programs that have been put into place to better the quality of life in India is predominantly more than other tobacco companies globally. British American Tobacco and Philip Morris have implemented their own CSR programs and if these policies weren’t put into place, they would certainly come under scrutiny without some type of CSR policy considering the industry they are in and the size of both companies. In comparison to companies outside of the tobacco industry, ITC still is sitting towards the top because of the policies in place.

The company’s decision-making is concentrated on the greatest concerns of stakeholders. Checks and balances also make up a majority of decisions made as it is a method to ensure power is not exploited and the decisions will benefit stakeholders. ITC’s corporate social responsibility and Sustainability Committee will be assigned based on the board of directors’ approval. A CSR Plan outlining all programs to be conducted throughout the fiscal year and the associated budget will be identified and taken into consideration. There is a strong belief in transparency and accountability as these all are the framework for decision making at the company (ITC 2019).

ITC has an incredibly thorough Code of Conduct policy which also comprises their corporate control approach and their principles. As stated in their corporate governance statement on ethical corporate citizenship “ITC believes that corporations like itself have a responsibility to set exemplary standards of ethical behavior, both internally within the organization, as well as in their external relationships. The Company believes that unethical behavior corrupts organizational culture and undermines stakeholder value.” (ITC, 2019.). In regard to corporate social responsibility this is particularly true. According to ITC’s web page the company has a complete section of its CSR policy in association to governance. It fully explains the checks and balances they take to ensure that determinations are made ethically.

There are no major gaps in the organizations strategy mostly due to the comprehensive governance policy the company maintains regarding any decisions associated to CSR. However, policies already established in ITC state that the Corporate Management Committee that oversees programs involved in CSR will meet once per quarter for a review of programs and issues. This will result in fewer errors and less of a chance for any potential problems that may affect stakeholders.

When thinking of ITC, socially responsibility comes to mind. They are a company who is devoted to improving the quality of life for many of India’s people and many more across the world. There is a strong belief from the firm to continue to help their country and establish programs that will help the environment and the citizens of their nation. Within the scope of CSR, ITC is exceptionally conforming when it comes to the standard models of CSR in today’s business environment. ITC’s strategic plan establishing the company’s CSR program is outstanding and allows extremely little space for possible threats to stakeholders. Suggested improvements the business may possibly take are not essentially part of their CSR approach plan however, continued diversification into new segments business that are less contentious and have less of a negative effect on communities may be a better plan of action. This action will expand the footprint of the company and only make them a stronger company in regard to CSR. When compared to other corporations globally ITC is exceedingly steady, notably with others from similar industries. There is much detail that ITC employs when it comes to their decision-making methods. ITC comprehensive approach gives little room for possible consequences as its system of checks and balances, combined with their beliefs in ethical business practices are rooted throughout the company.

The CSR strategy plan that ITC has established is an incredibly thorough CSR policy that involves numerous distinct segments and facets of social responsibility. This plan effects individuals not just only in India but throughout the world. ITC’s plan encompasses four essential sections in which every element of this strategy will be found in one of these sections. The following four segments consist of philanthropic, economic, legal, and ethical. Every one of these segments are incredibly crucial to ITC’s complete CSR approach strategy. The leading role of the CSR approach strategy that ITC deploys is focused on enhancing the value of life for the residents of India. There is a particular spotlight on women, children’s education and farmers (Ojha, 2010). In order to maintain such an inclusive CSR program, the corporation must also be profitable, and this is where the economic segment comes into play. ITC, “as the organization had a turnover of over US $6 billion and a market capitalization of nearly US $30 billion” (Ojha, 2010.). The corporation is operated extremely well on a management scale and in the case study, it indicates that each company segment, other than one, was exceptionally profitable. This demonstrates the real depth of the corporation and the success of diversifying the business when tobacco is their primary segment.

Several corporations have established CSR programs that mirror ITC’s plan to include the components that make up their strategy. However, each company will tailor its own CSR strategy that reflects the size to the company, how many separate segments that they operate in and how profitable they are. Every CSR approach strategy will have the four key foundations of philanthropic, economic, legal, and ethical. Nonetheless, each corporation’s programs that and individual business segments will still fall into these key foundations but may vary in some fashion. Philip Morris USA has comparable elements to that of ITC that it has established tobacco as its primary division of the business. Just as ITC has done in India, Philip Morris USA has done the same for farmers in the U.S. by promoting sustainable farming, and good agricultural methods.

There are numerous influences that make up a CSR approach strategy and comprise of internal and external effects. External influences that ITC and other tobacco companies have dealt with primarily come from criticism due to the adverse health consequences of tobacco. A strong CSR program can counter the public opinion to show that ITC and other corporations are committed to social responsibility. ITC’s core values make up the internal influences of the company, respect for people and nation orientation (ITC, 2019). Several elements of the CSR approach strategy are developed from these values. The corporation considers strongly supports their country in many directions. ITC’s CSR programs contribute assets created to support the environment and sustainable farming methods. The impact of the internal and external influences that ITC sees have significantly impacted the corporation’s CSR strategy in a way that the company has equaled and surpassed industry standards.

A significant risks that ITC is exposed to is the limiting assets available to offset the damaging publicity of the corporation’s core segment of tobacco. ITC has been investing in other sectors of business in the attempt to diversify and sway away from tobacco. However, there is little evidence that the corporation is making an effort to research the adverse impacts of tobacco and an effort to investigate the possible methods that could counteract these negative side effects. Additionally, cigarette butts damage the environmental impact and non-smokers are exposed to dangerous secondhand smoke. The stated risks are not just directed to ITC but numerous other corporations in the industry have experienced similar risks as these are issues are seen across the entire industry.

The revised strategy will consist of similarities from the old plan with one of the key changes in philanthropy. Establishing new programs that will be devoted to researching the health effects of tobacco and finding methods to combat addiction, are one suggested course of action. There will be a requirement to have a joint relationship with an expert in the health research field. In addition to the changes in research, new programs that will be dedicated to the environment should be established as well. More research in designing cigarette butts to be completely biodegradable is a must.

While developing this plan internal and external influences were taken into consideration. The established company values and methods shows an internal commitment to enhance society and our planet. Existing programs and elements of ITC’s CSR strategy demonstrate these values however, there seemed to be something was missing. When looking at ITC and the fact that they are one of the largest tobacco companies in the world, they should have already established research methods in finding ways to make tobacco consumption safer for consumers and the environment.

There was no indication with problems or issues involving ethics from ITC’s prior CSR approach strategy, so there was no need to revise or make changes. Ethics is the basis of the CSR program and ITC has established its position regarding its dedication to company ethics and the excellent job of deploying its CSR strategy. Ethics has an influence in each of ITC’s programs and sections of their old CSR strategy as that of the new as well.

References

Ganti, Akhilesh (2019) Social Responsibility. Retrieved from, https://www.investopedia.com/terms/s/socialresponsibility.asp

ITC (2019) CSR Policy. Retrieved from, https://www.itcportal.com/about-itc/policies/corporate-social-responsibility-policy.aspx

ITC (2019) Our Profile. Retrieved from, https://www.itcportal.com/about-itc/profile/index.aspx

Ojha, Abhoy (2010) ITC LTD.: Toward a Triple Bottom Line Performance. Retrieved from, https://hbsp.harvard.edu/download?url=%2Fcourses%2F635474%2Fitems%2FIMB339-PDF-ENG%2Fcontent&metadata=e30%3D

Shira, Dezan (2019) Corporate Social Responsibility in India. Retrieved from, https://www.india-briefing.com/news/corporate-social-responsibility-india-5511.html/