Redeeming The Past

Letter From the Editor: Can diversified conglomerates compete more effectively than focussed rivals in emerging markets like India? This is an issue that sounds almost as old as the hills, but in recent times, it has come into sharp focus

Published: Jun 19, 2010

As one of the country’s largest corporations, ITC has always remained media-shy ever since the sordid events of the Nineties shook the very foundations of the company. Yet every now and then, it chooses to come out of its shell and provide an opportunity for a more in-depth interaction. Last month, it decided to engage with Forbes India. Chairman Y.C. Deveshwar and his entire top brass shared their perspective on ITC’s future with my colleague, Associate Editor T. Surendar, and me across Delhi and Kolkata and over video conference from Chennai and Bangalore.

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Those who’ve tracked ITC’s fortunes through the decades will know the history of Virginia House in Kolkata’s Chowringhee, where ITC is headquartered. I’ve heard many business leaders pay lip service to serving India’s needs. But right from the time A.N. Haksar took charge as the first Indian chairman of ITC, the company has been a test case for redefining several modern precepts of management. For starters, can diversified conglomerates compete more effectively than focussed rivals in emerging markets like India? This is an issue that sounds almost as old as the hills, but in recent times, it has come into sharp focus as ITC took on Hindustan Unilever, the Indian subsidiary of the Anglo-Dutch multinational that almost made this country its second home.

ITC and HUL are a fascinating study in contrasts. In the last two decades, ITC has decisively moved away from the operating philosophies of its erstwhile parent BAT and struck its own path. HUL, on the other hand, has integrated closely with its parent and recognised that in a globalised world, there are obvious scale advantages of being part of a larger entity.

Today, the two organisations are in the midst of a bruising battle for control of the FMCG market. To my mind, there is no bigger battle between a local challenger and a formidable global giant. To add colour to the drama, Deveshwar is a big MNC baiter. He took on BAT and effectively kept them at bay. He now wants to prove that it takes local insights and knowledge to win in a major emerging market like India. HUL has all the textbook advantages of a dominant incumbent. So the real issue: Can ITC’s sheer determination and its humungous cash hoard break down the hegemony of HUL?

Perhaps not, but it will be a battle that needs to be understood in all its dimensions. We chose to sit on the fence and re-examine ITC’s preparedness. I’ve got to say this: Irrespective of the final outcome, there is nothing more exciting for a business journalist to witness a determined challenger get ready for an audacious assault.

So which side are you on? Do write in to share your thoughts.

 

(This story appears in the 02 July, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • suman chowdhury

    While it will take some time for ITC to match the marketing might of HUL, but ITC's ability to focus and produce results in diversified field from hospitality industry , paper and fmcg is really commendable. Companies like HUL should also learn from ITC how to manage staple food business alongside with detergents and soaps, which is also a non core buisness area for ITC.

    on Jun 25, 2010
  • VAibhav

    ITC is without doubt one of the most respected and diversified companies of India. It makes for a good conglomerate, however, it needs to go a long way to match up to HUL in the FMCG space. <br /> HUL is solely focused in this sector and has created benchmarks when it comes to consumer insights, sales and distribution systems, brand development and brand building. ITC on the other hand has been a a very sales driven organization, thanks to its tobacco business which requires intense distribution. However they need to work on the overall marketing systems to challenge HUL in a domain they have created.

    on Jun 21, 2010
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