ITC is one of India's foremost private sector companies with a market capitalization of over US $ 22 billion and a turnover of over US $ 5 billion.ITC is rated among the World's Best Big Companies. ITC ranks among India's `10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by Business Week. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery.
Sector selected cigarettes product
Introduction of cigarettes business in ITC LTD.
ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has a leadership position in every segment of the market. It's highly popular portfolio of brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake.
The Company has been able to build on its leadership position because of its single minded focus on value creation for the consumer through significant investments in product design, innovation, manufacturing technology, quality, marketing and distribution.
ITC's pursuit of international competitiveness is reflected in its initiatives in the overseas markets. In the extremely competitive US market, ITC offers high-quality, value-priced cigarettes and Roll-your-own solutions. In West Asia, ITC has become a key player in the GCC markets through growing volumes of its brands.
ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru, Munger, Saharanpur and Kolkata. These factories are known for their high levels of quality, contemporary technology and work environment.
INTRODUCTION ABOUT RISK MANAGEMENT:-
Risk is the ultimate four-letter word of business, investment and government. Entrepreneurs and political leaders understand as well as anyone that if nothing is ventured, nothing can be gained, and that therefore risk can never be entirely eliminated. Nonetheless, the effort to minimize, or at least manage risk, has become a major focus of most corporate entities, and it's standard practice for public companies to disclose their operating risks each quarter in their public filings.
Features
Any effective risk management plan will begin with identifying potential risks, which may exist in many forms. Not only tangible assets like capital can be at risk, but intangible ones such as reputation and goodwill can be damaged, either through the course of normal operations or by some extraordinary circumstance. One common formula for assessing risk is the probability of the event (as a number less than one) multiplied by the cost of the event.
TECHNIQUES
There are as many actual risk management techniques as there are types of businesses, but once a risk has been identified and assessed, most efforts at mitigating the risk fall into four basic categories regardless of the context. The first, avoidance, can be as simple as not engaging in activity that produces the risk, but this not only eliminates risk but potential benefits as well. Risk reduction through concrete steps is far more common, and the specifics will be related to the type of business and risk involved. Risk transference is also highly beneficial as when an available option; it involves outsourcing the problem to another entity such as through the purchase of insurance. Finally, risk retention is inevitable in some cases where the risks are either unlikely, or the costs of mitigating or transferring the risk are prohibitive.
IDENTIFICATION OF VARIOUS RISK INVOLVED IN ITC LTD.
If we talk about the overall risk of the company company company has so many risk involved in business the major four type of risk are INVESTMENT RISK, GOVERNMENT RISK, ENTREPRENEUR RISK, POLITICAL RISK apart from this there are so many risk involved in ITC LTD. That are given below .
Business risk
Cash Flow
Insurance
One dimensional thinking
Financial risk
Financial risk management involves analysis of risk and methods to mitigate risk that may lead to financial loss. It doesn't matter how large or small a company is, having someone or a team of individuals reviewing risk and implementing policies to lessen risk is essential.
Project risk
There are so many risk and issue involved in new project of the company it is very difficult to judge either project is viable or not so many external factor effect the project like political , economical , governmental etc.
Economy risk
We know that economy is situation not stable in every country economy depend on domestic country factor as well as global factor e.g recession in 2009 effect whole global economy so in every business economic risk play important role for the successful and failure of business.
Social risk
Social and cultural risk also effect the business some time society not allow to launch product in the market some time society and cultural against the business product e.g BIEF BURGER OF MC-DOBALDS so society play important role for the success and failure of product
Technological risk
Technology also play important role in every business if your competitor has superior technology but you have not then you can suffer the problem to sale the product as well as competition.
Copy ,patent , Trade mark risk some time some ;- some time copy ,patent trade mark restrict the business to grow because our competitor has right to produce the product and sale the product in market but we have not so we can say that copy right, patent restrict to grow .
Goodwill risk some time product is selling like hot cake reason being brand image of the product . so reputation of business as well as goodwill of business create problem to sell the product in market if your product has good image in market it in positive sign for you and viva versa.
IDENTIFICATION OF VARIOUS RISK IN CIGARETTES PRODUCT:-
THERE ARE SO MANY RISK INVOLVED IN CIGARETTE BUSINESS WHICH ARE DISCUSS BELOW:-
Manufacturing risk
Paper risk
Tobacco production risk
Taxation
Sales risk ( cigarettes advertisement effect sales)
Purchase restriction
Health issue
Smoking bans
Cigarette butt
Cigarette litter
Apart from this there are so many other risk involved in cigarette business risk that are given below.
Investment risk
Strategic risk
Operational risk
Financial risk
Environmental risks, including natural disasters
Employee risk management, such as maintaining sufficient staff numbers and cover, employee safety and up-to-date skills.
political and economic instability in any foreign markets you export goods
Manufacturing risk:- While the assembly of cigarettes is straightforward, much focus is given to the creation of each of the components, in particular the tobacco blend, which may contain over 600 ingredients, many of them flavorings for the tobacco. A key ingredient that makes cigarettes more addictive is the inclusion of reconstituted tobacco, which has additives to make nicotine more volatile as the cigarette burns.
Paper risk :- The paper for holding the tobacco blend may vary in porosity to allow ventilation of the burning ember or contain materials that control the burning rate of the cigarette and stability of the produced ash. The papers used in tipping the cigarette (forming the mouthpiece) and surrounding the filter stabilise the mouthpiece from saliva and moderate the burning of the cigarette as well as the delivery of smoke with the presence of one or two rows of small laser-drilled air holes. This paper is very expensive . if we talk about cigarettes paper is raw material for this. If raw material is costly product cost is also rise.
TOBACCO RISK ;- Tobacco is blend in paper tobacco is a agricultural product is production is seasonally and depend upon nature so production of tobacco is also a risk for ITC limited
Price of cigarette is depend upon demand and supply of tobacco. If demand of tobacco is more then price is high and vica versa.
Taxation;- Government impose more tax on cigarette company because cigarette is harmful for health government want less consumption of these product so government impose more tax on cigarette company . resultant low income, low investment, low modern technology used. Overall as compare to international market cigarette industries is not growing.
Sale risk :- we can say that there is a restriction to the sale of this product to minor and in every advertisement it is necessary for all cigarette company to print these wording "cigarette smoking is injure to health" resultant limited sale of cigarette . so we can say that sale risk is also a big risk for ITC LTD.
Purchase restriction: According to Indian law those person whose age is below 18 year cannot purchase cigarette target customer is only middle and old age people .it has been illegal for retailers to sell tobacco in all forms to people under the age of 18 in INDIA.
Health issue :- Cigarette use by pregnant women has also been shown to cause birth defects (which include mental and physical disability).On average, each cigarette smoked shortens lifespan by 11 minutes and half of smokers die early of tobacco-related disease and lose, on average, 14 years of life.
Smoking bans :- Many governments impose restrictions on smoking tobacco, especially in public areas. The primary justification has been the negative health effects of secondhand smoke. Laws vary by country and locality. See:
Smoking age
Smoking bans
Smoking bans by country
Smoking bans in private vehicles
Difficult to rise in Indian market as well as global market..
Cigarette butt The common name for the remains of a cigarette after smoking is a "(cigarette) butt". The butt typically comprises about 30% of the cigarette's original length It create lot of pollution so government restrict it is against the society we can say that indirectly it is a societal risk.
Other risk
Investment risk
On ground of assurance of the return, there are two kinds of Investments - Riskless and Risky. Riskless investments are guaranteed, but since the value of a guarantee is only as good as the guarantor, those backed by the full faith and confidence of a large stable government are the only ones considered "riskless." Even in that case the risk of devaluation of the currency (inflation) is a form of risk appropriately called "inflation risk." Therefore no venture can be said to be by definition "risk free" - merely very close to it where the guarantor is a stable government. For the business of cigarette few people will be ready to give gurrantee.
Strategic risk
Strategic risks are those risks associated with operating in a particular industry.
They include risks arising from:
merger and acquisition activity
changes among customers or in demand
industry changes
research and development
Financial risk
Financial risks are associated with the financial structure of your business, the transactions your business makes and the financial systems you already have in place.
Identifying financial risk involves examining your daily financial operations, especially cashflow. If your business is too dependent on a single customer and they are unable to pay you, this could have serious implications for your business' viability. See our guide on how to identify potential cashflow problems.
Operational risk
Operational risks are associated with your business' operational and administrative procedures. These include:
recruitment
supply chain
transportation
accounting controls
IT systems
regulations
board composition
Application
At last we can say that there are so many risk involved in cigarette business which are discussed above to consider all the risk cigarette business take its position government risk and political risk is major risk in cigarette business apart from this raw material risk like paper, filter, paper filter tobacco are the other major risk if we see the past data we can say that tobacco price and tax on tobacco price increase every year 9due to some government policy even in budget 2010 cigarette is costlier as compare to previous budget ) and no subsidy is provide to this sector if subsidy is provide to this sector this sector will grow domestically as well as internationally but question arise "what about the health of the person" then make rules and regulation for domestic country for less consumption of cigarette and promote industry to go globally so that our export is more we reduce current and capital account and increase the GDP of the country
REFRENCES
http://www.ehow.com/about_4681522_what-risk-management-techniques.html
www.itcportal.com
en.wikipedia.org/wiki/ITC_Limited
http://en.wikipedia.org/wiki/Cigarette
http://www.businesslink.gov.uk/bdotg/action/detail?r.s=m&r.l1=1074404796&r.lc=en&r.l3=1074404839&r.l2=1079050214&r.i=1074405230&type=RESOURCES&itemId=1074405311&r.t=RESOURCES
http://en.wikipedia.org/w/index.php?title=Special%3ASearch&search=RISK+IN+CIGARETTES+SECTOR+&go=Go
http://www.businesslink.gov.uk/bdotg/action/detail?r.s=sc&r.l1=1074404796&r.lc=en&r.l3=1074404839&r.l2=1079050214&r.i=1074405311&type=RESOURCES&itemId=1074405670&r.t=RESOURCES
http://en.wikipedia.org/wiki/Investment_risk
