Abstract

The case traces the evolution of ITC Limited (ITC) from its inception as a marketing subsidiary of British American Tobacco (BAT) in 1910 to one of India’s most valued diversified corporations. Remarkably, despite being a dominant market leader in the socially undesirable tobacco business, ITC is regarded as a responsible corporate citizen. Even more significantly, ITC which regards itself as an “Indian” company in which BAT, its ‘‘erstwhile parent’’ is a large and important ‘‘shareholder’’, can be held out as an exemplar of the India Way – looking beyond stockholders' interests to public mission and national purpose – articulated by Professor Peter Cappelli and his colleagues at Wharton.

 The century long story is captured in five sections. While first section traces the early years of the company, the next four sections present ITC’s evolution under its four Indian chairmen. The “Haksar Era” outlines the strong nationalist context in which BAT’s stake in ITC was diluted, and the company’s diversification into hotels and paperboards businesses. “The Sapru Era” describes the consolidation of market leadership in cigarettes and the company’s foray into agri-business. “The Chugh Era” captures the tumultuous relationship between BAT and ITC, and the aborted takeover attempt by BAT. “The Deveshwar Era” traces his initiatives to strengthen the core businesses, diversify into new areas and embed a strong focus on social imperatives. The case concludes with questions on the company’s goal to become the No. 1 FMCG (fast-moving consumer goods) company in the country, and the succession challenges faced by Deveshwar.

Learning Objective

The richness of the ITC story (it is a 100-year-old company) along with its unique context (its origins as a multinational subsidiary and its dominant presence in the socially undesirable tobacco business) and its emergence as one of India’s most valuable corporations helps us to explore the entire gamut of issues ranging from “parent–subsidiary” relationships in the context of managing multinationals (in a course on International Management) to the role and purpose of business in modern day society (in a course on Corporate Governance and Leadership). Specifically, the case can be used to evaluate the viability of governance frameworks/leadership models such as the “India Way” – held out as alternatives to the model of management widely practiced in the United States and other Western countries. Is the relevant “society” the one where the headquarters of the multinational is located (“home” country), or is it that of the subsidiary (“host”) country? The potential for conflict between these two mandates is strong. And when the social mission is one of nation development, the management of the parent–subsidiary relationship − already demanding because of inhabiting diverse competitive and institutional environments − could become extremely challenging because of the emotional and political undertones that typically accompany any ‘‘national’’ cause. The ITC case enables one to explore these issues.