Porter s Diamond Model

Factor Conditions -

Moderate

As it could be read from the case, the factors that were available for the tinplate market were moderate for TCIL to market their product. Edible oil and processed food segment were TCILs largest business operations which were followed by battery and crown other miscellaneous products.

The raw material for manufacturing tinplate, Tin Mill Black Plate (TMBP), continued to be entirely imported. TCIL faced inherent disadvantages: they were continuing to import TMBP, while all major steel mills worldwide were making both their own TMBP and their own tinplate. In 1997, TCIL established a new cold rolling facility. Combined with the supply of hot rolled coils from Tata Iron and Steel Company (TISC) (a sister concern), TCIL was now in a position to receive an uninterrupted supply of raw material to meet the tinplate product demands. TCIL supplied tinplate to manufacturers in four major product segments: edible oil cans, soft drink crowns, processed food and batteries. While the first three manufacturers were food related, they were viewed as distinct segments, due to the buying behavior of their end users, brand equity related to their end products and the nature of competition in the food market. The import duty structure for tinplate gave credence to the view of liberalization. The downward revision of customs duty resulted in foreign companies entering the tinplate market. A review of the content of the imports revealed that a large portion of the product being imported under the low customs tariff were secondaries, which were not prescribed for food packaging. Though manufacturing prime tinplate required adherence to stringent standards, lack of proper monitoring mechanisms to ensure the standard of tinplate

required in the food sector, encouraged some manufacturers to use secondaries for packaging food products. Despite buying centers influences belief that Tinplate Company of India had the capabilities to cater to the technical requirements of their customers, the company was not capable of responding to the changing and sensitive needs of customers. (Market demands for more fizz in soft drinks could require a change in the tinplate specifications or tinplate with new specifications might be required to accommodate a new line of equipment in the battery industry.) Tinplate Company of India was caught between the highly price sensitive lower-end customers and the high-service expectations of the highend customers.

Related & Supporting Industry -

Fully Capitalized

Soon after the lowering of customs stuff, global tinplate manufacturer and other unorganized suppliers began to move aggressively into different segments of tinplate market of India. After acquisition with Tata Steel and Iron Company in 1981, TCIL increased its involvement in the packaging industry by adding a facility to manufacture tinplate with thicknesses that could range from 0.17 millimetres to 0.30 millimetres. The company started addressing the requirements of the metal packaging industry, which required imported tinplate for the production of cans for baby food, processed food and tinplate for battery jackets.

Coca-Cola and Pepsi were the two brands that dominated the Indian soft drink industry. These multinationals demanded a high standard to product parameters and even sample tested the crowns in Japan and Atlanta, Georgia. Due to such stringent focus on specifications, the companies that catered to Coca- Cola and Pepsi purchased their requirements from foreign companies, such as Fritz, Sukai and TMN, forcing a number of the Coca-Cola and Pepsi competitors to fold in the past decade.

Battery manufacturers bought about 90 per cent of their tinplate from foreign companies, as even a minor flaw in the tinplate quality (which could cause difficulties in printing the battery label, and thus affect the brand image) could lead to rejection of their product.

The processed food industry used tinplate for packaging foods such as fruit pulp and juices, mushrooms, meats, coffee and cashews. The food market included well-known companies such as Nestle and Brooke Bond. Traditionally, these brands have had a business relationship with the Tinplate Company of India, buying 22 per cent of their cans from this supplier.

The edible oil industry differed from the other industries in the willingness of their can manufacturers to waive the specification required for products made from tinplate. In other sectors, manufacturers were not in a position to waive specifications, due to the brand equity built up over a period of time and manufacturing complexities.

Competition to Tinplate Company of India in the edible oil segment was largely from the unorganized companies. In other segments, competition came from foreign companies. SAIL was a company that made significant inroads into the edible oil segment by positioning itself as a company that was better than the unorganized sector. Tinplate Company of India and SAIL catered to organizations in the edible oil segment that were more sensitive to specific product parameters, rather than just price. Even these customers may not exhibit loyalty because of the price-sensitive nature of end users of edible oil.

Demand Condition -

Attractive

There was a huge demand for tinplate across the globe. The Tinplate market was about 210,000 metric tons (t) per annum, of which the food sector, including edible oil, processed foods and crowns, consumed about 94 per cent of tinplate for packaging see. The edible oil industry was the single largest driver of tinplate demand in the country, consuming almost 148,000 t or about 70 per cent of total tinplate demand. India was becoming more westernized in its tastes and placed a high demand for packaging solution by tinplate. As household units becoming smaller demand for smaller packaging with increased busying frequency also raised high. On the other hand growth in hotel industry also indicates sustained demand for bulk packs. Finally high industrial

growth which is almost 9% implies that there is increasing demand for branded/ packed products, the driving force would continue to remain buyout. Customer satisfaction of tinplate from different manufacturers across different segments reflects the customer perception of specific product parameters. Although TCIL scored well on most parameters in the edible oil segment, customers may prefer alternate suppliers if their prices are lower. Customers may even waive the prerequisites on specific parameters in favor of a lower price with a competitor.

In addition to increased Indian demand for tinplate packaging products and the potential size of the Indian market, TCIL was encouraged by two other factors: the growth in the tinplate market and the Indian packaging consumption pattern. When analyzing the specialty tinplate industrys sales growth from 1993 to 1997 the industry experienced enormous growth in total sales through the years. In 1997 the growth level in battery segment was 20%, the edible oil segment was 5%, crown segment was 15% and processed food was 10%. Focused on higher priced than competitors and targeted to number of different segments.

Firm Strategy / Structure -

TCIL management had established the strategy of the firm to be focused on high price high quality product in number of different segments of the tinplate market. From the customer satisfaction table we can see that at the battery segment, in all the product parameter except price and and service, TCIL has the lowest rating compared to other competitors, which means only TCILs pricing is more reasonable and acceptable to customers. On the other hand, the biggest segment that is edible oil segment TCIL has great score in most parameters except price. Thats why customers prefer alternating suppliers with the lower price. At the soft drink crown segment TCIL also has lower rating in price and other parameters other than delivery. Finally in the processed food TCIL has greater score in price and delivery.

Competition to Tinplate Company of India in the edible oil segment was largely from the unorganized companies. In other segments, competition came from foreign companies. SAIL was a company that made significant inroads into the edible oil segment by positioning itself as a company that was better than the unorganized sector

Tinplate Company of India and SAIL catered to organizations in the edible oil segment that were more sensitive to specific product parameters, rather than just price. Even these customers may not exhibit loyalty because of the price-sensitive nature of end users of edible oil. In other segments, namely battery, crown and processed foods, foreign companies owned the majority of the market. Despite buying centres influences belief that Tinplate Company of India had the capabilities to cater to the technical requirements of their customers, the company was not capable of responding to the changing and sensitive needs of customers. (Market demands for more fizz in soft drinks could require a change in the tinplate specifications or tinplate with new specifications might be required to accommodate a new line of equipment in the battery industry.)

Government -

Not Much Mentioned In the Case

The case does not discuss any relevant clauses that relates to any form of government intervention towards this industry, or how they operate in the respective countries. Although, the case does discuss how these firms would enter into the desired markets and capture their attention.

The foreign companies aggressively entering into the Indian tinplate market is a result of liberalization and lowering customs tariff. On the other hand, as the regulating standard lacks enforcement widespread use of sub standard, defective tinplate is increasing. The political climate showing sign of continuity in policies toward industries also implied survival of strongly focused, customer oriented companies.