A Manufacturing unit in Stainless Steel in India

What strategies in product mix and sales channels have successful plants adopted in Stainless Steel industry in India?

Submitted by: Tarun Mehta

Dissertation fulfillment for the M.A. in Entrepreneurial Management European Business School, Regents College, London September 14th 2007,

Under the Guidance of: Chris Coleridge

Table of Contents

ACKNOWLEDGEMENT...3 1.0 INTRODUCTION..4 2.0 LITERATURE REVIEW..6 A. BACKGROUND OF STAINLESS STEEL..6 B. THE PRODUCT MIX6 C. MANUFACTURING STRATEGY...9 D. SALES CHANNEL..12 E. DIRECT AND INDRECT DISTRIBUTION..14 F. KEY CONSIDERATIONS FOR SUCCESSFUL SALES CHANNEL..15 G. RESOURCE BASED THEORY..16 H. IMPLICATION OF VALUE CHAIN..19 I. CONCLUSION21 3.0 RESEARCH METHODOLGY...22 A. SECONDARY DATA.23 B. LIMITATIONS FOR SECINDARY DATA...24 C. PRIMARY DATA25 D. LIMITATIONS FOR PRIMARY DATA25 4.0 SECONDARY ANALYSIS.26 A. STEEL: GLOBAL PERSPECTIVE.26 B. AN OVERVIEW STEEL INDUSTRY28 C. INDIAN STEEL INDUSTRY: AN APPRISAL..30 D. INDUSTRY SHOWCASE...31

E. ANALYSIS OF THE INDIAN STEEL INDUSTRY..35 F. TRANSFORMATION STRATEGY...40 5.0 PRIMARY RESEARCH 42 A. Interview with Mr. Jason Katplan, Analyst in Cru Steel, London...42 B. Interview with Mr. Mukesh Chandan, Managing Director, Chandan Steel Limited, India...45 C. Email sent to Mr. Jitendra Kanungo, Manager, Ramani Steel House, India46 D. Email sent to Mr. Robert Hobson, Senior Analyst, MEPS (International) Ltd48 6.0 ANALYSIS50 7.0 CONCLUSION.52 8.0 BIBLIOGRAPHY55 APENDIX 1 APENDIX 2 APENDIX 3

ACKNOWLEDGEMENTS
I would like to express my sincere thanks and gratitude to Mr. Chris Coleridge, for his invaluable support and information which helped me to complete the project.

To all the people in CRU Steel, London, who allowed and entertained my queries, especially to Mr. Jason Katplan, who gave me his important time and all the information that I needed.

To Mr. Mukesh Chandan, Chandan Steel Ltd, India, I would like to express my gratitude. He did give the information on the Indian steel industry, which was the root of my research. His knowledge about the industry and operations in the Indian market was very helpful.

To European business school, which gave me an opportunity to enlighten my knowledge about the steel industry. To all the people who helped me in gathering information to achieve the research objective.

Finally I would like to thanks my family without whose support it was difficult to gather and analyze the information I had. My family had been a great source of inspiration for me in completing this project.

1) INTORDUCTION
Up till the early nineties, the manufacturing units in the steel industry in the Indian economy had been operating under a much protected environment; the need for competition was felt in the industry as the entire industry had been revolving around a few big players like SAIL, TATA Steel, and Jindal. This protected environment had resulted in limited production efficiency, lack of better products and lack of good professional practices, (Ranganathan and Kannabiran, 2004) but the opening up of the economy for the foreign investments; globalization, privatization and deregulation have created some hurdles and opportunities for the Indian manufacturers in the steel sectors. Following the liberalization, there have been a number new entry in the Indian steel industry, which led to increase in the production but the demand, was never stagnant as it went on increasing year by year. Till date the Indian manufacturers are not capable to produce the amount of steel products which can meet the demand within the country.

The paper will try determining the need for setting up a manufacturing unit in the steel sector with analyzing the big players in the Indian steel industry. The work done in this paper will try to review at how some big players have established themselves in the steel industry. It will examine the strategies required to increase the sales nationally and internationally and what will be the optimum product mix for the steel industry in order to be successful.

Steel industries in India contribute up to 34.03% of the total export in the years 200203, out of which stainless steel products signifies about 42,931.85(in INR /IN lakhs) (47.70 million) of exports from India and it is expected to grow by 35% every years.

Average annual base paid to Production skilled worker in china is $2300 while in India it is $1900. this clarify that apart from cost, though India has an advantage of skilled and cheap labour but still it lags way behind china, which ranks 1st among the developing countries and 3rd in world market for producing about 349.4 million ton of stainless steel in 2005, whereas Indian produced about 38.1 MT during the same year. Indian steel industry need to more efficient in utilizing it recourses to increase it sale in international market and that can be achieved by selecting a proper product mix and establishing an efficient sales channels.

2) LITERATURE REVIEW:
What strategies in product mix and sales channels have successful plants adopted in Stainless Steel industry in India?

A) Background: Stainless steel is a subset of iron based alloys, which has a major content of Chromium and Nickel which enables the metal to resist corrosion, mechanical resistant, energy absorption; high temperature resists 100% recyclable, hygienic, and aseptically fashionable and because of its distinct features this type of product is applied in different industries: such as handling equipment, construction industry, building exteriors, automobile industry, chemical processing plants, pulp and paper industry, water supply industry, consumer products, shipbuilding and many more.

B) Product Mix: The term product mix has received considerable amount of attention in any industry and has been given more importance in the literatures and by the economists. The importance is been given to develop the weighs for the product in the wide range of products based on the single objective, maximizing the firms profitability. But the weighs of the product should be given on the basis of their ranks. Ranking the products is not an easy task because it is driven by a number of financial and nonfinancial goals and objectives; also it has to deal with some complex terms like time, cost, uncertainty and interdependencies between the manufacturing system along the products for the product mix and the accounting system.

Studies have shown how the traditional costing system, theory of constraint (TOC), Activity Based Costing (ABC) are compared in making the product mix decision. (Corbett, 1998; Low, 1992; Holmen, 1995; MacArthur, 1993; Kee and Schmidt, 2000; Goldratt and Cox, 1992). Low, (1992) and Spoede et al (1994) illustrates that TOC can be more profitable mix than ABC. Kee (1995), using the same examination shows that an ABC model which integrates the cost of capacity of production activities can perform better than TOC. In stainless steel industry it is very important to reduce the raw material cost or to have maximum utilization of the resources. For both traditional costing and ABC, Low (1992) and Corbett (1998) have used the same costing system to calculate the margin which is sales minus raw material costs. Reconciliation suggested by Holmen (1995), MacArthur (1993), Bakke and Hell berg (1991), reveals that TOC, with its focus on variable costs and ABC, with its focus on the wide planning activities will be complimentary models in making a decision for the product mix. These learned men are of the conclusion that for the short run decisions TOC is appropriate where as ABC is optimum in the long run decisions. The product mix algorithm reveals that how can a firm have maximization of resources to maximize its manufacturing performance, Lea and Fredendall, (2002). However, researchers like Goldratt and Cox, (1992) argue that the TOC product mix algorithm would perform as good as or better than ABC, Lea and Fredendall, (2002). While, Fredendall and Lea, (1997), (2002); Plenert and Lea, (1993) said that getting an optimum solution from TOC is not guaranteed, because it considers only the constraints while determining the product mix.

Different firms have different operating strategies; these firms have different rankings for different strategies in terms of importance to the major long term strategies such as

product differentiation and cost leadership, Shank and Govindarajan, (1992). Majority of the firms seek cost control meanwhile differentiate the products from competition through promotion, branding, advertisements, and designs Green, (2002). The cost leadership and the product differentiation have a huge impact on the performance of the firm. The performance would differ depending on the assigned weights to the products to the performance metrics. A single objective will be considered that is of cash flow and the other objectives will be left aloof by these methods. Hence, Fuzzy hierarchical technique will be more effective than the methods discussed above. Zadehs (1965) pioneered the use of fuzzy sets. Bellman and Zadeh (1970), Dubois and Prade, (1979), Jain, 1976 and Yager, (1978; 1981) proposed a decision making paradigm using second order fuzzy sets.

Long term Growth of the firm

Cost Leadership

Product Differentiation

Earnings

Cash Flows

Market Share

Non Financial Objectives

Sheets

Pipes

Flanges

Bars

Evaluating and assigning the weights and the ranks to the products as per the product mix. Any firm under the study of this fuzzy hierarchical model will be able to rank order or assign weights to the number of products it deals in. according to the model the firm goal of long term growth is fulfilled by the bottom level. Here the first level

attributes towards the two important terms that is cost leadership and product differentiation. The second layer represents the corporate performance: Earnings, cash flows, market share and objectives that are other than the financial ones. The Layer at the bottom represents the product mix of the firm and the performance of each one can be revealed by this model. Seamless pipes are those pipes which are made up from solid billets, these billets are than heated in a furnace and they are rotated under extreme pressure. The rotation helps the billets top open up from the centre which is than shaped and converted into the form of a pipe.

C) Manufacturing Strategy: Taking manufacturing strategy in to account different author have different perspectives; Skinner (1969), is the pioneer in giving definition to Manufacturing Strategy. He believes that Manufacturing Strategy means to exploit some of the properties of the manufacturing function as a competitive weapon. On the other hand Hayes and Wheelwright (1985), have a different view point of defining manufacturing strategy as a consistent pattern of decision making in relation to the manufacturing function which will be linked to the business strategy. To this Hill (1987), has a different approach; he states that manufacturing strategy is a coordinated approach in which consistency is achieved between the functional capabilities and the policies for the success of the business in the market place. A very different approach has been given to manufacturing strategy by Swamidass and Newell (1987), as they mentioned that manufacturing strategy should be effective as a competitive weapon for achieving the business and the corporate goals.

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The literature on the manufacturing strategy reviewed by Anderson et al (1989) states that there is a lacking for a solid research in manufacturing strategy, terminology, frameworks and hypothesis. Minor et al (1994) reviewed only empirical studies and did not consider other methodologies available in manufacturing strategy research such as exploratory cross sectional and conceptual. Pannirselvam et al, (1999) and Prasad et al, (2000) were in general in nature and were not specifically on manufacturing strategy. A total of 260 articles have been reviewed and they have been published in five journals International Journal of Operations and Production Management, (IJOPM), Journal of Operations Management, (JOM), Productions and Operation Management, (POM), California Management Review (CMR) and Havard Business School, (HBR). Observations based on the journals on manufacturing strategy are given as below:
Manufacturing Strategy

Context

Process

Manufacturing Capabilities

Strategic Choices

Best Practices

Trans-national Performance comparison Measurement

Manufacturing Capabilities: the literature reviewed deals with competitive priorities, these are necessary to stand out in the competition, they are cost, quality, flexibility, delivery, specification and sustainable.

Strategic Choices: here it deals on some particular organized criteria like human resource, technology, management and environmental aspects. 11

Best Practices: This section deals with advanced manufacturing technologies and better and efficient management practices like JIT, TQM etc.

Trans-national comparison: the literature dealt in this section is something to with documentations on cross country wide studies comparing various strategy practices.

manufacturing

Performance Measurement: It includes performance measurement system design, development and assessment methodologies.

Literature survey: the literature survey reveals that the articles reviewed the manufacturing strategy.

These research articles clearly portraits that the need for more clear and well defined literature for the manufacturing strategy are required. To this Skinner (1969, 1974) was the pioneer to observe that a companys manufacturing ability could perform more function than to simply produce the finished products and to ship them on time. He was of the view that there are few important terms the company should emphasize on viz: cost, quality, flexibility and delivery.

Cost: the production and the distribution cost to be very low. Quality: competition has become fiercer than ever so there should be no compromise on the quality. Delivery: this has become a very distinct feature for a manufacturer as to meet the schedules. Feasibility: The unit should well develop to react to any uninvited circumstances as they should be well equipped with the flexible requirements.

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Another view on this issue is that manufacturing capabilities could be achieved through the alignment of the resources, and the competitive priorities along with the market requirement Kerr and Greenlaugh (1991). Whereas the other researchers like Hill and chambers (1991), Upton (1994; 1995), and Koste and Malhotra (1999), were of the view that feasibility could be more prominent and its application could be more useful in corporate and manufacturing strategies to achieve superior business performance.

D) Sales Channel: The right mix of the product is very helpful but what if there are no sales or very less sales? So it is very important to have a right mix of distribution channels or sales channels to increase the sales in order to achieve the goal of the firm. Selecting the right mix of distribution channels and having optimum utilization of these sales channels is very critical for any business in todays competitive environment. Maximizing the effectiveness of the direct organizations, sales representatives, distributors and resellers are the most common form of the sales channels. It is very crucial to have a proper assessment on the various distribution channels to have the optimum utilization of these channels. The consumers have become very demanding because of the increasing disposable income, the increasing number of options to choose from, has made the consumers more and more choosy and demanding. So the companies have to do their best and have to stand apart from the crow to be visible and competitive in the market. It is very important to manage and promote the new products effectively but by minimizing the cost ant at the same time the visibility of the inventory and sales across the various channel partners like distributors, retailers is a must for effective and efficient decision making.

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Supply chain management is all about optimum utilization of the over all activities of the company working together, to manage the activities and co-ordinate the complete chain, Vollmann and Cordon (1999, p.2). According to Vollmann and Cordon (1992) supply chain should be treated as one/single entity. Where as Houlihan, (1985, p.26) suggests that it should have more than one organizations involved with it. Bello and Williamson (1984) signified the importance of the distribution channels choice and structure of that channel in building up the marketing strategy; they also showed the magnitude of the success that a firm will enjoy in exporting was influenced by the structure between the channel members. Barsch (1981a) introduced a model based on the resource and the commitment levels for a channel selection for the firms planning to enter in to the export market. This model depicted 108 possible entry decisions using different types of export management levels and the commitments level. Czinkota and Ronkainen (1988) were of the view that a model of the attributes that influenced the basic customer and the industrial international channel options and also described that how the channel configurations varied with in the industries or even with in the same firm, for the similar product because markets in different nations have often had quite peculiar features. The model was called as Eleven Cs model, it explained the factors that will determine the channel design any exporter would use. These eleven factors of the model mentioned were: customer characteristics, communication, cost, control, capability, competition, coverage, capital, culture, company objectives and character. According to them, this model was very influential on both the development of the new marketing channels and to the modification of the channels that already existed.

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E) Direct and Indirect Distribution Channels: It may not be appropriate to view the distribution channels in dichotomous terms. In factual terms there are two extreme ends to both the channels, the integrated and independent distribution channel. Czinkota and Ronkainen, (1988) model of Eleven Cs would prove to be of great help to the major exporters who makes use of the factors in the model to develop their own distribution channel by the combination of the two extreme channel that is direct and indirect channels. Root (1964), commented that most basic differentiating feature for the two, direct and indirect channel is by the place where the second is located. Root (1984) classified that if the second channel was based in the producers country than it is said to be indirect channel, where as if the second channel is located in the buyers country than it is said to be indirect channel. To this Lilien (1979) expressed that if the channel has up to 50% equity than it is said to be indirect channel and if the channel has more than 50% than it is integrated channel. Another approach was given by Anderson and Coughlan (1987) defined as the distribution via company owned distribution channel is called as integrated or direct channel and if the channel is on the contract basis and an outsider to the company than it is called as independent or indirect distribution channel. Stern and El-Ansary (1988) stressed the benefit of the direct channel are more than that of the independent channel. It will be difficult and costly for a firm to ascertain whether the indirect channels are performing up to the levels as specified in the contract in case of a marketing strategy, Jensen and Meckling (1976), here the integrated channels will be of more useful and helpful in performing the duty, Etgar (1978); Keegan (1984); Terpstra (1989). Traditionally indirect channels tend to have more

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stages in the process of the distribution than the direct marketing, Root (1964) and it requires less investment in terms of both the money and in the management time for the manufacturing units than their counter part, Angelmar and Pras, (1984); Barsch, (1981a). The independent channel of distribution proved to be beneficial in lowering the cost of exporting due to the economies of scale, Anderson and Coughlan (1987); Angelmar and Pras, (1984). By the use of the indirect channels the manufacturers enjoyed higher margins and profits, it was also noticed that utilizing indirect channels avoided some of the disabilities of the office politics and achieved action through he threats, Anderson and Coughlan (1987).

Finally presumably, independent channel of distribution is more beneficial than the direct as the chances of increasing margins and profits is more, it also helps in lowering the cost because of the economies of scale, in case of the direct channel the cost increases because of managing them. Williamson (1979) also supported to this argument by saying that results in avoidance of the disabilities of the bureaucratic government structures.

F) Key considerations for the successful sales channel: It is very necessary for the company to be clear of the goals and objectives of the sales channel, in order to have a successful sales channel distribution the company has to take care of the following elements:

Understanding and factoring the needs of the channel partners:

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It is important to define the objective clearly to the channel partners, indicate the roles that they are playing in the channel, and acknowledge them with their responsibilities and functional limitations.

Communicating the goals and benefits to the channel partners: The CEO of the company needs to individually communicate to each of the channel partner and the companys sales personnel the logic and the purpose behind the sales distribution channel and the clear business benefits of the same. The channel partners needs to see the improvements in the Return on Investment because of the implementation of the same; hence a cost benefit analysis of the company should be provided to the channel partners before the implementation.

Technological flexibility and simplicity: It is as important any other factor that the sales portal should be very simple and easily usable. The data transfer should be also easy and fast. The speed for the portal will be the key aspects for a successful sales channel. Companies could benefit greatly if there is a structures approach to implementing sales channel distribution.

G) Resource Based Theory: According to Barney (1991, p.102), any firm is said to have a competitive advantage at the point when there is an implementation of a value creating strategy which is not being in use by any other existing or new competitor at the same time. Adding to this Bharadwaj et al, (1993, p.84) commented that this competitive advantage will remain sustainable only if the advantage is resisting erosion to the behaviour of the

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competitors or the business rivals. To this many literatures and authors viewed that Resource Based Theory can prove to be very vital when making any firm more competitive and allowing the firm to be sustain in the ever growing competition.

Originally, the Resource Based Theory was introduced and developed by Wernerfelt (1984), the attempt to develop the theory was to build a consistent foundation for the policies of the business. Over the years many literatures have been developed to this foundation and now there is an existence of many substantial literatures. Fahys (2000, .99) illustrates the relation ship between the key resources of the firm and the role of the management in processing these resources into the positions of a sustainable competitive advantage, leading to a superior performance in the market place. The model developed by Fahy highlighted some of the important aspects as a firms unique collection of resources and capabilities, out of which some possess the particular characteristics, barrier to duplication. It also suggested that the Resource based theory is different form the other models of the competitive advantage in figuring out the internal reasons for the superior firms performance. The potential importance of the firms internal and external resources was in existence way before the 80s with the economic theory of the impact of the firm heterogeneity on the increasing business rivalry and to the attainment of the super profits Chamberlin, (1933). Porter (1980) highlighted that the strategic management literature also focuses on the firms competitive advantage and the involvement of the firms strength and the weaknesses. In any steel company the usage of the resources is very important to determine the success.

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The utilization of the resources s clearly been seen by the number acquisitions done in the recent past, Mittals acquisition over Arcelor, was a very well know acquisition, the resources being almost doubled and the company have now been rate as the worlds number one steel maker. So this clearly demonstrates how resources can be vital and the proper usage is still more advantageous. Even the Tata- Corus acquisition which is the biggest acquisition in the Indian history, is also just because to have better grasp and much more efficiency in the utilization of the resources. A resource based model of sustainable competitive advantage in any steel industry:

Management Strategic Choices Resource identification Resource development & protection Resource Deployment

Key Resources Tangible Value Barriers to duplication Appropriability Sustainable Competitive Advantage Value to Customer Intangible Capabilities

Superior Performance Market Performance Sales Performance Financial Performance

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H) The implication of the Value Chain: Almost every company is operating on the faster evolutionary tracks and at a greater risk than at any other time in the past. Regardless of the industry, the concept of the value chain has been predominantly important and has become very crucial than ever. So the companys core capability is its ability to continually redesign its value chain and to reshuffle its structural, technological, financial, and human assets to achieve better and more competitive edge.

What exactly is a Value Chain? In simple terms Value chain means any individual, product or brand that adds value whether tangible or intangible, to a product or service that constitutes a value chain. The value added to a product or service is basically a contribution of many people, corporate seniors or juniors, creditors, share holders, engineers, employees, marketers, and channel partners. Some basic products involved in the value chain are capital goods, technological evolutions, in sourcing, outsourcing, innovations, in bound and out bound logistics and so on. All the persons, the process and the products that should generate knowledge and relationship are the assets for the firm; they should also generate supply and technologies assets for the firm. All these products, process and person of a firm and the human relationships that binds them al together define the resource assets of the firm as well as its value chain and which in turn results in to

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firms competitive advantage, Srivastava et al, (1998). In the notion of the value chain it is very important to cover the concept of the involvement of the customers in the value chain. The value added to the customers is more useful than a new product itself, convenient and state of the art. The experience of co-creating a product along with the company is competitive, Prahalad and Ramaswamy (2003). The added values to the company are from the insights of the customer interaction and participation, having continuous feedback from the customers, customer satisfaction, customer loyalty, retention and this result in the loyalty from the customers.

An example of a Value Chain in a Stainless Steel Company:

INPUT IRON ORE PROCESSING DRI KILN STEEL MAKING ELECTRIC ARC FURNANCE PRODUCT SALES

PIPES SHEETS COILS

RGIONAL DISTRIBU -TION

CAPTIVE COAL

IRON ORE

THIRD PARTY SALES

PLATES

LOCAL SALES

IMPORTED MATERIAL

BLAST FURNANCE

PIG IRON

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I) Conclusion:

In the paper above, an attempt had been made to notify the literature discussed on this industry. There has been a number of saying on different issues covered in this research topic, it was worth noting the saying of different people on the issues like Manufacturing Strategy that how important it is for any industry to have a proper and well planned manufacturing strategy. It is also very important to have a proper execution of the strategy. Further to this, the importance of the product mix in order to achieve the set goals of the firm. The steel industry exists in an environment in which, over the last 30 years, competition has intensified, customer demands have increased and high standards of quality and low costs have become the minimum hurdles for the continued growth of this industry. From the above literature it has become clearer that how some strategic moves can be very useful to become a successful company in an industry. The review has examined, in theoretical details, the importance of few strategic terminologies in gaining success. Though there was not much literature written or discussed on this industry, but the critical analysis was not to insight the negative aspect of the industry but was just to provide a frame work in which the steel industry operates.

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3.0) Research Methodology:

The term research methodology relates to the development of knowledge and the nature of that knowledge, it contains some important assumption about the way in which you view the world (Saunders et al., 2007, p.121). The research methodology for this research would be well illustrated as more qualitative and less quantitative. This means that mostly non- numerical data or data that have not been quantified (Saunders et al., 2007, p.608) will be collected to answer my research question. Inductive approach is based on a principal of developing theory after data that data have been collected (Saunders et al., 2007pg 38).

The main aim of the research project is to identify a successful strategy for setting up a steel manufacturing plant in India. In order to fulfil this main aim the following objectives needs to be achieved:

1. To analyse the steel industry environment in India during last five years. 2. To identify future Indian steel industry opportunity and threats in international market. 3. To identify the challenges involved in starting a manufacturing unit in India in term of human resources, land, capital, technology and find a possible out come.

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4. To identify strategy of companies who are involved in manufacturing of steel and study their management and marketing strategy in order to be successful. 5. To analyse the problem they had faced for establishing themselves as a manufacturer and also analyse the current problem they are facing in a current market. 6. To conduct a survey in order to know the consumers expectation and point of view when they buy steel product both in national and international market. 7. To analyse the current customers expectation in international market and draw a strategy with the help of survey data. 8. To study the feasibility of that drawn strategy in order to measure it practical acceptance in Indian market.

Research methodology focuses on to turn a research question in to a research objective and aims at getting the research project done more efficiently. It considers research strategies, choices, options, time scales and the path of getting the information required to have the optimum research done, Saunders et al, (2007, p. 153). The methodology required for this research project will be greatly in the way of interviews and sending emails across to the different companies back in India.

A) Primary Data: Apart from the interviews and the emails, I will try and analyze the manufacturing companys data and the will also conduct some surveys with people in the related field, which could be done back in India or in some part of the UK. I consider that this will be helpful because the information that I pursue is not based on some said facts but this information will have a strong ground and will be delivered by those who are

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a part of this industry, so it will be very helpful to get the information from the mouth of the people who are a part of the stainless steel industry. This will help me gather al the information required to set up a successful manufacturing unit in India, it will also give me the understanding about the industrial issues and the companies approach to be tactful and to solve the issues successfully. The main focus will be on clarifying the
importance of implementing a sales channel and alignment theory, understanding applied strategy, getting better acquaintance over the product mix. This research approach will be focusing on presenting an information and try to create a theory for relevant framework.

Interviews: This process is very important to me as all relevant information regarding my research topic will be gathered through one to one semi structured interview. My research question is based the grounds of fact and not on the assumptions, so having conducting the formal interviews will be very helpful, the information that will be collected will be through the companies or people in the same field and thus this will result in gathering the accurate and perfect information. The questions to be covered in the interviews will based on the past and the current performance of the companies and the industry as a whole.

Survey: Surveys would be conducted through email or telephone. The questions would be related to customers expectation and criteria they use to purchases. The survey will be designed for the people who frequently steel product in different sectors. In order to get information close to my research topic the questioners will be closed bracket question. The information gathered from the survey would help me to form a questionnaire which I intend to use it while interviewing face to face with SMEs involved in manufacturing.

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B) Limitation of Primary data: Interviewing company may not intend to disclose some information which is important to me and it will be time consuming with some geographical barriers. Identification of changes and strategy by a manufacture companies will be a limitation of the study, for the respondents it is sometime difficult to identify change and strategy from their prospective as it is considered as a part of normal business development. Conducting survey will also be difficult as many people may not be willing to do so.

C) Secondary Data: For having a theoretical framework, the use of the academic and specific books on the industry, journals, magazines, newspaper paper articles, websites and some company publications relating to the research topic. The secondary data are both of the public nature and private nature and the permission to use the information had been sought to ensure that the confidentiality of the material used will not be revealed. Most of the data gathered will be quantitative; though the use qualitative data will be there but wherever applicable in order to give more in-depth analysis to the research. The researcher will try to analyse the gathered information only where it is applicable and necessary to validate the arguments for the literature.

D) Limitation of Secondary data: It is very important to have the right and the accurate information for the research to be right and more prominent. There is a wide range of information available on the internet for the industry. On the other hand there had been very few academic books and professional journals have been written that were precisely relevant to the topic.

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The main problem in gathering this type of information was the accuracy of the data, as it could have been out dated for the industry. There was a constant flow of information everyday, which made it even more difficult for the information to be accurate.

4) SECONDARY ANALYSIS:
A) Steel: A Global Perspective The years in the recent past have witnessed an unprecedented turmoil in the international steel market. This situation in the global steel market could have been a result of the distance between the demand, capacity and the production thus leading to a fall in the global steel prices. According to IISI, the companies have been selling their products way below the actual price just to survive and sustain the competition. These practices have disturbed and distorted the international steel markets dynamics. On the contrary, it is believed and predicted that this capacity is not fully capable of delivering the best quality products, e.g. World Steel Dynamics has claimed that only 60% of the global Hot Rolled Coils capacity can satisfy the high end demand. The demand for the quality products will continue to grow over the time and the excess capacity which is seen in the current markets.
Real GDP growth (Percentage) World High Income Countries OECD Countries Euro Area Japan USA Non OCED Countries Developing Countries East Asia and Pacific Europe and 2003 2.5 1.9 1.8 0.5 1.4 3 3.2 5.3 8.0 5.9 2004 3.8 3.2 3.1 1.8 2.6 6.2 6.2 6.6 8.3 6.8 2005 3.1 2.4 2.3 1.2 0.8 4.4 4.4 5.7 7.4 5.5 2006 3.1 2.6 2.5 2.2 1.9 3.9 4.5 5.2 6.9 4.9 2007 3.2 2.6 2.6 2.6 1.9 2.6 4.1 5.4 7.2 5.0

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Central America Latin America 1.7 and Caribbean Middle East 5.8 South Asia 7.8 Sub-Saharan 3.4 Africa Source: World Bank

5.7 5.1 6.6 3.8

4.3 4.9 6.6 4.1

3.7 4.3 6.2 4

3.7 4.3 6.7 4.1

The last two decade has been witnessing an economic activity as a whole shifting dramatically towards the developing world; most of them are now growing even faster than the developed nations. This growth momentum has been carried forward in the current decade also; in fact the growth in the developing nations has by far outplayed the growth in the developed nations. One of the most obvious interpretations for the rising economic development of the developing nations is because of the rising incomes in this economy. A corollary to the rising income in these regions has been the growth in the population which has provided a plentiful supply of cheap labour. This in turn has made these nations more attractive to the overseas manufacturers and thus has led to an increase in the production activity. The increasing global demand for the commodities in general and steel in particular has been a significant out come of such a rapid economic changes, mostly in these developing nations.

It is worth while to notice that a report by WSD claimed that since 2001, the growth in the steel market has been declining in most of the mature markets but the Asian markets maintained the stability and continued to grow at a steady rate. The main reason behind the growth of the Asian markets was driven by the production and consumption demand in the Chinese market.

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Steel Production and Consumption in China

300 Metric Tonnes 250 200 150 100 50 0 1995 1997 1999 2000 Years 2001 2002 Production Consumption

B) An Overview: Indian Steel Industry The Indian steel industry is almost a century old now, until the nineties, the Indian steel industry operated in a regulated environment with insulated markets and large scale capacities reserved for the public sector. The government regulated markets determined the production and the prices for the Indian steel industry. SAIL and TATA Steel were the major producers and the only players during this period in the country, TATA steel being the only private player in the sector. The industry took its first major step in 1907 with the setup of first integrated steel plant in Jamshedpur by TISCO, since than the Indian steel industry has been one of the core sectors in the Indian economy and has been playing a significant role in the economic development of the country. The nineties was the turning point for the Indian economy and the Indian steel industry as India takes the first step towards liberalization. Along with the opening up of the economy the steel industry also saw the development of the number of domestic players. Local investment started pouring into the steel industry along with the foreign capital adding to the fresh capacities. The steel production and the consumption which earlier were controlled and governed by the government were no longer under the control of the government. Liberalization encouraged the growth of the private enterprises that further played a vital role in the growth of this industry. During the 90s the production capacities of the Indian steel plants was about 23 29

metric tones, the last decade saw the Indian steel industry integrating with the global markets bringing the adoption of the world class technology to produce high quality steel for the international standards, this integration has resulted a total investment of about 25 billion in the Indian steel industry mostly in the plant equipments. The current production has also gone up to 43 MT by 2005.

Steel Consumption over the last 5 decades

350 300 250 Metric Tonnes 200 150 100 50 0 18 19511960 44 63 107 Series1 Series2 314

19611970

19711980 year

19811990

19912005

The ending horizon of the twentieth century will go down as one the most turbulent phases for the Indian Steel industry. This phase witnessed many changes in the steel arena, transformation of the self contained national markets in to a linked global markets and making the competition more fiercer, the supply went on increasing resulting in no real appreciation of the steel prices in the international markets and simultaneously increasing the cost of the inputs and the raw materials, because of the competition and making the companys product to speak for themselves. All these resulted in a shock for the Indian steel industry as it had been operating in the protective environment. There was a downturn in the Indian steel industry during the mid nineties and the early 2000s. The main reasons for this downturn were DemandSupply mismatch and unremunerative prices. But the industry only to recover in 2002

30

and was the beginning to get back on its feet given the strong domestic economic growth and the increasing demand in the global markets. Consequently, the Indian steel manufacturers were in need of an effective forward looking strategy that would ensure their survival, sustainability and the growth. Formulation of the strategy that would successfully take on to the market forces and would help in providing sustainable competitive advantage that requires an effective understanding of the steel scenario in the international global markets. But today, India produces international standard steel in almost all the grades and varieties and does a net export resulting in the economic development.

C) The Indian Steel Industry: An Appraisal The Indian steel industry is derived of the mainly three groups; primarily of the wholly integrated steel producers which comprises of Steel Authority of India (SAIL), Tata Steel and Rashtriya Ispat Nigam Limited (RINL). The capacities of these group ranges between 4Mt to 5Mt. At the secondary level the group consists of Jindal Group, Essar and Ispat Steel. These companies fall in to the secondary level because their capacity range is between 1Mt to 2Mt. These two groups together hold a total of about 70% of the steel capacity in the Indian steel industry. Finally, the third (tertiary) group which comprises of the mini steel producers, using electric arc or induction furnaces and which are very small in size. These three sectors together contribute only about 2% share in the global or international trade, making India the 10th largest steel producer in the world. After the passage of the initial stage of stabilization following the economic reforms and the liberalization of the 1991, the industry observed an increase in the growth of about 22% and 14% during 1994-1995 and 1995-1996 respectively. The following year however witnessed a slow down in the economic

31

activity affecting almost all the industrial segments, leading to a steep drop in the growth of the steel consumption, just about 4% in total. During the same period the availability of the steel products in the market was growing rapidly which in turn resulted in the price drop for the steel products. The import in the steel industry started to grow and slowly the volume of imports went up very fast which pulled down the domestic prices. After the liberalization the Indian steel industry had by far seen improvements in the operating parameters but still they were not enough to overcome the problems of low productivity both in terms of labour and equipment.

Finished steel Production and Consumption

40 35 Metric Tonnes 30 25 20 15 10 5 0 2000
Source: JPC/Internal

consumption production

2001

2002

2003

2004

2005

Financial Year

The report above highlights that the production and consumption trends in the domestic industry, it shows that the performance of the steel industry is constantly improving. The consumption is growing along with the growth in the production, though the later is low comparatively. D) Industry Showcase:

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The investment in the industry went up to about 25 billion because of the projected demand for the steel in the economy by the terminal year of the planned Ninth Five year plan. The demand projected for this period was about 38mt. Result of this five year plan the installed capacity of the industry went up to about 35mt but the steel consumption during the same period was stagnant. The consumption for the finished steel did go up but was only marginal over the last five years. The following chart will pay attention to the level of the output laid down by the big players in the Indian Steel industry:
crude steel production
40 35 30 percentage 25 20 15 10 5 0 others sail Essar Ispat companies JVSL RINL TISCO

Company SAIL TISCO RINL ESSAR ISPAT JVSL OTHERS TOTAL

04-05 (MT) 12.46 4.10 3.45 2.36 1.99 1.85 8.61 34.82

SOURCE: JPC/ Internal

The graph above gives a clear picture of the production and consumption of the Steel products in the Indian Steel Industry.

The performance of any industry can be measured by some of the important indices such as Debt Equity Ratio (D/E), Return on Net worth, Net Sales/Total Assets and Net Profit/ Net Sales, which depicts the clear picture of how the industry is performing. The Debt Equity ratio for the steel industry is seen in the rising trend from 2.13 to 2.30 in the last four years. This reveals that the industry is performing a balancing act an increasing debt burden and becoming more leveraged. The industry

33

does reveal an improvement in the Asset Turnover ratio (Net Assets/ Total Assets) from 0.42 to 0.52, which shows that the industry is performing in upward trends and is utilizing its assets more efficiently. The financial performance of the Indian steel industry just cannot be explained with the liberalization and the globalization of the economy. The improving performance of the Indian steel industry can be observed by the rising share prices of the Indian steel companies. (See Appendix 2) The impressive performance of the Indian steel companies started in the early 21st century which continued to show the ability in the following years as well (See Appendix 3). Following the bad times in the year 2002-03, the industry recovered and is now extremely strong and has a very good financial position because of the increasing global prices and continued demand for the steel. From many years in the past the steel industry in the world did not receive much attention from the investment community which adversely affected in the global steel prices, but now in the recent past the industry has been given much attention and investment community increased the inflow of the investment resulting in a complete makeover of the world steel industry. The Indian steel industry has also benefited from the investment community as the industry could see the amount of investment made in the steel sector did increase rapidly, which is reflected in the rapid increase in the market capitalization of all the major steel producers in the country, which can be noticed in the following information in the form of a chart:

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Renewed Investment in Indain Steel

600 Rupees In Billion 500 400 300 200 100 0 Sep-00 Mar-01 Mar-99 Mar-00 Mar-02 Mar-03 Sep-03 Mar-04 Mar-05 Mar-06 Sep-06 Sep-98 Sep-99 Sep-01 Sep-02 Sep-04 Sep-05

Source: CRIS INFAC Combined market capitalization of all the steel producers

Year

The improvement in the Indian steel industrys performance is seen mainly after 2003-04, which was mainly due to the increase in the investment in the world steel industry resulting in the increase in the steel prices and also in the increase in the amount of exports and the increasing demand in the domestic market.

The Export and Import in the Indian Steel Industry: The prime reason for a better performance in the Indian steel industry is because of the increase in the exports and decrease in the imports: Export of Steel: Year 2001-02 2002-03 2003-04 2004-05 2005-06 Source: JPC Finished Steel (Qty in MT) 2.704 4.506 4.835 4.381 4.225

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The Indian economy allows frees export of steel. Advance Licensing Scheme allows free imports of the raw materials if the raw materials are used for the purpose of exports; this encourages export for Indian manufacturers. Import of Steel: The amount of steel imported in the Indian market is about 1.5 Million Tonnes annually. The last four year import of the finished steel is as follows: Year 2001-02 2002-03 2003-04 2004-05 2005-06 Source: JPC E) Analysis of Indian Steel Industry: The Indian steel industry has been in to practice since a very long time; there have been a number of changes in this industry in order to make it more effective and better in all the terms. From the ancient ages the steel industry has been the back bone of the Indian economy and has always played a very important in contributing towards the growth of the economy. Now let us try to analyze the industry with the help of SWOT analysis: Qty in MT 1.271 1.510 1.540 2.109 2.700

1) Strengths: The nation is very rich in the mineral resources; there is an abundance of iron ore, coal and many other resources in the country. The country is the fourth largest nation in terms of the reserves for Iron ore in the world. It reserves for Iron ore amounts to about 10.3 billion. The availability of these raw materials helps the prices for the raw material to be cheap or comparatively cheaper. The country is very vast and has big

36

pool of human resource; this helps the country to get the best technical manpower for the manufacturing set up. The gathered information states that the country is the third largest in terms technical manpower in the world, which is followed by United Stated and Russia. The Indian steel industry has comparatively low labour cost considered the amount of skills. This labour is low per unit considered the quality of these workmen. All these suffix ads up to enormous amount of savings which helps in reducing the production cost as compared to many of the advanced countries. Having a very vast geographical dynamics, India is very rich in resources and has a vast domestic market to be covered; Indian steel industry can overcome the challenges successfully.

2) Weakness: On one side the Indian steel industry seems to be very strong but on the other side of same coin there are some weaknesses which if not taken proper care can ruin or damage the whole industry. There are some deficiencies in the quality and the availability of some of the important raw material for the steel production which are not easily available in the country, e.g. high ash content of the indigenous coking coal adversely affecting the production. Besides these there is a major problem of getting some of the essential raw material like Nickel and Fero molybdenum which are the base for some of the steel products. Indian steel industry does not only suffer these problems but there are some more weaknesses related to the system in the country. This is a capital intensive industry where a high amount of initial investment is required and the returns are expected after a few years only. The Indian companies are charged an interest rate of about 14% on capital which makes it even more badly where as on the other hand in the countries like U.S and Japan has 6.4% and 2.4%

37

respectively. Every coin has two sides, so it is same with the Indian steel industry. On one side it has an advantage of having a very good work force but on the other hand the industry a problem of having low labour productivity. The average productivity of an Indian labour is about 75 t/man/per year for SAIL and TISCO has an average of about 100 t/man/per year, where as the production for POSCO a Korean company is about 1345 t/man/per year and a Japanese company NIPPON has about 980 t/man/per year. This gives an idea of the problem of low labour productivity. The Indian steel industry also faces the disadvantage of having a high administration cost, it has a high cost for the essential inputs like electricity which accounts for about just over 45% of the total cost. In USA, the average cost for a unit of electricity is about 3 cents where as in India it is about 10 cents for the same amount of electricity. There are a few more challenges for India like the competition for providing a better quality and the increasing prices for coking and non-coking coal, which adds to the list of challenges in front of Indian steel industry. The problem for better infrastructure like road, bigger and better ports etc. lack of investment in Research and Development. Low quality of steel and steel products because of the non availability of better raw material. Increasing taxation has now become major burden for the manufacturer in this industry.

3) Opportunities: India is known as the land of villages, in India about 70% of the population lives in rural areas. There are plenty of areas which need attention, these areas in need of development like improvement in the transportation system of the country, which will require a huge amount of consumption of steel products. The opportunity for the Indian steel sector lies here as in India almost all the sectors have enormous potential

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for the consumption of the steel products. In order to reach or race up with developing countries India has to increase the steel consumption level, which can be demonstrated in the following table: Region China Other Asia Europe NAFTA Others World 1999 103 93 368 349 72 133 2000 111 99 383 361 77 142 2001 136 98 371 311 79 143 2002 163 103 364 306 77 150 2003 178 104 370 308 78 155 2004 194 104 379 308 80 160

Source: IISI, Brussels

Even to reach the developing economies or to compare with the lately developed economies like China, India will require increasing the consumption level by a quantum. Booming Sectors: Indian economy is the second fastest economy growing in the world, which is next to the Chinese economy. Almost all the sectors in the Indian economy are booming but these sectors still have not been re designed or re developed. The sectors like Automobile, Engineering, Packaging, and few others have a huge potential for the consumption of the steel products. New and better steel products will be useful in improving the performance, simplifying the manufacturing process and increasing the reliability with in these sectors. There is an immense amount of potential for the steel consumption in the different sectors of the country only if the manufacturer of steel products improves the quality, durability and performance of the steel products, with bearing in mind the cost for the end user of these products. In an era of the ever changing technology the Indian steel manufacturer should keep the updates of the latest technology in order to enhance the quality of the steel products which will be useful in these applications. Producing and supplying the high quality of steel in the 39

required specification by the Indian steel manufacturers at the lowest possible cost will ensure an increase in the steel consumption in the country, hence this will reduce the need for the fabrication of the steel products which will help in reducing the cost for the steel products. For instance, some precoated sheets can be used for the manufacturing of the food processing machineries, electrical equipments and transportation.

Export Market: It is believed that the future for the world steel industry is improving. There is a forecast which states that the world steel consumption will double in the next 25 years. The improvement in the quality of the Indian steel makers along with the competitive advantage of the low cast will surely be helpful in establishing and controlling the export market.

Threats: Stagnant growth: The linkage between the growth of the economy and the growth in any of its sector is very strongly related. The Indian steel industry is no exception to it. During the period between the 1970s and the 1990s was same as the economy which was very slow. The slow growth in the economy and the steel industry enhanced the existing firms to be envy of each other. Result of this, the Indian steel industry was suffering from the price wars, which did not do any good to the industry and the economy of the country.

Substitutes:

40

One of the most attractive sectors for the Indian steel industry is the automotative industry; the entry of the plastic components will result in decrease in consumption of the steel products. In the automobile industry the only material that can take over the steel usage is aluminum. The only thing that allows steel to sustain in the automobile industry is because of the cost of electricity for the extraction and purification of aluminum in India weighs higher than of the steel. There are some areas where the usage of steel has already been replaced like railways sleepers, large diameter water pipes and domestic water tanks.

Many times the changes in the technology force the industry to change, India is a developing country and it has an expensive capital. If the technology changes than the technology becomes obsolescence and this becomes a major threat for the steel industry. The purchase quantity for the steel products depends on the requirements for the end-user. The price is sensitive and buyers tend to buy when there are discounts. The integrated steel manufacturers are often affected by the volatility in demand because they are unable to tune their production line with respect to the market demand fluctuations. The few other threats for the Indian steel industry could be, the high quality of products from the developed nations which could affect the domestic manufacturers and would decrease their market. On the other side there would be a threat from these developed nations as they would dump their products in to the country and would affect the countrys market. The problems of getting much financial help from the institution as in the past there was no investment in this industry, taking the fact in to consideration that the investment in this industry in too high.

41

F) Transformation strategy: The SWOT analysis for the Indian steel industry helps in understanding the current position of the industry, it also helps in knowing what is required by the industry. After analyzing the Indian steel industrys strength, weakness, opportunity and threats and also the experiences of the other manufacturers of steel of the world would be helpful in making a turnaround strategy for the success and the growth of the Indian steel industry. The aim of the strategies would be to gain maximum benefits from the strengths, also to reduce or decrease the adverse effects of the weaknesses and also to turn these weakness into the strengths. To convert the opportunities in to a real time situation and make the most out of it, finally knowing the threats and be prepared in advance to face them and combat these threats. Thyssen Krupp Materials (UK) Ltd, gave their view for stainless steel product mix, it has higher resistance to corrosion in any environment whether man made or natural, to have proper material it is important to select proper type and grade of stainless steel for a particular use. The presence of Chromium forms a layer of Chromium oxide (Cr2O3) mixed with oxygen. This layer is very thin and this helps for the metal to be shiny, but the layer caused is impervious to water and air, protecting the metal from beneath. Stainless Steels resistance to corrosion and staining, very low maintenance and this makes the metal host for many commercial applications. The product is available in many forms like Sheets, Bars, Pipes, Tubes, and Flanges useful in many different applications. Stainless Steel metal is 100% recyclable, actually over 50% of new stainless steel materials are made from the recyclable scrap, which makes the metal in some way an eco friendly material.

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5) PRIMARY RESEARCH
The research conducted in this section tends to be actual and factual in nature, which proves to be the support for the information gathered from the journals, books, internet and other forms of secondary sources. The interviews conducted and e-mails sent across within this framework were largely centered to the strategy and their experiences in the segregate fields:

A)

Interview with Mr. Jason Katplan, Senior Analyst, CRU, London.

In the year 2002-03 the price for the nickel on the commodity market was trading between 8000 to 10000 points, these prices reflect a lot about the positioning and the trading conducted on the Nickel, on the commodities market.

43

The following year showed an improvement in the prices for the Nickel on the commodity market, the demand for this commodity went on increasing, it was seen that there was a huge amount of investments coming in to the commodity.

As the demand was seen increasing for the stainless products, there was seen a shortage for the supply of the Nickel. There is an indirect co-relation between the demand and supply, because of the increasing demand for the stainless steel products the prices for Nickel were increasing enormously.

Further more during the early years the investors were not interested in investing in the commodity traded in the market and did not show any interest in them. Due to the lack of institutional investors, hedge funds and equities in the industry and in the commodity, the trading prices for the Nickel did not see any transformation in their prices.

During the years 2004-05 the demand for the stainless steel products went on increasing through out the world, mostly developing economies and which was lead by the Chinese economy.

The Chinese economy increased their consumption for the stainless steel products, which resulted in the shortage of supply of these products in the world, resulting in an increase in the prices for the Nickel on the commodity market.

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Nickel Prices
60000 50000 40000 30000 20000 10000 0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 May-02 May-04 Sep-04 May-05 Sep-06 Jan-07 May-07 Sep-02 May-03 Sep-03 Sep-05 May-06

Source: LME

Years

Stainless steel contains a high percentage of Nickel, Molybdem and Chromium. But steel prices are mostly affected by the prices of Nickel only and this is because nickel is the only material traded on the commodity market. The other raw materials does not have any market demands.

At the start of the financial year 2007 nickel has been trading at the historic high of over 50000 points on the LME index

The impact of this big investment in a very short period was huge and steel prices became more volatile, to an extent it was a speculation created by some institutional investors, to avoid all these practices LME came in to the picture and changed the guidelines for the new investment in this industry.

These investors started moving their investment to a different industry and thus there was an enormous amount of withdrawal of money from the industry, which resulted in the felling of the prices on the commodities market.

45

The growth of the steel industry will increase and will sustain the competition in the long run, because of the nature of the steel products there is a benefit to the steel industry as in there is no alternative or substitute to the steel products. Also the industry is diversifying, there are better products offering, different forms and specification of products are offered. Technology intervention has made it possible to have better product mix, having galvanized sheets, coils, flanges etc which enables todays manufacturer to increase their sales nationally and internationally.

The steel industry is more of cyclic in nature, the demand for the steel products is growing at a faster rate; for example the demand for the steel products grew to about 15% compared with the demand last year, in 2007 it has already crossed 5% demand over the demand for the year 2006. This clearly states that the industry is in the growing phase and will continue to grow in the long run.

B) Interview with Mr. Mukesh Chandan, managing director for Chandan Steel Limited, India. To be successful as a manufacturer in the steel industry, it is very essential to have the best quality products with the optimum performance.

Indian market is a very price sensitive market, where a small movement in the prices for the commodity can have drastic changes on the whole industry and the products. Stainless steel does get affected with the volatility and the movements in the prices of Nickel on the commodity market. But these movements in Nickel prices have no or

46

less direct relation with Steel products. The manufacturers in the developed markets do not get affected with the movements in the Nickel price as they are based on the long term contracts. On the other hand, the immature markets do not even stand the volatility of these changes in the prices.

The cost involved in this project is very high. The setting up of the steel manufacturing unit is a long gestation project. The project involves a high input costs along with high variable cost. In India the steel industry used to be operated in a controlled market, but after the liberalization and the opening up the economy the regulators for the industry have minimized. The need for diversification is very much seen in this industry. Manufacturers now should not only see the quality as one of the major asset but also the cost and the margin in terms of increasing their sales nationally and internationally. Different products offering is also the way to be successful, as the demand for the steel products has been increasing in the Auto industry in the recent past, manufacturers should now concentrate on making more improvised products for the construction, railway, processing and fabricating industry which could be the way to become successful in this industry.

C) An e-mail sent to Mr. Jitendra Kanungo, purchase manager of Ramani Steel House, India. The email sent to Mr. Jitendra Kanungo did help in establishing some very crucial facts about how the Indian steel market is been operating, what factors will be required in or order to be successful. The information also gave light to the underline

47

factors of how manufacturers can increase their national and international sales by making a better and efficient product mix.

The most successful ways of increasing your national and international sales is to maintain the highest quality standards. There should be some very important links between you and your sales channels. In todays competitive environment it is very difficult to survive not only on the quality standards but also on the cost effectiveness of the companys offerings,

Further it is essential to have good stock distribution facility through out the country, the delivery standards to be more feasible in terms of changes and specifications required by the customers. In the stainless steel industry, the final products have a very high impact on the customers. The need for the better product mix is seen in the market, as the steel products are further used for fabrication, processing and ascertaining. This shows the need for diversification still prevails in the industry, as different it will be helpful for development of new long products for construction, heavy plates for Ship building, different alloys and Nickel mix which will be helpful in managing the company in good or bad times.

Taking in to consideration the raw material for the production of the steel products, the manufacturers have now become more cautious of the volatility with the prices of the Nickel in the market.

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The relation between Nickel and Stainless steel in direct because stainless steel products have the content of nickel in high amount, and Nickel is the only material, compared with the other ingredients of Steel, which is traded on the commodity market.

Till the early nineties, the steel market was operating in the regulated market but with the opening up of the economy the regulated market was eroded and there was no monopoly left in the market. Many private manufacturers did enter in to the market and established new competition in the market, thus giving better products, quality and prices.

LME has always played a vital role in regulating the Nickel prices on the commodity market. But there has never been a direct impact on the steel manufacturers as the LME guidelines restrict themselves to Nickel and other related commodities. Only the changes in Nickel affect to some steel products and that is what major steel manufacturers were worried about. The growth in the steel industry is enormous; almost every nation requires stainless steel products in order to make their economy more developed and sustainable. D) An e-mail sent to Mr. Robert Howson, Senior Analyst, MEPS (International) Ltd. UK. According to Mr. Robert Hobson, to become a successful manufacturer in the global steel industry it is very important to maintain good customer relationships in the local market, maintain the quality levels to the highest standards. This will enable the manufacturer to establish a distribution network with the Trading companies in the international market, thus it will help in increasing the sales.

49

The fall in the price of the Nickel on the commodity market will have a dramatic effect in the stainless steel market as the Nickel content in the stainless steel product is high, so the impact of the change in the price of Nickel is directly related to the stainless steel prices. The steel market does not operate in a controlled environment, though there are direct implications of the LME (London Metal Exchange) on Nickel which is very important material in the stainless steel.

There are various stainless steel products which are performing better, for instance, in 2005, the demand for steel flanges was almost doubled the demand in the previous year. In the coming years, Steel flanges, Sheets, Coils, will tend to have more demand because of the resistance quality and the multiple usages in different sectors like automotive, appliances, agricultural equipment, etc. In every industry the need for diversification and expansion is always there, the steel industry is also running through the same phase and it needs product diversification. In the near future the industry will be leaning towards the flat rolled products as the usage for these products is there almost in every sector in the economy.

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6) ANALYSIS:
The primary information gathered provides an insight to the secondary information and reveals the fact about the world and the Indian steel industry dynamics. The research conducted in this paper explains, how the Indian steel industry developed since the liberalization policy of 1991. The research does give light to the growth for the steel industries in the world but still the need for the steel manufacturer is strongly felt in the Indian economy and there are many challenges in front of the Indian steel manufacturer which needs to be taken care:

51

The country has a shortage of the supply of the important inputs which tends to be the biggest challenge for the steel manufacturers. The government policies on the import of raw material levy heavy taxes, which becomes a big burden on the manufacturers in the country. The steel production in the country is way behind the other developing nations, for example: china produced about 349 million tons of steel in 2005, where as India could produce only 34.9 million tons during the same period. This clearly portraits that though the Indian steel sector has been developing but still it is way behind in the international competition. In all the interviews and the mails one thing is very clear that Indian steel industry needs to manufacture more diverse products, different ranges of products like flat rolled bars, sheets, galvanized coils, high percentage alloys and so on to compete in the international markets. But again, Indian steel manufacturers face the problem of making better products because of not having upgraded technology. So the Indian steel manufacturer has to import the technology which results in the price increase, because of this price hike the Indian manufacturer loses its competitive advantage of low cost and hence the Indian manufacturer loses on its sales. Thus, this is leading to become more vicious circle for the Indian steel manufacturer.

Mr. Robert Hobson did mention that in order to increase your national and international sales it is very essential for the steel manufacturer to have strong customer relationships with the local customers, and also establishing strong links with the Trading companies in the international markets.

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7) CONCLUSION:
It is rather difficult to set a particular frame work for the success of any manufacturer in the Steel industry, as any industry has a political and economical influence on its operations. Before liberalization, there was a huge political influence over the working of the Indian steel industry as it was operating in a controlled and protected environment. However, to an extent the success and the failure of a company depends on the strategies executed by the management team.

53

The Indian steel industry is one of the oldest industries in the history of the Indian economy. Since the inception, there has been enormous development in the industry. The growth in the industry was clearly visible but the Indian steel industry was not only behind the developed economies but was behind the lately developing economy and its competitor, China. During the year 2004, China had enormous demand for steel products and the imports were way too high. But, by the end of the following year, China became one of the top steel producers in the world. Still India cannot compete with the amount of steel produced in china. The steel industry from the ancient times has predominantly remained technically and production driven, India sadly lacks in both of these segments. There are many reasons for this poor performance, there are very few big manufacturers in the Indian steel industry, the product offering from these manufacturers have been limited, no diversification is seen in their offerings and finally the weak link between the manufacturer and the customers i.e. weak sales channel.

Low Profile on Product Range:

Today the Indian steel industry is operating at high level of business complexity, there is the need to eliminate all these complexity and focus on some selected product and markets to achieve success as in any other industries.

There are hardly any different products offered by the Indian steel industry than the products that were offered during the inception of this industry. Todays manufacturer

54

makes the same sheets, HR (hot rolled) coils, CR (cold rolled) coils, and so on. There has been no diversification in the range of the products offered by them. From the research it is known that the demand for the flat rolled products has been increasing over the last few decades, India still does not produce them in huge quantity because of very few manufacturers in this stream. India is known as best place for manufacturing from the in the eyes foreign companies, because of the advantage of cheap labour in the world. Though India has an advantage of labour, still it remains ineffective in terms of producing different, better and quality goods. The main reason behind this is lack of technology and manufacturing support given to the Indian companies. The cost of raw material is increasing sharply, over the next few years this sharp price rise will continue. Not having different ranges of products for the customer, which does not allow the manufacturer to remain in stable conditions in times of ups and downs.

Other thing that keeps the steel manufacturing worried is the hike in the prices for the raw material. In the recent past there has been a tremendous rise in the raw material prices for the steel products. Nickel is one of the major ingredients for the stainless steel products, the research conducted shows that during the recent years it has increased about 200%. Meps (international) revealed their view on the stainless steel products as the Nickel content in them is very high, as this material is more volatile; manufacturers are tending towards the products whish has less Nickel content. Hence, this is the time for the manufacturers to start diversifying their product mix before it is too late.

Establishing Proper Sales Channel:

55

After the production activity comes distribution, producing finished goods in the best possible manner and having no sales is of no good. A manufacturing company cannot increase their sales unless they have a proper and well established distribution channel. Of late, the Indian companies have realized the importance of the sales channel, which can be seen by the recent Mergers and Acquisitions between international companies, for example; TATA Steel with Corus Steel, UK is one of the biggest acquisitions in the history of Indian companies. Mr. Robert, Meps, mentioned that to become successful it is very essential to have well established network with trading companies in the international market. A manufacturing unit, in order to be competitive and successful should not only have a proper strategy but should also execute it in the best possible way. Since the introduction of the first steel company in India, it has come a long way but yet this is not the end of the route and has to travel a lot more. To travel the rest of the journey successfully the government has to encourage more entries in to the steel market.

8) RECOMMENDATIONS:
India is rich in mineral resources. The government of India should help in developing the raw material resources in order to make sure maximum supply of good quality raw materials. It should make certain that the resources are used to the optimum level, more and more exploitation of the iron ore mines. It should provide better infrastructure i.e. utilities, electricity etc to ensure optimum performance of the unit. Encourage the investment in this industry and let the market forces drive the prices for

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the steel products and the raw material. Encouragement should be made to invest in the Research and Development, should help the manufacturer to gain knowledge about the international relations.

Finally, as the raw material prices are moving towards the peak and the steel prices are set to decline by the competition, gaining control over the raw material sources will be the only key to success and increase profits for any manufacturer. The only way to decide the manufacturers position is by checking whether how much the unit can maximize their profits by utilizing the value additions and minimizing the cost by adopting backward integration and ensuring a better supply chain mechanism.

9) REFERENCES:
H.S. Noorani, International Journal of Retail &Distribution Management, Vol.35, No.9 2007, pp- 746-749. Metals Trade Intelligence, Vol. IX, No. 14- February 20, 2007. J.J.Gabszewiccz and J F Thisse, Entry (and Exit) in a differentiated industry, J Econ, Theory 22 (1980), 327-328.

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Bakke, N. and Hellberg, R (1991). Relevance Lost? A critical discussion of different cost accounting principles in common with decision making for the short and long term product scheduling. International journal of production Economics, 24: pp. 1-8 Bellman, R and Zadeh, L (1970) Decision Making in a Fuzzy Environment, Management Science 17 pp. 141-164. Journal of Consumer Marketing, Volume 21, Number 7. 2004, pp 486-496. Corbett, T (1998) Throughput Accounting. Fredendall, L and Lea, B. R (1997) Improving the product mix heuristic in the theory of the constraints, International journal of the production research, 35/6 pp 15351544. Goldratt, E and Cox, J (1992) The Goal, second edition Green, C. H (2002). Differentiation through selling, not branding. The Leigh Advisor, (Fall) Holmen, J (1995). Growth through the value and sales mix. The Canadian Journal, March, 19(1) Kee, R and Schmidt, C (2000) A fuzzy multiple objective programming approach for the selection of a flexible manufacturing system. (September 21). Lea, B and Fredendall, L (2002) the impact of the management accounting, product structure, product mix algorithm and planning horizon on manufacturing performance. Lea, T and Plenert, G (1993) Optimizing theory of the constraints when new products alternatives exist. Low (1992) Do we really need product costs? The theory of the alternative constraints.

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Angelmar, R and Pras, B (1984), product acceptance by the middlemen in Export channels, Journal of business Research, Vol 12 p.227-40. Czinkota, M and Ronkainen, I (1988), international marketing, The Dryden Press, Forth Worth. TX. Bello, D and Williamson, N (1984) Contractual arguments and marketing practices in the indirect export channel, Journal of international business studies, Vol 16, p.65-82. Barsch, JJ (1981a), Deciding on an organizational structure for the entry in to the export marketing, journal of the small business management, vol.19 p.7-15. MacArthur, J (1993). Theory of constraints and activity based costing: friends or foe? Journal of Cost management, 7(2) pp. 50-56. Anderson, E and Coughlan, A (1987) international market entry and expansion via independent or integrated channels of distribution, Journal of Marketing, Vol. 51 No.1 p.82. Etgar, M (1978) the effects of forward vertical integration of service performance of a distributive industry, journal of industrial economics, Vol 26, March p.249-55. Keegan, W (1984) Multinational Marketing Management, 3rd ed. Prentice Hall. Lilien, G (1979) Advisor 2, modelling the marketing mix decision for industrial products. Management Science, Vol 25 Feb. 191-204. Terpstra, V (1989) international marketing 4th ed. Dryden Press, NY. Barney, J (1986), Organizational culture: can it be a source of sustained competitive advantage? Academy of Management Review, Vol. 11 p. 656-65.

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Barney, J (1991), Firm resources and sustained competitive advantage? Journal of management, Vol. 17 No. 1 p. 99-120. Bharadwaj, S, P. Fahy, J (1993), Sustainable competitive advantage in service industry, a conceptual model and research propositions, Journal of marketing , Vol. 5 p. 83-99. Chamberlin, E (1933), the theory of monopolistic Competition, Harvard University Press, Cambridge, MA. Wernerfelt, B (1984), a resource based view of the firm, Strategic management journal, Vol. 5 p. 171-80. Wernerfelt, B (1995), the resources based view of the firm, ten years after, Strategic management journal, Vol 6, p.171-4. Root, F (1964) Strategic planning for export marketing, Einar Harcks Forlag. Stern, L and El- Ansary, a (1988) Marketing Channels, Prentice Hall, Englewood Cliffs. Hussein, J and Bell, J (2006) Change in SME international: Vol. 13 No. 4 Pg. 562583. Ellis, J and Williams, D International Business Strategy (London: Pitman Publishing, 1995). Sinha, G and Ghosal, T. (1999) Managing Service quality/ quality customers services: Strategic Advantages for Steel Industry in India Vol.9 No. 1 pg. 32-39.

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Patterson, M (1992), the product mix decision: a comparison of theory of constraints and labour based management accounting. Production and inventory management journal, 33; pp 80-85. Saunders, M. Lewis, P. and Thornhill, A. (2007) Research Methods for Business Students, 4th edition, Pearson Education Limited, Essex, England, ISBN. Shank, J and Govindarajan, V (1992). Strategic cost management and the value chain, journal of cost management, winter: pp. 5-21. Spoede, C. Henke, E and Umble, M (1994). Using the activity analysis to locate profitability drivers: ABC can support a theory of constraints management process. Management Accounting, 75(11). 43-48. Yin, R.K (1994) Case Study Research: Design and Methods 2nd Edition, Beverly Hills, Sage. School of Education. Zadeh, L (1965), Fuzzy sets. Informal and Control, 8: pp.338-353. http://md1.csa.com/partners/viewrecord.php?requester=gs&collection=TRD&reci d=200406450591MD&q=strategies+for+sustainable+turnaround+of+Indian+Steel+In dustry&uid=1028258&setcookie=yes [accessed on 16th June 2007] http://ies.lbl.gov/iespubs/41844.pdf [accessed on 16th June 2007] http://steel.nic.in/oecd/DSTI_SU_SC(2006)4_ENG.pdf [accessed 16th June 2007] http://www.steel.nic.in/oecd/DSTI_SU_SC(2006)4_ENG.pdf [accessed on 17th June 2007]

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http://www.emeraldinsight.com/Insight/viewPDF.jsp? Filename=html/Output/Published/EmeraldFullTextArticle/Pdf/0240210701.pdf [accessed on 17th June 2007] http://www.ssina.com/overview/intro.html [reviewed on 19th June 2007]
http://www.mercerhr.com/summary.jhtml?idContent=1201340 [accessed on 16th June 2007]

www.duplexworld.net/nickel/ShowPage.aspx?pageID=665 [viewed on 21st June 2007] http://site.securities.com/doc_pdf?pc=IN&doc_id=145632159 [viewed on 21st June 2007] www.thyssen.co.uk/newsite/Stainlessteel.htm [accessed on 25th June 2007] www.ideas.repec.org/p/fip/fedhwp/wp-99-6.html [accessed on 25th June 2007] http://www.emeraldinsight.com/Insight/viewPDF.jsp? Filename=html/Output/Published/EmeraldFullTextArticle/Pdf/0770210704.pdf [accessed on 25th June 2007] www.excellenc.com/distribu.htm [accessed on 28th June] http://www.madehow.com/Volume-1/Stainless-Steel.html [accessed on 28th June 2007]

Appendix 1:

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Interview 1 Mr. Jason Katplan, a senior analyst for the steel market from CRU, a steel consultancy company, London. July 28th 2007

Q. Why are the prices for the Nickel, on the commodities market fluctuating so much?

A. The prices for the Nickel as a commodity are precisely related to the trade and the demand for this commodity in the market and on the commodities market. The demand for the Nickel as a commodity was seen rising in the past. In the year 200203 the prices for the nickel on the commodity market were trading between 8000 to 10000 points, these prices reflect a lot about the positioning and the trading conducted on the Nickel, on the commodities market. The following year showed an improvement in the prices for the Nickel on the commodity market, the demand for this commodity went on increasing, it was seen that there was in improved amount of investments coming in to the commodity. The demand for the stainless steel products went on increasing during these years and Nickel is the most important part or ingredient for the making of the stainless steel products. As the demand was seen increasing for the stainless products, there was seen a shortage for the supply of the Nickel on the commodity market. Because of the increasing demand for the stainless steel products the prices for the Nickel were seen shooting up. In particular these are the main or the vital reasons for the fluctuations in the prices of Nickel on the commodity market.

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Q. During the year 2005-2006 the prices for Nickel on the commodity market did reach the highest ever mark, why the steel prices are not affected by any of the other ingredients?

A. In the early years the investors were not interested in the commodity market and did not show any interest in the market. Due to the lack of institutional investors in the industry and in the commodity the trading prices for the Nickel did not see any drastic changes in the prices. For years there was no investment in Nickel which did not attract any of the institutional investors. In the recent past the demand for the stainless steel products went on increasing through out the world, mostly developing economies and which was lead by the Chinese economy. The Chinese economy increased their consumption for the stainless steel products, which resulted in the shortage of supply of these products in the world, resulting in an increase in the prices for the Nickel on the commodity market The raw material do not possess any scarcity in nature as these are available in plenty, so the prices for the stainless steel products does not get affected by any other material a part from nickel.

Q. Today the prices for the Nickel is going down which is not showing an appealing prospect for the new investors in this industry, So is it the wrong time for the investors to come in and is this not a stable industry? Do you think that the industry has reached a maturity stage and the opportunity for the new players in this industry has stagnated?

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A. With all of a sudden the increase in the prices for the Nickel on the commodity market there were assumptions and presumptions that the steel industry is tending towards becoming more volatile. But with the entry of the new institutional investments, hedge funds, equities and big players; nickel went on increasing on the commodity market. The impact this big investment in a very short period was huge and steel prices became more volatile, to an extent it was a speculation created by some institutional investors, to avoid all these practices LME came in to the picture and changed the guidelines for the new investment in this industry. As soon as the changes made by the LME came into existence the big investment came to an end. These investors started moving their investment to a different industry and thus there was an enormous amount of withdrawal of money from the industry, which resulted in the felling of the prices on the commodities market. Most the developing world today are aiming to perform more better and they are ready to take on the competition from the developed world, the consumption of the steel products will increase more and more. Therefore, the growth of the steel industry will increase and will sustain the competition in the long run, because of the nature of the steel products there is a benefit to the steel industry as in there is no alternative or substitute to the steel products. The steel industry is more of cyclic in nature, the demand for the steel products is growing at a faster rate; for example the demand for the steel products grew to about 15% compared with the demand last year, in 2007 it has already crossed 5% demand over the demand for the year 2006. This clearly states that the industry is in the growing phase and will continue to grow in the long run.

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Interview 2 Meeting with Mr. Mukesh Chandan, Chandan Steel, Mumbai, India. August 25th 2007

1) According to you, what are the most successful ways of increasing your national and international sales? What do you think is necessary to be successful in this competitive market? Quality, Stock distribution Further Processing, Pricing and ascertaining trends each market needs. 2) What implication does Nickel have on the Steel market? As in if Nickel falls on the commodities market than will that have direct co relation to the steel market or to what extent the prices of the steel products will be affected with the fall of the Nickel? It will effect only to Stainless Steel makers. There will be Direct Effect to the Price of Stainless steel to Nickel prices only in Nickel content Stainless materials. Will not affect Carbon Steel as well as Stainless (400 series grades) and some extent. 200 series grade will not be affected. The demand ratio of Nickel content stainless to other can go vice versa. As customer switch over there usage demand depending upon cost.

3) Is the steel market operating in a regulated (controlled) market? What are implications of the changes made by the LME on the Steel market in India? Not controlled Market.

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There is No Direct Effect of it on Indian Steel market. Only some effect can happen in case of Nickel price ups/down. 4) What should be the best product mix for a successful manufacturer as per today's steel market? Long Products for Construction / Infrastructure, Heavy Plates for Ship Building. Grade set up of Different Alloys / Nickel alloys will be best suitable to manager Ups / Down in Industry.

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Interview 3 Email to Mr. Robert Howson, Senior Analyst, MEPS (International), London. From : Sent : To : robert howson <robertjhowson@cs.com> Friday, August 10, 2007 7:44 PM "\"Tarun mehta\"" <hardcoretarun@hotmail.com> RE: I am student and need help for my dissertation, Subject : please give me the information | | | Inbo x

Good day: Answers to your questions are as follows: 1. You need to have customer relationships in your home market and be able to establish a network with Trading Companies in International Markets. 2. The fall in the price of Nickel will have a dramatic effect in the Stainless Steel market but virtually none on carbon steel. 3. Can't advise on set up cost in India, the steel market is a old market but will remain strong as steel is used in many areas, automotive, appliances, agricultural equipment, etc. 4. The steel market is not a controlled market and I believe efforts on the LME will fail. 5. Can't answer that question, however would lean to flat rolled products, galvanised sheets and coils, more processed products. Yours sincerely, R Howson Meps (International) Ltd. -----Original Message----From: Tarun mehta Sent: 9/8/2007 10:05 AM To: robertjhowson@cs.com; kamleshmsanghvi@gmail.com Subject: I am student and need help for my dissertation, please give me the information Hello Sir, With regard to our telephonic conversation a few days ago, I am writing this to ask for your help in completing my dissertation. Please help me with information I require in order to complete my Masters, I need your help in the following questions, if you can please give light to the questions below, which will be highly appreciated: 1) According to you, what are the most successful ways of increasing your national and international sales? what do you think is necessary to be successful in this competitive market?

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2) What implication does Nickel Nickel falls on the commodities correlation to the steel market steel products will be affected

have on the Steel market? As in if market than will that have direct or to what extent the prices of the with the fall of the Nickel?

3) What is the set up cost, follow up cost, or initial set up cost for the manufacturing unit in Indian? What is the growth potential for the Steel market, not only in Indian but also in the international market? 4) Is the steel market operating in a regulated (controlled) market? What are implications of the changes made by the LME on the Steel market in India? 5) What should be the best product mix for a successful manufacturer as per today's steel market?

Interview 4: Email to Mr. Jitendra Kanungo, Ramani Steel House, India From : Sent : J Kanungo <ramanisteel@gmail.com> Friday, August 10, 2007 2:24 PM | | | Inbo x

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To : Subject :

"Tarun Mehta" <hardcoretarun@hotmail.com> Re: please mail the answer at the earliest i need it

On 9/08/07, Tarun Mehta <hardcoretarun@hotmail.com> wrote: 1) According to you, what are the most successful ways of increasing your national and international sales? What do you think is necessary to be successful in this competitive market? REASONABLY GOOD QUALITY AT A REALISTIC PRICE, INDIA IS A PRICE CONSCIOUS MARKET. 2) What implication does Nickel have on the Steel market? As in if Nickel falls on the commodities market than will that have direct co relation to the steel market or to what extent the prices of the steel products will be affected with the fall of the Nickel? NICKEL DOES NOT HAVE ANYTHING TO DO WITH STEEL BUT STAINLESS STEEL IS SURELY AFFECTED BY NICKEL PRICE MOVEMENS. MILLS IN THE DEVELOPED MARKETS HAVE LONG TERM CONTRACTS AND HAVE A VERY VERY MINIMAL EFFECT IN SHORT TERM BUT OTHER IMMATURE MARKETS MAKE MOOLAH OUT OF MOLE HILLS. 3) What is the set up cost, follow up cost, or initial set up cost for the manufacturing unit in Indian? What is the growth potential for the Steel market, not only in Indian but also in the international market? IT IS A LONG GESTATION PROJECT WITH INPUT COSTS ARE VERY HIGH.ONLY STRONG PLAYERS WITH AMPLE CASH FLOWS SHOULD INVEST IN IT. 4) Is the steel market operating in a regulated (controlled) market? What are implications of the changes made by the LME on the Steel market in India? THERE ARE NO REGULATORS IN THIS BUSINESS. BEST WOULD BE INTO HIGH QUALITY HIGH MARGIN LONG TERM CONTRACT MANUFACTURING FOR THE AUTO OR ACTUAL USER INDUSTRY. A TIE UP OF 60 PERCENT OF PRODUCTION WITH THE USER INDUSTRY IS MUST FOR LONG TERM SUCCESS.

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Appendix 2:

INDUSTRY: CUMULATIVE FINANCIAL STUDY

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F Y 2006 No. of Companies Net Sales Operating Income Expenses OPBDIT OPBDT OPBT PBT PAT GROSS BLOCK NET BLOCK INVESTMENT CURRENT ASSETS DEBT EQUITY CAPITAL D/E DIVIDEND PAYOUT
SOURCE: PARIJIT CONSULTING

FY 2005 61 663032.46 684936.55 540813.93 144122.62 108041.29 66160.22 45631.27 59690.77 811751.52 481283.77 36042.07 165157.89 436798.01 90514.44 2.79 8.22%

71 90833.67 926689.4 665451.1 261238.4 227146 186016.5 115366.3 145659.3 837207.8 490029.8 29701.63 203190.5 404887.4 77427.65 1.45 16.46%

Appendix 3:
Comparative Study of the Financial Performance of the Indian steel company:
INCOME STATEMENT [Rs. Mn]

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Companies

Essar Steel 12 60983. 9 61024. 9 18668. 1 13824. 7 9881.8 5901.5

Ispat Industries 12 56876 61037.1 14911.4 8383.2 4023.2 6960.6

Months Gross Sales Operating Income OPBDIT OPBDT OPBT PAT

Jindal Iron and Steel Company Ltd 12 22519.03 22700.74 9326.18 8388.44 6860.52 763.29

Steel Authority of India Ltd 12 283449 293314.5 100004.6 93875.8 82606.3 68169.7

Tata Steel Ltd 12 144989.5 145797.6 60460.8 58172.8 51985 34741.6

Source: Parijit Consultancy

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