PROFILE OF THE JINDAL ORGANISATION

EXECUTIVE SUMMARY

Global marketing offers a way for companies of all sizes to grow by expanding their customer base beyond the domestic market. However, the complexities of global marketing demand careful planning and proper implementation.

This study has been conducted to gain knowledge about the potential strength of Stainless Steel exports of China. The supply demand scenario, domestic steel industry and the present and possible role of India was analyzed in case of China.

To start with the Indian and the world Iron and steel Industry is studied and comparative study of the performance of Exporting Countries and Indian industry is analyzed.

Indias positioning in the global perspective will depend upon cost competitiveness of the Indian. Besides the continuous emphasis is to given on new technology/process/products developed, productivity improvement, quality improvement. The Chinese steel market is one of the most active markets in the world. China is a country with a dynamic economy whose annual growth rate has stayed at 7-8 percent in the last five years.

After this China Customer are segmented, and the most attractive segments for Indian Exporters are selected as target markets. The company studied is Jindal Steel Ltd. Jindal Stainless is among the top twelve stainless steel producers in the world along with Arcelor, KTS, Acerinox, Avesta Polarit, and POSCO etc. The company itself has two offices in China and is a well-known brand in the Chinese Stainless Steel Industry. It is a pioneer in the production of Chrome Manganese Stainless Steel and last year 90% of Jindal Stainless' exports were to China.

OBJECTIVES of the study

Indian business firms are facing problems on the international marketing front and the possible strategies the can employ for going global and maintain their stride with global scenario

Marketing Mix of Global Marketing

Marketing planning helps you decide what products or services are required in your market, then how to sell them and what price to put on them. So focus on the seven Ps of marketing people, planning, product, positioning, pricing, place and promotion.

People

The personal, cultural, social and psychological attitudes of your customers are important. If you are going to meet their needs; do some basic market research.

Planning

your market research needs to be analyzed and evaluated. You can then start to predict the requirements of your customers.

Product (or service)

What makes your product different from that of your competitor? Can you develop any brand values for your product? Decide what your unique selling point is and work out how the customer will benefit from your product or service.

Positioning

Differentiate your product from that of your competitors. Look for the gap in the market for your product; work out why this gap exists. How big is this market? Does it have short and/or long term growth potential? Decide who your competitors are and how they will react to your plans. What makes your product special? How will you develop and exploit competitive advantage; work out the best time to launch your product.

Pricing

What people feel about a product is reflected in what they are prepared to pay for it. Identify what value your customers place on your product. Then decide which market segment you will attack e.g. premium or budget. What discount structure (if any) will you offer for volume. What will be your pricing policy for agents, wholesalers and retailers?

Place

You may need to work out how your goods will move from where they are produced to where they are sold. You may want to use wholesalers, retailers or your own premises. Or will you use direct marketing, telemarketing, or e-commerce via the Internet?

Promotion

This is the most visible aspect of marketing. It pulls together various communication elements- Corporate identity; Branding; Advertising strategy; Public relations, internal and external; Direct marketing; Sales promotion and merchandising; Sales and sales management; Exhibitions.

Developing Marketing Strategies

Positioning and differentiating the market offerings through the product lifecycle

Developing new market offerings

Designing global market offerings

This study will also be conducted to gain knowledge about the potential strength of Stainless Steel exports of China. The supply demand scenario, domestic steel industry and the present and possible role of India was analyzed in case of China.

To start with the Indian and the world Iron and steel Industry is studied and comparative study of the performance of Exporting Countries and Indian industry is analyzed.

In the next step, the environmental analysis of China is done. The environments selected included macro-micro economic environment, legal environment, social environment, and business environment, of China.

Indias positioning in the global perspective will depend upon cost competitiveness of the Indian. Besides the continuous emphasis is to given on new technology/process/products developed, productivity improvement, quality improvement. The Chinese steel market is one of the most active markets in the world. China is a country with a dynamic economy whose annual growth rate has stayed at 7-8 percent in the last five years.

The Iron and Steel Industry is one of the major foreign exchange earners, despite of important role it plays in balancing Indias international trade. Steel has pervaded our daily lives from the kitchen to hospital and industry. Because of its ability to withstand corrosion, steel has found an indispensable slot even in the medical world. Extensively used, steel is sudden in a wide assortment of container industry, galvanizing units, engineering industry electrical industry, re-rolling industry and heavy industry. Hence we can say that:

There is a little bit of steel in everyones life

Iron containing less than 2% carbon and less than 1-% silicon and not more than a trace of phosphorus is what is usually termed steel. Carbon is the principal hardening element in steel. The increment of carbon % within steel increases the hardness of steel. The hardness becomes correspondingly less in steel containing more than 85% carbon than low carbon ranges.

production process

There are two primary methods of making steel, differing in terms of the process and raw materials used : the blast furnace route (BF) and the electric arc furnace (EAF) route. In the BF process, the iron is first reduced with coke in a blast furnace and then refined to produce molten steel, while in the EAF process a mix of scrap and sponge iron is melted using electricity in an electric are furnace to produce long and flat products.Stainless steel is gaining recognition and it is considered as the friendly and sustainable material because of its corrosive resistance and for its easy to clean / hygienic surfaces. Its versatility, durability and its supraliminal quality makes stainless steel the exceptional material of a choice for the new millennium. Initially stainless steel found its applicability in cutlery and gradually into textile, chemical and other engineering industries. Today its application has created wonders in the Architecture, Building and Construction (ABC) and Automobile, Railways and Transportation (ART).

Stainless steel usage in the building and construction sector would increase in the coming years. If the potential of the market is fully realized in terms of the prospective end use sectors mentioned above along with the continuing growth of the utensil market, the future growth rate of stainless steel can even be higher than witnessed in the last decade.

Indian Steel Industry

Indian Steel Industry is now going through a speedy growth path. In the global scenario, China remains the worlds largest crude steel producer in 2008. Chinas steel sector has been following an upward trend, with sale of steel product reaching their highest levels in recent years. Increased imports and decreased export have combined to bring great pressure to bear upon chinas steel market. The Antidumping Measure taken by the United States against China HR Plates has seriously helped up Chinas export.

In china the volatile Nickel price create uncertainty in the stainless steel market. Chinas Metal Sector has been enjoying a period of astonishing growth. Trend of production and consumption are further elaborated with respect to category of products like cold rolled flat, bars, wire rods and pipes. Stainless steel world has a department specialized in research and intelligence to help meet the markets increasing need for the resolution of complex technological and informational problem.

Stainless steel production in India is speedily increasing since the last three decades. Initially India had to depend on foreign markets to meet its requirement of stainless steel. Today India is self sufficient enough to make stainless steel of all grades, shapes & sizes and is also a major exporter of stainless steel of utensil grade. In the Public Sector, the special steel plants of Steel Authority of India Limited (SAIL) at Durgapur and Salem have made significant contribution for the growth of this industry. Mukand Limited, Panchmahal Steel Limited, Shah Alloys Industries Ltd., Jindal Strips Limited have also contributed significantly in making India self-sufficient in stainless steel production. (William A. Johnson, 2001)

Most (around 75%) of the Indian stainless steel market is still in the kitchen segment. Indian Railways is switching over to manufacture their passenger coaches which will require 15 mt stainless steel per coach in coming 5 years. The Indian government is using Ferric cold rolled stainless steel strips for making coins. The main focus of Indian stainless steel industry is China which still imports 90% of stainless steel. (William A. Johnson 2001)

Exports from India

Iron and steel exports from India started after 1964, the first time Indias supply dominated her domestic needs. Though the Indian exports are quite vulnerable to domestic demand conditions, the export market has been doing reasonably well in the past few years, with FY03 seeing an increase of more than 100% over the previous year. The increase in exports to Asia (approx. 227%) and America (105%) has contributed to this massive growth. The abundant availability of raw materials like iron ore and cheap manpower in India provide tremendous potential for the iron and steel sector to grow. (Peter M Fish, 2003)

The recovery of the steel sector witnessed in 2006-07 was carried forward in Q1 2007-08. Production and apparent consumption were higher by 8.4 per cent and 1.6 per cent, respectively. Production growth was 9.4 per cent in the flats segment as against 5.7 per cent in the non-flat segment. Apparent consumption growth in the flat and non-flat segments was 1.5 per cent and 5.1 per cent, respectively.

The apparent consumption growth in the flat segment was negative despite a positive production growth, due to sharp rise in exports coupled with a poor domestic off-take largely due to the transporters strike in April 2003. Export performance was remarkable with a growth of 38.6 per cent during the period. Imports were higher by 26.8 per cent.

Export growth was higher for flat products (41.8 per cent) as against non-flat products (21.8 per cent). Import growth was higher for non-flat products (42.9 per cent) as against flat products (25.7 per cent). The capacity utilization (primary and secondary producers) of crude steel production improved from 86.3 per cent in Q1 2002-2003 to 92.0 per cent in Q1 2003-2004.

India exported about 3.85 million tonnes of stainless steel production in 2007-08. Of these, low nickel high manganese grade hot rolled and cold rolled products were 30,000 tones. In the 300 series, hot rolled and cold rolled products were about 30,000 tones, Corex Furnace Bars 43,600 tones, wire and cables about 22,000 tones. The export of 400 series was 13,800 tones of which CF Bars were 9,200 tones and wire and coils about 3,400 tones. The export of utensils and kitchenware during 2007-08 was about 80,000 tones. The value of utensil export by India in 2007-08 was about US $ 47 million to Middle-East.

Statement of the problem

The study is intended to find the export potential of Stainless steel to Chinese market, to reveal present pattern and possible future developments of supply, demand and consumption in relevant product specific markets.

Jindal Strips Limited is the largest integrated producer of stainless steel in India. It is Flagship Company of Jindal Group set up in 1970 under the visionary of Mr. O.P.Jindal. Jindal Organization is ranked fourth amongst the top Indian Business houses.

The company initiates developing new market for its stainless steel products around four to five years back and has been able to achieve compounded average growth. Jindal is the leader in domestic market of stainless steel and it is trying to become a major player in international market. With a market share of 50% in India, it also exports to various countries across the globe. Jindal stainless is the only company in India which has the composite stainless steel plant for the manufacture of Slabs, Blooms, Hot rolled and Cold Rolled Coils.

This study is carried out keeping in the interests of Jindal Strips Limited and hence it becomes important to have an insight of the domestic market and export potential in the Chinese market.

Objectives of the study

1. To study various global marketing strategies

2. This study highlights the export potential of Jindal Strips Limited in China.

3. This study may help Jindal Strips Limited in identifying new markets.

4. This study would present the strategic alliances that Jindal Strips limited can form to reduce the risk in the market.

A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions. A global firm is a firm that operates in more than one country and captures R&D, production, logistical, marketing, a financial advantages in its costs and reputation that are not available to purely domestic competitors. Global firms plan, operate, and coordinate their activities on a worldwide basis. Fords world truck has a European-made cab and a North American- built chassis, is assembled n Brazil, and is imported into the United States for sale. Otis Elevator gets its door systems from France, small geared parts from Spain, electronics from Germany, and special motor drivers from Japan; it uses the United States for systems integration. A company need not be large to sell globally.

Developing an International Marketing StrategyAn international marketing strategy involves developing and maintaining a strategic fit between the international company's objectives, competencies, and resources and the challenges presented by its international market or markets. (Terpstra, V. and Sarathy, R., 1997) As such, the international strategic plan forges a link between the company's resources and its international goals and objectives in a complex, continuously changing international environment. Given the changing nature of the environment, the international company's strategic plan cannot afford a typical long-term focus (a five- or ten-year plan); rather, the planning process must be systematic and continuous, and it must re-evaluate objectives in light of new opportunities and potential threats. (Carol Graham, 2001)Another dimension of international marketing strategy is linked to the company's commitment to its international markets. Some companies use international marketing only to test the waters or to unload overproduction. (Carol Graham, 2001) This approach to international marketing, although it might open long-term opportunities to the company, does not indicate a substantial commitment to internationalization and is not a premise for success in the long term in international markets. A long-term international commitment that entails substantial investment in terms of resources and personnel is likely to bring the company the greatest rewards in the long run. Such a strategy will make the company a stronger competitor in the world market, as well as at home.International strategic planning takes place at different levels(Isobel Doole and Robin Lowe, 2003):At the corporate level, the strategic plan allocates resources and establishesobjectives for the whole enterprise, worldwide. The corporate plan has along-term focus and involves the highest levels of management. PepsiCoBeverages headquarters (including its international headquarters) arelocated in Purchase, New York, USA. The company's corporate plan isdeveloped here.Frank Bradley and Michael Gannon (2000) proposes that planning at this level involves international target market selection decisions:

At the division level the strategic plan allocates funds to each business unitbased on division goals and objectives. In the PepsiCo example, its divisionfor Eastern Europe is located in Vienna, Austria. From there, the companycoordinates all local (country-level) operations. At this point, Pepsi mayuse various portfolio analysis tools to decide which brands to harvest, toinvest in, or to divest, and plan its resources accordingly. At the business unit level, within each country, decisions are made regarding which consumer segments to target. At this level, Pepsi develops a strategic plan. At the product level (line, brand), a marketing plan is developed for achieving objectives. PepsiCo's marketing plan for Poland, for example, mightinclude increasing the consumption of Pepsi and Pepsi Light and launching Pepsi Max beyond the cities of Warsaw, Krakow, Wroclaw, and Poznan.Developing an International Marketing PlanAt this stage of the planning process, the international company develops a marketing plan. Assuming that the company has already analyzed its marketing opportunities and researched and selected the target market, it must now (Terry Hennessy, 1999) Develop marketing strategies for the target market, deciding on the product mix for the local target market, as well as on the other components ofthe marketing mixdistribution, promotion, and pricing. Plan the international marketing programs. Manage (organize, implement, and control) the marketing effort.The decision on which elements of the marketing mix to use in a particular target market is closely linked to the product's life cycle and to the market entry strategy selected: A product in the early stages of its life cycle, such as the Palm Pilot, will most likely be sold to consumers in highly industrialized countries for a high price, accompanied by heavy promotion. (Isobel Doole and Robin Lowe, 2003) A product will most likely be manufactured in a developed country and exported to the rest of the world. Alternatively, a product in the later stages of its life cycle, such as a videocassette recorder, will be sold to consumers worldwide, regardless of country development level. The company selling the product will heavily compete on price and, thus, most likely manufacture the product in a developing country where labor is inexpensive, to sell all over the world. Most likely, the company will have at least one subsidiary located in the country of product manufacture. (Carol Graham, 2001)Insights into the marketing strategies that companies use to target international markets reveal that marketing mix decisions are complex and based on extensive research. Kraft Foods (www.kraftfoods.com), for example, has made interesting product mix decisions: It sells coffee products and confectionery products that cover the spectrum of target consumersand the brands often cannibalize.Among the many brands of coffee Kraft Foods offers are: Jacobs coffee: This product sells mainly in Central and Eastern Europe.Jacobs coffee is popularly known as a quality German brand. Because consumers in Central and Eastern Europe have traditionally had frequentinteraction with German consumers and have acquired a taste and preference for German brands, marketing the Jacobs brand in this region wasappropriate. Had Kraft brought the product to the United States, it wouldhave had to challenge quality perceptions of bulk coffee associated withdeveloping countries in Latin America (Colombia and Guatemala, in particular) and Africa (Kenya, especially) and value perceptions held by storebrands and other low-priced national brands such as Folgers and Kraft'sown Maxwell House. (Dana-Nicoleta Lascu 2003) Gevalia coffee: This brand is aimed at the Scandinavian market andimported into the United States as a gourmet product sold exclusively bymail order.Among the numerous confectionery products Kraft offers are the following: Milka: Kraft Foods is now importing its European Milka brand of chocolate into the United States, selling it primarily through chain stores such asTarget. Mass-market consumers in the United States are increasinglyreplacing favorite local candy bars with products that are perceived asmore sophisticated and that are available at competitive prices. (Dana-Nicoleta Lascu 2003) Competitors such as Ferrero Rocher and Dove have had great success with the pre mium chocolates they sell in the U.S. market, and they are increasingly placing their products in the impulse-purchase section, by the cash register. Kraft's Milka is using a similar strategy, selling its basic-milk chocolatewith the picture of a Swiss cow in the Alps on the packaging at Targetstores. Milka also is available in a wider selection at shops that specialize inforeign gourmet foods. (Frank Bradley and Michael Gannon, 2000) Suchard: Kraft Foods is restricting the distribution of its premiumchocolate Suchard to Western Europe. Suchard has been for decades thetraditional competitor to Lindt in the premium chocolate market inEurope. The Suchard name has long been associated with French-speakingSwitzerland, and most European consumers do not know that it is ownedby an American company. Toblerone: Kraft is distributing its Toblerone chocolate brand extensively,all over the world.Kraft also has numerous brands that are restricted to a few markets. Among them are Daim, aimed at Scandinavian consumers, and Bis, aimed at Argentina and Brazil.Kraft Foods, a company based in the United States, has different mix strategies for each market. And it sells to the U.S. consumer only a fraction of its international offerings, some of which are positioned as premium European imports. It should be mentioned that companies with more limited resources will very likely be more restricted in their worldwide market coverage.Companies entering more and more countries in search of new markets are likely to face increasing difficulty in continuously monitoring and controlling their international operations. These firms must monitor not only the constantly changing marketing environment, but also changes in competitive intensity, in competitor product/service quality strategies, in supply chains, and in consumer expectations. (Dana-Nicoleta Lascu 2003)

Major Decision in international marketing :

Deciding on the International Entry ModeThe company control over operations and overall risk increase from the export mode to the wholly owned subsidiary entry mode. (Terpstra, V. and Sarathy, R., 1997) In general, companies tend to use the export mode in their first attempt to expand internationally and in environments that present substantial risk, and companies tend to approach markets that offer promise and lower risk by engaging in some form of foreign direct investment. (Terpstra, V. and Sarathy, R., 1997) There are, however, many exceptions to these statements: Companies that have been present for decades in attractive international markets, such as Airbus Industries and Caterpillar, continue to export to those markets, rather than manufacture abroad. Similarly, many new small businesses find that they can manufacture products cheaply abroad and distribute them in those markets without making a penny in their home country; this is increasingly becoming a possibility for companies selling on the World Wide Web. (John D. Daniels, 2005)

Indirect ExportingIndirect exporting means that the company sells its products to intermediaries in the company's home country who, in turn, sell the product overseas. A company engaging in indirect exporting can use middlemen such as export management companies, trading companies, or agents/brokers to distribute its products overseas. (Carol Graham, 2001) Alternatively, the company can use cooperative exporting, also referred to as "piggybacking" or "mother henning." With cooperative exporting, companies use the distribution system of exporters with established systems of selling abroad who agree to handle the export function of a no competing (but not necessarily unrelated) company on a contractual basis. (Isobel Dole and Robin Lowe, 2003) Such companies are paid on commission or are charged a discount price for the product; they are larger companies with extensive experience in and knowledge of the target international market. (Gilligan, C. and Hird M., 1986)Using indirect exporting does not require market expertise, nor a long-term commitment to the international market. The company's risk also is minimal; at most, it can lose a product shipment. Among disadvantages are lack of control over the marketing of its products - which could ultimately lead to lost sales and a loss of-good will that might ultimately affect the perception of the company and its brands in other markets where it has a greater commitment.Some companies use indirect exporting as a first step toward a greater degree of involvement. After a sufficient consumer franchise is secured and the market is tested with the initial shipment, a company might commit resources for additional investment in the market. It should be mentioned, however, that indirect exporting in the long term does not necessarily mean that the company is not committed to the market; it simply means either that the company does not have the resources for greater involvement or that other markets are performing better and need more company resources. (Carol Graham, 2001) One of Europe's leading car makers, Germany's Volkswagen, operates through independent importers and distributors in Belgium, the Netherlands, Switzerland, and Austria, while in France, Germany, Italy, and Spain, which together account for 83 percent of European sales, it controls its wholesale operations directly. (Frank Bradley & Michael Gannon, 2000)Direct ExportingCompanies engaging in direct exporting have their own in-house exporting expertise, usually in the form of an exporting department. Such companies have more control over the marketing mix in the target market: They can make sure that wholesalers and retailers observe the company's marketing policies, charging the suggested sale price, offering the appropriate promotions, and handling customer requests promptly and satisfactorily. (Terpstra, V. and Sarathy, R., 1997) More control, however, is expensive. Companies carry the cost of their export department staff, and the costs involved in selecting and monitoring the different middlemen involved in the distribution processfreight forwarders, shipping lines, insurers, merchant middlemen, and retailersas well as other marketing service providers, such as consultants, marketing researchers, and advertising companies. (Dave Savona, 1992)

One venue that opens new opportunities for direct exporting is the Internet. With a well-developed web site, companies now can reach directly to customers overseas and process sales online. And many companies do: Catalog retailers and dot-corn companies, such as Lands' End and Amazon, respectively, long ago made their first international incursions by exporting their products to consumers abroad and are rapidly expanding their international operations. (Frank Bradley and Michael Gannon, 2000)

The challenges for companies using the Internet to export their products involve securing the appropriate credit in environments where credit cards and personal checks are uncommon and, finally, having sufficient sales to warrant staff expenditures needed to process and handle the international sales. (John D. Daniels, 2005)Licensing

A popular international entry mode, licensing presents more risks to the company but also offers it more control than exporting. Licensing involves a licensor and a licensee. The licensor offers know-how, shares technology, and often shares a brand name with the licensee. The licensee, in turn, pays royalties. (Dave Savona, 1992) The two approaches to licensing are licensing without the name and licensing with the name.Licensing without the NameA licensor is very selective when choosing a licensee, ensuring that products manufactured under license are of the highest quality. When quality cannot be guaranteed, either because the licensee does not allow the licensor sufficient control and scrutiny, or because the licensee cannot guarantee quality, it is preferable for the products produced under license not to carry the licensor's brand name. (Frank Bradley and Michael Gannon, 2000) In the early 1970s, Italy's Fiat granted a license to Avto VAZ, Russia's largest automobile manufacturer, to manufacture Lada, Russia's most popular automobile, and an important export to neighboring and other developing countries. Under a similar arrangement, France's Renault granted a license to build Dacia brand automobiles in Romania in the 1960s. Today, the automobile, which continues to sell under the Dacia name, is as popular as ever, and, in 1999, Renault acquired a 51 percent stake in the company. (Isobel Doole and Robin Lowe, 2003)Licensing with the NameLicensors can decide to adapt the names of their products when they have a greater confidence in the capability of the licensee's workforce. One example is Poland's Polski Fiat. Fiat was confident of the reliability of Polish manufacturing and did not require the use of a different name for the product. Today, Fiat no longer licenses the Fiat name to Polish manufacturers; it has set up a subsidiary with multiple operations, Fiat SpA, which manufactures many of the Fiats sold in Eastern Europe under the Fiat brand name (primarily lower-priced models, such as Fiat Punto and Seicento J. (John D. Daniels, 2005)Licensing is a lower-risk entry mode that allows a company to manufacture a product all over the world for global distribution. Beverly Hills Polo Club, for example, conducts business in approximately 85 countries around the globe, producing apparel licensed under its own name, all licensed apparel for Harvard University, as well as Hype, Karl Kani, and Blanc Bleua line that sells in upscale European retailers. (John D. Daniels, 2005)Licensing permits the company access to markets that may be closed or that may have high entry barriers. In the examples in the "Licensing without the Name" section, Lada, Dacia, and Polski Fiat were sold in the countries of manufacture at low prices, with few taxes, while automobile imports were charged tariffs at rates ranging from 50 to 100 percent.Companies that engage in licensing agreements also limit their exposure to economic, financial, and political instability. In the event of a national disaster or a government takeover, the licensor licensing without the name incurs only the loss of royalties. The licensor that permits the use of the name may suffer a loss of reputation in the short term if the products are manufactured without licensor supervision and/or if they do not uphold the licensor's standard. In the latter case, the licensor has some control, at least in international markets. (Gilligan, C. and Hird M., 1986) For example, it can bring to the attention of international trade bodies the sale of products that are illegally using its brand name, assuming the company has international trademark protection; in most markets, it also can sue the former licensee.A downside of licensing is that it can produce a viable competitor in the licensee, who is well equipped to competently compete with the licenser. Simply training locals in company operations, particularly technology, can lead to the development of skills for future competitors.Franchising

According to Isobel Doole and Robin Lowe (2002) Franchising is a means of marketing goods and services in which the franchiser grants the legal right to use branding, trade marks and products, and the method of operation is transferred to a third party the franchisee in return for a franchise fee. The franchiser provides assistance, training and help with sourcing components, and exercises significant control over the franchisees method of operation. It is considered to be a relatively less risky business start up for the franchisee but still harnesses the motivation, time and energy of the people who are investing their own capital in the business. For a franchiser it has a large number of advantages including the opportunity to build greater market coverage and obtain a steady, predictable stream of income without requiring excessive investment. (Isobel Doole and Robin Lowe, 2002)

Franchising (or business format franchising, to be accurate) is the permission given by one person, the franchisor, to another person, the franchisee, to use the franchisors trade name, trade marks and business system, in return for an initial payment and further regular payments (Sandhya, Krishnamurthy 2002)

Having satisfied himself that franchisee would be suited to running his own business and that he will accept the restrictions laid down by the franchiser, franchisee will choose the type of business in which he would like to work and be happy that it is in a market with good potential. (Harry G. Barkema, 1997) Franchisee now need to choose the franchiser. If he has picked a category in which there are only one or two franchisers, it would be wise to select a second category to avoid having too small a choice. This will also give him a wider selection of territories. (Sinha, Piyush Kumar 1999)

Obtain a list of the franchises, which are available in the business category franchisee has chosen. Which is best for him? Although this is the last stage of your assessment process, it is, of course, the most important. He may be right for franchising and the market he has chosen may be full of promise, but this will not make up for an ineffective franchiser.

There are many questions (Windsperger J. 2002) that can be asked to assess the quality of a franchiser, but most falls into the following fields.

Has the franchise been sufficiently tested and are its franchisees successful? Do the initial fee and continuing fees (or product mark up) represent good value for money? Do the on-going fees (or product mark up) still leave the product or service competitive in the market place and provide sufficient profit for the franchiser and franchisee to make the business worthwhile?

Have the franchiser sufficient financial and management resources to do what they say they will do to make your business succeed? Are they fair and ethical in their business conduct? Are they a member of the British Franchise Association, whose members are required to abide by a code of business practice? In the event of the franchisers failure are there alternative suppliers?

Joint Ventures

Joint ventures involve a foreign company joining with a local company, sharing capital, equity, and labor, among others, to set up a new corporate entity. Joint ventures are a preferred international entry mode for emerging markets. In developing countries, joint ventures typically take place between an international firm and a state-owned enterprise; in this case, the company's partner is the local government. As such, the company is assured instant local access and preferential treatment.Many developing countries welcome this type of investment as a way to encourage the development of local expertise, of the local market, and of the country's balance of tradeassuming the resultant production will be exported abroad. (Gilligan, C. and Hird M., 1986) In most developing countries, the international firm will typically provide expertise, know-how, most of the capital, the brand name reputation, and a trademark that is internationally protected, among others. The local partner will provide the labor, the physical infrastructure (such as the factory and access to the factory), local market expertise and relationships, as well as connections to government decision-making bodies. (Carol Graham, 2001)It is typical for the local government of the developing country to limit the joint-venture ownership of international firms to less than 50 percent. It is also typical for the local government to encourage the reinvestment of profits into the firm, rather than the repatriation of profits by the international firm. As such, the government, in effect, leads the international firm to engage in transfer pricing, a method whereby the parent company of the international joint-venture partner charges the joint venture for equipment and expertise, for instance, above cost. (Harry G. Barkema, 1997)

Joint ventures could constitute a successful approach to a greater involvement in the market, which is likely to result in higher control, better performance, and higher profits for the company. Successful joint ventures abound. (Frank Bradley and Michael Gannon, 2000) In one example, British Petroleum PLC established a joint venture in Russia, under the name Petrol Complex, with ST, a powerful local partner with close ties to the Moscow city government. The company owns 30 BP gas stations, each of which sells an average of 3.5 million gallons of gasoline a year, four times the average of a gas station in Europe. (John D. Daniels, 2005) BP offers Russian drivers good service (a rare commodity in this market), as well as minimarkets with espresso bars and a wide selection of wines; this is in stark contrast to the Russian gasoline stations where customers pay for gasoline by stuffing cash through a tinted window and where they communicate with the salesperson through a microphone. (Sabrina Tavernise, 2001)The joint-venture entry mode is not limited to developing countries. Numerous joint ventures are operating throughout Europe, and they are increasingly coming under the scrutiny of the European Commission, which assesses their impact on competition. (Harry G. Barkema, 1997) Typically, the Commission appoints a taskforce to investigate the impact of the joint venture on competition and then issues a statement of objections within six to eight weeks, giving the companies involved a chance to respond and request a hearing before the Commission makes its final decision with regard to the joint venture; whenever no such statement is issued, the deal is assumed to be on its way for approval, (Brandon Mitchener and Deborah Ball, 2001) One joint venture that the European Commission has examined involves the diamond giant De Beers Centenary AG (the world's largest diamond-mining company) and the French luxury goods company LVMH Moet Hennessy Louis Vuitton SA (which owns, among others, Christian Dior, Moe't & Chandon, Louis Vuitton, and Donna Karan); the company wants to produce De Beers-branded jewelry and open a network of exclusive shops all over the world. (Brandon Mitchener and Deborah Ball, 2001)Overall, 70 percent of all joint ventures break up within 3.5 years, and international joint ventures have an even slimmer chance for success (Dave Savona, 1992). Companies can, to a certain extent, control their chances for success by carefully selecting the joint-venture partner; a poor choice can be very costly to the company. Other factors that will increase the success of the international joint venture are the firm's previous experience with international investment and the proximity between the culture of the international firm and that of the host country; a greater distance erodes the applicability of the parent's competencies. (Harry G. Barkema, 1997)Reasons for the failure of joint ventures are numerous. The failure of a partner can lead to the failure of the joint venturefor example, the joint venture between a mid-size company, Bird Corp. of Dedham, Massachusetts, and conglomerate Sulzer Escher Wyss Inc., a subsidiary of Sulzer Brothers Ltd. of Switzerland. Although the joint venture performed well, Bird Corp. experienced serious problems, with unsteady revenues and slim profits, leading to the failure of the joint venture. (Savona, 2004) Even a natural disaster or the weather could lead to failure: Zap-ata, a $93 million Houston, Texas, company involved in natural gas exploration, took a 49 percent share in a joint venture with Mexican investors with the goal of fishing on Mexico's Pacific coast for anchovies, processing them, and selling them as cattle and poultry feed The weather system El Nino caused the anchovies to vanish, leading to the failure of the joint venture. (Savona, 2004)Like licensing and franchising, joint-venture partners can turn into viable competitors that know the firm's operations and competitive strategies. In this case, the local partner will undoubtedly become a formidable competitor locally, where the firm will be protected by the government. (Harry G. Barkema, 1997) Internationally, however, the international firm has some capability to combat the new competitors through controls and agreements with the supply chain and distributors that will prevent access to equipment or to markets, for example.Wholly Owned Subsidiaries

Companies can avoid some of the disadvantages posed by partnering with other firms by setting up wholly owned subsidiaries in the target markets. The assumptions behind a wholly owned subsidiary are that (John D. Daniels, 2005) The company can afford the costs involved in setting up a wholly ownedsubsidiary. The company is willing to commit to the market in the long term. The local government allows foreign companies to set up wholly ownedsubsidiaries on its territory.

Frank Bradley and Michael Gannon, (2000) suggests that the company can develop its own subsidiary, referred to as greenfielding, which represents a costly proposition, or it can purchase an existing company through acquisitions or mergers. Many opportunities for acquisitions have recently emerged in developing and developed markets alike: Governments have been de-socializing services and industries, rapidly privatizing industries that were formerly government owned or operated. Opportunities have emerged in the area of telecommunications, health care, energy, and even the national mail service.The most important advantage that a wholly owned subsidiary can provide is a relative control of all company operations in the target market. In particular, a subsidiary offers the company control over how to handle revenue and profits. Wholly owned subsidiaries also carry the greatest level of risk. A nationalization attempt on the part of the local government could leave the company with just a tax write-off.Additional difficulties could arise when a company decides to acquire or merge with another. In the case of DaimlerChrysler, Daimler quickly found out that the former Chrysler was not performing up to par and quickly proceeded to restructure, weeding out former Chrysler employees. (Dana-Nicoleta Lascu 2003) In general, the company acquiring another or building its wholly owned subsidiary will not be able to share risks with a local partner, nor will it benefit from a partner's connections; it must build its own.Even selling the subsidiary can eventually haunt the company years later. Har-rods Buenos Aires was originally set up as a subsidiary of Harrods London, but became an independent company in 1913 and changed hands several times. Today, Harrods Buenos Aires operates in Argentina and has no relationship whatsoever with Harrods Londonwhich cannot address this issue successfully in the local courts in Argentina.Strategic alliances

In analyzing the results of joint ventures in China, Vankonacker (1997) observes that joint ventures are hard to sustain in stable environments and concludes that more direct investment will be wholly owned offering Johnson and Johnsons oral-care, baby and feminie hygiene products business as a success story.

Whilst all market entry methods essentially involve alliances of some kind, during the1980s the term strategic alliance started to be used without being precisely defined to cover a variety of contra contractual arrangements which are intended to be strategically beneficial to both parties and which cannot be defined as clearly as licensing or joint ventures. Bronder and Pritzl (1992) have defined strategic alliances in terms of at least two companies combining value chain activities for the purpose of competitive advantage. Perhaps one of the most significant aspects of strategic alliances has been that it has frequently involved cooperation between partners who might in other circumstances be competitors. Some examples of the bases of alliances are(Frank Bradley and Michael Gannon, 2000):

Technology swaps

R&D exchanges

Distribution relationships

Marketing relationships

Manufacturer supplier relationships

Cross-licensing

There are a number of driving forces for the formation and operation of strategic alliances.

Insufficient resources: the central argument is that no organization alone has sufficient resources to realize the full global potential of its existing and particularly its new products, competitors will exploit the opportunities which arise and become stronger. In order to remain competitive, powerful and independent companies need to cooperate.

Pace of innovation and market diffusion: the rate of change of technology and consequent shorter product life cycles mean that new products must be exploited quickly by effective diffusion out into the market. This requires not only effective promotion and efficient physical distribution but also needs good channel manager, especially when other members of the channel are powerful, and so, for example the strength of alliances within the recorded music industry including artists, recording labels and retailers has a powerful effect on the success of individual new hardwire products such as the Sony compact disc and Philips digital compact cassette. (Dana-Nicoleta Lascu 2003)High research and development costs: as technology becomes more complex and genuinely new products become rarer, so the costs of R&D become higher. For example, Olivetti and Canon set up an alliance to develop copiers and image processors. In order to recover these costs and still remain competitive, companies need to achieve higher sales levels of the product.

The pharmaceutical company Glaxos success in marketing Zantac, its nulcer drug, was achieved by using a network of alliances the most effective of which was including Roche in the US.

Concentration of firms in mature industries: many industries have used alliances to manage the problem of excess production capacity in mature markets. There have been a number of alliances in the car and airline business, some of which have lead ultimately to full joint ventures or take\overs.

Government cooperation: as the trend towards rationalization continues, so governments are more prepared to cooperate on high cost projects rather than try to go it alone. There have been a number of alliances in Europe- for example, the European airbus has been developed to challenge Boeing, and the Euro fighter aircraft project has been developed by Britain, Germany, Italy and Spain.

Self-protection: a number of alliances have been formed in the belief that they might afford protection against competition in the form of individual companies or newly formed alliances. This is particularly the case in the emerging global high technology sectors such as information technology, telecommunications, media and entertainment. (Dana-Nicoleta Lascu 2003)Market access: strategic alliances have been used by companies to gain access to difficult markets, for instance, Caterpillar used an alliance with Mitsubishi to enter the Japanese market.

In light of the fact that two thirds of alliances experience severe leadership and financing problems during the first two years, Bronder and Pritzl (1992) emphasise the need to consider carefully the approach adopted for the development of alliances. They have stressed the need to analyse the situation, identify the opportunities for cooperation and evaluate shareholder contributions Devlin and Blackley (1988) have identified some guidelines for success in forming alliances. There needs to be a clear understanding of whether the alliance has been formed as a short-term stop gap or as a long term strategy. It is, therefore, important that each understands the other partners motivations and objectives, as the alliance might expose a weakness in one partner which the other might later exploit. It is apparent that many strategic alliances are a step towards a more permanent relationship, but the consequences of a potential breakup must always be borne in mind when setting up the alliance.

Glaxo appears to have changed its strategy resulting in the take-over of Welcome. More recently it announced a proposed, merger with Smith Kline Beecham but at the first attempt it failed, apparently because of a clash of personalities of the top executives. (John D. Daniels, 2005)As with all entry strategies, success with strategic alliances depends on: effective management, good planning, adequate research, accountability and monitoring. It is also important to recognize the limitations of this as an entry method. Companies need to be aware of the dangers of becoming drawn into activities for which it is not designed.

Each of these have advantages and disadvantages.

Entry ModeAdvantagesDisadvantages

ExportingAbility to realize location and experience curve economiesHigh transport costs

Trade barriers

Problems with local marketing agents

Turnkey contractsAbility to earn returns from process technology skills in countries where FDI is restrictedCreating efficient competitors

Lack of long term market presence

LicensingLow development costs and risksLack of control over technology inability to realize location and experience curve economies

Inability to engage in global strategic coordination

FranchisingLow development costs and risksLack of control over quality

Inability to engage in global strategic coordination

Joint venturesAccess to local partners knowledge

Sharing development costs and risks

Politically acceptableLack of control over technology

Inability to engage in global strategic coordination

Inability to realize location and experience economies

Wholly owned subsidiariesProtection of technology

Ability to engage in global strategic coordination

Ability to realize location and experience economiesHigh costs and risks

(Hill, C.W.L., Hwang, P. & Kim, W.C. 2006)

The magnitude of the advantages and disadvantages associated with each entry mode is determined by number of factors, including transportation costs, trade barriers, political risks, economic risks, costs and firm strategy. The optimal entry mode varies by situation, depending on these factors. (Hill, C.W.L., Hwang, P. & Kim, W.C. 2002) Thus, whereas some firms may best serve a given market by exporting, other firm may better serve the market by setting up a new wholly owned subsidiary or by acquiring an established enterprise. In the opening case Tesco has primarily entered foreign markets through acquisition of established players in those markets. (John D. Daniels, et al, 2005)

Strategic alliance are cooperative agreements between actual or potential competitors. The term strategic alliances is often used to embrace a variety of arrangements between actual or potential competitors including cross-shareholding deals, licensing arrangements, formal joint ventures, and informal cooperative arrangements. Strategic alliances have advantages and disadvantages, and Tesco must weigh these carefully before deciding danger is that the firm will give away more to its ally than it receives.

Deciding which markets top enter

In deciding to go abroad, the company needs to define its marketing objectives and policies. What proportion of foreign to total sales will it seek? Most companies start small when they venture abroad. Some plan to stay small; others have bigger plans. Going abroad on the internet poses special challenges.

Product

Warren Keegan has distinguished five adaptation strategies of product and promotion to a foreign market

Straight extension means introducing the product in the foreign market without any change. Straight extension has been successful with cameras, consumer electronics, and many machine tools. In other cases it has been a disaster. General foods introduced its standard powered jell-O in the British market only to find that British consumers prefer the solid wafer or cake form. Campbell Soup Company lost an estimated $30 million in introducing its condensed soups in England; consumers saw expensive small-sized cans and did not realize that water needed to be added. Straight extension is tempting because it involves no additional R&D expense, manufacturing retooling, or promotional modification; but it can be costly in the long run.

Product

Do Not Change ProductAdapt

ProductDevelop New Product

PromotionDo not Change Promotion Straight extension Product adaptation Product invention

Adapt PromotionCommunication adaptation Dual adaptation

All types of steel products will be required to support the ongoing industrial growth in the country. Because there is a little bit of steel in everybodys life starting from pin to construction, automobile, railways and engineering. In short, promotion of steel usage today has gained so much of importance both at national and international levels. But one needs to be very selective well in advance today in deciding the product mix that should be able to meet users demand in domestic international market.

Successful operation of highly sophisticated iron and steel industry depends to a great extent or technical and commercial information, particularly, the information in respect of various options of plants and equipments, their availability, range of investment, selection of sites, use or users of the product, availability and demand for the product in market (present and future) prospective competitors, various tariff and non tariff barriers, price trends in domestic and international markets are some of the essential information which an entrepreneur must know at least broadly before entering into steel industry.

However, Indias positioning in the global perspective will depend upon cost competitiveness of the Indian. Besides the continuous emphasis is to given on new technology/process/products developed, productivity improvement, quality improvement. However, Indias positioning in the global perspective will depend upon cost competitiveness of the Indian. Besides the continuous emphasis is to given on new technology/process/products developed, productivity improvement, quality improvement.

MAJOR DEMAND DRIVERS FOR STEEL INDUSTRY IN INDIA

Higher infrastructure spending - It is an unquestionable fact that the infrastructure situation in India is poor. If the Indian economy has to maintain its growth rates, the infrastructure situation has definitely got to improve. Spending on infrastructure will definitely lead to a higher demand for steel. (Anthony P D'Costa, 2000)Higher standard of living The standard of living is expected to go up in the coming decade. This will in turn push up the demand for consumer durable and automobiles. Percentage of the demand for flat products comes from these industries. Hence, any pickup in these sectors should lead to a higher demand for flat products. (Anthony P D'Costa, 2000)According to Sanjiv J Phansalkar(2003)Steel Products can be categorized as:

Semi-finished: These are intermediate products cast from liquid steel for further rolling into finished products. These are often sold by Integrated Blast Furnace Producers (IBFPs) to small mini mills and rolling mills to be rolled into finished steel. They include billets, blooms, rods, which are rolled into long products or slabs which are rolled into flat products. While some countries export semis (e.g. Russia), India uses them in the domestic industry as inputs for higher value-added long and flat products.

Long products: These include bars, rounds, angles and structural and are mainly used in construction, infrastructure and heavy engineering. These products require lesser capacities. Long products are the largest steel category produced in India accounting for around 50% of total production.

Flat products: These include sheets, coils and plates and are mainly used in automobiles and consumer durable. The technology for the manufacture of flats is critical and it requires larger capacities for manufacturing. These are high-value products and enjoy higher margins. These can be hot rolled, cold rolled, galvanized or coated. This category, usually the largest product category in developed countries is small in India accounting for about 44%.

Pipes: These include seamless pipes and welded pipes.

Source: Anthony P D'Costa (2008)

Stainless steel is the generic name for a number of different steels used primarily for their resistance to corrosion. The one key element they all share is a certain minimum percentage (by mass) of chromium: 10.5%. Although other elements, particularly nickel and molybdenum, are added to improve corrosion resistance, chromium is always the deciding factor. The vast majority of steel produced in the world is carbon and alloy steel, with the more expensive stainless steels representing a small, but valuable niche market.

ANALYSIS OF STEEL INDUSTRY

Global Scenario According to recent estimates (Metal Bulletin, Feb. 17, 2004) the total world finished steel consumption is expected to be of the order of 1120mt by the year 2007.

During the past decade, international trading of steel has been to the tune of 25-30% of the total world production. On an average, around 180-190m tones of saleable steel drawing (finished products and semis) is traded in the international market.

China remained the worlds largest Crude Steel producer in 2008 also (220.12 million metric tons) followed by Japan (110.51 million metric tons) and USA (91.36 million metric tons). India occupied the eighth position (31.78 million metric tons). EU27, USA, S.korea, China, UAE and Germany were the largest importers of steel in 2008. China, Japan, EU27 and Ukraine were the largest exporters of steel in 2008.

The Surplus capacity and prevalence of market distorting practices in the global steel market have induced protectionist measures from a number of steel trading countries. In the OECD meeting they suggests that there was a long-term solution to global steel over-capacity, the proponents of the OECD steel deliberations are of the view that subsidies and related government support have caused and are causing significant distortions in the steel markets and these will be required to be reduced.

In retaliation to the US action EU countries, China, Canada and Thailand have imposed provisional safeguard measures against import certain steel products.

Table 2: WORLD TOP STEEL EXPORTERS (Million of tons of exports)

20072008% change y-o-y

China 65.256.2 -14

JAPAN35.137.1 4

EU2532.234 6

Ukraine29.928.4 -5

RUSSIA29.228.2 -3

South Korea18.119.7 9

Turkey14.818.3 24

USA10.312.6 23

Taiwan10.99.8 -10

BRAZIL10.49.1 -12

(World Steel Dynamics, April 2009)

Market Scenario

Liberalization, which started in 1991, changed the market scenario. There have been no shortages of steel materials in the country after liberalization.

The opening up of the economy has brought in new dimensions in the demand analysis for the steel sector, with the reduction in import duties and the partial abolition of the freight equalization scheme being some of the changes. The implication of these changes is that steel demand is no longer fully supply determined but is governed by market forces. Carbon steel consumption increased from 14.84 million tones in 1991-92 to 33.370 million tones in 2004-05.

There was a recession in Steel industry for some time has staged a turnaround since the beginning of 2002 and the efforts are being made to boost demand.

China has been the main export destination. The Indian steel industry is buoyant by the reason of strong growth in demand mainly by the demand for steel in China. Domestic prices have firmed up in the face of strong demand both domestic and foreign.

Production

Steel production has gone up considerably during the last decade from 9.4 million tones in 1985-86 to about 21 million tones in 1995-96, that is, a growth of about 125% within a period of 10 years and planning to reach 49 million tones by the year 2006-07. In 2004-05, production of finished carbon steel was 38.39 million tones and Pig iron production in 2004-05 was 3.17 million tones. The market share of main producers (i.e. SAIL, RINL, and TISCO) was 39%

Table 3: Production Performance(In million tones)

Item2006-07April December 2007

TargetActualFulfilment(%)TargetActualFulfilment(%)

Hot Metal14.1014.6010410.9611.31103

Crude Steel13.0313.5010410.2610.37101

Saleable Steel11.8612.581069.269.60104

Prime ProducersSecondary ProducersTotal

Pig Iron11.00 (8.3)41.50 (35.8)52.50 (29.0)

Sponge Iron-2.2654.44

Finished Steel143.00 (9.6)185.50 (5.5)32.85 (7.2)

(Steel Scenario, July 2008)

Graph 1: Production of pig iron and finished carbon steel

(Source: Steel Scenario, July 2005)

The Race to Consolidate

Chinese mills now dominate the list of the world's biggest producers In 2008 the top 15 steel producers accounted for 36% of world production - 10 years ago the top 15 made just over 25% of world production. Arcelor-Mittal remains by far the biggest producer but with output down 11% in 2008 its share of world output fell by 1% to 8%. Nippon Steel remains the2nd biggest producer but now only marginally ahead of Baosteel which, helped by the acquisition of Guangdong, increased its output 24% in 2008. Indeed 6 of the top 10 producers are now Chinese, helped by a spate of merger andacquisition activity in 2008.Global Steel Price Indicators

MainRegional Steel Trade Flows

International Steel Trade

Pricing and Distribution

Price regulation of Iron and steel was abolished on 16.1.1992.

The government removed the distribution controls on iron & steel except five priority sectors i.e. Railways, Defense, Small Scale Industries Corporations, Engineering Goods Exporters and North Eastern Region.

Government has no restriction over prices of iron and steel products

Price increases have taken place mainly in long products than flat products.

Imports of Iron and Steel Least potential items are ERW and seamless pipes and tubes, since their imports are controlled.

India has been importing around 1.5 Million Tones of steel yearly.

Graph 2:Import of Iron & Steel from 1997-98 to 2003-04(Stainless Steel Review, Mar 2004)

In the case of unbridled imports of cheap/seconds and defective steel there are several measures like:

a. The Government has fixed floor prices for 7 items of steel products - HR coils, HR sheets, CR coils, tin plates, CRNO, Plates and Alloy Steel Rods and Bars.

b. The customs duty on defective HR Coils has been lifted to the bound rate of 40 per cent.

The imports of certain steel items have been depend to mandatory compliance of quality standards certified by the Bureau of Indian Standards (BIS). Coalition to BIS norms imply supplying information like name and address of the importer, generic or common name of the commodity, net quantity, weights and measures, month and year of packaging and maximum retail sale price. (www.steel.gov.in/annual.htm)

Iron and Steel Exports

Advance Licensing Scheme allows duty free import of raw materials for exports.

Duty Exemption Pass Book Scheme also facilitates exports.

Indian steel exports have been subject to anti-dumping/anti-subsidy duties actions by the stronger economies over the last few years.

China has imposed safeguard measures on import of various items of steel products by fixing tariff quotas. However, these measures do not apply to India.

The rising trend in Indian steel exports that was being witnessed in the last couple of years was halted due to these anti dumping actions initiated by the advanced, developed nations of the world, which led to the loss of major markets for the Indian steel exporters. Despite the initial setbacks Indian exports have recovered - largely due to the ability to find out alternative export markets where selling steel has been profitable. (www.steel.gov.in/annual.htm)

Table 4: Export of finished carbon steel

YearsExports

2001-021.622

2002-031.880

2003-041.771

2004-052.670

2005-062.664

2006-072.725

2007-084.20

(Iron & Steel Review, May 2008)

Duties & Levies

Custom Duties

Peak rate of Custom Duty has been reduced during last 5 years .In the Union Budget 2003-04 it has been further reduced to 25%. This has compelled domestic sector to become internationally competitive.

The custom duty on seconds and defective steel has also been retained at 40%, which would increase the gap between the prime and the defective category and make the import of seconds and defectives less attractive.

Custom Duty has been reduced on a wide range of inputs, which cause the cost of production for the domestic steel industry.

In the Union Budget 2003-04 the Customs Duty on Met Coke has been rationalized at 10%. However, the steel manufacturers have been given exemption from paying 4% SAD. (www.steel.gov.in/annual.htm)

Excise Duty

Excise Duty on iron and steel has not been reduced in consecutive union budgets.

Currently excise duty on all iron and steel is 16% ad valor called CENVAT.

INDIAN STEEL INDUSTRY: AN OVERVIEW

India got into steel making in the early 20th century when JRD Tata set up the first steel mill in the country in 1907 in Jamshedpur. Since then, the steel industry has undergone a lot of changes but the TISCO continues to be the largest private steel maker in the country. Tisco and SAIL dominated the steel industry in the 70s and 80s. With the price control regime in place, the steel firms could turn in a profit without any major effort.

Structure of Indian Iron & Steel Industry

(Capacity in million tonnes)

Category Sector No. of Units Working Units Total CapacityWorking Capacity

Crude Steel Integrated Pelts 9917.7817.78

EAF 188 45 10.685.33

IF 934 661 9.417.23

Secondary Sector Iron making and Resolvable Pig iron units18 16 5.74 5.57

Sponge iron units 23 20 6.07 5.79

Rerolling/DownstreamRerolling units 2710 2080 27.4422.81

HR Units 12 7 4.594.33

CR Units 75 60 2.93 2.7

GP/GC Units 16 13 1.04 0.96

Tinplates 210.15 0.09

(Source: Iron & Steel Review, 2004)

The categorized steel products

TypeEnd Product User Industries

Semi-finished Ingots, billets & slabEAF Units and mini-steel plants

Long Products Wire rods and bars Construction & wires

Flat Products Hot rolled (HR), cold Rolled (CR) and Galvanized coils (GC)Consumer durable, industry machinery

Railway materials Railway tracks Railways

Special Tin plates and pipes Automobiles, aircraft & shipbuilding

(Source: World Steel Dynamics)

Production, Performance and Projections

(In million tones)

1999-002000-012002-032003-042004-052006-07 (P)

Pig Iron 3.29 3.39 3.00 3.16 3.11 4.65

Sponge Iron 5.00 5.32 5.11 5.34 5.44 6.18

Finished Steel 22.72 23.3723.8226.71 29.70 32.01

(Source: Iron & Steel Review)Production

(In million tones)

Primary ProducersSecondary Producers Total

Pig Iron 0.96.23

(- 22.58%)2.15 (11, 40%)3.11 (-2.2%)

Sponge Iron -12.51 (11.70%) 5.44 (1.87%)

Finished Steel 12.51 (11.70%)17.19 (10.83%) 29.70 (11.19%)

* Figures in brackets indicate percentage increase over last year

(Source: Iron & Steel Review)

Indias export of Iron & Steel

(In million tones)

Year Total Pig Iron Total Semis Total Finished Carbon Steel Total Steel

2000-01 451 300 1622 1922

2001-02 785 503 1880 2383

2002-03 281 174 1770 1944

2003-04 290 328 2670 2998

2004-05 230 195 2805 3000

2005-06 242 270 2730 3000

2006-0727530025753150

2007-0829533528503480

(World Steel Dynamics, 2004)

FUTURE PROSPECTS INDIAN STAINLESS STEEL INDUSTRY The Indian steel industry has a bright future with 75% of market of stainless steel is in kitchen segment. 95% of the gas stove market uses only stainless steel. India has emerged as the largest manufacturer of 200 series low nickel stainless steel in the world. Railways will used to manufacture of passenger coaches requiring 15 mt stainless steel per coach in next 5 years. The Delhi Metro Rail Corporation tendered for 200 all stainless steel coaches. The government of India is using ferric cold rolled stainless steel strips for making coins. (www.steel.gov.in/annual.htm) The usage in industrial and other segments is still very low which will be expected increase in future.

Global trends and its affect on Indian marketsThe transport and automotive sector accounts for nearly 14% and the construction sector takes around 12% stainless steel. In India at present consumption in these two segments put together is just l%. This gives clear picture of future prospects in both building and transport sectors in India. The automobile companies also will be demanding the use of stainless steel in increasing amounts for the production of fume exhaust and catalytic converter applications. The major international fast food joints are investing in India for the consumption of stainless steel. Fast food joints using good quantity of stainless steel for making kitchen equipments, service area and furniture.

The major steel exporting companies aimed on China because it still imports 70% of its total demand of 1.5 million tons. The large potential exists in value added products like pipes, tubes and kitchen utensils. Also India also good production environment for stainless steel long products like bar, rod and wires which has good markets in Europe, South East Asian region and USA.

NATIONAL STEEL POLICY

1. OBJECTIVE:

Strategic Goal :

a) Diversified steel demand through modern and efficient steel policy.

b) Global competitiveness in terms of cost, quality and product mix.

c) 100(mT) by 2019-20 from the 2005 level of 38 mT.

IMPORTS:

1. Imports duty rates brought down.

2. Industry should be protected from unfair trade practices.

3. Institutes mechanisms for import surveillance.

4. To monitor export subsidies in other countries.

Production, Imports and Exports and Consumptions

(In Million Tones )

SWOT ANALYSIS OF THE INDUSTRY

Strength

Availability of iron ore and coal.

Low labor wage rates.

Abundance of quality manpower.

Mature Production base. Weaknesses

Unscientific mining.

Low productivity.

Coking coal import dependence.

Low R & D investments.

High cost of debt.

Inadequate infrastructure

Opportunities

Unexplored rural market.

Growing domestic market.

Exports.

Consolidation.Threats

China becoming net exporter.

Protectionism in the west.

Dumping by competitors.

Technologies, Research & Development

Have synergy with the natural resources endowments with the country.

Conducive to production of high-end and special steel required for sophisticated industrial & scientific applications

Minimize damage to the environment at various stage of steel making and mining.

Optimize resource utilization

Development of front end and strategic steel based material.

TRADE POLICY

EXPORTS :

1. 25% of total production in 2019-20 from 11% in 2004-05.

2. 30% share of exports in global production

3. Export credit, trade information.

4. Cut transaction cost and progress of multi-lateral negotiations.

5. Trade agreement to broaden the export base.

6. Export of value-added steel through project exports.

INVESTMENT PROMOTION AND POLICY IMPLEMENTATION

Provide a single-window clearance for large projects.

110 mt of steel production by 2019-20.

Prepare & implement road maps for technological & productivity improvement.

Monitor the implementation of the national steel policy to global standard.

CASE STUDY

ORGANIZATION: THE JINDAL

When we talk about the business empire, the Jindal group is ranked sixth amongst the top Indian Business Houses in terms of assets, the Group today is a US$2 billion conglomerate.

Jindal Organization was set up in the year 1970. It has grown from an indigenous single-unit steel plant in Hisar, Haryana to the presently one of the largest steel producer in Asia. The organization is still expanding, integrating, amalgamating and growing. New directions, new objectives, but the Industries motto remains the same- "We are the Future of Steel". (www.jpcindiansteel.org/jindalprofile8.htm)

The Jindal group has been technology-driven and has a broad product portfolio. Yet, the focus at Jindal has always been steel. From mining of iron-ore to the manufacturing of value added steel products, Jindal has a preminent position in the flat steel segment in India and is on its way to be a major global player, with its overseas manufacturing facilities and strategic manufacturing and marketing alliances with other world leaders.

Jindal Organization aims to be a global player. In achievement of its objectives, it is committed to maintain world class quality standards, efficient delivery schedules, competitive price and excellent after sales service. US$2 billion Jindal Organisation has expanded and diversified into core business areas ensuring synergy amongst its various business ventures, spreading over 13 plants at 10 pivotal locations in India and two plants in USA.

The Jindal team embodies one of the most popular talent pools of technological acumen available in the country today. With experience that has enabled the organisation to put up large scale projects within record time.

Jindal Stainless Limited

India's largest integrated manufacturer of Stainless Steel catering to about 40 percent of Indian demand.

Plant Location - Hisar, Haryana

Capacity - 500,000 tpa

High Carbon Ferro Chrome plant at Visakhapatnam, Andhra Pradesh

GROUP COMPANIES

Jindal Iron & Steel Company Limited

Plant Locations - Vasind and Tarapur, Maharashtra

Saw Pipes Limited

Plant Location - Kosikalan, Uttar Pradesh, Gujarat

Jindal Vijayanagar Steel Limited

Plant Location - Toranagallu, Karnataka

Jindal Steel & Power Limited

Plant Location - Raigarh, Madhya Pradesh

Saw Pipes Usa Inc

Location - Bay Town, Texas, USA

Jindal United Steel Corporation

Plant Location - Bay Town, Texas, USA

Vijayanagar Minerals Private Limited

Plant Location - 20 km from JVSL plant

Jindal Thermal Power Company Limited

Plant Location - Toranagallu, Karnataka

Jindal Praxair Oxygen Company Limited

Location - Toranagallu, Karnataka

(www.jpcindiansteel.org/jindalprofile8.htm)

PROFILE OF JINDAL STAINLESS LTD

JINDAL is India's largest integrated stainless steel manufacturer, which is continuing growth through positive measures, such as a construction project of a new Ferro- chromium factory, as well as pursuing an expansion program of a new stainless steel plant, and it expects the further development and has keenly requested cooperation from Nisshin Steel which has many years' experience in actual performance of various Technical Assistance projects.

JINDAL STRIPS LIMITED was incorporated to manufacture mild steel, HR plates and coils. It started a mini steel mill at Hisar in 1971. As a strategy to counter low margins in mild steel, JSL diversified into production of stainless steel in the late 70s. JSL was the first company to produce stainless steel HR coils.. In 1977 stainless steel production started. In 2003 the company was reorganized as JINDAL STAINLESS LIMITED. (Annual Report, JSL)

In 1983, JSL forward integrated with a CR plant for stainless steels at a site adjacent to its sister company Jindal Iron's plant at Vasind (near Mumbai). In 1990, JSL embarked upon major backward integration-cum-expansion by commencing work on a sponge iron plant at Raigad in Madhya Pradesh. JSL has over the years developed a number of technologically new processes to save on capital and operational costs.(www.jindalstainless.com)

The Company's indigenously designed rotary kilns, for sponge iron, had teething problems and the setting up of the sponge iron plants was hence, considerably delayed. It is the largest (around 40%) integrated producer of Stainless Steel in India.

At Hisar lies Indias only fully integrated Stainless Steel plant. With the expansion of the unit, the production capacity has increased from 250,000 to 300,000 tonnes per annum. The main reason for the success of JSL is the fact that everything from the conversion of raw material into billets and slabs to hot rolling of strips and plates and cold rolling is done in-house. (www.jindalstainless.com)

The Hot Rolling Division at Hisar

At Hisar there are two major operational units namely hot rolling unit and cold rolling unit. The hot rolling unit comprises of steel melting shops, hot rolling mills (steckel mill, strip mill), finishing units, power plants and oxygen plant etc.

The cold rolling unit comprises of cold rolling, annealing and pickling lines and finishing facilities. Maximum value addition takes place in cold rolling unit. During the Financial year 2001-02, the division had produced 326,405mt of stainless steel that represents around 130 per cent of the capacity utilization.

The higher capacity utilization has been feasible with increased focus of the company to improve the operational efficiency, which has also supported the company's strategy to reduce cost. During the year an additional 60,000 tones of cold rolling capacity was commissioned which has now resulted in total cold rolling capacity of 90,000 tones per annum. The additional capacity would be utilized for producing predominately value added stainless steel products for both domestic and Exports markets. (www.jindalstainless.com)

Highlights

Jindal Organization is a celebrity. Ranked sixth amongst the top Indian Business Houses.

New directions, new objectives... but the Jindal motto remains the same- "We are the Future of Steel (www.jindalstainless.com)

The last decade has been very challenging as the business environment was very competitive, India was globalizing and there were multiple complex issues at play. But we managed to surmount it all and emerge on the top adding new parameters to our achievements and bringing in the kind of excellence that will make the industry and country proud. The companys net sales stood at Rs. 5,459 crore in 2007-08 as compared to Rs. 377.15 crore in 1998-99 and Profit After Tax (PAT) at Rs.1,236.96 crore in 2007- 08, while it was Rs. 46.50 crore in the year 1998-99. JSPLs compounded annual growth rate in terms of net sales is 35% & PAT is 44%, a stupendous growth indeed and I am thankful for that to our committed workforce.

It has been a decade gone well and we look forward to another challenging decade with our determination to reach for the stars.Milestones:

* Spreading out globally in steel production and mining.

* The largest private sector investor in the state of Chhattisgarh.

* An ISO 9002 & ISO 14001 certified Company.

* Manufactured 120 meters Rail, longest in the world.

* First to produce the 3.5 meters wide steel plates.

* Pioneered manufacturing of Hot Rolled Parallel Beam & Columns in medium and large size.

* Worlds largest coal based Sponge Iron manufacturing unit with its captive mines & power plant.

Recognitions:

* JSPL was nominated as one of the emerging companies by Economic Times in 2001* Among the top 20-investor friendly companies listed by Business Today in2004.

* One of the ten fastest growing large size companies listed by Dalal Street,2006.

* One of the ten most investor friendly companies listed by Dalal Street, 2006.

* National Energy Conservation Award six times between 2001-07.

* Eight Environment Awards between 2003-08.

* Six Performance Awards between 2001-2005.

* Three Safety Awards and two HR Awards.Growth story of the decade

ExportsWorldwide demand of stainless steel has shown an average growth of around 4-5 per cent as compared to growth in domestic markets of around 5-7 per cent. The company started developing new markets for its stainless steel products around 4-5 years back and has been able to achieve compounded average growth of 234 per cent based on exports worth Rs. 653.01 Crore during FY 2007-08 as compared to exports worth Rs. 592.84 Crore during FY 2006-07. During the FY 2001-02 the company executed order worth US$ 55 million for export of 55,000mt of stainless steel slabs to leading stainless steel producers in US in a short time span of around five months. The positioning of your company in international markets has improved extensively with the execution of the above export order.

As a result of rapid growth of economic development and increase in people's standard of living in China, demand of stainless steel has climbed to a record high. China has become the largest stainless steel consuming country with its stainless steel apparent consumption exceeding that of USA. The stainless steel markets in China have shown average annual growth rate of 17 per cent will consumption of 2,253,000mt in 2001 compared to 260,000mt in 1990.

The company has been able to successfully tap the increasing stainless steel demand in China & other South East Asian countries and has established its office in China and Vietnam to service the expanding customer base in these markets.

NET SALES & OTHER INCOME

Projects

Investment in Chhattisgarh:

An MoU was signed between JSPL and the Govt. of Chhattisgarh on 4th May 2007 for additional projects worth Rs. 8,438 crore.

Total Project Cost:

8,720CroreCHHATTISHGARH

Investment in Chhattisgarh:

An MoU was signed between JSPL and the Govt. of Chhattisgarh on 4th May 2007 for additional projects worth Rs. 8,438 crore.

Further Expansion at Raigarh Plant:

* 2 MTPA Cement Plant

* Additional Power Generation of 270 MW

* Medium Structural Mill

* Pipe conveyor from mines to plant

* Mini Blast Furnace upgradation

* 1 MT SMS Bloom Caster and Oxygen Plant

* Fabrication Plant in Industrial EstateInvestment in Orissa:

JSPL is investing over Rs. 40,000 crore in Orissa in steel production and

power generation. It proposes to produce 12.5 MTPA steel in two phases

and generate 2500 MW of power over the next decade or so.

Highlights of Angul Project:

* The Project is proposed to be setup on 5750 acres of land, 93% of which is barren.

* The technology to be adopted for this Integrated Steel Plant will be the DRI/BF/EAF route. The DRI Plant has unique feature of using Syn Gas from the Coal Gasification Plant as reductant. The DRI/coal gasification route is being used for the first time in the world and has the advantage of using high ash coal which is predominantly available in the vicinity of the project site.

* Work on setting up of DRI plant of 2.0 MTPA capacity, plate mill of 1.5 MTPA capacity and power plant has started.

* Plate Mill of 1.5 MTPA has already been ordered and Hot Strip mill is planned to be finalized by August, 2008.

Investment in Jharkhand:

In Jharkhand the company plans to produce 11 MTPA of steel and 2600 MW of power in phases at a combined investment of over Rs. 27,000 crore.

Highlights:

* JSPL has taken over the assets of closed Bihar Alloys & Steel Ltd. at Patratu,

about 40kms from Ranchi.

* Using the available land and adding some more, the company is setting up

the new steel and power plants, which would provide gainful employment to a

large number of people and will also help in the economic and infrastructure

development of the region.

* Foundation Stone for the Plant was laid by Shri Madhu Koda, Honble Chief Minister of Jharkhand on 18th March, 2007.

* Feasibility Report and Detailed Project Report completed by MECON for the Steel Plant.

* Complete plant layout frozen, site activities like leveling started, basic engineering in progress.

* Bar Mill of 1 MT and Wire Rod Mill of 0.6 MT capacity already ordered and civil structural work has started.

* Jeraldaburu Iron Ore Mines, Jitpur Coal Block and Amrakonda-Murgadangal Coal Block allocated.

Marketing

The continuing recessionary trend observed during the first half of the financial year 2005-06 got reversed during second half. The demand for stainless steel increased substantially during later part of the year and there were chaotic activities by the service centers trying to build inventories by placing larger orders to tile manufacturers. Jindal also benefited by this trend and has resulted in surge of export volumes. There was almost a three-fold increase in the export dispatches. This trend continued during the first quarter of 2002-03 also and is likely to continue further. JSL, in addition to exports, has increased its dispatches on the domestic front as well as some new areas got special attention from the marketing team, this includes dispatches to auto industry, Govt of India Mint and Railways. Jindal continues to be regular supplier to large and prestigious corporate customers like BHEL, NITRO, and Dept. Of Atomic Energy, L&T, Nuclear Fuel Complex etc. (www.jindalstainless.com)

Quality and Research & Development

JSL supplies quality products to a host of industries and customers. The consistency of the product quality has ensured that stainless steel manufactured at Hisar is meeting requirements for special applications such as nuclear power, atomic energy, railway coaches and wagons, coinage, refineries, fertilizers, copper industry, surgical and razor blades, utensils, etc. Besides the Quality Assurance Department is working independently to operations so as to ensure strict compliance to the requirements of the customers. The Company is upgrading ISO 9002 system to ISO 9000-2000 version, which will be more, focused towards customers' feedback and hence will bring the company more closely and responsive to meet the customers requirement. ISO 14001 systems is in place, which shows the concern of the company towards environment protection. As a step forward the company is now in process of implementing OHSAS-18001 which will ensure safe and healthy working condition to the employees and people living in the vicinity of the Company Research & Development unit in Hisar is further making rapid strides to introduce more value-added products in the company's product portfolio, the manufacturing of duplex stainless steel which finds applications in manufacturing of pressure vessels, equipment for water treatment, digesters in pulp and paper industry etc. has been stabilized by the R&D team. The company has also started manufacturing of cupronickel material for coinage and high Nickel alloys such as 'Invar' utilized in m