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Organization study on SAIL
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INDEX
TOPIC NO TOPIC NAME PAGE NO.
1 CHAPTER 1 INTRODUCTION 11
1.1
1.2
1.3
1.4
1.5
1.6
INTRODUCTION
OBJECTIVES OF STUDY
SCOPE OF STUDY
METHODOLOGY OF THE STUDY
PERIOD OF STUDY
LIMITATIONS OF THE STUDY
12-13
2 CHAPTER 2 INDUSTRY ANALYSIS 14
2.1
2.2
2.3
2.4
2.5
2.6
2.7
INTRODUCTION
GLOBAL STEEL INDUSTRY
NATURE OF STEEL INDUSTRIES IN INDIA
RESEARCH AND DEVELOPMENT
EMPLOYEMENT OPPORTUNITIES IN STEEL INDUSTRY
PEST ANALYSIS
KEY PLAYERS IN THE STEEL INDUSTRY
15-18
3 CHAPTER 3 COMPANY ANALYSIS 19
3.1
3.2
3.3
BUSINESS ANALYSIS
INTRODUCTION
HISTORY OF THE COMPANY
20-28
1 | Page
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
VISION
MISSION
OBJECTIVES OF SAIL
OWNERSHIP AND MANAGEMENT
BUSINESS IN TERMS OF PRODUCTS AND SERVICES
PRODUCT PROFILE
ORGANIZATIONAL STRUCTURE OF STEEL INDUSTRY
SWOT ANALYSIS OF SAIL
3.2
3.2.1
3.2.2
3.2.3
STAKEHOLDER ANALYSIS
CUSTOMER
SUPPLIERS
AFTER SALES REPORT
29
3.3
3.3.1
3.3.2
COMPETITORS ANALYSIS
LIST OF COMPETITORS
FIVE COMPETITIVE FORCE MODEL OF MICHAEL PORTER
30-34
3.4
3.4.1
3.4.2
3.4.3
3.4.4
PRODDUCT/SERVICE/QUALITY/PERFORMANCE ANALYSIS
ABCD ANALYSIS FRAMEWORK
SIX SIGMA QUALITY ANALYSIS
QUALITY CIRCLE METHOD
CUSTOMER SATISFACTION AND RENTENTION SURVEY
34-37
3.5
3.5.1
FINANCIAL PERFORMANCE ANALYSIS
BALANCE SHEET
38-46
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3.5.2
3.5.3
3.5.4
3.5.5
PROFIT AND LOSS ACCOUNT
FINANCIAL ANALYSIS
CASH FLOW STATEMENT
COMPANY’S FUTURE EARNINGS POTENTIAL
3.6
3.6.1
3.6.2
3.6.3
3.6.4
3.6.5
3.6.6
3.6.7
3.6.8
3.6.9
STRATEGY ANALYSIS
VARIOUS CORPORATE STRATEGY
GLOBAL STRATEGIES
DIGITAL STRATEGY LIKE USAGE OF INFORMATION
COMMUNICATION TECHNOLOGY
E COMMERCE STRATEGY TO DECREASE THE COST AND
INCREASE THE BUSINESS SHARE
RESEARCH & DEVELOPMENT TO DEVELOP NEW PRODUCTS,
PROCESSES, SERVICES, BUSINESS MODELS
CUSTOMER RETENTION AND NEW CUSTOMER STRATEGY TO
EXPAND BUSINESS
ACQUISITION & MANAGING OF HUMAN RESOURCE
STRATEGIES
46-48
3.7
3.7.1
3.7.2
3.7.3
3.7.4
MARKETING ANALYSIS
DEMAND FOR PRODUCTS & SERVICES
ADVERTISEMENT STRATEGIES
COLLABORATION STRATEGIES
PRODUCT/SERVICE INNOVATIVE STRATEGIES
49-50
3.8 HR DEVELOPMENT & RETENTION STRATEGY 50-51
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3.8.1
3.8.2
3.8.3
3.8.4
IDENTIFICATION OF HUMAN RESOURCES
TRAINING STRATEGIES
PRODUCTIVITY ENHANCEMENT STRATEGIES
EMPLOYEE MOTIVATIONAL STRATEGIES
3.9
3.9.1
3.9.2
3.9.3
3.9.4
3.9.5
NEW TECHNOLOGY ADOPTION STRATEGY
INVENTORY OF EXISTING TECHNOLOGIES
SURVEY OF NEW TECHNOLOGY
DEVELOPMENT OF INDIGENOUS NEW TECHNOLOGY OR
PROCUREMENT OF NEW TECHNOLOGY
TECHNOLOGY ADOPTION, AUTOMATION AND IMPROVING
PRODUCTIVITY
51-52
3.10
3.10.1
3.10.2
3.10.3
3.10.4
3.10.5
LEADERSHIP ANALYSIS
LEADER/DECISION MAKER
TYPE OF LEADER/MAKER
QUALITIES OF LEADER
FUTURISTIC STRATEGIES
ACCEPTANCE OF LEADER BY ORGANIZATION
53
3.11
3.11.1
3.11.2
ANALYSIS OF IMPLEMENTATION OF ITANDAUTOMATION
STRATEGIC PLANNING FOR IT IS FUNDAMENTAL TO THE
ULTIMATE EFFECTIVENESS OF IT IMPLEMENTATION
INTERDEPARTMENTAL COORDINATION HAS PROVEN TO BE
A MAJOR FACTOR IN EFFECTIVE IT IMPLEMENTATION
54
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3.11.3
3.12
3.12.1
3.12.2
3.12.3
3.12.4
THE EXPERTISE LEVELS OF EXECUTIVE WITH REGARD TO IT
INNOVATION & FUTURE PLAN ANALSYIS
VALUE ADDED PRODUCTS/SERVICES
NEW PRODUCT/SERVICES DEVELOPMENT AND
COMMERCIALIZATION
EFFORTS ON CUSTOMER SATISFACTION DELIGHT AND
RETENTION
IDENTIFYING NEW OPPORTUNITIES
55
4 CHAPTER 4 FINDINGS SUGGESTIONS AND CONCLUSION 57-58
5 BIBLIOGRAPHY 59
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CHAPTER 1
INTRODUCTION
1.1 INTRODUCTION
An organization is a social arrangement which pursues collective goals, which controls
its own performance, and which has a boundary separating it from its environment. Organization
is the association formed by a group of people who see that there are benefits available from
working together towards some common goal.
Organizational studies are the study of individual and group dynamics is an
organizational setting, as well as the nature of organizations themselves. Whenever people
interact in organization many factors come in to play. Organizational studies attempt to
understand and model these factors. Organizational study is essential to any MBA student as it
helps them to connect theory with practice.
Organizational study refers to the study of organization as a whole and getting adequate
knowledge with various departments in the organization. The study was carried out at Steel
Authority of India limited (SAIL). This study is based on the different aspects and dimensions of
different departments of the company.
1.2 OBJECTIVES OF STUDY
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The overall objective is to conduct a study on organizational study on Steel Authority of
India Limited (SAIL). The following are the specific objectives of the study
● To examine the developments of SAIL.
● To understand about the functional areas of the company.
● To understand the organization structure of SAIL.
● To understand the product profile of SAIL.
1.3 SCOPE OF STUDY
With an increasing entry of new companies, information of newer technologies and
changing economies, the world of business is changing very rapidly. This organizational study in
Steel Authority of India Limited exposes to the practical side of the business enterprise. This
study helps to understand the history, structure, activity and the products of the company and its
contribution to the Indian economy. This study exposes to various departments.
1.4 METHODOLOGY OF THE STUDY
Data required for the study is obtained through secondary sources.
● Secondary data
The secondary data is collected from journals, company files and annual reports, department
manuals and website of the company.
1.5 PERIOD OF THE STUDY
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The organizational study was conducted in Steel Authority of India Limited, for one
month (01/06/2020 to 30/06/2020).
1.6 LIMITATIONS OF THE STUDY
● An in-depth study of the company could not be carried out due to shortage of time.
● The main limitation of the study is collection of information because most of the
information is confidential
● The company has limitation to disclose their financial details, so a detailed analysis of
financial performance of the company is not possible.
CHAPTER 2
INDUSTRY ANALYSIS
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2.1 INTRODUCTION
Steel industry, the business of processing iron ore into steel, which in its simplest form is
an iron-carbon alloy, and in some cases, turning that metal into partially finished products or
recycling scrap metal into steel. The steel industry grew out of the need for stronger and more
easily produced metals. Technological advances in steelmaking during the last half of the 19th
century played a key role in creating modern economies dependent on rails, automobiles, girders,
bridges, and a variety of other steel products.
Steel is crucial to the development of any modern economy and is considered to be the
backbone of human civilization. The level of per capita consumption of steel is treated as an
important index of the level of socio-economic development and living standards of the people in
any country. It is a product of a large and technologically complex industry having strong
forward and backward linkages in terms of material flows and income generation. All major
industrial economies are characterized by the existence of a strong steel industry and the growth
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of many of these economies has been largely shaped by the strength of their steel industries in
their initial stages of development.
2.2 GLOBAL STEEL INDUSTRY
The global steel industry employs more than two million people worldwide, with a
further two million contractors and four million people in supporting industries. It is at the source
of employment for more than50 million people. Steel is a key product supplier to industries such
as automotive, construction, transport, power and machine goods and it is the main material used
in delivering renewable energy solar, tidal and wind. 97% of steel by-products can be reused and
all the steel which is more than 150 years old can be recycled. Global steel recovery rate is for
recycling is estimated at weighted average of more than 83%.
2.3 NATURE OF STEEL INDUSTRY IN INDIA
Steel industry is one of the basic industries of the country and plays an important role in
strengthening the economy. The India steel industry is one of the major industries in India
whereas the Indian government plays a vital role in the development of the steel industry in
India. The India steel industry is experiencing a slow but steady growth. The steel industry in
India has huge scopes in the future with massive scale of infrastructural development happening
all across the country.
The growth in the Indian steel sector has been driven by domestic availability of raw materials
and cost-effective labor. Consequently, the steel sector has been a major contributor to India’s
manufacturing output. India’s steel production capacity has expanded to 137.975 million tones in
FY19.
2.4 RESEARCH AND DEVELOPMENT
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Steel plays an important role in global economic growth as it is an indispensable part for
development of a nation. As a result, continual improvement in steel technology is must for
sustainable economic growth of a nation. Towards achieving this aim numerous corporate
research and development centers of global steel producing companies have been established and
operating with significant impact on world economy.
Steel research centers have strong potential for playing a significant role on global
development as overall wellbeing of people in the world is reflected by their per capita
consumption of steel. World-wide economic scenario continues to be challenging but appears to
be bottoming out. Therefore, global economic growth mostly in developing country like India,
China and Brazil requires high utilization of steel in coming years.
The R&D efforts by the Indian steel companies out of their own corpus have mainly
concentrated on improving internal processes related to saving costs and improving efficiency.
Process improvements such as beneficiation and palletization of iron ore have received good
response in the industry. Adoption of continuous casting together with thin slab casting as well
as dedicated technologies for harnessing waste heat are drawing the attention of the steel
companies. These have led to improved productivity and energy efficiency in the Indian steel
industries.
2.5 EMPLOYEMENT OPPORTUNITIES IN STEEL INDUSTRY
Steel manufacturing is a competitive global industry. Steel industry has experienced an
increased productivity by the consolidation within the industry and continual improvements in
manufacturing operations. Hence, employment levels have decreased, despite expanding steel
production. However, in the coming years, job opportunities are expected to be very good for
engineers and skilled production and maintenance workers.
The steel industry employs people with different skills and diverse knowledge, who have
the ability to work in multi-disciplinary teams. The steel industry is committed to offering
employees the opportunities to further their education and develop their skills. Not only is this a
way of enhancing quality of work and productivity but it also boosts employee satisfaction.
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A safe working environment for all employees is the number one priority for steel
companies.
2.6 PEST ANALYSIS
A PEST analysis is an acronym for a tool used to identify the macro (external) forces facing an
organization. The letters stand for Political, Economic, Social and Technological.
Political factors
● Recommendations on captive mines
● National steel policy to remove bottlenecks
Economic factors
● GDP growth rate
● Reduction in custom duty
Social factors
● Rural urban divide
● Higher disposable income
Technological factors
● Popularity of steel portals
● Application of steel markup language
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2.7 KEY PLAYERS IN THE STEEL INDUSTRY
● Rashtriya Ispat Nigam Limited (RINL)
● Tata Steel
● JSW Steel
● SAIL
● VISA Steel
● Essar Steel
● Bhushan Steel
● Jindal Steel & Power
● Facor Steel
● MESCO Steel
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CHAPTER 3
COMPANY ANALYSIS
3.1 BUSINESS ANALYSIS
3.1.1 INTRODUCTION
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Steel Authority of India Limited (SAIL)is an Indian state-owned steel making company based in
New Delhi, India. SAIL is a leading steel-making company in India and one of the seven
Maharatnas Central Public Sector Enterprises. It is a public sector undertaking, owned and
operated by the government of India with an annual turnover of INR 44,452 Crore for the fiscal
year 2016-17. SAIL was incorporated on 24 January 1973, and the company is having 78,333
employees. The annual production of. SAIL is the largest steel production in India and one of the
largest steel producers in the world.
3.1.2 HISTORY OF THE COMPANY
Hindustan Steel Limited (HSL) was set up on 19 January 1957.Later on Bhilai and Durgapur
were handed over to HSL on April 1957. Later in 1964, Bokaro Steel Limited was incorporated.
Later the concept of creating one umbrella came up and the Steel Authority of India Limited
(SAIL) was created on January 24, 1973, with an authorized capital of Rs. 2000 crore, was made
responsible for managing five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and
Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was restructured as an
operating company.
3.1.3 VISION
To be a respected world Class Corporation and the leader in Indian steel business in
quality, productivity, profitability and customer satisfaction.
3.1.4 MISSION
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● Build lasting relationship with customers based on trust and mutual benefits.
● Uphold highest ethical standard in conduct of business.
● Create and nurture a culture that supports flexibility, learning and proactive to change.
● Chart a challenging career for employees with opportunities for advancement and
rewards.
● Value opportunity and responsibility to make meaningful difference in people’s lives.
3.1.5 OBJECTIVE OF SAIL
● To Endeavour to supply steel at internationally competitive cost and quality to domestics
as well as foreign consumes.
● To have fully committed and motivated work forces.
● To acknowledge SAIL responsibility towards maintaining ecological balances and to
effective schemes that would help presences the natural environment.
● To build market and brand loyalty by expenditure action on customer complaints to
maintain and increase quality.
3.1.6 OWNERSHIP AND MANAGEMENT
The Government of India owns about 75% of SAIL's equity and retains voting control of
the company. However, SAIL, by virtue of its Maharatna status in May 2010, enjoys significant
operational and financial autonomy. Mr. Anil Kumar Chaudhary is the current chairman
3.1.7 BUSINESS IN TERMS OF PRODUCTS AND SERVICES
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SAIL produces and provide vital as well as basic infrastructure facilities across the length
and breadth of India. SAIL is continuously meeting the growing demand for steel from different
sectors contributing in the growth of Indian economy like infrastructure, railways, power,
transportation, defense, oil & gas, heavy industries, construction, white goods, automobiles, etc.
With an unmatched range of mild steel, both in long and flat categories, as well as a wide variety
of special and stainless steels.
3.1.8 PRODUCT PROFILE
The Steel Authority of India Limited (SAIL) has always been the forerunner in the steel
sector and tops the list of steel-making companies in India. SAIL has a wide range of steel
products - both Long and Flat. SAIL also produces Tubular products and Railway products such
as rails, wheels, axles and wheel sets.
Long products
Structurals
Structural steel is a category of steel used for making construction materials in a variety of
shapes.
Crane Rails Bars Roads
Crane Rail are manufactured using high grade materials and is known for its sturdiness,
durability and application specific design. Crane Rails are mainly used in overhead EOT, Gantry
Crane and Hoists.
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Rebars Wire Rods
Rebar (short for reinforcing bar), known when massed as reinforcing steel or reinforcement
steel, is a steel bar or mesh of steel wires used as a tension device in reinforced concrete and
reinforced masonry structures to strengthen and aid the concrete under tension.
Flat products
HR Coils Sheets & Skelp Plates
HR sheets or hot rolled sheets are steel sheets that are soft enough to bend flat on itself in any
direction, without cracking. They are ductile enough for shallow drawing used in variety of
industries in the domestic market.
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CR Coils & Sheets
Cold Rolled Steel is ideal for projects where precision is essential. The metal is easily formable
for moderate draw applications. This makes it ideal for use in many home appliances and metal
furniture.
GC Sheets/GP Sheets Coils
Galvanized Plain Coils & Sheets Galvanized Plain Sheets & Coils are required in many
processes specially fabrication of various industrial and domestic good.
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Tinplate
Tinplate is light gauge, cold-reduced low-carbon steel sheet or strip, coated on both faces with
commercially pure tin. It thus combines in one material the strength and formability of steel and
the corrosion resistance, weldability and good appearance with lustre of tin.
Electrical Steel
Electrical steel sheets are used as magnetic cores for everything from power generators to
transformers to motors.
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Railway products
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3.1.9 ORGANIZATIONAL STRUCTURE OF STEEL INDUSTRY
The organizational structure in any business is important for the survival as all
organizations have to be able to accomplish tasks and carry out certain duties. Structure splits the
tasks of the whole organization into smaller and more practical chunks, and allocates them to
sections of the organization that are held responsible for its completion. It also ensures that all
the different sections are coordinated and controlled in a way which it has to achieve something.
3.1.10 SWOT ANALYSIS
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FINANCERESEARCH
PLANT
MANAGEMENTCHAIRMAN AND CEO
RAW MATERIALHR
TECHNICALCOMMERCIAL
FUNCTIONAL MANAGERS
Strengths
Strengths of SAIL include diversified product mix, well established nationwide
marketing network, captive iron ore resources, skilled manpower, captive power plants, land
bank for future expansion, dedicated R&D wing and strong balance sheet. Further, the on-going
modernization is going to take SAIL ahead in terms of modern technology adoption, automation,
product quality, bigger product basket, process efficiency & diversification opportunities.
Weaknesses
Dependence on external sources for key input like coking coal leads to exposure of the
Company to the market risk. Regular superannuation in large numbers, over the years, has
resulted in skill depletion largely in the technical areas. Transfer of skill and knowledge has to be
given thrust. Besides, technological up-gradations and modernization also call for consistent
efforts towards competency development of employees.
Opportunities
∙ The Indian steel industry is poised for a robust growth over the medium term. There would be
opportunities provided by a rapidly expanding domestic market.
∙ Focus on infrastructure projects viz. industrial freight corridors, new ports and new cities
planned along the freight corridors provide opportunities for enhanced steel consumption.
Threats
∙ Intensification of competition from domestic as well as foreign steel producers.
∙ Fall in international steel prices due to decline in raw material prices both for iron ore &
coking coal.
∙ Excess steel capacity in the country could lead to a margin squeeze.
∙ Slowing growth in China could potentially increase competition from cheap imports.
3.2STAKEHOLDER ANALYSIS
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3.2.1 CUSTOMER
Besides supplying its full range of products to institutional buyers like Defense and the
Railways, SAIL is successfully servicing the requirements of a variety of customers. SAIL offers
to its customers a wide product profile matched with excellent service, and a choice ranging from
widely traded items like Hot Rolled Coils to specialty products like CRNO steels.
3.2.2 SUPPLIERS
SAIL has set up a countrywide network of over 1730 Dealers who ensure availability of
quality steel in virtually all the districts of the country for building long-lasting, cost-effective
and safe structures.
3.2.3 AFTER SALES REPORT
Steel Authority of India Limited (SAIL) has reported December sales at 1.68 million
tonnes. A company statement said that this was the highest ever sales by the company in a
month.
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3.3COMPETITORS ANALYSIS
3.3.1 LIST OF COMPETITORS
Steel Authority of India Limited (SAIL) has got many competitors. The below list are few
competitors,
● Tata steel Ltd
● Jindal steel & power Ltd
● JSW steel Ltd
Tata Steel Ltd
Tata Steel Limited, formerly Tata Iron and Steel Company Limited (TISCO), is an Indian
multinational steel-making company headquartered in Kolkata, West Bengal, India, and a
subsidiary of the Tata Group. It is one of the top steels producing companies globally with
annual crude steel deliveries of 27.5 million tonnes (in FY17), and the second largest steel
company in India (measured by domestic production) with an annual capacity of 13 million
tonnes after SAIL.
PRODUCT PROFILE
Tata steels is engaged with the manufacture and sale of steel products in India and
internationally. They offer hot and cold rolled coils and sheets, galvanized sheets, tubes, wire
cods, construction rebars and bearings. Tata steels is one of the few steel companies that are fully
integrated from mining to the manufacturing and marketing of finished products.
STRATEGY
● Tata steels consists of Corus products mainly manufactured at UK and Netherlands.
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● Ferroy alloy products consist of chrome ore, manganese ore and ferro chrome and ferro
manganese.
Jindal steel & power Ltd
Jindal Steel and Power Limited (JSPL) is an Indian steel and energy company based in Hisar.
With turnover of approx. US$ 5.5 billion, JSPL is a part of about US$18 billion diversified
Jindal Group conglomerate. JSPL is a leading player in steel, power, mining, oil and gas and
infrastructure in India. The company produces steel and power through backward integration
from its own captive coal and iron-ore mines.
PRODUCT PROFILE
JSPL has a unique product portfolio that caters to markets across the steel value chain. JSPL has
pioneered production of Hot Rolled Parallel Flange Beams and Columns in the country. The
company also introduced world’s longest 121-metre long rails in the country and is the first to
manufacture Head Hardened Rails for high-speed trains and metros in India. JSPL also
manufactures customized steel products like Weld Mesh and Cut & Bend Rebars aimed to speed
up the construction process.
STRATEGY
● Long Rails and Flash0 Butt Welded Rail Panels with customized specifications.
● Parallel Flange beams and columns with provision for ultimate design flexibility to
structural designers.
● art plate mill that can produce plates and coils of 5 meter and 3 meters respectively.
● Angles and Channels provided have features of excellent durability, superior Weldability
and superior straightness and strict dimensional accuracy.
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JSW Steel Ltd
JSW Steel Ltd. is an Indian steel making company based in Mumbai, Maharashtra. It is a
subsidiary of JSW Group. It is one of the fastest growing companies in India with a footprint in
over 140 countries. JSW Steel is an Indian steel company owned by the JSW Group based in
Mumbai, Maharashtra, India.
PRODUCT PROFILE
JSW Steel is globally recognized as a manufacturer of high-end, value-added steel. The
Company has a large bouquet of flat and long products to meet diverse global needs. The
Company is also strengthening its value-added product portfolio to address the rising demand for
such types of steel. Their main products include Long products and Flat products.
STRATEGY
● Color Coated products- It has features like corrosion resistance and high strength
● Cold Rolled Closed Annealed or simply CRCA sheets and coils are manufactured at
modern facilities with latest operational technologies
● Galvanized Steel manufactured by JSW Steels are of impeccable quality.
● TMT Bars- It has an absorption capacity for higher energy and are specially designed for
zones that are prone to earthquakes.
3.3.2 FIVE COMPETITIVE FORCE MODEL OF MICHAEL PORTER
Steel Industry has registered a phenomenal growth across the world over the past few
years. Porter’s Five Forces Model is a tool or a framework that is used to work out how
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competitive an industry is, and therefore how attractive the industry is for someone who wants to
enter that industry and achieve high profits.
Porter’s Five Forces – Force 1: Threat of new entrants
● Threat for new entrants is low for integrated steel industry
● Growth is stagnant from the low price of steel
● Economies of scale
● Significant capital investment in acquiring property and equipment
● Barriers to exit are also very high as tax laws and accounting rules inhibited the closing
of inefficient plants
● Difficult access to supply and distribution
● Slightly higher for the mini mill industry due to the lower capital commitment and scale.
Porter’s Five Forces – Force 2: Threat of substitutes
● In steel industry the threat of substitutes is moderate to high.
● High in applications where strength is not a crucial concern but cost is (e.g. plastic, wood,
synthetic materials, fiberglass)
● Moderate in applications that require strength since substitute materials are just not strong
enough
● Threat of cheaper Chinese steel could take sales from domestic players too.
Porter’s Five Forces – Force 3: Bargaining power of customers
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● The bargaining power of customer is moderate
● The huge availability of steel products has allowed buyers to set the price they will for
steel products.
● Relatively low switching cost
● Larger buyers have (e.g. car makers) have more bargaining power.
Porter’s Five Forces – Force 4: Bargaining power of suppliers
● The bargaining power of supplier for the industry is moderate
● Iron ore and scrap are relatively cheap commodities
● There are only few suppliers
● Mini mills reliability on scrap metal can cause it to shift to a more costly materials like
iron carbide in cases of higher cost of scrap metal due to limited supply
● Bargaining power of union workers is medium too.
Porter’s Five Forces – Force 5: Competitive rivalry
● The competitive rivalry is high
● There is not much product differentiation resulting in intense competition to get large
contracts thereby minimizing customers switching cost and loyalty and causing excess
capacity.
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● High exit barriers since assets are specialized due to various technology being used in the
industry
● Increase of mini-mill competitors
● Increase in global competitor, taking up greater market shares.
3.4Product/Services Quality/Performance Analysis
Steel Authority of India Limited, manufactures and sells a range of steel products,
including hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structurals,
railway products, plates, bars and rods, stainless steel, and other alloy steels. The company
produces iron and steel at five integrated plants and three special steel plants, located principally
in the eastern and central regions of India.
The company’s long and flat steel products are offered in the domestic, as well as the
international markets. This is carried out by the company’s Central Marketing Organization
(CMO) that transacts business through its network of 37 branch sales offices spread across the
four regions, 65 warehouses, and 26 customer contact offices.
3.4.1 ABCD ANALYSIS FRAMEWORK
ABCD is an acronym that stands for Advantages, Benefits, Constraints, and
Disadvantages.
Application of ABCD analysis results in an organized list of a business advantages,
benefits, constraints, and disadvantages in a systematic matrix. This includes how various issues
should be identified for models/concepts/systems based on a generalized framework and then
how to derive a specific framework for a business model. A general guideline is given on how to
identify various factors affecting these determinant issues based on the four constructs
advantages, benefits, constraints and disadvantages.
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Advantages
● Abundance of iron ore and other mineral for steel.
● Well qualified and technically skilled manpower
Benefits
● Durability and flexibility
● Cost efficiency and cheaper to use
● Recyclability
Constraints
● Lack of technology
● Shortage of metallurgical coal
Disadvantage
● Maintenance cost of a steel structure is very high
● If steel loses its ductility property, than chances of brittle fractures increase.
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3.4.2 SIX SIGMA QUALITY ANALYSIS
Six Sigma is a method that provides organizations tools to improve the capability of their
business processes. This increase in performance and decrease in process variation helps lead to
defect reduction and improvement in profits, employee morale, and quality of products or
services.
Six Sigma in metal industry also requires extensive understanding of the DMAIC
approach. It helps dramatically boost the quality of the production and manufacturing processes
used in this specific field, significantly reduce mistakes and defects and ensure that there is no
impending or current loss in metal.
Define
The definition stage involves the proper utilization of the most effective and powerful tools
especially those that are mentioned above in creating a list of the probable causes of the major
losses of metal. It establishes the baseline of a process.
Measure
This step involves the evaluation of probable causes of losses with the help of statistical tools
proven to be effective in properly keeping track of metrics.
Analyze
It aims to completely analyze the results of the performed measurements and identifying the
main and real causes of steel losses.
Improve
This step aims to implement improvement actions based upon the conclusions generated from
the analyze phase. It aims to define process actions that guarantee the elimination of physical
losses during typical or normal operations.
Control
It primarily focuses in controlling the process improvements made and in making sure that these
improvements continue to offer the best results in the metal industry.
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3.4.3 QUALITY CIRCLE METHOD
A quality circle is a participatory management technique that enlists the help of
employees in solving problems related to their own jobs. Circles are formed of employees
working together in an operation who meet at intervals to discuss problems of quality and to
devise solutions for improvements. Quality circles have an autonomous character, are usually
small, and are led by a supervisor or a senior worker.
3.4.4 CUSTOMER SATISFACTION AND RETENTION SURVEY
Customer satisfaction is a fast-growing concept and pivotal to the performance of any
organization. In recent years, the concept has become the primary issue in all industries. The
purpose of the study was to assess customer satisfaction levels with current services provided by
the Steel Authority of India Limited selling reinforcing steel to the construction industry. A
survey was carried out in the steel industry to gather information regarding customer satisfaction.
A quantitative research approach was used and data were collected by means of a questionnaire
that was distributed among the company’s customers. The company has developed a positive
relationship with its customers However, the area of stock availability had a wider gap and it was
recommended that the company must always make the plant available for production. There is a
positive perception of the company’s service quality and customer satisfaction even though there
is scope for improvement as reflected by the existing of gaps within the company’s operations.
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3.5Financial Performance Analysis
3.5.1 STEEL AUTHORITY OF INDIA LIMITED BALANCE SHEET OF THE YEAR
ENDED 31ST MARCH 2019
LIABILITIES AMOUNT ASSETS AMOUNT
Equity capital 4131 Fixed assets 61,359
Reserves 33021 Investments 1,585
Net worth 37151 Capital work in progress 16,014
Borrowings 45,170 Inventories 19,689
Trade payables 7,258 Trade receivable 4,495
Other liability items 26,177 Cash equivalents 219
Other liability 33,435 Loans and advance 21,137
other asset items -7,742
37,799
TOTAL LIABILITIES 116,756 TOTAL ASSETS 116,756
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3.5.2 STEEL AUTHORITY OF INDIA LIMITED PROFIT AND LOSS ACCOUNT OF
THE
YEAR ENDED 31ST MARCH 2019
PARTICULARS AMOUNT AMOUNT
INCOME
Sales Turnover 66,967.31
Net Sales 66,967.31
Other Income 358.04
TOTAL INCOME (gross profit) 70,041.97
EXPENDITURE
Raw Materials 35,268.19
Power & Fuel Cost 6,052.52
Employee Cost 8,830.34
Miscellaneous Expenses 9,798.77
TOTAL EXPENSES 59,949.82
OPERATING PROFIT 9,734.11
Profit Before Depreciation Interest and Taxes 10,092.15
Profit Before Depreciation and Tax 6,937.23
Depreciation 3,384.72
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Profit Before Tax 3,552.51
Tax 1,159.07
NET PROFIT 2,178.82
3.5.3 FINANCIAL ANALYSIS
Profit ratio
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings.
Gross profit
Profit margin is one of the commonly used profitability ratios to gauge the degree to which a
company or a business activity makes money. It represents what percentage of sales has turned
into profits.
Gross profit ratio= gross profit/net sales*100
= 70,041.97/66,967.31*100
= 104.5%
SAIL has generated 104.5% gross profit.
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Net profit
This ratio measures the overall profitability of company considering all direct as well as indirect
cost. A high ratio represents a positive return in the company and better the company is.
Net profit= Net Profit ÷ Sales * 100
=2,178.82/66967.31*100
=3.2%
SAIL has generated 3.2% net profit.
Return on assets
This ratio measures the earning per rupee of assets invested in the company. A high ratio
represents better the company is.
Return on assets=Net Profit ÷ Total Assets*100
=10,092.15/116,756*100
=8.6%
Return on Equity
Return on equity shows how well a company can use shareholder investments to generate profits.
Return on equity=Net Income ÷ Average Shareholder’s Equity*100
Operating Profit
A company’s operating profit reveals how much revenue is left over after it covers both COGS
and operating expenses.
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Operating profit= Operating Profit ÷ Net Sales*100
= 9,734.11/66,967.31*100
=14.5%
Liquidity Ratios
Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt
obligations. These ratios measure the ability of a company to pay off its short-term liabilities
when they fall due.
Quick ratio
Quick ratio measures current (short term) liquidity and position of the company
Quick ratio = current asset + sundry debts + bank / current liability
Current assets=19,689+4,495+219+1585+21,137
=47,125
Current liability=45,170+7,258+26,177
=78,605
=47,125/78,605
=0.59
Current Ratio
Current ratio is balance-sheet financial performance measure of company liquidity. Current ratio
indicates a company's ability to meet short-term debt obligations.
Current ratio= current asset/current liability
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=47,125/78,605
=0.59
Activity Ratios
Activity ratios measure the efficiency of a business in using and managing its resources to
generate maximum possible revenue.
Inventory turnover ratio
The inventory turnover ratio details the efficiency with which inventory is managed. The ratio
shows how well the business manages its inventory levels and how frequently they are
replenished.
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
ASSET TURNOVER RATIO
The asset turnover ratio measures the efficiency with which a company utilizes its assets to
generate sales. The ratio calculates net sales as a percentage of assets.
Asset Turnover Ratio = Sales / Average Total Assets
WORKING CAPITAL RATIO
The working capital turnover ratio indicates a business effectiveness in utilizing its working
capital. Working capital is the total amount of current assets minus the current liabilities.
Working Capital Ratio = Net Sales / Working Capital
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LEVERAGE RATIO
A leverage ratio is any kind of financial ratio that indicates the level of debt incurred by a
business entity against several other accounts in its balance sheet, income statement, or cash flow
statement. These ratios provide an indication of how the company’s assets and business
operations are financed (using debt or equity).
DEBT TO EQUITY RATIO
This ratio indicates total debt used in the business in comparison to equity. A higher ratio
represents insecurity to the creditors and other lenders and the low ratio represents more safety or
cushion to lenders.
Debt equity =Total Debt/ Shareholders Fund
45,170/37151
=1.21
Total debt
Total debt includes both short term and long term debt. Short term debts are the current
liabilities. Long term debt includes loans, debentures, bonds, mortgage loans, and secured loans.
Total debt = long term debt + current liabilities
=45,170+78,605
=123,775
Shareholder-return ratio
The return on shareholders' equity ratio shows how much money is returned to the owners as a
percentage of the money they have invested or retained in the company
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3.5.4 CASH FLOW STATEMENT OF STEEL OF AUTHORITY OF INDIA LIMITED
YEAR ENDED ON 31ST MARCH 2019
AMOUNT AMOUNT
CASH FROM OPERATING ACTIVITY
Profit from operation 9,892
Receivables (676)
Inventory (2,607)
Payables (282)
Direct taxes 36
Other operating items 939
Net cash inflow from operating activities 7,302
CASH FROM INVESTING ACTIVITY
Fixed assets purchased 3,989
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Fixed assets sold 101
Investments purchased (35)
Interest received 124
Dividends received 44
Net cash outflow from investing activities (3,756)
CASH FROM FINANCIAL ACTIIVITY
Proceeds from borrowing 1,374
Repayment of borrowing (1,613)
Interest paid 3,352
Net cash outflow from financial activities (3,591)
NET CASH FLOW (45)
A cash flow statement is a financial statement that summarizes the amount
of cash and cash equivalents entering and leaving a company. The cash flow statement measures
how well a company manages its cash position, meaning how well the company
generates cash to pay its debt obligations and fund its operating expenses.
3.5.5 Company’s future earnings potential
The growth in domestic steel demand is expected to be about 7.5% during calendar years 2019
and 2020. SAIL is expected to report around 8% sales volume growth till 2019-20, given the
smooth execution of its expansion plans.
For instance, SAIL added two additional blast furnaces during the past year. Its new steel melt
shop at Bhilai is also expected to be fully operational soon.
3.6Strategy Analysis
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3.6.1 Various corporate strategy
Corporate strategy is hierarchically the highest strategic plan of the organization, which
defines the corporate overall goals and directions and the way in which will be achieved within
strategic management activities. It is a long-term, clearly defined vision of the direction of a
company or organization.
The three main types of corporate strategies are growth, stability, and renewal.
3.6.2 Growth
A growth strategy is when an organization expands the number of markets served or
products offered, either through its current business or through new business. Because of its
growth strategy, an organization can increase revenues, number of employees, or market share.
3.6.3 Stability
A stability strategy is a corporate strategy in which an organization continues to do what
it is currently doing. Examples of this strategy include continuing to serve the same clients by
offering the same product or service, maintaining market share, and sustaining the organization's
current business operations.
3.6.4 Renewal
When an organization is in trouble, something needs to be done. Managers need to
develop strategies, called renewal strategies, that address declining performance.
Steel Authority of India Limited follows the corporate strategies especially the stability because
the company offers same product to their clients as per their need. SAIL also follows other two
strategies too, that is why SAIL is one of the largest steel producers.
3.6.5 Global Strategies
A global strategy is one that a company takes when it wants to compete and expand in the
global market. In other words, a strategy business pursues when they wish to expand
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internationally. A global strategy refers to the plans an organization has developed to target
growth beyond its borders.
Steel Authority of India Limited also produce its product worldwide in order to expand in
global market and by this the growth of the company is developed.
3.6.6 Digital Strategy like usage of information communication technology
Steel Authority of India Limited has developed in sales by one these strategies which is
by using the information communication technology. In sales, it enables the demand forecast use
case based on a detailed understanding of customer needs and demand drivers to allow the
companies to reduce inventory and improve margins while delivering better service.
3.6.7 E-Commerce Strategy to decrease the cost and increase the business share
Steel Authority of India Limited has been using social media to increase their business.
One of the best way to increase the business with the help of network or social media is to have a
proper connection or customer engagement. Increasing engagement will helps to maintain the
current share and turn more new customers into loyal buyers.
Communicate frequently via social media and email. Post new content on a regular basis and
encourage customers to share and comment on it. Make engagement part of the selling process.
Send a survey after each order asking customers for feedback about the ordering process,
delivery and other issues.
3.6.8 Research & Development Strategy to develop new products, processes, services,
business models
India’s finished steel consumption is anticipated to increase to 230 MT by FY2030- 31.
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Steel is going to witness a huge demand driven by affordable housing (construction in urban and
rural areas), expansion of railways network, opening of defense sector for private participation
and the growth in automobile sector Going Forward.
3.6.9 Customer retention and new customer strategy to expand business
Steel Authority of India Limited has got a good relationship with their customers and this helps
them to expand their business. The company gives more importance to customer satisfaction.
3.6.10 Acquisition & Managing of Human Resource Strategies
Steel Authority of India Limited is committed to offering employees the opportunities to further
their education and develop their skills. Not only is this a way of enhancing quality of work and
productivity but it also boosts employee satisfaction.
SAIL has achieved its present level of excellence through investing in its human resource, whose
skill and knowledge constitute the basis of every initiative, be it technology or innovation.
3.7 Marketing Analysis
3.7.1 Demand for Products & Services
Demand for steel products in emerging markets is forecast to amount to approximately
1.3 billion metric tons in 2020. Emerging markets, India and China in particular, play a
significant role in the global demand for steel products. Global demand for steel is expected to
increase throughout 2020. In industrial nations, growth is slow due to tougher environmental
regulations and uncertain demand from the automotive and construction industries
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3.7.2 Advertisement Strategies
SAIL has always been visible through promotional and branding activities in its
marketing mix. SAIL has sponsored the training and other expenses of wrestlers Sushil Kumar
and Yogeshwar Dutt for preparation for the 2010 Commonwealth Games. Another wrestler
taking part in the Olympics, Rajiv Tomar, is also being developed by SAIL for the
Commonwealth Games. Through Make in India campaign, it has created awareness among
entrepreneurs to associate with SAIL. It is working towards empowering small steel consumer in
rural areas of the country by making steel available through its dealer network.
3.7.3 Collaboration Strategies
Steel Authority of India Limited undertook to float a joint venture company in
collaboration with USX Engineers & Consultants Inc., Pittsburg, USA for development and
execution of technology and system integration for computer applications in basic industries
such as those engaged in steel mining and metallurgy.
3.7.4 Product/service innovation strategies
The major efforts are directed towards cost reduction, quality improvement and value-
addition to products of SAIL plants and providing application engineering support to SAIL’s
products at customers’ end. RDCIS, along with steel plants, takes initiatives to develop special
steel products utilizing the modernized production facilities at steel plants.
3.8 HR Development & Retention Strategy
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Human resource practices are most effective when coordinated with strategic goals of
organizations. HR practices role in the company’s success is growing rapidly with the growth in
many sectors in the present globalized era.
3.8.1 Identification of Human Resources
Steel Authority of India Limited (SAIL), nation’s largest steelmaker and a ‘Maharatna’ Public
Sector Enterprise has been awarded with the prestigious SCOPE Award for Best Practices in
Human Resource Management for the year 2014-15.
SAIL management has repeatedly emphasized on the value of human capital in providing the
competitive advantage and identified the potential of a high performing team. The company
believes in guiding organizations’ investments in people through things like leadership
development, job design, and knowledge sharing through systematic & focused interventions and
policy of Learning and Development.
3.8.2 Training strategies
SAIL has been striving to reach new heights in the spheres of technical training,
management training and other training activities including training for technical upgradation,
modernization, automation and computerization etc. SAIL’s training
policy is based on the realization that the development of human resources is crucial
to the success of the organization. The company is also aware of the changing
environment with respect to continuous updating of technologies, skill requirements,
growth strategies and future plans. The company’s policy is dynamic and flexible.
The major areas focused for training in SAIL are:
1) attitudinal change,
2) optimal utilization of existing manpower,
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3) enhancing efficiency,
4) proper orientation/induction of all new entrants
3.8.3 Productivity enhancement strategies
Steel Authority of India Limited plan and co-ordinate the scale and speed of change in all major
organizational elements, including people and manpower structure, attitudes and values, skills
and education, technology and equipment, products and markets. These changes develop positive
attitudes and an organizational culture which will be favorable towards productivity
improvement as well as technological change.
3.8.4 Employee motivational strategies
An organization has to provide welfare facilities to their employees to keep
their motivation levels high. Steel Authority of India limited provides welfare measures to their
employees like, House Building Advance ∙ Advance for purchase of motor vehicle ∙
Reimbursement of expenses towards Medical treatment ∙ Scholarship schemes ∙ Scheme for
Farewell to retiring employees ∙ Assistance of Funeral expenses ∙ Life cover scheme ∙
Employee Family benefit schemes ∙ Provident fund and Gratuity
3.9 New Technology adoption Strategy
3.9.1 Inventory of existing technologies
Rolling mill and Quench box are used by the Steel Authority of India Limited. The
existing technologies are used to save time and reduce the wastage of raw materials. Proper
maintenance and operation ensure the best quality for the end products in any facility. They are
quintessential for the production of steel goods, as they directly affect the composition, strength,
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endurance, uniformity, ductility, and other such properties. Due to advancing technologies, a lot
of developments have tweaked the existing machinery to improve the process.
3.9.2 Survey of new technology
In steel Authority of India limited, when a new technology is been adopted a survey is conducted
among the employees and workers to know whether its applicable for to use to increase
productivity. A new technology is only adopted after a detailed study and survey.
3.9.3 Development of indigenous new technology or procurement of new technology
In Steel Authority of India Limited the development of indigenous new technology gave a way
to superior in quality, much less expensive, and more easily delivered products to the customers
which also helped the company to increase production.
3.9.4 Technology adoption, automation and improving productivity
Technology adoption in steel industry of India limited have helped to gain more productivity as
well as the process got faster and easy. Adoption technologies for harnessing waste heat are
drawing the attention of the steel companies. These have led to improved productivity and
energy efficiency in the Indian steel industries.
3.10 Leadership Analysis
3.10.1 Leader/decision maker
SHRI ANIL KUMAR CHAUDHARY
Shri Anil Kumar Chaudhary has assumed the position of Chairman, SAIL w.e.f. 22nd
September, 2018. He has a rich experience of more than 34 years in the Iron & Steel Sector
while working with Steel Authority of India Limited (SAIL), a ‘Maharatna’ PSU including the
experience as Director (Finance) of the Company, a position he held for more than 7 years prior
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to the current assignment. He has acquired all round knowledge of the entire steel industry while
working in different capacities in the Company.
3.10.2 Type of leader/leaders
Shri Anil Kumar Chaudhary connect with their team by facilitating open communication,
encouraging employee growth and development.
3.10.3 Qualities of leader
In a company a leader should have an ability to influence, motivate, and enable others to
contribute toward the effectiveness and success of an organization or group of which they are
members.
3.10.4 Futuristic Strategies
According to the global steel market outlook report the steel demand will increase from 1537MT
in 2014 to 1992MT in 2030. Infrastructure development in developing economies will increase
the demand for iron and steel in the years to come. Iron and steel continue to be a flourishing
industry.
3.10.5 Acceptance of leader by Organization
Participation in decision-making always increases acceptance of leader‟ though involving entire
group requires lot of efforts and time but ensures high level of acceptance of decisions and leader
also, resulting in efficient execution.
3.11 Analysis of Implementation of IT and Automation
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3.11.1 Strategic planning for IT is fundamental to the ultimate effectiveness of IT
implementation
In Steel Authority of India Limited the IT strategic plan outline a mission statement that states
what it plans to achieve and how the IT strategy relates to the organization's overall company’s
objectives. This process will also help analyze the gap between where the IT department
currently is in achieving its goals and what it wants to achieve.
3.11.2 Interdepartmental coordination has proven to be a major factor in effective IT
implementation
IT implementation has given a way of new opportunities in the production as well as it made the
processes easy and faster. For the proper functioning there is a need of an effective IT
implementation and in Steel Authority of India Limited the Interdepartmental coordination has
proven to be a major factor in effective IT implementation.
3.11.3 The expertise levels of executives with regard to IT
Steel Authority of India Limited has a good panel of expertise levels of executives with regard to
IT.
3.12 Innovation & Future Plan Analysis
3.12.1 Value added products/services.
Sail is putting a premium on its 20 value added products for defense and construction that it
expects will strengthen product mix and lead to better realizations.
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3.12.2 New product/service development and commercialization
Development and commercialization have improved processes and products. Also enhance the
capability of its human resources to emerge as a center of excellence. The major efforts are
directed towards cost reduction, quality improvement and value-addition to products of SAIL
plants and providing application engineering support to SAIL’s products at customers’ end.
3.12.3 Efforts on customer satisfaction, delight, and retention
Steel Authority of India Limited have improved the products and services according to the
customer satisfaction. Products are made for customers and their satisfaction is important for the
company.
3.12.4 Identifying new opportunities
SAIL is focusing on developing high-impact leadership amongst its ranks for which it is
sensitizing talented young executives to drive the top management's agenda of 'change' and for
transforming the PSU into a vibrant organization.
Chapter 4
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Findings, Suggestions and Conclusions
Results/observations of the study
● Steel Authority of India, the largest state-owned domestic steel company plunged into a
net loss of Rs 429.62 crore in the quarter ended December 31, 2019 on the back of lower
realizations against a net profit of Rs 616.30 crore in the same period a year earlier.
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● The company's revenue from operations went up by around 5% to Rs 16,728 crore up
from Rs 15,910.45 crore in the previous corresponding period
● Company’s sales grow by 3% and 26% over the previous corresponding period
respectively.
● In Q4FY19, SAIL posted a net profit of Rs 468 crore against a net of Rs 815.57 crore in
Q4FY18. The company's EBITDA stood at Rs 2461 crore, while turnover touched Rs
18,323 crore, a growth of 9% over the previous corresponding quarter.
Suggestions based on the analysis
Keeping in view the above observations and findings of the study the following points are
suggested to improve the financial performance in the steel companies in India.
● The main problem before the iron and steel industry is of mounting trend of cost. All the
components of costs are increasing continuously year by year which affects the financial
performance of the Industry. Therefore, it is the need of the hour that the iron and steel
industry shows better performance by reducing the operating cost. For controlling the
cost in industry standard costing system should be introduced to improve their
performance.
● The study has revealed that the long-term financial strength of the iron and steel
companies is not satisfactory. The commercial operation and financial strength have
continued to be weak. To improve the financial position of the iron and steel industry it is
suggested that the capital of the companies should be restructured by a part of the loan
capital into equity capital.
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Conclusion
The country has vast potential in mining and ferrous metallurgy, as symbolized by large
coal and iron ore mines and the steel plants. The demand for finished steel is expected to reach a
level of 100 million tonnes and mining capacity to the level of 250 million tonnes during the next
two decades. To meet the domestic demand and also increased steel exports, more finished steel
of international quality and price will have to be produced. For this, new units will have to be set
up based on internationally competitive technology, apart from upgrading and modernization of
the existing units.
The profitability of the steel company improved during the last five years mainly due to
higher production as well as sales of saleable steel, coupled with improvement in product-mix,
productivity and techno economic parameters as well as higher sales realization, in spite of
increase in costs and railway freight on Inputs. Growth in steel is normally directly related to
GDP. Some analysts actually believe that the Indian steel industry would grow at a faster rate
than what can be expected from the GDP (the amount of steel required to produce one unit of
gross nation output) is likely to increase.
Since the Indian steel industry has tremendous growth potential, and the per capita
consumption is bound to grow at a much faster rate, matching capacity additions in relation with
domestic demand will be needed. Thus, the dreams of our planners to accelerate the economic
growth in the country by effecting increased steel production of reasonable cost are still possible
to be translated into reality.
5. Bibliography
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