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SUMMER TRAINING REPORT ON
Effectiveness of Marketing Strategies to Maintain
Market Share in A Developing Economy
For
STEEL AUTHORITY OF INDIA LIMITED
By
PAYAL BHATTACHARYA
87
In Partial Fulfillment for the award of the degree
Post Graduate Diploma In Management
2009-2011
NEW DELHI INSTITUTE OF MANAGEMENT
50 (B&C), 60, Tughlakabad Institutional Area, New Delhi-110062
E-mail : [email protected] Website : www.ndimdelhi.org1
SUMMER TRAINING REPORT ON
Effectiveness of Marketing Strategies to Maintain
Market Share in A Developing Economy
For
STEEL AUTHORITY OF INDIA LIMITED
Under the supervision
Of
Mr. G Burman
Submitted By- Submitted to-
Payal Bhattacharya Prof. Megha Chawla
Roll number 87
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ACKNOWLEDGEMENT
Inspiration and hard work always played a key role in the success of any
venture. At the Level of practice, it is often difficult to get knowledge without
guidance. “Project is like a bridge between theoretical and practical”.
There is always a sense of gratitude which one expresses to other for the
helpful and needy services that render during all phases of life. I would like to
do so as I readily wish to express my gratitude towards all those who have been
helpful to me in getting this mighty task of training to a successful end.
I am grateful to New Delhi Institute of Management for designing such a
course structure so that I can gain a practical exposure before actually going to
the field.
I am heartily grateful to Prof. Megha Chawla who was a continuous
source of inspiration throughout the project and an all-time helping hand.
I am also thankful to the Industry Mentor, Mr. G Burman, Mr. S Paul and
the entire training organizers of SAIL who provided me with all the needful
practical knowledge and training so that I can groom myself for the corporate
world.
3
DECLARATION
I, Payal Bhattacharya, student of New Delhi Institute of Management 2009-
2011 declare that every part of the Project Report Effectiveness of Marketing
Strategies To Maintain Market Share in A Developing Economy for SAIL that
I have submitted is original.
I was in regular contact with the nominated guide and contacted 13 times for discussing the project.
Date of project submission : 26/07/2010
<signature of the student>
Faculty’s Comments :
<signature of the Faculty Guide>
Prof. Megha Chawla
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CONTENTS
I. Executive Summary
II. Literature Review
1. Company Background
2. Industry Overview
3. Government Policies or Taxation Aspects
III. Introduction to the Project
a. Objective
b. Job Assigned
c. Key Responsibilities
d. Stages of Project
e. Activity Sheets
IV. Details of the Work Done
V. Research Methodology used
VI. Major Learning
VII. Constraints Faced
VIII. Findings & Conclusions
IX. Suggestions & Recommendations
X. References
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EXECUTIVE SUMMARY
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets.
SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India’s second largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making.
SAIL manufactures and sells a broad 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. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines.
SAIL's wide range of long and flat steel products is much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organization (CMO)CMO’s domestic marketing effort is supplemented by its ever widening network of rural dealers who meet the demands of the smallest customers in the remotest corners of the country. With the total number of dealers over 2000 , SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts of the country.
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LITERATURE REVIEW
Steel Authority of India Limited :Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets.
Beginning of SAIL goes as far back as 1954 when Hindustan Steel Limited (HSL) was established, with the President of India holding shares of this company on behalf of Indian citizens. HSL was primarily set up for managing Rourkela steel plant. Durgapur and Bhilai steel plants were set up initially under supervision of ministry of iron and steel. From 1957 onwards these two plants were brought under Hindustan Steel Limited’s control. Registered office of HSL originally set up in New Delhi shifted to Calcutta in 1956 and thereafter to Ranchi in 1959.
After incorporation of Bokaro Steel Plant in 1964, and completion of Rourkela, Durgapur and Bhilai steel plants, ministry of steel and mines drafted a policy for forming a holding company to manage all activities of these steel producing units. Consequently SAIL was established in 1973 with an authorized capital of Rs.2000.crores.
Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad 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. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India’s second largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making.
SAIL's wide range of long and flat steel products is much in demand in the domestic as well as the international market. This vital responsibility is carried
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out by SAIL's own Central Marketing Organization (CMO) that transacts business through its network of 37 Branch Sales Offices spread across the four regions, 25 Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact Offices. CMO’s domestic marketing effort is supplemented by its ever widening network of rural dealers who meet the demands of the smallest customers in the remotest corners of the country. With the total number of dealers over 2000 , SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts of the country.
Major Units
Integrated Steel Plants:
Bhilai Steel Plant (BSP) in ChhattisgarhDurgapur Steel Plant (DSP) in West Bengal
Rourkela Steel Plant (RSP) in Orissa
Bokaro Steel Plant (BSL) in Jharkhand
IISCO Steel Plant (ISP) in West Bengal
Special Steel Plants :
Alloy Steels Plants (ASP) in West BengalSalem Steel Plant (SSP) in Tamil Nadu
Visvesvaraya Iron and Steel Plant (VISL) in Karnataka
Subsidiary Steel Plants:
Maharashtra Elektrosmelt Limited (MEL) in Maharashtra
Joint Ventures:
NTPC SAIL Power Company Pvt. Ltd (NSPCL) :- A 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and National Thermal Power Corporation Ltd. (NTPC Ltd.); manages the captive power plants at Rourkela, Durgapur and Bhilai with a combined capacity of 314 megawatts (MW). It has installed additional capacity by implementation of 500 MW (2 x 250 MW Units) power plant at Bhilai. The commercial
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generation of 1st Unit has commenced in April’2009 and the 2nd Unit in October 2009.
Bokaro Power Supply Company Pvt. Limited (BPSCL) :- This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in January 2002 is managing the 302-MW power generating station and 660 tonnes per hour steam generation facilities at Bokaro Steel Plant. BPSCL has proposed to expand its capacity by installing 2x250 MW coal based thermal unit at Bokaro. In addition, construction activities are underway for installation of 9th Boiler (300T/Hr) & 36 MW Back Pressure Turbo Generator (BPTG) project at Bokaro.
Mjunction Services Limited :- A 50:50 joint venture between SAIL and Tata Steel formed in 2001. This company promotes e-commerce activities in steel and related areas. Newly added services include e-Assets sales, Events & Conferences, Coal Sales & Logistics, Publications etc.
SAIL-Bansal Service Center Ltd :- SAIL has formed a joint venture with BMW industries Ltd. on 40:60 basis to promote a service centre at Bokaro with the objective of adding value to steel.
Bhilai JP Cement Ltd :- SAIL has incorporated a joint venture company with M/s Jaiprakash Associates Ltd to set up a 2.2 MT slag based cement plant at Bhilai. The company shall commence cement production at Bhilai by March'2010, whereas clinker production at Satna has started in 2009.
Steel Manufacturing Companies in India
There are several Companies who are continuously working in this sector and are continuously meeting the growing demand all over the country.
SAIL/Steel Authority of India Limited
TATA – TISCO
RNIL
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Essar Steel
Jindal Steel
ISPAT
Saesa Goa
Nippon Denro Ispat
Usha Ispat
Lanco Industries Limited
Market Share of Different Steel Companies in India(2010-11)
SAIL – The 5 Integrated Plants &Their Products
Bhilai Steel Plant (BSP) in Chhattisgarh
The products manufactured in this plant are: -
1. PMP that is PM Plates2. Heavy & Light Structurals
3. Beams, Channels & Angles
4. TMT Bars, Rods and Rebars
5. Rail and
6. Billet, Blooms & Slabs
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Durgapur Steel Plant (DSP) in West Bengal
The products manufactured in this plant are: -
1. Medium Structurals like Skelp which are small coils, Wheels, Axles
2. ISP that includes TMT, Billet Blumes, Light Structurals
Rourkela Steel Plant (RSP) in Orissa
The products manufactured in this plant are: -
1. HR coils/plates2. CR coils/sheets
3. GP/GC that is Galvanized Plates/Galvanized Coils
4. PMP that is PM Plates
5. Pipes which further includes two different types –SW Pipes and ERW pipes.
6. Wide, Heavy & Chequered Plates
Bokaro Steel Plant (BSL) in Jharkhand
The products manufactured in this plant are: -
1. HR coils/ sheets/plates2. CR coils/ sheets
3. GP/GC that is Galvanized Plates/Galvanized Coils
4. Pig Iron
IISCO Steel Plant (ISP) in West Bengal
The main products produced by this plant are :-
1. Heavy and Light Structurals2. Rods and Bars
3. Pig Iron
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SAIL - Working Of A Steel Plant
The Different Departments
Raw Materials and Material Handling Plant
The Raw Material and Material Handling plant receives blends, stores and supplies different raw materials to the Blast Furnaces, Sinter Plants and Refractory Plants as per the requirements. It also maintains a buffer stock to take care of any supply interruptions. Some 9MT of different raw materials like iron-ore fines, lumps, limestone and dolomite lumps and chips, hard coal manganese ore are handled here every year.
Coke Ovens and By-product Plant
The Coke Oven Plant converts prime and medium coking coal blended with imported coal into high quality coke for the Blast Furnaces producing primary products and recovering valuable by-products like anthracene oil, benzene, toluene, xylene, etc. A coke oven battery has 8 batteries with 69 ovens, each maintained meticulously in terms of fugitive emission control, use of phenolic water and others pollution control measures. All of the steel plants are situated near coal, iron-ore and bauxite belts.
Blast Furnaces
The Blast Furnace produces molten iron hot metal for steel making. Bell-less top charging, modernized double cast houses, coal dust injection and cast house slag granulation are deployed in the furnaces. The process of iron-making is automated using PLC Charging System and Computer Controlled Supervision System. The Blast Furnace slag and gas are either used directly within the plant or processed for re-cycling.
Steel Melting Shops
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Hot-metal from the Blast Furnace is converted into steel by blowing 99.5% pure Oxygen in the LD Converter. Suitable alloying elements are added to produce different grades of steel.
Continuous Casting Shops
The Continuous Casting Shop/CCS has two double-strand slab casting machines, producing high quality slabs of width ranging from 950mm to 1850mm. CCS has a Ladle furnace and a ladle rinsing station for secondary refining of the steel. The Ladle Furnace is used for homogenizing the chemical mixture and the temperature.
Argon injection in the nozzle prevents re-oxidation and nitrogen pick-up, maintaining steel quality. The eddy current based automatic mould level control gives better surface quality. The air mist cooling and continuous straightening facilities keep the slabs free from internal defects like cracks. CCS produces steel of drawing, Deep Drawing, Extra Deep Drawing, Boiler and Tin Plate quality. It also produces low alloy steel like LPG, WTCR, SAIL Core and API grade.
Slabbing Mills
Slabbing Mills transform ingots in to slabs by rolling them in its 1250mm Universal Four-High Mill. The rolling capacity of the mill is generally 4MT per annum. The shop has Hot and Cold Scarfing Machines and 2800T Shearing Machines. Controlled heating in Soaking Pits. Close dimensional accuracy during rolling and hot and cold scarfing help produce defect free slabs.
Hot Strip Mills
Slabs from CCS and Slabbing Mills are processed in the Hot Strip Mill. The fully automatic Hot Strip Mill produces a wide range of slabs – of thickness varying from 1.2mm to 20mm and width from 750mm to 1850mm. Walking Beam Reheating Furnaces provide uniform heating with reduction in heat loses, ensuring consistency in thickness throughout the length. High-pressure De-scaling System helps eliminate rolled-in scale. There is a roughing group that maintains width within close tolerance. It has a roughing train of a Vertical Scale Breaker, One 2-high Roughing Stand and four 4-high
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Universal Roughing Stand. The Finishing Group consists of a Flying Shear, Finishing Scale Breaker and seven 4-high Finishing Stands. Hydraulic Automatic Gauge Control System in the Finishing Stands ensures close thickness tolerance. The Work Roll Bending System ensures improved strip crown and flatness. The Laminar Cooling System is a unique feature to control coiling temperature over a wide range within close tolerance. The Hydraulic Coilers maintain perfect coil shape with on-line Strapping System. On-line Robotic Marking on the coil helps in tracking its identity.
Hot Rolled Coil Finishing
All the hot rolled coils from the Hot Strip Mill are received in HRCF for further distribution or dispatch. HR coils rolled against direct shipment orders are sheared and finished to customer-required sizes and dispatched to customers. The shop has two shearing fines with capabilities of 6,45,000 T/yr and 4,75,000 T/yr respectively.
Cold Rolling Mills
The Cold Rolling Mill uses technology to produce high quality sheet gauge material like Tin Mill Black Plate and Galvanized products. Cold Rolling is done to produce thinner gauge strips of very smooth and dense finish, with better mechanical properties than Hot Rolling strips. Rolling is done well below re-crystallization temperature without any prior heating of the material. The products of CRM is used for deep drawing purposes, automobile bodies, steel furniture, drums and barrels, railway coaches, other bending and shaping jobs and coated steels. The CRM complex comprises of two pickling lines including a high speed Hydrochloric Acid Pickling Line with re-generation facilities, two Tandem Mills, an Electrolytic Cleaning Line, a continuous Annealing Line, Bell Annealing Furnace, two Skinpass mills, a double Cold Reduction Mill, Sheraing Lines, Slitting Lines and a packaging and dispatch section.
Hot Dip Galvanizing Complex
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The Hot Dip Galvanizing Complex integrated with CRM produces zinc-coated Cold Rolled Strips resistant to atmospheric, liquid and soil corrosion. The continuous Coil Corrugation Line in the HDGC produces corrugated sheets and the Galvanized Sheet Shearing Line produces galvanized plain sheets for a variety of applications.
Service Departments
The Service Department like Traffic, Oxygen Plant, Water Management and Energy Management provide invaluable support to a gigantic plant. All the plants have vast networks of railway tracks and diesel locos to smoothly run their operations. The Oxygen plant provides oxygen, nitrogen and argon for processes like steel making and annealing. Water Management looks after the huge water requirements of the plant and the township, providing different grades of water and taking care of recycling needs. Energy Management juggles the supply and demand of by-product gases and their demand as process fuel.
Maintenance Departments
The Maintenance Departments looks after the large-scale electrical and mechanical maintenance, in-addition to shop-based maintenance wings for running repairs and maintenance. These facilities are capable of executing the massive capital repairs, supported by fabrication facilities of auxiliary shops.
Auxiliary Shops
To meet its need for maintenance and repairs, the plants have a number of engineering shops such as Machine Shops, Forge Shops, Steel Foundry, Cast Iron and Non-ferrous Foundry, Electrical Repair Shop and power Facilities Repair Shop, etc. These shops are also involved in procurement-substitution, productivity enhancement and quality improvement jobs, thus, saving revenues and enhancing equipment availability.
The Stores
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The aim of the Stores department is to store the materials in good condition and in right number. Each item in the plant is kept in the stores be it a spare product or chemicals products or machines, structures, rubber items. The stores deal with the material management. All the materials going in and out of the plant are given MPR/ Material Purchase Requisition which is then screened by the stores department and if satisfied this document is then sent to the purchase department. This department has connection with the vendors who then supply the raw materials through air, water, road, rail, etc. Stores then store these items according to the catalogue. The company who want to take the finished products they inspect the products, they are then issued a goods receipt note/GRN, gate passes are given along with the STO/Stock Transfer Order.
The Process Of Steel Production
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LimestoneLimestone Iron-OreIron-OreCoke OvenCoke Oven Sinter PlantSinter Plant
CoalCoal
BLAST FURNACE
PIG CASTING M/C
PIG CASTING M/C
Pig Casting M/C
Pig Casting M/C
BOFBOF
CC Slabs
CC Slabs
IngotsIngots
Slabbing Mill
Slabbing Mill
ROLLED SLABSROLLED SLABS
Hot Strip MillHot Strip Mill
MARKETING IN SAIL
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SAIL’s Core Values
Customer Satisfaction
Concern for People
Consistent Profitability
Commitment to Excellence
Vision Of SAIL
To achieve market leadership and prosper in business through continuous improvement of satisfaction of: -
Customer Needs
Quality of the Products
Prices of the Products
Services provided by the Company
Also, SAIL wants to be a respected world class corporation and the leader in Indian Steel business in quality, productivity, profitability and customer satisfaction.
HR CFHR CF HR Coil for Sale
HR Coil for Sale
HR PLATES/SHEETS
HR PLATES/SHEETS
Pickling LinesPickling Lines
Cold RollingMill
Cold RollingMill
TMBP Coils
TMBP Coils
Anealing LinesAnealing Lines Galvanising LinesGalvanising Lines
GP/GCGP/GCCR Coils/Sheets
CR Coils/Sheets
The CMO/ Central Marketing Organization
ISO 9001:2000 certified Central Marketing Organization ( CMO ) is India’s largest industrial marketing set-up. The CMO/Central Marketing Organization is the main body of SAIL that markets all the carbon steel produced by all the five integrated steel plants under SAIL with the commercial directorate at the International Trade Division, New Delhi and headquarters at Kolkata, Mumbai and Chennai. The CMO operates through its 37 regional branch offices spread all over the country in order to cater to the needs of the customers situated in the Northern, Eastern, Western and Southern regions of the country. These branch offices have a total of 25 departmental warehouse equipped with mechanized handling systems, that stores the materials produced by all the five integrated steel plants.
The branch offices are in close co-ordination with the plants and the orders of
different regions are monitored on a day-to-day basis. The corporate office at New Delhi, different CMO offices and the plants that are separated by thousands of kilometers but are connected to one another through SAIL’s own internet called SailNet. The network provides instant online access to the distributed database. The main CMO offices at Kolkata, New Delhi, Mumbai and Chennai find out the market demand throughout the country with the help of the different CMO branch offices and the CCOs. The CMO branch offices
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The Seven-Cs of SAIL
Consistent Quality
Committed Delivery
Customized Product Mix
Contemporary Products
Competitive Price
Complaint Settlement
Culture of Customer Services
collect the reports from the CCOs and along with their own respective reports submit them to the CMO Head Offices. The Head Offices match the market demand with the production capacity of each of the integrated plants working under SAIL and accordingly allocates these plants what quantity, which type, what quality and in how much time the products are to be produced by each of them separately.
There are several regions throughout the country where SAIL has reached through the CCO/ Customer Contact Officer, a total of 26 in number. Each of these CCOs is attached to a particular parent branch CMO office and reports to that branch only. The CCOs are situated in Bangaluru(Karnataka), Goa, Ranchi & Jamshedpur (Jharkhand), Andaman & Nicobar Islands, N.E Zones, Siliguri(West Bengal), Bihar, etc.
CMO’s domestic marketing effort is supplemented by its ever widening network of rural dealers who meet the demands of the smallest customers in the remotest corners of the country. With the total number of dealers crossing 2,000, SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts of the country. CMO through its joint venture partner M/s Metal Junction has simplified steel buying by providing net based facilities through its on line ‘e-store’, that provides door-delivery facilities to its small house builders.
Extensive customer contact, product and segment specialization, close monitoring of order servicing and feedback analysis through a Customer Satisfaction index are established norms at CMO. The customer-friendly approach of CMO is backed by practical after-sales service. Through the process of Key Account management, CMO provides single-window service to key customers across the country for every business transaction from enquiry to order booking, order tracking to delivery, and even consultancy and after-sales service.
CMO’s International Trade Division
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International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited unit of CMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integrated steel plants. Ever ready to meet the exacting demands of its global customers, ITD maintains a close liaison with customers and the production units to cater the customized requirements of its customers both in terms of quality and sizes.
SAIL’s product basket includes products such as Rails, Structurals, Merchant Products, Wire Rods, Re-Bars, Plate Mill Plates, Hot Rolled Coils, Hot Rolled Plates/ Sheets, Cold Rolled Steels, Galvanised Steels, Cold Rolled Non Oriented ( CRNO ) coils, Chequered Plates, Slabs, Billets and Pig Iron besides cut-to-size Hot Rolled and Cold Rolled materials through its joint venture service centre. Our major products are also covered by stringent certifications such as CE marking TUVand ‘U’ mark required by sophisticated. Both ITD and T&S are accredited with ISO 9001:2000 certification.
ITD has successfully established SAIL’s brand name globally. Among the notable destinations for SAIL products are Japan, P.R. of China, Korea, Taiwan, Vietnam, Philippines, Singapore, Malaysia, Thailand, Indonesia, Australia, Mexico, Europe (UK, Germany, France, Belgium, Italy, Spain, Netherlands, Portugal), Sudan, Oman, UAE and the neighbouring countries such as Myanmar, Bangladesh, Sri Lanka and Nepal.
The Transport & Shipping Division of CMO headquartered at Kolkata with its branch offices at Haldia, Paradip, Vizag and Kolkata ports, ensures timely import of the key ingredient in steel making, coking coal and handles its entire logistics. It also caters to other plant imports and ensures efficient dispatch of steel exports.
The Marketing Mix /4Ps of SAIL :-
Product Mix
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SAIL produces a wide variety of products, maintaining the best quality for each of them. SAIL is continuously making efforts to increase its products’ quality. Providing agricultural inputs to the farmers, building roads and bridges, meeting the daily customer needs are some of the main concerns for SAIL. The main product mix includes :-
1. Flat Products – Wide and Heavy Plates, HR Coils, HR Sheets, HR Plates, CR Sheets, CR Coils, TMBP Coils, Galvanized Sheets, Galvanized Coils, Electrolytic Tin Plates and CRNO Electrical Sheets.
2. Long Products – Bars, TMT Bars, Rounds, Ribbed Twisted Bars, Angles, Channels, Beams, Joist, Wire Rods and Flats.
3. Track/Railway Materials – High Conductive Rails, Crane Rails, Heavy Rails, Crossing Sleeper Bars, Wheels & Axles and Wheel Sets.
4. Tubular Products – ERW Pipes and Spirally Welded Pipes.
5. Semis/Semi-finished Goods – Slabs and Billets & Blooms.
6. Pig Iron – Of all grades
Product Mix Tonnes/annum
HR Coils/Sheets/Plates 21,20,000
CR Coils/Sheets 13,90,000
GP/GC Sheets 1,70,000
Tin Mill Black Plates 1,00,000
7. By-products – The by-product section includes all sorts of coal chemicals produced by different-different plants of SAIL after steel production.
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a) Benzol Products – Benzene, Toluene, Xylene and Solvent Naphtha.
b) Tar Products – Coal Tar Pitch, Crude Anthracene and Hot Pressed Naphthalene.
c) Fertilizers – Ammonium Sulphate (Raja Khaad).
d) Miscellaneous – Sulphuric Acid, Ferrous Sulphate, Oxygen, Argon, Coke Fraction, etc.
e) Alloy & Special Steel – Blooms, Billets, Bars, Flats, Forgings of different shapes and sizes and Continuous Cast Slabs.
f) Ferro Alloys – Manganese, Medium Carbon Ferro-manganese low Carbon Ferro-manganese and Silicon-manganese.
The product analysis is carried out on the basis of nature of the product, uses of the product, number of customers, sales volume that the product generates and sales revenue that the product generates.
Price
The number of steel companies is rapidly increasing in India, so the competition is also increasing. SAIL, in order to maintain its customer-relation, to increase its customer base so as to grow in its business and hold its roots in the market, has defined pricing strategies. Price is the most important ‘P’ for SAIL in order to retain its regular customers to be in the competition.
CMO Head Quarter at Kolkata along with Delhi International Trade Department set the prices of the products. The budget for every year is prepared during its previous year for a time period of three to four months i.e within April(lean month) to June(month when capital requirement is maximum). This budget is prepared by the CMO for the product mix by taking the Company profits into consideration, keeping the volume intact. The pricing decision is done based upon:
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1) The market price, both in the international market as well as in the domestic market depending upon the competition.
2) The price of the raw materials, both imported from foreign market and from domestic market.
3) The market conditions.
And so, the prices of different products keep on changing every month. There are different types of prices set by the CMO:-
1. Base Price – This is the basic price of each product. This price, once set by the CMO for any particular product, remains same throughout the country i.e that particular product is sold at the price fixed by CMO to all the customers.
2. Discounted Price – This price is again decided by the CMO and is categorized into different types:-
Same Discount – This is the discount which is given at the same rate to all the customers whatever be the product. This is given in order to promote sales and attract customers.
Quantity Linked Discount – This discount is given to any customer if in case that customer is taking/lifting more goods i.e purchasing more goods from the Company at a particular time irrespective of MoU/Memorandum of Understanding.
Monthly Linked Discount – This discount is given to the customer in order to promote sales on a monthly basis.
Quarterly Linked Discount – This discount is given to the customer in order to promote sales on a quarterly basis for a full quarter even if the price of that particular product in the market increases or decreases. For example for lifting HR Coil of 32000T SAIL gives its customer Rs 500 per ton as a discount.
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Early Bird – This discount is given to the customer on a monthly basis in case the finished goods are not sold. In this discount the CMO branch offices gets MT/Marketing Tour from the CMO Headquarter, Kolkata via their regional CMO offices. Almost 5% to 10% discount is given on all those items which remain unsold and are sold in the beginning of every month to any customer.
3. Spot Price - This is the price at which the CMO branch offices sell the products and keeps on changing on the basis of market conditions each month. This price includes all sorts of rebates and discounts given by the Company for the customers.
4. Firm Price - This is the price which is decided by CMO once and is fixed for a particular type of customer of SAIL for a particular period of time i.e a price which has been made fixed for a project of a particular company remains fixed on quarterly terms or for six months whatever be the market price. And after the term is over the price can change.
Place
SAIL being a Manufacturing Company has no separate places or outlets for distributing its finished goods to its customers rather all sorts of distribution takes place from the Main Stores of each of the five integrated plants. After production, the finished goods are kept by these plants in their respective stores in proper conditions. The CMO branch offices are then responsible of selling these finished goods to the respective customers depending upon their need at the pre-decided prices.
Promotions
Whatever the promotional strategies are adopted by SAIL, those are done mainly for the Dealers. This is because its main target is to increase its sales through vast dealer-networks as these dealers are connected to the
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far flung areas, to small customers where the Company cannot directly reach. The dealer-promotions mainly include:-
1) Advertisements given in the newspapers all over India and through television and radio in rural areas.
2) Hoardings and banners
3) Wall paintings
4) Leaflet and pamphlet distributions
5) Dealership boards
6) Sponsoring like in World Cup Hockey held in February 2010.
7) Promoting through trains like SAIL promoted its products by sticking leaflets on ‘Agust Kranti Express’ window panes (all).
8) SAIL slogans – “There is a little bit of SAIL in everybody’s life”.
Customers of SAIL
What is the most important thing for SAIL is customer satisfaction and customer retention, thus, maintaining a good and healthy relationship with its customers.
SAIL has different types of customers including :-
Dealers (both active and non-active)
Permanent customers
I. B2B/business to business like of railways
II. Projects-based
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III. Regular manufacturers of electrodes, drums, barrels, furniture and automobiles
IV. Construction companies
Traders those who buy defective products from SAIL
Switch-off & Switch-on customers those who are taking/lifting SAIL products for the first time and also in large quantities and may or may not come for their future needs.
There are different categories of customers of SAIL for its different types of products :-
TMT and GP/GC customers - Active and Non-active Dealers
HR Coils – There are two segments of customers for this products :
1. Traders who mainly deal with the C&P/Cutter & Processor method.
2. Consumers :
a. Tube/tyre Section
b. Coal Reducers for automobiles’ body parts
c. Auto Segments of Pune, Chennai and Jamshedpur.
HR Plates – there are different consumers of this products :
1. Construction Industry
2. Trade Segments
3. Power Projects
4. Engineering Departments
Plate Mill Plate – Construction Industries like L&T.
CR Coils/Sheets –
1. Trade Segments26
2. Barrel Segments like for oil drums by oil companies
3. White Goods/Consumer Goods
4. Auto Sector
Plate Sheets –
1. Light Engineering & Construction Sectors
2. Trade Segments
Major Customers
Indian Railways
BHEL(Bharat Heavy Electricals Ltd), NTPC, L&T, Surya Roshni
Jindal Pipes, TATA Motors, TATA Steel
Ashok Leyland, Balmer & Lawrie Company, Godrej, Voltas
BCCL(Bharat Coking Coal Ltd), CCL(Coking Coal Ltd)
HCC(Hindustan Construction Company), IVRC Ltd, Gammon India, Cochin Shipyard, Garden Rich Shipyard.
Sales & Distribution At SAIL
The main marketing body of SAIL is CMO. The branch offices of CMO and the CCOs under their respective branch offices find out the market demands throughout the country. This is done throughout the year, mostly on every month before hand and is done by :-
Regular Customer Surveys – This is mostly done to increase the customer group, to capture more market and captivate new customers when negotiations on certain terms and conditions including product price take place. The customers whom SAIL finds out to be reliable and eligible legally are finalized.
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Customer Visits – The branch offices send their officers who go and meet their permanent customers who find out their demands. Even at times, the customers come and meet these officers. Some negotiations on certain terms and conditions including product price take place. The customers whom SAIL finds out to be reliable and eligible legally are finalized.
Dealer Relationships – SAIL sells most of its products through dealers only, mainly the TMTs & GP/GCs and so, this is a vast network which has been started from 2006 onwards. The dealers give advertisements and the CMO branch offices on the basis of these ads only goes for dealer-survey. They inspect to find out the best dealers and if satisfied only then appoint these dealers through Monthly Commitment/MC. In this MC, the MRRP/Maximum Recommended Retail Price is given to each of the dealer by SAIL. This MRRP is a fixed rate given for one particular month which includes the dealer profit margin and also the dealer discount. SAIL, in order to promote sale through dealer-network, give commercial discount to these dealers, help them in their promotional activities and conduct Annual Dealer Meet – where the top 10 dealers are selected on the basis of their sales and motivate them so that they work better.
This demand-forecasting is done every month and the final reports, the results of North, South, East and West, are submitted by the branch offices to the regional offices from where these reports are fed to the CMO Head Quarters, Kolkata. They then match the production capacities of all the five integrated steel plants with the current demand, after a lots of consultations the demand is finalized and the quantity to be produced by each of these plants are allocated to them. SAIL then starts giving advertisements for the customers to register their demands at their nearest branches and also online.
After the customers get themselves registered, SAIL negotiates with them on the quantity they are lifting based upon which MoU/Memorandum of Understanding is signed. For example if SAIL asks its customer to buy 15% HR Coils from them within the next three months and if the customer agrees
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to do so, then MoU is signed by SAIL for that company. But if the customer does not agree, then no MoU is issued and they come under non-MoU category like for pipes, electrical steel sheet, pig iron, API pipe, Tin PET. MoU is an order booking scheme. But MoU for Railways will be different than MoU for Projects.
Once the MoU is signed, the goods are finally sold to their respective customers once the payment is made. There are different Monetary Policies for sales :-
Cash Sales – In this, the customer makes the full payment for goods in cash directly and MP/Movement Plant is issued to them which mean the customers after paying the cash gets MP from the respective CMO branch office and can take the demanded items from the plant directly. SAIL mainly prefers cash sales only as it is more secured.
Credit Sales – In this, SAIL evaluates the customers on the basis of the credibility of that particular company in the market and only then the deal is sanctioned. This sale is preferred only for reliable, long-term and trustworthy customers of SAIL. The credit sales can be of different types on the basis of interest rates :-
Interest Bearing Credit Sales
Interest Free Credit Sales – this is sanctioned in very rare cases if incase the customer company cannot make the payment in-hand but does it later, especially Government undertakings like Railways.
Other different types of credit sales on the basis of security/risk involved:-
Secured Credit Sales :- These are for the customers who are guaranteed by the bank and are issued an LC/Letter of Credit.
Unsecured Credit Sales :- These type of sales are practiced for different types of projects only and needs CMO Director’s approval.
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SAIL accepts Banker’s Cheque and even DD/Demand Draft but in rare cases.
After the payment is fully made by the customer company, then comes the matter of distribution. The items are distributed either from the plant stores department or from the ‘Warehouses’. All the CMO branch offices have a warehouse under them. These warehouses store the finished products produced by all the 5 integrated steel plants and thus, help in distribution. The distribution take place in two different modes :-
Direct Dispatch :- In this kind of distribution, the customer who has made the entire payment either sends their own wagon or makes payment of freight charges to the railways for lifting the goods from the warehouse or the plant stores department, so a direct dispatch from the plant to the customer takes place. This takes place either through railways or by roadways only. The direct dispatch is meant for big customers like Locomotive Works Division for repairs and maintenance of wagon, only who lifts large quantities of goods and makes payments, all at one time. SAIL prefers this because there is quicker inflow of money and outflow of goods from the stock, thus meant for immediate sale.
Stockyard Dispatch :- This kind of distribution takes place for small customers who purchase small items at a time from the stockyard. The finished products after production are kept at the stockyard and the customers are informed about this. Then the items are dispatched to the customers as per their need and information either through rail or by roads. There are few places in India where SAIL does stockyard dispatch because steel requirement is least in these areas like Agra, Allahabad, Kota, Durgapur, Cochin, Coimbatore, etc, for pig iron, making ships and machinery.
If the market is undergoing a boom period, SAIL entertains almost 70% direct dispatch and in normal conditions generally SAIL sells its goods almost 60% through direct dispatch and rest 40% through stockyard dispatch. Direct dispatch only through roads take place in Bhilai and Rourkela while that in Bokaro it takes place only through railways.
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Semi-Finished Goods Selling
After demand forecasting is done by the CMO branch offices, they find out that the market demand for the semi-finished goods are more. Then, they order the respective plants for supplying a particular quantity of such semi-finished goods to their respective Conversion Agents. These semi-finished goods like billet blooms are converted to TMT or at times HR Coils are even cut to make sheets if demanded by any oil company for slitting oil. Company like SAIL is going for such conversion in order to increase the Company’s Net Sales Ratio/NSR because the Company can cater to the different demands of the market and increase its profits.
NSR includes the basic price and the conversion margin by deducing the rebate to be given to the customer.
SAIL does this kind of conversion of semi-finished goods into varied types of products so as to provide services to the people under the Joint Venture of SBSCL/ Sail Bansal Service Center Limited in which SAIL is having 61% share. SAIL is also trying to open SBSCL offices in Chennai in the South and Mumbai/Pune in the West.
Selling of Defective Materials & By-products in SAIL
Many times it happens with SAIL that the products have already been sold out are found defective by the customers. At that time, the customer sends back the goods, informs the respective CMO branch office from where it was issued the MoU and this branch office returns back the money for that much defective part. The defective items which come back from the customers are first unloaded in the secondary stores department and then sold out through tenders by CMO only. But before that a catalogue of the defective products, their license and mode of dispatch are decided and then they are forwarded to the Metal Junction. The advertisements of these tenders are given by the Metal Junction.
Metal Junction/m-junction is the body which does on-line auction in coal and steel. It is a Joint Venture between SAIL and TATA Steel. It gives all the information about the auctions to the customers and acts as an interface
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between the companies and their customers. The m-junction gives online notice about the tenders in which the EMD/Earnest Money Deposit value is mentioned. Certain terms and conditions are also mentioned in them.
First the registration takes place and interested customers become the members. They need to submit their ID-proof, their tax information, a copy of PAN number, VAT number. Then, the customers need to submit the EMD against the tender chosen. The EMD can be of Rs.50000 or Rs.100000. Customers submitting an EMD of Rs.50000 can participate in the auction only for one time. But those who submit an EMD of Rs.100000 can participate in the auction as long as their deposited money remains with SAIL. After submitting all these documents, SAIL issues the customers their IDs and their respective password. Then the auction starts and is carried out by the m-junction on every Wednesday. This auction is called the ‘e-auction’. The customer with highest bidding amount is the H1-bidder. In case the customers fail to participate in the auction then their EMD is forfeited. After the e-auction is over the m-junction sends its reports regarding the price the customers were ready to pay and the highest bidding price where the auction stopped to the CMO. The CMO open the sealed-envelope where the original decided price of the defective product is written and compared with the bidding prices. The satisfactory price is then approved and the customer is given an offer letter highlighting the time period within which they need to submit the money and take away the goods. The customer pays the security deposits for X number of days, 3% for X+5 days and then the rest of the amount. In case, the customer is unable to lift the goods within the given time period, then he has to pay a penalty at the rate of 24% per annum. In case the customer fails to submit even the security deposit, then the party’s EMD and money are forfeited and the party cannot take part in the next three auctions.
Sectoral Growth (in percentage)
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As the global economy is treading the path of recovery, the business outlook seems to be positive. The global economy is gradually coming out of a deep recession and the world GDP is expected to stabilize at 3 to 4% level. Meanwhile, China and India will be the centers of economic growth and the GDP growth is estimated to be between 8 to 10% in the next three to five years.
India is expected to continue on a growth path in fiscal year 2011 and is expected to post a GDP of 9% in fiscal year 2012.
The global steel demand will return to the pre-crisis levels. Indian steel demand is expected to grow around 10-12% in fiscal year 2011 and will be driven by the auto, construction and infrastructure segments. It will be interesting to note that the global steel demand in 2010 is 70% of the installed capacity. At a juncture like this, India is likely to be an attractive destination for both imports and setting up of new facilities.
Sector-wise Consumption of Stainless Steel (FY09)
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The stainless steel market has again started seeing signs of recovery in demand since the beginning of 2010. The trend has been widespread, starting from Indian market to US, Europe and recently China.
The domestic steel industry is currently growing fast with enormous future growth potential, experts feel. Even in tough times of economic slowdown, the industry succeeded in sustaining it’s positive growth momentum on the strong fundamentals of domestic demand from construction, automobile and infrastructural sectors.
The year 2009 was surely a recovery for India as far as stainless steel was concerned. There has been some improvement in demand as well as in prices. As mentioned by N.C Mathur, director marketing, Jindal Stainless Ltd(JSL), that owing to weaker market conditions, capacity utilization was not at its optimum level before 2009.
In 2009, a net surplus of around 30 to 40% was created, resulting in producers pulling down their current capacity utilization. But the situation is improving slowly and current capacity utilization by the domestic industry is at 80 to 90%. Therefore, the stainless steel manufacturers in the domestic market are targeting to take its capacity utilization to the optimum level.
Growth in the End-users Segment
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Sector CAGR FY 01 – FY 09
Metal Goods 8.0%
Processing & Engineering 20.3%
Automobiles, Railways & Transport 50.1%
Architecture, Building & Construction
50.4%
Electro Mechanical 25.6%
With the growing impetus on the oil segment, the envisaged development of six petrochemical investment regions over the next 10 years would entail an investment of $218 billion. Moreover, India is emerging as a global refining hub with almost 65 million tons (mt) per year of additional refining capacity over the next five years.
Apart from this, the resurging segment of real estate and construction will also be a great demand driver. In the residential real estate segment, which is the first to recover among others in the same genre, is likely to see a massive boost owing to rapid urbanization. Meanwhile, the commercial real estate has been a bit slow but almost 250 million square feet of additional IT/ITES space is likely to come up by FY 2014, noted by experts. In addition to this, modernization of airports and railway stations will also provide a boost to the stainless steel demand.
Finally, one of the most attractive segments have been the automotive, railways and transportation segments which are likely to witness a massive growth in the years to come. The auto sector saw a real optimistic growth since July 2009. So, this will be one of the most attractive segments for stainless steel. The ferritic grade which was primarily used in the kitchenware segment is slowly finding usage in the automotive segment. Moreover, metro coaches will also be one of the major consumers of stainless steel with massive plan for development of metro rail system in 10 cities.
Facts & Figures
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Production of Saleable Steel by
SAIL in Four Years(in mt)
Sales by Volume on Yearly Basis at SAIL
YEAR TONNAGE(million tons)
2009-10 11.222
2008-09 10.438
2007-08 11.714
2006-07 11.174
2005-06 10.547
The Q4 net sales exceeded Rs.11900 crores, a record 37% higher value-added steel production in Q4 boosts profitability by 40%. In spite of sales growth of 7% during FY ’10 in volume terms at 12.11 million tons, of which one-third constituted value-added items, net turnover at Rs. 40,551 crore was lower by about 6% .
Net Sales of SAIL in Q4 2009-10 (in Rs. crore)
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The company has achieved a net sales turnover of Rs. 11,955 crore during the quarter, as against Rs. 11,790 crore in the corresponding period last year (CPLY). Q4 FY10 Net sales of SAIL is Rs .11,955 crore, 1% increase over CPLY.
Net Sales of SAIL in Last Four Years (in Rs. crore)
SAIL has a net sales of Rs.40,551 crore in FY 09-10, decrease of 6% over CPLY.
Cash Profits of SAIL Over Last Four Years (in Rs. crore)
The profit earned for 2009-10 Rs.was 11,469 cr.an increase of 7% over CPLY.
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Falling Market Share of SAIL Year-wise:
Actions Taken by SAIL to Increase Market Share
Enhancing Dealer Networks The steel awareness in India is very less. The per capita consumption is only 38 to 40kg. Moreover people are using steel but blindly, they don’t even know that why they are using, where they are using, what is the benefits of steel or how it is produced, etc. For this purpose only SAIL is increasing its market by enhancing its ‘Dealership and Dealer-networks’.
The sale through dealers’ network of SAIL during Q4 FY10 is 6.05 lakh tonnes, a growth of 18%. 54% of galvanized sheets and 27% of TMT bars are sold through dealer network.SAIL is expanding its dealer network because these dealers are connected to small customers of small districts all over the country.
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2010-2011 2005-06
Rural Marketing – A New Target MarketThe most important issue for the steel companies in India these days is to increase their market, look for a new market and expand their brands to these new markets. So what SAIL is doing. With the planning of increasing the production capacity from 13MT to 23MT in 2012, SAIL is searching for new markets and rural market is the safest bet because this is the unexplored India. After downturn most of the companies are turning towards rural markets. But the rural market has its own challenges - a large market, with little awareness. Products like TMT bars, which are the most advertised retail steel product, are dominated by unorganised and small players in the rural market. Of the total TMT bar market, bigger players like SAIL, Tata Steel, Rashtriya Ispat Nigam Ltd and JSW Steel have a 45 per cent market share, while the balance is with the unorganised and small players.SAIL, being an early mover has its advantages. SAIL TMT is an established brand and commands a premium of at least Rs 2,000 a tonne in the market. In spite of this, the rural market is important enough for SAIL to extend the product at the same price — SAIL officials say SAIL TMT is available in the remotest corners of the country at the same price as in the city outlets. According to trade sources, other companies typically add the freight cost.
SAIL has reached out to India’s hinterland through “Apna SAIL Shops”, retail outlets built exclusively for the purpose. SAIL officials say the network at present is more than 2,000 dealers, and growing. Over the past year, SAIL TMT advertisements have sprung up across the country — airports, hoardings in metros, buses, local cable in small towns and villages, and long-distance Rajdhani and Shatabdi trains. New-age advertising like the FM radio is also being used to promote SAIL TMT for these rural markets.
Advertising for SAIL may have been stepped up, but it’s still meager compared to the smaller TMT bar producers. Trade sources say for every tonne of TMT sold by a small player, the amount spent on advertising is Rs 100. For SAIL, trade sources say, it would be about half of that. Brand endorsers for regional TMT players include Sanjay Dutt, Kapil Dev, Mithun Chakraborty, among others. The public sector steel major, on the other hand, relies on the star value of its corporate brand. After all, it said many moons ago, “There’s a little bit of SAIL in everyone’s life.”
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Expansion & Modernization Plan of SAIL
The Sales of Saleable Steel at SAIL 2009-10
Saleable Steel Production (Plant Wise & Quarter Wise) in MT
The saleable steel production in BSP/the Bhilai Steel Plant remained same for the two quarters of FY 2010 after it had dropped in Q4 FY 2009. The production has been same since Q4 2009 in DSP/the Durgapur Steel Plant. Similar conditions prevailed in BSL/the Bokaro Steel Limited and ISP/the IISCO Steel Plant for both the years 2009-10. The production of RSP/the Rourkela Steel Plant showed ups and downs in 2009-10.The crude steel production at SAIL in Q4 FY 2010 was 13.51 million tons, an increase of 1% from last year’s. The average capacity utilization for saleable steel was 114% and for hot metal it was 105%. The blast furnace productivity has been 1.57t/cu m/day, an increase of 5% over CPLY.And along with that the falling market share and share prices, SAIL has adopted the strategy of ‘Expansion & Modernization Plan of SAIL’. The Steel Authority of India Ltd. (SAIL) has drawn up ambitious expansion plans and is set to take its capacity from the current level of around 13 million tonnes per annum (tpa) to 20 million tpa by the year 2012. With the backdrop of the upheavals in the global steel industry in the recent past, SAIL has chosen to draw up a long-term
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strategy for itself. `Corporate Plan - 2012' is a blueprint for the company's growth in the coming years in tandem with a growing market.The company has planned an investment of Rs. 25,000 crores by 2011-12. The immediate priority schemes were taken by 2006-07 when an investment of around Rs. 4,300 crores was started. V. S. Jain, the Chairman, SAIL, said the capital expenditure would be financed mainly through internal accruals and would be supplemented by market borrowing.
SAIL has planned to increase the capacity of all its five integrated steel plants. Its Bhilai plant will see the capacity go up from 4.9 million tonnes to 7.0 million tonnes by 2012, Durgapur from 1.9 million tonnes to 2.8 million tonnes per annum, Rourkela from 2.0 million tonnes to 4.0 million tons, Bokaro from 3.5 million tonnes to 6.5 million tones and IISCO from.4 million tones to 2.4 million tonnes . The other subsidiary steel plants’ under SAIL will also increase their production – VISL from .1 million tonnes to .2 million tonnes , ASP from .2 to .4 million tonnes and SSP from .2 to .3 million tonnes, giving a total of 23.1 million tonnes of steel per annum.
The areas broadly identified for investment are development of iron ore mines, rebuilding coke oven batteries at BSP and DSP, revamping of iron and steel making facilities at BSP, DSP and BSL, installation of a blast furnace at RSP, installation of auxiliary fuel injection systems in all blast furnaces in a phased manner and installation of new finishing mills.
SAIL estimates that by 2012, India's consumption of steel will double from its current levels to 55-60 million tonnes. Corporate Plan - 2012 envisages upping SAIL's domestic market share from current level of 23% (of 60-61 million tonnes) to around 25% (of the projected 55-60 million tonnes) in 2012. This would be done through a mix of measures including stepped-up production, further intensification of market orientation, and improved cost and quality competitiveness.
The ongoing expansion plan has been planned to achieve saleable steel production of 20.23 million tone at a cost of Rs. 37000 crores. The capital expenditure which has already been made during 2007-08 to 2009-10 includes an amount of Rs.18020 crore, including Rs.12056 crore for expansion and Rs. 5964 crore for other schemes. The capital expenditure planned to be spent during 2010-2011 is Rs.12,254 crore approximately. This will result into :-
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Enhancement of production capacity and market share.World class technology and products.Improved product mix.Enhanced pollution control measures with environmental conservations.Captive power generation to increase from 872MW to 1922MW.Increase in the iron-ore and coal linkages from 23mtpa in 2009-10 to 100mtpa by 2020 for iron-ore while from 13.8mtpa in 2009-10 to 50mtpa in 2020 for coal.
Product-wise Expansion Plan(in million tonnes)Particulars 2009-2010 After ExpansionHot Metal 14.5 26.2Crude Steel 13.5 24.6Saleable Steel 12.6 23.1
SAIL in New BusinessSAIL now is not only trying to expand its brand name but it is slowly trying to put more stress in establishing its roots in completely new businesses :-
With the slag produced as a secondary product from the blast furnace of the steel plant, SAIL has taken the step of utilizing this slag in cement manufacturing. So, it has started Cement Factories at Bhilai and Bokaro and is starting now one in Burnpur West Bengal near ISP/ the IISCO Steel Plant.SAIL is also planning to reopen the Fertilizer Plant at Sindri, Jharkhand now under its brand name in order to utilize the ammonium sulphate that is produced as a by-product in the Bokaro Steel Plant. Ammonium Sulphate is used to prepare fertilizers useful for plants.
Corporate Social Responsibility at SAILModel Villages :- Almost 79 villages have been adopted as Model Steel Villages across 8 states for exclusive development of Medical facilities,
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Education, Roads, Sanitation, Community Centre etc. and 13 such villages have already been completed during 2007-08.Initiative towards 100% literacy in steel townships during 2007-08, five free schools set up for under privileged children providing free mid-day meals, school uniforms, text books, stationery items and transportation.Medical health centres set up at Bhilai, Bokaro, Rourkela and Burnpur for providing free medical consultation, medicines for needy population.Project “Jaladhara” taken up in tribal villages in VishakapatnamDistrict for providing drinking water to the nearby villages from the naturalsprings.Flood relief operation undertaken in 3 states –Bihar, Uttar Pradesh and Assam.SAIL is working towards a clean and sustainable environment, enhancing its environmental performance as an integral part of its business philosophies and values.
Other New Strategic Initiatives by SAILERP/Enterprise Resource Planning has been implemented in BSP(Apr,2010), DSP(Oct, 2010)and BSL(Apr, 2010). 6 crore modules have been implemented in these plants.The joint venture company ‘SAIL SCI Shipping Pvt Ltd’ has been incorporated on 19th may 2010 to cater to SAIL requirements of shipping imports of coal.The action of merger of MEL with SAIL is a great success.SAIL is in process of finalizing a joint venture partner for its proposed SEZ project at SALEM.MOU has been signed with Kobe Steel, Japan for the feasibility of ITmk3 technology.There will be a joint collaboration in iron and steel area with Nippon Steel.SAIL with POSCO are jointly doing a feasibility study for usage of Finex Technology.SAIL is about to acquire refractory unit of BSCL at Salem.
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The Steel Industry :India is the third largest producer of steel in the world in Q1 FY09. India Steel Industry has grown by leaps and bounds, especially in recent times with Indian firms buying steel companies overseas. The scope for steel industry is huge and industry estimates indicate that the industry will continue will to grow reasonably in the coming years with huge demands for stainless steel in the construction of new airports and metro rail projects. The government is planning a massive enhancement of the steel production capacity of India with the modernization of the existing steel plants.
Government targets to increase the production capacity from 56 million tones annually to 124 MT in the first phase which will come to an end by 2011 - 12. Currently with a production of 56 million tones India accounts for over 7% of the total steel produced globally, while it accounts to about 5% of global steel consumption. The steel sector in India grew by 5.3% in May 2009. About 50% of the steel produced in India is exported. India's export of steel during April - December 2008 was 64.4 MT as against 9.7 MT in December 2007. In February 2009, steel export increased by 17% to 12.6 MT from 10.8 MT in the same month last year. More than 50% of steel from India is exported to China. The Government's decision to reduce export duty on iron ore lumps from 15% to 5% has given a major boost to the export of steel.
The excess power shortage hampers the production of steel. There is usage of outdated process for productionIndia lags behind in the production of stainless steel and also there is a deficiency of raw materials required by the industry. The labor productivity is low. It is 144 tons per worker per year against 600 tons in Western Europe as per estimates. Also there is an inadequate shipment capacity and transport structure
There are many strong points of the industry that makes it one of the leading names in the global steel industry. The rate of labor wage in India is among one of the lowest in the world thereby making large scale production feasible. The boom witnessed in the automobile industry has ensured that the demand for steel is increasing gradually and will continue to do so in the near future. There is huge manpower in India which is another reason why steel production in India is high and the industry is doing pretty well both nationally and internationally.
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The steel industry in India has been moving from strength to strength and according to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16.Recently, Steel Minister, Mr Virbhadra Singh said that India will become the world's second-largest steel producer by 2012, more than doubling its capacity to 124 million tonnes (MT) as part of the push being given to assist overall infrastructure development. Steel production rose 4.2 per cent to reach 60 MT in 2009-2010, according to the Ministry of Steel. The National Steel Policy 2005 had projected an annual steel consumption growth of 7 per cent based on GDP growth rate of 7-7.5 per cent and production of 110 MT of crude steel by 2019-2020.
India's steel consumption rose 8 per cent in the year ended March 2010, over the same period a year ago on account of improved demand from sectors like automobile, infrastructure and housing. The country’s steel consumption increased to 56.3 MT in the 12 months to March 2010 from 52.3 MT in the previous year, as per the Ministry of Steel.
Government Policies for Steel Industry
Some of the important policy measures have been framed by the Ministry of Steel and they assist about these policies to the private companies.
Important Policy Measures
i. In the new Industrial Policy announced in July, 1991 Iron and Steel industry, among others, was removed from the list of industries reserved for the public sector and also exempted from the provisions of compulsory licensing under the Industries (Development and Regulation) Act, 1951.
ii. With effect from 24.5.92, Iron and Steel industry has been included in the list of `high priority' industries for automatic approval for foreign equity investment upto 51%. This limit has been recently increased to 100%.
iii. Price and distribution of steel were deregulated from January 1992. At the same time, it was ensured that priority continued to be accorded for
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meeting the requirements of small scale industries, exporters of engineering goods and North Eastern Region of the country, besides strategic sectors such as Defence and Railways.
iv. The trade policy has been liberalised and import and export of iron and steel is freely allowed. There are no quantitative restrictions on import of iron and steel items, covered under Chapter No. 72 of the ITC(HS) Code. The only mechanism regulating the imports is the tariff mechanism. Tariffs on various items of iron and steel have drastically come down since 1991-92 levels and the government is committed to bring them down to the international levels. In Chapter 72 there are two items viz. 72042110 and 72042910, which fall in the restricted list of imports.
v. Iron & Steel are freely importable as per the Extant Policy.
vi. Iron & Steel are freely exportable.
vii. Advance Licensing Scheme allows duty free import of raw materials for exports.
viii. The floor price for seconds and defectives continues till date.
ix. Imports of seconds and defectives of steel are allowed only through three designated ports of Mumbai, Calcutta and Chennai.
x. Mandatory pre inspection certificate by a reputed international agency for every import consignment of seconds and defectives.
xi. In the union Budget 2007-08 the import duty on seconds and defective has been further reduced from 20% to 10%.
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INTRODUCTION TO THE PROJECT
Objective of the ProjectMarketing strategies play a vital role in maximization of sales revenue along with customer satisfaction. The project objective is to analyse the marketing strategies adopted by SAIL to continue its growth in a developing economy. The strategies are related with various aspects of marketing like market segmentation, target market, promotional strategies, marketing mix, etc.
The following are some of the few objectives of my project :-
To evaluate the current market situation in a developing economy like India.
To find out the potential market of steel in such a developing economy.
To frame out how marketing is done by SAIL for its prime products.
To assess the reasons behind the falling market share of SAIL on the basis of market survey.
To analyze the marketing strategies adopted by SAIL to maintain its sales, profits, market share and customer satisfaction by market survey.
Job AssignedThe key job assigned by SAIL was
To find out the current market scenario in a developing economy like India.
To get the current demand of Steel in the country in different sectors.
To notify the Production and Sales scenario at SAIL.
To analyse the marketing strategies on the basis of market survey.
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Key ResponsibilitiesTo carry out a Market Research in the Eastern Belt of the country – Jharkhand.
Analyse the strategies adopted by SAIL on the basis of the Research.
Find out the effectiveness of those strategies.
Stages of the ProjectI. Recording the various Marketing Strategies implemented by SAIL.
II. Collection of secondary data from the CMO/Central Marketing Organization branch office.
III. Analyzing the strategies – on what basis SAIL is carrying out its business.
IV. Collection of primary data on the basis of a market survey in four regions of Jharkhand – Bokaro, Jamshedpur, Ranchi and Dhanbad.
V. Data analysis and proving of hypothesis.
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DETAILS OF THE WORK DONEFirst of all, I was told about the working of different departments in the steel plant of BSL or Bokaro Steel Ltd. How the different plants of SAIL carries out the steel production was also told. SAIL has a huge Marketing Division catering to the needs of its huge customer base throughout the country. Due to the coming of the new players, large number of marketing strategies has been adopted and implemented by SAIL. Then, I was asked to analyse those strategies and this was to be done on the basis of a market survey of a Sample Size 40-45 in the eastern region of the country - Jharkhand.
The Sample Size covered by me was 40 that included 20 MoU customers and 20 Dealers around the region. The time period within which I was supposed to complete this survey was two weeks. I was supposed to visit the offices of the MoU customers- these are those Companies which are involved in manufacturing of tyre tubes, electrosteel, oil companies, auto companies, etc. The companies of these MoU customers are situated mostly in Jamshedpur and Bokaro. I was asked to call the different dealers who are mostly scattered in the different districts of Jharkhand.
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RESEARCH METHODOLOGYMethodology refers to the process of doing a work systematically. The project report consists of certain systematic procedures to generate some scientific results for an effective decision-making. The methodology followed for this project is given below :-
DATA COLLECTION : As the present study concerns the industrial project, a primary source of data collection method has been adopted.
DATA TABULATION : The data have been tabulated to find out reasonable information. This tabulation work is done with the help of numbers.
DATA ANALYSIS : Different statistical and non-statistical techniques like histograms, pie-charts, etc, have been used to analyze the information gathered and to quantify it.
HYPOTHESIS :
I. Null Hypothesis : - The market share for SAIL have been falling as compared to earlier data due to lack of well-defined marketing strategies.
II. Alternate Hypothesis :- The market share has been falling not due to lack of strategies. But because of the ever-existing demand-supply gap.
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MAJOR LEARNING
SAIL being the leading steel-making company in India and with the increasing number of new entrants in the Indian market, SAIL is facing numerous opportunities and also along with that tremendous threats. SAIL is practicing a Speculative form of business. Making infrastructure, engineering, automobiles, construction and capital goods sector its Target Markets, SAIL has followed Product Specialization(eg- HR sheets of different width to suite different market needs), Market Specialization(as SAIL supplies all sorts of goods required by its target sectors) and Selective Specialization(SAIL supports agricultural, white goods segments and defence sectors) since years to strengthen its business. Besides SAIL has also practiced Product Development by slowly adding new features to its existing products, bringing new variants like CR coils of different width- one for making drums in oil sector while the other for tubes in auto sector.
Along with the above sectors, SAIL has also made Rural India as it’s another important Target Market.
Along with its steel business, SAIL has also encouraged Line Addition in the form of cement and fertilizer business. SAIL has started cement manufacturing by adopting Horizontal Diversification- a new product from a new technology but meant for the same customer group- real estate, auto sectors, etc. Also, through Conglomerate Diversification SAIL has started its fertilizer business, a new product of new technology for new customers. Both these businesses undergo Backward Integration as SAIL is itself producing the raw materials for both cement and fertilizers and sells under its brand name.
The pricing strategy SAIL follows is different for its different businesses based upon the product quality like for steel business it follows Premium Pricing Strategy or high pricing strategy for its high quality; for its cement business it follows Super Value Strategy or low pricing strategy even if the quality is high; its fertilizer business is based on Super Value Strategy or low pricing strategy for high quality again keeping the farmers’ capability in concern. But all these
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products’ prices are fixed only after matching with the market price keeping their competitors in mind.
These are some of the strategies based upon which SAIL is carrying out its business as per my analysis. These strategies were to be further analysed that to what extent they are effective on the basis of the market survey.
I visited the Indian Oil Corporation, South Eastern Railways Branch Office and Electrosteel Factory in Bokaro; the Tata Motors, Tata Ryreson, TISCL, Utkal Automobiles, Caparo Engineering, Auto Profiles, etc in Jamshedpur. What I learnt from this survey is that SAIL being a PSU has taken everything for granted, the product quality is low – poorer than Tata Steel, Jindal and even Essar and Ispat. Few of them find the prices of the products not worth of the product quality compared to other Companies. This is not the end. SAIL is unable to meet the demands regularly for most of them due to which it is slowly losing its customers and also, market share is going down. There always remains a wide delivery time gap and also poor transportation facilities as few of them mentioned. Time management is the most important issue to be taken care of the most at SAIL. Along with it another most important issue is the total mismanagement and corruption in SAIL and among its staff also contributes to such a downfall.
After this survey the most important point which I have noticed is that many people goes by a wrong notion that SAIL is a big brand it does not need any sorts of marketing and promotional strategies. But the time has changed now and SAIL is not the only Company supplying steel in India. There are rather many competitors, the new entrants also. Also, many believe that a business is known by its customers. It is aptly said but what I understood throughout this project is - that customers always come only as the priority not as a definition of the business. A business is defined by its strategies. To know the market demands, to find out what are the market trends, needs, it becomes very important for every business to learn its customers thoroughly and then finely define their strategies surrounding their customers’ needs keeping their business policies intact. Any failure in the market – discontent among the customers regarding products may be due to a smallest loophole in the strategies.
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CONSTRAINTS FACEDNo survey remains devoid of any limitations. Even the present survey is not an exception in this case. These are the few limitations of the study :-
The main problem was the irresponsiveness shown by the training department as well as the lack of knowledge of the main training mentors.Lack of all sorts of co-operation and proper guidance from any of the Company (SAIL) people.During the survey most of the companies refused to answer to any sorts of questions and asked for a prior appointment date. So, there was a lot of traveling and wastage of time and I had to return empty-handed most of the time. The time period allotted for the project was not enough to carry it out in a broader perspective.The area of the study allotted, mainly the research part was confined to Jharkhand only and so the sample size was small and could not include other parts of the country.
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FINDINGSData Analysis
The following data analysis has been done on the basis of the market survey conducted where each of the customers were asked ten questions and their answers have been evaluated on the scale of 5. The Sample size covered is 40.
Customers' Sl No. Marks Allotted( X - X) ( X - X)2
1 4 -1.9625 3.851406252 0.5 1.5375 2.363906253 2 0.0375 0.001406254 2.5 -0.4625 0.213906255 3 -0.9625 0.926406256 3 -0.9625 0.926406257 2 0.0375 0.001406258 2.5 -0.4625 0.213906259 4 -1.9625 3.85140625
10 3.5 -1.4625 2.1389062511 2 0.0375 0.0014062512 2.5 -0.4625 0.2139062513 0.5 1.5375 2.3639062514 1 1.0375 1.0764062515 1 1.0375 1.0764062516 0.5 1.5375 2.3639062517 2 0.0375 0.0014062518 3 -0.9625 0.9264062519 2 0.0375 0.0014062520 1.5 0.5375 0.2889062521 1.5 0.5375 0.2889062522 1 1.0375 1.0764062523 2 0.0375 0.0014062524 2.5 -0.4625 0.2139062525 2 0.0375 0.0014062526 2 0.0375 0.0014062527 2.5 -0.4625 0.2139062528 3 -0.9625 0.9264062529 1 1.0375 1.0764062530 1.5 0.5375 0.2889062531 4 -1.9625 3.8514062532 1 1.0375 1.07640625
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33 1 1.0375 1.0764062534 1.5 0.5375 0.2889062535 2 0.0375 0.0014062536 3 -0.9625 0.9264062537 2.5 -0.4625 0.2139062538 2 0.0375 0.0014062539 1.5 0.5375 0.2889062540 1 1.0375 1.07640625
X =2.0375 35.69375
Standard Deviation =
0.944639481
Population Mean = 5Sample Size, n = 40
6.32455532
Sample Mean, X =2.0375
To prove the Hypothesis,Applying Z-test
Z=(Sample Mean -Population Mean)/(Standard Deviation/ n)
Z= -19.83454588
If I consider that the confidence level for the null hypothesis is 99% i.e 0.99, then Z99% = -1.65.
According to the Z-test, Z = -19.835.
So, Z < Z99% . This proves the null hypothesis true.
So, this proves that the market share for SAIL have been falling as compared to earlier data due to lack of well-defined marketing strategies.
CONCLUSIONS
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Whichever company comes up in the market, its business can only explore if it can satisfy its customer. And to satisfy its customers it needs to understand their needs and likings very minutely. This is because only if it understands its customers, it can frame its strategies and implement them finely getting the results as per the Company’s own expectations.
After carrying out the above research and the data analysis, this picture got clearer. SAIL had a market share of approximately 33% in 2005-06. But this market share only drastically dropped down to approximately 21% in 2010-11. The research itself speaks that customer dissatisfaction has been the main reason behind this and this customer dissatisfaction has been because of the irresponsiveness, corruption, lack of concern for their business among the employees, sluggish growth, etc. Being a Government Undertaking, SAIL is showing mismanagement in time, product quality, services and even sometimes for prices. The figures itself proves this. The quantity produced and the quantity sold is a huge gap and this gap is showing an everlasting result till date. The untimed delivery, poor quality products, location problems, improper services and mostly the demand v/s supply gap has resulted in this. The marketing strategies adopted by SAIL is not working as per expected. The pace at which the competition is gaining strength, the new entrants and the existing competitors are establishing their roots, its high time now for SAIL to redefine its strategies. Although many new strategically initiatives have been taken by SAIL, but the time will itself say that how much these strategies will be successful.
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SUGGESTIONS & RECOMMENDATIONS
Consistent Quality :- The quality of the products should be consistent to the buyers’ requirements. The quality should be increased at least up to a certain extent in order to fight back in the competition.
Customized Product Mix :- The product mix should also include few more varieties to meet their customer demands. Longer the product line is, larger will be the customer-base.
Committed Delivery :- Time management should be taken care of with utmost concern. The order and delivery time gap should be minimized to miniature form as the timed delivery is the most important point for the customers.
Competitive Pricing :- For few of the customers prices of SAIL’s products are perfect but for most of them the pricing is not at all competitive compared to other steel maker especially Tata Steel Ltd. The prices should be finalized keeping in mind the competing product prices.
After sale Realtions :- This formula is applicable and is used by every industry today. As competition is increasing day y day, consumers are also looking for an excellent after sales services like attaining the complaints on their part, etc in which SAIL still needs to work upon.
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ANNEXURE
REFERENCES
www.mjunction.com
www.sail.co.in
www.sail.com
www.google.com
www.wikipedia.com
The Steel Insight – published by metal junction
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OUESTIONNAIRES
For MoU Customers
1.Are you a regular customer of SAIL?
a) Yes b) No
2.What is the best part of SAIL that made you to be its regular customer?
a)Price b) Product Quality c) Services d) Reliability e) Location
3.Are you fully satisfied with their price or product quality or services?
a) Yes b) No
4.Has anytime happened that SAIL could not meet your demands?
a) Yes b) No
5.What do you do in such situations?
a) Leave SAIL forever b) Wait for SAIL to replenish back
c) Switch over to other Companies
6.Which other Companies do you buy the products from?
a)Tata Steel b) JSW c) Ispat d) Essar e) Other Local Companies
7.Do you find these Companies better?
b) Yes b) No
8.In which case do you find the difference?
a)Price b) Product Quality c) Services d) Others
9.Is SAIL successful in attaining your complaints?
c) Yes b) No c) At times
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For Dealers
Are you an exclusive dealer of SAIL?
What made you to be an exclusive dealer of SAIL?
If not an exclusive dealer of SAIL, then which other Companies are you dealing with?
Do you find them better than SAIL?
What is the difference?
What types of promotions do you do?
Do you find them effective?
If not an exclusive dealer of SAIL, then what difference do you find in the promotions of SAIL and other companies?
Do you find their promotions more effective than SAIL?
In case of complaints, is SAIL successful in attaining them?
Has SAIL couldnot meet your demands?
What do you do in such cases?
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