XAVIER INSTITUTE OF MANAGEMENT, BHUBANESWAR

TATA STEEL
Capstone Deliverable - 2
Group - 31 8/2/2012

Submitted by : Anju P Amrita Dutta Sasmita Swain Sruti Mishra

Tata Steel-External Environment Analysis :The objectives here is to have a macro level understanding of the external environment by considering the trends and issues that change, influence, and affect the industry in which the organization operates. The overall industry understanding comes from looking at the elements that influence the environment such as the Capital markets, Industry capacity, Technological factors, Pressure from substitutes, Threat of new entrants, Economic factors, Political factors, Regulatory factors, Geographic factors, and Social factors

CONTENTS
Trends in Steel Industry ........................................................................................................................... 3 Long Term Issues in Steel Industry: ......................................................................................................... 3 Impact of Capital Market: ....................................................................................................................... 5 Impact of Industry Capacity and Demand: ............................................................................................. 5 Impact of Technological factors: ............................................................................................................. 5 Porters 5 forces: ...................................................................................................................................... 5 Economic Factors .................................................................................................................................... 6 Geographic Factors ................................................................................................................................. 6 Regulatory Factors .................................................................................................................................. 7 Evolution of Steel Industry over time ...................................................................................................... 7 Key success factors in the industry .......................................................................................................... 8 Events or activities that can change the rules of the game .................................................................... 8 Short term outlook .................................................................................................................................. 9 Medium Term Outlook ............................................................................................................................ 9 Long term outlook ................................................................................................................................... 9 Cost of reward being winner / looser in the industry............................................................................ 10 Appendix A ............................................................................................................................................ 10 References ............................................................................................................................................. 11

Trends in Steel Industry:

Indias economic growth is contingent upon the growth of the Indian steel industry. Consumption of steel is taken to be an indicator of economic development. While steel continues to have a stronghold in traditional sectors such as construction, housing and ground transportation, special steels are increasingly used in engineering industries such as power generation, petrochemicals and fertilisers. India occupies a central position on the global steel map, with the establishment of new stateof-the-art steel mills, acquisition of global scale capacities by players, continuous modernisation and up gradation of older plants, improving energy efficiency and backward integration into global raw material sources. Below is the steel consumption level . The finished steel production in India has grown from 1.1 million tonnes in 1951 to 31.63 million tones in 2001-02, which can be regarded as a remarkable example of Indias development in economic activities. Tata played a vital role in the improvement of steel production also. For that reason in the development of Indias economy, Tata played a significant role. As a result the consumption level of steel from 1990 to 2002 was continuously in an increasing order, but in 2003 it was not like earlier. In respect to the per capita income and consumption of steel it is very less in India as compared to other countries. Below is a tabular representation of the consumption of steel from 1990-91 to 2002-03 (Refer Appendix A) Steel production in India has increased by a compounded annual growth rate (CAGR) of 8 percent over the period 2002-03 to 2006-07. Indian demand is projected to rise to 200 million tonnes by 2015. Given the strong demand scenario, most global steel players are into a massive capacity expansion mode, either through brown-field or green-field route. By 2012, the steel production capacity in India is expected to touch 124 million tonnes and 275 million tonnes by 2020. While green-field projects are slated to add 28.7 million tonnes, brown-field expansions are estimated to add 40.5 million tonnes to the existing capacity of 55 million tonnes. Steel is manufactured as a globally tradable product with no major trade barriers across national boundaries to be seen currently. There is also no inherent resource related constraints which may significantly affect production of the same or its capacity creation to respond to demand increases in the global market. Even the government policy restrictions have been negligible worldwide and even if there are any the same to respond to specific conditions in the market and have always been temporary. Therefore, the industry in general and at a global level is unlikely to throw up substantive competition issues in any national policy framework. Further, there are no natural monopoly characteristics in steel. Therefore, one may not expect complex competition issues as those witnessed in industries like telecom, electricity, natural gas, oil, etc. This, however, does not mean that there is no relevant or serious competition issue in the steel industry. The growing consolidation in the steel industry worldwide through mergers and acquisitions has already thrown up several significant concerns. The fact that internationally steel has always been an oligopolistic industry sometimes has raised concerns about the anti-competitive behaviour of large firms that dominate this industry. On the other hand the set of large firms that characterize the industry has been changing over time. Trade and other government policies have significant bearing on competition issues. Matters of subsidies, non-tariff barriers to trade, discriminatory customs duty (on exports and imports) etc. may bring in significant distortions in the domestic market and in the process alter the competitive positioning of individual players in the market. The specific role of the state in creating market distortion and thereby the competitive conditions in the market are a well-known issue in this country.

Long Term Issues in Steel Industry:

Competitiveness in Steel:
In the short-term the price of steel is relatively inelastic. The users of steel need time to redesign their products to use less steel and more of other materials. In the short term, customers will accept an increase in the price of steel provided they are confident that their competitors are incurring a similar increase. In the longer term, steel is in fierce competition with other materials. The good news for steel is that the problems facing some competitive materials are at least as serious as our own.In the case of aluminium, this is much more energy-intensive than steel. Each tonne of primary aluminium requires over 10 times the level of energy required for a tonne of steel. In the case of wood, our planet is running out of timber, as mans consumption is greatly in excess of our ability to replant. In the case of plastics, the increase inthe real cost of hydrocarbons undermines its competitiveness. Nevertheless, steel is under strong competitive pressure in all its applications and particularly in the case of packaging and automotive. Our response to this challenge must be to find ways to increase the

value in the use of steel. In the 21st century steel must be an intelligent material. We should achieve success by producing high value products. Although we may sell less in tonnes we will achieve higher revenues if we can demonstrate to our customers the superiority of the new steels in application. There are areas where we can be very positive about steel. There is a boom in shipbuilding worldwide and indeed the move to double-skinned hulls for environmental protection favours a greater use of steel. Alternative energy sources such as wind power are steel intensive. Perhaps the greatest prize for steel is to increase its penetration in construction. Construction is already the largest single steel-using sector and we have only just scratched the surface of steels potential. Steel provides flexibility to architects, speed of construction, long life and easy recycling. IISI is leading a consortium of 11 steel companies that over the next five years have an ambitious market development programme to grow the market for steel in construction, particularly in theres identical area where our present market share is low. While construction standards and practices are unique to each country, there is a core of know-how and technology enabling steel companies to work together globally to provide better housing solutions.

Price volatility:
Customers will accept higher steel prices provided their competitors accept the same. However it is very difficult to promote the use of more steel if there is high volatility in its price. Recently there has been an increased volatility in the price of steel and there will be a re-examination of options to hedge this risk for the steel industry and its customers. However, recent experience there has not been to reduce volatility; indeed the volatility in the price of nickel is a fundamental weakness in growing the market for stainless steel. Other solutions will emerge to reduce the risk of volatility in steel prices.

Global warming:
The earths atmosphere is warming. Scientists disagree as to whether this is due to natural cycles, increased sunspot activity or to man through the generation of greenhouse gases. However, the steel industrys opinion on the scientific argument is irrelevant since governments worldwide have accepted the findings of the International Panel on Climate Change and have agreed to reduce manmade greenhouse gases through the UN Framework Convention on Climate Change. The steel industry accounts for 6% of all man-made CO2 emissions and therefore it is in the frontline of governments attention. Those governments that accepted commitments under the Kyoto Protocol to reduce greenhouse gas emissions have chosen to focus on the industrial sectors such as steel and power since this is politically easier than focussing on the general public, even though their use of energy and transportation are the biggest generators of greenhouse gases. A further issue for the steel industry is that the Kyoto Protocol requires short-term action only from the signatory countries . By introducing measures such as carbon taxes or the requirement that all emissions of CO2 above a restricted allocation should be bought through a carbon emissions trading regime, governments in these countries run the risk of placing their steel industry at a serious competitive disadvantage. If the outcome of increasing the costs of steelmaking in these countries is to accelerate reallocation to developing countries there will be no environmental gain. Indeed, energy efficiency and CO2 emissions from the steel industry in Russia or China are significantly worse than in Japan or Western Europe. Consequently the impact on the environment will be negative. In the short term, the steel industry has relatively little chance to improve its energy efficiencies with presently known technology

Sustainability:
The commitment to sustainable development is not just because we believe it is the essential agenda for the 21st century but also because we believe steel has a strong and positive role to play in mans development. The four economic indicators we chose are: investment in new processes and products, operating margins, return on capital employed, and value added. A sustainable steel industry requires a margin enough to cover the cost of capital. The price of steel products must be high enough so that we are self-funding and do not fall back on state aid or subsidies. Not only do governments have better things to do with their money than subsidise the steel industry, but also, subsidies give a major distortion to our business and fail to reward the most competitive and innovative companies. Profits must be high enough to justify investment in new products and processes and this, in turn, is essential to ensure the survival and growth of our industry.

Other Issues faced in Steel Industry:

Regulatory & Policy issues by the Government Capacity augmentation & Infrastructure requirements Technology infusion in the industry Raw material security Greenfield projects Environmental and R&R aspects Rural Demand

Consumers perspective Demand driven growth

Impact of Capital Market:

The Steel Industry was expecting an increase in import duty on certain steel and steel products and was also hopeful of a hike in export tax on iron ore. None of the two demand of the Industry were met. However focus on Infrastructure is expected to provide indirect demand push. Over a medium term perspective the government plans to increase the investment in infrastructure to more than 9 per cent of GDP by 2014. Overall with Industry demands not met the Budget is neutral for the Steel sector with a negative bias.

Impact of Industry Capacity and Demand:

India is all set to become the second largest producer of steel in the world by 2013, with an installed annual production capacity of 120 million tonnes. Currently, India has the fourth largest steel sector in the world, both in terms of capacity and production. By 2013, India will be the second largest steel producer in the world. India's production capacity currently stands at around 80 million tonnes and this capacity was expected to rise to over 150 million tonnes by 2020. The steel-making capacity of the country was just 51 million tonnes in 2006. This is likely to cross 110 million tonnes by next financial year when the brown-field capacity addition projects of SAIL, JSW Steel and Tata Steel get commissioned. The growth in steel demand averaged 10 per cent over the last seven years and there was a likelihood that the trend would continue at least for the next decade. There are expectations that steel demand in the country may exceed 10 per cent at times, during the next 10-15 years horizon. In such a scenario, the steel production capacity should reach 150 million tonnes by 2018. He hoped the country would be able to meet the demand through domestic production at least for the next five years.

Impact of Technological factors:

Steel technology has entered a period of particular vitality, when new processes are being stimulated by raw material and energy changes or whether they are creating opportunities to use new raw materials and energy sources is not important: the technology of the industry is not static. Relatively small integrated systems based on coal reductants and electrical energy are feasible now, and the opportunity to add capacity in small increments, where it is needed, can lower the industry's capital intensity. Major developments in iron-making and steel-making include: 1. pneumatic steelmaking 2. hot-blast techniques that permit continuous production of liquid iron in the blast furnace; 3. the electric arc furnace (EAF); 4. continuous casting

Porters 5 forces:
1. Bargaining Power of Suppliers: MEDIUM to HIGH
For integrated steel plants: Integrated steel plants have captive mines which supply raw materials at low cost For non-integrated or semi-integrated steel plants: These have to source their raw materials from suppliers who may bargain depending on their size. Globally, the top three mining giants BHP Bilton, CVRD and Rio Tinto

supply nearly two-thirds of processed iron ore requirements to steel plants and command very high bargaining powers. In India too, NMDC is a major supplier to these plants.

2. Barriers to entry: HIGH

Huge capital investment required: It is estimated that to set up capacity of 1 mega tonne per annum in an integrated steel plant, the investment required is about 25 to 30 bn Rupees Economies of scale: Benefits of economies of scale come from greater bargaining powers with suppliers, R&D expenses, and proportionately lower fixed costs. Integrated steel plants often invest in captive mines to have cheaper raw materials, which is not a feasible option for new entrants. Economies of scale are hence difficult to reach for new entrants Regulatory Clearances: The Indian Government have generally pro-steel-manufacturer policies but the regulatory clearances are difficult to achieve for new entrants Scope of Product Differentiation: There isnt much scope of product differentiation in steel. The big players have established brand names which have got associated with quality but new entrants will take a long time in achieving this Access to existing distribution channels: The existing distribution channels are working at almost full capacity. If new entrants are to set up new distribution channels they would incur huge expenses

3. Threat of Substitutes: MEDIUM to LOW

Threat in Automotive Market: This is one of the biggest markets of steel. In recent years though, steel has been increasing replaced by Aluminium, Plastics and Composites. Steel, however, cannot be completely replaced. Also, Aluminium is more costly because of the high cost of electricity extraction and purification of aluminium in India In other markets: Steel has been replaced in railway sleepers (RCC sleepers), large diameter water pipes (RCC Pipes) etc. Technological advancements may further make substitution of steel easier but not in the near future

4. Bargaining Power of Buyers: MIXED

The major steel consumption sectors like automobiles, oil and gas, shipping, power generation etc. enjoy high bargaining powers because of high volumes. Smaller consumers do not get these benefits

5. Competition from existing players: HIGH

Existence of International players: The steel industry is global in nature. Large steel producing countries like China influence global pricing because of volumes and aggressive exports at lower prices which they can afford because of their economies of scale Indian Scenario: In India, the demand is still more than the supply because of rapid industrialisation. India is a net importer of steel. Existing players will fight tooth and nail to supply the unfulfilled demand

Economic Factors
The phases in the steel industry have clear cycles and are influenced by prevailing economic conditions. Factors like worldwide production capacity, fluctuations in imports and exports and variation in tariffs. Steel production depends on substantial amounts of raw materials and energy. Iron ore fines, iron ore pellets, scrap, electricity, natural gas, coal and coke are indispensable in the production process. Any prolonged gaps in the supply of any of these, or substantial increase in costs would adversely affect the business and future prospects of the company. Economic factors have caused pronounced cyclical fluctuations in the steel markets and increasing pressures n costs of metals and energy in the recent past. Export oriented businesses are also affected by tariff barriers and fall in demand due to weakening economic conditions of importers which are gain economic factors wielding power over the industry.

Geographic Factors

Steel industries have been historically located where raw materials, power supply and running water are readily available. After the 1800s, the ideal location was near coal fields and close to canals and railways. 1950s onwards, a seaport near a steel industry became necessary because the volumes had become so huge that iron ore had to be imported from overseas. Indian steel industries have grown taking advantage of raw materials, cheap labour, transport and market. All the important steel producing centres such as Durgapur, Burnpur, Bhilai, Jamshedpur, Rourkela, Bokaro are situated in a region that spreads over four states- West Bengal, Jharkhand, Odisha and Chattisgarh. This is the Chhotanagpur Plateau which has ample reserves of Iron Ore and ready availability of coal from Raniganj and Jharia. Bhadravati and Vijay Nagar in Karnataka, Vishakhaptnam in Andhra Pradesh, Salem in Tamil Nadu are other important steel producing centres that utilise local resources.

Regulatory Factors
Most countries of the world have regulations that aim to protect the interests of the domestic steel industry. This is however not the case for India. On the contrary regulatory issues have often served as big drawbacks for the industry. A good example of this is regulations on land acquisition and mining. These delay and hinder the growth of domestic steel industries. For new entrants these in conjunction with other regulatory measures for entry, pose serious problems. Added to these is the environment related regulations that have been put in place to save Mother Earth. These ramp up the costs of production because effluents are to be treated before being released. Also, steel plants can no longer be located in places where they could have found advantage because of the need to prevent pollution and destruction of natural habitat of numerous organisms. An example of this is the following excerpt from the Economic Times 27 th February Issue: Due to various regulatory issues in the mining industry and delays in expansion plans across manufacturing and infrastructure industries, steel consumption as per the 12th Five Year Plan is expected to grow at 9% during 2012-17, which is even lower than the 10.4% growth in the 10th Plan.

Evolution of Steel Industry over time

The history of the steel industry can be dated back to the ancient times around three thousand and five hundred Before Christ. But the modern steel industry was initiated by Mr Henry Bessemer of England during the mid nineteenth century. At the same time, Mr William Kelly of United States started the production of steel in a different approach as that of Bessemer. Thus it led to the production of large quantities of steel at comparatively low costs. The year 1888 saw rapid innovations in the processes of steel production due to the rising demand of steel from various other industries such as railway industry, automobile industry, and construction industries. The utilization of the Open Hearth system of steel production continued from the year 1910 to 1960 where after a new process came into picture which was known as the Electric Arc Furnace. This process helped in the production of stainless steel and in recycling of scrap steel items. After the 1980s, China became the largest producer of steel. Over the course of the twentieth century, the production of crude steel has risen at an astounding rate. Steel production saw a tremendous growth in developing countries such as China, Brazil and India . The steel industry reforms, particularly in 1991 and 1992 led to strong and sustainable growth in Indias steel industry. The Tata Iron and Steel Company Limited was registered in Bombay on 26th August 1907. The company was originally constructed for a capacity of 160,000 tonnes of pig iron, 100,000 tonnes of ingot steel, 70,000 tonnes of rails, beams and shapes and for 20000 tonnes of bars, hoops and rods. Soon after the outbreak of the First World War in 1914, the plant was all geared up to meet the needs of the government. Again, during the Second World War, Tata Steel contributed towards supplying war materials. Today, as a result of innovation and technological up gradation, Tata Steel, has become a well run modern steel plant one of the best in the world. Tata Steel is yet to establish itself as a supplier of choice with its products and services. In the future lays an integrated steel plant in India with truly world class facilities along with a will to win amongst a committed and streamlined workforce.

Key success factors in the industry

1. Cost Efficiency: One of the major factors contributing to the success of the steel industry is the cost efficiency achieved through large scale plants, low cost location and rapid adjustment of capacity to output. Again, small scale plants can achieve low costs through flexibility and high productivity and with better technology. Increasing Demand: There is always a high demand existing for steel from various other large scale industries like railway industry, construction industries, and automobile industries. Not just this, steel is also used prominently by households for various purposes. Thus, it is the high demand that contributes to the success of steel industries. Meeting Customer Expectations: Customers look for low price, consistent and reliable supply of products. The industry can cater to the varying customer needs so as to be able to successfully meet the demands and balance the supply demand equation. Differentiation: There exist different varieties of steel having specific technical specifications. Product differentiation can be achieved through technical expertise and better service quality. Top Management: The top management plays a crucial role to the success of the industry. The support and vision from top management along with a shared sense of direction, trust and transparency creates an organizational culture that strives for excellence. Raw material availability: The proximity of required raw materials adds to the advantage. Again, the bargaining power of the suppliers comes into picture here which can create a bottleneck to the success. Capital Investment and expansion: This industry is highly capital intensive and so there is a need for steady flow of investments to keep it going. Again, there must be scope for expansion.

2.

3.

4. 5.

6. 7.

The above factors determine the success of steel industry. In case of Tata Steel, the success can be attributed to: Improvised cost structure Technological Expertise Good top management

Long-term viability of the industry as a whole, and the reaction of capital markets to new developments As per the wordings of Ratan N Tata, Steel has been and will be, the basic foundation material for national growth and the industry will continue to be an important ingredient in a global economic recovery. Although the steel industry gets affected by environmental factors such as global economic downturn, however even through these difficult times, it has struggled to adhere to its long term strategies in the global market. The steel industry is viable and the mergers and acquisitions further prove this point. The industry is driven by the climate of eat or be eaten and this leads to steel companies deciding on the fact whether to be an acquirer or an acquisition target. These mergers and acquisitions are likely to result in a higher degree of pricing stability and better margins for steel producing companies. Again, according to the Iron Ore market 2011-2013, there has been an estimate that iron ore use will increase from 1.92 billion tonnes in 2011 to about 2 billion tonnes in 2012 and 2.08 billion tonnes in 2013. Thus in order to adapt to the growing demand, there will be an increase in the competition among the major players of the steel industry. The steel industry having made rapid progress over the years have been getting all the necessary support for its dynamic growth from the capital markets as well as government. While the government has been backing the industry with favourable industrial norms, the private sector is supporting it with investments worth millions of rupees. The capital market has reacted favourably owing to the fact that there is enormous scope for increasing consumption of steel in almost every sector. Again, in case of India, there is an added advantage of rich mineral resources like iron ore, coal and other raw materials required for iron and steel making. This makes it a hot spot for investments.

Events or activities that can change the rules of the game

1.

2. 3.

4.

Powerful Suppliers: It can be seen that the bargaining power of suppliers is quite high. Thus if suppliers are in a position of exerting bargaining power on the industry by raising prices or by reducing the quality of goods, the profitability can be squeezed and thus leading to new ball game. Powerful Buyers: The customer can also impact the rules of the game by forcing prices to come down, by demanding higher quality or better service. Merger and Acquisition: Merger and acquisition can impact the way in which the organization works because post acquisition, issues related to cultural differences can crop up which have to be dealt with diligence so as to enhance the trust between the two parties Shift to Emerging markets: The steel production is shifting from the matured to emerging economies. Hence there are fewer domestic growth prospects and this in turn increases threats for established players. This demands more capacity to capitalize on the growth

Short term outlook

Steel industry plays a vital role in the growth of economy. It finds its application in infrastructure and constructions, automobiles, transportation and industrial application. The recent euro zone sovereign debt crisis has created uncertainty in the market. The large government budget deficits have led to austerity measures leading to halt in investment in infrastructure and other industries. The global steel sector is expected to grow at a slower rate due to the financial uncertainty and volatility. However growth rate is expected to be better in emerging countries than in developed countries. This is mainly due to the fact that GDP growth in these countries is substantially high in comparison to developed nations. GDP globally is mainly driven by BRIC nations. India is expected to grow by 7.8% in 2012 and steel industry can add capacity to capitalize that growth. In India with government plans to boost economy in by injecting funds in sectors like infrastructure, construction automobile and power, the steel industry is expected to grow at CAGR of 10%. However, globally the demand for steel is lesser than the steel making capacity. In 2011, steelmaking capacity increased by 80 million tonnes, resulting in an estimated 493 million tonnes of excess capacity. This is affecting the operational efficiency and profitability. The industry in short term needs to maintain the margins with fluctuating demand and volatility in raw material prices.

Medium Term Outlook

The landscape of steel industry is changing with production shifting from developed to emerging markets. With lesser prospects of growth there has been an increase in competitive pressure across value chain for raw materials, labor and capital. The suppliers of raw materials and steel consumers have increased bargaining power than before. In response steelmakers have to develop better business models to sustain the fluctuations of demand and raw material prices. They have to adapt with flexible production process to overcome the excess capacity. Entering into the emerging markets with joint ventures or green field projects will help to ease off the excess capacity issues. Merger and acquisitions prevent additional steel capacity, providing production efficiency and economies of scale. The markets to enter will be heavily determined by the cost competiveness that it can offer. There is also a need to address the challenges of environmental degradation, rehabilitation and development of transportation network. These issues impact the availability, cost of production and usage pattern of raw materials. Choice of energy efficient clean and green technology and investments also affect the operational agility which will directly improve the bottom line. In India the capacity has not reached its maximum and is expected to gain momentum in next 5 years. The new plants under brown field or green field ventures should be based on modern state of art technologies to ensure higher productivity, lower energy consumption and better quality. India was the worlds fifth largest producer of crude steel in 2011 and is expected to become the worlds second largest producer by 20152016.

Long term outlook

Even though steel industry will witness growth, the steelmaking capacity ahead of demand needs to be addressed. The long term prospects of steel industry will hinge on how it is able to counter the shortage of coking coal with alternative resources, optimal utilization of iron ore deposits, availability of alternative sources of fuel and natural gas and development of infrastructure.

To become resistant to price and demand fluctuations steel industry will see more consolidations. Consolidation has been primarily driven by the urge to increase global scale and operations, and access new markets and become global players in terms of cost, quality and quantity. Indian steel consumption is expected to rise from 200 million tonnes by 2020 from about 72 million tonnes in 2011 owing to growing incomes and urbanization drive demand. The construction sector which accounts for 50% of steel consumption will be the key demand growth driver along with rising demands from white goods and automobile industries. India has abundance of iron ore, coal and many other raw materials required for steel making technologies. And the low unit labour cost makes the production cost of steel less compared to other countries. Given its direct correlation to GDP growth, the Indian steel industry is expected to experience robust growth in the future. However with demand overtaking supply, country is expected to remain net importer of steel. India's steel imports may go up by to 50 million tonnes to make up for the anticipated 200 million tonnes demand by 2020 against 150 million tonnes of expected domestic production.

Cost of reward being winner / looser in the industry

There are plethora of advantages being market leader in the industry in terms of financing, marketing, sales and distribution, and attracting skilled talent pool. It is easier for a well identified brand to attract investors and raising capital needed for expansion. An established company with better quality products will be able to leverage the marketing and advertising campaigns. It can also fetch better returns on investment for campaigns. It is easy for a top selling brand to establish relationships with retailers and distributors. It will also help in better negotiations regarding margins and placement of products. It is easier for a established brand to open up new market outlets than a lesser known brand. Market leaders attract qualified candidates and this influx of top talent will help to retain the market leader status. In a nutshell a leader in the industry will claim better margins with lower cost of customer acquisition and is likely to propel its growth faster and more profitably.

Appendix A

Year

Consumption Levels (In million tonnes)

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97

14.37 14.83 15 15.32 18.66 21.65 22.13

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1997-98 1998-99 1999-2000 2000-2001 2001-2002 2002-2003

22.63 23.54 25.01 26.53 27.44 20.65

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