Strategies For Sustainable Turnaround of Indian Steel Industry

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Strategies for Sustainable Turnaround of Indian Steel Industry

S Mitra Mazumder, Associate Member


T Ghoshal, Non-member

The challenges that confront Indian steel industry in the age of globalisation are complex in nature. The secret of
sustainable turnaround lies in how Indian steel industry faces the challenges and develops combative and anticipatory
prowess. Problems and solutions may vary with organisations but there is more a commonality than initially meets the
eye. A two-step strategy is suggested for the sustainable turnaround in the industry. These stages, aimed to ensure
survival and growth have been termed survival strategy and growth strategy. The survival strategy provides a founda-
tion upon which a potent growth strategy could be formulated. While the survival strategy would ensure the survival
of the ailing steel industry, the growth strategy would simultaneously take care of its total transformation towards a
better future. Both stages, to be implemented through an integrated plan, are essential to enable the industry overcome
the present imbroglio.

Keywords: Steel, SWOT, Survival, Growth, Strategy

TURBULENCE IN INDIAN STEEL INDUSTRY pricing practices have distorted the global market dynamics.
The last decade of the twentieth century will go down as one Ironically, it is predicted that capacity that is capable of
of the most turbulent phases for Indian steel industry. The delivering quality products is not so much; eg, the World Steel
period witnessed sweeping changes in the steel arena — Dynamics (WSD)2 has claimed that only 60% of the global HR
transformation of self contained national markets into linked coils capacity can satisfy the high end demand. Quality
global markets and consequent fierce competition; oversupply demand will continue to rise over time and the excess capacity
of most kinds of steel resulting in no real appreciation of steel that is seen today, producing common grades, will be rendered
prices and simultaneous rise in input cost; and most useless in the market unable to find buyers. According to
importantly, rise in customer expectations. The problem was WSD, by 2005, the world will see pure liquidation of 45 Mt of
compounded by a slowdown in growth of steel intensive crude steel capacity much of which will be due to obsolescence
industries like consumer durables and capital goods leading to of technology3. However, in the same period there will be an
negligible growth in demand. All these came as a shock since estimated capacity addition of 81 Mt4 resulting in a net addi-
for decades Indian steel industry operated under a protective tion of 35 Mt.
environment. Consequently, Indian steel manufacturers are in
Since 2001, while growth has been negative in most mature
need of an effective forward-looking strategy that would
markets, Asia has maintained a steady growth rate. The Asian
ensure their survival, sustenance and growth. Formulation of
production growth has mainly been driven by the surge in
an effective strategy that would successfully take on the
steel demand and production in China.
market forces and would provide sustainable competitive
advantage requires an effective understanding of the steel The huge Chinese appetite for steel has led the 10.2% surge in
scenario in the international arena, the trends of the Indian output (Table 1). The growth in Chinese steel demand,
market and responses of the Indian steel industry. generated mainly by demand from infrastructure sector is a
beacon for Indian steel since both the nations are comparable
STEEL: A GLOBAL PERSPECTIVE on many counts.
Recent years have witnessed unprecedented turmoil in the
global steel market. The crisis in the international steel market
might be attributed to the disbalance between capacity,
demand and production and consequent drop in prices.
Throughout the world there is an apparent over capacity
(estimated to be between 100 Mt-150 Mt)1 in the steel sector.
According to the IISI, the companies have been selling their
products below costs to survive in global competition. Such
S Mitra Mazumder is with EL Group, R&D Centre for Iron and Steel,
while T Ghoshal is with Management Training Institute, SAIL, Doranda,
Ranchi 834 002.
This paper (revised) was received on August 27, 2003. Written discussion on he
paper will be entertained till January 31, 2004. Figure 1 Crude steel production and apparent consumption in China

64 IE (I) Journal—MM
Table 1 World crude steel production by region (1998-2002), Mt global trade. After passing through the initial phase of
stabilization following the economic reforms and liberalisation
Region 1998 1999 2000 2001 2002 4 4 Yearly
Years Years Growth,
initiated by the Government of India in 1991, the steel
Difference Growth, % industry experienced an average growth of 22% and 14%
% during 1994-1995 and 1995-1996, respectively. The year
China 115 124 127 151 182 67 58.4 14.6 1996-1997 however, witnessed a drastic transformation in the
domestic steel scenario. A slowdown in economic activity
Other Asia 193 193 213 210 220 27 14.2 3.5
engulfed almost all the industrial segments, leading to a steep
EU (15) 160 155 163 159 158 –2 – 0.9 – 0.2 drop in the growth rate of steel consumption—about 4% in
1996-1997 and remaining almost flat in 1997-1998 and 1998-1999.
Other Europe 47 43 47 46 48 1 1.6 0.4
At the same time, the availability of steel in the market grew
CIS 74 86 99 100 101 27 35.7 8.9 rapidly with the commissioning of fresh capacities, leading to
NAFTA 129 129 134 118 122 –7 – 5.1 – 1.3 declining trend in the price of steel. Figure 2 gives a glimpse of
post-liberalisation supply demand scenario in India. Increased
Others 59 58 65 66 71 12 19.1 4.8 volume of imports pulled down the domestic prices and
World 777 788 848 850 902 125 16.1 4.0 eroded the bottom line of domestic producers. The problem of
cheap imports was further increased by the quantum rise in
Source : IISI/Iron and Steel Review, June 2003
the imports of seconds and defective grades of steel at the cost
of imports of prime quality steel.
INDIAN STEEL INDUSTRY—AN APPRAISAL
While there have been progressive and substantive
Indian steel industry mainly consists of three distinct groups 5. improvements in the operating parameters of Indian steel
The first group comprises the integrated steel producers and industry as a whole since 1996-1997, these have not been
includes Steel Authority of India Ltd (SAIL), Tata Steel sufficient to overcome the adverse factors discussed hitherto.
(capacity 3 Mt) and Rashtriya Ispat Nigam Ltd (RINL) (3 Mt). Besides, the industry is also plagued by the problems of low
SAIL has four integrated steel plants at Bhilai (4 Mt), productivity both in terms of equipment and labour, frequent
Bokaro (4 Mt), Durgapur (2 Mt) and Rourkela (1.8 Mt). The price enhancement of inputs such as power tariff, railway
group of secondary majors consists of the Ispat Group, Jindal freight rate and coal prices etc which continue to be under the
Group, Lloyds and Essar. Their capacities range between 1 Mt administered price regime.
and 2 Mt using a mix of technologies, with much lesser degree
of backward integration. These two strategic groups together The Ninth Five-Year Plan had projected the demand for steel
hold around 70% of the mild steel capacity in the Indian steel by the terminal year of the Plan period (March 2002) at 38 Mt.
industry. The third group of tertiary producers are mini-steel This saw new investments in the sector, mostly by new
plants, using electric arc or induction furnaces and are very generation steel companies in the private sector, of over Rs 25 000
small in size. crore during the last five years. Consequently, the installed
capacity of the industry has gone up to around 35 Mt but steel
Together these sectors make India the 10th largest steel consumption has stagnated. The consumption of finished steel
producer in the world, but with only a 2% share in the has gone up only marginally over the last five years. The
revised estimation (Table 3) shows the demand (29.5 Mt) to be
Table 2 Regionwise production share in global steel output well short of installed capacity.
(1991 and 2001), %
Industry Performance
Region Share in Global Crude Steel Production The performance of Indian steel industry has been analysed in
1991 2001 the medium term from 1997 to 20011. The sample for analysis
includes data from SAIL and Tata Steel among the ISPs and
China 9.6 17.6 JVSL, Ispat, Essar and Lloyds among the secondary majors7.
Japan 14.9 12.1

Other Asia 9.0 11.6

NAFTA 13.7 14.0

Eu (15) 20.2 18.8

Other Europe 6.7 5.4

Former USSR 18.0 11.9

Others 7.9 8.6

World Total 100.0 100.0

Source : Iron and Steel Review, June 2003


Figure 2 Demand and supply scenario in India

Vol 84, October 2003 65


Table 3 Category wise estimated demand for iron and steel
all India 2002-2003

Category Quantity, × 103 t

Bars and rods 10500

Structural 2500

Railway materials 845

Plates 2250
Figure 4 Performance index (1997-2001): Net sales to total assets ratio
HR coils/skelp 6600

HR sheets 500 These four indices taken together show that the steel industry
had been passing through a difficult phase characterised by
CR coils/sheets 3300
increasing debt, low asset utilisation, industry wide losses
GP/GC sheets 1930 (except Tata Steel) and intense competition. The present
dismal financial performance of Indian steel industry cannot
Electrical steel sheets 200
just be explained by the liberalisation and globalisation of
Tin plates 325 Indian economy. Given the strategic nature of the Indian steel
Pipes 850 industry and its over all importance in the economy, there is a
need for an in-depth analysis.
Total finished steel 29500
The rejuvenating performance of the industry is reflected in
Important performance indices such as Debt-Equity Ratio (D/E), the rising share prices of Indian steel companies. As can be
Return on Networth (Post tax) (RONW), Net Sales/Total seen from the Figure 6, all steel makers have now been able to
Assets and Net Profit/Net Sales have been calculated and perform consistently and the share prices have remained above
depicted in the Figures 3-6. Rs 100 (face value Rs 10) defying the industry trend. All others
Figure 3 depicts the rising trend of D/E from 2.13 to 2.90 in are trading above par value.
the last four years. This shows that the industry is shouldering INDIAN STEEL INDUSTRY—MAJOR PROBLEMS
an increasing debt burden and becoming more leveraged. AND CONCERNS
Figure 4 shows an improvement in Net Sales/Total Assets
The Indian steel manufacturers are faced with some major
(Asset Turnover Ratio) from 0.42 to 0.52, although this figure
problems and concerns, which work as inhibiting factors to
lags behind international standards. (This ratio for the US steel
their effort towards gaining the competitive edge. A few of
industry was 1.2 during the period 1975-1993)8. This
these are:
improvement indicates that the industry is utilising its assets
more efficiently and/or is shedding assets. Unremunerative Prices
RONW (Post-Tax), as depicted in Figure 5, has plummeted Stagnating demand, domestic oversupply and falling prices
from a + 3% return in 1997-1998 to – 9% before making a in the last four years have hit Indian steel makers. Barring
partial recovery to – 3% in 2001-2002. This indicates that the the sporadic rise in demand in the recent months, it has
industry, in general, is eroding its networth, losing money and suffered from unremunerative prices to the extent that
thus, becoming unattractive to the equity investors. companies have been finding it difficult to maintain capital
In Figure 6, the ratio of Net Profit/Net Sales exhibits the costs.
decreasing profit levels, from + 2% in 1997-1998 to a low
Stagnating Demand for Steel
of – 6% and to somewhat recovered position of – 2% in 2000-2001.
This indicates losses and heightening competition in the According to Mckinsey and Co the domestic steel industry
Indian steel industry. is set to witness a 33% over capacity in the hot rolled coil

Figure 3 Performance index (1997-2001): Debt-equity ratio Figure 5 Performance index (1997-2001): Return on net worth (post tax)

66 IE (I) Journal—MM
Weaknesses
Endemic Deficiencies
These are inherent in the quality and availability of some of
the essential raw materials available in India, eg, high ash
content of indigenous coking coal adversely affecting the
productive efficiency of iron-making and is generally
imported. Advantage of high Fe content of indigenous ore are
often neutralized by high basicity index. Besides, certain key
ingredients of steel making, eg, nickel, ferro-molybdenum are
also unavailable indigenously.
Figure 6 Performance index (1997-2001): Movement of share prices Systemic Deficiencies
However, most of the weaknesses of the Indian steel industry
sector by the year 2003 when the domestic capacity can be classified as systemic deficiencies. Some of these are
currently at 45%, in long products and semis is expected to described here.
drop at 22% by that year. The non-flat products are also
High Cost of Capital
likely to face an over capacity of over 21.4%.
Steel is a capital intensive industry; steel companies in India
Lower Consumption are charged an interest rate of around 14% on capital as
Steel consumption in India over a period of time has compared to 2.4% in Japan and 6.4% in USA.
exhibited a strategy correlation to GDP growth Low Labour Productivity
(correlation coefficient of 0.9855 between 1960-1961 and
1996-1997) and gross domestic capital formation (0.981). In India the advantages of cheap labour gets offset by low
The correlation with GDCF has been 1.0 for the period FY labour productivity; eg, at comparable capacities labour
1994 to 1999. As investments declined from 1996-1997 productivity of SAIL and TISCO is 75 t/man year and 100 t/man
onwards, steel consumption also decreased. year, for POSCO, Korea and NIPPON, Japan the values are
1345 t/man year and 980 t/man year.
Failure to Develop Trade Especially International Trade High Cost of Basic Inputs and Services
The countries which have achieved major growth High administered price of essential inputs like electricity puts
including growth in steel industry, like Japan, China and Indian steel industry at a disadvantage; about 45% of the input
South Korea have largely used their trading houses to costs can be attributed to the administered costs of coal, fuel
develop their markets abroad. In India, we have singularly and electricity, eg, cost of electricity is 3 cents in the USA as
failed to do so. As a result, Indian steel industry does not compared to 10 cents in India; and freight cost from Jamshedpur
have a major presence even in the neighbouring countries. to Mumbai is $50/tonne compared to only $34 from
The reasons for the same include lack of profit motive, Rotterdam to Mumbai. Added to this are poor quality and
wrong scale of assets, little or no co-ordination between ever increasing prices of coking and non-coking coal.
plants and markets, inappropriate logistics/locations,
over-manning, poor investment decisions, lack of Other systemic deficiencies include:
innovation and inadequate investment in requisite areas.
l Poor quality of basic infrastructure like road, port etc.
INDIAN STEEL INDUSTRY—A SWOT ANALYSIS l Lack of expenditure in research and development.
Strengths l Delay in absorption in technology by existing units.
India has rich mineral resources. It has abundance of iron ore, l Low quality of steel and steel products.
coal and many other raw materials required for iron and steel l Lack of facilities to produce various shapes and
making. It has the fourth largest iron ore reserves (10.3 billion qualities of finished steel on-demand such as steel for
tonnes) after Russia, Brazil, and Australia. Therefore, many automobile sector, parallel flange light weight beams,
raw materials are available at comparatively lower costs. It has coated sheets etc.
the third largest pool of technical manpower, next to United
States and the erstwhile USSR, capable of understanding and l Limited access of domestic producers to good quality
assimilating new technologies. Considering quality of iron ores which are normally earmarked for exports,
workforce, Indian steel industry has low unit labour cost, and
commensurate with skill. This gets reflected in the lower l High level taxation.
production cost of steel in India compared to many advanced
countries (Table 3). With such strength of resources, along Besides these Indian steel makers also lacked in international
with vast domestic untapped market, Indian steel industry has competitiveness on determinants like product quality,
the potential to face challenges successfully. product design, on-time delivery, post sales service,

Vol 84, October 2003 67


Table 4 Comparative cost of steel production, % Unexplored Rural Market

Item USA UK France Germany India The Indian rural sector remains fairly unexposed to their
(Base) multi-faceted use of steel. The rural market was identified as a
potential area of significant steel consumption way back in the
Energy 24.1 19.8 22.1 23.4 32.9 year 1976 itself. However, forceful steps were not taken to
Iron ore 15.4 12.7 12.7 13.9 5.4 penetrate this segment. Enhancing applications in rural areas
assumes a much greater significance now for increasing per
Fluxes and
capital consumption of steel. The usage of steel in cost
ferro alloys 5.9 7.6 7.6 6.8 8.5
effective manner is possible in the area of housing, fencing,
Others 25.6 27.5 27.3 27.1 21.9 structures and other possible applications where steel can
substitute other materials which not only could bring about
Total material 71.0 67.6 69.7 71.2 68.8
advantages to users but is also desirable for conservation of
Labour 40.7 27.1 36.6 43.4 13.9 forest resources.
Misc taxes 1.9 1.9 4.1 2.4 6.6 Other Sectors
Works cost 113.6 96.6 110.5 117.1 89.3 Excellent potential exist for enhancing steel consumption in
Depreciation other sectors such as automobiles, packaging, engineering
and interest 9.1 6.6 2.4 12.2 10.7 industries, irrigation and water supply in India. New steel
products developed to improve performance simplify
Total cost 122.7 103.2 122.9 129.3 100.0 manufacturing/installation and reliability is needed to
Source : IE (I) Journal-MM, vol 82, April 2002, p 17 enhance steel consumption in these sectors. Main objective
here have to be improvement of quality for value addition in
use, requirement of less material by reducing the weight and
distribution network, managerial initiatives, research and thickness and finally reduction in overall cost for the end user.
development, information technology and labour Latest technology must be adopted by Indian steel
productivity etc. As is evident in Table 4, the weaknesses gets manufacturers for production of superior quality of steel for
reflected in India’s poor standing in the global competitiveness these applications. For example, pre-coated sheets can be used
as measured in terms of indicated parameters. in manufacture of appliances, furnishings, electric goods and
public transport vehicles. Production and supply of superior
Opportunities
grades of steel in desired shapes and sizes will definitely
The biggest opportunity before Indian steel sector is that there increase the steel consumption as this will reduce fabrication
is enormous scope for increasing consumption of steel in need, thereby reduce cost of using steel.
almost all sectors in India. Table 6 gives a glimpse of untapped
Few other perceived opportunities are:
potential of increasing steel consumption in India; eg, even to
reach the comparable developing and lately developed Export Market Penetration
economies like China and other Europe, a quantum jump in It is estimated that world steel consumption will double in
steel consumption will be required. next 25 years. Quality improvement of Indian steel combined

Table 5 Major determinants of international competitiveness

Item Unit India Brazil South Korea Canada USA Japan Germany

Product quality Index 41 52 61 68 60 93 93

Product design Index 34 57 49 58 70 81 71

On-time delivery Index 30 36 59 62 63 93 88

After sales service Index 41 39 47 63 58 90 79

Distribution network Index 52 52 57 66 74 72 76

Labour productivity Ratio 6177 7724 9291 30034 44070 4667 38207

Training Index 36 37 47 40 48 79 69

Managerial Initiative Index 61 61 68 62 74 72 73

Expenses in R&D % of GDP 0.91 0.38 1.63 1.32 2.66 2.85 2.79

Information Tech Index 44 52 59 63 57 82 87

Source: Steel and Metallurgy, November 2001, p 34

68 IE (I) Journal—MM
Table 6 Regionwise per capita consumption in the world, kg tend to exhibit price sensitivity and buy when there are
discounts. This volatility of demand often affects the
Region 1999 2000 2001 2002 2003 f 2004 f Five years integrated steel manufacturers because of their inability to
growth, tune their production in line with the market demand
% fluctuations. Some other threats are:
China 103 111 136 163 178 194 88
l Ever decreasing import duty on steel.
Other
l Dumping of steel by developed countries.
Asia 93 99 98 103 104 104 12
l High quality products from developed countries
EU(15) 368 383 371 364 370 379 3
available for import at very competitive prices.
Other
l Non-availability of capital from financial institutions
Europe 160 182 172 183 187 190 19
for iron and steel sector.
CIS 86 106 116 105 109 112 30
Strategic Restructuring — A Comparative Analysis
NAFTA 349 361 311 306 308 308 – 12
The effect of globalisation on steel industries in different
Others 72 77 79 77 78 80 11 regions or countries has not been uniform. Each region is
World 133 142 143 150 155 160 20 unique in its own way in terms of raw materials availability,
technology adopted, market conditions, trading policies, etc.
Sources : IISI, Brussels, f = forecast
Consequently restructuring of steel industries in different
regions have been done in a manner that best suits the needs
with its low cost advantages will definitely help in substantial
and situations of the country or region (Table 7). The
gain in export market.
divergent strategies adopted for restructuring by steel
Threats industries in different countries/regions provide the right
perspective for building a turnaround strategy for Indian steel
Slow Industry Growth industry.
The linkage between the economic growth of a country and
the growth of its steel industry is strong. The Indian steel STRATEGIES FOR TURNAROUND
industry is no exception. The growth of the domestic steel The strengths, weaknesses, opportunities and threats before
industry between 1970 and 1990 was similar to the growth of Indian steel industry as well as experiences of other steel
the economy, which as a whole was sluggish9. This sluggish makers of the world form the basis of determining the
growth in the steel industry has resulted in enhanced rivalry strategic thrust for turnaround of the Indian steel industry in
among existing firms. As the industry is not growing the only the wake of the today’s market scenario. The strategy aims to
other way to grow is by increasing one’s market share. derive maximum benefit out of strengths, minimize or
Consequently, the Indian steel industry has witnessed spurts neutralize weaknesses, cash is on opportunities and combat
of price wars and heavy trade discounts, which has done the threats.
Indian steel industry no good as a whole.
A two-tier strategy is suggested for effecting and sustaining
Threat of Substitutes turnaround of Indian steel industry. While survival strategy
Plastics and composites pose a threat to Indian steel in one of would ensure industry’s immediately survival, the growth
its biggest markets — automotive manufacture. For the strategy would take care of transformation and sustainable
automobile industry, the other material at present with the growth of the industry in the long run. These strategies have
potential to upstage steel is aluminium. However, at present been integrated through an integrated plan of action that
the high cost of electricity for extraction and purification of comprises three sub-plans, ie, a short-term plan, a medium-
aluminium in India weighs against viable use of aluminium for term plan, and a long-term plan. While the survival strategy
the automobile industry. Steel has already been replaced in would be operated through the short and medium term plans,
some large volume applications: railway sleepers (RCC sleepers), the growth strategy may be implemented through the medium
large diameter water pipes (RCC pipes), small diameter pipes and long-term plans. The overview of the integrated strategy is
(PVC pipes), and domestic water tanks (PVC tanks). given in Annexure 1.
Technological Change Survival Strategy
Technological changes often force the industry structure to The survival strategy aims to ensure immediate survival of
change. For a developing country like India where capital steel industry in India. The key goal of survival strategy is to
itself is costly, technological obsolescence is a major threat. ensure immediate financial turnaround that would provide
the industry with sufficient financial liquidity, necessary for
Price Sensitivity and Demand Volatility
running the operations effectively. Benchmarking as a
The demand for steel is a derived demand and the purchase strategic tool would be the key process to achieve the primary
quantity depends on the end-use requirements. The traders goal of financial turnaround for the steel industry.

Vol 84, October 2003 69


Table 7 Strategic restructuring — a comparative analysis adopted. Ensuring a financial turnaround would demand
benchmarking of all critical operations. Benchmarking would
Country/ Problems Key steps/ thrust areas help the steel industry in cost reduction and control starting
Region/ from procurement to delivery stage.
Nation
Short-term Plan
USA Technological Mini-mills using scraps
obsolescence Mergers and acquisitions The short-term plan is aimed at providing a lease of life to the
Efficient use of capital ailing steel industry. It would also help it to withstand the
Higher employee productivity adverse pressures of the environment and move towards
growth and development. The short-term plan would also
Latin America Technological Individual marketing strategies provide it with a breathing time for working a potent strategy
obsolescence New focussed investments for future.
and overall Refurbishing plants Upgrada-
slowdown tion of existing facilities Cost Reduction
Cost reduction is probably the most important driver for
Brazil Anticompetitive Eliminating cross-ownership
improving competitiveness. To ensure a competitive
market through government
advantage, steel makers have to concentrate on the following
regulation
areas:
Western Overall slowdown Large scale privatization
l Reducing operating costs.
Europe Concentration on higher
value-added products l Reduction in working capital costs.
Mergers l Reduction in product inventory (unsold stock).
High quality service centres
l Improving techno-economic parameters.
CIS countries Lack of competition Formation of joint stock
l Substitution of raw material.
companies
Shift towards employee l Differentiated sourcing.
ownership l Effective supply chain management.
Japan Poor competitiveness Balance between competition l Social infrastructure costs.
Diminutive export and co-operation
Operating and working capital costs need to be brought down
market Overall reduction in cost
through a combination of benchmarking and strict cost
Business process re-engineering
control; potential for improvement in techno-economic
Strategic international alliance
parameters like energy consumption, yield etc need to be
China Heavy debt Massive technological identified through benchmarking and implemented through
Excessive taxation improvement in-house research and technological expertise. A major cost in
Social services costs Improvement in quality of steel manufacturing relates to the cost of raw material. There
products is a need to selectively focus on purchase of high-value items.
Empasis on high value products This can be achieved through focusing on the ‘Total Cost of
Ownership’ instead of just the purchase price and identifying
Thailand Market shrinkage Rationalisation of capacity critical levers that can be used to reduce the ultimate cost. Cost
Non-performing loan Closure of unproductive capacity of raw material like imported coal is to be analysed with
Anti -dumping Mergers respect to its productivity and for the optimum purchase
pattern. Efforts should also be made to develop product-
Korea Structural weaknesses Reforms
specific and differentiated sourcing strategies instead of
in the corporate and Formulation of new laws
current practice of a single strategy for all purchases. The other
financial sectors Increasing capacity utilization
opportunities for cost reduction lie in reducing internal
by rationalizing production
business costs like inventory holding, transportation and
capacity
purchase processing costs. Plants should also identify on a
Source : Compiled from ‘Globalisation and the Future of the Indian Steel continuous basis the measures to increase revenue by reducing
Industry’, Supriya Dasgupta, Iron and Steel review, December 2000, freight costs, cost of arisings, demurrage and non-confirmed
pp 26-36 orders. The social infrastructure costs may also be looked into
for its effectiveness and brought down in a phased manner.
Benchmarking requires those advanced or best practices in a
specific area and/or process is identified and existing practices Revenue Maximisation
are compared against best practices; when there are gaps Maximising revenue is perhaps the only step that will enable
between the two, the best practices are, to the extent possible, the steel makers to remain in business. To maximise revenues,

70 IE (I) Journal—MM
attempts should be made to achieve a favourable ratio of customer satisfaction model are established, it will be easier to
turnover to the net block. Revenue can be maximised by segregate various activities/units/processes, which would be
maximising collections not only in terms of quick recovery of capable to work as a profit centre. Once these ‘profit centres’
outstanding payments, but also in terms of maximising net are identified, the whole organisation may be divided into a
sales realization by offering as less discounts as is possible. chain of interlinked profit centres. The key objective of this
This would require meticulous planning, rigorous monitoring approach is all the activities would be divided into cost-
of outstanding dues, effective management of sundry debtors centres, as small as possible and each cost centre would strive
and efficient inventory management. The above should also be to work as a profit centre; in addition, each cost centre must
supplemented by aggressive order-book management too. strive to satisfy internal customers. The medium term plan
There should efforts to select products and markets that give would include activities for financial restructuring, business
maximum return. restructuring, operational restructuring and market expansion plan.

Focussed Marketing Financial Strategy


The objective of focussed marketing is to have a differentiated The initial financial objective should be to generate adequate
marketing strategy for products and services. Though the internal resources through operational efficiency for self-
concept may be new to the steel industry, it may be sustained growth. Efforts should also be made to maximize the
emphasized that focussed marketing with the help of market valuation of the company, manage the accumulated
differentiation strategy is the only way by which steel makers cash and engage in long term financial planning for future
can outpace competition in today’s business scenario. This business growth. The important components of the financial
would require modification of products and services for strategy should be:
various segments of customers. Existing products need l Realistic projections of liquidity costs and
repositioning so that greater perceived value could be offered expenditure.
to customers. The manufacturing processes might have to be
readjusted to suit prevailing market requirements. Focussed l Mobilizing short/long term external funds at
marketing would mean harmonizing all elements of the minimum cost.
marketing mix — product, price, product, place, pace and
l Maximising internal resource generation.
people to their advantage. While it will be necessary to offer
high quality of product in terms of adherence to specifications, l Ensure maximum return on investments through
it will also be necessary to adhere to extend competitive offer financial analysis and evaluation of projects.
in terms of commercial terms, packaging, performance
guarantee and services. These services could either be in terms l Improve profitability through regulation and control
of adding value to the offered product like slitting of coils, side of expenditure.
shearing etc and also in terms of providing pre and post sales l Develop a deep sense of cost-consciousness by
service like offering information about the status of orders, inculcating a sense of ownership.
fast redressal of claims, updating technical know-how and
suggesting better application of existing products. Even if the l Participation for influencing policy-making related to
profits are less, it is advisable to ensure fast selling of products steel industry for safeguarding interest.
to avoid accumulation of inventory and faster cash in-flow.
This would lead to increase in sales turnover and better return Financial Restructuring
on capital invested. The distribution strategy should ensure The financial restructuring would intent to improve financial
faster delivery of goods to the customers. Thus, while direct health of the steelmakers. The focus would be at repayments
distribution should be continued, introduction of dealers/ of large borrowings for capital expenditure, manage the cost
stockists in the rural areas and smaller towns should be and time overruns increasing the cost of new assets without
expedited. corresponding return on capital employed and ensuring
sufficient future cash flows to meet debt servicing and capital
Medium Term Plan
expenditure requirements. There is thus a need to religiously
The medium term plan is devised to consolidate the gains monitor important parameters like sales, gross margins,
received by the survival strategy and also configured to initiate interest and depreciation, profit after tax, net worth, total debt
a long-term plan for the growth of the industry. The aim of the and debt equity ratio. The key feature of a financial
medium term plan is to consolidate the competitive restructuring would be:
positioning of the steel makers and is intended to be achieved
l Restructuring of asset values by writing down to the
by following the ‘profit-centre’ and ‘internal customer’
extent of interest capitalised.
model. By following ‘internal customer satisfaction’ model
for all internal processes, a chain of continual improvement l Writing off loans and interests to the extent possible.
can be created by making every self-contained process l Restructuring of capital and liabilities through
answerable for its performance and therby adding value at reduction of debts by financial institutions, to the
every stage. Once the systems and processes for internal extent possible.

Vol 84, October 2003 71


l Reduction in plant inventory through just-in-time l Improving the utilisation of tools and equipment and
procurement. operational efficiency.
l Strategic partnership in non-core businesses. l Reducing the amount of customer complaints,
warranty and liability claims.
l Outsourcing of non-core services. l Acclerating the waste elimination within
Financial restructuring will have a positive impact on the organisation.
profitability of the company through reduction of interest and
Servicing Steel
depreciation charges as well as efficient deployment of capital.
It will also help in mitigating the financial risks by reducing Though steel plants have capability to produce steel products
the debt-equity ratio and improving debt servicing capability in small tonnages in varied size range, production is usually
of steel industry10. done in economic lots, which are generally quite large, to
minimize cost by taking advantage of economies of scale. Steel
Business Restructuring service centres are processing and distributing intermediaries
Business restructuring is a process by which companies are who act as bridge to meet the gap between steel makers and
transformed into entities that are fighting fit. The process customers by processing steel into tailor made sizes in smaller
includes trimming of extra fat from the organizations like lots ‘just in time’ as generally required by small or medium
rightsizing of manpower, concentrating on core competency, customers. The area of steel servicing is gaining more and
hiving off of non-core assets, prioritizing capital expenditure more importance today and time has come to consider it is a
decisions and raising self sufficient profit centres11. critical element of steel supply chain because of the following
reasons:
Redesigning corporate key processes is essential in this respect.
Every activity across the board needs analysis as to its value (a) End users want to reduce their own financial
adding capacity. A value-chain is thus to be prepared and all investments and overhead. By taking help of service
activities done in the process of manufacturing and delivering centres, they can get the kind of material they want
products and services are to be evaluated. The concept of without spending on equipment and machinery
Strategic Business Units is relevant in this context. Under this meant to do so.
concept, each set of activity from starting to the end, is (b) The end user can better assure quality of the parts used
analyzed for its efficacy of delivering value against a cost and in his products by having service centres for further
efforts are made to enhance the value on a continual basis processing12.
while minimising the cost. Strategic Business Units provide
steelmakers with the sharpness to deal with competition, Market Expansion
increase speed of response and enhance customer service that Enhancing steel consumption could prove to be a potent
are essential in today’s context. Possibilities of strategic medium-term strategy for the Indian steel manufacturing
alliances and collaborative arrangements among competitors units. New avenues should be explored and market expanded
in mutually beneficial areas could be explored. Joint R&D for steel companies to turnaround. As is evident today, most
may save a lot of investments and joint marketing in non- of the consumption of steel is concentrated in the urban
competitive areas will help in getting better results at lower institutional segment and a smaller chunk goes to the urban
costs. However, as the Indian steel industry is extremely trade. There is a need today to expand the market beyond to
fragmented, it will be more reasonable to expect an the rural market, agricultural sector, coated galvanised steel
evolutionary rather than a revolutionary consolidation. for manufacturing of car bodies, ultra light steel auto body
(ULSAB), fabricated and similar other areas. Efforts should
Operational Restructuring also be made to penetrate the trade and medium and small
The operations of steel making need to be relooked in view of customers in a big way to touch high volume turnover and
the intense competition today. This involves change in reduce financial risks. Besides the conventional segments and
technology, optimising existing operations and enhancing markets, there is also need to look for non-traditional
employee competence to support these. A review of segments. The use of non-traditional steel may encompass
operational parameters has already been elicited in the areas where steel is still insignificant and also areas where steel-
previous paragraphs. Implementation of total quality system use has to be initiated afresh. Some such segments could be
will positively affect operational levels across the board. steel almirah in rural households, non-mechanised transport
Operational restructning by implementing total quality like bullock carts, tonga, thela, doors, windows, grills and
system can result in: other building components and irrigation. Others could be
silos for grain storage, scaffoldings for building construction,
l Reduction in scrap, rework and extra labour. appliances and kitchenware etc13. These marketing services
l Reduction of work in progress (WIP), inoentory should be augmented for better customer service. This
levels, material handling and excessive capital includes information at every stage of order processing, pre
equipment replacement. and post sales service, providing technological knowledge,

72 IE (I) Journal—MM
settling claims, and helping customers to achieve better A A–Activity :
productivity. Core Business Product R&D, Manufacturing,
Growth Strategy Activity Marketing, Sales etc

While survival strategy must ensure that the company should B–Activity :
survive and sustain itself, it becomes necessary that effective Improving the organizations ability
long-term strategies should also be formulated that could go B
to perform A work,
beyond the immediate present and ensure the company’s Improve A’s
eg, introducing IT applications,
future prospects. A carefully formulated growth strategy is Capabilities
Introducing quality processes etc
essential to managing change in a competitive market. Such a
growth strategy should not only envisage the competitive C–Activity :
position of the industry but also foresee the comparative Improving the organizations ability
C
strengths of the industry. The elements of such a growth to perform B work,
Improve B’s
strategy should follow a systemic approach, where all its eg, identifying potential areas of
Capabilities
elements are unified to each other and synergise together for improvement, forming teams etc.
achieving the desired goals.
Figure 7 The continual improvement chart
Long Term Plan
minimize investment in new technology. The development
The long-term plan is formulated to ensure long term growth
of the industry. The key process to achieve long term growth process must cover all improvement aspects of process/
would be continual improvement. A key to the long-term product/service—both internal (steel industry) and external
(customers). A few such areas are:
vitality and competitive edge for an organization will be to get
better and better at improving itself. Continual improvement l Optimisation of existing process technologies for
could be in an area where quantification can be carried out maximization of productivity at minimum cost, (eg,
such as production, or it could be in an intangible area such as through simulation models and data-base management).
attitudes and commitment towards a certain objective. But
continual improvement cannot be directionless, there must l Maximising existing steel quality (even beyond
exist an approach by which it can be achieved. Organizations specifications) to attract and retain customers.
need to learn more effective ways of assimilating dramatic l Recommend remedial measures for cost saving
improvements on a continuing basis. They need to get better through energy conservation, elimination of low
at understanding requirements, surveying, evaluating, value steps of operation, minimising losses, (eg, yield
selecting, integrating, developing, testing, and applying the of liquid steel).
improvements. And they need to get better and better at
deploying the improvements into rapidly shifting organizational l Intense focus on product development activities,
targets. To improve this B-Activity improvement capability, specifically developing difficult-to-make and high
organizations will need to invest in an explicit on-going value steel grades to meet global challenges with
C-Activity. The continual improvement chart (Figure 7) shows continuously modified strategies, (eg, win back the
the interlinkage of these activities. auto-sector customers from aluminium, composite
materials, back to alloy steels).
STEEL RESEARCH—STRATEGIC DIRECTION
l Devote on application engineering areas including
Figure 8 shows the relationship between competitive design and use, such that the ‘product development to
environment and technological innovation. Therefore, marketing’ cycle is as short as possible.
strategic research will play a pivotal role in sustainable
l Maximum possible reduction in the specific
turnaround. There must exist a balance between ‘generation’
consumption rates of raw materials through quality
of new information (or knowledge) and better ‘exploitation’
upgradation and improvement of yield.
and ‘extrapolation’ of existing body of knowledge (or
information) available. Steel R&D need to focus on new ways
of meeting user needs (both internal and external) in an
increasingly demanding market-place; more important, this
goal is to be met utilizing existing elements of resources, such
as available raw material, manufacturing capacity and
marketing capability.
The main objective should be improving R&D’s role in
overall business scenario both through incremental and major
improvements. This can be achieved by maximum possible Figure 8 The relationship between competitive environment and
exploitation and utilisation of existing technology to innovative technology. Source: POSCO

Vol 84, October 2003 73


l Improvement of physico-chemical properties of raw l Improvement in yield.
materials for iron making through improved
techniques of beneficiation, sizing, agglomeration and l Increase in labour productivity.
process control. l Reduction in cost of production.
l Improvement of blast furnace productivity and l Reduction in energy consumption.
reduction in the coke requirement by burden
preparation including increasing use of agglomerates, l Reduction in environmental pollution.
improved design of blast furnaces and stoves to
l Improvement in working conditions.
increase the top pressure, blast temperature and
control of burden distribution and auxiliary fuel Provision of flexibility in the process of manufacture to cater
injection. to the changing customer needs of quality and variety.
l Introduction of technologies of pre-treatment of hot l Full exploitation of existing facilities to minimize the
metal to reduce the metallurgical load on the steel investments on new facilities.
melting units.
l Selective conversion of relatively obsolete facilities
l Reduction of energy requirement and improvement into modern efficient units.
of yield in rolling processes and improvement of
quality of products. l Introduction of automation and computerisation on a
large scale.
l Reduction in the heat duration in steel making.
The objective would be to adopt state-of-the-art technologies
l Making the plant pollution-free through various
in a phase manner based on carefully analysed ‘return on
technological measures including novel waste
investment’. Proven technologies that need to be adopted
utilisation efforts, (eg, EAF dust treatment to recover
across the industry are given in Table 8.
costly alloy elements).
Automation in Technology Area
l Skill transfer and technology transfer.
Automation, done in right earnest has been proved to be
Besides by involving customers in the various stages of
highly productive and cost effective in steel industry across the
research steel industry can provide them a better opportunity
world. Few important areas that need immediate attention
to offer suggestions and recommendations on various key
are:
aspects of the product.
Technological Strategy l Computer control operation of coke ovens including
computerized firing control.
Technology strategy should involve assessment and
benchmarking of the strengths and weaknesses of the l Ore burden computer control operation in blast
technological scenario of the whole industry and consequent furnace.
identification of technological threats and opportunities. In l Sophisticated process control and operation in BOF/
addition, formulation of strategy must also rely on informed EAF.
prediction/forecasting of future likely change in technologies
that may influence the iron and steel industry in a big way. l Automatic width control, gauge control, on-line
Besides, following broad aspects need to be carefully analysed shape measurement, ultrasonic testing etc of flat
while formulating the technology plan: products.

l The specific constraints faced by steel plants in Market Sustenance


general and individually.
In order to be ahead of the competition, it is necessary for the
l The present state of technology of iron and steel Indian steel industry to aggressively handle the market and
industry in the international sphere. adopt either the differentiated strategy, strategy of cost
leadership or the strategy of focus. With the help of these
l The return on investment on each technology. generic strategies, the steel manufacturers can formulate a
l The possibility of bridging the technology gap in a potent marketing strategy by analysing the products’ stage in
phased and cost-effective manner. the product life cycle.
Thus, the steel manufacturers can sustain the market through
l Selection of proven technologies and systems for
the following steps:
modernisation.
(a) Identifying core competency and aligning it to the
Overall Technological Targets
products and services.
l Superior quality of finished products.
(b) Segmenting markets and analyzing the changing
l Increase in production. customer needs.

74 IE (I) Journal—MM
Table 8 Proven technologies to be adopted Brand Equity of Steel
Technology Benefits Branding of steel as a ‘futuristic product’ would provide suste-
nance to steel market. The reasons to given for this promotion
Mining
are:
High efficiency crusher Reduction in energy cost, quality
High efficiency magnetic separator improvement — Excellent strength/performance characteristics

Coke-making — Price/performance
Washing of indigenous coal Export substitution, uniform quality, — Ease of fabrication and joining
Automation in coke ovens improvement in productivity,
— Formability
Installation of state-of-the-art decrease in energy/operating cost
battery — Recyclability

Sinter plant — Quality


Lime dosing, Increase in productivity — Ability to meet increasing safety requirements.
Increase in bed height and under Improvement in sinter quality
grate suction HRD Strategy
Use of blue dust/quality In the ultimate analysis, the success of the plans to substan-
super fines tially raise production, master sophisticated technology and
introduce large scale automation and achieve market
Iron-making
leadership would depend upon effective human endeavour.
Coal dust injection with oxygen Coke replacement, productivity
Competitive superiority of the industry could result from
enrichment increase
relative superiority in knowledge, skills and resources that
Improvement in furnace design
business can deploy. To this extent, it would be the
by use of silicon carbide bricks,
competence of manpower that would ultimately give the
copper stave cooling, bog depth etc
industry the competitive edge. This competence defined in
Steel-making terms of ability to achieve pre-determined goals must be
Slag splashing of BOF lining Improvement in lining life supplemented with a conducive environment for work,
Hot metal usage in EAF Reduction in energy cost systems that enables employees to perform better and
Pig iron/DRI charging in I, Scrap substitution processes that help them to ensure maximum productivity at
Scrap pre-heating, recovery of his work place.
slag from slag of IF etc
IT Strategy
Casting and finishing
The advantage of a proper IT-based information system is that
Thin slab casting, beam blank Productivity increase, less defects,
accurate information can be obtained at a much faster rate,
casting and direct rolling improvement in product quality,
reducing downtime and speeding up decision making process.
Electro-magnetic stirring, lower production cost, customer
Since, time is more than money, it would have direct impact
high speed mould satisfaction
on cost. The objective would be to implement IT in all
Thermo-mechanical treatment,
operations and to integrate these with day-to-day decision
on-line accelerated cooling
making process. IT applications will help in streamlining both
Size free rolling
process chain and supply chain and would thereby result in
Product development cost reduction and increase in productivity in the following
Product of light weight beams Expansion of steel market, import manner:
Production of superior quality steel substitution, international l Cycle time (production to sales) reduction.
like micro alloying, TMCP, SULC, marketability
TRIP, colour coated steel, coated l Information availability.
composite product etc Improved cash flow.
l
l Savings in inventory carrying costs.
(c) Understanding the industry standards and positioning
their offering vis-a-vis competition. l Reduction in communication costs.
(d) Establishing channels of distribution and reaching out l Enterprise integration.
to the customers most effectively.
l Better design of products and services.
(e) Taking care of the customers with sensitivity, speed
and responsiveness. l Faster response to market changes.
(f) Building relationship for a long-term sustenance of l Ease of operation and reduction in manual effort for
the company. sales data compilation and analysis.

Vol 84, October 2003 75


The overall emphasis should be to align with global trend
of e-commerce in steel as early as possible.

KEY DRIVING FORCES


Sustainable implementation of the strategy would require
reinforcement (driving force). The three kinds of
reinforcements required are discussed here.

Quality Reinforcement
The objective is clearly optimizing three Cs (Cost, Customer,
Competition), centred on Q (Quality).
The importance of quality at the core of the objective cannot
be over emphasized.
In times of strong economic expansion and growth, major
business forces squeeze the profit structure of all Figure 10 Quality and profitability inter-relationship
organizations. Factors such as increasing customer
expectations, aggressive global competition, acquisitions and three factors in each of these aspects. ‘What’ is the first aspect
mergers can cause more pressure on the expenses companies of the strategic process that signifies the essential factors that
incur in providing products and services. Therefore, it is need to be managed for successful sustenance. These include
essential for delivering the perceived quality value for today’s the systems/structure, cultural synergy and superior values.
customers demand. This explains why quality has been kept at They are of crucial importance and must be managed in order
the centre. Figure 10 shows how overall quality improvement to manage change. ‘How’ is the second aspect for effective
would affect profitability. management of change that works as prime instruments for
managing change. These include strategy, speed and
Organisational Reinforcement sensitivity. It is with these three factors that any turnaround
Effective organizational turnaround would require reinforcement management process could be successfully accomplished. The
of organizational strength. This is achievable through third aspect is the ‘Who’. This aspect signifies the stewardship,
maximizing the effectiveness of the nine intra-organizational supervision and self. It has been observed that it is the people
factors. These factors — leadership, supervision, people, strategy, at all strata of the organizational hierarchy influence any
systems and structure, cultural synergy, sensitivity, speed and effective management of change. These three sets of factors —
superior values provide the basic framework for successful each with three factors, hold the key to any effective
turnaround. The inter-relationship of these factors and their management of change.
cumulative effect would have a significant effect on the The inter-relationship of each of these elements has been
company’s competitive edge. The mutual affinity of these explained in Figure 12.
factors and their relative impact on the change management of
the company is illustrated below with the help of a model — Policy Reinforcement : Role of Government and Policy
termed as the Crystal Model. Makers
An effective strategic process requires the optimization of Government in general and policy makers in particular has a
these nine factors. Enumerated as Nine Ss, these nine factors pivotal role to play as enabling agency for implementation of
provide the What, Who and How of the strategic process for strategies for turnaround in Indian steel industry. Showing
effective management of change in an organization. There are due concern, government has already initiated steps for
formulating a new steel policy which include a road map for
the Indian steel industry. It is expected that the steel policy
COST (minimize)
will take into consideration all aspects of steel production like
demand and supply, quality of imported raw materials, trade
barriers in conformance with the World Trade Organisation
(WTO) etc. The new steel policy is expected to improve the
competitiveness of the Indian steel industry in the

Q international markets and also suggest ways to increase the


domestic consumption. The Joint Parliamentary Committee
(JPC) under the Ministry of Steel has recommended ‘priority
status’ for the steel industry. In its report on the Indian iron
and steel sector the JPC also advocated the setting up of a Joint
CUSTOMER COMPETITION
(delight) (beat)
Task Force. It also suggested that customs duty on certain
critical inputs, not available indigenously, should be reduced.
Figure 9 Quality reinforcement Among others, it asked for rationalisation of the structure of

76 IE (I) Journal—MM
CONCLUSION
Ultimately strategies will viable if the business is managed to
achieve that viability. Experience suggests that the industry
today remains predominantly technically and production
driven. This must change. Today steel industry operate at high
levels business complexity. Today there is need that they
eliminate all unnecessary complexity and focus on selected
products and markets to achieve as in many other industries.

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Stewardship, Structure, 6. B Muthuraman and T Tolia. ‘Cold Rolled Steel Flat Products Market in
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Values Authority of India Limited, September 1, 1999, pp 11-13.

8. J Santiono and T Anggraeni. ‘Steelmaker Restructuring: Why and How.’


Iron and Steel Review, June 2002, pp 38-40.

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HOW Indian Iron and Steel Review, May 2002, pp 21-22.

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Sensitivity
12. R R Simmons. ‘How Companies Survive.’ Iron and Steel Engineer, vol 65,
no 1, January 1998, pp 36-39.

13. Editorial. ‘Economic and Political Weekly.’ October 13, 2001.


Figure 12 The nine-S inter-relationship
14. Editorial. ‘Economic and Political Weekly.’ December 29, 2001.
domestic freight for all modes of transportation, power, for
exportable steel at the rates given to the National Thermal 15. S G Dastidar. ‘New Challenges and Options for the Iron and Steel
Power Corporation (NTPC), excise duty deferment on capital Industry.’ Iron and Steel Review, vol 45, no 5, October 2001, pp 5-6.
goods and reduction in the stamp duty on financing steel
16. S K Sinha. ‘Status of Indian Iron and Steel Industry.’ Iron and Steel Review,
projects.
vol 44, no 3, August 2000, pp 85-88.
The JPC also wanted that permission be granted to the
17. ‘Downturn in the Steel Industry, Lessons to be Learnt.’ Iron and Steel
industry for floating steel bonds with the facility of capital
Review, vol 45, no 5, October 2001, p 40.
gains, exception under sections 54EA and 54EB; greater access
to resources from financial institutions created for funding 18. S G Dastidar. ‘Reforms and Restructuring in Global Steel.’ Iron and Steel
infrastructure projects, withdrawal of excise duty on the value Review, December 2001, pp 13-15.
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19. D Yue. ‘The Impact of B2B e-commerce on the Asian Steel Industry.’ Iron
concrete and restriction on import of defective and seconds
and Steel Review, December 2001, pp 31-38.
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the strategic turnaround process. October 2001.

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21. I Christmas. ‘The Future of Steel.’ Iron and Steel Review, October 2001, 25. IISI Website at www.iisi.org.
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ANNEXURE 1

INTEGRATED TURNAROUND STRATEGY

SURVIVAL GROWTH
STRATEGY STRATEGY

SHORT-TERM PLAN MEDIUM-TERM PLAN LONG-TERM PLAN

KEY GOAL : KEY GOAL : KEY GOAL :


FINANCIAL TURNAROUND OPERATIONAL TURNAROUND SUSTAINABLE STRATEGIC
TURNAROUND
KEY PROCESS TO ACHIEVE THE KEY PROCESS TO ACHIEVE THE
GOAL : GOAL : KEY PROCESS TO ACHIEVE THE
BENCHMARKING PROFIT CENTRE APPROACH AND GOAL:
INTERNAL CUSTOMER MODEL CONTINUAL IMPROVEMENT
COST REDUCTION
● Reducing operating costs FINANCIAL RESTRUCTURING STRATEGIC RESEARCH
● Reduction in working capital costs ● Asset restructuring ● Identification of priority areas
● Substitution of raw material ● Strategic cost reduciton-across the ● Quality improvement
board ● Customised product development
● Social infrastructure costs
● Divestment in non-core business
● Differentiated sourcing TECHNOLOGY PLANNING
● Effective supply chain management BUSINESS RESTRUCTURING ● Stage-wise adoption of latest
● Redesigning key corporate processes technology
REVENUE MAXIMISATION
● Consolidation and collaboration ● Process automation
● Maximising net sales realisation
OPERATIONAL RESTRUCTURING ● Eco-friendliness as key parameter
● Effective product/market analysis
● Increasing customer base ● Management systems and structure INTEGRATED IT STRATEGY
● Penetrating marketing ● Capital productivity ● Networking with customers,
communication ● Steel servicing suppliers
● Debtor’s management ● Widespread IT application
MARKET EXPANSION
● E-commerce
OPERATIONAL EFFICIENCY ● Enhancing steel consumption
● Asset utilisation efficiency ● Augmenting marketing services
MODERN HRD STRATEGY
● Capital productivity MARKET SUSTENANCE
● Labour productivity ● Establishing brand equity of steel
● Customer loyality
● Yield improvement

Quality Reinforcement Organizational Reinforcement Policy Reinforcement

78 IE (I) Journal—MM

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