Term Paper Ajinkya 08

8/3/2019 Term Paper Ajinkya 08

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BUSINESS

MARKETING

M B A , 3 r d S E M

M A R K E T I N G

SUBMITTED BY: AJINKYA

1PI10MBA08

TERM PAPER

ON

ADITYA BIRLA MINERALS (ABY) SUBSIDARY OF

HINDALCO INDUSTRIES LTD


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ADITYA BIRLA MINERALS (ABY)SUBSIDARY OF HINDALCO INDUSTRIES LTD

INTRODUCTION

1. a ADITYA BIRLA MINERALS (ABY) is an Australian based mining company with a

focus on copper production and exploration; located in Perth, Western Australia. It holds

mining and copper exploration activities at the Birla Nifty Copper Operation (BNCO) in the

Great Sandy Desert, Pilbara, WA and the Mt Gordon Copper Operation (MGO) located in th

e Mt Isa Block, QLD.

Aditya Birla Minerals was established in 2003 to pursue copper production and develop

copper in concentrate sources in Australia. The company acquired the Nifty copper mine in

WA and Mt Gordon copper mine in QLD, alongside adjacent tenements for prospective

copper exploration

Both Nifty and Mt. Gordon have a long term life of mine off-take agreement with

Hindalcofor supplyofcopper concentratetothecopper smelterat Dahej, Gujarat.

Aditya Birla Minerals understands that excellence in environmental performance is essential

to business success, which is why the companys copper production, underground mining,

drilling and exploration meet environmental laws and regulations. The Queensland and West

Australian copper production accounts for approximately 20% of Hindalcos concentrate

requirements.

The company ships copper in concentrate produced from Nifty and Mt Gordon copper mines

to the Hindalco copper smelter in India. The company has entered into an agreement to sell

the entire life of mine production to Hindalco Industries Limited. (Birla copper) ABY is

presently 51% owned by Hindalco,.Hindalco is a member of the Aditya Birla Group, which is

one of Indias largest industrial conglomerates.

ADITYA BIRLA GROUPHINDALCO INDUSTRIES LIMITED

COPPER PRODUCTS COPPER PRODUCTS

& DISTRIBUTION

ADITYA

BIRLA

MINERALS

BIRLA COPPER

END

CUSTOMERS


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HINDALCO INDUSTRIES LIMITED

Hindalco is one of the leading companies in aluminium and copper production in India and is

positioned amongst the top five aluminium majors worldwide. Hindalco acquired the copper

mine in WA and QLD in 2003, where, together with Aditya Birla Minerals utilised copper

resources and undertook underground mining for enhanced copper production. The company

also owns and operates a copper unit in India, producing copper cathodes, cast copper rods

and other products including precious metals, fertilisers, sulphuric acid and phosphoric acid.

It has an integrated copper smelting and refinery facility located in Dahej, India, (Hindalco

Copper). Hindalco Coppers facility was initially commissioned in 1998 with an annual

capacity of 100 ktpa and has been progressively expanded to its current commissioned

capacity of 500 ktpa. Hindalco Coppers strategy is to source a significant percentage of

feedstock from strategic long-term sources

BIRLA COPPER

It enjoys leadership position in India, having built up-percent domestic market share with in

three years of commissioning. It has also made successful forays into the export markets of

the Middle East, South East Asia, china Korea and Taiwan.

Birla copper has a mega green field copper smelting and refining complex at dahej in the

bharuch district of Gujarat, India. With an investment of Rs 1,850. Crore, it is largest of itskind in India. The plant produces world- class copper cathodes, continues cast copper rods

and precious metals. Sulphuric acids, phosphoric acid, di-ammonium phosphate, other

phosphatic fertilizers and phospho- gypsum are also produced at this plant .

Birla copper aspires to be among the worlds foremost cost competitive producers of cooper.

To reach this goal, it had under taken a brown field expansion raising its smelter capacity

from 65,000 tones per annum to 146000 tones per annum. The copper division is evaluating a

further expansion as well, so as to rank among the top 10percent of cost competitive producer

globally.

To make birla copper an integrated producer of copper, the company believes that upstream

expansion through ownership in mines is important for a smelter of its size.


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As a first step in this direction, birla copper acquired the nifty copper mines in Australia.

Nifty currently has a capacity of 25000 tones per year of copper cathodes, with a large

underdeveloped copper sulphide.

1 b. PRESENT STATUS IN INDUSTRY

Aditya Birla Minerals is poised to become the fourth largest producer of copper in Australia with the

commissioning of the Nifty sulphide operations it is expected to be one of the richest underground

copper operations in the world.

Aditya Birla Minerals produced 67,415t and 57,093t of copper in concentrate for the financial year

2008-09 and 2009-10 with a focus on copper production over exploration activities. The concentrate

produced from each copper mine in WA and QLD is shipped to Hindalcos 500,000 tpa rated Dahej

copper smelter in India.Aditya Birla Minerals provides copper resources to Hindalco, maintaining

their position as industry leader.

'Birla Copper is the Market Leader'

Birla Copper reported a further rise in market share from 39% in 1998-99 to 48% during 1999-2000

and remained the Market Leader in the domestic copper market. The Company's market share was as

high as 50% during the fourth quarter of the last fiscal. The Company turned in an impressive growth

in copper sales volumes from 62,962 tonnes in 1998-99 to 98,362 tonnes in 1999-2000, an increase of

over 50% YoY. Its strong growth in volumes and market share were primarily due to a positive

demand situation, changing consumption pattern, aggressive marketing efforts and continued focus on

quality and customer service.

BIRLA copper, with an over 45 per cent market share, is India leading copper producer in

private sector. Its plant at dahej in Gujarat, produces world class copper cathodes, continuous cast

copper rods and precious metals.

A part form copper products, euphoric acid, phosphoric acid, di-ammonium phosphate, other

phosphates fertilizers and phosphor gypsum are also produced at this plant.


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1c. SUMMARY OF BUSINESS AREAS AND PRODUCTS / SERVICES

y Copper BusinessHindalco's copper division, with its integrated facility at Dahej in the Bharuch district

of Gujarat, enjoys a leadership position in India. The unit has the unique distinction of

being the largest copper smelter in the world at a single location with a 500,000 tpa

capacity with multiple world class technologies. The facilities comprise copper

smelters, captive power plants, utilities and a captive jetty. The company's copper

product range includes copper cathodes and continuous cast copper rods. Birla Copper

also produces precious metals, sulphuric acid, phosphoric acid, di-ammonium

phospate (DAP) and other phosphoric fertilisers, and phospho gypsum


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PRODUCTS DISCRIPTION

Copper cathodes

Hindalco's copper cathodes branded as Birla Copper and Birla Copper II are known for high

purity and consistent quality. These are largely used in the manufacture of continuous copper

rods for the wire, cable and transformer industries, and copper tubes for consumer durable

goods, such as air conditioning and refrigeration, as also other applications in the form of

alloys and sheets. Copper alloys such as brass, bronze, cupro-nickel, etc., find application in

diverse areas such as defence, mint, construction and the electrical industry.

The Birla Copper laboratory has been accredited by NABL (National Accreditation Board for

Testing and Calibration Laboratories) in accordance with the standard ISO/IEC 17025:1999.

Birla Copper Cathodes are square shaped, with 99.99 per cent copper purity levels, produced

using the Mount ISA electro-refining process. They meet the international quality standards

BS 6017 1981 (1989) and u-Cath-1 / ASTM B-115 (1999) and are registered as LME A

Grade. They are high grade and boast the lowest levels of various group and individual

impurities.


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Continuous castcopper rods

Hindalcos continuous cast copper rods meet all the requirements of international quality

standards. Their excellent surface finish makes them suitable for processing to enamelled,

coated and plated wires. They are available in diameters of 8, 11, 12.5, 16 and 19 mm.

The homogeneous structure and fine grain size of the continuous cast copper rod result in

outstanding drawability. It can be drawn to an ultra-fine wire at a high yield rate.

The Birla Copper rod is considered suitable for power and communication cables, strips for

power and distribution for transformers, magnet wires, and zari manufacturing. Larger

diameter rods 11, 12.5 and 16 mm are used to produce profiles and busbars.

Birla Copper is the only manufacturer of the 19-mm-diameter copper rod in India. This rod is

used for groove conductors and profiles.

Precious metals

Precious metals are extracted at our precious metals refinery located at Dahej. Gold and silver

have an affinity to copper ore and are found in certain quantities in the concentrate supplies.

Hindalco pays for the gold and silver content based on the prevailing international bullion

market prices and other factors.

The precious metals are extracted after copper refining to produce 99.9 per cent pure gold,

silver and selenium. The residue contains traces of platinum and palladium, which are sold as

platinum group metal mix, commonly known as PGM.


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1d.ORGANIZATION STRUCTURE

1e.MARKETING & SALES ORGANIZATIONAL STRUCTURE

MARKETING STRATEGY

OLD STRATEGY

Marketing Head office (Renukoot)

EAST WEST NORTH SOUTH

Vice-President V-P V-P V-P

Extrusions Rolled Primary

Sales Manager (Territory Manager)


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The new marketingstrategy structure is as follows:-

MARKETING HEAD OFFICE (MUMBAI)

CMO* (CHIEF MARKETING OFFICER)

EXTRUSIONS ROLLED PRIMARY

Vice-President


Regional Manager

T.M T.M T.M (Territory Manager)


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2. STRUCTURE OF THE INDUSTRY

Indian Copper Industry is 300 years old, as ancient Indians used copper in Ayurveda for

surgical tools. Long back Hippocrates followed the Indian practice for the usage of copper in

medicine and is now considered the Father of Medicine.

The Indian industry can be classified into two broad categoriesmanufactures of refined

copper (copper cathodes) and manufacturers of copper products

The copper industry is highly dependent on the performance of and demand for products like

power and telecommunication cables, transformers, generators, radiators and other anci l lary

components. Hence, its growth is closely linked to the country's economic and industrial

growth.

Although, the industry is capital and power intensive, entry barriers are moderate. These

basically relate to economies of scale, access to ore supplies and environmental issues. In

India, copper reserves are mainly concentrated in Bihar, Rajasthan and Madhya Pradesh and

only public sector Hindustan Copper Ltd (HCL) has been allocated all these mine having a

copper content of just 1.2 - 1.3 percent against the world average of 2 3 percent. Private


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copper producers including Hindalco Industries (Hindalco) and Sterlite Industries (SIL),

however, import concentrate and then, produce refined metal Into ingots.

The Indian copper industry was opened for private sector investment in 1992. Prior to 1992,

the industry was dominated by HCL, a public sector undertaking (PSU) incorporated in

November 1967 with the objectives, inter alia, to carry out mining operations and produce

copper and related products. HCL subsequently took over the copper ore mines from

National Mineral Development Corporation Ltd. (NMDC). These mines are located at Khetri

and Kolihan in Rajasthan, and Rakha Copper Complex in Jharkhand Till 1997, the only

producer of primary refined copper was HCL.

The installed capacity for refined copper production at its two integrated copper plants was

(and is) around 47.5 ktpa, which used to meet approximately 25-30 percent of India's

requirement for refined copper. The balance demand was met through imports. The other two

producers of copper in India now are Hindalco and SIL.

Overall, the copper concentrate market is expected to remain in deficit during CY 10 due to

an increase in smelting capacity in China and lack of addition of major mining projects. This

would put pressure on spot TCRC.

Further the demand growth in the Indian copper consumption would be robust particularly in

the power cables, transformers and other related segments and also due to the thrust on

energy efficiency and infrastructure development.

DISTRIBUTION OF COPPER IN DOMESTIC MARKET


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Future Outlookofthe Copper Industry:

Copper is a key sector impacting the Indian economy. Copper has a number of applications

across several sectors such as telecom, power, construction, transportation, handicrafts,

engineering, and consumer durables.

The performance of the copper industry is highly dependent on the performance of and

demand for products like power and telecommunication cables, transformers, generators,

radiators and other ancillary components. Hence, its growth is closely linked to the countrys

economic and industrial growth. India has been growing at a steady and sustained

compounded average growth rate of 5.6 per cent for the past 20 years. This is expected to

improve further to a level of around 8 per cent in the future. The outlook for the copper

industry in India is therefore positive.

2b. SIZE AND GROWTH RATES

The size of Indian Copper Industry (consumption of refined copper per annum) is around five

lakh tonnes, and now the copper industry in India takes up about 3% of the entire world

market for copper

Indian copper production capacity in the year 1995 has registered a robust growth after the

government allowed private sector companies. In the year 1996 the capacity has grown 16

times from mere 62,000 to 997,500 tones in 2007.

The government owned Hindustan copper is a vertically integrated producer whereas

Hindalco and Sterlite industries are mainly custom smelters.

Copper production has seen a strong growth in India in the last few years. It has increased

from 420,000 tones in 2004 to 740,000 tonnes in 2007, registering a growth rateof21%

CAGR. As mentioned before, Hindalco and Sterlite industries account for more than 80% of

the total copper production in India.

2b.MAJOR PLAYERS

The Indian industry can be classified into two broad categoriesmanufacturers of refined

copper ( copper cathodes ) and manufacturers of copper products. Of the three

manufacturers of refined copper, HCL is the only primary producer, which mines and


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refines copper; Hindalco and SIL process primarly imported copper concentrate to

produce end products like copper bars, rods and wires.

Other players include around 1,000 units in the small-scale sector, which are primarily

involved in converting scrap consumption.

Top Copper Industries

Sterlite Industries Ltd.

Hindalco Industries

Hindustan Copper

2b(i). STERLITE INDUSTRIES (INDIA) LTD.

Company Background:

Sterlite Industries (India) Ltd (SIIL) is a leading producer of copper in India. (SIIL) is the

principal subsidiary of the Vedanta Resources Group. SIIL pioneered the manufacturing of

Continuous Cast Copper Rods in India and established India's largest Copper Smelting and

Refining Plant for production of world class refined copper. SIILs main products, Copper

Cathodes and Copper Rods meet global quality benchmarks.

Products & Its Applications:

A] Copper Cathodes

Applications

Continuous Cast Copper Rods Copper Wire Bars, Bus bars, Billets, Ingots, Moulds and Other semis Copper based alloys and downstream products Copper tubes, strips and foils


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2c.Importantenvironmental factors

Copper production is not an environmentally benign activity. From mining and milling

through hydro- and pyrometallurgical processing to refining,

Copper production can have significant adverse impacts on air quality, surface and

groundwater quality, and the land .While these impacts can be severe when the materials

handled include toxic or hazardous substances (e.g., ores with a relatively high concentration

of arsenic), they also can be modest due to technological and other pollution controls, and

because of mitigating features of the climate, geology, and ecology of most copper-producing

areas.

Environmental Impacts ofCopper Production


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INDIAN COPPER MARKET EVIRONMENTAL ANALYSIS

PORTERS MODEL

ThreatofSubstitutes: Medium to High

Copper faces competition from other metals like Aluminium

and also experiences shifts in market preferences due to

drastic changes in technology (e.g. Fixed line to wireless).

Bargaining Power of

Supplier

High with respect to

secondary producers

who do not have captive

mines.

Low with respect to

Primaryproducers who

have captive mines.

Bargaining Power of

BuyerLow: Medium

Fragmented nature of the

buyer industry results in

limited bargaining power of

buyer. However, drastic

technological changes is

affecting behavior of key

buyer i.e. Telecom

segment.

Inter Firm Rivalry Low:

Medium

Existence of just 3 majorplayers

limits market competition.

However, declining domestic

market enhances competition

level.

Barriers to Entry: High

Capital cost and ownership of copper

mines are key entry barriers.


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3. BUYER BEHAVIOR IN THE COPPER INDUSTRY:-

There are normally three types of buying behavior exhibited in the industrial buying: New

task, Modified Rebuy and Straight Rebuy. In case of Aditya birla minerals ltd. customers

most of the purchases are Straight Rebuy and Modified Buy. Sometimes the specifications

and quality has to be modified and that comes under the Modified Buy.

The role of buying centre is very important while buying the material. The buying centre

comprises of people from the organization who have sufficient knowledge about the raw

materials. In the purchases of raw materials the major members are the purchase manager,

safety engineer, General Manager, vice-president of operations and mining engineer. These

people with their specialized knowledge prepare the initial draft of the specifications, identify

the raw materials that meet those specifications, shortlist the suppliers, have detailed

discussion about the products and negotiate their prices.

Lets explain the phenomena with an example: Suppose an Electrical company wants to go

for buying of copper cathode for manufacturing their products, the following procedure will

be followed:

1. The company will understand the need and characteristic of the need.2. The company will search for possible suppliers and will contact them..3. The supplier like Aditya birla minerals will send their sales representative to interact

with the company personnel.

4. The sales representative will brief on the product specifications and suggest thetonnage required after considering various factors.

5. Based on the interaction the buyer may ask one particular company for a proposal ora group of companies to submit their proposals.

6. The buying may be done on the basis of evaluation of the proposals.7. In case of one company being asked for a proposal there will be a series of

negotiations on price as well as specification till the final deal is struck.

8. The influencers in this decision maybe the administrative officer who looks after theupkeep and administration of manufacturing department.

9. The Gate keeper will be the Public relationship department of the company and alsothe secretary of the manager who filter the information reaching the buying centers.


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10.The decider will be the director of the company who has the formal authority tofinalize the deal and actually will make the final decision. He will communicate his

decision to the manager who in turn will finalize the deal.

11.Once the deal has been finalized contract will be signed between the parties.Exampleofbuying behavior:

BUYING BEHAVIOUR IN CONSTRUCTION MARKET

Construction is the main market for wire, cable and copper products including building wire,

power cable, copper plumbing and air-conditioning tube, copper sheet and alloy products.

Building wire is the largest of the wire and cable markets, accounting for around 37% of wire

rod consumption. Brook Hunt estimates building wire consumption to grow at approximately

5% annually over the 2006 to 2010 period, as a result of demand for greater numbers of

electrical outlets at home and at the workplace and the use of more or heavier copper

conductors in response to the increasing need for enhanced electrical energy efficiency and

greater power quality. Similarly Brook Hunt estimates global demand for power cable in the

power utility market to grow at 5% annually over this period. Copper tube, predominately in

the plumbing and heating systems in air conditioners and refrigeration systems, accounted for

an estimated 14% of world refined copper consumption in 2005, and is the second largest of

the copper product markets. Brook Hunt estimates demand for copper tube to increase from

2.8 mt in 2005 to just under 3.6 mt in 2010.

ELECTRICAL AND ELECTRONIC PRODUCTS containing copper include

telecommunication cable, power cable, transformer windings, semiconductors and motors for

heavy appliances. While copper has largely been substituted by fibre optic (FO) cable in

long distance networks, owing to the high cost of FO cable, copper telecommunication cable

has remained the preferred link between the main network and consumers. Brook Hunt

estimates demand for copper from structured wiring and other technological advancements

to support growth in telecommunication cable demand at an average annual rate of 4.4%

during the five years to 2010.

The other main wire and cable segment to supply the electrical sector is winding wire, which

is estimated to have accounted for around 14.1% of copper wire rod consumption in 2005,

making it the second largest wire and cable market. Applications include transformers,

generators, stereos, television sets and motors.


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Overall, the pattern of copper consumption in the end-use markets shows that demand for

copper typically moves closely with changes in industrial production.

The breakdown of copper by use is as follows:

Copper Consumption Patternin India

Sector Applications % share

ElectricalMotors, Pumps, Generators, Transformers,

Switchgears, power and control cables30

Electronics &

TelecomTelecom, Cables, Telephone wires, Electronics 22

TransportAuto-electrical, Railway, Electrification, Electric

Locomotives, etc8

Consumer Durables Fans, washing machine, batteries, bulbs, wiring, etc 6

Building &

ConstructionHousing Wiring, pipes, etc 9

OthersGeneral Engineering., Process Industries Defense,

Mints, handicrafts25

4. MARKET SEGMENTS AND POSITIONING:

Aditya Birla Minerals is well positioned for the ongoing delivery of copper products into the

growing Asian construction, electrical and industrial markets. The Asian region accounted for

around 42 per cent

of the world's copper consumption in 2005 and is expected to account for around 39 per cent

of global consumption growth over the next five years.

4a. Market segments intheindustry:

The market for copper products in India is very widespread

Geographically

By diversified of end user

Further, there are a large number of small and medium consumers and a select a few large

consumers. The smallest consumer would be consuming as little as 1MT/Month. However,

the largest numbers of Hindalcos customers are in the consumption range of 5-50

Mts./Month.

Hence there is large potential for introducing the new uses and the increasing the

consumption. As a strategy thereof or, companies decided to cater to as many consumers as

possible. Their distribution system therefore, is designed to the object.


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The companies manufacture the products with very specification as desired by the various

customers.

4c&4d. Market segmentation & PositioningofHindalco (Birla minerals &

Birla copper)

(A)Market segmentation based on the product group

On the basis of product groups, Hindalco market may be segmented in the following manner :

Copper Gold and silve Acid Fertilizers Processing of metals

(B)Market segmentation on the basis of product wise keen consumers.

(C) Market segmentation based on the demand pattern.

Based on size & frequency of order, Hindalco(BIRLA MINERALS & BIRLA

COPPER market may be segmented as follows:

Bulkcustomerso Bulk customers are those customers, whose demand is very high and

consistence.

Small & Mediumo Small & medium customers may be bracketed as those customers, whose

demand is comparatively low and not so consistence, some of the small

customers of Hindalco included ITI Allahabad, Defense Organization,

Dockyards etc.

(D)Market segmentation based on the priority:

On the basis of priority given to various orders Hindalco market may be segmented in the

following manner:

RoutinecustomersRoutine customers are those customers, who are regularly sourcing the company.

Their orders are processed in the normal course of working.


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Special customersSpecial customers are those customers, whose orders are for products under

developments. Since their demand is usually urgent in nature they are given priority

under routine customers. Examples: Export Customers, Government organization like

Defense, Establishment etc. continue this category.

(E)Market segmentation based on consumption sector.

Electrical Transportation Building & constructions Industrial Machinery

(F)Market segmentation based on geographical areas

Copper consumers are spread all over the country. Different area has different type of industries,

whose are used copper in different quantity. Here, segment the market in geographical areas based on

consumption or demand pattern.


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5a&5b. Products / Services strategies:

MATURITY STAGE

The products of Aditya Birla mineral are in Maturity stage of the product lifecycle. As theproducts as already enters the maturity stage, the number of competitors entering the market

increase resulting in the decline in the growth of profits. The marketing strategy when a

product is in maturity stage of Aditya Birla minerals is:

i. Enter new marketsii. Keep the existing customers satisfied

iii. Cut marketing, production and other costs to maintain profit margins.It is applicable for all the products of Hindalco industries limited, as it has long existence in

the copper market.


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Conceptual framework

Industrial Product Life-Cycles

The product life-cycle is a series of different stages a product goes through, beginning from

its introduction into the market and ending at its discontinuation and unavailability. These

stages are commonly represented through the sales and profit history of the product itself,

although there can be many other variables that affect the lifespan of a product line. Between

the initial growth and concluding maturity stages, the profit curve usually reaches its peak.

During the maturity phase of the life-cycle, sales volumes for an established product tend to

remain steady, or at least do not suffer from major declines, but the rate of profit drops.

In most cases, the trajectory and behavior of the product life-cycle is determined by a set of

factors over which manufacturers and marketers have little control, forcing them to react tochanging circumstances in order to keep their product development strategy viable. These

external factors include shifting consumer requirements, industry-wide technological

advances, and an evolving state of competition with a companys market rivals. The

fluctuating patterns of a life-cycle indicate that a different marketing and product

development approach may be needed for each stage of the cycle. Understanding life-cycle

concepts can aid in long-term planning for a new product, as well as raising awareness of the

competitive landscape and estimating the impact that changing conditions can have on

profitability.

The Life-Cycle Curve

Industrial products usually follow an S-shaped life-cycle curve when sales and profits are

plotted over time. However, certain products, such as high-tech goods and commodities, may

follow a different life-cycle pattern. High-tech products often require longer development

times and higher costs, making their growth stages long and their decline stages short, while

commodities, such as steel, tend to have relatively static demand with sales that do not

appreciably decline from an absence of competition. Sales would drop, though, from an

increase in competing products.


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Under most life-cycle conditions, profits typically peak before sales do, with profits reaching

their peak level during the early growth stages and sales reaching their peak in the maturity

stages. Competition tends to be lower at the beginning of the life-cycle, but as competing

companies start to offer lower prices, newer services, or more appealing promotions in the

maturity phase, the initial product must be made more attractive. This often results in

comparable price drops or increased spending on advertising and promotions, as well as

greater investment in distribution and modifications to the existing product. The initiatives

improve sales, but drive up costs and lower profits.

The Introductory Stage

After being introduced into the market, a new industrial product will yield varying degrees of

acceptance. Some products may find acceptance soon after release, while others may take

longer to develop a customer base. One of the reasons for this disparity involves the skill set

required to make full use of a new product. Goods that need relatively little training and do

not obligate users to learn new skills or refine existing ones typically find market share more

rapidly than complex products. A company that introduces a product requiring a high degree

of learning and expects a relatively low rate of acceptance can focus on market development

strategies to help build consumer appeal. Conversely, products with a low learning curve and

a quick route toward acceptance may need a marketing strategy designed to offset rival

products, as competition at these levels tends to be higher.

The Growth Stage

When an industrial product enters a period of higher sales and profit growth, the marketing

plan often shifts to focus on improvements to the design and any added features or benefits

that can expand its market share. Increasing the efficiency of distribution methods can help

improve product availability by reaching more customers, and some degree of price

reductions, particularly for large-scale operations, can be introduced to make the product

more appealing for purchase. Maintaining the higher price set at the introductory stage

increases the risk of competitors entering the market due to the wider profitability margin.

Similarly, without stronger distribution efforts the product may have limited availability,

which encourages rival companies to encroach on market share.


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The Maturity Stage

The maturity stage of a life-cycle is characterized by an increase in the number of market

competitors and a corresponding decline in profit growth as a percentage of sales. To

compensate for the level of saturation that occurs during this phase, the product development

strategy revolves around entering new markets, often through exports. It may also be helpful

to increase efforts to satisfy existing customers in order to preserve the customer base.

Reducing spending on marketing and production can help maintain profit margins.

The Decline Stage

In the decline stage, the competition for product pricing tends to escalate, while profits and

sales generally decrease. When working with industrial products, marketers sometime opt to

discontinue a product when it has reached this level or introduce a replacement product that

renders the previous version obsolete. Marketing and production budgets are typically scaled

back to save on costs, and resources may be shifted to newer products under development.

Product decline usually proceeds more quickly among industries that rely on rapidly

changing technologies, with newer advances periodically driving existing goods out of the

market:

6. CHANNEL AND DISTRIBUTION STRATEGIES:

CONCEPTIUAL FRAME WORK

Generally two methods of distribution are in practice.

1) Direct marketing channel2) Indirect marketing channel

Direct marketingchannel: when there is no intermediary levels of manufacturers or sellers

it is called direct marketing channel.

Manufacturer

Customers


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Indirect marketingchannels: Indirect marketing channel is channel containing one or more

intermediary levels. Manufacturers or sellers are appointed various type of marketing

intermediaries in context of nature

Types of channel members

1) Clearing and forwarding agents

2) Distributors

3) Wholesalers

4) Merchandising agents and brokers

5) Commission merchants


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6a. GENERAL INDUSTRY DISTRIBUTION CHARACTERISTICS:

MANUFACTURER

MANUFACTURER

BUSINESS DISTRIBUTORS

DEPOTS,

WAREHOUSES

RESIONAL SALES

OFFICES, AREA

SALES

EXECUTIVES

CUSTOMERS CUSTOMERSCUSTOMERS


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6b. VARIOUS MODES OF DISTRIBUTION IN HINDALCO(BIRLA

MINERALS AND BIRLA COPPER)

Hindalco emphasizes on , Taking the product to the market Distribution of products

in Hindalco is carried out through a network of zonal offices, Area offices, Agents, Stockiest

and company operated Depots, located through the country.

HINDALCO

AGENT/STOCKIST

PLANT

PRODUCTION

INSPECTION &

PACKAGING

GODOWN

WAREHOUSE

CUSTOMER

DESPATCH

AGENT/STOCKIST

ZONAL OFFICE

CUSTOMER


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A briefdescriptionis given below:

(A) ZONAL AND AREA OFFICES:

Hindalco has established five zonal offices, in various part of country. There is a network of

area offices, functioning under various zonal offices. Zonal offices carried out variousMarketing Sales functions of company.

They provide following functions: Signed a contract between the zonal offices and customers, regarding to details of

products such as quality, packing, transportation, destination, etc.

Clearly mentions about the mode of payments. Eliminating intermediaries. Make a direct contact with the customers Help the company to cater to the need of customers. Helpful the company to earn additional profits

(B) AGENTS

Agents are those persons/institutions, who provide orders to Hindalco, on behalf of the

customers. The company has appointed a number of agents, all around the country to sell the

products. They are paid commission on the generated sales. Agent being a local person/

institution can use his contacts and influence, to generate sales in a local market. Agents

function as an important mode of distribution, as they enable the company to minimize

distribution costs.

(C) STOCKIESTS

Hindalco appointed a number of stockiest in various geographical areas across the country.

Certain products of the company are sold through the network. Stockiest are made conform

sale for the company.

Stockiest is free to make sell to any customer Free to charge any price from customers Helps the company to cover the wide geographical market. Helpful in minimizes extra distribution setup costs.


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(D) DEPOTS

HINDALCO operate 15 depots in various part of the country. Depots send the various

requirements at the work office and thud, maintain suitable inventory to cater to the demand

of the market. This is provide the following advantages to the company & also the customers:

TAX-SHIELD: In many states, state sales tax is less then the central sales tax. Inthese states sales of products through depots, lead to tax saving.

AT RANDOM DELEVERY: Emergency needs of customers full filled immediatelyby the depots, at a premium price small offtakes of the scattered customers can also be

provided easily by the depots.

HELPFUL IN PRODUCTION: Depots provide a foundation to the productiondepartment, by keeping inventory of the various products. For example, in the even of

surplus stock, products can be transferred to the various depots. Similarly, Production

Schedules can be planned with greater accuracy, with the help of estimated

requirements, sent by depots.

CONSIGNMENT AGENTS & STOCKIEST

ZONE WAREHOUSES Noof

CONSIGNMENTAGENTS

Noof

STOCKIEST

EASTERN 2 6 8

NORTHERN 5 - 32

SOUTHERN 3 12 20

WESTERN 3 26 24


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6 B(I)DISTRIBUTION PROCESS AT HINDALCO LTD.

There are differenttasks involved in distributionprocess:-

These are as follows:

Order processing Packing & Insurance, Banking, Bills, Ware housing Transportation Godown sales procedure..

Order booking

Every purchaser has to book his order giving details which aluminium rolled products

they want such as Plain sheet, Cold rolled coils, milk can sheet, circles, etc. Purchaser should

be fully disclose about the product such as, product name, quality, quantity, technical data,

mode of transportation, desire delivery time, payment mode etc.

Technical wing of Hindalco examines their application and if necessary also make

inspection of the facing and decided quality to be offered. Thereafter, terms of payment

finalised and his order is finally booked. This order is passed to the relevant personnels

officials with relevant details.

Priority

A priority list of all categories of consumers has been fixed in consultation with all

concerned. Consumer gets delivery in order to their priority, which is also followed by

transporting agents.

Order processing:

Hindalco procure order either directly from the customers or through the

agents/stockiest. The order contains the name of product, quality, size, clearance etc.

After the receipt of orders from the customers or agent Company scrutinizes the order.

A production planning programmed is prepared for rolled production monthly basis. This

monthly report is sent to the respective production department i.e. rolling mills by the end of

the preceding month. The produced material is sent to the inspection and packing department.


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Warehousing

Every has to store to goods while they wait to be sold. A strong function is necessary

because production and consumption cycles rarely match. Ware housing is the responsibility

of warehouse incharge in Hindalco. The work start when warehouse officials receive finished

goods from production. Hindalco warehousing incharge dispatches the material to respective

customers on advice of CSMO and follows the guidelines given to them. The guidelines are:

At warehouse:

While taking delivery from inspection & packing to ensure packages are intact & dry.

If packages are damaged or loose condition, get it repacked.

If packages are wet, do not accept it.

During loading at warehouse

Trucks floor should be clear and flat. There should not be any hole or damage in the floor of the Trucks Floor should be covered with Tarpaulin. Packages being loaded should be intact and dry Proper stocking of packages should be done while loading. Heavy packages to be kept at bottom and lighter packages over heavy.Packages:

No vertical stoking of packages. After loading truck should be covered with tarpaulin.

During storage

Outdoors storage should be avoided. Do not store packages directly on the floor, use wooden pallets. Cheek condition of metal every few hours to ensure no water condensation

Delivery of material: They deliver the material as per the delivery order. Then they note

down the delivered material in the godown register. Then they send delivery report daily to

zonal office.

Bankinginsurance bills & other documents

Hindalco enjoys the facilities of three public sector banks & private sector bank in its

town Renukoot.


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United Commercial Bank (UCO Bank). State Bank of India (SBI). Allahabad Bank. Industrial Development Bank of India (IDBI).

Banking services at Renukoot is punctual. Banks help the company in carrying the

documents to the party. It helps in quicker payments relisation.

Insurance

Every material is dispatched duly insured. There are two types of insurance.

Carrier Risk. Owner Risk.Hindalco arranges insurance facilities for its customers. If there are any damages in

transportation they will issue a damage certificate & the customer can claim its insurance

company on the basis of damage certificate.

GODOWN SALES PROCEDURE

Godown sales procedure describes the sales procedure of Hindalcos products through its

godown. The respective zonal head exercise control over all activities related to godowns

sales. This sales procedure is followed by all the godown of company situated at Delhi,Faridabad, Chandigarh, Jaipur, Haryana, Bangalore, Hydrabad, Calcutta Gohati, Mumbai,

Silvasa, Taloja There is a clearing agent in the godown, which is appointed by Hindalco

for the operation & maintenance of the godown.

7.PRICING STRATEGIES: PRICING STRUCTURE

Copper is traded in various stages of processing including concentrate; blister and anode;

refined, semi-fabricated, and fabricated products; and scrap Within these stages exists an

even broader range of classifications of copper products, such as old and new scrap, wire

bars, ingot, cakes, billets, etc. Most copper is tradedand its price determinedas refined

cathode and rod (i.e., refined metal at least 99.99 percent copper), however .The price

structures for other types of the metal are determined by refined copper prices.


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Copper may be sold either through contracts or on-the-spot trading on the commodity

exchanges the London Metal Exchange (LME) and the Commodity Exchange of New York

(COMEX). Today, around 80 to 95 percent of trade involves contracts between refiners and

semi-fabricators for cathode or rod; the remainder is sold in on the spot trading on the two

exchanges.

7A.PRICING DETERMINANTS FOR INDUSTRY:

The LME and COMEXThe amount of copper traded on the LME is a very small part of all copper trade, but

this market plays an important role in setting the price. The LME serves as a

hedging marketa clearing market for producers whose output exceeds their

contracts, for small producers, and for accumulated inventories. Inventories in the

LME are an indicator of the balance of supply and demand in the world copper

market .Copper is traded on the LME in the form of electrolytic cathode or high

conductivity fire refined copper in 25 tonne contracts. Delivery can be immediate (the

next day) or in 3 months from approved LME warehouses. All trade occurs between

the LME member and the customer .

Direct Producer-Customer ContractsMost copper trade involves transactions between refiners and semi-fabricators.

Contracts for primary refined copper are usually for 1 year, A contract typicallyspecifies the total annual tonnage and the monthly delivery limits within which the

buyer can make purchases.31 Other specifications include point of delivery, packing,

etc. Unlike most commodities, the price is not specified, but stated more generally in

a pricing clause such as the sellers price at the time of delivery. sz Ores and

concentrates usually are sold in longterm contracts of 1 to 10 years. These contracts

may be linked to financial agreements in which a smelter may provide financing for

resource development in return for a percentage share of the mines output.

Near-Term Price DeterminantsNear-term prices (1 to 3 years) tend to fluctuate in response to normal business cycles

through their effects on consumer demand. Price shifts may be exaggerated by

speculative actions,


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Near-term copper price movements also are tied to the relative inelasticity of world

copper supply and demand, which in turn may mask longer-term effects

Long-Term Price DeterminantsInthe longterm (5 years and beyond), prices are determined bythe structureof

the market, including: the degree of ownership concentration (and thus market

control) among producers and consumers; economic forces, such as technological

change leading to radical shifts in production costs or consumer demand; and

investment patterns, including the extent of governmentparticipation. For the copper

industry, some noteworthystructural, economic, and technological factors may play

an important role in long-run pricing. First, long-term contracts for ores and

concentrates are likely to become more prevalent as the location of new smelting

capacity isincreasingly dictated by environmental concerns.

Second, concentration of ownership in the industry, particularly mining, has become

more diluted. While the most recent sales of domestic capacity have, for the most

part, meant fewer companies involved in domestic production, more countries have

entered the market.

7b.Pricing strategies ofcompany

Demand for copper metal is mainly related to industrial activity with copper supply

historically reacting slowly to changes in market demand, resulting in large swings in the balance between supply and demand unlike metal there is no terminal market for

concentrates, with concentrate prices established through negotiations between the buyer and

seller.

Long-term concentrate contracts can cover one year, or many years (typically up to 13), with

most long-term contracts renegotiated annually. When mines sell concentrate to smelters, the

mines are paid for a portion of the copper metal and any byproducts, with penalties for

impurities (e.g. arsenic, bismuth, fluorine), contained in the concentrate while the smelters

will charge the mines a TC/RC, and retain some exposure to movements in the copper price

above and below certain agreed trigger prices, through a price participation (PP)

mechanism.

The level of TC/RCs, which are expressed in US dollars per dry metric tonne (dmt) of

concentrate (the TC) and in cents per pound of payable copper (the RC), and PP, are


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generally negotiated annually and fluctuate depending on the supply and demand conditions

in the concentrate market.

Typically copper mine revenue is most sensitive to changes in the TC/RC. Custom copper

concentrates are predominantly sold under long-term contracts with the remainder being

available to the spot market. Virtually any tonnage can be offered for sale at any time of the

year on the spot market and there is normally no PP mechanism for spot sales.

Example of pricing for copper cathode:

Copper pricing is based on the spot LME A Grade copper price plus an agreed quality

premium.

Revenue for the sale of copper cathode is based on the expected copper price applicable for

the agreed quotation period (varies between one to two months from the date of shipment).

8.MARKETING & SALES structure and analysis

Hindalco has quite a good network for distribution of its products. Finished goods is sold and

distributed to the costumers by following means.

DIRECT SALES FROM MANUFACTURING UNITS:

SALES THROUGH STOCKISTS:

SALES THROUGH AGENTS:

MANUFACTURER CUSTOMERS

MANUFACTURESTOCKISTS CUSTOMERS

MANUFACTURE CUSTOMERSCONSIGNMENT

AGENT


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SALES THROUGH DEPOTS

MARKETING STRATEGY

OLD STRATEGY

Marketing Head office (Renukoot)


Vice-President Vice-President Vice-President Vice-president

Extrusions Rolled Primary

Sales Manager (Territory Manager)

MANUFACTURE DEPOTS CUSTOMERS


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ADVANTAGES

y Cost effectivey Geographical area oriented.y Focus on all products simultaneously.

DISADVANTAGES

y Product promotion scheme is not applicable.y Lack of information about a particular product.y Over work load.y No more time & scope for a particular product.y Consumer satisfaction is not appropriate.y

The above old structure was not taking much advantage of the new global market.

Analysis of the advantage and disadvantage of the regional based marketing strategy, it is not

suitable in modern marketing specification era. So that, in 2003 company decided to go for

opting the new marketing strategy based on product specification. For this the company

transferred its marketing head office from Renukoot to Mumbai


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The new marketingstrategy structure is as follows:-

MARKETING HEAD OFFICE (MUMBAI)

CMO* (CHIEF MARKETING OFFICER)

EXTRUSIONS ROLLED PRIMARY

Vice-President


Regional Manager

T.M T.M T.M (Territory Manager)

ADVANTAGES

y Its product based..y Emphasis on more customer satisfactions.y Helpful to increasing the sales performance of various products of product line.y Helpful to production processes to deliver the products.y Accumulation of small customers.y Provide quick service to customers.y Enhance the sales promotion.


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DISADVANTAGES

y Cost ineffective.y More men power required.

9.SWOT ANALYSIS OF ADITYA BIRLA MINERAL (HINDALCO

INDUSTRIES LTD) MARKETING OPERATIONS

STRENGTH

Global brand image. Cost effective producer. Sound financial position. A high degree quality consciousness is the core competence of the company, ISO 9001

and ISO 14001 have added more prestige to the company.

Company has a well-established distribution network, covering a geographically wide andscattered market.

A well focused human resources development. Serve maximum customer satisfaction.WEAKNESS

Present production capacity is not adequate to meet the rising high demand. Technology is not upgraded to mark as compare to global giants in copper industry.OPPORTUNITY

R & D collaboration with universities and another research organization. More emphasis on downstream production of value added products. Recycling should be adopted as routine production. Raising more finance from marketing for more acquisition and merger for consolidating

position in the global market.

THREATS;

Innovative revaluation in plastic and steel industry. Reduce in exude duty. Fall in price of copper in neighboring countries.


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SWOT ANALYSIS OF DISTRIBUTION CHANNEL

STRENGTH

Product based marketing channel. Strong dist. channel based on geographically wide & scattered market of India.. Flexible distribution process for customers via direct sales and indirect sales. Company made more than 50% direct sales. Convenient road transportation.

WEAKNESS

Not tapped all the potential areas especially in eastern and southern zone. A 50-40% sale depends on indirect marketing. The present distribution system is not adequate to meet the demand of Copper in the coming

years. It is in this light, that the present dist. system needs to be updated. Certain

recommendations, with regard to the same have been suggested ahead.

THREATSWEAKNESS

DISTRIBUTION

CHANNELSOLUTION

STRENGTH OPPORTUNITY


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OPPORTUNITY

The demand of the companys products is rapidly increasing. Thus, there is a necessity to expandthe dist. network to avail the benefits of the fast growing market.

Indirect sales should be converting in direct sales through TM sales force.

THREAT

The major threat is from the competitors like sterilitie industries and hcl ltd etc. because thecompany may lose its market leader position , if it does not take timely steps to modify its present

distribution system in the wake of fast growing demand


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SUGGESTIONS/RECOMMENDATIONS/CONCLUSIONS

Certain recommendations with regard to distribution channel of HIL are as under:

(A)Northern zone offers the most lucrative sales in last financial year.. In the light of such high salesdriven by the factors such as heavy investments in infrastructures and related industries

machinery, transportation etc. In this zone our more than 65% sales depends on indirect sales. So

that our focus should convert indirect sales to direct sales. Our effort should be here increase the

depots in proportionate way, and also made appointment TMs and RMs.

(B)Southern zone is also the fast growing market for the company. The zone offers bright prospectsto company in terms of future demand driven by rapid industrial expansion. In this zone our more

than 60% sales depends on direct sales and also we face cutthroat competition. In maintain the

sales need of continuous market research in regard to distribution channel & appoint stockiest

instead of consignment agents.

(C)Western zone is the key market of the company. This zone is the most advanced zone inindustrialization in the country. In this zone our 65%(Approx.) sales is through direct sales.

Analysis of sales data, present depots, stockiests & consignment agents, 35% of the sales in this zone

is indirectly depending upon consignment agents & stockiest. The demand of this zone is very high.

To optimize in this key zone, the company should established additional depots in that areas-

Ahmedabad & Nagpur for enhancing direct sales.

(D)In eastern zone companys, indirect sales is approx. 70%. Such a heavy indirect sales reflects thatthe company is not in

direct contact of its customers and their worries and feedback and these are most essential factors for

improving level of sales.

In direct sales is not helpful to create, grow & retain the customers. So making the sales

customer oriented and to improve the sales, the company can take the following initiatives-

1. Assign sales representatives to contact all prospects in this area.2. Design a sale promotion complains focusing on brand awareness.3. Appoint a regular sales representative with each stockiest.4. Shift to retail format of business by owning Copper galleries in

malls.


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CONCLUSION:

The above study makes it clear that aditya Birla minerals (HINDALCO )has a well-

established market for its products. The company is making a reaped progress in the various

spheres of its business activities besides the company adopts a favorable attitude towards

safety environments and quality consideration. The company has also been undertaking

various community developments programs. In the nearby located areas.

It has been a learning a exercise to complete this project, working on this project I

found the practical knowledge about the industrial organization. It has been an enjoyable and

fruitful experience to me. I certainly gained a lot of practical knowledge while on training.

Business is undergoing a strategic transformation companies require clear vision and an

attunement to balance the need sustainable in doing sum. It is a pointer to the direction in

which corporate strategies would need to change in order to make organization function a

truly responsible.

In other words future belongs to only those organizations that undertake and imbibe well

defined SCM. The globalization of SCM with goal of increasing competitive advantage,

creating more value-added and reducing costs through global sourcing.

In a highly competitive business environment a well established supply chain strategy

absolutely essential for ensuring competitive edge in the market place. SCM is the most powerful tool for bringing innovations and maintaining price competitions which is a door

step for transferring companies into a power house.


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BIBLIOGRAPHY

INTERNET;

www.hindalco.com

www.aditya Birla.com

www.google.co.in

www.wikipedia.com

www.adityabirlaminerals.com.au

Term Paper Ajinkya 08

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