INTRODUCTION

Today, companies around the world have started thinking in global terms.

National boundaries are no longer limiting factors. The world is shrinking

rapidly due to increasing advances in communication as well as financial flows.

The emergence of a borderless world has suddenly widened the horizons of

competition. Industries are under tremendous pressure to keep pace with the

continuous technological and economic reforms sweeping the globe. Forces of

globalization, liberalization and competition have shaken up the corporate sector.

International production processes, cross border trade and services, global

competition and total quality management, technological and social changes,

privatization efforts and new environmental awareness are challenging

organizational leadership around the world. Organizational identity is at cross

roads. It has now become necessary for companies to look beyond the frontiers

of their own nation.

India's Export Thrust:

Exports provide the foreign exchange that the economy needs to fuel and

accelerate growth and the confidence of staying away from foreigp exchange

crisis. The import of intermediate and capital goods required for increasing

output needs to be financed by foreign exchange earned through exports. Quality

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production is the key to better export prospects. The main factors which affect

the promotion of exports are:

a) Effective policies that boost export earnings.

b) Continuity and stability in the envisaged policies.

c) Structural transformation in all the allied areas relating to export

management.

The changing World market:

Important developments in the world markets have changed trends in

international trade. Breakdown of socialistic eastern block and the USSR and

their transformation from socialistic planned states with controlled and

command economies to market economies, emergence of trade blocks like

EEC, NAFTA, ASEAN etc., and adaptation of GATT. The implications of

the above will result in the emergence of a borderless world and a freer

movement of goods and services with no restriction on trade.

Indian Economy-The Back drop:

At the time of Independence, the country's planners were strongly

influenced by the socialistic pattern of thinking. The primary task before

them was to bring about the speedy growth of the economy in both the

industrial and agricultural sectors. Accordingly, economic plans were

formulated on a state owned model, reserving large chunk of the economy

for the public sector. However over the year’s investment in the public

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sector have been made in various other areas thus diverting from the role

envisaged for it. Inadvertently, this has led to high cost economy, thus losing

the competitive advantage.

India, unlike the Asian tigers like South Korea, Hong Kong, Singapore

and Taiwan, did not opt for the export-led growth strategy. It pursued import

substitution and self-reliance as the main economic theme. As a consequence, the

performance in international trade has been lackluster. India's share of world

exports was a meager 0.56 percent in 1990-91.

Granite which remained an isolated sector till recently is on the threshold

of making a quantum jump in exports very soon. Granite has been identified by

the Government as the 15th thrust sector for export. The booming industry so far

dominated by small scale units with a handful of medium size factory has begun

to attract big giants in the corporate setting. The focus is on exports, though a

part of the finished output is likely to get diverted in the domestic market where

the construction boom is well under-way. The Government has relaxed norms for

setting up 100 % EOU.

Polished granite tile manufactured out of natural granite blocks of

different colours is a decorative building material and can suitably be a substitute

in the market. They are generally preferred because of their glossy finish,

durability and aesthetic value.

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The study has been undertaken with the following objectives:

PROJECT AT A GLANCE

1. Name of the company : LAKSHMI DURGA GRANITES LIMITED

2. Construction : Public Limited

3. Size of the company : Medium Scale

4. Nature of Industry : Processing of Granite Slabs

5. Location : Survey No : 240 Bibinagar,

Nalgonda District,
Andhra Pradesh.

6. Managing Director : Sri S. RAMACHANDRA RAO

7. Products of manufacture : Polished Granite Slabs

8. Installed Capacity : 40,000 Sq.mts. of slabs

9. Capacity Utilization : 75% 10. Sales turnover at optimum

capacity utilization : Rs. 250 lakhs

11. Cost of the project : Rs. 6001akhs

12. Type of Unit :100% Export Oriented Unit

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 M/S LAKSHMI DURGA GRANITES LIMITED (LDGL) was

incorporated on 25' January ,1990 with a main object of setting up 100% Export

Oriented Granite Processing Unit in Andhra Pradesh, INDIA. LDGL has license

under 100% EOU Scheme to manufacture 78,000 Square Meters of Granite Slabs

Vide the Department of Industrial Development Letter No.PER/103(91)

Misc.dt.31.10.91.

The objectives of the company for setting up this Unit are:

1 Utilizing the vast granite resources in India in the manner most beneficial,

to the country and the Company.

2. Exporting value added granite products in order to earn the maximum of

foreign exchange.

3. Erecting good market for Indian Granite Products abroad. 4. Adding to

employment generation.

With steady increase in building activities and the need for a long lasting

wall cladding and flooring materials with little / no maintenance, granite has

become very popular in developing countries during last 10 years. India with

abundant resources of good quality granite has a great potential for increasing its

share in the world market in several folds. This project is started for exploiting

this opportunity.

LAKSHMI DURGA GRANITES LIMITED has implemented the granite

cutting and polishing unit with a capacity of 40,000 Sqmts. P.a. assistance with

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Andhra Pradesh State Financial Corporation and Andhra Pradesh Industrial

Development Corporation ( the state owned financial institutions ) by way of a

term loan of Rs.436 lakhs. The plant has commenced its commercial production

during the month of December ’93.

LIST OF DIRECTORS

Promoter Directors : 1. Mr. S. RAMACHANDRA RAO

MANAGING DIRECTOR

2. Mrs. JHANSI LAKSHMI DIRECTOR

3. Mr. JEEVRAJ PATEL DIRECTOR

Board Basing Directors : Mr. T. SATYANARAYANA

ZONAL MANAGER, A.P.S.F.C

A.P.S.F.C. BIO-DATA OF THE PROMOTERS/DIRECTORS

SRI &RAMACHANDRA RAO:

MANAGING DIRECTOR

Sri S. RAMACHANDRA RAO aged about 48 years is the Chief

Promoter of the company having 28 years business experience. He was in the

business of coffee trade for a period of about S years. He has established a steel

re-rolling mill and has handled the day to day affairs of the mill as the

Managing Partner for a period of 8 years. Later , he has started coal business

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and Transport business in large scale in the name of M/s. Lakshmi Durga

Enterprises and M/s. Lakshmi Durga Coal Carriers and was the Managing

Partner for the past 14 years. Recently, he has established M/s. Lakshmi Durga

Hotels in Hyderabad. Now he has diversified the activity and has entered into

granite field and has gathered knowledge about granite industry and mines. He

is the Chief Promoter of the project and the Managing Director of the company.

SMT. S. JHANSI LAKSHMI: DIRECTOR

Smt. S. JHANSI LAKSHMI aged about 45 years having substantial

business experience for the past 20 years is one of the Promoter Directors of the

company. She is a partner in M/s. Lakshmi Durga Enterprises a profit making

concern for the past 14 years.

SRI JEEVRAJ PATEL : DIRECTOR

Sri JEEVRAJ PATEL aged about 46 years having business experience for

the past 20 years is one of the Promoter Directors of the company. Sri Jeevraj

Patel who hails from Gujarat state is in the business of timber and partner in M/s.

Sree Rama Timber Depot. He is also an active participant in the granite unit.

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INCENTIVES AND CONDITIONS OFFERED UNDER THE 100% EOU

SCHEME:

Government of India has set up several Export Processing Zones and Free

Trade Zones to encourage entrepreneurs to start units for supplying different

products in international markets and to earn precious foreign exchange for the

country. These units have been extended several benefits.

Lakshmi Durga Granites Limited comes under the purview of

Visakhapatnam Export Processing Zone ( VEPZ ). The company will send the

quarterly progress reports and other information requested by the Commerce

Ministry, Government of India to the Visakhapatnam Export Processing Zone.

The 100% export oriented units are allowed duty free import of capital goods,

components, spares, consummables, office equipment, material handling

equipment; construction materials etc. under Open General License ( OGL ) which

are required for the manufacture of the product.

These units are allowed import of capital goods against free foreign

exchange or bilateral credits.

These units are permitted to import drawings, blue prints, technical charts

without any import duty.

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 Any unit in the domestic tariff area (D.T.A) supplying capital or revenue

goods to a 100% export oriented unit is treated as deemed exports and will be

eligible for all export concessions.

Any purchase of capital or revenue goods from D.T.A. is allowable on

an excise duty free basis.

Goods (capital or revenue) supplied by the units in the D.T.A. will be

exempt from payment of central sales tax.

A 100% export unit is allowed to sell its products to domestic projects

under global tender conditions.

The Government of India is to issue a green card to such units, this will

ensure priority treatment in matters of allotment of raw materials, power

clearance, import of capital goods from Central and. State Governments.

Units under the scheme are exempt from payment of excise and sales

tax on the finished product.

Rejects up to, 5% will be allowed to be sold in the domestic market.

This would be allowed on payment of customs duty on imported inputs and

central excise duty of indigenous inputs as well as duties on finished product.

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Foreign collaboration is permitted and foreign equity capital upto 100% is

permissible.

For all approved investments and collaborations the Government allows

remittance of know-how fees, royalty and dividends subject to payment of

taxes if any are due.

The production of the unit shall be undertaken to be manufactured in

bond and customs authorities shall be provided bond facilities.

The entire production of the unit shall be exported for a period of ten

years or less from the date of commencing commercial production as may be

specified by the Government.

A legal undertaking in this regard will be executed by the undertaking. If

the duration is not specified it will be deemed as ten years.

Time phasing for achieving 100% exports may be considered on merits.

However, in such case during the gestation period exports shall have to be atleast

three fourth of the production.

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 It is pertinent to discuss here some other benefits accruing to the unit as

per income tax rules. However, for the sake of better understanding we have

listed below the benefits the unit is entitled to:

INCOME TAX BENEFITS APPLICABLE TO THE NIT

The following items will be subtracted for "Profit after Interest" to arrive

at taxable income:

1. Under section IOB of income tax act 1961, the company being a 100%

EOU, would be eligible for exemption of its entire profits and gains

derived from the unit for any five consecutive assessment years at the

option of the company, failing within a period of eight years beginning

with assessment year 1994-95.

2. If the company does not take the option of section 1 OB 100% of the

export profits are exempt from Income tax under section 80HHC.

The unit has been sanctioned by the State Government a cash subsidy of

Rs.1.5 lakhs, since the unit is set-up in backward area.

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 GRANITES

GENERAL:

There is considerable variation in conceptualizing granite in the several

application areas and as such it does closely correspond with the petrologic

definition. In petrology, granite is the group name describing a family of

plutomic of deep seated igneous rocks having even structural characteristics by

the presence of mineral quartz, felspar and some ferro-magnesian minerals.

Black granites are the dark igneous rocks rich in ferro-magnesian minerals and

petrologically classified as diorite, gabbro, dolerite etc.

APPLICATION AREAS

Granite is one of the important dimension stones by virtue of its physical

characteristics. It shows higher resistance of weathering, high crushing strength

and is capable of retaining polish fresh for centuries. This also affords different

pleasing colors to the end user. Further, the homogenous grain structure, its

availability in large blocks and the case of mining makes it an excellent

proposition for the architectural and engineering purposes.

Granite is known for its aesthetic look and is used in producing

monuments/memorials, slabs for flooring, facading, kitchen tops, vanity tops etc.

articles like flower vases, balls and balusters can also be produced. Dressed, cut

and shaped in different sizes, it is also used as flagging stones over steps,

walkways and terraces. The engineering grade granite is used in the construction

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of bridges and other structures, piers, sea and river walls, dams, grade separators,

retaining walls and pavement.

Also due to its size, stability, low denting and wear resistance qualities it

has made a great impact in the manufacture of scientific and laboratory

equipment like surfaces, plates, parallels, cubes, straight edges, measuring

prisms and other meteorological aids.

While engineering specifications relate to strength and durability,

dimension stone specification for architectural purposes cater to the aesthetic

qualities such as design, surface, appearance and workmanship.

In India granite has been extensively used in the erection of temples,

forts, palaces, museums, monuments etc., since olden times.

Physical & Thermal Properties of Granites:

Density < 16 ft cube 160-190

Compressive strength (10-3 psi) 13-55

Rupture modular (10-3 psi) 1.3-5.5

Shearing strength (10-3 psi) 3.5-6.5

Yong's modular (10-6 psi) 4-16

Modular of rigidity (10-5 psi) 2.16

Possion's ration 0.5-0.2

Abrasive hardness index 37-38

Porosity, volume % 0.6-3.8

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48 hour water absorption 0.2-0.58

Thermal conductivity 20-35

(per ft. per hr per.... )

Coefficient of thermal 3.6-4.6

Indian Standards:

For systematic development of building stones standardization plays a

very important role. Building stones have to be standardized for dimension and

other mechanical operation like grooving, sawing, grinding, polishing, edge

cutting etc. Granites and its building construction fall under Indian standards

IS:3316-1974.

Granite for Building Industry:

Granite well known as a reliable material for the building industry have

been scarcely used in the past due to its high degree of hardness and consequent

difficulties to machining operation and the difficulties caused the cost of granite

products to be very unattractive for the use. Due to operational constraints the

industry did not have the capacity to deliver proper quality of granite products at

right time as demanded by market.

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Technical Innovation:

Since marble is being rapidly replaced by the granite, the demand for

granite has been steadily increasing in the world market. The advancement of

technology in granite industry now transformed the rough block into highly

polished granite through machining operation. Due to this technological

innovation, the industry is now able to reduce the production costs and

considerably increased its productivity.

The technical improvement in cutting by block cutters had made great

advancement in cutting dimensions of the granite blocks as such the sizes

obtained have been made increasingly bigger (from 30 cm in width upto 45 cm

and now upto 61 cm) and the thickness have been made increasingly thinner all

without charge in the economic parameters.

Thus the introduction of block cutters results higher rate of production and

also short to have an advantage in the finishing process due to the smooth and

plain surface of the strips . The roughness, which is typical to the traditional

cutting system, has been eliminated as a result of the rotating action of the

diamond discs.

The use of granite to building/construction industry can be divided into

three major segments . the building construction industry, for memorials and the

home improvement/do -it yourself (DIY) sector.

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Building Construction:

Industrial sources estimates that about 60 % of the total traded material

stone is used in the construction industry. Major use of granite include interior

and exterior cladding, paving, flooring and sills.

Memorials:

The market of natural stone for use as memorials is around 40 % of the traded

natural stone, largely black granite is used for memorials. Standardization of

memorial specifications by church and municipal authorities have presented

market opportunities.

Home Improvement /Do-it -yourself (DIY)

The home improvement and do-it-yourself sector has a buoyant trade in

natural stone. The range of products demanded by the market can be divided into

two major categories:

a) Modular elements for flooring, internal and external claddings, steps,

sillos, etc. upto a maximum width of 610 mm in a variety of lengths

and thickness.

Tiles (modular granite) in the standard dimensions: 300x600xI2,

450x50x 12, 600x600x 12, 18x 18x 1 /2, 12x24x l /2, 24x24x 1 /2".

b) Slabs and large panels above 610 mm (24") width.

The demand for modular granite has strongly developed with the arrival of

specialised installation and there is proof of tendency towards further increase of

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the demand. It is therefore, fair to assume that new instruments backed by the

latest technology of diamond tools will improve the finishing and which in turn

make new investor to reap the benefits in near future.

Granite for Industrial use:

Granite is a term used commonly for ingenous rocks which are widely

used as building materials. There are abundantly available in South India in the

form of rocks, boulders etc. in the rich variety of shades and colours.

Granite is also a commonly used term for some of the rocks used in

industrial applications such as surface plates, machine structure, etc. The

composition of these rocks vary from place to place. Granite consists of a fairly

coarse grained aggregate of quartz and felspar with small quantity of black or

white mica. It is more commonly found in grey granite, black granite and pink

granite. The most popular stone used for surface plates has been black granites or

dolomite, unlike grey granite, these rocks have low percentage of quartz.

Selection of Granite for surface plate:

The properties to be considered for selecting a rock for manufacture of

surface plate are hardness, density, the grain and non-existence of natural or

induced flaws. Uniformity of grain and structure is a good hardness, density of

the grain and non-existence of natural or induced flaws. High density granite

generally gives better compressive strength. The hardness of a rock is dependent

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upon its chemical composition. large amount of quartz content gives higher

hardness to the rock. Hardness is generally measured by shore scleroscope

method. The recommended hardness value in engineering application in between

80 & 90 (shore D).

PROJECT DETAILS

PROJECT:

The company is an existing 100% Export Oriented Granite Slab Cutting

Unit with an installed capacity of 40,000 Sqmts. The company has already

started commercial production.

LAND AND LOCATION

The plant is located on State Highway No.5 at Survey No.240, Bibinagar,

Nalgonda District, Andhra Pradesh. The company has purchased 3 acres of land

and it will be entering into an agreement for purchase of 4 acres of land adjacent

to the existing land shortly. The site is 35km from Hyderabad City. The site

enjoys the necessary facilities of high tension power station, telephone, telex and

other communication facilities. It has a railway station situated about ''/z km.

from the site.

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BUILDINGS

The construction of main factory of 40,000 Sqmts. capacity has been

completed. Other buildings like security room, water tanks, generator room, store

room, administrative block are completed. The administrative building (office) is

located at Lakshmi Nagar, Kothapet, Hyderabad. The total buildings constructed

will be sufficient for the project.

TECHNOLOGY/PROCESS

To begin with, granite blocks of optimum size are mined with the latest

mining equipment's, dressed into cubical shapes and transported to the factory.

The rough granite blocks are sliced in desired thickness for slabs on the

gangsaws. The entire operation is programmed as fully automatic. The rough

slabs so obtained are transferred to the polishing line where they are polished by

means of multi-heads fitted with abrasives in the presence of water. The polished

slabs are then transferred to the edge cutting machine where they are cut to sizes

as per the customers requirements and will be ready for packing. The main

process being cutting and polishing is done on Italian machinery. The

performance and efficiency is rated highly.

RAW MATERIALS

The major raw materials required are rough granite blocks. The company's

requirement of rough granite blocks at the optimum level of production

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envisaged has been assessed as 2500 Cmts. per annum. The company has

acquired sufficient quarries to meet the requirements. The required raw material

will be procured from the mines of the company. The details of owned quarries

are stated in list of quarries statement.

CONSUMMABLES

The main consummables such as steel grits, steel blades, polish abrasives

and other accessories and spares are being imported from reputed suppliers in

Italy. Being a 100% Export Oriented Unit the same are available for import

without payment of customs duty.

POWER

The maximum requirement of power for the project is estimated at 450

KVA which is taken from APSEB. The company has acquired 2 D.G. sets of 320

KVA each as a standby arrangement to take care of the total power requirement.

WATER

The water for cooling purposes is estimated at 300 kl. per day and is

available from the three borewells dug at the site.

EFFLUENTS

The process does not generate any harmful or hazardous effluent. No

objection certificate from Andhra Pradesh State Pollution Control Board is not

required for granite slab cutting units.

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MARKET

The existing demand for polished granite is not restricted to construction

industry but also popular as tomb stones, monuments etc. The company has

entered into Memorandum of Understanding with different foreign buyers in

EUROPE, GERMANY and USA, as they are the main consumers of polished

granite slabs. The total committed offtake by the aforesaid imports will cover the

entire installed capacity of 40,000 Sqmts. per annum and the selling prices are

based on commercial rates prevailing in the international market at the time of

placement of the relative firm orders subject to a stipulated minimum price.

Further the company will also undertake direct export to other places such as

AUSTRALIA, SINGAPORE, JAPAN etc. The company envisages no difficulty

in marketing the company's product.

PERSONNEL

The company will be providing direct employment to about 85 persons

including factory workers, supervisory and administrative personnel. Both

unskilled and semi-skilled labour are available locally. The organizational

structure of the company is given in the following chart:

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 ORGANISATIONAL CHART

CHARMAN
& M.D.

DIRECTOR

Manger (Mar) Deputy Senior Accounts Manger

& Exports Manager(Fin) & Administrative Production
Offices

Computer Accountant
operator Maintainance Production
Engineer Incharge

Supervisor

Receptionist

Operator Operator Operator

Receptionist Gangsaw Gangsaw Gangsaw

Receptionist
Helpers Helpers

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 2. AUTOMATIC SURFACE POLISHING MACHINE

To polish the surface of the sawn material coming out of the gangsaw we

have selected Heavy Duty Surface Polishing Machine. The grinding process will

start with diamond head to remove uneven surface and the steel shots. After this

operation abrasives will be used for grinding and polishing the surfaces. Usually

there are two degrees of polish which can be classified into:

1. Mirror Finish.

2. Honed Finish.

The above finishes will be achieved by setting the right grinding pressure,

water supply and grinding speed.

3. LENGTH AND CROSS CUTTING

These machines are equipped with 300 or 400mm dia blades. Depending

on the width of the material to be cut, as on the order the blades can be adjusted.

The polished building slabs are run on a conveyor belt where the cutting

operation is executed. The cutting process is automatic.

4. FLAMING MACHINE

The flaming machine is used for burning the surface which will give a

symmetrically rough surface. This mat finished stones are normally preferred for

pavements, wall decorators etc. The flame finish obtained by sharp chisels fitted

23
on the motor powered heads and variations in the surface finish is possible by

selecting different chisel heads and also adjusting the degree of flame. The

flamed finished material has gained importance in the recent times due to its

unique appearance. The flame finish is usually done after the gangsaw cut.

PRODUCTION PROCESS

1. RAW MATERIAL

The raw material i.e. granite blocks are quarried out from the quarries and

will be transported to the factory for cutting. There are different varieties of

granite material available in different parts of India. India offers more than 50

varieties of granite. These granite blocks are cut in the factory into slabs.

2. CUTTING

Blocks are cut by gangsaws. These machines are imported from Gaspari

Mennotti, Italy. For cutting the blocks, blades, steel grits and lime water are

used. Each gangsaw is fitted with 120 blades. This machine can cut a slab of size

3m length and width 2m with thickness of 2cm or 3cm or 4cm depending upon

the order.

3. POLISHING

Slabs that are cut at the gangsaw will be brought to the line polisher. The

line polishing machine is also imported from Mordenti, Italy. This machine is

24
fitted with 12 polishing heads. Each head has provision for fixing 6 polishing

bricks (abrasives). There are different stages in polishing. In the first stage

roughness of the surface and also thickness variation are removed. And after 6-7

stages final polish will be done.

4. REJECTIONS

If there are any cracks, lines or double color is noticed in the slabs, those

slabs will be rejected and will not be exported. Only slabs without any defects

are exported. The rejected slabs sometimes will be sold in the Domestic Tariff

Area ( DTA Sales ) or will be made into small cut size slabs avoiding the defects

and will be sold in the international market.

5. PACKING AND CRATING

Slabs that are ready for export will be packed in a seaworthy wooden

crates. Each slab is wrapped in a polyethene sheet. In each crate 10 slabs will be

accommodated.

6. EXPORT

The packed granite slabs are exported to different countries in a 20 feet

container. One 20 feet container can be stuffed with 300-350 Sqmts. of slabs.

After stuffing the container all the export formalities like sealing the container,

examining and certifying the documents will be done by the Customs and

25
Central Excise Authorities of the range concerned. After this the container will

be transported to Madras or port of shipment on truck or through Inland

Container Depot (ICD) by goods train. All the shipping formalities and shipment

of the container at the port of shipment will be done by the company authorized

Clearing and Forwarding Agent.

CUSTOMS AND CENTRAL EXCISE:

Every dispatch from the factory will be inspected by the Customs and

Central Excise Authorities of the range concerned. After signing the

documents - invoice, packing list, AR4, etc. the authorities will put a seal to

the container at the factory which will be taken to the port and loaded directly

on to the vessel at the port of shipment. Documents signed by the Customs

and Central Excise Authorities of the range concerned will also be sent to the

Customs Authorities at the port of shipment. At the time of shipment invoice

and packing list will be appraised by the Customs Authorities at the port of

shipment and these will be sent to the exporter along with GR form and bill of

lading from the carrier to be presented to the bank for negotiation.

International marketing is the performance of business activities that

direct the flow of goods and services to consumers or users in more than one

nation. Though international marketing is in essence export marketing, it has a

broader connotation in the marketing literature. It also means entry into

26
international markets in the following ways : (a) Opening a branch/subsidiary

abroad for processing, packaging, assembly or even complete manufacturing

through direct investment; (b) Negotiating licensing/ franchising

arrangements whereby foreign enterprises are granted the right to use the

exporting company's know-how, viz., patents; process or trade marks, with or

without financial investment, (c) Establishing joint ventures in foreign

countries for manufacturing and or marketing; and (d) Offering consultancy

services and undertaking turnkey projects abroad. Depending upon the degree

of a firms involvement, there may be several variations of these arrangements.

Exporting means operating in a cross-cultural environment. This makes

the task of marketing more complex because the marketer must appreciate

how different is the foreign culture from his own and how this difference has

to be reflected in shaping his behavior pattern as well as Iris export marketing

strategy.

Some of the factors relevant to international marketing are:

1. Social Factors:

Social factors play an important role in international marketing. These

social factors vary from country to country. It is essential that the companies

have an understanding of the national legal regime prevailing in that country.

Political situation prevailing in the country where operations are intended also

27
affects international trade. Political stability helps in improving confidence in

the target country. The other social factors are culture, language and climate.

2. Economic Factors

Another important factor is the economic variables affecting

international trade. Every country tries to protect its domestic markets and

help its exporters and business community. Most commonly, tariffs, quotas

(either quantitative or qualitative restrictions or both), licensing and non-

tariff barriers also affect the economic environment. Currency restriction in

the form of foreign exchange controls, and other fiscal policies, internal

demand management policies and instruments.

3. Competition:

International companies have to be prepared to face severe

competition from producers in the importing country, exporters from other

competing countries and also from other exporters from one's own country.

4. Logistics:

Logistics is a vital factor which no international company can afford

to neglect various modes of transport (sea, air , freezer, space etc.) and the

costs of transportation have to be taken into account.

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5. Risks:

Risk is inherent in every business more especially so in international

operations. Some of the risks to be tackled are political risks, commercial

risks, acts of God and acts of enemies; pirate and thieves etc. The higher the

risk the more profit a person can get.

29
 FLOW CHART

Commitment to export

Analyse

Internal Factors: External Factors: Market

Product & Resources Environment & Competitive Profiles

Decide

- Target Market
- Market Segment
- Entry Method
- Marketing Strategy

Set

Implement

Organise: Department, Subsidiary, External Factors: Market

Joint Venture & Export House Environment & Competitive Profiles

Export

Review, Modify & Set New Targets

30
Steps to be followed by a company before going International:

The first step obviously is the most crucial one, viz., the commitment to

go for. international business. Once this basic decision has been accepted as the

organisation motto, the second step is to carry out the SWOT analysis. This

analysis consists of evaluating the strength, weakness, opportunities and threats

of the company against the perspective of internal, external and international

parameters. The results of this analysis will help in reaching conclusion (the third

step) with regard to (a) Which markets to enter, (b) Which particular segments,

(C) How to enter and (d) How to market. Once the decisions have been taken on

these, the company will be in a position to set the targets (the fourth step) in

terms of market penetration, sales volume, or product awareness relative to

specified time horizons. The fifth step is to develop the organisational system to

carry out the international marketing functions and to make adequate resources

available to make the functioning effective. The sixth step involves the carrying

out of the actual job of international marketing. The seventh and the final step is

to review, identify the mistakes, if any, modify the system, if required, and set

new targets for the succeeding period.

31
Importance of international trade:
No country has within its own boundaries resources for economical
production of all its requirements. International trade makes possible for a
country to obtain goods it cannot produce or cannot produce as cheaply as other
countries. Hence a country's well-being is determined to a great extent by the
nature of its foreign trade. Today products are being improved upon and
produced in greater number. As a result, standards of living throughout out the
world are improving. The importance of international trade to consumers lies in
the fact that they can purchase from the cheapest sources.
International trade leads to an increase in overall employment.
Development of imports and exports gives a fillip to auxiliary services such as
transport, shipping, banking and insurance which further increases
employment.
International trade has increased economic interdependence of nations.
Modern industries are dependent upon a variety of raw materials all of which
cannot be conveniently and economically produced in any one country. If the
flow of important raw material is disturbed in anyway, production in
industries dependent on them will be seriously dislocated. At present, goods
are not exported merely because there is surplus for exports. Often goods are
produced specifically to satisfy export demands. Sometimes exports are
encouraged to obtain essential imports.
The ratio of imports and exports to Gross Domestic Product affords a
reasonably god measure of the actual degree of dependence of a country upon
international trade. The following table contains relevant figures for some
countries for the year 1975 to 91:

32
TABLE 1.1: SHARE OF FOREIGN TRADE IN GROSS DOMESTIC
PRODUCT OF SELECTED COUNTRIES DURING 1987 TO 1003 (in %)

Countries 1987 1992 2001 2003

Belgium 92 146 128 143
Denmark 54 54 16 68
Nigeria 56 45 44 63
Canada 42 48 47 57
U.S.A. 14 18 16 22
Brazil 20 19 16 15
Mexico 12 21 23 31
Australia 23 29 26 36
Sri Lanka 38 79 60 68
Indonesia 40 47 41 54
Japan 23 26 17 19
Korea, Rep. Of 65 68 58 61
Bangladesh 14 29 24 23
Pakistan 20 37 33 38
Singapore 238 414 336 447
Germany 39 47 51 67
Netherlands 86 90 96 103
U.K. 43 45 49 49
Norway 60 62 53 81
Switzerland 48 65 63 69
India 14 17 15 18
* Percentages calculated on the basis of data provided in the hand book of

International Trade and Development Statistics and World Development Reports.

Source: UNCTAD – Handbook of international trade and

development statistics.

It is extremely difficult to analyse all the influences which go to determine

the percentages shown in table 1.1. Yet certain facts stand out fairly clear certain

countries mostly depend upon international trade like the Netherlands, Norway,

Belgium, and Denmark, these countries are small and fairly wealthy countries.

33
The countries least dependent upon international trade form an oddly assorted

collection - the U.S.A, Russia, India and China. Their great size with wide range

of domestic resources is responsible for their relatively high degree of self-

sufficiency. The group contains both the richest and the poorest of countries. The

correlation between income per head and dependence on international trade is

positive, and though small, is just enough to be statistically significant.

The increase in world trade has been due to a number of factors. In the

post-war years, vigorous expansion of the world economy, partly due to

Government policies, aimed at ensuring economic growth, has provided the

principal impulse for the growth of world trade. The gradual liberalization of

trade restrictions and import quotas, reduction in customs tariffs and the vigorous

export promotion activities have also contributed to the growth of world trade in

no small measure. The increased flow of funds from the economically advanced

countries to the developing ones has also helped in the growth of world trade.

Regional Distribution of World Trade:

The developed countries dominate the world trade whose share has been

around 70 percent during the last 27 years (Table 1.2). The share of the

development countries increased from 18 percent to 30 percent during this

period.

34
 TABLE 1.2

DISTRIBUTION OF WORLD EXPORTS DUEINT 1980-02

Particulars 1980 1990 1995 1999 2002

World 314 1,995 1,932 3,034 3,700
Developed Countries 223 1,256 1,272 2,133 2,600
Developing Countries 57 561 455 634 1,100
Centrally planned Economics* 34 177 205 267

Source: GATT

With the breakdown of USSR & East European Communist regmines,

this nomenclature is not longer useful.

35
 The following chart shows the distribution of World Exports

during 1980-2002

4000
3500 World
VALUE US $ BILLION

3000
2500 Developed Countries

2000
Developing Countries
1500
1000 Centrally planned
500 Economics*
0
1980 1990 2000 2010
Years

36
Trade and output trends in 1990s:

In 1997 and 1998, trade growth has been exceptionally strong as

compared to output growth. The higher rate of growth in world trade than in

world outpour in recent years is the result of both recent developments and

of ongoing long term changes in the world economy.

World trade expanded strongly in 2000, recording the largest yearly

gain since 1976, and growing more than twice fast as 1999. The pace of

global output growth was also stronger in 2000 than in 1999, but remained

well below the growth of trade. The substantial gap between trade growth

and output growth in 2000 is a reflection of the continuing integration of

national economies through trade.

After a bumper year in 2000, world trade expansion slowed slightly to

8 percent in 2001. In value terms, world merchandise exports rose by 19

percent to $4.9 billion.

Commercial services like banking and tourism were worth an

estimated $ 1.2 billion, up by 14 percent on +99+x. The hike in value was

mainly due to the depreciation of the dollar against most other currencies, as

well as higher commodity prices.

Developments in Asia:

The volume of imports grew by 13 percent and outstripped the growth

in exports for the fourth straight year. Despite sluggish domestic demand,

37
 Japanese imports grew by, 11.5 percent while exports increased by just 2.5

percent. The earlier explosion in Chinese exports slowed slightly and its

import growth remained will below the Asian average.

TABLE 1.3 INDIA’S FOREIGN TRADE IN DOLLAR TERMS

Year Exports Growth rate Imports Growth rate Trade balance

1996-97 18.1 9.2 24.1 13.5 -5.9
1997-98 17.9 -1.5 19.4 -19.4 -1.5
1998-99 18.5 3.8 21.9 12.7 -3.3
1999-2000 22.2 20 23.3 6.5 -1.1
2000-01 26.3 18.4 28.6 22.9 -2.3
2001-02 28.2 21.4 32.5 29.8 -4.3
(Apr-Feb)

Source: UNCTAD – Hand book of international trade and development

statistics.

India’s trade deficit in 2002-03 has increased by 19.86%

It was reported some time ago that out of 150,000 registered

exporters. Only 3,500 account for 80 percent of total exports from India.

Export marketing is the integrated marketing of goods and services

destined for customers in international markets. Export marketing requires:

1. An understanding of the target market environment.

2. The application of all the conceptual and analytical tools of marketing,

specifically:

a) The use of marketing research and the identification of market potential.

38
b) Product design decisions, pricing decisions, distribution and channel

decisions, and advertising and promotion decisions.

c) Organization, planning and control.

The fact is that exporting is becoming increasingly important as

companies in all parts of the world are stepping up efforts to supply and

service the markets located outside their national boundaries.

Export Financing / Methods of Payments:

The decision as to the appropriate method of payment for a given

international sale is a basic credit decision. A number of factors must be

considered, including currency availability in the buyer's country,

creditworthiness of the buyer, and the seller's relationship to the buyer. The

different methods for arranging payment for export merchandise sales to

buyers abroad are:

1) Letter of Credit:

Letter of credit is the payment method most often used in international

trade. A Letter of Credit (L/C) is essentially a "Letter" by which a bank

substitutes its creditworthiness for that of a buyer. A letter of credit can be

considered a conditional guarantee issued by the bank on behalf of the buyer

to a seller assuring payment if the seller complies with the terms set forth in

the letter of credit. The exporter ordinarily receives payment at the time of

39
shipping. The documents are presented to the bank for negotiating the letter

of credit in the seller's country.

2) Documentary Collection (Drafts):

A documentary collection is a method of payment using a bill of

exchange, also known as draft. With a documentary draft, the documents which

are required to clear the goods through customs and conveying the title and other

important shipping documents are sent to a bank in the importer's country. The

draft is presented to the importer along with these documents. which are

delivered against the importer's honouring the draft.

3) Cash in Advance:

Some times the exporter may request cash payment in whole or in part in

advance of shipment. It may be due to credit risks abroad being high, exchange

restrictions, or when exporter may be unwilling to sell on credit terms.

4) Sales on Open Account:

Open account, terms generally prevail in areas where exchange controls

are minimal and exporters have long standing relations with good buyers in near

by or long - established markets.

5) Sales on a Consignment Basis:

In countries with free ports or free trade zones, it can be arranged to have

consigned merchandise placed under bonded warehouse control in the name of a

40
foreign bank. Sales can then be arranged by the selling agent and arrangements

made to release partial lots out of the consigned stock against regular payment

terms. The merchandise not cleared through customs until the sales has been

completed.

The process of export begins when the customer sends an enquiry to the

supplier. The company in reply dispatches its quotation with details of its

products, their price and quantity available.

When the customer places the order with the company, a dispatch note is

sent by the company to its factory.

Export Documentation:

Every export shipment must be accompanied by a number of documents.

Documentation in one of the major differences between domestic and

international trade. Export documentation plays a vital role in international

marketing as it facilitates the smooth flow of physical goods and payments

thereof across national frontiers. Export documentation is however, complex as

the number of documents to be filled in is large, so also is the number of

concerned authorities to whom the relevant documents are to be submitted. Any

mistake in providing correct details in the documents may create problems for

the importer in getting the goods from the ships when they arrive at the port of

destination.

41
 The most frequently required documents for an export shipment are tire

following:

a) Commercial Invoice:

This document is the seller's bill of the merchandise. This is the basic

document in an export transaction. It contains all the information which is

required for the preparation of all other documents. It is thus, a document of

contents.

It gives the description of the goods, customs Co-operation Council

Nomenclature (CCCN), price charged, the terms of shipment and the marks and

numbers of on the packages containing the merchandise. The date, name and

address of both buyer and seller, name of shipping vessel and the port for

debarkation should also be included. There is no standard form of commercial

invoice. The exporter has to design his own form.

The description of the merchandise in the commercial invoice must

correspond exactly to the description in the letter of credit. Unless the letter of

credit specifically states otherwise, a generic description of merchandise is

usually acceptable in the other documents. The commercial invoice is generally

receipted and signed by the seller and it is submitted in a set of at least three

copies. The main purpose of commercial invoice is to check that appropriate

goods have been shipped and that their unit price, total value, markings on the

package, etc., are consistent with those mentioned in other documents.

42
b) Certificate of Origin:

The certificate has to be obtained by the buyer without which permission

to import may be refused in some countries. The essence to this document is to

certify that a particular good was originally produced or manufactured in a

particular country. The main purpose of this certificate is to establish the right of

the product to preferential duties to which it may be entitled. A certificate of

origin needs to be certified by the chamber of commerce in the exporting

country.

c) Certificate of Inspection:

This certificate is demanded sometime by a foreign buyer. He insists upon

such a certificate to make himself sure that the goods he is buying meets a

certain standard. This certificate is issued by one of the authorized inspection

agencies in the exporters country. The exporter has to settle in advance with his

customs as regards the payments of the expenses to carry out the inspection.

d) Packing List:

This list is intended to supplement the commercial invoice when the

numerous units of the same product are being shipped. It is also needed when the

quantities, weight of contents of the individual units are to be checked by

receiver of the shipment. It helps in sorting out the packages in weighing the

43
goods. The exporter himself has to evolve his own packing list. The customs

officials may carryout a partial examination by checking a certain number of

cases and if the packing list proves to be accurate for these, the rest of the

shipment is assumed to be in order.

e) The Bill of Lading:

It is a document which is issued by the shipping company acknowledging

that the goods mentioned therein have been placed on board the ship and an

undertaking that the goods are in order and condition as received and will be

delivered to the consignee, provided that the freight specified therein has been

duly paid.

The Bill of Lading has the following main functions:

1. It is a document of title to the goods shipped.

2. It is a receipt for goods and

3. It is an evidence of the contract of affreightment.

When the export contract is Cost , Insurance and Freight (C.I.F), the

exporter makes payment of the freight and gets "freight paid " bill of lading. On

the other hand, if the contract is Free on board the freight has to be paid by the

importer. The bill of lading should give the details about the exporter, carrying

vessel, goods shipped, port of shipment, destination. Bill of lading are made in

sets, usually of two or three originals, any one of which gives title of the goods.

44
The bill of lading is presented by the importer to the agent of the ship when the

ship arrives at the port of destination.

f) GR Form:

This form has been prescribed by the RBI to ensure that the foreign

exchange receipts in respect of exports are repatriated to India. This has to be

prepared in duplicate. Both the copies have to be submitted to the customs

authorities at the port of shipment. Customs authorities will] certify the value

declared by the exporter on both the copies of the GR form and will also record

the assessed values. They will retain the original to be sent to the RBI directly.

They will return the duplicate copy which is submitted with the goods. The

negotiating bank sends the duplicate copy to the RBI after the exporter proceeds

have been realised.

g) AR Form:

Rule 12 of the central Excise rules formulated in terms of basic provision

of section 37 of the Central Excise and Salt Act 1944 provides for refund of

central excise duty paid in respect of export product cleared from the factory

under AR-4 /AR-4 A formalities. Rule 13 and 14 provide for export excisable

goods without payment of central excise duty under the system known as export

under bond, Rule 13 provide for export under bond in respect of single export

45
transaction, where as rule 14 provide for export under bond on a containing

basis.

To avail these facilities these forms has to be duly filled in by the exporter

specifying the details about the shipment, port of shipment, the amount of duty

applicable, the fact that the duty has been paid or there is enough credit balance

in the running account have to be submitted to the Range Superintendent.

The following documents are required to be prepared before the material

is actually dispatched from the country ; (copies annexed)

1. Purchase Order

2. Invoice

3. Packing & Weight list

4. Certificate of Analysis

5. Certificate of Origin

6. AR-4 Form

The Customs House Agents prepares the following document. (Copies

enclosed in Annexure).

1. Shipping Bill 2.GR From 3. Air Way Bill (AWB) for Air cargo. All

these documents are duly certified by the customs inspector and the

Superintendent. The material is than loaded into the airplane.

46
EXPORT MARKETING OF LDGL

LDGL, in a very short span (soon after commencing its production in

December '93) increased its sales rapidly. The company produces building

slabs and special wall cladding. The company has very good contacts with

their customers (importers) abroad, particularly with U.S where the demand

for granites was increasing several folds every year. Lakshmi Durga Granites

Limited is also planning to increase its sales by exporting to other potential

countries like Japan, Singapore etc. An analysis of various factors of'

marketing are:

A. MARKETING MIX:

Neil border developed the concept of the marketing mix in 1962. Mc

Carthy coined the 4P's. "The 4P's were Price, Place, Promotion and Product.

PRODUCT:

In the domestic marketing framework, the product is visualised as

consisting of several sub-elements.

- Product Line. - Packaging.

- New Product Development. - Branding.

- Warranties

- After Sales Service.

47
 In the case of granites, there i; no such thing as branding and after sales

service. When granites are exported they are sent in containers, hence, these

granites are not labelled or branded. The quality of granites play an important

role. The company has to confirm to strict quality standards i.e. perfect

polishing, cutting, etc. The granite products as a whole can be classified into

three different categories:

1.Granite monuments and markets.

2.Building material

a. Granite building slabs.

b. Granite tiles.

3. Precision products like surface plates.

The demand for each product is varying depending on its application,

replacement marker and usage. For example, the demand for monuments in

the last few years is not growing. In other words monument market is not a

growing market. but inspite of this handicap, Indian monuments due to the

availability of variety of block materials have gained substantial market share

in the global market. Whereas, on the contrary the demand for building slabs

is growing at a rapid pace. The new buildings are equipped with granite slabs

and the old buildings are being replaced by granite slabs. Same way granite

tile market is also booming.

48
 The precision products like surface plates are also required in huge

numbers. But the bottleneck to manufacture the surface plates with

international tolerance and heavy investment is a stumbling block for this

particular product.

The building slabs ca n be classified into:-

i) Granite slabs.

ii) Marble slabs.

iii) Artificial stone.

Out of the above three materials granite slabs has gained world wide

popularity and importance due to its stability, colour, aesthetic look, easy

maintenance, etc. So the company has selected granite slabs as their main

product.

The different product lines of the company are:

1. Building slabs for internal wall cladding.

2. Building slabs for external wall cladding.

3. Building slabs for reception/ counter tops.

4. Building slabs for kitchen tops.

5. Building slabs for dinner halls.

6. Building slabs for bathrooms.

Packaging has often been described as the silent salesman. To provide

protection in fact is the basic function of packaging. From a marketing stand

point, the basic function of packaging lies in its role as a sales tool. LDGL does

49
the packing carefully in wooden crates. The small space between each granite

was provided to avoid any cracks. The spaces were filled with polythene covers.

The company does not pack the granite the granite slabs beyond a certain limit

say 10 slabs here.

While product packaging is more of a concern for consumer product

exporters, transport packaging is a concern for all. Inadequacy of packing can

result in danger to the cargo during transit, resulting in loss and dispute with the

buyer abroad. `transport packaging needs to be based on the individual product

features (i.e. fragile, water, etc.), the handling system at the port of shipment and

destination and any legal requirement banning use of specified material for

packing. The Indian Institute of packaging is in a position to give technical

advice on the packaging requirements of specific export products.

SALES:

The sales of the company can be seen from the following charts of the

company for 2000-01, 2001-02, 2002-03. The sales for 2000-01, 2001-02 and

includes the sales in the International market and the DTA Sales:

50
 SALES FIGURES FOR THE YEAR 2000-01

MONTH TOTAL SALES

JUN 1492260
JUL 2281320
AUG 76109
SEP 2000 342588
OCT 2524008
NOV 1192589
DEC 175366
JAN 2230168
FEB 2001 4766881
MAR 7011335
TOTAL 22092624

Source: UNCTAD – Hand book of international trade and development statistics.

8000000
7000000
6000000
Millions

5000000
4000000
3000000
2000000
1000000
0
Mar-01
Jun-00

Oct-00

Jan-01
Nov-00
Jul-00
Aug-00

Feb-01
Dec-00
Sep-00

51
 SALES FIGURES FOR THE YEAR 2001-02

MONTH TOTAL SALES

APR 1777972
MAY 1821198
JUN 1144707
JUL 2001 1994852
AUG 881125
SEP 1206253
OCT 3520095
NOV 2981221
DEC 3591716
JAN 2002 3318336
FEB 3421946
MAR 7887220
TOTAL 33546647
Source: UNCTAD – Hand book of international trade and development statistics.

9000000
8000000
7000000
6000000
Millions

5000000
4000000
3000000
2000000
1000000
0
Jul-01
Jun-01

Oct-01

Nov-01
May-01

Jan-02

Mar-02
Apr-01

Aug-01

Dec-01

Feb-02
Sep-01

52
 SALES FIGURES FOR THE YEAR 2002-03

MONTH TOTAL SALES

APR 2447067
MAY 1973158
JUN 2070170
JUL 2002 474894
AUG 1460260
SEP 2347506
OCT 712690
NOV 1460466
DEC 1366004
JAN 2003 677798
FEB 3004175
MAR 1614446
TOTAL 19608537

Source: UNCTAD – Hand book of international trade and development statistics.

3500000
3000000
2500000
Millions

2000000
1500000
1000000
500000
0
Jul-02
Jun-02

Oct-02
May-02

Nov-02

Jan-03

Mar-03
Apr-02

Aug-02

Dec-02
Sep-02

Feb-03

53
COMPARISON OF SALES FIGURES FOR THREE YEARS

MONTH 2000-01 2001-02 2002-03

APR - 1777972 2447067
MAY - 1821198 1973158
JUN 1492260 1144707 2070170
JUL 2281320 1994852 474894
AUG 76109 881125 1460260
SEP 342588 1206253 2347506
OCT 2524008 3520095 712690
NOV 1192589 2981221 1460466
DEC 175366 3591716 1366004
JAN 2230168 3318336 677798
FEB 4766881 3421946 3004175
MAR 7011335 7887220 1614446
TOTAL 22092624 33546647 19608537

Source: UNCTAD – Hand book of international trade and development statistics.

20000000

15000000
Millions

2002-03
10000000 2001-02
2000-01
5000000

0
OCT
JUN
JUL

NOV

JAN
DEC

MAR
AUG

FEB
MAY
APR

SEP

Price:

Compared to other P's, pricing decisions are more complex because of

their nature. There is an intangible element in price and it is perceived and

evaluated in diverse ways by prospective buyers. Considerable research all over

54
the world has shown that buyers associate quality with price, especially when

they are not technically competent to evaluate the product. The higher the price

the better the quality is supposed to be. Therefore, price serves as an information

clue to the buyer, not only with respect to the sacrifice he has to make in terms of

money, but also with respect to relative quality levels.

The prices in the granite industry are fixed based on the decision taken by

all the granite manufacturers at a meeting. Among all the granite types prelevent

in the market Black Galaxy has the highest price (1 cubic metre- Rs. 50,000/-).

The prices fixed by LDGL range from Rs. 9,000 to Rs. 50,000. The company is

going for a PRICE PENETRATION STRATEGY. In other words the company

will be introducing their product to some of the leading architects with a low

price in order to introduce their products to some of the prestigious on going

projects. After establishing themselves, they will be expanding their activity to

replacement market and also to different market segments. The buyers relations

with the company and the size of orders they place, to some extent determine the

price.

55
Distribution Channel:

Distribution channel refers, to primarily to the middlemen or intermediary

marketing institutions which perform certain marketing functions. Several

distribution options are open to an exporting company. They are:

- to set up a distribution/ sale office abroad

- to sell directly to the importer

- to appoint distributors

- to sell directly to the channel member at the bottom of the distribution

channel

- to sell directly to the end users. This mostly happens in the tender

business.

It is important to appreciate that these options are not mutually

exclusive. It is perfectly possible that the company will decide to work through

different channels in different channels in different countries. Even in the same

country it can use multiple channels to cater to distinctly different market

segments. There are different channels available for marketing building slabs.

They are as follows

ZERO LEVEL: Manufacturer ..............................Architects.

ONE LEVEL: Manufacturer ........ Retailer ........... Consumer.

TWO LEVEL: Manufacturer .... Wholesaler ........ Retailer ..... Consumer.

THREE LEVEL: Manufacturer ........ Wholesaler ..... Jobber ..... Retailer .....

Consumer.

56
 In this the company has selected the Zero level channel namely

Manufacturer ......... Architects. The company is also following Level Two.

The company's marketing strategy is to contact leading architects in

Europe, United States and other important market segments.

A majority of Indian exporting firms use the services of agents. In fact

even firms having their own offices may prefer to use their services because

some functions are best performed by agents. A few larger companies have also

appointed distributors abroad, especially when products exported are those that

need after sales service.

A majority of the Indian firms , use agents whichever specific form of

distribution channel a fine may use, there are atleast three parties which are

involved in a transaction. Each party has it's own needs and unless these needs

are satisfied, the firm will fail in it's marketing objectives. The primary

expectations of the exporter from the channel member is that he will provide

access to the market segments, outlets as he target for his products. In addition ,

he will provide marking support by organizing post sales service, technical

presentations helping in participation in trade fairs or exhibitions. The exporter

will obviously look forward to a regular feed back on how his product is faring,

what are the competitive developments in the field and suggestions for further

product or market development.

The expectations of the buyers, are most important and these must be met

by the combined efforts of the exporter and the channel member. He needs quite

57
clearly delivery and purchase terms. The principle task of the exporter is to

ascertain the specifics of these generic needs, evaluate his and the channel

members combined ability to satisfy the customer needs and also his own ability

to satisfy the channel requirements.

Promotion

For most Indian exporting firms, resources that could be allocated for

promotion are strictly limited for two reasons. Firstly, the initial export volume

being small, there is no possibility of allocating the promotional costs over the

export sales for immediate recovery as it would result in high uncompetetive

prices, thereby, promotional expenses are to be treated as entry costs and

hopefully as recoverable over a period. This may not be a feasible proposition for

many firms especially when the amounts involved are large. Secondly, even if

the rupee resources could be organized, the foreign exchange equivalence can

not be without the RBI's permission and the present dispensation does not really

allow for any large splash in a multimedia framework, especially because foreign

media costs are astronomical.

Optimizing within the budget constraint, an export firm is essentially left

with three options which can be used singly or collectively. These are:

- sales tour, with or

without Government subsidy

- participation in trade

fairs/ exhibitions

58
 - direct mailing.

LDGL is not following any of these promotional activities. The company

strongly believes in establishing contacts with it's foreign buyers. The company

neglects the importance of trade fairs/ exhibitions and sales tours.

b) COMPANY'S TARGET MARKET

The building slabs are handled by many different market segments like

wholesalers, retailers, architects, contractors etc. Company's target market is

wholesalers, architects and contractors. In other words with the company's

mechanized production of building slabs with international quality standards it

will be marketed only to the architects where it will be used for non-residential

commercial purpose. The building slabs are predominantly used for the above

purpose in the following places

1. Office Buildings.

2. Industrial Buildings.

3. Religious Buildings.

4. Hotels and Hospitals.

5. Airports and Subway Stations.

6. Engineering Industries.

The company's main aim of targeting this market is due to the

tremendous growth in this market and also the massive usage of building slabs.

59
SURVEY OF BUYERS INTENTION AND CONSUMER PREFERENCE:

The United States Buildings Slabs Association have conducted the survey

to analyze the reason for popularity of granite building slabs. The following

chart will clearly indicate why granite building slabs are preferred compared to

marble or artificial stone.

Availability of color : ................44%

Cost of material : .....................62%

Greater Life : ...........................69%

Easy to maintain : .................................71

Durability : .......................................80%-100%

d) MARKETING STRATEGY:

The company's main marketing concept is to penetrate in the major

markets like United States and Canada where the demand for the granite slabs

are multiplying every year. Since the company is 100% EOU the entire

marketing has to be done abroad and therefore establishing contacts with the

importers is an essential prerequisite for the success of the project . The major

competition for the company is more likely from the manufacturers belonging to

European countries rather than Indian counterparts. Though many 100% EOU's

are coming up in India there may not be much competition as India's share in

world export trade in granite hardly exceeds 0.5%. Compared to 4500 units in

Italy alone our total 100% EOU's shall not cross even 200 units in the coming 5

60
years. Further, as India with its cheap labour and vast resources of granites can

easily compete world market with its economical production costs. Hence, there

is no problem for marketing of granite products abroad.

EXPORT PROCEDURE:

Many marketing managers fail to explore fully potential business abroad

because of their uncertainty about, or simply lack of understanding of export

mechanics while exporting is certainly more demanding than a strictly domestic

business, by using the information provided by Department of commerce and

employing agents and other professionals familiar with the formalities, export

sales can be handled almost as easily as domestic sales. One need not travel

abroad and meet with customers in person to be successful in exports. Before

following the export procedure the company should satisfy various documents

relating to exports such as regulatory requirements and operational requirements.

Regulatory requirements are to submit the following documents like GR forms,

export license, inspection certificate, and certificate of origin. Operational

requirements includes submitting such documents like shipping bill , Bill of

lading, Marine Insurance policy etc. An Indian exporter should take the

following steps on processing the export order:

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1) Scrutinizing the Export Order

The exporter at first should scrutinize the export order in terms of the

terms and conditions of the order or contract. All subsequent actions depend on

this step. It should be ensured that the contract is in accordance with the

provisions of the laws relating to export -import track, the export promotion

policies of the Government and the foreign exchange regulations prevalent for

the time being in the country.

The export order must specify, in unmistakable terms, the mode of

payment such as letter of credit, documents against acceptance etc. The best

mode of payment is through letter of credit. The essential terms and conditions of

export order such as delivery schedule, packing, inspection marking etc. must

tally with those of the L/C and these should be strictly adhered to. The

documents required by the foreign buyer must be submitted to the negotiating

bank in the exact specified form and manner. The exporter should confirm the

export order only when he finds the terms of L/C satisfactory and in order. But in

case of LDGL the company is depending on D/A terms instead of L/C.

2) Producing the goods:

After confirming the export order, since the company is a manufacturer -

exporter it has to make necessary arrangement for manufacturing the goods as

per the export order i.e. date by which the goods must be manufactured and other

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formalities must be completed, date of shipment, the size of the granite building

slabs they want etc.

3) Clearance from excise and Inspection Authorities:

As soon as the goods have been manufactured, the company has to follow

the procedure of getting clearance from the excise and inspection authorities. For

getting clearance from the excise and inspection authorities the company has to

prepare AR4 form and GR form documents.

4) Obtaining Shipping Bill

After the goods have been dispatched to the port town, the exporter

applies for the marine insurance policy. This is obtained in duplicate. At this

stage formalities like. Certificate of origin are completed. The company then,

sends the following documents to his clearing and forwarding agent along with

detailed instructions of i) Invoice ii) Original export order iii) AR 4 form iv)

Packing list v) Certificate of inspection. The C & F agent then takes delivery of

goods and prepares shipping bill. Then shipping bill will be presented at the

shipment.

5) Formalities with Negotiating Bank:

Once the goods have been shipped and the necessary documents are

dispatched to the importer, the next stage is to collect the payment from the

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importer. For this purpose, the company has to contract the negotiating bank. He

submits the following documents for negotiation:

a) GR form b) Commercial Invoice c) Certificate of origin d) Packing list

The documents given above are processed in the negotiating bank with

reference to the terms and conditions in the export order. One set of the

following documents is transmitted to the importer. By the first air mail: i) Bill

of lading ii) commercial invoice iii) Certificate of Origin iv) Packing list. The

negotiating bank sends the duplicate copy of the GR form to the RBI.

The original copy of the bank certificate and the attested copies of the

commercial invoice are returned to the exporter/company. The duplicate copy of

the bank certificate is forwarded to the joint chief controller of Imports and

Exports of the area.

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SUMMARY AND SUGGESTIONS

The use of granites was not known properly during the early part of this

century. But soon people realised the importance of granites and the high

resistant quality they possess. Granites are known for their durability, low

maintenance and their aesthetic look. In India the importance of granites grew up

after 1930's when the first granite plant was started in Mysore in 1930 named

M/s Ramappa & Sons. Every country needs to export to get the foreign exchange

and for accelerating the growth. Today nations and the companies have started

exporting their products (they are getting a new concept known as "Global

Village"). LDGL is one among those companies which are exporting their

products abroad by exporting value added granite product and thereby increasing

the foreign exchange.

LDGL is a 100% Export Oriented Unit. The sales for the company will be

done in international markets but if there are any faults in the polished granites

they are sold in the domestic market at very low prices.

The major markets for the company are Canada and U.S.A. where the demand

for granites are growing very rapidly. The company is also exporting to

upcoming markets like Japan, Singapore, Germany, etc.

The company is increasing its exports so as to utilize the vast resources

present in the country. The marketing mix of the company is different from that

of others. The granite products as a whole can be classified into three different

categories:

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1.Granite monuments and markets.

2.Building material

a. Granite building slabs.

b. Granite tiles.

3. Precision products like surface plates.

The company deals with polished granite building slabs (The company

has chosen this because the demand for setting up granites in new buildings as

well as replacing the old buildings with granites is growing very rapidly). The

determination of the price for the granites by the granite industry is different

from that of other industries in the sense that only in this industry the prices are

determined by having a meeting with all the granite manufacturers, LDGL

follows this method of pricing for the granites by having a meeting with other

companies. The prices quoted by Lakshmi Durga Granites Limited range from

9,000 /- to 50,000 /- for 1 cubic meter. The company is going for a Price

Penetration Strategy. The company follows Zero level distribution channel i.e.

Manufacturer -------------- Architects. LDGL does not under go any promotional

activities. It sells its granites by maintaining good contacts with its customers

abroad. The company neglects the importance of sales tours, trade fairs etc. The

main markets for the company are U.S.A., Canada, Europe, Japan.

For the goods to be exported from one country to another country the

company has to follow a procedure. LDGL follows the procedure of submitting

the documents like AR4 form, Invoice List, Certificate of Origin, Packing List,

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Bill of Lading etc. LDGL is depending only on D/A (Documents against

Acceptance) instead of going for Letter of Credit which is very effective. The

following are some suggestions given to the company from the problems

identified. They are:

SUGGESTIONS

1. Usage of modern means of communication like e-mail,

Internet is not noticed in the company. Correspondence

through e-mail is important. As business is done on

international level browsing through the Internet is also

important to identify prospective importers.

2. Participation in international trade fairs abroad is also not noticed. To

identify the business, participation in international trade fairs is essential.

Through trade fairs we can come into contact with more number of

buyers. So management should also undertake constant foreign trips to

have personal contacts with the buyers.

3. In international marketing quality and delivery schedules play a major

role. Delay in transporting raw materials to the factory is affecting in

meeting the delivery schedules. If the company plans in advance in

acquiring the raw material it can overcome the delay in delivery

schedules. It should also strictly adhere to the quality standards.

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4. Company is supplying most of the consignments on D/A basis

( Documents against Acceptance ) with credit period ranging from 60-120

days. Company should dispense with D/A payment terms and should

concentrate on payment by Letter of Credit.

5. Utilization of services of export promotion council of the industry

concerned is important. To utilize the services of the export promotion

council the company should constantly communicate with CAPEXII,

Chemicals and Allied Products Exports Promotion Council ) to know the

latest information on the international markets.

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 BIBLIOGRAPHY

1. R.L. Varshney and B. Bhattacharyya, International Marketing

Management, An Indian Perspective, Sultan Chand & Sons

Educational Publishers, New Delhi.

2. Philip Kotler, Marketing Management Analysis, Planning,

Implementation and Control, Prentice-Hall of India Pvt. Ltd.

3. Warren J. Keegan, Global Marketing Management, Prentice -Hall of

India Pvt. Ltd.

4. Annual Reports, LDGL. 5. Journal of Marketing.

69
 LIST OF QUARRIES

S.No LOCATION AREA IN ACRES COLOUR

OWN QUARRIES

1. Singaram Village,

Narayanpet 5 Cheeta Black

Mandal, Mahaboobnagar Dist. to Jet Black

Andhra Pradesh.

2. Budawada Village, 15 Black Galaxy

Cheemakurthy Mandal,

Ongole District, Andhra Pradesh.

3. Yerraballigudem, 12 Absolute

Black Warangal District,

Andhra Pradesh.

The company has also entered into a sublease agreement with the

following quarries

(100% Buy back with interest for advance)

l. Yenokonda, 10 Black

Galaxy Cheemakurthy Mandal,

Ongole District, Andhra Pradesh.

2. Gantalaginta, 4 Absolute

Black Warangal,

Andhra Pradesh.

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3. Tekkali, 7 White Galaxy

Srikakulam,

Andhra Pradesh.

4. Krishnagiri, 10 Paradiso

Dharampuri District,

Tamil Nadu.

5. Amudalapally, 5 Tan Brown

Kesavapatnam,

Karimnagar,

Andhra Pradesh.

6. Kadamsapur, 4 Cafd Imperial

Karimnagar District, (Chocolate Brown)

Andhra Pradesh.

The company also purchases other granite varieties like Orissa Green,

Lavender Blue, Himalaya, Multi-color Red etc. to cater to the needs of various

customers.

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EXPORTER: Invoice No. & Date:
Buyer’s Order No. & Date:
LAKSHMI DURGA GRANITES LIMITED
100% EXPORT ORIENTED UNIT
9-11, LAKSHMI NAGAR, KOTHAPET,
HYDERABAD – 500035. A.P. INDIA.
Ph: (040) 24043141, 24040263
CONSIGNEE BUYER (if other than Consignee):
Pre-Carriage by Place of Receipt by Country of origin of Country of Final
ROAD Pre-Carrier Goods INDIA Destination
Vessel / Flight No. Port of Loading
Port of Discharge Place of Delivery
Marks & Nos. No. & Kind of Pkgs. Description Quantity Remarks
of Goods
S.No. Crate No’s Dimension Pieces / Crates No. of Total
From-To Crates Pieces

! Total :

_______________ _________________________

TOTAL NET WEIGHT (MT) : Signature & Date

TOTAL GROSS WEIGHT (MT):

Source: UNCTAD – Hand book of international trade and

development statistics.

72