Table Of Content

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Topics Introduction to Steel Industry in India Market Structure and Competition Analysis Indian Steel Industry Oligopoly Market Introduction - Steel Authority of India Limited (SAIL) India Ltd Demand and Supply Analysis - Steel Pricing Analysis - SAIL
Introduction to Steel Industry in India Market Structure and Competition Analysis Indian News Paper Industry Monopolistic Competition Introduction The Times of India

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Demand and Supply Analysis - TOI Pricing Analysis - TOI Comparative Analysis SAIL India Ltd and The Times of India Recommendation and Conclusion

List Of Tables
S/No. Table - 1 Table - 2 Table - 3 Table - 4 Table - 5 Tables Production and Domestic Sales of HR Coils/Sheets and Plates - 2009 Availability for domestic use and Apparent Consumption of Steel Independent steel reference prices in India Daily Circulation of Top Newspaper in India Circulation of TOI and Total news paper readers. Page No. 3 5 7 10 13

List Of Graphs
S/No. Table - 1 Tables Market Share of Steel In India 2009 Page No. 4

Market Structure, Competition And Market Analysis of SAIL India Ltd Introduction to Steel Industry in India
Steel is crucial to the development of any economy and is considered to be the backbone of human civilization. Production and consumption of steel is considered to be an indicator of economic development. India occupies a central position on the global steel map, with the establishment of new state-of-the-art steel mills, acquisition of global scale capacities by players, continuous modernization and upgradation of older plants, improving energy efficiency and backward integration into global raw material sources1.

We have an oligopoly in Steel Market in India. Indian Steel Market provides great scope in studying the Oligopoly market, there exists a free market with few government regulation, little evidence of any cartelization or joint pricing behavior. In spite of free technology and knowhow, steel industry in India is an oligopoly due to the huge fixed/initial cost of setup and long gestation period. Key Dates2: 1913: Production of steel begins in India. 1918: The Indian Iron & Steel Co. is set up to compete with Tata Iron and Steel Co. 1948: A new Industrial Policy Statement states that new ventures in the iron and steel industry are to be undertaken only by the federal government. 1954: Hindustan Steel Ltd. is created to oversee the Rourkela plant. 1959: By now, Hindustan is responsible for two more plants in Bhilai and Durgapur. 1964: Bokaro Steel Ltd. is created. 1973: The Steel Authority of India Ltd. (SAIL) is created as a holding company to oversee most of India's iron and steel production. 1993: India sets plans in motion to partially privatize SAIL. 1999: The company posts losses as a result of an industry downturn. 2003: SAIL's output surpasses ten million tons of saleable steel.
1 2

Competition Commission of India - 2009 http://www.fundinguniverse.com/company-histories/Steel-Authority-of-India-Ltd-Company-History.html

Objective of the study

 Critically Study the Market Structure, Competition And Market Analysis of Steel Industry in India with reference to SAIL ltd Ltd.  Provide Recommendation to SAIL to tap the booming Steel Indusry.

Assumptions and Limitations:

1. Steel production in this study is inclusive of Liquid, Alloy, Non-Alloy and Structural Steel. 2. Mining leases and sub-leases are excluded from the study. 3. Data on demand ie apparent consumption is inclusive of double counting. 4. Data on supply i.e. availability for domestic use, after accounting for exports and stock variations 5. Sales figures of TISCO were taken without considering the Corus merger. 6. Pricing study is done only for Hot Rolled Coil assuming a similar pricing pattern exists in other variants sold.

Market Structure and Competition Analysis Indian Steel Industry

Broadly there are two types of producers in India viz. integrated producers and secondary producers. Integrated steel producers have traditionally integrated steel units have captive plants for iron ore and coke, which are main inputs to these units. Currently there are three main integrated producers of steel namely Steel Authority of India Limited (SAIL), Tata Iron and Steel Co Ltd (TISCO) and Rashtriya Ispat Nigam Ltd (RINL). SAIL dominates amongst the three owing to its large steel production capacity plant size.

Secondary producers use steel scrap or sponge iron/direct reduced iron (DRI) or hot briquetted iron (HBI). Secondary producers include Essar Steel Ltd., Ispat Industries Ltd., and JSW Steel Ltd. There are 120 sponge iron producers; 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces; and 1,200 re-rollers in India3.

SAIL dominates amongst the three owing to its large steel production capacity plant size.

Table 1 : Production and Domestic Sales of HR Coils/Sheets and Plates - 2009 (In '000 tonnes) Producers SAIL Tata Steel JSW Steel Essar Steel Ispat Industries Other Secondary TOTAL Domestic Sales 2945.2 1352 1189.3 1761.5 1810.2 1052 10110.2 Production 4830.4 3030 2148 2580 2143 1052 15783.4

Source: Joint Plant Committee and specific company information.

Government of India, Ministry of Steel, National Steel Policy, 2005.

Fig : 1 Market Share of Steel In India 2009

Other Secondary 10% SAIL 29%

Ispat Industries 18%

Essar Steel 18%

JSW Steel 12%

Tata Steel 13%

Despite the data gaps one is faced with, one remains fairly clear in concluding that the HR coils market, and especially of the wider dimensions, is controlled by five major producers4.

Steel has no major trade barriers across national boundaries to be seen currently. There is also no inherent resource related constraints which may significantly affect production of the same or its capacity creation to respond to demand increases in the global market. Even the government policy restrictions have been negligible worldwide and even if there are any the same to respond to specific conditions in the market and have always been temporary. Therefore, the industry in general and at a global level is unlikely to throw up substantive competition issues in any national policy framework. Further, there are no natural monopoly characteristics in steel.

Indicus Analytic report by A.S. Firoz, 2008, State of Competition in the Indian Steel Industry

Oligopoly Market
An oligopoly is an industry dominated by few firms that, by virtue of their individual sizes are large enough to influence the market price5. The firms may employ restrictive trade practices (collusion, market sharing etc.) to raise prices and restrict production in much the same way as a monopoly. Firms often collude in an attempt to stabilize unstable markets, so as to reduce the risks inherent in these markets for investment and product development.

Characteristics6: y y y y y y y
Profit maximization conditions: Maximizes profits by producing where marginal revenue equals marginal costs. Ability to set price: Oligopolies are price setters rather than price takers. Entry and exit: Barriers to entry are high Number of firms: "Few" a "handful" of sellers. Long run profits: Oligopolies can retain long run abnormal profits. Product differentiation: Product may be homogeneous or differentiated Interdependence: Competing firms will be aware of a firm's market actions and will respond appropriately.

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Case Fair, Principles of Economics Eighth Edition. http://en.wikipedia.org/wiki/Oligopoly

Introduction - Steel Authority of India Limited (SAIL) India Ltd

SAIL traces its origin to the formative years of an emerging nation - India. After independence the builders of modern India worked with a vision - to lay the infrastructure for rapid industrialization of the country. The steel sector was to propel the economic growth. Hindustan Steel Private Limited was set up on January 19, 1954. The company, incorporated on January 24, 1973 with an authorized capital of Rs. 2000 crore. Since its inception, SAIL has been instrumental in laying a sound infrastructure for the industrial development of the country7.

Demand and Supply Analysis Steel (2008 2012)

Table 2 : Availability for domestic use and Apparent Consumption of Steel in India: 2008-2012 (In '000 tonnes) Year Availability for domestic use Apparent Consumption Gap 2011-12 23127 23370 -243 2010-11 69117 68581 536 2009-2010 64755 63652 1103 2008-2009 62745 61186 1559 Source: Joint Plant Committee

Steel production in India has increased by a compounded annual growth rate of 8% over the period 2002-03 to 2006-07. Going forward, growth in India is projected to be higher than the world average, as the per capita consumption of steel in India, at around 46 kg, is well below the world average (150 kg) and that of developed countries (400 kg). Indian demand is projected to rise to 200 million tonnes by 2015. By 2012, the steel production capacity in India is expected to touch 124 million tonnes and 275 million tonnes by 20208.

7 8

http://www.sail.co.in/aboutus.php Competition Commission of India - 2009

Pricing Analysis - SAIL India Ltd

Table 3 : Independent steel reference prices in India Month Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Hot Rolled Coil - SAIL 31300 32200 31900 30000 30200 31900 31925 31085 30975 30975 32882 33772 32292 32292 (Rs/tonne) Hot Rolled Coil Industry Average* 33000 33000 32700 32200 32300 32700 32800 31885 31840 33382 33882 34782 34582 34582

Source: http://www.meps.co.uk/indian%20steel%20prices.htm Industry Average* - Avg considered SAIL, TISCO, JSW and ESSAR

From the table it can be ascertained that SAIL has been pricing its products slightly lesser to the industry. The price in Steel industry is reviewed and reset on a monthly basis even though price variation happens on a daily basis. Under the new industrial policy Price and distribution controls were removed, thus the steel prices are market determined. In 2008-09 Govt. asked the steel producers to hold prices down in the face of rising domestic and global demand for steel. There is no document to establish that there is formal or written down agreements on prices among the major players9. price rise necessitated by factors external to the industry e.g. increase in capital cost, rise in border steel prices and freight charges.

Competition Commission of India - 2009

Market Structure, Competition And Market Analysis of Times of India Introduction to News Paper Industry in India
India is one of the few countries in the world to have many business newspapers, which not only reflects the vitality and vibrancy of the media, but also the new vitality of our economy. The large readership for these business newspapers transcends from the rapidly growing corporate sector, it also illustrates the growing interest that the general public now evinces in economic matters which reflect the growing importance of business and economy in our national discourse. The Indian print media industry netted $90.80 million in foreign investment in the last three years10.

We have an Monopolistic Competition in News Paper Industry in India.

We have great example of monopolistic completion in print media of India. We have a combination of product and services when we study this industry. Apart from the tangible element of newspaper we also have intangible element of knowledge (news). Increase in the literacy rate has direct positive effect on the rise of circulation of the newspapers in India. Key Dates11:
1780: First Indian newspaper from Calcutta, the Bengal Gazette.

1818: The first newspaper in an Indian language was the Samachar Darpan in Bengali 1838: The Times Of India was founded as The Bombay Times and Journal of Commerce. 1915: Price for the paper is cut from 4 annas to 1 anna as new rotary machines increase supply. 1991: The Times of India is chosen as one of the world's six greatest newspapers by the BBC. 1997: The first color photograph in newspaper.. 2006: Indian newspaper industry had a turnover of Rs 13,500

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Statisticsindia.com http://en.wikipedia.org/wiki/Print_media_in_India

Objective of the study

Critically Study the Market Structure, Competition And Market Analysis of News Paper Industry in India with reference to Times of India.

Assumptions and Limitations:

1. Few data on Newspaper are inclusive of Periodicals which could not be separated. 2. Competitors are not limited to English Daily, but all daily available in market. 3. Price of newspaper is exclusive of combo newspaper eg: Economic Times with The Times of India. 4. Since demand of Newspaper could not be ascertained the total readers in the market is assumed to be the demand. 5. Ad revenue which is a major source of Income is kept out of study.

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Market Structure and Competition Analysis Indian News Paper Industry

The Indian Newspaper industry can be primarily segmented across two categories viz English Newspapers and Regional / Vernacular Newspapers. The English medium dominates the industry in terms of advertisement revenues, though vernacular newspapers outperform the English newspapers in circulation. English newspaper industry in India has been fragmented with the players having a regional focus such as the Deccan Chronicle in Hyderabad, Hindustan Times in Delhi, Times of India in Mumbai, Hindu in Chennai, Telegraph and Statesman in Kolkata, Deccan Herald in Bangalore, Gujarat Samachar in Ahmedabad. However, the industry is witnessing a trend whereby players are looking beyond their home territories viz. Times of Indias and Business Standards entry into certain newer territories and Deccan Chronicle and Hindustan Times also doing the same. Times of India has the largest circulation among all English-language newspapers in the world, across all formats (broadsheet, tabloid, compact, Berliner and online). It is owned and managed by Bennett, Coleman & Co. Ltd. which is owned by the Sahu Jain family.

Table 4 : Daily Circulation of Top Newspaper in India News Paper Times of India Dainik Jagran Malayala Manorama The Hindu Deccan Chronicle Source: Audit Bureau of Circulations - Jan 2011 Language English Hindi 1189.3 1761.5 1810.2 Circulation 3.146 2.168 1.514 1.36 1.349

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The Indian language papers have taken over the English press as per the latest NRS survey of newspapers. The main reasons being the marketing strategy followed by the regional papers and second reason being the growing literacy rate. Increase in the literacy rate has direct positive effect on the rise of circulation of the regional papers. In 1997 the number of newspaper and periodicals published were 4170512. The newspaper Industry has low enrty and exit barriers. However there is a intense competition for market share in the industry. Many players are well established in their respective regions and is difficult for new players to penetrate the market. In India the industry is in its growth phase Few criticisms were drawn by the existing newspaper in being biased to a particular region, religion or for its affiliation to a political party.

12

KPMG Industry Report 2000.

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Monopolistic Competition
Monopolistic competition is a form of imperfect competition where many competing producers sell products that are differentiated from one another (that is, the products are substitutes but, because of difference such as branding, not exactly alike). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms13. The long-run characteristics of a monopolistically competitive market are almost the same as a perfectly competitive market. Two differences between the two are that monopolistic competition produces heterogeneous products and monopolistic competition involves a great deal of non-price competition, which is based on subtle product differentiation. A firm making profits in the short run will nonetheless only break even in the long run because demand will decrease and average total cost will increase.

Characteristics14: y y y y y
Product differentiation : Firms sell products that have real or perceived non-price differences. Many firms : There are many firms and many firms prepared to enter the market. Free entry and exit : In the long run there is free entry and exit. Independent decision making : The firm gives no consideration to what effect its decision may have on competitors. Market Power : A firm can raise it prices without losing all its customers.

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Case Fair, Principles of Economics Eighth Edition http://en.wikipedia.org/wiki/Monopolistic_competition

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Introduction The Times of India

The Times of India is an English-language daily newspaper in India. It has the largest circulation among all English-language newspapers in the world, across all formats (broadsheet, tabloid, compact, Berliner and online). It is owned and managed by Bennett, Coleman & Co. Ltd. which is owned by the Sahu Jain family.

In the year 2008, the newspaper reported that (with a circulation of over 3.14 million) it was certified by the Audit Bureau of Circulations (India) as the world's largest selling Englishlanguage daily newspaper, placing as the 8th largest selling newspaper in any language in the world. The Times of India is the most widely read English newspaper in India with a readership of 70.35 lakhs (7.035 million). This ranks the Times of India as the top English newspaper in India by readership15.

Demand and Supply Analysis Times of India

Table 5 : Sales and Total news paper readers. (In Millions) Year 2008 2009 Circulation 2.7116 2.789 Apparent Readers 6.395 6.931 7.425 Gap 3.6834 4.142 4.417

3.008 2010 Source: KPMG -FICCI Report 2011

Indian print media can be expected to grow conservatively at around 9% over the next 4 to 5 years. However, the industry has been experiencing growing margin pressures due to increasing newsprint costs which are not yet being passed on to readers due to intense competition. Newspapers reach only 35 per cent of our adult population even though the adult literacy is about 65 per cent. To build this gap between readership and literacy and also to

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Indian Readership Survey (IRS) 2010

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remain competitive the publications have kept their prices low and depended entirely on advertisers to subsidize the reader and to increase the sales.

Pricing Analysis - Times of India

The newspapers price in India are

y y y y y y y y y y y y

Rs. 10.00 The Economic Times (Sat/Sunday Delhi) Rs. 9.00 The Economic Times (Sat/Sunday Mumbai) Rs. 8.00 The Financial Express, Business Standard (Sat/Sunday) Rs. 5.00 Sunday Times Rs. 4.00 The Financial Express Rs. 3.50 Business Standard Rs. 3.00 The Times of India, Live Mint Rs. 3.00 The Hindu Rs. 3.00 The New Indian Express Rs. 2.50 The Economic Times, Mumbai Mirror Rs. 2.00 Dainik Bhaskar Rs. 1.00 Bangalore Mirrior

Though, newspapers in India are not inclined to do so. With the ePaper version of almost all of the top newspapers of India freely available on the web, the daily newspapers, sunday or weekdays, cannot be termed overpriced or pushing the readers on the web. The Times of India is priced in tune with the market and has been settled on this price for a long time. Its major competitors the Hindustan times, The Hindu and Deccan Chronicle all are prices in similar price wagon. The product/Service differentiation comes in the language used in news article, usage of color photograghs and off late news paper is competing against each other in supplement sheets of news paper providing additional information on all days of the week.

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Comparative Analysis SAIL India Ltd and The Times of India

Table 6 : Differential Analysis of SAIL and Times of India

Nature of Company Industry Cost of Entry Market Structure No. of Competitors Pricing

SAIL Steel Very High Oligopolistic Competition 5 Slightly Lower than Market Average

Times of India News Paper (Print Media) Relatively High Monopolistic Competition Many competitors In par with the competitors

Growth Supply Govt, Regulation Major Competitor Major Threat Hamper to Growth

12.5% Lower than Demand Minor Regulation TISCO Imports Increasing Energy and raw material cost

9% In Equilibrium with Demand No Regulation The Hindu TV, E-News Reducing Ad revenue and popularisation of other media

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Recommendation and Conclusion

SAIL INDIA LTD 1. The Demand of Steel products is growing at a higher rate than its Supply as the one of the leading market player SAIL should work on procuring more raw materials. 2. As planned the increase of plant capacity should be materialized at the earliest. 3. Try to obtain Economies of Scale in its existing plant operation. 4. Put forth a recommendation to set up an independent Steel regulator to monitor price and quality. 5. Informal price control by Govt. should be discouraged. 6. Consider Raw material import from China. 7. New technologies to use indigenous natural resources would have to be developed.

THE TIMES OF INDIA 1. It is recommended to hold the price for the now as an increase in price would drastically reduce the demand. 2. Consolidate the regional approach to cater to the requirement of readers by emphasizing on local news. 3. Market other news paper such as Economic Times, Vijaya times etc to penetrate other segments of newspaper readers. 4. Not to compromise on material in relation to ads, as of late The Times of India has been criticized for its over dose of ads. 5. Promote reading habits at grass root level Schools; So as to sustain the market for forthcoming years. 6. Diversify to Vernaculars, especially in Hindi, Malayalam and Guajarati.