Project Report-Porters Five Force Analysis of GDM

EXECUTIVE SUMMARY
The research titled PORTERS FIVE FORCE MODEL ANALYSIS OF WIDMA GUN DRILLING MACHINE is undertaken to analyze the threats from substitutes as well as new entrants and competition among the Gun Drilling Machine manufacturers. This study also analyses the bargaining power of customer and the vendor.
To accomplish the task, a survey was carried out among the users and non-users of WIDMA gun drilling machine with a sample size of 65 respondents based on convenience sampling. This was done by means of online questionnaire which was sent to the respondents by email. The data so collected was analysed by both percentages and statistical method.
The survey was conducted using the online market research website, in which questionnaire was prepared as per the requirement. This website was even used to send the questionnaire to the selected respondents and also remind the respondent about the survey, so that they can respond whenever they were free.
This study gives a birds eye view of the WIDMA Gun drilling machine and important concepts which are related to the performance and future prospect of the machine among the users and nonusers.
This report will help Kennametal - Machining Solution Group to evaluate their product. This will act as a tool for the company to know their opportunities and threats in the market. This report will also help the company to take right decision and steps for its better sales and service and also make strategies to face the competition by other players in the industry.
Department of MBA, PESIT
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INDUSTRY PROFILE
OVERVIEW
India ranks 17th in production and 12th in the consumption of machine tools in the world. The country is set to become a key player in the global machine tools industry and is likely to see substantial high end machine tool manufacturing, even as China keeps its lead in lower end volumes. Several firms have entered the Indian machine tools sector, or announced plans for joint ventures or wholly owned subsidiaries in India. Machine tools a strategic industry, forms the backbone of many if not most of the major sectors of industrial activity in a country in the traditional manufacturing context. Therefore, a country such as India which is on the threshold of becoming a major global industrial and economic power must have a strong, well-developed, robust and modern machine tool industry to support and assist its manufacturing sector. In India, the machine tool industry supports the strategic development and growth of the automotive, the white and brown goods, the capital goods industries as well as strategic sectors such as defense, railways, aerospace, etc. Machine tools also contribute to the vibrancy of small and medium scale manufacturing industries, in particular, the millions of job shops in the country. In India, the Rs.17 billion machine tool industry supports more than Rs. 2,000 billion manufacturing sector in the country. The Indian machine tool industry predominantly comprises manufacturers from the small and medium-sized enterprises. There are about 150 major manufacturers in the organised sector. About three-quarters of total machine tool production in the country comes out of ISO certified companies that are involved in manufacturing of metalworking machine tools, manufacturing solutions, accessories, and cutting tools & tooling systems.
Historical Backdrop
This sector has had a long history of growth in India, beginning in the 1940s. From early 1950s to mid-1970s, the machine tools industry evolved under an umbrella of protection in which the growth was based on import substitution. The Government of India set up the Hindustan Machine Tools (HMT), which provided a nucleus for development of technological capabilities and skills. It also spearheaded sprouting of several ancillary units in the private sector by providing support and thus became local suppliers of components, etc.
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During the 1950s to mid-1960s, this sector bolstered in confidence and began to absorb imported technology and manufacture machine tools to specifications given by foreign collaborators. It also initiated developmental work directed to modifying machine tools and developing variants of machines for which design had been acquired by the purchase of licenses. In the 1980s, the industry developed further and was able to acquire know-how in machine tool technology in order to reproduce and even develop new machine tools, particularly special purpose machine tools (SPMs). The national expertise developed over the years provided the needed human resources to initiate creative modified versions of existing machine tools manufactured under license, thereby further paving the way towards self-reliance through aggressive R&D in India. As a result of the various initiations, output of the Indian machine tool industry, witnessed a steep rise from Rs. 290 million in 1970-71 to Rs. 1,185 million a decade later. And by the time of the economic liberalisation in 1990-91, turnover of the industry touched a new high of Rs. 4,135 million. Indian machine tool industry was among the first industry sectors to be thrown open to global competition in the economic reforms of the early Nineties. That, however, did not deter the industry, to face the onslaught challenges and towards this direction improved features of their machines, enhanced productivity, increased reliability and performances, and embraced TQM practices. Efforts of domestic machine tool manufacturers made a paradigm shift that led to a manifold increase in performance. The spurt in the countrys manufacturing activity since 2003-04 led to increased potential for Indian machine tools, which got a boost from the automotive sector. The booming automotive and auto ancillary industry in India is currently driving growth and the competitiveness of the Indian machine tool industry. Domestic manufacturers are fulfilling stringent tolerances, and process capability requirements of the highly demanding auto industries. The focuses of several Indian manufacturers currently provide machine tools with integrated Total Productive Maintenance (TPM) features. This has increased the potential and improved the competitiveness of Indian-built machine tools. The strength of the Indian machine tool industry was galvanised by Indian Machine Tool Manufacturers Association (IMTMA) the apex industry body of machine tool and manufacturing solutions, which currently represents over 80 per cent of the machine tool industry in India. With a membership of over 350 small, medium and large companies, IMTMA is the single point of contact for the machine tool industry in India. While the Indian machine tool industry takes determined steps to support its users and customer through a range of value-adding initiatives, along with a greater emphasis on R&D activities.
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Simultaneously it has initiated steps to develop mechanisms to protect and provide market exclusivity, in domestic and international markets, for locally developed innovations and/or new and improved product and processes.
Industry Strengths
The machine tool industry in India is recognised for: Capability to manufacture low-cost, highly productive manufacturing solutions, especially customised products, for Indian and overseas users in the range of turning centers, machining centers, and grinding machines. Consistent attempt to transform the industry to become more produ ctive, more efficient, and, above all, much more cost competitive. Products offered by the Indian machine tool industry today are priced much lower than earlier. Strong emphasise towards improvement of quality. Over 75 per cent of the total p roduction of the industry comes from ISO certified and CE accredited manufacturers. Engineering expertise on design, CAD, documentation, testing and evaluation. Mos t machine tools manufactured in India are indigenously designed. Pool of skilled workforce specialising in assembly, design, and software development, as well as in efforts to further strengthen their design and innovative skills. Forging backward integration with sub-suppliers and vendors for greater standardisation of components and assemblies. Proactive efforts to reach out to customers through process of interactive dialogues at the industry and at the individual company levels. Special focus on increasing reach of the industry to other potential overseas market s. The machine tool industry is making special forays to establish presence in key machine tool markets through joint participation in overseas fairs, as well as establishment of exclusive machine tool show centers. As a result, Indian machine tools are today well accepted in China, Germany, Italy, France and North America.
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Core Competency
The Indian machine tool industry manufactures almost the complete range of metal-cutting and metal-forming machine tools. Customised in nature, the products from India comprise conventional machine tools as well as computer numerically controlled (CNC) machines. There are other variants offered by Indian manufacturers too, including special purpose machines, robotics, handling systems, and TPM-friendly machines. One of the significant developments in machine tool industry in recent times has been the Computer Numerically Controlled (CNC) machines. Emergence of CNC machine tools and its dominance over the last few years in the overall product segment stemmed from its value-added features, such as enhanced productivity, higher precision, increased reliability, better finishing, and improved aesthetics and design. Achievement of higher growth and increased share of CNC machines in the overall output surmises the commitment of Indian machine tool manufacturers to providing competitive manufacturing solutions, now at cost effective prices. In terms of key product segments, high growth areas for the Indian machine tool industry include turning centers, machining centers, grinding machines, and cell manufacturing, amongst others. The other emerging demand is for total manufacturing solutions, whereby users seek to economise on manufacturing cost and time.
Current Scenario
The auto sector accounts for 60% of machine tool demand in the country. Auto Component Manufacturers Association (ACMA) estimates India will sell 2.7 million cars, 12.5 million two wheelers and 0.5 million commercial vehicles (CVs) in 2010-11. This will grow exponentially to 10 million cars, 30 million two wheelers and 2.2 million CVs by 2020. This means that auto component manufacturers will have to invest $2 billion every year, and machine tool operators in the country will have to ramp up capacity by 7-8 times to meet that demand. The local machine tool players do not have the financial wherewithal to make such levels of investments. Around 60% of the sector consists of small unorganized players. The remaining 40% includes bigger organized players like HMT, Kennametal (MSG), Premier and Ace Micromatic. The current size of the machine tool industry stands at Rs 9,000 crore and IMTMA forecasts this to increase to Rs 23,000 cr. by 2020.
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COMPANY PROFILE
A. BACKGROUND AND INCEPTION OF THE COMPANY Innovation, perseverance and close attention to customer needs have characterized Kennametal since its founding. In 1938, after years of research, metallurgist Philip M. McKenna created a tungstentitanium carbide alloy for cutting tools that provided a productivity breakthrough in the machining of steel. "Kennametal" tools cut faster and lasted longer, and thereby facilitated metalworking in products from automobiles to airliners to machinery. With his invention, Philip started the McKenna Metals Company in Latrobe, Pennsylvania. Later renamed Kennametal, the corporation has become a world leader in the metalworking industry and remains headquartered in Latrobe. Kennametal developed an international presence from the start. Philip sold early patent rights to British industrialists who later also began Kennametal of Canada. Exports through the company's first five years totaled more than $2.5 million, and by 1955 Kennametal had representation in 19 countries. The company's overseas manufacturing started in 1957 with a joint venture in Italy. A joint venture in the United Kingdom and a German sales subsidiary soon followed. Between 1972 and 1981, foreign sales grew from 17 to 34 percent of the total. McKenna Metal's first full-year sales, with a staff of 12 employees, totaled some $30,000. But World War II saw American heavy industry shift into high gear. Kennametal's annual sales approached $10 million and employment was nearly 900 as the company's tools were used extensively in the wartime economy. In 1993, Kennametal acquired Hertel AG, a tooling systems manufacturer headquartered in Frth, Germany, with operations throughout Europe and worldwide. This enabled the corporation to compete more effectively in Western Europe, gain better access to emerging markets in Eastern Europe, and offer additional product lines in Asia Pacific. The Asia Pacific effort was further expanded to include manufacturing joint ventures for mining tools in China and a metalworking tool manufacturing plant in Shanghai. In 2002, Kennametal acquired Widia, a leading manufacturer and marketer of metalworking tools in Europe and India which was incorporated in India in the year 1964.
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A Technological Leader
Kennametal was founded on the strength of a technological breakthrough, and a list of highlights demonstrates that it has continued to lead its industry in innovation. In 1946, the company introduced the Kendex line of mechanically held, index able insert systems that accelerated tool changing and increased machining precision.
Kennametal's unique, patented Thermite process for producing impact-resistant macro crystalline tungsten carbide today remains the best way to produce extremely tough tool materials for demanding applications such as mining.
In 1964, Kennametal introduced tungsten-carbide-tipped Ken grip tire studs. Although studs clearly contributed to safe winter travel, they became controversial amid speculation about their role in road deterioration. After legislation limited the use of carbide studs, Kennametal left the business in 1977.
Leader in the development of silicon-nitride based "Sialon" ceramics for the machining of exotic aerospace materials.
First to develop cobalt-enriched substrates for coated inserts was first to commercially introduce physical-vapor-deposition (PVD) coated cemented carbide cutting tools and created the first commercially viable diamond-coated carbide inserts.
Leader in the development of quick-change tooling systems that today lead the world in versatility, speed and accuracy. Kennametal maintains its technological leadership through its $30-million Technology Center at its world and North America headquarters in Latrobe, Pennsylvania, and complementary facilities in various locations around the globe. The facilities are dedicated to rapid development of products engineered to meet specific customer requirements.
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B. NATURE OF THE BUSINESS CARRIED Kennametal India Ltd carries out its business strategically in three segments: I. II. III. Metalworking Solutions & Services Group (MSSG) Advanced Materials Solutions Group (AMSG) Machining Solution Group (MSG)
I. Metalworking Solutions & Services Group (MSSG) segment: In the MSSG segment, the company provides consumable metal cutting tools and tooling systems to manufacturing companies in a range of industries throughout the world. Metal cutting operations include turning, boring, threading, grooving, milling, and drilling. Its tooling systems consist of a steel tool holder and cutting tools, such as index able inserts and drills made from cemented tungsten carbides, ceramics, cermets or other hard materials. The company also provides solutions to its customers metal cutting needs through engineering services. Engineering services include field sales engineers identifying products and engineering product designs to serve customer needs. The company serves various industries that cut and shape metal parts, including manufacturers of automobiles, trucks, aerospace components, farm equipment, oil and gas drilling and processing equipment, railroad, marine and power generation equipment, light and heavy machinery, appliances, factory equipment, and metal components, as well as job shops and maintenance operations. KENNAMETAL is the only major machine tool supplier in the country which offers both machine and tooling solutions. It produces Special Purpose Machines which are customized products. It also produces tool and cutter grinding machines. All the machines are designed with TPM and safety measures. II. Advanced Materials Solutions Group (AMSG) segment: In the AMSG segment, the companys principal business lines include the production and sale of cemented tungsten carbide products used in mining, highway construction, and engineered applications requiring wear and corrosion resistance, including compacts and other similar applications. Additionally, the company manufactures and markets engineered components with a proprietary metal cladding technology, as well as other hard materials that likewise provide wear resistance and life extension of the target component. These products include radial bearings used for directional drilling for oil and gas; extruder barrels used by plastics manufacturers, turbine blades, burner tips and tubing used in power generation applications, food processors and numerous other
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engineered components to service various industrial markets. It also provides metallurgical powders to manufacturers of cemented tungsten carbide products, intermetallic composite ceramic powders and parts used in the metalized film industry. The company also provides application-specific component design services and on-site application support services. It provides its customers with engineered component process technology and materials that focus on component deburring, polishing, and producing controlled radii. The companys mining and construction tools include products fabricated from steel parts tipped with cemented carbide, as well as wear resistant products made from steels and other hard materials. Mining tools, used primarily in the coal industry, include long wall shearer and continuous miner drums, blocks, conical bits, drills, pinning rods, augers, cladded products, wear pins, and a range of mining tool accessories. Highway construction cutting tools include carbide-tipped bits for ditching, trenching and road planning, grader blades for site preparation and routine roadbed control and snowplow blades and shoes for winter road plowing. The company produces these products for mine operators and suppliers, highway construction companies, municipal governments and manufacturers of mining equipment. The company's customers use engineered products in manufacturing or other operations where extremes of abrasion, corrosion or impact require combinations of hardness or other toughness afforded by cemented tungsten carbides, ceramics or other hard materials. III Machining Solution Group (MSG) Segment:
In the MSG segment, the companys principal business lines include the production and sale of Special Purpose Machines (SPM) used mostly in Automobile industry. For over two and a half decades, MSG has been leading the special purpose machine tool industry in India, elevating it to the best global standards. MSG has state of the art manufacturing plant, they partner with customers spanning diverse industries across the country and overseas. They count on MSG for high performance, world class total machining solutions to manufacture their most critical components. The Machining Solution group of Kennametal India provides end-to-end metal cutting solutions and not just stand-alone machines. They offer customers an unmatched advantage by leveraging their close association with world-renowned tooling brands and their access to a global application database, besides their ability to design customized machines and tooling.
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C.
VISION, MISSION AND QUALITY POLICY
Vision:
The vision statement of Kennametal is as given below: To be recognized as a premier, customer-driven enterprise that delivers our promise of exceptional value, growth and productivity solutions to our customers, consistent returns for shareholders, and rewarding careers to employees.
Mission:
Kennametal delivers productivity to customers seeking peak performance in demanding environments by providing innovative custom and standard wear-resistant solutions, enabled through our advanced materials sciences, application knowledge, and commitment to a sustainable environment.
Quality Policy:
Promise of Kennametal: Engineering your competitive edge. OPPERATIONAL EXCELLENCE: Kennametals systematic process of reducing and eliminating waste in all its processes. STRATEGIC PLANNING: Consistent development of long-term business strategy in alignment with the companys vision, key values, and ambitions. INNOVATION: Stage-gated product development process for rapidly bringing world-leading new products to market. CUSTOMER EXCELLENCE: A process to continuously deliver the best economic value to increase their customers competitiveness. TALENT DEVELOPMENT: Kennametals process to manage and develop their workforce to be highly competitive and performance driven. PORTFOLIO MANAGEMENT: Guides an extremely disciplined approach to the identification, closing, and integration of acquisition candidates and portfolio management of existing businesses.
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D. PRODUCTS/ SERVICES PROFILE There are five important products of MSG under the brand name WIDMA of Kennametal. They are 1. Special Purpose Machine
The WIDMA range of Special Purpose Machines offer solutions covering all machining operations: turning, milling and drilling including special operations like fine boring, deep hole drilling, facing and centering etc. All WIDMA machines are designed to maximize productivity, reduce cycle time and achieve optimal cost per component. 2. WIDMA Flex series
The WIDMA Flex family of machines is specially designed to help industry optimize manufacturing. They are built on the Lean concept. It combines the versatility of a General Purpose Machine with the productivity of a Special Purpose Machine. WIDMA Flex is eminently adaptable to different applications. Standard Flex module, customized work holding and various combinations of additional axes ensure high productivity.
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3.
Fixtures/ Tooling
To address the complex challenges in machining, one needs to have rich insights into all the three major areas involved The Machine, the Tooling and the Fixtures and how they interact. WIDMA manufactures this comprehensive and intensive expertise to give its customers the most optimal integrated machining solutions for their machining needs. 4. Ecogrind
The best choice for a wide variety of tools. Dedicated to the manufacturing and regrinding of round tools in one setup. They are designed with well balanced & optimum axes configuration, superior rigidity and adequate power. They ensure high productivity and impeccable precision.
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5.
Special Vertical Turning Machines
Over 100 installations ,these uniquely designed machines answer the long-standing question - How can one maximize productivity and combine operations in a single set -up without compromising on component quality? From turning to more demanding turn-milling and complex 5-face machining, the range covers all applications, are designed for rigidity and optimization. They segment leading capacities, adequate spindle power and superior precision, all within a compact footprint .They have FEA optimized design and machine grade cast iron construction for vibration free long working life even in the most demanding conditions.
The Services provided by Kennametal are: Wear Assessment Solution Design & Engineering Cladding Fabrication & Application Installation Support
Ongoing Wear Monitoring & Consultation
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E. AREA OF OPERATION Operation of MSG of Kennametal is National and Regional. MSG has WIDMA brand which has its registered office & manufacturing plant in Bangalore. It has 4 regional offices in places such as Jamshedpur, Chennai, Gurgaon and Pune.
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F.OWNERSHIP PATTERN Kennametal India Ltd is a Public Limited Company and almost 88% of the shares is owned by the foreign partner. Pattern of share holding as on 30th June 2011
Distribution of shares as on 30th June 2011
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G.INFRASTRUCTURAL FACILITIES
Machining Solution Group (MSG) - Kennametal India is an organization headquaterd at Bengaluru of India. The Infrastructural Facilities available here are as follows. MSG division of Kennametal India is equipped with large machine assembly area located in Bengaluru. MSG- Kennametal India has Kennametal Knowledge Center which conducts various education/training courses to meet the training needs of the Industries. MSG- Kennametal India has a Sales department, Supply Chain Department, Project Management department and a dedicated Design center. In addition to this it has a very good office infrastructure and IT infrastructure, Canteen facility etc.
It also provides transportation facility to its employees.
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H. ACHIEVEMENTS AND AWARDS

Some of the awards won by MSG of Kennametal India are as follows: 1. FI foundation award winner For 6 Axis CNC Tool and cutter grainding machine WGS 6 2.IMTEX-92 For VALVE SEAT Generating and VALVE guide reaming machine Kennametal India Ltd - Second best in Medium Scale Category in EHS Awards 2010
Customer Awards: 1. Honda Award For Machine tools 2003-2004 2. Honda Award For machinery 2004-2005 3. Honda Award For QCDDM (Machinery) 2006-2007 4.FIE foundation award for best machine design. 4. Honda Award For QCDDM (Machinery) 2010-2011
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I.WORK FLOW MODEL OF MSG

Machine Tools Business is one of the important Business of Kennametal India Ltd. WIDMA machines are working with many satisfied customers like Honda , Bosch , Suzuki ,Toyota, Ashok Lyeland, etc.The end to end work flow of MSG is as described below:
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J. FUTURE GROWTH AND PROSPECTS

MSG- Kennametal India Limited has good infrastructure facility located in Bengaluru, which has helped the company improve the quality of its products and has aggressive investment plan to enhance capacity to meet increasing demand.
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3.MCKINSEYS 7S FRAME WORK
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a. Shared Values of Kennametal:

The values of Kennametal is as shown in the below figure.
a.1 People Kennametals talented global workforce is their number-one competitive advantage. It aspires to be the employer of choice for the best people.Their sustainability programs, designed to provide a safe and rewarding workplace,reflect the companys commitment to the highest levels of employee safety. Kennametals comittment is to provide their people with the components of a great place to work,such as: A safe work environment Career opportunities Opportunities to learn and grow Competitive Compensation a.2 Environment At the beginning of fiscal year 2008, Kennametal developed and launched the Protecting Our Planet initiative. This program is designed to foster, recognize, and reward employee achievement in the areas of energy and water conservation, waste reduction, and materials recycling. It reflects Kennametals dedication to lead by example in protecting our planet not just for this generation, but for many still to come.
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They annually present Environmental Health and Safety Excellence awards to: Reward and recognize extraordinary efforts in EHS throughout the organization. Promote EHS awareness and involvement among all employees. Share best practices among all sites. Inspire EHS greatness throughout Kennametal. The environmental initiatives are an integral part of their sustainability strategy, driving business value while creating a better environment. a.3 Innovation At Kennametal, innovation is defined as the process of delivering ever increasing business value to its customers. Innovation at Kennametal is not a function, it is a business process that is customer driven and owned by all functions collectively. The key metric of an innovative company such as Kennametal is the percentage of its revenue generated from new product sales. An innovative company must be continually bringing new products to market, and having them perform more successfully than the products they replace. a.4 Customer As customers drive toward more sustainable productivity, they look to Kennametal for innovative solutions that help them achieve their goals. In fact, in 2009 it began a total reorganization of their company, making it more customer centric and market focused. Helping customers meet their overall goals is clearly an objective of Kennametals sustainability program. They focus on products that provide customers with lower fuel costs, reduced packaging requirements, lower transportation costs, and improved product performance. a.5 Performance Kennametals FY 2011 financial performance demonstrates the companys ability to operate effectively and profitably in a challenging global environment, and to be a top-tier financial performer.
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Kennametal delivered improved overall performance in spite of uncertain market conditions. This was the result of careful planning and execution. Over the past few years, Kennametals management team has consistently demonstrated both of these capabilities, while redefining their business and positioning the company to perform in a sustainable manner in virtually any operating environment. a.6 Integrity Kennametal is diligent in communicating the values of integrity throughout the entire organization. The Kennametal Code of Conduct serves as the compass and bearings for the companys strong commitment to integrity, always doing the right thing, and doing what they say they will do, every time.
b. Staff:
There are more than 500 employees who are working dedicatedly to meet the goals of the organization. Customer Satisfaction and the organizational values are the motivators for the employees of Kennametal. The organizational culture is such that there is no difference between the employer and the employee. All the employees of the organization are treated equally.
c. Strategy:
The Strategies of Kennametal India are as follows:
c.1 WIN THE CUSTOMER: Earn a reputation as the most knowledgeable and easiest to do business with. Develop and retain customers, and deliver enhanced productivity solutions. Become the recognized leaders in customer loyalty, know-how and satisfaction, and increase our penetration into core markets and existing customers.
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c.2 ADVANCE WITH TECHNOLOGY: Deliver market-leading advances, innovations and customer delivery systems that will enhance our global competitiveness. Achieve product line renewal at an unparalleled pace. Make todays technological upgrades tomorrows tools for maintaining our advantage. c.3 COMMIT TO EXCELLENCE: Consistently deliver quality products and service solutions, on-time, and at record industry lead times. Maximize Lean processing to achieve top-tier performance and companywide financial excellence. c.4 GROW FOR PROFIT: Build and maintain a balanced portfolio of Products, Markets and Geographies- the Thirds, and consistently grow our enterprise at twice the market rate. Achieve organic, inorganic and emerging market growth with the focus on profitability and shareholder return. c.5 ENSURE MISSION READINESS: Acquire, train and manage talent for the challenges ahead, and be seen as the employer of choice for the best people. Develop a flexible, effective and ever-ready team that can deliver the best solutions faster and more accurately, and exceed customer expectations.
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d. Structure:
Kennametal India Ltd follows product organization structure approach. Activities are divided on the basis of individual product lines. The marketing, production, finance are contained within each department. The organization also have a centralized finance and Human Resource function. The organization structure is as shown. Managing Director Kennametal India Ltd.
Head - Finance, Legal
Head - Human Resource
Head- Machining Solution Group (MSG)
Head - Metal Working Business
Head - Metal Forming
Special Purpose Machine
Flex series
Fixtures / Tooling
Ecogrind
Special Vertical Turning Machines
Marketing & Sales
Design
SCM
Assembly
After Sales Service
Organization Structure of MSG - Kennametal India
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e. Systems:
The following are the systems that are present in Kennametal for smooth working of the organization. ISO 9001 Certified system ERP-SAP system for order booking and other process Auto-CAD and other computer aided tools systems for designing of machines.
f. Style:
Kennametal is an Organization following a lean structure. The managers follow the method of Management by Objectives in order to achieve the organizational goals. Every morning a small meeting with the manager and subordinates is done and all the activities for the day will be planned. The managers here acts as leaders and not just as managers. They are not autocratic.
g. Skills :
Skills are the capabilities of the staff within the organisation. MSG- Kennametal India is the largest manufacturer of Special Purpose Machines in India.The manufactures a entire range of machines for 2- wheeler and 4- wheeler vehicles.The companys skill lies in product design, mechanical engineering, electrical engineering, quality engineering & production engineering.
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4 .SWOT
ANALYSIS
Strengths
1. Existence in market since long time. 2. Large customer base. 3. Qualified & well trained employees. 4. Diversified product portfolio. 5. Good infrastructure.
Weekness
1. Less focus on SMEs. 2. Availability of flexible capacity is less to meet the unexpected demands. 3. Deteriorating delivery commitments.
Opportunities
1. Good scope for selling the SPMs in international market. 2. Very few SPM manufacturers in the country, can focus on customers of nonautomobile sector. 3. Can focus on number of SMEs. 4. Very few domestic competitors
Threats
1. Too much dependancy on automobile sector for selling of SPMs. 2. Entry of low cost Chinese SPMs into Indian market.
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5.
S.No Ratio
FINANCIAL STATEMENT ANALYSIS

Formula Year 2010-11 Values 217.12 111.89 142.15 75.73 142.89 111.89 97.23 75.73 0.00 21.98 0.00 21.98 540.17 105.23 394.98 66.42 540.17 106.66 394.98 104.16 88.55 385.01 51.97 349.78 88.30 506.94 148.87 372.25 88.30 296.95 148.87 297.80 Ratio 1.94
Current Ratio
Current Assets Current Liabilities

.
2009-10 2010-11
1.87 1.21 1.17 0.00 0.00 5.13
Quick Ratio
Quick Assets. Current Liabilities
2009-10 2010-11
Debt Equity Ratio
Debt. Equity
2009-10 2010-11
.
Working Capital Turnover Ratio
Sales Net Working Capital
2009-10 2010-11
5.94
Fixed Assets Turnover Ratio
Sales Net Fixed Assets

.
5.06 3.79
2009-10
2010-11 6 Return on Equity PAT Net worth

.
22.9%
2009-10 2010-11 7 Operating Profit Ratio EBIT Net Sales

.
14.8% 17.4% 27.9% 29.7% 49.9%
2009-10 2010-11
Return on Investment
EBIT Total Investment

.
2009-10
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6. LEARNING EXPERIENCE
It was a great opportunity for me to do my internship in such an esteemed organization. The organization culture is very good and it does create an homely atmoshphere and thus motivates to learn. I had a great experience learning in this Organization. Learning by doing was the strategy adopted throughout ten weeks of duration of the project. Every minute in the organization taught new things that would be a basement in my career. This was a good platform for me to learn about the day to day management in an organization. The ten weeks stay in the organization also helped me in improving my over all personality. I learned how to apply theory into practicle application. This was done by applying theoretical knowledge of Porters five force model into practical application. I gained the knowledge of organisation structure which affects the daily operations, decision making and flow of information.
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PART B
INDTRODUCTION TO THE RESEARCH

Statement of the problem
Kennametal Machining Solution Group is a Market Leader in Gun Drilling Machines Manufacturing and wanted to up keep this marker leadership position in next five years. Presently it feels that the competition, new technology and new entrant from foreign countries may erode the market share. So Kennametal Machining Solution Group wanted to know what would make KIL MSG to up keep the market leadership position in Gun Drilling Machine Manufacturing.
Purpose of the study:

The Indian machine tool industry is seeing entry of many foreign brands who are experts in Special Purpose Machine manufacturing. Also there is stiff competition when it comes to the manufacture of Gun Drilling Machine. The following below mentioned are the points which this study would be focusing on: A sound knowledge of consumer buying behaviour will help the marketer extract every bit of competitive advantage in terms of available substitutes knowledge, about the new entrants trying to enter Indian machine tool industry for the manufacture of Gun Drilling Machine and information about the competitors products and services. Through this study, an attempt has been made to identify the key factors (if any) that might lead to increased bargaining power of customer, Threats from substitutes as well new entrants and competitors performance.
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Objectives of the study

WIDMA will produce Gun Drilling Machine for Next 5 to 7 Years. MQL Drilling Operation is direct substitute threat for Gun Drilling Process. Gun Drilling Operations can also be possible to move into Machining Centers which can be a threat to SPM Gun Drilling Machines. Cost Per Piece will be higher when compared to General Purpose Machining centers Expecting Heavy Competition from China in terms of Cost. Expecting Heavy Competition from US and Europe in terms of Quality. Gun Drilling Machines should be standardized to some range to get higher market share to beat competition.
Scope of the study

1) To analyse the bargaining power of the customer. 2) To identify the potential threats or substitutes which would replace Gun drilling machine in future. 3) To identify the threats from new entrants into the industry, which would lead to decrease in market share of WIDMA gun drilling machines. 4) To analyse the bargaining power of the vendor / supplier. 5) To analyse the level of competition among the manufacturers of Gun drilling machine.
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Methodology of the study

For doing the survey a structured and disguised type of questionnaire was prepared which was based on the Porters Five Force Industry Analysis Narrowed Down only to Machine Tool Industry Gun Drilling Machines. The Research will collect data, analyze and interpret from all the Porters five forces specified in the Model Bargaining power of Customer Threat of New Entrant Threat of New Product and Technology Development Bargaining Power of Vendor.
Bargaining power of Customer

Bargaining power of customer is mainly to determine how much the customer power affects the profitability of the business. This act as a base for pricing strategy. In bargaining power of Customer, the study will cover the following parameters
Buyer concentration to firm concentration ratio
As the number of buyers increases relative to the number of competitors the negotiating power of anyone buyer decreases. Conversely as the number of buyers reduces relative to the number of competitors the power of the buyer increases
Differentiation of output
If the Product Provides significant Differentiation in Customer output product then Seller has higher bargaining power
Bargaining leverage, particularly in industries with high fixed costs
The products represent a relatively large expense for your customers. Customers may not price shop for a quart of oil, but they will price shop if purchasing a new vehicle.
Buyer volume
Buyers who buy only a few of your products each year are less likely to shop around for price on those items.
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Buyer switching costs relative to firm switching costs
A switching cost is a cost that your customer would incur if they ceased buying from you and commenced buying from one of your competitors. Higher the cost lesser the bargaining power These costs could be anything from the cost for legal to prepare and review of new contracts, the cost of stocking spare parts specific to your competitors products, the cost of adopting a new ordering system, the cost of retraining employees, or there maybe intangible costs such as increased risk (the unknon).
Buyer information availability
Customers have access to and are able to evaluate market information. You have less room for negotiation if buyers know market demand, prices, and your costs.
Ability to backward integrate
Customers could possibly make your product themselves, to meet their needs.
Availability of existing substitute products
A substitute is a different product or service that can be used instead of your industries products or services. A substitute is not a competitors version of your product. Substitutes are typically products/services that are not in your industry. Availability of such product reduces the sellers bargaining power.
Buyer price sensitivity
Is the ratio of reduction in sales with respect to unit price increase? More the price sensitive less the bargain power the seller has.
Differential advantage (uniqueness) of industry products
Your product is not unique and can be purchased from other suppliers. If your brand is homogenous or similar to all of the others, buyers will base their decision mainly on price. In this case the seller has less bargaining power
Buyer profitability
Buyer profitability are your customers profitable and likely to remain profitable? The more profitable your customers are the less likely they are to be concerned with the amount you charge.
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Decision Maker Incentives.
The decision maker within your customers business may be receiving incentives from your competitors such as free tickets. However they are equally likely to be given incentives, to negotiate, by their employer. The presence of incentives influences the decision, with part of the decision based on something other than merit.
New Entrant
You may have the market cornered with your product, but your success may inspire others to enter the business and challenge your position. The threat of new entrants is the possibility that new firms will enter the industry. New entrants bring a desire to gain market share and often have significant resources. Their presence may force prices down and put pressure on profits. In New Entrant the study will cover the following parameters.
The existence of barriers to entry (patents, rights, etc.)
Processes are not protected by regulations or patents. In contrast, when licenses and permits are required to do business, such as with the liquor industry, existing firms enjoy some protection from new entrants.
Economies of product differences
If Product differentiation is easily achievable and can be done economically then the chance of new entrant into the market is more.
Brand equity
Customers have little brand loyalty. Without strong brand loyalty, a potential competitor has to spend little to overcome the advertising and service programs of existing firms and New Firms is more likely to enter the industry.
Switching costs
In situations where customers do not face significant one-time costs from switching suppliers, it is more attractive for new firms to enter the industry and lure the customers away from their previous suppliers.
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Capital requirements
Start-up costs are low for new businesses entering the industry. The less commitment needed in advertising, research and development, and capital assets, the greater the chance of new entrants to the industry
Access to distribution
You will have developed methods to distribute your products to your customers, the harder it is for new entrants to replicate this distribution system the less likely new entrants are to enter and remain in the industry.
Customer loyalty to established brands
If customer loyalty is very less among the established brands then chance of new entrant is more likely
Absolute cost
Do you have a good location, long term arrangements for access to raw materials or unique production or distribution system that makes it hard for anyone to compete with you then chance of new entrant is less.
Industry profitability;
The more profitable the industry the more attractive it will be to new competitors
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Threat of Substitute
New Product and Technology Development (Substitute) Products from one business can be replaced by products from another. If you produce a commodity product that is undifferentiated, customers can easily switch away from your product to a competitors product with few consequences. In contrast, there may be a distinct penalty for switching if your product is unique or essential for your customers business. Substitute products are those that can fulfill a similar need to the one your product fills. In this the study will cover the following parameters
Buyer propensity to substitute
Refers to your customers loyalty to your product or service .How do your customers react to substitutes, do they trial them or are they loyal to your industry? It would also pay to identify the things that need to change for your customers to change their propensity to trial substitute products.
Relative price performance of substitute
Refers to the cost effectiveness of the substitute products, (Total supply chain costs) Alternative products that provide overall savings to your customers, without impacting the quality of your customers products or services are more likely to be viewed favorably for adoption.
Buyer switching costs
In situations where customers do not face significant one-time costs from switching to substitute then, it is more attractive for firms to use the substitute product.
Perceived level of product differentiation
It is the substitute perceived as a product differentiator.
Number of substitute products available in the market
If more number of substitutes are available, then the chance of switch to substitute is more likely.
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Bargaining Power of Vendors

Any business requires inputslabour, parts, raw materials, and services. The cost of your inputs can have a significant effect on your companys profitability. Whether the strength of Suppliers represents a weak or a strong force hinges on the amount of bargaining power they can exert and, ultimately, on how they can influence the terms and conditions of Transactions in their favor. Suppliers would prefer to sell to you at the highest price possible or provide you with no more services than necessary. If the force is weak, then you may be able to negotiate a favorable business deal for yourself. Conversely, if the force is strong, then you are in a weak position and may have to pay a higher price or accept a lower level of quality or service. In this the study will cover the following parameters
Supplier switching costs relative to firm switching costs
If the switch cost of supplier from one firm to another is higher than the Bargaining power of vendor is less.
Degree of differentiation of inputs
If the input from the vendor is different from other vendor then the vendor has higher bargaining power
Impact of inputs on cost or differentiation
If the input from the vendor makes significant differentiation in product then the vendor has higher bargaining power
Presence of substitute inputs
Refers to an alternative product or service that is not in your supplier's industry. If it is available then the vendor has less power to bargain
Strength of distribution channel
If the Distribution channel of the vendor is very strong and the availability is very quick then the vendor has significant bargain power.
Supplier concentration to firm concentration ratio
Refers to the ratio of suppliers to buyers in your industry
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Decision on data collection method

Bargaining Power of Buyer
Buyer concentration to firm concentration ratio Data Type: Secondary Data Data Source: - Historical Database, Internet and Data Collection Agency. Attribute:1) 2) No. of buyers available in the market (Customers who buys SPM Gun Drilling machine) No. of SPM Gun Drilling Machine Sellers in the Market.
Differentiation of output Data Type: - Primary Data Source: - Directly From the Buyers Sample Attribute: How The Buyer Feels about the WIDMA Gun Drilling Machines Features, Service and Quality. Bargaining leverage, particularly in industries with high fixed costs Data Type: - Secondary Data Source: - Historical Database, Internet and Information Bureaus Attribute:- What is the cost of Gun Drilling Machine primarily to find out whether gun drilling machines has high fixed cost or not. Buyer volume Data Type: Secondary Data Source: - Historical data. Attribute:-Customer wise Gun Drilling Machine sales in one year, frequency of purchase and number of machines purchased by the customer.
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Buyer switching costs relative to firm switching costs Data Type: - Primary Data Source: - Group Discussion & Buyer Attribute:Collects switching cost of Buyer incase if he switches from WIDMA to another Supplier like Admin Cost, ordering cost, training cost and increased Risk. Buyer information availability Data Type: - Primary & Secondary Data Source: - Customer & Group Discussion Attribute:How Buyer Get to Know about the competitors & Substitute Product Ability to backward integrate Data Type: - Primary Data Source: - Group Discussion Attribute:Whether customer has a chance and will go for backward integration Availability of existing substitute products Data Type: - Secondary & Primary Data Source: - Historical data, Internet, Information Bureau and Customer Attribute:List of Substitute available to customer which serves customer Gun Drilling requirement Buyer price sensitivity Data Type: - Secondary & Primary Data Source: - Historical Customer Budget Data, Group Discussion, Customer Attribute: - At what price customer stops buying.
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Impact of output on the cost of Differentiation Data Type: - Primary Data source: - Customer Attribute:Does the WIDMA Gun Drilling Machines provide Differentiation to customer product? Decision Maker Incentives. Data type: - Primary Data Source: - Internal Sales Team Attribute: Availability of Decision Maker Incentives System with competitor and how much this impacts the sales conversion
New Entrant
The existence of barriers to entry (patents, rights, etc.) Data Type: Secondary & Primary Data Source: Historical Data, Information Bureaus, Internet and Internal Team Attribute:Existence of Patent, Govt. Policy for Foreign Entrant & Domestic Entrant, Capital Requirement for Startup, Economy of Scale based on the Capex. Brand equity Data Type: Primary Data Source: Customer Attribute: - Brand Equity What is the Relative Market Share? What is the Relative Price? What is the Durability?
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Switching costs or sunk costs Data Collection plan already exist in bargaining power of Customer Capital requirements Data Collection Plan already exists in Entry Barrier. Access to distribution Data Type: - Secondary Data Source: - Historical Data, Internet Attribute:How much access the New Entrant has in terms of Sales and after sales service distribution Customer loyalty to established brands Data Type: - Primary Data Source: - Secondary Attribute:Which Brand the customer willing to buy next time when the customer buys next time? Which Brand the customer willing to refer to another colleague or friend from another company when they want to buy the product? Industry profitability Data Type: - Secondary Data Source: Historical Data Attribute: PAT
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New Product and Technology Development

Buyer propensity to substitute Already exist in bargaining power of Buyer Relative price performance of substitute Data Type: Primary & Secondary Data Source: Historical Data, Internet, Information Bureaus Attribute: Overall cost saving to customer when they use the substitute (without affecting the quality of the output product) Buyer switching costs Data type: - Primary Data Source: Customer Attribute:Cost if they incur while changing to substitute product (Legal Cost, Spare inventory, risk perceived) Perceived level of product differentiation Data type: - Secondary Data Source: Internet, information Bureaus Attribute:What is the Difference between Substitute and the Current Product offering in terms of cost, quality of output, ease of operation and service availability? Number of substitute products available in the market Data type: Secondary Data Source: Internet, Information Bureaus Attribute:List of Substitute Product Available
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Bargaining Power of Vendors

Degree of differentiation of inputs Data Type: - Primary Data Source: Internal SCM Team Attribute: Supplier Product or service is unique supplier product attribute restricts from buying from others Impact of inputs on cost or differentiation Data type: - Primary Data source: - Internal Design & SCM Team Attribute:Whether the supplier input reduces the cost or product differentiation. Presence of substitute inputs Data Type: - Primary Data Source: - Internal SCM Team Attribute:Is there any Substitute available for the Supplier input? Supplier concentration to firm concentration ratio Data Type: - Primary Data Source: Internal SCM Team Attribute: Firm Concentration Ratio and Supplier Concentration Ratio Importance of Volume to the supplier Data Type: - Primary Attribute: - What is the Importance of Production Volume to the supplier?
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DATA COLLECTION
As the users of Gun drilling machine are situated in different parts of India, the area of study was all over India. Convenience sampling method was used as this technique helped in sending the questionnaire to the respondents who have used / not used WIDMA Gun drilling machine. Data was analysed by using Microsoft Excel. SAMPLING METHOD: SAMPLE SIZE Convenience Sampling : The sample size has been fixed to 65 respondents. The respondents responded through online survey (Survey monkey) SAMPLING PLAN COVERAGE DURATION DATA SOURCES : Online questionnaire : All over India : 8 Weeks : questionnaire
PRIMARY DATA Primary data is the data collected specifically for the study currently undertaken. The procedure followed and the collection of primary data is by structured online questionnaire, which consisted of multiple choice questions, open end and close ended questions.
SECONDARY DATA Data which is useful in solving the current problem, which was collected for different purpose. It includes the information collected from the Organisation website / database, Journals, Articles and prior research report.
RESEARCH INSTRUMENT: TYPES OF QUESTIONS :
Online Questionnaire Multiple choice questions, Ranking type questions, Dichotomous questions, Open ended and close ended questions.
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LIMITATIONS OF THE STUDY

The study is limited to only Gun drilling machine users. The findings are based on the information given by the respondents. It is assumed that the respondents understood the questions in the questionnaire as they were supposed to, the chances of misunderstanding were remote but it cannot be ruled out. The study was focused mainly on the middle level managers and not on the end user / operator of the machine. The competitive rivalry analysis is not included in the scope of this study and is being done by third party to have an un-biased result.
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ANALYSIS, DESIGN AND INTERPRETATION

1. Bargaining power of Customer 1.1. Buyer concentration to firm concentration ratio
No. of Buyers of GDM No. of Manufacturers of GDM Ratio
90 12 7.5
TABLE-1: Buyer concentration to firm concentration ratio calculation
Analysis: The ratio obtained from study is 7.5, thus with increase in the number of manufacturers, the ratio goes on increasing. The bargaining power of customer increases with the increase in the number of sellers.
CHART 1: Number of buyers and number of manufacturers of Gun Drilling Machine Interpretation: There are few manufacturers of Gun drilling machine in the market. Thus, the bargaining power of customer is low.
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1.2. Differentiation of output RATING FOR WIDMA PARAMETER QUALITY FEATURES PERFORMANCE DELIVERY SERVICE VALUE FOR MONEY AESTHETICS AVG. RATING 7 6 7 6 6 7 6
TABLE-2: Average rating for WIDMA Gun Drilling Machine on different parameters Analysis: This was analysed based on the parameters such as Quality, Features, Performance, Delivery, Service, Aesthetics and Value for money of the Gun drilling machine. As per responses obtained from 46 respondents, who all are the users of WIDMA Gun drilling machine, the value was calculated as 6.4 (Table - 2), which is moderately high. Higher the value of differentiation of output, lower will be the bargaining power of customer.
CHART 2: Average rating for WIDMA Gun Drilling Machine on different parameters Interpretation: The users of WIDMA Gun drilling machine feel that the product provides significant differentiation in their output product, thus in this case both manufacturer and buyer have moderate bargaining power.
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1.3. Bargaining leverage, particularly in industries with high fixed costs Analysis: The product represents a relatively large expense for the buyer. This is because the machines have high fixed costs. Thus, the buyer will definitely negotiate with the manufacturer of the machine and would take longer time to make purchase decision. As a result of which the bargaining leverage is quite high. Thus, with more number of manufacturers, the bargaining leverage also increases. Interpretation: From the study it can be interpreted that there are many manufacturers of Gun drilling machine. Thus, the bargaining power of customer is high. 1.4. Buyer volume Average WIDMA sales per year Average Non-WIDMA sales per Year Average GDM sales per customer per year Average WIDMA top 20 customer purchase per year. 2.45 0.98 3.43 3.125
Buyer Volume percentage TABLE-3: Details about Gun Drilling Machine sales
0.912
Analysis: From the database of the organisation, it was observed that the average WIDMA sales per year per customer is 2.45.The average non-WIDMA sales per year, obtained from the survey is 0.98.Thus, the total Gun drilling machine sales per customer per year is 3.43. Whereas, the average WIDMA top 20 customer purchases per year is 3.125. Interpretation: It can be interpreted from above analysis that the buyer volume percentage is high at 91.2%.That is, more number of GDMs are sold by WIDMA. Thus, WIDMA has a lower bargaining power than customer.
CHART -3: Average Gun drilling machines sales per year
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1.5. Buyer switching costs relative to firm switching costs Risk in switching the manufacturer No risk WIDMA GDM user since how many years 1 - 2 Yrs. 2 - 3 Yrs. 3 - 5 Yrs. < 5 Yrs. Total Percentage Respondents 1 1 0 7 9 21% Moderate risk 1 3 3 25 32 74% High risk 0 0 0 2 2 5% Total 2 4 3 34 43 Percentage Respondents 5% 9% 7% 79%
TABLE-4: Study of relationship between Level of risk an individual customer feels in switching the manufacturer & No. of years since a customer is using WIDMA machine WIDMA GDM user? No Risk in switching the manufacturer Total No risk Moderate risk High risk 5 13 4 22 Yes 9 32 2 43 14 45 6 65 22% 69% 9% 100% Total Percentage Respondents
TABLE-5: Study of relationship between WIDMA users/ non-users & level of risk the individual customer feels in switching the manufacturer. Analysis: From above tables it can be analysed that WIDMA has many customers who are using its Gun drilling machine for more than 5 years which is about 79% (TABLE-4). Also, it can be analysed that most of the respondents feel that there is moderate risk in shifting from one manufacturer to another. Only 21% respondents feel that there is no risk in switching from one manufacturer to another. Among all the respondents both users as well as non-users of WIDMA GDM, the percentage who said there is moderate risk is 69% and those who said no risk in switching is 22%. Interpretation: Based on above analysis it can be interpreted that most of the respondents would not like to switch from one manufacturer. But, this can be due to the fact that there are few manufacturers. Thus, with increase in number of manufacturers the bargaining power of customer will increase.
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1.6. Ability to backward integrate Analysis: From TABLE-4 it can be analysed that there are more respondents who are using WIDMA Gun drilling machine for more than 5 years which is about 79%. Interpretation: Thus it can be interpreted that the ability to backward integrate among the users of the Gun drilling machine is very low. Also, expertise is required in terms of designing and manufacturing of the Gun drilling machine. Thus, bargaining power of customer is low in this case. 1.7. Availability of Substitute Products Percentage Replacement to GDM among Respondents Application 17% 22% 16% 22%
S.NO.
Substitute Known By Respondent
1 2 3
Twist Drill Machining Centers MQL
Maximum percentage Replacement to GDM among Respondents Application
TABLE-6: Comparison among substitutes for GDM
CHART 4 : Percentage Replacement to GDM among Respondents Application Analysis: From survey it can be analysed that, as per respondents only 22% of the machining can be shifted from Gun drilling machine to any of the known substitutes (Table - 6). Moreover, many respondents are unaware of the available substitutes for Gun drilling machine. Interpretation: It can be interpreted that, since most of the respondents are unaware about any substitutes for Gun drilling machine, there are chances that they will get information about available substitutes from any source and may shift from Gun drilling machine to that substitute. In such situation the bargaining power of customer will be definitely high.
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1.8. Buyer price sensitivity Average Price sensitivity to domestic Mftrs. Average Price sensitivity to Chinese Mftrs. Considered average price sensitivity 17% 18% 18%
TABLE-7: Buyer price sensitivity in comparison with Chinese manufacturers
CHART 5: Buyer price sensitivity in comparison with Chinese manufacturers Analysis: From TABLE-7 it can be analysed that the respondents are ready to pay 18% more and buy the Gun drilling machine from WIDMA. Also, when Chinese manufacturers are considered, same is the percentage more that the respondent is willing to buy at. Interpretation: The price sensitivity of 18% is quite high, thus the buyer has higher bargaining power than the supplier. 1.9. Impact of output on cost differentiation Total no. of customer response Total no. of customers who said quality of machining will improve Percentage impact TABLE- 8: Impact of output on cost differentiation Analysis: From TABLE-8 it can be analysed that only 30% of the users feel that by using WIDMA Gun drilling machine quality of machining will improve. Interpretation: It can be interpreted that the WIDMA Gun drilling machines doesnt improve the quality of machining for the customers product. Thus, in such situation there is very low uniqueness about the WIDMA Gun drilling machine, resulting in higher bargaining power of buyer. 46 14 30%
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2. Threat from New Entrants 2.1 The existence of barriers to entry (patents, rights, etc.)
Analysis: When it comes to machine tool industry, there is 100% FDI allowed. Also the import duty rate of 25% is quite low for an International manufacturer to enter Indian market and sell his machines. Also, secondary data available through IMTMA & other government websites, it can be analysed that there are neither entry barriers in the form of Government regulations nor any patents for the technology related to Gun drilling machine. Interpretation: Thus, it can be interpreted that any new or foreign manufacturer can enter machine tool industry in India to manufacture and sell the Gun drilling machine. In such case the threat from new entrants is very high. 2.2 Brand equity Competitor -1 Competitor -2 Relative Market share Relative Price Durability Brand Equity
WIDMA Relative Market share Relative Price Durability Brand Equity 0.4 1.18 0.9 42%
Relative Market share Relative Price Durability Brand Equity
0.3 1.2 0.9 32%
0.2 1.05 0.9 19%
TABLE-9: Brand Equity analysis among competitors Analysis: Assuming the relative market share of WIDMA to be 40% and similarly assuming the market share of local competitors 1 and 2 to be 30 and 20% respectively, it can be analysed that the available brand equity to enter the industry for new company is only 6% (100-(42+32+19)). Interpretation: Thus, for a new entrant very less percent of market share is available to enter the industry. In such situation the threat from the new entrants is very low. Note: The relative market share is assumed because the actual data is not available and finding the market share is out of the scope of this study. The same is being done by the third party.
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2.3
Switching costs Risk in switching the manufacturer No risk Moderate risk 1 3 3 25 32 74% High risk 0 0 0 2 2 5% Total 2 4 3 34 43 Percentage Respondents 5% 9% 7% 79%
WIDMA GDM user since how many years
1 - 2 Yrs. 2 - 3 Yrs. 3 - 5 Yrs. < 5 Yrs.
1 1 0 7 9 21%
Total Percentage Respondents
TABLE-10: Study of relationship between Level of risk an individual customer feels in switching the manufacturer & No. of years since a customer is using WIDMA machine. Analysis: As analysed from bargaining power of customer that WIDMA has many customers who are using its Gun drilling machine for more than 5 years (TABLE-10). Also, from TABLE-10 it can be analysed that most of the respondents feel that there is moderate risk in shifting from one manufacturer to another. Only 21% respondents feel that there is no risk in switching from one manufacturer to another. Interpretation: Based on above analysis it can be interpreted that most of the respondents would not like to switch from one manufacturer. But, this can be due to the fact that there are few manufacturers. Thus, if customers do not face significant one-time costs from switching suppliers, it is more attractive for new firms to enter the industry and lure the customers away from their previous suppliers. In such situation the threat from new entrants is high.
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2.4
Capital Requirement DEPARTMENT MONTHLY EXPENSES IN RUPEES VARIABLE FIXED COST COST TOTAL COST 3,52,11,360.00 10,96,000.00 42,36,32,320.00 6,17,97,66,800.00 43,18,85,620.00 42,57,04,520.00 1,03,77,300.00 7,47,13,66,560.00 747.14
SALES DEPARTMENT ASSEMBLY DEPARTMENT DESIGN DEPARTMENT SCM DEPARTMENT SERVICE DEPARTMENT TOTAL
51,48,66,400.00 13,70,000.00 3,57,91,760.00 23,84,500.00 3,53,34,960.00 16,85,000.00 7,91,400.00 8,80,500.00
62,19,95,880.00 74,16,000.00 62.20 0.74
Total variable cost distributed over 5 years 44.50 Total cost incurred in 5 years 106.70 Assuming avg. cost of Gun drilling machine 5000000 213.39 No. of machines to be manufactured in a year to break even 42.68 TABLE-11: Capital requirement calculation for Gun drilling machine manufacturing Analysis: From TABLE-11 it can be analysed that the total fixed cost is 62.20Cr. & the total variable cost distributed over 5 years is 44.50 Cr. So, a total cost incurred in 5 years is 106.70 Cr., considering 50L to be the average cost of the GDM, the total cost incurred is 213.4 Cr. Thus, in order to breakeven over a period of 5Yrs. The company should manufacture 43 machines per year. For a local manufacturer, the initial investment of 106 Cr. is very high and he has only 6% of the available market share to sell his machines which is less. For an International manufacturer, there should be a proper provision of service as and when required by customer. This at the moment is not available as per respondent feedback. Interpretation: Based on the analysis, the threat from new entrants is low in this case.
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2.5
Customer loyalty to established brands WIDMA GDM user? No Yes 35 4 53 8 87% 13% Total
Would you go with the manufacturer who is new to industry Total
No Yes
18 4
22
39
61
TABLE-12: Customer loyalty to established brands Analysis: WIDMA has a brand loyalty of 53% among the customers, which is quite high. In such case the customer shifting from WIDMA to new manufacturer is very less. This can be proved from the TABLE-12, which says that 87% of the respondents are not going to buy from a manufacturer who is new to the industry. Interpretation: It can be interpreted that, when coming to customer loyalty, WIDMA has many loyal customers. Thus, the threat of new entrant in this situation is low. 2.6 Customer loyalty to established brands
Analysis: WIDMA has a brand awareness of 53% among the customers, which is quite high. In such case the customer shifting from WIDMA to new manufacturer is very less. This can be proved from survey, which says that 87% of the respondents are not going to buy from a manufacturer who is new to the industry. Also, from respondents it was found that 94% of them are ready to re-purchase WIDMA machine based on their previous experience with WIDMA. Interpretation: It can be interpreted that, when coming to customer awareness, WIDMA has many loyal customers. Thus, the threat of new entrant in this situation is low. 2.7 Absolute cost
Analysis: WIDMA has good location, long term arrangements for access to raw materials, better production and good access distribution system. These all provide low absolute costs. Interpretation: Any new entrant will also be in a position to have low absolute cost. Thus, there is moderate threat from the new entrants. 2.8 Industry Profitability
Analysis: The SPM industry has very moderate profitability. Longer the presence in the industry, higher the profitability. Interpretation: As there is moderate profitability in this industry, the new entrant would not see it attractive to be in this industry.
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3. Threat of New product or Substitutes 3.1 Buyer Propensity to substitute Percentage replacement by MQL Percentage replacement by Machining centers Percentage replacement by Twist Drill Max.% Replacement to GDM among customer application TABLE-13: Buyer propensity to substitute products 16% 22% 17% 22%
CHART 6: Percentage replacement by substitutes Analysis: From survey it can be analysed that, as per respondents only 22% of the machining can be shifted from Gun drilling machine to any of the known substitutes (TABLE-13). Moreover, many respondents are unaware of the available substitutes for Gun drilling machine. Interpretation: It can be interpreted that, since most of the respondents are unaware about any substitutes for Gun drilling machine, there are chances that they will get information about available substitutes from any source and may shift from Gun drilling machine to that substitute. In such situation the threat from new product or substitute will be definitely high.
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3.2
Relative price performance of substitute MQL- impact on Cost per piece 70 36 No. of respondents Decrease in cost per piece as per respondents 51% Average 57% 63% 27 17
GPM - impact on Cost per piece No. of respondents Decrease in cost per piece as per no. of respondents
TABLE-14: Relative price performance of substitute Analysis: From TABLE-12 it can be analysed that the average percentage of relative price performance by substitutes is 57%. But the decision of substituting GDM by other product cannot be done based only on cost. When it comes to application and feasibility the substitutes fail to match the performance of Gun drilling machine. Thus, there is every less chance that the Gun drilling machine will be replaced by any of the substitute. Interpretation: The threat from the substitutes in terms of cost per piece when compared to Gun drilling machine are low. Thus, the threat from the substitutes in this case is high. But when other impacts such as quality of machining, speed of machining, etc. are considered the threat from the substitutes is low. 3.3 Buyer Switching costs
Analysis: It is analysed that the switching cost for the buyer from existing product to any new product or substitute is moderate. Interpretation: Since very few respondents are aware of any of the substitutes, they going of immediate switching for a new product or substitutes are very moderate. 3.4 Perceived level of product differentiation
Analysis: The cost of the substitutes such as machining centers and MQL are very less in comparison with Gun drilling machine. But most of the respondents are unaware of any of the substitutes. But the quality of machining is not as good as the one obtained from Gun drilling machine. Interpretation: Since most of the respondents are unaware of any substitutes, the threat from substitutes in terms of cost and quality is low. 3.5 No. of substitute products available in the market
Analysis: From survey it can be analysed that only three substitutes are known to few respondents. Thus, most of the respondents are unaware of even existence of any substitute for Gun drilling machine. Interpretation: Since there are very few available substitutes, the threat from these substitutes is low.
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4. Bargaining Power of Vendor

4.1 Supplier Switching costs relative to firm switching cost Analysis: The cost for switching from firm to another for a vendor is very high as he cannot effectively in terms delivery, payment terms and quality. Moreover, firms have many vendors to rely on, whereas the vendor has only few firms on whom they have to rely to do business. Interpretation: Since the cost of switching for a vendor is very high, the bargaining power of vendor is low. 4.2 Impact of inputs on cost or differentiation
Analysis: From survey done on 29 important components of Gun drilling machine, it was found that there are only 10% of the components which had differentiation effect on the Gun drilling machine. Also, there were possibilities that those components would be available with other vendors with same parameters. Interpretation: It can be interpreted that the vendors have very low bargaining power as only 10% of the components purchased have differentiation effect on Gun drilling machine. 4.3 Supplier concentration to firm concentration ratio
Analysis: Since there is no data available pertaining to all other manufacturer a vendor supplies the same component, it is assumed that the top suppliers to this industry have less than 30% of the market share. Interpretation: Since top suppliers to this industry have less than 30% of the market share, the bargaining power of vendor in this case is low. 4.4 Supplier ability to forward vertically integrate
Analysis: From the study it has been observed that there are no such suppliers with ability to forward vertically integrate. Interpretation: Since there are no suppliers with the ability to forward vertically integrate, the bargaining power of vendor is low in this case.
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FINDINGS
By this study it is found that WIDMA is established brand among Gun Drilling Machine manufacturers in India. MQL Drilling Operation is not a direct substitute threat for Gun Drilling Process but only a technology, which even WIDMA can adopt and gain expertise. Gun Drilling Operations can also be possible to move into Machining Centers which can be a threat to SPM Gun Drilling Machines. Costs per piece from Gun drilling machines are higher when compared to General Purpose Machining centers. Gun Drilling machines are not flexible. Gun Drilling Machines occupy more space than general purpose machines. Gun Drilling Machines connected load / Power consumptions are higher when compared to General Purpose machines. Presently very less Competition from China, but once they start providing proper service, they are major threat to WIDMA. Presently less competition from US and European Gun drilling manufacturers in terms of Quality. This is mainly because of less service provision from US & European manufacturers. Gun Drilling Machines should be standardized to some range to get higher market share to beat competition.
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SUGGESTIONS
1. WIDMA should improve on the parameters such as Quality, Features, Performance, Delivery, Service and Aesthetics of Gun drilling machine. This would help WIDMA in differentiation of their machines. 2. WIDMA should always maintain healthy relationships with the existing customers and should try to make them loyal customers, which in turn would not allow any new entrants to erode the market share of WIDMA. 3. WIDMA should try to make Gun drilling machines more flexible as most of the respondents were ready to buy a machining center with Gun drill as attachment. 4. MQL is a technology and not a new product. WIDMA should manufacture more and more machines with MQL technology to gain expertise and minimize the threat that MQL would capture the market share of Gun drilling machine.
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CONCLUSIONS
From the analysis of bargaining power of customer, it can be concluded that the bargaining power of buyer is moderate. The main reason for being high is because there are many manufacturers. With passage of time there are possibilities that few more manufacturers would enter the industry. Also most of the respondents are unaware of any substitutes available for Gun drilling machine. Once they come to know about the existence of substitutes, they most likely to go for the substitutes because of their reduced machining costs. From analysis it can be found out that the threat from new entrants is moderately low. The main reasons for low threat levels are high initial capital requirement, many loyal customers and moderate industry profitability. Since only less percent of market share is available for entering the industry, the treat is low. From analysis it can be found out that the threat from new entrants is low. The main reason being that most of the respondents are unaware of any existing or available new product or substitutes for Gun drilling machine. Moreover, the quality of output is not same when compared with the output of Gun drilling machine.
From analysis it can be found that the bargaining power of vendor is low. This is because,
there are many suppliers and very few firms which manufacture Gun drilling machine. Also most of the suppliers are from small scale industries.
Thus, based on the analysis of the Porters forces it can be concluded that there is no threat to
the Gun drilling machine in coming future.
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Kennametal-Gun Drilling / Deep Hole Drilling Machine Survey

Dear Sir, We are thankful for the association with us in the past and also for valuable future association. We are conducting a market study on Gun Drilling / Deep Hole drilling machine to understand its performance & application requirements from industry experts. In this survey we are conducting survey for both WIDMA as well as non WIDMA Users. We have chosen you as an industry expert for providing us with your valuable responses, which would help us in providing with better product and service in future. Thus, we expect your responses to be from industry expert point of view. We request to spare 15 20 minutes of your precious time for this valuable survey of ours. Your responses will be known to us & we assure you that the information / data provided by you will not be disclosed to the third party and the result of the study will be used for improving product and services to the industry. Thanking you once again and look forward for early response from you. To begin with the survey kindly click on "Next" button below. Yours Faithfully, Team WIDMA, Kennametal India.
*1) If you think of Gun Drilling / Deep Hole Drilling Machine for your machining application. Which make would come into your mind at the first instance?
*2) Are you a user of WIDMA Gun Drilling Machine (GDM) / Deep Hole Drilling Machine? Yes If NO directly go to question 10. *3) Since how many years you have been using WIDMA GDM? Less than 1 Yr. 1 - 2 Yrs. 2 - 3 Yrs. 3 - 5 Yrs. More than 5 Yrs. No
*4) How many WIDMA GDM's have you purchased or used till now? Less than 3 3-5 6 - 10 11 - 15 More than 15
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*5) How would you rate WIDMA GDM in terms of (where 1 - 2 Very Poor, 3 - 4 Poor, 5 - 6 Good, 7 - 8 Very Good, 9 - 10 Excellent) PARAMETERS QUALITY FEATURES PERFORMANCE DELIVERY SERVICE VALUE FOR MONEY AESTHETICS 1 2 3 4 5 6 7 8 9 10
*6) Do you agree that WIDMA GDM's are equipped with better technology/features when compared to other Domestic manufacturers? Strongly Agree Agree Neutral Disagree Strongly Disagree Can't say, since haven't used any domestic manufacturer's GDM
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*7) Do you agree that WIDMA GDM's are equipped with better technology / features when compared to European manufacturers? Strongly Agree Agree Neutral Disagree Strongly Disagree Can't say, since haven't used any European manufacturer's GDM *8) Using WIDMA GDM, will Reduce cost of machining Improve quality of machining Required performance is achieved None of the above
*9) Consider a situation wherein you need to finalize the supplier based on the price difference (among domestic manufacturers). At what price difference (in percentage) would you not consider WIDMA GDM? Less than 5%
5 - 10%
10 - 15%
15 - 20%
More than 20%
*10) You have/are used/using non-WIDMA GDM for/since........... Years. Zero Yrs. Less than 1 Yr. 1 - 3 Yrs. 3 - 5 Yrs. More than 5 Yrs.
*11) How many non - WIDMA GDM's have you purchased / used till now? Zero 1-3 4-7 7 - 10 11 - 15 More than 15
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12) When you are in need of GDM, who all are the manufacturers you would consider for buying (Other than WIDMA)? * A) B) C) D)
13) How would you rank all the manufacturers mentioned by you along with WIDMA? In case you have not mentioned any names in option B, C & D of above question, kindly rank those as NA. (Rank 1 is highest & 5 is lowest) NA WIDMA A) B) C) 1 2 3 4 5
*14) Select the location of the GDM / DHD Machine Manufacturer you mentioned in the previous question Only in India India , US , UK and Europe India and Other Asian Countries India , US , UK , Europe and Other Asian Countries
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*15) The quality and reliability of the Gun Drilling Machines manufactured by Chinese / Other Asian Countries will be.... Better than WIDMA Equivalent to WIDMA Poorer than WIDMA Will not rate since I have not used Chinese/Other Asian countries m/c Will not rate since I have not used WIDMA m/c Will not rate since I have neither used WIDMA nor Chinese/Other Asian Countries m/c
*16) Consider a situation wherein you have to make a choice from one of the below I Low cost Chinese GDM, where machine needs to be imported from China, with no service network in India. II GDM which is of moderate cost, but is of good quality and comes with good service provision, which is manufactured in India. III Low cost Chinese GDM, where machine needs to be imported from China, with moderate service network in India. In such case what would be your decision? GO WITH I GO WITH II GO WITH III
*17) Consider a situation wherein you need to finalize the supplier based on the price difference (considering WIDMA & Chinese / Other Asian manufacturers). At what price difference (in percentage) would you not consider WIDMA GDM? Less than 5%
5 - 10%
10 - 15%
15 - 20%
More than 20%
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*18) How would you rate Chinese / Other Asian country 's Gun Drilling Machine in terms of (where 1 - 2 Very Poor , 3 - 4 Poor, 5 - 6 Good, 7 - 8 Very Good, 9 - 10 Excellent ) PARAMETERS QUALITY FEATURES PERFORMANCE DELIVERY SERVICE VALUE FOR MONEY AESTHETICS 1 2 3 4 5 6 7 8 9 10
19) Which of the technologies similar to gun drilling are you aware of or you think are capable of replacing the GDM? (For any of your machining application) A B C
20) According to you how much percentage of machining would shift from GDM to any of the above technology? (If you have not mentioned any technology in above question, kindly select NA) NA A B C Zero% 0 - 10% 10 - 25% 25 - 50% 50 - 75% < 75%
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*21) What according to you would be the impact if GDM's are brought to / converted to General Purpose Machining centers? INCREASE COST PER PIECE INVENTORY COST DECREASE REMAIN SAME
*22) Whether your application of deep hole drilling can be done in general purpose machining centers with Gun Drill / Deep Hole Drill as attachment (Without compromising on the quality of output) ? Yes No
*23) According to you, what percentage of the jobs can be done on general purpose machine using Gun Drill as attachment for your machining application? Zero% > 10% 10 25% 25 50% 50 75% < 75% *24) Are you aware of MQL (Minimum Quantity Lubrication) technology? Yes If NO kindly go to question 31 *25) Have you ever used MQL for any of your machining purpose? Yes If NO kindly go to question 31 No No
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*26) For which application had you used MQL?
*27) Based on your experience with MQL, What is the performance & machining quality level when compared to Gun Drilling / Deep Hole Drilling? Excellent Good Neutral Fair Poor *28) Whether MQL would be able to replace GDM for any of your machining application? Can replace completely Only partially It cannot replace GDM *29) What according to you would be the impact on machining if MQL technology is implemented compared to GDM? (Select the suitable option from below) INCREASE QUALITY OF MACHINING COST PER PIECE DECREASE REMAIN SAME
*30) According to you, what would be the percentage of machining that MQL would be replacing that of GDM in your machining applications? Zero % > 10% 10 - 25% 25 - 50% 50 - 75% < 75%
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*31) Consider a situation wherein you have to make a choice from one of the below I) GDM which is of moderate cost, but is of good quality and comes with good service provision, which is available in India. II) GDM is highly priced with excellent quality and features, but less service provision and also the machine needs to be imported from Europe / U S / Japan. In such case what would be your decision? GO WITH I Kindly share your views on option chosen by you. GO WITH II
*32) If you consider switching from present manufacturer to other manufacturer, what according to you would be the level of risk that you will be subjected to? No Risk Moderate Risk High Risk
*33) To reduce the machine delivery time , if we (WIDMA) standardize the GDM (in terms of size, range, feed, etc. ) in few models, so that you can choose any one model which can be configured to suit your requirement with limited options. Will you go for purchasing it? Yes No
*34) Would you go with the manufacturer who is very much new to the industry? Yes No
*35) Would you go with the manufacturer who already exists in international market but is operating for the first time in domestic market? (No production & limited service facility in India). Yes No
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*36) How likely are you to recommend WIDMA to people you known? Always More Frequently Less Frequently Never Not used WIDMA yet *37) Based on your experience with WIDMA GDM, would you go for buying it next time? If no who would you go for? Yes Not used WIDMA yet 38) How many GDMs you might require at the end of * First Year * Second Year Third Year *39) What would be your suggestion to WIDMA in order to maintain / start relationship with you? No
We thank you for the valuable time which you have provided us through this survey. This survey will definitely help us in providing you with better product and service. Regards, Team WIDMA
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BIBLIOGRAPHY
Text Books: Quantitative methods for business by Anderson ,sweeney and Williams.
Referencess:
www.kennametalindia.com www.imtma.com A report on the Indian capital goods industry-2011 www.widma.com
Page 73

Project Report-Porters Five Force Analysis of GDM

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Project Report-Porters Five Force Analysis of GDM

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EXECUTIVE SUMMARY

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

VISION, MISSION AND QUALITY POLICY

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Special Vertical Turning Machines

Ongoing Wear Monitoring & Consultation

Department of MBA, PESIT

Department of MBA, PESIT

Distribution of shares as on 30th June 2011

Department of MBA, PESIT

It also provides transportation facility to its employees.

Department of MBA, PESIT

H. ACHIEVEMENTS AND AWARDS

Department of MBA, PESIT

I.WORK FLOW MODEL OF MSG

Department of MBA, PESIT

J. FUTURE GROWTH AND PROSPECTS

Department of MBA, PESIT

3.MCKINSEYS 7S FRAME WORK

Department of MBA, PESIT

a. Shared Values of Kennametal:

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

Head - Finance, Legal

Head - Human Resource

Head- Machining Solution Group (MSG)

Head - Metal Working Business

Head - Metal Forming

Special Purpose Machine

Special Vertical Turning Machines

Marketing & Sales

After Sales Service

Organization Structure of MSG - Kennametal India

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT

FINANCIAL STATEMENT ANALYSIS

Current Assets Current Liabilities

1.87 1.21 1.17 0.00 0.00 5.13

Quick Assets. Current Liabilities

Debt Equity Ratio

Working Capital Turnover Ratio

Sales Net Working Capital

Fixed Assets Turnover Ratio

Sales Net Fixed Assets

2010-11 6 Return on Equity PAT Net worth

2009-10 2010-11 7 Operating Profit Ratio EBIT Net Sales

14.8% 17.4% 27.9% 29.7% 49.9%

EBIT Total Investment

Department of MBA, PESIT

Department of MBA, PESIT

Department of MBA, PESIT