IRON AND STEEL INDUSTRY

Submitted by
Group 22
Saurav Tripathy- 18P047
Sanjana Pabbati- 18P109
Akshat Goyal- 18P185
Cheemalapati Lakshmi Bhargav- 18P192
Jahnavi Budur- 18P197
Krtin Jain – 18P203
Introduction to the industry
The Iron and Steel Industry is one of the major industries in India. It drives the industrial progress of
the country. It is considered to be a key industry on which several small- and medium-scale industries
like the transport, communication, power and fuel industries depend.

India is the largest producer of sponge iron in the world and the 3rd largest finished steel consumer in
the world after China & USA. The Government of India has taken various steps to boost the sector
including the introduction of National Steel Policy 2017 and allowing 100 per cent Foreign Direct
Investment (FDI) in the steel sector under the automatic route. The growth in the Indian steel sector
has been driven by domestic availability of raw materials such as iron ore and cost-effective labor.
Consequently, the steel sector has been a major contributor to India’s manufacturing output.

Development of steel sector:

 The economic reforms initiated by the Government since 1991 added new dimensions to
industrial growth in general and the steel industry in particular.
 Licensing requirement for capacity creation was abolished, except for certain locational
restrictions and the steel industry was removed from the list of industries reserved for the
public sector.
 Automatic approval of foreign equity investment up to 100% was granted. Price and distribution
controls were removed with a view to make the steel industry efficient and competitive.
 Restrictions on external trade, both in import and export, were removed with drastic
reductions in import duty.
 General policy measures like reduction in import duty on capital goods, convertibility of rupee
on trade account, permission to mobilize resources from overseas financial markets among
others, also benefited the Indian steel industry.
The growth profile:

 The liberalization of industrial policy and other initiatives taken by the Government have given
a definite impetus for entry, participation and growth of the private sector in the steel
industry.
 While the existing units are being modernized/expanded, a large number of new steel plants
have also come up in different parts of the country based on modern, cost effective, state of-
the-art technologies.
 In the last few years, the rapid and stable growth of the demand side has also prompted
domestic entrepreneurs to set up fresh green field projects in different states of the country.
 Today, as the 2nd largest crude steel producer globally and with a capacity of over 100 million
tons, the Indian steel industry has come a long way.

Demand-Availability:

 Demand and availability of iron and steel in the country are largely determined by market
forces and gaps in demand-availability are met mostly through imports.
 Interface with consumers exists by way of meeting of the Steel Consumers’ Council, which is
conducted on regular basis.
 Interface helps in redressing availability problems, complaints related to quality.

Way forward:

 The Indian steel industry has entered into a new development stage, post de-regulation, riding
high on the resurgent economy and rising demand for steel.
 Huge scope for growth is offered by India’s comparatively low per capita steel consumption and
the expected rise in consumption due to increased infrastructure construction and the thriving
automobile and railways sectors.
 The New Industrial Policy Regime provides opportunities for growth of Iron and Steel in private
sector.
 The Government has also announced a policy for providing preference to domestically
manufactured Iron & Steel products in Government procurement.
 Ministry of Steel is playing the role of a facilitator, providing broad directions and assistance to
new and existing steel plants, in the liberalized scenario.

About the company

AAA is a Steel manufacturing firm established in 2017. The company is looking for continuous
improvement in the product and service portfolio which will allow it to serve high performing segments
in Indian landscape.

New products planned: AAA 355

About the game:

Before we start with what the game is about, first let us have a look at what is Product life cycle.

Product Life cycle -

 Every product in its lifetime goes through various stages. The first stage for is product
development. This is the stage wherein the product in conceived and developed.
  Second stage is the introductory stage. During this stage, the sales growth is generally slow
and the company experiences a lot of expenses as a good amount of money is spent on
marketing in order to create awareness.

 Third stage is growth stage, wherein there is sharp increase in sales and the product starts
becoming profitable. Company spends on marketing in order to gain market share.

 Fourth stage is maturity stage. During this stage the sales after growing for a period of time
starts going down. The profits are the highest but they start stagnating too. Coming might
invest in innovation and promotion in order to sustain this stage for as long as they can.

 The fifth and final stage is decline stage. During this the sales decrease significantly and the
product is replaced by its alternatives.

The game is based on product life cycle and the game takers would be judged on how well they
understand each stage of the life cycle and how they apply marketing concepts to provide different
inputs in each round. The teams during the span of game will have to analyze how the factors such as
Competition, Profits, Prices, Distribution, Advertising strategy, Consumer sales and promotion
expenditure vary at different stages of the product life cycle and how do they respond to such
variations. As the product is already made so the product development stage is over and we directly
start with introductory stage. The product under consideration is high strength variant of steel hollow
sections called AAA 355, which has enhanced yield strength and an additional variant with fire-
resistance properties. Due to its features, the product is subject to competition from other players in
the industry too.

Basic rules:

 The game will be played by 5 players

 Each player will be acting as a company that will have to decide each input based on their
research and the data given at the beginning of each round

 Each player will be valued at the end of every round as per the decisions taken by him

 The game will continue for 5 different stages of product life cycle however this will not be
mentioned to the participants.

 At the end of which a winner will be declared. The player with the highest profit and market
share will be considered the winner of the game
How to play?

 The game is divided in 5 stages. The first stage Is Introduction, second stage is Growth, third
stage is Shake out, fourth stage is Maturity and the final stage is decline.

 At the starting of each round, every player will have to input 6 variables which are,

1. Price – Price is one of the key factors in the industry due to huge competition and high
input prices combined with macroeconomic factors. Players should choose their prices
wisely that would allow them to increase their profitability and at the same time,
understand the pricing strategies of their competitors and price accordingly.

2. Marketing Expense – Since our product is a new product in the market, it will require
the players to do B2B marketing and gain a first-mover advantage in the industry.

3. R&D Expense - Investments in R&D activity and innovation could help the company to
lower its future capital requirements and operating costs, while also increasing yields
and reducing resource and energy use. These investments would ultimately help the
company become more efficient and economically viable.

4. Number of units to produce – With increasing input prices and fluctuating demands in
the global markets, companies must decide the number of units of the new product thy
want to produce in a year.

5. New distribution centers – Since this is a new product, it would require high distribution
for better market penetration

6. CSR – Companies investing in CSR activities will have an edge over the other players in
the game and investment in these activities would increase their sales up to 2%.

 Participants will be given data such as the Inventory, Expected demand for the next year, Cost
of new distribution center, Retained earnings, Variable cost per unit and Market share.

1) Inventory – Depending on the demand growth rate, they should decide on the range of
inventory. There is a cost associated with inventory

2) Expected demand – Expected demand growth percentage

3) Retained earnings – Cash retained with the person at the end of each round

4) Cost of new distribution center – Cost associated with each distribution center

5) Variable cost per unit – It involves cost of labor and raw materials

6) Market share – Market share of the company

 At the backend, following calculations will take place:

 1) Sales vector – Every input variable has some weightage and weightage wise sum of all the
inputs is equal to sales vector

2) Market share – Sales vector of a company divided by summation of sales vectors of all the
companies

3) Sales units – The number of units sold

4) Revenue – This is number of units sold multiplied by price of each unit

5) Inventory – The outstanding inventory at the end of each round

6) Inventory cost – The cost associated with the idle inventory

7) R&D cost – As inputted by the participant

8) SG&A – Marketing expenses and selling expenses

9) COGS – This is 25% of the revenue

Basis all the factors mentioned above, profits will be calculated at the end of each round.
The team with the highest profit at the end of 5 rounds will be declared as the winner.

Learnings:

 At the end of the game, the players will have a good understanding of the product life cycle.
Every stage has different decisions to be take based on Competition, Profits, Prices,
Distribution, Advertising strategy, Consumer sales and promotion expenditure. The players will
learn how to responses to each factor changes during different stages.

 Based on the inputs provided, the players would be able to assess the importance/weightage
for each parameter. As a result of which, they will get a basic idea of product idea rating
device.

 The players would also learn about the life cycle of a product in iron and steel industry in
particular and how the industry operates in general and thus make decisions accordingly.