TERM PAPER

BY:

DEOBRAT SAHAY

USN:1PI10MBA41

Serial No. Content

1 Introduction to the Company:a. Historyb. Present status in industryc. Summary of business areas and products / servicesd. Organization structure (high level)e. Marketing & Sales Organizational Structure

2 Structure of the industry:a. Size and growth ratesb. Major playersc. Important environmental factors

3 Buyer behavior in the industry:a. Typical buying center and characteristics for the

industryb. Specific organizational strategies adopted by the

company to handle buyer behavior

4 Market segments and positioning:a. Market segments in the industryb. Segments addressed by the subject companyc. Positioning adopted in each segment

5 Products / Services strategies:a. Product lifecycle analysis for company productsb. New product development and justification

6 Channel and Distribution strategies:a. Industry distribution characteristicsb. Channel / distribution strategies adopted by the

company and analysis

7 Pricing Strategies:a. Pricing determinants for industryb. Pricing strategies of company

8 Marketing & Sales Management:a. General Patterns in industryb. Company marketing structure and analysis

9 Consolidated SWOT analysis of company’s marketing operations

10 Recommendations for the future

1. Introduction to the Company:

a. History

In July 1945, two young brothers P.P Chhabria and K.P Chhabria came to Pune from Karachi in search of a livelihood and within six months set up a small shop selling electrical cables. The retail business became quite successful. A sizable order in the mid 1950's from the Defence Department for wire harnesses for trucks and tanks bolstered their confidence and they decided to manufacture Cables, themselves.

Starting as a small-scale industrial unit in 1956, they manufactured PVC insulated cables for the automobile industry. Finolex brand was born from "Fine" & "Flexibles" and "O" with an electric arc across it - signifying the electrical cable business the company was in. Their relentless search for growth and doughty perseverance saw them through some difficult times and in 1972 the enterprise turned into a limited company.

Since then, there has been no looking back and following a public offering in July 1983, Finolex Cables Limited embarked on a continuous process of expansion and modernization which enabled it to become the most diversified & largest cable manufacturer in the country.

Their relentless quest for growth saw the brothers establishing Finolex Industries Limited (FIL) in 1981. The company sought to manufacture Rigid PVC Pipes and Fittings at Pune, which find large-scale application in the agriculture sector. In a shrewd move towards backwards integration, the company has set up a PVC resin manufacturing facility at Ratnagiri on the west coast of India.

The early nineties saw the Finolex Group expanding into new business domains to manufacture Optic Fibre Cables and Copper Rods. Today the Group turnover exceeds Rs.30 Billion (about US $ 750 million)

Finolex Cables Ltd (FCL) and Finolex Industries Ltd (FIL) are the two group companies whose equity shares are listed on the Bombay Stock Exchange and National Stock Exchange. Global Depository Receipts of Finolex Cables Limited are also listed on the Luxembourg Stock Exchange. Professionally managed, with continuous updating of technology and strict quality controls, Finolex strives for maximum customer satisfaction. Over the years, it has attained a significant position on the industrial map of India.

b. Present status in industry :

Finolex Cables Ltd, the flagship company of the Finolex Group was established in 1958 in Pune. Today, it is India's largest and leading manufacturer of electrical and telecommunication cables with a turnover in excess of Rs.16 Billion (about US $ 320 million)

The company started its operation with the manufacture of PVC insulated electrical cables for the automobile industry. Since then, the Company has constantly endeavored to augment its product range to include, PVC insulated electrical wires and Flame Retardant Low Smoke electrical wires, PVC insulated single core and multicore industrial flexible cables, Rodent Repellent Multicore Flexible Cables, PVC Insulated Winding Wires and 3 Core Flat Cables, XLPE 3 Core Flat Cables, Power and Control Cables, High Voltage Power Cables (Upto 33 kV), Polyethylene Insulated Jelly Filled Telephone Cables, Auto & Battery Cables, Co-axial and CATV cables, LAN Cables, Switchboard Cables, Fibre Optic Cables and others.

The company has manufacturing facilities at Pimpri and Urse in Pune as well as at Goa & Uttarakhand. The company has, over the years, established its reputation as an innovative leader and quality manufacturer by continuously upgrading technology, modernizing manufacturing facilities and maintaining highest standards of quality and services. Today, the name Finolex has become synonymous with Quality and enjoys overwhelming confidence of the customers. Investors have also fancied its stock in view of its phenomenal progress leading to a manifold increase on investment in stock through the years.

The company has received the ISO 9002 systems certification across all product lines and plants. Besides ISO 14001-quality certification has been accorded to its plants in Urse (JFTC & Co-Axial) and Goa (JFTC & HW) and Pimpri.

Every cable is manufactured using bright annealed electrolytic grade copper – 99.97% pure manufactured in house and is insulated with virgin grade PVC (manufactured by group company Finolex Industries Limited) that is formulated in-house.

The company has received several honours such as Harvard Business School Association of India - Economic Times award for "corporate excellence"; IIM - LIC award for 'marketing' and

the Engineering Export Promotion Council's 'export performance certificate'. Recently, the company was awarded the Export House status by the Directorate General of Foreign Trade.

c. Summary of business areas and products :

The Company operates in two main segments - Electrical Cables and Communication Cables. To support its requirement of Copper Rods for both type of cables, the Company manufactures Continuous Cast Copper Rods(CCC rods), at its Rod Plant at Goa. Part of this production of CCC rods is, however, sold to third party customers. The result from this operation is declared under the Copper Segment. Besides, the Company also manufactures PVC Sheets for various applications like roofing, signage and interiors, which business the Company intends to cease from in the near term. Further, the Company has over the last few years, expanded its product range to include Electrical Switches and Compact Fluorescent Lamps (CFLs). These items, however, account for less than 5% of the Company’s turnover and are hence reported as “Others” in the Segment Results

PRODUCTS

• Flexible Cables

• Winding Wires & 3 Core Flat Cables

• 3 Core Flat Cables (XLPE)

• Battery Cables

• Auto Cables

some other products:-

• Switches

• Compact Fluorescent Lamps (CFLS)

AccountsHuman Resource

ProductionQuality Control & Assurance

Purchase

Managing director

MarketingSales

Product Design & Development

Management Representative

d. Organization structure (high level) :

e. Marketing & Sales Organizational Structure :

- Electrical Cables (including Excise Duty) at Rs.14,074 million as compared to Rs 11,093 million in the previous year.

- All Communication cables (including Excise Duty) at Rs. 2,042 million as compared to Rs.1,907 million in the previous year.

- Copper Rods (net of interdivisional transfers and including Excise Duty) at Rs.5,106 million as compared to Rs.3,615 million in the previous year.

• Exports were lower at Rs. 394 million as against Rs. 583 million of the earlier year.

• The income from operations (including excise duty) was Rs.21,864 million for the year under review as compared to Rs.17,266 million for the earlier year.

• Looking at possible synergies, the Company had shifted the Low voltage power cables facilities from Pimpri to Urse towards the end of the previous financial year. Cost synergies are now clearly visible, with better people and machine utilizations as well asimproved coordination with the marketing team.

• There has been a delay in the commencement of operations at the Joint Venture with J-Power Systems Corp of Japan. This is primarily owing to construction related delays. Machine erection is now under way and the plant is expected to be operational inthe current financial year.

2. Structure of the industry:

a. Size and growth rates :

Against the backdrop mentioned above, during 2010-11 your Company saw signifi cant growth in the top line with sales registering a 25% growth in value terms. This increase was most visible in Electrical Cables and Copper segments. In volume terms growth was significant– with star performances from product offering to the following customer sectors – power, automotive, agriculture, real estate and OEM.As a policy your Company had decided not to keep any uncovered exposures on account of foreign exchange – all its current purchases of raw materials from outside India are fully covered as soon as the import is finalized. However, foreign currency and interest rate protection measures taken in the earlier years, continued to produce negative results and an amount of Rs.344.406 million has been charged as an Exceptional Item to the Profit & Loss Account in the year 2010-11.Income for the year under review was significantly higher at Rs.20,616.82 million (previous year Rs.16,428.26 million) representing a growth of 25% over the previous year. Following the robust growth achieved at the sales level, your Company has recorded a Net Profit of Rs.867.79 million as against a Net Profit of Rs. 576.20 million in the previous year.Segmentally, while Electrical Cables contributed 65%, Communication Cables contributed 10% to the total sale of products

b. Major players:

Alex polymers ltd.

Bhansali engg. polymers ltd.

Chemplast sanmar ltd.

Gujrat petrosynthese ltd.

Hindustan flurocarbons ltd.

Indian petrochemicals corp. ltd.

INEOS ABS(India)ltd.

Kama holding ltd.

Manali petrochemicals ltd.

c. Important environmental factors:

Implementing and maintaining an Environmental Management System. Preventing pollution. Complying with applicable legal requirements and with other requirements established. Promoting conservation of energy and resources. Constantly striving for continual improvement in our environmental performance.

3. Buyer Behavior in the industry:

a. Typical buying center and characteristics of industry:

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

New task, Modified Rebuy and Straight Rebuy. In case of Finolex purchases mostly the buying

is Straight Rebuy and Modified Buy. Sometimes the specifications and quality has to be

modified and that comes under the Modified Buy.

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

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

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

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

their specialized knowledge prepare the initial draft of the specifications, identify the raw

materials that meet those specifications, shortlist the suppliers, have detailed discussion about the

products and negotiate their prices..

Let’s explain the phenomena with an example: Suppose a cable manufacturer wants to go for

buying of wires, the following procedure will be followed:

1. The company will understand the need and characteristic of the need.

2. The company will search for possible suppliers and will contact them..

3. The supplier like Asahi Glass will send their sales representative to interact with the

company personnel.

4. The sales representative will brief on the product specifications and suggest the tonnage

required after considering various factors like size of automobile, quality of glass

offering, size of glasses, flat glass or float glass.

5. Based on the interaction the buyer may ask one particular company for a proposal or a

group of companies to submit their proposals.

6. The buying may be done on the basis of evaluation of the proposals.

7. In case of one company being asked for a proposal there will be a series of negotiations

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

8. The influencers in this decision maybe the administrative officer who looks after the

upkeep and administration of manufacturing department.

9. The Gate keeper will be the Public relationship department of the company and also the

secretary of the manager who filter the information reaching the buying centers.

10. The decider will be the director of the company who has the formal authority to finalize

the deal and actually will make the final decision. He will communicate his decision to

the manager who in turn will finalize the deal.

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

12. This is an example of a New Task in buying.

4. Market segments and positioning:

a. Market segments in the industry :

b. Segments addressed by the subject company:

Electrical Cables

Electrical cables can be further categorised into light duty electrical cables, power and control cables.

Light duty electrical cables include electrical wires used extensively for lighting. The main product of this category is 1100 volts PVC insulated wires which find application in electrification of residential, commercial and industrial establishments, electrical panel wiring and consumer electrical goods. The building industry and white goods industry have a close correlation with personal income. Higher the personal income, higher is the spending on essentials for life and thereafter on comforts of life. India is a growth story due to favourable demographics and competitive cost structure. As the economic activity is increasing, the personal incomes are growing as well as more and more of population is coming within the spectrum of spending for housing and white goods. This fuels commercial and industrial activity to go up. Upswing in economic activity is attracting foreign investment into the country, boosting the economic activity further. The business and individual confidence levels are high. Hence, there is

increase in demand for buildings and rise in consumption-expenditure. Such an environment is creating deeper and a wider market place for this variety of electrical wires .

Performance:For the year 2010-11 under review, the electrical cables registered sales (inclusive of excise duty) of Rs.14,074 million against Rs.11,093 million of the previous year.

Communication Cables

The communication cables comprise of state of art, new generation communication cables and traditional telephone cables.

The state of art communication cables are either copper based or glass based. The copper based cables include LAN cables, coaxial cables, PE insulated switchboard cables and V-SAT cables. These cables are used for last mile 22 connectivity. LAN cables are used in high speed networks, Coaxial cables are used to provide content input to TV receiving sets and in microwave communications and mobile towers, PE insulated switchboard cables are used to connect telephone instruments to an EPABX system and V-SAT cables find their application in V-SAT towers to connect the dish to the base station.

Performance:The communication cables segment (including optic fi bre) recorded sales of Rs.2,042 million for the year 2010-11 under review against Rs.1,907 million for the earlier year.

5. Products / Services strategies:

a. Product lifecycle analysis for company products

b. New product development and justification :

NEW PRODUCTS:

With the continuous increase of Copper prices which nearly touched USD 10,000 per ton on the LME the Company has developed products with “Copper Clad Aluminium Conductors” for certain applications, to soften the rising cost impact of copper. Such products have proven to provide customers with similar performance levels.

Looking at the customer requirements, the Company adds new variety of cables to its product range. Accordingly during the year under review, the Company’s Marketing team successfully launched state-of-art cables such as Halogard cables based on Halogen Free Flame Retardant (HFFR) insulation, Co-axial cables using Copper Clad Steel (CCS) conductor and Figure 8 cables that were designed and developed by the in-house R&D team. In its continuous efforts to identify and address the needs of niche markets, your Company has assessed the market potential for manufacture of Aluminium Conductor Steel Reinforced (ACSR Conductor) and Enamelled Wires and is in process of identifying a suitable party who possesses the requisite technology to enable developing new products to meet the requirements of such markets.

6. Channel and Distribution strategies:

a. Channel / distribution strategies adopted by the company and analysis:

The distribution channel is mostly based upon agencies.

vinayaga agencies Finolex ProductsWith a rich industrial experience vinayaga agency have established rich vendor base with one of leading Electrical Wires and Switches manufacturers – Finolex. This company has made a niche in the international market since past 50 years due to its international quality products that offers trouble free performance.

 Vinayaga agencies customize these products as per the specifications of our clients. The range they supply includes Power & Control Cables, Communication Cables, Technical Write Up and Light Duty Cables. Following are the salient features of the products:

Reliable Strong Safe Cost Efficient Superior Standard

Competitive Pricing Long Functional Life

8. Marketing & Sales Management:

Electrical Cables (including Excise Duty) at Rs.14,074 million as compared to Rs 11,093 million in the previous year.- All Communication cables (including Excise Duty) at Rs. 2,042 million as compared to Rs.1,907 million in the previousyear.- Copper Rods (net of interdivisional transfers and including Excise Duty) at Rs.5,106 million as compared to Rs.3,615 million

in the previous year.

9. Consolidated SWOT analysis of company’s marketing operations:

STRENGTHS:

• One of India’s leading cable manufacturers.

• Has the widest range of cable products in both segments and is recognized as a “Total Cable Solutions” Company capable of designing cable solutions for every need.

• Acknowledged as a leader in technology with a strong emphasis on quality

• Has the widest distribution network, which is being further expanded

• Backward integrated in respect of its major materials – CCC Rods, PVC compounds and FRP rods which allow the Company a certain technical superiority over its competitor while providing a cost advantage as well.

• A strong brand image and value – for long it has been the only cable company to hold the Super Brand status; the brand has also enabled the Company to market its products in overseas markets.

• Expanded into product segments that are adjacent to the electrical cable market i.e. CFLs and electrical switches – this move has brought additional market reach at minimal cost expansion.

OPPURTUNITIES:

-Product quality.-Continuous product improvement-Introduction of new products through in-house developments

WEAKNESS:

Have to depend on success in exports to justify its capacity additions

THREAT:Realizations in JFTC business are anticipated to decline

10 RECOMMENDATIONS:-It should improve its export by justifying its capacity additions.-Should concentrate on northern India-it must open its branches in north east part of India.-It should open its distribution channels.