Management of Technology – 2Management of Technology – 2 Project Report Project Report

SJMSoM, IITBombay SJMSoM, IITBombay

Group B3: Prasenjit Debdas 08927855

Ashwin Durga 08927872

Jaskaran Bakshi 08927840

Rishi Jain 08927902

Prashant Gupta 08927841

Company Selected: JSW Steel

AgendaAgendaTable of Contents About the company: Facilities of JSW Steel Brief Technology and Company History Technology Evolution at JSW Steel Key Competencies Technology Strategy Type Strategic Context and Technology choice SWOT Analysis Technology Business Linkage Technology Strategy Technology Audit (Ford) Strategy Adopted by JSW Steel Technology SWOT – Hax-Majluf Framework Conclusion References 

IntroductionIntroduction JSW Steel Ltd belonging to the Jindal Group was

incorporated in the year 1994. Jindal Iron & Steel Co Ltd (JISCO) promoted Jindal Vijayanagar Steel Ltd, which was renamed as JSW Steel Ltd.

JSW Steel Ltd is today a fully integrated steel plant producing from pellets to colour coated steel.

As far as equity holding is concerned the promoters hold a major of about 45 percent stake in the company equity while the institutional investors has a significant share of above 29 percent and individuals hold about 13 percent.

The registered office of JSW Steel is at Mumbai.

Facilities of JSW SteelFacilities of JSW Steel

Vijaynagar Works Fully integrated steel plant, located in Bellary district, 340

kms from Bangalore.

Vasind and Tarapur Works Apart from being a leading manufacturer of cold rolled

and color coated steel, Tarapur and Vasind works is today India’s biggest producer & largest exporter of galvanized steel. The total capacity of Vasind and Tarapur Works is 0.9 MTPA of Galvanised, GALVALUME & Colour Coated Cold Rolled products.

Salem Works Salem Works is the only integrated steel plant in Tamil

Nadu and is located at Pottaneri/M. Kalipatti villages and at about 35 kms from Salem.

Key Competencies of JSW Key Competencies of JSW SteelSteel

Size The Company is the largest producer of galvanized

steel (in terms of installed capacity) in India.

Servicing The Company positions itself differently in its servicing

ability in a commodity business where product differentiation is difficult. Driven by a relationship building model, it enters only into long-term contracts with key customers, offers superior product customization and responds to customers needs with a sense of emergency.

Branding The Company's pre-coloured galvanized products were

marketed for the first time in 2007-08 under the brand name of "JSW Colour on".

Scope

Leadership

Full Selective

Leader

Follower

Technology Strategy Type:Technology Strategy Type:

Why Technology Follower:Why Technology Follower:

Not much investment in R&D over the last few years.

Has been acquiring technologies from other players such as Siemens for Blast furnace.

JSW Steel’s R&D Spend over JSW Steel’s R&D Spend over the last few years:the last few years:

2008 2007 2006 2005 2004

Capital Expenditure 13.6 2.45 5.2 1.86 1.13

Recurring Expenditure 0.76 1.27 0.82 1.69 1.27

Total Expenditure 14.36 3.72 6.02 3.55 2.4

Total R&D Expenditure as % 0 0 0 0 0.07

Strategic Context and Strategic Context and Technology ChoiceTechnology ChoiceScope

Strategic Focus

Broad Narrow

Low Cost

Differentiation

Focus on cost reductionFocus on cost reductionOver the years, JSW Steel’s focus has been

on cost reduction .Given below is what it has achieved over the years.

UOM 2003 2005 2007 2009Capacity mtpa 1.60 2.50 3.80 6.80 Project Cost Rs. crores 6,500 8,517 9,992 16,442 SIC Rs./ton 40,625 34,068 26,295 24,179 Note : SIC = Specific Investment Cost

SWOT AnalysisSWOT Analysis

Strengths:Strengths: It operates in both the upstream and downstream

sectors. Vijayanagar Works is a fully integrated steel plant. An

integrated plant has in house capabilities for the entire range of activities involved from extractions of minerals, refinement to the production of finished goods.

JSW is the first steel producer in this world to use Corex Technology for producing hot metals.

JSW is India’s largest private steel maker. This allows JSW to the economies of scale in production and better bargaining power with respect to suppliers and costomers.

The Company has recently launched GALVALUME, a revolutionary product in the steel industry.

The labor and conversion costs( these include labour cost, energy cost and other manufacturing costs) per tone of steel are among the lowest in the industry( both domestically and internationally)

Productivity per employee at JSW steel is comparable to international standards.

 

Weakness:Weakness:

It does not own mines for some of its basic raw materials.

Inability to utilize 100% capacity. Low perception among investors about the company’s

management and ability to sustain growth. Although the company is focusing a on R&D, the budget

is only a fraction of what international competitors can afford to invest in their R&D activities.

Opportunity:Opportunity:

JSW steel is located in a fast growing country like India where the per-capita steel consumption is still low but this means huge potential for growth.

JSW steel has access to top talent from the country and that too at comparatively lower prices than the competition.

JSW steel still does not have captive mines and once they have it, their cost structure would improve further and the external risk to the company will be mitigated to a large extent.

Threats:Threats: The entry of the world biggest steel corporations( like

Arcelor Mittal) into India will pose a major threat to the company.

The current economic scenario where steel demand is declining around the world is another major area of concern for the organization. The company has already postponed and/or delayed some of its projects which were in the pipeline.

The domestic competitors like Tata Steel are expanding rapidly and JSW steel need to keep up with the competition.

Fiscal incentives from the government might be another area of concern for the company because some of these might be withdrawn anytime.

The cyclical nature of the steel industry means that the company needs to control its cost and have efficient production processes throughout.

The company also need s to manage its rapid growth effectively and not go off track. This is another area which of concern and is likely to be the managements top priority.

Technology Strategy of JSW Technology Strategy of JSW SteelSteel

TechnicalCapabilities

ProductPlatforms

ProcessPlatforms

Appropriation

Deployment In products

Deployment inValue chains

Create Change the rules Support ExistingFundamentally of Rivalry BusinessNew business

Business Strategy Technology Strategy

RESOURCE

COMMITMENTS

18

Technology Business Linkage

ScaleScale up technology and up technology and capacity:capacity:

1. JSW has been over the years scaling up capacity through various projects by the way of:

2. Greenfield expansions

3. Brownfield expansions

4. Mergers & Acquisitions

5. Consolidation

6. Joint ventures

Expansions:Expansions:

10

6.8

4.13.8

2.51.61.61.6

0

2

4

6

8

10

12

2003 2004 2005 2006 2007 2008 E 2009 E 2010 E

Inorganic

Merger

Brownfield & Organic

Greenfield - Value added - Crude steel

1.081.28 1.28

2.08 2.08

1.28

2.08

Technology OptimizationTechnology Optimization

Technology selection

Blending of technology

Strong R&D set up

Corex process & Non recovery coke oven

Cost effective & energy efficient route

Environment friendly

Mix of Blast Furnace & Corex route

Optimal utilisation of energy resource

No usage of petro fuels

Continuous focus to innovate and improve the process

Cost Reduction:Cost Reduction:

Set up facilities at low investment per ton

UOM 2003 2005 2007 2009Capacity mtpa 1.60 2.50 3.80 6.80 Project Cost Rs. crores 6,500 8,517 9,992 16,442 SIC Rs./ton 40,625 34,068 26,295 24,179 Note : SIC = Specific Investment Cost

Improve factor efficiencyImprove factor efficiency

◦Labour Labour productivity of 978 ton/man year

(2009) comparable with international standards

◦Capital Avg. ROCE improved from 18.31% (2004)

to 23.01% (2006) Market capitalisation at Rs. 4,749 crs

(2006), up from Rs. 1,059 crs (2004) Enterprise value at Rs. 8,906 crs (2006),

up from Rs. 5,599 crs (2004)

 

Robust Business modelRobust Business model

JSW steel follows the Disintegrate process and Integrate approach to achieve a efficient business model.

JSW Steel Ltd.Integrated operations

VMPL / NMDC - Tie up for Iron

Ore

SWPL - 5 MTPA port at

Goa

JPOCL / BOC - Tie up for

Oxygen

JEL - Tie up for power

Market expansionMarket expansion

Creating brand image: It is branded as Jindal Vishwas in domestic markets and Galvplus in international markets.

Presence in many markets and exports to over 70 countries across 5 continents

Technology SWOT – Hax-Technology SWOT – Hax-Majluf FrameworkMajluf Framework

STU Description

1. Design Technology Involves Technologies related to the basic definition and architecture of the type of steel required by the customer.

2. Manufacturing Technology-galvanization technology

Involves new technologies to produce better quality of galvanized steel.

3. Color Coating Technology Involves the technology used to coat the steel produced before it is sent for packaging for delivery.

4. Manufacturing Technology-coils and strips Involves the technologies covering the entire gamut of production of steel coils of better quality as per customer standards at the least possible cost.

5. Material Technology Involves technologies to see that the best quality of steel is produces with the least amount of slag. The best raw materials and their use is covered by these technologies.

Technology-Portfolio Technology-Portfolio Matrix Matrix

Inference from T-P MatrixInference from T-P Matrix Looking at the technology portfolio, we find that

the technology attractiveness for STU1 is going to increase from 2009 to 2012 as well as the strength. JSW steel needs to focus on this STU to reap the benefit, especially when design technology can has higher profit margins.

STU2 will reduce in technology attractiveness, but would remain substantially attractive. They should not devote more than the resources already required by the STU.

The technology attractiveness of STU3 is going to increase rapidly in the next 3 years and JSW should allocate sufficient resources to make use of this opportunity.

 

Contd…Contd…We see that the strength is not going to improve

as much as the attractiveness of the technology. They should focus on developing the strengths in

this area. STU4 does not seem to be technology attractive and at the same time the strength of JSW steel will mostly go down in the years due to lower spend on research.

However, given that this forms a major part of their business, they should look to concentrate on other STU’s of their business. STU5 will be as attractive as today, but the strength will decrease due to lesser focus on internal development of technology in this aspect.

Conclusion:Conclusion: Conclusion  JSW Steel though is driven by technology, does not spend

much on Research and development and prefer to acquire and get technology solutions from outside either through purchase or sometimes through Joint ventures and projects.

JSW Steel can be described as a Technology follower. Though is strives to have the latest technology in manufacturing as well as other technology units, it prefers getting the technology from the innovators and the front runners.

Technology forms the core of its business. JSW steel focuses on producing low cost products over the years and are able to do that consistently over the last 10 years. The average cost of production/tonne has reduced over the years and the productivity of labor has increased substantially over the years. This has primarily been due to the deployment of latest technology in their processes and in order for this trend to continue, it needs to sustain investment in this domain.

 

References:References: 1. All data about R&D, Technology, Competition, Industry from

CMIE Database2. Capitaline – For select financial data3. http://www.ifisresearch.com/jws.pdf4. http://books.google.co.in/books?

id=987Ut4dF35kC&pg=PA91&lpg=PA91&dq=upstream+and+downstream+steel+products&source=bl&ots=MOQ_Db1T3l&sig=flFTYB5AZqX0r5uXDerETlqGmyM&hl=en&ei=lTL0SenwMov26gOQrYHJDw&sa=X&oi=book_result&ct=result&resnum=2

5. http://72.14.235.132/search?q=cache:vHmqh1wf97wJ:www.jsw.in/media_zone/pdf/galvalume%2520PRESS%2520RELEASE-2-19Feb2008.pdf+GALVALUME+JSW&cd=1&hl=en&ct=clnk&gl=in

6. http://hindu.com/businessline/2001/04/18/stories/021818ek.htm

7. JSW Steel Website – http://www.jsw.in

Thank YouThank You

AppendixAppendix

Note:Note:= The STU is not relevant as a source of

competitive advantage-Potential for minor supportE Even- STU support average

performance+ Potential for mild competitive

advantage++ Potential for strong competitive

advantageX Current position in 2009O future position in 2012

STU: STU: Design Design TechnologyTechnology

STU: Design Technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Potential for enhancing Competitive advantage in Products X,O Processes X,ORate of technology change X O Continuous

improvements look to continue

Potential for long term value added X O

Impact on Cost X O Performance X,O Quality O X

DifferentiationImpact on entry barriers X,OImpact on setting Industry standards X,OImpact on improving industry X O

Total Score of TA for year 2009: X-> 30 for year 2012: O-> 33

STUSTU: Manufacturing : Manufacturing Technology-galvanization Technology-galvanization technologytechnology

STU: Manufacturing Technology-galvanization technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Potential for enhancing Competitive advantage in Products O X Processes X,O Rate of technology change O XPotential for long term value added O X

Impact on Cost X,O Performance X O Quality X,O

Differentiation XImpact on entry barriers X,OImpact on setting Industry standards X,OImpact on improving industry O X

Total Score of TA for year 2009: X-> 31 for year 2012: O-> 26

STU:STU: Color Coating Color Coating TechnologyTechnology

STU: Color Coating Technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Potential for enhancing Competitive advantage in Products X O Processes X ORate of technology change X,OPotential for long term value added X,O

Impact on Cost X O Performance X,O Quality X O

Differentiation X OImpact on entry barriers X OImpact on setting Industry standards X OImpact on improving industry O X

Total Score of TA for year 2009: X-> 27 for year 2012: O-> 37

STU: STU: Manufacturing Manufacturing Technology-coils and Technology-coils and stripsstrips

STU: Manufacturing Technology-coils and strips, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Potential for enhancing Competitive advantage in Products X O Processes X,ORate of technology change X OPotential for long term value added X,O

Impact on Cost X O Performance X O Quality X O

Differentiation XImpact on entry barriers XImpact on setting Industry standards XImpact on improving industry X

Total Score of TA for year 2009: X-> 18 for year 2012: O-> 20

STU:STU: Material Material TechnologyTechnology

STU: Material Technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Potential for enhancing Competitive advantage in Products X O Processes X,O Rate of technology change X,OPotential for long term value added O X

Impact on Cost X O Performance X,O Quality X O

Differentiation XImpact on entry barriers X OImpact on setting Industry standards X,OImpact on improving industry X

Total Score of TA for year 2009: X-> 27 for year 2012: O-> 27

Internal Scrutiny for Internal Scrutiny for technology (strengths)technology (strengths)

STU: STU: Design TechnologyDesign Technology

STU: Design Technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Technology Capabilities Human resources X,O Equipments & Systems O X Access to internal Resources X OTechnology embodiment Cost reduction X O Standards X,O Design Quality X O

Total Score for year 2009: X-> 15 for year 2012: O-> 19

STU: STU: Manufacturing Manufacturing Technology-galvanization Technology-galvanization technologytechnology

STU: Manufacturing Technology-galvanization technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Technology Capabilities Human resources X,O Equipments & Systems X O Access to internal Resources O XTechnology embodiment Cost reduction X O Standards X,O Design Quality X O

Total Score for year 2009: X-> 21 for year 2012: O-> 23

STU: STU: Color Coating Color Coating TechnologyTechnology

STU: Color Coating Technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Technology Capabilities Human resources X,O Equipments & Systems O X Access to internal Resources X,OTechnology embodiment Cost reduction X O Standards X,O Design Quality X,O

Total Score for year 2009: X-> 27 for year 2012: O-> 28

STU: : STU: : Manufacturing Manufacturing Technology-coils and Technology-coils and stripsstrips

STU: : Manufacturing Technology-coils and strips, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Technology Capabilities Human resources X,O Equipments & Systems X O Access to internal Resources X,OTechnology embodiment Cost reduction O X Standards X Design Quality X,O

Total Score for year 2009: X-> 17 for year 2012: O-> 14

STU: STU: Material Material TechnologyTechnology

STU: Material Technology, X->2009,O->2012Factors =

1-2

E3

+4

++5

Comments

Technology Capabilities Human resources X,O Equipments & Systems X,O Access to internal Resources O XTechnology embodiment Cost reduction O X Standards X,O Design Quality X,O

Total Score for year 2009: X-> 17 for year 2012: O-> 21

STU scores for Technology STU scores for Technology Attractiveness and StrengthAttractiveness and Strength

Technology Attractiveness Technology StrengthSTU No. X-> 2009 O-> 2012 X-> 2009 O->2012

S1 30 33 15 19S2 31 26 21 23S3 27 37 27 28S4 18 20 17 14S5 27 27 25 21