Management of Technology – 2 Project Report SJMSoM, IITBombay Group B3: Prasenjit Debdas 08927855 Ashwin Durga 08927872 Jaskaran Bakshi 08927840 Rishi Jain 08927902 Prashant Gupta 08927841 Company Selected: JSW Steel

Agenda Table 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

Table 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

Introduction 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.

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 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.

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 Steel 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".

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".

Technology Strategy Type: Scope Leadership Full Selective Leader 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.

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 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 Technology Choice Scope Strategic Focus Broad Narrow Low Cost Differentiation

Focus on cost reduction Over the years, JSW Steel’s focus has been on cost reduction .Given below is what it has achieved over the years.

Over the years, JSW Steel’s focus has been on cost reduction .Given below is what it has achieved over the years.

SWOT Analysis

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.

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: 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.

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: 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.

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: 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.

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 Steel

Technical Capabilities Product Platforms Process Platforms Appropriation Deployment In products Deployment in Value chains Create Change the rules Support Existing Fundamentally of Rivalry Business New business Business Strategy Technology Strategy R E S O U R C E C O M M I T M E N T S Technology Business Linkage

Scale up technology and capacity: JSW has been over the years scaling up capacity through various projects by the way of: Greenfield expansions Brownfield expansions Mergers & Acquisitions Consolidation Joint ventures

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

Greenfield expansions

Brownfield expansions

Mergers & Acquisitions

Consolidation

Joint ventures

Expansions:

Technology 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

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: Set up facilities at low investment per ton

Set up facilities at low investment per ton

Improve 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)

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

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

Market 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

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-Majluf Framework STU Description 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.

Design Technology

Technology-Portfolio Matrix

Inference 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.

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… 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.

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 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.

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: All data about R&D, Technology, Competition, Industry from CMIE Database Capitaline – For select financial data http://www.ifisresearch.com/jws.pdf 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 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 http://hindu.com/businessline/2001/04/18/stories/021818ek.htm JSW Steel Website – http://www.jsw.in

All data about R&D, Technology, Competition, Industry from CMIE Database

Capitaline – For select financial data

http://www.ifisresearch.com/jws.pdf

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

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

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

JSW Steel Website – http://www.jsw.in

Thank You

Appendix

Note: = The STU is not relevant as a source of competitive advantage -Potential for minor support E Even- STU support average performance + Potential for mild competitive advantage ++ Potential for strong competitive advantage X Current position in 2009 O future position in 2012

= The STU is not relevant as a source of competitive advantage

-Potential for minor support

E Even- STU support average performance

+ Potential for mild competitive advantage

++ Potential for strong competitive advantage

X Current position in 2009

O future position in 2012

STU: Design Technology STU: Design Technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Potential for enhancing Competitive advantage in Products X,O Processes X,O Rate 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 Differentiation Impact on entry barriers X,O Impact on setting Industry standards X,O Impact on improving industry X O Total Score of TA for year 2009: X-> 30 for year 2012: O-> 33

Products

Processes

Cost

Performance

Quality

STU : Manufacturing Technology-galvanization technology STU: Manufacturing Technology-galvanization technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Potential for enhancing Competitive advantage in Products O X Processes X,O Rate of technology change O X Potential for long term value added O X Impact on Cost X,O Performance X O Quality X,O Differentiation X Impact on entry barriers X,O Impact on setting Industry standards X,O Impact on improving industry O X Total Score of TA for year 2009: X-> 31 for year 2012: O-> 26

Products

Processes

Cost

Performance

Quality

STU: Color Coating Technology STU: Color Coating Technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Potential for enhancing Competitive advantage in Products X O Processes X O Rate of technology change X,O Potential for long term value added X,O Impact on Cost X O Performance X,O Quality X O Differentiation X O Impact on entry barriers X O Impact on setting Industry standards X O Impact on improving industry O X Total Score of TA for year 2009: X-> 27 for year 2012: O-> 37

Products

Processes

Cost

Performance

Quality

STU: Manufacturing Technology-coils and strips STU: Manufacturing Technology-coils and strips , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Potential for enhancing Competitive advantage in Products X O Processes X,O Rate of technology change X O Potential for long term value added X,O Impact on Cost X O Performance X O Quality X O Differentiation X Impact on entry barriers X Impact on setting Industry standards X Impact on improving industry X Total Score of TA for year 2009: X-> 18 for year 2012: O-> 20

Products

Processes

Cost

Performance

Quality

STU: Material Technology STU: Material Technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Potential for enhancing Competitive advantage in Products X O Processes X,O Rate of technology change X,O Potential for long term value added O X Impact on Cost X O Performance X,O Quality X O Differentiation X Impact on entry barriers X O Impact on setting Industry standards X,O Impact on improving industry X Total Score of TA for year 2009: X-> 27 for year 2012: O-> 27

Products

Processes

Cost

Performance

Quality

Internal Scrutiny for technology (strengths)

STU: Design Technology STU: Design Technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Technology Capabilities Human resources X,O Equipments & Systems O X Access to internal Resources X O Technology embodiment Cost reduction X O Standards X,O Design Quality X O Total Score for year 2009: X-> 15 for year 2012: O-> 19

Human resources

Equipments & Systems

Access to internal Resources

Cost reduction

Standards

Design Quality

STU: Manufacturing Technology-galvanization technology STU: Manufacturing Technology-galvanization technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Technology Capabilities Human resources X,O Equipments & Systems X O Access to internal Resources O X Technology embodiment Cost reduction X O Standards X,O Design Quality X O Total Score for year 2009: X-> 21 for year 2012: O-> 23

Human resources

Equipments & Systems

Access to internal Resources

Cost reduction

Standards

Design Quality

STU: Color Coating Technology STU: Color Coating Technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Technology Capabilities Human resources X,O Equipments & Systems O X Access to internal Resources X,O Technology embodiment Cost reduction X O Standards X,O Design Quality X,O Total Score for year 2009: X-> 27 for year 2012: O-> 28

Human resources

Equipments & Systems

Access to internal Resources

Cost reduction

Standards

Design Quality

STU: : Manufacturing Technology-coils and strips STU: : Manufacturing Technology-coils and strips , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Technology Capabilities Human resources X,O Equipments & Systems X O Access to internal Resources X,O Technology embodiment Cost reduction O X Standards X Design Quality X,O Total Score for year 2009: X-> 17 for year 2012: O-> 14

Human resources

Equipments & Systems

Access to internal Resources

Cost reduction

Standards

Design Quality

STU: Material Technology STU: Material Technology , X->2009,O->2012 Factors = 1 - 2 E 3 + 4 ++ 5 Comments Technology Capabilities Human resources X,O Equipments & Systems X,O Access to internal Resources O X Technology embodiment Cost reduction O X Standards X,O Design Quality X,O Total Score for year 2009: X-> 17 for year 2012: O-> 21

Human resources

Equipments & Systems

Access to internal Resources

Cost reduction

Standards

Design Quality

STU scores for Technology Attractiveness and Strength Technology Attractiveness Technology Strength STU No. X-> 2009 O-> 2012 X-> 2009 O->2012 S1 30 33 15 19 S2 31 26 21 23 S3 27 37 27 28 S4 18 20 17 14 S5 27 27 25 21