Project on Cement industry Porter 5 Forces Made by Gaurav Singh Rana

1. Factors affecting rivalry among competition :
Current characterization Future Trend
1. DEGREE OF SELLER
CONCENTRATION
The major players in this industry
are-
 Steel Authority Of India -
They have a market
share of 20% and are the
largest producer of
Crude steel in MT.
 Rashtriya Ispat Nigam
Limited - they have a
market share of 5%
 Tata Steel- they have a
market share of 10%.
 JSW - Thy have a market
share of 8%
 ISPAT - They have a
market share of 3%.
 ESSAR - They have a
market share of 5%
 JSPL - They have a
market share of 3%
 Others 1 (includes
production from EAF
Units/ COREX-BOF) -
have a market share 14%
 Others 2 (includes
production from
induction furnace ) -
have a market share of
about 32%.
The steel industry plans to grow
at 11.3% till 2017 as well as
production volume is also
estimated to rise to around
123.9 MT. Thus the degree of
each seller's concentration can
increase if they capitalize on this.
Also the growth in technology
and higher participation by
private sector will lead to even a
higher market share of private
sector. Also the increase in
foreign investment in this
industry will change their
concentration.
2) RATE OF INDUSTRY GROWTH The steel industry is currently
growing at a CAGR of 7.7%.
The steel industry is expected to
grow by a CAGR of 11.3% in
2012-17 plan.
3) SIGNIFICANT COST
DIFFERENCES
There are no significant cost
differences as yet among sellers
due to high availability of iron
ore and low cost labor in India.
Every company in this industry
has set up their factory near
iron ore mines and thus each
company have somewhat similar
cost.
In future availability of cheaper
technology might result into cost
differences that are significant
4) EXCESS CAPACITY Currently only 89 percent
capacity is being utilized for
producing steel in India. Thus
there is no excess capacity.
During the twelfth five year plan
crude steel production is
estimated to grow at CAGR of
11.3% due to large scale capacity

2. Factors affecting rivalry among competition :
addition plans for steel
production during this period.
5) COST STRUCTURE OF FIRMS :
SENSITIVITY OF COSTS TO
CAPACITY UTILIZATION
Costs are relatively low in this
industry as the capacity
utilization is 89%. However costs
are low also due to easy
availability of iron ore and cheap
labor. Thus costs are affected by
a number of factors and not just
capacity utilization
As the capacity is to increase,
there will be also an increase in
production levels. This will also
reduce costs further due to the
concept of economies of scale.
6) DEGREE OF PRODUCT
DIFFERENTIATION AMONG
SELLERS? BRAND LOYALTY TO
EXISTING SELLERS? CROSS PRICE
ELASTICITIES OF DEMAND
AMONG COMPETITIORS IN
INDUSTRY?
The degree of product
differentiation is non-existent
currently. There are three
categories of steel being
produced in India - Pig Iron,
Sponge Iron and Total finished
steel (alloy + non alloy). They are
produced similarly all across due
to same technology available to
all which is either through
oxygen route or electric furnaces
route.
Since there are only few very
established brands in India,
loyalty is very high. For ex: Govt.
Of India uses steel from SAIL
usually.
Cross price elasticity of demand
does not exist currently in this
industry as this is an oligopolistic
market and because of this all
companies have prices very close
to each others.
Product differentiation occurring
seems a little impossible as all
the companies in this industry
are equally capable of using new
technologies that might come in
the market. However use of
different technologies might lead
to difference in quality. Also
coming of foreign players in the
market with better and different
methods and technology might
increase in product
differentiation.
Loyalty might also change in
future due to change in quality.
Cross Price elasticity of demand
might also increase due to
change in quality as different
technologies will lead to
different costs which might lead
to different price.
7) BUYERS' COST OF SWITCHING
SELLERS
The switching costs are relatively
lower in this industry as the
products are more or less similar
to each other in this industry and
because of this the buyer has
more power in this industry thus
leading to lower switching costs.
This should remain relatively
same as steel makers make steel
according to user needs and
there might not be much
differentiation even after influx
of foreign competition.