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Marketing Strategy for Hindustan Dorr-Oliver Ltd. (HE/PV) Division
(Reg. No. : 510824056)
in partial fulfillment of the requirement for the award of the degree
MBA – Marketing Management (2008-2009)
Center Code No. 1951, 3rd Floor, Shyam Shikhar, Bapunagar, Ahmedabad – 380024.
I hereby declare that the project report entitled
Marketing Strategy for Hindustan Dorr-Oliver Ltd. (HE/PV) Division
Submitted in partial fulfillment of the requirements for the degree of Master of business Administration to Sikkim –Manipal University, India, is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other similar title or prizes.
Modi Hitesh Navnitlal Place: Ahmedabad Date: 20/12/2009 Reg. No: 510824056
The project report of
(Modi Hitesh Navnitlal)
Marketing Strategy for Hindustan Dorr-Oliver Ltd. (HE/PV) Division
Is approved and is acceptable in quality and form
---------------------Internal Examiner Vikas Rajput MBA
---------------------External Examiner Sandhya Harkawat MBA
This is to certify that the project report entitled
Marketing Strategy for Hindustan Dorr-Oliver Ltd. (HE/PV) Division
Submitted in partial fulfillment of the requirements for the degree of Master of Business Administration of Sikkim Manipal University of Health, Medical and technological sciences
(Modi Hitesh Navnitlal)
has worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, Diploma, Fellowship or other similar title or prizes and that the work has not been published in my journal of Magazine.
(Reg. No. 510824056)
Certified by Milap Shah ( MBA )
Acknowledgement I would like to acknowledge and extend my gratitude to the following persons who have made the completion of this project possible: First of all, I would like to thank my Project Guide Mr. Milap Shah for his great help. As he is being my Project Coordinator he provided me very necessary and important guidance and support until the submission of my project. I would also like to thank Mr. Saket Bhatt (General Manager) of Hindustan Dorr-Oliver Ltd. (HDOL), to provide me such a very exiting opportunity and for their good help to provide a better coordination and control among all the activities related to completion of the project. Lastly, I would like to be very thankful to the whole HDOL Family for their continuous effort in making the whole Project Activity very much learning and Interesting. I delivered my special thanks to my family members and friends for their constant support during the project.
(Hitesh Modi) Sikkim Manipal University
Primary objective of this study is to understand business prospectus of Process Plant Equipment (includes heat exchangers & pressure vessels) division of Capital Goods Industry. HDOL is chosen based on its excellent capability to grow in such a competitive world and this business unit adds a steady stream of revenues to the business model through sustained demand from various industries like Water, Pulp and Paper, Fertilizers etc where HDOL is already present. This study shows that how to encash business opportunities by market research, appropriate product mix and new product developments. Developing niche products using the latest technology and supplying to new industry verticals is an integral part of growth strategy. HDOL is working towards gaining a strong foothold in catering to the Nuclear Energy, Oil & Gas and Power sectors. The Indian Capital Goods Industry has been witnessing a turnaround after a prolonged period of recession. Capital goods manufacturers have been experiencing excellent growth both in the top and bottom line. Their order books are in a very healthy state which indicates the beginnings of an investment cycle in India. This observation is also borne out by the upward trend seen in the BSE Capital Goods Index. The capital goods industry needs to now strategize its future in order to maintain this momentum. The objectives of the study were to focus on the national as well as international competitiveness of these sectors in terms of benchmarking of costs, measuring cost effectiveness, productivity, marketing strategies, manpower development and R&D apart from looking at technology gaps and tariff protection required.
In today‟s scenario, just looking inward is no longer enough for survival. A presence in the export markets as a diversification strategy has become a must. The study has therefore looked at overseas business opportunities and tried to identify potential countries and projects. Competitive strategy involves positioning a business to maximize the value of the capabilities that distinguish it from its competitors. It follows that a central aspect of strategy formulation is perceptive competitor analysis. HDOL has adopted three prolonged approach in its quest to remain a top player in the global process plant equipment market. The initiatives centre on capacity augmentation, capability build up and enhancing the product portfolio through advanced technologies. This study reveals that the whole industry‟s growth will be increased due to investments in sectors like Oil & Gas, Petrochemicals, Power etc. and the companies are performing well due the fact of increased technological innovation and quality of the units. The stock price also got affected by the same making the Capital Goods sector favourable for the investors.
Table of Contents 1 Introduction 1.1 Definition 1.2 Purpose of Strategy 1.3 Factors Influencing Marketing Strategy 1.4 Marketing Strategies And Target Customers 1.5 Types of Marketing Strategies 2 Organization Profile 2.1 About Hindustan Dorr-Oliver Ltd. 2.2 Business Divisions 2.3 Business Performance Translating Into Numbers 3 Portfolio of Products 3.1 Product Range 3.2 Pressure Vessels 3.3 Heat Exchangers 3.4 General Details 3.5 Manufacturing Process 4 Organizations as Buyer 4.1 Organization‟s Buying Center or Decision making unit 4.2 Organization‟s Buying Situations & Process 4.3 Organizational Factors 5 6 7 Literature Review Research Methodology Analysis and Interpretation for Hypothesis-1 (H1) 7.1 Analysis 7.1.1 7.1.2 7.1.3 7.1.4 Oil & Gas Sector Petrochemicals Sector Fertilizers Sector Power Sector 1 2 3 4 4 5 8 9 11 12 13 14 15 17 20 22 25 26 27 28 29 35 40 41 41 47 50 52
Table of Contents 7.1.5 7.1.6 7.2 8 8.1 Sector wise Area of Interest Business Sector wise contribution for order booking during 2008-2009 Interpretation Analysis and Interpretation for Hypothesis-2 (H2) Analysis 8.1.1 8.1.2 8.1.3 8.1.4 8.1.5 8.1.6 8.2 9 9.1 9.2 10 Design & Engineering Capability Key Facilities Installed in Workshop SWOT Analysis Assessment of Competition Workshop facility comparision Few Equipment manufactured by LEVEL-1 53 54 55 56 57 57 58 61 62 64 65 67 68 69 72 73 74 75 80 82 84 85
Interpretation Analysis and Interpretation for Hypothesis-3 (H3) Analysis Interpretation Recommendations & Conclusions
10.1 Major Findings & Conclusion 10.2 Road Map to Rs. 500 Crores 10.2.1 10.2.2 10.2.3 Marketing Strategy for year 2010-11 Marketing Strategy for year 2011-12 Marketing Strategy for year 2012-13
10.3 Limitations of the study
Chapter - 1
The term „strategy‟ is drawn from the armed forces. It is a strategic plan that interlocks all aspects of the corporate mission designed to overpower the enemy or the competitor. An appropriate strategy is considered to be essential to face adverse situations such as cut-throat competition. Strategy may imply general or specific programmes of action outlining how the resources are deployed to attain goals in a given set of conditions. If these conditions change, the strategy also changes. Strategies give direction for the achievement of objectives necessary through the deployment of resources. The American Marketing Association defines marketing as "the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives." Marketers use an assortment of strategies to guide how, when, and where product information is presented to consumers. Their goal is to persuade consumers to buy a particular brand or product. A marketing strategy is a plan or an approach for marketing your products and services. Successful marketing strategies create a desire for a product. A marketer, therefore, needs to understand consumer likes and dislikes. In addition, marketers must know what information will convince consumers to buy their product, and whom consumers perceive as a credible source of information. Some marketing strategies use fictional characters, celebrities, or experts (such as doctors) to sell products, while other strategies use specific statements or "health claims" that state the benefits of using a particular product or eating a particular food.
1.2 Purpose of Strategy
A strategy is an operational tool to achieve the goals, and thus, the corporate mission. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. A company may view downsizing as a strategy in a competitive market to render cost-effective services. Thus, strategy provides a framework to guide thinking and action. Strategies are very much useful in organizations for guiding, planning and control. Strategy is a way of life both at the macro as well as micro levels for everyone, whether it is a nation or a company. To win over in a given complex situation, the organizations, even trans-nationals adopt strategies. They make changes, if necessary, even to their global strategies. An individual company may formulate its own strategy to bring out the desired results. The eventual success of the organization depends upon strategy formulation and implementation. The recently initiated moves such as globalization, privatization and liberalization are strategies to attain a globally competitive economy. Some marketing strategies are created for the purpose of capturing a certain segment of the market, but the majority of small business strategies are more generic in nature. Even so, it's important to understand what your strategy is trying to achieve.
1.3 FACTORS INFLUENCING MARKETING STRATEGY:
1.4 MARKETING STRATEGIES AND TARGET CUSTOMERS:
The results of analyzing market segments lead the marketer to consider one of the following target marketing strategies.
Undifferentiated or Mass Marketing – Under this strategy the marketer attempts to appeal to one large market with a single marketing strategy. While this approach offers advantages in terms of lowering development and production costs, since only one product is marketed, there are few markets in which all customers seek the same benefits. Model-T), few companies now view this as a feasible strategy. 4 While this approach was very popular in the early days of marketing (e.g., Ford
Differentiated or Segmentation Marketing – Marketers choosing this strategy try to appeal to multiple smaller markets with a unique marketing strategy for each market. bigger markets can be divided The underlying concept is that many sub-markets and an into
organization chooses different marketing strategies to reach each submarket it targets. Most large consumer products firms follow this strategy as they offer multiple products (e.g., running shoes, basketball shoes) within a larger product category (e.g., footwear).
Concentrated or Niche Marketing –This strategy combines mass and segmentation marketing by using a single marketing strategy to appeal to one or more very small markets. It is primarily used by smaller marketers who have identified small sub-segments of a larger segment that are not served well by larger firms that follow a segmentation marketing approach. In these situations a smaller company can do quite well marketing a single product to a narrowly defined target market.
Customized or Micro-Marketing - This newest target marketing strategy attempts to appeal to targeted customers with individualized marketing programs. products. For micro-marketing segmentation to be effective the marketer must, to some degree, allow customers to “build-their-own” This approach requires extensive technical capability for marketers to reach individual customers and allow customers to interact with the marketer. The Internet has been the catalyst for this target marketing strategy. As more companies learn to utilize the Internet micro-marketing is expected to flourish.
1.5 TYPES OF MARKETING STRATEGIES:
Marketing strategies may differ depending on the unique situation of the individual business. However there are a number of ways of categorizing some generic strategies. A brief description of the most common categorizing schemes is presented below: Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies:
o o o
Leader Challenger Follower
Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm‟s sustainable competitive advantage.
Product differentiation Market segmentation
Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types: Pioneers
Close followers Late followers
Growth strategies - In this scheme we ask the question, “How should the firm grow?” There are a number of different ways of answering that question, but the most common gives four answers:
o o o o
Horizontal integration Vertical integration Diversification Intensification
Chapter - 2
2.1 About Hindustan Dorr-Oliver Ltd. (HDOL)
Hindustan Dorr Oliver Limited (HDO) is an Indian EPC (Engineering Procurement Construction) company having its core business activities in providing Engineered Solutions, technologies and EPC installations in LiquidSolid Separation applications. Hindustan Dorr-Oliver Limited has a new face. HDO is now a wholly owned subsidiary of M/s. IVRCL Infrastructures and Projects Ltd., who are one of the leaders in Indian infrastructure industry, having core business focus on total Water Management including pumping, conveyance, treatment and distribution, national highways, roads, buildings, hydro-electric projects, power distribution, desalination, etc. IVRCL is also executing many projects on BOOT basis for various Government Departments of India. HDO has over decades established a unique track record and position as an extremely dynamic, totally reliable and component-engineering company, having a cutting edge of superior technologies to emerge among leading process equipment and plant engineering companies in India. Today, with every conceivable engineering skill at its disposal, HDO is engaged in an endless endeavour to upgrade, modify, adapt and invent products, processes and technologies to design, construct, install, erect and commission systems on complete EPC basis. Corporate Vision & Mission : Vision : Our aspiration is to become a leading creator of Shareholder Value in the Engineering Industry.
To achieve this, we will use the ENERGY of our people, develop and implement LEADING EDGE technologies and draw on both to deliver EFFECTIVE world-class solutions to our customers. Mission : To consistently out perform expectations and deliver superior value to both our Customers and Stakeholders. To achieve this, we will ENERGISE our people with a positive culture that rewards INNOVATION, breeds INITIATIVE and encourages INTELLIGENT risk taking. Network across the country : Head Office : Manufacturing Facility : Branch Offices : o o o o Delhi Chennai Kolkata Local site offices wherever projects are under execution Mumbai Ahmedabad
HDO Technologies Ltd. (subsidiary of HDOL), Bangaluru & Hyderabad Key Facts : Founded : 1974 Numbers of Employee : 1200 Revenue : Rs. 520.28 Crores Headquarter : Mumbai, India
2.2 Business Divisions :
Engineering, Procurement & Construction (EPC)
Knowledge Process Outsourcing (KPO)
Mineral Processing & Beneficiation Environment Fertilizers & Chemicals Pulp & Paper
Heat Exchangers & Pressure Vessels Proprietary Equipments
Design & Engineering Outsourcing
EPC Diversification Opportunity Hydrocarbon Sector Bulk Material Handling, Pelletisation Plants, Coal Washeries, Oil & Gas, Power New Industries & Processes Established Brand Equipment & Client Relationship
Manufacturing Addition of Industry Verticals Develop Niche Products
KPO End to End skill sets Tap the Global & Domestic demand
Expansion Sustainable Growth
Capacity Expansion & Product Portfolio Proprietary Equipment & Replacement Demand
Delivery Centres and client additions In house requirements & Low cost – High Quality Proposition
2.4 Business Performance Translating Into Numbers
Five Years at Glance – Operating Results 2005-2009#
600 500 520.28
Rs. in Crores
400 300 200 100 0 143.87 86.78 213.59
HDOL Manufacturing Business Turnover in Crores
85 90 80 70
Rs. in Crores
60 50 40 30 20 10 0 2005 28
Chapter - 3
PORTFOLIO OF PRDUCT
3.1 Product Range :
Heat Exchangers & Pressure Vessels Division : • Pressure Vessels Tanks, Spheres, Reactors, Columns, Storage Tanks • Heat Exchangers
Proprietary Equipment : • • • • • • • • • • Horizontal Pan Filters Screw Classifiers / Rake Classifiers / Clarifiers/ Clarifloculators Kelly Filters Red Mud Component Filters Precoat Drum Filters Rotary vacuum Drum Filters Brown Stock Washers Bleach Washers Digester System for Pulp and Paper Plants Drier, Cooler, Granulator and Pulverizer for NPK and DAP Fertilizer plants Our area of interest will be Pressure Vessels and Heat Exchangers (Process Plant Equipment) of Capital Goods Sector. This project is limited to Pressure Vessels & Heat Exchangers only.
3.2 Pressure Vessels :
Vessels, tanks, and pipelines that carry, store, or receive fluids are called pressure vessels. A pressure vessel is defined as a container with a pressure differential between inside and outside. The inside pressure is usually higher than the outside, except for some isolated situations. The fluid inside the vessel may undergo a change in state as in the case of steam boilers, or may combine with other reagents as in the case of a chemical reactor. Pressure vessels often have a combination of high pressures together with high temperatures, and in some cases flammable fluids or highly radioactive materials. Because of such hazards it is imperative that the design be such that no leakage can occur. In addition these vessels have to be designed carefully to cope with the operating temperature and pressure. It should be borne in mind that the rupture of a pressure vessel has a potential to cause extensive physical injury and property damage. Plant safety and integrity are of fundamental concern in pressure vessel design. Pressure vessels are used in a number of industries; for example, the power generation industry for fossil and nuclear power, the petrochemical industry for storing and processing crude petroleum oil in tank farms as well as storing gasoline in service stations, and the chemical industry (in chemical reactors) to name but a few. Their use has expanded throughout the world. Pressure vessels and tanks are, in fact, essential to the chemical, petroleum, petrochemical and nuclear industries. It is in this class of equipment that the reactions, separations, and storage of raw materials occur. Generally speaking, pressurized equipment is required for a wide range of industrial plant for storage and manufacturing purposes.
Major Pressure Vessels supplied by HDOL to various customers :
Client : Bharat Oman Refineries Ltd., Bina, MP Equipment : HP Air Receiver Size : 4.5 m Dia. x 17.8 m Lg. Weight : 140 MT
Client : ONGC, Hazira, Gujarat Equipment : LPG Drier Size : 3 m Dia. x 12.5 m Lg. Weight : 111 MT
Client : Hindustan Petroleum Ltd., Mumbai Equipment : Air Surge Drum Size : 5.25 m Dia. x 15 m Lg. Weight : 90 MT
Client : Bharat Oman Refineries Ltd., Bina, MP Equipment : Flare KO Drum Size : 5 m Dia. x 17.4 m Lg. Weight : 51.5 MT 16
Client : Hindalco Industries Ltd., Renukoot, UP Equipment : Pressure Decanter Size : 6.5 m Dia. x 20 m Lg. Weight : 160 MT Fabricated at site
3.3 Heat Exchangers :
Heat exchangers transfer heat from a hot fluid to a colder fluid through the combined mechanisms of conduction and forced convection. In most heat exchangers, a metal wall separates the two fluids. All heat exchangers are similar in their principle of operation; however, heat exchangers may differ in the specific fluids that are used in the heat transfer process, the layout of the metal tubes, and the configuration of the enclosure. Main types of heat exchangers : • Shell-and-tube heat exchangers • Air-cooled heat exchangers • Double-pipe heat exchangers • Plate-and-frame heat exchangers
At present HDOL manufactures, Shell and Tube heat exchangers only. However, HDOL opt for new products viz. Air cooled heat exchangers and Plate & Frame heat exchangers.
Basic arrangement of a shelland-tube heat exchanger
In shell-and-tube heat exchangers, one fluid, known as the "tube side" fluid, flows inside a set of parallel tubes known as the "tube bundle." These tubes are enclosed within a metal shell. The other fluid, known as the "shell side" fluid, flows inside the shell but over the outside of the tubes. Both the metal shell and the tubes are pressurized, and they must withstand the specified design pressures during the intended lifetime of the equipment.
Major Heat Exchangers supplied by HDOL to various customers :
Client : Alaqua Inc, USA Item : Evaporator Weight : 32 MT
Client : Rashtriya Chemicals & Fertilizers Ltd. Item : TAIL Gas Preheater Weight : 25 MT
Client : Reliance Industries Ltd., Jamnagar Item : Tube Bundle Weight : 36 MT
Client : Numaligarh Refinery Ltd., Assam Item : Trim Cooler Weight : 54 MT
Client : Indian Oil Corporation Ltd., Panipat Item : LVGO Crude Exchanger Weight : 29.5 MT 19
3.4 General Details :
MAJOR PRESSURE VESSEL PARTS : Shell, Heads, Saddle/Skirt/Leg/Bracket Support, Process Connections, Internals etc. MAJOR HEAT EXCHANGER PARTS : Shell, Heads, Tubes, Tubesheets, Std. & Non Std. Forgings, Cover, Baffles, Saddle/Skirt/Bracket Support, Process Connections etc. MAJOR RAW MATERIAL FORMS : Plates, Std. & Non Std. Forgings, Pipes, Fittings, Fastners, Gaskets etc. MAJOR RAW MATERIAL : Carbon Steel, Stainless Steel, Low Alloy Steel, Non-Ferrous Material (Ni based alloys, Cu-Ni, Brass, Inconel, Incoloy etc.), Special Metals like Titanium, Zirconium etc. CRITICAL PARAMETERS : Orientation : Horizontal / Vertical Design & Operating Conditions Material Selection Size Strength Calculations Depend on application Depend on application, Various Loads applicable on equipment Depend on service, design conditions, life expected, Cost Depend on application, Location & Space, transportability, Cost Depend on material, size, design conditions 20
ACTUAL DIMENSIONS PERFORMED : PRESSURE VESSELS / COLUMNS: Diameter Height/Length Thickness Weight : : : : 7100 mm 36000 mm 92 mm 160 MT
HEAT EXCHANGERS: Tube sheet Thickness Tube OD x Length
240 mm 38.1 mm x 12000 mm
PARAMETERS CONSIDERED FOR ORDER PLACEMENT BY CLIENTS : Plate Bending Capacity Weight Lifting Capacity Hydrotesting Facility Welding Capability Drilling & Machining Facility Workshop Layout Current Workload For shell rolling For size (Dia. & Length) & Weight For high pressure equipment For different material For tubesheet drilling and machining of other components To check suitability of transportation & movement To ensure availability of spare capacity for execution of order
Also, financial condition of the company is ensured for successful execution of order.
3.5 Manufacturing Process :
1) Pre-Order Activities : a. Enquiry Generation i. Marketing Efforts ii. Registration for various products iii. Enlistment in Vendor List (Client & Project wise) b. Enquiry Receipt i. Tenders ii. Online tender download from e-tendering web-sites iii. Non-Tender type enquiries (through e-mails, courier) c. Reviewing Tender Documents d. Discussion with various departments for specific requirements, if any e. Enquiry for raw materials for competitive pricing f. Tender/Offer Submission (through Post/Courier/E-mail/e-tendering) g. Order Receipt – through Negotiation / L1 basis / Reverse Auction 2) Pre-Manufacturing Activities : a. Receipt of Order i. Contract Review w.r.t. pre-order commitments ii. Issue of work order to various department with necessary documents iii. Kick off Meeting to discuss criticality of equipment, setting up mile stone for various activities keeping in view of delivery conditions as per order b. Design and detail Engineering i. Design and Detailed Fabrication Drawing preparation ii. Preparation of technical delivery condition of raw material iii. Submission of drawings to client/TP for approval and clearing of drawing till final approval from client/TP 22
c. Planning i. Preparation of PERT and Barchart ii. Production Plan based on 3 months planning keeping in view of delivery date and availability of raw material iii. Preparation of Workload chart for each fabrication shop and machineries d. Production Engineering. i. Design of Jigs and Fixture ii. Method improvement iii. Tooling iv. Automation and mechanization of various production related activities e. Welding Engineering i. Qualification of new procedures for the future material ii. Qualification of welding procedure for the order iii. Welder qualification iv. Maintain Qualification record of welders v. Training of welders for new processes vi. Maintain record of all welding procedures vii. Analysis of weld repairs and taking corrective action f. Material Management (Procurement) i. Procure material for manufacturing in a sequence as required by Planning ii. Control on inventory of raw material and components iii. Procurement of plant and machinery iv. Ensure that the material cost is within the estimate
v. Provide material prices to proposal engineering during estimate 3) Manufacturing Activities : a. Micro Planning i. Planning activities for 2 weeks ii. Check availability of raw material iii. Planning for activities like X-ray, Rolling, Crane, Welding Equipment b. Production i. Material Identification, Marking & Cutting ii. Rolling iii. Fit-up, Welding iv. Radiography v. Assembly vi. Heat Treatment vii. Sand/Shot Blasting and Painting c. Quality Control i. Preparation of welding and testing plan ii. QAP iii. Certify TDC for material to be procured iv. Inspection of material as per TDC v. Coordination with third party inspection vi. Quality check for various manufacturing activities d. Despatch i. Route Survey and Transporter finalization ii. Ensure pre-despatch requirement of customer
Chapter - 4
ORGANIZATIONS AS BUYER
4.1 ORGANIZATION’S BUYING CENTER OR DECISION MAKING UNIT
Consists of all individuals and groups who participate in the purchasing decision making process, who share some common goals and the risks arising from the decisions. Depending on the size and complexity of the organization/buying situation, decision may be made by just one person or even by a group of persons from several relevant departments. THE BUYING CENTRE: ORGANIZATIONAL BUYING ROLES
(information & evaluation criteria) (initiate purchase idea)
(formal decision making authority)
(control access) (use purchased material / services) (purchase & contractual documentation)
(top management – approves decider’s choice)
ORGANIZATIONAL BUYING ROLES Gatekeepers: Those who control access to other members in the buying centre (e.g., receptionists & telephone operators) Initiators: Those who initiate the idea of purchase; may or may not be a part of the organization Influencers: Those who directly or indirectly influence the purchase decision by providing relevant information and suggesting relevant criteria for evaluation of alternatives Deciders: Those who are formally authorized to make the final choice from among the available alternatives Buyers: Those who are formally authorized and directly responsible for making the purchase and contractual documentation with the supplier Approvers: Those who approve the purchase proposals made by the deciders/buyers (usually the top management) Users: Those who actually use the purchased material and services
4.2 ORGANIZATION’S BUYING SITUATIONS & PROCESS
BUYING SITUATIONS : New product – requires complex decisions, high involvement and lot of time Modified Rebuy - Changes in quantity, quality, price, time of supply – based on needs Straight Rebuy - Repurchase of items bought regularly – from selected vendors
BUSINESS BUYING PROCESS :
Problem Recognition General Need Description Product Specification
Supplier Search Proposal Solicitation & Evaln Supplier Selection
Order & Purchase
6.3 ORGANIZATIONAL FACTORS
PurchasingDepartment Upgrading CrossFunctional Roles Decentralized Purchasing of Small Items
PurchasingPerformance Evaluation & Pro. Buyers
Chapter - 5
Opportunities in Oil & Gas (India Brand & Equity Foundation)
Growing energy demand of India and necessity to service that to ensure economic growth is not compromised, presents business opportunities in the complete value chain of oil and gas sector. Exploration for domestic production growth, development of discovered fields, transportation of crude oil, gas and products, refining to service the petroleum product domestic demand and exports, retailing infrastructure; prospective blocks to encourage all these sectors provide business and investment opportunities.
“Basic Statistics on Indian Petroleum & Natural Gas, 2008-09” – Ministry of Petroleum & Natural Gas
The sales/consumption of petroleum products during 2008-09 were 133.400 million metric tonnes (including sales through private imports) which is 3.45% higher than the sales of 128.946 million metric tonnes during 200708. The total number of exploratory and development wells and metreage drilled in onshore and offshore areas during 2008-09 was 381 and 888 thousand metres respectively. The total refinery crude throughput during 2008-09 at 160.77 million metric tonnes is 2.99% higher than 156.10 million metric tonnes crude processed in 2007-08 and the prorate capacity utilisation in 2008-09 was 107.9% as compared to 104.8% in 2007- 08. The Oil and Gas Sector Overview in India – 2009 (KPMG) India today boasts of surplus refining capacity, with further large expansions planned. The major expansions are for the Vadinar refinery of Essar, the Indian Oil Corp oration (IOC) refinery at Paradeep and the planned refineries at Bina in Madhya Pradesh by BPCL and Bhatinda in Punjab by HPCL-Mittal Energy.
India is aiming to emerge as a refining hub even as global refining markets have tightened with the closure of small refineries in North America and Europe mainly due to challenges in investing in cleaner fuels and high compliance costs. In addition, permits for Greenfield refineries are hard to obtain in these countries due to environmental concerns. Therefore, capacity addition is primarily coming from emerging economies like India, China and some Middle Eastern countries. The Government of India has been providing tax incentives and fiscal incentives to new refineries.
FINAL REPORT ON THE INDIAN CAPITAL GOODS INDUSTRY (Department of Heavy Industries, Govt. of India) The process plant equipment industry has evolved primarily on the basis of the requirement to set up core process industries in India after Independence. The demand today is also from these process industries being set up but the size of the plants have increased and are at times comparable, or larger than global capacities. The industry caters to a wide variety of process industries like oil & gas, petroleum refining, petrochemicals, chemicals, fertilizer, pharmaceuticals, metal industry, cement, paper, sugar, cryogenics, distilleries etc. Internationally the trend that is witnessed in the heavy engineering sector is that of a shift in base from Europe to Japan to now Korea, Taiwan, East European countries and China & India due to logistics and cost. Today in India there are a few companies who have made a mark in the export arena due to their manufacturing skills and quality. Today the manufacturing facilities are equipped with modern machinery and are producing very sophisticated equipment such as high pressure heat
exchangers, spiral heat exchangers, multiwall vessels, airfin coolers, multitubular reactors etc. The internationally renowned consultants in the process industries like Flour Daniel, Bechtel, Foster Wheel, LG, Daelim, Jacobs, Kvaerner, Mitsui Babcock, Linde, ABB Lummus, Technip, Jacobs, Stone & Webster, Udhe and Toyo Engineering have offices in India. They are increasingly using the Indian process plant manufacturers‟ expertise in engineering and manufacturing for outsourcing since they are in the process of creating global vendor databases for the purpose of expanding their low cost structure purchase options. When asked what should be the company‟s strategy to enhance market share, 47 percent said that they followed no strategy at all. Out of the remaining 53 percent companies who have or followed a strategy to enhance their market share, the majority felt that the top most priority in enhancing market share was by achieving high quality and service. The second priority they felt was aggressive marketing. Third was to reduce costs and lastly they felt increasing the product range may help them to increase their market share. However, surprisingly it was noted that an aggressive marketing strategy was followed only by 28 percent of the companies, 30 percent do not even collect competitors‟ information and the balance 42 percent have a basic understanding of marketing strategies and are aware of their competitors / own competitive advantage. Competitive pressures in the global manufacturing environment are forcing manufacturing organizations to re-engineer in order to become more competitive in the marketplace. Toward that end, management of these organizations is paying closer attention to the changing nature of
manufacturing performance, and the systems, processes and measures used in its evaluation. Competitor Analysis (Adapted from Michael E. Porter, Competitive Strategy, 1980, p. 49.) In formulating business strategy, managers must consider the strategies of the firm's competitors. While in highly fragmented commodity industries the moves of any single competitor may be less important, in concentrated industries competitor analysis becomes a vital part of strategic planning. Competitor analysis has two primary activities, 1) obtaining information about important competitors, and 2) using that information to predict competitor behaviour. The goal of competitor analysis is to understand:
with which competitors to compete, competitors' strategies and planned actions, how competitors might react to a firm's actions, how to influence competitor behavior to the firm's own advantage.
Casual knowledge about competitors usually is insufficient in competitor analysis. Rather, competitors should be analyzed systematically; using organized competitor intelligence-gathering to compile a wide array of information so that well informed strategy decisions can be made. Michael Porter presented a framework for analyzing competitors. This framework is based on the following four key aspects of a competitor:
Competitor's objectives Competitor's assumptions Competitor's strategy Competitor's capabilities
Objectives and assumptions are what drive the competitor, and strategy and capabilities are what the competitor is doing or is capable of doing. These components can be depicted as shown in the following diagram: Competitor Analysis Components What drives the competitor What the competitor is doing or is capable of doing
Competitor Response Profile
Resources & Capabilities
Adapted from Michael E. Porter, Competitive Strategy, 1980, p. 49.
Chapter - 6
This chapter describes the way in which the study is conducted in terms of methods of data collection Analyzing, Interpreting and Reporting Results. It also describes the motivation, scope and limitations of the study along with the objective of the study.
6.1 Research motivation
India's economy is on the fulcrum of an ever-increasing growth curve. With robust growth of the Indian economy, the demand for commodities has been on the rise which has already enforced huge investment into various sectors and has resulted into heightened activity in the domestic sectors like Oil & Gas, Petrochemicals and Nuclear Power. In turn, Engineering Industry is also showing continuous upward trend in growth for last couple of years by catering the need of expansions and new projects of these sectors. This clearly indicates that a study is required for an untouched manufacturing sector of process plant equipments in India from global recession.
6.2 Problem Definition
How different business sector‟s growth affects Process Plant Equipment manufactures growth. How this opportunity can be encased by correct product mix, diversification, and new product development. What are the areas of improvement to cater industry demand.
6.3 Research Objectives
The specific objectives of the research were: 1. To identify business opportunities in various business sectors for process plant equipments 36
2. To understand organization buying behavior 3. Marketing Strategies to be adopted for heavy engineering company 4. Importance of detailed competitive analysis to develop future business plan 5. Importance of Correct product mix and New Product Development in process plant equipment industry
6.4 Scope of study
India is flooding with expansion of existing plants and development of new projects in Oil & Gas, Petrochemicals, Power, Fertilizers, Metal etc. It is importance to tap these opportunities by proper market research, identifying area of interest, strengthening company‟s capabilities and developing marketing strategy. Scope of Study is limited to Hindustan Dorr-Oliver Ltd.
There are a set of hypothesis that has to be substantiated to bring justice to research topic and they are: H1: Oil and Gas Sector is having better business prospectus than other business sectors with current workshop facility. H2: HDOL cannot become LEVEL-1 Company with current workshop facility. H3: Heat Exchangers are better than Pressure Vessels in terms of profitability.
6.6 Research Approach
Both qualitative to better define our research problem and get a deeper insight into it and quantitative methods to produce data that can be statistically analyzed and whose results can be expressed numerically were used.
6.7 Type of research
Exploratory research is a type of research design that has its primary objective the provision of insight and understanding of problem setting. The nature of research is exploratory based on sample that provides insight understanding and problem setting. It involves approaches such as informal discussion with HDOL officials in the initial stage. The research was also descriptive research i.e. to identify the cause of something that is happening or something happened because of that cause. The research will be a quantitative analytical research which will be descriptive in nature.
6.8 Sampling Technique :
Broadly there are two methods of sampling were used: Judgmental sampling is a form of convenience sampling in which the population elements are selected based on the judgment of the researcher. Here, we have selected four major business sectors like Oil & Gas, Petrochemicals, Fertilizers and Power. Other business sectors are also contributing in growth, but their contribution is very less, hence, not covered.
The sampling technique used here is a non random sampling technique called quota sampling i.e. the population is divided into subclasses and then picking up the data non-randomly. In the present case, we have selected Competitors as well as Business Sectors based on their revenue among the groups. The company showing the highest revenue in their respective field is taken.
6.9 Data Collection strategy
Both primary and secondary data was collected. In Primary data collection, HDOL‟s status of enquiries, order booking, interview of HDOL official are evaluated. The secondary data was gathered through books, journals, articles, web-sites of Ministry of Petroleum, BSE, NSE and various companies website of different business sectors.
6.10 Data Analysis Strategy :
The analysis of the available data will be based on the tools and techniques used in financial management and statistics. Mainly MS Office Excel Package would to use to carry out the hypothesis testing and descriptive statistics. The analysis will include the performance of the sample companies for last five years. The analysis will include both technical and fundamental analysis, which includes comparison of annual results of companies from different business sectors for selection of companies. analysis of competitors. We have also done simple competitive
Chapter - 7
Analysis & Interpretation for Hypothesis – 1 (H1)
Hypothesis – 1 :
H1: Oil and Gas Sector is having better business prospectus than other business sectors with current workshop facility.
7.1 Analysis : 7.1.1 Oil & Gas Sector :
Growing energy demand of India and necessity to service that to ensure economic growth is not compromised, presents business opportunities in the complete value chain of oil and gas sector. Exploration for domestic production growth, development of discovered fields, transportation of crude oil, gas and products, refining to service the petroleum product domestic demand and exports, retailing infrastructure; prospective blocks to encourage all these sectors provide business and investment opportunities. Indian companies are expanding refinery capacity and putting up green-field refinery projects. Global oil majors are seriously evaluating investments in India. Recently BP announced understanding for forming a joint venture with HPCL (Hindustan Petroleum Corporation Ltd.) for a grassroots refinery. RIL has also announced their interest in increasing refining capacity from 33 MMTPA to 50 MMTPA. India has ambitions to become the hub for petroleum products exports. Demand for petroleum products in the Asia Pacific region is estimated to be 41
around 25 to 27 million barrels per day (1.2-1.3 billion tonnes per year) in the year 2010. However, the refining capacity in the Asia Pacific region is expected to increase from the current 21.9 million barrels per day (1.09 billion tonnes per year) to a maximum of 25 million barrels per day in the year 2010 (Source : Industry Sources). The export potential coupled with the additional capacity additions and new refineries provide a unique opportunity for potential investors. The opportunity exists in the form of investment in capacity additions to the existing refineries and forming consortium with private and NOCs to set up new refineries. Institutional Arrangements
Ministry of Petroleum & Natural Gas
Upstream : Exploration & Production
Downstream : Refining & Marketing
Industry Bodies / Others
Hindustan Petroleum (Refining & Marketing) GGSR (Refining) Indian Oil (Refining & Marketing) IBP (Marketing)
Petroleum Planning & Analysis Cell Centre for High Technology
Mangalore Refineries & Petrochemicals (Refining)
ONGC Videsh Ltd. (Overseas E&P)
Petroleum Conservation Research Association Petro Fed
Oil India Ltd.
Chennai Petro (Refining) Bongaigaon Refinery (Refining) Bharat Petroleum (Refining & Marketing) Kochi Refinery (Refining) Numaligarh Refinery (Refining) GAIL Gas Transport & Petrochemicals Reliance Industries Ltd. (Refining & Marketing) Oil Industry Safety Directorate
Private E&P Players : Cairn, RIL, NIKO, etc.
Petroleum India International
Engineers India Limited
Outlook for the Exploration & Production Exploration activity, prior to NELP (The New Exploration Licensing Policy), was dominated by public sector firms such as Oil and Natural Gas Corporation Ltd. (ONGC) and Oil India Ltd. (OIL). The sector received a major boost in 1974, when the massive Mumbai High fields were discovered off India's west coast. Even after three decades, these fields continue to be the mainstay of India's indigenous production. Realizing that these fields would gradually deplete over time and no major discoveries were being brought into production, the Government introduced the NELP, with an aim of encouraging private sector participation in the oil and gas sector. Recent rounds of NELP have proved attractive in gaining the interest of Indian private sector and foreign players, with the private sector giant, RIL, winning the maximum number of blocks after the state-owned ONGC. A number of foreign players such as Cairn, BHP Billiton etc have also participated in the bidding rounds, forming consortiums with domestic and other foreign players. However, some of the super-majors, such as ExxonMobil, Shell etc. continued to watch from the sidelines, rather than mark their presence in the bidding rounds.
Exploration Status 1998-99 (3.14 million sq. km)
M o de ra t e t o We ll E xplo re d,
Une xplo re d ,
P o o rly E xplo re d ,
E xplo ra t io n Init ia t e d,
Source : DGH
Exploration Status 2006-07 (3.14 million sq. km)
Une xplo re d M o de ra t e t o We ll E xplo re d,
P o o rly E xplo re d ,
E xplo ra t io n Init ia t e d,
Source : DGH
Outlook for the Refining Sector India is aiming to emerge as a refining hub even as global refining markets have tightened with the closure of small refineries in North America and Europe mainly due to challenges in investing in cleaner fuels and high compliance costs. In addition, permits for Greenfield refineries are hard to obtain in these countries due to environmental concerns. Therefore, capacity addition is primarily coming from emerging economies like India, China and some Middle Eastern countries.
Installed Capacity of Refineries (As on January 1, 2009) Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 NRL ONGC MRPL RIL RPL EOL BPCL BRPL HPCL CPCL Refinery IOCL Location Digboi Guwahati Barauni Koyali Haldia Mathura Panipat Chennai Narimanam Bongaigaon Mumbai Visakhapattanam Mumbai Kochi Numaligarh Tatipaka Mangalore Jamnagar Jamnagar Jamnagar Capacity (MMT) 0.65 1 6 13.7 6 8 12 9.5 1 2.35 5.5 7.5 12 7.5 3 0.078 9.69 105.47 33 29 10.5 72.5 177.97
SUB TOTAL (PSU)
SUB TOTAL (PVT) TOTAL REFINING CAPACITY MMT : Million Metric Tonnes Source : MoPNG - Ministry of Petroleum & Natural Gas
Refinery wise Capacity Addition during XI Plan – New Projects Public Sector Sr. No. 1 2 3 4 5 6 7 8 9 10 11 Refinery Indian Oil Corporation Ltd., Haldia Indian Oil Corporation Ltd., Panipat Indian Oil Corporation Ltd., Paradip Hindustan Petroleum Corporation Ltd., Mumbai Hindustan Petroleum Corporation Ltd., Vizag HPCL-Mittal Energy Ltd., Bhatinda Bharat Oman Petroleum Ltd., Bina Bharat Petroleum Corporation Ltd., Kochi Chennai Petroleum Corporation Ltd., Chennai Mangalore Refinery & Petrochemicals Ltd., Mangalore Oil & Natural Gas Corporation Ltd., Tatipaka Private Sector 12 13 Essar Oil Ltd., Vadinar Nagarjuna Oil Corporation Ltd. (NOCL) 3.5 6 9.5 62.99 MMTPA 1.5 3 15 2.4 7.5 9 6 2 1.7 5.31 0.08 53.49
SUB TOTAL (PSU)
SUB TOTAL (PVT) GRAND TOTAL MMTA : Million Metric Tonnes per Annum Source : MoPNG - Ministry of Petroleum & Natural Gas
India’s Refining Activity has been steadily growing
Refining Capacity MMT
177 149 114.6 127 127.4 132.5
2009 2012 (Forecast)
Petrochemicals Sector :
The petrochemical industry of India is less than 40 years old. Petrochemicals cover basic chemicals like Ethylene, Propylene, Benzene and Xylene. The other major components are the intermediates like MEG, PAN and LAB etc, Synthetic fibres like Nylon, PSF and PFY, Polymers like LDPE/HDPE, PVC, Polyester and PET etc and Synthetic rubber like SBR, PBR. The sector has a significant growth potential. Although the current per capita consumption of petrochemicals products is low, the demand for the same is growing: The major players in this field include Reliance, Indian Petrochemicals Limited (IPCL), National Organic Chemical Industry Ltd (NOCIL) and Gas Authority of India Ltd (GAIL) etc.
The Petrochemical industry is seen to hold good growth potential in the medium-term as domestic per capita consumption of petrochemical derivatives is fraction of world levels, indicating significant potential for future growth in India. Demand growth in India is fuelled by several factors : Higher GDP growth than global rates; Higher presence of traditional materials leading to greater opportunities for substitution and Increased application development carried our by large players to fuel downstream demand.
State wise production of Petrochemicals Gujarat – Hub of Petrochemicals
Source : Ministry of Chemicals & Fertilizers
Maharashtra West Bengal Other States
Major Customers in Petrochemicals Sector : Reliance Industries Ltd.- Jamnagar & Hazira IPCL- Vadodara, Gandhar, Nagothane (now RIL) GAIL India Ltd. Haldia Petrochemicals Ltd., Haldia Mangalore Refinery & Petrochemicals Ltd., Mangalore Deepak Fertilizers & Petrochemicals Ltd. BASF GNFC NOCIL
New Projects under progress : ONGC Petro-additives Ltd., Dahej (OPaL) – Petrochemical Complex GNFC, Dahej – New TDI Plant ONGC Mangalore Petrochemicals Ltd. – Petrochemical Complex
Fertilizer Sector :
The Indian fertilizer industry has emerged as the fourth largest producer of fertilizers in the world after China, USA and Russia. Nitrogenous and phosphatic fertilizers are produced indigenously, while requests for potassic fertilizers are met through imports. India‟s requirements for 2007-08 were 26 MM Tons urea going up to 29 MM Tons in 2008-09 against a production of 20 MM Tons The requirement for 2011-12 is around 35.5 MM Tons for which availability should be approx. 39 MM Tons and thus under the present production scenario the import will rise to 19 MM Tons The demand-supply gap is expected to grow further and may worsen in view of the fact that 16 out of the 29 urea units are over 20 years Immediate need to install 13-15 MM Tons urea capacity by 2011-12 equivalent to 11 to 13 Ammonia Plants of 2200 MTPD each
Major Customers in Fertilizers Sector : IFFCO – Kalol, Kandla, Phulpur & Aonla Rashtriya Chemicals & Fertilizers Ltd. – Chembur & Thal KRIBHCO – Hazira Gujarat Narmada Valley Fertilizers & Chemicals Ltd. – Bharuch Gujarat State Fertilizers Co. Ltd. – Vadodara National Fertilizers Ltd. – Nangal, Bhatinda & Panipat Mangalore Fertilizers & Chemicals Ltd. - Palambur Chambal Fertilizers & Chemicals Ltd. - Chambal Nagarjuna Fertilizers & Chemicals Ltd. Paradeep Phosphates Ltd. - Paradeep
New Projects under progress : KRIBHCO, Surat – Revamp Project (on verge of completion) IFFCO, Kalol – Expansion Project
Power Sector :
India has been one of the fastest growing economies in emerging markets. Indian economy has posted more than 9% growth for three years consecutively and has seen a decade of more than 7% growth. One of the key factors behind any growing country is the energy requirement and supply in that country. India's per capita consumption of energy is extremely low as compared to other countries and the world average. For example, the Total Primary Energy Consumption (TPES) in India is just 0.51 tonnes of oil equivalent, while the world average is more than three times this figure, as the table below indicates. Similarly, the per-capita electricity consumption stands at just 503 Kilowatt-Hour (KwH) per year, less than one-fifth that of the world average of 3 2659 KwH and a massive 13515 KwH in the United States. These figures illustrate the fact that there is a massive potential in India for the growth of energy consumption, should the supply rise to meet the demand as it increases.
Per capita TPES consumption (toe/capita) India (2006) Europe (2006) World Avg (2006) US (2006) China (2006) Korea (2006) Japan (2006) 0 1.44 4.48 4.13 5 10 1.8 7.74 0.51 4.7 Per capita Electricity consumption (Kwh) India (2006) Europe (2006) World Avg (2006) US (2006) China (2006) Korea (2006) Japan (2006) 0 5000 2060 8063 8220 10000 15000 2659 13515 503 8381
Source: International Energy Agency, Key World Statistics 2008
Major Customers in Power Sector : NTPC Alstom Power Voith Siemens Thermax Ltd. BHEL VA TECH Antrz McNally Bharat Engineering
No new projects are in Thermal/Hydro Power sector. There will be big projects in Nuclear Power Sector, but current HDOL capability is not sufficient.
Sector wise Area of Interest :
Area of Interest Vessels, Heat Exchangers, Columns, Reactors, Driers with metallurgies like CS, LTCS, SS, NACE/HIC, Low Alloy, Duplex SS, Super Duplex SS, Claded material, CuNi, Brass, Al-Br, Monel Vessels, Heat Exchangers, Columns, Reactors with metallurgies like CS, LTCS, SS, Low Alloy, Duplex SS, Super Duplex SS, Claded material Vessels, Heat Exchangers, Columns with metallurgies like CS, SS, Low Alloy, Claded material, Special Urea grade materials like 2Re69 Surface Condensers, Feed Water Heaters, High Pressure Heat Exchangers Business Opportunity Excellent
Oil & Gas
Business Segment wise contribution for 2008-09
HDOL Orders Booked
Oil & Gas Petrochemicals
HDOL Enquiry Pattern
8% 2% 20%
Oil & Gas Petrochemicals Fertilizers Power Others
7.2 Interpretation :
Looking to growth pattern of various sectors discussed above, Oil & Gas sector dominates others sectors. There are many big players like ONGC, IOCL, HPCL, BPCL, RIL etc. Also, it should be noted that Exploration & Refining supplies feed/raw material for other sectors like Naphtha to Petrochemicals/Fertilizers/Power sectors and Natural Gas to Fertilizers/Power. Further, existing refining capacity is 177.97 MMTPA and new projects are coming with refining capacity of 62.99 MMTPA, means this sector is growing by 64.6%, hence, it proves heavy investment in this sector. It is proved that Oil & Gas sector is one the driving force of economy. Petrochemicals Sector is also emerging sector. Few expansion projects like OPaL, OMPL are under progress and there will be good requirement of process plant equipments. There are no major investments in Fertilizers & Power Sector. Looking to HDOL product range, it is clear that Oil & Gas Sector is full of opportunities and we can supply variety of high value equipment. Analysis of enquiry received and orders booked by HDOL also shows that Oil & Gas Sector contributes more than other sectors. Hence, the hypothesis that Oil and Gas Sector is having better business prospectus than other business sectors with current workshop facility is proved correct.
Chapter - 7
Analysis & Interpretation for Hypothesis – 2 (H2)
Hypothesis – 2 :
H2: HDOL cannot become LEVEL-1 companies with current
8.1 Analysis :
8.1.1 Design & Engineering Capability : Software PVElite Microprotol HTRI AutoCAD 2008
Codes & Standards American Society Mechanical Engineers (ASME) American Society of Testing Materials (ASTM) Tubular Exchanger Manufacturers Association (TEMA) American National Standards Institute (ANSI) American Welding Society (AWS) Indian Standard (IS) Indian Boiler Regulations (IBR) PD 5500 SMPV RULES (For Explosive Applications) GAS CYLINDER RULES (For Explosive Application)
8.1.2 Key Facilities Installed in Workshop : * All dimensions are in mm. No. 1 Machinery Heavy Duty Plate Bending Machine Purpose* 50/32 Thk. x 3000 Wide CS/SS Plate 110/65 Thk. x 3000 Wide CS/SS Plate (Order Placed, will be commissioned in January, 2010) 1000 Thk. x 4000 Diameter 50 MT + 50 MT = 100 MT 20 MT + 20 MT = 40 MT Others cranes – 10 MT, 7.5 MT (2 nos.), 5 MT (2 nos.), 3 MT 4 5 6 Semi Automatic Submerged Arc Welding Welding Machineries Machine Shop 4 nos. 80 nos. Lathe Machines, Drilling Machines, Milling Machines, Gear Hobbing Machine, Horizontal & Vertical Boring Machine 1 nos. Up to 50 mm OD tubes – 6 nos. Radiography – In house Ultrasonic Testing – sub contracted Hardness Testing – sub-contracted Destructive Testing – sub-contracted 10 Heat Treatment Sub-contracted to United Services
CNC Deep Drilling Machine Electric Overhead Crane
7 8 9
CNC Plasma Cutting Machine Electric & Pneumatic Tube Expanders Testing Facility
4th & 5th Fabrication Shop
CNC Drilling Machine 59
SWOT Analysis (HDOL)
Insufficient enlistment with some PMC / LSTK / Clients / Consultants / Project Specific Vendor List Past failures and insecure clientele due to the same Weak past track record for higher metallurgy Lack of high end technology in the core product range Slow execution and high over head compared to same size / turn over Companies Facilities like dished end mfg. & testing lab is not available Unexplored Export Market
Part of a bigger infrastructure company (IVRCL) Key facilities and machineries available Experienced Manpower Accreditation & Certifications SAP implemented Good tie-up with suppliers for support Prime Location for Mfg. Network across the Country Full support from Management Capability to carry out site jobs
Recession is over New Projects in Oil & Gas Sector and Petrochemicals Good Market rapport due to successful and timely execution of orders Heavy investments in Nuclear Power Strategic long term collaboration with (foreign) technology partners Export Market
Easy market entry for competition Stiff competition for low value items Late action could leave company behind in new / emerging areas Loss of Key Staff Competition from Chinese & Korean Suppliers Margin squeeze
Assessment of Competition
Level - 1 (Big Players having huge developed facilities) • • • L&T ISGEC Godrej and Boyce • • TEMA VTV
Level – 2 (Companies having medium level facilities) • • • • • HDOL Anup Engineering Patels Air Temp Gansons Engineering GR Engineering, • • • • Hindustan Rediators, Fab Tech Precision Equipments GMM Pfaudler
Level – 3 (Small capacity) • • • • • Minakshi Industries Reynolts Engineering Aero Engineers Aerotherm Novatech • • • • ME Heat Gemini Industries Bhillai Steel Unique Chemoplast
LEVEL – 1 COMPANIES : Companies are having high end technologies, skills, facilities, technological tie-ups, strong proven track records. They are normally interested in very large to large equipment, critical metallurgy, very high value items. LEVEL – 2 COMPANIES : We fall under category of LEVEL-2. Companies are having comparable skills, facilities, good proven track records. They are normally interested in medium to large equipment, critical metallurgy, high value items. LEVEL – 3 COMPANIES : Companies are having small to medium size workshop facilities. They give very tough competition to Level-2 companies. They are normally interested in small to medium equipment and medium value items. HDOL stands at LEVEL-2 at present. HDOL competes with LEVEL-2 & 3 companies. To enjoy comfortable situation, HDOL has to raise its capabilities comparable to LEVEL-1 companies, where HDOL can secure orders with good margins. Lost Order Analysis :
Workshop facility comparison :
At present, L&T is No.1 heavy fabrication company in India. HDOL is keeping eye on L&T and see as a role model. Below is the comparison of facilities among LEVEL-1 companies and HDOL.
L&T Over seas offices Dust Free Environment for SS & High Alloy Fabrication Heavy Duty shops with 230 MT Cranes Indigenous design for High Pressure Heat Exchangers U, U2, N, R, S, CE marking, SQL Approval Fusion Welded Pressure Vessels up to 200 mm (8”) thickness by Lloyds Sea-going jetty Very High Level Design Heads Global Supplier Base Godrej Over seas offices Yes ISGEC Over seas offices No TEMA Over seas offices No HDOL No No
175 MT Collaboration U, U2, U3, R, S, CE marking, NBBPVI, SQL Approval Fusion Welded Pressure Vessels up to 200 mm (8”) thickness by Lloyds Sea-going jetty Very High Level Design Heads Global Supplier Base
230 MT NO „U- 2‟, „U‟, „S‟, „R‟ and „NB‟ , SQL, CE Stamp Fusion Welded Pressure Vessels up to 200 mm (8”) thickness by Lloyds Sea-going jetty Very High Level Design Heads Global Supplier Base
150 MT Collaboration U, U2, R, S, CE marking, Approval
100 MT No
No Very High Level Design Heads Global Supplier Base
No No Working on it
Narrow Gap SAW (Submerged Arc Welding) Electro Slag / Submerged Arc Strip Cladding Long Seamer Nozzle to Shell / Head Welding Systems Inner Bore Overlay (min. 38mm ID) Orbital Tube to Tube Sheet Welding Rolling 250 mm Rolling 225 mm Rolling 250 mm
Few Equipment’s manufactured by LEVEL-1
companies : Godrej & Boyce Mfg. Co. Ltd., Mumbai
HCGO (ULSD) REACTOR supplied to a Refinery in USA Weight (Kgs) : 665,000 Thickness : 153 + 5 = 158 mm
HDOL‟s Limitation for such jobs : HDOL cannot handle such a heavy job. HDOL do not have plate rolling capacity of 158 mm HDOL do not have U2 Stamp HDOL do not have jetty to dispatch such large size equipment
D HYDRO COLUMN supplied to a Refinery in USA Length (mm) : 73 meters Weight (Kgs) : 467,000
TEMA India Ltd.
HDO do not have technology for High Pressure Screw-Plug Heat Exchangers
L&T Ltd., Powai & Hazira Works
Screw Plug type Heat Exchanger
HDOL‟s Limitation for such jobs : HDOL cannot handle such a heavy job. HDOL do not have plate rolling capacity of more than 50 mm HDOL do not have jetty to dispatch such large size equipment HDO do not have technology for Screw Plug type heat exchanger HDOL do not have design capability for such a critical equipment
FCC Reactor supplied to a Reliance, Jamnagar Size : 10.2 m ID x 45.7 m Length Weight : 1148 MT
ISGEC, Yamunanagar, Haryana
Site Fabricated Columns at IOCL, Panipat Refinery Atmospheric Column: Diameter - 6,800mm T/T Length – 59,800mm Weight - 390 MT Vacuum Column: Diameter – 10,000mm T/T Length – 52,450mm Weight - 580 MT HDOL do not have capability to carry out site work for such large & heavy equipment
8.2 Interpretation :
As reviewed and analyzed above, HDOL is having very good design capabilities, machineries, space, infrastructure etc. among LEVEL-2 & 3 companies. HDOL stands at LEVEL-2 at present. HDOL management aims to compete LEVEL-1 companies for critical high value equipment. HDOL is lacking behind from top companies in many respects like technological tieups, machineries, skilled man power, certifications and accreditations, proven track record, welding capabilities, sea front, global presence, automation in fabrication & welding techniques etc. Lost order analysis also reveals that small and medium category suppliers giving stiff competition and to secure order, HDOL has to squeeze margins. SWOT analysis also indicates lots of scope of improvement to come out this situation. To enjoy comfortable situation and exploit niche market, HDOL has to raise its capabilities comparable to LEVEL-1 companies, where HDOL can secure orders with good margins. Above analysis proves that HDOL cannot become LEVEL-1 Company unless it expands his wings across every area discussed. Hence, the hypothesis that HDOL cannot become LEVEL-1 companies with current workshop facility is proved correct.
Chapter - 9
Analysis & Interpretation for Hypothesis – 3 (H3)
Hypothesis – 3 :
H3: Heat Exchangers are better than Pressure Vessels in terms of profitability.
9.1 Analysis :
Overview of both Heat Exchangers and Pressure Vessels is already given in chapter “Product Portfolio”. We are repeating few thing herebelow : MAJOR PRESSURE VESSEL PARTS : Shell, Heads, Saddle/Skirt/Leg/Bracket Support, Process Connections, Hardware, Internals (if required) etc. MAJOR HEAT EXCHANGER PARTS : Shell, Heads, Tubes, Tubesheets, Girth Flanges, Forgings, Cover, Baffles, Saddle/Skirt/Bracket Support, Process Connections, Hardware etc. MAJOR RAW MATERIAL FORMS FOR VARIOUS PARTS : PART / COMPONENT Shell, Heads, Baffles Heat Exchanger Tubes Tubesheets Process Connections Girth Flanges, Cover Supports RAW MATERIAL FORM Plates Tube Forging Pipes & Flanges Non-Std. Forgings Mild Steel Plates & Structural Parts like Beam, Channel, Angle
COST DISTRIBUTION OF VARIOUS PARTS IN PERCENTAGE (%) : This cost distribution is arrived in consultation with HDOL‟s estimation & costing department. Present order product mix covers 70% pressure vessels and 30% heat exchangers. This cost analysis is arrived by studying 50 nos. pressure vessels and 50 nos. heat exchangers of various types. Cost of Item in Percentage (%) Component / Part Plates Mild Steel Plates / Structures Forgings Tubes/Pipe Hardware Welding Electrodes / Consumables Painting / Packing Labour and other cost Total Cost Pressure Vessels 64% 2% 5% 1.5% 3% 9.5% 2% 13% 100% Heat Exchanger 13.5% 2% 22% 44% 6% 6% 1% 5.5% 100%
KEY FACTS ABOUT HEAT EXCHANGERS: Minimum HOLDs compared to pressure vessels activities can be started quickly) Tubes are required before approx. 2 months of job completion so interest burden of tube cost (44% of total cost) is less. In case of pressure vessels, major cost contributor is plate which is necessary to start work which we need at early stage of manufacturing HDOL is having capability of Thermal as well as Mechanical design of heat exchanger, so economical design with optimization can be done by playing various technical parameters Basically heat exchanger is having two sub-assemblies viz. Main Shell & Tube Bundle. Both sub-assemblies can be fabricated separately so overall cycle time of manufacturing is less compared to pressure vessels If we compare Price v/s Weight (like Rs. / kg) then heat exchanger is having high value compared to vessels Compact in construction, hence requires less space and handling capacity Variety of construction options like Screw-Plug type, Helix heat exchanger, Plate-Frame type, Air Cooled type etc. These options contributes value addition (so manufacturing
HDOL is having all capabilities right from design to dispatch. It should also be noted that market requirement of both the product is not controlled by us. We can only choose market mix to be adopted depending capacity utilization. If spare capacity is available, then opportunity for pressure vessels can be materialized. Above analysis reveal many advantages of heat exchangers which prove it superior to pressure vessels. Heat Exchangers are having different kind of construction models, which can make product mix rich. If we consider unit time period (say a year), then it is sure that HDOL can manufacture more nos. of heat exchangers compared to pressure vessels of similar weight. Price ranges for pressure vessels from Rs.100/kg to Rs.125/kg and for heat exchanger from Rs.200/kg to Rs. 225/kg. So, above analysis proves that heat exchangers generate more revenue than pressure vessels. Hence, the hypothesis that Heat Exchangers are better than Pressure Vessels in terms of profitability is proved correct.
Chapter - 10
Recommendations & Conclusion
An attempt is made to identify the factors that influence Process Plant Equipment manufacturers in terms of business opportunities from various business sectors, future prospectus, product mix, high technology products and awareness of technological developments in market. The major findings of the study are listed below:
Major Findings & Conclusion :
Process Plant equipment sector is a highly capital as well as labour intensive sector with a strong engineering orientation where the products are mostly custom built. The industry at present is equipped with modern machinery in addition to competent engineers with management skills, skilled technicians and qualified welders. Looking to growth pattern of various sectors discussed, Oil & Gas sector dominates others sectors and this sector is growing by 64.6%, hence, it proves heavy investment in this sector. Looking to HDOL product range, it is proved that Oil & Gas Sector is full of opportunities and we can supply variety of high value equipment, hence, it is having better business prospectus than other sectors. Petrochemicals Sector is also emerging sector with few new projects. HDOL management aims to compete with LEVEL-1 companies for critical high value equipment. To reach at LEVEL-1, improvement and enhancement are required in areas like technological tie-ups, machineries, skilled man power, certifications and accreditations, proven track record, welding capabilities, new workshop having facility jetty near by and penetration in export market. Hence, it is proved that with current workshop facility, HDOL cannot become LEVEL-1 company. There is huge requirement of heat exchangers and pressure vessels in oil & gas sector globally. There are huge oil refineries in gulf countries, so efforts are required for market penetration.
Better product mix is always necessary for overall growth of the company. Though market requirements are not governed by us, efforts must be made to tap business opportunities for heat exchangers. Heat exchangers are having many plus points; hence, it is having good profitability compared to Pressure Vessels.
ROAD MAP TO RS. 500 CRORES
Road map to Rs. 500 Crores turn over includes general marketing strategy, market research, future prospectus and 3 years Marketing Strategy. General Approach to secure orders :• • • • Vendor Registration Personal approach with decision makers and shop visit by client Up gradation of the Product in terms of Metallurgy, Size & Product A total support and access to client through out the execution and make them feel special • • • Expand customer base – Generate Brand Name Tracking of new projects in pipeline Regular information to the existing and potential clients regarding development at HDO. Arranging visit. • • • Exploring new vendors for competitive raw material costing Penetrate into the market for Maintenance Requirements Optimize costing & become more cost effective to clients 75
Present Market Scenario :• • • • • Recession is over Rise in Global Oil demand Oil prices have reached up to 80 $ per Barrel OPEC has started increasing their production of Oil All related project which went on hold during recession have resumed and peaking up speed • • Indian refinery has also put projects on fast track To utilize byproduct of refineries, various new refineries in India are coming up with petrochemical complex • As per 11th plan Investment of Rs. 1,00,000 Cr. per year has been planned on power plant. • Industry is also concentrating on renewable energy resources (i. e. Solar Power Plant, Wind Energy etc.) • Investment of Rs. 1,50,000 Cr. has been planned in solar power plant avenue. • Indian process plants are 15 year old and hence replacement market is also significant.
Upcoming Projects for next 5 years in India Refineries • • • • • IOCL, Paradip MRPL, Manglore HPCL, Mumbai HPCL, Visag. Kakinada Refinery, Kakinada • Essar Oil Refinery, Jamnagar Fertilizer Plants • • KRIBHCO, Surat IFFCO, Kalol • Petrochemical Complexes • • • OPAL, Dahej OMPL, Manglore RIL Petrochemical Complex, Jamnagar • BORL, Bina (Petrochemical Complex) BCPL, Assam
Oil & Gas Sector • • ONGC, Uran ONGC, Hazira
Power Plant • • • • • • NTPC Sasan Power Limited (M.P.) Akaltara Power Limited (C.G.) Coastal Gujarat Power Limited Coastal Karnataka Power Limited Maharashtra Ultra Mega Power Project Co.
Solar Power Plant • • • RIL Electrotherm, Ahmedabad Clinton Foundation
Few Upcoming Projects (Global) Refinery • • • • Jubail Refinery, Saudi Arabia KNPC, Kuwait Yanbu Refinery, Saudi Arabia Petrobrass, Brazil
Petrochemical Complex • Petrochemical Complex, Abu Dhabi
Fertilizer Plant • Ruwais Fertilizer, Abu Dhabi
Oil & Gas Project • Gasco, Abu Dhabi
Product wise Potential :
Actions required to add Valuable Products : Development of Welding Capabilities to cater high grade of metallurgy Develop Production Facility to deal with Higher Thickness Product Increase Resources in terms of Man & Machineries Commitment of all cadre of employee toward quality & system Aggressive & Continuous Marketing in Targeted Area Rigorous Market Research
Marketing Strategy for year 2010-11 :
Products, which can be developed: Equipment with Duplex & Super Duplex Materials Equipment with Low Alloy Steels (LAS GR 11 & LAS Gr 22) Equipment with Higher Thickness (Up to 100mm) Air Cooled Heat Exchanger for refinery application LP Heater for Power Plant through BHEL Equipment for Solar Power Plant (Low & Medium Pressure Equipment) Note: Potential in the range for FY 2010-2011 is Rs. 2500 Cr.
Facility to be augmented with required investment :
Description Duplex Qualification as per EIL specification LAS welding Qualification. Welding preheating facility to be developed , required for LAS Material Finning facility for Air Cooled Heat Exchangers ASME U2 Stamp, CE Marking Machine for Nozzle Opening (Baggo make) Technical Tie up / Collaboration for Air Cooled Heat Exchanger Automatic SAW Machine to weld Nozzle with Shell. Faros Blator to avoid Manual Weld edge preparation. 30 150 300 50 20 200 Investment in Rs. Lac 10 10 5
Shop Floor Area (Bay with 200MT Capacity). Dedicated Shop for SS fabrication. Welding Expert and Metallurgist. Training of employees. Higher Thickness Plate Rolling Machine TOTAL
In Process 2 5 5 Received 787
Competitor in the range 1. ISGEC 2. Godrej 3. Precision 4. Essar Heavy Engineering Result Expected: Price advantage as competition with few big names of industry. Present shop floor capacity is 850 MT/Month will enhanced to 1500 MT/Month. Higher return in Rs./MT due to higher metallurgy. Offer to order conversion ratio of 15 % (present rate) will improve. 5. Techno Process 6. GR Engineering 7. Gansons Engg. 8. Anup
Expected order booking will be Rs. 250 Cr.
Marketing Strategy for year 2011-12
Products, which can be developed: Equipment with High thickness up to (100mm to 200mm) Screw Plug Heat Exchangers High Pressure Feed Water Heater Air Cooled Heat Exchanger for Power plant Ammonia Convertor Secondary Prereformar Carbamate Separator Power plant equipment (High Pressure Heat Exchangers). Equipment with Exotic Metallurgy (i. e. Incoloy, Inconel, Hast Alloy) Equipment Weighing higher than 300 MT for Site Fabrication
Total Potential of for this range of product: Rs. 4000 Cr. Facility to be augmented with required investment:
Description Investment in Rs. Lac Plate Rolling Machine up to 250mm shell thk Furnace to facilitate hot rolling. Welding qualification for Low Alloy Steels for higher Thk. (up to 200mm) ASME U3 Stamp. Technical Tie up / Collaboration for Screw Plug Heat 50 200 500 50 05
Exchanger & Power Plant Equipment Strip Cladding Facility. Qualification for WOL with strip cladding. Shop Floor Area (Bay with 250MT Capacity) Clean room facility for Exotic Metal. 150-200 MT capacity crane for site fabrication Plate rolling machine up to 80mm for site fabrication TOTAL 15 05 In Process 25 1000 300 2150
Competition for above said product range: 1. ISGEC 2. Godrej & Boyce 3. L & T Limited 4. BHEL Result Expected: Can be a sixth largest fabrication company of India More Price advantage as competition with the biggest names of industry Present shop floor capacity is 850 MT/Month will enhanced to 2200 MT/Month Higher return in Rs./MT due to higher metallurgy Offer to order conversion ratio of 15 % (present rate) will further improve Expected order booking will be Rs. 400 Cr. 5. GR Engineering 6. TEMA 7. And many international Supplier.
Marketing Strategy for year 2010-11 :
Products, which can be developed: Large Surface Condenser for Power Plant Complete Steam Line including Piping & Instrumentation for Solar Power Plant Boiler Drum Urea Reactor Urea Stripper Carbamate Condenser EO Reactor Polypropylene Reactor DHDS Column for Refinery Applications Methanol Convertor Equipment weighing 500 MT for site fabrication Equipment with very high metallurgy (i. e. Ti, Zr, SS 31050 Urea Grade) Total Potential of for this range of product: Rs. 7000 Cr.
Description Investment in Rs. Lac Qualification for welding of forged shell Qualification of exotic metallurgy (i. e. Ti, Zr, SS 31050 Urea Grade) Welding qualification for Low Alloy Steels LAS Gr 22 V Shop floor area near jetty. Automatic Tube to Tubes-sheet welding Machine Experts to handle Super critical equipments. Heat Treatment Furnace 8m X 8m X 18m TOTAL 20 4000 150 100 500 4800 10 20
Competition for above said product range: 1. L & T Limited 2. BHEL 3. ISGEC 4. Godrej & Boyce 5. Mangiarotti, Italy Result Expected: Can be a fourth largest fabrication company of India Can handle super critical equipment Further Price advantage as competition with the international industry Present shop floor capacity is 850 MT/Month will enhance to 2200 MT/Month Higher return in Rs./MT due to higher metallurgy Offer to order conversion ratio of 15 % (present rate) will further improve Expected order booking will be Rs. 500 Cr 6. HITACHI, Japan 7. Borsig, Germany 8. Vijay Tank & Vessels (VTV) 9. Luigi Rasta, Italy 10.Korean Heat Transfer
Limitations of the study
As with any exploratory research, the findings of this study are to be accepted with several limitations. Since limitations of a study can be viewed as directions for future research in the field, it is pertinent to list limitations and future research opportunities simultaneously. Scant and adequate secondary data on technology products market in India was available This study does not take companies who are the part of the industry but are small & medium players. 85
This study does not cover many equipment of Capital Goods Sector. Various analyses carried out from the basic data available from HDOL which may not cover picture of whole industry. Survey could not be done due to scatted locations of companies and respondents.
Books & Journals Text Books of SMU Research Methodology – C. R. Kothari Principles of Marketing – Philip Kotler Final Report on The Indian Capital Goods Industry (by CII) Fundamentals of Heat Exchanger Design – Ramesh Shah & Dusan P. Seculic Pressure Vessel Design Manual – Dennis Moss A report on Indian Engineering Industry – Corporate Catalyst India A Report on Oil and Gas - IBEF
Websites and Database : www.google.com www.wikipedia.org www.hdo.in www.temaindia.com www.isgec.com www.larsentoubro.com www.anupengg.com www.patelairtemp.com www.dghindia.org (Directorate General of Hydrocarbons) www.petroleum.nic.in (Ministry Petroleum & Natural Gas) www.commerce.nic.in (Ministry Commerce & Industry) www.dhi.nic.in (Ministry of Heavy Industries and Public Enterprises) www.ibef.org (India Brand Equity Foundation) www.fert.nic.in (Ministry of Chemicals & Fertilizers) www.iocl.com www.ongcindia.com 87
www.bharatpetroleum.com www.ril.com www.mrpl.co.in www.hindustanpetroleum.com www.nationalfertilizers.com www.rcfltd.com www.iffco.nic.in www.kribhco.net www.bseindia.com www.moneycontrol.com www.ntpc.co.in www.gnfc.in http://in.kpmg.com www.asiatradehub.com www.kpc.com www.energy.gov (U.S. Department of Energy) www.gail.nic.in www.nrl.co.in www.zuari-chambal.com www.gsfclimited.com www.deepakgroup.com www.crisil.com www.saudiaramco.com www.bhel.com
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