PRIVATE AND CONFIDENTIAL

GCL - Case Analysis

IIMA - Strategic Management

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Candidate : Rohit Bhayana Email ID : smbl02.rohitb@iima.ac.in Date : 01 Oct 2020

 Porter Five Forces
ISP MINI Mills
Threat of Buyers – (H) Threat of Buyers – (H)
•Customers are Quality sensitive and are particular Customers are sensitive to price and timely delivery
about the durability and timely delivery.

Threat of Suppliers – (H) Threat of Suppliers – (H)

•Labor cost is very high •Dependent on suppliers for raw material
•High technology cost •Labor cost is high

Threat of Substitutes– (L) Threat of Substitutes– (L)

•No Alternate solution •Some industries may have started to use Aluminum
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and Plastics, but is very limited

Threat of Competition-(H) Threat of Competition– (H)

•Special equipment's required for production •Too Many producers in the market
•Multiple producers in the market •Commoditized product

Threat of New Entrants-(M) Threat of New Entrants-(H)

•Entry Barrier is high •Low Entry Barrier
•Capital Required if high •Low Capital Requirement
•Government Policies are favorable •More than 100 mini mills

Candidate : Rohit Bhayana Email ID : smbl02.rohitb@iima.ac.in Date : 01 Oct 2020

 Hambrick’s Diamond Model

Arena : Staging:

•Minimills and continuous casting products •8 MT Induction furnace to produce billets

•Focus on Gujarat only  •Setup captive windfarm at porbandar for power
•Continuous Casting, Induction furnace for castings •Foundry and casting division
•Moving towards reaching ISP status due to varied product offerings •Rolling mills
•Get ISO certification
Vehicles :
Economic Logic :
•B2B with Traders
•B2C  for machine manufactures High Profit margin by production cost reduction.
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•Self owned

Differentiator :

•Reduced cost due to bulk E2E internal owner ship of life cycle
•Strong local supplier base in Ahmedabad and near ness to customers
•Stickiness and trust with customers
•Incentives for Traders, lower credit cycle
•Space to expand and  short turn around time ,50% less than competition
•Ownership  of Wind mills

Candidate : Rohit Bhayana Email ID : smbl02.rohitb@iima.ac.in Date : 01 Oct 2020

 Strategy Formulation
Option 1:  add  billet production – add melting capacity - $6.5 m

•$554 billet price +$11 reheating=$ 565  -- per  Exhibit 7

•$ 400 steel scrap + Labor cost + Power cost + Interest cost on $ 6.5 m
•Net return (0.23 - 0.62m) =  4 to 10% return on 6.5 m investment
•Appetite for better investment based on the balance sheet as per debt equity ratio.
•Challenge is NPV & High Power cost.

Option 2: option 1+ Power plant - $14.2 m

•Cost of Power plant VS borrowing power – which is cheaper?

•Capacity will be fully utilized (currently 33%) – 3 fold production increase
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Option 3: Setup only power plant - $7.7 m

•Capacity increases but reheating cost increases too.

•Billet procurement is add-on.

Option 4: Maintain status quo

•Non core product.

•Limited / cyclic demand with no established market for GCL.

Candidate : Rohit Bhayana Email ID : smbl02.rohitb@iima.ac.in Date : 01 Oct 2020

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Thanks

Candidate : Rohit Bhayana Email ID : smbl02.rohitb@iima.ac.in Date : 01 Oct 2020