Outline

• 1983: Spartek, incorporated as a public company in Andhra Pradesh (March), Capital

Goods License (October), Power Supply (March), Foreign Collaboration (March),
Institutional Loan sanctioned (August-November)

• 1984: Spartek got the industrial license (march), import licenses (march -may), Foreign
Collaboration (March), Institutional Loans-Documents, Consent for the public issue (Sept.)

• 1985: Obtained license for the capacity expansion to 26000 TPA

• 1986: Obtained license further increase the capacity to 40000 TPA

• 1988: The expanded capacity of 26000 TPA became operational

 Introduction
• In the year of 1983, Mr. Krishna Prasad Tripuraneni, incorporated a company called as
Spartek Ceramics India Limited with a capacity of 12000 TPA.

• Sensing the demand for ceramic flooring in the west, Mr. Tripuraneni decided to invest in
the ceramic industry and set up a factory.

• Positioning of the product was a problem as people were familiar with the mosaic
flooring. The Ceramic Tiles were positioned for its aesthetics.

• The Ceramic Industry was becoming an attractive industry looking at the returns Spartek
had got. (Profits were more than double in the second year for Spartek)
 What is the core competence of Spartek? (VRIO analysis)
S.No Resource V R I O Implications

1. Project Yes Yes Yes Yes Sustainable

Management competitive
of Spartek advantage

2. Quality of the Yes No Yes No Temporary

ceramics competitive
advantage

3. Superior Yes No Yes Yes Competitive

Technology Advantage
(SFT)

4. Brand Image Yes Yes No Yes Competitive

Advantage

5. Distribution Yes No Yes Yes Competitive

network Advantage
 Five- Force Analysis for Ceramic Industry (June 1988)
• Supplier’s power: The extraction of ceramic raw materials was earlier the family business of the owner, so
bargaining power of the supplier is low.

• Buyer’s power: The ceramic tiles were new in India and people started adopting it, the switching for the
customers was easy and so the Buyer’s power is high.

• Competition from Existing players: Almost 9-10 players had set up their production plant in the period, and
thus there was intense competition from the existing players. It was high.
• Barriers for new entrants: there were few barriers like huge initial investment and 25% export mandate,
otherwise the barriers to new entrants were not much, it can be medium.

• Threat from Substitutes: Looking at all the advantages that ceramic tiles provided at a reasonable cost, the threat
of the substitutes was low. (Of course taking into consideration the natural marble rocks, which the upper class
used to buy)
 Comparison of ratios with the competitors (1986-87)
Ratios Spartek Somany Pilkingtons Neyveli Ceramics
Raw materials/Sales 0.16 - -
EBITDA/Sales 0.28 0.27 0.056
EBIT/Sales 0.23 0.11 -0.14
Net profit/Sales 0.19 0.09 -0.14

• Spartek has stable earnings (EBITDA/Sales) and also has higher net profit when compared to
Somany Pilkingtons ,Neyveli Ceramics and Regency etc…

• OPTION: Merge with Somany Pilkingtons

• Acquisition of debt ridden Neyveli Ceramics (18.9 million) and Regency Ceramics (10.7
million) would create a problem for Spartek.