Electrosteel Case

International Marketing

Abhimanyu Mishra 18DM006

AKASH KUMAR 18DM017
AMAN NEGI 18DM019
ANIRUDH SINGAL 18DM024
ANKIT GIRI 18DM028
SIMARPREET SALUJA 18DM216
1. What are the key success factors for Electrosteel? Is international expansion a good
idea?

Success Factors

India had policies that protected local industry, and that combined with complicated government
bureaucracy, complex duties, and convoluted tax structures that made it difficult for multinationals
to conduct business there. Electrosteel being the local player could enjoy the protectionism provided
by the local state and central governments.

As the state and the central governments were investing highly on the infrastructural projects,
Electrosteel was growing at a rapid speed owing to these new infrastructural projects across the
domestic market.

Being the biggest producer of CIP and DIP in the domestic market Electrosteel they have a Well
Established brand in India and maintained an extensive local network of agents and a team of sales
professionals.

In India the operational costs are very low and the labour is available at cheaper cost than those
used by competitors. The skilled labour is available in India at fairly low wages and the employees at
Electrosteel are loyal.

Early entry into market in 1965 gave it First Movers advantage

The plant had been accredited with ISO 9002 certification and international product certification
widely recognized by customers.

International Expansion

International expansion would offer a strong opportunity for continued growth, with the added
benefit of providing additional hard currency for further investment in new production technologies.

Expanding the company internationally would make it a global player and building an overseas plant
was particularly attractive, as it would effectively translate into Electrosteel being considered a global
competitor, yielding lower costs and reduced import duties.

The growth experienced during 1990s in the domestic market is not expected to continue in the
future. This indicates that the domestic market is stagnating and hence it needs to enter the
international market.

The funding agencies in India were pulling hands from the infrastructural projects and the demand
was supposed t decrease in the coming years which leads to finding the international expansion.

In the domestic market the small players are emerging and they can provide tough competition on
the price, so it makes sense to expand internationally.
2. What is your evaluation of opportunities either to expand either in Vietnam or in
France? How do these alternatives compare (at a minimum include operational,
financial and marketing considerations)?

Vietnam
Operational Problems: No proper
infrastructure, Transportation
facilities lacking,
Water and Sewage problem
France
Problems: Labor cost was 10
times that of India or Vietnam,
Language barrier for the
managers

Opportunities: Transportation
cost will be saved, will be
considered as local

Political Problems: Weak administrative

structure, Bureaucratic political
system, Previous units failed

Opportunities: Vietnam Govt.

giving incentives and helpful
Financial Opportunities: *A premium of Problems: Increase in cost (by
15% on water projects by int. 90%) just considering extra
agencies. labour cost

* Saving of 10% (If both Casting Opportunities: Overall price

Marketing and Competition
and finishing line produced)
*Sales office cost
$120,000/year
*Not much additional
marketing effort required as no
competition
*First Mover Advantage
premium of 12% over int. prices
*Sales office cost
$400,000/year.
* Highly Competitive but could
gain niche market fot itself.
3. As Das what is your recommendation going ahead? How would you implement your
plan?

Option/Location Vietnam France

Option 1 Sales Office Sales Office
Cost $120,000 Cost $400,000
Option 2 Casting and Finishing lines Casting and Finishing lines
Cost Cost
Casting $40 million Casting $40 million
Finishing $0.9 million Finishing $1.873 million
Option 3 Only Finishing lines Only Finishing lines
(No additional capacity for (Additional casting capacity of
casting) 10000 tonnes as of today)
Capital Cost - $900,000 Capital Cost - $1,873,000

The manufacturing and export departments at Electrosteel had concluded that Electrosteel should
target a total export volume of approximately 60,000 tonnes per year, based on current domestic
demand and an expansion of production capacity. As a result it has been formalized a corporate
objective of ramping up international volumes by 10,000 tonnes per year. Our projected additional
export volume targets are 10000 tonnes, 20000 tonnes and 30000 tonnes in 2004.
Clearly Vietnam would not be able to support this strategic decision made by the higher
management.

Forecasted volumes in Europe are 30000 tonnes annually. So, the target international volumes are
met if the projections come true. Electrosteel can gradually enter into different countries in Europe
starting with France immediately, in case we wish to continue with the gradual ramping up of volume
by 10000 tonnes annually.