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PEST

ANALYSIS

A

REPORT

ON

STEEL INDUSTRY

Submitted To: Submitted

By:Prof. Jalpa Patel Patel

NayanaAmin

khushbu

Patel Mayuri


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K.J. Institute of Management,

Vadasma

PREFACE

As a part of the curriculum of the MBA Programme the students are

required to undergo project work in addition to their theoretical study

so as to enable them to have the knowledge of the practical aspect of

the Business Administration.

As students of management it is learning experience to analysis an

industry. It is the most essentials tools for us to expose our skill as a

future responsible managerial post. So, we decided to STEEL

INDUSTRY. It helps us to develop our skill & confidence to do better

in all respect in management fields.

The project work is required to be undertaking where we get theopportunity to know about the real information of the area we have

selected, which altogether different from theory. The report contains

the detail information about Steel industry and all the information,

which is important for management student.


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ACKNOWLEDGEMENT

This report has been submitting in partial fulfillment of the

requirement of the award of MBA from K.J INSTITUTE OF

MANAGEMENT.

It is a universal fact that for study of a project in depth, we need the

support of many people right from the stage of conceiving the idea to

completion of report. It is difficult for a single person to do the job

efficiently without interaction & involvement of othersWe are also greatful to Miss Jalpa Patel, faculty members of

K.J.Institute of Management for their support whenever required.

Discussions with friends also have served to provide sought after

information. We are thankful to all our batch mates.


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TABLE OF CONTENT

Sr.

No.

Particular Page

No.1 History Of Steel Industry

2 List Of Steel Companies in India

3 PEST Analysis

3.1 Political Factor

3.2 Economical Factor

3.3 Social Factor

3.4 Technological Factor

4 Conclusion

5 Bibliography


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HISTORY OF STEEL INDUSTRY


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During Ancient Period

The history of iron and steel making in India goes back by several centuries. It

dates to 480 BC when archers in India used arrows tipped with steel. The iron

pillar of Dhar near Indore in Madhya Pradesh dates back to about 321 AD, the

iron pillar of Kutab Minar near Delhi dates back to about 400 AD and the ironbeams of Sun temple of Konark in Orissa dates back to 13th century. These

pillars are a testimony to ancient India's expertise in the making of steel.

Before Independence

The roots of the Indian Steel industry in modern times can be traced to the year

1874, when a company called Bengal Iron works at Kulti near Asansol in West

Bengal produced iron. One of the most important landmarks in the history of

Indian steel industry was the commencement of the Tata Iron and SteelCompany at Jamshedpur in the state of Bihar in 1907.The other prominent steel

manufacturers before independence were Indian Iron and Steel Company

(1922),Mysore Iron and Steel Works(1923) and Steel Corporation of Bengal

(1937).

After Independence

India found it difficult to sustain development in steel sector after independence

on its own due to the lack of technological development. The high cost ofdeveloping technology in this sector proved to be a major hindrance. That's

when the government decided to go for synergy with other countries for

technology transfer. Some of the prominent steel plant set up then was in

Rourkela in collaboration with West Germany and in Bokaro in collaboration

with Russia. These steel plants came under the purview of public sector

enterprises.

Post LiberalizationThe post liberalization scenario in the Indian Steel industry has witnessed a

monumental shift. Some of the salient features are:

The need for license for increasing capacity has been abolished.

Steel industry has been removed from the list of Industries under the

control of state sector.


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Foreign equity investment in steel has gone up to 74%.

In January 1992 the price and distribution controls were removed.

Policies like convertibility of rupee on trade account, freedom to mobilize

resources from overseas financial markets and restructuring of existing tax

structure have immensely benefited the industry.

Milestone

The Indian steel industry has come a long way since its humble beginnings. The

takeover of the British steel giant Corus steel by Tata Steel and the acquisition

ofArcelor by Mittal Steel herald a new beginning for the Indian steel industry.

These events signify the fact that the Indian steel industry has acquired a global

identity and is today extremely competitive globally. Some of the prominentsteel producers today are Posco, Tata Steel, Essar, Ispat, Sail and Rinl.

Future trends

It has to be said that the global recession has affected the Indian steel

industry especially stainless steel, but the steel industry is trying to offset the

negative effect of the recession by focusing on transportation and construction

projects which are usually funded by the government. India is the only country globally to record a positive overall growth in

crude steel production at 1.01 per cent for the period January -March 2009.

It is estimated that India's steel consumption will grow at nearly 16%

annually till 2012.

The National Steel Policy has forecasted the demand for steel would

reach 110 million tons by 2019-2020.


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```` Indian Steel Industry

India is currently the fifth largest steel-producing nation in the

world with production of over 54 million tones (MT).

However, it has a very low per capita consumption of steel of

around 46kgs as against an average of 198kgs of the world.

This wide gap in relative steel consumption indicates that the

potential ahead for India to raise its steel consumption is high

Being a core sector, steel industry tracks the overall

economic growth in the long term. Also, steel demand, beingderived from other sectors like automobiles, consumer

durables and infrastructure, its fortune is dependent on the

growth of these user industries

The Indian steel sector enjoys advantages of domestic

availability of raw materials and cheap labor. Iron ore is also

available in abundant quantities. This provides major cost

advantage to the domestic steel industry, with companies like

Tata Steel being one of the lowest cost producers in the

world.

However, Indian steel companies have to bear additional costs

pertaining to capital equipment, power and inefficiencies

(low per employee productivity). This has resulted in the

erosion of the edge they would have otherwise enjoyed dueto availability of cheap labor and raw materials.

The government reinstated basic customs duty on steel

imports in order to protect India from dumping of cheap steel

products. It has also provided series of benefits to auto,


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There are many strong points of the industry that makes it one of the

leading names in the global steel industry. The rate of labor wage in

India is among one of the lowest in the world thereby making large

scale production feasible. The boom witnessed in the automobile

industry has ensured that the demand for steel is increasing gradually

and will continue to do so in the near future. There is huge manpower

in India which is another reason why steel production in India is high

and the industry is doing pretty well both nationally and

internationally.

Investments

Numerous steel companies some major projects in the pipeline to invest in India

Steel industry. Steel companies have earmarked more than 100 million USD for

the setting up of sponge iron units in Koppal and Bellary in Karnataka. As per

Investment Commission of India more than 30 billion USD are in the pipeline

for investment over the next five years.

Steel is a deregulated sector and the Government does not directly make

investments in the steel industry. However, a Gross Budgetary Support (GBS)

of Rs.118 crores has been provided for promotion of Research and Development

(R&D) in the Iron and Steel Sector during the Eleventh Five Year

Plan. Government implements various fiscal measures in the form of duties and

taxes, from time to time with an overall view to regulate economy and boost the

industry.

Growth Potential of the Industry

Amongst the other newly steel-producing countries, South Korea has stabilized

at around 46-48 million tones, and Brazil at around 30 plus million tones. This

brings the focus of the industry to India. Considering a steel consumption of

300 kg per man per year to be a fair level of economic development, India will

have to come up to somewhere around 300 million tones, if it is to fulfill its


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ambitions of being a developed country. That of course is a long journey from

the present production level of around 50 million tones but one must consider its

past before coming to a conclusion about its potential. India was producing only

around a million tonnes of steel at the time of its independence in 1947. By

1991, when the economy was opened up steel production grew to around 14million tones. Thereafter, it doubled in the next 10 years, and then it is doubling

again, maybe over a slightly longer span. Steel Production in India is expected to

reach 124 million tons by 2012 and 275 million tons by 2020 which could make

it the second largest steel maker.

In the developed countries, the trend is on consolidation of industry. Cross-

border mergers have been taking place for several years. The focus is on

technological improvements and new products.


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PEST ANALYSIS

PEST analysis stands for "Political, Economic, Social, and

Technological analysis" and describes a framework of macro-

environmental factors used in the environmental scanning componentofstrategic management.

The model has recently been further extended to STEEPLE and

STEEPLED, adding education and demographic factors. It is a part of

the external analysis when conducting a strategic analysis or doing

market research, and gives an overview of the different macro

environmental factors that the company has to take into consideration.It is a useful strategic tool for understanding market growth or decline,

business position, potential and direction for operations.

The growing importance of environmental or ecological factors in the

first decade of the 21st century have given rise to green business and

encouraged widespread use of an updated version of the PEST

framework. STEER analysis systematically considers Socio-cultural,

Technological, Economic, Ecological, and Regulatory factors.

Political Factor:
http://en.wikipedia.org/wiki/Environmental_scanninghttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Demographicshttp://en.wikipedia.org/wiki/Market_researchhttp://en.wikipedia.org/wiki/Green_businesshttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Demographicshttp://en.wikipedia.org/wiki/Market_researchhttp://en.wikipedia.org/wiki/Green_businesshttp://en.wikipedia.org/wiki/Environmental_scanning


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Political factors are how and to what degree a government intervenes

in the economy. Specifically, political factors include areas such as tax

policy, labor law, environmental law, trade restrictions, tariffs, and

political stability. Political factors may also include goods and services

which the government wants to provide or be provided (merit goods)

and those that the government does not want to be provided (demerit

goods or merit bad). Furthermore, governments have great influence

on the health, education, and infrastructure of a nation.

Economic Factor:

Economic factors include economic growth, interest rates, exchange

rates and the inflation rate. These factors have major impacts on how

businesses operate and make decisions. For example, interest rates

affect a firm's cost of capital and therefore to what extent a business

grows and expands. Exchange rates affect the costs of exporting goods

and the supply and price of imported goods in an economy.

Social Factor:

It includes the cultural aspects and health consciousness, population

growth rate, age distribution, career attitudes and emphasis on safety.

Trends in social factors affect the demand for a company's products

and how that company operates. For example, an aging populationmay imply a smaller and less-willing workforce (thus increasing the

cost of labor). Furthermore, companies may change various

management strategies to adapt to these social trends (such as

recruiting older workers).
http://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Tax_policyhttp://en.wikipedia.org/wiki/Tax_policyhttp://en.wikipedia.org/wiki/Labour_lawhttp://en.wikipedia.org/wiki/Environmental_lawhttp://en.wikipedia.org/wiki/Trade_restrictionhttp://en.wikipedia.org/wiki/Tariffshttp://en.wikipedia.org/wiki/Merit_goodhttp://en.wikipedia.org/wiki/Demerit_goodhttp://en.wikipedia.org/wiki/Demerit_goodhttp://en.wikipedia.org/wiki/Healthhttp://en.wikipedia.org/wiki/Educationhttp://en.wikipedia.org/wiki/Infrastructurehttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Inflation_ratehttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Tax_policyhttp://en.wikipedia.org/wiki/Tax_policyhttp://en.wikipedia.org/wiki/Labour_lawhttp://en.wikipedia.org/wiki/Environmental_lawhttp://en.wikipedia.org/wiki/Trade_restrictionhttp://en.wikipedia.org/wiki/Tariffshttp://en.wikipedia.org/wiki/Merit_goodhttp://en.wikipedia.org/wiki/Demerit_goodhttp://en.wikipedia.org/wiki/Demerit_goodhttp://en.wikipedia.org/wiki/Healthhttp://en.wikipedia.org/wiki/Educationhttp://en.wikipedia.org/wiki/Infrastructurehttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Inflation_ratehttp://en.wikipedia.org/wiki/Cost_of_capital


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Technological Factor:

It includes ecological and environmental aspects, such as R&D

activity, automation, technology incentives and the rate of

technological change. They can determinebarriers to entry, minimumefficient production level and influence outsourcing decisions.

Furthermore, technological shifts can affect costs, quality, and lead to

innovation.

3.1 POLITICAL FACTOR

TAX RATE:-The tax rates paid by steel companies are about the same as those paid

by the average manufacturing firm of equal profitability. This is

particularly true now that the 1986 tax reform aims at greater

neutrality among corporate taxpayers.

But the new tax law even provides the industry with two exceptional

benefits. First, the transition rules allow steel companies a refund on

unused investment tax credits, which total $500 million for the 10 low

largest firms in the industry.

These firms have been unable to use the tax credits because they have

not been profitable enough to pay taxes. Second, as a permanent

feature, the law permits the steel companies to use accumulated net

operating losses (over $7 billion at present) to offset future income

that would otherwise be taxable.

Export-Import Policy:-

It includes how the government influences the export or import of the

particular industry as a whole.
http://en.wikipedia.org/wiki/R%26Dhttp://en.wikipedia.org/wiki/Automationhttp://en.wikipedia.org/wiki/Technological_changehttp://en.wikipedia.org/wiki/Barrier_to_entryhttp://en.wikipedia.org/wiki/Outsourcinghttp://en.wikipedia.org/wiki/Innovationhttp://en.wikipedia.org/wiki/R%26Dhttp://en.wikipedia.org/wiki/Automationhttp://en.wikipedia.org/wiki/Technological_changehttp://en.wikipedia.org/wiki/Barrier_to_entryhttp://en.wikipedia.org/wiki/Outsourcinghttp://en.wikipedia.org/wiki/Innovation


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The steel industry is highly cyclical and is affected significantly by

general economic conditions and other factors such as worldwide

production capacity, fluctuations in steel imports/exports and tariffs.

Steel prices are sensitive to a number of supply and demand factors.

Steel markets recently have been experiencing larger and more

pronounced cyclical fluctuations.

This trend, combined with the upward pressure on costs of key inputs,

mainly metallics and energy, presents an increasing challenge for

steel producers. The key drivers for maintaining a competitive position

and good financial performance in this challenging environment are

product differentiation, customer service, cost reduction and cashmanagement.

The dependence of certain operating subsidiaries of the steel

companies on either export or domestic markets may limit its

flexibility in managing its business. Some of the steel companies are

primarily export oriented, as domestic markets are not adequate to

support operations, and some of the companies are substantially

dependent on the domestic markets of their countries of operation.

Any rise in trade barriers or trade related actions in main export

markets, or any fall in demand in the export or domestic markets due

to weak economic conditions or other reasons, may adversely affect

the Operations of these companies and may limit their flexibility in

managing its business.

Steel production requires substantial amounts of raw materials and

energy, including iron ore fines, iron ore pellets, scrap, electricity,

natural gas, coal and coke. Any prolonged interruption in the supply of

raw materials or energy, or substantial increases in their costs, could


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adversely affect the business, financial condition, results of operations

or prospects of steel companies

Employment opportunity:-

The education and training you need to work in the steel industrydepends on the kind of job you want. Some companies prefer to hire

high school or vocational school graduates for processing jobs. Most

training is done on the job, however. Usually, workers start in

unskilled jobs and learn by helping experienced workers. It takes up to

four years to learn some of the most highly skilled jobs, such as those

of blowers or rollers, but you may have to wait much longer for an

opening in one of these positions. Steel companies often encouragetheir employees to take courses in subjects such as chemistry, physics,

or metallurgy to upgrade their skills.

Advancement in plant jobs in the steel industry usually follows a set

pattern. For example, a worker may start as a laborer and become a

second helper, a first helper, and then a keeper before advancing to a

job as a blast furnace blower. Companies usually consider such factors

as experience and leadership ability when promoting workers into

positions that require the supervision of other workers. Some

steelworkers advance by getting into an apprenticeship program and

learning one of the maintenance trades. Professional employees can

advance in their departments. Many engineers become executives in

the industry.

The number of jobs in the steel industry is expected to decline by 13

percent by 2014 as larger companies purchase smaller companies and

establish more efficient operations. More opportunities should be

available in EAF mills, which are expected to increase their share of

the market, than in integrated mills. Throughout the industry,

productivity is anticipated to improve through the automation of tasks


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formerly handled by lower-skilled workers, and remaining jobs will

require higher levels of skill and education. Opportunities are expected

to be good for computer scientists and for mechanical, metallurgical,

industrial, electrical, and civil engineers. Skilled production jobs will

increasingly require associate's degrees in technology.

Working Conditions:-

Working conditions depend on the kind of job. Many steelworkers areexposed to intense heat and noise. Remote-control devices allow someemployees, such as furnace operators, to work at a distance from themost extreme conditions. Many processes in the steel industry must beoperated around the clock. Therefore, workers work in shifts. Ingeneral, the workweek is forty hours long. Most production workers inthe industry are members of a labor union.

Exchange rate:-

An exchange rate is the price of a country's currency in terms of

another country's currency.

Price of one country's money in relation to another's. Exchange rates

may be fixed or flexible. An exchange rate is fixed when two

countries agree to maintain a fixed rate through the use of monetary

policy. Historically, the most famous fixed exchange-rate system was

the gold standard; in the late 1850s, one ounce of gold was defined as

being worth 20 U.S dollars and 4 pounds sterling, resulting in an

exchange rate of 5 dollars per pound. An exchange rate is flexible, or"floating," when two countries agree to let international market forces

determine the rate through supply and demand.

Price at which one country's currency can be converted into another's.

The exchange rate between the U.S. Dollar and the British pound is


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different from that between the dollar and the German mark, for

example. Most exchange rates float freely and change slightly each

trading day; some rates are fixed and do not change as a result of

market forces.

The price of one country's currency expressed in another country's

currency. In other words, the rate at which one currency can be

exchanged for another. For example, the higher the exchange rate for

one euro in terms of one yen, the lower the relative value of the yen.

The price of a currency expressed in terms of another currency.

An exchange rate is the current market price for which one currency

can be exchanged for another. If the U.S. exchange rate for the

Canadian Dollar is $1.60, this means that 1 American Dollar can be

exchanged for 1.6 Canadian dollars.

Inflation rate:-

Inflation in India is at an acceptable level and remains much lower

than in many other developing countries. But off late prices of

essential commodities such as food grain, edible oil, vegetables etc

have risen sharply and in the process driving up the inflation rate.

Inflation is defined as a sustained increase in the general level of

prices for goods and services. It is measured as an annual percentage

increase. As inflation rises, the value of currency goes down. Thus the

purchasing power of the currency, i.e. the goods and services that can

be bought in a unit of currency, too goes down.

3.3 Social factor


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Status:-

Choosing steel depends on standard of living of the country. Ifthe

standard of living is high than they choose more expensive and rich

steel products and if it is low than they choose the product

accordingly.

Population growth rate:-

The growing population rate may increase the demand of steel for

Indian steel industry. As the growth rate is high it affects the demand

of the steel product.

Age distribution:-

The demand for product changes according to the age for e.g.:

youngsters prefer steel and fancy furnish and old age people choose

wood furnish.

3.4 Technological Factor

1. R&D Activity:-

There are many companies in Steel industry having healthy

competition that leads them to invest in Research & Development

Activity. At last it results in development of STEEL INDUSTRY.

2. Automation:-Before one decade there were so many companies using man power

for producing Steel Parts. Which was consumed so much time for

making production but now it requires less time and man power

because of high technology and Information System.


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3. Rate of Technology Change:-

World is not enough for creative mind thats why the technology

change very fast with time and it is necessary for any company to

adapt new technology for produced better product within time period.

4. Technology Incentive:-

As per the technological changes, the new technology should be

rewarded that would be an important factor which will help Steel

industry to grow.

Conclusion


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Today, the buyers of readymade steel furnish, are aware of the running

trends, and demand the newest in fashion and products at a reasonable

cost. At the front position of this evolution are the smaller players,

which private labels that are thoroughly transforming the furnish

products for the population. With the supply chain limitations eased,

organization in real estate markets, and rationale tax structure, the

readymade furniture have became more lucrative and it is anticipated

that this will be the main segment in the next five years.


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Bibliography

http://en.wikipedia.org/wiki/Global_steel_industry_trends

http://indiacurrentaffairs.org/trend-in-steel-industry-in-india/

www.tradechakra.com

http://pib.nic.in/feature/feyr2000/fmar2000/f060320002.html
http://en.wikipedia.org/wiki/Global_steel_industry_trendshttp://indiacurrentaffairs.org/trend-in-steel-industry-in-india/http://www.tradechakra.com/http://pib.nic.in/feature/feyr2000/fmar2000/f060320002.htmlhttp://en.wikipedia.org/wiki/Global_steel_industry_trendshttp://indiacurrentaffairs.org/trend-in-steel-industry-in-india/http://www.tradechakra.com/http://pib.nic.in/feature/feyr2000/fmar2000/f060320002.html

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