strategic orientation of hng

8/3/2019 Strategic Orientation of Hng

1/15

STRATEGIC ORIENTATION OF

HINDUSTHAN NATIONAL GLASS & INDUSTRIES LIMITED

Submitted to: Submitted by:

Prof. A.K.Sar Jayanta Chakraborty 10202200

Tushar Kanti Nayak 10202201

Swarasij Guha Roy 10202202

Ritesh Shreemal 10202220

ManasRanjan Mohapatra 10202227

Abhishek Adhikari 10202199

Anindya S Nayak 10202219


2/15

Company Overview

HNG was founded by Mr. C.K.Somany in 1946 following the commissioning of Indias first fully

automated glass manufacturing plant at Rishra (near Kolkata). At present, it is the key player in Indias

container glass industry with a pan India presence.

It is the market leader with a share of ~55%. The company caters to industries like liquor,pharmaceuticals, beverages and processed foods among others. It is presently operating with a

cumulative capacity of 3307 TPD across 6 manufacturing units.

In the 5 ml - 3200 ml segment, HNGIL is the market leader. It caters to varied end users sectors like

liquor, beer, pharmaceutical, beverage, processed food and cosmetic covering industry majors like HUL,

Coca-Cola, Dabur, GSK, Nestle, Pepsi, Reckitt Benckiser, UB Group etc. The company also exports its

products overseas to markets such as South East Asia, Middle East, Africa, Europe and North America.

The companys export component though is currently small at 5% of total revenues.

Industry Information

The glass segment of Indias packaging industry is growing at the rate of approx 15% p.a. The untapped

potential of the Indian market is reflected in the per capita glass consumption of glass of around 1.4 kg

when compared with 10.2 kg in Japan and around 27 kg in the USA.

Demand of the glass container industry is driven by growth in end user segments such as liquor, beer,

pharmaceuticals, food processing and carbonated drinks. The liquor and beer industries are the majorusers of glass containers, accounting for around 60% of Indias glass container production, followed by

pharmaceuticals 20%, food 10%, carbonated drinks 5% and remaining cosmetics & others.

Demand for float glass in India has grown at a rate of 12% during the last 3 years, driven by growth in

end user segments such as automobile and real estate. However, the business is still at a nascent stage

in India compared to other countries like the US, the UK and China. The lack of sufficient float glass lines

as compared to other countries reflects the huge untapped potential in the Indian market. The demand

of float glass is likely to grow at a healthy 11-12% over the next 5 years backed by strong growth in the

construction and automobile industries.

Product Information

The Company has one of the widest portfolios for the container glass ranging from 5ml to 3200ml

across multi-colored bottles (Amber, Flint and Green). The products are available in over 30 countries.

The company has been accredited with ISO 9000:2000 certification, ensuring stringent quality protocol

and ISO 22000 for food and safety.


3/15

TechnologyHNG introduced the NNPB (Narrow Neck Press and Blow) technology in 2007-2008. It is a revolutionary

process that not only controls the distribution of glass inside the container but also reduces the weight

of glass by 33%. HNG is the first to introduce and commercialized this technology in India. The company

had invested a capital of Rs. 100 Cr.

Strategic Direction

Vision:

To create a world-class glass manufacturing plant that pursues Quality, Cost Reduction, and

Productivity Improvement measures in a truly holistic manner leading to Customers, Shareholders,

Employees and Suppliers Satisfaction; this integrated effort will result in the company becoming an

Industry Benchmark and a role model for systems, processes and results.

Mission:

At HNG we look forward to customer satisfaction. Our main objective is to ameliorate our customers

and stakeholders, and in the process strengthen the roots of our organization, so that we can emerge

as the behemoth in the glass packing industry.

Values:

At HNG, we believe in the core values of people, operational excellence, innovation and integrity.

It is our people that give us the gusto to move forward, keeping all the obstacles at bay. With our

diligent workforce, production has become so much easy.

Our operational excellence has given us the strength to lunch our product with even more confidence.

We have an installed capacity of 2825 TPD and this is what distinguishes us from competitors.

Innovation and integrity are two important things that drive the HNG team. These values are like assets

that consolidates us in our march towards a greater future.


4/15

Macro Environmental

Sectors

Trends Impact on the Industry Opportunity/Threats

Social 1. Increased awareness

about recycling.

2. Prevention of land

contamination and

minimize carbon

emissions to air and

water.

1. Increased CSR.

2. Potential to capture

larger market share.

3. New project

implementation.

Opportunity.

Technological 1. Installed NNPB

(Narrow Neck Press &

Blow) technology.

2. Collaborations with

international

companies.

1. Able to produce high

quality at less cost.

Opportunity.

Economical 1. Performance linked

to robust growth in the

end user segment.

2. Focus on sustainable

growth.

Stimulate

renewable-

favoring market

forces with

attractive

return rates.

To encourage

consumers to

shift to latest

advancements

in technological

products.

Threat.

Political 1. Grant of funds by

Govt. for R&D.

1. Make production

cheaper and generation

more efficiency.

Opportunity.

Porters Five Forces Model:

Threat of entry:

Item Key TOE

Brand loyalty commanded by incumbents High 1. Customers are brand loyal.

2. New players will require a lot of

brand building.

Economies of scale in the business High 1. Barriers to entry.

2. Change in technology.

3. High power and fuel cost.

Capital requirement High 1. Setting up new manufacturing units.

2. High cost associated with


5/15

distribution channel.

3. High working capital requirement.

Buyers switching cost low 1. Homogeneous products and low

price difference.

Easy access to input No 1. Availability and procurement of sand

for production.

History of past retaliation Low 1. Technological advancement is low.

Power of Suppliers:

Item Key POB

# of suppliers relative to # industry players High As suppliers are

more they are

having less

power.

Average buying volume of the industry per transaction High(depends

on plant

capacity)

Power o f

supplier is low.

Suppliers do sell to other industries also High Natural

resources like

sand, lime stone

and soda ash

etc. are also

used in other

industry.

Cost (to industry players) of switching between suppliers Low Power of

supplier is low.

Industry players can integrate backward into the supplier industry Low Can integratebackward but

capital

requirement is

high.

Suppliers cannot integrate forward into the industry Low Power of

supplier.


6/15

Powers of Buyers:

Item Key POB

#buyers relative to # of

industry players

High Power of buyers is low as demand is more than supply.

Buying volume per

average transaction

High Demand for container glass is directly linked to performance of end

user industries.

Industry players do sell

to all buyer segments

High Industry sells to all segments. It does not differentiate.

Buyers can buy from

multiple players

High HNG Caters to customers across segments (Like liquor, beer, food,

soft drinks, pharmaceuticals etc.). Piramals maximum revenue comes

from pharmaceuticals sector.

Cost (to the buyers) of

switching between

players

Low Buyers can switch.POB is high.

Buyers cannot integrate

back to the industry

Low End users can not integrate backwards.

POB is low.

Industry players can

integrate forward

Low Industry player cannot integrate forward.

POB is low.

Threat of Substitutes:

Item Key TOS

Substitutability of the industrys product (availability and

comparability of substitutes price/ performance)

High PET

bottles &

Aluminum

cans are

substitute

of

container

glass.

Profitability of substitute products industry High Available

but not

preferred.


7/15

Strategic Group and Segmentation Analysis:

The glass industry has three prime segments i.e. Container Glass, Float Glass and Fiber Glass.

The container glass segment produces glass packaging products, such as bottles and jars. The float glass

segment caters to residential and commercial construction, automobile windshield, mirrors etc. The

fiber glass is further divided in to two sub industries like building insulations (Glass Wool) and textiles

fibers used to reinforce plastics and other materials for the transportation, marine, and constructionindustries.

The company focuses on container glass segment and has recently forayed into the float glass segment.

Float Glass Segment:

The Company possesses a market share of around 35% in western India and of around 20% and 18% in

northern and southern India respectively.

Integrated glass plant having capacity to manufacture toughened, insulated glasses for architectural

and automotive application 18% raw material source within 100-150 km and 20% of the production is

sold within 500 km.

The company has a Pan-India presence with distribution network of 758 agents.

Diversified supplier base for each raw material to reduce any business risks on account of non-supply

Container Glass Segment:

Liquor and beer industries are the main users of glass containers with 60% share, followed by

pharmaceuticals 20%, food 10%, carbonated drinks 5%, and cosmetics & others account for the

remaining

Favorable demographics and rising disposable incomes drive consumption across end-user industries in

India.

The per capita consumption of glass in India is ~1.4kg, as against 27.5kg in US and UK and 5.9kg in

China.

Figure 1. End User Segmentation

52, 52%

15, 15%

11, 11%

9, 9%

13, 13%

Liquor

Beer

Food

Pharmaceutical

Others


8/15

Liquor:

Indians consume 200 mn cases of IMFL and 220mn cases country liquor. Increasing trend of social

drinking, driving the sector growth at almost 13%.

Beer:

The consumption has been increasing by 15-20%.

Food Processing:

This industry is expected to grow at a rate of 10% in next 5 years.

Pharmaceuticals:

Increased consciousness for wellness leads to demand. Indian pharmaceutical market is expected to see

a CAGR of 12-15% over the next 3 years (as per IMS research).

Carbonated Drinks:

This is an Rs 6000 Cr industry and is expected to grow at 6-8% p.a.

Cosmetics:

Domestic cosmetics and toiletries segment is growing at 15-20%.

The Value Net:

Competitors:

Cooperation among rival firms can bring about new technologies and R&D activities by which they can

explore a new market through a new product which can be beneficial to the industry as a whole.

Suppliers:Firms can integrate with the suppliers to develop quality products and ensure uninterrupted supply of

raw materials.

Customers:

Firms can collaborate with the end users so as to fulfill their specifications and requirements keeping

intact the industry standards and environmental norms. The company has introduced the NNPB

technology to enhance light weight bottles manufacture thereby ensuring reduced per bottle cost for

the customer (up to 33% of lower weight, lower transportation cost, less breakage).

Complementor:

Firms can synergize with the Complementor which will increase their scope of expansion. HNG has a

joint venture with OMCO International NV (world's leading glass mould manufactures) for mould

manufacturing facility; it also has an alliance with Siemens to leverage its technological innovation in

automation and energy efficiency.

Identifying Key Success Factors

What do customers

want? (Analysis of

demand)

How do firms survive

competition? (Analysis

of competition)

Key success factors

Glass Industry

(Container )

Technologically

advanced

Adaptation of

new

Using NNPB

(Narrow Neck


9/15

products.

Light weight &

high quality

glass.

Aesthetically

appealing glass

container.

Low cost

products.

Continuous

availability.

technology.

Diversified

product

portfolio.

Economical

pricing.

Capacity

expansion.

Low resource

consumption

(water and

energy).

Press & Blow)

technology.

Pan India

presence.

Brand loyalty.

Highest

installed

capacity 2930

TPD.

Internal Analysis

RELATIONSHIP AMONG RESOURCES, CAPABILITIES & COMPETITIVE ADVANTAGE

The Industry key success factors for this industry mainly rest upon the product differentiation that

requires continuous product development which is an outcome of regular technological up-gradation

and lowering natural resource consumption.

Strategy

Organizational Capabilities

Strong R&D, Product

development, Govt. relations,

CRM

Industry Key SuccessFactors

Using NNPB (NarrowNeck Press & Blow)

technology.

Pan India presence.Brand loyalty.Highest installed

capacity 2930 TPD.

CompetitiveAdvantage

Differentiation: Light weight

container glass.

Replacing gaswith fuel.

Low Cost & Pricemaker.

RESOURCES

TANGIBLE INTANGIBLE HUMAN

Strong BalanceSheet with debt

equity ratio 0.37.

Adequate cashreserves.

Highest installedplant capacity.

High brandvalue.

LatestTechnology(NN

PB)

R&D.

Propermanagement ofintellectual

capital

Effectivecollaboration

among

employees


10/15

The rightful integration of its resource and capabilities has enabled HNG to come up with the product

differentiation competitive advantage. The regular spending on technology and R&D activities is due to

strong financial backbone and the enhance employee co-operation which has lead to the development

of intellectual capital within HNG.

DISTINCTIVE COMPETENCIES SHAPE THE FUNCTIONAL-LEVEL STRATEGIES

THAT A COMPANY CAN PURSUE

HNG functional strategies have lead to the attainment of its competitive advantage with value creationto gain superior profitability.

Superior Efficiency: Superior efficiency has been achieved by the strategic global alliances and

acquisitions, technological innovations in automation and energy efficiency and above all consolidation

of resources and capabilities. Over the years HNG has spent massively on technological development

lead to its economies of scale in the current development scenario.

HNG has a long term customer relationship which has helped to decrease the total fixed cost and

average per unit cost of sale. Customer Loyalty has been a driving force in HNGs superior efficiency.

Superior Quality: At HNG quality has never been compromised. Better quality means less rework,

fewer mistakes, fewer delays and better use of time and materials and that leads to cost reduction. The

Company has one of the widest portfolios for the container glass ranging from 5ml to 3200ml across

multi-colored bottles (Amber, Flint and Green). The products are available in over 30 countries. The

company has been accredited with ISO 9000:2000 certification, ensuring stringent quality protocol and

ISO 22000 for food and safety. HNG is a public limited company too.

Superior Innovation: HNG is collaborating with noted international companies, such as Emhart Glass

(U.S), HEYE Glass (Germany), Pennekemp (Germany), Horn Glass (Germany) and Zippe (Germany).

Emhart is the world's leading supplier of equipment, controls and parts to the glass container

industry which is providing HNG with the latest glass bottle forming machines. It is alsosupplying state-of the-art BIS machines to be installed for the first time in Asia. HNG is also

using NNPB technology resulting in 33% reduction in weight of glass container.

Resources

Distinctive

Competencies

Capabilities

Functional

Strategies

Superior:

Efficiency

Quality

Innovation

Differentiation

Low Cost

Value Creation

SU P

P R

E O

R F

I I

O T

R A

B

I

L

I

T

Y

FUNCTIONAL LEVEL STRATEGIES CAN BUILD RESOURCES & CAPABILITIES TO ENHANCE

DISTINCTIVE COMPETENCIES


11/15

Customer Responsiveness: HNG is making light weight bottles and bottles of fancy shapes and

sizes, of different colors, and with frosted finish. This has enhanced glass aesthetics, compared

to PET and Tetra pack. HNG is focusing more on narrow neck press and blow process (NNPB)

to enhance lightweight bottles manufacture. This has ensured higher per tonne realization, while

reducing the per bottle cost for the customer (up to 33% lower weight, lower transport cost, less

breakage). Presently HNG has a market share of 55%.

VALUE CHAIN FOR HNG

All the above factors have come together for HNG to create its competitive advantage thus helping it to

maintain profitability over the years and serve the customers as per their needs. Thus a margin is being

generated with the integration of support and primary activities entitling HNG to create a barrier for

other players.

Strong Financial Position, Accounting, Global Alliances, Low D/E Ratio

Young Managers, Attractive incentives, Periodical Training

SUPPORT ACTIVITIES

PRIMARY ACTIVITIES

Firm

Infrastructure

HR

Technology

Development

Procurement

Inbound Operations Outbound Marketing & Services

Logistics Logistics Sales

Latest

technology

(NNPB).

Fuel

based to

gas based.

Waste heat recovery

project sites for power

generation.

Sourcing equipment

from 100% owned

subsidiary.

Sourcing

Amber sand

Importing

latest glass

bottle

forming

machines

Use of

cullet.

Focus on

automation

for cost

reduction

Strong

distribution

channel

supplying

direct to

end users.

Direct

Marketing

Website

Customer

specific.

Prompt

customer

feedback

model


12/15

ASSESSING RESOURCES AND CAPABILITIES OF HNG

ASSESSING RESOURCES OF HNG ON SCALE OF 1-10

Resource Importance

HNGs Relative

Strength Comment

R1. Finance 9 9

Rating AA+ & PR1+ by CARE

Ratings. Low Debt Equity

Ratio(0.37)

R2. Technology 10 9 Leader in NNPB (Narrow Neck Press& Blow)

R3. Plant and

Equipment

9 9 Importing latest glass bottle forming

machines. Highest & constant

capacity addition.

R4. Distribution 7 8

Direct marketing.

R5. Brands 7 7 High brand loyalty (50% market

share).Participated in national andinternational trade fairs in order toenhance brand visibility.

The key Resources are Finance, technology, updated equipment and a wide distribution network.

These factors integrate to form a part of the competitive advantage strategy. The resources are

well determined by the key success factors for the industry.


13/15

ASSESSING CAPABILITIESS OF HNG ON SCALE OF 1-10

Capability Importance

HNGs

Relative

Strength

Comment

C1. Product

Development

9 9 It is very strong in product

development as compared to

competitors.

C2. Manufacturing 8 7 High plant capacity thereby enjoys

economies of scale/scope.

C3. Financial

Management

10 9 Debt equity ratio 0.37. Sufficient

cash reserves. Loaned funds of Rs.

640 Cr.

C4. R&D 6 6 Spending for gaining operational

efficiency. Total expenditure Rs.

13lacs in FY11.

C5. Marketing and

Sales

9 8 Direct Marketing. Participated innational and international trade fairs in

order to enhance brand visibility.

C6. Government

Relations

4 6 Important in emerging markets.

Only resources alone cant provide a platform for implementing on competitive advantage. The

resources need to be applied with the capabilities to form a part of the strategy. The industry key

success factors induce the capabilities to work upon to build the competitive advantage for the

company. HNG has a strong relation with the State Govt. of different states. Continuous product

development becomes very important.

APPRAISING RESOURCES AND CAPABILITIES OF HNG

R5C5

R4

C6

C3R3

C1

C2

R1

R2Superfluous strengths Key strengths

I

10

5


14/15

The resources and capabilities are being assessed so as to find out which resources and capabilities are

important and in which HNG has relative strength. The factors in which HNG has relative strength will

help it to charge a premium on the price of services it provides. The strength determines the resources

and capabilities in which economies of scale can be achieved.

HNG is a leader in technological innovation and also backed up by good financial condition and a wide

distribution network. Government regulations need to be improved so that the company can undertake

in-house R&D activities.

The Delta Model

At HNG three distinct strategies are followed:

1. Strategic Priority 1: Grow value of the HNG brand and widen the product portfolio.2. Strategic priority 2: Transform the go-to market model to improve efficiency and effectiveness.3. Strategic priority 3: Attract, develop and retain a highly talented and diverse workforce.

The three distinct strategic options are:

Systems lock-in Total customer solutions Best products

Systems Lock-In:

The company enjoys economies of scale due to highest installed capacity (2930 TPD) and several

proposed greenfield and brownfield projects across India.

The company is the countrys largest container glass manufacturer with a commanding market share of

55% .The Company has focused on both organic and inorganic growth. The Company has successful

turnaround six sick units over a period of time.

The Company has synergized with the Complementor to increase their scope of expansion. HNG has a

joint venture with OMCO International NV (world's leading glass mould manufactures) for mould

manufacturing facility; it also has an alliance with Siemens to leverage its technological innovation in

automation and energy efficiency.

C4


15/15

Total Customer Solutions:

The Company has one of the widest product portfolios ranging from 5ml to 3200ml across multi-colored

bottles. Furthermore the companys products are available in over 30 countries.

The Indian container glass market is estimated to be a Rs. 30-billion business, accounting for 12% of the

packaging industry and is expected to grow at 10% to 12% per annum in the future. India's is one of the

lowest per capita glass container consumption at 1.4 kg as compared to 27.5 kg in the USA and 10.5 kg

in Japan.

Demand for container glass is driven by the growth in user industry i.e. liquor, beer, pharmaceuticals,

cosmetics, perfumery, food and beverages. The liquor and beer industries are the main users of

container glass with 70% contribution, followed by pharmaceuticals 10%, food products 10%, beverages

6% and cosmetics 4%. Business in this industry also differs from one region to another.

It has a prompt feedback customer model. The Company has an in house fleet of over 100trucks to de-

risk supply side logistics.

The Company has a team of highly experienced and competent management to cater to varied

customer demand.

Best Products:HNG has the highest plant capacity which enables to enjoy economies of scale thereby lowering the

cost of products.

The Company specializes in light weight container glass (by using NNPB technology) across three colors

such as Amber, Flint and Green and also with frosted finish. This has enhanced glass aesthetics,

compared to PET and Tetra Pack.

Value Proposition:

ValueProposition

Element

Description

Experiences Integrated teams of skilled professionals with deepunderstanding of client's business.

End to end delivery with high quality and competitiveprice.

Value Delivery

Systems Installed a value score card system in collaboration with

Ernst & Young.

Training of professionals (Young Managers Programmefor selecting potential managers).

Setting up of an HR strategy cell.Value

Appropriation Value gained by customer: Light weight container glass.

Different shapes and sized bottles.

Value gained by HNG: Leveraging long term relationshipswith clients and servicing their growth needs.

Value shared by both: Lower resource consumption(Energy & water), conversion of fuel based units to gas

based to reduce carbon emission.

strategic orientation of hng

Documents