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PROJECT REPORT ON STUDY OF performance highlight & EXPORT MARKETING OF NALCOSuryadatta Institute of Management & Mass Communication Survey No. 342, Near Lalani Quantam, Behind DSK Ranwara, Off. Pashan Chandni Chowk Road, Pune-21 Maharashtra, INDIA. FACULTY GUIDE: INDUSTRY GUIDE: Mr. Manish Singh & Mr. J.R.Kapoor Meena Solanki Madam Chief Manager (Marketing) 1
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Page 1: Final Report

PROJECT REPORT

ON

“STUDY OF performance highlight & EXPORT

MARKETING OF NALCO”

Suryadatta Institute of Management & Mass CommunicationSurvey No. 342, Near Lalani Quantam,

Behind DSK Ranwara, Off. Pashan Chandni Chowk Road,

Pune-21 Maharashtra, INDIA.

FACULTY GUIDE: INDUSTRY GUIDE:Mr. Manish Singh & Mr. J.R.KapoorMeena Solanki Madam Chief Manager (Marketing)

SUBMITTED BY:Pritish PriyadarsiCourse: MKT+IT

Roll No: 1999/09050032Batch: 2009-2011

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Suryadatta Institute of Management & Mass Communication

Summer internship project

Title: - Study of performance highlight & export marketing of NALCO

Objectives: -The main objectives of the project are

To ascertain NALCO’s performance highlight in the market.

To know the marketing strategies of NALCO.

To study documentation & export sales procedure in detail.

To offer suggestions for effective strategies to cope up with the growing competition.

Duration: - 2 months (1st June to 30th July 2010)

Name of the project guide: - Mr. J.R. Kapoor

Name of the faculty guide: - Mr. Manish Singh & Meena Solanki Madam.

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ACKNOWLEDGEMENT

This project has been helped by a number of persons at different stages. I would be failing in my mission if I do not express my gratitude towards all those people.

I would like to thank Suryadatta Institute of Management and Mass Communication, pune for providing me an opportunity which has enabled me to undergo a summer internship which in turn has helped me gain immense knowledge of the concerned market and the appropriate ways to implement the theoretical knowledge.

I would like to thank my guide Mr. Manish Singh & Meena Solanki Madam for their support, valuable suggestions & mentoring me in the proper manner.

I would like to convey my sincere gratitude to Mr. J R Kapoor, Chief Marketing Manager, NALCO for his kind co-operation & mentoring me in the appropriate manner which enabled me to bring out this project report.

In addition to this, I would also like to thank other NALCO officials, state government authorities of Orissa for their whole hearted support & coordination in my endeavour.

Also I cannot forget the support of Mr. Ashish Sharma & all the respondents who spared there valuable time in filling my questionnaires and helped me for completion of my project work with giving opinions at different phases of this project.

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DECLARATION

I, Pritish Priyadarsi do hereby declare that the dissertation entitled “Study of

export marketing of NALCO” submitted by me for the fulfillment of summer

internship is an original piece of work done by me and has not been published or

issued to any other institution before. The present document is only submitted to

NALCO.

Place:

Date: Pritish Priyadarsi

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CERTIFICATE

This is to certify that Mr. Pritish Priyadarsi (MKT+IT), 1999/09050032, a student of SURYADATTA INSTITUTE OF MANAGEMENT AND MASS COMMUNICATION has undergone his summer internship training program from 1st June 2010 to 30th July 2010, in the marketing division, NALCO, Bhubaneswar under the project entitled “STUDY OF EXPORT MARKETING OF NALCO” submitted for the partial fulfillment of the requirements of PGDM embodies the work done by him under the guidance of Mr. J.R.Kapoor. He has been sincere, hard working and dedicated and the work entitled to him has met all the requirements in detail.

Mr. J R KapoorChief Marketing Manager

NALCO

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Contents

1. Executive summary

2. Introduction

3. About NALCO

4. Background of the project

5. Objectives of the project

6. Project Methodology

7. Nalco’s performance highlight

8. Marketing Strategies

9. Product Mix

10. Documentation & sales procedure

11. Conclusion

12. Learning

13. Recommendation

14. Bibliography

15. Annexure

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Executive Summary

The report mainly deals with the marketing strategies & export sales procedures of NALCO. The study focuses on studying these two aspects of NALCO, to analyze the performance highlights of it & then coming up with appropriate recommendations for future. First the aluminum industry of India was studied to get the insights of it & to find out NALCO’s position in it. The performance highlights was determined by taking into consideration the production capacity, efficiency level, sales, profit, employee satisfaction and customer satisfaction level as well. The marketing strategies & the export sales procedures were scrutinized intensely to find out sany loopholes that force NALCO to lack behind other companies in some aspects. Though NALCO proved to be a very efficient organization but still a lot of areas of improvement were found out & those were recommended to the company to cope up with the ever increasing competition. To find out the performance highlight NALCO’s current record was compared with its last 10 years record as well as with its target for the year in all sectors concerning alumina & aluminium. For the same objective an employee satisfaction survey was carried out to examine their satisfaction level & attitude towards their responsibilities & to the company as a whole. A customer satisfaction survey was also done & analyzed to find the customer satisfaction index. All these contributed to satisfy the objective which stated that though NALCO is having a very good position in the market now but it is soon going to face some serious threats from other companies. Though NALCO’s production capacity increased in the current financial year still its profit decreased drastically mainly due to the current recessionary trend. But another reason is the increasing competition from other companies like HINDALCO & Vedanta. The customer survey revealed that it is still having a very good brand image among its current customers. The employees are mostly satisfied apart from two three factors such as the transfer policy & safety at the work place. The marketing strategies are quite good to meet its current targets & the future plans are also heading towards the right path. Export sales procedures are mostly good though a minor tweaking can be done in the tendering process of NALCO. All these things are deeply analyzed & appropriate recommendations are given in this project.

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Introduction:-

Salient features of Indian aluminium Industry:

Highly concentrated industry with only five primary plants in the country

Controlled by two private groups and one public sector unit

Bayer-Hall-Heroult technology used by all producers

Electricity, coal and furnace oil are primary energy inputs

All plants have their own captive power units for cheaper and un-interrupted power supply

Energy cost is 40% of manufacturing cost for metal and 30% for rolled products

Plants have set internal target of 1 – 2% reduction in specific energy consumption in the next 5 to 8 years.

Energy management is a critical focus in all the plants

Two plants have declared formal energy policy

Each plant has an Energy Management Cell

Achievements in energy conservation are highlighted in the Annual Report of the company

Energy targets are based on best energy figures achieved in their sector / region and by the plant itself in the past

Generally, government policies were rated as conducive to energy management

‘Task Force’ formed by BEE in this sector to work as catalyst in promoting energy efficiency

High cost of technology is the main barrier in achieving high energy efficiency

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Orissa’s Aluminum industry:

53 % of the country’s bauxite resources are found in this eastern state which entitles India to be the 5th in bauxite & 8th in the aluminum export in the world. Apart from that 53 % bauxite, Orissa also has resources of 40 % of the total aluminum produced within the country. The bauxite mines in Orissa are located in Koraput, Kalahandi, and Raygada & Balangir.

NALCO

It’s a company that believes in the fact that even ordinary people have extra ordinary attitude. The company is known as National aluminium company limited or famously known as NALCO. It was incorporated in 1981 as a public sector enterprise under ministry of mines, govt. of India with the technical collaboration with Aluminium pechiley of France. NALCO enjoys the status of a five star export house since January 1992. Today as an ISO 9001:2000, ISO 14001 & OHSAS 18001 company with its products registered in London metal exchange, NALCO has emerged as the largest integrated bauxite alumina & aluminium complex in Asia. Now NALCO enjoys the status of a Navratna company.Vision: To be a reputed global company in the metals & energy sector.Mission: To achieve growth in business with global competitive edge providing satisfaction to the customers, employees, shareholders & community at large.

To strengthen its market position, NALCO has started the second phase expansion after the successful completion of the first phase in 2002. The ongoing expansion with an investment of more than 5000 crore Indian rupees will raise the capacity of its various production unit as below.

Unit Original capacities After 1st phase expansion

After 2nd phase expansion

Bauxite mines 24,00,000 MT 48,00,000 MT 63,00,000 MT

Alumina refinery 8,00,000 MT 15,75,000 MT 21,00,000 MT

Aluminium smelter 2,30,000 MT 3,45,000 MT 4,60,000 MT

Power plant 600 MW 960 MW 1200 MW

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NALCO is a bright example of India’s industrial capability with consistent track record in capacity utilization, technology absorption, quality assurance, export performance & posting of profits.

Operations:

I: Bauxite mines

NALCO’s 48,00,000 MTPA bauxite mine located at Panchpatmali hills of Koraput district in Orissa is among the most sophisticated and eco friendly mining operations of the world. This mining is highly computerized & mechanized. Transportation of the ore to the alumina refinery, located downhill is done through a 14.6 km long single flight out curve cable belt conveyer of 1800 MTPA.

II: Alumina refinery

It is one among the top 10 refineries in the world. It has a capacity of 15, 75,000 MTPA, energy efficient & uses Bayer’s process technology. After meeting the consumption needs of around 7, 00,000 MT of alumina of its own smelter, the balance quantity of alumina goes to market for selling in the domestic & international market.

III: Aluminium smelter

It is located at Angul in Orissa & has a capacity of 3, 45,000 MTPA. It comprises of 3 pot cells with 240 electrolytic pot cells in each along with integrated facilities from casting of metal, ingots, sows, billets, wire rods & stripes. With the acquisition & subsequent merger of International aluminium products limited (IAPA) with NALCO, the 50,000 MTPA export oriented rolled products unit is added to produce foil stock, fin stock, cable wraps, standard sheets & coils.

Port facilities

NALCO has port facilities at the inner harbor of Vishakhapatnam port on Bay of Bengal for bulk export of alumina & import of caustic soda lye. It has storage facility of 75,000 MT each with the ship loading rate of 2200 MTPA. It can handle export about 1 million MTPA of alumina. Besides aluminum metal is exported from the port also.

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Captive power plant

It is another show piece in efficient & reliable power generation with 960 mw capacity, close to its smelter & near Talcher coal fields. It provides uninterrupted power supply to the smelters & also connected to a state grid for sale of surplus electricity.

Background of the project

It can be seen above that NALCO has a total alumina refinery capacity of 15, 75,000 MTPA. NALCO needs 7,00,000 MTPA for its internal consumption at its smelter. The balance quantity of approximately 8, 75,000 MT is sold by NALCO. Out of that amount the company uses around 25,000 MT for production of specialized alumina, zeolite & some quantity is sold in the domestic market as alumina. This leaves a balance of 8, 50,000 MT which is exported.

For export sales of alumina, NALCO transfers its alumina from plant to Vizag port. From there it offers sale of alumina in bulk through large vessels.

Objectives of the project

Aluminium is a metal with its application increasing in various sectors of growth like housing, infrastructure, aviation, electricity, automobiles etc. At the same time NALCO is competing with all the existing drawbacks of the industry within its capacities & a lot of new players are evolving to take advantage of the demand of alumina in the market. Therefore it is important for NALCO to look into their product & marketing mix & find some strategy for improvement in their market share.

In view of above, my project intends to a study of various components of NALCO’s sales of alumina in the market.The main objectives of the study are

To ascertain NALCO’s performance highlight in the market.

To know the marketing strategies of NALCO.

To study documentation & export sales procedure in detail.

To offer suggestions for effective strategies to cope up with the growing competition.

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Project Methodology:

The whole study of the export sales of NALCO was divided into 5 different phases.

In the first phase the objectives, scope & the procedure were finalized & synchronized under the guidelines of the company guide.

The second phase was dedicated for collection of data & information about NALCO, its marketing strategies & its sales procedure in an extensive manner & to understand the nitty-gritty of everything.

The third phase was intended to get a practical aspect of the study by visiting the mine sites as well as the port where export facilities are available.

In the fourth phase various interviews were conducted with authorities of NALCO, in the same phase feedbacks were also collected from the customers of NALCO to get the insights & customer satisfaction quotient.

In the final phase with the help of sorted data & information the final report was prepared.

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NALCO’s performance highlight

To find out the performance highlight of NALCO in the market, two different processes were undertaken.

1. In the first process NALCO’s record was found out from books, journals, and websites.

2. In the second process, interviews were conducted with competent authorities of NALCO; state Govt. & feedbacks were also taken from the customers as well as the employees of NALCO.

Findings of the first process:-

Since the formation of the company in 1981 as a flagship public sector enterprise under the ministry of mines, Govt. of India, NALCO has come out with excellent physical & financial results in all these years, bettering its own records of the previous years in almost key areas & has always exceeded the targets fixed for the company. The information of the year 2009-10 is given below with the data of previous year.

PRODUCTION 2008-09 2009-10Increase over

previous year (%)

Bauxite (MT) 4,700,027 4,878,888 3.80

Alumina Hydrate (MT) 1,576,500 1,591,500 0.95

Aluminium (MT) 361,262 431,488 19.43

Net Power (Million Units) 5,541 6,295 13.60

SALES      

Export of Aluminium (MT) 82,314 146,948 78.52

Domestic Metal Sale (MT) 271,274 289,031 6.54

Total Metal Sale (MT) 353,588 435,979 23.30

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Production performance:-

It can be seen from the table that the calcined alumina production has increased considerably in 2009-10 as compared to 2008-09.Its because NALCO is the only company that exports alumina. That’s why it is going aggressively when it comes to alumina production. This can also be seen from the total alumina dispatch figure.

NALCO’s production performance for the last 12 years

Year Bauxite(MT)

Alumina(MT)

Aluminium (MT)

Power(MU)

1998-99 26,61,557 8,83,300 2,00,162 3,9021999-00 28,06,288 8,94,500 1,46,205 3,5882000-01 28,22,464 8,86,000 2,12,663 3,9852001-02 28,34,189 9,39,000 2,30,516 3,8332002-03 35,22,059 11,13,000 2,31,674 3,9702003-04 47,77,003 14,80,000 2,44,708 4,2912004-05 48,16,762 15,50,100 2,98,208 5,1222005-06 48,22,000 15,90,000 3,59,000 5,6792006-07 48,00,000 MT 14, 75,000 MT 3,48,000 MT 5968 MU2007-08 48, 00,000 MT 15, 59,000 MT 3,57,000 MT 5609 MU2008-09 47,700,027MT 15,76,500 MT 3,61,262 MT 5,541 MU2009-10 48,78,888 MT 15,91,500 MT 4,31,488 MT 6,295 MU

Sales performance for the year 2008-09

Sales Units Actual during 2007-08

Performance during 2008-

09

% increase (+)Or decrease (-)

Export salesAlumina MT 8,59,900 8,51,899 - 0.93

Aluminium MT 97,200 83,000 - 14.00

Sales performance against the target

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Sales Units Target for 2008-09 Achievement during 2008-09

Alumina export MT 8,50,000 8,51,800Aluminium export MT 90,000 83,000

Sales performance in the last 10 years

Year Alumina in MT Aluminium in MT1998-99 6,10,940 39,6851999-00 4,79,620 95,1852000-01 4,95,723 1,18,8682001-02 6,70,120 1,06,2832002-03 10,37,287 1,07,3022003-04 9,34,870 1,31,1762004-05 9,09,000 1,33,0002005-06 8,62,600 1,21,0002006-07 7,73,570 1,29,0002007-08 8,59,900 97,2002008-09 8,51,800 83,000

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Findings of second process:-

In this process the first step was to find out whether the organization faces any kind of problem officially. The main objective was to find out whether NALCO is able to maintain a good coordination between the state government & the union government for its official & legal bindings.

Almost all the questions got similar kind of response of more than 90 % employees being very happy with NALCO apart from the following two. So these two questions are discussed over here.

1. What is the safety of the workplace ?

At the Corporate office, Bhubaneswar

89

74

percentage of respondents

Very GoodGoodAdequatePoorVery Poor

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At the Alumina refinery, Koraput

217

9

21

51

percentage of respondents

Very GoodGoodAdequatePoorVery Poor

At the Mine site, Damanjodi

2 6

22

23

47

percentage of respondents

Very Good GoodAdequatePoorVery Poor

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As it can be very well seen from the graphs that the safety at different places are quite different, steps must be taken immediately to avoid any dissatisfaction among employees. 100 % of the employees at the corporate office said that their workplace is adequate or better than that while that percentage drastically decreased to 8 % at the mine site. It was only 19 % at the plant. This is primarily because of the recent naxalite attack on the plant of NALCO which took away lives of policemen. Steps have been taken in this regard but it does not seem adequate. It seems that NALCO is still vulnerable to such attacks in the near future.

2. How good is the transfer policy of NALCO ?

12

17

29

33

9

percentage of respondents

Very GoodGoodAdequatePoorVery Poor

It can be seen that 42 % of the total employees are not satisfied with the transfer policy of NALCO while only 12 % of them are saying it’s very good. The point to be noted here is all the 12 % of the people are currently placed in the corporate office. Necessary measures must be taken immediately in this regard.

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Marketing strategies of NALCO

Let us analyze the marketing strategy as per some basic concepts of marketing. Let us first scrutinize the four Ps i.e. product, price, promotion & place.

Product:-

This is the main & key element in the market offering. It’s the basic thing that the customer wants from any company. The company delivering products of superior quality always gets an edge over its competitors. Therefore NALCO always concentrates on its products, tries to come up with unique products that are in demand. Quality is an aspect that the company always focuses on. It also involves the timing of introduction of new products making product line decisions & product innovations.

Price:-

Pricing strategies are the aspects having the utmost importance as it is the only revenue generating part of the market mix. In case of the aluminium industry where there is scope for both import & export, a lot of analysis is done before finalizing the price. When the domestic currency appreciates, a firm can either reduce its domestic prices, thus maintaining the foreign currency prices at the pre-appreciation level or maintain the domestic currency prices which would result in the increase in the foreign currency price. The former would result in the profit margin coming down, the later in a fall of the market share. NALCO mainly focuses on market penetration strategy for some products while for most of them it follows the market skimming strategy.

Promotion:-

The promotional strategy decides the amount that the firm desires to spend in various markets in promoting its products. In case of aluminium industry especially Indian aluminum industry there is no real need of any promotional strategies. Therefore NALCO does not take any specific & regular promotional campaigns though it comes up with some PR activities by sponsoring different sports events in Orissa. For example every year NALCO comes up with state level hockey tournaments & also supports cricket to a large extent. Apart from these

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NALCO also organizes billiards tournaments, donates ambulances to different hospitals. It has a mobile van also operating in the capital city. These activities actually serve its promotion as well as the society as all these are part of corporate social responsibility of NALCO.

Place:-

It is a very important aspect considering aluminum is a highly hygroscopic material. The process from extraction of bauxite from the mines, to converting that to alumina & finally transferring that to alumina & bringing that to the port where export facilities are available is a very tedious process & every measure is taken not to increase the operational cost.

Now let’s take the aluminum industry into consideration & find out NALCO’s strategies to cope up with it so far.

The aluminium industry is highly concentrated with just five plants in India accounting for the entire production capacity of around 1.2 MT per annum. The per capita consumption of aluminium in India is only 0.8 Kg against 25 kg in USA, 19 kg in Japan, 10 kg in Europe. Even the world’s average per capita income is about 10 times of that in India. One reason for low consumption in the country is because consumption pattern of aluminium in India is vastly different from that of developed countries.

The demand for aluminium is expected to grow by about 9 % per annum from present consumption levels. This sector is going through a consolidation phase and existing producers are in the process of enhancing their production capacity so that a demand supply gap expected in future is bridged.

India, the ninth largest economy in the world, is poised to join the elite superpowers & India’s rich mineral resources of several primary metals, accelerates the growth. In particular, aluminium, the third most abundant element on earth, is increasingly being used in more & more applications increasing in various sectors of growth like housing, aviation, electricity & automobiles etc. In India the full potential is yet to be explored & exploited. Now the aluminium industry has seen the influx of a number of new players.

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There is a sharp demand curve but unfortunately the supply curve is not rising as rapidly. So in the conclusion it can be said that there is a huge market for the aluminium in the near future in the Indian market.

To tap the above market of alumina NALCO has developed following marketing strategies.

1. Increasing the production capacity of its product by brown field expansion of the bauxite-alumina plant.

In order to achieve the above NALCO has already started the 2nd expansion of its plant which will be commissioned during December 2008. After the expansion NALCO’s bauxite mines, capacity will increase to 63, 00,000 MT from the present capacity of 48, 00,000 MT & the alumina refinery capacity will also increase to 21, 00,000 MT from the present 15, 75,000 MT. Even though NALCO is also expanding its aluminium smelter plant capacity from present 345,000 MT to 460,000 MT , it will only require approximate 920,000 MT of alumina. This will result in huge balance alumina capacity of around 12, 00,000 MT available for sale.

2. Entering into long term alumina agreement

Alumina is a commodity whose prices are subject to wide fluctuation in the market depending on international demand-supply scenario. To remain away from the uncertain market, NALCO enters into long term agreement with traders or direct aluminium smelters. This is also necessitated from the fact that alumina plant is a continuously running plant & in order to keep the plant operational regular evacuation of the material is extremely necessary from its silos. Thus the long term contract helps NALCO to remain present in market, to absorb the shock of wide fluctuation of prices in the market & keep their plant operational.

3. Spot sale of alumina

As mentioned above that alumina is subject to wide fluctuation in the market, NALCO also reserves some alumina to sale in the spot market. This entitles NALCO to achieve better realization in case the international prices have risen

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substantially high. NALCO usually sales alumina in spot market through tendering. In such cases the tender quantity is usually limited to 25-35 thousand MT, which is shipped, in one single lot.

PRODUCT MIX

Aluminium MetalIngotsSowsBilletsWire rodsAlloy wire rodsCast strips

           

Alumina & HydrateCalcined AluminaAlumina Hydrate

Zeolite-A

Special ProductsSpecialty Hydrate/Alumina(Alumina Chemicals)

  

Rolled ProductAluminium Rolled Products

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Documentation & sales procedure

Generally, documentation is perceived to be the most complex, difficult & critical activity of export marketing, particularly in India. Procurement of an export order & acquisition or production of goods for exports is as important as ensuring their physical delivery & remittance of sales proceeds. The documentation formalities are essential for enabling the importers to get the contracted goods & the exporters to get the sales amount as well as to secure export incentives in various forms.

One may categorize export documents into three dimensions on the basis of their role in smooth flow of trade. These dimensions are

1. Commercial dimension2. Legal dimension3. Incentive dimension

Commercial dimension

The set of commercial documents used as shipping documents or principal export documents are essential smooth flow of international trade. For a consignment being sent on CIF basis, the full commercial documents consist of the following.

A. Commercial invoiceB. Bill of lading/ Airway bill/ Post parcel receipt/ Railway receipt/ Lorry

receiptC. Cargo insurance policy/ CertificateD. Bill of exchange

In addition of the above specified documents, specific transactions may need addition documents upon buyer’s requirement, which may flow out of either legal necessities or commercial need. It may also be noted that the kind & number of copies of these documents depend upon the nature of the export contract.

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Legal dimension

After becoming an export company, it is required to obtain a registered-cum-membership certificate (RCMC) from the relevant export promotion council, commodity board or any other designated body. The next step in becoming an exporting unit is to obtain importer-exporter code number from the “Director General of foreign trade”.

(a) GR form/PP form

GR/PP form in duplicate is required for every consignment for obtaining custom’s clearances. This form is needed as a legal requirement under foreign exchange regulation act of India. GR form needed for all consignments other than the one being shipped by post while PP form is needed for going by post.

(b)Shipping bill

Shipping bill is the main document for obtaining custom’s permission for shipping goods. This document is of four types.

Dutiable shipping billFrees shipping billDrawback shipping billEx-bond shipping bill

Incentive dimension

Exports from India are supported through a number of assistance & incentive schemes. The exporter wishing to avail of these schemes have to put forward his claims by presenting relevant documents supporting his claim to different authorities. These documents are AR form, copy of shipping bill, copy of bill of lading etc.

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Documentation

All exports of metallurgical grade calcined alumina (sandy type) of NALCO are through tendering on FOB ST (spout trimmed) Vishakhapatnam port (India) basis in bulk. The typical lot size per alumina shipment is 25-35,000 MT. there are two types of tendering.

Open tendering: These tenders are published in the newspapers; publications etc and remain available for viewing & participation in the tender by a large group of people & organization.

Limited tendering: Such tenders are limited to the customers who remain in the preferred lost of customers of an organization. This is being done to stop the non-serious participants in the tender.

NALCO’s export sales procedure is based on tender floated only to the customers who are registered with NALCO. So it can be seen here NALCO goes for limited tendering.

For registration the company specifies following eligibility criteria which is available in the NALCO’s web site & also communicated to the prospective buyers when they contact the company for buying alumina.

A. Eligibility

Tender for spot contracts:

Only overseas prospective buyers/companies having sound financial & business credentials and experience in international trading are eligible to be registered with NALCO.Overseas offices of central public sector undertakings of Govt. of India are also eligible to apply for the registration.The annual turnover of the buyers should not be less than USD 15.00 million or equivalent.

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Tender for term contracts:

Only overseas prospective buyers/companies having sound financial & business credentials are eligible to be registered with NALCO.Overseas offices of central public sector undertakings of Govt. of India are also eligible to apply for the registration.The overseas buyers should have experience in international alumina or bulk commodity business and should have purchased minimum 50,000 MT of alumina or bulk commodity during last three years including at least one bulk cargo of around 25,000 MT.The annual turnover of the buyers should not be less than USD 70 million or equivalent. If the turnover /accounts statement of the subsidiary / division seeking registration is not available Sseparately, the group turnover / account statement may be considered provided the group holding company gives undertaking guaranteeing performance of subsidiary / division. The group holding company should have majority stake in the subsidiary.

B. Document information to be furnished for registration:

Name, address, telephone, telefax, e-mail of the company for correspondence along with the names of contact persons & their capacities.Description about the business activities of the company, address of the registered office and contact numbers.In case the overseas buyer has an Indian representatives, details of the representative along with due authorization. If the overseas buyers have offices in India the details about the Indian offices.

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Published latest annual reports. If such annual reports are not published, the same should be declared and certified accounts statements may be furnished.Prospective buyers shall have to arrange to provide their banker’s certificate in respect of their solvency / financial capability by the bankers directly to NALCO.The names of the first class international banks through whom the buyer intends to open letter of credit.Details of alumina cargos / bulk commodities purchased during last three years with supporting documents (for registration in tenders for term contracts).Any other information which the buyer feels relevant for registration.

Bid opening:

In this step various registered customers are required to bid for the material in the presence of committee members and different bidders in which the sale order goes to the highest bidder.

Sale order / contract with the highest bidder:

In this step, a sale order or contract is formed with highest bidder in which price, quantity of materials, lay days, other conditions are specified. For sale of alumina Nalco in general enters into contract on FOB Vishakhapatnam port basis.

FOB- Free On Board:

It means that the seller fulfills his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment. This means buyer has to bear all costs and risks of loss of damage to the goods from that point. This term can only be used for sea or inland waterway transport. When the ship’s rail serves no practical purpose, such as in the case of roll-on / roll-off or container’s traffic, the FCA term is more appropriate to use.

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Apart from this there are different types of transport procedures as well such as

1. Free Carrier (FCA)2. Free Alongside Ship (FAS)3. Cost & Freight (CFR)4. Cost, Insurance & Freight (CIF)5. Carriage Paid To (CPT)6. Carriage & Insurance Paid To (CIP)7. Delivered At Frontier (DAF)8. Delivered Ex Ship (DES)9. Delivered Ex Quay (DEQ)10.Delivered Duty Unpaid (DDU)11.Delivered Duty Paid (DDP)

Process of lifting the Cargo

Buyer’s job: the buyer’s job is to open the letter of credit in the opening bank in favor of NALCO. The supplies are against irrevocable letter of credit (L/C), payable at sight, in US dollars, at the counters of State bank of India, commercial branch, Bhubaneswar, India. The L/C must be opened in a first class international bank acceptable to NALCO and conforming to uniform customs & practice for documentary credits, 1993 revision, and publication no. 600 of ICC. The L/C must allow TT reimbursement within two working days. The buyer should also arrange for the shipping vessel for lifting the cargo from the Vishakhapatnam port.

Letter of credit

A letter of credit is an undertaking issued by a bank at the request of an importer, to an exporter to the effect that if exporter exports the goods and presents the specified documents strictly as per the specified terms, the banks will make the payment without fail. Therefore a letter of credit is an undertaking to pay. It is issued by a bank in importer’s country. It is an undertaking to the exporter. Therefore it is always addressed to him. However it is not sent to him directly. Instead, it is sent through a bank in his country so that the genuineness of the instrument can be verified by such bank. The bank issuing the letter of credit is

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liable to pay the amount, once the exporter presents the documents strictly in compliance with terms & conditions of the letter of credit. This liability is absolute on the part of the issuing bank and it has to pay the value of import covered under the L/C to the exporter, independent of the fact whether it gets paid by the importer or not.

Need for a letter of credit

In international trade the buyer (also called importer) and the seller (exporter) mostly, do not know each other personally. The seller does not like to part with goods without being paid & the buyer does not like to pay before the receipt of the goods. This problem is solved to a great extent by arranging a letter of credit. Under this arrangement, the buyer requests his bank to issue a letter of credit. The bank acts as an intermediary and issues this letter of credit to the exporter. Through this letter, the bank undertakes to pay the amount to the seller if he sends the goods and submits the documents as in the letter of credit. The letter of credit acts as a firm undertaking of a bank to pay. It carries the creditworthiness of the bank & therefore the exporter becomes sure of payment once he performs his part of the contract and sends the documents strictly as per the terms of the letter of the credit. The importer also becomes sure of getting the goods after payment to bank which enables him to receive all the required documents.

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Seller’s job (NALCO):

As the contract is based on FOB terms, NALCO’s job is to transport the merchandise up to the port and keeping it ready for loading on to the vessel.

Pre dispatch / loading documentation:

The following two documents are required:

1. PI (Proforma invoice)2. Standard instruction to the port office of NALCO.

The next step is filing of documents with customers and taking permission from the port authority for loading on the vessel. The port authority in the form of shipping bill will give the permission. After getting the shipping bill the shipment containers are loaded on to ship at the port.

Post shipment documentation:

After loading the shipment on to the ship following documents are required:

1. Bill of lading: It is given by captain / agent of the vessel certifying that the vessel has received the shipment.

2. As per the L/C, certain documents are necessary:a. Certificate of originb. Certificate of weightc. Certificate of analysis / quality

Then the next step is presenting the documents to NALCO’s advising bank through the marketing-finance department, which also prepares the commercial invoice.

The advertising bank then checks the documents and sends telex message to the opening bank of the buyer for release of the payment.

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Conclusion

After doing the study & analyzing the data collected during the study it is found out that though NALCO has improved its production capacity but its profit decreased in the current financial year as compared to the last year. But NALCO has another expansion plan to increase its efficiency.

The main point to be noted here is that the state government is rejecting any expansion & extraction policy of other players in the market because of the decreasing reserves of bauxite. But NALCO has a site which it has not started extraction at. It has also acquired another site in Andhra Pradesh which makes its reserves available for at least 100 years at the current extraction speed. This will surely help NALCO in expanding & competing with other players. The marketing strategies adopted by NALCO are good enough to cruise in the current market scenario. The export sales procedure is healthy enough that makes it the only exporter of alumina from the Indian sub continent.

NALCO has got a good position in the aluminium market. Its products enjoy worldwide reputation and are accepted in many countries because of its quality. It is capable of expansion plans because of its sound financial condition. All its expansion program are the vital examples in achieving its goal of securing a good status at the international level.

There is still some deficiency in its strategies which if sorted out soon will make NALCO the best among all the NAVARATNA companies & truly a showpiece.

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Learning

1. As aluminium industry is highly centralized & tough competition is seen among some big players only, the whole industry study actually gave a new dimension to the manufacturing industry knowledge.

2. Employee satisfaction is a very important matter of concern when a company analyses its performance even if it’s a manufacturing one like in the case of NALCO. Their satisfaction level actually increases the productivity & efficiency level of the organization.

3. It’s anytime better to retain the customers rather than going in for new customers.

4. Marketing strategies adopted by a public sector unit is actually quite different from the private players existing in the market.

5. The basic criteria & the requirements to trade in the international market were known during the study of the project.

6. The tendering & bidding process involving larger transactions were studied.7. It was concluded that production, sales & profit are not the only parameter

of choosing the performance but employee & customer satisfaction also hold much importance.

8. A company must have to innovate with its product line in order to have the competitive advantage.

9. Efficiency in the supply chain management & the promotional & marketing activities are very important in industries in which there is not much competition involving price.

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Recommendations

1. NAXALITE ISSUE

Though naxalite issue is not directly affecting the productivity of NALCO, but it definitely has an impact on its profit as it increases the loss. The last attack on NALCO at its mine site was mainly aimed at stealing the explosives that are used to blast the hard rock of the hills containing bauxite. The whole thing not only caused loss in lives & explosives only but it affected the production also as extraction was completely stopped for 7 days & it was done in only one shift instead of two for the following 7 days. This left the refinery plant in serious need of bauxite for some days though there were enough reserves at the plant.

Now after the attack, I would seriously recommend NALCO to increase its security big time as that part of the state is dominated by the naxalites & NALCO cannot afford any such attacks. Though it has been increased now but I guess NALCO is still vulnerable for further attacks. So NALCO must tighten its security.

2. TRANSFER POLICY

When I was having a casual conversation with the employees about the company they all seemed very enthusiastic. But when I tried to get the information the second time around, I came to know that apart from the safety issues, one issue was the transfer policy of NALCO. As I have already shown in the graphs about the dissatisfaction level of the employees at the mines, I would recommend NALCO to take the measures as soon as possible.

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3. CHINA’S STRATEGY

China has announced reduction in export tax on plates, sheets & rods which will cause oversupply of aluminium metal into the international market. Chinese industry players also expect the government may reduce the export tax on primary aluminium & aluminium alloy to 5 % from 15 %. Traders in Japan & South Korea fear that oversupplied Chinese exports would adversely affect the local markets. As a matter of fact there is already surplus existing in the global market with production at 40,332,000 tonnes & consumption at 39,122,000 tonnes. So I would recommend NALCO to ask the Indian government to take some necessary measures such as increasing the import tax to prevent the Indian players to import from China. It should be noted here that Canadian govt. has already imposed a tax between 40 % & 119 % on import of Chinese aluminium extrusions.

4. ALUMINA PRODUCTION CURTAILMENT

According to the sources, alumina market was 0.59 million tonnes surplus in 2007. Though it has decreased but it is still more than 0.39 million tonnes. In 2009, the alumina market looks to remain under pressure as the demand of it is driven by the demand for aluminium which is expected to remain weak. So NALCO needs to adjust its alumina production rates to rebalance the market as alumina is not a storable commodity.

5. DOMESTIC SALES

Along with the export sales, NALCO should also focus on the domestic market. Because of the recession the international market is going down but at the same time there is a need in the domestic market. India is currently the fastest growing car market in the world growing twice as fast as the global average. It manufacturers the entire range of components like engine parts, drive, transmission & steering sub systems etc. The consumption pattern of Aluminium in India is different. The largest contributor to Aluminium consumption is Power sector which is expected to feel relatively less heat following the global meltdown as the sector is marked by government spending. Apart from auto sector growth, NALCO can also focus on the transportation & the packaging sector in India.

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Year 2006-07 2007-08 2008-09(up to Nov’

08)

2008-09(extrapolated)

Production (1) 11,62,232 12,40,409 8,65,801 12,98,701Domestic Sales (2)

8,83,111 9,28,544 6,03,637 9,05,455

Imports (3) 1,10,623 1,73,207 1,03,848 1,55,772Scrap Imports

(4)2,34,208 2,04,400 1,38,930 2,08,395

Total Domestic

Consumption

12,27,942 13,06,151 8,46,415 12,69,622

% of imports in domestic

consumption

28.10 28.91 28.70 28.70

It can be seen from the above table that 28 % of the domestic consumption is still ruled by imports. NALCO definitely can try to tap this market by increasing its domestic sales.Though it is the only exporter of alumina in the Indian sub continent but in the domestic sales it lacks behind HINDALCO in spite having a larger production capacity. So by increasing its quality for the domestic market, expanding the customer database, it should also try to tap the domestic market.

6. EXPANSION PLANS

I would recommend NALCO to go ahead with all its expansion plans & projects in spite of the current recession & the fall in the profit that it suffered this time. The reason for saying so is the current recession is not predicted to last for more than five years & any project of NALCO would take at least that much of time to start operation. One more advantage for going with the projects now is that during this period the machineries, labor & other input costs can be obtained at a cheaper rate.

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7. SPOT & TERM CONTRACT

As discussed earlier, NALCO offers two types of contracts. Every registered customer is given equal chance & new bids are invited for every lot of alumina. My suggestion would be to give preference to the term contract owners while finalizing the spot contracts. Because this will increase the brand loyalty among them & they are the bigger customer that NALCO relies on. So they should be given preference in this case.

8. PROMOTION

As discussed earlier, NALCO has never gone for promotional activities because of the nature of the market. But according to me the market is changing. NALCO has to restructure its strategies in order to cope up with the increasing competition. Vedanta is investing heavily in promotion with hoardings, bill boards & TV commercials. A picture of a hoarding of Vedanta aluminium limited is given in the next page.

Though it’s not a big threat as of now but NALCO should start acting according to the market change as soon as possible. To tap the domestic market it has to go for promotional activities.

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Recent activities by the competitors……...

Hindalco's Q1 net profit: Rs.602.9 crore

Hindalco Industries, the country's largest aluminium producer, reported a flat net profit of Rs.602.9 crore in the first quarter of 2007-08 fiscal, compared to Rs.601.5 crore in the corresponding period a year ago. This performance can be attributed to lower prices for alumina, which offset the gain from rise in metal output.

The company, which bought Canada's Novelis in a $6 billion deal in April, registered a 9 per cent increase in net sales at Rs.4,677.9 crore in the first quarter, compared to Rs.4,273.7 crore in the corresponding period a year earlier. Other income grew 61 per cent to Rs.124.6 crore.

Analysts said low realization of alumina and frequent cuts in domestic aluminium prices hit Hindalco's profit. They said aluminium prices, which were stable in recent months (while other metals on record highs), are expected to rise in coming quarters which would have a positive impact on Hindalco's profitability. Hindalco's Chief Financial Officer S. Talukdar said the integration of Novelis had begun but the full benefits of the acquisition would accrue only after 2010.

(Source: Business Standard 31.07.07)

Birla to up Hinalco stake to deter bidders

Kumar Mangalam Birla plans to take majority control of Hindalco Industries to forestall a takeover in what's potentially a record year for metals and mining mergers.

"I would like our stake to be more than 50% and, if not, at least 40% in the next two years," Birla said. His family owns 31.4% of the $5.6 billion company, according to its website.

(Source: DNA, 25.07.07)

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Hindalco buys Alcan's 45% in Utkal Alumina

Aditya Birla group's flagship company Hindalco Industries announced an agreement to buy out Canadian aluminium major Alcan's 45% stake in Utkal Alumina International (Utkal) for an undisclosed amount. The Utkal joint venture was established in 1992 and involves the development of a new bauxite mine and setting up an alumina refinery in Orissa. The transaction will be complete in a month, Hindalco Industries has stated.

The transaction marks the complete exit of Alcan, and Hindalco becomes the 100% owner of the Utkal project. The Aditya Birla group had initially acquired a 20% stake in Utkal Alumina when it bought out Indal in 2000. Later, it increased its stake to 55%.

(Source: The Financial Express, 19.07.07)

Vedanta to invest Rs.100 cr in forest conservation

The Orissa government has asked for Rs.100 crore from Vedanta Resources for conservation of ecology in the Niyamgir hills. Out of this amount, Rs.42 crore will be spent on the wildlife in the area, where the Vedanta group's Sterlite Aluminium will mine for bauxite.

State steel and mines minister Padmanabha Behera told that the latest in scientific technology would be used for mining of bauxite in Niyamgir hills. Only 20 hectares will be allowed for mining at a time. Steps will be taken to plant 16 lakh trees under a compensatory afforestation programme.

Under a peripheral developmental project, Rs.12 crore will be spent for the betterment of the lives of 7000 tribals living in the surrounding 21 villages.

(Source: The Financial Express, 04.07.07)

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Bibliography:-

Books

1. Philip Kotler, Kevin Lane Keller : Marketing Management, 2008

2. NALCO : Inside story of NALCO

3. Energy Management Policy – Guidelines for Energy Intensive Industry of India, Chapter 3, pp 13-36 by Bureau of Energy Efficiency

Magazines & articles

4. Minerals & metals review, April 2010

Websites

5. www.energymanagertraining.com/aluminium/pdf/Industry%20overview %20-%20Aluminium.pdf

6. www.nalcoindia.com 7. www.rediff.com/india/business/budget2009/special 8. www.aluminiumtoday.com 9. www.crugroup.com

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Employee’s name ____________________________________________________

Gender_________________________________________________________

Department ________________________________________________________

1. How long have you been working for NALCO?

a. Less than 3 monthsb. Less than 1 yearc. Less than 3 yearsd. More than 3 years

2. Do you know who are you responsible to & responsible for?

a. Yesb. Noc. Think so

3. Have you worked for any other company before?

a. Yes

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Please tick in the appropriate box as per your ratings where 1 = very good, 2 = good, 3 = adequate, 4 = poor & 5 = very poor.

1. Your understanding of company’s mission & goals.

1 2 3 4 5

2. Depth, truth & quantity of information & knowledge conveyed from the top management as well as within two different departments.

1 2 3 4 5

3. Safety of your workplace.

1 2 3 4 5

4. Your benefits (salary, compensation, holiday & sick benefits)

1 2 3 4 5

5. The environment in this organization in balancing between work and personal life.

1 2 3 4 5

6. Opportunities for professional growth in this organization.

1 2 3 4 57. Transfer policy of NALCO.

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1 2 3 4 5

8. Employee performance evaluation.

1 2 3 4 5

Thank You

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